Streetsmart Limited v Far North District Council HC Whangarei Cp.30/00

[2001] NZHC 375

IN THE HIGH COURT OF NEW ZEALAND
WHANGAREI REGISTRY CP.30/00

BETWEEN STREETSMART LIMITED
Plaintiff

AND FAR NORTH DISTRICT COUNCIL
Defendant

Hearing: 14 May 2001 (in Auckland)

Judgment: 14 May 2001

Counsel: Paul Buetow for plaintiff
Graeme Christie for defendant

[ORAL] JUDGMENT OF WILLIAMS J
[on application for further discovery]

[1] This is an application by the plaintiff, Streetsmart Limited, for further discovery from the defendant, Far North District Council.

[2] Initially, there were three categories of documents of which further discovery was sought. They included the tender documents and alternative tender documents submitted by a competitor of Streetsmart, Impact Services Ltd, in relation to the initial tender which is at the heart of this proceeding but those documents have now been provided by the District Council to Streetsmart and accordingly that aspect of the application was not pursued.

[3] The second category of documents sought were re-tender documents submitted by Impact Services to the District Council and it will be necessary to deal with that in due course, as will the third aspect of the application which relates to documents concerning legal advice given by the District Council’s solicitors in relation to the initial tender process and a re-tender process which followed.

[4] The claim centres round a call by the District Council for tenders for its Community Services Maintenance contracts for its various Wards. The call for tenders was sent out on 9 June 2000 and details of the tender documents are extensively pleaded in the claim. When tenders closed on 29 June Streetsmart pleads that the District Council then undertook an evaluation process of all the tenders. It seems that the tenders at that stage included tenders from Streetsmart, Impact Services, and possibly some others. After that evaluation there was apparently a recommendation to the Council that the Ward contracts for the work described be awarded to Streetsmart. However, it is pleaded that following the release of that report Impact Services challenged the process by which the tender had been conducted and as a result on about 27 July 2000 the Council sent all tenderers a notice which effectively informed them that it did not intend to accept any of the tenders initially lodged and would re-tender the contracts.

[5] It is of some importance to note that the Council in its defence effectively accepts all of that version of events but says in relation to the notice that re-tendering would be adopted, citing a quotation from the Council’s letter that:

“This is to advise that after legal advice a recommendation is expected to be made at a meeting on 27 July 2000 that Council, under cl 1.7.1 of the contract not accept any tender and that the contracts be re-rendered.”

[6] Streetsmart filed a re-tender and alternative re-tender on 21 August but after correspondence with Streetsmart and other tenderers on 6 September 2000 the Commission accepted Impact Services’ re-tender.

[7] The causes of action are, first, breach of the tender contract in which Streetsmart asserts that the council was in breach of express or implied terms of the tender contract in a number of ways leading up to the decision to re-tender and in particular in its negotiations with Impact Services. There are further causes of action alleging breach of the Fair Trading Act 1986, breach of fiduciary duty and negligence, all relating to aspects of the Council’s process during the initial tender round and the Council’s decision not to accept any of the initial tenders and re-tender the work.

[8] The relief claimed by Streetsmart includes its cost of preparing the tender, loss of profits and loss of opportunity but it is significant to note that all those claims relate to the initial tender round, not to the re-tendering.

[9] The first aspect of discovery in contention relates to Impact Services’ re-tender documents, that is to say the documents which it submitted to the Council as part of the re-tendering process following Council’s decision to re-tender. Those documents were presumably the documents which lead to Council awarding the contracts to the competitor. Mr Buetow, on behalf of Streetsmart, submitted that Impact Services’ re-tender documents were relevant to the matters in issue in this proceeding, relying on the well-known passage from the judgment of Brett LJ in The Compagnie Financiere Et Commerciale Du Pacifique v The Peruvian Guano Company (1882) 11 QBD 55, 63 to the following effect:

“It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly,” because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences.”

[10] Mr Buetow submitted that the re-tender documents were relevant and would be of assistance to Streetsmart in pursuing both its line of inquiry and in cross-examining Council officers at the hearing on the basis that the form and content of the Impact Services’ re-tender might reflect back on Council’s process and its evaluation of the initial tenders.

[11] With respect to counsel’s argument, however, this court finds itself unable to accept that submission. It is clear that the nub of this proceeding relates to the initial tender and to Council’s evaluation process and its decision to re-tender. It is reasonable to suppose that as a result of the legal advice it received and whatever may have been Impact Services’ objections, the re-tendering process would have been conducted on a different basis. Seeing that there is nothing in this case which puts the re-tender process in issue, the Court takes the view that it could not be said that any documents submitted by Impact Services as part of the re-tendering round could be relevant to the Council’s process of calling for and evaluating the initial tenders particularly when the re-tendering was conducted on an amended basis. That aspect of the application is accordingly dismissed.

[12] The final matter relates to the legal advice given to the Council, which led it to re-tender.

[13] In his submissions, Mr Buetow set out the categories of documents to which Streetsmart wished to obtain access. They included:

“[a] Letters from the Council to its solicitors of 20 and 24 July 2000;

[b] Attachments and handwritten notes attached to the letter of advice from Council’s solicitors dated 24 July 2000; and

[c] Any file notes made by the Council’s solicitors at its meeting with the Council on 21 July 2000.”

[14] A copy of the letter of advice from Council’s solicitors to Council dated 24 July has been furnished by the defendant’s solicitors to the plaintiff’s solicitors but it is furnished on the basis that it can only be treated as not being forwarded on a “without prejudice” basis if the plaintiff’s solicitors accept that that document is the only document to which they are entitled to obtain access. Despite the Council’s solicitors having advised Streetsmart’s solicitors that there are no other documents containing any other advice, the plaintiff’s solicitors decline to accept that limitation on the matter, hence this application.

[15] The application is brought solely on the basis that privilege has been waived by the council in relation to the documents sought.

[16] Reliance was placed in particular on a decision of this Court in Tau v Durie [1996] 2 NZLR 190 but in the Court’s view it is of assistance also to consider the authorities on which that decision was principally based. The Court endeavoured to review the authorities in this area of the law in its decision in Registered Securities Ltd v “C” (24 May 1999 HC Auckland CP 593/97). Of particular relevance so far as this case is concerned is the decision of the High Court of Australia in Attorney-General for the Northern Territories v Maurice (1986) 69 ALR 31 the most relevant passage in which appears in the judgment of Deane J (at 42-43) where, in discussing waiver of legal professional privilege by imputation or implication of law the learned judge held:

“Waiver of legal professional privilege by imputation or implication of law is based on notions of fairness. It occurs in circumstances where a person has used privileged material in such a way that it would be unfair for him to assert that legal professional privilege rendered him immune from procedures pursuant to which he would otherwise be compellable to produce or allow access to the material which he has elected to use to his own advantage. Thus, ordinary notions of fairness require that an assertion of the effect of privileged material or disclosure of part of its contents in the course of proceedings before a court or quasi-judicial tribunal be treated as a waiver of any right to resist scrutiny of the propriety of the use he has made of the material by reliance upon legal professional privilege. There are, however, no considerations of fairness which require that compliance by a party with a procedural requirement that he prepare and make available a document setting forth the case which he proposes to make before a court or quasi-judicial tribunal should be treated as a waiver of his right to claim legal professional privilege in respect of all the material upon which he has relied in the preparation of that document. If, in such a document, a party sets forth part of the contents of a particular identified document or communication or asserts the effect of or his reliance upon a particular identified document or communication, it may be that considerations of fairness might require that he be treated as having waived any legal professional privilege in relation to the whole document or communication: cf Buttes Gas and Oil Co v Hammer (No 3) ]1981] 1 QB 223 at 252-52. Where, however, he does no more than make use of privileged material (eg legal advice, expert opinion of statements of potential witnesses) for the purpose of formulating the statement in such a document of the details of the case which he proposes to make, it would be an affront to ordinary notions of fairness to hold that the effect of his compliance with that procedural requirement was that he has waived his legal professional privilege in relation to such material.”

[17] More broadly, all the cases both here and overseas show that questions of implied waiver of privilege are grounded in notions of fairness (Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 156 ALR 634, 647; Commerce Commission v Fletcher Challenge Ltd (No.4) (1989) 2 PRNZ 15; Cory-Wright & Salmon Ltd (In Liquidation) v KPMG Peat Marwick [Privilege] (1992) 5 PRNZ 518). It is of interest that in the Commerce Commission case McGechan J held that imputed waiver depends on whether it “would be unfair or misleading to a party to refer to or use material and yet assert that all material associated with it is privileged from production.”

[18] In Tau v Durie itself what was in issue was the whether the Tribunal’s legal advice had privilege waived. McGechan J held (at 194 195):

“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.”

[19] A succinct summary of the position can also be found in Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corp [1981] Com LR 139.

“. . . where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from 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 through its real weight or meaning being misunderstood.”

[20] In endeavouring to summarise the effect of those cases this Court held in Registered Securities Ltd (at 16):

“(a) Mere reference or mention or reference to privileged material in the pleadings or witness statements is insufficient. What must be demonstrated is that the party asserting the privilege is relying on the privileged material and positively advances that material in support of its case to the point where the issues in the litigation are incapable of resolution without reference to the privileged material. If such occurs, waiver of privilege is imputed.

(b) If privilege is claimed for part only of a document to which reference is made in pleadings or witness statements, waiver of privilege in respect of the balance is likely to be imputed in order that the opposing party can check and ensure that all matters material to a particular issue are before the Court.

(c) The overall test is whether it would be fair to impute a waiver of privilege in respect of the material for which privilege is claimed in order to ensure that the integrity of the Court’s process and its ability to reach a proper decision as to the rights and liabilities of the parties is not impugned and the Court is not misled.”

[21] Turning back to the matters in issue in this case, Mr Christie, counsel for the District Council, submitted that the Council’s letter of 24 July 2000 earlier quoted and cited in the Council’s statement of defence was not a reliance on the solicitors’ opinion but merely an assertion in correspondence as to its existence. With respect to counsel, that distinction, in the Court’s view, is sophistical. The Court takes the view that the Council was plainly relying on its legal advice when in its letter of 24 July it sought to advise tenderers of its proposed course and to justify that course. The legal advice comes within the citation from Tau v Durie (supra) as a “legal opinion with inference invited as to favourable comment”. The Council was asserting that its legal advice was the basis for its action. In terms of the authorities it was “deploying” that advice (Matthews & Malek “Discovery” (1992) para 9.11 pp 226-227) or positively relying upon it and, in the Court’s view, in so doing it has waived privilege in relation to the advice itself.

[22] It follows that the plaintiff is entitled to discovery of that advice.

[23] As earlier noted, the documents sought include attachments and handwritten notes attached to the letter of advice. Mr Buetow explained in argument that the reference is to the reference in the defendant’s list of documents which refers to the letter of 24 July as having an attachment and handwritten notes with it though Mr Christie’s understanding was that there were no such attachments and handwritten notes. That matter must be determined between counsel. The Court is unable so to do. But if there are attachments and handwritten notes which form a part of the opinion, it may well be that privilege is also waived in that regard. That aspect of the application will therefore have to be adjourned part-heard although it is likely that counsel will be able to resolve the matter between them.

[24] The next matter relates to file notes made by the Council’s solicitor at its meeting with the Council on 21 July 2000. That material, in the Court’s view is not discoverable. It is not material on which the Council relies, indeed the probability is that Council officers may never have seen the material. It is not sufficiently incorporated as part of the legal advice. It is material which would ordinarily be covered by legal professional privilege and the authorities make it clear that the inviolability of privilege should be upheld unless waiver has occurred. In those circumstances the Court takes the view that those file notes are not discoverable.

[25] The final category of documents of which discovery is sought are letters from the Council to its solicitors of 20 and 24 July.

[26] As appeared during argument and in discussion, if those documents are discoverable, it would appear that they are discoverable not because of any privilege in relation to them has been waived but because in accordance with the authorities, such as Laurenson v Wellington City Council [1927] NZLR 510, Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart [1985] 1 NZLR 596 and General Accident Fire & Life Assurance Corp Ltd v Elite Apparel Ltd [1985] 1 NZLR 129, any privilege for those documents has been incorrectly claimed either on the basis that they are not covered by solicitor-client privilege or litigation was not then in prospect and they are accordingly not covered by litigation privilege. It may seem unfortunate, having regard to delays which have occurred in getting this application to a hearing, but the question of whether privilege is properly claimed for those letters has not been raised and accordingly was not argued. Rather than dismiss the application in that respect that aspect of the matter should also be adjourned part-heard and if further argument is necessary an amended application can be filed.

[27] In summary, therefore, the Court takes the view that the only aspect on which the plaintiff is entitled to be successful relates to the legal advice given by its solicitors to Council in its letter of 24 July 2000 and the application will be granted in that respect, dismissed in the respects set out in the judgment and adjourned part-heard in relation to the other aspects discussed. If a further hearing is necessary, counsel are to advise the Court within 28 days of delivery of this judgment failing which the proceeding is to go to conference.

[28] Costs reserved (1 1/2 hours).