Plaintiffs v Defendants

Supreme Court of Victoria|2010-02-15|Before: BYRNE J

EVIDENCE - client lawyer privilege - whether client lawyer relationship - whether communication made for dominant purpose of providing legal services - whether communication made for client.

1 These are my reasons for decision upon the preliminary trial of a question with respect to the admissibility of certain documents for which the fifth and sixth defendants have claimed client/lawyer or legal professional privilege. The question for my determination is in these terms:

Question

May a party to the proceeding other than the fifth and sixthnamed defendants ("the Artusa parties"), notwithstanding the objection of the Artusa parties on the ground of legal profession privilege or client legal privilege, adduce evidence of the content of any or all of the following documents:

(a) outline of evidence being Exhibit 3 (MFI);

(b) the comments of Mr Artusa upon counsel's memorandum of advice being Exhibit 2 (MFI);

(c) any report of S. J. Foley & Associates Pty Ltd;

(d) any report of R.I. Brown Pty Ltd;

(e) any report of Peter McCarthy of Culliver & Sims Pty Ltd.

2 The litigation arises out a joint venture undertaken by a number of investors for the purchase and development for commercial purposes of land at Hampstead Road, Maidstone, and at Geelong Road, Brooklyn. The joint venture vehicle was a company, the firstnamed plaintiff, Main-Road Property Group Pty Ltd ("Main-Road"), as trustee of the Main-Road Property Group Unit Trust ("Main-Road Trust").

3 The venture was promoted by a businessman, Michael Anthony Artusa, the sixth-named defendant. Mr Artusa was a director of Main-Road until 30 May 2003 and also the project manager engaged by Main-Road by a contract under which he was to be paid for his services 20 per cent of the profit. Mr Artusa's company, "A" Team Diamond Headquarters Pty Ltd (ATDH), the fifth-named defendant, as trustee for the Artusa Family Trust, was initially issued 800,000 $1 units in the Main-Road Trust.

4 Another party, who is said by the plaintiffs also to have been a promoter of the venture is Luigi (Gino) Pelligra, the third-named defendant. Mr Gino Pelligra and his sons, Paul Pelligra, the fourth-named defendant, Anthony Pelligra, and Rosario (Ross) Pelligra had for some years been engaged in the building industry. Pelligra Holdings Pty Ltd, the second-named defendant, a company whose directors were at all material times Mr Ross Pelligra and Mr Anthony Pelligra, was a building company which was engaged by Main-Road to carry out the building work for the venture.

5 By a contract in writing dated 11 February 2002, Main-Road agreed with Pelligra Holdings that it should carry out the building work at Hampstead Road for a fixed price of $1.72 million, or perhaps $1.72 million plus GST. It is likely that this document formalised an agreement which had been reached some months before because the price of $1.72 million had been mentioned to investors in September and October 2001. No formal contract was entered into for the work at Geelong Road.

6 Mr Paul Pelligra was the other director of Main-Road until 30 May 2003. Upon the establishment of the venture 1,200,001 $1 units were issued to a company, Pelligra & Sons Pty Ltd, the first-named defendant, whose directors were Mr Gino Pelligra and Mr Ross Pelligra.

7 Unlike the other venturers, ATDH and Pelligra & Sons did not contribute cash to the venture in consideration for their units. They contend that their consideration was to be their contribution of services to the venture. The ATDH contribution was to be its or Mr Artusa's entitlement to receive 20 per cent of the profit for its project management services. That of Pelligra & Sons was to be its entitlement to the surplus by way of profit and otherwise of Pelligra Holdings, being the difference between the contract price and its actual cost of performing the building work.

8 In evidence too is a handwritten agreement made between Mr Artusa and the Pelligras dated 28 September 2001. Under this agreement the 20 per cent project management fee payable to Mr Artusa or his company, Pelligra Holdings, was to be shared 50/50 with Pelligra & Sons, although mention is made of the Artusa share being that of a company, Nicolantonio Pty Ltd. The profit of Pelligra Holdings as builder would also be shared with Mr Artusa or Nicolantonio Pty Ltd, in this case the share for Mr Artusa or his company would be one-third, the remaining two-thirds remaining with Pelligra & Sons. This again does not fit comfortably with the fact that the profit was ultimately that of Pelligra Holdings.

9 There are considerable difficulties and obscurities surrounding this profit share agreement which I do not now need to resolve. It is sufficient for my purposes that Mr Artusa and Mr Gino Pelligra agreed that there was to be a sharing between them, or their entities, of the entitlements which they say were to be their entities' contributions to the venture. Mr Artusa said that this agreement lapsed or ceased to be effective when the structure of the project changed from joint venture to unit trust. This must have been no later than early November 2001 when Main-Road was incorporated and the Main-Road Trust established.

10 In late 2002 a further 99,999 $1 units were issued, 59,999 to Pelligra & Sons and 40,000 to ATDH. Again, no cash was paid for these units. The holdings of these parties were then: Pelligra & Sons, 1,260,000 units and ATDH, 840,000. There were 4 million units issued so that the shares of these unitholders were respectively 31.5 per cent and 21 per cent of the total units.

11 At a meeting at which most but not all of the other unitholders were present, Mr Gino Pelligra and Mr Artusa said, and the investors agreed, that their respective companies would take title to the two properties, reflecting their unitholdings after the further issue of the units. This is the subject of present complaint by the plaintiffs but I am not now concerned with this. In January 2003, Main-Road, as the registered proprietor of the two properties, transferred to Pelligra & Sons and to ATDH respectively a 315 one-thousandth share and a 210 one-thousandth share in the land as tenants in common respectively. The units held by these unitholders were not then cancelled.

12 It is said, although there may be dispute as to this, that the building work for the construction of the nine warehouses and ancillary work at Hampstead Road was completed or substantially completed by October 2002. The units were leased or sold on various dates from September 2002 to June 2003. The work at Geelong Road for the construction of nine warehouses, including perhaps a retail component, commenced in early 2003. It stopped soon after when the work performed was only that with respect to foundations.

13 In early 2003 Mr Artusa became concerned that Pelligra & Sons was conducting the building work at Hampstead Road to his disadvantage. He referred to overcharging and double-dipping by the Pelligra company. Mr Artusa said that he reported his concerns to Alan Trewartha, one of the investors, and that the two men carried out investigations of these matters.

14 In the course of this, Mr Artusa retained a quantity surveyor, Stephen Foley, to advise upon the actual cost of the work carried out at Hampstead Road. Mr Foley prepared a number of reports which were dated from 28 May 2003 to 31 October 2001.[1] Mr Artusa said he engaged Mr Foley on his own account and not on behalf of Main-Road. For present purposes I accept this to have been the case. He also paid for these reports out of the ATDH account.

15 R.I. Brown Pty Ltd is a consulting engineer. Mr Artusa was asked when he retained Mr Brown. In response he said this:

Definitely May 2003 and the reason why I know that is because I went and spoke to Mr Di Raco as I had been speaking to Mr Robert Downey during the months of March, April and May and when it was decided we were going to attack Mr Pelligra's credibility in his building ability, I went and saw Mr Di Raco and he recommended that I go and see Mr Russell Brown and that would have been in the middle of May 2003.

16 Mr Brown's reports were dated variously from 29 July 2003 to 13 December 2003.[2] The costs of these reports also was paid out of the ATDH bank account.

17 Culliver & Sims Pty Ltd is a surveyor which surveyed the levels of the building and work at Hampstead Road. This company was again engaged by Mr Artusa upon the recommendation of one Warren Ellis. Mr Artusa said that this recommendation was made about mid-June 2003. The Culliver & Sims report is dated 27 June 2003. It too was paid for from the ATDH account.

18 There is some dispute as to whether these payments were in fact made from the venture funds and as to whether ATDH was reimbursed for them by Main-Road. This matter was not fully explored and I make no finding about this.

19 Mr Artusa's concerns about overcharging by Pelligra Holdings were significant because the building contract was for a fixed price. It is difficult to understand, in these circumstances, how Main-Road could have a complaint unless it was based upon some pre-contract conduct which led to the agreement for an excessive price, or upon excessive claims for extras. Mr Artusa himself might have a complaint because excessive building costs might reduce the profit of the venture upon which his management fee depended. He might also have a complaint if the excessive cost reduced the builder's margin or profit in respect of which he, Mr Artusa, or his company, was to receive its share under the profit share agreement. But this profit share agreement, he said, had lapsed.

20 The two other documents for which privilege is claimed were first an outline of evidence dated 1 March 2004 prepared by Mr Artusa between May 2003 and early 2004 and signed by him later that year. There was a dispute as to whether it was signed in August 2004 or as late as October or November of that year.

21 The second document is a copy of the advice of Senior Counsel for the plaintiffs upon which Mr Artusa wrote his comments. These comments, Mr Artusa said, were provided in February 2004 at the request of one or other of the then directors of Main-Road, Mr Trewartha and Mr Angelo Russo, or the solicitor, Mr Beswick of Kempsons & Co. I should add that Mr Beswick denied he was the solicitor for Mr Artusa or for ATDH.

22 Mr Artusa said that he or his company, ATDH, retained Kempsons & Co, the 19th defendant by counterclaim, to act for him or it as their solicitors. He says too that the documents and expert reports in respect of which privilege is claimed were prepared and obtained by him to enable Kempsons, as solicitors for him or ATDH, to provide legal advice and to provide legal services for him or ATDH relating to an anticipated proceeding against one or other of the Pelligras, or their company.

23 One further non-controversial matter should be recorded at this stage. When the joint venture was established and Main-Road registered in November 2001, its directors were Mr Artusa and Mr Paul Pelligra. Under its constitution, the management of the affairs of Main-Road was entrusted to its two directors.[3] Nevertheless, it is clear that broadly speaking, and at least until their falling out in February or March of 2003, the respective functions of Mr Artusa and Mr Paul Pelligra as directors of Main-Road were that Mr Pelligra was concerned with the carrying out of the building work and Mr Artusa attended to the other aspects of the project. By this I do not intend that they did not consult together about these matters, it is just that they allocated the work in the manner I have described.

24 Pursuant to this arrangement, Mr Artusa handled the commercial aspects of the project. He arranged the marketing or selling or leasing of the units and importantly, he retained lawyers for this purpose when this was required. The lawyers who were retained for these matters included Kempsons and in particular, Mr Beswick.

25 In or about February or March 2003 when Mr Artusa was looking into the question of overcharging and double-dipping by Pelligra Holdings, he telephoned Mr Beswick asking him to attend a meeting which was to be held with the Pelligras at Geelong Road. Mr Artusa fixed the date of this meeting as 16 February 2003. Mr Beswick was present with Mr Gino Pelligra and his three sons. The meeting was held at the site hut at Geelong Road and later at the home of Mr Gino Pelligra. It seems from the accounts of this meeting that there was in existence about this time two matters of dispute. The first was Mr Artusa's allegation of overcharging and double-dipping by Pelligra Holdings at Hampstead Road. The second was an allegation of the Pelligras that Mr Artusa had withdrawn a cheque or cheques in the sum of $35,000 payable to cash. It was suggested that he had, in this way, misappropriated project funds.

26 It seems that Mr Artusa was successful in persuading the Pelligras that the money had in fact been applied for the purposes of the venture so that the misappropriation allegation against him disappeared. Mr Gino Pelligra said that the meeting occurred prior to 6 March 2003 and that this question of misappropriation had been resolved on or about that date, prior to the meeting. Mr Beswick said that the meetings took the form of shouting and mutual recriminations. He said that he could not recall whether the Pelligra allegation was discussed but he did recall debate about overcharging. Mr Artusa's allegation about overcharging was not resolved at this meeting.

27 A matter of contest before me was whether Mr Beswick attended this meeting as a solicitor for Mr Artusa or ATDH, or for Main-Road. Mr Artusa said that he considered that Mr Beswick was his lawyer and that he introduced him as such to the Pelligras at the meeting. I find that this in fact occurred and that Mr Beswick did not dissent from this introduction but he maintained before me that he considered that he was attending the meeting on behalf of Main-Road. The question, however, must be addressed not in terms of what the witnesses thought or believed, it requires me to assess the evidence and to determine whether this would lead a reasonable bystander to infer, on the balance of probability, the fact and nature of the retainer, if indeed there was a retainer at this stage. I mention this because there was no evidence that Mr Beswick ever charged for this attendance. No account was rendered to Mr Artusa or ATDH and it does not appear that any charge in the bills rendered to Main-Road is referable to this meeting.

28 From the date of this meeting, Mr Beswick gave advice to, and attended meetings with, Mr Artusa and also Mr Trewartha. Mr Artusa had informed Mr Trewartha, as a significant investor, of his concerns about the costing of the building works by Pelligra Holdings. In March 2003 Mr Artusa disclosed to Mr Trewartha that neither ATDH nor Pelligra & Sons had paid cash for their units. I accept the evidence of Mr Trewartha that Mr Artusa expressed remorse about this and that he said he would assist Mr Trewartha and the investors in their efforts to pursue the Pelligras and to reverse the transfers of titles to the properties so that Main-Road was restored as the sole proprietor.

29 This was certainly the position when Mr Artusa attended a meeting at the office of accountant, Stan Konidaris, on 5 April 2003. He offered to resign as director of Main-Road and to transfer to Main-Road his interest in the properties. Many of the investors were present at this meeting. I do not find that any settled agreement was reached between the parties at this meeting.

30 Some days earlier, Mr Artusa had consulted another solicitor, Frank Guastelegname of Caleandro, Guastelegname & Co. Indeed he had requested Mr Guastelegname, and also his present solicitor, Mr Acquaro, to accompany him to the Geelong Road meeting with the Pelligras to which I have referred. They were unable to do so.

31 In any event, Mr Guastelegname, on 3 April 2003, wrote to the Pelligras complaining about their overcharging. Mr Guastelegname terminated his retainer some days later because, as Mr Artusa said, the solicitor apprehended a conflict of interest since he had previously acted for Main-Road and because there was a deadlock between the directors of that company.

32 On 30 May 2003 Mr Paul Pelligra and Mr Artusa resigned as directors of Main-Road and Mr Trewartha and Mr Russo were appointed in their place. Mr Trewartha said that thereafter Mr Artusa was not involved in decisions made by Main-Road in respect of the problems with the venture. I accept this to be the case. Mr Artusa, however, continued to provide assistance to the new directors, including the provision of expert reports directed to showing the overcharging by Pelligra Holdings and its defective work and other complaints against it and the Pelligra parties generally. This assistance included the provision of his outline of evidence and his comments upon counsel's memorandum of advice.

33 The first question is whether the claim for privilege should be addressed under the Evidence Act 2008 or under the pre-existing statutory or common law regime. It was at first submitted on behalf of the Artusa parties that the entitlement to legal professional privilege is a substantial rather than a procedural right and it should therefore be governed by the law as it stood in 2003 rather than by the Uniform Act which came into force on 1 January 2010. This submission was not pressed in final address and in my view, rightly so.

34 The transitional provisions contained in clause 2 of Schedule 2 of the Evidence Act 2008 make it clear that the Act applies to a hearing commencing after the commencement date, 1 January 2010. The provisions of Part 3.10, Division 1, differ from the pre-existing common law and the Evidence Act 1958. In Telstra Corporation v Australis Media Holdings,[4] McClelland CJ in Eq concluded that the provisions of the New South Wales Uniform Evidence Act 1995 were inconsistent with the previous law concerning legal professional privilege so that the previous law did not apply to the trial before the court.[5] I would respectfully adopt his Honour's observations which are equally applicable to the Victorian Evidence Act 2008.

35 The claim for privilege under s 118 or s 119 then raises a number of issues:

(a) was there in existence at the relevant time the relationship of lawyer and client;

(b) was the dominant purpose of the communication or document which is sought to be adduced in evidence the provision of legal advice to Mr Artusa or ATDH, or the provision of legal services relating to an anticipated or pending proceeding in which he or ATDH may be a party;

(c) has Mr Artusa or ATDH acted in a way that is inconsistent with the objection now made within the meaning of s 122(2). This raises three sub-issues:

(i) did Mr Artusa or ATDH knowingly and voluntarily disclose the substance of the evidence in question to another person;

(ii) has the substance of the evidence been disclosed with the express or implied consent of Mr Artusa or ATDH;

(iii) has the disclosure been made as a result of deception; and

(d) are Main-Road or the investors, as persons retaining Kempsons jointly with Mr Artusa or ATDH entitled to adduce the evidence.

36 It is convenient to consider the question of the Kempsons retainer in two periods: the period prior to 30 May 2003 when Mr Artusa ceased to be a director of Main-Road, and the period after 30 May 2003 until perhaps October or November 2004 when Mr Artusa showed Mr Beswick the notice of contribution filed on behalf of the Pelligra parties. All of the communications, other than the reports of S. J. Foley & Associates of 28 May 2003, were made in the second period.

37 In this first period Mr Beswick had received instructions upon a number of legal matters on behalf of Main-Road. In each case these instructions were given by Mr Artusa as the director concerned with the commercial aspects of the venture. I am satisfied that when he was asked to attend the Geelong Road meeting in February or March 2003, Mr Beswick was not given any detail of the matters to be discussed.

38 The reasonable bystander would infer from the circumstances of the request and of the events at the meeting that Mr Beswick was attending on behalf of the trust, or perhaps on behalf of Main-Road. I am of course mindful of the fact that Main-Road was the trustee and that the controversy between Mr Artusa and the Pelligras was a controversy between directors and persons and entities associated with the directors. But the controversy as it then appeared was one which alleged misconduct by Pelligra Holdings in its role as builder engaged by Main-Road.

39 I accept the evidence that, at this early stage, the allegations of misappropriation of venture funds by Mr Artusa was not clearly brought to Mr Beswick's attention prior to the meeting.

40 In the months that followed this meeting, up to the end of May 2003, the work of Kempsons was directed to exploring and documenting Mr Artusa's allegations against Pelligra Holdings and these allegations were enlarged as further information came to light. I accept that at this time the directors of Main-Road were in deadlock so that Kempsons could not be instructed by that company. This was particularly the case since the allegations were directed to the Pelligra interests which the Pelligra director might be minded to protect.

41 Kempsons apprehended this and in March, or thereabouts, they indicated that they could not act for Main-Road. Nevertheless, they continued to attend meetings, take instructions and give advice. A significant topic of this advice in April and May appears to have been the desire to remove the control of the trust from the hands of the contending directors. This, Kempsons said, might be done by replacing the present directors or by changing the trustee of the Main-Road Trust. This was of course a matter of interest primarily to the trust or to the investors.

42 As a matter of contract, I conclude that the client of Kempsons at this time was Mr Trewartha, or perhaps him and Mr Russo on behalf of the investors. Mr Artusa was then a unitholder and a part-owner of the land so that it may be that as such he would have a common interest with the investors. The matter from Mr Artusa's point of view is complicated by the fact that he had an antipathy to Mr Gino Pelligra and to the Pelligras generally, so that the pursuit of allegations against them was consistent with this objective.

43 The fact remains that, putting to one side legal technicalities, such as the prospect of a derivative action which I do not suppose was in the mind of any of the two directors, the allegations, if made out, would be pursued in litigation on behalf of trust and the fruits of this litigation would pass through the trust to Mr Artusa as a project manager entitled to a share in profit, and also to the unitholders as beneficiaries.

44 I conclude therefore that in the first period Kempsons was not retained by Mr Artusa personally as his solicitor or as solicitor for ATDH. If I am wrong in my conclusion that at the Geelong Road meeting the question of his misappropriation of funds was not brought to Mr Beswick's attention, I would have concluded that at this meeting, Mr Beswick was representing his interests in resisting this allegation. On any view of the evidence, however, the allegation was no longer alive in the first period after that meeting so that this retainer by Mr Artusa or ATDH, if it did occur, no longer continued.

45 I return to the context in which the retainer arises in this period. Mr Artusa was gathering information and obtaining expert reports in this period in support of the complaints against Pelligra Holdings. In acting with respect to these matters, Mr Beswick was not acting for Mr Artusa personally.

46 I should mention, in case it be thought I had overlooked it, that there is no substance in the contention put on behalf of the Artusa parties that the trust ledgers or accounts maintained by Kempsons suggest a different conclusion.

47 The second period, the period after 30 May 2003, presents less difficulty. During the period the new directors of Main-Road retained Kempsons to advise and prepare the claims of Main-Road. A formal retainer agreement was entered into with Main-Road. Kempsons billed Main-Road for its services. In this period Mr Artusa was not present at the meetings of directors or the investors at which instructions were given to Kempsons.

48 Mr Artusa was repeatedly warned to seek his own independent legal advice. An instance of this was on 17 June 2003 when he was so advised by Mr Lithgow of counsel. He was told in March 2004, if not earlier, that he would be a defendant in the proceeding to be commenced against the Pelligra parties. To suggest he retained Kempsons in this period to act for him or ATDH is fanciful. To suggest that Kempsons were performing work in this period only for him or ATDH is even more so.

49 This is sufficient to dispose of the privilege claims. The entitlement of Mr Artusa or ATDH to resist the use by Main-Road or the Pelligra parties of the documents in question depends upon the existence of the relationship of lawyer and client between them and Kempsons. The client for this purpose is the person engaging the lawyer or an employee or agent of that person.[6] Moreover, the privilege asserted in this case is lost if Main-Road or Mr Trewartha or Mr Russo, who wish to adduce the evidence, retained Kempsons at the relevant time jointly with Mr Artusa or ATDH.[7]

50 If, contrary to my conclusion, Mr Artusa or ATDH did engage Kempsons at the relevant time, this must be a case of joint engagement, particularly in the second period. There is no substance in the alternative submission of counsel for the Artusa parties that in this period Kempsons was retained separately by Main-Road and by his clients. The fact remains that there was no distinction in the work performed by Kempsons. Having regard to s 124 Mr Artusa or ATDH cannot resist the adducing of the evidence by Main-Road.

51 Next, the deployment of the documents in question would not result in the disclosure of information which is relevantly confidential. The evidence showed that in every case Mr Trewartha was provided with the reports and was involved in the preparation of the outline of evidence and the comments on counsel's memorandum. He was given copies of these documents too. In no case was there imposed upon him by Mr Artusa any constraint upon the use he might make of the documents, except, implicitly, that they be not used otherwise than for the purpose of the litigation which Main-Road was preparing against the Pelligras, with Mr Artusa's support.

52 In these circumstances it cannot be a breach of any obligation imposed upon the person for whom the document was prepared that a document be used in the litigation for which it was prepared.

53 Central to the entitlement of client legal privilege is the purpose for which the communication was made. It is clear from Mr Artusa's evidence that his principal purposes in making the reports available were threefold: first, to bring the Pelligras to book for their misconduct; second, to assist the investors and Main-Road in the proposed litigation; and third, to ingratiate himself with them so that they would not sue him or ATDH. This was particularly demonstrated in his evidence regarding the purpose for preparing the outline of evidence. It was prepared, he said, so as to persuade the Pelligras that they should not resist the claims made by Main-Road. The content of the outline was for this purpose to include any "dirt" he had on them and even "white lies" so as to persuade them, the Pelligras, that resistance was hopeless. None of these purposes falls within the purposes described in s 118 or s 119.

54 Next, it was put on behalf of Main-Road that the privilege, if it ever existed, has been lost by reason of the fact that Mr Artusa knowingly and voluntarily disclosed the substance of the evidence to be adduced from it. This is the disclosure to Mr Trewartha and Mr Russo. On behalf of Mr Artusa and ATDH it is said that this disclosure was not a knowing or voluntary disclosure, alternatively that it was a disclosure which was the result of deception.

55 The requirement of sub-s 122(3)(a) that the disclosure be made knowingly and voluntarily directs attention on the state of mind of the disclosing person at the time of the disclosure. It is not concerned with the motive for making the disclosure or to circumstances which led to the disclosure. These last matters are the subject of sub-s (5). If the disclosing party did not know the disclosure was being made, or if the disclosure was made inadvertently, then the requirements of sub-s (3)(a) would not be met.

56 In the present case it is clear that Mr Artusa disclosed to Mr Trewartha and to Mr Russo, and also to Mr Beswick, as solicitor for the investors and Main-Road, the substance of the matters in each of the expert reports and each of his two documents. He knew what he was doing and he intended that they be made aware of the contents. His disclosure then was both voluntary and knowing.

57 By s 122(5)(a) such a voluntary or knowing disclosure is not to be taken to have caused the privilege to be lost pursuant to s 122(2) merely because the disclosure was made in circumstances, including where it was made as a result of deception. The word "merely" in sub-s (5) shows that the deception must be the sole or operative cause of the disclosure.

58 In the present case, counsel for the Artusa parties provided six particulars of the suggested deception: One, that Kempsons failed to advise the Artusa parties to obtain independent legal advice; two, that Kempsons failed to advise the Artusa parties that it had issued a writ against the Artusa parties and that the outline of evidence was intended to be used against the Artusa parties in the proceeding; three, that Kempsons failed to advise the Artusa parties that it had been instructed to commence legal proceedings against the Artusa parties; four, that Kempsons failed to advise the Artusa parties in writing that it did not act on behalf of the Artusa parties and that the Artusa parties should obtain independent legal advice; five, that Kempsons continued to have conferences with the Artusa parties and provided advice to them when Kempsons had been instructed to commence legal proceedings against the Artusa parties; and six, that Kempsons had led the Artusa parties to believe that Kempsons were acting on their behalf by reason of a number of factors. There were 15 factors relied upon as constituting the matters which led the Artusa parties to believe that Kempsons were so acting.

59 As to particulars 1 and 4, I have found that there was no failure on the part of Kempsons and the barristers retained by them to advise Mr Artusa to seek his own legal advice. This advice was given orally, there is no further requirement that it be given in writing.

60 Particulars 2 and 3 concern the decision of Main-Road and the investors to commence the proceeding against the Artusa parties. It should be observed that the writ was filed on 5 May 2004. A draft statement of claim had been prepared some months earlier. In paragraph 116 of his witness statement, Mr Artusa said that he received a draft of this statement of claim on 25 February 2004. There seemed to be some uncertainty about this but in any event, he acknowledged in the same witness statement that he had been informed by Mr Beswick on 1 March 2004 that he would be a defendant. There was some evidence that he was advised earlier that this was likely to be the case. He was not, however, informed that the writ had been filed until about October 2004 when he became aware that the Pelligra parties sought contribution from him and ATDH.

61 I accept that upon receipt of the notice of contribution he consulted Kempsons and was informed that the writ had been issued naming him and his company as defendants. The writ was thereupon served upon him and ATDH. I accept that when Mr Artusa was informed in March 2004 and thereafter that he would be a defendant, he was told that he should not be concerned because the proceeding was really aimed at the Pelligra parties.

62 The chronology is important because there is no evidence that at the time Mr Artusa prepared his comments on counsel's advice, or when he prepared his draft outline of evidence, that any decision had been made to sue him or ATDH. In any event, at the time he signed his outline of evidence he knew he was to be a defendant, although he had assurances from Mr Beswick about the benevolent intent of the plaintiffs.

63 I am satisfied that at all times from at least April 2003 Mr Artusa was aware that the investors were minded, if so advised, to bring legal proceedings to pursue their complaints about the non-payment of the consideration for the units issued to Pelligra & Sons and to ATDH, about the transfer of the titles to those companies, about the defective building work and about the overcharging for the building work. He too had a grievance against the Pelligras. He was prepared to assist the investors in order to pursue this grievance and in the hope that by providing this assistance, they would not pursue him for his involvement in these matters.

64 He made it clear in his evidence that this was his purpose when he spoke of the white lies which he said he included in his outline of evidence so as to cause the Pelligra parties to negotiate a settlement of the claims against him.

65 Particular 5 presents an aspect of this. Mr Artusa was prepared to make material available to the investors and to Main-Road, and to provide information and perhaps advice to them after the proceeding had been decided upon and he did so in order to achieve his own objectives.

66 Particular 6 presupposes that Mr Artusa believed that the Kempsons were acting for him and for ATDH and for no other party. I find that he had no such belief at any relevant time and certainly he did not have such a belief after 30 May 2003.

67 It follows from all of this that the application of Mr Artusa and ATDH that the reports of S. J. Foley & Associates Pty Ltd, R.I. Brown Pty Ltd and of Peter McCarthy of Culliver & Sims Pty Ltd, as well as Mr Artusa's own outline of evidence and his comments on counsel's advice are not protected by client lawyer privilege. I will not on this ground prevent a party from adducing evidence of their content in this proceeding. I would therefore answer the question for preliminary trial as follows,

Question

May a party to the proceeding other than the fifth and sixthnamed defendants ("the Artusa parties"), notwithstanding the objection of the Artusa parties on the ground of legal profession privilege or client legal privilege, adduce evidence of the content of any or all of the following documents:

(a) outline of evidence being Exhibit 3 (MFI);

(b) the comments of Mr Artusa upon counsel's memorandum of advice being Exhibit 2 (MFI);

(c) any report of S. J. Foley & Associates Pty Ltd;

(d) any report of R.I. Brown Pty Ltd;

(e) any report of Peter McCarthy of Culliver & Sims Pty Ltd.

[1] Reports dated 28 May 2003, 28 May 2003, 28 May 2003, 14 July 2003, 14 July 2003, 8 August 2003, 31 October 2003, and 31 October 2003.

[2] Reports dated 29 July, 6 August 2003, 26 September 2003, 26 September 2003, 13 November 2003 and 15 December 2003.

[5] See also Evidence Act 2008 (Vic) ss 9, 56(1).

At a glance

Court

Decision date

Before

Source

Judgment (85 paragraphs)

Parties

Cases Cited (1)