Towercom Pty Ltd v Fahour

[2011] VSC 455

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION

PRACTICE COURT

S CI 2011 2146

TOWERCOM PTY LTD (ACN 074 312 922)	Plaintiff
V
MOUSTAFA FAHOUR	Defendant

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JUDGE:	MACAULAY J
WHERE HELD:	Melbourne
DATE OF HEARING:	8 September 2011
DATE OF JUDGMENT:	9 September 2011
CASE MAY BE CITED AS:	Towercom Pty Ltd v Fahour
MEDIUM NEUTRAL CITATION:	[2011] VSC 455

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PRACTICE AND PROCEDURE – Waiver of client legal privilege – Whether client legal privilege is waived by the disclosure in pleadings of the substance of the evidence or of a document – Mann v Carnell (1999) 201 CLR 1 - Civil Procedure Act 2010 (Vic) s 26 - Evidence Act 2008 (Vic) s 122.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. L. Evans	Pryles & Co.
For the Defendant	Ms G. L. Schoff SC Ms J.E. Treleaven	Russell Kennedy

HIS HONOUR:

1. In its claim against Moustafa Fahour for wrongly causing it to sell land below market value, Towercom Pty Ltd pleads, as an integer in its particulars of loss, that the market value of the land was between $1.525 million and $1.85 million.  Towercom claims that its loss is the difference between market value and the sale price of $1 million. 

1. Fahour says that a (written) valuer’s opinion, which presumably supplied the foundation for that allegation, must be disclosed under s 26(1) of the Civil Procedure Act 2010 (Vic) because it is a document which is critical to the resolution of the dispute. Section 26 provides:

“(1)Subject to subsection (3), a person to whom the overarching obligations apply must disclose to each party the existence of all documents that are, or have been, in that person’s possession, custody or control-

…

(a)of which the person is aware; and

(b)which the person considers, or ought reasonably consider, are critical to the resolution of the dispute.

…

(3)Subsection (1) does not apply to any document which is protected from disclosure-

(a)on the grounds of privilege which has not been expressly or impliedly waived; or

(b)under any Act (including any Commonwealth Act) or other law.”

1. For the purpose of the application before the Court, Towercom has admitted a valuer’s opinion exists and does not dispute that it may be critical to the resolution of the dispute. But, it says that opinion is privileged and that privilege has not been waived. Thus, because of s 26(3)(a) of the Civil Procedure Act, it says s 26(1) does not apply to the valuer’s opinion.

1. To that Fahour says privilege has been waived by the disclosure of the substance of the evidence in Towercom’s pleading.

1. On Fahour’s application, an associate judge ordered that Towercom disclose the valuer’s opinion (and another document to which I refer later). Towercom appealed. The question I have to decide is whether Towercom has breached s 26(1) of the Civil Procedure Act by refusing to disclose the valuer’s opinion.  The real issue is whether any privilege attaching to the document has been waived by Towercom.

1. At common law, waiver of the privilege is governed by the principles in Mann v Carnell.[1]  Under the Evidence Act 2008 (Vic) it is governed by s 122.

   [1](1999) 201 CLR 1.

1. Under both the essential question is: has Towercom acted in a way that is inconsistent with it objecting to the production of the valuation opinion on the basis that doing so would disclose the contents of a confidential document prepared for the dominant purpose of it being provided with legal services for litigation?[2]

   [2]Ie. client legal privilege: Evidence Act 2008 (Vic), s 119.

1. There is no dispute that the valuation was prepared for such a purpose and is otherwise protected by privilege.  The only question is whether Towercom has acted inconsistently with the maintenance of the privilege by stating in its particulars of loss the market value of the property.  That value is presumed to reflect the opinion contained in the written valuation.

1. There had been some debate whether I should approach the question of inconsistency by applying the common law only, as in Mann v Carnell, or s 122 of the Evidence Act, assuming there is a difference.  I will consider each of them in turn. 

1. First, I turn to the common law.  Adopting the principles as stated in Mann v Carnell,[3] the question is whether Towercom acted inconsistently with the maintenance of confidentiality in the valuation by saying, in effect:  ‘I will tell you what I propose to prove market value to be.  But I will not presently disclose to you the document which is the basis of me saying I will be able to prove that value, because it is confidential’.

   [3](1999) 201 CLR 1, 13 [28], [29].

1. In my view, it is not inconsistent with the maintenance of confidentiality in a valuer’s opinion of market value, supplied confidentially to a solicitor to provide a proper basis for alleging a fact in a pleading, to plead that value.

1. It is important to recognise the stage the proceeding has reached.  An allegation of material fact is not a statement of evidence.  It is not meant to be evidence.  It is only an allegation of fact.

1. A solicitor must have, and now must certify[4] that he or she has, a proper basis for making an allegation in a pleading.  However, that circumstance does not convert the pleading of a material fact, the proper basis for which is to be found in an expert opinion shown to the solicitor, into the disclosure of evidence or the substance of evidence or even the substance of the opinion.  That is so unless, on the face of the pleading, the pleading goes beyond merely asserting a material fact and asserts the existence of the opinion and its substance.

   [4]Civil Procedure Act2010 (Vic), s 42(1)(a).

1. Here, the defendant relies upon two things:  first, the pleading of the material fact and, secondly, an acknowledgement that a confidential valuation, most probably the basis for that allegation, actually exists. 

1. But the existence of such an opinion should be inferred in every case, particularly now, where an assertion of fact is made which, by its nature, depends upon expert opinion. And, it is not to act inconsistently with the maintenance of confidentiality in a document to admit its existence, even though it may be inferred that the document is the foundation for a solicitor to be able to certify that proper basis exists for pleading a fact.

1. In my view, Fahour’s argument amounts to saying this; ‘because you acknowledge you have a document that supplies the proper basis for asserting a material fact, the assertion of that material fact is inconsistent with preserving any confidentiality in the document’.  I disagree.  I do not consider that the plaintiff acted inconsistently under the Mann v Carnell principles.

1. I then turn to s 122 of the Evidence Act. Section 122 relevantly provides:

“(2)Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.

(3)Without limiting subsection (2), a client or party is taken to have so acted if-

(a)the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or

(b)the substance of the evidence has been disclosed with the express or implied consent of the client or party.”

[emphasis added].

1. So the question is:  is Towercom ‘taken to have so acted’ because it has consensually disclosed the substance of the evidence or of a document?[5]  In my view Towercom is not to be taken to have so acted.  

   [5]In relation to disclosure under s 26 of the Civil Procedure Act2010 (Vic), s 131A(1) of the Evidence Act2008 (Vic) arguably applies s 122, ‘with any necessary modification’, as if the objection to producing a document was an objection to the adducing of evidence.

1. I do not hold that view because of any absence of consent, or because the plaintiff has acted under compulsion in having to plead market value to properly particularise its loss, as was argued for Towercom.  Rather, it is because the assertion of market value in the particulars of loss is not disclosure of the substance of evidence or the substance of a document, and does not purport to be.  It is the assertion of a fact for which it was once assumed, and now must be certified, there is a proper basis for the making of it.  The evidentiary basis for the assertion of the fact, for which the solicitor certifies there is a proper basis, remains to be seen.

1. In conclusion, whether it is the common law test that applies, or s 122 of the Evidence Act that governs the matter, there has been no express or implied waiver of the privilege in the valuer’s opinion admitted to exist.

1. I turn to the issue of Patricia Ilhan’s intentions also referred to in the particulars of loss.  If (which is not apparent) a document exists to support the allegation about Patricia Ilhan’s intentions, and privilege is claimed, the same reasoning which I have just articulated would apply to that document.  In other words, any privilege existing in such a document would not have been waived merely by the allegation of her intentions, as a fact, in the particulars of loss.

1. Therefore, I am not satisfied there has been any contravention of s 26 to found the making of a s 29 order under Civil Procedure Act.  The appeal is allowed, and the application in the summons will be dismissed. 

1. However, I will direct, under s 26(2)(a) of the Civil Procedure Act, that disclosure of such documents as must be disclosed because of s 26(1) be made within seven days.

1. The orders will be:

(1)The appeal is allowed and the orders of the Honourable Associate Justice Randall made 19 August 2011 are set aside.

(2)The plaintiff make disclosure in accordance with s 26(1) of the Civil Procedure Act 2010 (Vic) by 4pm 16 September 2011.

(3)The defendant pay the plaintiff’s costs of and incidental to the defendant’s summons filed 15 August 2011, and of the appeal commenced by notice of appeal filed 24 August 2011.

1. (Discussion re certificate)

(4)Under s 4 of the Appeal Costs Act 1998 (Vic), the defendant be granted an indemnity certificate in respect of the costs of the appeal.