Messenger v Stanaway Real Estate Ltd
[2014] NZHC 2103
•2 September 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-7205 [2014] NZHC 2103
BETWEEN JAMES MESSENGER and JUNE MARY
MESSENGER Plaintiffs
AND
STANAWAY REAL ESTATE LIMITED Defendant
AND
GARY MESSENGER First Third Party
REALTY NZ LIMITED Second Third Party
SIMPSON WESTERN (A FIRM) Third Third Party
Hearing: 3 June 2014 Appearances:
M G Ring QC for Applicant/Defendant
G P Blanchard and R M Cederwall for Plaintiffs
P M Fee for Third Third PartyJudgment:
2 September 2014
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 2 September 2014 at 3.30 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Kennedys, Auckland Counsel: M G Ring QC, Auckland Lowndes Jordon, Auckland G P Blanchard, Auckland Jones Fee, Auckland
MESSENGER v STANAWAY REAL ESTATE LIMITED [2014] NZHC 2103 [2 September 2014]
Introduction
[1] The Defendant (“Stanaway”) seeks orders setting aside claims for privilege made by the Plaintiffs (“the Messengers”) in their affidavit of documents sworn
19 July 2013. The documents in issue comprise 14 files and are dated between
4 December 2006 and at least 21 January 2013 (“documents”).
[2] The Messengers have asserted that the documents are privileged on the grounds of either or both solicitor/client privilege or litigation privilege. There is no dispute that the Messengers were entitled to claim privilege. The issue is whether they since have waived privilege by:
(a) disclosing, or allowing the third third party, the Messengers’ solicitors Simpson Western, to disclose any significant part of the documents in circumstances that are inconsistent with a claim of confidentiality;1 and/or
(b) acting so as to put the documents in issue in the proceeding.2
[3] The Messengers oppose the application on the ground that there has been no waiver.
[4] In their submissions, Simpson Western proposed a “middle ground”, being an order for tailored discovery. I do not propose to adopt that course.
[5] For reasons set out below, I am satisfied that there has been a waiver of privilege in a confined class of documents, but not in the balance.
Background
[6] I do not understand the matters to which I refer below to be contentious but, if I am wrong, nothing I say in this decision has any bearing on the facts that may be
found at trial.
1 Evidence Act 2006, s 65(2).
2 Section 65(3).
[7] The dispute at the heart of this proceeding arises from events in and after
2006. In 2006 the Messengers appointed Stanaway as their agents on the sale of their property in Auckland (“property”). The Messengers’ claim is that Stanaway was negligent in its advice and they seek to recover losses which they contend were caused by that negligence. Stanaway denies the claim but, if it is found to have any liability, seeks contribution from various third parties, including Simpson Western.
[8] On 30 November 2006, the Stanaway agent handling the matter (“agent”)
presented two offers to purchase. The Messengers accepted one of these offers on
1 December 2006, being an offer by purchasers referred to as Goodman and Rattray (“G & R”), for $5,995,000 (“agreement”). The offer had been prepared by G & R’s agent. The Messengers then instructed Simpson Western to act for them on the sale.
[9] The agreement recorded that the date for settlement was “18 December”. An issue arose as to whether that meant 18 December 2006 or 18 December 2008. The matter was important because G & R were to pay the purchase price by instalment. If the date for settlement were 18 December 2006, then the Messengers were required to give title to G & R, even though $3,245,000 had yet to be paid.
[10] G & R’s solicitors took the view that the date for settlement was
18 December 2006. Some of the evidence before me suggests that Simpson Western believed that to be correct. Regardless, Simpson Western advised the Messengers that they should insist that settlement was to take place on 18 December 2008, given the risk of passing title when so much of the purchase price remained outstanding.
[11] The sale did not settle on either 18 December 2006 or 2008. The Messengers cancelled the agreement and in May 2009 sold the property to a third party for
$4,430,000, approximately $1.5 million less than G & R had agreed to pay.
[12] The Messengers sought to recover their losses from G & R (“G & R litigation”). The High Court found that the settlement date was 18 December 2006 and dismissed the Messengers’ claim.3 The Court of Appeal upheld the High Court’s finding on the date of settlement but allowed the appeal on another ground and
entered judgment against G & R.4 The Messengers were unable to enforce the judgment against G & R. The Messengers then commenced this proceeding against Stanaway and Stanaway joined Simpson Western in late 2013.
Section 65 Evidence Act 2006
[13] Stanaway relies on s 65(2) and (3) of the Evidence Act 2006 (“Act”) which provide:
65 Waiver
(1) A person who has a privilege conferred by any of sections 54 to 60 and 64 may waive that privilege either expressly or impliedly.
(2) A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim of confidentiality.
(3) A person who has a privilege waives the privilege if the person—
(a) acts so as to put the privileged communication, information, opinion, or document in issue in a proceeding; or
(b) …
[14] There is no dispute that the privilege claimed by the Messengers arises from ss 54 and/or 56 of the Act.
[15] Section 54 provides that a client has a privilege in respect of any communication between them and their legal adviser if that communication was intended to be confidential and was made in the course and for the purpose of provision of legal services.
[16] Section 56 provides that a person who is, or contemplates becoming, a party to a proceeding has a privilege in communications made for the dominant purpose of preparing for the proceeding.
[17] Section 65 provides for the circumstances in which the holder of the privilege may waive those and other privileges provided for in the Act.
[18] Waiver under s 65(2) requires, first, that the Messengers have made a voluntary disclosure (or given consent to the same) of a “significant part” of the privileged documents etc and, secondly, that the disclosure has occurred in circumstances inconsistent with a claim of confidentiality.
[19] In the present proceeding, s 65(3) would require the Messengers to have acted so as to put the privileged documents “in issue” in the proceeding.
[20] Counsel referred me to several decisions from New Zealand (before and after the enactment of the Act), Australia and England.5 I have, however, been guided by Asher J’s approach in Body Corporate 191561 v Argent House Ltd, namely:6
[31] ... the opportunity of a clean slate should be grasped. Given the complexities and uncertainties of the law of waiver, it is apt to apply this approach here, and to go no further than the words of the section. ...
[32] In particular, I do not approach the question of waiver from the
perspective of “fairness” which was considered in a number of cases prior to
2006, and had been emphasised as a key consideration ... However, the issue of fairness is not referred to in s 65 as a matter to be considered in
determining whether waiver has occurred. ...
[33] Clearly then the concept of fairness is subsumed in the requirement for inconsistency. ...
[21] Given that, and for obvious reasons, I have placed the greatest weight on those New Zealand authorities which consider the provisions with which I am concerned. In particular, these are Houghton v Saunders regarding s 65(2) and
Astrazeneca Ltd v Commerce Commission regarding s 65(3)(a).7
5 BHP Billiton Petroleum (Bass Strait) Pty Ltd v Esso Australia Resources Pty Ltd [2007] VSC
281; Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2007] VSCA 224; and Fulham Leisure Holdings Ltd v Nicholson Grant & Jones [2006] EWHC 158 (Ch).
6 Body Corporate 191561 v Argent House Ltd (2008) 19 PRNZ 500 (HC) at [31] – [33].
7 Houghton v Saunders (2009) 19 PRNZ 476 (HC) at [54] and [55]; and Astrazeneca Ltd v
Commerce Commission (2008) 12 TCLR 116 (HC) at [39].
Issues
[22] It is common ground between counsel that the starting point for considering Stanaway’s application is the identification of the issues in the proceeding, and how the documents in issue might be relevant to those issues. The identification of the issues in any given case will not only bear on s 65(3) but also whether a “significant part” of a privileged communication has been disclosed and whether the circumstances of disclosure are “inconsistent with a claim of confidentiality”.
Messengers v Stanaway
[23] The Messengers’ claim against Stanaway is that:
(a) Stanaway owed them a duty of care and fiduciary obligations;
(b)Stanaway breached the same in several respects but largely in failing to advise that the date of settlement was uncertain and that there were risks in accepting G & R’s offer; and
(c) the breach caused losses, including costs incurred in the G & R
litigation and on the resale in May 2009.
[24] Stanaway’s defence is that there was no breach as its agent advised the Messengers that G & R’s offer posed risks and that the Messengers should take legal advice before accepting the offer. If it is found to have breached its duties, Stanaway denies that such breach caused the losses claimed. Its case is that the Messengers brought those losses on themselves, by adopting the strategy they did as regards G & R. If liable, Stanaway alleges that the Messengers were contributorily negligent.
[25] In reply, the Messengers deny Stanaway recommended that they obtain legal advice prior to accepting G & R’s offer and deny they were contributorily negligent.
[26] Accordingly, the factual issues between the Messengers and Stanaway will be:
(a) what the agent said/should have said to the Messengers on
30 November/1 December 2006;
(b)if Stanaway breached its obligations to the Messengers, whether that breach caused one or more of the heads of loss claimed;
(c) if so, the quantum of that loss; and
(d) whether the Messengers were contributorily negligent.
Stanaway v Simpson Western
[27] Stanaway’s case against Simpson Western goes to the strategy which Simpson Western advised the Messengers to pursue as regards G & R. Stanaway’s case is that the Messengers ought to have been advised to pursue other strategies. Stanaway thus seeks contribution or indemnity in respect of any liability to the Messengers.
[28] Simpson Western’s defence is that the other strategies proposed by Stanaway were not open in fact, or posed a greater risk than the strategy adopted.
[29] Accordingly, the issue between Stanaway and Simpson Western will be whether Simpson Western could have or should have advised the Messengers to adopt a different course(s) of action.
Grounds of application
[30] Stanaway has provided a schedule of the disclosures on which it relies, individually or cumulatively, as constituting waiver by the Messengers in the documents (“schedule”). The schedule comprises nine categories, being:
(a) Category 1 – privileged documents included in Simpson Western’s list of documents without any claim to privilege. These are Simpson Western’s invoices to the Messengers evidencing the sum claimed by way of costs, and a letter from Mr Brian Stewart of Simpson Western
to the New Zealand Law Society (“NZLS”) dated 24 April 2009, responding to a complaint against him by G & R.
(b) Category 2 – parts of an affidavit sworn by Mr Gary Simpson of
Simpson Western in opposition to joinder.8
(c) Category 3 – references to privileged communications in the brief of evidence of Mr James Messenger served in this proceeding.
(d) Category 4 – express waiver of privilege in particular documents.
(e) Category 5 and 6 – references to privileged communications in the briefs of evidence of Mr Brian Stewart and Mr Alistair Prew of Simpson Western.
(f) Category 7, 8 and 9 – references to and/or disclosure of privileged communications in briefs of evidence that the Messengers served in the G & R litigation, and in evidence given in the High Court in the G & R trial.
Discussion
[31] I turn now to consider each of these categories. References below to “[ ]”
are references to individual items in the schedule.
Category 1 – Documents disclosed in list
[32] Counsel for Stanaway submits that, by disclosing copies of Simpson Western’s invoices and Mr Stewart’s letter to the NZLS, the Messengers have waived privilege in the documents under each of s 65(2) and (3) of the Act.
[33] It is not necessary for me to consider Mr Stewart’s letter to the NZLS in any detail. It is apparent from that letter that Mr Stewart was responding to a complaint
made by G & R. The letter is irrelevant to the issues in this litigation. I am satisfied
8 Affidavit of G Simpson sworn 8 November 2013.
that the mere inclusion of it in a list of documents does not constitute waiver under either s 65(2) or (3) of the Act.
[34] That leaves the invoices. As counsel for Stanaway submits, the invoices refer to privileged communications such as discussions between lawyer and client, legal analysis and the like. Counsel for Stanaway referred me to BHP Billiton v Esso Australia in which the Court held that, by seeking reimbursement of expenditure on legal costs, Esso had exposed the content of privileged documents to scrutiny.9 This
conclusion was confirmed on appeal by Esso.10
[35] One of the issues in the wider litigation between BHP and Esso was whether Esso was entitled to reimbursement for legal costs pursuant to the terms of an operating agreement between the parties. The Court upheld BHP’s submission that Esso had waived legal professional privilege by making that claim.
[36] Counsel for the Messengers submitted that the Court’s decision on this issue has been the subject of criticism. It is not necessary for me to consider the merits of the decision or the criticism that there has been. It is apparent that the Court in that case was influenced by what it considered to be issues of fairness. As I have said, however, I agree with Asher J that in the New Zealand context it is a matter of applying s 65(2) and/or (3). To the extent considerations of fairness may continue to be relevant, they are subsumed within those provisions.
[37] In the present case, I am not persuaded that the Messengers’ claim for damages, coupled with disclosure of the invoices, is inconsistent with a claim of confidentiality in the documents, or that the Messengers have acted so as to put the documents in issue.
[38] If the Messengers are able to establish breach and causation, then of course it will be necessary to address the issue of quantum. Directions to address that issue can be made to ensure that Stanaway has an opportunity to challenge the sum
claimed. I am not satisfied, however, that there has been a waiver at present.
9 BHP Billiton Petroleum (Bass Strait) Pty Ltd v Esso Australia Resources Pty Ltd, above n 5.
10 Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd, above n 5.
Category 2 – Messengers’ opposition to joinder of Simpson Western
[39] In his affidavit Mr Simpson refers to Simpson Western’s receipt of the agreement; Mr Simpson’s discussions with his colleague, Mr Prew; and the strategy that was adopted vis-à-vis G & R.
[40] Counsel for Stanaway submits that Stanaway should be given access to the documents so that it can explore the merits or otherwise of the decisions that were made.
[41] Counsel for the Messengers submits, and I agree, that the terms of the agreement and the strategy adopted vis-à-vis G & R are not in issue in this proceeding. What is in dispute is whether that strategy ought to have been pursued and whether other courses of action were open and could/should have been followed.
[42] I do not consider that the references in Mr Simpson’s affidavit constitute a waiver of a “substantial part of the documents” or that the references are inconsistent with a claim of confidentiality. Nor have the Messengers put the matters referred to “in issue”.
Category 3 – Messengers’ briefs of evidence – current proceeding
[43] Mr Messenger refers to five privileged communications in his brief of evidence.
[44] Mr Messenger refers to two documents [3.1 and 3.3] as helpful in terms of refreshing his memory “as to the key events of 30 November/1 December 2006” and his “understanding at around the time of these key events”.11 The documents themselves are an email from Mr Messenger to Mr Stewart dated 21 January 2007 and a file note dated 22 January 2007 of a discussion between Mr Stewart and Mr Messenger.
[45] I accept Stanaway’s submission that by disclosing these documents, the
Messengers have waived privilege to the extent referred to below, pursuant to
s 65(2). As counsel submitted, the events of 30 November/1 December 2006 are critical in the proceedings.
[46] As French J said in Houghton v Saunders:12
[55] ...
(iii) whether “a significant part” of privileged material has been disclosed as required by s 65(2) will depend on the substance rather than the quantity of privileged material that is disclosed: Bete Fog Nozzle Inc v Delavan Ltd & Ors HC Auckland CIV-2008-404-000169, 18 June 2008 Rodney Hansen J at [23].
[47] I am satisfied that Mr Messenger’s discussion and disclosure of these two documents, on such a critical issue, constitutes disclosure of a significant part of privileged communications on this issue, and in circumstances inconsistent with a claim of confidentiality.
[48] I take a different view regarding statements Mr Messenger has made in other parts of his brief as to his communications with Simpson Western. These references are to a fax from Mr Messenger to Mr Stewart dated 22 January 2007 attaching a listing agreement [3.2]; to a letter from Simpson Western to the Messengers dated
4 December 2006 (heavily redacted) attaching a copy of the agreement [3.4]; and to a telephone call from Mr Prew to Mr Messenger shortly after 12 or 13 December
2006 regarding G & R’s contention that title was to be transferred on 18 December
2006 [3.5].
[49] Mr Messenger’s references to these communications are made in passing. The matters to which they refer are not contentious in the proceeding and I accept the submission of counsel for the Messengers, that without more, Stanaway cannot establish a waiver within s 65(2) or (3) of the Act.
Category 4 – Express waiver of selected documents
[50] Stanaway also relies on the Messengers’ disclosure of six documents [4 – 4.5]
comprising letters from Simpson Western to the Messengers dated 15 June and
17 September 2007; notes of interviews between Simpson Western and Michelle Messenger (the Messengers’ daughter in law); two interviews between Simpson Western and Stanaway personnel; and an email from Gary Messenger to Simpson Western dated 14 July 2011.
[51] The first two letters refer to legal issues in the dispute with G & R and outline a strategy for settlement discussions. Again, I do not consider the disclosure of those documents to be inconsistent with a claim of confidentiality in the documents in issue. Nor are those matters “in issue” in the proceeding.
[52] I have reached a different conclusion in respect of the other documents. I am satisfied that the disclosure of these documents constitutes a waiver pursuant to s 65(2), as they also address the contentious issue of the events of 30 November/
1 December 2006.
Categories 5 and 6 – Simpson Western’s briefs of evidence – current proceeding - Brian Stewart and Alistair Prew
[53] Stanaway also rely on references to privileged information in Mr Simpson’s and Mr Prew’s briefs of evidence [5 – 6.5]. These references, such as they are, have been made with the Messengers’ consent.
[54] The references are to matters such as the strategy adopted as regards G & R; advice from Simpson Western to the Messengers dated 17 September 2007 regarding a settlement strategy with G & R; an email from G & R to Simpson Western dated
22 April 2008 containing a settlement offer made on a without prejudice basis; instructions from the Messengers to Simpson Western dated 10 May 2008; and a letter dated 4 December 2006 from Simpson Western to the Messengers “highlighting some of the key terms of the agreement”.
[55] Privilege in the email from G & R to which I have referred is vested in
G & R and the Messengers. That privilege may only be waived by all the persons
who have the privilege.13 G & R has not waived privilege, so I put that document to one side.
[56] In so far as concerns the other matters, again I am satisfied that the references are to matters which are inconsequential to the determination of this dispute and I am not satisfied that there has been a waiver for the purposes of s 65(2) or (3).
Categories 7, 8 and 9 - Briefs of evidence filed by the Messengers in the G & R litigation and notes of evidence in the G & R proceeding – disclosed by the Messengers in the current proceeding
[57] The references in the briefs in the G & R litigation and in the notes are likewise on issues which are inconsequential to the determination of the present proceeding. I do not consider that Stanaway has made out any disclosure or “putting in issue” that would constitute waiver under s 65(2) or (3) of the Act.
Result
[58] I am satisfied that there has been a waiver of privilege to the extent identified in [47] and [52] above.
[59] The Messengers are required to give discovery of all documents that are relevant to the issue of what transpired on 30 November and 1 December 2006. I reserve leave to apply if any issue or dispute arises as to the scope of the waiver, or any other matter.
[60] Counsel for the Messengers asked that I reserve the matter of costs. It may be that the parties can agree but, if not, they should submit memoranda.
..................................................................
M Peters J
13 Evidence Act 2006, s 65(5).
4