Edwards & Ors v Vic Land Rehabilitation Pty Ltd & Ors [2012] VSC 188

For the first, second, third and fourth Plaintiffs on the injunction application

For the second and third Defendants on the injunction application

For the fifth, sixth, seventh and eighth Defendants (by cross claim)

1 Until their resignations in February 2012, the first plaintiff Corey Edwards and the second plaintiff Jay Sbisa were employees in a business carried on by the first defendant Vic Land Rehabilitation Pty Ltd ("VLR") and more recently by the fourth defendant VLR Holdings Pty Ltd ("VLRH") either directly or through subsidiaries. The business involved procuring the right to place fill upon land owned by others and placing fill for a fee on that land.

2 VLR is the trustee of the VLR Unit Trust and VLRH is the trustee of the VLR Holdings Unit Trust.[1] The defendants (VLR parties) submit that the provisions of the VLR and VLRH unit trust deeds and unit holder agreements bind the parties and regulate their conduct. In particular, they submit that the unit holder agreements prohibit Edwards and Sbisa from competing with the business of VLR and VLRH including the procuring of clean fill sites for others whilst they are unit holders and for a two year period after they cease being unit holders. Edwards and Sbisa are currently unit holders and directors of VLR and VLRH.

3 Edwards and Sbisa submit that the unit holder agreements are unenforceable. They assert that the agreements were procured by misrepresentations and were signed in circumstances where the documents were not explained to them and where they did not have the opportunity to take advice.[2]

4 Mark Richard Liemant, Gary Robert Liemant and companies associated with them, Earthtrak Pty Ltd and Earthtrak Australia Pty Ltd (Liemant parties), are defendants to a cross-claim brought by the VLR parties. Damages are sought against them for knowingly inducing Edwards and Sbisa and their respective companies (Edwards and Sbisa parties) to breach their obligations to VLR and VLRH.[3]

5 Mr Schlicht of counsel and Mr Nixon solicitor act for the Edwards and Sbisa parties.

6 The VLR parties seek orders restraining Mr Schlicht and Mr Nixon from continuing to act for the Edwards and Sbisa parties in this proceeding. They also raise an issue concerning discovery.

7 The restraint application has as its foundation the contents of affidavits recently sworn and filed in the proceeding by Gary and Mark Liemant.[4]

8 In his affidavit, Gary Liemant deposes that in the first or second week of December 2011 he met Edwards and Sbisa to see if he could secure their services for Lantrak and in December 2011 started talking more specifically with them about the basis of an agreement between them; that he asked Edwards and Sbisa for details to ascertain their commitment to EPH Pty Ltd (the third defendant), especially with regard to how much notice they would need to give that they were leaving. After being told that they had signed documents but didn't know exactly what was in them, Gary Liemant suggested to Edwards and Sbisa that they should ask EPH Pty Ltd for copies of relevant documents so that they would all know what they were dealing with; that when the documents had been given to them they had been informed that there was a restraint of trade clause.

9 Gary Liemant deposes that he told Edwards and Sbisa that whilst Lantrak was ready and willing to do business with them, they should first seek legal advice as to the effect of the documents that they had signed; that neither he, his brother Mark Liemant or any entity associated with them have entered into any written contracts with Edwards and Sbisa, though in around late January 2012 and subject to resolving the issue of their freedom to legally work with Lantrak, they reached an "in-principle agreement". The details of this "agreement" are not presently important save that Earthtrak Australia Pty Ltd (the eighth defendant by cross-claim) was to be the corporate vehicle used to manage clean fill sites in and around metropolitan Melbourne under the Lantrak banner. On 23 January 2012, Earthtrak commenced making fortnightly payments to an entity associated with Mr Edwards. On

1 February 2012, Earthtrak commenced making payments to an entity associated with Mr Sbisa.

10 In late January or early February 2012, Edwards and Sbisa advised Gary Liemant that their lawyer had informed them that there was a restraint of trade clause but it was not enforceable. To ensure this was correct, Gary Liemant asked to speak to their lawyer directly.

11 To that end, in about late February 2012 Gary Liemant met with Edwards' and Sbisa's solicitor, Simon Nixon, who confirmed this advice as "his preliminary view and said that he had instructed a barrister to seek more detailed advice".

12 Subsequently, Gary Liemant was informed that Edwards and Sbisa were attending a meeting with Mr Nixon and a barrister. Gary Liemant asked whether he could attend the meeting and they agreed. On 2 March 2012, Gary Liemant attended a meeting at the chambers of Mr Schlicht of counsel with Mr Schlicht, Mr Edwards, Mr Sbisa and Mr Nixon. During this meeting Mr Schlicht provided legal advice on the enforceability of the restraint clause.

13 On 5 March 2012, Gary and Mark Liemant attended a meeting at the offices of Mr Nixon with Mr Nixon, Mr Edwards and Mr Sbisa. During this meeting, Mr Nixon provided legal advice on the enforceability of the restraint clause. Both Gary and Mark Liemant depose that Mr Nixon has never been retained as their solicitor nor has he ever been retained to act for any entity associated with them. Mark Liemant corroborates the contents of his brother Gary Liemant's affidavit insofar as it refers to him.

(1) whether disclosure of advice given in conference with counsel and a solicitor in the Liemant affidavits constitutes a waiver of privilege; and

(2) if yes to (1), whether counsel and the solicitor for Edwards and Sbisa should be restrained from further acting in the proceeding.

Does disclosure in the Liemant affidavits of the advice given in conference constitute a waiver of privilege?

15 The applicants submit that the Liemant brothers knowingly and voluntarily disclosed the contents of the legal advice to another person in their affidavits. They submit that this conduct was inconsistent with the client or party objecting to the adducing of the evidence under the terms of s 122(2) and s 122(3) of the Evidence Act 2008 and that the conversations were not for the dominant purpose of providing legal advice to Edwards and Sbisa,[5] but were to advise the Liemants who are parties who voluntarily disclosed the contents of the legal advice. It was submitted that any privilege, whether it be characterised as client legal privilege of Edwards and Sbisa, or common interest privilege, has been waived under s 122(2) and s 122(3) of the Evidence Act; that if there was a common interest in the privilege between Edwards, Sbisa and the Liemants, there has been a waiver by the Liemants and that fairness dictates that the waiver by one is waiver by all.

16 In relation to waiver of common interest privilege, the applicants relied on the observations of Tamberlin J in Patrick v Capital Finance Corporation (Australasia) Pty Ltd.[6] In that case, his Honour said:

In the case of joint interest privilege, which arises from legal advice being given to joint clients, each must join in the waiver to waive privilege...[7]

This is to be contrasted with common interest privilege, where it will not always be necessary for all the interested parties to concur in the waiving of the privilege in order for the privilege to be waived. Fairness may require that waiver by one of the parties constitutes waiver by all. This is to be determined according to the circumstances in which the privileged communication took place and came to be exchanged and provided to others. [8]

17 The applicants also rely on Mann v Carnell which enunciates the common law principle that it is inconsistency between the conduct of the client and the maintenance of the confidentiality which effects waiver of the privilege.[9]

18 Section 122 of the Evidence Act relevantly provides:

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 voluntarily 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

(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.

19 The plaintiffs, who are respondents to the application, submit that the legal advice given in the conference with the legal advisors is subject to client legal privilege under either s 118 or s 119 of the Evidence Act. They submit that the communications between Edwards and Sbisa and their lawyers were confidential communications for the dominant purpose of providing Edwards and Sbisa with legal advice or professional legal services relating to an anticipated Australian legal proceeding in which they would be parties and that the privilege has not been waived.

20 Section 117(1) of the Evidence Act relevantly provides:

Confidential communication means a communication made in such circumstances that, when it was made -

(a) the person who made it; or

(b) the person to whom it was made -

was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law;

21 Section 118 of the Evidence Act relevantly provides:

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 the lawyer

...

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

22 Section 119 of the Act relevantly provides:

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 between the client and another person, or between a lawyer acting for the client and another person, that was made...

...

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

23 Section 120 of the Act provides:

Unrepresented parties

(1) Evidence is not to be adduced if, on objection by a party who is not represented in the proceeding by a lawyer, the court finds that adducing the evidence would result in disclosure of -

(a) a confidential communication between the party and another person; or

(b) the contents of a confidential document (whether delivered or not) that was prepared, either by or at the direction or request of, the party -

for the dominant purpose of preparing for or conducting the proceeding.

24 It is evident from the definition of "confidential communication" in s 117(2) of the Evidence Act that regard must be had to the circumstances that existed at the time the communications were made.[10] To satisfy the definition there must be "an express or implied obligation not to disclose" the contents of a communication. In State of New South Wales v Jackson, the New South Wales Court of Appeal held that this is not confined to obligations which arise in the course of a solicitor/client relationship but extends "to an unspoken obligation, and to an ethical, moral or social obligation".[11]

25 The respondents submit that even if the meetings were not subject to an express legal obligation of confidentiality, it would be sufficient if they were subject to an implied legal obligation of confidentiality or to an implied ethical, moral or social obligation of confidentiality.

26 In this case, the Liemant brothers were invited to attend conferences that Edwards and Sbisa had arranged with their legal advisors. The conferences took place in formal, private locations; in the case of the solicitor, at his office and in the case of counsel, at his chambers. The mere presence of Mark and Gary Liemant at the time the communications were made does not indicate that the communications were not intended to be confidential.[12] Though there is no evidence of an express agreement to maintain confidentiality of the communications which occurred during those meetings, I am satisfied that the communications were made in circumstances where there was an ethical, moral or social obligation to maintain the confidentiality of the communications.

27 In addition, the respondents submit that at the time of the meetings Edwards and Sbisa and the Liemant brothers arguably had a "common interest" in the sense that that term is used by Staughton LJ in Gotha City v Sotheby's.[13] In Gotha City v Sotheby's, Cobert Finance, which was selling a painting, disclosed its legal advice to Sotheby's who were to auction the painting. Staughton LJ said:

Whether or not there is sufficient community of interest to justify a common interest privilege is not a matter upon which I express any view. What I do say is that both Cobert Finance and Sotheby's were presumably anxious that there should be a sale of this picture with good title by Sotheby's at their auction house. They have a common interest, not in the technical sense but in plain ordinary language, to that extent. One can see that pursuit of that interest might well require that the legal advice received by Cobert Finance should remain confidential between them.

28 The common interest, it was submitted, was to resolve satisfactorily the issue of whether Edwards and Sbisa's were free to commence work legally with Lantrak. It was submitted that the pursuit of that common interest required that the legal advice received by Edwards and Sbisa should remain confidential between them. I accept that this is an additional reason to import an obligation of confidentiality.

29 In the present case, the Liemant brothers had not retained Mr Nixon as their solicitor or Mr Schlicht as their counsel. Accordingly, they are not clients for the purposes of s 122 of the Evidence Act and any client legal privilege in the confidential communications was not their privilege to waive. For present purposes, the clients are Mr Edwards and Mr Sbisa who are entitled to the benefit of confidentiality of the communications between their lawyers and themselves which they may relinquish should they wish to do so.[14]

30 For the purposes of construction, I note the several references to the "client or party" in s 122 of the Evidence Act. In particular, in s 122(2) (to a client or party acting inconsistently); in s 122(3) (to a client or party knowingly or voluntarily disclosing); in s 122(4) (to an employee or agent of a client or party); and in s 122(5) (to circumstances where a client or party is not taken to have acted inconsistently). These references relate back to the reference to "client or party concerned" in s 122(1) which must be considered in the context of the immediately preceding sections in Division 1 of Part 3.10 of the Act.

31 For completeness, I note that in s 117(1) there is an extended definition of client and an extended definition of party which each include an employee or agent of the client or party, a personal representative of the client or party if the client or party has died and a successor to the rights and obligations of the client or party in respect of the confidential communication. The extended definition of party does not apply in the present case.

32 In my opinion, in s 122(1), the "client" is a person who holds the privilege in confidential communications under s 118 and s 119 and the "party" is a person who is not represented in the proceeding by a lawyer but nevertheless holds the privilege in confidential communications under s 120.[15]

33 I am fortified in my view after considering the Explanatory Memorandum to the Evidence Bill 2008 which states:[16]

Clause 122 is designed to align the Bill more closely with the common law test for loss of privilege as set out in Mann v Carnell... Clause 122 is concerned with the behaviour of the holder of the privilege... The intent of this clause is that privilege should not extend beyond what is necessary, and that voluntary publication by the client should bring privilege to an end...

34 To accede to the applicants' submission that the Liemants are "parties" for the purposes of s 122 and that a party can waive the privilege held by the client without the client's authority would substantially re-write the common law position. In my view, it is not only contrary to the meaning of s 122 properly construed but would be contrary to the intent of the legislation which was to align s 122 more closely with the common law test for loss of privilege.

35 In the present case, the Liemant brothers are represented in the proceeding by a lawyer and they cannot therefore be characterised as a "party" for the purposes of s 122. Therefore, it is only necessary to determine whether the client has acted in a way that is inconsistent with the client objecting to the adducing of the evidence.

36 On the material before me it is evident that the disclosure by the Liemants was made without authority and in breach of the implied obligation of confidentiality. I am satisfied that the communications were made for the dominant purpose of the clients being provided with professional legal services relating to an anticipated proceeding, even though those services were provided in the context of the Liemants attending the meetings.[17] In my opinion, neither Edwards nor Sbisa have acted in a way that is inconsistent with them objecting to the adducing of evidence of what occurred during the conferences with their lawyers. The legal advice was disclosed to the Liemants in the course of a confidential communication during the conferences,[18] but Edwards and Sbisa are not to be taken to have acted in a manner inconsistent with them objecting to the adducing of the evidence of the legal advice merely because that occurred.[19] Edwards and Sbisa object to disclosure of the material. Neither of them has acted in a way that is inconsistent with them doing so.

37 In the circumstances, I find that the client legal privilege of Edwards and Sbisa in the advice given in conference has not been waived.

Should counsel and the solicitor for Edwards and Sbisa be restrained from further acting in the proceeding?

38 In light of my finding that privilege has not been waived, it is not necessary to answer this question. However, given the focus on this question in the applicants' argument I will deal with it briefly.

39 Based on the premise that privilege has been waived the applicants submit, among other things, that it would be open to the VLR parties or the Liemant parties to call either or both Mr Schlicht or Mr Nixon as witnesses to give evidence as to what was said at the meetings in Mr Nixon's office in late February 2012 and on 5 March 2012 and with Mr Schlicht on 2 March 2012 in Mr Schlicht's chambers.

40 In the circumstances, it was argued that Mr Schlicht cannot continue to act as counsel and that Mr Nixon cannot continue to act as solicitor in the proceeding; that their personal and professional conduct may be attacked if there is an exploration of what occurred during the meetings; that neither Mr Schlicht nor Mr Nixon would be able to objectively maintain their professional independence given their involvement in the meetings attended by the Liemant brothers. It was submitted that the public interest in a fair trial process requires that Mr Schlicht and Mr Nixon be restrained from acting and that no prejudice is shown as to why they should not be restrained.

41 It was not in dispute that the test to be applied in such circumstances is objective, namely whether a fair minded, reasonably informed member of the public would reasonably conclude that the proper administration of justice requires that counsel be restrained from acting;[20] that the principle applies with equal force to a solicitor;[21] that the administration of justice sometimes requires the balancing of competing interests;[22] and that due weight should be given to the public interest in litigants not being deprived of the lawyer of their choice without due cause.[23]

42 I would also add that the court's inherent jurisdiction to restrain legal practitioners from acting is to be regarded as exceptional and is to be exercised with caution.[24]

43 Had I found that privilege had been waived, I would nevertheless have declined to make an order restraining counsel and the solicitor from further acting in this proceeding. In this case:

• the Liemant parties do not intend to call Mr Schlicht and Mr Nixon to give evidence.

• the Edwards and Sbisa parties do not intend to call Mr Schlicht and Mr Nixon to give evidence.

• counsel for the Edwards and Sbisa parties does not intend to cross-examine any witness in respect of what occurred at the meetings.

• the Liemant parties indicate they would not be relying on the contents of the affidavits to the extent that they refer to the legal advice and do not oppose the relevant passages being struck from the affidavits on the basis that they are inadmissible.

• it is not clear that the communications in the solicitor's office and in counsel's chambers will ultimately be of any relevance to the issues to be determined at trial (I express no view on the issue of relevance). One of the ultimate questions for the Court to determine is whether the restraint of trade clause is enforceable. With due respect to counsel and the solicitors (on either side) their opinions are unlikely to bear on that question.

• it is not evident that any issues of credit or propriety of the conduct of counsel or the solicitor are likely to arise if they were called to give evidence.

• the trial is fixed for a hearing commencing in less than a week. Mr Schlicht and Mr Nixon have been retained in the matter from the outset, Mr Schlicht having drafted the originating motion.

44 In this case, whether the claim succeeds or fails will not lead to any adverse consequences to either the barrister or the solicitor. They have no financial interest in the outcome of the proceeding other than the payment of their professional fees. The propriety of their conduct is not in question. In my view, a fair minded and reasonably informed member of the public would reasonably conclude that the proper administration of justice would not require that counsel or the solicitor be restrained from acting.

45 In the circumstances, there is no compelling reason to require the plaintiffs to change the counsel and the solicitor of their choice at this late stage.

46 Accordingly, the application to restrain counsel and the solicitor from further acting is refused.

47 In relation to the application for discovery of taxation returns for the financial years ended 30 June 2009, 30 June 2010 and 30 June 2011 and bank statements, I am satisfied that the request is not merely a fishing expedition. In the points of claim dated 5 April 2012, the plaintiffs allege, in effect, maladministration of the VLR Unit Trust and VLR Holdings Trust and a failure and refusal to pay the plaintiffs wages, benefits, damages and entitlements or to account and pay the third and fourth plaintiffs their share of trust property and the profits of the business.[25]

48 The bank statements and taxation returns of the financial years ended 30 June 2009, 30 June 2010 and 30 June 2011 may shed light on the amount and source of revenue to the plaintiffs which may indicate whether the Liemant interests induced Edwards and Sbisa to breach any duties owed to the VLR interests. In the circumstances, I accept that the bank statements and tax returns for the period concerned are relevant to the issues between the parties to the proceeding and should be discovered. On this issue, I propose to make orders in the form proposed in paragraph 6(a) of the draft form of orders.

[1] Affidavit of Michael John Champion sworn 1 May 2012 at paragraphs 3-7.

[2] Defence to Amended Cross-Claim dated 18 April 2012 at paragraphs 12-15; Affidavit of Michael John Champion sworn 1 May 2012 at paragraph 8.

[3] Amended Points of Claim dated 16 April 2012.

[4] Affidavit of Gary Robert Liemant sworn 16 April 2012; Affidavit of Mark Richard Liemant sworn 16 April 2012.

[5] Evidence Act 2008 ss 122(2) and 122(3). See also Evidence Act 2008 s 118.

[6] [2004] FCA 1249.

[7] See Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405, 412-413; Now see s 124 of the Evidence Act 2008 on joint client privilege.

[8] Patrick v Capital Finance Corporation (Australasia) Pty Ltd [2004] FCA 1249, 8 [23] (citations omitted).

[9] [1999] HCA 66; (1999) 201 CLR 1, 13 [28]-[29].

[10] See generally the remarks of Lush J in R v Braham [1976] VicRp 56; [1976] VR 547, 549.

[11] State of New South Wales v Jackson [2007] NSWCA 279 [41].

[12] R v Braham [1976] VicRp 56; [1976] VR 547, 548-9; R v Sharp [2003] NSWSC 1117, [33].

[13] [1997] EWCA Civ 1897; (1998) 1 WLR 114, 122.

[14] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, 13 [28].

[15] Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2008] NSWSC 1070, 6 [26] per Barrett J considering s 122 of the Evidence Act 1995 (Cth).

[16] Explanatory Memorandum, Evidence Bill 2008, 46.

[17] I assume that for the sake of the analysis of s 122(2) and s 122(3) (without deciding) that the affidavits "disclosed the substance" of the advice given in conference. This issue was not specifically addressed by the parties in argument.

[18] Section 122(5)(a)(i) and s 122(5)(c) of the Evidence Act 2008.

[19] Section 122(5) of the Evidence Act 2008.

[20] Garde-Wilson v Corrs Chambers Westgarth [2007] VSC 235, 9 [41]-[43]; Grimwade v Meagher [1995] VicRp 28; [1995] 1 VR 446, 452; Geelong School Supplies Pty Ltd v Deane [2006] FCA 1404; (2006) 237 ALR 612, 620 [35]; Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582-583 [76]; Buffalo Corporation Pty Ltd v Lend Lease Prime Life Ltd (Unreported, Supreme Court of Victoria, Judd J, 26 October 2010) 2-3 [6]-[9].

[21] Geelong School Supplies Pty Ltd v Deane [2006] FCA 1404; (2006) 237 ALR 612, 620 [35]; Buffalo Corporation Pty Ltd v Lend Lease Prime Life Ltd (Unreported, Supreme Court of Victoria, Judd J, 26 October 2010) 3 [8].

[22] Buffalo Corporation Pty Ltd v Lend Lease Prime Life Ltd (Unreported, Supreme Court of Victoria, Judd J, 26 October 2010) 6 [16].

[23] Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582-583 [76]; Grimwade v Meagher [1995] VicRp 28; [1995] 1 VR 446, 452.

[24] Kallinicos v Hunt [2005] NSWSC 1181; (2005) 64 NSWLR 561, 582-583 [76]; Grimwade v Meagher [1995] VicRp 28; [1995] 1 VR 446, 452. For a recent summary of the applicable legal principles and their application see Gangemi Pty Ltd v Luppino Pty Ltd & Anor [2012] VSC 168.

[25] Points of Claim dated 5 April 2012 [21]-[24].