Feridun Akcan v Gabriel Cross

EX TEMPORE Judgment 1REIN J: These proceedings concern a bistro restaurant operated at the Drummoyne Sailing Club ("the Club"). The plaintiff claims that he was the silent partner in the business. His sister and brother-in-law, the defendants, deny that any partnership was formed between them. The plaintiff claims an entitlement to a one third share of the partnership profits. In addition to the first question of whether in fact any partnership was formed, there is an issue about what the true profits of the partnership are and for what period. There is no dispute that the Club was not informed of the plaintiff's claimed involvement in the partnership. Before the licence agreement was entered into between the Club and the defendants, the defendants and the plaintiff went to see a barrister, Mr Rory McCrudden. The parties' versions of how the three came to meet and the purpose of the meetings diverge. The content of the discussions at the meeting is also the subject of conflicting evidence. 2The defendants assert that the plaintiff cannot give evidence about that meeting by virtue of s 118 of the Evidence Act 1995 (NSW). In his submissions Mr Silver, counsel for the defendants, contended that: (1) The issue must be determined on the basis of the plaintiff's version of events, namely that the plaintiff and the defendants went to Mr McCrudden for legal advice. (2)Since legal advice was being sought by all three, the privilege is a joint privilege and cannot be waived by one of them. Mr Silver refers to Farrow Mortgage Services Pty Ltd in Liq v Webb (1996) 39 NSWLR 601, 607 D-E; (1996) 132 FLR 466; (1996) 14 ACLC 1240 and Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151, [41]; (2004) 13 ANZ Ins Cas 61-612 ("the MMI case") (3) The onus is on the party who asserts loss of privilege to establish loss: see Sharjade Pty Ltd v RAAF Landings (formerly Darwinia Estate Pty Ltd) [2008] NSWSC 151, at . (4)Section 124 of the Evidence Act does not apply to this case because, at the time of advice, the relevant dispute had not arisen. 3Mr Evans, counsel for the plaintiff, submits that: (1)Privilege has to be established before the question of whether it has been lost can be determined. (2)The plaintiff was a party to the conversations to which Mr McCrudden deposes. (3)It is confidentiality that legal professional privilege exists to protect: see Mann v Carnell (1999) 201 CLR 1 at 28, (1999) 168 ALR 86; (1999) 74 ALJR 378; (1999) 21(1) Leg Rep 13; (2000) Aust Torts Reports 81-539, [1999] HCA 66 per Gleeson CJ, Gaudron, Gummow and Callinan JJ. (4)On the defendants' case, the defendants went to seek advice themselves and elected to do so in the presence of the plaintiff and hence cannot assert a right of confidentiality. (5)It is necessary to focus on the communication and it did not contain anything suitable for protection as a privileged communication. The principal disclosure was that there was an agreement to go into partnership and share the profits. A document described as a "lease" was shown to Mr McCrudden and he told the plaintiff and defendants that it was a licence not a lease. He recommended that they see a solicitor. None of these matters, says Mr Evans, warrant the protection of legal professional privilege. (6)The purpose for which the claim of privilege is raised cannot be separated from consideration of the fact that Mr McCrudden was a witness to the agreement and privilege is being relied on by the defendant to "protect their own dishonesty in now trying to assert there never was an agreement or partnership". 4Section 118 of the Evidence Act is in the following terms: 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. 5I think that Mr Silver is correct in his assertion that the matter should be considered on the basis of the plaintiff's version, in other words, that all three sought advice from Mr McCrudden and I will proceed on that basis. I accept too that where two or more clients retain a solicitor or barrister the privilege, which they are entitled, cannot be waived by one of them alone when a third party seeks to obtain, or use, details of what was said by or to the lawyer retained. I do not accept, however, that one of two or more joint clients can resist the evidence from the other party, or the lawyer, as to what was said to the lawyer by the other or others in proceedings between them. Indeed, the passage the MMI case at [41] cited by Mr Silver is to the contrary. I set it out: If two persons join in a legal enterprise, the privilege is their joint privilege. From this it follows that the privileged communication may be disclosed to each without breach of privilege, because each client shares an interest in the subject matter of the communication. Joint clients may not maintain privilege against each other (Re Konigsberg (a bankrupt), ex parte the Trustee v Konigsberg [1989] 3 All ER 289 at 297). 6The parties are together entitled to maintain their privilege against the rest of the world and this means that waiver by one is insufficient to affect the other party's privilege (see generally Farrow Mortgage Services Pty Ltd in Liq v Webb at 608-D and Evidence Act, s 122(5). The MMI case was concerned with quite a different point but the matter of statement or principle there is relevant to this case. In Re Konigsberg (a bankrupt), ex parte the Trustee v Konigsberg [1989] 3 All ER 289; [1990] Fam Law 94; [1989] NLJR 1302; [1989] 1 WLR 1257 which was mentioned in the MMI judgment, Justice Peter Gibson said the following: Finally I return to the first ground on which counsel for the trustee relies for his submission that privilege cannot be asserted by Mrs Konigsberg against the trustee. Counsel referred me to the following passage in Phipson on Evidence (13th edn, 1982) para 15-11 under the heading 'Joint retainer': 'When two parties employ the same solicitor, the rule is that communications passing between either of them and the solicitor, in his joint capacity, must be disclosed in favour of the other--e.g. a proposition made by one, to be communicated to the other; or instructions given to the solicitor in the presence of the other; though it is otherwise as to communications made to the solicitor in his exclusive capacity.' Thus if the communication with or from the solicitor in his joint capacity must be disclosed privilege cannot be asserted by one of the two parties against the other in proceedings against each other. This is established by Shore v Bedford (1843) 5 Man & G 271, 134 ER 567. In that case the plaintiff having a claim against the defendant went with the defendant to the plaintiff's solicitor, who agreed to write on the defendant's behalf to a third party. The defendant made a statement in the plaintiff's presence to the solicitor and the plaintiff subsequently brought an action against the defendant. It was held that the statement was not a privileged communication and questions could be asked of the solicitor's clerk as to what had been said. 7Indeed in Farrow itself Justice Sheller, with whom Acting Justice Waddell agreed, said at p 608: Two or more persons may join in communicating with a legal adviser for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege. So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication. Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication. But the parties together are entitled to maintain the privilege "against the rest of the world": Phipson, par 20-28 and par 20-29. 8In other words there is a significant difference between the privilege which two or more persons jointly have against the world as opposed to the position inter se. 9There is a helpful and interesting analysis of why parties to a joint retainer cannot assert privilege against one another. It is found in The Law of Privilege edited by Bankim Thanki QC, 2nd ed, 2011, Oxford University Press, 2006. The learned authors say (excluding footnotes) at 6.05: It is often said that where two or more parties have jointly retained a lawyer they have waived privilege as between themselves. Notwithstanding the number of cases which analyse such situations in terms of waiver, this view is a misconception. The better and much more coherent view is that no privilege exists between the parties in the first place, as they do not retain confidence against one another. Each of them is entitled to benefit from any privileged communication arising out of the joint retainer. Therefore, there is nothing to waive. As privilege is an immunity from compulsory disclosure, parties to a joint retainer cannot assert privilege against each other since each of them is entitled and meant to possess the communication in the first place. 10In the same vein as all the abovementioned cases is the decision of Justice Rix in Hellenic Mutual War Risks Association (Bermuda) Ltd v Harrison (The Sagheera) [1997] 1 Lloyd's Rep 160, 165-166. 11It follows that I accept Mr Evans' contention that s 118 of the Evidence Act does not assist the defendants because the focus is on confidential communications and the communications between the plaintiff and the defendants and Mr McCrudden were not confidential communications: see Mann v Carnell and Deane J in Baker v Campbell (1983) 153 CLR 52 at 115-116; 49 ALR 385, 433 cited in Mann v Carnell, [19]. What was said by the defendants to Mr McCrudden in the presence of the plaintiff cannot be confidential as between the plaintiff and the defendants. There is no express or implied obligation on Mr McCrudden not to disclose its contents to the plaintiff since, if said, it was said by the defendants in the presence of the plaintiff. 12I turn now to s 124 of the Evidence Act. Section 124 is in the following terms: 124 Loss of client legal privilege: joint clients (1) This section only applies to a civil proceeding in connection with which 2 or more parties have, before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter. (2) This Division does not prevent one of those parties from adducing evidence of: (a) a communication made by any one of them to the lawyer; or (b) the contents of a confidential document prepared by or at the direction or request of any one of them; in connection with that matter. No cases on s 124 were cited but Mr Silver drew attention to the fact that the learned author of Cross on Evidence, March 2013, LexisNexis, commented on the absence of clarity of expression in the phrase "jointly in relation to the same matter" in s 124(1) (see [47, 280]). To this I would add that Mr Odgers in his text Uniform Evidence Law, 10th Edition, 2012, Thomson Reuters has commented that the Court may have difficulty in determining what "matter" means. 13I do not accept Mr Silver's proposed construction. Whilst not felicitously expressed, I think it is tolerably clear that the intent of the section is to refer to the retention of a lawyer in connection with the same subject matter as is involved in the proceedings. To require that there has been retention of a lawyer prior to proceedings but after a dispute has arisen for the section to apply does not make sense. In context it is obvious that "matter" does not mean matter in the sense of "proceedings" because the joint retention of the lawyer must have been before the commencement of the proceedings. 14In my view s 124 is intended to confirm the common law position and the section applies to permit Mr McCrudden to give evidence of the admissions that he claims were made in his presence by the defendants. Accordingly, I allow the evidence.