Supreme Court of WA|1999-05-18|Before: Mr P

Todd v Novotny & Anor [1999] WASC 28 (18 May 1999)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : TODD -v- NOVOTNY & ANOR [1999] WASC 28

Practice and procedure - Claim of privilege by third party ordered to give discovery - General principles in relation to claim for privilege - Joint privilege - Common interest privilege - Implied waiver

Attorney-General (NT) v Kearney [1985] HCA 60; (1985) 158 CLR 500

C-C Bottlers v Lion Nathan Ltd [1993] 2 NZLR 445

Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501

Eng Mee Yong v Letchumanan [1980] AC 331

Esso Australia Resources Ltd v Federal Commissioner of Taxation (1997) 150 ALR 117

National Westminster Bank plc v Daniel [1994] 1 All ER 156

Woollahra Municipal Council v Westpac (1994) 33 NSWLR 529

1 MASTER SANDERSON: This is the plaintiff's application for an order that Luke John Martino ("Martino") do produce for inspection certain documents referred to in an affidavit of discovery dated 2 December 1998 and over which privilege has been claimed. Martino is not a party to these proceedings. An order for discovery was made against him pursuant to O 26A r 5. This application for third party discovery has quite a history and to understand the context of the application it is necessary to briefly detail that history.

2 On 12 February 1998 the plaintiff made application for third party discovery against Martino. Martino is an accountant who is a partner in the firm of Deloitte Touche Tohmatsu. Up until January/February 1999 he was a director of the second defendant. It also appears that he is a friend of the first defendant. To further complicate matters, he has from time to time acted as an adviser to the defendant. He was also, at all material times, a director of South Pacific Resources Corporation ("SPR") a company with which both the plaintiff and the first defendant were involved as directors. This confusion of roles has caused some difficulty as will become apparent during the course of these reasons.

3 On 30 April 1998 I ordered that Martino give discovery. On 23 June 1998 Martino swore an affidavit in compliance with that order. In that affidavit he deposed to having searched all relevant files held by Deloittes and he also deposed, as follows:

"3.2 In my capacity as a partner of Deloittes, I have been responsible for the provision by Deloittes of professional advice on various matters to the First Defendant ('Novotny'), the Second Defendant ('Backload') and South Pacific Resources Corporation ('SPR'). That advice has been given in relation to various matters many of which are of a sensitive commercial nature - Novotny, Backload and SPR may suffer prejudice if the documents are released to competitors;

3.3 I resigned as a director of Backload in late January/early February 1998;

3.4 I have not taken an active role in the business and affairs of Backload or SPR. My role has been always to act solely in a professional capacity as and when required;"

4 In Part 2 of the First Schedule to the accompanying list of documents (Annexure "A"), Martino objected to producing 127 documents on the grounds of legal professional privilege. Subsequent to filing of the affidavit sworn 23 June 1998 the plaintiff sought orders that Martino file and serve a further affidavit better describing all documents enumerated in Part 2 of the First Schedule of the list of documents sufficiently stating the grounds of privilege claimed. I made an order to that effect on 18 November 1998. On 2 December 1998 Martino swore an affidavit in compliance with my order. In paras (3), (4) and (5) of that affidavit Martino further detailed his professional relationship as an accountant with each of the defendants and South Pacific Corporation and as a director of the second defendant.

5 In the affidavit sworn 2 December 1998 Martino withdrew the claim to legal professional privilege in relation to 23 documents. He maintained the claim of legal professional privilege with respect to the rest. On 10 February 1999 the plaintiff applied for an order that Martino produce for inspection by the plaintiff all of the documents referred to in para (8) of his affidavit swore 2 December 1998. There were some 73 documents the plaintiff sought to inspect. The matter came on in general chambers before me on 23 March 1999. I adjourned the application to a special appointment and ordered that Martino file any affidavit in opposition to the plaintiff's application by 1 April 1999 with provision for the plaintiff to file and serve any answering affidavit by 15 April 1999. The time for Martino to file his affidavit was later extended to 23 April 1999 and an affidavit sworn that day has been filed. The claim for privilege was abandoned with respect to a further 16 documents. Thus, the original claim for privilege over 127 documents has been reduced by 39 documents since the date of the filing of the first affidavit of discovery. It is also apparent that this process of discovery from a non party has taken an inordinate amount of time. The application was initiated some 14 months ago and the parties are still in dispute over what documents should be available for inspection. While not all of the responsibility for this delay can be sheeted home to Martino it is apparent that his failure to comply promptly with various orders has largely been responsible for the delays that have occurred.

6 In his affidavit of 23 April 1999 Martino deals with the basis of the claim for privilege relating to certain documents in his possession. These documents came into Martino's possession as a consequence of his position as a director of SPR. The documents generally relate to a claim by the first defendant to be indemnified by SPR against the costs of the action brought against him by the plaintiff in these proceedings. Paragraphs 12 - 14 of Martino's affidavit are in the following terms:

12. I am aware that Novotny sought indemnity from SPR for the costs of the Action. The indemnity was sought pursuant to the provisions of an indemnity agreement entered into between SPR and Novotny dated 21 November 1995 (the 'Indemnity Agreement'). Now produced and shown to me and marked with the letters 'LJM4' is a true copy of the said Indemnity Agreement.

13. I have considered the statement of claim in this proceeding. From my perusal of the statement of claim, I note that:-

13.1 there is an allegation of partnership between the Plaintiff and Novotny in relation to opportunities to be exploited by SPR;

13.2 the Plaintiff makes a general claim that he is entitled to participate equally with Novotny in all profits Novotny makes from SPR;

13.3 based on the above allegations, the Plaintiff specifically claims:-

13.3.1 he should be entitled to share equally with Novotny in profits made by Novotny arising from an agreement called Assistance Agreement dated 10 May 1995; and

13.3.2 that he should be recompensed for failing to obtain options from SPR because Novotny did not nominate him for election to SPR's board of directors in or about mid - 1995.

14. As a director of SPR, I was notified of and became involved in negotiations for Novotny to obtain indemnity from SPR under the Indemnity Agreement. During the process of those negotiations, correspondence was received by me, as a director of SPR, from solicitors in Canada advising SPR. On most occasions, the advice received by SPR from its solicitors was not disclosed to Novotny or Backload and has not, subsequently, to my knowledge been disclosed to Novotny or Backload. The client legal professional privilege attaching to those advices, and the documents forwarding those advices to me has been maintained by SPR and has not been waived, nor have I been instructed to waive such privilege."

7 In support of this application the plaintiff filed an affidavit sworn 28 April 1999. That affidavit annexed to it certain correspondence over which privilege had previously been claimed but was not now claimed. Annexure "RJTT9" is a copy of a fax transmission from SPR to Martino dated 28 May 1998. It reads, in part, as follows:

"All documentation, (including correspondence, minutes, agreements, etc) which you received from the Company in your capacity as a Director of SPR are open and free for discovery by Todd's lawyers. As far as SPR is concerned, there is nothing to hide. I see no need for you to further engage lawyers to represent your role as a Director of SPR. If you require further legal or other help to handle the discovery of documents related to your role as Michael's adviser, those costs should be for Michael's account.

I'm not sure how the Australian courts handle these matters but as far as the Company is concerned, you are free to bundle up everything you received from SPR into boxes and deliver as is to the other side. Let them sort through the volumes of paper."

8 It was submitted by counsel for the plaintiff that this letter amounted to a waiver by SPR of any privilege they had over any documents held by Martino. That submission seems to me to be correct. It is always open to a party to waive privilege. That is sometimes done, for instance, when a party provides to an opponent a copy of an expert report upon which it intends to rely. In the absence of an order relating to expert evidence, the disclosure of such a report is a clear waiver of privilege. There is no question of an implied waiver such as was dealt with by the High Court in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674.

9 During the course of the hearing the first defendant sought to file an affidavit of Paul Redding which annexed a copy of a facsimile transmission from Lexacal Investment Corporation, the new name for SPR, advising that it did not in fact waive privilege over the documents held by Martino. Counsel for the plaintiff objected to this affidavit being read into evidence. Although I read the affidavit, I am not prepared to admit it into evidence. In my view it comes too late in the day. The waiver of privilege was contained in a facsimile transmission of 28 May 1998. Martino and SPR have known for nearly 12 months of the dispute as to privilege. It is entirely inappropriate that they should file evidence on the matter on the morning of the hearing. But even if the affidavit had been admitted into evidence it would not, in my view, have changed the position. The fact is that privilege was waived by SPR and it cannot now be recalled.

10 As it turned out, this application involved consideration of a range of principles applying when a claim of privilege is made. Before dealing with the particular facts of this case it is appropriate that I state the applicable principles. The point at which to begin is to restate the rationale for the existence of legal professional privilege. In Grant v Downs (supra), the High Court put the position as follows (at 685):

" ... according to traditional doctrine, (the rationale) is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the solicitor to make a full and frank disclosure of the relevant circumstances to the solicitor. The existence of the privilege reflects, to the extent to which it is accorded, the paramountcy of this public interest over a more general public interest, that which requires that in the interests of a fair trial litigation should be conducted on the footing that all relevant documentary evidence is available."

11 It is important to note that what is here being considered is legal professional privilege. The fact that two individuals communicate about litigation with the intention that such a communication should be confidential does not give rise to a claim for privilege. If privilege is to attach to any of the documents the subject of the application, it must arise as legal professional privilege. No issue of public immunity privilege arises in this case.

12 There are two aspects to legal professional privilege. Where no litigation is contemplated or pending confidential communications passing between solicitor and client for the purpose of obtaining legal advice or assistance are privileged: see Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 487. For such privilege to apply, the solicitor must be acting in his professional capacity and the communication must be for the purpose of obtaining legal advice, not information as to matters of fact: see Kelly v Commonwealth (1978 - 1980) 39 FLR 372; Allan, Allan & Hemsley v Deputy Commissioner of Taxation [1989] FCA 125; (1989) 86 ALR 597. Where litigation is contemplated or pending, documents brought into existence for the purpose of use in legal proceedings or for the purpose of obtaining or collecting evidence or to be used in them, attract legal professional privilege. To claim so-called litigation privilege two tests must be satisfied. First, at the time the document came into existence, litigation must be pending or actually have been initiated. Secondly, the document must have been prepared for the sole purpose of that litigation: see Grant v Downs (supra) at 677 and Handley v Baddock [1987] WAR 98. (This latter case provides an interesting example of how the sole purpose test can be applied in practice.)

13 No privilege attaches to confidential communications between a party and his accountant, even if litigation is pending and advice is being sought from the accountant in relation to the litigation: see Chantrey Martin & Co v Martin [1953] 2 QB 286 at 294. It may be, however, that such communications are privileged because they satisfy the sole purpose test. For instance, if a party to litigation wrote to his accountant seeking certain financial information which would be used as evidence in the proceedings, then both the communication to the accountant and the reply would be privileged. But the privilege would be litigation privilege, one aspect of legal professional privilege. No privilege would arise simply because there was a confidential communication between client and accountant.

14 So-called common interest privilege is a further aspect of legal professional privilege. Common interest privilege arises where parties have a shared or similar interest in the subject of communication between one or more of them and a legal adviser. The most often quoted statement of common interest privilege is that offered by Lord Denning MR in Buttes Gas & Oil Co v Hammer ((No 3) [1981] 1 QB 223. His Lordship described common interest privilege as privilege in aid of anticipated litigation in which several persons have a common interest. He put the position as follows (at 243):

"It often happens in litigation that a plaintiff or defendant has other persons standing alongside him - who have the self-same interest as he - and who have consulted lawyers on the self-same points as he - but these others have not been made parties to the action. Maybe for economy or for simplicity or what you will. All exchange counsel's opinions. All collect information for the purpose of litigation. All make copies. All await the outcome with the same anxious anticipation - because it affects each as much it does the others. Instances come readily to mind. Owners of adjoining houses complain of a nuisance which affects them both equally. Both take legal advice. Both exchange relevant documents. But only one is a plaintiff. An author writes a book and gets it published. It is said to contain a libel or to be an infringement of copyright. Both author and publisher take legal advice. Both exchange documents. But only one is made a defendant.

In all such cases I think the courts should - for the purposes of discovery - treat all the persons interested as if they were partners in a single firm or departments in a single company. Each can avail himself of the privilege in aid of litigation. Each can collect information for use of his or the other's legal adviser. Each can hold originals and each make copies. And so forth. All are the subject of the privilege in aid of anticipated litigation, even though it should transpire that, when the litigation is afterwards commenced, only one of them is made a party to it. No matter that one has the originals and the other has the copies. All are privileged."

15 This opinion, while obiter in the Buttes' decision, has been accepted in Australia: see Bulk Minerals (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd (1988) 13 NSWLR 689, per Giles J at 695 - 696; Network Ten Ltd v Capital Television Holdings Ltd (1995) 36 NSWLR 275, per Giles J at 279 - 280 and Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405, per Giles J at 409 - 410. Despite these decisions, common interest privilege is not by any means a well developed area of the law: see Farrow Mortgage Services Pty Ltd (In Liq) v Webb (1996) 39 NSWLR 601. (I will have more to say about this decision below.) Common interest privilege is founded on an identity of interest between two parties. If the parties are in a position where they are potential adversaries or if they are acting from entirely selfish motives, then common interest privilege will not arise: see Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd, (supra).

16 Common interest privilege is to be distinguished from joint privilege. Joint privilege was considered in the Farrow Mortgage Services' case, (supra), and the headnote admirably summarises the conclusion reached by the court:

"Two or more persons may join in communicating with a legal adviser for the purpose of retaining services or obtaining advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege.

Joint privilege can arise when one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the contents of the communication.

Accordingly, no privilege attaches to such communications as against others who, with the client, share an interest in a subject matter of the communication. But the parties together are entitled to maintain the privilege 'against the rest of the world'."

17 If a company obtains legal advice that is privileged the passing on of that advice to the company's directors is not a waiver of privilege. That is not because the company and the directors are entitled to common interest privilege or that there is joint privilege, but rather because the company cannot act other than through its directors. There is no disclosure apart from the company itself. No question of the waiver of privilege arises: see Black v Smallwood [1966] HCA 2; (1996) 117 CLR 52.

18 Privilege can be waived by a party who is entitled to the privilege. The waiver must be by the party who is entitled to the privilege not by the legal adviser: see Freer v Freer [1956] SASR 163 at 169. Express waiver, I have dealt with above. But there may also be an implied waiver of privilege. The principles relating to implied waiver of privilege were considered by the High Court in Attorney General (NT) v Maurice, (supra). Deane J put the position as follows (at 492 - 493):

"Waiver of legal professional privilege by imputation or implication of law is based on notions of fairness. It occurs in circumstances where a person has used privileged material in such a way that it would be unfair for him to assert that legal professional privilege rendered him immune from procedures pursuant to which he would otherwise be compellable to produce or allow access to the material which he has elected to use to his own advantage. Thus, ordinary notions of fairness require that an assertion of the effect of privileged material or disclosure of part of its contents in the course of proceedings before a court or quasi-judicial tribunal be treated as a waiver of any right to resist scrutiny of the propriety of the use he has made of the material by reliance upon legal professional privilege."

19 Furthermore, there are instances when communication of privileged material to a third party who has no interest in the litigation will, nonetheless, not destroy the privilege.

20 This issue was considered by the High Court in New Zealand in the decision of Harbour Inn Seafoods Ltd v Switzerland General Insurance Co [1990] 2 NZLR 381. This was a decision of a single Judge at first instance and it is not a matter which appears to have received attention from the courts in Australia. Nonetheless, the decision provides a useful guide. Quoting from the headnote, the court held:

"Although it was possible for a privilege to be waived by disclosure to the other party, the critical question in the present case was a different one, namely whether the disclosure to a non-party was an effective waiver of privilege. Disclosure of a document to a particular non-party does not necessarily constitute a waiver of privilege in respect of the party seeking production. Waiver could result in such circumstances if the non-party was at the time of the disclosure the agent, representative, or otherwise acting on behalf of the person seeking production. There could also be circumstances where the disclosure was made in such a way as to show that reliance on the claim of privilege had been foregone."

21 Finally, it may be that in relation to a particular document some parts of that document can be concealed either because they are irrelevant or because they are privileged. That may mean that part of a particular document is disclosed and part of it is not. In some cases the privileged material and the non-privileged material are so intertwined that the whole document should be privileged. In other circumstances, depending on how the document was brought into existence, it may be that inspection would be ordered despite the fact that this would throw up some privileged material. These two alternative positions were discussed and analysed in some detail by McPherson J in Curlex Manufacturing Pty Ltd v Carlingford [1987] 2 Qd R 335 at 341 - 342.

22 There was one point upon which counsel were agreed in relation to this application. That was that I should inspect the documents to satisfy myself as to whether or not privilege was properly claimed. Both counsel relied upon what was said by Stephen, Mason and Murphy JJ in Grant v Downs (supra), where their Honours put the position as follows (at 688 - 689):

"It is well accepted that the court in allowing production and inspection of documents exercises a judicial excretion. In so doing it needs to scrutinise with care claims of privilege made on the ground now under consideration. It is for the party claiming privilege to show that the documents for which the claim is made are privileged. He may succeed in achieving this objective by pointing to the nature of the documents or by evidence describing the circumstances in which they were brought into existence. But it should not be thought that the privilege is necessarily or conclusively established by resort to any verbal formula or ritual. The court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence."

23 I do not understand that passage from the joint judgment to mean that in every instance where a claim of privilege is disputed the court should inspect the documents and decide whether the claim is properly made. Once documents are properly described and privilege is claimed it is for the party attacking the privilege to establish some basis that calls into question that claim. Once uncertainty arises, once some credence can be given to the claims of the applicant, then inspection by the court is an option and one that should be used. On the other hand, if there is no basis for suggesting that privilege has been waived or that it has not properly been claimed in the first place the court should not inspect the documents: see Trade Practices Commission v Stirling [1979] FCA 33; (1979) 36 FLR 244 at 247 and Trade Practices Commission v Bata Shoe Co (No 1) [1979] FCA 60; (1980) 44 FLR 145 at 146 - 147.

24 Counsel for Martino, in his submissions, broke the documents over which privilege is claimed into seven separate categories. I have found it useful to adopt this approach and deal with the particular categories. However, before doing so I should deal with one aspect of the plaintiff's submissions which seems to amount to a general attack on the claim for privilege. The plaintiff's position can perhaps be best illustrated by quoting an example. In his affidavit of 2 December 1998 Martino claimed privilege over document 27 which was described as follows:

"Facsimile transmission M Novotny to L Martino - 13/02/1997.

Legal professional privilege is maintained over this document. It was created solely for the purposes of the Action. The document reproduces parts of advice provided to the Defendants by their solicitors in relation to the Action. The document was created solely for the purpose of seeking legal advice."

25 In his affidavit of 23 April 1999 Martino withdraws his claim for privilege over document 27 (which is annexed to that affidavit as Annexure "LJM5"). A reading of the document itself makes it very difficult to understand how privilege could ever have been claimed in relation to this document. It is a handwritten facsimile from Novotny to Martino sent to Martino's home. It is conversational in tone and it was clearly not prepared solely for the purposes of seeking legal advice. Indeed, the only reference to solicitors is to be found in para (1) of the note where Novotny says that he has an appointment to see his solicitors in the near future. Counsel for the plaintiff submitted that, in light of the misdescription of this and other documents over which privilege had been claimed in the affidavit of 2 December 1998 but was abandoned in the affidavit of 23 April 1999, the whole of the claims for privilege were suspect and that in itself was reason enough for the court to inspect the documents.

26 There is no doubt that the way in which document 27 was described in Martino's affidavit of 2 December 1998 was misleading and that is cause for great concern. Martino is a partner in a large accounting firm and he is obviously familiar with the ways of business. He is advised by highly competent and experienced solicitors. It is very difficult to understand how he could have described document 27 as he did. His affidavit provides no explanation as to the circumstances which led to his reconsidering the claim for privilege. While there appears to be no authority directly on the point, it would seem to me that a party who abuses a right to claim privilege either by blatant misdescription of documents or otherwise runs a substantial risk of being denied the right to maintain the claim for privilege. At best, it is a factor which casts doubt on the veracity of the claim for privilege made by Martino and is a factor to be taken into account in considering whether or not the documents ought be inspected.

27 Turning then to the documents, the first category nominated by Martino are documents which are said to be privilege communications from one defendant to another. This is a claim for common interest privilege. There are some 19 documents referred to. I have inspected all of the documents and I have reached a conclusion as to which documents or parts of documents are privileged. It is not appropriate that I detail the contents of any particular document to the point where inspection of that document is unnecessary because its contents have been disclosed as part of these reasons. To do that would be unfair to Martino and the defendants because, apart from anything else, it might render any future appeal nugatory. But it will assist if I explain the methodology that I have adopted and in relation to each document indicate why I have reached a particular conclusion. So far as the methodology is concerned, this can be conveniently illustrated by reference to document 6. This is described by Martino in the following terms (para 8 in his affidavit of 2 December 1998):

"Facsimile transmission M Novotny to L Martino with attachments 20/09/96.

Legal professional privilege is maintained over this document. It was created solely for the purposes of the Action. The document annexes and reproduces parts of the advice provided to the Defendants by their solicitors dated 20 September 1996 in relation to the Action."

28 In his affidavit of 23 April 1999 Martino maintains his claim for privilege and provides this further expanded description of the document at para 19:

"Facsimile transmission M Novotny to L Martino with attachments 20/09/96.

Legal professional privilege is maintained over this document. It was created solely for the purposes of the Action. The document annexes and reproduces parts of advice provided to Novotny and Backload by their solicitors dated 20 December 1996 in relation to the Action. The document also refers to the Canadian Action, the Release and the Indemnity Agreement."

29 Document 6 is in fact in three parts. The first part is a facsimile from the first defendant to Martino sent to Martino's home. It is chatty and conversational and it does not seem to me to attract legal professional privilege. While it is true that Martino may have an interest in common with the first defendant in this litigation, given his position as a director of the second defendant, it is not the common interest which gives rise to the privilege. The privilege must first exist, then disclosure of the privileged communication to the third party is protected by the common interest test. The fax itself ought to be available for inspection.

30 Annexed to this fax from Martino there is a fax from the first defendant to SPR. This fax deals with the first defendant's claim that he is entitled to an indemnity from SPR under the terms of the indemnity agreement. It seems to me that in this context SPR has an interest in the litigation between the plaintiff and the first defendant. At the time this fax was sent the parties were in discussions about whether or not the first defendant was protected by the indemnity agreement. It is apparent from the terms of the communication that the first defendant was trying to protect his position and he was clearly frustrated that SPR were not prepared to concede its liability to indemnify him. On that basis it may be argued that the first defendant was communicating with SPR out of self interest and there was, in reality, no common interest. But that conclusion is, I think, too harsh in the circumstances. The parties were considering their respective positions. SPR had not yet indicated that it would not indemnify the first defendant and the first defendant could be excused for communicating with SPR on the basis the indemnity would be forthcoming. It therefore seems to me that common interest privilege would apply to this document.

31 I have already concluded that SPR has waived privilege. Is the waiver by one party in the circumstances of this case sufficient to amount to a waiver of privilege as against the plaintiff? I think not. It comes down to a question of fairness. Is it fair that SPR, a company which now has no interest in this litigation, should waive privilege so that the privilege of the first defendant as against the plaintiff is removed? Put in those terms, it seems to me that fairness requires that the first defendant be entitled to maintain his claim for privilege in relation to this document.

32 The second annexure to the first defendant's fax to Martino is a copy of a letter from the first defendant's solicitors to him. It is clearly a privileged document. It satisfies the sole purpose test. It has been passed on to SPR who has waived privilege. Once again, it seems to me that fairness requires that the first defendant be entitled to maintain his claim to privilege over this document. I would adopt the same reasoning in relation to this document as applied to the communication from the first defendant to SPR.

33 In the result, then, the facsimile from the first defendant to Martino should be available for inspection. In reaching that conclusion I have taken into account the possibility that what is contained in that facsimile may disclose what is contained in the privileged annexures. However, it seems to me that the disclosures are not such as to allow the plaintiff access to the privileged documents. In other words, it is not necessary to delete anything from the fax from the first defendant to Martino to protect the privilege attaching to the other documents.

34 I have applied a similar approach to all of the documents on the list. I propose then to indicate which particular parts of documents I regard as privileged and which should be available for inspection. I will not go through an analysis of each part of each document. All of the documents covered in this category involve facsimiles sent from the first defendant to Martino. I will refer to each of these facsimiles as "the primary fax". Other parts of the document are annexures. With respect to the annexures, in my view, all are subject to common interest privilege. Some of the communications are with SPR and SPR has waived privilege, but I am satisfied that in all cases it would not be fair to visit this waiver upon the first defendant. On that basis I would not order that any of the annexures be available for inspection. Certain of the primary faxes pass on to Martino comments which deal with the discussions between the first defendant and SPR over the indemnity agreement. There can be no suggestion of common interest privilege attaching to these communications between the first defendant and Martino. While Martino was a director of both Backload and SPR at the relevant time, the communications were not directed to him in this capacity. But it would seem to me that the documents are protected because there was no implied waiver by the first defendant. There is no unfairness about privilege being claimed in relation to these documents. They have not been relied upon in part, nor have they been disclosed to an agent of the plaintiff.

35 I am satisfied then that the claim for privilege in relation to all documents in category 1, save for the primary fax in document 6, is properly made.

36 The second category of documents is described as:

"Privilege communications created during or as a result of discussions with legal advisers during which legal advice was sought and obtained (for example, handwritten file notes)."

37 Privilege is properly claimed with respect to all of these documents. It is not entirely clear whether all of the documents were created during meetings between Martino, the first defendant and their legal advisers. But even if that was not the case, the documents were certainly brought into existence during discussions between Martino and the first defendant in relation to legal advice. At this time Martino was still a director of Backload. Either joint privilege or common interest privilege applies in relation to all of these documents.

38 The third category of documents is described as:

"Privilege communications created by a third party (namely SPR)."

39 There are three documents referred to in this category. Each of these documents was sent to Martino in his capacity as a director of SPR. The fact that the documents were transmitted to a director by the company does not amount to a waiver of privilege. But the company has now waived privilege. This is not a question of either common interest or joint privilege. The privilege is with the company. It is the company that has waived privilege. A similar waiver from either the first defendant or Martino is not required. These three documents should be produced for inspection.

40 The fourth category of documents relates to discussions between Martino and his solicitors in relation to the third party discovery application. All of these documents are privileged.

41 The fifth category is described by Martino's solicitors as:

"Privilege communications between the Defendants, SPR and Mr Martino and subject to the claim of common interest privilege."

42 In my view, common interest privilege applies to all of these documents, save for document 13. That is a document which is a direct communication between the company and its directors and privilege has been waived.

43 The sixth category are documents over which the claim for privilege is withdrawn. About these I need say nothing further.

44 Finally, Martino claims privilege in relation to a category of documents described as:

"Privilege communications from the First Defendant to SPR subject to the claim of common interest privilege."

45 I am satisfied that in relation to all of these documents common interest privilege would apply. None of these documents should be available for inspection by the plaintiffs.

46 In the circumstances, it is appropriate that after publishing these reasons I give the parties the opportunity to consider the nature of the orders that should be made. I will also allow Martino the opportunity to consider whether an appeal is warranted because this is a case where a stay of execution pending an appeal may be appropriate. I will hear the parties with respect to this question (if it arises), the form of the orders and in relation to costs.

47 I should make one final point - more a practical point than anything else. Some of the documents, the subject of this application, are facsimiles which were received on thermal paper. They are starting to fade. The disputes in relation to these documents may not be at an end and it may be some time before they are resolved. It is therefore appropriate that the facsimiles which are starting to fade be photocopied and thus preserved. If necessary, I will make orders in this regard.

Todd v Novotny & Anor [1999] WASC 28

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (91 paragraphs)

Todd v Novotny & Anor [1999] WASC 28 (18 May 1999)

Parties

Cases Cited (16)