Fletcher v Davidson

LEGISLATION CITED : Uniform Civil Procedure Rules, Pt 21, r 21 Civil Procedure Act, s 14

Guinness Peat Limited v Fitzroy Robinson (1987) 1 WLR 1027 Kang v Kwan & Ors [201] NSWSC 698 CASES CITED : Lake Cumberline Pty Limited v Effem Foods Pty Limited (1994) 126 ALR 58 Seven Network Limited v News Limited [2005] FCA 142 Swaab v Commissioner of New South Wales Police Service [2005] NSWSC 901

PARTIES : Stephen Charles Fletcher (Plaintiff) Mark Davidson (t/as Davidsons Solicitors)

COUNSEL : P. Menadue (Plaintiff) J. Downing (Defendant)

SOLICITORS : A.J. Law Solicitors (Plaintiff) Middletons Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST

20279/06 STEPHEN CHARLES FLETCHER v MARK DAVIDSON (t/as DAVIDSONS SOLICITORS)

JUDGMENT 1 HIS HONOUR: There are presently two notices of motion before the Court, one filed by each party.

The plaintiff's motion 2 The plaintiff seeks an order that the defendant be required to serve a further and better list of documents in which privilege is claimed only in respect of documents both in the first and second list for which there is a valid claim. In the alternative, the plaintiff seeks an order that the defendant make available to the plaintiff all documents that are listed in Pt 1B(i) of the first and second lists.

The defendant's motion 3 The defendant seeks an order that it be excused from strict compliance with Pt 21 r 21.3 of the Uniform Civil Procedure Rules.

The nature of the cause 4 At the outset it is desirable that the nature of the cause and the issues be summarised. 5 The defendant is a solicitor who acted for the plaintiff at a time when the plaintiff lent money to a Mr Donald-Oates (the borrower). It is alleged that the defendant breached his duties both in contract and in tort in failing properly to advise the plaintiff about the risks of the transaction including the possible inadequacy of an unregistered mortgage offered by way of security. It is also alleged that the defendant breached his fiduciary duty, putting himself in a position of possible conflict in a situation where he acted not only for the plaintiff but for the borrower. The borrower defaulted in making repayment of the loan and the amount claimed in the statement of claim is in excess of $1 million. The borrower was made bankrupt on 15 November 2005. 6 In short, the defendant denies liability to the plaintiff.

The discovery process thus far 7 Consent orders as to discovery filed on 19 June 2006 provided that the parties nominate categories of documents for discovery by 10 July 2006 and that they serve verified lists of documents by 24 July 2006. The defendant, on 25 September 2006, verified a list of documents, affirming that the documents in Pt 1A and 1B of the list were within his possession. In paras 5 and 6 the issue of privilege was raised concerning those documents referred to in Pt 1B. No issue here arises as to the claim for privilege raised in para 6 of the affidavit of discovery, which paragraph refers to the documents listed in Pt 1B(ii) and Pt 1B(iii). However, in para 5 of the affidavit the issue of privilege is raised in relation to the documents in Pt 1B(i), and it is affirmed that the documents there listed "may be privileged from production on the grounds set out in that part". 8 Turning to "that part", the following is stated: " B. Documents where privilege may be or is claimed (i) Client Legal Privilege or some other privilege may be claimed by Cameron Donald-Oates or another person over the following documents and parts of documents pursuant to Division 1 of Part 3.10 of the Evidence Act 1995." 9 A claim for privilege was similarly expressed in the defendant's second list of documents (exhibited to the affidavit of Toby Colin Blyth and appearing at p 104 of the exhibit). 10 The plaintiff here submits that the defendant has failed to satisfy his obligations as to discovery in the affidavit and lists described above. The defendant resists the claim for the relief sought by the plaintiff. It is contended on his behalf that he has done what is required of him. Alternatively, if there has been a failure to comply with the rules, he seeks to be excused from further compliance, and hence his notice of motion seeking an order pursuant to s 14 of the Civil Procedure Act.

The competing submissions 11 Mr Menadue, appearing for the plaintiff, submitted that there has been a failure to comply with the requirements of Pt 21 r 21.3. This provision requires that the defendant's list of documents "must identify any document that is claimed to be a privileged document, and specify the circumstances under which the privilege is claimed to arise." Mr Menadue submitted also that the defendant's supporting affidavit is deficient and that r 21.4 has not been satisfied. Hence, in para 5 the defendant does no more than to affirm that the documents referred to may be privileged on the grounds set out in Pt 1B(i) and, going to that part of the list, what is stated is that privilege may be claimed by (the borrower) or another person over the documents that are then listed. There has been no specific assertion of a claim of privilege and there has been no attempt to state the circumstances under which the privilege is claimed to arise. 12 For his part, Mr Downing, on behalf of the defendant, has submitted that there has been compliance by the defendant with his obligations in that he has done the best he can do. The documents identified in the list in relation to which privilege is expressed in the manner set out above are documents concerning which the defendant has no claim of privilege. Any claim would be the claim of the borrower or one of the other persons in whom in the circumstances the right to claim may arise and may be asserted. 13 The obligation as to discovery arises concerning documents taken to be relevant to a fact in issue as defined in Pt 21 r 21.1(2). These motions have proceeded upon the basis that the documents are to be taken to be relevant to a fact in issue. The documents in the list are described in general terms, but it is to be inferred that they came into existence or into the possession of the defendant whilst he was acting for the borrower and associated companies. There is an affidavit sworn by the defendant on 8 November 2006 which evidences that the defendant started to act for the borrower in 1998 and thereafter he acted for associated companies as well. He acted for the borrower in relation to an advertising business in which he was involved and later he acted for him in respect of property development. Then, in June 2003, the defendant commenced to act for the borrower in connection with the acquisition and sale of properties. It is to be noted that the loan transaction was in December 2003. 14 The defendant through his solicitors has written to the borrower care of his trustee in bankruptcy seeking to be advised whether the borrower makes a claim for privilege concerning any of the documents in Pt 1B(i). A similar letter has been written to other persons and companies identified in the material exhibited to Mr Blyth's affidavit. Some seventeen companies, apparently associated with the borrower company, are identified in a letter written by the defendant's solicitors to the plaintiff's solicitors on 2 November 2006. Thus far there has been a lack of response from the various addressees. 15 As I indicated in the course of submissions, I do not consider that the defendant has complied with the requirements of Pt 21 r 21.3(2)(d). Hence I afforded to the defendant the opportunity to seek the relief now sought pursuant to s 14 of the Civil Procedure Act. In determining what orders it is appropriate to make on the notices of motion before the Court, it is necessary that there be due regard to relevant matters of principle which I will now record.

Relevant matters of principle 16 1. There is a requirement that a list of documents for discovery purposes be prepared after careful and thorough search and inquiry and the deponent to the affidavit supporting the list must pay strict regard to Pt 21 r 21.4(2) of the Uniform Civil Procedure Rules and the responsibility which is involved in making the supporting affidavit. Rule 21.4 requires that the maker of the affidavit depose to having made "reasonable inquiries" as to the existence and location of the documents listed.

The solicitor for the maker of the affidavit must be alert to the issue of privilege when the list of documents is being prepared, and claim privilege on behalf of his clients when appropriate, unless the privilege is waived.

It follows that the solicitor must ensure that only documents not attracting privilege are disclosed by the discovery process. Thus, in Guinness Peat Limited v Fitzroy Robinson (1987) 1 WLR 1027 Slade LJ, with whom the other members of the Court of Appeal agreed, said at 1045: "…the party giving discovery…should ensure that only documents in respect of which no claim of privilege is made should be disclosed."

See, generally, Riley, Solicitors' Manual at 10,025 as to the lawyer's responsibility in relation to privilege.

As to waiver of privilege, it is, of course, the privilege of the client, not his solicitor, and it is for the client to determine whether to maintain or waive privilege. I refer to the statement of principle in Kang v Kwan [2001] NSWSC 698 where Santow J said: "It must be remembered that the privilege is that of the client. Neither solicitor nor an intermediary (who is the agent of either the client or the solicitor) can without the client's authority either consent to the material being adduced or, again without instructions, abandon that obligation that goes with a solicitor's retainer, to maintain the privilege. The powers and duties of the solicitor and the agent are not affected by the termination of the solicitor-client relationship or the agency; see Attorney General (NT) v Maurice (1986) 65 ALR 230 at 235 per Woodward J. 30 It is not enough that the solicitor refrain from disclosing a privileged communication. It is well-settled that if he or she does disclose, that solicitor may be liable to the client for damages for breach of duty; see "Cross on Evidence" (Butterworths) 4th ed by D Byrne and J D Heydon at 707. The lawyer's duty goes further than this. It is to do that lawyer's best to ensure that a valid claim for privilege is not lost; see Rosenberg v Jaine [1983] NZLR 1 at 7 per Davison CJ; Commissioner of Taxation (Cth) v Citibank Ltd (1989) 85 ALR 588 at 596 per Bowen CJ and Fisher J; State Drug Crime Commission v Larsson (1991) 53 A Crim R 131 at 134 per Newman J; Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 91 A Crim R 451 at 522 per Kirby J. Cf Tuckiar v The King (1934) 52 CLR 335 at 346 per Gavan Duffy CJ, Dixon, Evatt and McTiernan JJ."

Where privilege is claimed, the making of the claim should follow a thoughtful and responsible assessment as to whether the claim is attracted to the document in question. Mr Menadue referred in submissions to Seven Network Limited v News Limited [2005] FCA 142 where Tamberlin J referred with apparent approval to the submissions of counsel in that case: "The obligation of a person verifying a list of documents in respect of which legal professional privilege is claimed is to consider the documents and make a careful and reliable evaluation of whether it is proper to make the claim."

In my opinion, the obligation of a claimant was appropriately expressed in the above cited passage.

Since it is the client's privilege and it is for the client to determine whether that privilege is to be waived, it follows that the privilege continues until waived by the person entitled to assert the privilege at the relevant time. Counsel referred to Lake Cumberline Pty Limited v Effem Foods Pty Limited (1994) 126 ALR 58 (see in particular the judgment of Tamberlin J at 65[30]) and Swaab v Commissioner of New South Wales Police Service [2005] NSWSC 901. These decisions support the proposition I have stated. 17 The requirements of Pt 21 r 21.3 and the requirements of Pt 21 r 21.4 concerning the affidavit supporting the list of documents are entirely consistent with the principles I have stated above and the need to assert the claim of privilege and the circumstances under which the privilege is claimed to arise are to be seen with the above principles in mind. 18 The documents presently filed by the defendant do not address in a satisfactory form the requirements of r 21.3 and the affidavit in support does not satisfactorily address the requirements of r 21.4 either. The facts relied on as establishing the possible existence of privilege are not stated. 19 Ought the Court dispense with the requirement of the rules identified in the circumstances of this case? This brings me to the defendant's application under s 14 of the Civil Procedure Act. The section affords the mechanism for some relaxation of the requirements of any rule of court where the need for this becomes evident. However, the purpose behind the rule under consideration should not be ignored and any relaxation of its requirements should only be to the extent necessary to meet the circumstances under consideration. 20 In the present case the defendant does not know whether those whose privilege may fall to be considered would wish to maintain or waive the privilege. Strictly speaking, where a document attracts privilege the privilege remains until waived and the defendant cannot waive privilege on his own initiative. On the other hand, the defendant is not in a position to positively assert that a claim for privilege is being maintained. It does not appear that the defendant is equipped with knowledge as to whether any person entitled to claim privilege has any interest in maintaining it. 21 It seems to me that the defendant's circumstances call for some relaxation of the requirements of the relevant rules. The defendant ought to be permitted, having evaluated the relevant material, to state in his affidavit that the documents as to which he forms such a judgment "appear to be documents to which privilege attaches". The defendant must, however, state the facts relied upon as establishing the existence of the privilege. The defendant may state, where appropriate, that he is not aware whether the person entitled to maintain the claim to privilege seeks to maintain or waive that claim. 22 I am not persuaded, however, that any further relaxation of the requirements of the discovery rules is necessary in the present circumstances. The defendant ought not to be permitted to rely upon the documents presently filed without further attention to r 21.3 and to r 21.4. It is necessary that there be due consideration of the documents in Sch 1B(i) to see whether a claim for privilege is properly maintainable and if such be the case then the circumstances in which that claim is made should be specified. The documents to be considered are, after all, in the defendant's possession, and presumably came into his possession in the course of his activities as a solicitor. The defendant ought to be able to form a judgment as to whether documents appear to be documents to which privilege attaches and to complete his affidavit accordingly. If, having considered the affidavit and what is stated in it, the plaintiff wishes to challenge a privilege claim in respect of any particular document(s), then the court can consider the issue arising and the person whose claim for privilege it is could be given the opportunity to be heard if need be. 23 It may be that the need may emerge for further relaxation of the requirements of the rules after the defendant addresses the task set, and for this reason I will stand the defendant's notice of motion over generally with liberty to restore it on three days notice. 24 The plaintiff has been substantially successful on his notice of motion and he should now have an order for costs in his favour. 25 For the above reasons, I make the following orders:

1. Order that the defendant, within twenty-eight days, serve upon the plaintiff a further list of documents in which in Pt 1B(i) the defendant identifies those documents in respect of which there appears to be an entitlement to claim privilege.

2. Order that the supporting affidavit of the defendant states in respect of any document concerning which there appears to be an entitlement to make the claim for privilege the facts relied on as supporting that apparent entitlement.

3. On the defendant's notice of motion, the requirements of r 21.3 and r 21.4 are varied to the extent I have indicated but the defendant's notice of motion is otherwise stood over generally with liberty to restore on three days notice.

4. Order that the defendant pay the plaintiff's costs of the plaintiff's notice of motion. **********

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