Auckland District Law Society v G J Judd

IN THE COURT OF APPEAL OF NEW ZEALAND

CA151/00

BETWEEN	AUCKLAND DISTRICT LAW SOCIETY
First Appellant

AND	G J JUDD
Second Appellant

AND	B & ORS
First Respondent

AND	RUSSELL MCVEAGH MCKENZIE BARTLEET & CO
Second Respondent

Hearing:	6, 7 & 8 March 2001
Coram:	Elias CJ Gault J Keith J Tipping J McGrath J
Appearances:	R E Harrison QC and G M Illingworth for the Appellants R J Craddock QC, B R Latimour and A L Ringwood for the Respondents D L Mathieson QC for F W M McElrea
Judgment:	16 October 2001

JUDGMENTS OF THE COURT

Judgments

Para No

Elias CJ   [1] - [24]
Gault, Keith and McGrath JJ   [25] - [135]
Tipping J  [136] - [176]

ELIAS CJ

Legal professional privilege protects from disclosure confidential communications between a client and his legal adviser for the purpose of legal advice. Such protection is essential if advice is to be candidly informed and given. Where the advice is sought in connection with litigation, the privilege is an important part of the fundamental right of unimpeded access to the courts. Even where litigation is not immediately in prospect, the privilege recognises the public benefit in legal professional assistance if members of the community are to avoid disputes and order their affairs lawfully. As such, it supports the principle of legality upon which our society is organised. Legal professional privilege is subject to exceptions. It does not protect advice for purposes of fraud or illegality. And it may be limited by legislation. In the absence of express statutory language, such an important protection could be displaced only by statutory implication which, as a matter of interpretation of the statute, is clearly necessary. Since the propositions do not appear to be contentious, I do not attempt any review of the case law which supports them. Sufficient authority for present purposes is to be found in R v Uljee [1982] 1 NZLR 561 ; Commissioner of Inland Revenue v West-Walker [1954] NZLR 191; R v Home Secretary, Ex parte Leech [1994] QB 198, 210 per Steyn LJ; R v Secretary of State for the Home Department, ex parte Daly [2001] 3 All ER 433, 438-439 per Lord Bingham (approving ex parte Leech).
The principal question raised by the appeal is whether the common law legal professional privilege of solicitors who seek legal advice in litigation to which they are parties is removed by the Law Practitioners Act 1982 for the purposes of an investigation of a complaint of professional misconduct. No provision of the Act expressly requires that result. I do not consider that the Act, properly construed, removes the privilege as a matter of necessary implication. For reasons which are slightly different to his, I agree with the provisional conclusion of Tipping J on the point. I would decide the appeal on that basis. Since I have also had the advantage of reading in draft the judgment of McGrath J which fully traverses the background and sets out the legislation, I can be brief in explaining why.
On the second question raised by the appeal, I agree with Tipping J and for the reasons he gives that Paterson J was correct to hold on the facts that privilege in the documents, if established, was not waived by Russell McVeagh.
The Auckland District Law Society relies upon the power given by s101(3) of the Act to compel production for inspection of documents in the possession or control of the solicitors complained against. This power is invoked both as an answer to the claim by Russell McVeagh for return of documents said to be privileged and as authority for the Society’s counterclaim for a declaration that Russell McVeagh is required to produce the documents. In both the claim and counterclaim s101(3)(d) is relied upon as a statutory override of the common law legal professional privilege.
The documents in issue are said to have been created for the purposes of obtaining legal advice from and representation by counsel in legal proceedings to which the firm was a party. The documents have not been inspected by the Court. Whether the claim of legal professional privilege is validly made and whether it is subject to any common law exception (such as fraud or, arguably, because the documents themselves constitute the misconduct in issue) remains to be determined in the High Court.
Section 101(3)(d) may be invoked by a District Committee inquiring into a complaint made under s98 or investigating professional misconduct of its own motion under s99. It empowers the District Council or its complaints committee to “require the production for inspection . . . of any books, documents, papers, accounts, or records that are in the possession or under the control of the person complained against…….and that relate to the subject-matter of the inquiry”. The sanction for failure to comply with a requirement of the District Council of committee for production under s101(3)(d) is provided by s101(6):
Every practitioner shall be guilty of misconduct in his professional capacity who, without lawful justification or excuse, refuses or fails to comply with any lawful requirement of a District Council or committee under this section.
In my view, far from excluding the protection of legal professional privilege by necessary implication, s101(6) preserves it. “Lawful justification or excuse” as a matter of ordinary use of language must include any justification or excuse recognised by law. Legal professional privilege is a lawful justification or excuse for refusing to comply with compulsory disclosure unless the compulsory disclosure regime expressly or by necessary implication excludes it. Some support for this view can be found in Taylor v New Zealand Poultry Board [1984] 1 NZLR 394, 404 per Cooke J and in Corporate Affairs Commission of New South Wales v Yuill (1991) 172 CLR 319, 338-339 per Gaudron J and 347-348 per McHugh J (both dissenting).
There is no express exclusion of legal professional privilege. The judgment of the majority finds an implied exclusion in the provisions of s127 which is said “to express the entire coverage area of preserved privileges”. This conclusion is apparently based on the principle of construction that express reference in one provision limits the scope of another more general provision to exclude the subject expressly dealt with. Further support is gained from the legislative history.
In my view, s127 does not deal exclusively with the scope of privilege in respect of evidence or disclosure under the legislation. It is, rather, principally concerned with the privileges and immunities which protect judicial process.
By common law those who participate in judicial proceedings (as witnesses, counsel, judges, jurors, or solicitors) are protected from civil actions arising out of pleadings, evidence, statements or submissions. In defamation claims, for example, statements in court proceedings have absolute privilege. Witnesses, parties, and solicitors are privileged from arrest on civil process while attending court. A witness is protected from civil proceedings in respect of the evidence given in court and this immunity is not confined to actions for defamation.
Such immunities and privileges are to be distinguished from evidentiary privilege, which is the right to refuse to disclose evidence relevant to the determination of an issue in court. They arise when application has been made to a court and protect all stages of the proceedings. They are based upon the public interest in the administration of justice.
The immunities and privileges which protect judicial process have been extended beyond courts to other tribunals acting judicially. Such extension has sometimes been achieved by the common law, but is often expressly provided for in the statutes setting up the tribunals and conferring their functions.
Section 127 is such express provision for the purposes of disciplinary proceedings under the Law Practitioners Act. It deals with the immunities and privileges of witnesses and counsel in proceedings. Sections 137 and 189 provide wider protection for Tribunals, Law Societies and others in inquiries, investigations and proceedings.
The inclusion of s127 does not indicate a limit to the circumstances in which evidential privilege can be claimed under s126 of the Act. It is directed at a different concern, as indeed the heading to the section (“Immunity of witnesses and counsel”) suggests. There is no necessary implication from the inclusion of s127 in the Act that legal professional privilege does not justify resistance to the compulsory disclosure provisions contained in s101(3) or s126(1). Indeed, ss126(5) and 101(6) are to opposite effect in their recognition of lawful justification or excuse as a ground for resisting compulsion.
Evidential privilege is in my view preserved by s126(5) in the case of witnesses in disciplinary proceedings under the Act and it is preserved by s101(6) in respect of compulsory disclosure in inquiry into a complaint. There is no occasion to read down the wide reservation provided for in both subsections for “lawful justification or excuse” to exclude claims of evidentiary privilege on the basis that the subsections, unlike s127, do not explicitly refer to “privilege”. If s127 were intended to cover the entire scope of privilege under the Act, then the privileges against self-incrimination and other privileges recognised by law would be excluded from “lawful justification or excuse” even though they clearly are justifications or excuses recognised by law.
A witness in disciplinary proceedings would be able, on the reasoning of the majority judgment, to claim privilege under s127, although not under s126. That is an awkward interpretation of the provisions, read in context. Section 126 is explicitly concerned with evidence in the Tribunal, as its heading indicates. It is to be expected that a reservation of justification to resist the compulsion provided in the section for evidence and production of documents would be contained within s126 itself. That is what s126(5) provides. In my view it is artificial to say that s126(5) allows all other lawful justifications apart from those to which the label “privilege” is attached and that the right to resist on the basis of “privilege” (whether against self-incrimination or on the basis of legal professional privilege) is to be found in s127. Section 127 is not principally directed at matters of evidence and evidentiary privilege. It also deals with the distinct and important concern of immunities in proceedings. It is not redundant if claims of evidential privilege are “lawful justification” under s126(5).
On the reasoning of the majority, a practitioner whose conduct is being inquired into under s101 would not be entitled to assert any privilege, not even that against self-incrimination. That is a conclusion I would come to with the greatest reluctance. A privilege against self-incrimination is an important plank of our system of criminal justice, affirmed in the case of those charged with offences by the New Zealand Bill of Rights Act 1990. The Serious Fraud Office Act 1990 does abrogate the privilege for the purposes of investigation under that Act. Parliament has however limited the subsequent evidential use that can be made of statements obtained by compulsion to those cases where the person interviewed gives evidence inconsistent with the statement (s28). Compared to such careful and specific legislation, it is unlikely that Parliament would sweep away the privilege here by a general allusion to privilege in s127.
I agree with Tipping J that if privilege can be reasserted at a Tribunal hearing to prevent production of privileged material in evidence (as the majority would have it under s127, and as I believe under s126), there is no convincing reason for lifting privilege at the stage of an inquiry into a complaint. The suggestion that it would allow the Society to follow up other trails which could lead to admissible evidence strikes me as stretched. If Parliament had intended to make such provision for investigation, it could have done so explicitly as it has done in the Serious Fraud Office Act. The existence of a policy argument that such power to override privilege might be useful is not a reason to adopt a strained interpretation of the legislation.
I do not accept that privilege cannot be available as a defence to s87. Section 87, too, employs the language of “lawful justification or excuse” to excuse failure to comply with ss 83 and 85 of the Act. Those sections permit the Council to take possession of a solicitor’s records and documents and to require production of business or accounting records relating to trust accounts. I agree with Tipping J that in the light of its policy and purpose the Act does not permit lawyers to assert the privilege of the client to thwart investigation. And I agree that the privilege attaches only to good faith communications for the purpose of the lawyer obtaining legal advice about his personal circumstances or litigation in which he is a party. Proper invocation by a lawyer of the privilege available to all other clients does not impede the proper application of the Act in the protection of the public interest.
I consider that the legislative history provides no support for an interpretation that the words “lawful justification or excuse” in ss101(6) and 126(5) do not include claims of privilege. Indeed, the inclusion in the earlier legislation of provisions equivalent to s126(5) as well as to s127 seems to me to point the other way. As already indicated, those two sections can be seen to preserve evidential privilege as a lawful justification (s126(5)) and to grant immunities and privileges appropriate for judicial proceedings (s127).
The Law Practitioners Acts of 1935 and 1955 contained no power of compulsory disclosure before disciplinary proceedings. Before enactment of the 1982 Act, the role of the District Council and its Committee was adjudicative only. There was no separate provision for investigation before proceedings were initiated by application, charges, inquiry, or investigation. “Inquiries” and “investigations” under the older legislation were adjudicative processes resulting in disciplinary outcomes. It was therefore appropriate to apply to those proceedings the immunities and privileges provided by s127 and its precursors in the 1935 and 1955 Acts, ss11 and 45 respectively. Powers to compel evidence and production of documents were conferred only as part of the adjudicative function. Section 126 of the 1982 Act is equivalent to s10 of the 1935 Act and s44 of the 1955 Act. Both earlier sections protect the witness upon “lawful justification”. For the reasons already given, I consider that those earlier provisions, as is the case with s126, provided protection for evidential privilege as well as other lawful justifications.
It is unnecessary to decide whether the immunities and privileges provided under s127 in protection of proceedings are available in inquiries under s101. That turns upon what is meant by “proceedings under this Part of this Act”. Section 101 is contained in the same part of the Act as s127. Although in the past common law immunities have turned on whether the function being exercised is judicial (see, for example, Royal Aquarium and Summer and Winter Garden Society Ltd v Parkinson [1892] 1 QB 431; Lincoln v Daniels [1962] 1 QB 237), the law is evolving and the common law immunities may extend to processes of investigation which precede judicial proceedings (see, for example, X v Bedfordshire County Council [1995] 2 AC 633, 755 per Lord Browne-Wilkinson). In the case of s127, the question is one of statutory interpretation in which the common law protections are part of the context. The formal procedures provided by s101 and the developing common law may indicate that inquiries under s101 are “proceedings” for the purposes of the immunities and privileges provided by s127. On the other hand, the language of s127, with its reference to “witnesses and counsel” and its location among sections dealing with hearings before the Tribunal, may point in another direction. The evolution of s127 through earlier legislation, as discussed by Tipping J, would also have to be considered although the adjudicative nature of the investigations under the earlier legislation may mean that no consistency of the meaning of “proceedings” can be expected.
For these reasons, I would dismiss the appeal. The majority are however of contrary opinion.

Disposition

In accordance with the judgment of Gault, Keith and McGrath JJ, the appeal is allowed and orders are made in the terms in that judgment (see paras [133] to [135]).

GAULT, KEITH AND McGRATH JJ
(DELIVERED BY McGRATH J)

Table of Contents
Paragraph Number

Introduction.................................................................................. [25]

The facts........................................................................................ [30]
High Court decision...................................................................... [50]
Submissions on appeal................................................................. [60]

Discipline of law practitioners: the legislative history.............. [72]

Discipline of law practitioners: the Law Practitioners

Act 1982 ........................................................................ [75]

The West-Walker case................................................................... [97]

Does the Act exclude legal privilege?.......................................... [100]

Waiver........................................................................................... [124]

Outcome of the appeal................................................................. [130]

Conclusion and Orders of Court................................................ [132]

Introduction

There are two stages to the disciplinary process under the Law Practitioners Act 1982 for dealing with complaints about the conduct of legal practitioners. The first stage is investigative and the second adjudicative. During the investigative stage a District Law Society, or a committee on its behalf, endeavours to ascertain whether the conduct complained of is of such gravity as to require charges to be brought against the practitioner. During the adjudicative stage a disciplinary tribunal determines whether or not the practitioner is guilty of misconduct, and, if so, what penal orders should be made. This appeal is concerned with the scope of the protection against compulsory disclosure of information given by legal privilege to practitioners who are subject to the disciplinary process. The focus is on legal professional privilege but the concern extends to litigation privilege. The appeal is concerned in particular with privilege during the investigation stage.
While the disciplinary regime is created by statute the privilege concerned is sourced in the common law. Its foundation lies in the importance of all members of the public, including lawyers, being free to seek independent legal advice, uninhibited by concerns that what is then communicated may later have to be disclosed. But the effectiveness of the statutory regime regulating the conduct of barristers and solicitors is also a matter of great public importance which goes to the needs of the administration of justice. The issue whether the privilege gives protection against compulsory disclosure of information in the course of the statutory disciplinary process for law practitioners accordingly gives rise to a tension between important principles and values.
The law firm, Russell McVeagh, and its partners at the relevant time, (respondents in the appeal) sought in the High Court an order for the return of certain documents from the first appellant, the Auckland District Law Society (the Auckland Society), and the second appellant (Mr Judd) who was its counsel. It was alleged that the documents contained confidential and privileged information. Russell McVeagh had provided the documents to Mr Stuart Ennor, now deceased but at the time counsel instructed by the Auckland Society, on the understanding that there would be certain restrictions on the use of the information contained in the documents. Russell McVeagh claim that an agreement to this effect was breached. Having unsuccessfully sought the return of the documents from the Auckland Society, the respondents issued these proceedings.

The Auckland Society rejects the contention it breached the agreement, and argues that it is entitled to hold the documents concerned under its powers to compel production under the Law Practitioners Act 1982. That is because it is investigating certain complaints against members of the legal profession to which it contends the documents are relevant. The Auckland Society, by counter-claim, sought a declaration that Russell McVeagh was required to produce the documents to the Auckland Society or to its complaints committee (“the committee”) either under the original agreement made, or by virtue of the statutory powers under the Law Practitioners Act 1982 or because any privilege had been waived, or because it was in the public interest to do so.
The proceeding was heard in the High Court by Paterson J (CP M1539SD99, 5 May 2000). He decided that Russell McVeagh need not have provided the documents, which were subject of legal privilege and thereby protected from compulsory disclosure requirements. The Auckland Society was bound to hold them for the purposes originally agreed and otherwise to respect their confidentiality. They could not be used to investigate the complaints subsequent to the one in respect of which they were handed over. The Auckland Society appealed against this judgment.

The facts

Three special partnerships were formed for the purpose of bloodstock investment, between 1985 and 1987. The solicitor for the promoter of each of the partnerships was Mr Carran who was a partner of Russell McVeagh. Following failure of the partnerships, proceedings were issued in the High Court against the promoters and professional advisers to the promoters. In all proceedings Russell McVeagh was either an original defendant or was subsequently joined. All proceedings were ultimately settled out of court in 1996.
As a result of the partnership failures the Auckland Society received several written complaints against Russell McVeagh or partners the first being a complaint from Mr Hatton, on 3 August 1996 which was expressed to be against the firm. As a result, on 13 October, a former partner of Russell McVeagh, Mr McElrea, who is a District Court Judge, provided the Auckland Society with a confidential report under Rule 6.03 of the New Zealand Law Society Code of Ethics. In this report Mr McElrea alleged improper conduct by Mr Carran, who by then had ceased to be a partner at Russell McVeagh. We refer to it as the McElrea complaint. The report suggested that the Auckland Society request from Russell McVeagh copies of all relevant documents, including privileged documents, relating to the professional indemnity insurance cover of the firm.
A third complaint, known as the Otto complaint, was received by the Society on 13 March 1997. It was made against the firm and unnamed partners. A fourth complaint, the Molloy complaint, was received on 21 May 1998 from Mr Molloy QC. Serious allegations were contained in the Molloy complaint against a number of partners and former partners of Russell McVeagh which concerned the establishment of the bloodstock partnerships but also traversed wider grounds, including the conduct of the subsequent litigation.
On 25 November 1996 the complaints committee was set up by the Auckland Society to investigate the complaints received against Russell McVeagh and various partners. Mr Ennor was appointed as counsel advising the complaints committee.
The Auckland Society wrote to the partners of Russell McVeagh on 19 March 1997 concerning the McElrea complaint and requested copies of the documents concerning professional indemnity insurance that Mr McElrea had referred to in the report accompanying his complaint. Russell McVeagh was aware of that report. The letter of 19 March referred only to the McElrea complaint and did not mention the Hatton or Otto complaints. To assist the Auckland Society with its investigations, Russell McVeagh expressed willingness to provide it with certain documents subject to certain restrictions on their use. Arrangements for the documents to be provided were subsequently made between counsel acting for Russell McVeagh, Mr Lusk QC, and Mr Ennor. Alleged breaches of this agreement by the Auckland Society have led to the current proceedings.
In a letter to the Auckland Society of 7 April 1997 in response to that of 19 March Russell McVeagh stated:
May we assure you of the firm’s willingness to assist and cooperate in the Society’s investigation in respect of [Mr X]. There are, however, preliminary issues which need to be dealt with which we outline in this letter.
…there is still litigation on foot against the firm in respect of the bloodstock partnerships. For this reason, the confidentiality of all of the information held by the firm is very important. A number of the documents which the firm can produce are privileged in this litigation.
We understand that the Society has appointed Mr Ennor to investigate the complaint. We propose that we should make the privileged documents available to Mr Ennor on the express basis that, in doing so, privilege is not waived, and that the documents will not be further copied by Mr Ennor. Could you please advise whether the Society is prepared to deal with the privileged documents in that way.
At that time Mr Lusk was overseas. Russell McVeagh indicated in its letter of 7 April that they wished to have him involved in the process of providing the information, and suggested that on his return Mr Lusk contact Mr Ennor. The letter then concluded:
In the meantime, could you please confirm that the Society will accept the arrangements we have suggested in respect of the privileged documents.
Mr Ennor’s firm replied on 14 April 1997:
We are happy for the matter to be approached in the first instance as you have suggested in your letter of 7 April.
When he returned Mr Lusk and Mr Ennor reached an arrangement in terms of this exchange of letters. Mr Lusk gave evidence that the arrangements were made with Mr Ennor, to provide the information to him, in order to assist him to understand the correct factual background to the McElrea complaint. He said that he made the arrangement personally with Mr Ennor, which meant that he and Russell McVeagh were willing to make the information available to Mr Ennor because of the trust and confidence they had in him. He said the arrangement were not intended to extend beyond Mr Ennor to any other counsel who might replace him. Such replacement was neither discussed or contemplated.
The terms of the arrangement on Mr Lusk’s evidence were as follows:
(a)   Privilege was not waived in the documents or information;
(b)     The documents were not to be further copied by Mr Ennor;
(c)   The documents and information were not to be further distributed by Mr                    Ennor;
(d)     Mr Ennor would not refer any of the information to the Auckland Law   Society without prior consultation with Mr Lusk regarding the putting in   place of appropriate protections.

In addition there was a clear understanding that Mr Ennor and Mr Lusk would discuss any issues which arose concerning the documents and information.

On 14 May 1997 the documents were handed over to Mr Ennor. The following day Mr Ennor wrote to Mr Lusk seeking clarification regarding certain matters and concluded this letter:
May I retain the two red ring-binders in the meantime.

On 23 May 1997 Mr Lusk replied:

Those two binders were intended to be your copies to be retained by you. Our request at this stage is that you do not distribute further copies of that material. Our sensitivity, as I have mentioned to you, is in relation to the outstanding claim of Equiticorp. That arises only from the Ermine matter. If you need for professional reasons to refer some of our material to your Council Committee, could I ask you before doing so to identify what it is so that I can see whether there is a potential sensitivity, and we can then discuss if some protections can be put in place.

On 18 June 1997 Mr Ennor invited comment from Mr Lusk on the extent of his references to the material provided to him in a draft report Mr Ennor had prepared for the complaints committee in respect of Mr Carran. Mr Ennor agreed to contact Mr Lusk first, if he felt the need to, or was requested to provide the committee with copies of material in the ring-binders. Mr Lusk replied indicating he had no objection to what Mr Ennor proposed to tell the committee based on the material provided.
On 23 September 1997 Auckland Law Society provided copies of the McElrea, Hatton and Otto complaints to Russell McVeagh. Paterson J found that until then Russell McVeagh was unaware of the terms of the Hatton complaint or that it was against the firm as well as Mr Carran. The Judge also found that on 14 April 1997, when the documents were handed to Mr Ennor, there was no suggestion from Mr Ennor that the documents would be used for purposes beyond the investigation of Mr Carran.
At this point the issue of privilege first arose. On 12 March 1998 Mr Ennor requested further assistance from Mr Lusk who, on 1 April 1998, advised that he would have difficulty responding to this request without disclosing certain information which he had received from Mr Carran. Mr Lusk pointed out he was acting as counsel for Russell McVeagh, and on this basis he said he could not waive Mr Carran’s privilege.
In mid May 1998 Mr Judd QC was appointed counsel for the Auckland District Law Society. He took over the investigations resulting from the bloodstock litigation, although Mr Ennor still continued to have a role. Mr Judd was instructed to consider all four complaints. He received Mr Ennor’s files which included the ring-binders of documents handed over to him by Russell McVeagh. Mr Ennor did not at the time advise Mr Judd of the arrangements made in April 1997 with Mr Lusk.
On 22 May 1998 Mr Judd reported to the committee concerning one of the documents received by Mr Ennor from Russell McVeagh. It was a copy of a memorandum prepared by counsel acting for Russell McVeagh for their insurers F.A.I. Insurance Ltd. Mr Judd quoted extensively from this memorandum in a letter to the society dated 25 May 1998. The memorandum was headed:
Privileged Memorandum of Counsel prepared for Davenports, Solicitors for Justicia Mutual Association Inc, FAI Insurance Ltd & others - professional indemnity insurers of Russell McVeagh McKenzie Bartleet & Co/re: Buckingham Enterprises Ltd & Company: claim by Leitch & others; Wicklow Bloodstock (Nos 2-5) Partnership: Claim by Davis and others,
Against Russell McVeagh McKenzie Bartleet & Co.

This use of one of the documents is said in the litigation to be in breach of the arrangements of April 1997 and to entitle Russell McVeagh to require their return.

On 25 May 1998, under s99 of the Law Practitioners Act 1982, the Auckland Society resolved to conduct its own investigation into the matters arising from the bloodstock partnerships litigation. The resolution was passed by the Society on the advice of Mr Judd which in turn was based on the information he had derived from the documents originally provided to Mr Ennor.
It was not until 27 June 1998 that Russell McVeagh learned of Mr Judd’s involvement and at this point there was correspondence between the Auckland Law Society, Russell McVeagh and its solicitors. On 14 July 1998 Mr Lusk learned that Mr Judd held the documents handed over in April 1997. He wrote the next day to Mr Ennor advising that the privilege which Russell McVeagh at that time had intended to protect was now an issue. He asked that the Auckland Society observe the terms on which the documents had been provided.
On 25 July 1998 Mr Judd accepted that he would stand in the shoes of Mr Ennor. He noted that he was happy “in first instance” to hold the documents on the basis set out in letter 7 April 1997 from Russell McVeagh. The letter observed that the bloodstock litigation was over, and that he would notify Mr Lusk before making a copy of any documents. The Auckland Law Society and Mr Judd did not however accept that the documents were held subject to Russell McVeagh’s restrictions nor that they were to be returned to Russell McVeagh.
On 30 April 1999 Russell McVeagh made a complaint about the Auckland Society to the New Zealand Law Society concerning the retention and misuse of their documents. At this point litigation was threatened.

High Court decision

Paterson J found that under the arrangement made by Mr Lusk and Mr Ennor, which in the Judge’s view was not a contractual arrangement, the documents were provided on the following basis:
(a) Privilege was not waived in the documents or information;
(b)The documents were not to be further copied;
(c)The documents and information were not to be further distributed;
(d)Counsel would not refer any of the information to the Society without prior consultation with Mr Lusk regarding the putting into place of appropriate protections.
His Honour went on:
The prohibition on copying and distributing the information as well as the requirement on Mr Ennor to discuss any proposed reference of information to the Society, indicated that Mr Ennor was only able to use the information in a limited manner. Mr Ennor himself recognised this restriction when on 18 June 1997 he forwarded to Mr Lusk extracts from a draft report to the Committee and asked Mr Lusk to comment on “the extent of my references to the material you have provided to me.” He noted that if the Committee requested him to provide copies of the material he would make contact with Mr Lusk first. While the arrangement was made to enable Mr Ennor to understand the correct factual background to the (McElrea) complaint, the arrangement did not expressly provide that the Society could use the documents as evidence in bringing disciplinary proceedings against Mr X. The documents could only be used for that purpose if, either a new arrangement was entered into between the Society and Russell McVeagh or the Society had a legal right to obtain the documents against the wishes of Russell McVeagh.
The Judge then dealt with the issue of whether Mr Ennor had been entitled, as plainly he thought, to hand over the copies of the documents in the ring-binders to Mr Judd. That possibility had not been addressed in April 1997. His Honour held that the Auckland Society had accepted the terms on which Russell McVeagh proposed that the documents be made available. Information was provided to the complaints committee in accordance with those terms because of Mr Lusk’s agreement. But an objective interpretation of the arrangement entitled Mr Ennor to pass the documents to Mr Judd who was then required to hold them on the same terms as had Mr Ennor. Mr Judd was not permitted to make information from the documents available to the complaints committee without prior consultation with Mr Lusk, but there was no right of veto held by Russell McVeagh.
An important issue addressed by Paterson J was whether legal professional privilege was overridden by the Law Practitioners Act. The Auckland Society had argued that the broad powers in s101(3) to compel production of documents and giving of information did abrogate the privilege claimed by Russell McVeagh in this case. The Judge considered the leading case of Commissioner of Inland Revenue v West-Walker [1954] NZLR 191 where wide general language in taxation legislation, conferring similar powers on the Revenue, was held not to extinguish legal privilege. Paterson J referred to s101(6) of the Law Practitioners Act which creates an offence of failing to comply with such requirements to produce documents “without lawful justification or excuse.” That phrase, in his view, could cover a claim for privilege which was the legal basis given for non-compliance.
He saw as neutral s127 of the Law Practitioners Act, which gives witnesses and counsel in legal proceedings the same privileges and immunity in relation to disciplinary proceedings as they if they were proceedings in a Court of Law. Here, on the one hand, Parliament had not expressly stated that privilege was abrogated in a section which addressed privilege. On the other, he acknowledged that it might be argued “that s127 was necessary because other legal privilege was abrogated by the Act”.
Paterson J reasoned that the West-Walker case had clearly stated the common law rule concerning legal privilege many years prior to enacting the Law Practitioners Act in 1982. In light of that, if Parliament had wished to abrogate the privilege it could and should have done so by making express provision. It was also difficult to see why the purpose of the Law Practitioners Act should abrogate the privilege in respect of disciplinary proceedings, when it would remain available to a practitioner who was subject to criminal prosecution. While recognising there were strong public policy considerations that suggested the Act should override privilege, Paterson J concluded it had not been abrogated, either expressly or by necessary implication. Overseas decisions proceeding on a different basis did not apply in New Zealand.
Paterson J then considered and rejected an argument for the Auckland Society that the privilege had been waived. In the present case the disclosure of documents to Mr Ennor was for a limited and specific purpose concerning an investigation of the conduct of Mr Carran. No waiver could be imputed in those circumstances in relation to complaints against the firm generally or persons other than Mr Carran. He also rejected a submission that even if the documents were privileged such privilege was irrelevant to the claim for breach of confidence.
Finally, Paterson J addressed the cause of action for breach of confidentiality. He held that the information given to Mr Ennor was of a confidential nature. It was provided in circumstances importing an obligation of confidence, so that the Auckland Society was not able to take improper advantage of possession of the information. Mr Judd’s letter concerning the FAI report was in breach of the confidentiality obligation first because extracts had been copied and secondly because there had been no prior consultation.
But for the privilege attached to the documents, the public interest in investigation of complaints would have allowed the Auckland Society to retain the documents for the purpose of wider investigations. That was because the public interest would override the obligation of confidence. The privilege which he had upheld, however, overrode the public interest defence. It had not been waived other than for the specific limited purpose of the complaint against Mr Carran.
Accordingly Russell McVeagh had provided confidential material which, because of the privilege, it need not have provided. The Auckland Society and the complaints committee could not exercise powers to compel production of the documents because of the privilege. It followed that, it could not use them in its investigation of Russell McVeagh, and practitioners other than Mr Carran in relation to the McElrea complaint. The documents could be retained but only to provide information for the purpose of that particular area of investigation, concerning which there had been a limited waiver of privilege, but not otherwise.

Submissions on appeal

Mr Harrison QC for the appellants contended the appeal raised two broad issues of principle. The first was whether the right of a legal practitioner personally to claim privilege, in relation to communications in the course of obtaining legal advice, was lost on voluntarily handing over privileged material to a District Law Society for purposes of a disciplinary investigation. The second issue of principle was whether the Law Practitioners Act 1982, the Rules made under it and the public interest, together or separately, override the legal professional privilege which otherwise would be available to a law practitioner under investigation.

The submissions on the first issue of principle challenged Paterson J’s finding concerning the nature and effect of the arrangement between the Auckland Society and Russell McVeagh. Paterson J held that the limited scope of the arrangement was to provide Mr Ennor with background information on the bloodstock transactions, for the purposes of the complaint against Mr Carran. This had also been the basis of the Judge’s further finding that there had been only a limited waiver of privilege when the documents were made available. The appellants also put in issue whether it was open to Russell McVeagh to waive privilege only for a specific purpose, and in a specific context, without waiving it generally. Finally, the appellants submitted there was an implied imputed general waiver of privilege in the circumstances in favour of the Auckland Society.
On the second issue of principle the appellants contended that Paterson J’s finding that the right to privilege prevailed over the powers of a District Law Society to compel production of documents was wrong. Mr Illingworth argued that the principles arising from the West-Walker decision did not apply to legal professional discipline under the Law Practitioners Act 1982.
In the course of his oral argument Mr Harrison sought to meet the concern that if they did not have legal professional privilege law practitioners would be inhibited in taking legal advice concerning their own professional conduct. He made a concession. He accepted that the 1982 Act would not abrogate the privilege in those circumstances. He suggested that the scope of s101(6), which recognises the defence of lawful justification or excuse, might let in the privilege, to cover such communications. Mr Mathieson supported this approach. We understood them to draw a distinction between material evidencing the conduct under investigation by a District Law Society and communications obtaining and receiving advice concerning the propriety of that conduct. The latter would, according to the concession, be the subject of a privilege enjoyed by law practitioners as clients.
Mr Craddock QC and Mr Latimour, for the respondents, supported the findings of Paterson J on the terms of the April 1997 arrangement. They also contended the Judge was correct to find there was a breach of obligations of confidentiality in relation to the documents which bound the Auckland Society and its counsel. Finally, they supported the Judge’s conclusion that the documents were privileged and that the privilege was neither overridden by the statute nor waived.
The respondents’ submissions emphasised that the documents were provided specifically to Mr Ennor. They were not to be further copied nor distributed by him. They were accordingly not provided to the Auckland Society at all. Furthermore they were provided solely for the purposes of consideration of the McElrea complaint against Mr Carran and could not be used outside that context. The analysis of the parties’ rights and obligations, Mr Craddock contended, must proceed from that basis. Russell McVeagh had not waived privilege, beyond the confined scope of the terms of the arrangement and was within its rights to insist that they be observed.
Three relationships giving rise to privilege were identified in Mr Latimour’s submissions for the respondents. Russell McVeagh practitioners who were subject to investigation were in a situation in which they were clients entitled to both solicitor client privilege and litigation privilege. The privilege was jointly enjoyed with their insurers for whom the legal advisers at the time were also acting. The original clients at the time of the bloodstock transactions also had rights to privilege which Russell McVeagh must uphold unless they were waived.
In supporting the High Court’s conclusion that privilege was not overridden or abrogated by s101 the appellants’ submissions relied on the fundamental importance of the privilege and the consistent rejection of the argument that it was overridden in several New Zealand cases since West-Walker was decided “all involving statutes regulating matters of greater or at least equal importance as the Law Practitioners Act.” They also assert that had it been intended to override the privilege the legislature would not have enacted ss101(6) or 127.
Mr Mathieson QC made submissions on behalf of Mr McElrea which we agreed to hear regarding him as a person sufficiently interested in issues raised in the appeal. Mr McElrea is both a complainant and a former partner in Russell McVeagh.
Mr Mathieson argued there was a distinction reflected in the 1982 Act between the investigation of complaints against a practitioner and the process following the making of charges. He argued that:
Any disciplinary proceedings are referred to as “proceedings”. These are certainly not a mere continuation of the complaints investigation. It is only proceedings to which the separate rule in s126 about production of books, documents and papers etc applies. It is only proceedings in which witnesses and counsel have the immunities referred to in s127. It follows that s127 is irrelevant to the earlier investigation phase, as is s126. It also follows that the Court would be entirely justified in emphasising that Russell McVeagh’s claim that legal professional privilege has been breached at the investigation stage, and the legal issue which that generates, is to be sharply distinguished from the operation of legal professional privilege during the hearing of the prosecution of disciplinary proceedings.

and later that:

Parliament cannot have intended that relevant documents be shielded from the investigation so that it would be wholly or partly frustrated.

Mr McElrea is a District Court Judge, but his status is not relevant to any aspect of the proceeding or this appeal. His name was suppressed when we commenced hearing the appeal. Since the hearing, as earlier foreshadowed, Mr Mathieson on his behalf has asked that the suppression order be lifted.
The issues in the appeal relate to specific documents which are listed in a schedule to the amended statement of claim. The documents concern the bloodstock transactions and litigation arising from them. There is also some correspondence between Mr Ennor and Mr Lusk. No documents appear to be concerned with legal advice concerning the conduct of practitioners who are parties to this appeal. Against that background we turn to consider the statutory provisions regulating conduct of law practitioners and the impact they have on the common law privilege.

Discipline of law practitioners: the legislative history

The origins of statutory provisions for discipline of the legal profession go back to the Supreme Court Ordinances of 1841 and 1844. These gave the Supreme Court authority to remove the names of practitioners from the Rolls “upon reasonable cause” and also to impose lesser sanctions. The lack, however, of a designated body to bring instances of irregular conduct to the attention of the Courts presented difficulties. This was addressed when the New Zealand Law Society (the Law Society) was incorporated by the New Zealand Law Society Act 1869. The bringing and conduct of disciplinary proceedings seems to have been the primary purpose of formation of the Law Society, although that was not expressly stated in the Act. In 1878 express statutory provision was made for disciplinary functions to be exercised by District Law Societies. (Portrait of a Profession (1969) R B Cooke QC ed pp143 to 149; Discipline within the New Zealand Legal Profession (6 VUW Law Review (1971-1973) 337, 340-341, W R Flaus)).
The Law Practitioners Amendment Act 1913 conferred an express power on the Law Society to investigate charges of professional misconduct against any practitioner and to prosecute those in breach of statutes, rules or regulations relating to practice of law. The Act did not, however, spell out the procedure to be followed and conferred no power to require information (s2(c) and (d)). These powers were continued in the Law Practitioners Act 1931 (s63(2)(b) and (c)). The 1931 Act also first stated the general functions of the Law Society, so far as are relevant to professional conduct, to be:
63. (1) The general functions of the Society shall be to promote and encourage proper conduct amongst the members of the legal profession; to suppress illegal, dishonourable, or improper practices; to preserve and maintain the integrity and status of the legal profession; to provide opportunities for the acquisition and diffusion of legal knowledge; to consider and suggest amendments of the law; to provide means for the amicable settlement of professional differences; and generally to protect the interests of the legal profession and the interests of the public in relation to legal matters.

The Law Society had the power under s63(2)(d) to institute proceedings against practitioners. District Law Societies were given the same powers (s57(1)). Until 1935, however, the Court continued to have the exclusive power of discipline itself.

The Law Practitioners Amendment Act 1935 established a Disciplinary Committee of the Law Society to be appointed by the Council of the Law Society. The Disciplinary Committee was given power to inquire into charges of professional misconduct made against practitioners by the Law Society or any District Law Society. On their application, and following such inquiry, the Disciplinary Committee was empowered to strike off the names of practitioners from the rolls of barristers and solicitors (s4(1)). Powers of suspension from practice, imposition of financial penalties, censure and to order payment of costs were also given to the Disciplinary Committee (s3). Although the disciplinary powers of the Court were retained the statutory provision for professional self regulation through the separate roles of the Law Societies and the Disciplinary Committee became predominant in the regulation of professional conduct of legal practitioners. This continued under substantially the same structure under the Law Practitioners Act 1955. The 1955 Act was repealed and succeeded by the Law Practitioners Act 1982 which is the current statute.

Discipline of law practitioners: the Law Practitioners Act 1982

Under the 1982 Act, subject to a provision for conscientious objection, the New Zealand Law Society consists of all practitioners who hold current practising certificates as barristers or solicitors. Practitioners are also all members of the District Law Society of the district where they practise or principally practise (ss3 and 23).
Section 4 of the 1982 Act states the general functions of the Law Society, the first being to promote the interests of the legal profession and the interests of the public in relation to legal matters. The Act then states public interest functions in the same terms as in the previous legislation:
4. General functions of Society - (1) The general functions of the Society shall be-
(a)….
(b)To promote and encourage proper conduct among the members of the legal profession:
(c)To suppress illegal, dishonourable, or improper practices by members of the legal profession:
(d)To preserve and maintain the integrity and status of the legal profession:
….
The 1982 Act also retains the power for the Law Society to institute prosecutions against practitioners, or others, for breach of any statute, rules, or regulations relating to the practice of law (s5(2)(d)). This is linked to the Law Society’s power to make rules for the effective exercise of its functions and powers and in particular regulating professional practice, conduct and discipline (s17(2)(d)). The Law Society ceased to have the adjudicative power, exercised by its disciplinary committee, to investigate charges of professional misconduct against practitioners, no doubt reflecting the establishment of separate disciplinary tribunals by the Act to exercise functions previously undertaken by the Disciplinary Committee of the Law Society. Under the 1982 Act the Councils of the District Law Societies have the same powers as the New Zealand Law Society with exceptions that are not relevant to this appeal (s29).
Part VII of the 1982 Act set out a more elaborate scheme for discipline in the legal profession. The disciplinary process may be initiated either by a complaint by a member of the public, or, of its own initiative, by the decision of a District Council to cause an investigation to be made (ss 98 and 99). An inquiry into a complaint must follow as soon as practicable (s101(1)). The inquiry may be undertaken by either the District Council or, as is generally the case, a committee which it appoints (s100). For convenience in discussing the legislation we shall refer to such inquiries as being undertaken by a complaints committee. The statute is specific as to the procedure to be followed by a complaints committee in its inquiry into a complaint. Section 101 of the 1982 Act in its present form provides:
101. Inquiry by District Council or committee- (1) Every such complaint or matter (in this section referred to as the complaint) shall be inquired into as soon as practicable by the District Council or, if it is referred to a complaints committee, by that committee.
(2) If in the opinion of the District Council or committee the case is of sufficient gravity to warrant the making of a charge, the District Council or committee shall-
(a)Where the complaint is against a practitioner, make a charge against him before either the District Disciplinary Tribunal or the New Zealand Disciplinary Tribunal:
(b)Where the complaint is against a person employed by a practitioner, make a charge against him before the New Zealand Disciplinary Tribunal.
(3) In the investigation of the complaint the District Council or, as the case may be, the complaints committee-
(a)Shall send particulars of the complaint to the person complained against, and invite him to make a written explanation in answer to the complaint:
(b)May require or permit the person complained against to appear before it to make an explanation in answer to the complaint:
(c)May make, or on behalf of the District Law Society employ any person to make, such inquiries relevant to the complaint as the District Council or committee considers necessary:
(d)May require the production for inspection by the District Council or committee or any person so employed by it of any books, documents, papers, accounts, or records that are in the possession or under the control of the person complained against or, as the case may require, his employer and that relate to the subject‑matter of the inquiry:
(e)May require the person complained against and, if the case so requires, his employer to give all information in relation to any such books, documents, papers, accounts, or records that may be reasonably necessary for the purposes of the inquiry.
(4) Subject to this section, the District Council or committee may follow such procedure in inquiring into the complaint as it thinks fit.
(5) On completion of the inquiry, the District Council or committee shall-
(a)Notify the complainant and the person complained against of its conclusions and of any action taken or to be taken by it as a result of the inquiry; and
(b)Where the complaint relates to the operation of a solicitor’s trust account or to the audit of any such account, notify the Joint Audit Board of the complaint, its conclusions, and of any action taken or to be taken by it as a result of the inquiry.
(5A) Where the Joint Audit Board is notified of a complaint and other information under subsection (5)(b) of this section, the Joint Audit Board may disclose any of that information to the Law Society inspectorate established under section 88A of this Act and to any auditor of a solicitor’s trust account, except that the Joint Audit Board may not disclose the name of, or any other identifying information about, the solicitor, the solicitor’s firm, or the auditor to whom the inquiry related.
(6) Every practitioner shall be guilty of misconduct in his professional capacity who, without lawful justification or excuse, refuses or fails to comply with any lawful requirement of a District Council or committee under this section.
To summarise, if following investigation the case is considered by a complaints committee to be of sufficient gravity, a charge or charges must be made either to the appropriate District Law Practitioners Tribunal or to the New Zealand Law Practitioners Disciplinary Tribunal, established under the Act (s101(1) and (2)). The person the subject of complaint may be required to appear before the complaints committee to make an explanation in answer to the complaint and may also be required to produce for inspection any books, documents, papers, accounts or records in his or her possession or control that relate to the subject matter of the inquiry. The person the subject of complaint may also be required to give all information concerning such items reasonably necessary for the purposes of the inquiry (s101(3)(b), (d) and (e)). These powers and duties are reinforced by the stipulation that practitioners are guilty of professional misconduct if they refuse or fail “without lawful justification or excuse” to comply with lawful requirements of the committee under the section concerned (s101(6)).
The principal function of the New Zealand Law Practitioners Disciplinary Tribunal is to hear and determine charges laid with it against practitioners in accordance with the above provisions or referred to it because of the gravity of the case by a District Disciplinary Tribunal. The New Zealand Tribunal also hears appeals brought against District Tribunal decisions (s110, s106(2)).
The orders which the New Zealand Tribunal is empowered to make, after inquiry into a charge and a finding that a practitioner is guilty of misconduct in a professional capacity or other improper conduct specified in the Act, include striking a practitioner’s name off the roll of practitioners and suspension of a practitioner from practice (s112). The powers also include making of orders as to the manner of future practice by a practitioner which may include a requirement that the practice be available for inspections (s112(2)(f) conferring the District Tribunals’ power under s106(4)(g) on the New Zealand Tribunal).
The Act also confers a power on both the New Zealand and District Tribunals to compel persons to attend and give evidence, and creates an offence of failure to comply with such requirements in the following terms:
126. Evidence - (1) A Tribunal, by notice in writing signed by a member or by the secretary of the Tribunal, may require any person to attend and give evidence before it at the hearing of any proceedings under this Part of this Act, and to produce all books, documents, papers, and records in that person’s custody or under his control relating to the subject matter of the proceedings.
…
(5) Every person commits an offence against this Act who, without lawful justification or excuse, refuses or fails-
(a)To attend and give evidence when required to do so by a Tribunal; or
(b)To answer truly and fully any question put to him by a member of the Tribunal; or
(c)To produce to the Tribunal any book, document, paper, or record required of him.

It is followed by a provision protecting privileges and immunities which we shall shortly consider.

Powers are also given to District Councils under Part V of the 1982 Act to intervene in solicitors’ practices in certain circumstances. These were originally introduced in the 1955 Act. The powers arise where a District Council is satisfied there is reasonable cause to believe a practitioner or employee is guilty of theft, or of improper conduct in relation to money or other property of a client. They also arise where a practitioner is bankrupt or unable properly to administer a trust account due to physical or mental disability, or where a practitioner has died. In those circumstances the District Council can take over the practitioner’s trust bank account, take possession of records or documents in the practice, intercept mail addressed to the solicitor’s office and enter the premises, by force if necessary to search for and remove records and documents (ss81 to 83). It is an offence to fail to produce records or documents or to give information that is required under these provisions, to which there is a defence of lawful justification or excuse (s87(b)). It would, however, be inconsistent with the purpose of the powers of intervention under Part V of the 1982 Act for that defence to extend to claims to legal privilege or client confidentiality. Instead the Act curtails communication of information demanded. The Act also expressly permits a person appointed to examine accounts of a firm of solicitors, to communicate matters first to the appointing Council, secondly in giving evidence before a Disciplinary Tribunal and thirdly to the Police, but to no-one else (s85(6) to (10)).

Mr Harrison’s contrary argument was based substantially on cases of inadvertent disclosure, starting with Calcraft v Guest [1898] 1 QB 759. Two New Zealand cases have doubted the correctness of an absolute rule that inadvertent disclosure destroys privilege: see Uljee (supra) and Corporate Group Holdings Ltd v Corporate Resources Group Ltd [1991] 1 NZLR 115 per Hillyer J. It is also difficult to reconcile the apparent absoluteness of the Calcraft line of cases with what was said by Neill LJ in British Coal as noted above. In any event inadvertent disclosure can be distinguished from a case involving a deliberate disclosure on stated terms.
Furthermore, Calcraft v Guest must be read in conjunction with Ashburton v Pape [1913] 2 Ch 469. Calcraft’s case was concerned with privileged documents and Ashburton with confidential documents. Calcraft is usually cited for the proposition that once privileged documents have been disclosed, they may be used in evidence whatever the circumstances of the disclosure. Ashburton substantially modified the effect of that proposition by holding that equity could restrain the use to which the law allowed the disclosed documents to be put, provided equitable intervention took place before the documents were deployed in evidence. Equity looks to the circumstances in which the documents came to be disclosed and will restrain their use in evidence, and indeed in other ways, if such use would, in the light of those circumstances, be inequitable. It is no longer necessary to try to reconcile the two decisions; the former being the common law approach, and the latter the approach of equity. The equitable rule was formulated to alleviate the rigours of the common law and must be regarded as prevailing today. Hence I am satisfied that the Courts should recognise the concept of partial waiver; ie. disclosure on terms which restrict the use which may be made of the privileged material.
Mr Harrison cited the case of Paragon v Freshfields [1999] 1 WLR 1183, 1188 B-C; albeit in a slightly different context. That case recognises the concept of a partial disclosure with the consequential issue being the scope of the waiver. Mr Harrison also cited the decision of Henry J in Harbour Inn Seafoods Ltd v Swizterland General Insurance Co Ltd [1990] 2 NZLR 381, 384 in which the Judge held that you could have partial waiver in the sense of a waiver as regards X but not as regards Y. That too suggests the law is not and should not be that once there has been any form of disclosure, it is deemed to be a total waiver irrespective of the terms of the disclosure: see also the later decision of the same Judge in C C Bottlers Ltd v Lion Nathan Ltd [1993] 2 NZLR 445. I am therefore of the view that the appellant’s contention that the disclosure to Mr Ennor destroyed privilege for all purposes cannot be sustained. To accept it would be unduly rigid and would unhelpfully stultify sensible cooperation of the kind intended here. It is therefore necessary to consider the effect of the terms upon which the disclosure was made.

The terms of the arrangement

The issue which has arisen between the parties on this aspect of the case can be shortly stated. The Society contends that properly construed the arrangement between Russell McVeagh and Mr Ennor meant that privilege was being maintained by Russell McVeagh only in relation to its involvement in the bloodstock litigation. The corollary, so the Society argues, is that privilege was not being maintained as against the Society and was thus waived in this respect, either from the outset or once the bloodstock litigation had been settled. It should be recalled again here that Russell McVeagh was a party in its personal capacity to that litigation. Litigation as well as advice privilege could therefore apply. It is helpful to refer to the text of the crucial letter written by Russell McVeagh to the Society on 7 April 1997:
…there is still litigation on foot against the firm in respect of the bloodstock partnerships. For this reason, the confidentiality of all of the information held by the firm is very important. A number of the documents which the firm can produce are privileged in this litigation.
We understand that the Society has appointed Mr Ennor to investigate the complaint. We propose that we should make the privileged documents available to Mr Ennor on the express basis that, in doing so, privilege is not waived, and that the documents will not be further copied by Mr Ennor. Could you please advise whether the Society is prepared to deal with the privileged documents in that way. (emphasis added)
The letter in which this was said was written in reply to the Society’s letter to Russell McVeagh of 19 March 1997. In that letter the Society had referred solely to Mr McElrea’s complaint about Mr X. The Hatton and Otto complaints which the Society had received on 3 August 1996 and 13 March 1997 were not mentioned. Before talking about privilege, Russell McVeagh had in its letter expressed a willingness to cooperate in the investigation of Mr X, its former partner.
The letter expressly states that privilege was not waived. Mr Harrison emphasised, however, that this statement immediately followed the reference to some of the documents being “privileged in this litigation”, ie. the bloodstock litigation in which Russell McVeagh was personally implicated. There had of course been the earlier reference to the confidentiality of all the documents being very important. Russell McVeagh was therefore telling the Society that all the documents were confidential and some of them were privileged. The context for both these statements was that there was “still litigation on foot against the firm in respect of the bloodstock partnerships”. The Society therefore argues that it is a natural and logical inference that Russell McVeagh was reserving privilege because of and in relation to the bloodstock litigation. The Society points out that there is no suggestion in the letter that the reservation of privilege went wider than that.
While partial waiver, as has been discussed, is possible in law, voluntary disclosure of privileged documents will, prima facie, amount to a general waiver. The party seeking to retain privilege in such circumstances must demonstrate the extent to which privilege is reserved. The Society’s case is that the only extent which can be clearly discerned from the terms of the crucial letter, is that privilege was being retained solely as regards the bloodstock litigation. The documents were being made available to the Society’s counsel to assist in his investigation of the complaint against Mr X. The question of an investigation on a wider basis than that was not mentioned and so, the Society contends, it is not appropriate to hold that privilege was being reserved beyond the bloodstock litigation. Against that, however, there is force in Mr Craddock’s point that the simple statement “privilege is not waived” is not qualified and the earlier reference to the bloodstock litigation represented the reason for the retention of privilege and did not represent any cutting back of the otherwise general extent of the reservation. I interpolate here that Mr Ennor’s reply to the letter of 7 April agreed to proceed as proposed “in the first instance”. I agree with the Judge that the words “in the first instance” cannot alter the basis on which Russell McVeagh was supplying the documents. These words simply foreshadowed that at a later stage things might change, but any such change would have needed Russell McVeagh’s agreement.
Another factor which must be borne in mind is that privilege, once established, is not limited to the immediate context in which it has arisen. This is what is meant by the phrase: once privileged always privileged. Thus privilege does not cease with the cessation of the circumstances which gave rise to its existence. When lawyer A ceases to be a client of lawyer B or the litigation in which the privilege arose is concluded, that fact obviously does not remove the privileged status of bona fide communications which have passed between them. The privilege attaches to the communication and, if it is made in a privileged setting, it remains privileged. If that were not so the utility of privilege might be significantly reduced. By the same token a statement that privilege is not waived must ordinarily mean that the maker of the statement is preserving privilege on a basis which is not limited to the immediate circumstances in which it arose. It is therefore inherently unlikely that a statement expressly reserving privilege was intended to reserve privilege only during the currency of its immediate purpose, the more so when it is borne in mind that the privilege attaches to the communication.
I do not consider that the terms of the letter leave the essential issue open to much doubt, but I will nevertheless consider the matter on a wider basis. Russell McVeagh was making the documents available to counsel representing its District Law Society to assist in an investigation into the conduct of a former partner. If some of the documents were privileged as regards Russell McVeagh, they must also have been privileged as regards Mr X, on account on his having been a partner in the firm at the relevant times. Mr X was entitled to that privilege as much as any other partner. Russell McVeagh could not in the circumstances waive his privilege and it is reasonable to infer they must have been aware of that. Later letters from Mr Lusk to Mr Ennor of 16 June 1998 and 15 July 1998 make reference to this dimension. Equally the Society through its very experienced counsel, Mr Ennor, must have been aware that if Russell McVeagh had privilege, Mr X would have had privilege in the documents too. The Society could hardly have construed Russell McVeagh’s letter as a waiver of privilege on behalf of Mr X after he had left the firm. Looked at in this way, it is difficult to see why Russell McVeagh would be waiving privilege for all purposes other than the bloodstock litigation, albeit that was obviously the immediate focus of their attention.
Documents made available to a District Law Society in the course of an investigation must, as earlier noted, be used by the Society solely for the purpose of the investigation. They cannot voluntarily be used or disclosed for any other purpose. Russell McVeagh’s only logical concern as regards the bloodstock litigation, would have been lest some other party in the litigation might subpoena Mr Ennor, or someone from the Society, to produce the documents in case they might be shown to be adverse to Russell McVeagh’s interests. This possibility presupposes the awareness of such other party that the documents had been supplied to Mr Ennor. This seems a fairly remote possibility unless there was some improper conduct on the part of those investigating the complaint. The point is that the risk to Russell McVeagh’s interests in the bloodstock litigation of disclosure of the documents to the Society does not seem great, albeit the immediate focus of the letter of 7 April is clearly on that risk.
I do not regard Mr Lusk’s oral evidence as taking the matter any further. He simply confirmed the essence of the arrangement as apparent from its written terms. Both the words themselves in their context, and the circumstances as would have been apparent to the parties, suggest an intent to retain privilege for all purposes. The ultimate question is what the parties intended in relation to privilege by the arrangement into which they entered. While the context is of course important, the dominant words in Russell McVeagh’s letter are, in my views, the words “…. on the express basis that, in doing so [making the documents available], privilege is not waived….”.
I am satisfied, after full consideration of the competing submissions, that the Judge was correct when he viewed the arrangement as amounting to a general reservation of privilege. For the reasons given I do not consider the dominant words are limited by their context. They should be allowed in these circumstances to speak for themselves. How else could Russell McVeagh reserve privilege for all purposes other than Mr Ennor’s intended use of the documents? In respect of that use the Judge made a clear finding to which I refer in the next paragraph and which I would not disturb. My view is reinforced by the embargo on Mr Ennor further copying the documents.
My ultimate conclusion is therefore that Russell McVeagh’s privilege in the documents was waived only for the limited purpose of enabling Mr Ennor to familiarise himself with the very complex background to the complaint against Mr X. As Paterson J put it, the documents were made available for inspection by Mr Ennor and not by the Society. They were made available only for the purpose of Mr McElrea’s complaint against Mr X. That was the compass of the Society’s expressed wish to see the documents. It would in this light be unreasonable to take the view, against Russell McVeagh’s clear statement that privilege was not waived, that the firm had effectively made a general waiver, save for the immediate purposes of the bloodstock litigation. It is a clear inference from the circumstances that Russell McVeagh was intending to make the documents available to Mr Ennor only for the purposes of enabling him to understand the background to Mr McElrea’s complaint against Mr X. The Society’s failure to mention the other two complaints, which it had by then received, does not give it a secure basis for suggesting that Russell McVeagh should have expressly referred to any other complaints, actual or potential, if it wished to reserve privilege as regards them.
There is in the end no sufficient reason to read the crucial letter as waiving privilege on any wider basis than is inherent in the arrangement made, namely that Mr Ennor would be able to examine the documents but would not copy them to anyone else. The combination of circumstances which attended the making of the arrangement can only mean that, by saying it was not waiving privilege, Russell McVeagh was making it clear that the privileged documents were to be viewed solely by Mr Ennor and were to be used by him solely for the purpose of familiarising himself with the circumstances which lay behind the complaint made by Mr McElrea against Mr X. Any greater use of the privileged documents by Mr Ennor and now by Mr Judd, amounts to a breach of the arrangement. Such greater use cannot be compelled by the Society because Russell McVeagh has retained privilege in the documents. In saying that, I am assuming that the documents are truly privileged and that no fraud or other analogous exception to that privilege exists.

Summary

It is convenient by way of summary to set out the four issues which, during the hearing, counsel accepted required determination on the appeal. On each issue I set out my conclusions in summary form.
(1)Is the Society empowered by the Law Practitioners Act 1982 to compel production of documents otherwise the subject of legal professional privilege? No. This answer is subject to the caveat that the issue whether the Act totally abrogates privilege at the investigation stage is reserved for final determination after full argument.
(2)Is partial waiver possible in law? Yes
(3)What was the effect of the arrangement between Russell McVeagh and Mr Ennor? It amounted to a partial waiver enabling Mr Ennor to familiarise himself with the background to the complaint by Mr McElrea against Mr X. Subject to that, Russell McVeagh retained privilege in those documents for which a valid claim to privilege existed.
(4)Could the Society legally bind itself to accept such retention of privilege in the light of its statutory duties? As is inherent in the answer to the first issue, the answer is yes but subject to the same reservation.

Conclusion/formal orders

I would deliver this judgment on an interim basis in the light of the fact that it was agreed at the hearing that the question of imputed or implied waiver should be reserved for further consideration. If the Society wishes to pursue that question, a further fixture should be arranged, at which any other outstanding issues can be addressed. So far, I regard the contentions advanced by the Society as having failed. I would uphold Paterson J’s decision. Subject to the need for a further hearing, and what may transpire if any such hearing is required, my view is that the appeal should be dismissed, with consequential orders as to costs, and the matter remitted to the High Court for any further determinations that may be necessary consequent upon this judgment. However the orders of the Court are those set out in the judgment of the majority (see paras [133] to [135 ] herein).

Solicitors

Glaister Ennor & Kiff, Auckland, for Appellants
Bell Gully, Auckland, for Respondents
Sellar Bone & Partners, Auckland, for F W M McElrea

[2001] NZCA 292

16 October 2001