New South Wales Supreme Court CITATION : New Cap Reinsurance Corp Ltd (In Liq) v G S Christensen & Ors [2008] NSWSC 93 HEARING DATE(S) : 14 February 2008 JUDGMENT DATE : 14 February 2008 JURISDICTION : Equity Corporations List JUDGMENT OF : Hamilton J DECISION : Privilege attaches to documents. CATCHWORDS : EVIDENCE [74] – Facts excluded from proof – On grounds of privilege – Professional confidence – Legal profession – Documents – Document prepared for legal proceedings – Evidence Act 1995 s 119(b) – Documents prepared for purpose of preparing expert's report are prepared for purpose of the client being provided with professional legal services. LEGISLATION CITED : Evidence Act 1995 ss 119(b), 122(1) & (2) CATEGORY : Procedural and other rulings CASES CITED : Mann v Carnell (1999) 201 CLR 1 New Cap Reinsurance Corporation Ltd (In Liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258 New Cap Reinsurance Corporation Limited (In Liquidation) (P1) PARTIES : John Raymond Gibbons (P2) G S Christensen & Others, Lloyds Syndicate Number 958 (Ds) FILE NUMBER(S) : SC 2306/02 COUNSEL : D L Cook (Ps) V A McWilliam (Ds) SOLICITORS : Henry Davis York (Ps) PricewaterhouseCoopers Legal (Ds) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST HAMILTON J THURSDAY, 14 FEBRUARY 2008 2306/02 NEW CAP REINSURANCE CORPORATION LTD (In Liq) & ANOR v G S CHRISTENSEN & ORS, LLOYD'S SYNDICATE NUMBER 958 JUDGMENT 1 HIS HONOUR: In this matter I am to determine whether or not privilege subsists in respect of a considerable number of documents in the hands of Mr M C Smith, who has prepared an expert accountant's report proposed to be tendered in these proceedings. The report has been served and it has been indicated pursuant to a direction made by White J, who is to be the trial judge, that it is intended to rely on the report at the trial, which commences before his Honour next Monday. 2 His Honour earlier in an associated matter made a ruling concerning whether or not certain of the documents were privileged in the hands of the plaintiffs' solicitors: New Cap Reinsurance Corporation Ltd (In Liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258. Those proceedings have now been resolved by settlement, but the parties are now arguing over whether or not privilege attaches to the documents in the hands of Mr Smith in these proceedings, which, as I say, are listed for trial on Monday. 3 The argument has been conducted by Mr D L Cook of counsel on behalf of the plaintiffs and by Miss V A McWilliam of counsel on behalf of the defendants. The matter is not an easy one and I have received considerable assistance in resolving it from the arguments as presented by both counsel. 4 The evidence relied on by the plaintiffs in support of the claim for privilege is an affidavit of Mr Smith sworn on 8 February 2008. In paragraph 12 of that affidavit Mr Smith has sworn that all the documents "were created for the dominant purposes [sic] of preparing my report in these proceedings". Mr Smith was not cross examined on his affidavit. 5 The claim of privilege is made under s 119(b) of the Evidence Act 1995 (the "EA"). That section provides that "evidence is not to be adduced if the court finds that adducing the evidence would result in the disclosure of the ... contents of a confidential document (whether delivered or not) that was prepared for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding". 6 In White J's judgment in New Cap Reinsurance his Honour said: "[28] A lawyer will provide professional legal services in relation to a witness' statement of evidence where the lawyer is asked to advise on what the statement should contain and settle the form of the statement. The deployment of the final report by the plaintiffs' lawyers through its service on the opposite party and its tender into evidence will also constitute the provision of professional legal services relating to the proceeding." 7 It has been argued before me that there is an inconsistency between the second sentence of [28] and what his Honour said in [35] of the judgment. It is not necessary for me to determine whether or not there is in fact an inconsistency and what would flow from that inconsistency. I have a clear view that what his Honour said in [28] is correct. 8 It was put to me that I could not or should not determine on the material before me that the relevant documents were prepared for the dominant purpose of the client being provided with professional legal services. It was suggested that a bald statement to that effect, even on oath, is not a sufficient basis for such a determination. Attention was also drawn to possible inconsistencies within Mr Smith's affidavit, for instance, between the statement in paragraph 12 that I have set out and other portions of his affidavit, including paragraph 10. 9 Despite these objections, I am prepared to accept Mr Smith's word that the dominant purpose for which the documents referred to were prepared was the client being provided with professional legal services. I am assisted in coming to that conclusion by the inherent probability that that was so. I accept that, whether or not the documents were prepared by Mr Smith or in his office or came into his office for use in the exercise he was carrying out, the whole purpose of the exercise was to prepare in the end a report for use in the proceedings and I am prepared to accept that this was the dominant purpose overall of the preparation of the documents. In my view that statement is not displaced by statements by Mr Smith as to other purposes that he had along the way as, for instance, in relation to the communication of draft reports to the solicitors during the process, as was dealt with by White J in his judgment. 10 The purpose of the client being provided with legal professional services is not limited to a purpose of the person who prepared the document. In this case it was not Mr Smith's purpose to provide professional legal services to the clients, but to produce a report which would be furnished to the solicitors for them to use in the fashion set out in the second sentence of [28] of White J's judgment, that use constituting the provision of professional legal services. 11 This area of the law is bedevilled (as in so many matters arising under the EA) by the creation of a regime different from the common law relating to already very complex legal issues in the law of evidence. However, my view, as I have already indicated, is that the views stated by White J concerning the effect of s 119(b) of the EA is clearly what is mandated by the words of that section, which now alone governs the relevant situation. In my view, privilege attached to the documents under s 119(b). 12 The documents having been the subject of privilege, the question now arises whether that privilege was lost. This again is now mandated by statute. The relevant statutory provisions are in s 122 of the EA as follows: "122 (1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made ... …… (c) under compulsion of law..." 13 I turn first to subsection (2). Whatever else may be said about that subsection, it cannot apply, because any relevant disclosure was through service of Mr Smith's report. That service was the result of the direction of the Court and was therefore made under compulsion of law. As I have said, neither the service of the report nor any indication pursuant to direction that it is intended to rely on it makes it mandatory upon the plaintiffs to tender that report when the time comes at the trial. They remain free to do so or not do so as they then choose. 14 That brings me to subsection (1) of s 122. There is law to the effect that the consent referred to in s 122(1) may be an implied consent that arises where material is used and the Court perceives an inconsistency, where necessary informed by considerations of fairness, between the conduct of the client and maintenance of the confidentiality: see Mann v Carnell (1999) 201 CLR 1 per Gleeson CJ, Gaudron, Gummow and Callinan JJ at [29]. 15 The reason why there is not at the present time a "waiver", as it is commonly called, under the provisions of s 122(1) is for the same reason as stated above in relation to s 122(2), that is, the relevant material has not yet been used by the plaintiffs by tender and the plaintiffs remain free not to use it in their discretion. Until the material is tendered, there is not an inconsistency which attracts the operation of s 122(1). 16 Therefore, in my opinion, privilege still attaches to the relevant documents. ********** 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.