Liberty Financial Pty Ltd v Bluestone Group Pty Ltd & Anor

Federal Court of Australia|1978-12-11|Before: Heerey J

REASONS FOR JUDGMENT 1 On 21 April 2005 I ruled that documents relating to the state of mind of the applicant (Liberty) in commencing certain other litigation were discoverable: Liberty Financial Pty Ltd v Bluestone Group Pty Ltd [2005] FCA 470. As anticipated at the time, disputes have now arisen as to legal professional privilege and waiver. The nature of the present proceeding and the issues raised in the pleadings are set out in my earlier judgment, which I incorporate by reference in these reasons. Suffice it to say for the moment that the first respondent (Bluestone) sent to a number of commercial entities a document called the "Q&A Information Sheet" which gave Bluestone's views about litigation instigated by Liberty against Bluestone in the Federal Court and other courts. In the present proceeding Liberty alleges that this document contains misleading and deceptive statements, contrary to s 52 of the Trade Practices Act 1974 (Cth) (TPA), and is defamatory. 2 There are now before the Court a number of motions seeking various orders: · Liberty's 14 September 2005, inspection of certain discovered documents; · Bluestone's 14 September 2005, inspection of certain discovered documents; · Liberty's 27 September 2005, setting aside subpoenas. 3 Each party submitted that its opponent had not made out a claim for legal professional privilege in respect of some of its discovered documents. I made ex parte rulings on these submissions. The parties agree that such rulings are accurately recorded in an email from Bluestone's counsel to Liberty's counsel dated 10 October 2005. The orders to be taken out should record those rulings. For those documents for which a claim has been established, questions of waiver now arise. 4 Waiver in the present context will arise where there is an inconsistency between the conduct of the party claiming privilege and the maintenance of the confidentiality which the privilege is intended to protect. This will be so even though the party may not have intended, subjectively, to give up the privilege: Mann v Carnell (1999) 201 CLR 1 at [29]. A particular example of this doctrine relevant to the present case is where a party pleads a cause of action, or defence, which puts in issue its state of mind: Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 at 166-167.

Alleged waiver by Bluestone 5 Liberty pointed to Bluestone's defence which admitted that the Q&A Information Sheet set out its views on some aspects of the litigation then on foot and asserted its belief that Liberty had commenced these proceedings for the purpose of interfering with Bluestone's loan securitisation project "Sapphire I" (see my earlier judgment at [5]). Moreover, Liberty says, further and better particulars filed by Bluestone gave details of when Mr Alistair Jeffrey, Chief Executive Officer of Bluestone, formed such beliefs on the part of the company and his reasons for forming them. The latter involved such matters as Liberty's application for preliminary discovery against Permanent Trustee Company Ltd (Permanent) and correspondence from Freehills on behalf of Bluestone asserting that the preliminary discovery application was: "… considered to be an abuse of process having regard, amongst other things, to the nature of the information sought, the misconceived nature of the application, the omission of relevant correspondence from the affidavit filed in support of the application and the service of the application on the managing director of Permanent Trustee Company Limited (at his home at 10 pm)." The particulars go on to refer to the commencement of proceedings without prior notice or correspondence, the refusal to accept undertakings, Liberty's attempt to seek injunctive relief against Permanent where it "was or ought to have been apparent to Liberty that" Permanent was acting as an independent trustee company, "generally the matters set out in the facsimiles from Freehills to Jerrard & Stuck dated 6 May 2002 and 5 August 2002", the withdrawal of the application to join Permanent and the withdrawal of the application for preliminary discovery. 6 Bluestone submitted that its beliefs as pleaded and particularised are not dependent upon the receipt of legal advice and that the beliefs "are capable of being held based solely on (Bluestone's) observation of Liberty's behaviour". 7 It is not quite clear to me why Bluestone has pleaded and particularised its beliefs in defence to the TPA claims. Liberty's claims do not seem to relate to future matters within the meaning of s 51A. That being so, one would think that the representations in the Q&A Information Sheet were either true or not, and if not then Bluestone's beliefs as to their truth would make no difference. However, I have to deal with the present question on the basis of the pleadings as they stand. While it is theoretically possible for lay people, especially business people to form, without any legal advice, a belief that litigation is what lawyers would call an abuse of process, Bluestone's particulars suggest that this is not what has happened in the present case. The belief formed by Mr Jeffrey seems to be based on intimate involvement with Bluestone's solicitors, and informed by detailed knowledge of procedural steps and correspondence between the respective solicitors. Concepts such as "the misconceived nature of the application" bear the hallmarks of a lawyer's input. 8 I conclude therefore that Bluestone has waived privilege. 9 Liberty also argued that Bluestone's plea of fair comment to Liberty's defamation cause of action raised the issue of Bluestone's state of mind. That is not correct. The plea of fair comment does not require a defendant to prove that at the time of publication he honestly believed the comment which was conveyed by the publication complained of. The contrary view of the Supreme Court of Canada in Cherneskey v Armadale Publishers Ltd (1978) 90 DLR (3d) 321 has not been followed in Australia: Pervan v North Queensland Newspaper Co Ltd (1993) 178 CLR 309 at 328-329, Herald & Weekly Times Ltd v Popovic (2003) 9 VR 1 at [259]-[265], see Publishing the Defamatory Statements of Others (1985) 59 ALJ 371. Where a plaintiff seeks to rebut a fair comment defence by pleading malice, the defendant's honest belief will be in issue, but the onus will be on the plaintiff to prove lack of such belief. Accordingly there will be no waiver of privilege because it is not the defendant who has put his state of mind in issue. Nevertheless, although Liberty fails on this branch of its argument there appears to be no distinction between privileged documents relating to the TPA defence and those relating to the defamation defence. The one waiver applies to all. 10 Some documents are the subject of without prejudice privilege. Liberty argued that there has been a waiver because offers to settle may reveal that Bluestone did not have the belief alleged in its defence. 11 Such an argument would render without prejudice privilege virtually useless in any case in which state of mind was in issue. The essence of the privilege is that, in order to facilitate the settlement of litigation, it permits parties to take a position which is at odds with their case on the record, without that being used against them. I reject this particular waiver claim. 12 Two questions were raised by Bluestone. First, it submitted that inspection be limited to those portions only which respond to the categories of discovery under my earlier order, on the basis that the balance of the material in those documents is irrelevant to the issues in dispute in the proceeding and is otherwise confidential to Bluestone. 13 At the moment, all that is in issue is the extent to which Liberty should be able to inspect the documents in question. Bluestone has not yet sought to use them for the purposes of this litigation. The question whether legal professional privilege can be maintained for part of a document has usually arisen in a context when there has been some forensic use of another part of the same document. Thus in Great Atlantic Insurance Co v Home Insurance Co [1981] 2 All ER 485 counsel read in court two paragraphs of a memorandum without being aware that there were other parts of the document for which privilege was claimed. The English Court of Appeal held that privilege had been waived in respect of the whole document. Templeman LJ at 492 cited with approval the judgment of Mustill J in Nea Karteria Maritime Co Ltd v Atlantic and Great Lakes Steamship Corporation (unreported, 11 December 1978), where his Lordship said: "...where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being understood." Templeman LJ added that the question whether part of a document could be introduced without waiving privilege to the other part could not be satisfactorily decided in the absence of informed argument to the contrary, and there could be no informed argument without disclosure, which would make argument unnecessary. 14 When the High Court considered this question in Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 their Honours' approach was in similar terms. Gibbs CJ said at 481 that the question whether a waiver should be implied depended on whether it would be "unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production". Mason and Brennan JJ said at 488 that "[t]he holder of privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication". Deane J at 492 pointed out that the claim book in question had not been "prepared for use, or accepted or used as evidence". 15 I conclude therefore that unless and until the documents in question are used or, to use Mustil J's term, deployed by Bluestone in this litigation, inspection should be restricted as submitted. 16 Secondly, Bluestone submits that inspection should be limited to legal practitioners on behalf of Liberty who do not also act for it in other litigation. While documents obtained on discovery can only be used for the purposes of the litigation in which the discovery takes place (Home Office v Harmon [1981] QB 534), it is said that practitioners would not be able to shut out of their mind information obtained from such documents: Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 38, D & J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 at 123. Liberty made a corresponding submission itself; that is to say it argued for a similar restriction on Bluestone's inspections. 17 If the parties reach mutual agreement on this question, then well and good. In the absence of such agreement however, I do not think I should impose such a restriction. The question whether practitioners engaged in litigation in, for example, the Supreme Court of Victoria, should be barred from further involvement because of their acquisition of confidential information is a matter for that court. It is not for me to say which practitioners should or should not participate in litigation in that court.

Alleged waiver by Liberty 18 In my earlier judgment I held that Liberty had put in issue its state of mind because it alleged to be untrue the representations in the Q&A Information Sheet that it commenced litigation which was an abuse of process: see [8]-[11]. Ordinarily this would operate as a waiver; see Telstra. 19 Liberty however argued that it is implicit in Bluestone's defence that it had sufficient information within its own knowledge to enable it to make these representations, as otherwise "it would be quite wrong of it to make such representations that it could not justify". Liberty says it can prove its legitimate purpose in prosecuting the litigation and, absent any evidence from Bluestone, it has not waived privilege because it brought the present proceeding as a response to Bluestone publishing material without any proper basis. This proceeding, Liberty says, is a defensive action, forced on it by Bluestone. It ought not be open to Bluestone, having made the representations without any subjective basis, to then compel Liberty to disclose documents which are privileged and confidential. Liberty notes that Bluestone has not brought any strikeout application in the proceedings which it claims, in the Q&A Information Sheet, to be an abuse of process. 20 These arguments to my mind do not alter the basic fact that Liberty chose to institute the present proceeding, which puts in issue its state of mind in commencing and continuing with the other litigation. I have so held in my earlier ruling, which Liberty has not sought to appeal. A party sued under s 52 does not have to prove the truth of the representations complained of, or even an honest belief in their truth. 21 A specific argument relates to document 18 in Pt 2 of Sch 1 of Liberty's list of documents. This is a letter from Liberty's general counsel to Mr Kerry Sidaway dated 6 February 2004. An extract from it is set out in the judgment of Smart AJ in Volpes v Permanent Custodians Ltd [2005] NSWSC 827 at [39]. On the principles discussed above, this has been used by Liberty in litigation and there has accordingly been a waiver. 22 I conclude there has been a waiver by Liberty. Inspection should be however subject to the same restrictions as to irrelevant and confidential parts of documents as is discussed above in relation to Bluestone's documents. Liberty also raised the question of restrictions on inspection by practitioners engaged in other litigation. I answer this in the same way.

Bluestone subpoenas 23 Bluestone has procured the issue of subpoenas directed to certain parties requiring production of: "(1) All documents created prior to the date of issue of this subpoena recording or referring to the purpose and/or intention of Liberty Financial Pty Ltd and/or Liberty Funding Pty Ltd (together, Liberty) in commencing and/or engaging in the following proceedings: (a) V213 of 2001 in the Federal Court of Australia (First Federal Court Proceedings); (b) V1256 of 2001 in the Federal Court of Australia (Copyright and Confidential Information Proceedings); (c) V477 of 2004 in the Federal Court of Australia (DEF Proceedings); (d) the instant proceedings, namely, V714 of 2004 in the Federal Court of Australia (Q&A Proceedings); and (e) any other proceedings in which Bluestone Group Pty Ltd (t/as Bluestone Mortgages) (Bluestone) and/or Permanent Custodians Ltd (Permanent Custodians) is a defendant or respondent and which are funded by Liberty, including 1584 of 2004 in the Supreme Court of NSW (Volpes Proceedings), (together, the Relevant Proceedings) including, but not limited to all correspondence with Liberty or its external advisers. (2) All documents created prior to the date of issue of this subpoena recording or referring to Liberty's purpose and/or intention in making the following applications in the Copyright and Confidential Information Proceedings: (a) application for preliminary discovery against Permanent Custodians on 1 March 2002; and (b) application to join Permanent Custodians on 30 April 2002, (together the Relevant Applications). (3) All documents created prior to the date of issue of this subpoena recording or referring to advice sought, obtained or provided to Liberty in connection with commencing and/or engaging in the Relevant Proceedings and the Relevant Applications. (4) All documents created prior to the date of issue of this subpoena recording or referring to Liberty's reason for or purpose and/or intention in proposing to join Alistair Jeffery as a respondent to the Q & A Proceedings. (5) All documents created prior to the date of issue of this subpoena recording or referring to a policy, program, strategy, approach or plan prepared or maintained by Liberty (or an intention formed by Liberty) with respect to: (a) litigation against competitors; (b) damaging or stifling the business of a competitor through litigation; and (c) litigation for the purpose of defending Liberty's market share." 24 The recipients and their roles relevant to these proceeding are: · Australia and New Zealand Banking Group Ltd - Liberty's banker; · Macquarie Bank Ltd - Liberty's banker which provided it with various services, including financing; · Richard Facioni - employee of Macquarie Bank until 19 August 2005; · Patrick Eng - employee of Credit Suisse First Boston, another banker for Liberty; · Sherman Ma - Managing Director of Liberty and, in his personal capacity, a plaintiff in a Supreme Court proceeding against Bluestone; · Mallesons Stephen Jaques - solicitors retained by Liberty. 25 Liberty seeks an order setting aside these subpoenas pursuant to O 27 r 4 of the Federal Court Rules on the grounds that they are: · an abuse of process; · too wide, fishing, oppressive and/or vexatious. 26 Liberty argued that the documents sought mirror those identified in the orders for discovery I have already made. Since there has been no complaint of the adequacy of Liberty's list of documents, that affidavit verifying the list is presumed to be conclusive and accordingly it is an abuse of process to use these subpoenas to gain access to documents that have already been ordered to be discovered and have in fact been discovered. The documents, it is said, must have emanated from Liberty. 27 Bluestone says that it is entirely conceivable that the recipients hold documents, relating to Liberty's relevant intention and purpose, which do not "emanate" from Liberty and which are not otherwise in Liberty's possession, custody or control. Such documents may include, for example, copies of file notes and other internal documents prepared by the recipients, correspondence between the recipients and persons other than Liberty, and correspondence between the recipients and Liberty which are materially different from the version held by Liberty, for example, those containing handwritten notations made by a recipient. 28 I accept Bluestone's argument on this point. There is not necessarily correspondence between documents discovered by Liberty and documents answering to the same description held by the recipients. The examples given by Bluestone are plausible. 29 Further, Liberty argued that Mallesons and Messrs Facioni and Ma are either agents and/or officers of Liberty and thus documents in their possession, custody or control must have already been the subject of discovery by Liberty. Liberty's list of documents is to be treated as conclusive. 30 However, Bluestone points out, correctly in my view, that each of the recipients may hold documents in a capacity other than as agent and/or officer of Liberty. Mr Ma is himself a plaintiff in the Supreme Court proceedings and may hold documents in his personal capacity. Mr Facioni is an employee of the Macquarie Bank and Macquarie's representative on Liberty's board. He may hold documents either in his personal capacity or in his capacity as a director of Liberty. As to Mallesons, the solicitor/client relationship does not render all documents held by the firm necessarily within the possession, custody or control of Liberty. Documents prepared by Mallesons for its own benefit or protection for example would not have been discovered by Liberty. 31 Liberty has not discovered any documents between itself and Mr Facioni or Mallesons. 32 Liberty says that the subpoenas are vague and/or ambiguous. The recipients cannot know by reading the subpoenas what is the subject matter of the various proceedings referred to in par 1 of the schedule to the subpoena and how, says Liberty, would the recipient know whether within the terms of par 1(e) Liberty had funded various litigation. 33 I do not think this objection is made out. The subpoenas require the recipient to identify documents as relating to particular subjects: Lucas Industries Limited v Hewitt (1978) 45 FLR 174 at 188. Of course the recipient can only carry out this task within the limits of his own knowledge. It may be, to take a purely hypothetical example, that Macquarie Bank had a note of a meeting in which somebody from Liberty said "We will increase our market share because we are starting proceedings in the Federal Court to stymie Bluestone's Sapphire I securitisation". That would be a document which Macquarie Bank would be able to identify as within the scope of the subpoena. Equally hypothetically there might be some other document which on its face does not give any such indication to the recipient although, combined with other knowledge not in the recipient's possession, it would do so. But the recipient would not be bound to produce that for the simple reason that it would not be able to see its relevance. Likewise if the recipient does not know of any other proceedings which are funded by Liberty then it cannot produce documents relating to such proceedings. 34 Liberty contended that the subpoenas were too broad. For the reasons already mentioned I think they relate to specified subjects. True it is that there is no temporal limit, but they relate to particular events in time, namely the instigation of particular proceedings, so realistically would not require searches over a large time period. 35 It is said that the material in the case of Mallesons is voluminous. An affidavit from Mallesons to Freehills stated that there are some 50 archive boxes of material to review. 36 However, if the documents are in Liberty's possession, custody or control they ought to have been reviewed as part of Liberty's own discovery. 37 It is said that the subpoenas require the recipients to make a judgment as to whether a document relates to Liberty's purpose or intention in relation to the particular litigation and Liberty's "policy, program, strategy, approach or plan" in respect to litigation against competitors. 38 In my opinion, the recipients do not have to, as Liberty argued, guess as to what was in someone else's mind. The recipients do not have to do anything other than determine whether a particular document on its face records or refers to a particular purpose or intention. 39 Finally, Liberty submits that the subpoenas are fishing. There is no evidence adduced by Bluestone that the recipients have had, or are likely to have had, any documents relating to the description set out in the subpoenas. 40 I do not think the subpoenas here are fishing. They are related to issues in the proceedings and directed to parties that have relationships with Liberty of a kind that may have generated documents relevant to this proceeding. It is objectively conceivable that the recipients may have or have had documents of the kind sought. The party procuring the issue of a subpoena does not have to put on evidence to show the recipient is likely to have evidence of the kind sought. 41 The application to set aside the subpoenas is therefore dismissed. Orders 42 The parties are to bring in minutes of orders to give effect to these reasons. 43 Since each side has some success the costs of the various motions will be reserved.

I certify that the preceding forty three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.

Associate: Dated: 20 October 2005 Counsel for the Applicant: S K Wilson QC and C Salpic

Solicitors for the Applicant: Dibbs Abbott Stillman

Counsel for the Respondents: S M Anderson and P Wallis

Trade Practices Act 1974(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (9)