Uebergang v Uebergang

Supreme Court of NSW|2017-08-07|Before: Kunc J, Mr J

EX TEMPORE Judgment

HIS HONOUR: The parties to these proceedings are all members of the Uebergang family. Without disrespect, I shall refer to the family members by their given names.
The plaintiff ("Glen") sues his parents ("Max and Diane") and his brother ("Shaun"). Although Glen's case is put in several different ways, the basic allegation is straightforward. Glen alleges that in or about September 2014 he reached a binding agreement with the defendants as to how the family farming partnership would be dissolved. He seeks specific performance of that alleged agreement. The defendants say that the negotiations between the parties never reached the point of an agreement.
During the course of the negotiations and until these proceedings were commenced, Max and Diane retained the services of Mr C J Newbigin, a partner in the Inverell firm of solicitors Avern McIntyre & Co ("AM"). They were also assisted by their longstanding accountant, Mr J Michael of Thomas Davis Brown & Co ("TDB").
Glen issued subpoenas to AM and TDB. By notice of motion filed on 19 May 2017, the defendants seek to have those subpoenas set aside or that Glen not be given leave to inspect documents produced pursuant to those subpoenas. With commendable efficiency, in the hearing before me the parties reduced the scope of the dispute between them to whether a bundle of seven categories of documents produced by AM were subject to legal professional privilege. The bundle was provided to me in chambers by the defendants after the hearing in response to my invitation that they should refine and reconsider their claim in the light of the course of the argument.
It was common ground that the dispute had to be resolved by applying the common law of privilege. The only evidence relied on by the defendants was an affidavit sworn by Max ("Max's affidavit").

Background

The proceedings were commenced by statement of claim filed on 1 March 2017. The essence of the dispute is set out in these paragraphs of the pleading: "11. On or about 27 August 2014, Maxwell and Diane caused the accountant for the Partnership, Mr Joseph Michael of Thomas Davis Brown & Co (TDB), to email to Glen and Shaun a document entitled "Restructure of Pearsby Hall Pastoral: Proposals & Options for Proposed Restructure". 12. The document pleaded in paragraph 11 above contained terms for the transfer of land and the dissolution of the Partnership which stated in part: "1. Glen has obtained a full time job. 2. All partners agree that a partnership restructure should happen at this stage. 3. As part of family succession planning, Max and Diane have determined that the net assets of the partnership shall be split in the following proportion: • 55% to Shaun • 45% to Glen … 4. Pearsby Hall will be transferred to Shaun. … 6. Current liabilities of the partnership will be split between Shaun and Glen based on the level of assets taken over. 7. The partnership restructure will initially involve Shaun taking over the Pearsby Hall Pastoral Partnership. 8. Shaun will be given the option to lease the Top Nobby property from Max, Dianne and Glen for a period of three (3) years, commencing some time before 31/12/14. The lease period will cease on 31/12/17. 9. Shaun as lessee will be allowed to make all decisions relating to cropping, stocking etc in relation to the Top Nobby property. 10. At the end of the lease period on 31/12/17 Glen has the absolute right to terminate the lease and then farm the Top Nobby property in his own right. 11. At this point Max and Diane will transfer their 50% interest in Top Nobby to Glen for no further consideration other than Glen taking over the existing loan on the property. 12. In relation to the assets a proposed split may be as follows: • Pearsby Hall property to Shaun; • Top Nobby property to Glen; • Cattle to Shaun; • Plant and equipment - principally to Shaun but Glen may be given the option to retain some plant items in his own name, if agreed to by Shaun; • If Glen retains plant Shaun to be given the option to dry hire during the period of the lease. 13. After the properties are valued and the assets are divided then the bank loans are then split in proportion to allow a 55-45% split. 14. Max and Diane to review their level of drawings as current payments of agistment, fuel, phone, power etc will not continue following partnership change. The new drawings figure will reflect this change. 15. Shaun and Glen to be responsible for paying 50% each of the drawings required by Max and Diane until 31/12/17. … 22 At the end of the lease period 31/12/17 Max and Diane will retire fully from all the business structures, and at that point Shaun and Glen will pay an amount of $25000 each as a final payment for all property, stock, plant etc. Shaun and Glen will then no longer be liable for any further payments to Max and Diane. … The items set out in this document are issues either agreed upon or to be agreed upon. You all may have other issues that need to be added to this list for resolution." 13. On or about 3 September 2014, Maxwell and Diane caused Mr Joseph of TDB to email a document to Glen and Shaun. 14. The document pleaded in paragraph 13 above contained additional terms to those pleaded in paragraph 12 above and stated in part: "7. Shaun to take over the Pearsby Hall partnership immediately. The equity adjustment to be done after determining a final date. This date can even be backdated, preferably to a month end date, for example 31/07/14 can be the final date. Once Glen commences his job he will cease to draw funds from Pearsby Hall. Shaun then effectively manages the new partnership in his own right. It will take at least a month to determine all the values of assets and liabilities of the partnership to work out the final adjustment. 8. Lease to be negotiated between Max, Di, Glen and Shaun, but as close to market value as practical. 9. A legal lease agreement to be done and to include all the normal clauses included in a commercial lease agreement. … 12. Plant and equipment to be valued independently. As Shaun is to operate the farming enterprise for over three (3) years, he is to be given first choice on all plant and equipment items that he requires. Glen is to only keep plant that Shaun doesn't need to require. … 14 Max and Di have indicated that a monthly draw of approximately $3100 may be sufficient. This is to replace current draw and fuel, phone and agistment reimbursement." 15. On or about 4 September 2014, Maxwell telephoned Glen. 16. During the telephone call pleaded in paragraph 15 above, Maxwell said words to the effect that: (a) "you have one day to accept the proposal or I will buy you out of the Partnership"; and (b) "there won't be any more negotiations". 17. On or about 4 September 2014, Glen emailed Mr Joseph of TDB, Diane and Shaun. 18. The email pleaded in paragraph 17 above stated in part: "Following Dad's phone call to me this morning, I just want everyone to understand that now is the only time when I can ask questions and voice the concerns I have on what all of this means to the future I will have in farming. I do not agree with all of the partnership proposal however I have been given little choice but to accept the proposal. Based on this I accept the partnership proposal and I agree to go forward with the process of getting land, machinery, stock and lease agreements valued. These are specifics that need to be sorted out before we come to a final resolution. A few of my current queries and still unanswered questions are below..." 19. The parties did not respond to the email pleaded in paragraphs 17 and 18. 20. The parties did not respond to the email pleaded in paragraphs 17 and 18 until after about December 2015 to indicate that the parties had not reached an agreement for the transfer of land and the dissolution of the Partnership."
One of Glen's arguments was based on a submission of implied waiver said to arise from these allegations. Paragraph 38 of the statement of claim alleges: "38. After about September 2014, Maxwell and Diane and/or Mr Michael of TDB instructed the law firm Avern Mclntyre & Co (Avern Mclntyre) on behalf of the Partnership to prepare documentation to give effect to the terms pleaded in paragraphs 12 and 14 above."
This is traversed by paragraph 30 of the defence: "30. In answer to paragraph 38 of the claim, Avern Mclntyre were instructed to prepare documentation for further discussions and negotiations between the parties in attempting to reach agreement on dissolving the partnership and transferring land. No such agreement was ever concluded between the parties."

Glen's arguments - overview

Before turning to the documents themselves, it is convenient to deal with Glen's argument as to why the documents were not privileged. By the end of the hearing, and having regard to the contents of the documents ultimately provided to me for inspection, four objections need to be considered: 1. Litigation privilege has not been proven. 2. The defendants' evidence was too imprecise for the Court to be satisfied that advice privilege had been made out. 3. There had been an implied waiver of any privilege by reason of paragraph 30 of the defence. 4. Mr Michael was a third party. In the absence of a claim for litigation privilege, the common law of advice privilege did not extend the protection to communications with him.
I will consider each of these arguments in turn.

Glen's arguments - no litigation privilege proven

The relevant documents date from May 2015 to shortly after the proceedings were commenced. Mr May submitted that in so far as the claim for privilege was for litigation privilege - that is to say a privilege in relation to confidential communications made for the dominant purpose of giving or receiving legal advice when proceedings had been commenced or reasonably anticipated - there was no evidence to enable the Court to conclude when proceedings were reasonably anticipated. There were, for example, no letters of demand or evidence of other threats from Glen that litigation would be commenced.
Mr Gunning, properly and fairly, conceded that there was no evidence (without recourse to the Court examining the documents themselves) from which an inference could be drawn as to when litigation could have been reasonably anticipated. Having reviewed the documents, I can say that they do cast light on the topic.
There is a note of a conference between Max and Mr Newbigin on 11 February 2016 at which arbitration and the appointment of receivers and managers was discussed. The possibility of a court case is expressly referred to in the note of a conference on 18 July 2016 (as to which see further paragraphs [47] to [50] below).
Accordingly, I am satisfied that, considered objectively (see Grant v Downs (1976) 135 CLR 674; [1976] HCA 63 at 682 per Stephen, Murphy and Mason JJ; Barwick CJ agreeing), proceedings could have been reasonably anticipated from 11 February 2016. It follows that thereafter the defendants are entitled to rely on common law litigation privilege. However, prior to that date the only privilege on which the defendants can rely is common law advice privilege, namely whether a confidential communication was made or a document prepared for the dominant purpose of a lawyer providing legal advice or legal services: Esso Australia Resources Limited v Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67.

Glen's arguments - insufficient evidence

Max's affidavit comprises several pages of background information and then a table setting out each category of documents, a list of the documents and a general narrative about each category of documents as a class. Mr May submitted that the evidence was insufficient to make out the claim for privilege by reference to the observations of the Full Federal Court in Barnes v Federal Commissioner of Taxation [2007] FCAFC 88; (2007) 242 ALR 601 ("Barnes"): "18 The authorities emphasise the need for focused and specific evidence in order to ground a claim for legal professional privilege. In Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185 at 189, Black CJ and Emmett J reiterated the principles that verbal formulae and bare conclusory assertions of purpose are not sufficient to make out a claim for privilege: see also National Crime Authority v S (1991) 29 FCR 203 at 211 (per Lockhart J); Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 689 (per Stephen, Mason and Murphy JJ). Where possible the Court should be assisted by evidence of the thought processes behind, or the nature and purpose of advice being sought in respect of, each particular document. The fact that generalised evidence is not challenged in cross-examination does not mean that such evidence must be accepted, particularly when it is as manifestly inadequate as it is in this case. As in Kennedy v Wallace, mere general assertions of the purpose of creation of the documents are insufficient to discharge this onus. Even though in that case some evidence as to the purpose of particular records was adduced, Allsop J at 216 considered that the onus had not been discharged because the evidence did not permit a conclusion to be drawn as to the dominant purpose of the creation of any particular document or entry in a document. Simply to show that one purpose for creation of the document was to obtain legal advice or assistance is not good enough."
Mr Gunning submitted that in its totality the evidence was sufficient.
I respectfully adopt the passage quoted from Barnes as a correct statement of principle. However, the nature of the evidence required to make out a claim for privilege will depend on the number and type of the documents concerned. Circumstances are too various to offer much general guidance. However, I respectfully endorse the emphasis in Barnes on particularity: the need for evidence in relation to each particular document. While efficiency is a laudable objective, it should not be readily assumed that while for general descriptive purposes some documents can be described as falling into categories, a claim for privilege can be adequately proven by providing evidence on a category by category basis. In some cases it may be possible but, at least in my experience, not as often as the regular attempt by the profession to use categories in such claims would suggest.
I will consider Mr May's submission further when I come to deal with the seven categories of documents. However, I can record at this stage of my reasons that the point is well taken in relation to Category 1, although not the other categories. Even in relation to Category 1, the evidence does demonstrate that some, perhaps all, of the documents are privileged. However, the lack of particularity means the Court has had to exercise its discretion to look at the documents. Having made that decision in relation to Category 1, for more abundant caution I decided to inspect all the documents.

Glen's arguments - implied waiver

For convenience I will set out again the relevant paragraph from each of the statement of claim and the defence: "38. After about September 2014, Maxwell and Diane and/or Mr Michael of TDB instructed the law firm Avern Mclntyre & Co (Avern Mclntyre) on behalf of the Partnership to prepare documentation to give effect to the terms pleaded in paragraphs 12 and 14 above." "30. In answer to paragraph 38 of the claim, Avern Mclntyre were instructed to prepare documentation for further discussions and negotiations between the parties in attempting to reach agreement on dissolving the partnership and transferring land. No such agreement was ever concluded between the parties."
Mr May relied on the well-known statement of the High Court in Mann v Carnell [1999] HCA 66 at [29]; (1999) 201 CLR 1 at 13 (citations omitted) ("Mann"): "29. Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large."
He submitted that having gone beyond a bare denial and made a positive assertion as to what AM were instructed to do, it would be inconsistent in the relevant sense on the part of the defendants to maintain confidentiality in documents which went to that issue.
Mr Gunning submitted that result should not follow when paragraph 30 of the defence was responding to the "vague" allegation in paragraph 38 of the statement of claim. He pointed, in particular, to the reference to instructions being allegedly given "on behalf of the Partnership".
I do not accept Mr Gunning's submission. The vagueness or otherwise of paragraph [38] is not to the point. The drafter of the defence has understood it sufficiently to make a positive plea in response which is quite precise. That puts in the issue the question of what instructions were given to AM and, in accordance with Mann, constitutes an implied waiver of privilege by the defendants.
However, the implied waiver is limited only to the instructions that were given to AM. In the course of argument Mr May accepted, correctly, that it could not go further. This conclusion means that two of the relevant documents must be produced to Glen (see further paragraphs [46] and [53] below).

Glen's argument - third party communications

Mr May submitted that because Mr Michael was a third party - Max and Diane's accountant - communications between him and Mr Newbigin were not subject to common law advice privilege. There was no dispute between the parties that was the result of the decision in Wheeler.
There is no doubt that Wheeler supports the proposition that third party communications are protected when litigation has begun or is in contemplation. Given the Court's finding at paragraph [18] above, the question of advice privilege only relates to the period before 11 February 2016.
Nevertheless, for the period before that date, or if I am wrong in the conclusions set out in paragraph [18] above, the question arises whether Wheeler remains good law in this State.
The answer to that question requires resolving the different views expressed by the Victorian Court of Appeal in Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332; [2002] VSCA 59 and by the Full Court of the Federal Court in Pratt. The former is to the effect that advice privilege is not available where one of the parties to the communication with the solicitor is a third party who is not the agent of the client for the purpose of the communication. The latter is to the effect that the question of agency is not decisive of the privilege. It is the purpose or function of the third party's involvement that should decide the question.
In Melrose Cranes and Rigging Pty Ltd v Manitowoc Crane Group Australia Pty Ltd [2012] NSWSC 904, S G Campbell J concluded, after a thorough but nonetheless obiter analysis of the authorities, that Wheeler remained the law in this State. If it were necessary for me to decide the question, I would respectfully agree with his Honour's conclusion but express my preference for the law as set out in Pratt if I were unconstrained by authority for the reasons given by the Federal Court.
However, the factual conclusion I have reached about Mr Michael's role relieves me from having to resolve the question and I expressly do not do so. For the reasons which follow, I find that Mr Michael was, in the sense required by Wheeler, Max and Diane's agent for the purpose of communicating with and instructing Mr Newbigin and his firm. As such, communications with him were identical to communications with Max and Diane and therefore have the benefit of the advice privilege at common law assuming that Wheeler is the law in New South Wales. I am also of the view that the same result would follow were I able to apply Pratt (and whether or not Mr Michael was Max and Diane's agent in the requisite sense).
In Wheeler Lord Jessel, MR said (at 682): "… The actual communication to the solicitor by the client is of course protected, and it is equally protected whether it is made by the client in person or is made by an agent on behalf of the client, and whether it is made to the solicitor in person or to a clerk or subordinate of the solicitor who acts in his place and under his direction."
Cotton LJ said (at 684): "It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word "representatives". If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these persons were no representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients, the Defendants, to do certain work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor."
There is no question about confidentiality or dominant purpose in relation to any of the relevant documents. The real debate centres on Mr Michael's role, about which Max's affidavit contained: "13. TDB were and have been our family accountants for many years. … 17. Prior to seeing Mr Newbigin for the first time about these matters on 4 May 2015, I had been dealing with Joe Michael in relation to the proposed dissolution of the Partnership. Having reviewed the file notes produced by Avern Mclntyre & Co (the dates of which are set out further in Table 1 below), I do not believe that I engaged or consulted Mr Newbigin to assist us in the preparation of documents or the negotiations with Glen, relating to the dissolution of the Partnership before 4 May 2015. 18. Prior to 4 May 2015, Joe Michael had previously assisted in our negotiations with Glen by engaging in correspondence with Glen during the period that Glen relies upon in his Statement of Claim to assert that an agreement was reached (for example during the period 27 August 2014 to 4 September 2014). … 24. I am aware, from a number of file notes identified in Table 1 below, that Mr Newbigin and Joe Michael often liaised together in relation to the draft Deed and amendments to various drafts of the Deed to then submit to Glen, during the period from May 2015 to March 2017. This was done on the instructions of Diane and I, so that we could continue to receive the legal assistance and advice from Mr Newbigin during our negotiations over the proposed dissolution of the Partnership and family restructure with Glen. … [Explanation provided for Category 4 and 5 documents] Correspondence between our solicitors and our accountants, relating to: • preparing draft documents and correspondence concerning the proposed dissolution of the Partnership, and • the progress of negotiations with Glen over the proposed draft Deed to dissolve the Partnership. At the time of this correspondence, both TDB and Mr Newbigin were assisting or acting for Diane and myself in providing advice and guidance during the negotiations with Glen. Further, the letter to TDB dated 15 December 2016 enclosed the Counsel Advice referred to in category 7 below."
It must be said that this evidence does not make Mr Michael's role - to communicate with Mr Newbigin on behalf of Max and Diane to obtain legal advice - as clear as it might have done, nor with the particularity in relation to individual documents in the way I consider necessary as set out in paragraph [21] above. However, it is capable of sustaining a finding to that effect.
What has put the matter beyond doubt is my examination of the documents themselves. Undoubtedly Mr Michael brought his skill and knowledge as an accountant to the task, but the documents make clear - sometimes in terms - that Mr Michael was acting as Max and Diane's agent for the purpose of seeking, receiving and communicating Mr Newbigin's advice on the negotiations and documents in relation to the proposed dissolution of the family farming partnership.
As to some matters it appears from the documents that Max and Diane were content to leave Mr Michael to deal with Mr Newbigin with little or no reference back to them. On other matters the documents record him being a conduit between them and their solicitor. It is clear that Mr Michael was not retained as just another professional adviser "on the team" to give accounting advice to Max and Diane directly or to Mr Newbigin on their behalf. Mr Michael appears to have been so integrally involved on behalf of Max and Diane that he was something of an alter ego for them in dealing with Mr Newbigin. His presence at conferences with Mr Newbigin attended by Max or Diane (or both) is, from the documents, consistent with and in furtherance of that role.
The conclusion I have reached on Mr Michael's role as an intermediary also seems to reflect Glen's understanding as is revealed in the way he has pleaded his case (emphasis added). "11. On or about 27 August 2014, Maxwell and Diane caused the accountant for the Partnership, Mr Joseph Michael of Thomas Davis Brown & Co (TDB), to email to Glen and Shaun a document entitled "Restructure of Pearsby Hall Pastoral: Proposals & Options for Proposed Restructure". … 13. On or about 3 September 2014, Maxwell and Diane caused Mr Joseph of TDB to email a document to Glen and Shaun. … 17. On or about 4 September 2014, Glen emailed Mr Joseph of TDB, Diane and Shaun. … 38. After about September 2014, Maxwell and Diane and/or Mr Michael of TDB instructed the law firm Avern Mclntyre & Co (Avern Mclntyre) on behalf of the Partnership to prepare documentation to give effect to the terms pleaded in paragraphs 12 and 14 above."
Analysing the question by reference to the decision in Pratt, the same result follows whether or not I am correct on the question of agency. In Pratt there was no litigation on foot or in contemplation. The plaintiff company received advice from its lawyer in relation to a balance sheet reconstruction. As a result of that advice the company asked an accountant to prepare a report valuing its losses. It received the report and forwarded it to its lawyers. The Full Court allowed an appeal from the primary judge's decision that Wheeler meant that the report was a third party communication which did not have the benefit of advice privilege. In doing so, the Full Court accepted that the accountant was not the company's agent.
In my respectful view, Mr Michael's role fell exactly with that identified by Finn J in Pratt (with whom Merkel J agreed): "41. To deny that a third party is an agent in such circumstances does not, though, provide a sufficient or principled reason for denying privilege to the documentary communication (or contents) it has authored. The important consideration in my view is not the nature of the third party's legal relationship with the party that engaged it but, rather, the nature of the function it performed for that party. If that function was to enable the principal to make the communication necessary to obtain legal advice it required, I can see no reason for withholding the privilege from the documentary communication authored by the third party. That party has been so implicated in the communication made by the client to its legal adviser as to bring its work product within the rationale of legal advice privilege. 42. There are, in my view, clear reasons of policy that support extending the privilege to such third party authored documentary communications. Whether a natural person or a corporation, a party seeking to obtain legal advice may not have the aptitude, knowledge, skill and expertise, or resources to make adequately, appropriately or at all such communication to its legal adviser as is necessary to obtain the advice required. Such is commonplace today where advice is sought on complex and technical matters. To deny that person the ability to utilise the services of a third party to remedy his or her own inability or inadequacy unless he or she is prepared to forego privilege in the documents prepared by the third party, is to disadvantage that person relative to another who is able adequately to make the desired communication to a legal adviser by relying upon his or her own knowledge, resources, etc."
Alternatively, the dominant purpose test would be satisfied in relation to Mr Michael's role for the purposes of the approach preferred by Stone J: "105. The coherent rationale for legal professional privilege developed by the High Court does not lend itself to artificial distinction between situations where that expert assistance is provided by an agent or alter ego of the client and where it is provided by a third party. Nor, in my view, should the availability of privilege depend on whether the expert opinion is delivered to the lawyer directly by the expert or by the client. Provided that the dominant purpose requirement is met I see no reason why privilege should not extend to the communication by the expert to the client. This approach is consistent with the High Court's ruling in Daniels (see [84] above) that legal professional privilege protects communications and therefore prevents the disclosure of information or documents that would reveal communications protected by the doctrine."

The categories - Category 1

The evidence in Max's affidavit in relation to Category 1 is attached as Schedule 1 to these reasons. Referring back to my observations in paragraph [21] above, it lacks the degree of particularity for the evidence to be sufficient in and of itself to make out the claim for privilege in relation to each document. This is especially the case because it treats the file notes that constitute the category in a global fashion. It is, however, sufficient to engage the exercise of the Court's discretion to inspect the documents.
Having inspected the documents I am satisfied that they are all subject to advice privilege (including so far as they record attendance with or in the presence of Mr Michael) or litigation advice privilege in accordance with the findings set out in paragraphs [18] and [34] above, except for: 1. Note of attendance on 4 May 2015 by reason of the implied waiver referred to in paragraphs [27] and [28] above. 2. Note of a telephone attendance on 11 May 2015 by Mr Newbigin with Glen. 3. Note of a telephone attendance on 20 May 2015 with a solicitor apparently to be retained by Glen. 4. Note of a telephone attendance on 10 November 2016 on someone at Crown Lands. 5. Note of a telephone attendance on 7 December 2016 where I am not satisfied from the terms of the note that Mr Michael was acting in the capacity of agent I have identified in paragraph [34] above or that the attendance was in connection with the dispute with Glen.
Among the documents in this category is the note of a conference on 18 July 2016 at which Shaun was in attendance with Max and Mr Michael. Mr May submitted that Shaun's presence demonstrated the conference lacked the necessary element of confidentiality and that there was no common interest privilege between Shaun on the one hand and Max and Diane on the other.
In support of the latter submission, Mr May referred to the dictum of Giles CJ Comm D (as his Honour then was) in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 at 410 that "two persons interested in a particular question will not have a common interest for the purposes of common interest privilege if their individual interests in the question are selfish and potentially adverse to each other. In such a case there will not be the necessary identity of interest". It was submitted that under the proposed dissolution of partnership, Shaun, on the one hand, and Max and Diane, on the other hand, had potentially adverse interests as buyer and seller, lessee and lessor and prospective former partners.
I do not accept that submission, but again for reasons which only become apparent from the Court's inspection of the note and a longer file note of the same conference which falls under Category 2.
As is apparent from the dictum of Giles CJ Comm D, it is necessary to identify the "question". Examination of the two notes makes three things clear: 1. It was an occasion of confidence. 2. Irrespective of whether Shaun had his own solicitor at the time (which is not clear), Shaun was in attendance to receive advice from Mr Newbigin. 3. The "question" was not the working out of the proposed dissolution as between Shaun and his parents, but rather the position of dispute that the three of them found themselves in vis-à-vis Glen. This last characterisation is borne out by subsequent events, being Glen bringing these proceedings against Shaun and his parents (who share common legal representation).

Category 2

Category 2 contains handwritten file notes which give more detailed accounts of the attendances which are the subject of the file notes in Category 1. There are also one or two other file notes which record attendances that are not reflected by the shorter file notes in Category 1.
Because the file notes are enumerated individually, I am satisfied that when read with the narrative explanation, the evidence is sufficient for the Court to determine whether or not privilege pertains (subject only to resolution of the question about Mr Michael's status).
For the same reasons that apply to Category 1, all of the documents in Category 2 are privileged, with the exception of the more extensive file note relating to the conference on 4 May 2015 which I have already indicated is subject to the implied waiver referred to in paragraphs [27] and [28] above.

Category 3

This relates to correspondence between Max and Diane with Mr Newbigin and his firm. The only difficulty with upholding the claim as described in Max's affidavit in relation to this category was an ambiguity in the description (my emphasis), "Confidential correspondence to us relating to draft documents for the proposed dissolution of the Partnership, and correspondence between Avern McIntyre and Glen's legal representatives". On its face the emphasised correspondence would not be subject to privilege. However, on examination of the documents it is apparent that what was meant was that the documents related to such correspondence (e.g. letters seeking instructions about such correspondence) rather than being the inter partes correspondence itself. Once this point is understood, the claim for privilege is clearly made out.

Categories 4 and 5

These categories relate to correspondence between AM and TDB. The explanation given in Max's affidavit relating to both categories it set out in paragraph [37] above.
By reason of the various findings set out in paragraphs [18] and [34] above, the claim for privilege in relation to these documents is upheld.

Category 6

Mr May, correctly, accepted that the claim for privilege in relation to the one document in this category was properly made on the face of the description in Max's affidavit.

Category 7

This category relates to correspondence between Mr Newbigin and counsel in relation to the partnership dissolution and the issues raised in these proceedings. There was no dispute that the claim was properly made on the face of the description in Max's affidavit, other than in relation to counsel's tax invoices. If those invoices did not disclose any confidential legal advice, then it was accepted that they would not be privileged: Allen, Allen and Hemsley v Deputy Federal Commission of Taxation (NSW) (1989) 20 FCR 576.
The invoices do not contain any advice. It follows that the claim in relation to category 7 is upheld, except in relation to: 1. Counsel's tax invoice dated 16 December 2016. 2. Counsel's account statement in relation to his earlier tax invoice. 3. Enclosure letter and its contents dated 10 January 2017 from Mr Newbigin to Counsel.

Conclusion

The defendants' claim for privilege is therefore upheld except in relation to a handful of documents. The Court has prepared a bundle of those documents (which I will mark Exhibit A) to which access will be granted.
The orders of the Court are: 1. The Plaintiff is to have access to the documents produced on subpoena by Avern McIntyre and Co that are contained in Exhibit A. 2. The balance of the documents produced on subpoena by Avern McIntyre & Co are to be released to the defendants for return to that firm other than those documents in relation to which inspection is not opposed. 3. Order (1) is stayed up to and including 5pm today.

Costs

Mr Gunning has made two submissions on the question of costs. First, he has submitted that the defendants were, to a very large measure, successful on their motion and should therefore have their costs, especially when Glen's arguments had not been articulated until Mr May's submissions were served on 2 August 2017. Alternatively, he submitted that if the Court took the view that the defendants' lack of adequate evidence on some points had put the Court to the necessity of inspecting the documents, then there should be no order as to costs. In Mr Gunning's submission, on no view should the defendants have to pay Glen's costs.
Mr May submitted that Glen should have his costs of the motion on the indemnity basis for three reasons. First, by obtaining access to the notes of the conference of 4 May 2015, Glen had achieved a better result than had been the subject of discussions between the parties. Second, the Court had been required to review the documents. Third, in so far as Glen's arguments had not been fully exposed to the defendants until Mr May's submissions had been provided on 2 August 2017, that lateness did not make any difference.
Mr May's reference to a "better result" was based on a letter from Glen's solicitor to the defendants' solicitor on 6 July 2017 which included: "I write to enquire whether, given the affidavit of Maxwell Uebergang, your clients might simply agree to my client having access to the contents of the file of Avern McIntyre & Co up to and including 10 May 2015. If that is agreed, then my client will not need to file and serve his evidence on Monday and your clients' motion can be dealt with by consent orders. Please advise me if that is agreed".
On the same day, the defendants' solicitor sent Glen's solicitor a list of documents over which privilege was not claimed. However, it took some time for those documents to be provided to Glen's solicitor.
The course of the correspondence thereafter is somewhat indeterminate as to the fate of the suggestion made in the letter of 6 July 2017. The defendants' solicitor asked more than once whether Glen continued to press only for the production of the contents of AM's file up to and including 10 May 2015. No direct answer was ever received. There was an implicit answer in Glen's submissions, being that the totality of the claim for privilege was being challenged.
As it happened, if the defendants had accepted Glen's solicitor's proposal, then they would have provided the file notes of the attendance on 4 May 2015 which the Court has ruled were the subject of an implied waiver.
It is therefore true that, to the extent of the file notes of the 4 May 2015 conference and the handful of other documents which the Court has ruled are not privileged, Glen has done better than if his solicitor's suggestion of 6 July 2017 had been accepted. However, that does not have the result contended for by Mr May for at least two reasons.
First, I accept Mr Gunning's submission that his clients were not unreasonable in the events which happened, in particular when their requests as to whether or not Glen pressed only for production of the documents up to 10 May 2015 went unanswered.
Second, and perhaps of even greater importance for present purposes, Glen's solicitor's suggestion did not make any reference to the possibility that failure to adopt the suggestion would be relied on in relation to the question of costs. That is also another reason why I think the defendants were not unreasonable in the approach in which they took.
I am therefore satisfied that this is not a case where Glen should have his costs of the motion either at all or on the indemnity basis. The real issue is whether or not the defendants should have their costs.
Costs are in the discretion of the Court. There are only two aspects of that which need to be elucidated. First, the Uniform Civil Procedure Rules 2005 (NSW) provide that, unless otherwise ordered, costs should follow the event: UCPR Pt 42 r 42.1. Second, while the Court's costs discretion is at large, it must be exercised judicially: that is to say rationally and for the purpose for which it was intended.
It is true to say that the defendants have largely succeeded in their claim for privilege, albeit after abandoning it over some documents in preparing the bundle which was ultimately provided to the Court. However, there is a feature of this case which, in my view, means that the usual position of costs following the event should not apply.
That feature is the inadequacy of the defendants' evidence in a number of critical respects, with the consequence that the Court had to inspect the documents for itself. Much of the evidence which formed the basis of the defendants' success came only from that inspection. However, I have no doubt that evidence could have been adduced to the same effect which would not have involved waiving any privilege in the documents.
This case exposes an important point of practice in relation to privilege claims.
When a party is called upon to substantiate a privilege claim, it is essential that affidavit evidence is immediately prepared and served which fully supports the basis for the claim with adequate particularisation in relation to each document. Undertaking that task properly maximises the prospect that the claim will not have to be decided by the Court or, if it does, ensures that it can be dealt with in the most efficient way possible.
Preparing thorough and sufficiently particularised evidence has three desirable consequences.
First, it requires the party which is maintaining the claim for privilege to think carefully and critically in respect of each document about the basis or bases on which it says privilege is claimed. That should have the result that only reasonably arguable claims for privilege are pressed.
Second, when the party which is pressing for access to the documents receives such evidence, it is able to satisfy itself as to two critical matters: 1. It can obtain some degree of satisfaction that the opposing legal representatives, in the proper exercise of their duty as officers of the Court, have given proper consideration to the viability of the claim. 2. It can make a fully informed and realistic assessment as to whether the processes of the Court should be engaged to obtain access to those documents.
If the matter does come to Court, then the availability of evidence of the kind to which I have referred will enable the Court to deal with the application promptly. While the Court has a discretion to inspect the documents itself, there are at least three reasons why that course should be avoided where possible: 1. It generally involves some delay, in particular if there are a large number of documents. In this case there were approximately 100 documents to be inspected, which took about three hours to review in chambers. 2. There is an inherent risk of unfairness to the party seeking access to the documents. It becomes subject to a decision of the Court based on evidence which it has not had the opportunity to see or make submissions about. 3. There is also the risk of unfairness to the party claiming privilege. It may be that the Court itself, not being possessed of all the facts or having the advantage of submissions from that party, may fail to understand the full significance of matters in the documents which support the claim for privilege. This point (and the one made in the preceding sub-paragraph) all underline the importance and desirability of the way in which the Court usually proceeds, namely that all the evidence is available to both parties and the Court has the advantage of submissions from both parties in relation to it.
It is precisely because, in this case, the defendants have largely been successful on the basis of findings which the Court has made as a result of inspecting the documents that I am satisfied that, in the exercise of the Court's discretion as to costs, there should be no order as to costs. I therefore accept Mr Gunning's alternative submission (see paragraph [62] above). As I have already observed, affidavit evidence which would have supported those findings could have been prepared and served in the usual way referred to in paragraph [76] above. Had that been done, the motion may not have been filed or the scope of the argument may have been significantly narrowed. The usual costs outcome in favour of the defendants would almost certainly have followed if, having filed adequate evidence of the kind to which I have referred, the defendants had succeeded.
Accordingly, the Court will make no order as to the costs of the defendants' notice of motion. Uebergan v Uebergan - Schedule 1 (7.94 KB, pdf)

Amendments 11 August 2017 - Schedule 1 attached at bottom of judgment DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 August 2017

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