Sovereign v Bevillesta

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4486/96 - SOVEREIGN MOTOR INNS PTY LTD V BEVILLESTA PTY LTD

1 HIS HONOUR: This judgment relates to the admissibility of evidence in the hearing of proceedings No.4486/96. 2 The proceedings have been brought by a lessee against a lessor to complain of breaches of covenant in respect of hotel premises in North Sydney. Initially the plaintiff sought injunctive relief but at the final hearing it seeks only damages. 3 The question for decision now, during the course of the final hearing, is whether a letter of advice dated 20 November 1996 from the plaintiff's solicitor (Mr R Laws) to the managing director of his client, the plaintiff, is admissible in evidence against the plaintiff. 4 The letter was written shortly before the proceedings were commenced and is expressed to be about the objects of the proposed claim. The writer notes that when his file was opened, the object was to force the lessor to comply with its obligations under the lease with respect to stated matters (including the air-conditioning system), but since that time 'the bulk of these problems seem to have been overcome'. The writer then notes that the claim for compensation for loss of profits was originally envisaged as being 'a lever' to force the lessor to comply with its obligations, and was not an object in itself. The letter proceeds to confirm instructions to file a statement of claim, which would in part seek compensation and says: 'Your intention in that regard is to 'keep the lessor honest in regard to its obligations under the lease''. The writer advises that the proceedings would not be commenced in the Commercial Division because the hearing would come on too rapidly, and advises that the proceedings be commenced in the Equity Division as no hearing would take place for a number of years and the lessor 'would then have it hanging over its head when considering its obligations under the lease.' The letter then sets out arrangements for finalising the draft Statement of Claim. 5 Clearly the letter would be protected by client legal privilege if there was no disentitling factor. This has not been disputed. The question is whether the plaintiff's privilege has been lost by waiver, a question governed by s122 of the Evidence Act 1995 (NSW). The facts relating to the alleged waiver are as follows. 6 Pursuant to an order made on 1 September 1997, the plaintiff prepared a verified list of documents, the affidavit of verification being sworn by its managing director on 1 October 1997. Part 1 of the list specified numerous documents one by one. Part 2 of the list was a description of about 370 documents claimed to be privileged. The documents in Part 2 were described by category, rather than being specified individually. The first category was: 'Correspondence and memoranda of conversations and conferences between officers and employee [sic] of the [plaintiff] and its legal advisers to give instructions and advices guiding the proceedings.' 7 The defendant's solicitor and officers of the defendant attended the office of the plaintiff's solicitor on 2 February 1998 for the purpose of inspecting the discovered documents. The solicitor brought a copy of the verified list of documents with him. They were given access to various cardboard boxes and ring-binders of documents and were left to carry out their inspection. Additional ring-binders of documents were provided to them after they arrived. They found it very difficult to identify the listed documents in the materials provided, since the documents were not individually numbered. However, they were able to conduct their inspection and they tagged various documents for copying. One of those documents was the letter of 20 November 1996. 8 Subsequently there was protracted correspondence between the solicitors about the copying of the tagged documents. In his letter dated 19 November 1998, the defendant's solicitor referred to his earlier letters of 19 February, 4 September, 20 September and 20 October 1998 requesting copies of the documents. The letter of 19 November 1998 is expressed in strong language. It asserts that the plaintiff was required by the Supreme Court Rules to provide photocopies or photocopying facilities. It complains of the plaintiff's failure to comply with the Rules and says that the defendant's preparation of the case was being hampered. The letter proceeds: 'In the absence of any reason being submitted for your failure to comply with the Rules and our requests we are left to speculate as to the cause. It is [sic] long been our client's opinion, expressed to you and the plaintiff on many occasions, that these proceedings are baseless and have been brought for an ulterior purpose. The material discovered by your client, which provides no foundation for the claims asserted in the statement of claim, only serves to strengthen that view. There is in particular the candid admission in one of the documents that your client's motivation in bringing the proceedings is to secure a negotiating position with a view to procuring a substantial reduction in rent, rather than to vindicate the plaintiff's alleged rights as asserted in the statement of claim. ... In the circumstances we suggest that your client examines very closely whether it is wise to continue this litigation or discontinue and avoid incurring further substantial expense.' 9 It is probable that the document containing the 'candid' admission', to which the author of the letter of 19 November 1998 intended to refer, is the letter of 20 November 1996. 10 At some time not long after the letter of 19 November 1998, the tagged documents were photocopied by someone in the office of the plaintiff's solicitor and the copies were made available to the defendant's solicitor. They included the letter of 20 November 1996. There was no covering letter listing the documents supplied, nor any further claim to privilege. It is probable that the copying was done as a purely administrative task by an employee of the plaintiff's solicitor rather than by Mr Laws himself, and on the balance of probabilities I so find. There is no evidence that Mr Laws reviewed the bundle of photocopies before they were released. 11 Mr Laws says that the letter of 20 November 1996 was inadvertently left in one of the ring-binders which he made available for inspection. He says that if he had known it was there, he would have removed it. He says that the subsequent copying and release of the letter was simply a continuation of the initial inadvertent mistake. 12 The question before me arises during the course of the final hearing. It is governed by the provisions of the Evidence Act of New South Wales. The Evidence Act applies in relation to all proceedings in this Court, including the subject proceedings (ss 2 and 4). However, the provisions of the Act which concern client legal privilege are expressed in terms which relate to the adducing of evidence. That being so, the provisions concerning the privilege are apt to apply to the trial, but probably not to pre-trial discovery procedures: See Mann v Carnell (1999) 168 ALR 86, paragraph 17 (per Gleeson CJ, Gaudron, Gummow and Callaghan JJ). That case shows that there may well be differences of principle between the provisions of s 122 dealing with waiver of privilege and the common law on that subject. In particular, to the extent that the common law has regard to imputed waiver on the basis of principles of fairness enunciated in Attorney General v Maurice (1986) 161 CLR 475 and Goldberg v Ng (1996) 185 CLR 83, there may be no scope for that approach under the statutory provisions. 13 This serves to distinguish all cases decided on waiver at common from cases decided under the statute. Specifically, I do not find Hooker Corporation v Darling Harbour Authority (1987) 9 NSWLR 538 to be of assistance in the present case, given that my task is to apply the statutory provisions. 14 Section 122(2) states that subject to subs (5) (which does not apply in this case), Pt 3.10 Div 1 (client legal privilege) does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made in four stated circumstances. The stated circumstances are not relevant to the present case. Therefore, under subs (2) the critical question is whether the plaintiff, as a party to the proceedings, has knowingly and voluntarily disclosed the substance of the letter of 20 November 1996 to the defendant. 15 Section 122(4) appears literally to be relevant. It is again expressed to be subject to subs (5). It states that Pt 3.10 Div 1 does not prevent the adducing of evidence if the substance of the evidence has been disclosed with the express or implied consent of the client or party to another person, other than in circumstances not presently relevant. Subsection (4) would raise the question whether the letter of 20 November 1996 was disclosed with the express or implied consent of the plaintiff. 16 It appears that there is an issue whether subs (4) is applicable in circumstances such as the present. In Mann v Carnell the Full Federal Court took the view that an issue concerning waiver of privilege in pre-trial circumstances was governed by s 122 of the Commonwealth Evidence Act (relevantly indistinguishable from the New South Wales Act) on the basis that while s 122 did not directly apply to pre-trial circumstances, it was to be applied derivatively, in effect as an extension of the common law. The 'derivative application' approach was rejected by the High Court of Australia in Esso Australia Resources Limited v The Commissioner of Taxation (1999) 168 ALR 123 and, consistently with that decision, the High Court in Mann v Carnell found that the Full Federal Court had erred in purporting to apply s 122. While that tends to undermine the authority of the Full Federal Court's judgment, it is nevertheless relevant to note that the Full Federal Court dealt with the construction of s 122, taking the view that subs 122(4) applies only to disclosures by someone other than the client, or an agent or employee of the client. If that is correct, then subs (4) has no application here. 17 I must say, however, that on the face of the subsection such a construction is, with respect, not compelling. I have not had the benefit of argument on the point and I therefore propose to assume, for the purposes of my decision, that subs (4) is relevant and deal with the matter both under subs (2) and subs (4). 18 The first question, then, is the one which arises under subs (2), namely, whether the plaintiff has, 'knowingly and voluntarily' disclosed to the defendant the substance of the letter of 20 November 1996 by disclosing the letter itself. The meaning of the words, 'knowingly and voluntarily' was touched upon by Goldberg J in Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391. That case was decided, of course, before the High Court resolved the 'derivative application' issue. Not surprisingly, therefore, his Honour's judgment addresses statutory as well as common law principles, even though the issue related to pre-trial discovery. As far as the statute is concerned, his Honour quoted the following remarks from Rolfe J of this Court in Ampolex v Perpetual Trustee Co (Canberra) Pty Ltd (1996) 40 NSWLR 12 at 22: 'I assume that the word 'voluntarily' is intended to mean something other than 'under compulsion of law' which appears in paragraph (cf). I think the distinction is that the disclosure was made voluntarily in the sense that it was not made by way of mistake, it being possible that a disclosure may be made knowingly yet by way of mistake and accordingly perhaps not voluntarily.' 19 Rolfe J found it unnecessary to decide whether the notion of voluntary disclosure excluded disclosure made by mistake, but Goldberg J commented on that issue. He said (145 ALR at 406): 'In my opinion s 122 is not to be so limited in circumstances where formal discovery is made.' 20 He found that disclosure of a letter, on the facts before him, was a voluntary disclosure as part of the formal process of discovery and inspection and therefore subs (2) defeated the claim to privilege in that case. 21 I note, however, that there are some important points of distinction between the Meltend case and the present circumstances. In that case the issue arose in the context of pre-trial discovery following an order for discovery made by the Court. The respondent filed a list of documents stating that documents enumerated in Part 2 of the first schedule to the list were privileged on the ground of legal professional privilege. One of the documents specifically listed in Part 1 of the schedule, and therefore not subject to the claim of privilege, was the document which was the subject of Goldberg J's decision. The solicitor for the applicant inspected the documents in Part 1 of the schedule, including the letter in question, and subsequently requested a copy of it. Only at that stage did the respondent's solicitor claim that the letter was subject to legal professional privilege. The evidence of the respondent's solicitor was that he had considered the documents in the list before filing it. He had taken the view that the letter in question was not privileged but had subsequently changed his mind. His evidence was that at the time when he settled the content of the list he did not 'quite appreciate' that the letter was privileged, and that when compiling the documents in response to the request for copies he 'realised' that a claim for privilege ought to have been made, and so issue was joined on that question. Unlike the present case, the document was not copied and provided to the other side. 22 The important distinction between Meltend and the present case is that here the evidence indicates that there was an intention to claim privilege in respect of the document at all relevant times, but the intention was not effectuated due to simple inadvertence. It is plain, in my view that the letter of 20 November 1996 fell within the relevant category in Part 2 of the verified list of documents and, therefore, a reader of the verified list of documents would realise that it was intended that that letter be included in the documents for which privilege was claimed. If ever there was a letter which bespoke 'privileged communication', it was the letter of 20 November 1996. It was clearly a letter of advice from solicitor to client. It said the sorts of things that would be inconceivable to be said in circumstances other than circumstances of confidentiality and privilege. 23 In my view the defendant's solicitor, when reading that letter, must have realised that it was a letter of a privileged kind and therefore it had been made available for inspection by mistake. In those circumstances it appears to me that that Mr Laws did not 'knowingly and voluntarily' disclose the letter to the defendant. Whatever may be the precise limits of those words, they do not apply in a case where everything indicates an intention to claim privilege in respect of the document and what has gone wrong is attributable to sheer inadvertence or carelessness. 24 Sub-section 122(2) refers to 'a client or a party.' In my view it is appropriate in the present case to attribute the intention and state of mind of Mr Laws to his client, the plaintiff. In that respect I adopt what was said by Goldberg J in Meltend at 403. It was within the ostensible authority of Mr Laws, as solicitor, to form an intention with respect to the privilege of character of the letter of 20 November 1996, and it was within his ostensible authority to waive privilege in the manner provided in s 122. I have found that Mr Laws did not do so, and therefore privilege has not been waived under that sub-section by the plaintiff. 25 In some ways my conclusion on the application of subs (2) is not a satisfactory one. My reasoning should not be taken to condone the conduct of the plaintiff's solicitor in all respects. If it had been appropriate to determine this matter upon the fairness principles of the common law, I would have been influenced by the observations of Goldberg J in the Meltend case at 404. It is particularly of concern that the inspection took place in February 1998 and the documents, including the letter of 20 November 1996, were not copied and made available for almost a year. There was more than enough time for the plaintiff's solicitor to discover his mistake and rectify it. Assuming (since the evidence is not sufficient for me to make a finding on this point) that the mistake was not discovered until after the photocopied documents were handed over, there is nothing in the evidence to explain why the matter was left for determination until the hearing and no interlocutory application was made to resolve it. But none of those matters is relevant to the question whether the plaintiff knowingly and voluntarily disclosed the letter. 26 Nor does it seem to me this is a case where it is appropriate to exercise a discretion under s 135 of the Evidence Act. The effect of the combined application of s 118 and s 122 is that the letter cannot be adduced into evidence because it is protected by client legal privilege and the removal of the privilege under s 122(2) has not occurred. So the evidence is inadmissible. This is not a case for the exercise of discretion to exclude evidence otherwise admissible, and there appears to be no discretion to admit evidence which s 118 of the statute excludes. 27 I have expressed doubt as to whether s 122(4) is applicable in the instant circumstances. If it were applicable, it would require me to decide whether the substance of the evidence has been disclosed with the express or implied consent of the plaintiff. For that purpose it would be appropriate to have regard to the conduct and intentions of the plaintiff's solicitor, who had ostensible authority to waive privilege on his client's behalf for the reasons which I have given. The question would then be whether, when the letter of 20 November 1996 was made available for inspection on 4 February 1998, and when subsequently a copy of it was provided to the defendant, the letter was disclosed with Mr Laws' express or implied consent. 28 The evidence indicates that on balance Mr Laws did not give express or implied consent to the disclosure of this particular letter. His unchallenged evidence was that the letter was included in a ring-binder by mistake and the mistake was simply continued at all relevant subsequent times. In my view, the correct conclusion in those circumstances would be that he did not consent. I would reach that conclusion on the basis that imputed consent is not raised by subs (4), which speaks only of express and implied actual consent, and therefore the 'fairness' considerations of the common law discussed in Goldberg J's judgment and in the judgments which he summarises are inapplicable to subs (4). 29 My conclusion, therefore, is that the letter of 20 November 1996 is protected by client legal privilege under section 118 of the Evidence Act of New South Wales and it is inadmissible. * * * * * * * * *

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