Strack v Grey

[2016] NZHC 1980

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2015-012-000162 [2016] NZHC 1980

UNDER

the Contractual Remedies Act 1979

IN THE MATTER

of an agreement for sale and purchase of real estate dated 24 February 2014 between Matthew Francis Strack, Tracey Leigh Strack and WMC Trustee Limited as vendors and David Harvey Grey as purchaser

BETWEEN

MATTHEW FRANCIS STRACK, TRACEY LEIGH STRACK AND WMC TRUSTEE LIMITED

Plaintiffs

AND

DAVID HARVEY GREY Defendant

Hearing:	23 August 2016
Appearances:	D R Tobin for Plaintiffs L A Andersen for Defendant
Judgment:	25 August 2016

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS RE PRIVILEGE

[1]      On  24  February 2014  the  defendant  (Mr  Grey)  purchased  a  property  in

Dunedin from the plaintiffs (the Aurora Trust).

[2]      On 26 February 2014 Mr Grey’s solicitors wrote by fax to the Aurora Trust’s solicitors.   They said that Mr Grey had obtained a building report which was not satisfactory,  so  the  agreement  was  cancelled.    The  Trust  maintains  that  whilst Mr Grey purported to cancel the agreement, he was not entitled to do so and in fact

repudiated  it.    It  says  that  in  successive  communications  Mr  Grey’s  solicitors

STRACK & WMC TRUSTEE LTD v GREY (Privilege) [2016] NZHC 1980 [25 August 2016]

maintained that repudiation.   The Trust says that on 3 March it cancelled the agreement.

[3]      The Trust placed the property back on the market and later resold it.  In this proceeding it sues to recover the difference between the sale price to Mr Grey and the sale price achieved on resale.

[4]      The Trust and Mr Grey have given discovery of documents.   The Aurora Trust challenges privilege claimed by Mr Grey in relation to five documents.  Two are handwritten notes written by his then solicitor, three are emails she wrote to Mr Grey.

[5]      Mr Grey says that these documents are privileged under s 56 of the Evidence

Act 2006, which provides to the extent relevant:

56     Privilege for preparatory materials for proceedings

(1)     Subsection (2) applies to a communication or information only if the communication or information is made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding (the proceeding).

(2)    A person (the party) who is, or on reasonable grounds contemplates  becoming,  a  party  to  the  proceeding  has  a privilege in respect of –

(a)     a communication between the party and any other person: (b)    a communication between the party’s legal adviser and

any other person:

(c)     information  compiled  or  prepared  by  the  party  or  the

party’s legal adviser:

(d)     information compiled or prepared at the request of the

party, or the party’s legal adviser, by any other person.

[6]      It is common ground that Mr Grey has given discovery of his solicitors’ conveyancing file up until 26 February 2014, the date on which he maintained his solicitors cancelled the agreement.  He claims litigation privilege for what he says is advice he received about cancellation of the contract, discussions he had with his solicitor about cancellation of the contract and other matters subsequent to that time. He says that he has not expressly or impliedly waived the privilege with regard to any matter associated with this litigation.

[7]      During the course of argument counsel for Mr Grey made available to me the five documents which are in issue.   One of them is dated 26 February 2014.   I discuss this further below.  The other four are dated 27 February 2014 and are timed sequentially through the afternoon of that day commencing at 2.15 pm.

[8]      Having  reviewed  the  documents  I am  satisfied  that  the  first  of  the  four communications on 27 February is within the terms of s 56(1) of the Evidence Act

2006.  It records a communication which, in my view, was prepared for the dominant purpose of preparing for an apprehended proceeding.  It follows that the three further documents in issue, which were sent later that afternoon, are also subject to the privilege set out in s 56(1).

[9]      Conversely, I am not satisfied that the document prepared on 26 February

2014 is privileged under s 56(1). As is disclosed in discovery, it is a handwritten file note by the solicitor for Mr Grey.  The file note records that it was made at 2.20 pm, which is 1 hour 20 minutes before the fax referred to in paragraph [2] above, which was sent at 3.40 pm, according to a handwritten notation on its face.  Although there are no numbered paragraphs in the note, it falls into five paragraphs.   The first records what Mr Grey said to the solicitor about information given to him by a builder, reporting on the property.  The second records something the agent – which I take to be the land agent who orchestrated the sale – said in relation to using a builder.  The third relates to a website, and information from DCC – I assume the Dunedin City Council – about insulation.

[10]     The fourth records a discussion between Mr Grey and his solicitor about the time that Mr Grey would contact the land agent, and agreement that Mr Grey would contact the agent after the solicitor had cancelled the contract.

[11]     In the fifth paragraph the solicitor records that Mr Grey understands that he is supposed to get an “actual report” but that he “doesn’t see why it is necessary”.  The second sentence of this paragraph records that the solicitor will phone when she has faxed through the cancellation and at that point Mr Grey would call the agent.

[12]     In my opinion, this note records a conversation between Mr Grey and his solicitor in relation to cancellation of the contract.  In my judgment nothing in the note suggests that in this discussion any question of this possibly leading to a claim against Mr Grey was raised or discussed.  Rather, it records an instruction that the contract is to be cancelled because of a building report, discussions about who would tell the land agent and when, mention of information about the insulation, and a record of the solicitor’s view of Mr Grey’s understanding about needing an “actual report” and his opinion that this is not necessary.   There is nothing in the note to suggest that Mr Grey and his solicitor then discussed what might happen, adverse to his interests, if indeed he did cancel for the given reason and therefore nothing to suggest a proceeding against him might ensue.  There is nothing in the file note to suggest, for example, that the solicitor advised Mr Grey not to cancel the contract on the basis of the report he had obtained from a builder.

[13]     For these reasons I find that this document does not record a communication made for the dominant purpose of preparing for an apprehended proceeding, in terms of s 56(1) and that it does not, therefore, attract litigation privilege.

[14]     Mr Andersen argues that once it was decided to cancel on the basis of an oral building report, when the condition in the contract required a written building report, a proceeding must have been apprehended and therefore s 56(1) should apply.  I do not agree.  Section 56(1) applies when a proceeding is apprehended, not when one might possibly have been apprehended.

[15]     Finally, Mr Andersen says that Mr Strack rang Mr Grey and informed him that there was nothing wrong with the insulation between the walls, this being the issue within the builder’s report that so concerned Mr Grey that he instructed his solicitor to cancel the contract.  However, his evidence is that this conversation took place after the fax cancelling the contract was sent, and that fax was sent after the conversation which is referred to in the file note in question.   Therefore, when Mr Grey was talking to his solicitor at 2.20 pm, he had not had the conversation with Mr Strack and did not know, therefore, that Mr Strack may dispute his ability to cancel the contract as Mr Andersen suggested.

Outcome

[16]     I find that:

(a)     documents D102, 103, 104 and 105 are subject to the privilege in s 56 of the Evidence Act 2006; and

(b)document  D101  is  not  subject  to  that  privilege  and  should  be discovered.

[17]     Counsel agreed that costs should follow the event.  The application related to more documents than those referred to in this agreement.   Some have been made available and in respect of some, challenge to privilege was withdrawn before the hearing.   In relation to the hearing itself, each party has enjoyed a measure of success.  I do not think it appropriate to apportion that measure of success, other than

on a broadly equal basis. As a result costs will lie where they fall on this application.

J G Matthews

Associate Judge

Solicitors:

Solomons, Dunedin.
A D Paterson, Solicitor, Dunedin.