Ingot Capital v Macquarie Equity

Akins v Abigroup Limited [1998] 43 NSWLR 539 Austress v Marlin [2002] NSWSC 958 R v Bell; Ex parte Lees (1980) 146 CLR 141 Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297 CASES CITED : Dubbo City Council v Barrett [2003] NSWCA 267 New Cap Reinsurance Corporation Ltd v Renaissance Reinsurance Ltd [2007] NSWSC 258 R v Crown Court at Manchester, ex parte Rogers [1999] 4 All ER 35 Trade Practices Commission v Port Adelaide Wool Company Pty Limited (1995) 60 FCR 366 Van Zonneveld v Seaton [2004] NSWSC 960

PARTIES : NCRA - 36th Cross-claimant Guy Carpenter Parties

COUNSEL : D Cook - 36th Cross-Claimant L P Menzies - for Guy Carpenter Parties

SOLICITORS : Henry Davis York - 36th Cross-Claimant TressCox - for Guy Carpenter Parties

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST

50169/01 INGOT CAPITAL INVESTMENTS PTY LIMITED v MACQUARIE EQUITY JUDGMENT - Ex Tempore 1 HIS HONOUR: This case concerns whether a claim for client legal privilege is made out. It is common ground that the existence of privilege is to be decided in accordance with the principles by which client legal privilege arises under the Evidence Act 1995 and not in accordance with the principles governing the Common Law of legal professional privilege. 2 The documents concerning which the dispute exists are sought for the purpose of an argument about the costs payable in connection with the thirty-third cross-claim in this matter. This cross-claim was brought by NCRA. It alleged that the directors of a company had breached their duty by creating a deceptive balance sheet and that the defendant to the thirty-third cross-claim, a broker known as Guy Carpenter, was knowingly involved in that breach of duty. It was contended that the purpose of the misleading balance sheet was to disguise the fact that there had been a breach of a covenant in the company's finance facility, and that if that breach of covenant had not been disguised, its bank, the Dresdner Bank, would have called up the finance facility earlier than it in fact did. McDougall J has dismissed the thirty-third cross-claim. 3 Mr Valencourt is a United States banker who at the time relevant to the cross-claim worked for Dresdner Bank. In the course of pre-trial preparation the solicitors for NCRA, Henry Davis York, served a statement of evidence that was proposed to be given by Mr Valencourt. The statement of evidence was dated 5 October 2005 and it was served on 6 October 2005. Ultimately Mr Valencourt did not give evidence at the trial. 4 That situation was notified to, amongst others, the solicitors for Guy Carpenter on 10 May 2006. On that date the solicitors for NCRA sent them a facsimile saying: "We confirm that we have been informed by Mr Valencourt's legal adviser, Mr Cummings, of Baker & McKenzie New York, that Mr Valencourt is reluctant to attend. A copy of the email from Mr Cummings dated Saturday 19 April setting out Mr Valencourt's position is attached." 5 That email from Mr Cummings stated: "I have now been able to speak with Mr Valencourt. As you appreciate, the events you ask about occurred a long time ago and at this point Mr Valencourt believes he can no longer remember the details of those events with sufficient clarity and accuracy to be able to testify about them in any useful manner. He does not think he will be able to contribute much to the trial of this matter and is reluctant to spend perhaps three days on the witness stand feeling foolish about not being able to answer questions put to him by a series of counsel. It would not seem to be a good use of his time or that of the court or counsel. Under these circumstances he believes there would be no point in his appearing as a witness in this matter. 6 The case that Guy Carpenter wishes to make at the forthcoming hearing has been summarised by its solicitor as raising questions: "About whether there was a proper factual basis for the pleaded case on Dresdner causation - at the time of commencement of the proceedings by NCRA and at various subsequent times." 7 Guy Carpenter contends that NCRA acted unreasonably because it did not have a proper factual basis for advancing the case and it either did so without having the relevant documentary evidence or, if it did have the "Dresdner documents" (as described in paragraph 15(c) of the submissions in reply), it failed to properly consider or analyse them. On that basis it intends to seek indemnity costs. 8 Guy Carpenter has served a notice to produce on NCRA, seeking production of the following documents: "6. Any written communications, or records thereof, or any part thereof, recording or relating to: (a) The availability or unavailability of Valencourt to give evidence in these proceedings, where by video link or in person; or (b) The willingness or unwillingness of Valencourt to do so." 9 While some documents have been produced in response to that paragraph of the notice to produce, a claim of client legal privilege has been made in relation to three categories of documents. Guy Carpenter does not argue about the claim in relation to one of those categories. The two categories that remain in dispute have been identified as:

(1) written communications between Henry Davis York and Mr Valencourt personally;

(2) written communications between Henry Davis York and Mr Valencourt's legal representatives (Baker & McKenzie, Sydney and New York). 10 The evidentiary foundation for the claim of privilege is an affidavit of the solicitor for the cross-claimant on the thirty-third cross-claim. She there states without objection that all of the communications there referred to: "were conducted in confidence pursuant to Henry Davis York's duty of confidence owed to NCRA under its retainer." 11 She also states, concerning the first category of documents, that they came into existence: "7(a) for the purpose of providing professional legal services to NCRA in relation to these proceedings, Henry Davis York made contact and communicated with Mr Valencourt personally with a view to speaking with him to potentially obtain evidence from him for the purpose of these proceedings ..." 12 She deposes that the second category of documents came into existence: "7(b) for the purpose of providing professional legal services to NCRA in relation to these proceedings, Henry Davis York also communicated with Valencourt's legal representatives (Baker & McKenzie in Sydney and New York), with a view to obtaining evidence from Valencourt in these proceedings …" 13 Mr Menzies, counsel for the defendant to the thirty-third cross-claim, put his claim for access to the documents on two separate bases. One is that the documents never attracted privilege. The other is that any privilege which might once have attached to them has been waived. Whether the Privilege Ever Existed. 14 Mr Menzies made clear that he was not necessarily seeking to see the whole of any document which fitted within one or other of the categories that are in dispute. He made clear that if there was a document that contained information relating to Mr Valencourt's availability or willingness to give evidence, and also information relating to the substance of the evidence that Mr Valencourt might give, only disclosure of the portion of the document that dealt with Mr Valencourt's availability or willingness to give evidence was sought. 15 The statutory provisions that are relevant to whether a claim for privilege exists are as follows: " confidential communication means a communication made in such circumstances that, when it was made:

(a) the person who made it, or (b) the person to whom it was made, was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law. 118 Legal advice 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 or a lawyer, for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

119 Litigation 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 between the client and another person, or between a lawyer acting for the client and another person, that was made, or (b) the contents of a confidential document (whether delivered or not) that was prepared, for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party." 16 Mr Menzies took me to the remarks of Justice Branson in Trade Practices Commission v Port Adelaide Wool Company Pty Limited (1995) 60 FCR 366 at 373, where her Honour said, concerning privilege alleged to arise under s 119 of the Evidence Act: "It is not every confidential communication between a legal adviser and potential witness in preparation for a trial which attracts privilege." 17 While I accept that that statement is correct - for instance a confidential communication between a legal adviser and a potential witness in preparation for a trial might still fail the dominant purpose test in s 119 - it does not advance the argument very far. The existence of the privilege must be measured by comparing the facts of the case with the text of s 119. 18 Mr Menzies points me to the decision of Lord Bingham of Cornhill CJ in R v Crown Court at Manchester, ex parte Rogers [1999] 4 All ER 35. The question at issue in that case was whether appointment diaries and attendance notes of a solicitor showing the time at which a person had attended his offices were privileged. Lord Bingham said at 41: "The record of time on an attendance note, on a time sheet or fee record is not in my judgment in any sense a communication. It records nothing which passes between the solicitor and the client and it has nothing to do with obtaining legal advice. It is the same sort of record as might arise if a call were made on a dentist or a bank manager. A record of an appointment made does involve a communication between the client and the solicitor's office but is not in my judgment, without more, to be regarded as made in connection with legal advice. So to hold would extend the scope of legal privilege far beyond its proper sphere, in my view." 19 Mr Cook, counsel for the respondent, submitted that that decision should be distinguished from the present case. First, he pointed out that it depended on the Common Law of legal professional privilege. He pointed out that one difference between the Common Law and the client legal privilege that arises under the Evidence Act is that the Common Law confers privilege upon communications and records of communications, while the privilege that is afforded by the Evidence Act goes further and extends to the contents of a confidential document prepared for the relevant dominant purpose, whether the document is delivered or not (New Cap Reinsurance Corporation Ltd v Renaissance Reinsurance Ltd [2007] NSWSC 258 at [20]). 20 While he is correct in pointing out that that difference exists, it is not a distinction which bears upon the facts of the present case because all of the documents in dispute in this case are described as "communications". 21 Another ground of distinction that Mr Cook points to is that the privilege in question in Rogers was a privilege relating to legal advice, not a privilege relating to litigation. I accept that that is so. 22 The safer guide to deciding whether privilege exists under the Evidence Act is not to rely upon English decisions concerning the Common Law, but to apply the test as construed by Australian courts. 23 Under the definition of "confidential communication" in the Evidence Act it is not necessary for the relevant relationship of confidence to be one that exists between the parties to the communication. It is sufficient if only one of them is under an obligation of confidence in relation to that communication. For example, if a solicitor were to discuss with a potential witness the evidence that that witness could give, the solicitor would clearly be under an obligation of confidence to his client concerning the contents of the discussion. That is sufficient to make it a "confidential communication" within the Act, even though the potential witness might be free to discuss with anyone he chooses the contents of his conversation with the solicitor. 24 Applying the text of s 119 to the present case, I am satisfied that the communications that are in dispute all count as "confidential communications" within the meaning of the Evidence Act. When the task that the solicitor was engaged in was for the purpose of providing professional legal services to her client in relation to these proceedings, and no submission has been put that I should not treat that as being a dominant purpose, it seems to me that the test of s 119 is satisfied in relation to the first category of documents. 25 Likewise, the stated purpose of the communications with Baker & McKenzie are ones that, in my view, fall within s 119. 26 Mr Menzies referred me to the decision of Justice Barrett in Austress v Marlin [2002] NSWSC 958. There, Justice Barrett was dealing with a situation where an affidavit had been filed and served by one party to the litigation, who ultimately did not read that affidavit at the hearing. The legal representative of the other party to the proceedings then sought to read or tender the affidavit. A question arose of whether client legal privilege applied to that affidavit. His Honour held that, even though an affidavit that has been filed and served in one set of proceedings, but not relied upon in those proceedings, retains confidentiality such that it cannot be used in another set of proceedings, that principle did not apply: "where it is sought to use in particular proceedings affidavits or witness statements served by one's opponent in those same proceedings. The purpose of the communication, in a case such as that, is to inform the recipient of evidence the serving party intends to lead. That communication cannot carry with it any form of restriction upon the use the recipient may make of the material, save that it must be used for the proper purposes of the particular proceedings." 27 While I respectfully agree with those observations, the factual situation in which they were made is different to the present. 28 I have also considered whether the decision of the High Court R v Bell; Ex parte Lees (1980) 146 CLR 141 had any relevance. That case held that no privilege attached to a client's communication to a solicitor of the client's address. It related to the common law privilege concerning the giving of legal advice. As well, there was a most important and relevant factual consideration in the case. At the time the client in question was hiding a child in breach of an order of the Family Court. Even though the client in question was approaching the solicitor for a purpose connected with property proceedings, not for a purpose connected with custody of the child, and even though the solicitor was unaware that the breach of the Family Court order had occurred, there was a special and narrow basis on which there was an absence of privilege. It was that it related to the absence, on public policy grounds, of legal professional privilege concerning information which would enable the court to discover the whereabouts of a child who was the subject of court orders (145 per Gibbs CJ, 154 per Stephen J, 159 per Murphy J, and 163 per Wilson J, with whom Aickin J agreed). Thus Bell does not govern the present situation. 29 In those circumstances I am of the view that there was initially privilege attaching to the documents that are the subject of the dispute. Waiver 30 Any question of whether waiver exists is determined in accordance with s 122 of the Evidence Act 1995 which so far as is relevant provides: 122 Loss of client legal privilege: consent and related matters (1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made: … (c) under compulsion of law, or … ... (5) Subsections (2) and (4) do not apply to: (a) a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person, or (b) a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to a proceeding or an anticipated or pending proceeding in an Australian court or a foreign court." 31 The waiver is said to arise from both the provision of the evidence statement, and also from the provision of Mr Cummings' email. 32 The evidence statement is one which was provided in obedience to directions of the court. A document that is provided to the court directions is provided, "under compulsion of the law" within the meaning of s122(2)(c): Akins v Abigroup Limited [1998] 43 NSWLR 539 at 552; Dubbo City Council v Barrett [2003] NSWCA 267. While s 122(2) is subject to s 122(5) there is no basis for concluding that s 122(5) applies here. Thus, waiver of the privilege has not arisen from the serving of the statement. 33 The concept of consent in s 122(1) extends to an imputed consent that arises when it would be unfair or inconsistent for a person who has disclosed one document to keep another document hidden: Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297 at [30]-[33]. It is unnecessary to decide in this application whether there is any difference between "unfair" and "inconsistent" in this context, or whether the relevant principle relates to just one of being "unfair" and "inconsistent": cf Van Zonneveld v Seaton [2004] NSWSC 960 at [11]. 34 Comparing the terms of the email with the description of the two categories of documents in question I am not able to decide in the abstract whether it would be unfair or inconsistent to keep any of the documents for which privilege was claimed hidden, or whether it would not. Whether that is so would depend on the content of the communications themselves. I have therefore regretfully come to the conclusion there is no alternative but for me to inspect the documents and to make up my mind about them one by one. **********

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