Discovery and inspection of documents - legal professional privilege - waiver - whether intention to waive the privilege as a whole - imputation made where fairness requires - "draft" writ or statement of claim produced in settlement discussions - whether privilege waived - onus of proof

Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475.

Southern Equities Corporation Ltd v Western Australian Government Holdings Ltd unreported, 16 June 1993 Western Australia Supreme Court (Full Court).

Sicpa North America Inc. v Donaldson Enterprises Inc NJ Super L, 430 A 2d 262 (1981).

Dubai Bank Ltd v Galadari and Ors (1990) 1 Ch 98.

Corrs Chambers Westgarths

Counsel and Solicitors Mr W G Hodgekiss

1. The applicant produce to the respondent the "draft writ"

referred to in the reasons for judgment for inspection and for

copying.

2. The applicant pay the respondent's costs of this

application.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

(On application to inspect document for which a claim of legal professional privilege is made)

BEAUMONT J Before the Court is a notice of motion in proceedings arising out of a dispute between the landlord and the tenant of commercial premises. In the principal proceedings, a claim for damages is made by the tenant, Argyle, for allegedly misleading conduct; and a cross-claim is made by the landlord, Darling Harbourside, for rent allegedly due. In support of Argyle's claim in the principal proceedings, not yet dealt with, reference has been made in affidavit evidence filed on its behalf, to the production, by a director of Argyle, of a "draft" writ or draft statement of claim ("the draft writ") in the course of negotiations between the parties. Darling Harbourside now seek to inspect the document; Argyle resists this, claiming legal professional privilege.

2. In the affidavit of Angelo George Pippos, a director of Argyle, sworn 23 July 1993, Mr. Pippos referred to negotiations which took place in June 1991 between representatives of the parties to the principal proceedings: Mr. Pippos and Mr John Anton Szangolies, another Argyle director, represented Argyle at this discussion; Darling Harbourside were represented by Messrs. Starkey and Gardner. In para.78 of his affidavit, Mr. Pippos said:

"On 25 June 1991 I, Szangolies and, to the best of my

recollection, McGregor met with Starkey and Gardner at the

office of Darling Harbourside. At the meeting, the

following conversation took place:

Gardner said: 'Well gentlemen here we are yet again. I

don't know what we are going to be able to

achieve today but let's hope its something constructive.'

I said: 'Listen Gardner we're sick of you blokes

stuffing us around. We're sick of your

intimidatory behaviour and you're holier

than thou attitude. You guys seem to

think that you can keep hitting us around

the head and we'll sit here and take it.

You treat us like all those countless

number of failed tenants who you have

treated so unmercifully. If you want to

fight, you'll get one. We've got the

resources to fight this to the death, and

I'm not joking. I have here with me a

draft Statement of Claim prepared by our

solicitors and we're ready to move. So

don't think I've come here cap in hand as

I've done so many times in the past and

that I'll sit here and listen to your

endless bullshit and associated threats.

You want to talk about some rental

relaxation based on justifiable claims

please tell me because I don't think we

should all be sitting here wasting our

respective times. We came here in late

May and you sent us away to put forward a

proposal which we did in an atmosphere of

conciliation which I thought we had

achieved. I sent you a letter on 7 June

with an offer which I thought was more

than fair in the circumstances and you

Gardner came back on 17 June with your

usual jackboots threatening to throw us

out. That's hardly in conformity in the

atmosphere of conciliation when we last

had our parting. I'm not going to sit

here and go through all the old reasons -

here's our figures, they tell the story

now what are you going to do?' (Emphasis added)

Gardner said: 'You don't expect the landlord to

subsidise your business and livelihood.'

I cut him short and said:

'Cut the bullshit, I don't think there's

any need to stay here any longer. Go for

your life and see if you can get us out.'

At that point Starkey said:

'Come on gentlemen we are here to reach

some sense of agreement.'

I said: 'You've got our proposal in writing. I

sent it to you on 7 June. That's the best

we can offer and I think it's still far

too much. I certainly believe that for

the business to be viable the offer is far

too generous. I told you our position.

We can serve this writ tomorrow it's

already to go. The balls in your court.

We've been trying to negotiate with you

fellas for two years and all we get are

stalling tactics designed to frustrate any

sort of amicable settlement of our

differences. All we get are offers of

deferment which are purely cosmetic and

don't address the problem. (Emphasis added)

..."

3. In his affidavit sworn 23 July 1993, Mr. Szangolies said (para.200):

"After some posturing by both sides I, together with Pippos

and McGregor, met with Starkey and Gardner at the landlord's

office on 25 June 1991. I recall that Pippos was very

forceful and said:

'We are not going to sit here and listen to your

rubbish anymore. You keep putting us off with

intimidatory behaviour. If you want to go to court

I'm happy to accommodate you. It's not an option that

I want to pursue but I have the resources to use if I

have to.'

Pippos then produced a Writ and put it on the table.

Gardner said: 'That doesn't scare us. We're not here to

subsidise your business.

..." (Emphasis added)

4. In a subsequent affidavit sworn 22 October 1993, Mr. Pippos said:

"I refer to paragraph 18 of Mr Pentecost's 27 August 1993

Affidavit. A draft writ was displayed to Mr Pentecost but

never shown to him in the form of tabling the document and

allowing him to read it."

5. By facsimile transmission dated 25 August 1993, addressed to the solicitors for Argyle, the solicitors for Darling Harbourside called for a copy of the writ as a discoverable document. The solicitors for Argyle responded on 27 August, contending that the document fell within the class of document to which legal professional privilege extended. Reference was made to Trade Practices Commission v Sterling [1979] FCA 33; (1978) 36 FLR 244.

6. By notice of motion filed on 8 October 1993, Darling Harbourside seeks (para.2) an order that its solicitor be permitted to inspect, and to copy, the draft writ. The only evidence before the Court on the notice of motion is the affidavit material set out above. The respondents were not cross-examined.

7. On behalf of Darling Harbourside, it is apparently accepted that the draft writ was a privileged document. However, Darling Harbourside contends that, the document having been displayed to its representatives at the meeting, any privilege was waived by Argyle. For its part, Argyle disputes that its conduct amounted to a waiver or that fairness in the sense explained in Attorney General (NT) v Maurice (Maurice's Case) [1986] HCA 80; (1986) 161 CLR 475 now requires the production of the writ for inspection by Darling Harbourside.

8. The principles to be applied in this area are well settled. The leading authority for present purposes is Maurice's Case, reference should also be made to a recent decision of the Supreme Court of Western Australia; and to an American case dealing with facts with some similarity to the present matter.

9. In Maurice's Case, the claims book was handed to the Commissioner and the other parties. In the course of the proceedings, the claimants made incidental reference to its contents. The Commissioner ruled that he should not require production of source materials used in preparing the book. A challenge by way of judicial review of the Commissioner's ruling failed.

"The matter was argued as though the question in issue was

whether source material is waived by a waiver of the

privilege in respect of a document derived from that source

material. Although it does not matter, it does not seem to

me right to suggest that the 1982 Claim Book was privileged.

It was not a document which had been brought into existence

for the sole purpose of being submitted to legal advisers

for advice or use in legal proceedings: see Grant v Downs

... On the contrary the completed claim book (any drafts

were no doubt in a different situation) was intended to be,

and was, communicated to all the parties concerned and it

was open to any party to make any proper use of it.

However, if the claim book had been privileged, there can be

no doubt that the distribution of the copies would have

waived the privilege. On either view the question is

whether the publication and use of the claim book

constituted a waiver of the privilege in respect of the

documents which formed some of its sources."

11. Having said that there was no express waiver and no actual intention to waive, Gibbs CJ said (at 481):

"...the question whether a waiver should be implied depends

on whether it would be unfair or misleading to allow a party

to refer to or use material and yet assert that that material,

or material associated with it, is privileged from production."

12. With reference to some of the decided cases, Gibbs CJ said (at 481):

"These cases may be explained by saying that it is not

unfair or misleading to refer to a document in a pleading or

affidavit which is not put into evidence but that if the

document is set out in full the privilege is waived. A

fortiori, of course, privilege in respect of materials used

in drawing a pleading or an affidavit and not referred to

therein, would not lose their privilege because they had

been used in that way."

"The 1982 Claim Book was in some respects analogous to a

pleading; it served to state the case which the claimants

intended to present although it went into much more detail

than would be expected of a formal pleading. So long as the

claim book was not used in any other way, it is impossible

to say that it was in any respect unfair or misleading to

lodge it with the Commissioner and to distribute it to the

parties without making available the sources from which it

was derived.

The 1982 Claim Book was a document of a kind that would not

be admissible in ordinary proceedings, but if it had been

admissible in the proceedings before the Aboriginal Land

Commissioner, and if it had in fact been admitted as

evidence, the appellant would have been entitled to test its

accuracy and weight, and since that could hardly be done

unless it was known on what sources it was based,

considerations of fairness might have required those sources

to have been produced."

"An implied waiver occurs when, by reason of some conduct on

the privilege holder's part, it becomes unfair to maintain

the privilege. The holder of the privilege should not be

able to abuse it by using it to create an inaccurate

perception of the protected communication."

"It is well settled that a litigant of course does not waive

his legal professional privilege to research materials,

directly or by implication, by merely submitting a pleading..."

"If ... 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: ... Where, however, he does no

more than make use of privileged material (e.g. legal

advice, expert opinion or 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."

"... inappropriate to speak in terms of waiver of privilege

in relation to the claim book."

"Until it is placed in evidence, which never occurred with

the 1982 Claim Book, it remains no more than a statement of

the claimants' case for use in the relevant proceedings by

all parties. It is a document which is intended to be

communicated to the Commissioner and other participants in

the hearing. It is not in any sense a confidential

communication nor is it intended to be. In those

circumstances I am unable to see how it is a document to

which legal professional privilege attaches.

Before it emerges in its final form, successive drafts of a

claim book may be privileged but this is not because of any

privilege attaching to the final product. Draft pleadings

in an action may be privileged, but I have never heard it

suggested that a statement of claim or a defence or a reply

is privileged so that the privilege is waived when it is

filed or delivered to the other side. The reason why the

draft may be privileged before the document is completed was

early explained in Walsham v Stainton..., upon the basis

that, although after a pleading has been filed it becomes

publici juris, the drafts 'might disclose the precise

character of confidential communications with the solicitor,

by showing the alterations made from time to time'. In the

same way a letter to the other side in litigation which is

drafted in a solicitor's office may be privileged before it

is sent because it may reveal confidential communications

between the solicitor and his client. Once it is sent,

however, it ceases to be confidential and there is not

privilege in it, not because privilege in the document is

waived, but because no privilege attaches to it. (Emphasis

added)

When the claim book in this case reached final form

or, at all events, when it was put to the use for which it

was intended, it was not a confidential communication and

not a privileged document. Legal professional privilege

exists to secure confidentiality in communications between a

legal adviser and his client but it can have no application

in relation to a document the purpose of which is to

communicate information to others. Of course, what is

contained in such a document may reveal some confidential

communication between a legal adviser and his client, but if

it does do so and so waives privilege, the waiver is of the

privilege in the anterior communication and not in the

document itself."

19. Dawson J concluded with these observations (at 499):

"The fact that the claim book may have drawn upon

information contained in communications which were

themselves privileged, being made solely in contemplation of

litigation, involves no violation of the confidence in which

those communications were made. That is obvious. There

would be little point in communications made in

contemplation of litigation if they could not be used for

the purposes of the litigation. What is important is that

the 1982 Claim Book, while its source may be information

imparted upon a privileged occasion, does not disclose the

content of any privileged communication and so does not

abandon the element of confidentiality which the privilege

protects. There was, therefore, no waiver of privilege."

20. In Southern Equities Corporation Ltd v Western Australian Government Holdings Ltd, unreported, 16 June 1993 (1993 SAWAJB 70), the Full Court of the Supreme Court of Western Australia upheld a claim of legal professional privilege in respect of a witness's affidavit obtained by solicitors with an intention to use it at trial if the gravely ill witness should die beforehand. The Full Court disagreed with reasoning at first instance to the effect that, as the affidavit was created in order to be filed, it could not be equated to a proof of evidence and attracted no privilege because it lacked confidentiality. The High Court, having granted leave, has reserved its decision on an appeal from the Full Court's decision.

21. In Sicpa North America Inc. v Donaldson Enterprises Inc., NJ Super L, 430 A 2d 262 (1981), it was held that a limited disclosure of information, which was supplied to an adversary for settlement purposes only, can result in a waiver of the protection afforded to such information by the "attorney - client" privilege. Martin JSC said (at 265):

"The result is the same where the client discloses, or

consents to counsel's disclosure, of some of the privileged

information where the purpose of such disclosure is to

advance the client's own self-serving objectives. It makes

no difference in such a situation that only a part of the

privileged information is disclosed, as a partial waiver of

a privileged communication effectively waives the entirety

thereof......A party cannot choose to disclose only so much

of an allegedly privileged matter as is helpful to his case;

once a party begins to disclose a confidential communication

for a purpose outside the scope of the privilege, the

privilege is lost......In Burlington Industries, a patent

infringement action where the defendant moved to compel

discovery, the court held that a disclosure of confidential

information during settlement negotiations is a waiver as to

the limited information disclosed. This court finds that

Burlington should control in the present situation,

notwithstanding plaintiff's attempt to limit the scope of

the disclosure by contract."

22. The above authorities support the following propositions for present purposes:

(1) A draft of a pleading, as distinct from the pleading itself,

will, ordinarily, be protected by legal professional privilege as

containing confidential information not intended to be disclosed to

an adversary.

(2) This privilege may be waived, wholly or in part, where the party

entitled to the privilege intends to waive it, wholly or in part.

(3) Where the privilege is intended to be waived in part only, the

law may nonetheless impute an intention to waive the privilege as a

whole, whatever the actual intention. The imputation will be made,

as a matter of implied waiver, where the "fairness" of the

situation, in the sense described by Wigmore, requires.

23. As has been noted, none of the deponents was cross-examined. However, for present purposes, from the evidence in their affidavits, the following findings of primary fact should be made with respect to what occurred at the meeting held on 25 June 1991:

(1) The representatives of Argyle produced a document which they

described as a "draft" statement of claim or writ.

(2) The document was placed upon the table.

(3) The representatives of Argyle indicated that the "draft"

pleading was ready to be filed, and would be filed, on the following

day, if necessary.

24. In the circumstances, the following inferences should, I think, be drawn from these primary facts:

(4) Although described as a "draft", the document was to be

treated as a pleading in its final form which was ready to be filed

and served on the adversary.

(5) That Argyle consented, indeed invited, the representatives of

Darling Harbourside to read the document at the meeting.

(6) This was done by Argyle in order to secure a perceived

advantage in the bargaining process.

25. In my opinion, an order for the disclosure of the document now in dispute should be made, on two grounds.

26. In the first place, it is well-established that the onus is on Argyle: it is for the party refusing disclosure to establish his right to refuse (see, e.g. Waugh v British Railways Board [1979] UKHL 2; (1980) AC 521 at 541.) As Dawson J, in the passage cited from Maurice's Case (at 496) has pointed out, a statement of claim is not privileged, even if drafts of it, before it reaches its final form, may be. But it is not clear on the evidence whether the present document was, or was not, in its final form: although it was described as a "draft", it was also said to be ready to be filed. The present case is thus on all fours with Dubai Bank v Galadari and Ors (1990) 1 Ch 98 where it was held that the evidence did not clearly establish the true character of the document in dispute as one that would attract privilege.

27. Alternatively, if I am wrong in the foregoing conclusion, there remains the question whether, as a matter of fairness, a waiver of the privilege should be imputed. In my view, for the reasons given in Sicpa, it should. In the present case, Argyle invited its adversary to take note of, and by implication, if necessary to read the document, as part of Argyle's bargaining strategy. In those circumstances, in return for the perceived bargaining advantage to Argyle of making that offer, it is only fair, in my view, that Argyle should not now be permitted to withdraw its earlier invitation. In my opinion, the privilege should be treated as waived, even if there was no actual intent to waive. Yet, as has been seen, the evidence available is consistent with the existence of such an intention.

28. For all these reasons, the claim for privilege should be rejected.

29. Although the draft writ was produced during settlement discussions, Argyle has confined its claim to one of legal professional privilege and has not suggested that "without prejudice" privilege is available, possibly because of the limits on the ambit of such a claim concluded in the Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1955) 99 CLR 285 at 291-3; (see the discussion in McNicol, The Law of Privilege, at 475-8.) It is not necessary for me to pursue the question.

1. Direct that the applicant produce to the respondent the

"draft writ" referred to in the reasons for judgment for inspection

and for copying.

2. Order that the applicant pay the respondent's costs of

this application.