Mitchell v Murphy
[2019] NZHC 3257
•11 December 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-965
[2019] NZHC 3257
BETWEEN HOWARD BRENT MITCHELL AND LYNNE MARY MITCHELL
Plaintiffs
AND
CLARE DIANA MURPHY as trustee of the VICTOR SYDNEY TRUST
First Defendant
IAN BRUCE KEMP
Second DefendantBARFOOT & THOMPSON LIMITED
Third Defendant
Hearing: 14-18, 21-22, 30 October and 1 November 2019 Appearances:
S Wroe and M Ibram for the Plaintiffs D Collecutt for the First Defendant
No appearance by or on behalf of the Second and Third Defendants
Judgment:
11 December 2019
JUDGMENT OF GORDON J
This judgment was delivered by me
on 11 December 2019 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Rainey Law, Auckland
Ganda & Associates, Auckland
Counsel: S Wroe, Auckland
D Collecutt, Auckland
MITCHELL v MURPHY [2019] NZHC 3257 [11 December 2019]
Introduction
[1] The first defendant, Clare Murphy, sought a pre-trial order that the plaintiffs, Howard and Lynne Mitchell (the Mitchells), had impliedly waived privilege in respect of communications with their solicitor at the time of the purchase of a property (the subject of the substantive dispute), pursuant to s 65 of the Evidence Act 2006 (the Act).
[2] I heard the application at trial after the opening submissions for the Mitchells but before evidence commenced. I determined that privilege had not been waived. I now set out my reasons.
Background
[3] The Mitchells brought proceedings against Mrs Murphy for contractual misrepresentation and misleading and deceptive conduct under the Fair Trading Act 1986.1 The Mitchells purchased a townhouse from Mrs Murphy, which they claim is a leaky home. The Mitchells say Mrs Murphy, through her real estate agent, represented that the property was not a leaky home (and that it was built with extra care and included superior features as compared to other units in the block) despite being aware of a history of leaks in the townhouse in question and other townhouses in the complex of seven townhouses.
[4] Mrs Murphy’s primary defence is based on cl 22 of the sale and purchase agreement (SPA), which purports to exclude any warranties or representations, and states that the sale is on an “as is, where is” basis. That clause provides:
Purchaser acknowledgment
22.1The purchase acknowledges that:
(a)the dwelling has been built with a plaster cladding system;
(b)prior to entering into this agreement the purchaser has been advised to and has had the opportunity to make independent enquiry in respect of the construction, the cladding and weathertightness issues.
1 The Mitchells also brought a claim under the Fair Trading Act against the second defendant, Ian Kemp, who provided the pre-purchase inspection report, and against the third defendant, Barfoot and Thompson Ltd. The latter claim settled prior to trial. Neither of those claims is relevant for present purposes.
22.2Notwithstanding anything in this agreement the vendor provides no representations or warranties in respect of the matters set out in clause 22.1(a) and (b) and the vendor shall not be liable for any claims, costs, losses, damages or liabilities whatsoever suffered or incurred by the purchaser in relation to the matters set out in clause 22.1 and relating to the construction of the property, the cladding system and the weathertightness thereof.
22.3The purchaser agrees that the purchaser is purchasing the property on an as is and where is basis and the vendor warranties in clause 7.1 and
7.3 of this agreement shall apply to the matters set out in clause 22.1.2
[5] Mr Mitchell, in his first brief of evidence (dated 22 July 2019), referred to the receipt of legal advice as follows:
[First version]
13.Lynne and I decided that we would make an offer $1,150,000. Lynne and I had used Fortune Manning as our solicitors over the years. We called and told them that we were going to make an offer on the property. I spoke to a solicitor called Anita Wan who had acted for us previously in the sale of a commercial property. Anita advised that another solicitor would be acting for us in this instance but we got the impression if [sic] was under her oversight. I asked Anita to send through some clauses for the agreement.
14.On 21 November 2016 I sent the real estate agent a copy of the clauses which Anita had sent me. …3
…
19. The agreement was signed on 1 December 2016 … I called Fortune Manning to discuss the agreement before I signed. The solicitor and I had a short conversation, just a few minutes. This solicitor was a junior solicitor working under Anita Wan, I believe she was recently qualified. We discussed the reduced due diligence period and short timing for the escape clause. I think she mentioned clause 22. It did not ring any serious alarm bells for us give the highly positive view we already had of the property.
[6]In a second (replacement) brief of evidence (dated 19 August 2019), [13] and
[14] were retained but [19] was amended to read as follows:
[Second version]
2 The parties agreed that the word “not” should be inserted after the word “shall” so as to read “ … shall not apply …”.
3 The three clauses were: a due diligence clause; a clause providing that the agreement was conditional upon the sale of the Mitchells’ property; and a vendor escape clause. The agent, Ms Goodall, then incorporated those three clauses into the SPA and added cl 22 and sent the draft agreement to the Mitchells.
19. The agreement was signed on 1 December 2016 … I called Fortune Manning before I signed the agreement. I spoke to Anita Wan, who was the junior solicitor assisting us with this purchase and the contemporaneous sale of our other property. We discussed the terms of the agreement. The agreement did not ring any serious alarm bells for us given the highly positive view we already had of the property so I signed it and returned it to Joss Goodall [the agent].
The law
[7]Mrs Murphy relied on both s 65(2) and (3)(a) of the Act, which provide:
65 Waiver
…
(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
…
[8] In the substantive trial, Mrs Murphy says that under s 50 of the Contract and Commercial Law Act 2017 (CCLA) it is fair and reasonable that cl 22 is conclusive between the parties. The Mitchells therefore cannot sue on any pre-contractual representations. Section 50 provides:
50 Statement, promise, or undertaking during negotiations
(1)This section applies if a contract, or any other document, contains a provision purporting to prevent a court from inquiring into or determining the question of—
(a)whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
(b)whether, if it was so made or given, it constituted a representation or a term of the contract; or
(c)whether, if it was a representation, it was relied on.
(2)The court is not, in any proceeding in relation to the contract, prevented by the provision from inquiring into and determining any question referred to in subsection (1) unless the court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to the matters specified in subsection (3).
(3)The matters are all the circumstances of the case, including—
(a)the subject matter and value of the transaction; and
(b)the respective bargaining strengths of the parties; and
(c)whether any party was represented or advised by a lawyer at the time of the negotiations or at any other relevant time.
[9] Section 50 of the CCLA therefore provides the relevant context in which to determine whether the privileged communication was put in issue in the proceeding.
Submissions
Mrs Murphy
[10] Mr Collecutt, for Mrs Murphy, submitted that the Mitchells had waived privilege in the communication with their solicitors by referring to it in Mr Mitchell’s brief of evidence. He submitted that the Mitchells were seeking to downplay the nature of their legal advice and were trying to pick and choose the aspects of the legal advice that are disclosed; and further that they had put the nature of the legal advice they received in issue in the proceeding.
[11] He submitted that the Mitchells were effectively seeking to inject the substance of the communication with the “junior solicitor” in evidence and/or create an inference as to the defective or inadequate nature of the advice as:
(a)the solicitor is referred to as a “junior solicitor”
(b)the advice is referred to as having been given during a “short conversation, just a few minutes” (later said to be 24 minutes by reference to time records which were disclosed by the Mitchells); and
(c)the advice in relation to cl 22 of the SPA “did not ring any serious alarm bells” for the plaintiffs.
[12] Accordingly, he submitted that the evidence had been drafted to enable the inference to be drawn that the advice given was insufficient to make the Mitchells aware and they did not understand that no warranty was being given as to construction, cladding and weathertightness issues; that they had been advised to make their own inquiries on these issues; and that they were buying the property on an “as is, where is” basis.
[13] There has been waiver under s 65(3)(a), Mr Collecutt submitted. The Mitchells cannot put the legal advice in issue in this proceeding or seek to have the benefit of reliance upon the substance of the advice and yet still seek to shield that advice from disclosure to Mrs Murphy.
[14] In relation to s 65(2), he submitted that, whilst Mr Mitchell amended the first brief of evidence, that original brief is still able to come before the court. Mr Collecutt referred to r 9.14(d) of the High Court Rules 2016, which provides that a party may cross-examine any party to a proceeding on a brief, served under those rules, that is inconsistent with a statement previously made by that party. And, he said, the first brief is inconsistent with the second, amended, brief of evidence.
[15]Accordingly, Mrs Murphy sought orders that:
(a)Privilege has been waived in relation to the content of the legal advice obtained by the Mitchells in relation to cl 22 of the SPA;
(b)Anita Wan, the junior solicitor who the Mitchells consulted, give evidence as to the actual advice that she gave the Mitchells in relation to cl 22 of the SPA; and
(c)Any written advice provided by Ms Wan and/or her firm, Fortune Manning, in relation to cl 22 of the SPA, be discovered.
The Mitchells
[16] In response, Ms Wroe, for the Mitchells, submitted, first, in relation to s 65(2), that the Mitchells had not disclosed a “significant part of the privileged
communication”. The brief discloses the content of the communication in a limited way. The first brief refers to the “reduced due diligence period and short timing for the escape clause” and cl 22; the second brief refers simply to “the terms of the agreement”. She submitted that this is not a significant part of the communication. In any event, any significant disclosure (denied) was not made “in circumstances that are inconsistent with a claim of confidentiality”. Hence, she submitted, the s 65(2) waiver argument must fail.
[17] Secondly, in relation to s 65(3), Ms Wroe submitted that the privileged communication was not put in issue the proceeding. The issue in the proceeding, Ms Wroe submitted, is whether the Mitchells obtained legal advice, and the nature and extent of that advice. That is relevant to s 50(3)(c) of the CCLA and the “fair and reasonable” assessment the Court is required to make. The content or substance of the communication is not relevant.
[18] Ms Wroe did not accept that, by implication, the Mitchells were seeking to make submissions about the content of the legal advice. She had not opened the case on that basis and she said that she did not intend to close on the basis that junior solicitors give low quality, defective advice. She noted that the seniority of Ms Wan is a matter of public record, whether or not it is in Mr Mitchells’ brief of evidence.
[19]Accordingly, Ms Wroe submitted that privilege was not impliedly waived.
Discussion
Section 65(2) — Have privileged communications been disclosed in circumstances that are inconsistent with a claim of confidentiality?
[20] First, there must be a voluntary disclosure. The Act does not define, or give guidance as to, when a disclosure is voluntary.4 However, it is apparent that, in this case, there was voluntary disclosure by Mr Mitchell; he referred, as a plaintiff, to the privileged communication in his brief of evidence, which was served on Mrs Murphy.
4 Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence: Act and Analysis (Thomson Reuters, Wellington, 2018) at [EV65.05(1)].
[21] Secondly, there must be disclosure of a significant part of the privileged communications. What is a “significant part” is a matter of the substance, rather than the quantity, of material disclosed.5
[22] Disclosure of the existence of a privileged document as distinct from its contents will not normally amount to implied waiver.6 Mere passing mention in pleadings may not suffice.7
[23] Both counsel relied on Astrazeneca Ltd v Commerce Commission.8 In that case, Astrazeneca challenged the lawfulness of a notice to supply information and documents issued by the Commerce Commission under the Commerce Act 1986. Astrazeneca claimed that the alleged conduct which prompted the service of the notice was exempted from the operation of the Commerce Act by s 53 of the New Zealand Public Health and Disability Act 2000.
[24] There was a preliminary issue in the case concerning waiver of legal professional privilege. Astrazeneca maintained that the Commerce Commission had waived privilege with reference to legal advice contained in, but excised from, a memorandum put in evidence by the Commission. The memorandum had been provided by the investigator to the Chair of the Commerce Commission. It ran to 33 paragraphs and set out s 53(2) of the New Zealand Public Health and Disability Act 2000. There then followed a paragraph of about five lines which was excised. It was common ground that the excised paragraph contained legal advice concerning s 53.
[25] In Astrazeneca, Panckhurst J held that privilege had not been waived. The case was run under s 65(3)(a) but Panckhurst J also referred to s 65(2) as follows:
[42] It has crossed my mind whether s 65(2) of the Evidence Act, by which privilege is waived through disclosure of a significant part of a privileged communication, may be more relevant than s 65(3)(a). However, I am satisfied that this is not the case. In the first place there was no express disclosure of the advice. But, arguably, by implication at least, there was disclosure. The implication being that [the excised paragraph] contained advice to the effect that s 53(2) posed no bar to the issue of the notice. But
5 Houghton v Saunders [Privilege] (2009) 19 PRNZ 476 (HC) at [55(iii)].
6 At [55(iv)].
7 Tau v Durie [1996] 2 NZLR 190 (HC) at 194.
8 Astrazeneca Ltd v Commerce Commission (2008) 12 TCLR 116 (HC).
even assuming this much, and for essentially the same reasons as appear in the previous two paragraphs [the advice related to a matter of statutory interpretation; and no material reliance on the legal advice nor injection of the substance of that advice into the proceedings], I consider a waiver of privilege is not indicated.
[26]Similarly, in this case, there was no express disclosure of the advice.
[27] As to whether there was disclosure by implication, I turn to Mr Collecutt’s submission that the Mitchells have invited inferences as to the defective or inadequate nature of the legal advice, thereby speaking to the substance of the advice; and his submission that such disclosure is disclosure of a significant part of the privileged communication. Mr Collecutt relied on this Court’s comments in Tau v Durie that a party cannot expect to put forward the existence of legal opinion, with an inference invited as to favourable content, and refuse to disclose the document.9
[28] However, in that case, the Court continued that the matter is a question of degree; there is no “inexorable standard”.10 I do not consider there is an implication as to the advice given in this case. The “no serious alarm bells” comment is made in the context of Mr Mitchell’s statement that he had already formed a highly positive view of the property. Therefore, I do not consider that “any significant part” of the privileged communication was disclosed.
[29] If, contrary to the view I have reached, there was disclosure of a significant part of the privileged communication, the disclosure must be inconsistent with a claim of confidentiality. The test is whether, in all the circumstances, the conduct is inconsistent with maintaining the confidentiality of the privileged material in a way that could lead to injustice if the privilege is upheld.11 A fact-specific inquiry is required.12
[30] In my view, the material was not disclosed in circumstances inconsistent with a claim of confidentiality. It is the first brief of evidence that refers to cl 22. Rule 9.14(a) of the High Court Rules provides that nothing pertaining to the exchange
9 Tau v Durie, above n 7, at 194.
10 At 194.
11 Houghton v Saunders [Privilege], above n 5, at [55(vii)].
12 McDonald and Optican, above n 4, at [EV65.05(3)], n 2979.
of briefs in those Rules “deprives any part of that party’s right to treat any communication as privileged”.13 Briefs can be amended, including to avoid waiver of privileged materials from occurring, and, indeed, Mr Mitchell has amended his brief of evidence. The amendment having been made prior to trial, the initial reference to cl 22 is not inconsistent with maintaining the confidentiality of the privileged material in a way that could lead to injustice if the privilege is upheld.
Section 65(3)(a) — Have privileged communications been put in issue in the proceeding?
[31]In Astrazeneca, this Court held, in relation to s 65(3)(a) of the Act, that:14
[39] … The mere relevance of a privileged communication to an issue in the case provides no basis for waiver. Even a party’s asserted reliance upon a privileged communication is generally insufficient. Waiver occurs where a party both asserts reliance upon the privileged communication and also seeks to inject the substance of the communication in evidence. …
[32] Mr Collecutt placed some reliance on Tau v Durie, which was decided prior to enactment of the Act. In that case, McGechan J stated:15
It is all in the end a matter of fairness. A party cannot expect to put forward the existence of legal opinion, with inference invited as to favourable content, or part of a legal opinion which is favourable, and refuse to disclose the opinion document, or the remainder of it, so enabling the position to be checked. If a party positively advances it, the party must disclose it. Mere passing mention in pleadings may not suffice to call the doctrine into play. I agree immediately that the assertion of the existence of legal opinion by a plaintiff and the simple admission or denial of its existence by a defendant ordinarily would not require that defendant to disclose. There are questions of degree. I do not accept that there is some inexorable standard which arises from some perceived need for invariable certainty.
…
However, the statement of claim contains rather more. In paras 35 as to improper purpose, 37 as to predetermination and bias, and 39 as to unreasonableness, there are pleadings met in the statement of defence by denials plus affirmative assertions. The affirmative assertions by the first defendant are these. He says:
13 Capital + Merchant Finance Ltd v Perpetual Trust Ltd [2015] NZHC 1233 at [20].
14 Astrazeneca Ltd v Commerce Commission, above n 8, citing Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA); and Shannon v Shannon [2005] 3 NZLR 757 (CA).
15 Tau v Durie, above n 7, at 194–195.
“… further that he obtained and relied on an independent legal opinion on his powers to preside.”
[33] In my view, that case does not assist Mr Collecutt. The Mitchells do not assert reliance on the privileged communication. If there was any doubt, Ms Wroe’s explicit statement of the Mitchells’ position as referred to in [18] above makes that clear. Nor, for the reasons already discussed in relation to s 65(2), did Mr Mitchell seek to inject the substance of the communication in evidence.
[34] I come back to the particular issue in the proceeding against which waiver is to be considered. The issue is whether it is “fair and reasonable”, under s 50 of the CCLA, for Mrs Murphy to rely on cl 22 of the SPA. The onus is on Mrs Murphy. Section 50(3)(c) provides that whether any party was represented or advised by a lawyer at the relevant time is relevant in assessing the “fair and reasonable” aspect. What is relevant to s 50(3)(c) is whether or not legal advice was obtained not the substance of the advice.
[35] The Court of Appeal recently held, in Bushline Trustees Ltd v ANZ Bank New Zealand Ltd, that the nature and extent of the advice obtained is relevant to the inquiry under the predecessor to s 50.16 In that case, there had been no waiver of privilege. A solicitor had been instructed to provide legal advice on swap terms. In the High Court, Edwards J stated that “[i]t may be inferred from the execution of a solicitor’s certificate that Mr England [the solicitor] did in fact do just that”.17
[36] The Court of Appeal referred to Mr England’s advice as being of a “mechanical, formal, nature”.18 Mr Collecutt sought to argue that the statement by the Court of Appeal that “the nature and extent of legal advice provided to a customer is relevant when making the fair and reasonable assessment”19 should be read to also include the content or substance of the advice.
16 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2019] NZCA 245 at [251].
17 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2017] NZHC 2520, [2018] NZCCLR 19 at [136].
18 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd (CA), above n 16, at [271].
19 At [251].
[37] I do not accept that submission, at least in the context of this hearing. The nature and extent of the advice is before the Court. Mr Mitchell’s brief addresses that. I am not persuaded that the substance of the advice is relevant.
Results
[38]For the above reasons, privilege has not been waived.
Gordon J
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