Rose Angela Caffey Atf the Caffey Family Trust v Leatt-Hayter
[2013] WASC 255
•8 JULY 2013
ROSE ANGELA CAFFEY ATF THE CAFFEY FAMILY TRUST -v- LEATT-HAYTER [2013] WASC 255
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 255 | |
| Case No: | CIV:1258/2012 | 2 JULY 2013 | |
| Coram: | ALLANSON J | 8/07/13 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Claim that privilege waived upheld Order for inspection of documents | ||
| B | |||
| PDF Version |
| Parties: | ROSE ANGELA CAFFEY ATF THE CAFFEY FAMILY TRUST ROSE ANGELA CAFFEY JAMES DALE CAFFEY GEOFFREY RICHARD LEATT-HAYTER JOSCELYN ROYSTON LEATT-HAYTER SEASIDE CORPORATION PTY LTD |
Catchwords: | Practice and procedure Inspection of documents Legal professional privilege Waiver in affidavit Fraud exception Turns on own facts |
Legislation: | Nil |
Case References: | Australian Securities and Investments Commission v Mercorella (No 3) (2006) 58 ACSR 40 AWB Limited v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30 Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 Barclays Bank Plc v Eustice [1995] 1 WLR 1238 Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101 British American Tobacco Australia Limited v Secretary, Department of Health and Ageing (2011) 195 FCR 123 British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524 Crescent Farm (Sidcup) Sports Limited v Sterling Offices Limited (1972) Ch 553 Gartner v Carter [2004] FCA 258 In the Matter of ACN 005 408 462 Pty Ltd (formerly TEAC Australia Pty Ltd) [2008] FCA 964 Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 Osland v Secretary, Department of Justice (2008) 234 CLR 275 Secretary, Department of Justice v Osland [2007] VSCA 96 Southern Equities Corporation Ltd (in Liquidation) v Arthur Andersen & Co (1997) SASC 6373; (1997) 70 SASR 166 Temwood Holdings Pty Ltd v Western Australian Planning Commission [2003] WASCA 112 The Attorney-General (NT) v Kearney [1985] HCA 60; (1985) 158 CLR 500 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
ROSE ANGELA CAFFEY
JAMES DALE CAFFEY
Second Plaintiffs
AND
GEOFFREY RICHARD LEATT-HAYTER
JOSCELYN ROYSTON LEATT-HAYTER
First Defendants
SEASIDE CORPORATION PTY LTD
Second Defendant
Catchwords:
Practice and procedure - Inspection of documents - Legal professional privilege - Waiver in affidavit - Fraud exception - Turns on own facts
(Page 2)
Legislation:
Nil
Result:
Claim that privilege waived upheld
Order for inspection of documents
Category: B
Representation:
Counsel:
First Plaintiff : Mr G D Cobby
Second Plaintiffs : Mr G D Cobby
First-named First Defendant : Mr J C Yeldon
Second-named First Defendant : No appearance
Second Defendant : Mr J C Yeldon
Solicitors:
First Plaintiff : Henry Sklarz
Second Plaintiffs : Henry Sklarz
First-named First Defendant : Cullen Babington Macleod
Second-named First Defendant : No appearance
Second Defendant : Cullen Babington Hughes
Case(s) referred to in judgment(s):
Australian Securities and Investments Commission v Mercorella (No 3) (2006) 58 ACSR 40
AWB Limited v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
Barclays Bank Plc v Eustice [1995] 1 WLR 1238
Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101
(Page 3)
British American Tobacco Australia Limited v Secretary, Department of Health and Ageing (2011) 195 FCR 123
British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524
Crescent Farm (Sidcup) Sports Limited v Sterling Offices Limited (1972) Ch 553
Gartner v Carter [2004] FCA 258
In the Matter of ACN 005 408 462 Pty Ltd (formerly TEAC Australia Pty Ltd) [2008] FCA 964
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1
Osland v Secretary, Department of Justice (2008) 234 CLR 275
Secretary, Department of Justice v Osland [2007] VSCA 96
Southern Equities Corporation Ltd (in Liquidation) v Arthur Andersen & Co (1997) SASC 6373; (1997) 70 SASR 166
Temwood Holdings Pty Ltd v Western Australian Planning Commission [2003] WASCA 112
The Attorney-General (NT) v Kearney [1985] HCA 60; (1985) 158 CLR 500
(Page 4)
1 ALLANSON J: The plaintiffs claim damages and other relief pursuant to the Fair Trading Act 1987 (WA) and the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) against three defendants: Geoffrey Leatt-Hayter, Joscelyn Leatt-Hayter, and Seaside Corporation Pty Ltd. The claim is listed for trial before Beech J on 12 August 2013.
2 The present application is for an order that the defendants' solicitors produce 13 documents for inspection by the plaintiffs. The documents, as described in the application, are:
1. handwritten file note by the defendant's solicitor with client contact details: undated;
2. unsent draft email by defendant's solicitor with advice to client: undated;
3. draft of warranty clause for advice to client: undated;
4. letter confirming advice to client and instructions with costs agreement: 17 August 2009;
5. email from Geoffrey Leatt-Hayter to defendant's solicitor for advice on sale: 15 August 2009;
6. internal memo between the defendant's solicitors re instructions and advice: 17 August 2009;
7. handwritten file note by defendant's solicitor noting defendant's instructions: 17 August 2009;
8. email of advice from defendant's solicitor to Geoffrey Leatt-Hayter: 17 August 2009;
9. email from Geoffrey Leatt-Hayter to defendant's solicitor re advice: 17 August 2009;
10. email of advice from defendant's solicitor to Geoffrey Leatt-Hayter: 18 August 2009;
11. email from defendant's solicitor to Geoffrey Leatt-Hayter re advice given: 25 August 2009;
12. email from Geoffrey Leatt-Hayter to defendant's solicitor: 25 August 2009;
(Page 5)
- 13. draft of warranty clause with defendant's solicitor's handwritten note: 26 August 2009.
3 The application was opposed by Mr Leatt-Hayter and Seaside Corporation who claim the documents are privileged. I do not understand it to be in dispute that the documents would be subject to legal professional privilege but for two particular claims made by the plaintiffs: first, the plaintiffs say that Mr Leatt-Hayter has given a sufficient account of the advice he received to amount to waiver of privilege in that advice; second, the communications between Mr Leatt-Hayter and the solicitor are not privileged because they fall within the 'fraud' exception.
The issues raised in the pleadings
4 In 2009, the plaintiffs purchased a book supply and retail business known as Westbooks from Seaside Corporation. Mr Leatt-Hayter was a director of Seaside Corporation.
5 The plaintiffs claim that in or about early August 2009 Seaside Corporation made representations to them by providing an information memorandum in relation to the sale of the business. The representations were:
1. as to the total sales for the financial years ended 30 June 2007, 30 June 2008 and 30 June 2009;
2. as to the gross profit of the business in those years;
3. regarding the competitiveness of another supplier to the major client of Westbooks, the Library Board of Western Australia;
4. that as the community grew it would become eligible for greater funding and allocation of resources for its libraries;
5. the prospects of the business were sound; and
6. the website for the business generated strong sales.
6 Also in early to mid-August, and before 19 August 2009, Mr Leatt-Hayter made further oral representations, including representations to the effect that the funding for library materials increased automatically as the population increased.
7 The plaintiffs plead that in reliance on the representations Ms Caffey entered an agreement to purchase the business for $1.9 million,
(Page 6)- $1.3 million of which was attributed to goodwill. The plaintiffs' offer is dated 19 August 2009.
1. in May 2004, the State government had allocated a total of $10.3 million in funding, in addition to the annual funding of approximately $7.7 million, for the purchase of library materials over four years;
2. the government allocated a further $4.335 million for the purchase of library materials in the year ending 30 June 2009;
3. the sales and profits for the years 2007 to 2009 were wholly or substantially due to the additional funding, and the business would not achieve those or similar trading figures once the additional funding was exhausted;
4. the additional funding was exhausted by June 2009;
5. the defendants had no reason to believe that additional funding, above the $7.7 million allocated annually, would be allocated by the government for the purchase of library materials after June 2009.
9 The plaintiffs plead that the defendants failed to disclose these matters to the plaintiffs before 30 October 2009, although each defendant knew of them. The plaintiffs plead that knowledge is to be inferred from facts including:
1. the defendants met regularly with representatives of the State Library;
2. on 17 August 2009, Mr Leatt-Hayter sought and obtained advice from Peter Lark and Co, solicitors, regarding the warranties the defendant should provide as seller in the contract of sale;
3. on or about 19 August, the first defendant inserted a warranty term into the draft agreement to the effect that the second defendant warranted it was not in possession of any knowledge or information which:
- (a) if unrevealed, could prove detrimental to or adversely affect the normal trading of the business; or
(b) if revealed could cause the plaintiffs to substantially modify or withdraw their offer for the business,
but that the plaintiffs would not make any claim for breach of those warranties or that those warranties were untrue and misleading based upon any fact if that fact would have been revealed as at the date of the agreement by a search of any public register kept by a government agency in relation to the defendants or the business.
11 In their defences, the defendants say that they informed the plaintiff that funding for public libraries was based on a framework agreement between the State government and local governments, and that framework agreement was publicly available via the State Library website. The defendants plead the Annexure C warranty. They further plead that information pertaining to the level of funding provided by the State government and the framework agreement were publicly available.
12 In their reply to the defence, the plaintiffs specifically allege that the additional funding to the Library Board of Western Australia for the purchase of library materials ceased on 30 June 2009, and that the decline in the profitability of the business was due wholly or substantially to that funding ceasing.
Evidence
13 In part, the plaintiffs rely in this application on matters which are not directly pleaded. In an affidavit sworn 30 May 2013, the plaintiffs' solicitor, Paul Wayne Catalano, annexes documents, some of which were obtained on subpoena. Those documents include:
1. Minutes of a meeting held on 21 July 2009, and attended by Mr Leatt-Hayter and representatives of the Library Board, which record: 'Funding for public Libraries has reduced to 6.5 million. There will be a reduction in orders'.
2. An offer to purchase the business, dated 14 August 2009, from B&F Cassidy, atf the Cassidy Family Trust (the Cassidy offer). The Cassidy offer included a warranty (cl 8) in these terms:
- The Sellers jointly and severally warrant that they are not in possession of any knowledge or information which:-
8.1 If unrevealed could, at a later date, prove detrimental to or adversely affect the normal trading of the subject business, or
8.2 If revealed now could cause the Buyer to substantially modify their terms of this offer or withdraw this offer.
- 3. An offer to purchase the business, dated 19 August 2009, from Stuart Spyvee and Dean Spyvee atf the Spyvee Family Trust (the Spyvee offer). It did not include a clause in the same terms as cl 8 of the Cassidy offer.
4. A tax invoice from the defendants' solicitors, which records on 17 August 2009, 'Meeting with Geoff Leatt-Hayter, advice in relation to the sale of the business and drafting warranty and vendor protection provisions'.
5. The offer from the plaintiffs, dated 19 August 2009. A clause in the same terms as cl 8 in the Cassidy offer has been deleted, and Annexure C included. The balance of the purchase price was due on 30 October 2009, with possession on completion of the counting of stock on 31 October.
14 Both the Spyvee offer and the Cassidy offer included the REIWA 2006 General Conditions for the Sale of a Business as a going concern. Clause 24(h), of the REIWA General Conditions is a representation that 'all information which is known to the Seller relating to the Business or this Agreement which is material to be known by a Buyer, has been disclosed to the Buyer'. It is not clear on the documents before me in this application whether cl 24(h) of the General Conditions is incorporated in the agreement between the plaintiffs and the defendants.
15 Mr Catalano's affidavit also annexes some later documents. I am not satisfied that they assist me in the limited questions I am to determine on this application.
Waiver
16 The plaintiffs say that there has been a waiver of privilege in the advice obtained from Peter Lark and Co in the witness statement of Mr Leatt-Hayter where he says at pars 138 to 143:
1. that an offer was received from the plaintiff on 19 August;
(Page 9)
- 2. that he took the offer to his lawyers 'to have them check over the terms';
3. the lawyer advised him:
that I should not accept [the plaintiffs'] offer in its current form and should instead allow him to draft a lengthy offer. I recall he showed me one of his precedent documents. I also recall being taken aback as to how long and complicated it was.
I recall informing the lawyer that did not want to rewrite the entire contract and instead asked him to prepare a condensed simplified version of his precedent document. He did and I left his office with what became Annexure C to [the plaintiffs'] offer';
4. Mr Leatt-Hayter then advised the business broker that he wanted Annexure C included in the offer from the plaintiffs and would not accept it otherwise.
17 Mr Leatt-Hayter does not refer to the whole of his communications with his lawyer or the whole of the advice given. Whether he has waived privilege in the advice generally, and not just the advice that he should not accept the offer in its current form, is to be determined by reference to the principles which apply to implied waiver: British American Tobacco Australia Limited v Secretary, Department of Health and Ageing(2011) 195 FCR 123 [41].
18 Mr Leatt-Hayter's witness statement was made in the context of an express plea by the plaintiffs that the defendants' conduct was misleading and deceptive in failing to disclose their knowledge about future State government funding for the public library system. The plaintiffs plead that the defendants' knowledge may be inferred from matters including Mr Leatt-Hayter's conduct in seeking and obtaining legal advice about the warranties they should provide to the plaintiffs, and in including the Annexure C warranty in the draft agreement. In these circumstances, is it inconsistent for the defendants to maintain that the communication with the lawyer is confidential and privileged when Mr Leatt-Hayter is to give evidence that the lawyer advised him not to accept the offer in its current form? It is irrelevant whether Mr Leatt-Hayter intended to waive privilege. It is the perceived inconsistency (if any) between his conduct and maintenance of confidentiality, informed by questions of fairness, that results in waiver: Mann v Carnell[1999] HCA 66; (1999) 201 CLR 1 [28] - [29].
(Page 10)
19 Not all references to the gist of advice necessarily result in waiver: see, for example, Secretary, Department of Justice v Osland[2007] VSCA 96; Osland v Secretary, Department of Justice (2008) 234 CLR 275, although there the disclosure was not for a forensic purpose. The importance of whether the advice was disclosed in court, or for a forensic purpose, is made clear by Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101 [5], [68] (disclosure in a letter sent to 'emphasise and promote the strength and substance of the case to be made against Mr Bennett'),andTemwood Holdings Pty Ltd v Western Australian Planning Commission [2003] WASCA 112 [18] - [19] (disclosure in open court).
20 The disclosure in this case is in a witness statement. Mr Leatt-Hayter's statement may ultimately stand as his evidence-in-chief at trial, subject to rulings on objections. But the defendants may choose not to call him. Whether or not he is called, the production and exchange of witness statements is part of the pre-trial processes which aid in defining the issues and informing the parties to the proceedings of the case that has to be met: see Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 [8].
21 The defendants submit that the matters disclosed in Mr Leatt-Hayter's witness statement are 'at the very outside margin of relevance' to the case pleaded by the plaintiffs. They submit that there is no inconsistency or unfairness in Mr Leatt-Hayter disclosing that he received legal advice but maintaining that the advice, and whether it was regarding the warranties the defendants should provide to the plaintiffs, should remain confidential.
22 I recognise that the plaintiffs have, in a sense, put this matter in issue by their plea that the obtaining of advice is a fact relevant to the inference of knowledge. I also take into account that, independently of Mr Leatt-Hayter's witness statement, there is now evidence in the tax invoice from the defendants' solicitor, that the meeting of 17 August was in relation to the 'sale of the business and drafting warranty and vendor protection provisions'. But the present position is that Mr Leatt-Hayter says in his witness statement that he was advised not to accept the offer, and new warranties were provided, but not why. He has not simply disclosed that he received legal advice, but stated the effect of it. The court will be asked to determine whether inferences can be drawn, taking into account what Mr Leatt-Hayter says in his witness statement, but without knowing what Mr Leatt-Hayter was told about why he should not accept the offer.
(Page 11)
23 Had Mr Leatt-Hayter confined his witness statement to the fact that he received legal advice, that statement would not waive privilege in the advice. But he has gone further and stated that he was advised not to accept the offer. That statement, together with his evidence about the inclusion of Annexure C creates a situation where the court could be misled if it does not have the whole of the context of the advice that was given.
24 The result, in my opinion, is that the defendants have waived privilege in the advice given to Mr Leatt-Hayter regarding the offer he took to the solicitors and referred to in his witness statement at pars 138 to 143. Where privilege is waived for one piece or part of advice, it is impliedly waived in relation to other advice if that other advice is necessary to a proper understanding of the first: see British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524 [121]. On the material before me, I cannot say whether any of the 13 documents which are the subject of this application fall outside the waiver. Should there be any issue between the parties about that question, I will grant liberty to apply within a short period.
The fraud exception
25 The second basis on which the plaintiffs dispute the claim of privilege is what is described as the 'fraud exception': communications in furtherance of a crime or fraud are not protected by privilege because the privilege does not attach to those communications. Although it is not necessary to determine this ground, it was fully argued and, should I be wrong as to waiver, I should express my conclusion.
26 To establish that privilege does not apply, the plaintiffs must do more than rely on mere allegation or assertion of the purpose of the communication. There must be sufficient evidence to 'give colour to the charge' or show that there is, at least, some prima facie evidence that it has a foundation in fact. The authorities relevant to the level of proof required at this stage are discussed and conveniently summarised in AWB Limited v Cole (No 5)[2006] FCA 1234; (2006) 155 FCR 30 [217] - [219]:
27 The evidence on which the plaintiffs rely is shortly summarised. The minutes of the meeting of 21 July 2009 show that the defendants, and in particular Mr Leatt-Hayter, were aware that the additional State government funding to libraries had come to an end. They knew the effect of that additional funding on the financial performance of the business in the years 2007, 2008 and 2009. The Cassidy offer contained warranties on behalf of the sellers that they did not possess knowledge or
(Page 12)- information which, if revealed, could cause the buyers to substantially modify the terms of or withdraw their offer. The plaintiffs ask the court to infer that the defendants knew that the information about government funding was information within the warranty, in the form in which it was stated in the Cassidy offer, and that the defendants sought advice to enable them to avoid, or at least moderate, the consequences of not disclosing that information to the plaintiffs. This resulted in the lawyers drafting an agreement that substituted warranties more favourable to the sellers. The communication to the lawyers was thus in furtherance of their deliberate nondisclosure of material information.
29 In Southern Equities Corporation Ltd (in Liquidation) v Arthur Andersen & Co (1997) SASC 6373; (1997) 70 SASR 166, 174 on which the plaintiffs rely, Doyle CJ said that fraud in this context:
… embraces a range of legal wrongs that have deception, deliberate abuse of or misuse of legal powers, or deliberate breach of a legal duty at their heart. It is not enough, I consider, that one could simply say that a transaction constituted sharp practice, or fell below the normal standard of commercial probity. It is not enough, I consider, that one would regard a transaction on which advice was sought as artificial, or as deliberately structured to take advantage of the law on a topic. In light of the authorities, one cannot be more precise than that.
30 The exception has been applied to deny privilege to advice or communications in furtherance of purposes which have been described as frauds on justice: to enter a transaction at an undervalue for purposes of defeating a creditor(Barclays Bank Plc v Eustice [1995] 1 WLR 1238); to restructure a corporate group to put assets beyond the reach of the (Page 13)
- legitimate claims of a secured creditor (Gartner v Carter [2004] FCA 258); to grant securities to one class of creditors that would defeat the rights of other creditors (Australian Securities and Investments Commission v Mercorella (No 3) (2006) 58 ACSR 40); to organise the affairs of a company to ensure that its principal creditor would not recover its debt (In the Matter of ACN 005 408 462 Pty Ltd (formerly TEAC Australia Pty Ltd) [2008] FCA 964).
32 I am not satisfied that the facts on which the plaintiffs rely fall within the exception. The Annexure C warranty does not, on its face, defeat the rights of the plaintiffs. First, it retains the warranty that the sellers are not in possession of material knowledge or information. The exception to the warranty is confined to matters that would be revealed by search of a Government register or information in the public domain. Second, while the buyer acknowledges that it has not relied on any warranties or representations other than those expressly contained in the agreement, such a clause is not unusual or one which by its terms demonstrates a fraudulent or dishonest purpose. Third, cl 8.4 in Annexure C limits the buyer's right to bring a claim after the first anniversary of settlement. But there is an express exception to that limitation provision for fraud, wilful default, or deliberate failure to disclose information. In summary, the terms of Annexure C do not support the inference that the purpose of the legal advice was in furtherance of a fraud so as to place the communication with the lawyers outside the proper and confidential scope of dealings between the defendants and their lawyers. The other matters on which the plaintiffs rely, in particular Mr Leatt-Hayter's knowledge at the time he consulted the lawyers, are not sufficient to satisfy me that this was not privileged communication.
Conclusion
33 The result is that, in my opinion, the defendants have waived privilege in the advice to which Mr Leatt-Hayter refers in his witness statement at pars 138 - 143. I will order that the documents be produced
(Page 14)- for inspection within seven days from the date of this order. I also give liberty to apply within seven days if there is any issue to be determined regarding the extent of waiver. That issue would be likely to require consideration of the documents in question.
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