Stuart v Rabobank Australia Ltd

1. Leave be granted to the first respondent to have access to, inspect and copy in the Registry, the documents produced in accordance with the subpoenas addressed to Catherine Higgins (S2) and James W Kewley (S3).
2. Leave be also granted to the solicitors for the first respondent (Gadens Lawyers) to uplift those documents, for the purposes of inspection and copying, on the following conditions: (a) the documents not leave the custody of the solicitors; (b) the documents be returned to the Registry in the same condition, order and packaging as when uplifted; and (c) the documents be returned promptly and, in any event, when an officer of the Registry so requests.
3. The applicants' pay the costs of the first respondent of its interlocutory application for access to the documents produced in answer to the subpoenas referred to in order 1, as agreed or assessed, those costs not to include the costs of the appearance on 17 March 2017. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ROBERTSON J: 1 Legal professional privilege has been claimed in relation to documents produced under subpoena by Catherine Higgins, in relation to one set of documents, and James Kewley, in relation to a second set of documents. Catherine Higgins is a solicitor of Agility Legal, and is the applicants' former solicitor. James Kewley is the applicants' former counsel, briefed by Ms Higgins. 2 The question of legal professional privilege requires urgent determination because, I understand, the subpoenaed documents are sought to be used in a hearing beginning at 10:15 this morning, being a hearing in which witnesses who have travelled from interstate are involved. 3 That hearing is of an interlocutory application filed by the first respondent bank that the applicants' substantive proceedings be stayed or dismissed on the ground, inter alia, that those proceedings, brought by the applicants, have been settled by agreement. 4 When the matter first came before me as duty judge on 17 March 2017, I understood the issue to have been whether legal professional privilege was established. It became clear that, instead, the issue was whether the applicants had waived, by operation of law, their legal professional privilege in respect of the documents produced in answer to the two subpoenas. 5 The applicants, the parties claiming legal professional privilege, relied on an affidavit sworn by Keith Robert Spencer, their present solicitor, dated 15 March 2017. 6 The schedules to that affidavit refer to provisions of the Evidence Act 1995 (Cth), but because what is involved at present is a question of access to documents, rather than the adducing of evidence, the Evidence Act does not apply and the matter is governed by the common law: Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67; 201 CLR 49 (Esso); Northern Territory v GPAO [1999] HCA 8; 196 CLR 553. 7 In these circumstances the approach I shall take is to assume that legal professional privilege would otherwise obtain, particularly in the light of what Gleeson CJ, Gaudron and Gummow JJ said in Esso at [35] as to privilege attaching to communications made with the dominant purpose of obtaining legal assistance in and for the purposes of the conduct of actual litigation. 8 I was taken by counsel for the first respondent, the moving party in seeking access to the subpoenaed documents, to written submissions filed on behalf of the applicants, dated 13 March 2017, to the effect that the application by the first respondent for declarations and other relief should be dismissed for the following reasons: (a) the Court has no jurisdiction or alternatively should not in the due exercise of its discretion make declarations and orders upon the new cause of action which is said to arise in the matter founded upon the agreement dated on or about 26 August 2016 between the parties; (b) there was no authority for the former legal representatives of the applicants or both of them to enter into such agreement; (c) there was no agreement as alleged of 26 August 2016; (d) in any event the agreement should be set aside in equity as unconscionable in all the circumstances. 9 Those submissions also stated that insofar as it was suggested that waiver was relied on in relation to the documents produced in answer to the subpoenas, the applicants did not read their affidavits with respect to any communications with the former lawyers. 10 I shall assume this to be so. 11 To my mind there are two main issues. The first is whether the service of the affidavits constitutes a waiver. By the affidavits I mean the affidavits sworn by the applicants, one affidavit by Mr Mark Stuart dated 24 January 2017 and an affidavit sworn by Mrs Catherine Stuart of the same date to which I have been taken. The second main issue is whether in the circumstances of this case the contentions I have set out at [8] above, including that the former legal representatives of Mr and Mrs Stuart had no authority to enter into the alleged agreement of 26 August 2016 said by the first respondent to have settled the substantive proceedings, themselves constitute a waiver of legal professional privilege in the communications evidenced by the documents produced in answer to the subpoenas. 12 I first deal with a submission raised by counsel for Mr and Mrs Stuart to the effect that the first respondent's application to inspect the documents produced in answer to the subpoenas be dismissed on the ground that it was unfairly or prejudicially late. I am not persuaded that there has been late service of the material sought to be put forward on that application so as to prejudice the responding parties, the applicants. The material I have taken into account is the applicants' two affidavits, to which I have referred, and the written submissions on behalf of the applicants which I have summarised at [8] above. I do not accept the submission that the first respondent's application should be dismissed on this ground. This is particularly so in light of the adjournment of the application from the morning of Friday 17 March 2017 to this morning, 20 March 2017. 13 I next deal with a further threshold point raised by counsel for Mr and Mrs Stuart. He submitted that the affidavit of the applicants' present solicitor, Mr Spencer, in support of the claim for privilege over the documents produced under the subpoenas was conclusive. In my opinion that could not be so in relation to questions of waiver and I reject that submission. The authority relied on by counsel, Seven Network Ltd v News Ltd [2005] FCA 915, concerned "further and better discovery" and "review" of the privilege claims made in respect of documents covered by certain lists. The Court said, at [25] that, ordinarily, an affidavit verifying discovery will be accepted as conclusive as to the adequacy of the discovery but later in the reasons, at [32], cross-examination of the deponent who had verified a list of documents claiming privilege was contemplated. There was also reference, at [33], to the inspection of documents by the Court for the purpose of deciding the validity of claims for privilege. In my opinion, Seven Network Ltd is not authority for the proposition for which counsel for the applicants contended. 14 A third threshold point raised by counsel for the applicants was that the first respondent's application to inspect the documents should be dismissed because dealing with the claim for legal professional privilege in the present circumstances might result in two different decisions, one by me and one by the judge hearing the interlocutory application that the substantive proceedings be stayed or dismissed. I do not accept that submission: the judge hearing that interlocutory application will not revisit the question of legal professional privilege. Indeed, the reason that I heard the application for inspection was to avoid the potential for legal embarrassment on the part of that judge. 15 In relation to the service of the applicants' affidavits, to which I have referred, Cadbury Schweppes Pty Ltd v Amcor Ltd [2008] FCA 88; 246 ALR 137 concerned the common law, as does the present case. In Cadbury Schweppes, Gordon J considered and applied dicta of the Full Court in Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; 218 ALR 283 at [22]ff for the proposition that service of a witness statement was conduct "inconsistent with the maintenance of the confidentiality which the privilege is intended to protect", citing Mann v Carnell [1999] HCA 66; 201 CLR 1, particularly at [29], and an implied waiver of privilege had occurred. In such a case, her Honour said at [17], the existence of the privilege could not be made to turn on whether the other side in fact placed the document into evidence or used it for examination. Once it was found that the original holder of the privilege could not control further dissemination of the document, the privilege was destroyed as a matter of law without further enquiry into whether the communication was in fact disseminated. See also [16] in Cadbury Schweppes. Counsel for the first respondent referred also to Australian Competition and Consumer Commission v Cadbury Schweppes Pty Ltd [2009] FCAFC 32; 174 FCR 547 In my opinion that decision, especially at [83], [95] and [103] supports the reasoning of Gordon J to which I have referred. 16 I do not accept the applicants' submission that the decision of Gordon J is relevantly distinguishable. I do not accept it as a point of distinction that on or about 13 March 2017 the first respondent was told that the applicants proposed not to read their affidavits on the interlocutory application for stay or dismissal. Accepting that those affidavits were not served until 30 January 2017, as I was told by counsel for the applicants, there remains a period of some six weeks where on any view the first respondent was entitled to use the contents of those affidavits for the purpose of that interlocutory application. I also do not accept it as a point of distinction that the present case involves an interlocutory hearing. Counsel for the applicants also referred to s 122(5) of the Evidence Act but that provision does not apply for the reasons I have explained at [6] above, and I also do not accept that it is a point of distinction that in the present matter the Court directed the applicants' affidavits to be filed, whereas the matter before Gordon J involved witness statements. 17 I do not accept the applicants' submission that what was said in State Bank of South Australia v Smoothdale (No 2) Ltd [1995] SASC 5478; 64 SASR 224, particularly by King CJ at [11], remains good law. In my opinion, that has been overtaken by later authority: see Australian Competition and Consumer Commission v Cadbury Schweppes Pty Ltd at [77]. 18 Applying the principle in [15] above, I find that the service of the affidavit of Mr Mark Stewart sworn 24 January 2017 waived legal professional privilege in the communications he had with Mr Kewley and Ms Higgins (née Mooshi) as to what he, Mr Stuart said to Mr Kewley about settlement and what he had made clear to Ms Higgins and to Mr Kewley. In this respect I refer in particular to the statements at [8] and [10] of that affidavit as to what Mr Kewley and the Stuarts' solicitor knew of Mr Stuart's position from discussions he had had with both of them. I also note the statement at [12] of that affidavit: "I dispute… that my former legal representatives had any authority to enter into such settlement [with the Bank]." 19 Applying that same principle, I find that service of the affidavit of Mrs Catherine Stuart sworn 24 January 2017 also waived legal professional privilege in the communications she had with Mr Kewley and Ms Higgins about settlement of the proceedings. I refer in particular to the statement at [12] of that affidavit: "Mr Kewley had no authority from me or my husband to accept the Gadens letter. Both Mark and I had told him 'You have to preserve our rights to pursue the Bank' and we did not change that position at any time." I also refer in particular to the statement at [15] of that affidavit as to what Mr Stuart had told Mrs Stuart and their former solicitor and counsel. 20 In my opinion, it is relevantly inconsistent for the applicants to communicate their version of the communications with their former lawyers but seek to prevent the other parties to the litigation from having access to material which may show a different version of those communications. I refer to Benecke v National Australia Bank (1990) 35 NSWLR 110 at 111F-G per Gleeson CJ. See also Mann v Carnell at [28]-[29]. 21 In the alternative, I reach the same conclusion in respect of the contentions on behalf of Mr and Mrs Stuart that there was no agreement as alleged; there was no authority for the former legal representatives of the Stuarts to enter into such agreement; and "in any event the agreement should be set aside in equity as unconscionable in all the circumstances." These submissions put in issue the legal advice Mr and Mrs Stuart received and the instructions Mr and Mrs Stuart gave. I refer again to [12] of Mr Stuart's affidavit. It would be relevantly inconsistent to claim legal professional privilege in the relevant communications so as to prevent the other parties to the litigation from having access to material relevant to those issues. See Macquarie Bank Ltd v Arup Pty Ltd [2016] FCAFC 117 at [28]-[30]. In my opinion this is not a case where the holders of the privilege have done no more than put his or her state of mind in issue, but the holders of the privilege have directly or indirectly put the contents of the otherwise privileged communications in issue. The holders of the privilege have made assertions and brought a case which is about the contents of the otherwise privileged communications and which necessarily lays open the confidential communications to scrutiny. By such conduct, in my opinion, an inconsistency arises between those acts and the maintenance of the confidence which is at the heart of legal professional privilege. 22 I note the terms of the subpoena to Mr and Mrs Stuart's former solicitor as being "All documents recording the instructions received by you in respect of the following correspondence concerning settlement of [the] proceedings…", followed by a listing of 12 letters or emails. In those circumstances and for the reasons I have given I grant to the first respondent access to the documents produced to the Court in answer to that subpoena. 23 Similarly, I note the terms of the subpoena to Mr and Mrs Stuart's former counsel: "All documents recording the instructions received by you in respect of the following correspondence concerning settlement of [the] proceedings…", followed by a listing of 12 letters or emails. In those circumstances and for the reasons I have given I grant access to the first respondent to the documents produced to the Court in answer to that subpoena. 24 As to costs, I order that the applicants' pay the costs of the first respondent of its interlocutory application for access to the documents produced in answer to the subpoenas to Ms Higgins and Mr Kewley, as agreed or assessed. Those costs should not include the costs of the appearance on 17 March 2017. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.