Wright v Tan HC Auckland CP 678 SD00

[2001] NZHC 687

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP 678 - SD00

BETWEEN WARWICK FRANCIS WRIGHT of Auckland, Solicitor and CHRISTINE ANNE WRIGHT of Auckland, Married Woman
Plaintiffs

AND ERIN SYLVAN MARY TAN of Auckland, Married Woman and
CHIN WAH TAN of Auckland
First Defendants

AND MIAO KEE YUNG of Auckland and
NORA CHU YUNG of Auckland, Married Woman
Second Defendants

AND THE AUCKLAND CITY COUNCIL a body corporate constituted pursuant to the provisions of the Local Government Act 1974
Third Defendant

Hearing: 25 July 2001

Counsel: R J Katz QC for Plaintiffs
F E Baker for First Defendants
No appearance for Second and Third Defendants

Judgment: 27 July 2001

JUDGMENT OF PRIESTLEY J ON INTERLOCUTORY APPLICATION SEEKING PRODUCTION OF DOCUMENTS

Solicitors:
Kirkby Law, PO Box 3415, Auckland
Rudd Watts & Stone, PO Box 3798, Auckland
Ellis Gould, PO Box 1509, Auckland
Simpson Grierson, Private Bag 92 518, Auckland

Counsel:
R J Katz QC, PO Box 1900. Auckland

Introduction

[1] The plaintiffs wish to inspect six documents. Those six documents are listed in the second part of the first defendants’ supplementary verified list of documents sworn and filed on 11 June 2001. The second defendants claim the documents in question are privileged.

[2] Pursuant to r 311 of the High Court Rules the six documents were inspected by me for the purpose of deciding the validity of the claim of privilege. I also had the benefit of full argument by counsel.

[3] I shall refer to all six documents by their document number. The documents (using the same numbers allocated in the first defendants’ supplementary verified list) are:

1. Letter from D Clark, partner of Wilson McKay the first defendants’ former solicitors, to the first named first defendant dated 11 May 1999.

5. Ditto, dated 14 December 1999.

9. “Without prejudice” letter from Ellis Gould, the second defendants’ solicitors, to Rudd Watts & Stone, the first defendants’ solicitors, dated 1 May 2001.

15. “Without prejudice” letter from Rudd Watts & Stone to Wilson McKay dated 11 May 2001.

18. “Without prejudice” letter from Wilson McKay to Rudd Watts & Stone dated 14 May 2001.

19. Facsimile from third defendant’s solicitor, Simpson Grierson, to Rudd Watts & Stone dated 30 May 2001.

[4] Having had the advantage of inspecting the documents myself I am able to reach a decision in respect of five of them without difficulty. Privilege has been correctly claimed in respect of those five documents. I set out below reasons for that decision and make it clear that the brevity of those reasons should not be construed as indicating that I have given no or scant consideration to the competent submissions of Mr Katz who, of course, did not have the benefit of inspecting the documents himself.

[5] In particular I have considered Mr Katz’s submission that privilege cannot be claimed in a situation where parties’ pleadings have put certain matters at issue with the result that fairness dictates a waiver. In this particular case counsel referred me to portions of the statement of defence and counterclaims which he submitted had specifically raised such issues as the first defendants’ state of mind, their actual knowledge at the time, and certain counterclaim prayers which necessarily invoked a judicial discretion.

Background of the proceeding

[6] The first plaintiffs are the owners of a property at Omana Avenue, Epsom. The property is a rear lot enjoying access to a street by virtue of a narrow strip of land.

[7] The second defendants in 1999 were the owners of a front and middle lot. The front lot (Lot 1) had road frontage to Omana Avenue. The middle lot (Lot 2) had appurtenant to it a right of way over the access strip of the plaintiffs’ land. That right of way which constitutes a registered easement was created in approximately 1939.

[8] The right of way contains various conditions the most important of which is probably condition 3 which provides, inter alia, that “ . . . no building [shall] be erected having a frontage wholly to the right of way.”

[9] In approximately June 2000 the second defendants sold Lot 2 to the first defendants. At some subsequent date the second defendants transferred and granted to the first defendants an easement over a narrow metre wide strip of land along the western boundary of Lot 1 which is allegedly described as an easement of right of way, parking, energy supply, telephone service and garden. The plaintiffs allege that the granting of this easement by the second defendants to the first defendants is in all the circumstances a device to circumvent perceived difficulties arising out of condition 3 of the 1939 easement which arguably might prevent the erection of a building on Lot 2 which was “wholly” dependant on the right of way for access. That adverb and its legal effect will loom large in this proceeding.

[10] The first defendants in addition to filing a statement of defence have brought four counterclaims against the plaintiffs. The first counterclaim, which impacts on both the plaintiffs and the third defendant, seeks a declaration that the recently created right of way on the western boundary satisfies condition 3. The second counterclaim alleges that the plaintiffs are estopped from preventing the first defendants from building on Lot 2. The third counterclaim seeks the extinguishment of condition 3 pursuant to s 126G of the Property Law Act 1952. The fourth counterclaim seeks relief pursuant to s 129B of the Property Law Act on the basis that Lot 2 might be landlocked.

[11] Against that background I now turn to examine the claim of privilege raised in respect of each of the six documents.

Document 5

[12] This letter from the first defendants then solicitor reviews previous discussions between the first defendant Mrs Tan and the plaintiff Mr Warwick Wright. It reviews the plaintiff’s stance and gives specific advice. Although litigation was not at the date of the document afoot, advice was sought and given over an apparent dispute between the plaintiffs and the first defendants. Solicitor client privilege undoubtedly attaches. There is nothing in the letter which justifies waiver either under fairness or any other principle. Privilege is correctly claimed.

Document 9

[13] This “without prejudice” letter from the first defendants’ solicitors to the second defendants’ solicitors, explores a possible settlement. In Rush v Tompkins v Greater London Council [1989] 1 AC 1280, the House of Lords examined the issue of privilege claimed in respect of “without prejudice” correspondence between parties which had resulted in a compromise between the plaintiffs and one defendant where the proceeding remained afoot against other defendants. The House of Lords decision was unanimous. The principles were clearly stated:

“The [without prejudice] rule applies to exclude all negotiations genuinely aimed at settlement whether oral or in writing from being given in evidence. A competent solicitor will always head any negotiating correspondence “without prejudice” to make clear beyond doubt that in the event of negotiations being unsuccessful they are not to be referred to at the subsequent trial. However, the application of the rule is not dependent upon the use of the phrase “without prejudice” and if it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission . . . . I believe that the question has to be looked at more broadly and resolved by balancing two different public interests, namely the public interest in promoting settlements and the public interest in full discovery between parties to litigation.” (Per Lord Griffiths, 1299-1300)

[14] Although couched in terms of admissibility the origin of the appellate judgment was a summons seeking specific discovery of the documents in question.

[15] A similar approach was adopted in Allison v KPMG (1994) 8 PRNZ 128. The exception of correspondence in the course of settlement negotiations evidencing a settlement has no relevance to document 9.

[16] The subject matter of this document falls well outside any of the principles contained in Mr Katz’s submissions. It relates to settlement negotiations between the parties. Privilege has been correctly claimed.

Document 19

[17] This facsimile responds to telephone discussions between the solicitors of the first defendants and the third defendant respectively. It is identical in character and purpose to document 9. Privilege is correctly claimed.

Documents 15 and 18

[18] My initial reaction was that although privilege had properly been claimed, no great harm would result if these documents were shown to the plaintiffs’ counsel. Document 15 is a report on this proceeding from the first defendants’ solicitors to their client’s previous solicitor who had acted on the purchase of Lot 2. Document 18 is the reply. Counsel for the first defendants correctly pointed out to me that the letters contain references to settlement offers, views on the respective liability of the parties, and other matters of strategic significance.

[19] The sole purpose in writing document 15 was related to the litigation. It contains information which is properly part of the function of the first defendants’ solicitors in the litigation. Additionally there is a prospect that Wilson McKay might at some subsequent stage be joined as a party to this proceeding should the first defendants allege that professional negligence had caused or contributed to any loss which might flow if the plaintiffs were to succeed.

[20] Again none of Mr Katz’s submissions persuade me that privilege ought to be waived. My conclusion is that privilege has properly been claimed for both these documents.

Document 1

[21] The plaintiffs’ challenge to the privilege claimed by the first defendants in respect of this document raises important and difficult policy issues. The letter was written by the first defendants then solicitor. That solicitor had been retained to act for the first defendants on the purchase of Lot 2 from the second defendants. Paragraph 2 of the first defendants’ statement of defence alleges that the first and second defendants entered into an agreement for sale and purchase on or about 7 May 1999. Counsel inform me that the agreement became unconditional in approximately June 1999. The letter was obviously written at an early stage of the solicitor’s retention.

[22] I have inspected the letter. It forwarded certain materials to the first defendants and also relayed to them certain information and advice. The letter was not, of course, written at a stage when this or any other litigation was contemplated. It is precisely the type of letter which a client in a conveyancing transaction might expect from a competent solicitor at that early stage of the transaction.

[23] The starting point must be that privilege attaches to communications between a solicitor and his or her client. The first defendants have not waived privilege in respect of document 1. The Court has no power to order the production of documents which are privileged.

[24] The English Court of Appeal in Balabel v Air-India [1988] Ch 317 has held that communications passing between a solicitor and client during the course of a conveyancing transaction are privileged. The broad purpose of the communication is the obtaining of legal advice by the client as and when appropriate during and throughout the course of the transaction. It is not necessary for a document specifically to seek or obtain advice in order to be privileged.

“Although originally confined to advice regarding litigation, the privilege was extended to non-litigious business. Nevertheless, despite that extension, the purpose and scope of the privilege is still to enable legal advice to be sought and given in confidence. In my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes have to be construed broadly. Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required or appropriate on matters great or small at various stages. There will be a continuum of communication and meetings between the solicitor and client. The negotiations for a lease such as occurred in the present case are only one example. Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach. A letter from the client containing information may end with such words as “please advise me what I should do”. But, even if it does not, there will usually be implied in the relationship an overall expectation that the solicitor will at each stage, whether asked specifically or not, tender appropriate advice. Moreover, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context.” (Per Taylor LJ at 330)

[25] Taylor LJ went on to approve a dictum of the Chief Master whose decision was under appeal in the following terms:

“As indicated, whether such documents are privileged or not must depend on whether they are part of that necessary exchange of information whose object is the giving of legal advice as and when appropriate. Accordingly, I agree with the formulation made by the Chief Master in the present case, subject to the additional words which I have placed in brackets. He said:

“Once solicitors are embarked on a conveyancing transaction they are employed to ensure that the client steers clear of legal difficulties, and communications passing in the handling of that transaction are privileged [if their aim is the obtaining of appropriate legal advice] since the whole handling is experience and legal skill in action and “a document passing during a transaction does not have to incorporate a specific piece of legal advice to obtain that privilege”.” (at 332)

[26] This approach seems to have been followed in New Zealand; see Equiticorp Finance Group Ltd v Collett (1991) 3 PRNZ 509, 511; Hight v TV3 (1996) 9 PRNZ 651. Letters sent by a solicitor at an early stage of a conveyancing transaction are demonstrably part of a “continuum” and the background against which the solicitor and client may respectively give and seek advice.

[27] Mr Katz’s submissions relied in part on Matthews v Malek, Disclosure, (2nd Ed) which reviewed Australian jurisprudence in this area. The text lists four categories where what is described as the “fairness waiver” applies. Paragraph 10.05 summarises it thus:

“The principle of waiver through “fairness” exists in other common law jurisdictions, but has developed differently. Thus, for example, allegations of poor legal services have long led to waiver of privilege in relation to the subject matter of the allegations, in both the United States and Canada, but the principle undoubtedly goes wider than this. In Australia, four categories of case have been identified where “fairness” waiver applies:

(i) where professional negligence is alleged against a legal practitioner, and the entirety of the professional advice given by him to the plaintiff would be admissible;

(ii) where the state of mind of a plaintiff is in issue, and legal advice given to him is relevant to this issue;

(iii) where a party’s use of privileged material makes it unfair to deny his opponent the opportunity to refer to such material;

(iv) where the fact finding role of the court would be seriously compromised, or the court might be misled, if privileged material could not be referred to.”

[28] In counsel’s submission (ii), (iii), (iv) could well apply here.

[29] In counsel’s submissions the first defendants had, through their pleadings, put at issue a number of matters in respect of which the privileged letter might be highly relevant. These included their state of mind; the actual knowledge they had at the time Lot 2 was purchased and at the time the easement between them and the second defendants was created; the pleading in paragraph 8(b) of their statement of defence that they had no actual knowledge of the third condition of the right of way until 2 December 1999; and the various counterclaim remedies sought which would require an assessment of the first defendants’ conduct.

[30] Mr Katz relied on a dictum of Derrington J in Wardrobe v Dunne [1996] 1 Qd R 224, 226:

“Notwithstanding the high status of professional privilege and the careful protection which the law affords it, when the contents of a privileged communication become the subject of a legitimate and reasonable issue in the litigation, then the privilege is lost.

It does not matter whether the issue is raised by the party claiming privilege or the party seeking to override it, providing that the issue fairly arises on the litigation.”

[31] Counsel additionally relied heavily on Telstra Corp Ltd v BT Australasia Pty Ltd (1998) 156 ALR 634, a decision of the full Bench of the Federal Court of Australia. That case is authority for the proposition that in some cases, particularly when a party’s state of mind has been put in issue by the proceedings, the law will imply a consent or waiver to the use of privileged material.

[32] It is not necessary for the purposes of this decision to review the facts of Telstra. The litigation involved a commercial dispute arising out of the management and development of a public integrated tele-communications network for New South Wales and the tendering process for that system. The documents in question included documents concerning the retainer of solicitors to advise one of the parties and documents relating to advice about a party’s contractual entitlement.

[33] Against that background I do not consider that the broad statements of principle contained in Telstra (quite apart from the fact that the decision is a persuasive rather than a binding authority) are particularly germane to the simple issue of privilege raised by document 1.

[34] Mr Katz submitted the Court dealing with the substantive proceeding would have to take into account all the circumstances of the case, which would necessarily include the actual knowledge and state of mind of the first defendants both when they bought Lot 2 and when they entered into the easement arrangement with the second defendants. Undoubtedly a portion of the information conveyed to the first defendants by their solicitor in document 1 is relevant to those issues. Indeed counsel for the plaintiff would have had little difficulty in working out the subject matter of part of document 1 in the light of counsel for the first defendants advice to the Court that paragraph 8(c) of the first defendants’ statement of defence would need to be amended because it was at variance with that part of document 1.

[35] The submissions of counsel for the first defendants were neatly summarised by her aphorism “privilege trumps relevance”. In her submission Telstra Corporation Ltd v BT Australasia Pty Ltd (supra) was not good law and had not been followed in other Australian jurisdictions. Counsel relied on the principle set out in Balabel v Air-India (supra) para [24] and submitted that document 1 clearly fell inside the category of an exchange of information between the first defendants and their solicitors the object of which was the giving of legal advice.

[36] Counsel submitted that no contents of document 1 had been deployed (see for instance, Cedco Publishing Co v Hodder Moa Beckett Publishers Ltd (unreported, High Court Auckland, CL 33/00, 29 May 2001, Williams J) and Commerce Commission v Carter Holt Harvey Building Products Limited (unreported, High Court Auckland, CL 27/95, 21 November 1999).

[37] Nor in counsel’s submission were the first defendants using privileged material which rendered it unfair for the first defendants to continue to claim privilege (Attorney-General of the Northern Territory v Maurice (1986) 65 ALR 230; Westgate Transport Limited v Methanex New Zealand Limited (2000) 14 PRNZ 81).

[38] I admit, however, to some uneasiness about the glaring inconsistency between a portion of document 1 and what is currently pleaded in paragraph 8(c) of the first defendants’ statement of defence. The inconsistency perhaps exemplifies Mr Katz’s submission that it would be possible for a litigant to give an untruthful answer during cross-examination to a question where that untruth could otherwise be exposed by reference to a privileged document.

[39] I am not, however, persuaded that at its current stage the issues of this proceeding justify the Court constructing a waiver argument to breach the cloak of privilege which properly surrounds document 1. As matters currently stand, in my judgment privilege has been properly claimed for document 1 and it should not be produced.

[40] Different considerations, including the fairness waiver principle submitted by Mr Katz, could well arise if Wilson and McKay were to be joined as parties in this proceeding, or if through either their pleading or their evidence, the first defendants were to assert that they were unaware of condition 3 of the right of way at the time the argument between the first and second defendants became unconditional. I say no more on that topic since I cannot prophesy what stance the first defendants will adopt. The concepts of notice and knowledge in the circumstances of this case may have no relevance or could become highly relevant. The difficulties arising out of those concepts are compounded by the fact that notice in respect of registered interests under the Land Transfer Act 1952 is markedly different from actual notice which may be different again from understanding the nature and legal effect of information received.

[41] Doubtless if either of the two developments referred to in the previous paragraph occur a fresh application for production of document 1 can be made. On the current state of the proceeding, however, I regard document 1 as being privileged. The plaintiffs’ application for its production is refused.

Costs

[42] Counsel agree that costs should be reserved. The first defendants have, however, been successful. I do not intend to fix costs in respect of this interlocutory application. Leave is reserved for the parties to file memoranda on costs if the need arises.

Orders

1. Production of the six specified documents is refused.

2. Costs are reserved.