Banksia Mortgages Limited v Croker and Ors

[14]

The legal professional privilege claim 2 There were two emails for which legal professional privilege was claimed which passed between the plaintiff's Risk Manager, Mr Curnow and its in-house solicitor, Mr Fitzgerald. The two emails were inadvertently produced to the defendants, in answer to a notice to produce. At issue was whether or not the plaintiff had met the onus which fell upon it to establish the privilege claimed. 3 Section 118 of the Evidence Act 1995 provides: " 118 Legal advice Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of: (a) a confidential communication made between the client and a lawyer, or (b) a confidential communication made between 2 or more lawyers acting for the client, or (c) the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person, for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client." 4 It is apparent that Mr Fitzpatrick is a lawyer who is employed to perform both legal and commercial functions. It was not in issue that both at common law and under the Evidence Act such an employee may give legal advice which is privileged. The definition of 'client' in s 117(1)(a) of the Evidence Act includes a lawyer's employer. There is no question that the advice provided by Mr Fitzpatrick to Mr Curnow by email was a 'confidential communication' as defined in s 117(1). Mr Fitzpatrick undoubtedly had a duty not to disclose the advice he had so given. The question to be determined is thus whether the dominant purpose of providing the confidential communication was in order to provide legal advice. 5 Both Mr Curnow and Mr Fitzgerald gave affidavit evidence and were cross examined. Mr Fitzpatrick is a solicitor who operates a sole practice, as well as being employed by the plaintiff as its corporate solicitor. His own practice accounts for around 20% of his professional time. He conducts that practice from his office at the plaintiff's premises in Melbourne and maintains his practicing certificate and has his own indemnity insurance. He has no qualifications as a financial advisor and provides no financial advice to the plaintiff. 6 Mr Fitzpatrick reports to the plaintiff's managing director. At the time the plaintiff operated with a team of about 5 or 6, at the management level. Mr Fitzpatrick is not a member of the plaintiff's credit or lending committees. Mr Curnow is a member of that committee. Mr Fitzpatrick is also the plaintiff's Compliance manager and is responsible for the plaintiff's risk management programme. He denied systematically providing commercial advice to the plaintiff. He regarded compliance as a part of the overall risk managerial function. His role was to chair the overall risk programme and his participation in committees was to give consideration to legal issues, not commercial matters. The plaintiff holds three financial services licences. The Company Secretary provides quarterly returns to ASIC on financial matters. Mr Fitzpatrick has dealings with ASIC in relation to the two prospectuses which the plaintiff issues each year. He and the company secretary negotiate commercial insurance policies for the plaintiff. On Mr Fitzpatrick's evidence, commercial aspects of the business are the responsibility of other officers. He is not consulted about them. 7 In cross examination, Mr Fitzpatrick also explained that he was the author of documents in use in the plaintiff's business, such as the prospectuses. He did not prepare transactional documents, which were either prepared by others in house, or by external legal advisers. 8 Mr Fitzpatrick's employment agreement was in evidence. It appeared to be a standard form document for 'full time managers', which had annexed to it a position description, with the plaintiff having the discretion to add to or vary the duties there specified. The duties specified were:

[30]

9 There are no formal provisions in the contract calculated to protect Mr Fitzpatrick's independence as a legal adviser. It was Mr Fitzpatrick's evidence that he maintains files for his private practice, as well as for his work for the plaintiff. Day to day he provides legal advice to the plaintiff's officers and staff, for the purpose of conducting the plaintiff's banking business. There are no written protocols governing how such advice may be sought from Mr Fitzpatrick. 10 Mr Curnow's evidence was that he had dealt with the defendant's application for finance in 2005. He sought legal advice by email from Mr Fitzgerald and had received an email reply. It was these emails which were here in issue. Mr Fitzgerald was not provided with a copy of the defendants' loan application and was not involved in the decision to lend, which was not made at that time. Mr Fitzpatrick was provided with the information provided in the email and was referred to the website of the firm Skyder. He was asked to give certain legal advice. He was not asked whether the loan should be approved. His reply was passed onto the credit analyst to deal with. The final arbiter of approval of the loan was the credit committee. 11 Mr Fitzpatrick answered the question asked of him by Mr Curnow and added some additional comments in his email response. Mr Curnow did not pursue the other matters dealt with by Mr Fitzpatrick. Mr Fitzpatrick explained in cross examination that these comments were not legal advice. He suggested in his email that he and Mr Curnow should speak. They did not do so. Mr Curnow explained that he had not sought commercial advice from Mr Fitzpatrick and did not perceive that anything which Mr Fitzpatrick might have had to add, was relevant to the decision as to whether to lend. He had not sought further advice from Mr Fitzpatrick. He assumed that anything which he had to add had nothing to do with the contents of the defendants' application. 12 It was the evidence of Mr Curnow that he was seeking legal advice and that of Mr Fitzpatrick that he understood that was what he had been asked to provide. That evidence was not challenged. It was the defendants' case that their purpose was not determinative. Given Mr Fitzpatrick's role and the nature of his response to Mr Curnow's request, it was apparent that there was no necessary independence between Mr Fitzpatrick and the plaintiff, with the result that the advice which he gave, even when sought by Mr Curnow as legal advice, was not privileged. 13 The starting point is a consideration of the purpose for which the advice given was sought. Like the common law, section 118 is concerned with 'the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client'. That is an objective test, but the subjective intentions of those responsible for bringing the emails in question into existence is entitled to be given weight and may be decisive (see Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67; (1999) 201 CLR 49 at [172] per Callinan J). The evidence that it was Mr Curnow's purpose to obtain legal advice and Mr Fitzpatrick's purpose to provide it must thus be given proper consideration. 14 Conversely, it may also not be overlooked that not all of Mr Fitzpatrick's duties were those of a lawyer giving legal advice. He had a broader role. That is not an unusual position for in-house solicitors such as Mr Fitzpatrick. As discussed in Sydney Airports Corp Ltd v Singapore Airlines Ltd [2005] NSWCA 47 at [23]: "An in-house solicitor is, by reason of his or her position, more likely to act for purposes unrelated to legal proceedings than an external solicitor, whom in the normal course, has no relevant function other than that involving legal proceedings and/or legal advice. In determining whether or not a document was brought into existence for a purpose which was both privileged and dominant, the status of the legal practitioner was not irrelevant."

[42]

Q. You do not recall? A. No. 17 On this evidence it is apparent that Mr Fitzpatrick provided the legal advice which had been sought of him, but also volunteered two other statements. The first he viewed as commercial advice and the second a comment, which did not amount to advice and which was not taken up by Mr Curnow. In relation to the final comment, Mr Fitzpatrick explained in his affidavit what he was alluding to. That evidence was not challenged and confirms that the last comment which Mr Fitzpatrick made in the email was not legal advice. Mr Curnow's evidence was that he had not sought either the commercial advice, or the comment which Mr Fitzpatrick made and took no account of them. He did not pursue Mr Fitzpatrick's invitation to have a further discussion, not regarding anything more which he had to say, as relevant to the commercial decision which had to be made by the credit committee as to whether or not the loan would be made. 18 It follows logically from this evidence that the two final sentences of Mr Fitzpatrick's email were not privileged. They were not provided as legal advice. No other basis for privilege was claimed. There remains to be considered whether the balance of the email, in which Mr Fitzpatrick purported to give the legal advice sought of him, was privileged. 19 That turns on whether the privilege otherwise attaching to legal advice was not available in relation to advice given by Mr Fitzpatrick, because he lacked necessary independence, as the defendants argued. The notion of independence was developed at common law. I am not satisfied that any necessary independence was lacking in Mr Fitzpatrick's case. 20 The parties referred to various authorities to support their arguments. Branson J in Rich v Harrington [2007] FCA 1987; (2007) 245 ALR 106, had to consider the question of privilege in a context where proceedings had been brought against the members of a partnership, where the legal adviser who had provided the advice in respect of which privilege was claimed was one of the partners. Her Honour had regard to the views expressed by Tamberlin J in Seven Network Limited v News Ltd [2005] FCA 142:

[55]

24 In this case, I am satisfied that the evidence shows that Mr Fitzpatrick had necessary independence. While Mr Fitzgerald had other duties, which are properly to be regarded as commercial, amongst his duties Mr Fitzpatrick had the function of providing legal advice when sought of him by employees of the plaintiff such as Mr Curnow. This function was undoubtedly an important one for the plaintiff, given the business which it conducted. In the course of that business, Mr Curnow sought legal advice from Mr Fitzpatrick and received it. The subject of the advice sought was undoubtedly such that had the advice been provided by an external lawyer, there could be no question that it attracted privilege at common law and under s 118 of the Evidence Act. The evidence does not permit of the conclusion that the nature of Mr Fitzpatrick's employment relationship with the plaintiff was such that when he gave legal advice he was at risk of being compromised. Nothing in the evidence would lead to a general conclusion that his personal loyalties, duties and interests would influence the professional legal advice which he gave in accordance with his employment contract. Nor was anything of the kind suggested to him in cross examination in relation to the particular advice sought of him in this case. 25 To my mind, on the evidence there was nothing in Mr Fitzpatrick's other duties, interests or loyalties, which could conceivably be thought to have influenced the professional legal advice which he was asked to give Mr Curnow on this occasion and which he understood he was giving. Significant weight must be given to these subjective intentions, the Evidence Act contemplating as it does, that an employee such as Mr Fitzpatrick may give legal advice which is privileged. 26 It must be concluded that Mr Fitzpatrick had the necessary independence for privilege to attach to the legal advice which he gave. It follows that the privilege claimed has been established, other than in relation to the last two sentences of Mr Fitzpatrick's email, where he expressed an opinion and made a comment which went beyond the legal advice which he had been asked to provide. No privilege attaches to those sentences, but I am satisfied that they were not such as to alter the character of the legal advice which had been sought of him and which he earlier provided.

[58]

" 122 Loss of client legal privilege: consent and related matters (1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120. (3) Without limiting subsection (2), a client or party is taken to have so acted if: (a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person, or (b) the substance of the evidence has been disclosed with the express or implied consent of the client or party. (4) The reference in subsection (3) (a) to a knowing and voluntary disclosure does not include a reference to a disclosure by a person who was, at the time of the disclosure, an employee or agent of the client or party, or of a lawyer of the client or party, unless the employee or agent was authorised by the client, party or lawyer to make the disclosure. (5) A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because: (a) the substance of the evidence has been disclosed: (i) in the course of making a confidential communication or preparing a confidential document, or (ii) as a result of duress or deception, or (iii) under compulsion of law, or (iv) if the client or party is a body established by, or a person holding an office under, an Australian law - to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or part of the law, under which the body is established or the office is held, or (b) of a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person, or (c) of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court. (6) This Division does not prevent the adducing of evidence of a document that a witness has used to try to revive the witness's memory about a fact or opinion or has used as mentioned in section 32 (Attempts to revive memory in court) or 33 (Evidence given by police officers)." 29 The waiver is claimed to have flown from the affidavit sworn by Mr Mitry on 20 October 2009, which the defendants relied on when resisting an application for summary judgment at an earlier point in the proceedings. The defendants succeeded in the case which they then advanced. Mr Mitry deposed in his affidavit that:

[64]

33 His Honour went on: "13 Here, the defendants rely on "disclosure" waiver. They say that ASIC has disclosed part of the communication that occurred at the meeting on 21 November 2001, thereby waiving part of a protected communication, in circumstances where fairness dictates that the waiver of that part should result in waiver of the rest of the communication. They rely on Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 at 488, where Mason and Brennan JJ said: "The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication. Professor Wigmore explains: '[W]hen his conduct touches upon a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder' (Wigmore, Evidence in Trials at Common Law (1961), vol 8, para 2327, p 636). In order to ensure that the opposing litigant is not misled by an inaccurate perception of the disclosed communication, fairness will usually require that waiver as to one part of a protected communication should result in waiver as to the rest of the communication on that subject-matter." 14 I accept the defendants' submission that the principle about waiver through partial disclosure of a privileged communication applies not only where the disclosure takes place during the evidence at the final hearing, but also where it occurs in response to a notice to produce. Section 122(1) talks about evidence "given with the consent of the client", and does not in terms preclude the consent (that is, the waiver) from being given at an earlier time. A generally different view was taken, in England, in General Accident Fire and Life Assurance Corporation Ltd v Tanter [1984] 1 WLR 100, but (although it was followed by the Supreme Court of the Northern Territory in Prus Grybowski v Everingham (1986) 44 NTR 7) Tanter has been criticised, distinguished or not followed in other cases: see esp Sevic v Roarty (1998) 44 NSWLR 287 at 297-8 per Sheller JA, cf at 303ff per Powell JA; Re Konigsberg [1989] 1 WLR 1257 at 1264-5."

[65]

34 In this case the disclosure occurred at an earlier point in the proceedings. Not only did Mr Mitry then disclose by his affidavit that he had received instructions from Mrs Croker and that they were contained in the emails which he identified, he also disclosed the contents of the emails, or at least parts of them. It was not contended that the emails dealt with anything other than factual matters, but clearly, given the resistance to their production they must contain other matters not disclosed in Mr Mitry's affidavit. This disclosure of factual matters about which instructions had been received is not surprising. The affidavit was used in order that the plaintiff's claim for summary judgment could be defended. That exercise, undoubtedly, required evidence to be put on. 35 The necessary consequence of the disclosure of part of the communications received from Mrs Croker by email, is that the maintenance of a claim for privilege in the emails at this stage of the proceedings, is inconsistent with that earlier disclosure. The result of the course taken is that as well as what is contained in the affidavit being disclosed, the privilege which attached to Mrs Croker's email communications with her solicitor as to those matters was also waived by the filing and service of Mr Mitry's affidavit. While the emails were confidential communications which were privileged and to which s 119 of the Evidence Act attached, once their contents were disclosed, or partially disclosed as they were, that privilege was lost. 36 It was argued for the defendants that it was relevant that the affidavit was not to be further relied on in the proceedings. That is not determinative of the question which lies between the parties. 37 At common law, the question of waiver of legal professional privilege is concerned with notions of fairness between the conduct of the client and the maintenance of the privilege (see Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1). Where there is conduct which is inconsistent with the maintenance of the privilege, it does not matter that the privilege holder did not subjectively intend to lose the benefit of the privilege (see Federal Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 at [p 343]). 38 Here there was voluntary disclosure of parts of Mrs Croker's communications, in the course of the proceedings. It was not claimed that there was any mistaken belief that the there would be no loss of privilege in the emails by which those communications were conveyed. There was no suggestion that any mistake had been made in the disclosure of the communications, or that the disclosure had been inadvertent. Even in such a case, in Divall v Mifsud [2005] NSWCA 447, the Court of Appeal took the view that a privileged statement revealed in an answer given by a witness in cross examination, when counsel had failed to object, meant that there had been knowing and voluntary disclosure and that privilege was thereby lost. Here, there was no such failure. There was here not even a suggestion that this was a situation such as that considered by Austin J in Sovereign v Bevillesta [2000] NSWSC 521 at [23] of a:

Banksia Mortgages Limited v Croker and Ors - [2010] NSWSC 535 - NSWSC 2010 case summary — Zoe

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Judgment (71 paragraphs)

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