BRADLEY PHILLIPS P/L AND ANOR v BURN BRITE LIGHTS

"16. The plaintiffs alleged the motors were defective and the defendant settled the plaintiff's claim without admission of liability on the basis of the motors being defective.

17. In or about March 2001 the defendant and plaintiffs settled the plaintiffs' claim and the defendant's counterclaim on terms that involved the defendant paying the plaintiffs the sum of $600,000 in full and final settlement of the plaintiffs' claim and agreeing to release the plaintiffs from liability arising under the defendant's counterclaim ('the Settlement').

The terms of settlement are set out in a Deed of Release (undated) between the defendant and the plaintiffs and the plaintiffs' director, Craig Saunderson. A copy of the Deed of Release may be inspected by appointment at the offices of the defendant's solicitors.

18. By entering the Settlement the defendant reasonably mitigated its liability for the plaintiff's claim."

In the third party statement of claim it is alleged that the plaintiffs claimed from the defendant damages for breach of contract, negligence and breach of the Trade Practices Act arising out of an agreement to supply motors. In essence, the subject matter of the claim and the third party proceedings is a dispute relating to the adequacy or appropriateness of a certain type of bearing used in what has been described as a light heating exhaust fan unit. A settlement was reached between the plaintiffs and the defendant whereby the defendant paid to the plaintiffs the sum of $600,000.00 in full settlement of the claim and counterclaim between the plaintiffs and the defendant. The defendant seeks indemnity or, alternatively, contribution in relation to the settlement sum of $600,000.00.

I shall deal first with that part of the application which relates to the original list of documents. That list of documents was filed prior to the introduction into the rules of SCR 58A. This means that this aspect of the application is to be dealt with by reference to SCR 58.

In Kadlunga it was held that the description of documents in respect of which privilege was claimed should be sufficient to disclose whether or not the documents are documents capable of coming within that head of privilege. The detail of description stops short of a disclosure of the content of the document.

That decision was decided by reference to Order 31, Rule 14 of the 1947 Rules of Court. However, the decision has been applied on numerous occasions to the provisions of the 1987 Rules right up to the introduction of the amendment by way of SCR 58A: cf Southern Equities Corporation Ltd (In Liq) v Arthur Andersen and Co (No 3), unreported decision of Debelle J, 1 May 1998, Judgment No S6657.

Mr Karas, counsel for the third party, contended that the description in the plaintiffs' original list of documents (Document 7 on the Court file) is not sufficient to enable the third party to assess whether any particular document may or may not be properly the subject of a claim for legal professional privilege. The documents in respect of which privilege is claimed are set out and described in Part II of the original list of documents as follows:

"1. Communications and documents passing between the Defendant and its solicitors with reference to the matters now in question in these proceedings and prepared for the sole purpose of the giving, obtaining or recording of legal advice or alternatively for the sole purpose of litigation either instituted or reasonably anticipated and documents and correspondence prepared by the servants and agents of the Defendant for the sole use of its solicitors and counsel to enable them to give, obtain or record legal advice to the Defendant or alternatively to conduct this action, including Memoranda drawn by the solicitors in each case being confidential communications passing between solicitor and client for the purpose of obtaining legal advice or directly incidental thereto and in respect of which legal professional privilege is claimed.

2. Communications passing between the Defendant's Solicitors and Counsel, notes and memoranda prepared for Counsel, statements and proofs of witnesses and legal opinions.

3. Communications and documents brought into existence, prepared or obtained for the sole purpose of:

3.1 the matters now in question in these proceedings;

3.2 the Defendant seeking or obtaining legal advice or assistance."

In my view, the above description of documents in respect of which privilege is claimed clearly does not come within the principles as set out in Kadlunga. In my view, the documents ought to be described by reference to their date, if any, the author of the document, the addressee of the document, if that is applicable, and a brief description of the nature of the document should be provided. Of course, the defendant should not be required to include within the description of the documents material which would disclose the content of the document. But subject only to that limitation, the defendant should provide a supplementary list of documents containing the description just referred to in respect of those documents which are discoverable on the issues raised in paragraphs 16, 17 and 18 of the further amended third party statement of claim.

I turn to the balance of the application. It is not disputed that SCR 58A applies to the third and fourth supplementary lists of documents. The document described as the third supplementary list of documents does not appear to have been filed at Court but a copy of that document has been exhibited to the affidavit of Ivan Louis Waters sworn on 17 December 2001. That is an affidavit verifying discovery and it includes within the verified discovery the third supplementary list of documents. The fourth supplementary list of documents has been filed (Document 44). Both the third and fourth supplementary lists of documents contain a general description of the documents in respect of which privilege has been claimed which is essentially the same as the description included in the original list of documents. If the decision in Kadlunga applies to lists of documents which are governed by Rule 58A, it is clear that the defendant should be required to give a better description of those documents relating to the issues raised in paragraphs 16, 17 and 18 of the further amended third party statement of claim.

During the course of argument I was referred to a number of decisions, including the decision of Lander J in Citicorp Australia Ltd and Ors v Cirillo and Anor, an unreported decision delivered on 24 November 2000, Judgment No [2000] SASC 399. In that case, Lander J came to the conclusion that the decision in Kadlunga no longer applied because of the new provisions embodied in SCR 58A.

In the first part of his judgment Lander J dealt with the question of whether or not the decision in Kadlunga applied to the 1987 Supreme Court Rules after certain amendments had been made to the rule and after the decision of the High Court in Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 168 ALR 123, which altered the test to be applied in relation to claims for legal professional privilege. In general terms his Honour was of the view that the applicability of the reasoning in Kadlunga survived those events.

His Honour next considered whether or not the principles in Kadlunga were applicable to the discovery given pursuant to SCR 58A. The rule applies to lists of documents filed after 3 June 2000.

His Honour came to the view that the decision in Kadlunga had no application to lists of documents filed pursuant to the provisions of SCR 58A. He said (at paragraph 70):

"In my opinion, r 58A recognises that it is not only no longer necessary but no longer appropriate having regard to the use of the word 'only' in r 58A.06(1) to identify documents with the same particularity as was required by r 58 and the decision in Kadlunga Proprietors v Electricity Trust of South Australia.

In my opinion Kadlunga Proprietors v Electricity Trust of South Australia has no application to r 58A."

Mr Karas, counsel for the third party, contended that the decision was given per incuriam because Lander J did not refer to SCR 58A.05 which is as follows:

"58A.05 Any claim by a party for privilege for a document, and the grounds for it, are to be included in that party's list of documents."

He submitted that the effect of that rule was to require the party giving discovery of documents in respect of which privilege was claimed to itemise the documents individually.

It is appropriate at this stage to refer to paragraph 68 of the judgment of Lander J where he said:

"In particular r 58A does not include within it r 58.01 which previously provided:

'If a party claims that any document is privileged from discovery he shall specify the document and the ground upon [which] privilege is claimed.' "

I take Mr Karas to have submitted that SCR 58A.05 is the equivalent of SCR 58.01 and that, accordingly, Lander J proceeded under a mistaken belief as to the effect of the relevant Rules. I do not consider that it is open to me to refuse to follow the decision of Lander J even if his decision was made per incuriam: Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166.

Mr Karas also referred to an unreported decision of Debelle J in Southern Equities v Arthur Andersen delivered on 11 December 2000. In that case Debelle J had to consider a complaint by one party to the proceeding relating to the description of documents in respect of which privilege was claimed. His Honour said (at 1):

"In my view, Rule 58A.06 has no application in the case of privileged documents. Clearly, a privileged document or documents for which legal professional privilege has been claimed fall into a special category. They do so because a party seeks to rely on the privilege for the purpose of preventing the other party from inspecting the document. I do not think that the introduction of Rule 58A and, in particular, the enactment of Rule 58A.05 in any way alters or qualifies the decision in Kadlunga Proprietors v Electricity Trust of South Australia (1985) 39 SASR 410 in the case of privileged documents. In the case of privileged documents only, it is necessary, notwithstanding the enactment of Rule 58A, to provide a detailed description of each document contained in a file. In reaching that conclusion, I can do no better than rely on the reasoning of the Full Court in Kadlunga Proprietors. What underlies that reasoning is the fact that errors can be made, either through negligence or inadvertence, and the need to describe each document reduces the incidence of error. Furthermore, the requirement to examine each document for the purpose of description will focus the solicitor's mind closely upon the issue and will assist in determining whether in fact the claim for privilege should be made or maintained."

There is clearly a conflict between the principles stated in the authorities just referred to. I have given consideration as to whether or not the question, being of some importance, should be referred to the Full Court. I am reluctant to require the parties to shoulder the burden of costs which would necessarily result upon such a referral, even though Mr Karas encouraged me to do so as a last resort.

Having given the matter some consideration, I do not think it is necessary to refer the matter to the Full Court or to state a case to the Full Court. I think that the application can be satisfactorily dealt with by having resort to the alternative relied upon by the third party, namely the provisions of SCR 58A.07.

"58A.07 Where it is in the interests of justice the Court may order a party to file a supplementary list of documents identifying specifically each document contained within a general description of documents given in its previous list."

I think the rule applies to the circumstances of the present application. There has been a general description of privileged documents in the third and fourth supplementary lists. The question therefore to be decided is whether or not it is in the interests of justice to direct the defendant to file a further list specifically identifying each document in respect of which privilege is claimed confined to the issues raised in paragraphs 16, 17 and 18 of the further amended third party statement of claim.

Having considered counsels' submissions, I have come to the conclusion that the documents the subject of the application should be better identified in accordance with the terms of SCR 58A.07. In particular, I think it important that the quantum of the plaintiffs' claim is determined by reference to the settlement sum agreed to by the plaintiffs and the defendant. The defendant must prove the reasonableness of the settlement: Saccardo Constructions Pty Ltd v Gammon [1991] SASC 3102; (1991) 56 SASR 552. It is almost inevitable that the defendant will have to adduce evidence that would otherwise be the subject of a claim for legal professional privilege. The likelihood is that that evidence will include documentary evidence in respect of which privilege has been claimed and to date maintained. In those circumstances I think it is appropriate that the documents in respect of which privilege has been claimed relating to the matters pleaded in paragraphs 16, 17 and 18 of the further amended third party statement of claim be separately identified and described irrespective of whether or not they are subsequently to be tendered during the course of the trial. This then gives the third party the opportunity to make its own assessment as to whether or not privilege has been properly claimed.

In arriving at these conclusions I emphasise that the third party has not sought on this application to contend that privilege has been inappropriately claimed in respect of any of the documents the subject of the application. The third party merely wishes to have a sufficient description to enable it to make its own assessment as to whether or not privilege has properly been claimed. The third party did not seek to argue that because of the nature of the pleading, at least some of the documents in respect of which privilege has been claimed has been waived. I think this is the correct approach. The generality of the description of the documents in the two lists of documents the subject of the application precludes the third party from advancing such an argument because, unless the documents are itemised, the third party can only guess at whether or not privilege has been waived in respect of some of those documents.

In my view, the description of the documents, once they are separately identified, should be sufficient to enable the third party to make an assessment as to whether or not privilege has been properly claimed but the description must of necessity stop short of disclosing the content of the document.

For the above reasons I propose to make the following order:

That within 21 days from the date of this order the defendant file and serve a supplementary list of documents:

(a) which identifies individually the documents (if any) referred to in the defendant's original list of documents over which the defendant claims legal professional privilege limited to the documents relevant to the issues raised in paragraphs 16, 17 and 18 of the further amended third party statement of claim by reference to the date, author, addressee (where applicable) and a brief description of the nature of the document without disclosing its contents; and

(b) which identifies and describes in accordance with these reasons the documents referred to in the defendant's third and fourth supplementary list of documents over which the defendant claims legal professional privilege limited to documents relevant to the issues raised in paragraphs 16, 17 and 18 of the further amended third party statement of claim.