[2006] FCAFC 86
Cooper v Hobbs [2013] NSWCA 70
Council of the NSW Bar Association v Archer (2008) 72 NSWLR 236
[2008] NSWCA 164
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303
[2013] HCA 46
Ferella & Anor v Official Trustee in Bankruptcy (2010) 188 FCR 68
[1999] HCA 66
Osland v Secretary, Department of Justice (2008) 234 CLR 275
Source
Original judgment source is linked above.
Catchwords
[2006] FCAFC 86
Cooper v Hobbs [2013] NSWCA 70
Council of the NSW Bar Association v Archer (2008) 72 NSWLR 236[2008] NSWCA 164
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303[2013] HCA 46
Ferella & Anor v Official Trustee in Bankruptcy (2010) 188 FCR 68[1999] HCA 66
Osland v Secretary, Department of Justice (2008) 234 CLR 275
Judgment (4 paragraphs)
[1]
Judgment
On 7 November 2022, the hearing of the class action in respect of the construction of the Sydney light rail commenced. The proceedings are representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005 (NSW).
The first and second plaintiffs, Hunt Leather Pty Ltd (Hunt Leather) and Ms Sophie Hunt, and the third and fourth plaintiffs, Ancio Investments Pty Ltd (Ancio) and Mr Nicholas Zisti, are the lead plaintiffs in the action. At this stage, I am determining issues relating to liability and the losses said to have been sustained by the lead plaintiffs.
The plaintiffs allege that they suffered loss as a result of the impact of the light rail construction upon their businesses. Hunt Leather operates two stores in the city, being one in the Strand Arcade and one in the Queen Victoria Building. Ancio used to operate a Thai restaurant in Anzac Parade, Kensington.
The only cause of action pleaded by the plaintiffs is in nuisance. That is, the plaintiffs seek damages for both private and public nuisance. The defendant disputes that the plaintiffs have any cause of action, dispute any nuisance and, in any event, rely on a number of defences, including s 43A of the Civil Liability Act 2002 (NSW).
At the commencement of the hearing, the plaintiffs gave notice of their intention to include an additional claim for damages, being the total cost of the litigation funding arrangement that the plaintiffs have in place with a litigation funder.
At this stage, I do not know much about the arrangement except that I am told that the litigation funder will be entitled to 40% of all damages recovered. The plaintiffs say that, as a separate head of damages, I should award each plaintiff an additional 40% on top of any other damages assessed.
There is an issue between the parties regarding the proper particularisation of the claim but that does not matter for the purposes of the issue I am currently considering. I am informed that such a claim has never been accepted (and perhaps never made) in any other class action. The claim might be described as novel but, as is well known, the law develops in an incremental fashion and constantly evolves to suit changing times.
In response to the notification of the new claim, the defendant served notices to produce dated 26 October 2022 on Hunt Leather and Ms Hunt and Ancio and Mr Zisti respectively. The categories of documents in dispute are limited to paragraphs 1, 2, 3, 4 and 9 of the notices, which are in substantially the same terms. Whilst most of the discussion in this judgment will be in relation to Hunt Leather and Ms Hunt, equal considerations apply to Ancio and Mr Zisti.
Hunt Leather and Ms Hunt have agreed to produce documents in answer to categories 5, 6, 7 and 8 (which are in effect financial records) but dispute that the defendant is entitled to the documents covered by categories 1, 2, 3, 4 and 9 on the basis that:
1. Production of the documents would not serve any legitimate forensic purpose; and
2. The documents are privileged in any event.
It is clear from the description of documents in paragraphs 1, 2, 3, 4 and 9 that the defendant is seeking access to documents which might, in general terms, be viewed as privileged, being communications between the plaintiffs and their legal advisors and other related documents.
The reason that the defendant is seeking production of the documents is said to be the statements made by Ms Hunt and Mr Zisti in their affidavits dated 25 October 2022. The relevant paragraphs of Ms Hunt's affidavit are as follows:
"5. On or about 9 September 2019, I was approached by Mitry Lawyers and was asked whether the Hunt Leather and I would be willing to be appointed as lead plaintiffs in the proceedings. I agreed to this request.
6. On or about 1 O December 2019, Hunt Leather and I were appointed as lead plaintiffs in the proceedings.
7. At the time that Hunt Leather and I agreed to be appointed, and were appointed, as lead plaintiffs in the proceedings:
a. I was aware that the legal costs of running the proceedings to trial (Legal Fees) would likely be at least several million dollars;
b. I was aware that in the event that the proceedings were unsuccessful, an order could be made for the payment of the defendant's costs (Adverse Costs). I was aware that those costs would also likely be at least several million dollars;
c. I understood that, because of the ILP Agreement, I and Hunt Leather would not have to pay the Legal Fees and that ILP would pay the Legal Fees. I also understood that ILP had agreed to meet any order that might be made for the payment of Adverse Costs, so that I and Hunt Leather would not have to pay those costs.
8. Had it not been for the ILP Agreement, I would not have been willing for Hunt Leather or myself to be appointed as lead plaintiffs, because:
a. neither Hunt Leather nor I had the financial resources available to pay for the Legal Fees or to take on the risk of Adverse Costs; and
b. neither Hunt Leather nor I had the ability to borrow sufficient funds through traditional finance options, such as a bank loan, to pay for the Legal Fees or to take on the risk of Adverse Costs."
The relevant paragraphs of Mr Zisti's affidavit are in similar terms.
The defendant submits that, having regard to its understanding of the way in which the plaintiffs will be pursuing the particular claim and what the plaintiff will need to prove, it is entitled to obtain access to documents said to be referable to the particular statements made by Ms Hunt and Mr Zisti, even though the documents which would fall within categories 1, 2, 3, 4 and 9 would ordinarily be privileged. That is, the defendant is seeking access to communications between Ms Hunt with her lawyers referable to her statement that she was asked to be and agreed to be the lead plaintiff and further referable to her statement in paragraph 8 that, had it not been for the litigation funding agreement, she would not have been willing for either herself or Hunt Leather to be appointed as lead plaintiffs.
The defendant says that, having regard to its analysis of the way in which the plaintiffs will be pursuing the case, it will be necessary for the plaintiffs to prove at a minimum:
"a. that they made a decision to agree to be a lead plaintiff in these proceedings;
b. in making that decision, they would not have been willing and able to finance this litigation (including the risk of an adverse costs order) unless they had the benefit of the funding agreement that they signed with ILP;
c. it was the alleged nuisance that caused them to be unwilling or unable to finance this litigation (including the risk of an adverse costs order) without the ILP funding agreement;
d. that the defendant knew, or ought reasonably to have known, that a consequence of the alleged nuisance would be that the plaintiff would be unable to finance the litigation other than by obtaining funding of the kind provided by ILP;
e. the difference between the cost of funding under the ILP funding agreement, and the cost of funding that would have been available to the plaintiffs absent the financial harm they suffered in consequence of the alleged nuisance;
f. that the plaintiffs took all reasonable steps to mitigate the claimed loss, including by negotiating the best possible terms with ILP, and investigating the availability of alternative providers of funding on superior terms."
The defendant submits that, the plaintiffs, by putting their state of mind in issue, have waived privilege in the sense that they have opened up the confidential communications to scrutiny and acted in such a way that is inconsistent with the maintenance of privilege over the documents.
In response, the plaintiffs contend that the defendant has not identified the forensic purpose of paragraphs 1 to 4 of the notices to produce other than stating that the plaintiffs have put in issue their state of mind. The plaintiffs submit that it appears the defendant wishes to advance the case that the plaintiffs would not have been willing to become lead plaintiffs without litigation funding, even if they did have the means to pay the costs themselves. The plaintiffs submit that this is not an issue which arises on the claim the plaintiffs are advancing. If the defendant wishes to argue that the claim must fail without evidence establishing that they would have pursued claims in nuisance without litigation funding, the plaintiffs accept the claim would fail.
Further, the plaintiffs do not accept that the documents sought in paragraph 9 (which may relate to whether the plaintiffs had taken reasonable steps to obtain cheaper litigation funding), again, would not be relevant to any issue articulated thus far. Mr Hochcroft on behalf of the plaintiffs did suggest at one stage that there were no documents under category 9, but there has been no formal admission in that regard.
Certainly, a party seeking access to documents must establish that the documents could have a legitimate forensic purpose (I do not mean to make too broad a statement on that principle) but, in my view, when considering such a novel and substantial claim, about which there is little other judicial guidance and already competing views as to what evidence might be relevant, I would be cautious in adopting too narrow an approach to the question of legitimate forensic purpose.
The issue has only just been raised by the plaintiffs and the submissions at this stage on the legal argument and findings of fact which might be necessary are somewhat limited. It is only necessary to say I am satisfied having regard to the submissions of Mr Owens SC on behalf of the defendant that, at least on the way in which the defendant wishes to meet the claim and how it suggests that the plaintiffs will need to pursue it, the documents sought may have a legitimate forensic purpose.
Causation will surely be an issue, as will the terms of the litigation funding agreement and the circumstances in which the plaintiffs entered into such an agreement. It is at least arguable that the circumstances leading to the entry into such an agreement may be relevant.
I reject the plaintiffs' submissions that paragraphs 1, 2,3, 4 and 9 should be set aside on the grounds of no legitimate forensic purpose.
[2]
Waiver of privilege
Although the plaintiffs have not produced a list of documents over which they claim privilege, the matter is proceeding on the basis that all of the documents in categories 1, 2, 3, 4 and 9 would be privileged (subject to Mr Hochroth having another look at that issue). The defendant does not challenge the essential proposition that the documents would be privileged but submits that there has been a waiver of privilege.
The defendant says that, having regard to the statements made in the paragraphs of their evidence to which I have referred, the substance of the confidential communications has been disclosed (referring to s 122(3)(a) of the Evidence Act 1995 (NSW)). The defendant submits that the plaintiffs do not merely refer to the existence of a privileged communication. Rather, they have provided a description of the content of the communication. The defendant submits that the plaintiffs are relying on the communications as an element of the claim.
Further, the defendant submits that the maintenance of the claim for privilege is inconsistent with the plaintiffs' reliance on that which was said for the purposes of their claim for damages regarding the litigation funding (referring to s 122(2) of the Evidence Act).
Further, in respect of categories 1(c), 2, 3 and 4, the defendant submits that the plaintiffs have put in issue their state of mind in relation to their agreement to act as lead plaintiffs, such that they have waived privilege on any communications which affected their state of mind. The defendant submits that once the plaintiffs choose to rely on their state of mind as a basis for a decision they made in response to a privileged communication, it would be inconsistent for them to refuse to disclose the privileged material.
In respect of category 9, the defendant submits that any privilege in respect of discussions, advice or drafts relating to any negotiations or advice regarding the litigation funding agreement has been waived having regard to the statement made by the plaintiffs "had it not been for the ILP agreement".
At the end of the argument, Mr Hochcroft on behalf of the plaintiffs said the plaintiffs would withdraw reliance on the parts of the evidence to which I have already referred that form the basis of this argument. It is only necessary to say that I do not accept that withdrawal of the parts of the affidavits after service restores the plaintiffs to the position they were in before the service of the affidavits. It is not suggested that the inclusion of the paragraphs was a mistake. The plaintiffs cannot withdraw disclosure of the confidential information (if it has been disclosed) in these circumstances.
[3]
Determination
In Mann v Carnell, [1] the Court said:
"Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large."
As the High Court made clear in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd, [2] common law principles apply in considering s 122(2) (the inconsistency point). However, questions of inconsistency require a focus on the facts of the particular case. Other cases provide limited guidance. [3]
As McColl JA said in Cooper v Hobbs, [4] questions of waiver are matters of fact and degree, the question being whether a legitimate disclosure of the effect of legal advice is inconsistent with the maintenance of confidentiality in terms of the advice. [5]
In GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd ("GR Capital Group"), [6] Macfarlan JA undertook an extensive analysis relating to the authorities of implied waiver, identifying that the relevant test is no longer simply one of fairness. [7]
Having reviewed all of the authorities, his Honour then provided the following summary of the relevant legal principles: [8]
"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."
As his Honour said, the Court must decide whether it would be inconsistent with the privilege holder's conduct to maintain privilege and there may be a fine line on the issue.
In Rio Tinto, [9] the Full Court of the Federal Court observed that, where the privilege holder puts the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication.
Further, the question is not merely whether the privilege holder has put her or his state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue. Even if the evidence makes it clear that the advice was relevant, that would not be sufficient to waive privilege unless the content of the advice is sufficiently put in issue. [10]
Indeed, in Hastie Group Ltd (in liq) v Moore, [11] the Court held that it is not even sufficient that the party claiming privilege has referred to a particular class of documents, stating waiver ordinarily only occurs where the contents of privileged documents are relied upon and mere reference to the existence of a privileged communication will not suffice. [12]
In the end, I do not accept that the plaintiffs have disclosed the substance of the communications to which the defendant seeks access within the meaning of s 122(3)(a) of the Evidence Act. Nor do I accept that they have put the contents of any confidential communication in issue. Even if the plaintiffs' state of mind is in issue (and it is difficult to see how the plaintiffs have made it an issue), that does not in some way result in a waiver of privilege in respect of the confidential communications.
Adopting the language of Macfarlan JA in GR Capital Group, I do not accept that the plaintiffs have made express or implied assertions about the contents of confidential communications. They have not opened the confidential communications to scrutiny. In my view, the plaintiffs have not acted in such a way that is inconsistent with the maintenance of privilege within the meaning of s 122(2) of the Evidence Act.
This case does not fall within the observations in the Council of the NSW Bar Association v Archer, [13] as being a person raising an issue about his or her state of mind.
I am not satisfied there has been any waiver of privilege and paragraphs 1, 2, 3, 4 and 9 of the notices to produce dated 26 October 2022 are struck out.
[4]
Endnotes
(1999) 201 CLR 1; [1999] HCA 66 at [29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ).
(2013) 250 CLR 303; [2013] HCA 46 at [32].
Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; [2006] FCAFC 86 at [45] ("Rio Tinto").
[2013] NSWCA 70 at [70].
Osland v Secretary, Department of Justice (2008) 234 CLR 275; [2008] HCA 37 at [49] (Gleeson CJ, Gummow, Heydon and Kiefel JJ).
[2020] NSWCA 266.
Ibid at [53].
Ibid at [57].
At [52] (Kenny, Stone and Edmonds JJ).
see Ferella & Anor v Official Trustee in Bankruptcy (2010) 188 FCR 68; [2010] FCA 766 at [65] (Wigney J).
[2016] NSWCA 305 at [57] (Beazley P and Macfarlan JA, Leeming JA not deciding).
Ibid at [53].
(2008) 72 NSWLR 236; [2008] NSWCA 164.
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Decision last updated: 14 November 2022