Ulgera Gap Nominees P/L and Ors v Elders Ltd and Ors No. SCGRG 95/107 Judgment No. 5860 Number of Pages 12 Practice and Procedure

[1996] SASC 5860

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PERRY J

CWDS
Practice and procedure - documents - privilege - waiver - the plaintiffs in a breach of contract case sent copies of privileged letters received by them from their solicitors to their bankers, including letters advising of the prospects of success in their claim - the bank required the documents in order to obtain re- assurance that the action was likely to be successful, this being relevant to their willingness to maintain a lending facility to the plaintiffs - the documents were produced to the Court on a subpoena duces tecum addressed to the bank and perused by the solicitor and counsel for one of the defendants before an order was made preventing further access to the documents pending determination of the plaintiffs' claim to privilege - consideration of the question whether privilege had, in the circumstances, been waived. Grant v Downs (1976) 135 CLR 674; Vardas v South British Insurance Co Ltd (1984) 2 NSWLR 652; State Bank v Smoothdale (No 2)
(1995) 64 SASR 224; Goldberg v Ng (1995) 132 ALR 57; Attorney-General (NT) v Maurice (1986) 161 CLR 475, 69 ALR 31; Copping and Perball v ANZ McCaughan and Ors
(1995) 181 LSJS 157; Network 10 v Capital Television (1995) 36 NSWLR 275; Webster v James Chapman and Co (a firm) and Ors (1989) 3 All ER 939; IBM Corp and Anor v Phoenix International (Computers) Ltd (1995) 1 All ER 413; Pizzey v Ford Motor Company Ltd (1993) The Times, 8th March 1993, considered.

HRNG ADELAIDE, 30 May, 28 June 1996 #DATE 29:10:1996

Counsel for plaintiffs:   Mr R White

Solicitors for plaintiffs:   Ward and
   Partners

Counsel for defendants:   Mr N Rochow

Solicitors for defendants:   Rope Hamilton

Defendant William Albert Wright in person
(also representing Kimberley Nominees Pty Ltd)

Counsel for 1st Third parties (except N P Smith):    Mr B Bowler

Solicitors for 1st Third parties (except N P Smith): Hume Taylor and
   Co

Counsel for 1st Third party N P Smith:             Mr C J Weir

Solicitors for 1st Third party N P Smith:         Floreani Coates
   and Co

ORDER
Publication of reasons for judgment.

JUDGE1 PERRY J
1. The plaintiffs are a farmer and his wife and their family company, which is trustee for their family trust. The first defendant is a company carrying on the business of a real estate agency as well as that of a pastoral and stock agency. The second defendant was at all material times an employee of the first defendant. There are a number of other defendants and third parties in the action. This matter, however, concerns predominantly the plaintiffs and the first two defendants.

2. The action arises over a sale and purchase agreement in relation to the plaintiffsÕ farm property. The plaintiffs allege breach of contract, deceptive and misleading conduct, fraud, negligence and breach of duty respectively on the part of the various defendants.

3. On 23 April 1996, in the course of giving general directions, I gave leave pursuant to R 81.11 to any party to issue a subpoena as to documents returnable before me on Friday 10 May 1996. Pursuant to that leave, certain subpoenas were issued by the first and second defendants. In response to the subpoenas, four bundles of documents were produced to and retained by the Court. They were marked respectively MFID1-2(1), MFID1-2(2), MFID1-2(3) and MFID1-2(4).

4. The documents comprising MFID1-2(2) were produced on a subpoena addressed to Gregory Charles Anderson and Noel Burton Jenkins (the Jenkins documents). After they were produced, they were made the subject of an order which I made on 10 May 1996 limiting their availability for inspection, pending an application to have them removed from the bundle of documents on the ground of legal professional privilege.

5. The main point of contention concerns the bundle of documents MFID1-2(3). These documents ("the bank documents") were produced on subpoena addressed to the Bank of South Australia. On the date they were produced to the Court they were made the subject of the following order: " ... 3. That the solicitors for the first and second defendants are at liberty to copy all of the documents MFID1-2(3) on the footing that they will then discover them to all remaining parties in the usual way."

6. After the subpoenas had been returned, by separate applications (Court file documents 93 and 99.), the plaintiffs sought orders that a number of documents be removed from the bundles comprising the Jenkins and bank documents, to the intent that inspection of them by the parties be thereby denied.

7. As will be seen, the bank documents had already been perused by the legal representatives of the first and second defendants, and as to them, the plaintiffs further sought an order that they yield up any copies they might have made, and any notes recording their contents.

8. After hearing argument on both applications, on 28 June 1996 I made orders granting both applications. At the time I reserved the right subsequently to deliver reasons. These reasons are published pursuant to that reservation.

9. In the remainder of the reasons, I deal only with the position as to the bank documents, as disclosure of the Jenkins documents was withheld for what might be described as unexceptional reasons based on their evident character as documents subject to legal professional privilege.

10. I will go into a little more detail as to the history of the matter.

11. On 14 May 1996 a solicitor for the first and second defendants, Mr Baldock, attended in chambers and inspected the various bundles of documents (save the Jenkins documents), including all of the bank documents. Included in the bank documents was a bundle of correspondence tagged with a note "Correspondence re Court Proceedings". This bundle of correspondence contained a number of documents as follows:
    1. Copy letter from Ward and Partners to T. and M. Byles dated
    29 August 1994.

2. Copy letter from Ward and Partners to T. and M. Byles dated
    5 September 1994.

3. Facsimile transmission from Ward and Partners to T. and M.
    Byles, c/o Bank SA, dated 7 November 1994 enclosing a memorandum
    from Amanda Harley regarding Opinion on losses.

4. CounselÕs Opinion dated 8 November 1994.

5. Copy letter from Ward and Partners to T. and M. Byles dated
    9 December 1994.

6. Copy letter from Ward and Partners to T. and M. Byles dated
    5 April 1995 enclosing a document headed "Particulars of Loss".

7. Undated document prepared by the plaintiffs and headed "Loan
    Position Summary" addressed to Ward and Partners.

8. Undated statement of Trevor and Maxine Byles.

9. Document prepared by the plaintiffs and headed "Interest/Bank
    Fee Payments Incurred Since 31.3.94" addressed to Amanda Harley
    of Ward and Partners.

12. I will refer below to these documents by their numbers in this list.

13. Mr Baldock perused all of the documents and made copies of several of them. He supplied copies to counsel, Mr Roder.

14. At a hearing in chambers on 17 May 1996, Mr Roder undertook not to disclose the documents to anyone else pending hearing and determination of the application now in question.

15. On 27 May 1996, the solicitors for the plaintiffs sent a fax to Mr Baldock requesting that further undertakings be given to the Court by the defendantsÕ solicitors as follows:
    1. An undertaking to deliver all copies, whether made at court or
    elsewhere, of the documents for which privilege is claimed.

2. An undertaking not to disclose the contents of those documents
    to any other person.

3. An undertaking not to refer to the documents or the contents at
    any stage in these proceedings.

4. An undertaking to destroy any notes, letters or other written
    documents containing information derived from the privileged
    documents.

16. The solicitors for the plaintiffs threatened proceedings for injunctive relief against the defendantsÕ solicitors and Mr Roder as counsel, should these undertakings not be given. Mr Baldock replied on 28 May 1996 refusing to give the undertakings, being of the opinion that the undertaking previously given to the Court would be sufficient.

17. The solicitors for the plaintiffs also sent a letter to Mr Roder on 28 May to the same effect as their fax of 27 May 1996 to Mr Baldock. Solicitors for Mr Roder replied similarly in the negative on 30 May 1996. Two days later, the application concerning the bank documents was issued.

18. The questions raised by the application as to the bank documents are:whether the use of the documents ought to be restrained on the basis that they are confidential to the plaintiffs and the bank;whether the documents were protected by legal professional privilege;if protected by legal professional privilege, whether or not that privilege has been waived.

19. It is convenient to deal with the question of privilege first. The question of confidentiality only becomes relevant if privilege can be shown not to exist, or alternatively, if it has been waived.

20. All of the documents are copies. The copies were made and supplied to the bank for its information. The copying of the documents and their supply to the bank can be considered, for present purposes, as the one process.

21. It was conceded between the parties that the originals of the bank documents were privileged prior to their copying and supply to the bank, except for documents numbered 7 and 9.

22. In an affidavit sworn on 28 May 1996, Mr Trevor Byles, one of the plaintiffs, sets out the basis upon which each of the relevant documents was copied and provided to the bank.

23. The plaintiffs have an overdraft facility provided by the bank, in addition to a loan secured by a mortgage over their farm property. It became apparent to the bank that the plaintiffs would not be able, from the sale of the farm property, to meet the obligations imposed on them by the lending facilities provided by the bank. The plaintiffs then began to provide certain documents and information to the bank in order to obtain approval of continuance of the lending facilities. All documents and information were provided to the area supervisor of the bank, Mr Dean, based in Cowell.

24. According to Mr Byles, all of the documentation in question was provided to the bank for the purpose of reassuring it, from time to time, that the plaintiffs were pursuing recovery rights against the defendants in relation to the sale and purchase agreement, and that they were instructing solicitors for that purpose. This was to ensure that the bank would continue to provide the overdraft facility pending the outcome of the main litigation.

25. Mr Byles deposes that during the period when at least a number of the documents were provided to the bank, he was not aware of the concept of legal professional privilege. He was made aware of this concept and its applicability to the relevant documents in December 1994 by his solicitor.

26. In any event, he states that at all times he regarded the documents as "confidential to my wife and myself" and that he did not expect the documents to be provided to anyone else. Having later learnt something of the concept of legal professional privilege, he deposes to never having had "any intention" to "waive privilege in respect of the documents provided to the bank". He did not anticipate that these documents would be included in the documents produced on subpoena, as they eventually were.

27. His wife, the plaintiff Mrs Maxine Byles, swore an affidavit confirming the contents of the affidavit sworn by her husband, and presenting the same attitude in relation to the provision of the documents to the bank.

28. The question of legal professional privilege in the documents provided to the bank goes first to documents 1 to 6 and 8, over which legal professional privilege is not disputed as to the originals, and documents 7 and 9 over which privilege in the originals is disputed.

The copies of the privileged documents 29. Copies were made of these documents for the purposes set out above. Mr Rochow, counsel for the defendants submitted that these copies were created for a purpose other than litigation and are, therefore, not privileged (T64-65). He conceded that if they were simply made for record-keeping purposes, the sole purpose test in Grant v Downs (1976) 135 CLR 674. might be satisfied. But he contended that they could not be equated with documents made solely for record- keeping, in that maintaining the overdraft facility is a purpose which, he suggested, was at best collateral to the litigation.

30. I do not think that this renders the case as clear cut as the defendants have urged. In Vardas v South British Insurance Company Ltd [1984] 2 NSWLR 652 it was held that not only are record-keeping copies of privileged documents also privileged, but that copies of a privileged document made for a "dual purpose", that is, in anticipation of litigation and for "future reference", did not breach the sole purpose test of Grant v Downs. That case is different from the present case, but it illustrates a degree of flexibility inherent in the sole purpose test.

31. Where copies are concerned, the Court must look to the intention of the party at the time that document was created, that is, in this case the purpose that governed its supply to the bank. Mr Rochow submitted that the purposes outlined above for the copying and supply of the documents to the bank took them out of the class of privileged documents. He submitted (T71) that it was always open to the plaintiffs to have their solicitors provide the bank with a general letter of assurance, saying that litigation was being pursued and that it was worthwhile maintaining the overdraft facility. That is to say, it was not necessary to go to the lengths which the plaintiffs did to supply the bank with information.

32. Certainly, something of that sort might have been sufficient. However, the evidence as to what the bank itself demanded is unclear.

33. In an affidavit filed on 30 May 1996, the bank manager, Mr Dean, deposes, inter alia:
    " ... 9. I requested information from Trevor and Maxine Byles
    relating to their proposed legal proceedings. I sought this
    information to assist the bank in making decisions about continuing
    the overdraft facility for them.

10. I regarded the documents as having been provided to me in
    confidence pursuant to the normal bank customer arrangements ..."

34. It is clearly the case that the originals are privileged on the basis either of the provision of legal advice or in anticipation of litigation. The making of the copies was undertaken to facilitate the litigation. In my view, it would be taking too narrow a view of the scope of legal professional privilege to regard the copies made and supplied to the bank in the circumstances of this case as outside the rubric of that privilege. The more difficult question is as to waiver of privilege.

35. There is little doubt that there has been no express waiver by the plaintiffs of the privilege attaching to the documents. It was contended, however, that there had been an "imputed" or "implied" waiver.

36. In State Bank v Smoothdale (No 2) (1995) 64 SASR 224 at 227 His Honour the Chief Justice said:
    "The mere fact that a document is in the hands of the person other
    than the parties to the litigation in which its production is
    required, does not of itself deprive the document of its privileged
    character, Hartogen Energy Ltd (In Liq) v Australian Gaslight
Company (1992) 36 FCR 557 at 571. There must be some intentional
    communication amounting to a waiver, or circumstances in which the
    law imputes or implies waiver.It is obvious, of course, that in
    delivering the statements to the other parties, the respondent
    waived privilege at least to the extent necessary to permit the use
    of the statements by those parties for the purposes of the
obligation: Black and Decker Inc v Flymo Ltd. [1991] 1 WLR 753;
[1991] 3 All ER 158. Mr Conti argued that waiver for any purpose
    was waiver for all purposes, and that waiver in respect of one
    person was waiver in respect of all. He maintained that the notion
    of partial waiver is not part of the law of this country.The
    general principle is that once privilege is waived, it is waived
    for all purposes. There is, however, very persuasive English
    authority for the proposition that there may be waiver which is
    partial or limited only." (His Honour then goes on to consider
British Coal Corporation v Dennis Rye (No 2)) [1988] 1 WLR 1113;
[1988] 3 All ER 816

37. In Goldberg v Ng (1995) 132 ALR 57 at 72 Toohey J said:"Disclosure to a third party, such as a doctor for the purpose of obtaining an expert report to be used in litigation, does not constitute a waiver."

38. His Honour was, however, in a minority in that case. The majority of the High Court (Deane, Dawson and Gaudron JJ) held that the governing consideration was whether fairness required that the privilege should cease, whether the person intended that result or not, following Attorney-General (NT) v Maurice (1986) 161 CLR 475; 69 ALR 31.. Indeed, in Copping and Perball v ANZ McCaughan and Ors
(1995) 181 LSJS 157 it was held that once material had been released to experts, knowing that the expertÕs report must be discovered under the rules of court, when there is an intention to call the expert at trial, the privilege must necessarily be regarded as waived. Otherwise the expertÕs opinion could not be properly tested under cross-examination.

39. In any event, this factor does not arise here, and the question must be determined by reference to the principles of fairness expounded in Attorney- General (NT) v Maurice (supra).

40. That case was explained by the majority in Goldberg v Ng in the following terms (at 64):
    "When some such act or omission of the person entitled to the
    benefit of the privilege gives rise to a question of imputed
    waiver, the governing consideration is whether Ôfairness requires
    that his privilege shall cease, whether he intended that result or
    notÕ ( Wigmore on Evidence (McNaughton Rev 1961), Vol 8, para 2327,
    quoted with approval by Gibbs CJ and by Mason and Brennan JJ in
Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481, 488.)
    That does not mean, however, that an imputed waiver must completely
    destroy the privilege. Like an express waiver, it can be limited
    so that it applies only in relation to particular persons,
    materials or purposes."

41. In Network 10 v Capital Television (1995) 36 NSWLR 275. Giles J said (279):
    " ... a person entitled to claim legal professional privilege in
    relation to a document does not inevitably waive, or inevitably
    completely waive, that privilege by disclosing it to a third party:
    see Woollahra Municipal Council v Westpac Banking Corporation (
(1994) 33 NSWLR 529 at 539-540 and cases there cited , and more
    recently Goldberg v Ng.).

42. In my opinion, it would, within the meaning of the test of unfairness, be unfair to impute a waiver of privilege attaching to the bank documents by reason of the circumstances in which they were supplied to the bank. No waiver could arise as a result of the subsequent production of the documents by the bank in response to the subpoena, as that was not something over which the plaintiffs had any control.

43. This leads then to the question whether or not it remains unfair, in all the circumstances, to refuse to impute a waiver, given that Mr Baldock and Mr Roder have now both had contact with the documents.

44. Mr Rochow referred to the decision of Scott J in Webster v James Chapman and Co (a firm) and Ors ([1989] 3 All ER 939 at 946) who said in the context of the equitable jurisdiction:
    "If a document has been disclosed, be it by trickery, accident or
    otherwise, the benefit and the protection of legal privilege will
    have been lost. Secondary evidence of the document will have come

    into the possession of the other side to the litigation. The
    question then will be what protection the court should provide,
    given that the document which will have come into the possession of
    the other side, will be confidential and that use of it will be
    unauthorised. If the document was obviously confidential and had
    been obtained by a trick or by fraud, it is not difficult to see
    that the balance would be struck in favour of the party entitled to
    the confidential document. If the document had come into the
    possession of the other side not through trick or fraud but due to
    a mistake or carelessness on the part of the party entitled to the
    document or by his advisers, the balance will be very different
    from the balance in the fraud case." (946-947)

45. Scott J then added:
    "Suppose a case where the privileged document has come into the
    possession of the other side because of carelessness on the part of
    the party entitled to keep the document confidential and has been
    read by the other party, or one of his legal advisers, without
    realising that a mistake has been made. In such a case, the future
    conduct of the litigation by the other party would often be
    inhibited or made difficult were he to be required to shut out from
    his mind the contents of the document. It seemed to me that it
    would be thoroughly unfair that the carelessness of one party
    should be allowed to put the other party at a disadvantage."

46. In his affidavit sworn on 30 May 1996 Mr Baldock says:
    "4. When I saw the documents which are the subject of the
    plaintiffsÕ application, I considered that those copies were
    documents which had not been used for the purposes of the
    litigation and had been used for the purpose of obtaining funding
    from Bank SA and that if there were any privilege, it had been
    waived.

5. Included in the documents in the bundle of Bank SAÕs files were
    correspondence from the plaintiffsÕ solicitors addressed to Bank SA
    and a letter from the plaintiffsÕ solicitor addressed to their
    client acknowledging that a copy was to be given to the bank. The
    (sic) appeared to me to be deliberate disclosures to the bank of
    material which, if it had been privileged, was being waived.

6. After inspecting the documentation, I contacted counsel by
    telephone and discussed the fact that numerous documents had been
    provided by the solicitors for the plaintiffs to the bank. I
    sought and confirmed with counsel the view that the copies of
    documents given to the bank had not been used for the purpose of
    the litigation and that if there was any privilege it had been
    waived.

7. I did not recall using the expression deposed to by Mr Govey in
    conversation with him. I may well have expressed surprise - my
    surprise was that such documents had been provided to the bank."

47. Mr Govey is the solicitor for the plaintiffs. In an affidavit sworn on 29 May 1996 he deposed:
    "...14. On Tuesday 21 May 1996 I again spoke with Mr Baldock
    regarding the issue of the documents within FMID1-2(3) and
    particularly the circumstances upon which he continued to look at
    the documents and obtain copies of them when it was obvious that
    they were documents which would ordinarily be the subject of legal
    professional privilege. Mr Baldock replied with words to the
    effect that the documents had Ôslipped through the netÕ and that
    counselÕs opinion had been obtained to the effect that any right to
    privilege had been waived."

48. I do not propose to go into an analysis of the conduct of various solicitors in this matter, nor can I make any finding in favour of one affidavit by a solicitor over another. In relation to the above passage from Webster, however, I do not think it right to say that the documents in question have been read by a legal practitioner "without realising that a mistake had been made". In saying that, I do not suggest that Mr Baldock acted otherwise than in accordance with his affidavit. However, he had every reason to proceed with caution once he saw the heading "Correspondence re Court Proceedings".

49. In Webster, Scott J followed the above quoted passage with the following:
    "I do not think that this branch of the law is one where any firm
    rules as to how the balance should come down should be stated. It
    must be highly relevant to consider the manner in which the
    privileged document has come into the possession of the other side.
    It must be highly relevant to consider the issues in the action and
    the relevance of the documents to those issues. It must be highly
    relevant to consider whether, under any rules of the Supreme Court,
    the document ought, in one way or another, to have been disclosed
    anyway. All circumstances will have to be taken into account, as
    it seems to me, in deciding how the balance should be struck." (at
    947).

50. Mr Rochow pointed to the case of IBM Corp and Anor v Phoenix International (Computers) Ltd. [1995] 1 All ER 413. In that case, Aldous J held that in the event of disclosure and inspection:
    " ... (5) When deciding whether to intervene to prevent use of
    privileged documents, the court is exercising an equitable
    jurisdiction and it was therefore not confined to rigid rules. But
    when fraud is not established, the general rule is that no
    injunction will be granted after inspection unless:(a) the document
    is privileged; and(b) disclosure has occurred as a result of an
    obvious mistake." (422)

51. As to the test for an "obvious mistake", His Honour referred to the judgment of the Court of Appeal in Pizzey v Ford Motor Company Ltd (1993) Times, 8th March, heard on 26 February 1993. In that case, Mann LJ said:"It is of the utmost importance in the context of litigation that a party should be able to rely on the discovery of his adversary." (Quoted at 422).

52. This passage is in the context of a case involving discovery. The fact that the documents in question were produced on subpoena rather than in the discovery process is a point of distinction.

53. Mann LJ further observed that exceptions to the ability to rely on such discovery "must not extend beyond fraud and mistake". Then:
    "Cases of mistake are stringently confined to those which are
    obvious, that is to say, those which are evident. This excites the
    question: evident to whom? The answer must be, to the recipient of
    the discovery. If the mistake was evidence to that person then the
    exception applies. But what of a case where it was not evident but
    would have been evident to a reasonable person with the qualities
    of the recipient? In this context the law ought not to give an
    advantage to obtusity and if the recipient ought to have realised
    that a mistake was evident then the exception applies." (Quoted at
    422).

54. Aldous J then summed up Mann LJÕs approach by saying (423):
    "Mann LJ refers to the hypothetical but reasonable solicitor and
    postulates questions that such a person would ask. I conclude that
    he, with the aid of the evidence and surrounding circumstances,
    looked to see whether it had been proved on the balance of
    probabilities that the disclosure of the document would be seen by
    the reasonable solicitor to have been disclosed by mistake."

55. Mr Rochow submitted on the basis of these authorities that in the circumstances of this case, the reasonable solicitor would have expected privilege in this case to have been waived by the action of the plaintiffs in sending the document to the bank.

56. Here, two events combined to result in what was clearly inadvertent disclosure to the solicitor, and subsequently to counsel. Having been produced in response to a subpoena, the issue of which the plaintiffs could not control, the possibility of inadvertent disclosure was greater than would be the case where the solicitor for an opposing party makes discovery.

57. At the end of the day, I am not satisfied, with great respect to Mann LJ, that the test is limited to what the "reasonable solicitor" would have thought. This is an unusual case which illustrates that it is not desirable to circumscribe the exercise of the discretion by any such hard and fast formula.

58. But even if that is the test, in my view, a reasonable solicitor would have realised that the disclosure of documents of this nature could never have been intended or permitted by the plaintiffs, that it was inadvertent so far as the plaintiffs were concerned, and in that sense, a mistake.

59. In those circumstances, I have no hesitation in upholding the claim for privilege.

60. As to the originals of documents numbered 7 and 9, I am satisfied that having regard to the circumstances of their creation, they were, when they came into existence, protected by legal professional privilege. For the reasons which I have given, the copies of those documents produced by the bank from their file must be regarded as within the protection afforded by that privilege.

61. Having regard to my rulings as to privilege, there is no need to address the separate question of confidentiality.