Hine v New South Wales Land and Housing Corporation

REASONS FOR JUDGMENT 1 This is a notice of motion filed by the applicant on 9 April 2009. The notice of motion seeks an order that the respondents produce for inspection certain documents listed in the respondents' amended list of documents filed on 16 March 2009, as well as associated orders for costs. 2 The documents which the applicant seeks the respondents produce are all the subject of a claim for legal professional privilege. The amended list of documents adopts a format of identifying the number of pages and the date of a document with a description such as "Privilege: Email from Robert Bromwich counsel to Antonino Calcopietro Legal Services concerning IRC consideration in Gibson matter". The applicants challenge the claim for legal professional privilege, essentially, on two grounds. The first ground is that the respondents have not, by admissible evidence, properly established the basis of any claim for privilege. The second is that, insofar as such a basis is established, there has been an issue waiver with respect to the maintenance of the privilege. 3 In order to understand these claims, it is necessary that I give some short background to the proceeding as a whole, and the evidence on which the respondents rely. 4 The proceeding was commenced by application. The further amended application filed 30 October 2007 seeks damages under ss 42, 43 and 68 of the Fair Trading Act 1942 (NSW) and for breach of duty. The further amended statement of claim filed on 30 October 2007 alleges that the first and second applicants were subcontractors performing works for the respondents for a relatively lengthy period of time before 2002. In or about June 2002, the provision of services to the respondents became the subject of a contract known as the "Willowdene Head Contract" and the "Transfield Head Contract". These contracts permitted Willowdene Constructions Pty Ltd and Transfield Services (Australia) Pty Limited to engage subcontractors with the approval of the first respondent, with such approval not to be unreasonably withheld. Each of these contracts contained a term that the first respondent was entitled to prohibit Willowdene and/or Transfield from using any person or subcontractor in the performance of works under the contract if the first respondent's representative reasonably regarded that person or subcontractor as incompetent, negligent or otherwise unsuitable. This right flowed from clause 16 of the Department's General Conditions of Contract for maintenance contracts. 5 In the further amended statement of claim, the applicants say that on 24 March 2004 the Principal's representative under the Willowdene Head Contract, for and on behalf of the first respondent, issued to Willowdene a notice purportedly given under clause 16 of that contract prohibiting Willowdene from using the second applicant in the performance of any works under that contract. 6 The applicants also plead, in effect, that nobody informed them about, or provided them with any opportunity to respond to, allegations relating to alleged misconduct of a Departmental employee, and a pending investigation by the Department into any alleged association of the applicants with a Department employee. Further, the applicants claim that neither the Principal's representative (nor any other representative, employee or agent of the first respondent) at any time prior to the conduct pleaded, carried out any such investigations or provided the applicants with an opportunity to be heard about the proposed conduct. Finally, the applicants plead that the opinion held and expressed by the Principal's representative for and on behalf of the corporation on 24 March 2004, namely, that the second applicant was an unsuitable contractor, was unreasonable. 7 The reference in the pleadings to the opinion held and expressed on 24 March 2004 is to the notice given by the first respondent to Willowdene under clause 16 of the general conditions of contract. That notice states that, in accordance with clause 16, the Principal's representative directs that the contractor is prohibited from using the persons and/or entities named in Schedule 1 in the performance of the works, as the Principal's representative reasonably regards them as unsuitable on account of the matters raised in Schedule 2. Schedule 1 refers to CPR Property Pty Limited, being the second applicant in the proceeding. Schedule 2 states "The persons and/or entities' involvement in a pending investigation by the Department into their association with a Departmental employee, and certain allegations of misconduct made against the employee arising there-from". 8 In their amended defence to the further amended statement of claim filed 24 March 2009, the respondents admit the issue of the notice under clause 16, and say that "Clause 16 speaks for itself". They rely on clause 16 as if it were fully pleaded in the amended defence. They also deny certain of the allegations, including, in para 20 a denial of the corresponding para 20 of the further amended statement of claim, and plead that there were a number of separate investigations into the allegations of improper association and breach of the Department of Housing Code of Conduct by a Departmental employee, Mr Gibson, CPR Property and Mr Hine, carried out between March 2003 and 24 March 2004. The respondents also deny para 21 of the further amended statement of claim, that is, the allegation that the opinion reached was unreasonable. 9 The respondents rely on two affidavits in support of the claim for privilege. The first affidavit, sworn by Chris Valacos, appears mainly to relate to matters not in issue between the parties, namely that the Department's legal branch is independent of the Department's commercial activities. The second affidavit, of Antonino Calcopietro, solicitor, is more on point. In effect, Mr Calcopietro is a senior solicitor working in the legal services branch of the first respondent. He reviewed all of the disputed documents and, in short, his position appears to be consistent with that taken in the amended list of documents, namely, that each document was privileged on the basis that it either was for the dominant purpose of legal advice and/or was for the purpose for anticipated litigation. 10 The applicants' submissions may be summarised as follows. First, that it is clear that the common law relating to legal professional privilege applies because this is a pre-trial matter, referring to Seven Network Ltd v News Ltd (2005) 144 FCR 379; [2005] FCAFC 125 and Apotex Pty Limited v Le Laboratoires Servier (2008) 79 IPR 100; [2008] FCA 1466 at [26] as well as Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; [2006] FCAFC 86 at [43] in particular. The respondents do not demur from this position and I proceed on the basis that the common law applies. 11 As to the claim for legal professional privilege generally, the applicants say it is for the respondents making the claim to establish the facts giving rise to the privilege (Rich v Harrington (2007) 245 ALR 106; [2007] FCA 1987 at [7]). According to the applicants, it is insufficient for a party on a global basis simply to assert that documents were brought into existence for the purpose of legal advice and/or in anticipation of litigation. Moreover, a document brought into existence for the purpose of the investigation cannot be privileged because it is not for the relevant, dominant purpose. 12 Second, the applicants say that the doctrine of issue waiver applies. The touchstone for issue waiver is whether there is inconsistency between the maintenance of the privilege and the conduct of the respondents. In this case, the applicants say that the notice under clause 16 expressly puts in issue or asserts that the agent of the second respondent formed an opinion, namely, that the second applicant was unsuitable on account of the matters raised in Schedule 2. Further, the notice itself asserts that this opinion was reasonably reached. In these circumstances, the applicants say that matters going to the formation of that opinion and whether or not the opinion was reasonably reached are necessarily the subject of an issue waiver. The applicants support this by reference to various authorities including, in particular, Commissioner of Taxation v Rio Tinto Limited at [61]. 13 According to the applicants, what is required is a fact based inquiry. The applicants accept that issues of degree are involved and that more than a mere denial of an assertion is required. However, in this case, the applicants say that there is substantially more than a mere denial because the notice under clause 16 itself asserts both the existence of an opinion and its reasonableness. The defence of the respondents also unambiguously asserts both the formation of the opinion and its reasonableness. Thus, say the applicants, it is inconsistent for the respondents to maintain the privilege in circumstances where their own notice directly puts in issue the existence of the relevant state of mind and its reasonableness. In short, adopting para 34 of the applicants' written submissions, the applicants contend that: The case pleaded by the respondents necessarily lays open for scrutiny (1) the content of documents that constitute evidence of what is said to be 'investigations' of an improper association with the applicants; (2) the content of documents that constitute evidence or are likely to have contributed to the alleged formation by the Corporation's representative of a state of mind that CPR Property [the second applicant] was unsuitable; and (3) the content of documents that constitute evidence or are likely to have contributed to the manner of formation of that state of mind which is asserted to have been reasonable. 14 For their part, the respondents' principal submission is that the notice under clause 16 identifies the matters raised in Schedule 2 as those on which the respondents relied. Schedule 2, which I have already quoted, makes no reference to legal advice. In this sense, say the respondents, legal advice is not put in issue. Given the need to find inconsistency between the respondents' conduct and the maintenance of the privilege, one should conclude either that there is no inconsistency or that this case is at the lower end of the range from the obvious to the less obvious. 15 Both parties consented to me reviewing the documents. I have undertaken that review. On the basis of that review and the submissions which I have heard, it seems clear to me that there are documents over which legal professional privilege has been claimed which are either not privileged because: - (i) they relate solely to the investigation rather than the provision of any legal advice; and (ii) could not have been created in anticipation of litigation in the sense that they relate to administrative matters with respect to the investigation. There are also documents over which privilege has been maintained which relate directly to the formation of the relevant opinion either before the opinion was formed, or refer to circumstances in existence before the opinion was formed, even though the documents themselves have been brought into existence after the opinion was formed. 16 Having looked at the documents and heard the submissions, I accept that this is a case where there is not a mere denial of an obligation as in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499; [2003] FCA 384. It is a case where the circumstances necessarily lay open to scrutiny certain confidential communications. I am satisfied, at least in respect of some of the documents I have seen, that there is an inconsistency between the maintenance of the privilege and the conduct of the respondents, being their conduct in issuing the notice under clause 16 itself, and expressly relying upon and pleading the entirety of the clause in their defence, and otherwise denying the applicants' assertion of the unreasonableness of the opinion. In other words, the respondents' conduct has itself put in issue certain matters which might otherwise attract legal professional privilege. [Discussion with counsel concerning the form of the order which should be made] 17 Accordingly, I make the following orders: (1) By 19 May 2009, the respondents are to file and serve a supplementary list of documents producing for inspection documents over which privilege was claimed in the Amended List of Documents filed 16 March 2009, being documents that: (a) constitute or evidence what is said to be investigations of an improper association with the applicants; (b) constitute or evidence or are likely to have contributed to the alleged formation by the first respondent's representative of a state of mind that the second applicant was unsuitable; and (c) constitute or evidence or are likely to have contributed to the formation of that state of mind, which is asserted to have been reasonable. (2) The respondents are to pay the applicants' costs of the notice of motion filed on 9 April 2009 as agreed or taxed. (3) The exhibits be returned. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.