New South Wales Supreme Court CITATION : Biseja Pty Ltd v NSI Group Pty Ltd [2006] NSWSC 1497 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 4 December 2006 JURISDICTION : Equity JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 12/04/2006 DECISION : Claim for privilege upheld. Waiver not established. ; Amendment Allowed.; Statement excluded. CATCHWORDS : EVIDENCE – Privilege – litigation privilege – communications between lawyer and potential expert witness – Waiver – where document produced by expert on subpoena and access granted without objections – whether "knowing and voluntary disclosure". - PROCEDURE – Amendment – late amendment – where no prejudice. - EVIDENCE – prior representation – statement made in Building Adjudication between same parties – not admissible under ss 64 or 69. LEGISLATION CITED : (NSW) Building and Construction Industry Security of Payment Act 1999 (NSW) Evidence Act 1995 ss 64, 69, 119, s 122 Ampolex Limited v Perpetual Trustee Co (Canberra) Limited (1996) 40 NSWLR 12 CASES CITED : Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 75 FCR 511 ASIC v Rich [2004] NSWSC 934 PARTIES : Biseja Pty Ltd (plaintiff) NSI Group Pty Ltd (defendant) FILE NUMBER(S) : SC 2969/06 COUNSEL : M Willmott SC w M Sneddon (plaintiff) G Moore w F Hicks (defendant) SOLICITORS : L Capolupo & Co, Solicitors (plaintiff) William Costis & Associates (defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Monday, 4 December 2006 2969/06 Biseja Pty Limited v NSI Group Pty Limited JUDGMENT (ex tempore) 1 HIS HONOUR: One of the issues in these proceedings relates to whether, and to what extent, the cost of the Stage Two Works – assessed by BMT & Associates, quantity surveyors, at $14,716,971 plus GST – included margin for profit and overheads. 2 On 10 August 2006, Biseja's solicitor, L Capolupo & Co, wrote to the manager, BMT, summarising the matters in issue, enclosing a copy of certain of the pleadings and affidavits and of the Expert Witness Code of Conduct, and requesting a report on those issues. As I have said, the letter enclosed a copy of the Expert Witness Code of Conduct. 3 On 14 August 2006, BMT produced a document, plainly stamped "draft" on the cover sheet, entitled "Expert Report, Biseja Pty Ltd v NSI Group Pty Ltd". Although stamped "draft", it was signed at the foot of the second page, following the conclusion of the body of the report, by a principal of BMT. 4 On or about 24 October 2006, the solicitors for NSI, William Cotsis & Associates, had issued out of the Registry five subpoenas, four of which, including one addressed to BMT, were made returnable on 31 October 2006. Although, on 24 October 2006, William Cotsis & Associates wrote to L Capolupo & Co informing them of the issue of those subpoenas and their return date, the letter did not include a copy of the subpoenas. 5 Due to an oversight in the offices of L Capolupo & Co, the return date of the subpoenas was, apparently, not diarised and there was no appearance on behalf of Biseja when the subpoenas were returnable on 31 October 2006. There was an appearance on behalf of NSI, and the return date of the BMT subpoena was adjourned to 9 November 2006. 6 Some time before 9 November 2006, BMT produced in the Registry a yellow box of documents, which included the draft expert report of 14 October 2006. On 9 November 2006, there was an appearance on behalf of NSI. As well as the subpoena to BMT, a subpoena to the Bank of Western Australia was returnable for the first time on 9 November, and it appears that a subpoena to the Commonwealth Bank may have also been adjourned to 9 November. Mr Sneddon, junior counsel for Biseja, was present in court in the subpoena list that morning on another matter, and when this matter was called, appeared, as he was there in any event. In respect of documents produced by the Commonwealth Bank, he sought first access, being alert to a possibility that there might be an available claim for privilege in respect of documents produced by Legal Services of the Commonwealth Bank. He did not object to a grant of general access to the documents produced by BMT. 7 On 16 November 2006, William Cotsis & Associates wrote to L Capolupo & Co, enclosing a copy of the draft report of BMT and stating that it was intended to tender that document at the hearing. On 24 November 2006, L Capolupo & Co replied to William Cotsis & Associates, asserting a claim for privilege in respect of the draft report under (NSW) Evidence Act 1995, s 119, and that their client had not been represented on the return of subpoena by oversight. 8 The question for resolution is whether the draft report is inadmissable by reason of litigation privilege referred to in Evidence Act, s 119. That, ultimately, has two components. The first is whether a prima facie entitlement to privilege under s 119 is established. The second is whether it is established that any such privilege has been waived. 9 On the first of those issues, the party asserting the claim for privilege – here, Biseja – bears the onus of proving that claim. Section 119 provides that evidence is not to be adduced if, on objection by a client, the Court finds that adducing the evidence would result in disclosure of a confidential communication between, inter alia, a lawyer acting for the client and another person, made for the dominant purpose of the client being provided with professional legal services relating to an Australian proceeding. This covers many of the categories of communications between lawyers and third parties, such as communications with potential witnesses, which were also privileged at general law. 10 In this case, it is apparent from the letter of instructions to BMT, the accompanying Expert Witness Code of Conduct and the manner in which the draft report asserts compliance with the Code of Conduct and responds to the questions posed in the letter of instructions, that it is entitled to privilege within s 119. 11 That brings me to the question of waiver. Where it is alleged that the privilege attached to an otherwise privileged communication has been waived, the onus lies on the party asserting the waiver – here, NSI – to establish that there has been a waiver. 12 In this case, the question is whether there has been a waiver of the type described in Evidence Act, s 122(2), namely, that the client entitled to privilege has knowingly and voluntarily disclosed to another person the substance of the evidence (the exceptions are not relevant here). 13 The concept of knowing and voluntary disclosure was touched on by Rolfe J in Ampolex Limited v Perpetual Trustee Co (Canberra) Limited (1996) 40 NSWLR 12, in which his Honour expressed the view that the use of "voluntary" in the introductory words in s 122(2) must be intended to involve something more than merely not under compulsion of law, since those words were also used in s 122(2)(c). A disclosure may not be voluntary if it was made by way of mistake [Ampolex, at 22]. But this is not always the case. 14 In the context of formal discovery, in the absence of obvious mistake apparent to an inspecting party, or fraud, the position is that, once inspection has been allowed of a document listed in that part of an affidavit or list, in which privilege from inspection is not claimed, then any privilege attaching to that document is to be regarded as waived by being included in that part of the affidavit or list, and by being made available for inspection [Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 75 FCR 511 at 525, Goldberg J]. 15 In ASIC v Rich [2004] NSWSC 934, Austin J expressed the view that this approach was applicable mutatis mutandis where documents are produced under subpoena, or pursuant to a Notice to Produce. As a result, his Honour held that, where a large body of documents had been produced on subpoena by Price Waterhouse Coopers, expert witnesses retained in that litigation by ASIC, which included observations to counsel and a memorandum of counsel's advice which, prima facie, would have been entitled to privilege, that privilege had been waived. That, however, was in circumstances in which the solicitor for ASIC had made arrangements to inspect the documents to be produced by Price Waterhouse Coopers, where those documents which might apparently be amenable to a claim for privilege had been set aside and reviewed by ASIC's solicitor, and where the evidence did not go so far as to establish that the two documents in question – the memorandum and the observations – were not amongst those which the solicitor had inspected and decided not to make the subject a claim for privilege. That was also a case in which the context, as a whole, was that ASIC had not maintained claims for privilege to substantial numbers of documents which, at first sight, would have been entitled to privilege, so that it could not be said that it would have been obvious from the prima facie privileged nature of the observations and memorandum that there had been a mistake or oversight. 16 In this case, the evidence does not establish that Biseja knew what documents BMT was producing. The subpoena itself was not provided to L Capolupo & Co. There is no evidence that any inspection of the documents to be produced by BMT was undertaken on behalf of Biseja before they were produced. Although counsel was present when access was granted, and did not oppose that grant of access, the evidence does not show that anyone on behalf of Biseja knew that the draft report was being produced that morning under cover of that subpoena. In those circumstances, in my opinion, it has not been established that there was a knowing and voluntary disclosure by Biseja of substance of the draft expert report. 17 Accordingly, I uphold the claim for privilege and, by operation of s 119, evidence of the draft report is not to be adduced. 18 I remove from CX03 tab 9, which comprises the draft report. At 10.42 am (on application to amend cross-claim; see p 6 of transcript.) 19 HIS HONOUR: I grant leave to the cross-claimant to amend its cross-claim by filing a document in the form of that entitled Further Amended Statement of Cross-Claim, a copy of which is Annexure A to the Notice of Motion filed 27 November 2006. 20 It does not seem to me that the amendments truly involve the withdrawal of an admission. On the pleading as it stood before amendment, the cross-claimants' allegation was that it had entered into a construction contract, at a price which was 10/11ths of the BMT estimate. As I understand the previous pleadings, the theory was that NSI had foregone 10 percent of the quantity surveyor's estimate as an approximation or estimate of its profit margin component, and that it was in return for that concession that the alleged collateral agreement was made. 21 It seems to me that the effect of the amendment is to clarify what was meant by the original pleading rather than to withdraw anything admitted in it. That that is so is to my mind strongly confirmed by the circumstance that the Defence to Cross-Claim in its present form denies that the agreement was one for the works to be performed at cost, and asserts that the works were to be performed for an agreed price, namely, $10.7 million inclusive of GST. If anything, the effect of the amendment seems to me to bring the cross-claimant's case closer to the position articulated by the cross-defendant. 22 It has been made clear, and responsibly so on behalf of the cross-defendant, that the amendments, if permitted, will not involve any requirement to amend the defence to the cross-claim, nor necessitate any adjournment. In those circumstances, the justice of the case requires that leave to amend be granted, and there are no powerful discretionary considerations weighing against it. At 12:27 pm (On pages 312 to 317 of exhibit CX01; p 14 of transcript) 23 HIS HONOUR: Pages 312 to 317 of CX01 comprise documents, apparently prepared in connection with an adjudication application under (NSW) Building and Construction Industry Security of Payment Act 1999 on behalf of NSI against Biseja, which appear to describe the project management works or functions said to have been performed by NSI. They are, therefore, from the perspective of this Court, prior out of court statements as to matters in issue in these proceedings. 24 In Mr Semaan's affidavit sworn 16 June 2006, he apparently verifies the content of those statements. However, I do not think one makes a prior out of court statement admissible by saying on oath in the proceedings that it is true: otherwise, that would defeat the rule that excludes prior out of court statements except where, for example, Evidence Act, ss 64 or 69 can be invoked. 25 The grounds for admissibility under s 64 have not been established, and the availability of s 69 is excluded by s 69(3), since these documents were prepared in the context of an application under the Security of Payment Act. 26 Accordingly, I reject pages 312 to 317 of CX01. ********** 23/08/2007 - To attachment judgment - Paragraph(s) not applicable 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. 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