Stevenson J, Bergin CJ, McDougall J, Bergin J, Black J
Source
Original judgment source is linked above.
Judgment (8 paragraphs)
[1]
Solicitors:
Hall and Wilcox (Plaintiffs/Respondents)
Clifford Chance (Defendants/Applicants)
File Number(s): SC 2014/247471; 2015/245237
[2]
Judgment
The accounting firm Deloitte conducted an audit of the accounts of the Hastie group of companies (the "Hastie Companies") in 2008 and 2009.
The Hastie Companies, by their liquidators, have commenced proceedings in professional negligence against the relevant partners of Deloitte in relation to those audits.
The statements of claim in those proceedings were filed on the eve of the expiry of the applicable limitation periods.
The Hastie Companies obtained ex parte orders from Registrars of the Court extending the time for service of those statements of claim under Uniform Civil Procedure Rules 2005 (NSW) r 1.12; ultimately to 3 June 2016.
The statements of claim were served that day.
On 28 June 2016, Deloitte filed notices of motion under UCPR r 12.11 to set aside those orders extending time.
Those applications were listed for hearing before Bergin CJ in Eq on 19 and 20 September 2016 but were, on that day, adjourned to 10 and 11 November 2016.
In the meantime, Deloitte served on the Hastie Companies notices to produce various documents associated with the Hastie Companies' applications for extension of time.
The Hastie Companies claimed that some of those documents were the subject of client legal privilege.
By judgment dated 14 September 2016 (Hastie Group Ltd (In liq) v Moore & ors [2016] NSWSC 1315) McDougall J determined that, for the most part, the documents were either not privileged or that privilege had been waived.
The documents, in respect of which the Hastie Companies made a claim for privilege, related to efforts they made to obtain litigation funding for these proceedings.
His Honour referred to authorities which establish that such documents may satisfy the requirements of s 119 of the Evidence Act 1995 (NSW), but that whether they do so depends upon the particular circumstances of the litigation funding agreement in question and the particular facts of the case: for example per Bergin J (as her Honour then was) in Rickard Constructions Pty Limited v Rickard Hails Moretti Pty Limited [2006] NSWSC 234 at [36] and per Black J in In the matter of Lorie Najjar & Sons Pty Limited (in liquidation) (No 5) [2013] NSWSC 1336 at [5].
His Honour also at [22] referred to the observation of Hodgson JA in CSR Ltd v Eddy (2008) 70 NSWLR 725; NSWCA 83 that privilege may attach to such documents if and to the extent that the documents contain "material which expressly or impliedly conveys legal advice or views about tactics or strategy" (at [7]).
His Honour concluded that Deloitte had made good their case for access to the documents in respect of which privilege was claimed but added (at [33]):
"If it should be the case that any of those documents reveals legal advice or views in relation to prospects, strategy or tactics (as I have said, a matter on which the evidence is unsatisfactory) the relevant parts may be redacted."
His Honour:
1. directed the Hastie Companies to produce to Deloitte, within a time to be agreed, the documents in respect of which he had held that any privilege existing had been waived; and
2. noted that the Hastie Companies "may redact incidental parts of those documents in the manner that I have described".
Thus, notwithstanding McDougall J's dissatisfaction with the nature of the evidence relied on by the liquidators to make out their claim of privilege, his Honour authorised the Hastie Companies to redact the documents to mask any part of them that would reveal legal advice or views as to prospects, strategy or tactics. His Honour clearly intended that this may occur, notwithstanding the unsatisfactory nature of the evidence adduced by the Hastie Companies to make out their claim of privilege. His Honour did not specify any mechanism by which this might occur, obviously assuming that parties of this sophistication, as well advised as they are, would be able to come to some sensible arrangement.
The solicitors for the Hastie Companies have circulated a set of proposed redactions.
There has been some delay, and some inconsistency in the manner in which the proposed redactions have been foreshadowed. The proposed redactions have been produced progressively, which is said by Deloitte to have caused difficulty. However, the parties were working, evidently over last weekend, towards the hearing date of 19 September 2016 and I see no reason to doubt that the Hastie Companies' legal team did the best they could in the circumstances. Now that the matter has been adjourned, the matter can be considered in less pressing time constraints.
[3]
Deloitte's application before me
By notice of motion filed in court on 20 September 2016, Deloitte seeks an order requiring the Hastie Companies to produce all of the documents the subject of McDougall J's order, without redaction.
The basis on which Deloitte seeks that order is their contention that the Hastie Companies have not proved an entitlement to redact the documents consistently with McDougall J's reasons; that is that they have not proved that the proposed redactions concern passages in the documents which record "legal advice or views in relation to prospects, strategy or tactics".
In that regard, Mr Shearer, who appeared with Ms O'Halloran for Deloitte, drew my attention to the recent remarks of Brereton J in Hancock v Rinehart (Privilege) [2016] NSWSC 12 at [7] that:
"To sustain a claim of privilege, the claimant must not merely assert it; but must prove the facts that establish that it is properly made. Thus a mere sworn assertion that the documents are privileged does not suffice, because it is an inadmissible assertion of law; the claimant must set out the facts from which the court can see that the assertion is rightly made, or in other words 'expose…facts from which the [court] would have been able to make an informed decision as to whether the claim was supportable'. The evidence must reveal the relevant characteristics of each document in respect of which privilege is claimed, and must do so by admissible direct evidence, not hearsay." [Citations omitted]
Mr Shearer read an affidavit sworn by his instructing solicitor, Ms Angela Pearsall, which annexed some of the proposed redacted documents and summarised the evidence given by one of the liquidators, Mr Crosbie, in the extension applications and before McDougall J concerning the nature of those documents. On the basis of that material, Mr Shearer submitted that the Hastie Companies were "asserting a privilege claim by way of the redactions", and that no basis to assert privilege, or make the redactions contemplated by McDougall J has been made out.
Mr Studdy SC, who appeared with Mr Bulley for the Hastie Companies, read an affidavit of his instructing solicitor, Ms Elisabeth Pickthall.
Ms Pickthall deposed:
"The process of redaction involved me reviewing each document and redacting the parts of them that I considered fell within the statements by Justice McDougall in [the judgment of 14 September 2016]. That is the process that is referred to in the [letter of 16 September 2016]."
I read Ms Pickthall's affidavit as meaning that she is the person who determined what redactions should be made.
The letter of 16 September 2016 to which Ms Pickthall referred was sent under Ms Pickthall's reference and concludes by inviting contact with her, or another solicitor, "if you have any queries". I infer from those matters that Ms Pickthall was the author of the letter, or at least was directly involved in its composition.
The letter gives detailed reasons for the redactions of the 16 documents to which it refers.
Examples of such reasons are:
"Section numbered 1 entitled 'Background' are 6 arrow points. We deal only with those sections that have been redacted as follows:
1. Arrow points 3 and 4 convey legal advice provided by HDY to PPB in connection with the issue of priority of proceeds.
2. Arrow point 5 provides legal advice in relation to proposed claims made against the former directors and officers of the Hastie Group. The paragraph also sets out a strategy in connection with those proposed proceedings.
3. Arrow point 6 provides legal advice and a recommendation as to strategy in relation to these Proceedings.
…
Section numbered 2 provides detailed advice and sets out a detailed strategy and tactics in relation to proposed claims to be made against the former directors and officers of the Hastie Group. The lengthy redaction is required as each point raised directly deals with a point of legal advice and a strategy or tactic in connection with executing the advice provided.
…
The heading has been redacted as it discloses a strategy in relation to proposed claims to be made against the former directors and officers of the Hastie Group.
Slide 5 summarises in 4 key points, legal advice and identifies key strategies in connection with the advice at each point. The slide is in connection with proposed claims to be made against the former directors and officers of the Hastie Group."
In my opinion, a fair reading of Ms Pickthall's affidavit is that she determined what redactions should be made, and so far as concerns the 16 documents referred to in the 16 September 2016 letter, did so for the reasons set out in that letter.
Mr Shearer submitted that such evidence "does not address each document and…does not come close to meeting the standard of the evidence needed as referred to" in the passage from Hancock v Rinehart set out at [21] above.
I do not agree.
I read Ms Pickthall's evidence as going a good deal further than merely asserting the existence of privilege. Although Ms Pickthall expresses some conclusions (that parts of the documents "convey legal advice" or "provide legal advice" or "set out" matters of strategy and tactics), she goes on to state, albeit in summary form, the subject of such advice, strategy and tactics. It is hard to see what more Ms Pickthall could have said without revealing the material claimed to be privileged.
It is true that Ms Pickthall does not assert that she was the author of any of the documents and is therefore not the person who could give the best evidence as to what the author's purpose was.
But her description of the documents is not challenged and I see no reason why I should not accept it as being accurate.
I regard Ms Pickthall's affidavit as establishing, in relation to the documents to which she referred in her letter of 16 September 2016, a prima facie case that the redacted portions are the subject of client legal privilege.
[4]
Should I inspect the documents?
Mr Studdy proposed that I inspect the unredacted versions of the relevant documents to determine myself whether the claim for privilege was justified.
Mr Shearer objected to me taking that course and drew my attention to Brereton J's observations in Hancock v Rinehart at [31] that:
"…the court's power to inspect [documents said to be privileged]…exists not to facilitate proof by a claimant of the facts required to sustain the claim [for privilege], but to provide a means of enabling a claim to be scrutinised and tested."
His Honour expressed the opinion that it was "not merely unsatisfactory, but impermissible" in principle for a party to present the Court with a bundle of documents and ask it to rule on a claim for privilege (at [34]). As his Honour stated:
"The power was not intended to detract from the requirement that a person claiming privilege prove, by admissible evidence, the grounds of the claim."
So much may be accepted for present purposes, but that is not what the Hastie Companies are seeking here.
As I have said, so far as concerns the documents referred to in Ms Pickthall's letter of 16 September 2016, my opinion is that a prima facie case has been made that the redacted portions are the subject of client legal privilege.
I would not see inspection of the documents by me as facilitating proof of the facts required to sustain such a claim. I see it as providing a means of enabling the claim for privilege, now established on a prima facie basis, as far as concerns the 16 documents to which Ms Pickthall referred, to be "scrutinised and tested".
For those reasons, I propose to inspect those documents and will publish further reasons once I have done so.
[5]
Time sheets
The Hastie Companies also seek to redact time sheets maintained by the Hastie Companies and by their solicitors.
As to the Hastie Companies' time sheets, my attention has not been directed to any evidence setting out the basis on which the proposed redactions are sought to be made.
So far as concerns the solicitor's time sheets, Ms Pickthall said in her affidavit that she had not yet had an opportunity to review those time sheets.
I am inclined to give the Hastie Companies a further short time to adduce evidence as to the basis upon which any redaction is proposed.
[6]
The Westworth Kemp Report
At [34] of his Honour's judgment, McDougall J held that a "retainer letter to an expert" was privileged.
It was common ground before me that the expert in question is a Mr Westworth.
The Hastie Companies claimed privilege for a document which is described in one of the Hastie Companies' affidavits as "a report of Westworth Kemp undated and unsigned".
McDougall J made no finding that that document was privileged.
Mr Studdy invited me to infer from McDougall J's finding that as the "retainer letter" was privileged that the report must also be privileged. I do not see how, on the material available to me, I could reach any such conclusion.
The document should be produced.
[7]
Other documents
In argument before me on 20 September 2016, I was told that the Hastie Companies assert that some parts of other documents (that is beyond the 16 documents referred to in the 16 September 2016 letter) should also be redacted in accordance with McDougall J's direction.
Mr Studdy tendered a folder titled "Redacted Documents Produced", which I marked Exhibit 1. Exhibit 1, which contains most, but not all, of the 16 documents referred to in the 16 September 2016 letter together with a small number of other documents. Mr Studdy said he understood there may be further documents that the Hastie Companies would contend should be redacted.
I requested that a schedule be prepared to clarify these matters but, perhaps because of the imprecision of my request, the parties have been unable to agree on the form of such a schedule.
In the circumstances, I thought it best to publish these reasons and invite submissions as to what should now occur.
[8]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 23 September 2016