[2008] NSWCA 164
GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266
Mann v Carnell (1999) 201 CLR 1
Source
Original judgment source is linked above.
Catchwords
[2008] NSWCA 164
GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266
Mann v Carnell (1999) 201 CLR 1
Judgment (2 paragraphs)
[1]
Judgment
These proceedings arise out of a dispute between the plaintiff - EG Fuelco (Australia) Ltd - and the first and second defendants about whether the plaintiff has validly exercised an option to renew a lease in respect of service station premises at 287 Liverpool Road, Burwood. The premises comprise three separate land titles that are referred to in the further amended statement of claim as Lot 1, Lot 2 and Lot 3.
The first and second defendants are the registered proprietors of the premises. I shall refer to them as the Owners.
EG Fuelco claims that the third defendant, Woolworths Group Limited, validly assigned the lease of the whole of the premises to it on 7 March 2019. A transfer of lease was executed on that date and lodged for registration on or about 21 March 2019. EG Fuelco claims that, by administrative error, that transfer identified only Lot 1 as the subject of the transfer of lease. EG Fuelco claims that it first became aware of the alleged error in March 2023 when the Owners issued a notice requiring the plaintiff to vacate the premises. EG Fuelco claims that it performed the lease at all times between April 2019 and March 2023, including by paying rent and outgoings in respect of the whole of the premises, and that the Owners knew that EG Fuelco was doing so and that it was using the whole of the premises.
The Owners do not admit that Woolworths validly assigned the lease of the whole of the premises to EG Fuelco, and do not admit that the registered transfer of lease contained any error. The Owners contend that, since April 2019, EG Fuelco has been the lessee of Lot 1 and Woolworths has remained the registered lessee in respect of Lots 2 and 3. The Owners deny that EG Fuelco, to their knowledge, performed the lease in respect of the whole of the premises from April 2019.
EG Fuelco (Australia) Limited (ACN 627 348 645) v Peter Sleiman Property... [2024] NSWSC 807 | Case summary | Zoe
On 11 November 2022, EG Fuelco served a notice on the Owners exercising, or purporting to exercise, the first of four options to renew the lease in respect of the whole of the premises for a period of five years.
On 31 March 2023, the Owners issued a notice to vacate the premises. That notice stated that EG Fuelco was only the registered lessee of Lot 1, that Woolworths was the registered lessee of Lots 2 and 3, that EG Fuelco's purported exercise of the option to renew the lease in respect of the whole of the premises was invalid, and that Woolworths had failed to exercise its option to renew prior to the end of the option exercise period. In these proceedings, the Owners rely on those contentions in denying that EG Fuelco has validly exercised an option to renew the lease of the whole of the premises. EG Fuelco claims that it first became aware that the registered transfer of lease referred only to Lot 1 when it received this notice to vacate.
EG Fuelco claims that the Owners are estopped from denying that it was the lessee of the whole of the premises when it issued the notice exercising the option to renew, relying on the doctrines of estoppel by convention and estoppel by representation.
For the purpose of the doctrine of estoppel by convention, EG Fuelco claims that from April 2019, the Owners and EG Fuelco performed the lease on the mutual assumption that EG Fuelco was the lessee in respect of the whole of the premises. EG Fuelco relies on dealings between it and the Owners since March 2019, including EG Fuelco's payment of all rent and outgoings, negotiations in relation to rent reduction and rent deferral during the COVID-19 pandemic, negotiations in relation to fit-out, and negotiations in relation to a variation that EG Fuelco sought to the lease concerning payment of land tax.
The Owners deny that any such mutual assumption existed, and further say in paragraph 51 of their amended defence that the dealings and other matters particularised by EG Fuelco in pleading the alleged mutual assumption are "referrable to other plausible assumptions", including that the Owners believed that Woolworths had transferred the lease to EG Fuelco in respect of Lot 1 only, and not in respect of all three land titles comprising the premises. In support of that pleading, the Owners particularise paragraphs 57 and 58 of an affidavit of Mr Pierre Sleiman sworn on 23 November 2023. Mr Sleiman is the sole director and secretary of the first defendant, and is the only witness to be called by the Owners at the hearing commencing on 1 July 2024 of separate questions directed to the validity or otherwise of EG Fuelco's exercise of the option to renew the lease in respect of the whole of the premises.
For the purpose of the doctrine of estoppel by representation, EG Fuelco claims that the Owners knew since April 2019 (or alternatively September 2019) that it was labouring under a mistake that it was the registered lessee of the whole of the premises, and that, by their silence in failing to draw to its attention that the registered transfer of lease referred only to Lot 1, the Owners represented that EG Fuelco was the registered lessee of the whole of the premises. The Owners deny that they had the alleged knowledge, contending that the matters of which they were aware were consistent with Woolworths and EG Fuelco having intentionally transferred the lease to EG Fuelco only in respect of Lot 1, as referred to above. The Owners therefore deny that they made the alleged representation and, further deny that any representation of the kind alleged gives rise to an estoppel.
The relief sought by EG Fuelco to preclude the Owners from departing from the alleged mutual assumption or representation is a declaration that that its exercise of the option to renew the lease was valid.
Further or in the alternative, EG Fuelco claims that the Owners' silence to which I have referred above constituted false or misleading conduct concerning the nature of EG Fuelco's interest in the land, in contravention of s 30(1)(b) of the Australian Consumer Law, and unconscionable conduct contrary to the unwritten law, in contravention of s 20 of the Australian Consumer Law. EG Fuelco claims damages and other relief pursuant to ss 236 and 237 of the Australian Consumer Law. The Owners deny the alleged representation, and deny that they engaged in conduct that was false or misleading or unconscionable.
EG Fuelco alleges that the fourth defendant, LegalVision ILP Pty Ltd, and the fifth defendant, Ashurst Australia, were expressly retained by Woolworths and impliedly retained by EG Fuelco to provide legal services in relation to matters that included the transfer of the lease of the premises. EG Fuelco alleges that LegalVision and Ashurst each owed a duty of care to it, and that they breached that duty of care and/or engaged in misleading or deceptive conduct. It is unnecessary for present purposes to describe the issues raised by the claims against LegalVision and Ashurst in further detail.
By notice of motion filed on 27 June 2024, LegalVision seeks an order pursuant to rule 21.20 of the Uniform Civil Procedure Rules 2005 (NSW) requiring the Owners to produce for inspection by LegalVision documents specified in a notice to produce issued by LegalVision on 21 June 2024, being items 7 to 27 in Part 2 of the List of Documents dated 6 June 2024 served by the Owners in compliance with disclosure orders made in these proceedings. I heard the motion in the Real Property List on Friday, 28 June 2024, and made orders that afternoon substantially in the terms sought by LegalVision. I gave brief oral reasons for that decision at the time, on the basis that I would produce more detailed written reasons by the morning of Monday, 1 July 2024. These are those reasons.
Items 7 to 27 of Part 2 of the List of Documents relate to disclosure category 2, which is in the following terms:
"All documents and communications relating passing between the [Owners] and CMM Quay Legal (or any other professional advisor of [the Owners]) in respect of:
(a) the request of Pierre Sleiman to CMM Quay Legal (or any other professional advisor) for documents as referred to in paragraph 53 of the Affidavit of Pierre Sleiman sworn 23 November 2023 (the Affidavit); and
(b) the provision by CMM Quay Legal (or any other professional advisor) of the documents requested by Pierre Sleiman, including the documents listed in paragraph 54 above."
Part 2 of the List of Documents recorded the Owners' claim of legal advice privilege in respect of each of items 7 to 27. By the conclusion of the hearing of the motion, the Owners maintained their privilege claims only in respect of items 9, 12, 13, 16, 24, 25 and 26.
LegalVision accepts that the documents comprising items 9, 12, 13, 16, 24, 25 and 26 were the subject of legal advice privilege at the time that they were created or sent. EG Fuelco, which supported LegalVision's claim for an order for production of the documents, made no submission to the contrary. However, both LegalVision and EG Fuelco submitted that privilege has been lost because, by the pleading in paragraph 51 of their amended defence and by service of Mr Sleiman's 23 November 2023 affidavit, the Owners have put in issue Mr Sleiman's state of mind about the lease, and about the assignment of the lease EG Fuelco, in a manner that is inconsistent with the Owners maintaining privilege in items 9, 12, 13, 16, 24, 25 and 26.
Mr Sleiman's 23 November 2023 affidavit was tendered on the hearing of the motion.
In paragraphs 6 to 10, Mr Sleiman deposes that he is the sole director and secretary of the first defendant, and his brother Mr Nabil Sleiman is the sole director and secretary of the second defendant. The brothers have been in the business of purchasing properties for rental or development together for approximately 33 years.
In paragraphs 12 to 21, Mr Sleiman deposes that the Owners developed the service station and associated facilities after purchasing the premises as vacant land. In the course of undertaking that development, the Owners negotiated a lease of the premises to Woolworths, with the assistance of their solicitors Cichero McLean Menzies. CMM Quay Legal, which now acts for the Owners in these proceedings, took over the firm Cichero McLean Menzies.
In paragraphs 43 to 52, Mr Sleiman deposes that, in April 2019, he was confused by correspondence received from Woolworths on 1 April 2019 and from EG Fuelco on 4 April 2019 concerning a sale of business and an assignment of the lease from Woolworths to EG Fuelco. Mr Sleiman refers to these letters as the "2019 Letters". Mr Sleimann deposes that he required clarification about various matters, including the basis on which Woolworths claimed to be entitled to transfer the lease without the Owners' consent, the component of Woolworths' business conducted on the premises that Woolworths was selling to EG Fuelco, and how it would work in practice for Woolworths to operate the remaining components of that business and for EG Fuelco to operate the transferred components of that business from the leased premises under what Woolworths described as a "commercial alliance".
In paragraph 53 of his affidavit, Mr Sleiman deposes that he did not wish to waste further legal costs requesting clarification about those matters from Woolworths and its solicitors, when no clarification satisfactory to him had been provided in response to his previous requests. Mr Sleiman deposes that he "therefore asked CMMQ to order searches to try to fill in the gaps of information".
In paragraph 54 of his affidavit, Mr Sleiman lists the documents that CMMQ then provided to him, including a copy of the registered transfer of lease, various ASIC searches and other documents registered with ASIC relating to Woolworths and its related companies, and EG Fuelco. Mr Sleiman exhibits copies of each of those documents to his affidavit, which he defines as the "2019 Searches".
In paragraphs 55 and 56 of his affidavit, Mr Sleiman deposes that:
"55. From the 2019 Searches, I understood that:
(a) Despite Woolworths being in the petrol business at least as early as the commencement date of the Lease in 2008, Woolworths had incorporated Woolworths Petrol in 2018 to take over that petrol business, obviously with the purpose of selling the petrol business. Woolworths was the ultimate holding company of Woolworths Petrol;
(b) Under the Lease, the Owners' consent was not required for a transfer of Lease from Woolworths to Woolworths Petrol, because they were related companies. Accordingly, no consent was required when Woolworths transferred the Lease, in relation to one Title of the three Titles of Property, to Woolworths Petrol being a related company;
(c) Then Woolworths sold the shares in Woolworths Petrol to EG Group, which was not a related company;
(d) Then EG Group changed the name of Woolworths Petrol to EG FuelCo (Australia) Ltd (EG Fuelco);
(e) EG Fuelco was now the lessee of the Lease under one Title of the Property and Woolworths was the lessee of the Lease under the other two Titles of the Property.
56. So effectively, through a series of Lease allowed transactions, Woolworths had transferred the Lease in relation to one Title of the Property to a company which was not related to it. While I could not dispute that Woolworths did what it was able to do, I did feel this was slightly underhanded. I felt the transfer was contrary to the intention and spirit of the Lease terms, which only allowed its transfer, without the Owners' consent, to a related company. The concern was that the Owners did not know the integrity nor financial stability of the EG Group (the owner of EG Fuelco) other than what was claimed in the November 2018 Letter."
In paragraphs 59 and 60(b) of his affidavit, Mr Sleiman deposes that the Owners had no knowledge of the terms of the agreements that had been entered into between Woolworths and EG Group, and that he did not understand until he read the 2019 Searches that EG Fuelco had previously been called Woolworths Petrol Ltd.
In paragraph 66 of his affidavit, Mr Sleiman deposes that, based on the 2019 Letters and the 2019 Searches, and certain alleged conduct of EG Fuelco after April 2019, the Owners were led to believe that EG Fuelco was not the only lessee of the premises.
In paragraph 74 of his affidavit, Mr Sleiman refers to an affidavit of Mr Finlay of EG Fuelco, in which Mr Finlay refers to certain terms in a Redemption Agreement and a Transitional Services Agreement. Mr Sleiman deposes that he assumes that those agreements were entered into between Woolworths and EG Fuelco because he had not previously heard of those agreements. Mr Sleiman adds: "I could only rely on the 2019 Letters and 2019 Searches, and … I was not concerned as to how Woolworths and EG Fuelco sorted out their obligations between themselves."
In paragraph 111 of his affidavit, Mr Sleiman refers to a letter that CMM Quay Legal received from EG Fuelco's solicitors on 5 April 2023, which described the fact that the registered transfer of lease referred only to Lot 1 as an "oversight", and stated that EG Fuelco was the lessee of Lots 1, 2 and 3. Mr Sleiman deposes that this was the first time that he had been told that there was an error in the registered transfer of lease, and that the claim made by EG Fuelco's solicitors "did not sit well with me, particularly because it was inconsistent with the contents of the 2019 Letters …, and inconsistent with my understanding from the time of the 2019 Searches that Woolworths continued as a lessee of the Property".
As I have already mentioned, the Owners' privilege claim is now limited to items 9, 12, 13, 16, 24, 25 and 26 of Part 2 of their List of Documents responding to disclosure category 2. The basis of the privilege claim is that those items are confidential communications or confidential documents created for the dominant purpose of CMM Quay Legal providing legal advice to the Owners.
Item 9 is described as "2019-04-15 - CMMQ email to client.pdf".
Item 12 is described as "2019-04-19 - Letter to client re; do you want further advice.pdf".
Item 13 is described as "2019-04-19 - Letter to client re; closing tax invoice.pdf".
Item 16 is described as "2019-04-24 - CMMQ email to client.pdf".
Item 24 is described as "Internet search" and is dated 24 April 2019.
Item 25 is described as "Letter to client re; enclosing copy further searches ordered.pdf" and is also dated 24 April 2019.
Item 26 is described as "LRS Deed.pdf" and is also dated 24 April 2019.
The Owners rely on affidavits of their solicitors, Mr Harry Papadopoulos and Ms Josephine Muscolino, both of CMM Quay Legal.
Mr Papadopoulos deposed that he has been acting for Mr Sleiman and his companies for about 34 years, during which time he has given advice to Mr Sleiman in relation to his affairs, including in 2018 and 2019 regarding the assignment of the lease that is the subject of these proceedings. Mr Papadopoulos deposes that he received a call and email from Mr Sleiman on or about 4 April 2019 in relation to a letter that Mr Sleiman had received from Woolworths dated 1 April 2019. Mr Papadopoulos gave advice to Mr Sleiman during that phone call, and later ordered certain title, company and other searches at Mr Sleiman's request. Mr Papadopoulos provided a first letter of advice on 11 April 2019, which attached an earlier letter of advice on the same subject matter dated 14 February 2019. Mr Papadopoulos deposes that these two letters dated 14 February and 11 April 2019 are incorrectly listed in the Owners' List of Documents as being dated 19 April 2019. I infer that these are the documents comprising items 12 and 13. Mr Papadopoulos deposes that Mr Sleiman then requested further searches, following which Mr Papadopoulos gave further advice in a letter dated 24 April 2019. I infer that this advice was contained in items 16 and 25 referred to above. Ms Muscolino deposes that items 24 and 26 were attached to items 16 and 25.
As I have already mentioned, both LegalVision and EG Fuelco contend that the Owners have lost legal advice privilege in items 9, 12, 13, 16, 24, 25 and 26.
LegalVision submitted that the Owners have put Mr Sleiman's state of mind in issue by paragraph 51 of their amended defence and by serving Mr Sleiman's affidavit to which I have referred above, because Mr Sleiman's affidavit describes the 2019 Searches as the only source of the understanding that he claims to have had during the period from April 2019 to March 2023 that EG Fuelco was the lessee of Lot 1 and that Woolworths remained the lessee of Lots 2 and 3, and because Mr Sleiman has thereby impliedly asserted that he did not have legal advice about the transfer of the lease from Woolworths to EG Fuelco at that time. LegalVision submits that it is plain from the Owners' List of Documents, and from the evidence of Mr Papadopolous, that Mr Sleiman did have legal advice about that transfer in April 2019, and that it is inconsistent with the maintenance of the Owners' claim for privilege in that advice for Mr Sleiman to have put his state of mind in issue, impliedly asserting that his state of mind was not informed by any legal advice at the time.
EG Fuelco submitted that paragraph 55(b), the first sentence of paragraph 56, and paragraph 74 of Mr Sleiman's affidavit, read in the context of the subject matter of Mr Sleiman's claimed understanding, imply that his state of mind was informed by legal advice, and that Mr Sleiman has thereby impliedly disclosed the substance of that advice. EG Fuelco emphasised the central relevance of Mr Sleiman's claimed state of mind to the issues in the proceedings.
The Owners submitted that Mr Papadopoulos' evidence discloses that the legal advice given to Mr Sleiman in April 2019 was not limited to the 2019 Searches, that Mr Sleiman has not expressly referred to the substance of that legal advice in his affidavit, and that Mr Sleiman has given evidence only of his understanding based on the 2019 Searches that he instructed his solicitors to obtain. It was submitted that, in circumstances where Mr Sleiman was capable of forming the understanding to which he deposes based on those 2019 Searches, his knowledge of the terms of the lease, and his experience in the property industry referred to in paragraphs 6 to 10 of his affidavit, Mr Sleiman has not made any implied assertion about the contents of the legal advice that he received. The Owners submitted that there is therefore no inconsistency between their conduct in serving Mr Sleiman's affidavit and the maintenance of the privilege claimed in respect of the communications comprising the legal advice and attached documents in items 9, 12, 13, 16, 24, 25 and 26 of Part 2 of the Owners' List of Documents.
It is well established that client legal privilege is lost by reason of conduct of the client that is inconsistent with the maintenance of the confidentiality protected by the privilege: Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 at [28]-[29]; Evidence Act 1995 (NSW), s 122(2).
The principles, and the approach to be taken in determining whether the relevant conduct is inconsistent with the maintenance of the privilege in any particular case, were summarised by Macfarlan JA, with the concurrence of the other members of the Court of Appeal, in GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266. His Honour said at [57]:
"(1) The test is one of inconsistency between the privilege holder's conduct and its maintenance of the privilege, not one of general fairness or of relevance to an issue in the proceedings.
(2) Enquiring whether the privilege holder has made express or implied assertions about the contents of the confidential communications, and whether its conduct has therefore "laid open the communications to scrutiny", assists in ensuring that the court's focus is on inconsistency rather than simply relevance. If the privilege holder is understood to be asserting something about the contents of the communications, it is but a short step to conclude that it would be inconsistent for it to prevent those contents being scrutinised.
(3) On the other hand mere relevance of the content of the privileged communications to an issue raised in the proceedings by the privilege holder does not equate to inconsistency - something more is needed. It is of the essence of legal professional privilege that, if maintainable, it entitles a party to withhold potentially relevant documents from inspection by the other party.
(4) The determination of whether there has been an express or implied assertion about the contents of privileged communications giving rise to a relevant inconsistency is an evaluative decision to be made after consideration of the whole of the circumstances of the case. No hard and fast rules can be formulated. Those circumstances will include the degree of relevance of any advice to the issues in the proceedings, the centrality of the relevant issues in the proceedings and the likelihood of advice having been given, informed, as the High Court said in Mann v Carnell, by considerations of fairness.
(5) Having considered all those circumstances, the court must decide whether it would be inconsistent with the privilege holder's conduct for it to maintain privilege. The line between relevance to an issue and inconsistency in this context may be very fine and therefore one on which views might well differ."
In Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236; [2008] NSWCA 164, Hodgson JA (with whom Campbell JA agreed) recognised the need to look for inconsistency rather than general unfairness, and said (at [48]):
"It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind."
Applying those principles to the present case, I accept that Mr Sleiman has not expressly referred to any legal advice in his 23 November 2023 affidavit. However, the evidence of Mr Papadopoulos and Ms Muscolino establishes that items 9, 12, 13, 16, 14, 25, and 26 contain legal advice, or are attachments to legal advice, given to Mr Sleiman in April 2019 in relation to the 2019 Searches and the assignment of the lease from Woolworths to the plaintiff. It is inherently highly probable that such legal advice affected his state of mind about the effect of the transfer of lease, and about the identity of the lessee or lessees of the premises following registration of the transfer of the lease. In that context, Mr Sleiman's evidence of his state of mind in those parts of his affidavit to which I have referred above impliedly asserts that the substance of that legal advice was consistent with the understanding that he deposes to having formed in April 2019 after reviewing the 2019 Searches. In those circumstances, and bearing in mind that Mr Sleiman's state of mind which the Owners have put in issue is of central relevance to the issues in these proceedings, [1] the Owners' conduct in serving Mr Sleiman's evidence of his understanding to which I have referred above is inconsistent with the Owners maintaining privilege in the legal advice, which would unfairly preclude the other parties to the proceedings from effectively testing Mr Sleiman's evidence of his understanding, including his implied assertion concerning the legal advice. That inconsistency is not avoided by Mr Sleiman's affidavit having been drafted in terms that do not expressly refer to the legal advice that he in fact received, and that describe Mr Sleiman's understanding as having been derived from the 2019 Searches which his solicitors obtained on his instructions following which they provided him with legal advice about those searches and about the very issue that is the subject of Mr Sleiman's claimed understanding about which he has given evidence. The fact that the legal advice was not limited to the 2019 Searches per se, and extended to the underlying issue about which Mr Sleiman has given evidence of his understanding, does not assist the Owners' contention that the legal advice remains privileged.
For the foregoing reasons, I made the following orders on 28 June 2024:
1. Pursuant to rule 21.20 of the Uniform Civil Procedure Rules 2005 (NSW), order that by 10am on 1 July 2024 the first and second defendants are to produce for inspection by the fourth defendant the documents specified in the notice to produce dated 21 June 2024, a copy of which is annexure C to the affidavit of Michael Keith Thornell affirmed on 27 June 2024.
2. The first and second defendants are to pay the fourth defendants' costs of their notice of motion filed on 27 June 2024.
[2]
Endnote
See [9]-[12] above.
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Decision last updated: 05 July 2024