Everest Serviced Apartments Limited v Body Corporate 511909
[2022] NZHC 1925
•8 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1191
[2022] NZHC 1925
BETWEEN EVEREST SERVICED APARTMENTS LIMITED
Plaintiff
AND
BODY CORPORATE 511909
First Defendant
STRATA TITLE ADMINISTRATION LIMITED
Second Defendant
Hearing: 21 July 2022 Appearances:
L H Mau and A Robinson for Plaintiff S Maloney for First Defendant
No appearance for Second Defendant
Judgment:
8 August 2022
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
This judgment was delivered by me on 8 August 2022 pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
EVEREST SERVICED APARTMENTS LIMITED v BODY CORPORATE 511909 [2022] NZHC 1925
[8 August 2022]
Introduction
[1] This is an opposed interlocutory application by the plaintiff, Everest Serviced Apartments Ltd (“Everest”), pursuant, inter alia, to r 8.25 of the High Court Rules 2016 for an order or orders requiring the first defendant, Body Corporate 511909 (“the Body Corporate”), to provide further discovery.
[2] The application concerns collateral waiver, and the issue is when a waiver of privilege in respect of a document can extend beyond the document itself to related documentation.
Background
[3] The Body Corporate is the body corporate for a unit title complex in central Auckland known as Park Residences (the Complex). It engages the second defendant, Strata Title Administration Ltd (“Strata”), and another company, Park Residences Management Ltd (“Park”), in relation to the discharge some of its responsibilities as such.
[4] Everest was formerly a property management concern, engaged by approximately 50 unit title holders in the Complex — or rather the owners of approximately 50 units — to manage those units, letting them on behalf of the owners on generally short-term rentals.
[5] Everest alleges that the Body Corporate wanted to stop it — Everest — operating in the Complex, and that it ultimately achieved that by the implementation of an “unlawful campaign”. The net result, Everest says, is that it was obliged to close its business, which it did at the conclusion of the financial year ending 31 March 2019. It sues the Body Corporate (and Strata) claiming approximately $3,000,000 in damages, plus interest and costs.
[6] Everest pleads five causes of action. The first is breach of s 9 of the Fair Trading Act 1986, in which it asserts that the Body Corporate’s actions were deceptive and misleading. It pleads three economic torts, causing loss by unlawful
means, conspiracy to injure and unlawful means conspiracy. Its final cause of action is injurious falsehood.
[7] Central to Everest’s claim is an accusation that the Body Corporate was acting, and knew it was acting, unlawfully, when it relied on its own body corporate rules to impose certain obligations on Everest. The contention is that the Body Corporate asserted, incorrectly and unlawfully, that, according to the rules, Everest was required to provide daily lists of the parties to whom units were let.
[8] By this means, Everest seeks to establish that the Body Corporate had the necessary intention to establish the torts on which it relies.
[9] This proceeding was commenced on 20 June 2019. It is set down for a seven-day fixture commencing on 30 October 2023. Everest’s evidence is due to be served on 2 September 2022. As far as I am aware, the only outstanding interlocutory matter is this application.
[10] I pause at this point to record the way in which one aspect of the application has been clarified. In its notice of interlocutory application dated 29 April 2022, Everest sought:
(a)a declaration that privilege has been waived in relation to the Advice itself (defined in paragraph 5(b) below), and any correspondence or other document in connection with that Advice;
(b)that the Body Corporate reviews the documents over which it has claimed legal advice privilege and reconsider whether a claim of privilege can be maintained in light of such declarations;
(c)that the Body Corporate provide:
(i)a supplementary affidavit explaining the process undertaken to complete the review; and
(ii)open versions of any documents over which privilege has been waived.
[11] Counsel were diverted as a result of Everest’s apparent application for a declaration. As Mr Maloney submitted, technically, a declaration, whether at common law or under the Declaratory Judgments Act 1908, is a final remedy and out of place in an interlocutory application.
[12] I enquired of Ms Mau whether in fact Everest was seeking a declaration in that sense. She confirmed that it was simply inviting the Court to conclude that the Body Corporate had waived privilege as a foundation for seeking the orders sought in
(b) and (c).
Letter of advice
[13] On 15 November 2018, the Body Corporate’s solicitors, Price Baker Berridge, wrote to Strata providing advice as to whether or not the Body Corporate was entitled to rely on r 24 of its rules to demand that Everest supply the information already referred to. It is common ground between the parties that the letter was written to Strata in the company’s capacity as the Body Corporate’s agent, and that it was the Body Corporate that had the right to claim or waive any privilege in respect of the letter.
[14] It is also common ground that Price Baker Berridge’s letter of advice was provided in a professional context and that prima facie the Body Corporate was entitled to claim privilege in respect of it.
[15] For Everest Ms Mau submits that the Body Corporate waived privilege by voluntarily disclosing the document:
27.The elements of waiver (as set out at paragraph 24) are clearly made out:
(a)the Body Corporate itself voluntarily produced the Advice to Everest when:
(i)on 31 July 2020, it produced the Advice to Everest within three separate documents as part of its initial discovery;
(ii)on 10 November 2021, it produced the Advice to Everest in a further document as part of its supplementary discovery;
(b)the Body Corporate’s agent, Strata, produced the Advice to Everest and others when:
(i)on 29 November 2018, Strata emailed the Advice to Graham Peterson, the property manager of unit 2403 which was leased to Everest, knowing that the Advice was then passed to Everest;
(ii)on 19 November 2021, Strata produced the Advice to Everest in a further document as part of its supplementary discovery;
(c)the Body Corporate was informed of Strata’s production of the Advice and did nothing to countermand those acts or recall the Advice;
(d)on those occasions, the Body Corporate produced or disclosed, or consented to the production or disclosure of the Advice in full;
(e)on those occasions, the production or disclosure was in circumstances wholly inconsistent with a claim of confidentiality.
28.By disclosing the Advice, in full, it is as clear as it can be that the Body Corporate has waived its privilege in the Advice.
[16] On behalf of the Body Corporate Mr Maloney adopted a somewhat unorthodox position in relation to the question of whether there had been a waiver of privilege for the letter of advice. On the one hand he submitted that there had been no waiver because any disclosure had been inadvertent. On the other hand, he said that the letter had been at large for so long and had been circulated so widely that it would be unrealistic for the Body Corporate to seek to maintain privilege in respect of it.
[17] Section 65(4) of the Evidence Act 2006 provides that there is no waiver if a party entitled to maintain privilege in respect of a document discloses it “involuntarily or mistakenly or otherwise without the consent of the person who has the privilege”. In my view, subs (4) has no application in a situation such as this where the disclosure of the document was deliberate, even although the party disclosing it may have been oblivious to the consequences of doing so.
[18] Involuntary or mistaken disclosure appears to me primarily to cover accidental disclosure (such as where a party or its solicitors accidently disclose copies of both
open and privileged material in the discovery process). This was touched on by Asher J in Body Corporate 191561 v Argent House Ltd, where his Honour said:1
I conclude that the mistake must be a mistake as to the act of disclosure itself rather than the implications of it. Thus, a mistake in the handing over of a group of documents which were thought to contain all non-privileged material, but which unbeknownst to the discloser contained privileged material, would be the sort of mistake envisaged. It would be a voluntary but mistaken act. It would be unintentional. However, if the mistake was a deliberate handing over of a document without a consideration that it was privileged, or forgetting that it was privileged, that would not be the sort of mistake covered.
[19] As Ms Mau submits, there is no evidence that, following conscious disclosure of the document on the Body Corporate’s behalf by its agent, the Body Corporate at any stage sought to object (at least until such time as discovery took place in this case). This puts the case well outside of the parameters of one in which a principal has not consented to its agent’s disclosure of an otherwise privileged document.
[20] Had I reached the conclusion that s 65(4) did apply, so that the Body Corporate had not waived its entitlement to claim privilege in respect of the letter, the period of time that has elapsed since its disclosure would raise an additional issue, as Mr Maloney conceded. In circumstances where material which attracts the protection of privilege has been disclosed inadvertently, but a substantial period of time has elapsed before a claim of privilege is made, the length of time may be a relevant consideration in determining whether or not privilege has been waived. That is a factor that may reasonably be taken into account in assessing whether a person has produced a document in circumstances that are “inconsistent with a claim of confidentiality”.2 At common law, the question was whether there had been conduct inconsistent with maintaining the confidentiality of privileged material in a fashion that may lead to injustice if the privilege were to be upheld.3 The passage of a substantial period of time does not automatically result in a conclusion that privilege has been waived, given the underlying mischief to which privilege is directed. Nevertheless, lapse of time is a factor that may be taken into account under s 65(2).
1 Body Corporate 191561 v Argent House Ltd (2008) 19 PRNZ 500 (HC) at [42]; See also Courtesy Motors Ltd v Endeavour Commercial Ltd [2021] NZHC 221.
2 Evidence Act 2006, s 65(2).
3 Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA) at [38].
[21] Be that as it may, in my view, the Body Corporate has waived privilege in respect of the Price Baker Berridge letter.
[22] That brings me to the issue of whether the Body Corporate’s waiver of privilege in respect of the Price Baker Berridge letter requires it to disclose any related material.
Alleged collateral waiver
[23] Ms Mau submitted that, by waiving privilege in respect of the letter, the Body Corporate had effectively waived privilege in respect of any related privileged documentation sufficiently connected with that letter, so that if the letter was viewed in isolation that would convey a misleading picture. On that basis, she sought the orders set out in the notice of application quoted above.
[24] Ms Mau began her submissions by referring to the commentary in Cross on Evidence as to the scope of collateral waiver. The passage to which she referred was in the following terms:4
Collateral waiver has a broad effect. It extends further than requiring disclosure of all records of the particular communication with respect to which privilege has been waived. Collateral waiver will also apply to all other privileged communications and documents dealing with the same issue. A party will not be entitled selectively to waive privilege for only some of the material relating to the relevant issue, and thus rely on material favourable to its case, while keeping unfavourable material confidential. The issues in this context are the specific propositions that the party offering privileged material in evidence seeks to support with the privileged material offered.
[25] It is noteworthy that, in seeking to identify the scope of collateral waiver, the touchstone that the authors turn to is reliance.
[26] It is a party’s reliance on a document in respect of which it has waived privilege in the context of the litigation that ultimately triggers the prospect of collateral waiver and related material.
4 Mathew Downs (ed) Cross on Evidence (online ed, LexisNexis) at [EVA65].
[27] Ms Mau relied on three cases, NZX Ltd v Ralec Commodities Pty Ltd;5 Capital + Merchant Finance Ltd v Perpetual Trust Ltd6 and Westgate Town Centre Ltd v Auckland Council.7
[28] In NZX Ltd Dobson J dealt with NZX’s application for further discovery founded on Ralec’s waiver of privilege in respect of certain documents without extensive reference to s 65 of the Evidence Act, noting only that s 65 was not intended substantively to change the common law.
[29]Dobson J identified the issue in these terms:8
NZX’s solicitors confirmed that with Ralec that open discovery of numerous emails involving requests for, and provision of, legal advice had not been inadvertent. Thereafter, NZX pressed for disclosure of all other documents containing legal advice that had been created on the same range of topics. This was advanced as a first aspect of NZX’s second application for particular discovery, filed on 5 December 2014.
[30] Then, as Ms Mau emphasised, Dobson J went on to state what his Honour plainly viewed as the overarching principle in these terms:9
Holding a party to its waiver of legal professional privilege on a topic in such circumstances is essentially an issue of fairness; an inspecting party cannot satisfy itself that selective disclosure does not leave the inspecting party (and potentially the Court) with an incomplete and potentially misleading impression of the full extent of advice that had been received on the topic.10
[31] From that point, Dobson J examined the material in respect of which privilege had been waived under four topic headings and determined whether additional discovery was to be ordered, and its scope.
[32] As already said, Dobson J’s analysis did not focus on s 65, and nor was there any discussion of the sense in which the material in respect of which privilege had been waived was relied on by Ralec. His Honour’s reasoning appears to proceed on
5 NZX Ltd v Ralec Commodities Pty Ltd [2015] NZHC 241.
6 Capital + Merchant Finance Ltd v Perpetual Trust Ltd [2015] NZHC 1233.
7 Westgate Town Centre Ltd v Auckland Council [2021] NZHC 858.
8 At [103].
9 At [104].
10 Shannon v Shannon [2005] 3 NZLR 757 (CA) at [62] – a pre-Evidence Act 2006 decision, but the codification in s 65 is not intended to change the substantive law on waiver of privilege.
the basis that, having waived privilege in respect of any document, a party becomes obliged to disclose all closely related documentation, so as to ensure that the material in respect of which privilege has been waived does not present a misleading picture. Viewed in that way, I accept that NZX Ltd can be seen as supportive of the wider proposition advanced on Everest’s behalf by Ms Mau in this case.
[33] Turning to Capital + Merchant Finance, Ms Mau submitted that, there, Katz J “… explained that collateral waivers can occur to allow privileged documents to be considered in context, a principle known as the “cherry-picking rule”. This aims to prevent parties from waiving privilege for documents that further their argument, while maintaining a privilege for documents that may weaken their argument. Katz J concluded that where a collateral waiver applies, the party will be required to disclose any further privileged material that is relevant to the same issue for which the privileged material was deployed”.11
[34] That, in my view, is a fair summary. What is noteworthy is that there is an assumption in Ms Mau’s summary, which faithfully reflects the flavour of Katz J’s judgment, that, in order for the collateral waiver to apply so as to avoid any “cherry picking”, the material in question must be deployed by the disclosing party in advancing the case.
[35] Finally, as to West Gate Town Centre, Ms Mau recorded that, there, the Auckland Council disclosed a report prepared by legal advisers without reserving privilege. Wiley J concluded that privilege in the report had been waived. His Honour went on to conclude that there had also been a collateral waiver of documents referred to in the report because there seemed to be some commonality between the issues addressed in the pleadings and the documents in which privilege was claimed. Again, that appears to be an accurate summary.
[36]Wylie J’s concluded:12
Where privilege in a principal document is waived, waiver generally extends to all connected documents, and the enquiry becomes whether there is a
11 At [29].
12 Westgate Town Centre Ltd v Auckland Council, above n 7, at [49].
commonality of issues addressed by the connected documents.13 A party to a privileged communication is not entitled to make selective disclosure that can leave the inspecting party, and potentially the Court, with a misleading picture.14
[37] West Gate Town Centre probably articulates the principle of collateral waiver in the strongest terms, and is therefore most helpful from the plaintiff’s perspective. This is because, as Ms Mau submitted, there, counsel told the Court that the Council was not seeking to rely on the report in the litigation because it was not relevant to any issue in the case and therefore there was no possibility of unfairness or injustice.
[38] Wiley J rejected this as a foundation for declining to make the orders sought. In his Honour’s view, it was inappropriate to speculate as to whether the plaintiffs would be left with a misleading picture if the documents were not made available, given the Court had not inspected the relevant documents.15
[39] Seemingly, then, the Court relied solely on the commonality between the pleadings and the documents, concluding that they were likely to be helpful to the Court and the other parties as to their understanding of the substantive issue.16
[40] It is not obvious to me that that approach is in accordance with the underlying principles or the authorities. Essentially, this is because in a situation where the Court can be satisfied that the disclosing party will not be relying on the document or documents in question, there can be no question of unfairness or injustice.
[41] Mr Maloney submits that the doctrine of collateral waiver requires the Court to determine that in the context of the litigation the disclosing party will be relying on or, to use the word most commonly used in the authorities, deploying, any document in respect of which it has waived privilege. Then the Court considers if the deployment of that document or those documents may be misleading unless it is required to disclose any closely related document or documentation.
13 Pacific Pine Products Ltd v KRTA Ltd HC Gisborne CP34/89, 24 June 1993 at [28]-[30].
14 NZX Ltd v Ralec Commodities Pty Ltd, above n 5.
15 At [51].
16 At [51].
[42] The seminal case in relation to collateral waiver is the judgment of Mustill J in Nea Karteria Maritime Co Ltd v Atlantic and Great Lake Steam Ship Corp where his Honour said: 17
Where a party is deploying in Court material which would otherwise be privileged, and the opposite party and the Court must have an opportunity of satisfying themselves that what the party has chosen to release from that privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice its real weight or meaning being misunderstood.
[43] Mr Maloney went on to refer to other authorities to similar effect, including Kós J’s judgment in McGuire v Wellington Standards Committee (No 1) where his Honour said:18
It does not follow from the unqualified disclosure of part of the chain of communication that the entirety of communication between client and counsel, from the day of their first acquaintance, must be produced.
[44]And also, that:19
…the mere fact of disclosure of privileged material did not mean, ipso facto, that other parties had a right to production or admission of associated undisclosed material. The exercise is far more nuanced than that.
[45] As Mr Maloney submitted, Kos J went on to suggest a two-stage test to assess whether it is necessary in the interests of justice for the Court to make an order requiring the production of any material related to a document or documents in respect of which privilege has been waived. The two-stage test involved asking whether the material in question was truly relevant to an issue in the proceeding and if so, whether in the absence of an order requiring discovery of any related material, there would be an injustice.
[46]His Honour said that it was necessary to ask the second of those questions:20
… because only if it is necessary to avoid real injustice should privilege beyond what has already been disclosed be held to have been waived. And
17 Nea Karteria Maritime Co Ltd v Atlantic and Great Lake Steam Ship Corp (No. 2) [1981] Com LR 138 at 139.
18 McGuire v Wellington Standards Committee (No 1) [2014] NZHC 1159 at [23].
19 At [26].
20 At [27].
then, the extent of production or admission will be restricted to what is necessary adequately to ameliorate that injustice.
[47] To the extent that there are apparent inconsistencies between the analyses contained in cases such as Nea Karteria Maritime and Guire on the one hand and Westgate Town Centre on the other, rather than assume that the judges in those cases necessarily adopted different views, I am inclined to think that context influenced not only the outcomes but the terms in which the principles involved were articulated.
[48] To illustrate this, I refer to another case referred to by Mr Maloney, BIL New Zealand Treasury Ltd v PricewaterhouseCoopers New Zealand.21 As it happens, this was a judgment of mine. Having expressed a degree of caution in relation to making orders requiring discovery of what would otherwise be privileged material based on collateral waiver, essentially because of the importance the law places on protecting rights to claim privilege, most especially in the context of litigation, I nevertheless ordered the production of documentation related to documents in respect of which the plaintiffs in that case had waived privilege.22
[49] The terms in which I discussed the principles did not focus on deployment of that material. But, context is of course everything. In that case, the plaintiffs had pleaded the documentation and expressly relied on them in the development of their case. It was therefore unnecessary to emphasise reliance or deployment.
[50] In the end, it appears to me that the preponderance of authority indicates that in considering any application for collateral waiver the following principles should be applied:
(a)Before there can be any question of collateral waiver the Court must first be satisfied that there is a primary waiver of privilege in relation to a document or documentation falling outside the circumstances described in s 65(4).
21 BIL New Zealand Treasury Ltd v PricewaterhouseCoopers New Zealand [2022] NZHC 150.
22 At [70].
(b)It does not necessarily follow from a waiver of privilege in respect of a document that privilege is waived in relation to any related material.
(c)First, the document must be relevant to a live issue between the parties in the litigation. This is elementary. Aside from anything else if the document is not relevant then it is not even discoverable.23
(d)Second, the Court must also be satisfied that if it does not make an order requiring discovery of closely related material, that will result in injustice or unfairness — in short there must be a reason for making an order. The threshold for reaching this conclusion may not be high. A party waiving privilege in relation to an otherwise privileged document assumes a risk that this will give rise to collateral waiver of related documentation. Nevertheless, it is only if the Court concludes that a failure to order discovery of closely related material will result in an injustice or unfairness that there is any reason for the order.
(e)In assessing this, the Court may have regard to a range of considerations including, by way of example only:
(i)the circumstances of the waiver and whether it took place before or after the dispute arose or the proceeding was commenced;
(ii)whether any surrounding correspondence between the parties or their solicitors indicates the purpose for the disclosure;
(iii)whether the document is referred to in the pleadings, and if so for what purpose;
(iv)whether the disclosing party is seeking to rely on the document in question and, if so, for what purpose;
23 Evidence Act 2006, s 7.
(v)whether any open correspondence that exists between the parties sheds any light on whether and for what purpose the disclosing party is seeking to rely on the document;
(vi)any affidavit evidence offered on behalf of the disclosing party as to its intentions in that regard; and
(vii)any undertakings that may be offered.
[51] Such considerations are taken into account in order to enable the Court to make an assessment as to whether there is a need for an order for further discovery to avoid injustice. There is nothing novel in that analysis. The cases contain examples of judges having regard to all of those considerations.
[52] I have already concluded that in my assessment the Body Corporate has waived privilege in Price Baker Berridge’s letter of 15 November 2018.
[53] The circumstances in which the waiver occurred seem to have begun on 29 November 2018, when Strata transmitted a copy of the letter to Everest through a property manager of the Complex. This took place at a time when there was clearly some antagonism between the parties, but before the dispute in its subsequently pleaded form had emerged, and certainly before proceedings were commenced. Accordingly, whilst it is certainly the case that the Body Corporate, through its agent, was putting the letter forward in order to demonstrate the lawfulness of the step it was taking, it would be too much of a leap to suggest that it was relying on it in the context of the litigation.
[54] The contemporaneous correspondence exchanged at the time does not assist greatly. There was unquestionably an issue between the parties as to precisely what information the Body Corporate was entitled to demand of Everest, and both parties appear to have been offering the views of their solicitors in relation to this. However, again, these things took place well before the litigation commenced. Whilst they were undoubtedly relying on them in the context of a commercial engagement, it would be impossible to suggest that they were relying on them for the purposes of the litigation.
[55] Additionally, in the course of his submissions on the Body Corporate’s behalf, Mr Maloney explicitly reiterated that it was not the Body Corporate’s intention to rely on that evidence.
[56] The letter of advice itself relates to a purely legal question, that is to say the lawfulness or otherwise of the Body Corporate’s reliance on its rules to make certain demands of Everest. To the extent that is an issue in the proceeding, that is a matter for determination by the Court. The Body Corporate’s solicitor’s views as set out in their letter of advice at the time are neither here nor there.
[57] In all of those circumstances there is no reason at all to imagine that the letter of 15 November 2018 will see the light of day in the context of the proceeding. To use the language employed by Cross and in a number of the cases, it will not be deployed by the Body Corporate for the purposes of the litigation. Indeed, in my assessment, it would not even be admissible for that purpose.
[58] In those circumstances, my judgment is that there is no reason for the Court to make the order sought because there will be no prospect of injustice in the litigation. The Body Corporate will not be advancing any contention as to its state of mind based on the advice it received. Accordingly, even if there was related correspondence or other documentation that passed between the Body Corporate and its solicitors in which it was informed for example, that the actions it proposed to take were unlawful, the Body Corporate’s maintenance of privilege in relation to that material would not be the cause of an injustice in the sense required by the principles relating to legal privilege and collateral waiver.
[59]For those reasons, the plaintiff’s application is dismissed.
[60] Not having heard from counsel in relation to costs I reserve those. My preliminary view is that the Body Corporate as the successful party is entitled to a costs award on a 2B basis. With that indication I expect that counsel will be able to agree on costs. If not, any party seeking costs may file a memorandum in the usual way within 10 working days of the date of this judgment. Any response is to be filed
and served within a further 10 working days. If necessary I will deal with costs on the papers.
Associate Judge Johnston
Solicitors/Counsel:
Russell McVeagh, Auckland Price Baker Berridge, Auckland E St John, Auckland
Case Officer:
Catherine Koo
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