Wellington v Metcalf

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COSTS COURT

S ECI 2023 04390

BETWEEN:

HEATHER WELLINGTON	Applicant
v
KIRSTY METCALF	Respondent

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	4 July 2024
DATE OF RULING:	2 August 2024
CASE MAY BE CITED AS:	Wellington v Metcalf
MEDIUM NEUTRAL CITATION:	[2024] VSC 454

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COSTS – Jurisdiction of Costs Court – Taxation of costs following County Court proceeding – Disclosure of privileged documents during taxation of costs – Questions of waiver of privilege and implied undertaking – Whether issues actually relate to assessment, settling, taxation or review of costs – Supreme Court Act 1986 (Vic), ss 17C, 17D – Civil Procedure Act 2010 (Vic), ss 26, 27 – Supreme Court (General Civil Procedure) Rules 2015 (Vic), rr 63.42, 63.47 – County Court Civil Procedure Rules 2018 (Vic), rr 1.13, 63A.01, 63A.51.

PRACTICE AND PROCEDURE – Legal professional privilege – Implied undertaking or Harman obligation – Disclosure of documents during taxation – Whether waiver of privilege – Whether limited waiver – Evidence Act 2008 (Vic), ss 118, 119, 122.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr J McIntyre of counsel	Verduci Lawyers
For the Respondent	L A Warren Lawyers

TABLE OF CONTENTS

Issues for determination

The respondent’s application

Evidence

Background

Does the Costs Court have jurisdiction?

Consideration

Production of privileged documents

Respondent’s submissions
Applicant’s submissions
Consideration

Conclusion

HER HONOUR:

The applicant succeeded in her defamation action against the respondent in the County Court and was awarded costs on an indemnity basis (‘County Court proceeding’). She consequently applied for taxation of costs in the Costs Court (‘current proceeding’). The taxation has been slowly progressing. After commencing proceeding S EAPCI 2024 0049 in the Court of Appeal against the County Court orders (‘the appeal proceeding’), the respondent applied to the Court of Appeal to stay the taxation proceeding. The Court of Appeal disallowed the stay application.[1]
[1]Metcalf v Wellington [2024] VSCA 147.
This ruling concerns privileged documents that the applicant provided to the respondent for inspection in the Costs Court proceeding. The respondent wishes to use those documents in the appeal proceeding. The documents are primarily communications between the applicant’s counsel and solicitors, as well as solicitors’ file notes and correspondence between the applicant and her solicitor.[2] The respondent says the applicant has waived privilege over these documents and says that if an implied undertaking applies to prevent use of those documents in the appeal proceeding, then she should be released from it. On the other hand, the applicant says the Costs Court has no jurisdiction to hear the respondent’s application and that, in any event, she has not waived privilege over the documents.
[2]Specifically the documents itemised at [14] of the affidavit of Leonard Adrian Warren affirmed 29 May 2024 (‘Warren 29 May 24 affidavit’).

Issues for determination

The issues for determination are as follows:
(1)Does the Costs Court have jurisdiction to determine the respondent’s application? If so:
(i)did the applicant waive privilege over her file? Relatedly, was there a limited waiver?
(ii)are the documents subject to an implied undertaking not to use them in another proceeding? If so, should the respondent be released from the undertaking and permitted to use the documents in the appeal proceeding?

The respondent’s application

By notice filed on 29 May 2024, the respondent applies for the following:
(a)a declaration that the applicant has waived any legal professional privilege in the applicant’s file or any documents forming part of the file that were produced for inspection by the applicant to the respondent on 29 December 2023 and 12 February 2024;
(b)a declaration that there is no implied undertaking owed to this Court not to use any of the documents or the contents thereof inspected by her solicitors on 29 December 2023 and 12 February 2024;
(c)alternatively to (b), a declaration that if the respondent used any of the documents or the contents thereof inspected by her solicitors on 29 December 2023 and 12 February 2024 in the appeal proceeding, that would not be a breach of any implied undertaking owed to this Court;
(d)alternatively to (b) and (c), if this Court considers that the implied undertaking or s 27(1) of the Civil Procedure Act 2010 (Vic) (‘the CPA’) applies and, without release, prevents the use of those documents in the appeal proceeding, an order that:
(i)the respondent is released from any implied undertaking not to use the file or any documents forming part of the file or the contents thereof inspected by her solicitors on 29 December 2023 and 12 February 2024 so as to enable her to use those documents in the appeal proceeding; or
(ii)the respondent is released under s 27(3)(b) of the CPA of the obligation imposed by s 27(1) of the CPA not to use the file or any documents forming part of the file or the contents thereof inspected by her solicitors on 29 December 2023 and 12 February 2024 so as to enable her to use those documents in the appeal proceeding.
(e)an order that the applicant produce for the respondent’s inspection all documents relevant to General Objection 1 in the respondent’s notice of objections dated 25 March 2024[3] and for a preliminary hearing of the respondent’s contention made in General Objection 1 of her notice of objections dated 25 March 2024.
[3]The objection was to the effect that the applicant’s bill of costs had been prepared in breach of the indemnity principle.
The applicant opposes the orders sought by the respondent, save for (e). Subsequent to the hearing of this application, the parties provided minutes of proposed consent concerning (e). A determination is, therefore, not required.

Evidence

The respondent relies on affidavits of her solicitor, Leonard Adrian Warren, affirmed 8 December 2023, 8 May 2024 and 29 May 2024 (the ‘Warren 8 Dec 23 affidavit’, ‘Warren 8 May 24 affidavit’ and ‘Warren 29 May 24 affidavit’ respectively). The Warren 29 May 24 affidavit exhibits another affidavit. It is an affidavit affirmed by Mr Warren on 14 May 2024 and filed in the appeal proceeding (‘Warren 14 May 24 appeal affidavit’).
As discussed below, the parties disagree about whether a particular direction was given at a directions hearing in the current proceeding. Unfortunately, there was no transcript of the hearing. Mr Warren’s evidence is that no such direction was given. The applicant did not provide any evidence but contends the direction was given. I draw an adverse inference from the applicant’s failure to provide evidence. I accept Mr Warren’s evidence that no such direction was given at the hearing.

Background

In 2021, the applicant commenced a proceeding against the respondent claiming damages for defamation. Following a nine-day trial in the County Court of Victoria in August 2022, the trial judge found in favour of the applicant.[4]
[4]See: Wellington v Metcalf [2022] VCC 1759.
On 15 December 2022, the trial judge ordered that the respondent pay the applicant’s costs on an indemnity basis.
On 19 September 2023, a summons for taxation of costs and a bill of costs dated 8 September 2023 was filed in the Costs Court by the applicant, commencing the current proceeding.
On 24 October 2023, Mr Warren wrote to the applicant’s costs consultant, Alan Thompson, requesting inspection of the applicant’s file; this request was subsequently refused.[5]
[5]Exhibit ‘LAW-1’ to the affidavit of Leonard Adrian Warren affirmed 8 December 2023 (‘the Warren 8 Dec 23 affidavit’), 10-11.
On 20 November 2023, the respondent filed a notice of objections in the current proceeding.
On 28 November 2023, the parties attended a mediation before Costs Registrar Van de Berg. The costs issues did not resolve. After the mediation, Mr Warren verbally requested inspection of the applicant’s file; this request was refused. The Costs Court listed the proceeding for a directions hearing to determine the inspection issue.[6]
[6]Warren 8 Dec 23 affidavit, [14]-[15].
On 4 December 2023, Mr Warren wrote to Mr Thompson again requesting inspection of the applicant’s file. On 5 December 2023, Mr Thompson advised that the applicant had declined this request unless inspection were to occur by the respondent’s cost lawyer without the instructing solicitor present.[7]
[7]Exhibit ‘LAW-1’ to the Warren 8 Dec 23 affidavit, 12-13.
On 7 December 2023, Mr Warren wrote to Mr Thompson advising that the respondent’s cost lawyer was no longer engaged and requested he reconsider his position. On 8 December 2023, Mr Thompson advised that the applicant’s position was maintained.[8]
[8]Ibid, 14-15.
On 8 December 2023, Mr Warren wrote to Mr Thompson asking if there was some sensitivity that he needed to be aware of and suggested they ‘for example, agree [sic] an inspection that excludes some documents that concern you’.[9]
[9]Exhibit ‘LAW-1’ to the Warren 8 Dec 23 affidavit, 16.
On that same date, Mr Thompson replied to Mr Warren. Mr Thompson stated that his client was ‘reserving her rights as to issuing further proceedings’, adding that ‘the documents in my possession are indeed sensitive’.[10] Mr Warren subsequently replied querying, amongst other things, what material would be so sensitive that he could not inspect but a cost consultant could. He also stated that he would ‘consider a sensible carve out’.[11]
[10]Ibid, 17.
[11]Ibid, 18.
At 7:23pm on 8 December 2023, Mr Warren filed the Warren 8 Dec 23 affidavit in support of the respondent’s application to inspect the documents referred to in the applicant’s bill of costs. He requested that the applicant provide the respondent with the information required by r 63.42(2)(c) and (4) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). In the Warren 8 Dec 23 affidavit, under the heading ‘discovery’, Mr Warren deposes:
As can be seen from item 338, the actual discovery given by the [applicant] is very limited in scope. It is difficult to understand the claims in items 337, 341 and 345 without viewing what was produced by the [applicant] for her solicitor’s review. This item has added significance given the very high loading claimed.[12]
[12]Warren 8 Dec 23 affidavit, [8].
The Warren 8 Dec 23 affidavit identified five categories of documents, with the requisite item numbers, that the respondent specifically requested production of (although production of the applicant’s file at large was sought). Mr Warren also provided a chronology of his correspondence with Mr Thompson.[13] Mr Warren asserts:
The [respondent] is desirous of conducting an inspection, holding a further mediation after the inspection, and then if the matter does not settle, having an opportunity to file a long form notice of objections.
On the basis that there is a legitimate reason for the inspection, and that it would facilitate the overarching purposes set out in the Civil Procedure Act, and in the absence of a cogent reason advised by the [applicant] for her refusal to allow inspection at large or to co-operate in relation to an inspection regime, the [respondent] requests the Court’s assistance in either ordering an inspection at large of the file, or ordering the parties to co-operate in relation to an inspection regime which would permit inspection of the [applicant’s] file other than documents to which the [applicant] have (sic) a genuine and reasonable objection to producing for inspection. [14]
[13]Ibid, [10]-[22].
[14]Warren 8 Dec 23 affidavit, [23]-[24].
On 11 December 2023, the respondent emailed the Costs Court advising that she intended to apply for the orders sought in the Warren 8 Dec 23 affidavit at the directions hearing scheduled the following day.
On 12 December 2023, the directions hearing was convened by Costs Registrar Walton. At the directions hearing, the Costs Registrar made timetabling orders allowing the respondent to file and serve a notice of objections, the applicant to serve a response, and for costs to be assessed in chambers (’12 Dec 23 orders’).[15]
[15]Warren 8 May 24 affidavit, 26.
The 12 Dec 23 orders made do not refer to the respondent’s application for inspection. No transcript of the 12 December 2023 directions hearing is available. The only evidence of what occurred at this hearing, save for the 12 Dec 23 orders, are the Warren affidavits.[16] Mr Warren deposes that during the hearing, Mr Thompson indicated to the Court that he would produce for Mr Warren’s inspection the documents specified under the categories ‘discovery’ and ‘perusal of transcript’ in the Warren 8 Dec 23 affidavit. Mr Warren’s evidence is that, as a result of this concession, no order was sought or made about inspection.[17]
[16]See: Warren 8 May 24 affidavit; Warren 29 May 24 affidavit.
[17]Affidavit of Leonard Adrian Warren affirmed 14 May 2024 (‘Warren 14 May 24 appeal affidavit’), [27]-[29], contained in Exhibit ‘LAW-1’ to the affidavit of Leonard Adrain Warren affirmed 29 May 2024 (‘Warren 29 May 24 affidavit’), 131.
There is a contemporaneous letter that supports Mr Warren’s evidence. On 12 December 2023, Mr Warren wrote to Mr Thompson requesting production of the items listed under the headings ‘discovery’ and ‘perusal of transcript’ in the Warren 8 Dec 23 affidavit. In his letter, Mr Warren states:
Can you please produce for my inspection, as you indicated to the Court you would, the items under the heading Discovery (noting that item 345 should read item 353) and the items under the heading perusal of transcript, each as listed in paragraph [8] of my affidavit of 8/12/23.^[18]
[18]Exhibit ‘LAW-2’ to the affidavit of Leonard Adrian Warren affirmed 8 May 2024 (‘Warren 8 May 24 affidavit’), 27.
I find that, consistent with the Warren 8 Dec 23 affidavit, the respondent sought to inspect some of the applicant’s documents at the directions hearing. I infer from the correspondence above that Mr Thompson agreed to produce these documents during the hearing. These documents are not the privileged documents.
Mr Warren deposes that on 19 December 2023, Mr Thompson contacted him and indicated the applicant’s entire file would be made available for inspection, but that he did not want Mr Warren to disclose the contents of the file to the respondent.[19]
[19]Warren 14 May 24 appeal affidavit, [31], contained in Exhibit ‘LAW-1’ to the Warren 29 May 24 affidavit, 131.
On 20 December 2023, Mr Warren wrote to Mr Thompson referring to a conversation they had the previous day regarding availability to inspect the applicant’s file. Mr Warren stated that he could not comply with the applicant’s request that he not discuss what he was to inspect with his client. Mr Warren proposed to Mr Thompson that they discuss specific exclusions from the inspection ‘if there is something too confidential for me to see or Ms Metcalf to know about’. On the same date, Mr Thompson replied proposing times for inspection.[20]
[20]Exhibit ‘LAW-2’ to the Warren 8 May 24 affidavit, 24.
The inspection occurred on 29 December 2023. Mr Warren deposes:
On my arrival for the inspection on 29 December 2023, the [applicant’s] solicitor’s entire physical paper file in chronological order (both privileged and non-privileged documents) was voluntarily produced by Mr Thompson for my inspection (that is to say, not just the discovery items and the transcript items). He also handed me a USB for me to take away which was then said by him to contain the documents that the [applicant’s] solicitors had reviewed when deciding what discovery the [applicant] would make.
For ethical reasons, I specifically noted to Mr Thompson at the time of my inspection of the [applicant’s] file on 29 December 2023 that he was producing the [applicant’s] entire file, including privileged documents, to me, for my inspection, and he confirmed that that was the case.
Although the inspection took approximately 2 hours, I did not complete the inspection on 29 December 2023.^[21]
[21]Warren 14 May 24 appeal affidavit, [34]-[36], contained in Exhibit ‘LAW-1’ to the Warren 29 May 24 affidavit, 131-132.
On 3 January 2024, Mr Warren wrote to Mr Thompson advising that he had inadvertently failed to inspect ‘a pile of folders’ and requested another inspection. He further requested a complete photocopy of the documents contained in the affidavit of documents.[22]
[22]Exhibit ‘LAW-2’ to the Warren 8 May 24 affidavit, 24.
Later the same day, Mr Warren again wrote to Mr Thompson. He stated that the USB provided to him on 29 December 2023 did not contain the applicant’s documents alleged to have been reviewed by her solicitors but not discovered in the County Court proceeding (‘the undiscovered documents’). On 8 January 2024, Mr Thompson replied, stating he could arrange a further inspection.[23]
[23]Exhibit ‘LAW-3’ to the Warren 29 May 24 affidavit, 655.
On 9 February 2024, Mr Warren wrote to the Court advising that following further discussions with Mr Thompson, he would be ‘conducting a further file inspection’ and therefore requested that the timetable made on 12 December 2023 be extended.
The further inspection took place on 12 February 2024. Mr Warren deposes:
On 12 February 2024 I conducted a further inspection of the [applicant’s] file as part of the Costs Proceeding. Again, the [applicant’s] entire file was voluntarily produced to me for my inspection. [24]
[24]Warren 14 May 24 appeal affidavit, [46], contained in Exhibit ‘LAW-1’ to the Warren 29 May 24 affidavit, 135.
Between 12 February 2024 and 18 March 2024, the parties requested multiple extensions from the Costs Court regarding the timetable. The Costs Court notified the parties on 18 March 2024 that the further mediation would be vacated and that the bill of costs assessed in chambers.
On 25 March 2024, the respondent filed a notice of objections. Notably, the notice of objections stated that:
(a)at the directions hearing on 12 December 2023, the applicant agreed to produce, without an order from the Court, the documents referred to at items 337, 341 and 353 of the applicant’s bill of costs;
(b)the respondent inspected the applicant’s file on 29 December 2023 and 12 February 2024; and
(c)despite the respondent’s numerous requests, the applicant did not produce the undiscovered documents (being the documents referred to at items 337, 341 and 353).
On 2 April 2024, the applicant filed a response to the notice of objections.
On 8 April 2024, the Court provided a notice of estimate of $547,280. The respondent filed a notice of objection to the estimate on 17 April 2024.
On 10 April 2024, the respondent wrote to the applicant regarding, among other things, the current proceeding. Concerning the production of the applicant’s file, the respondent stated:
… we note that your client’s entire file was produced voluntarily by your client’s costs consultant, Mr Thomson (sic), despite no order requiring that production and despite no request being made for most of the documents therein. Mr Warren specifically noted to Mr Thompson that your client’s entire file, including privileged documents, were being produced to him for his inspection, and Mr Thompson indicated that there was no issue with his perusal of those documents. [25]
[25]Exhibit ‘LAW-2’ to the Warren 8 May 24 affidavit, 11.
On 29 April 2024, the applicant replied, stating:
Mr. Thompson indicated to the court that your application to inspect our client’s file was objected to, however despite his protests, an inspection was ordered by Cost Registrar Walton.
We are informed that it was put to Cost Registrar Walton that the inspection was a factfinding mission/fishing expedition and any waiver of privilege is therefore denied. [26]
[26]Ibid, 22.

On 3 May 2024, the respondent wrote to the applicant outlining the following events:[27]
(a)on 12 December 2023, Mr Thompson indicated to the Court that the applicant would produce ‘certain documents’ for the respondent’s inspection;
(b)on 12 December 2023, Mr Warren wrote to Mr Thompson requesting he provide certain documents;
(c)on 19 December 2023, Mr Thompson telephoned Mr Warren and indicated that he would produce the applicant’s entire file but that Mr Warren was not to disclose the contents of the file to the respondent;
(d)on 20 December 2023, Mr Warren wrote to Mr Thompson advising he would not inspect the file on that basis but would be open to discussing specific exclusions from the inspection;
(e)on 20 December 2023, Mr Thompson replied to Mr Warren’s email and did not seek to limit the respondent’s inspection;
(f)on 29 December 2023, Mr Thompson allowed Mr Warren to inspect the applicant’s entire file, including privileged documents. Mr Warren raised this with Mr Thompson, who confirmed the inspection was correct. Mr Warren was also provided with a USB said to contain the applicant’s undiscovered documents, although on Mr Warren’s later review, it did not contain said documents;
(g)on 3 January 2024, Mr Warren contacted Mr Thompson to advise he had inadvertently failed to inspect some folders; and
(h)on 12 February 2024, Mr Warren conducted a further inspection and again the applicant’s entire file was produced for inspection.
[27]Ibid, 31-32.
In the Warren 8 May 24 affidavit, Mr Warren foreshadowed the respondent making an application for a declaration that the applicant waived legal professional privilege over the files produced on 29 December 2023 and 12 February 2024, or in the alternative, that the respondent be released from the implied undertaking not to use these documents in the appeal proceeding, or further in the alternative, that the implied undertaking does not apply to the appeal proceeding.
On 9 May 2024, a directions hearing was held and the Costs Court made a timetable for the current application.
On 14 May 2024, in the appeal proceeding, the respondent filed an application for leave to appeal and an application other than for leave to appeal.
On 29 May 2024, the respondent filed a notice to the Costs Court along with the Warren 29 May 24 affidavit confirming the orders sought by the respondent. That notice to the Costs Court is the subject of the current determination.
As mentioned above, the Warren 29 May 24 affidavit exhibited the Warren 14 May 24 appeal affidavit, in which Mr Warren stated that he sought inspection of the applicant’s file due to concerns surrounding the applicant’s bill of costs and concerns regarding the adequacy of the applicant’s discovery in the County Court proceeding.[28] The Warren 14 May 24 appeal affidavit also outlined the chronology of the costs proceeding and exhibited the relevant correspondence,[29] which I will not reiterate given it is outlined above, save for the following:
between 3 January 2024 and 31 January 2024, Mr Warren and Mr Thompson exchanged multiple emails regarding the undiscovered documents not being produced for inspection on 29 December 2023;[30]
on 9 February 2024, Mr Warren wrote to Mr Thompson confirming Mr Thompson had advised him that no documents were provided by the applicant to her solicitors for the purpose of ascertaining whether they were discoverable in the County Court proceeding and taking issue with this. Mr Thompson subsequently confirmed that this was correct.^[31]
[28]Warren 14 May 24 affidavit, [21].
[29]Exhibit ‘LAW-3’ to the Warren 29 May 24 affidavit, 127-140.
[30]Ibid, 658-662.
[31]Ibid, 663-666.

Does the Costs Court have jurisdiction?

The respondent says the Costs Court has jurisdiction to determine the current application. She says that the questions regarding waiver of privilege and the implied undertaking are within the jurisdiction of the Costs Court as they are connected to the ‘assessment, settling, taxation or review of costs’. Further, if an implied undertaking exists in relation to the documents in the applicant’s file, this is an undertaking owed to the Costs Court (as the file was inspected in the taxation). The Costs Court must therefore consider whether the respondent should be released from the implied undertaking and, if so, the scope of that release.
On the other hand, the applicant says that the Costs Court does not have the jurisdiction to determine whether privilege was waived over her file and whether the respondent should be released from the implied undertaking. She says the appropriate forum for the respondent’s application is the County Court or the Court of Appeal. The specific documents sought by the respondent[32] were discovered in the County Court proceeding, when legal professional privilege was claimed. The Costs Court cannot release the respondent from the implied undertaking owed to the County Court.
[32]Namely the documents outlined at [14] of the Warren 29 May 24 affidavit.

Consideration

I find that the Costs Court has jurisdiction to determine questions of privilege and waiver. However, the Costs Court does not have jurisdiction to determine the question of whether the respondent should be released from the implied undertaking if bound by it. These are my reasons.
The Costs Court is established pursuant to s 17C of the Supreme Court Act 1986 (Vic) (‘the Act’). The Costs Court does not have inherent jurisdiction.[33] Instead, ‘the jurisdiction of the Costs Court is strictly confined to the matters mentioned in s 17D of the Supreme Court Act’.[34] Section 17D of the Act outlines the jurisdiction and powers of the Costs Court as follows:
[33]James (a pseudonym) v Taussig Cherrie Fildes [2022] VSC 559, [113].
[34]Ibid.
17D     Powers and functions of Costs Court
(1)       The Costs Court—
(a)has jurisdiction to hear and determine the assessment, settling, taxation or review of costs in all proceedings in the Court;
(b)has jurisdiction to hear and determine the assessment, settling, taxation or review of costs in proceedings in—
(i)the County Court;
…
— if, by or under any Act, the Rules or the Rules of those courts or VCAT, costs are to be assessed, settled, taxed or reviewed by the Costs Court;
…
(h)      has any other jurisdiction in relation to costs given to it—
(i)        by or under this Act or any other Act; or
(ii) by the Rules; or
(iii) by the Rules of another court or of a tribunal.
…
(2)The Costs Court has such powers of the Court as are necessary to enable it to exercise its jurisdiction.
(Emphasis added).
Rule 63A.01(3) of the County Court Civil Procedure Rules 2018 (‘County Court Rules’) provides that r 63A applies to costs payable under any order of the County Court, and is therefore applicable here.[35] Rule 63A.51 states that in exercising its jurisdiction, the Costs Court may refer any question arising on taxation to a judge for directions. Rule 1.13(2)(a) states that a reference to a judge is a reference to the Court constituted by a judge. This may be distinguished from references to an associate judge, judicial registrar or costs judge: see r 1.13(2)(b), (ba) and (c). As per s 17C of the Act, a costs judge is an associate judge allocated as such by the Chief Justice of the Supreme Court.
[35]Rule 63A.10 of the County Court Civil Procedure Rules 2018 (‘County Court Rules’) provides that where, as here, the County Court makes an order for costs, those costs may be taxed in the Costs Court without an order for taxation.
There are no authorities on whether the Costs Court has jurisdiction to determine a privilege dispute, or to release a party from the implied undertaking. However, the authorities relating to the jurisdictional limits of the Costs Court are instructive. For the Costs Court to exercise jurisdiction, it is insufficient that the issues in dispute have some connection to matters of ‘assessment, settling, taxation or review of costs’. Instead, the issues for determination must ‘actually relate’ to these matters.[36]
[36]Owerhall v Bolton & Swan [2015] VSC 417 (‘Owerhall’), [15].
In Owerhall v Bolton & Swan (‘Owerhall’), Bell J, on referral, analysed the jurisdictional limits of the Costs Court in the context of an application to set aside a settlement agreement. His Honour found that the issue for determination concerned the grounds upon which the settlement agreement could be set aside and was therefore fundamentally a contractual issue. Accordingly, Bell J concluded the Costs Court lacked jurisdiction as the plaintiff’s application did not relate to the ‘assessment, settling, taxation or review of costs’ – the issues within the defined jurisdiction of the Costs Court.[37]
[37]Owerhall, [15].
The circumstances here are distinguishable from those of Owerhall, which was concerned with a contract. The production of documents is intrinsically connected to the current proceeding.
In Gadens Lawyers v Beba Enterprises Pty Ltd, Emerton J (as Her Honour then was) held that the Costs Court had jurisdiction to enforce the right of a third party to obtain information about bills of costs to enable it to determine whether to apply for a costs review.[38] Her Honour held that ‘the Costs Court has both ancillary powers and any other jurisdiction “in relation to costs” given to it by statute or under the Rules’.[39] In so finding, her Honour reasoned that ‘the legislature could not have intended that responsibility for one small part of the review process, albeit one that may be anterior to any application for costs review, be taken out of the hands of the Costs Court and vested in the judges of the Trial Division’.[40]
[38][2012] VSC 519, [20]-[21] (‘Gadens’).
[39]Gadens, [22].
[40]Gadens, [22].
The taxation process involves the assessment of costs. Determining which documents may be inspected during a taxation, and whether or not they are privileged, or whether privilege has been waived, are all properly understood as functions within s 17D(2) of the Act. They are necessary functions to enable the Costs Court to exercise its jurisdiction to determine the assessment, settling, taxation or review of costs under s 17D(1). It is clear from the practices of the Costs Court that an assessment of costs may necessitate drilling down into documentary detail in this way.
The Supreme Court of Victoria’s Practice Note SC Gen 11 – Costs Court (‘Practice Note’) sets out practice concerning various matters in the Costs Court. Paragraph 6 of the Practice Note provides that, in commencing a proceeding in the Costs Court, a party must file a bill of costs and a summons for taxation. Paragraph 7.2 states, amongst other things, that an applicant for taxation must file copies of all disbursement invoices claimed. Paragraph 7.3 provides that the applicant may file a short statement to assist the Court in assessing the bill of costs. Evidently, a respondent will routinely scrutinise the bill of costs item by item. Paragraph 7.4 provides for the respondent to file a notice of objection at least seven days before the date of assessment per r 63.47(3) of the Rules. The notice of objection must state ‘specifically and concisely the grounds of objection to each item’ per r 63.47(2). The Costs Court disregards generalised objections such as ‘excessive’ or ‘production’: see paragraph 7.5. Per paragraph 7.7, all bills of costs claiming costs and disbursements over $50,000 will be listed for mediation.
As discussed, the mediation conducted in the current proceeding did not resolve matters. Accordingly, the assessment commenced. The documents in dispute were inspected in the context of a costs assessment. In light of the above, the dispute about privilege and waiver regarding the applicant’s documents is properly considered to fall within the jurisdiction of the Costs Court outlined under s 17D(1) of the Act.
I reject the applicant’s submission that the County Court should determine the costs dispute. I accept that the documents were discovered, and privilege was claimed over them, in the County Court proceeding. However, the taxation is a separate proceeding, and the applicant has claimed that the documents are subject to legal professional privilege in the current proceeding (in addition to the County Court proceeding). As such, the waiver dispute falls squarely within this proceeding. It is properly determined by the Costs Court.
Turning now to the question of whether the Costs Court has jurisdiction to determine questions relating to the implied undertaking commonly referred to as the ‘Harman undertaking’. It is common ground that the implied undertaking may apply to documents produced for taxation of costs. In Hearne v Street, the High Court explained the nature of this undertaking and held that it extends to documents produced for taxation of costs:
Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include … documents produced for the purposes of taxation of costs.[41]
[41](2008) 235 CLR 125, 154-155 [96].
In support of this proposition, the High Court cited Bourns Inc v Raychem Corporation, in which case Aldous LJ held:
In my judgment where a party to taxation discloses to a payer documents for the purpose of the taxation which are relevant to an issue and therefore should in the interests of justice be disclosed, an implied undertaking arises so that the documents can only be used for the purposes of those proceedings.[42]
[42][1999] 3 All ER 154, 170.
The parties here are in dispute about whether or not the implied undertaking applies to the documents disclosed by the applicant. The respondent relies upon the findings of Derham AsJ in Perton v Walters:
The fact that the disputed documents were produced voluntarily in the Costs Court proceeding, rather than by compulsion pursuant to an order of the Court, is reason enough to conclude that the implied undertaking is not applicable.[43]
[43](2018) 56 VR 306, 324 [61].
The question is whether the Costs Court has jurisdiction to hear the dispute about whether the implied undertaking applies, and if so, whether the respondent ought to be released from it. In contrast to the questions of privilege and waiver, this dispute does not ‘actually relate’ to matters of assessment, settling, taxation or review of costs or ancillary matters. It is therefore beyond the scope of s 17D of the Act. Accordingly, the Costs Court does not have jurisdiction. The respondent should apply for release from the implied undertaking in the appeal proceeding if she wishes to pursue it.
For completeness, I add three further matters.
First, I decline to refer the dispute about the implied undertaking to a judge of the County Court pursuant to r 63A.51 of the County Court Rules for two reasons. First, this power is limited to directions on any question arising on a taxation. The question of the implied undertaking does not arise on taxation. Secondly, to do so would be contrary to the overarching purpose of the CPA, because it would be inefficient to convene another court to hear a dispute that involves the use of documents in the appeal proceeding.[44] Moreover, that proceeding concerns an application for leave to adduce fresh evidence. The respondent has already described the privileged documents in the Warren 14 May 24 appeal affidavit. The respondent’s application in the appeal proceeding does not currently disclose those documents because the applicant claims they are privileged, and the respondent wishes to proceed carefully with respect to the implied undertaking.[45]
[44]See: Civil Procedure Act 2010 (Vic), s 7.
[45]Warren 14 May 24 appeal affidavit, [60], contained in Exhibit ‘LAW-1’ to the Warren 29 May 24 affidavit, 137.
Second, there is a statutory obligation regarding the use and disclosure of documents in civil proceedings: see s 26 of the CPA. The question of whether s 26 is applicable here is best decided, if necessary, with the question as to whether the implied undertaking applies.
Third, I reject the respondent’s submission that Dubey v Robert Chrzaszcz & Associates Pty Ltd (‘Dubey’)[46] is applicable. It does not address the jurisdiction of the Costs Court. Dubey is a decision of the Supreme Court of South Australia by Judge Dart concerning taxation of costs. The costs in question included costs incurred in a Federal Circuit Court proceeding. Judge Dart observed that the Federal Circuit Court does not have the power to tax costs between solicitor and client. As such, a separate proceeding must be issued. This may cause issues as to the implied undertaking to arise.[47] There was a dispute about whether documents utilised in the Federal Circuit Court proceeding were subject to the implied undertaking and, if so, whether using the documents in the taxation proceeding would be a breach of that undertaking.[48] Judge Dart held that the taxation process was ancillary to the Federal Circuit Court litigation and the Harman principle did not apply.[49]
[46][2022] SASC 116 (‘Dubey’).
[47]Ibid, [18]-[19].
[48]Ibid, [8]-[9].
[49]Ibid, [23], [30].

Production of privileged documents

Turning now to the privilege dispute.
It is common ground that the applicant’s file, as inspected by the respondent on 29 December 2023 and 12 February 2024, contained documents that are subject to legal professional privilege and would therefore attract the protection offered by ss 118 and 119 of the Evidence Act 2008 (Vic) (‘Evidence Act’).

Respondent’s submissions

The respondent submits that the applicant’s entire file was produced voluntarily and intentionally by her costs consultant, Mr Thompson. The respondent relies on the affidavit evidence of Mr Warren to illustrate that the applicant chose to produce her entire file, without compulsion, and without imposing limitations or conditions, despite:
(a)Mr Warren proposing that specific exclusions be discussed;
(b)following the directions hearing on 12 December 2023, and as recorded in the contemporaneous email from Mr Warren, the respondent only seeking production of two categories of documents;[50]
(c)the applicant producing her entire file for production, as opposed to the particular items conceded at the above directions hearing; and
(d)the respondent informing the applicant that she was producing her entire file, including privileged documents.
[50]These documents being the items listed under the headings ‘Discovery’ and ‘Perusal of transcript’ at [8] of the Warren 8 Dec 23 affidavit.
The respondent rejects any suggestion there was a ‘practical compulsion’ to produce documents.[51] Alternatively, practical compulsion to produce would only extend to the two categories of documents conceded by the applicant at the directions hearing on 12 December 2023 and not her entire file.
[51]Cf King (Trustee), in the matter of Zetta Jet Pte Ltd v Linkage Access Ltd (Discovery) [2019] FCA 1408, [10]-[11].

Applicant’s submissions

The applicant submits that her file was produced under compulsion and that she has not acted in a manner inconsistent with maintaining the confidentiality of her documents. She submits that privilege has, therefore, not been waived.
The applicant refers to correspondence between Mr Warren and Mr Thompson as early as October 2023 in which Mr Thompson speaks to the sensitivity of the applicant’s file. The applicant says this is tantamount to Mr Thompson asserting privilege.

The applicant rejects the respondent’s submissions that production of her file following the directions hearing on 12 December 2023 was voluntary. She says her file was produced following resolution of the respondent’s application to compel production and that ‘it was plainly produced in circumstances where privilege was asserted’.
If privilege was waived, the applicant submits it was limited to the taxation.[52]
[52]Referring to Goldman v Hesper [1988] 3 All ER 97; Players Pty Ltd (in liq) v Clone Pty Ltd (2013) 115 SASR 547, 566 [88].
The applicant conceded that no documents were redacted or excluded before producing the entire file to the respondent. The applicant made oral submissions that redacting and reviewing the file for exclusions would have been costly and oppressive in the circumstances. However, she conceded that there was no evidence before the Court in this respect.

Consideration

As held above, there was no order made or direction given at the directions hearing on 12 December 2023 for the applicant to produce the documents. There is no evidence of any practical compulsion for the applicant to produce the privileged documents.
The next question is whether the applicant waived privilege by providing the documents for inspection and whether any such waiver was limited. The principles concerning waiver are well-established; s 122 of the Evidence Act is applicable.
In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd, the High Court stated:
According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege).[53] It may be express or implied. In most cases concerning waiver, the area of dispute is whether it is to be implied. In some cases waiver will be imputed by the law[54] with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. The courts will impute an intention where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.[55]
In Craine v Colonial Mutual Fire Insurance Co Ltd,[56] it was explained that “‘[w]aiver’ is a doctrine of some arbitrariness introduced by the law to prevent a man in certain circumstances from taking up two inconsistent positions ... It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’”. In Mann v Carnell,[57] it was said that it is considerations of fairness which inform the court’s view about an inconsistency which may be seen between the conduct of a party and the maintenance of confidentiality, though “not some overriding principle of fairness operating at large”.
Those considerations, articulated in relation to waiver at common law, apply with equal force in relation to the statutory question posed by s 122(2) of the Evidence Act, and made applicable by s 131A of that Act to the determination of a question of waiver of client legal privilege arising in the context of pre-trial discovery. That question is whether the client or party concerned “has acted in a way that is inconsistent with the client or party objecting to” the production of a document. [58]
[53]Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305, 326; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, 658.
[54]Goldberg v Ng (1995) 185 CLR 83, 95-96.
[55]Mann v Carnell (1999) 201 CLR 1, 13 [29].
[56](1920) 28 CLR 305, 326.
[57](1999) 201 CLR 1, 13 [29].
[58](2013) 250 CLR 303, 315-316 [30]-[32] (original citations).
Turning now to a limited waiver of privilege during taxation of costs. In Players Pty Ltd (in liquidation) (Receivers appointed) v Clone Pty Ltd (‘Players v Clone’), the Full Court of the Supreme Court of South Australia stated:
… it is to be accepted that where a document is disclosed for the purposes of taxation, through compulsion by reason of a rule of court or by reason of a specific order of the court or otherwise, waiver is limited. A direct application of those principles to the present case compels the conclusion that there was here an express or intentional waiver. The documents were produced for inspection by the opponents in the litigation. There was no suggestion that the disclosure was subject to confidentiality. No reference was made at the time of disclosure to any claim of privilege or any limited waiver of privilege. [59]
[59](2013) 115 SASR 547, 566 [88] (‘Players v Clone’).
In Perton v Walters,[60] Derham AsJ considered the application of Players v Clone in circumstances where the plaintiff had disclosed documents subject to legal professional privilege in the course of a taxation of costs. In distinguishing the prior authorities, Derham AsJ held that production had occurred voluntarily and without limits, stating:
The circumstances giving rise to the limited waiver of privilege in Goldman [v Hesper] is plainly to be distinguished from the position here, just as it was distinguished in Players v Clone, where a situation analogous to this case arose.[61] The logic of the limited waiver of privilege was driven by those circumstances. The position in Victoria is different. There is no necessity to balance the rights of one party to natural justice (or procedural fairness) against the other party’s statutory or substantive common law right to maintain privilege over documents. There was no compulsion for Mrs Perton’s costs consultant to produce the documents for inspection. The order of the Registrar … cannot override Mrs Perton’s right to maintain her privilege over the disputed documents any more than an order for discovery or production of documents in a proceeding in this Court overrides that right. This explains McHugh J’s conclusion in Giannarelli No 2:
… that ultimately a party either waives the privilege entirely and allows the taxing officer and the other side to see the privileged documents or asserts the privilege and maintains the confidentiality of his or her documents.[62]
It cannot be said that Mrs Perton’s voluntary production of the documents for inspection was under compulsion. Her substantive common law right to maintain privilege, even by the use of redactions,[63] persisted in the face of the orders of the Registrar.
In the present case, Mrs Perton disclosed the documents in the Cost Court proceeding for the purpose of obtaining whatever assistance she could from that disclosure in pursuit of her costs assessment. That disclosure is inconsistent with maintenance of the privilege and she has waived her privilege in the documents. [64]
[60](2018) 56 VR 306 (‘Perton v Walters’).
[61]Players v Clone, 568 [98].
[62]Giannarelli v Wraith (No 2) (1991) 171 CLR 592, 607.
[63]Players v Clone, 567 [94].
[64]Perton v Walters, 322-323 [54]-[56] (original citations).
The same analysis applies here. As the background above discloses, despite suggestions from the respondent, the applicant did not redact or exclude the privileged parts of the file. She submitted that this would have been an expensive and oppressive exercise. However, there is no evidence to support that submission. Moreover, that explanation was not proffered at the time of disclosure.

Conclusion

The applicant waived privilege over the documents in the file produced to the respondent.
The Costs Court does not have jurisdiction to decide the dispute about whether the implied undertaking applies to the documents and, if so, whether the respondent may be released from that undertaking so she can use the documents in the appeal proceeding. In this instance, the Court of Appeal is the appropriate forum for such an application. Before embarking on that course, and consistently with her obligations under the CPA, the respondent should carefully consider her prospects of success.

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[2024] VSC 454

2 August 2024