Stamp and Stamp

[2007] FamCA 420

FAMILY COURT OF AUSTRALIA

STAMP & STAMP [2007] FamCA 420

FAMILY LAW – APPEAL FROM DECISION OF FAMILY COURT JUDGE – Legal professional privilege – Whether privilege attached to a file of the wife’s former solicitors – Orders for property settlement by consent – Wife’s application pursuant to s79A(1)(a) – Appeal allowed inspection of solicitors file.

FAMILY LAW – COSTS – Certificates granted - Federal Proceedings (Costs) Act1981 (Cth).

Family Law Act 1975 (Cth)
Family Law Rules 2004
Federal Proceedings (Costs)Act 1981 (Cth)
Evidence Act 1995 (Cth)

Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd Anors (1995) 37 NSW LR 405
Australian Agricultural Company Ltd & AMP Life Ltd [2006] FCA 371
BP Australia Ltd v Stallwood [2000] WASC 75
British American Tobacco Australia Service Ltd & Cowell (2002) 7 VR 524
Commissioner of Taxation v Rio Tinto Ltd (2006) 229 ALR 304
Commonwealth of Australia v Temwood Holdings Pty Ltd (2002) WA SC 107

DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384
Mann v Carnell (1999) 201 CLR 1
Thomason v Campbelltown Municipal Council (1939) 39 SR 347 at 358.

APPELLANT: MR STAMP

RESPONDENT: MRS STAMP

FILE NUMBER: PAF 2730 of 2004

APPEAL NUMBER: EA 27 of 2006

DATE DELIVERED: 11 May 2007

PLACE DELIVERED: Brisbane

JUDGMENT OF: Finn, May and Boland JJ

HEARING DATE: 8 November 2006

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 14 December 2005

LOWER COURT MNC: [2005] FamCA 420

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Gasic

SOLICITOR FOR THE APPELLANT: Foott, Law & Co

COUNSEL FOR THE RESPONDENT: Mr Lloyd with Mr Durer

SOLICITOR FOR THE RESPONDENT: Mark Turnbull & Co

Orders

1. That leave to appeal against the order of 14 December 2005 is granted.

2. That the appeal be allowed.

3. That the order made on 14 December 2005 is varied to provide that the order made on 16 August 2005 be no longer stayed.

4. That the Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by the appellant in relation to the appeal.

5. That the Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by the respondent in relation to the appeal.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Stamp and Stamp.

FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 27 of 2006
File Number: PAF 2730 of 2004

MR STAMP

Appellant

And

MRS STAMP

Respondent

REASONS FOR JUDGMENT

Finn J:

1. This is an application by the husband for leave to appeal an order made by Stevenson J on 14 December 2005 whereby her Honour refused leave to the husband’s solicitors to inspect the file of solicitors, “M & J”, who had acted for the wife, when she entered into property settlement orders with the husband made by consent.  The consent orders were made on 22 December 2003 in the Local Court at “G”.

2. On 29 October 2004 the wife filed an application in this Court seeking to set aside the consent orders under s79A(1)(a) of the Family Law Act 1975.

3. At some time prior to 16 December 2004, a direction was apparently made by the Court for the wife to particularise her claim, because on that date another firm of solicitors then acting for the wife, wrote to the husband’s solicitors, “F & Co” saying relevantly for present purposes (emphasis added):

   “Pursuant to the Court’s direction, we now provide the following particulars concerning the wife’s reliance on s79A(1)(a):

   1.The wife asserts that there has been a fraud on the part of the husband by failing to disclose…

   2.The wife also relies on the status of her health at the time she entered into the Consent Orders as affecting her capacity to provide proper instructions in relation to the proposed terms.

   3.The wife asserts that by reason of the above factors, without limiting the wife’s reliance on other factors as the evidence progresses, that there has been a miscarriage of justice contained in the Consent Orders entered into between the parties.

4. Apparently in response to a subpoena issued at the request of the husband, M & J, the solicitors who had acted for the wife on the making of the consent orders, produced their file relating to the making of the consent orders, and on 25 July 2005 the husband’s solicitors filed an application seeking “access” to that file.

5. According to Stevenson J’s reasons for judgment of 14 December 2005, a Registrar granted leave on 16 August 2005 to the parties’ legal representatives to inspect the documents produced by M & J, but the order was stayed for seven days to allow the wife time to file an application for review.

6. On 23 August 2005 the wife through her new solicitors filed an application seeking that the Registrar’s order of 16 August 2005 be set aside, and also that the subpoena to the wife’s former solicitors be set aside.

7. Directions were made on 2 September 2005 by Collier J for the hearing of a number of issues including the issue of “whether privilege attaches to the file of [M & J]”.

8. The hearing directed by Collier J took place before Stevenson J on 19 October 2005.

9. On 14 December 2005 her Honour delivered her Reasons for Judgment in relation to the various issues which she had heard on 19 October 2005.

10. In determining the issue of whether privilege attached to the file of M & J, her Honour referred first to the fact that one of the bases upon which the wife sought to set aside the consent orders was that “the status of her health [affected] her capacity to provide proper instructions in relation to the proposed terms”.

11. Her Honour then explained that it was asserted on behalf of the husband that the wife had waived privilege to the file of her former solicitors by particularising her claim in this way.  Her Honour then continued:

    19.      It was submitted on behalf of [the husband] that [the wife] has “put directly in issue her alleged lack of capacity to provide proper instructions to [M & J] regarding the consent orders”. Further, it was submitted that “the question of whether the nature and quality of the applicant’s instructions to her then lawyers was affected by her health cannot be fairly determined without reference to the advices, file notes and other correspondence.  Privilege cannot operate to compromise the court’s fact finding tasks”.

12. Immediately thereafter her Honour stated that she was not persuaded that the wife had “waived her privilege to the file of [M & J]” and she went on to explain her reasoning in the following way:

    “…What she has placed in issue is the impact of her state of health on her capacity to give instructions at the relevant time. It seems to me that the actual instructions given by her and the advice which she received from her solicitors would not touch on that issue.  It seems to me that the question of [the wife’s] capacity to provide proper instructions might be expected to be a matter for medical evidence”.

13. I agree with her Honour’s analysis that the only issue which the wife had placed in issue to that time, and then only by means of the letter from her solicitors dated 16 December 2004, was “the status of her health at the time she entered into the consent orders as affecting her capacity to provide proper instructions”.

14. I further agree with her Honour that the issue would be a matter for medical evidence, although I would add, at least in the first instance.

15. In my view, her Honour was therefore correct in refusing to grant leave to the husband’s solicitors to inspect the file of the wife’s former solicitors’ at least at the time and on the limited material then available from the wife, being only the claim made in a letter that “the status of her health” affected “her capacity to provide proper instructions”.

16. It is important to note that her Honour did not set aside the subpoena. Presumably the file produced by the wife’s former solicitors remains in the custody of the court and would be available for inspection if inspection were permitted at some future time.

17. It may very well be that once affidavits are filed (bearing in mind that there are no pleadings in this court), different issues may emerge which might justify a further application and indeed an order for inspection.

18. But in my view, the claim to inspect the solicitor’s file at the time it came before her Honour and on the basis of the material then filed was premature.

19. Accordingly I would not grant the husband’s application for leave to appeal her Honour’s order refusing leave to inspect the file.

May & Boland JJ:

Introduction

1. The husband asks for leave to appeal against the interlocutory decision of Stevenson J made on 14 December 2005. The learned trial Judge upheld the wife’s claim of privilege in relation to inspection of the file of her former solicitor.

2. On 22 December 2003, the husband and the wife entered into consent orders relating to their property, pursuant to section 79 of the Family Law Act 1975 (Cth) (“the Act”). Those orders were filed in the Local Court at “G”. Both parties were legally represented during the course of negotiations leading to the filing of those orders. Messrs “M & J” acted for the wife.

3. Prior to the orders being made, on 3 December 2003 the parties attended a meeting at the office of M & J. At that time the consent orders were agreed and documented by the parties.

4. On 29 October 2004 the wife filed an application pursuant to section 79A(1)(a) of the Family Law Act 1975, to set aside the orders for property settlement made by consent on 22 December 2003. On 1 December 2004 the Court directed that the wife should give particulars of her claim.

5. The wife asserted in particulars provided to the solicitors for the husband in a letter dated 16 December 2004 that:

   “(2)The wife also relies on the status of her health at the time she entered into the Consent Orders as affecting her capacity to provide proper instructions in relation to the proposed terms. (AB p.66)

   (The wife also claimed that the husband had been fraudulent)

6. After the wife commenced the present proceedings the husband’s solicitors issued a subpoena to M & J requiring production of the wife’s files. On 16 August 2005, a Registrar granted leave to the parties’ legal representatives to inspect documents produced by M & J. That order was stayed to allow the wife to file an application for review, which she did on 23 August 2005.

7. On 2 September 2005, the matter came before Collier J, who ordered that the wife’s solicitors serve on the husband medical reports upon which the wife would rely, and gave leave to obtain a hearing date for the hearing of the application with specific issues to be addressed. One of those issues was “whether legal professional privilege attaches to the file of [M and J]”.

8. Various procedural applications were heard before Stevenson J on 19 October 2005. Her reasons delivered on 14 December 2005 included refusing leave to the husband’s solicitors to examine the file of M & J, the wife’s former solicitors, who acted for her at the time the consent orders were made on 22 December 2003.

9. The application of the husband filed on 10 January 2006 asked that he have permission to appeal the decision of Stevenson J of 14 December 2005 refusing leave to the applicant’s solicitors to examine the file of M & J. The affidavit of the solicitor for the husband included as an attachment a draft Notice of Appeal.

10. It is asserted by the husband’s solicitors in their affidavit seeking leave to appeal that the contents of the letter dated 16 December 2004 effectively waived legal professional privilege to the file of M & J as:“The respondent has put directly in issue her alleged lack of capacity to provide proper instructions to [M and J] regarding the Consent Orders.” (p.4 para I)

Issues to be considered

1. The issues to be considered are twofold but depend on the other:

   a)Whether leave to appeal from Stevenson J’s interlocutory orders should be granted; and

   b)Whether the trial Judge erred in denying the husband’s solicitors leave to inspect a file of the wife’s former solicitors, M & J.

Judgment of Stevenson J

1. The Judge first considered the status of medical reports in relation to the wife’s health and whether the reports were permitted under the Family Law Rules 2004. The Judge then considered whether the wife had waived her privilege to the contents of her former solicitors’ file. The Judge noted that one of the bases on which the wife asserted the consent orders should be set aside was that“…the status of her health [affected] her capacity to provide proper instructions in relation to the proposed terms.”

2. The trial Judge also noted that:

   19.      It was submitted on behalf of Mr [Stamp] that Mrs [Stamp] has “put directly in issue her alleged lack of capacity to provide proper instructions to [M & J] regarding the consent orders”. Further, it was submitted that “the question of whether the nature and quality of the applicant’s instructions to her then lawyers was affected by her health cannot be fairly determined without reference to the advices, file notes and other correspondence. Privilege cannot operate to compromise the court’s fact finding tasks”.” 

3. Stevenson J held that the wife had not waived her privilege over the file of M & J. She held that what the wife:

   “20.…placed in issue [was] the impact of her state of health on her capacity to give instructions at the relevant time. It seems to me that the actual instructions given by her and the advice which she received from her solicitors would not touch on that issue. It seems to me that the question of [Mrs Stamp’s] capacity to provide proper instructions might be expected to be a matter for medical evidence

   …

   22.I am not persuaded that Mrs [Stamp] has waived her privilege by asserting that her state of health impacted upon her capacity to give proper instructions to her former solicitors.  I do not accept that it is necessary for Mr [Stamp’s] legal advisors to examine the file of [M & J] to meet that allegation.  Accordingly, I refuse to grant leave to the solicitors for Mr [Stamp] to inspect that file”.

4. The only order made by Stevenson J was that which is contained in the judgment: “I refuse to grant leave to the solicitors for Mr [Stamp] to inspect that file”.

Proposed Grounds of Appeal

1. The proposed Notice of Appeal listed the paragraph numbers of the orders appealed from as 18, 19, 20, 21 and 22, being the paragraph numbers of Stevenson J’s judgment where her Honour gave reasons for her refusal to grant leave.

2. It contains the following grounds:

   “1. There has been an error in law in that Justice Stevenson failed to apply the relevant principals [sic] governing the issue of legal professional privilege as stated in Thomason v the Council of the Municipality of Campbelltown (1939) 39 SR 347.

   2. Her Honour was in error in finding the respondent had not waived her privilege by asserting that her state of health impacted upon her capacity to give proper instructions to her former solicitors.

   3. Her Honour was in error in determining that it was not necessary for the appellant’s legal advisors to examine the file of [M & J] to meet that allegation.”

3. If leave is given and the appeal allowed the husband seeks orders:

   “1. That the appellant’s solicitor have leave to inspect the files of the respondent’s former solicitors relating to her application for property settlement and her workers compensation claim.

   2. That the Respondent pay the appellant’s costs of this Application for permission to appeal.”

4. The reference to the workers compensation claim arises from the fact that the wife had a horse riding accident in 1996. From a document called Statement of Facts – [Mr Stamp] and [Mrs Stamp] (November 2003), notes made by the parties’ mutual friend, a solicitor, for the purpose of settling on a consent order in the property proceedings it is apparent that it was known to both parties that an injury had occurred. In that document there were these paragraphs:

   “10.In 1996 [Mrs Stamp], while horse riding, fell from a horse and hit her head severely and has suffered mental inability since that date.

   11.The nature of [Mrs Stamp’s] incapacity is not apparent in normal discussions but is apparent to persons who knew her before the accident and have known her since the accident such as the writer.

   12.Medical evidence suggests [Mrs Stamp] has a 15 – 20% permanent disability as a result of this accident. She has been receiving workers compensation and is negotiating for a workers compensation lump sum payment believed to be in the vicinity of $90,000.”

5. That document is annexed to an affidavit of Mr F, the solicitor for the husband. It was filed 16 January 2006.

Preliminary Argument

1. Counsel for the respondent argued a number of preliminary points asking that leave not be granted and that if granted in any event the proposed appeal be dismissed. None of these were of any substance and it is not necessary for us to refer to them further.

The Husband’s Summary of Argument

1. Does an assertion by an applicant to a section 79A(1)(a) claim asking that orders be set aside based on the applicant’s health which affected her capacity to give instructions at the time of the consent orders, lead to the lawyers for the respondent being given permission to inspect the file of the applicant’s solicitors at the time of the consent order?

2. It was submitted by counsel for the husband in his written submissions that:

   “11.Her Honour referred (without citation of edition or other reference) to a passage from Cross on Evidence which referred to Mann v Carnell, but failed to consider and apply the issue of inconsistency in the manner required by the authorities. That failure constitutes an error of principle and could also work a substantial injustice. Proper consideration of the issue would have led to the conclusion that the Wife has waived her privilege.” (Original emphasis)

3. It was further submitted that Stevenson J’s failure to apply the principles of inconsistency, as they relate to waiver of privilege, fulfilled the criteria necessary to give leave and allow an appeal against an interlocutory decision.

4. The essence of the husband’s submissions are as this is a pre-trial application, and not an application to adduce evidence, that the common law rules about a waiver of professional privilege apply: Mann v Carnell (1999) 201 CLR 1; and Thomason v Campbelltown Municipal Council (1939) 39 SR NSW 347 at 358. We accept the correctness of this submission.

5. The submissions on behalf of the husband contained a detailed review of the authorities including reference to the judgment of Allsop J in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499. Her Honour did not refer in her judgment to any authorities. As mentioned there is a quote from Cross on Evidence, unfortunately without any reference to an edition.

The Wife’s Summary of Argument

1. It was submitted that the question to be decided is “has there been an implied waiver of privilege over the file of [M & J]?” It was submitted that the answer to that question is clearly “no”. In any event, the application was premature at least until the issue of the wife’s “status of her health” is properly before the Court.

2. In relying on Mann v Carnell (supra), counsel for the husband had referred to a number of other cases in relation to the question of state of mind. Privilege can be waived if a party’s state of mind or knowledge is an issue and legal advice was relevant to the formulation of the state of mind (Subs para 7). Reference was made to Australian Agricultural Co Ltd & AMP Life Ltd [2006] FCA 371. It is also correct that the wife “has not made any assertions as to the content of legal advice given to her and nor has she stated that her decision to enter into the consent property orders was based upon legal advice.” (Subs para 26)

1. We were also asked to consider the clear distinction between disclosing the existence of legal advice and disclosing its substance and content, see British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 and Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (1996) 40 NSWLR 12.

Principles

1. For the Full Court to grant leave to appeal from an interlocutory order it must be shown that the trial Judge erred in principle or that the decision worked a substantial injustice to the appellant.

2. Although no reference was made to Part 3.10 of the Evidence Act 1995 (Cth) we mention that the provisions of that Act are “…confined to the adducing of evidence in the course of a hearing in Court…” Mann v Carnell (supra). This application, being interlocutory in nature, did not require consideration of the Evidence Act 1995 (Cth). Consequently it is to the common law that reference must be made. See Commissioner of Taxation v Rio Tinto Ltd (2006) 229 ALR 304 particularly at paragraphs 43, 45-47 and 51.

3. The most significant decision remains that of Mann v Carnell (supra). Reference is often made in the context of arguments similar to this case to Thomason v Campbelltown Municipal Council (supra) particularly at 359 where Jordan CJ said in relation to a case where one of the issues was what advice the plaintiff had received from her legal advisors as to her alternative legal rights, that “…since the fact and nature of the advice is an issue in the case, I am of the opinion that privilege cannot be raised to prevent the proof of the advice”.

4. In Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltdv Anors (1995) 37 NSWLR 405, Giles CJ of the Commercial Division held that the principle extended to a situation where parties had made allegations raising the issue of their corporate states of mind, being states of mind to which their legal advice is, “likely to have contributed, they cannot claim legal professional privilege for that advice”. Of course it needs to be remembered that the decision of Giles CJ in Ampolex Ltd v Perpetual Trustee Co (supra) was prior to Mann v Carnell (supra) and to the extent that it was founded on concepts of fairness caution needs to be applied.

5. As has already been observed, the decision in Mann v Carnell (supra) remains the greatest influence on this subject. The High Court (Gleeson CJ, Gaudron, Gummow and Callinan JJ) said of the law relating to waiver of privilege at common law where there is, as in this case, no express or general waiver of privilege:

   “28.At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client's version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer's evidence as to advice given to the client will be received.

   29.Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.”

6. There is a move away from considerations of general fairness. The focus is on the inconsistency of an act, in this case the wife providing particulars of her claim, while maintaining the confidentiality of the communications between herself and her former solicitors.

7. The reference by counsel for the respondent to the approach to be taken where the claim of loss of privilege relates to what is said in pleadings is interesting in this case. At paragraph 117 of DSE (Holdings) (supra) reference was made to a case heard by a Master in Western Australia (BP Australia Ltd v Stallwood [2000] WASC 75). Allsop J, we think correctly, said that the propositions set out by the Master were too widely stated, and referred to the decision of Wheeler J in Commonwealth of Australia v Temwood Holdings Pty Ltd (2002) WASC 107 at paragraph 10 where her Honour said:

   “10.…On the other hand, a party may necessarily put its state of mind in issue in the proceedings by, for example, pleading reliance upon some representation or other or by seeking rectification of the contract for mistake; or a state of mind may be put in issue by some evidentiary assertion which is clearly relevant to the issues between the parties. In these latter types of cases, fairness clearly requires the waiver of the privilege in relation to legal advice which may have contributed to that state of mind. It is to be noted, however, that it is the conduct of the party who possesses the privilege which is capable of waiving it. It is not apparently open to another party to litigation to force waiver of a party’s legal professional privilege by making assertions about, or seeking to put in issue, the party’s  state of mind.”

8. In British American Tobacco Service Ltd (supra) after referring to a ruling of the trial Judge at paragraph 127 Phillips, Batt and Buchanan JJA agreed that:

   “127.… “Privileged documents are not available for inspection merely because they might throw light on the strength or weakness of the case as to specific issues or generally.…”

Conclusion

1. It seems that the wife proposes that the head injury of 1996 produced a mental disability, which affected her capacity to provide proper instructions to her solicitors when she agreed to consent orders in December 2003. There is expected to be medical evidence about any disability. The workers compensation records may provide evidence about her injury.

2. If there was a disability, then there must be an issue about the extent to which it affected her capacity to give instructions to her solicitors and how it affected her proper settlement of the property dispute. That will inevitably draw attention to the role played by her solicitors, and any advice to and influence upon the wife. An obvious question is what was the extent and manner of her instructions to them?

3. We respectfully cannot agree with the learned Judge, who said that “…the actual instructions given by her and the advice which she received from her solicitors would not touch on the issue (of the impact or her state of health or her capacity to give instructions)”. It is true that medical evidence may be important, but it would be wrong to allow that evidence to be given, and then exclude the possibility of evidence showing the interaction between her and her solicitors.

4. The wife has raised the issue about her capacity to provide proper instructions. That issue is inconsistent with the maintenance of her usual right to procedural legal privilege. She must be taken to have waived her right to that privilege. Accordingly we are satisfied there was an error of principle and leave should be granted.

5. In our view there are not sufficient circumstances outlined by the successful appellant that would make it appropriate that there be a departure from the provisions of s 117(1), namely that each party to the proceedings should bear his or her own costs. It is, however, appropriate that each party be entitled to a costs certificate pursuant to the provisions of the Federal Proceedings (Costs)Act 1981 (Cth) on the basis that the appellant’s appeal succeeded on a question of law.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court

Associate:

Date: 11 May 2007