LMI Australasia v Baulderstone Hornibrook

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50023/00 LMI AUSTRALASIA PTY LIMITED -v- BAULDERSTONE HORNIBROOK PTY LIMITED & DOCKLANDS STADIUM CONSORTIUM PTY LIMITED & BAULDERSTONE HORNIBROOK INTERNATIONAL PTY LIMITED

REASONS FOR JUDGMENT 1 The facts of this matter do not admit of serious disputation. It is an application for delivery up of material discovered by the plaintiffs to the defendants and provided to the defendants' solicitors for inspection. There is no dispute that the material required to be returned was material to which client legal privilege had attached. The only question is whether that privilege has been waived. 2 In these reasons I have described the solicitor in the employ of the plaintiffs' solicitors, charged with the conduct of this matter on behalf of the plaintiffs, as 'the plaintiffs' solicitor', and the solicitors in the employ of the defendants' solicitors as 'the defendants' solicitor'. The plaintiffs' solicitors are referred to as 'the plaintiffs' attorneys' and the defendants' solicitors as 'the defendants' attorneys'. 3 By agreement between the parties, the material in respect of which privilege is claimed (the subject material), has not been inspected by the defendants nor by their attorneys. It is clear that the subject material was discovered and provided to the defendants' attorneys without claim of privilege through the inadvertence of the plaintiffs' solicitor. It is also clear that the mistake was discovered by that solicitor immediately after the subject material was provided to the defendants' attorneys and that they were so informed of the mistake immediately thereafter. The defendants' attorneys have declined to comply with the request of the plaintiffs' attorneys to return the subject material. 4 The plaintiffs' solicitor, in his affidavit sworn 27 October 2000, has deposed to the circumstances in which the subject material was provided to the defendants' attorneys. He was cross-examined on this affidavit. It is no criticism of counsel to observe that the solicitor's affidavit evidence remained unqualified by that further evidence. 5 As part of the process of discovery, on 22 August 2000 the plaintiffs' solicitor obtained from the Houston based attorneys for the second plaintiff some nine hundred pages of documents (the Houston documents). The plaintiffs' solicitor observed that the Houston documents included privileged material which was located principally in one section of the bundle. 6 The process of preparing a discovery schedule included recourse to electronic processes, by which the documents were scanned onto a computer and then recorded onto a CD-rom. Commencement of a list for discovery from the data contained on the CD commenced on Friday 15 September 2000, initially, without any distinction being made between privileged and non-privileged documents. 7 It is clear that the list was prepared under pressure from the defendants' attorneys, who, on 15 September 2000, demanded that they be served, forthwith, with a list of documents and further demanded that commencement of inspection of the discovered documents take place on the following Monday. In default, the defendants' attorneys reserved the right to apply to the Court for an order for discovery. The plaintiffs' attorneys responded, by facsimile of the same day explaining the state of preparation of the list: informing the defendants' attorneys of the imminent departure on leave of the plaintiffs' solicitor and that the documents could not be provided before 6 October 2000. The defendants' attorneys responded, in a further facsimile of 15 September 2000, that the plaintiffs' timetable was unacceptable and repeated the demands for inspection made earlier that day. 8 The plaintiffs' solicitor went on leave in the following week and, as a consequence of the pressure for discovery of the defendants' attorneys, he interrupted that leave, on 26 September 2000, to continue preparation of the plaintiffs' list of documents. He completed that task on 3 October 2000, and on 4 October 2000 arranged for the documents in schedule 1 Part 1 of the list to be recorded on a CD-rom (the disc). That afternoon he caused the disc to be forwarded to the Sydney office of the defendants' attorneys together with an accompanying letter and a discovery schedule. 9 In preparing the discovery schedule, the plaintiffs' solicitor followed the conventional form of a division of the discovery schedule into Part 1 documents, for which no privilege was claimed, and Part 2 for which it was. 10 Later that day, while working on a statement of evidence, the plaintiffs' solicitor discovered that the subject material had been listed in Part 1 of the schedule and had been included in the disc provided earlier that day to the defendants' attorneys. He immediately recognised that the material was privileged. In his words the subject material had been included in Part 1 "entirely [as] the result of [his] own inadvertence". 11 The mistake of the plaintiffs' solicitor in failing to claim privilege for the subject material arose, principally, out of the fact that he had thought that the privileged material was collected, in substance, in the one section of the Houston documents. He weeded out that section and listed the documents included in that section in Part 2 of the schedule. He was unaware that in a different section of the Houston documents and some one hundred pages from the material he had identified earlier as privileged material, there was a further collection of privileged material. That was the subject material. 12 Having extracted out the section of privileged documents which he had previously identified, the plaintiffs' solicitor simply listed the balance of the Houston documents in Part 1 of the schedule. It was not a case of inspecting the subject material and erroneously concluding that it was not privileged. When the plaintiffs' solicitor did inspect the subject material on 4 October 2000, after it had been provided to the defendants' attorneys, he immediately recognised that it was privileged and that it was through his inadvertence that it had been included in Part 1 of the discovery schedule. 13 His conduct immediately thereafter was deposed to by him as follows: " 21. Upon realisation of my oversight, I immediately called Mr Robert Riddell of Gaden's Sydney office. Mr Riddell did not answer the phone and his voice-mail message said that he was not to return to work until 25 September 2000 (that is two weeks before I was calling). I therefore left a message for his secretary to telephone me urgently. I waited for a period of approximately 10 minutes and the secretary did not return my call. I then attempted to telephone Mr Riddell again and this time I managed to speak to him. We had a conversation to the following effect:- I said: Did you get my CD this afternoon?

I said: I need it back. There are some privileged documents on there.

He said: It's too late. I have sent it to Melbourne already. I didn't even look at it. I just sent it straight to Melbourne.

I said: I will call Melbourne and let them know. 22. I cannot recall whether I attempted to telephone Gadens Melbourne or not. In any event, I forwarded a facsimile to Gadens Melbourne advising that my client maintained its claim for privilege over pages 0627 to 0636… the facsimile was sent at approximately 5.13pm. I now consider that I sent the facsimile at 6.13pm and the facsimile transmission sheet incorrectly shows Eastern Standard Time. 23. On 5 October 2000, I attempted to telephone…[the] solicitor of Gadens Melbourne, on several occasions. I finally spoke to her at approximately 4.30pm and we had a conversation to the following effect:- I said: Did you get my fax about the CD?

She said: I got your fax but I haven't got the CD yet.

I said: Well, it's on its way. Robert Riddell sent it to you on Wednesday afternoon by courier. When you get it, make sure you don't look at the privileged documents.

I said: Not the whole CD, just those documents identified in my fax. I'll send you a new CD without the privileged documents as soon as I can.

She said: OK. We then discussed the Directions which we would be seeking for the Court when the matter was listed on 6 October 2000."

14 The facsimile forwarded by the plaintiffs' attorneys to the Melbourne office of the defendants' attorneys on 4 October 2000 was in the following terms: "We refer to our letter of today's date to your Sydney principals. We understand the CD enclosed with that letter has now been forwarded to your office. Due to an oversight a number of privileged documents were contained on that CD. Those documents are numbered image files LUS/0627.tif to 0638.tif inclusive. The production of those image files to you was not intended to be, and should not be taken as a waiver of our client's privilege over the documents. We would be grateful for your undertaking not to examine image files 627 to 683 or to obtain or keep copies of those files. As soon as possible, we will provide you with a replacement CD which does not contain those files. Once that has been provided, we will request you to return today's CD to us."

15 I think it is clear from the affidavit of the defendants' solicitor sworn 2 November 2000, that the difficulties experienced by the plaintiffs' solicitor in contacting her on 5 October 2000 was not the result of any attempt by her to avoid contact with him. Her conduct I think is beyond criticism, as appears from her affidavit in the following terms:

"14. At 5.47 I sent a further e-mail to Robert Riddell in the following terms:

I have spoken to Ian Denham and advised as follows:

1. We should be able to serve our last list by next Friday.

2. He will put on his statements in 4 weeks from tomorrow with our statements to follow 3 weeks afterwards ie (7 weeks)

3. Matter will come back for directions on 24 November.

4. I have endeavoured to speak to our client re these proposals this afternoon but I haven't been able to speak to him. I will e-mail if any problems.

..." 14. (sic) The Plaintiff's Lists of Documents and the CD were not received by me until 6 October 2000. Unfortunately, the documents in the List were not adequately described by the Plaintiffs' so as to enable them to be identified and accordingly it was not and is not possible to determine what the documents are that the Plaintiffs' seek to claim privilege in relation to. I did not and have not inspected any of the documents on the CD that accompanied the letter. 15. On about 11 October 2000, I handed the privilege issue back to Patrick Walsh, the responsible partner on the file. I advised him that the Plaintiff's (sic) were seeking to claim privilege over certain documents that had been discovered in Schedule 1 Part 1 of the Plaintiff's List of documents but which could not be identified by reading the List of Documents due to the inadequate manner in which the documents had been described in that List. I advised him that I had been informed by Robert Riddell that Ian Denham had advised him that the documents consisted of correspondence passing between LMI's Sydney office and the parent company LMI/HHI. I further advised him that the Plaintiff's solicitors had not advised us of the basis for the claim of privilege."

16 I think it is clear from the affidavit of Patrick John Walsh, sworn 2 November 2000, that after 11 October 2000 there was no issue as to whether the subject material was, of its nature, privileged. The only question was whether that privilege had been waived. 17 Following the facsimile of 4 October 2000 from the plaintiffs' attorneys and the telephone conversation between the plaintiffs' solicitor and the defendants' solicitor of 5 October 2000, there was a further telephone conversation between the plaintiffs' solicitor and Mr Walsh as set out in the facsimile of the defendants' attorneys to the plaintiffs' attorneys of 18 October 2000, which was in the following terms:

" We refer to your letter of 4 October 2000 enclosing draft List of Documents for your clients and a CD containing scanned images of all discovered documents, together with your subsequent facsimile of 4 October 2000 claiming privilege over certain documents contained on that CD. We also refer to your conversation with the writer on 11 October 2000, when the writer enquired as to the nature of the documents over which your clients claimed privilege, given that the same was not immediately apparent from the descriptions as contained in your clients' List of Documents. We confirm you state the basis of the privilege is legal professional privilege claimed over certain letters from your office to your clients. We also confirm, as stated to you in our conversation on 11 October 2000, that nether this office not our clients have examined any of the files contained on the CD delivered to our Sydney office under cover of your letter dated 4 October 2000. We do not consider that your clients can maintain legal professional privilege over such documents in circumstances where not only have your clients disclosed the documents in Part 1 of Schedule 1 of their respective List of Documents, but copies of same have also been imaged onto a CD for the purposes of inspection and delivered to our office. In this regard, we refer you to the decision of Mr Justice Goldberg of the Federal Court of Australia in Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391. In the circumstances, you are on notice that we intend providing a copy of your CD (delivered under cover of your letter of 4 October 2000) to our clients on Friday 27 October 2000. You should be aware that notwithstanding the foregoing, our clients' final List of Documents will include a letter dated 18 August 1999 from Moray Agnew Solicitors to LMI Australasia Pty Ltd, being a copy of a letter provided by your clients to our clients." 18 That position was challenged in the facsimile of the plaintiffs' attorneys of 20 October 2000, in which the defendants' attorneys were requested to provide certain undertakings in respect of the subject material and to return the disc in the absence of which the defendants' attorneys were informed that the plaintiffs would apply to the Court for appropriate orders. 19 In their response of 23 October 2000, the defendants' attorneys declined to give the undertakings and, in effect, invited the plaintiffs to make an application for orders requiring the return of the subject material: at the same time, offering to "maintain the status quo" by not inspecting the subject material. 20 The parties are agreed that the question of waiver of privilege is to be determined in accordance with common law principles divorced from any "derivative" principle gleaned from the Evidence Act 1995 (see Mann v Carnell (1999) 74 ALJR 378). 21 I think there is some utility in setting out, at length, the considerations expressed by Gleeson CJ, Gaudron, Gummow and Callinan J in their joint judgment in Mann when examining the question of waiver of privilege at common law, as follows: "Waiver of privilege at common law

At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client's version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer's evidence as to advice given to the client will be received.

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. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank , the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. 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.

In Goldberg v Ng this Court considered a case in which there was disclosure of a privileged communication to a third party, for a limited and specific purpose, and upon terms that the third party would treat the information disclosed as confidential. The Court was divided upon whether, in the circumstances of the case, privilege was waived. However, the reasoning of all members of the Court was inconsistent with the proposition that any voluntary disclosure to a third party necessarily waives privilege. No application was made on the present appeal to re-open Goldberg or any of the earlier authorities on the subject. In Goldberg , reference was made to the statement of Jordan CJ in Thomason v The Council of The Municipality of Campbelltown : "The mere fact that a person on some one occasion chooses to impart to another or others advice which he has received from his solicitor indicates no intention on his part to waive his right to refuse on other occasions to disclose in evidence what that advice was, and supplies no sufficient reason for depriving him of a form of protection which the law has deemed it specially necessary to throw around communications between solicitor and client".

His Honour's reference to intention must be read subject to what has been said above."

(at 384-385) 22 Clearly, the 'client' in this case had no intention to waive privilege. It is not enough for the defendants to show that the inclusion of the subject material in Part 1 of the draft discovery schedule was voluntary. That much is clear from Mann. Without recourse to "some overriding principle of fairness operating at large", in the circumstances of this case where, under pressure, in haste and through oversight the subject material was listed in Part 1 of the draft discovery schedule and its contents provided in the form of the CD to the defendant's solicitors and where the error was immediately brought to the attention of the defendants' attorneys, considerations of fairness inform me that there is no inconsistency in the conduct of the plaintiffs in maintaining a claim for privilege in respect of the subject material. 23 I have been referred to the decision of Goldberg J in Meltend Pty Limited v Restoration Clinics of Australia Pty Limited (1997) 75 FCR 511, in which his Honour found that privilege had been waived after discovery and inspection of documents, in respect of which there had been no prior claim for privilege. 24 I think it is clear from the reasoning of his Honour at pages 526 and 527 that it was germane to the judgment that no claim for privilege had been made prior to the inspection of the documents by the party against whom it was sought to maintain a belated claim for privilege. In this case there was no inspection, nor any case of "change [of] mind about the privilege attaching to a document after it had been inspected". Indeed it is not a case of "change [of] mind", but one of oversight. 25 I am satisfied that there has been no waiver of privilege, express or imputed, and that the applicant is entitled to the order sought for the delivery up of the disc. 26 The only remaining question is that of costs. The applicant seeks indemnity costs. I am satisfied that from 11 October 2000 it was clear to the defendants' attorneys that there had been a mistake, by way of oversight, on the part of the plaintiffs' solicitor in providing the subject material without a claim of privilege and that the oversight had been discovered and brought to the attention of the defendants' attorneys immediately after the provision of the disc to them. I have no doubt that the circumstances dictated the return of the disc to the plaintiffs' attorneys. One can only assume that instructions were given to the defendants' attorneys to resist return of the disc. In my view, that decision was insupportable after 11 October 2000 and warrants the imposition of indemnity costs to protect the plaintiffs from a burden of costs that they should never have been asked to bear. 27 I think the conduct of the defendants was such as to take it outside of the ordinary case of a disputation where parties are entitled to have their asserted legal rights tested. Rather, it was a case, in my view, of the defendants endeavouring to obtain an unjustifiable and unfair advantage of a situation which was the result of inadvertence on the part of the plaintiffs' solicitor: an inadvertence the facts of which had not been challenged prior to the cross-examination of the plaintiffs' solicitor. 28 There would have been no prejudice to the defendants in complying with the request of the plaintiffs' attorneys to return the disc: other than the loss of the benefit of taking an unfair advantage of the situation by gaining access to the privileged material. I am satisfied that only an order for indemnity costs would do justice to the successful applicant. 29 Accordingly, I make orders in terms of paragraphs 1 and 3 of the amended notice of motion and order that costs so ordered be assessed forthwith.

Last Modified: 12/19/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.