New South Wales Supreme Court CITATION : Perpetual Trustees Victoria Limited v Richard Kingsley Sheehan & Anor [2004] NSWSC 294 revised - 3/05/2004 HEARING DATE(S) : 5 April 2004 JUDGMENT DATE : 5 April 2004 JUDGMENT OF : Dunford J DECISION : Claim for client legal privelege upheld in part and overruled in part - other party given access in respect of which claim of privilege overruled. CATCHWORDS : Procedure - evidence - subpoenas - too wide - lack of legitimate forensic purpose - client legal privilege - waiver - implied consent to disclosure - material directly relating to matters in issue in subsequent proceedings Contracts Review Act 1980 Evidence Act 1995 LEGISLATION CITED : Fair Trading Act 1987 Legal Aid Commission Act 1979 ss 25, 26 SCR Pt 36 r 13 Trade Practices Act 1974 (Cth) Benecke v National Australia Bank (1993) 35 NSWLR 110 Commissioner for Railways v Small (1938) 38 SR (NSW) 564 CASES CITED : Garratt's Pty Ltd v Thanga Thangathurai [2000] NSWSC 39 New South Wales Commissioner of Police v Tuxford [2002] NSWCA 139 Perpetual Trustees (WA) Pty Ltd v Equuscorp Pty Ltd [1999] FCA 925 Telstra Corporation v BT Australasia Pty Ltd (1998) 85 FCR 152 PARTIES : Perpetual Trustees Victoria Limited v Richard Kingsley Sheehan & Anor FILE NUMBER(S) : SC 13593/01 P Dowdy - Plaintiff In person - First Defendant COUNSEL : M B Duncan - Second Defendant G Bartley P Griffin Heidtman & Co Lawyers - Plaintiff SOLICITORS : In person - First Defendant M B Duncan - Second Defendant Legal Aid Commission - 9 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DUNFORD J MONDAY 5 APRIL 2004 13593/01 PERPETUAL TRUSTEES VICTORIA LIMITED v RICHARD KINGSLEY SHEEHAN & ANOR JUDGMENT 1 HIS HONOUR: This judgment relates to three Notices of Motion to set aside two subpoenas for production issued by the plaintiff to the Legal Aid Commission and Mr Patrick Griffin of counsel, on the grounds that the subpoenas were too wide, oppressive, and lack any legitimate forensic purpose; but ultimately the argument revolved around whether client legal privilege in respect of a number of particular documents had been waived. 2 By Statement of Claim filed 21 November 2001, the plaintiff claimed possession of the defendants' house at Baulkham Hills on account of default under a mortgage, no instalments of principal and interest having been paid since 15 April 2001, and apparently nothing has been paid since. 3 The defendant filed defences relying on the provision of the Contracts Review Act 1980 and also alleged misleading, deceptive and unconscionable conduct contrary to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987. There were also, as I understand it, a number of further cross-claims with which I am not concerned. 4 The First Defendant, Dr Sheehan, was represented throughout the proceedings by Mr Patrick Griffin of counsel, instructed by Mr Tim Smith of the Legal Aid Commission, and although the Legal Aid Commission initially received an application from the Second Defendant, Mrs Sheehan, and tendered her some preliminary advice, she was throughout most of the proceedings, unrepresented. 5 After many mentions, adjournments, status conferences etc, the matter was eventually listed for hearing before Simpson J on 10 June 2003. Settlement negotiations took place over some hours on that day, and a settlement was apparently reached, which was reduced to writing in the form of Orders and Terms of Settlement providing for judgment for possession of the property, with leave to issue a writ of possession forthwith, judgment for the mortgage debt for $613,606.78, inclusive of costs and the cross-claims against the plaintiff were dismissed. The judgment for possession was stayed until 31 October 2003. 6 The Terms also noted an agreement between the parties, the effect of which was to allow the defendants to sell the property by 31 October and remain in possession in the meantime, and further provided that if the property was sold, the plaintiff would accept $595,000 on or before that date in full satisfaction of the judgment for possession and the judgment for the debt. The Terms of Settlement were signed by the solicitor for the plaintiff, the solicitor for the first defendant, and by both defendants personally. 7 Orders were made by Simpson J in accordance with the Terms of Settlement the following day, 11 June 2003. 8 Within a few days, the first defendant disputed the settlement on the ground that on account of the drugs he was taking on 10 June for the relief of severe pain, he lacked the capacity to comprehend and understand the Terms of Settlement, and did not give true consent to them, notwithstanding his signature appearing on the document; and he applied by Notice of Motion to set aside the judgments entered on 11 June. 9 Pursuant to orders made by Shaw J on 23 July 2003, he filed Points of Claim setting out the basis of his claim to have the judgment set aside. These Points of Claim are of 16 pages and contain 56 paragraphs plus particulars. He also swore an affidavit on 25 June dealing with his condition leading up to and on 10 June. 10 On 6 January 2004, the plaintiff issued two subpoenas addressed to Mr Smith of the Legal Aid Commission and to Mr Griffin. Each subpoena required production of the following documents: (1) All files, including letters, documents, draft documents, correspondence, file notes, invoices, accounts, receipts, fee disclosures and agreements relating to or touching upon: (a) acting for Richard Kingsley Sheehan in Supreme Court proceedings 13593/01, (b) advising Maureen Patricia Sheehan in Supreme Court proceedings number 13593/01 11 On 27 February, both the Legal Aid Commission and Mr Griffin filed Notices of Motion to set aside the subpoenas, and Dr Sheehan filed a Notice of Motion seeking similar orders on 4 March 2004. The grounds on which the Legal Aid Commission and Mr Griffin sought to set aside the subpoenas were no demonstrated legitimate forensic purpose, and the provisions of the Legal Aid Commission Act 1979 s 25(1), (2) and (3). The grounds on which Dr Sheehan sought to set aside the subpoenas were client legal privilege. None of the parties made a blanket objection to the subpoenas on the ground that they were too wide and oppressive. 12 In supporting affidavits, Ms Brooker, on behalf of the Legal Aid Commission, and Mr Griffin referred in detail to ss 25 and 26 of the Legal Aid Commission Act 1979 and claimed that all documents were excluded from production by virtue of such provisions. Those provisions provide in effect for the documents covered by the sections to be subject to the same privilege as communications between solicitor and client, particularly where as here, Mr Smith of the Legal Aid Commission was in fact acting as solicitor for Dr Sheehan. 13 At about the same time Dr Sheehan wrote to the Legal Aid Commission seeking to maintain client legal privilege in respect of any communication between him and it or Mr Griffin. Accordingly, the Legal Aid Commission and Mr Griffin felt compelled to maintain the claim, which was in substance one of client legal privilege, so long as Dr Sheehan sought to do so. 14 Ultimately, and following further correspondence, the dispute between the parties resolved to one of whether by reason of the first defendant asserting that by reason of his pain level and the drugs he was taking for such pain, he was incompetent, or lacked sufficient understanding and capacity to agree to the Terms of Settlement on 10 June 2003, he had consented, expressly or impliedly, to the plaintiff having access to the documents, which were the subject of client legal privilege, or, to use the terminology of the current prior to the Evidence Act 1995, whether by the above assertions he had waived the privilege. 15 In an affidavit sworn by Ms Brooker on 25 March 2004, she indicated that the Legal Aid Commission had approximately 16 lever arch folders plus other documents which came within the terms of the subpoena, and formally objected to the production of the documents on the ground of lack of legitimate forensic purpose, except for those documents comprised in, and identified as, six categories described as confidential Exhibits LDB 1 to LDB 6, in respect of which the Commission sought to maintain the client legal privilege asserted by Dr Sheehan. Mr Griffin took a similar approach. He only had six lever arch folders, which came within the terms of the subpoena. 16 On 31 March, Dr Sheehan conceded that the Plaintiff was entitled to access to the document described as Exhibit LDB 1, which is a copy of the Terms of Settlement, to which is annexed a handwritten document signed both by Dr and Mrs Sheehan, acknowledging that they wish to enter into the settlement, that they understand the Terms of Settlement, and that Dr Sheehan is sufficiently capable of understanding the same. That document became Exhibit A in the application before me. 17 The subpoena was clearly invalid and an abuse of process, being in the nature of discovery, and oppressive: Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573. 18 Having regard to that fact, and to the fact that no legitimate forensic purpose was or could be shown for the vast majority of the documents, it was open to the Legal Aid Commission, which had possession of the documents, to produce the documents and object to access being allowed, or, alternatively, to move to set aside the subpoena without producing the documents, as it did in its original Notice of Motion: New South Wales Commissioner of Police v Tuxford [2002] NSWCA 139 at [19] to [21]. 19 In my view, these subpoenas were an abuse of process and the recipients of them should have applied to have them set aside on that ground. They did in fact object on the ground of lack of legitimate forensic purpose, and this claim has been made good except in respect of those documents specified in the confidential exhibits LDB 1 to LDB 6 and, as I say, the argument before me proceeded on the issue of whether there had been a loss of client legal privilege by reason of waiver or consent pursuant to s 122 of the Evidence Act, made applicable to the production of documents on subpoena by SCR Pt 36 r 13. 20 It is now established that where the state of mind at the time of entering into an agreement or transaction is raised as an issue, there is an implied waiver or consent to the production of material relating to such a state of mind including mental capacity and competency: Telstra Corporation v BT Australasia Pty Ltd (1998) 85 FCR 152 at 168, Perpetual Trustees (WA) Pty Ltd v Equuscorp Pty Ltd [1999] FCA 925. These cases were followed by Bergin J in Garratt's Pty Ltd v Thanga Thangathurai [2000] NSWSC 39, and are reflective of the Common Law as discussed in Benecke v National Australia Bank (1993) 35 NSWLR 110. 21 I am therefore satisfied that when Dr Sheehan alleged in the Points of Claim and his affidavit that because of his pain and medication he lacked understanding, capacity and legal competency to agree to the Terms of Settlement, he waived client legal privilege in relation to any document in relation to that issue. 22 I accordingly examined the documents LDB 2 to LDB 6 to determine whether they relate to this issue. As I say, Dr Sheehan concedes that the plaintiff should have access to document LDB 1. I order that the plaintiff have access to the document LDB 1, Exhibit A. 23 LDB 2 is described in Ms Brooker's affidavit as the letter dated 13 June from Mr Patrick Griffin to the Legal Aid Commission, most closely approximating a final report to the Commission at the conclusion of the case. Apart from a brief reference to negotiation of the settlement, it is essentially a letter relating to counsel's fees. It may not strictly have ever been a matter for client legal privilege, but in any event, no legitimate forensic purpose has been shown for the plaintiff having access to it. I uphold the objection to production, and direct that the document be returned to the Legal Aid Commission. 24 LDB 3 is described in Ms Brooker's affidavit as a two centimetre thick bundle of copy medical reports in relation to the First Defendant. I was informed that they have, in the meantime, been produced to the Plaintiff, and I make no order in respect of them. 25 LDB 4 is described in Ms Brooker's affidavit as a copy of a small quantity of notes made by Mr Smith on 9 and 10 June 2003, in conferences with the First Defendant for the dominant purpose of representing and advising him in the aforementioned litigation. It is now conceded that the notes headed with the date "9 June" were actually made on 8 June. 26 I have examined the documents. Those relating to 8 June are, in my view, documents prepared for the purposes of the litigation, and so are two pages of the documents dated 10 June. Those are privileged from production, and I uphold the claim for privilege in respect of the documents in LDB 4 dated 9 June, and the two-page section of the documents dated 10 June. The other nine pages of notes dated 10 June relate to the settlement negotiations. I am satisfied that privilege has been waived in respect of those, and I order that the plaintiff have access to them. 27 In respect of LDB 5, it is described by Ms Brooker as a bundle of copy correspondence between the First Defendant, Mr Smith, the Commission and counsel in respect of the litigation for the period May to July 2003, all of which communications were made confidentially for the dominant purpose of representing or advising the plaintiff in respect of the aforementioned litigation. 28 I have divided this exhibit into two bundles. The larger bundle consists of correspondence from 28 May to 25 June. It relates to the settlement negotiations, the plaintiff's medical condition leading up to that settlement, and the knowledge that the Legal Aid Commission and counsel had or may have had in relation to his medical condition, and Dr Sheehan's attitude to the settlement in the days immediately following. All those matters in my view could be relevant to the claim to set aside the settlement, and privilege has been waived in respect of them. 29 In addition, there is a letter addressed to Bill Grant of the Legal Aid Commission of 19 June 2003, and his reply dated 30 July 2003. I am satisfied that the First Defendant's letter of 19 June was not written for the purpose of seeking legal advice or for the purpose of any litigation, but for the purpose of complaining to the Legal Aid Commission after the solicitor client relationship had terminated. 30 I am therefore satisfied that client legal privilege never existed in relation to that letter, or in relation to the reply. They also contain some assertions and other matters relating to the settlement and the relationship between the First Defendant and his solicitor at the time of settlement. 31 If there was any privilege attaching to these letters, I am satisfied that such privilege was waived, and I therefore order that in relation to the larger bundle, forming part of LDB 5, the privilege has been waived, and I grant access to the plaintiff. 32 In relation to the smaller bundle, part of LDB 5, these relate in my view to Dr Sheehan's preparation of his case to set aside the earlier settlement. I therefore uphold the privilege as they were prepared for the dominant purpose of litigation. I order that the smaller bundle forming part of LDB 5 be returned to the Legal Aid Commission. 33 LDB 6 relates to the preparation for the motion to set aside the settlement. I uphold the claim for client legal privilege and order that it be returned to the Legal Aid Commission. 34 I turn now to the question of the costs of the Motions. If a proper subpoena requiring only production of relevant documents had been issued, the appropriate course would have been for the Legal Aid Commission and Mr Griffin to produce the documents, draw the Court's attention to Dr Sheehan's claim for privilege, and then submit to such order of the Court, except as to costs. But these were not proper subpoenas; they were therefore entitled to apply to set them aside. 35 In addition, the Legal Aid Commission has actually produced and identified the relevant documents and facilitated the real issues on the subpoenas being resolved, and should be compensated for its costs in doing so. 36 If Dr Sheehan had not maintained his claim for privilege as to LDB 1 until Wednesday 31 March, and as to LDB 4, 5 and 6 until the hearing, a protracted hearing on Thursday 1 April would not have been necessary. On that hearing the plaintiff has been substantially, and almost wholly, successful. 37 Mr Griffin was unrepresented and should get his expenses. Mrs Sheehan was not a party to any Notice of Motion and had no interest to protect; and although she was represented by Mr Duncan, there was no reason for her to be here at all. Accordingly, she should not receive any costs in her favour. 38 Reference was made to the letter of the plaintiff's solicitors to the Legal Aid Commission dated 17 March, containing an offer to get instructions on a reduced ambit for the subpoenas. It was not a firm offer, but on the other hand, after that time the primary issue became that of client legal privilege and whether it had been waived. 39 Bearing these matters in mind, I order the Plaintiff to pay the costs of the Legal Aid Commission and the expenses of Mr Griffin up to and including 20 March 2004. 40 I order the First Defendant to pay the costs of the Plaintiff and of the Legal Aid Commission from 21 March 2004. I make no order for the costs of Mrs Sheehan. 41 In relation to the costs which I ordered to be reserved on 29 March, it appears from the affidavit that has now been filed by Mr Stuart, that his approach to my Associate to fix a date during last week was precipitous; the parties should have gone, as I understand they were directed to, to the Registrar's call-over at 9.00am last Monday, the matter would have been referred to me at 10.00am on Monday, when I would have allocated a date. What Mr Stuart sought to do was shortcut that procedure, and a date was fixed which was apparently not suitable to all parties. 42 However, if the proper procedure had been followed, it would still have been necessary for the parties to attend court last Monday. I accordingly, make no order in respect of the costs reserved on 29 March. ********** Last Modified: 05/03/2004 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.