Jake McKinley Pty Ltd v Geddes

Representation: Counsel:
M Pruscino (Plaintiff/Respondent)
A Britt (Defendants/Applicants)
Solicitors:
Jake McKinley (Plaintiff/Respondent)
A W Pitman & Co Solicitors (Defendants/Applicants)

File Number(s): 2023/152783

Publication restriction: Nil

EX TEMPORE JUDGMENT

1. The plaintiff is the law firm formerly known as Foulsham & Geddes. It has brought proceedings against a former employee who is the first defendant, and the trustee of the trust associated with him which is the second defendant. It seeks damages and other relief arising out of alleged breaches of duty by the first defendant.

2. The plaintiff has filed and served a report of Mr Kanan, a forensic analyst, in support of its claim for damages. Mr Kanan's report was dated 11 June 2024, and states that it was prepared in accordance with the Expert Witness Code of Conduct in Sch 7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).

3. Mr Kanan is the managing director of FTI Consulting Pty Ltd. On 28 October 2024, the defendant served a subpoena on FTI Consulting in which, among other things, it sought documents in the following categories:

“2. All correspondence between Michael Kanan and Jake [McKinley] Pty Ltd (formerly Foulsham & Geddes Pty Ltd) ACN 167 291 394 over the period 23 November 2023 to 30 June 2024 in relation to the preparation and finalisation of the expert report of Michael Kanan dated 11 June 2024.

3. All versions of the EXCEL Spreadsheet in its native electronic form exchanged between Michael Kanan and Jake [McKinley] Pty Ltd (formerly Foulsham & Geddes Pty Ltd) ACN 167 291 394.”

4. FTI Consulting has produced documents in response to the subpoena.

5. The plaintiff has claimed legal professional privilege in relation to the documents produced by FTI in response to categories 2 and 3. The defendants say that the plaintiff has not made out that the documents produced by FTI Consulting are privileged, and that even if they are, that privilege has been waived in circumstances where the plaintiff has now served Mr Kanan's report, and indicated that it proposes to rely on it at the final hearing on the question of damages.

6. On 5 December 2024, the defendants filed a notice of motion by which they seek orders for access to the documents in the disputed categories being documents now contained in subpoena packets S-7, S-8 and S-9 produced by FTI Consulting.

7. The documents in question are described in an annexure to an affidavit prepared by Mr McKinley affirmed on 20 November 2024. Mr McKinley has the carriage of the matter on behalf of the plaintiff. The annexure to Mr McKinley's affidavit is a schedule of documents that identifies documents by reference to a document number in each of the subpoena packets.

8. The description of the documents is, in each case, by reference to a date, a description of document type, a file name, and a brief description provided by Mr McKinley, no doubt from having inspected the documents himself.

9. For example, document 5 in subpoena packet S-7 is said to be dated 6 June 2024 and is described as "emails". There is then a file name which seems to be the file name from the messaging program from which the emails have been extracted. The description of the documents is "email from Michael Kanan to Jackson McKinley with enclosed Excel file (‘draft annexure E_review for factual accuracy.xslx’) noting instructions and referring to annexure E client list being used for pre-estimate of damages calculation.”

10. Although all of the documents now in dispute are described in similarly general ways by Mr McKinley, I am satisfied from his description of the documents that the documents were all prepared for the dominant purpose of communicating matters in connection with the preparation of Mr Kanan's expert report, and that the documents are subject to legal professional privilege, subject to any question of waiver. In each case, that conclusion rests on Mr McKinley's description of the documents in the annexure to his affidavit, as I have already described.

11. However, I note that in many if not most cases the documents are described as email chains containing or referring to "instructions" or as referring to such matters as "invoices" or "calculations" which makes it clear that the subject matter of the documents was related closely to the preparation of Mr Kanan's report. It in fact appears from Mr McKinley's general description of the documents that most of them seem to have been prepared for the purpose of either seeking or providing feedback and instructions to Mr Kanan on the substance of the proposed expert report.

12. The report itself refers to particular letters of instruction which have been annexed to the report. However, it is apparent from those letters of instruction that Mr Kanan was also provided with other instructions by way of email, and that those additional emails have not been attached to his report. In particular, a letter of instruction from the plaintiff to Mr Kanan dated 22 February 2024 says:

"We refer to the above proceedings, our letter of instruction to you dated 23 November 2023, and Mr Carswell-Doherty's emails to you dated 18 January 2024 (18 January instructions), 5 February 2024 (5 February instructions), and 12 February 2024 (12 February instructions). We wish to provide you with the following further instructions...”

13. The letter then sets out a number of additional instructions that are couched in terms of particular matters that seem to have been raised in the various “instructions” referred to in the opening paragraph which I have extracted above.

14. The additional emails referred to in the 22 February 2024 letter were within the scope of the subpoena to FTI Consulting. The annexure to Mr McKinley's affidavit includes several documents that are described as email chains that probably include the particular emails described as instructions in the 22 February 2024 letter, however, those documents have not been separately identified. I infer that they are in fact included in some or other of the chains of emails over which privilege is still claimed.

15. There are also a large number of email chains referred to in Mr McKinley's annexure that post-date the January and February 2024 email chains that I have just described. However, the description of those documents does not seem to differ in any material respect from the description given to the email chains that, as I have inferred, include the specific emails containing instructions as referred to in the 22 February 2024 letter. That is to say that going by Mr McKinley's description of the email chains in the annexure to his affidavit, it is hard to see why legal professional privilege would attach to one particular email chain and not the other. They are all described generally in much the same way.

16. The parties were not in dispute as to the principles applicable to the question of waiver. The defendants referred me to the decision of Lindgren J in Australian Securities & Investments Commission (ASIC) v Southcorp Ltd [2003] FCA 804 at [21] where his Honour summarised the relevant principles applicable to the question of whether, and if so, when legal professional privilege may be taken to have been waived in relation to communications with experts. His Honour said:

“I will apply the following principles which I did not understand to be in dispute:

1. Ordinarily the confidential briefing or instructing by a prospective litigant's lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege: cf Wheeler v Le Marchant (1881) 17 ChD 675; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246; Interchase Corp Ltd (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141 ("Interchase") at 151 per Pincus JA, at 160 per Thomas J.

2. Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client's lawyers and the expert witness, ordinarily attract the privilege: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 ("Propend"); Interchase, per Pincus JA; Spassked Pty Ltd v Commissioner of Taxation (No 4) (2002) 50 ATR 70 at [17].

3. Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications: cf Interchase at 161-162 per Thomas J.

4. Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents; cf Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481 per Gibbs CJ, 487-488 per Mason and Brennan JJ, 492-493 per Deane J, 497-498 per Dawson J; Goldberg v Ng (1995) 185 CLR 83 at 98 per Deane, Dawson and Gaudron JJ, 109 per Toohey J; Instant Colour Pty Ltd v Canon Australia Pty Ltd [1995] FCA 870; Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89 ("ACCC v Lux") at [46].

5. Similarly, privilege cannot be maintained in respect of documents used by an expert to form an opinion or write a report, regardless of how the expert came by the documents; Interchase at 148-150 per Pincus JA, at 161 per Thomas J.

6. It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report; cf Dingwall v Commonwealth of Australia (1992) 39 FCR 521; Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 83 FCR 397 at 400; ACCC v Lux at [46].”

17. However, as the plaintiff pointed out, it has also been held that the mere service of an expert report does not automatically mean that privilege in all communications with the expert is thereby waived.

18. The plaintiff referred me in this respect to the reasons of White J in New Cap Reinsurance Corporation Ltd (in liq*) v Renaissance Reinsurance Ltd* [2007] NSWSC 258 (New Cap Re). In that decision, White J explained by reference to s 122 of the Evidence Act 1995 (NSW) that the mere service of an expert report does not automatically lead to the result that privilege is waived. Rather, his Honour explained by reference to what had been said by the Court of Appeal in Chen and Others v City Convenience Leasing Pty Ltd & Anor [2005] NSWCA 297 at [29] to [33] that the question is governed by the question of inconsistency explained by the High Court in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66.

19. Justice White said that the qualification in [4] of Lindgren J's statement of principles in Australian Securities & Investments Commission (ASIC) v Southcorp Ltd is a significant one. He pointed out that there are many cases in which it has been held that privilege in material provided to an expert is not lost merely because the expert is called or the expert's report is served. The point, as White J explained, is to determine whether or not it can be said that the privileged documents influenced the content of the expert report, and that that is a matter that the opposite party should be entitled to test.

20. At [53] to[54] of his reasons in New Cap Re, White J said:

“[53] The question is not merely whether it could be said that the privileged materials were used in such a way that they could be said to influence the content of the report, but whether it could be said that they influenced the content of the report in such a way that the use or service of the report would be inconsistent with maintaining the privilege in those materials, such as, where it would be unfair for the party to rely on the report without disclosure of those materials. Where an expert’s report is submitted to a party’s legal advisers so as to be put into a form which will ensure that it is admissible, it can be said that the privileged communications between the expert and the lawyers have influenced the content of the report, in the sense of its form, although not in the sense of the formulation of the substantive opinions expressed by the expert. Likewise, privileged communications between an expert and the party’s lawyers whereby material information is provided to the expert in the form of assumptions or documents may well influence the content of the report. However, an expert’s report is required to state what material and assumptions are relied on. Use of a final report, which refers to such materials and assumptions, is not inconsistent with maintaining confidentiality in the communications which produced the final product.

[54] Having considered the documents in respect of which privilege is claimed, I do not consider that it could be said that they have influenced the content of the final report in such a way that the service or use of the report would be inconsistent with maintaining confidentiality in the privileged materials.”

21. The plaintiff also referred me to the reasons of Ball J, as his Honour then was, in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2013] NSWSC 211. In those proceedings, Ball J was asked to determine whether or not a party might have access to communications with an expert in circumstances where the expert's report had been served in anticipation of the hearing.

22. Justice Ball declined to grant access and, in doing so, particularly relied on what had been said by White J in New Cap Re. At [23] of his Honour's reasons, Ball J explained that it is common for a party's legal advisors to communicate with an expert for the purpose of giving instructions, and commenting on the form of the expert's report, and in some cases, testing tentative conclusions that the expert has reached. His Honour said:

"The court depends heavily on the parties' legal advisors to assist experts to address properly the questions asked of them and to present their opinions in an admissible form and in a form which will be readily understood by the court. Equally, the court depends heavily on the parties' legal advisors to ensure that any opinion expressed by an expert is an opinion the expert holds for the reason the expert gives and that the expert otherwise complies with the Expert Witness Code of Conduct. That requirement is reinforced by the acknowledgment that the expert is required to give concerning the code. The fact that legal advisors have communicated with an expert and provided comments on drafts of a report in a way which is consistent with discharging the first obligation is not a reason of itself for supposing that they have failed to discharge the second; and, as I have said, there is nothing else in the material Mr Cooper points to suggest that the OMB Parties' legal advisors have failed to discharge that obligation in the case of Professor Burton's report.”

23. However, notwithstanding his Honour's observations about the nature of a solicitor's obligations in the preparation of an expert report (which, in my view, deserved particular attention and respect), it is quite clear in these proceedings that there is real inconsistency between the position of the plaintiff in seeking to rely on Mr Kanan's report, and the maintenance of privilege in the email chains described in the annexure to Mr McKinley's affidavit as well as the Excel spreadsheets referred to in that annexure.

24. As I have already mentioned, Mr Kanan's report itself refers to at least three email instructions over which legal professional privilege is still claimed. I can see no reason at all why the defendants should not be entitled to see those documents at the very least. However, as I have also mentioned, those documents are described in the evidence quite compendiously as “email chains” in a way that makes it very difficult to distinguish or to tell any difference between the nature of those communications and the later communications that are also described as “email chains” involving “instructions” and like matters.

25. As I have already noted, many and possibly even most of the email chains in dispute here are described in a way that makes it quite clear that they relate to instructions to the expert, or otherwise relate to the substance of his report.

26. That is, they all seem to relate to the provision of instructions or to the substance of Mr Kanan's opinions.

27. I do not consider this to be a case where the defendants are seeking access to documents that deal with mere formalities or which merely raise matters for explanation such as those described in para 53 of White J's reasons in New Cap Re. Rather, the documents in question do appear to me to relate to the provision of instructions to Mr Kanan, and to the substance of his opinions.

28. There is, in my view, a relevant inconsistency giving rise to a real unfairness in the maintenance of privilege in these circumstances. I therefore will make orders in accordance with the notice of motion dated 5 December 2024:

29. Pursuant to rr 1.8 and 1.9 of the Uniform Civil Procedure Rules (UCPR), the Plaintiff’s claim for privilege over documents produced in packets S-7, S-8 and S-9 be overruled.

30. Order, pursuant to r1.9(4A) of the UCPR, that the Defendants be granted access to packets S-7, S-8 and S-9.

31. Plaintiff to pay the defendant’s costs of the notice of motion.

32. List the matter before the registrar at 9:30am on Tuesday 8 April 2025

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