Transport Industries Insurance Co Ltd v Masel
[1998] VSC 114
•19 October 1998
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION
Not Restricted
No. 2672A of 1986
TRANSPORT INDUSTRIES Plaintiffs INSURANCE CO LTD & ORS v GEOFFREY ROBIN MASEL & ORS Defendant
---
JUDGE: Eames, J. WHERE HELD: Melbourne DATE OF HEARING: 24, 25 September, 5, 12 October 1998 DATE OF RULING: 16, 19 October 1998 MEDIA NEUTRAL CITATION: [1998] VSC 114
---
DISCOVERY - legal professional privilege - action against former solicitors - claims in negligence and breach of fiduciary duty - defence of laches and acquiescence - reply alleging estoppel - whether privilege as to advice by new solicitors waived by nature of plaintiff's pleadings and issues raised in defence - whether part only of documents may be disclosed.
---
APPEARANCES: Counsel Solicitors For the Plaintiffs Mr J. Dwyer QC, with Norton Smith Mr G. Colquhoun and
Ms M. HughsonFor the 1-26th Defendants Mr S. Kaye QC with Deacons Graham & James Mr P. Cawthorn
HIS HONOUR:
The first to twenty sixth defendants (the "solicitor defendants") seek discovery of a wide range of documents in the possession of the plaintiffs, being documents constituting legal advice given to the plaintiffs between 1 January 1986 and May 1993 by the legal advisors who replaced the solicitor defendants as advisers to the plaintiffs after the termination of the retainer of the solicitor defendants. The plaintiffs have objected to production of those documents and have claimed legal professional privilege. The solicitor defendants do not dispute that the documents are privileged, but submit that privilege has been waived by virtue of matters pleaded in the Statement of Claim and Reply of the plaintiffs.
The plaintiffs’ action against the solicitor defendants alleges that as solicitors to the plaintiffs the solicitor defendants acted negligently and/or in breach of fiduciary duty owed to the plaintiffs in advising and acting on behalf of the plaintiffs who were underwriters for indemnity insurance cover held by the Health Commission of Victoria on behalf of Victorian hospitals and doctors in the year from 1 April 1980.
The application for discovery of these documents has been addressed before me on a number of occasions but was repeatedly adjourned. The matter was first adjourned at the suggestion of counsel for the plaintiffs so that it could be re-considered after the parties and myself had heard the detailed opening address made on behalf of the plaintiffs. The matter was subsequently adjourned on several occasions in consequence of the significant changes to the pleadings which were taking place, primarily by the plaintiffs (although some changes were also made to the pleadings of the solicitor defendants, not necessarily being made merely in response to amendments to the plaintiffs' pleadings). The pleadings remain documents of monstrous obfuscation, being so lengthy and complex as to hinder rather than facilitate any understanding of the issues between the parties, and make the task of considering an application such as this more onerous than necessary.
When the matter of the discovery application was last before me, and I then heard substantial argument, the issues which I then addressed related primarily to a limitation of actions defence, and to the plaintiffs' reply to that defence. In their Defence the solicitor defendants had pleaded that the causes of action were statute barred, and in their Reply to that defence the plaintiffs had pleaded that they had the benefit of s. 27(b) of the Limitations of Actions Act 1958 in that their right of action as to those causes of action which were apparently pleaded outside the limitations period, were said to have been concealed by the fraud of the solicitors.
Counsel for the solicitors argued before me, on the last occasion, that insofar as the plea was made by the plaintiffs that their rights of action had been concealed by the fraud of the solicitors until a time after the expiration of the limitation period, then the plaintiffs had rendered relevant the question whether they had in fact been aware of their rights of action at a time prior to the expiration of the limitation period. That, so it was submitted, made it relevant to know what legal advice as to their rights of action the plaintiffs had received within the relevant period from their own solicitors and counsel, and the plaintiffs had waived their privilege as to legal advice which was relevant to the issues raised in their Reply.
That is no longer the situation, because the plaintiffs no longer seek to defeat the limitation defence by pleading that their right of action had been concealed by the fraudulent conduct of the solicitor defendants. That allegation has been abandoned by the plaintiffs, and by virtue of that abandonment counsel for the plaintiffs has submitted that the application for discovery - which had been mainly predicated upon the existence of that plea in the Reply - can no longer be sustained.
Mr Cawthorn, junior counsel for the solicitor defendants, who argued the case for discovery, submitted that documents under several distinct categories should be discovered. In all instances, the documents constituted legal advice provided to the plaintiffs by the solicitors or counsel who acted on their behalf after the retainer of the solicitor defendants was terminated in 1986.
Broadly, counsel for the solicitor defendants identified the following categories of documents for which, so it was said, the claim for legal professional privilege was impliedly waived by the plaintiffs:
(a) documents relating to allegations in the pleadings concerning the plaintiffs’ lack of awareness of their entitlement to have avoided their policy of insurance; (b) documents relating to allegations in the pleadings which introduce as a relevant issue the corporate state of mind of the plaintiffs with respect to the plaintiffs' rights of action against the solicitor defendants; in particular, the plaintiffs' knowledge of its rights to bring proceedings in the form in which the statement of claim was amended in 1993; (c) documents relating to allegations in the pleadings that because the defendants had wrongly advised the plaintiffs as to their obligation to grant indemnity pursuant to the policy the plaintiffs paid out sums, and lost the opportunity to recover those sums. That allegation implied that the plaintiffs had not received independent legal advice, after the solicitor defendants had ceased to act, as to their entitlement to recover the sums which had been paid out in accordance with the solicitor defendants' advice.
At my direction, the plaintiffs filed an affidavit, sworn by Kenneth Gowans, identifying all documents which they held which related to legal advice received by the plaintiffs between the relevant dates, which advice was relevant to:
(a) the entitlement of the plaintiffs to avoid the policy; (b) the knowledge of the plaintiffs as to their entitlement to bring the proceedings in the form, and with the causes of action which were currently alleged in the statement of claim, as amended as at that time; (c) indemnity questions which arose concerning claims under the policy but after the solicitors had ceased to act for the plaintiffs.
The affidavit of Mr Gowans, sworn 28 August 1998, identified 356 documents as falling within the description of documents under paragraphs 9(a) and (b), above, and a further seven documents as falling within the description of paragraph 8(c), above. The decision to adjourn the argument on this application until after the opening address was appropriate, given the complexity of the pleadings, to which I have already made reference, but it has the effect that at a time when some witnesses have already completed their evidence I am now called upon to decide whether hundreds of additional relevant documents should be discovered to the solicitor defendants.
Although the affidavit of Mr Gowans states baldly that the documents relate to the topics which I identified, no doubt the documents also contain a range of advice which both generally and specifically relates to matters which are not topics identified in paragraph 9(a)(b) or (c) above. For reasons which I will later state, in making orders that so much of, and so many, documents as address particular topics must be discovered, I will permit the plaintiffs to excise such other topics from the documents when they are discovered.
LEGAL PRINCIPLES
In Telstra Corp Ltd v BT Australasia Pty Ltd (1998) 156 ALR 634 Branson and Lehane JJ very recently examined the various categories of cases in which the courts have ruled that documents otherwise the subject of legal professional privilege should be discovered. I gratefully adopt their Honours convenient summary of the relevant legal principles.
In the first place, as their Honours noted, at 645ff, where professional negligence is alleged against a legal practitioner then the entirety of the professional advice given by that practitioner to the plaintiff would be admissible (see Lillicrap v Nalder & Son [1993] 1 WLR 94). Secondly, where the state of mind of a plaintiff was relevant then evidence could be led concerning legal advice given to the party which would be relevant to the party's state of mind (see Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405, at 411 Thomastown v Cambelltown Municipal Council (1939) 39 SR (NSW) 347). The third category of cases are those where a party has made use of privileged material in such a way as to render it unfair to the opponent to deny the opponent the opportunity to make reference to privileged material. In Attorney General (NT) v Maurice Mason and Brennan JJ at 487 identified the element of unfairness as an important factor leading to the finding of an implied waiver of privilege, where there and been a limited disclosure (see, too, Goldberg v Ng (1995) 185 CLR 83, at 96).
An additional category of cases identified by Branson and Lehane JJ was that where the fact finding task of the court would be seriously compromised, or the court might be misled, were a party to be denied the opportunity to refer to privileged material of the other party (see Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419; Pickering v Edmunds (1994) 63 SASR 357). Although reference was made to this category as having application in the present case it does not seem to me that any case has been made out to suggest that such risk of misleading of the court is involved here, and it does not become necessary for me to decide whether it is settled law that such a category should be recognised by the court.
Branson and Lehane JJ saw the thread of unfairness and of implied waiver as being relevant to each category. Their Honours continued at 647:
"The legal professional privilege cases are, in our view, to be analysed in the same way. The quality of any particular legal advice, and the extent, if any, to which it was causative of loss and damage, can only properly be assessed once it is placed in the context of the totality of legal advice received by the client. The client, by bringing the proceeding, is taken to have consented to the use of the privileged material, or to have waived reliance on the privilege which would otherwise attach to such material. Reliance on the privileged nature of the material would, in the circumstances, be unjust and would inhibit the proper functioning of the legal process.
Where, as in this case, a party pleads that he or she undertook certain action ‘in reliance on’ a particular representation made by another, he or she opens up as an element of his or her cause of action, the issue of his or her state of mind at the time that he or she undertook such action. The court will be required to determine what was the factor, or what were factors, which influenced the mind of the party so as to induce him to act in that way."
In the case before me, the defendant solicitors relied upon Lillicrap v Nalder & Son [1993] 1 WLR 94 as authority for the proposition that where a plaintiff sues his former solicitor for negligence he waives all claim to privilege in relation to all matters which were relevant to an issue in the proceedings. That would be so particularly where the question of causation of loss is relevant, where, for example, it is asserted that loss occurred by reason of negligence of solicitors in failing to advise on a matter, and where the solicitors assert, and wish to prove by reference to other files, that their advice would not have been acted on, even if given. However, as Dillon LJ held at 99, the waiver only extended to such matters as were directly at issue in the proceedings and were otherwise admissible and relevant. As his Lordship noted: "There is no waiver for a roving search into anything else in which the solicitor or any other solicitor may have happened to have acted for the clients. But the waiver must go far enough, not merely to entitle the plaintiff to establish his cause of action, but to enable the defendant to establish a defence to the cause of action, if he has one".
The principles discussed in the above passage of the judgement of Branson and Lehane JJ apply in the present case although the plaintiffs do not allege that they took specific action in reliance on advice, but, rather, that they failed to take action, because they had not been informed of relevant facts, matters and circumstances known to their solicitors but withheld from their clients, the plaintiffs, by the solicitors.
Counsel for the solicitor defendants submitted that although the pleadings no longer refer to s. 27 of the Limitations of Actions Act the pleadings still make relevant the state of mind of the plaintiffs, in particular as to whether or not the plaintiffs were ignorant of their right to bring proceedings against the various defendants until the time when they were finally brought, thus delaying those proceedings and causing additional losses and damage. Furthermore, so it is submitted, the plaintiffs continue to assert that they were deprived of an opportunity to have brought proceedings earlier than they did because of the concealment of facts, matters and circumstances known to the solicitors, and concealment of their right of action.
For a matter to be concealed it must have been unknown from any other source, so it is submitted on behalf of the solicitor defendants, and it is relevant therefore whether the plaintiffs had gained from their new solicitors knowledge of the very matters which they allege were concealed from them by the former solicitors, the first to twenty sixth defendants.
Legal professional privilege is a matter of great importance to the system of justice and the public interest upon which it is based assumes paramountcy over the more general public interest that in the interests of a fair trial all relevant documentary evidence should be available to the court: Grant v Downs (1976) 135 CLR 674 at 685; Baker v Campbell (1983) 153 CLR 52 at 79, 93-4; Attorney General v Maurice, supra at 487; Commissioner Australian Federal Police v Propend Finance Pty Ltd 141 ALR 545, at 583-4, per McHugh J. The right to claim privilege should not be sacrificed, not even to promote the search for justice or truth in an individual case: Attorney General v Maurice, at 490; Propend, supra, at 608, per Kirby J).
In my opinion, not all of the matters to which Mr Cawthorn pointed each justify the conclusion that there has been waiver of privilege. I will deal with the various categories, in turn.
ENTITLEMENT TO AVOID THE POLICY
The first category of documents for which discovery is sought are those related to the question of the plaintiffs' right to avoid the policy. I am satisfied that privilege has been waived as to documents under this category.
Paragraph 84.16 of the Statement of Claim alleges that by reason of various deficiencies in the advice given to them by the solicitor defendants the plaintiffs lost the opportunity to avoid the insurance policy until 30 June 1993. Mr Cawthorn submitted that that allegation makes relevant the question whether the plaintiffs had been given advice by other legal advisers who replaced the solicitor defendants after their retainer was terminated in 1986, and who gave advice to the plaintiffs prior to 30 June 1993 concerning the plaintiffs' entitlement to avoid the policy.
From the time when the solicitor defendants ceased to act, until 30 June 1993, the plaintiffs were receiving legal advice from other firms of solicitors, and the affidavit of Kenneth Gowans, sworn 28 August 1998, deposes to the fact that in the period from 1 January 1986 until May 1993 legal advice was in fact received by the plaintiffs relating to the plaintiffs’ entitlement to avoid the policy. In my opinion, the present state of the pleadings renders any documents which relate to that issue relevant, and by virtue of the pleading it would be unfair that the plaintiffs might make that allegation in suing their former solicitors (against whom they seek to recover exemplary damages for contumelious disregard of their rights as clients) but be permitted to deny examination of other legal advice which they have received in the relevant period which might possibly demonstrate that they knew of their right to avoid the policy but chose not to do so, or else delayed doing so. The plaintiffs have waived their privilege with respect to those documents, in my view.
DOCUMENTS CONCERNING STATE OF MIND OF PLAINTIFFS
The next category of documents for which the solicitor defendants seek discovery are those for which the solicitor defendants contend there has been waiver of privilege because they make relevant the state of mind of the plaintiffs, an issue on which legal advice is likely to be relevant.
Counsel for the solicitor defendants identified a very wide range of documents which it was said became discoverable under this heading, concerning alleged concealed facts as well as legal advice relating to the various causes of action open to the plaintiffs. The claim for discovery was too wide, in my view, but a limited range of documents may be said to have been the subject of implied waiver.
(a) Advice on indemnity claims
By paragraph 84.16 of the statement of claim the plaintiffs allege that the underwriters lost the opportunity which presented itself in July 1981 to avoid the plaintiffs' policy ab initio with HCV and the hospitals. Thereafter, so it is alleged, the opportunity to avoid the policy only arose for the plaintiffs at 30 June 1993, the chance to have done so earlier being denied by virtue of the myriad alleged acts and omissions of the solicitor defendants which constituted breaches of duty of care and breaches of fiduciary duty. In paragraph 84.16 the plaintiffs further allege that they lost the opportunity to recover sums which had been incorrectly paid by way of indemnity as at July 1981, and that when the opportunity to do so had re-presented itself, at 30 June 1993, the plaintiffs had by then paid almost $3,000,000 by way of indemnity for doctors and hospitals on the basis of continuing incorrect advice, concealment of facts, and breach of duty of the solicitor defendants.
By paragraph 72.7 of the statement of claim the plaintiffs separately pleaded that by virtue of the breaches of duty of the solicitor defendants in giving incorrect advice as to the liability to indemnify doctors and hospitals - where, in truth, there had not been proper notification under the policy of circumstances which might give rise to claim or else where the claim should have been referred to the previous years' insurer, NEM - the plaintiffs had paid out sums by way of indemnity which should not have been paid and had lost the opportunity to recover those sums paid away, because the solicitors failed to advise the plaintiffs of the true terms of the policy, in particular clause 3 of the NEM policy and Clause 12 of the plaintiffs' policy. Because of that lost opportunity, so it is claimed, the plaintiffs suffered loss and damage which, by paragraph 32, is said to comprise sums paid by way of indemnity under the policy amounting to nearly three million dollars, together with loss of use of that money and lost interest which would have accrued on those sums.
The allegations under pars 84.16 and 72.7 therefore make relevant the question whether the plaintiffs were in fact in ignorance of their right to refuse to provide indemnity until 30 June 1993. From the time when the solicitor defendants ceased to act, until 30 June 1993, the plaintiffs were receiving legal advice from other firms of solicitors, as the affidavit of Kenneth Gowans sworn 28 August 1998 confirms. Mr Gowans deposes that between 1 January 1986 and May 1993 not only was legal advice received by the plaintiffs relating to the plaintiffs' entitlement to avoid the policy but also advice as to the indemnity claims brought by hospitals and doctors. In my opinion, the present state of the pleadings renders any documents which relate to the latter issue relevant (as, indeed, is the case with respect to legal advice concerning the question of avoidance).
By virtue of the pleading it would be unfair that the plaintiffs might make that allegation in suing their former solicitors (against whom they seek to recover exemplary damages for contumelious disregard of their rights as clients) but be permitted to deny examination of other legal advice which they have received in the relevant period which might possibly demonstrate that they knew of their right to avoid the policy, and of the true terms of the policies, and of their entitlement to have denied indemnity, but chose not to take those steps or else delayed doing so.
The plaintiffs have waived their privilege with respect to those documents, in my view. I will order that the plaintiffs disclose legal advice relating to the claims for indemnity of doctors and hospitals. It is not entirely clear on my reading of the pleadings whether the claim that the plaintiffs suffered loss of opportunity to recover sums paid out by way of indemnity is said to have operated until 30 June 1993 (as is alleged to be the period of lost opportunity with respect to their opportunity to avoid the policy) or to an earlier period. The application by the solicitor defendants, and the affidavit of Gowans, identifies a slightly shorter period, "May 1993" and I will apply the date 31 May 1993 in my order.
(b) Right to bring proceedings in their present form
In his affidavit Gowans lists a very large number of documents which fall into the category of legal advice received relevant to the plaintiffs' entitlement to avoid the policy but the schedule in which they are listed also includes documents under another category, namely, advices which are relevant to the knowledge of the plaintiffs as to their entitlement to bring the proceedings "in their present form". The question of the privilege of such documents falls to be separately considered, because when that affidavit was sworn the "present form" of the proceedings was different to that which is now before me.
Although counsel for the solicitor defendants identified a wide range of documents as being discoverable under this heading, I have concluded that only documents relating to advice concerning the plaintiffs' entitlement and/or the appropriateness and/or the timing for bringing equitable claims for breach of fiduciary duty against the solicitor defendants should be discovered.
Substantial amendments to the pleadings have very recently been made, in particular to the Statement of Claim and Reply. The amendments reflected, and responded to, the fact that the solicitors in their defence had pleaded the statute of limitations with respect to many of the common law claims for breach of duty. In reply to that defence the plaintiffs had pleaded, pursuant to s.27(b) of the Limitations of Action Act that their knowledge of their rights of action had been concealed by the fraud of the solicitors. By virtue of the most recent amendments, that plea has now been abandoned, and coupled with the abandonment of that plea the common law claims which gave rise to the limitations defence, and were at risk of having been declared by me to have been issued out of time, have also been abandoned. The plaintiffs have continued, or re-formulated, most of the claims, however, by asserting a claim in equity for breach of fiduciary duty. To those claims the defendants plead in their defence that the claims are barred by reason of laches or acquiescence.
I should make it clear that in stating that the plaintiffs have by their most recent amendment to the statement of claim abandoned many of the common law actions which had previously been brought, and which arguably were out of time, I am merely accepting the assertion of counsel for the plaintiffs that that is the effect of the most recent amendments. I have some doubt, in fact, whether the amendments necessarily achieve the intended result. I note, for example, that while I was informed that the common law claim which had appeared in paragraph 65 has now been abandoned, and that only a claim for breach of fiduciary duty is now pursued with respect to that issue, my reading of what I believe is the most recent amendment suggest that that is not so. I say that because, for example, paragraph 65.10 continues to refer to breaches of duties referred to in paragraphs 48 and 49.1 of the Statement of Claim, and a reading of those sub-paragraphs discloses that they continue to make allegations of breaches of common law duty of care (and possibly breach of contract). This illustrates the difficulty which the state of the pleadings creates in attempting to understand the issues between the parties. For the purpose of this ruling, however, I have assumed that all of the intended changes by way of amendments to the pleadings have in fact been achieved. There was some urgency in my making this ruling, so that the trial not be further delayed, and witnesses be thereby inconvenienced. The task of checking those assertions in the limited time available to me was simply impossible, so complex, and confounding, are the pleading documents.
Mr Cawthorn, for the solicitor defendants, maintained the application for discovery of the documents on the basis that although the specific issue of concealment raised by the pleading of s.27 of the Limitations of Actions Act is no longer pursued, the same issues of alleged concealment and lack of knowledge of their rights remain relevant, and, having been raised by the plaintiffs in their pleadings, constitute a waiver of privilege as to advice which the plaintiffs had received on those issues. Mr Cawthorn submitted that the documents are discoverable because the plaintiffs continue to make allegations in the pleadings about their knowledge, or lack of knowledge, of their rights to take action against the solicitors, and others.
Mr Colquhoun, junior counsel for the plaintiffs, submitted that there is no longer any relevance for discovery of advices relating to the plaintiffs' entitlement to bring the proceedings in their present form, since there is no issue, now, between the parties as to fraudulent concealment of their right of action, and any common law claims which are pursued are brought within the limitation period. As to the claims in equity, for breach of fiduciary duty, those are not subject to the limitation period and thus the question of when the plaintiffs might have received advice as to their entitlement to bring such claims is of no relevance, so it is submitted.
Mr Cawthorn submitted that it is relevant to these proceedings whether the plaintiffs were guilty of laches and acquiescence because that defence is pleaded by his clients. Hence, it is relevant whether there was undue delay in bringing the proceedings for breach of fiduciary duty and one matter relevant to the question whether there had been such delay is whether the plaintiffs had advice which would have enabled them to bring the proceedings at an earlier time.
Where the breach of fiduciary duty is alleged that is an equitable remedy, and in seeking equitable relief the party must demonstrate that it has acted with due diligence and has not simply allowed matters to stand for an unreasonable period: Erlanger v New Sombrero Phosphate Company (1878) 3 AC 1218. In deciding whether the defence of laches will succeed the court may have regard to such factors as the period of any delay in bringing the proceedings, the prejudice which the other party has suffered due to the delay, and the extent to which the prejudice was caused by the actions of the plaintiff. The degree of diligence exercised by the plaintiffs would also be relevant: see Nelson v Rye [1996] 2 All ER 186, at 200-201, per Laddie J. Mr Cawthorn submitted that if the plaintiffs had received advice from their new legal advisers as to their right to bring proceedings against the solicitor defendants then any delay in taking those proceedings was not due to the fault of the defendants but to the laches of the plaintiffs. Thus, it is relevant to know what advice they received as to their right to bring such proceedings at a time earlier than they did.
The fact that it is the defendants which raise the laches defence does not prevent the principle of waiver from applying. If the privileged matter is relevant and is subject to reasonable and legitimate inquiry by the court then it does not matter whether the issue is raised by the person holding the privilege or by the opponent: Wardrope v Dunn (1996) 1 QdR 224 at 226.
In response to the defence of laches the plaintiffs in their Reply assert that the solicitor defendants are estopped from asserting laches and acquiescence.
Before the most recent amendment to the Reply it pleaded, in paragraph 3.3, a wide range of conduct, involving suggested unconscionable concealment of facts by the solicitor defendants, as constituting an estoppel of the defence of laches. That paragraph of the Reply has now been deleted, and the claim for estoppel in response to the laches defence relates solely to decisions of Cummins J and, on appeal, of the Full Court (Masel v Transport Industries Insurance [1995] 2 VR 328) in which the court rejected an application to strike out the action for want of prosecution, and in which the courts made findings as to the contribution of the solicitor defendants to delays in the proceedings.
In my view, even though the plaintiffs now seek to overcome the laches defence by claiming that the defendants are estopped from alleging laches merely by reference to the judgments of the court, rather than to express assertions of concealment by the solicitors, the defence of laches does make it relevant whether the plaintiffs were delayed in bringing the proceedings for breach of fiduciary duty by reason of the acts of the solicitor defendants. If the plaintiffs had advice that they were entitled to bring such proceedings at an earlier time, but failed to do so, then the laches defence may gain some strength. In any event, quite apart from the question whether delay might provide a defence, the issue of damages is likely to be affected by the question of the timing, or delay, in bringing proceedings. In their prayer for relief against the solicitor defendants the plaintiffs seek exemplary damages, alleging that the solicitor defendants acted in contumelious disregard of their interests.
I conclude, therefore, that fairness dictates that the solicitor defendants should have the opportunity to examine the advice which the plaintiffs received as to the bringing of claims for breach of fiduciary duty during the relevant period after the solicitor defendants had ceased to act.
In support of the assertion that the plaintiffs had waived privilege with respect to any and all legal advice, in the relevant period, addressing potential causes of action which were open to the plaintiffs, Mr Cawthorn referred me to various passages in the plaintiffs' pleadings, in particular in the Reply, which were said to constitute a claim that the plaintiffs were not aware of their legal rights and of the causes of action, generally, open to be pursued, by virtue of concealment of such matters by the solicitor defendants. Additionally, it was submitted that the concealment of such matters raised the question of the state of mind of the plaintiffs and, thus, all allegedly concealed facts became relevant, and any advice concerning them also was discoverable. I will deal with that contention in the next section of this ruling.
In particular, Mr Cawthorn referred to matters alleged in paragraph 27 of the Reply and to the allegation which appears in paragraph 18, namely, that the solicitors engaged in conduct “to block, divert, obfuscate, and conceal from the plaintiffs the true nature of their cause of action against Brown, the broker and the solicitors and/or the evidence that the plaintiffs needed in order to raise and make out these causes of action”. That, he submitted, amounted to an allegation of concealment which, in turn, raised the question of the knowledge which the plaintiffs held at all relevant times as to their causes of action, generally, against the solicitors. Accordingly, any advice as to their causes of action against the solicitors was made relevant, so it was submitted.
As to the contention that there was an allegation of concealment of rights of action, generally, which made all legal advices discoverable, Mr Colquhoun, junior counsel for the plaintiffs, submitted that what is alleged in those passages of the pleadings to which reference was made is not that the solicitor defendants suppressed from the plaintiffs knowledge as to the elements of those causes of action which the plaintiffs eventually brought against the solicitor defendants but knowledge as to the existence of facts which were material to the accrual of the rights of action.
Thus, the plaintiffs may well have been advised by their present legal advisors, within the limitation period, that they could have brought proceedings against the solicitors for these causes of action if the necessary elements of these causes of action existed, but what was concealed from them by the solicitors was the existence of such material facts as meant that the causes of action had accrued and that the plaintiffs could have proceeded against the solicitors for those causes of action.
The plaintiffs therefore submit that it is not relevant what advice they may have received generally as to their rights to bring proceedings for the relevant causes of action. Such advice is not, therefore, discoverable. What is relevant is whether the facts which the plaintiffs alleged had been concealed did exist or not. Legal advice as to the entitlement to bring proceedings should those facts be proved to exist was of no relevance to the existence of those facts, Mr Colquhoun submitted. The facts either existed or they did not.
I agree with the submission of Mr Colquhoun, and I am not persuaded that there has been a wider waiver of privilege with respect to legal advice than within the ambit which I have discussed, above.
(c) Knowledge of facts alleged to have been concealed by solicitor defendants
At the time of the earlier submissions relating to the s.27(b) pleading of the limitations period, I asked counsel for the plaintiffs to produce a document which identified the material facts which it was contended in the Reply had been concealed by the solicitor defendants. Although that was done with respect to the s.27 plea, counsel for the solicitor defendants submitted that the majority of those allegations have been maintained by the plaintiffs, and, thus, it is clear that the following allegations of concealment of facts by the solicitors from the plaintiffs are now in issue in this trial:
(i) the solicitors had acted for the Health Commission or the Broker when they drew the wording of the 1980 policy;
(ii) it was an error of the drafting by the solicitors which resulted in the policy not providing indemnity for sessional doctors, as had been intended to occur by the HCV and the hospitals;
(iii) in drawing the terms of the 1980 policy the solicitors took their instructions from the Mr Austin, who was an employee of the Broker;
(iv) that when advising the plaintiffs as to the various claims for indemnity referred to in the statement of claim the solicitors were in a conflict of interest situation;
(v) when advising the plaintiffs as to claims made under the 1980 policy the solicitors knew, because they had drawn the 1980 policy, that it did not require the plaintiffs to provide indemnity to sessional doctors, and they knew, too, that the plaintiff's agent, Brown, was under a misapprehension as to that;
(vi) the advice given as to the avoidance of the policy due to non-disclosure of claims relating to the failure to test infants (claim 074) was flawed because there had been notification given;
(vii) the solicitors knew that if the terms of the plaintiffs’ policy did not cover sessional doctors they, the solicitors, would be liable to HCV and the hospitals, and the broker would also be liable;
(viii) the solicitors knew the terms and effect both of NEM’s policy and the plaintiffs’ policy;
(ix) when the solicitors held a meeting on 13 March 1985 at the broker’s office they were acting in their own interests and in the interests of the broker;
(x) the solicitors were acting in their own interests and in the interests of NEM and the broker when they wrote a letter of advice to CHS on 2 April 1985 (paragraph 85.16), when the wrote a letter of advice to CHS dated 25 July 1985 (paragraphs 72.3 and 85.17), when they gave advice to McKenna at a meeting at the broker’s office on 14 August 1985 (paragraph 85.19), when they wrote a letter of advice to CHS on 28 August 1985 (paragraph 85.19), when they wrote advice to CHS on 27 June 1986 (paragraph 85.21) and when they wrote a letter of advice to CHS dated 21 February 1986 (paragraph 85.22);
(xi) the solicitors were acting in a conflict of interest situation between their duty to the underwriters and themselves and the interests of NEM and the broker and that when advising, with respect to claims under the 1980 policy, the solicitors had knowledge based on a copy of NEM’s policy, notes of instructions for the drawing of the 1980 policy in Snowdon’s writing, their drawing of the 1981/82 policy;
(xii) that the solicitors were acting as solicitors for GEB and not the underwriters (Reply: paragraph 21);
(xiii) the solicitors knew the contents of file number 397024 (Reply paragraph 27.13).
Apart from these items of allegedly concealed facts, which were listed by the plaintiffs legal representatives, counsel for the solicitor defendants identified additional and more detailed allegations of concealed facts alleged within those paragraphs of the pleadings to which the plaintiffs had made reference in their document. It is not necessary that I set all of these matters in great detail, but I will briefly identify some of the additional matters. I have already addressed some of the matters identified in the listed items, above, because they raise discrete questions on the pleadings relevant to aspects of the discovery question which I have addressed under other headings.
In paragraph 18 of the reply the plaintiffs plead that in response to communications by CHS, which was acting as agent for the plaintiffs, and which was seeking information both from the broker and the solicitors and was querying the handling of claims made under the plaintiffs’ policy, it is alleged that the solicitors opened a file for the purpose of defending the broker and thereafter dealt with CHS in a way designed to conceal from the plaintiffs the true nature of their cause of action against Brown, the broker and the solicitors and/or the evidence that the plaintiffs needed in order to raise and make out those causes of action.
Counsel next referred to paragraph 21 of the reply which pleaded at paragraph 21.8 that the plaintiffs were deprived of the opportunity to investigate the acts, facts, matters and circumstances which related to the retainer representation allegation at a time closer to the engagement of the solicitors and before the death of Austin in September 1993. Mr Cawthorn submitted that paragraph 21 dealt with the solicitors’ current allegation that at all relevant times they were acting as solicitors for GEB. By their Reply the plaintiffs plead that the solicitors represented to the plaintiffs that they were acting for the underwriters.
The pleading in paragraph 21 of the Reply raised questions of the plaintiffs’ knowledge of legal issues, in particular whether GEB was the client of the solicitors. It also alleges in paragraph 21.3 that were the solicitors to be permitted to allege that they were, in fact, acting on behalf of GEB, and not as agent for the underwriters, then the underwriters would be placed at a disadvantage by having acted on the solicitors’ advice on the assumption that they were acting as their solicitors, and had lost the opportunity to protect their interests by obtaining independent legal advice, had the solicitors advised them that they not acting for the underwriters but, for GEB in its own right. This, therefore, is an allegation of estoppel.
It was not until 4 June 1996, by its second amended Defence, that the solicitor defendants raised the allegation that for all purposes they were acting in respect of claims made under the plaintiffs’ policy, but with GEB as their client and not the underwriters as their client. Mr Cawthorn submitted that the questions raised by paragraph 21 involve the plaintiffs’ knowledge and understanding of these various legal issues and that, in turn, makes relevant the question of what advice they were receiving from their solicitors and counsel at this time.
Counsel for the solicitor defendants referred to further paragraphs of the amended Reply of the plaintiffs, namely paragraphs 29, 35 and 36. Mr Cawthorn submitted that where an allegation of concealment is made that of itself raises the issue of the state of mind of the corporation and its officers and on principles discussed, above, that is sufficient to waive privilege.
Insofar as facts are alleged to have been concealed by the solicitors, then, Mr Cawthorn submitted, it must follow that the plaintiffs are asserting that they were unaware of any of those matters, and since they would have been likely to receive legal advice as to some or all of those matters then it followed that the plaintiffs had received advice on the topics which they allege they did not know about because facts had been concealed from them. The advice is therefore relevant and any privilege has been waived, Mr Cawthorn submitted.
Once again, I agree with the submission of Mr Colquhoun, who argued that all of the matters said to have been concealed were matters of fact or were matters on which the question of legal advice was irrelevant. I do not accept that the "state of mind" of the plaintiffs is raised at all, or at least in a way which would make it relevant to the case to know what advice may have been given by legal advisers. Even if I was wrong about those propositions, I see no unfairness which would apply if I denied the opportunity to the solicitor defendants to trawl through all legal advices and opinions simply because they may have addressed the wide range of concealed issues of fact which the plaintiffs and the solicitor defendants identified in the pleadings. Insofar as advice may have canvassed the possibility that such suspected events may have occurred, I agree with Mr Colquhoun that disclosure of legal advice in that regard can have no relevance to my task, nor could that knowledge advance the case of the solicitors, nor retard the case of the plaintiffs. There could be no suggestion of unfairness if I declined to order disclosure of advices canvassing those facts.
The cases cited earlier concerning the state of mind of a party demonstrate that the issue of the knowledge of the party was much more directly relevant in those instances than the matters identified in the pleadings to which I have been referred. The entitlement to claim privilege for legal communications should not be too lightly deemed to have been waived.
I therefore reject the suggestion that, save for the issues which I have expressly identified, the pleadings constitute a waiver of privilege by the plaintiffs, as to the facts identified as having been concealed from the plaintiffs.
DISCOVERY OF PORTION ONLY OF DOCUMENTS
Complaint is made that portions only of certain documents have been discovered, the plaintiffs having disclosed some portions of documents but objecting to the disclosure of the balance of the documents because it is privileged material. In no instance has it been demonstrated to me that the plaintiffs in so doing have abused their privilege by creating an inaccurate perception of the protected communication (as discussed in Attorney General v Maurice, at 488, per Mason and Brennan JJ). There is no unfairness in the delivery of edited material in this way and the right to do so is well recognised, as I confirmed in an earlier ruling on discovery in this case (delivered 14 August 1998); see, too, Waterford v Commonwealth (1986) 163 CLR 54 at 66 per Mason and Wilson JJ; Curlex Manufacturing Pty Ltd v Carlingford Australia General Insurance Ltd (1987) 2 QdR 335.
CONCLUSION - ORDERS
I conclude, therefore, that the plaintiffs should, by their appropriate officer, swear an affidavit identifying documents constituting legal advice given to the plaintiffs, confined to such advices and opinion, or portions of same, as address the topics listed below, and should discover those documents to the solicitor defendants:
(A) Legal advice in the period 1 January 1986 to 31 May 1993 1. Any legal advice concerning the entitlement and/or appropriateness and/or timing of the plaintiffs bringing claims against the solicitor defendants for breach of fiduciary duty.
2. Legal advice as to the entitlement or appropriateness of the plaintiffs to have declined, or alternatively accepted, indemnity with respect to claims made under the plaintiffs' policy, being claims which are now the subject of the plaintiffs' proceedings against the solicitor defendants, and as to which claims for indemnity the solicitor defendants had given advice to the plaintiffs (whether directly or through any agent) prior to the termination of their retainer.
(B) Legal advice in the period 1 January 1986 to 30 June 1993 3. Legal advice as to the entitlement, or appropriateness, of the plaintiffs to avoid the
policy.
For the moment, I will reserve the question of costs as to these orders, but I will give the parties the right to argue the questions of costs should an opportunity conveniently present itself during the running of the case.
---
0
7
0