Wayne Lawrence Pty. Limited v. Hunt & Ors. t/a Hunt Musgrave & Peach [1999] NSWSC 1044

New South Wales Supreme Court CITATION : Wayne Lawrence Pty. Limited v. Hunt & Ors. t/a Hunt Musgrave & Peach [1999] NSWSC 1044 CURRENT JURISDICTION : Equity Division Commercial List FILE NUMBER(S) : No. 50112 of 1998 HEARING DATE(S) : 19th October 1999 JUDGMENT DATE : 19 October 1999

PARTIES : Wayne Lawrence Pty. Limited - Plaintiff N. Hunt, M.J. Musgrave, G.F. Peach trading as Hunt Musgrave & Peach JUDGMENT OF : Hodgson CJinEq at 1

COUNSEL : Mr. J. Mannix, Solicitor for plaintiff Ms. J. Saddler, Solicitor for defendant SOLICITORS : Dixon Holmes du Pont, Sydney for plaintiff Mallesons Stephen Jaques, Sydney for defendant CATCHWORDS : Evidence - Privilege - Documents Produced on Subpoena - Whether Evidence Act Applies - Whether Privilege Waived by Assertion of Belief. ACTS CITED : Evidence Act (NSW) 1995 s.122 Atkins v. Abigroup (1998) 43 NSWLR 539 CASES CITED : R. v. Young (1999) NSWCCA 166 Telstra Corporation Ltd. v. BT Australia Pty. Ltd. (1998) 156 ALR 634 R DECISION : See pars.18 and 19 of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Tuesday 19th October 1999

NO. 50112 OF 1998 WAYNE LAWRENCE PTY. LIMITED V. HUNT & ORS.

JUDGMENT

1 The defendant in these proceedings has issued a subpoena to solicitors previously acting for the plaintiff requiring the production of certain documents relating to dealings between those solicitors and the plaintiff. I am dealing with an application by the defendant to inspect those documents, and a claim for legal professional privilege advanced on behalf of the plaintiff resisting such inspection. 2 The matter arises in this way. 3 On 23rd April this year, Einstein, J. ordered that the plaintiff provide security for costs of the defendant in the sum of $40,000.00 within 28 days. That order was not complied with, and on 31st May 1999, the defendant filed a Notice of Motion for dismissal of the proceedings. That Notice of Motion was heard and determined on 11th June 1999, and after a contested hearing, Rolfe, J. dismissed the proceedings. On 25th June 1999, the plaintiff filed a Notice of Motion seeking to set aside the judgments of 23rd April 1999 and 11th June 1999; and on 29th June 1999, the plaintiff filed a holding summons for leave to appeal to the Court of Appeal. 4 In support of the Notice of Motion filed 25th June 1999, there was filed on behalf of the plaintiff an affidavit by Wayne Lawrence dated 27th August 1999 in which, among other things, Mr. Lawrence asserts that, until Rolfe, J.'s decision, the plaintiff always believed that if the security for costs were not lodged, the hearing date would be vacated and the litigation stayed until the security for costs was provided. The affidavit goes on to assert that the plaintiff was shocked when the matter was struck out. 5 At the hearings before Einstein, J. and Rolfe, J., the plaintiff was represented by Counsel, instructed by the solicitors whose papers have been subpoenaed. In substance, what the defendants say is that the plaintiff by this affidavit has put in issue a belief of Mr. Lawrence on a matter as to which it is reasonable to think he would have had legal advice. The assertion of that belief therefore waives privilege in relation to communications with his legal advisers, at least in so far as those communications are relevant to that belief. 6 The issue as I have stated it seems simple, but the application raises many problems. 7 The first problem is whether the law applicable to this application is the common law as to legal professional privilege, or the Evidence Act 1995, and in particular, s.122 of that Act. The documents were apparently produced on 27th September 1999. With effect from 1st October 1999, the Supreme Court Rules were amended in order to make clear that in dealing with documents produced under subpoena, the provisions of the Evidence Act were to be applied. The situation in relation to documents produced before that date is not entirely clear. 8 There are a number of decisions, including the decision of the NSW Court of Appeal in Atkins v. Abigroup (1998) 43 NSWLR 539, to the effect that the Evidence Act should apply in relation to ancillary process as well as to the admissibility of evidence at a hearing. However, that decision was seriously doubted and distinguished in a decision of the NSW Court of Criminal Appeal in R. v. Young (1999) NSWCCA 166. I am inclined to think that I am still bound by the decision of the Court of Appeal; but because of the uncertainty as to the position, I think it is appropriate for me to look at this matter in the light of both alternatives. 9 Dealing first with the position under the Evidence Act, it would appear that legal professional privilege would relevantly be lost only if the adducing or production of the evidence has the consent of the client in question within s.122(1), or if the substance of this evidence has been knowingly and voluntarily disclosed within s.122(2). 10 If the affidavit had said that Mr. Lawrence had a certain belief, and that this belief was in accordance with the legal advice which he had received, then that would amount to disclosure of the substance of the legal advice, so that legal professional privilege in relation to communications concerning that matter could be lost under s.122(2). However, the affidavit does not say this, and in my opinion it does not disclose the substance of legal advice. 11 Alternatively, it could be suggested that by raising as a significant matter Mr. Lawrence's belief on this question, the plaintiff must be deemed to have consented to the adducing of evidence relevant to the question whether he did in fact hold this belief, and whether any such belief would be reasonable. That approach has some support from the decision of the majority of the Full Federal Court in Telstra Corporation Ltd. v. BT Australia Pty. Ltd. (1998) 156 ALR 634. In that case, the defendant pleaded that it undertook certain action in reliance on a certain representation; and the majority of the Full Court held that it thereby opened up as an element of the cause of action, an issue which could not fairly be assessed without examination of relevant legal advice. The majority of the Full Court considered that in such circumstances, the party is to be taken as either having consented to the use of the relevant privileged legal advice or communications, or to have waived reliance on the privilege which such material would otherwise attract. 12 Accepting that the decision of the majority in that case correctly interprets and applies s.122(1), it seems to me still that the question of whether the advancing of a person's state of mind is to be taken as consenting to the giving of evidence of confidential communication, or as waiving privilege, is a matter of degree in each case. It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver. It seems to me that, on the basis of all those matters at least, the Court has to make a judgment as to what is reasonable, and what is fair in the particular case. 13 In the present case, it seems to me that the belief alleged does not loom as a centrally important part of the plaintiff's case, particularly where there is no allegation that the belief was reasonable, or that it had any particular basis. As things stand, it is simply an allegation of a belief, unsupported by any positive suggestion that it was held reasonably, or any indication of the basis on which it was held. 14 Having regard to those matters, and having looked quickly at the material itself, I am not satisfied, as the matter stands at present, that the plaintiff should be considered as having given consent to the adducing or production of this evidence, or waived privilege, so as to come within the terms of s.122(1). The situation may become different if the plaintiff voluntarily comes to advance any suggestion that the belief was reasonably held, or held on the basis of advice or lack of advice from his legal advisers, or based on any particular ground which in turn has some implication about advice or lack of advice. If those suggestions come through a responsive answer to cross-examination, it would be, I think, a matter for the judge hearing the case to decide whether that really amounts to the plaintiff voluntarily putting forward a positive case of that kind, or merely giving an answer which was, in substance, required by the question, and thus initiated by the defendant. 15 It appears to be the law that where legal professional privilege or other privilege is claimed, that of itself cannot be the basis of an adverse inference being drawn against the party claiming that privilege. However, in my opinion, where a party is claiming to make out a case, and that party bears the onus of proof, and where that case could be given positive support by calling evidence of legal advice or lack of legal advice, the failure of that party to call that evidence can be taken into account in deciding whether that party has discharged the onus of proof which it bears. The plaintiff's solicitor accepted that this was so during argument. I take that view into account in reaching the conclusion that I do reach, because my view that the upholding of privilege does not involve unfairness to the defendant does depend upon my view that the defendant is not precluded from commenting on, and relying on, the failure of the plaintiff to support its case by giving evidence about its legal advice, or lack of legal advice, on this point. 16 Turning to the situation at common law, I think substantially the same position holds. The common law position approaches questions of consent and waiver without the necessity of fitting those questions into the words of s.122; but I think it is fair to say that, if one approaches s.122 in the way in which the majority did in Telstra Corporation v. BT Australia, there really is very little difference between the two positions. 17 In any event, for the same reasons that I have given in relation to s.122, in my opinion the material before me is not sufficient to establish consent to the production of the material or waiver of the privilege according to common law principles. (Submissions on costs) 18 I refuse the inspection of the documents. 19 I order that the defendant pay the plaintiff's costs of the hearing before me today, but I reserve leave for the defendant to apply to have that order set aside if, through some change of direction or evidence voluntarily given by the plaintiff, privilege is subsequently waived. ******************