Evidence - Facts excluded from proof - On grounds of privilege - Professional confidence - Legal profession - Waiver of privilege - Waiver implied by conduct - Legal costs claimed as damages by mistake - Claim abandoned before discovery process complete.

Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, applied.

Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2007] VSCA 224, distinguished.

Respondent/Defendant: M E O'Farrell SC and G O'Rafferty

Judgment Number: [2012] TASSC 12

1 This application concerns disputed claims of legal professional privilege in relation to documents discovered by the defendant. The plaintiff is seeking orders for documents covered by the claims for privilege to be produced for inspection by its solicitors or, alternatively, for such documents to be produced to the Court for inspection for the purpose of determining the privilege claims.

2 The defendant, Hockey Tasmania Incorporated, owns land at New Town where it has hockey fields and associated facilities. In or about July 2006 it entered into an agreement with the plaintiff, Johnstone McGee & Gandy Pty Ltd ("JMG"), for the provision of engineering services. As I understand it, the contract related to the construction of two hockey pitches where originally there was one. I was told that substantial work was done, that undulations developed, and that Hockey Tasmania ultimately engaged other companies and had remediation works done, at a substantial cost. JMG instituted this action, but sought only declaratory relief. The true claimant in the proceedings is Hockey Tasmania. By a counterclaim, it is claiming damages in excess of $2 million against the plaintiff and other parties that were added as defendants to the counterclaim. The present application does not directly concern those other parties, and they were not represented at its hearing.

3 In the course of the discovery process, Hockey Tasmania filed and served two lists of documents, each verified by affidavit, the first in February 2011 and the second in December 2011. Part II of each of those lists of documents related to privileged documents, but was formulaic in nature and really told the plaintiff's solicitors nothing. By a letter dated 23 February 2012, they applied for orders for the filing and service of another list of documents, verified by affidavit, properly describing the privilege claim documents and containing any further statement or grounds that Hockey Tasmania wished to advance in support of its claim of privilege.

4 A third list of documents, verified by affidavit, was sworn and filed on 27 February 2012. JMG contends that that list and affidavit were inadequate in various respects. It has not sought orders as to a fourth list of documents.

5 The application made by the letter dated 23 February 2012 also sought orders as to the production of the privilege claim documents. JMG has pursued its application in relation to those orders. The orders sought read as follows:

"3 Within 14 days, the defendant produce for inspection by the plaintiff's solicitors the privilege claim documents or such of them as this Honourable Court adjudges are not, or no longer are, properly the subject of a claim of privilege.

4 Pursuant to rule 394 of the Supreme Court Rules at the hearing of the application for Order 3 sought above, the plaintiff produce to the Court:

•

All of the privilege claim documents, and

•

All files of Toomey Maning relating to:

o

the rectification works to THC1 carried out in 2009, and

o

preparatory to such rectification works.

to enable such inspection by the court under rule 395 of the Supreme Court Rules as the court considers necessary or expedient."

6 The documents referred to as "the privilege claim documents" are described earlier in the relevant letter as follows:

"• all documents referred to in Part 2 of the First Schedule of any of the defendant's Lists of Documents which were brought into existence prior to 1 September 2009; and

• all copies of or from any such documents, whenever such copies have been brought into existence."

7 It was submitted on behalf of JMG that Hockey Tasmania had impliedly waived privilege in respect of the privilege claim documents. As counsel dealt with the implied waiver argument last, I will do the same.

8 Counsel for JMG, Mr Harris, made a number of criticisms of the third list of documents. In his submissions he seemed to suggest that privilege had not been claimed properly, and that I should therefore allow all the privilege claim documents to be inspected by the plaintiff's solicitors, or else inspect them all myself and then allow them to inspect those that I considered not to be privileged.

9 The third list of documents listed 20 items in respect of which legal professional privilege was claimed. Eighteen of those items were bundles of documents, as distinct from separately enumerated documents. Mr Harris submitted that the privilege claim documents should have been separately enumerated, and referred to a number of cases from Western Australia. In Tasmania, the Supreme Court Rules 2000, r384(1)(c), permits references to bundles. It says that a list of documents is to "describe each document or, in the case of bundles of documents of the same nature, each bundle, sufficiently to enable the document or bundle to be identified".

10 The third list of documents contains a paragraph in which Hockey Tasmania objected to their production "on the ground that the same are privileged communications as between solicitor and client or were brought into existence for the dominant purpose of this litigation". Although that paragraph identified two separate bases for claiming privilege, it did not specify which of those two types of claims applied to each of the 20 listed items. Ideally, the list should have done that. But I do not think that the failure to do that was significant in this case. Some of the listed items, from their descriptions, can clearly be identified as communications, or bundles of communications, passing between Hockey Tasmania, or representatives of Hockey Tasmania, and its solicitors. One item is its solicitors' file. Every listed item apart from that file describes a communication or bundle of communications with Hockey Tasmania's solicitors. To the extent that those communications were not with Hockey Tasmania's officers or employees, it is clear that they were with potential witnesses. There is nothing about the failure to match up the two different types of privilege claims with the individual listed items that suggests that, to any extent, the claims for privilege might not be sustainable. When privilege is claimed in a list of documents, there is no requirement that the documents in question be described in such a way as to enable the opposing party to form a prima facie view as to the correctness of the claim of privilege: Lazenby v Zammit [1987] TASSC 5; [1987] Tas R 54.

11 The deponent of the affidavit verifying the list of documents was a Mr Purcell, the chief executive officer of Hockey Tasmania. Mr Harris submitted that Mr Purcell could not have known whether or not the authors of particular documents contemplated litigation at any particular time. As I understand his submission, he suggested that it was impermissible for Mr Purcell to have said anything about a claim for privilege made on the basis that documents, not created by him, were brought into existence for the dominant purpose of this litigation. It is clear that there was nothing impermissible about the course taken. Rule 384(4) requires the affidavit verifying a list of documents to be in accordance with the prescribed form. The prescribed form is Form 27 in Schedule 1 to the Supreme Court Forms Rules 2000. Where the party making the list is a corporation, that form permits an officer of the corporation to swear the affidavit. It requires the deponent to say that the statements in the various paragraphs of the list are true to the best of that person's knowledge, information and belief. That is what Mr Purcell did.

12 In my view the privilege claims have been adequately made and verified by Mr Purcell's affidavit. That being so, JMG bears an evidentiary onus to adduce evidence adequately which, if accepted, could support the view that the claims for privilege are unfounded or mistaken: Smith's Weekly Publishing Company Ltd v Sunday Times Newspaper Co Ltd [1923] HCA 9; (1923) 31 CLR 552 at 563; Southern Equities Corporation Ltd v West Australian Government Holdings Ltd (1993) 10 WAR 1 at 16; Brambles Holdings Ltd v WMC Engineering Services Pty Ltd (1994) 14 WAR 239 at 247; CTC Resources (NL) v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48 at pars[33] - [34]; Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 2) [2010] WASC 217 at par[32].

13 Counsel for JMG relied on an affidavit sworn by his instructing solicitor, Mr Hudson, who deposed to having inspected a large quantity of documents that were produced by the solicitors for Hockey Tasmania by way of discovery. In par16 of his affidavit he said this about the privilege claim documents:

"Although I am at the disadvantage of not having seen the documents, I say to the best of my belief that many of the documents discovered in Part 2 to the First Schedule to the defendant's List of Documents are relevant to the issues in the litigation, including as to the reasonableness or necessity of the scope of the remedial works which HT [Hockey Tasmania] procured. I believe that as to many documents there are reasonable grounds to doubt whether the dominant purpose of the documents was the purpose of facilitating the obtaining of legal advice or the conduct of litigation. I believe that there are reasonable grounds to expect that other, equal or greater purposes of the documents included, inter alia (i) obtaining and considering engineering and other advices as to options for remediating the undulations and (ii) recording, explaining or justifying HT's decisions regarding the scope of the remedial works and extension of that [sic], and the financial implications thereto [sic]."

14 Clearly that paragraph advances an opinion, but not evidence in support of the opinion. Mr Hudson annexed to his affidavit copies of a large number of documents discovered by Hockey Tasmania. The contents of those documents, in my view, fall short of suggesting that the claims for privilege might have been inappropriate or too wide.

15 It seems clear from the annexures to the affidavit that Hockey Tasmania engaged another engineering company, referred to as "GHD", in or before November 2008, initially to investigate the undulation problem and report. Mr Harris drew my attention to the fact that some of the bundles of documents claimed to be privileged were described as containing items dated before November 2008. Item 14, which is dated 14 April 2008 to 6 September 2009, is described as "Bundle of emails between Hockey Tasmania (internally) and TMC [Hockey Tasmania's former solicitors] re: Steering Committee Meetings and legal advice". There is evidence that Hockey Tasmania had a steering committee which considered the undulation problem. However the evidence suggests that the undulation problem manifested itself well before April 2008. It is quite plausible that Hockey Tasmania and its solicitors were exchanging emails about the undulation problem from April 2008 onwards for the purpose of seeking and giving legal advice as to a possible claim against JMG. Mr Harris drew my attention to item 16, dated 24 July 2008 to 24 April 2009, which reads, "Bundle of emails between TMC, P Stanton, Hockey Tasmania re: rectification". There was evidence that Mr Stanton worked for a company that was engaged by Hockey Tasmania. If its solicitors communicated with Mr Stanton from 24 July 2008 onwards, it is quite plausible that their communications were brought into existence for the dominant purpose of litigation that was then contemplated. All in all, given the evidence as to the events that occurred from the development of the undulation problem until the issue of the writ in March 2009, there is nothing about the stated dates of the documents and bundles of documents claimed to be privileged to suggest that any of the privilege claims are untenable.

16 Counsel for JMG argued that there was no evidence before me that the documents in question were confidential, and that there was no evidence before me of the circumstances by reason of which it was said that litigation was contemplated at any particular time. He submitted that I could not be confident that all of the documents in question were privileged, and that the listed documents, or bundles of documents, could well contain communications that were primarily about how the remedial works were to be done.

17 However, in my view, the material before me simply does not discharge the evidentiary onus that I have referred to. Mr Hudson may very well have suspicions that the claims for privilege in respect of the 20 listed items are too wide and that, somewhere amongst the documents in question, there are documents in respect of which claims for privilege could not be sustained. However mere suspicion, and opinion insufficiently supported by evidence, are not sufficient to discharge the evidentiary onus.

18 I am not satisfied that the claims for privilege are sufficiently dubious or implausible for me to make an order under r394 for any of the privilege claim documents to be produced to the Court so that the disputed privilege claim can be determined. I am certainly not satisfied that it would be appropriate to make an order under r392 permitting the solicitors for JMG to inspect any of them.

19 Mr Harris submitted that privilege had been waived by Hockey Tasmania as a result of it claiming legal costs as part of its damages. In the first edition of its defence and counterclaim, dated 12 April 2010, Hockey Tasmania particularised its claim for damages. The particulars of that claim included a claim for legal costs in the sum of $95,734. In May 2011 Hockey Tasmania delivered further particulars of loss and damage, which again included claims for legal costs paid to three legal firms and a sole practitioner. The claim in respect of legal costs has since been abandoned. They are not mentioned in the most recent set of particulars of loss and damage, dated 19 October 2011.

20 It is clear that a successful plaintiff cannot recover its costs of the proceedings from the defendant as damages, even when the defendant's wrongful act has caused the plaintiff to incur those costs: Cockburn v Edwards (1881) 18 Ch D 449 at 459, 463; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 at par[45]; Gray v Sirtex Medical Ltd [2011] FCAFC 40; (2011) 193 FCR 1 at par[15].

21 It seems that the inclusion of legal costs in the claim for damages was misconceived, ie that it was a mistake that has since been corrected.

22 A client who is entitled to claim legal professional privilege is taken to have impliedly waived that privilege if the client engages in conduct which is inconsistent with the maintenance of confidentiality: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at par[28]. When a claim is made in an action for the reimbursement of costs payable to a solicitor, and the reasonableness or otherwise of the solicitor's charges is an issue in the action, the pursuit of that claim is inconsistent with the maintenance of the confidentiality of solicitor/client communication protected by legal professional privilege. In Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2007] VSCA 224, Esso was pursuing a contractual claim for the reimbursement of certain legal costs. In order for its claim to succeed, it needed to establish the purpose for which the costs were incurred, and that they were reasonably incurred. The Victorian Court of Appeal held that the making of the claim laid the privileged documents open to scrutiny, and that it would be inconsistent for Esso to maintain a claim for confidentiality in respect of them. On that basis, it held that Esso had impliedly waived privilege.

23 In DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 at par[58], Allsop J (as he then was) said, in a completely different context, that issue waiver arises when "the party entitled to the privilege makes an assertion (express or implied), or brings a case, ... which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication."

24 That passage was cited with approval by the Full Court of the Federal Court of Australia in Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 at par[61].

25 If Hockey Tasmania were pursuing its damages claim in respect of legal costs, however misconceived, I would have no hesitation in holding that it was no longer entitled to claim privilege in respect of documents relevant to the quantum or reasonableness of such costs. But the damages claim in respect of legal costs was made by mistake, and has been abandoned. In the words of Allsop J, there is now no forensic unfairness in allowing Hockey Tasmania's claim to proceed without disclosure of the communications in question. In my view the making and abandonment of a misconceived claim is not inconsistent with the maintenance of the confidentiality of solicitor/client communications which legal professional privilege exists to protect, at least when the abandonment occurs before the completion of the discovery process. The position would be different if a misconceived claim had been made and not abandoned when the time came for a court to determine a disputed privilege claim. But that is not the case here. In the present circumstances, I consider that there has not been an implied waiver of privilege.

26 If I am wrong as to that, then questions arise as to whether a waiver can be revoked, or can be temporary. When a privileged document has been inadvertently disclosed, the court may, in appropriate circumstances, grant an injunction to protect the privilege, even after the document has been inspected: Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 at 1044 - 1046. However in Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 at 541, Templeman LJ said that he was not persuaded that a trial judge had a discretion to restore privilege either in respect of the whole of a document that had been read from during a trial, or the unread part of the document. If there can be circumstances in which an implied waiver of privilege can be reversed, either by the conduct of the waiving party or by the exercise of some judicial discretion, this could very well be such a case. However I do not think it is necessary in the circumstances to determine whether there can be such a reversal.

27 The orders that I have been asked to make involve an exercise of discretion. Even if legal professional privilege in all documents relevant to the claim for legal costs has been impliedly waived and must forever remain so, I have a discretion to grant or refuse orders for their production and inspection. Because the damages claim in relation to the legal costs was misconceived and was abandoned at an appropriate stage, I think it would be unfair to Hockey Tasmania and contrary to the interests of justice to make the orders sought.

28 For these reasons, the application made by letter dated 23 February 2012 is dismissed.