New South Wales Supreme Court CITATION : Grace v Grace [2010] NSWSC 1514 HEARING DATE(S) : 16 November 2010 JURISDICTION : Equity Division JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 16 November 2010 DECISION : Privilege lost by waiver in respect of documents in folder 33. Claim for privilege upheld in respect of second and third documents in VD 213. CATCHWORDS : EVIDENCE – Facts excluded from proof – privilege – client legal privilege and litigation privilege – Waiver of privilege – whether disclosure was obviously mistaken LEGISLATION CITED : (NSW) Evidence Act 1995, s 118, s 119 CATEGORY : Procedural and other rulings Biseja Pty Ltd v NSI Group Pty Ltd [2006] NSWSC 1497 Derby & Co Ltd v Weldon (No 8) [1991] 1 WLR 73 CASES CITED : Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538 Meltend Pty Ltd & Rosenbaum v Restoration Clinics of Australia Pty Ltd & Marzola (1997) 75 FCR 511 Unsworth v Tristar Steering and Suspension Australia Limited [2007] FCA 1081 David Alexander Grace (plaintiff) Deborah Sharon Grace (first defendant) Julienne Grace (second defendant) PARTIES : Nevilda Holdings Pty Ltd (prov liq'r appted) (third defendant) Nevilda Investments Pty Ltd (prov liq'r appted) (fourth defendant) Dutchie Pty Ltd (sixth defendant) Phoenix Rising Investments Pty Ltd (seventh defendant) FILE NUMBER(S) : SC 06/259566 COUNSEL : D Williams SC w S Goodman (plaintiff) A Moses SC w D Stewart (first, second & seventh defendants) SOLICITORS : James Tuite & Associates (plaintiff) Clinch Long Letherbarrow Pty Ltd (first, second & seventh defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Tuesday, 16 November 2010 2006/259566 David Alexander Grace v Deborah Sharon Grace & Ors JUDGMENT (ex tempore) 1 HIS HONOUR: In the course of his cross-examination of the first defendant Deborah Sharon Grace, Senior Counsel for the plaintiff, Mr Williams SC, showed her a document, contained in volume 33 (V33) of the plaintiff's tender bundle but not yet admitted in evidence, which appeared to comprise instructions prepared by Ms Grace in connection with interrogatories proposed to be administered to the plaintiff. Senior Counsel for the defendants, Mr Moses SC, objected on the ground that the document was privileged within (NSW) Evidence Act 1995, s 118 or s 119. It then emerged that a number of documents contained in V33 were documents in respect of which the defendants wished to make a claim of privilege. The objection, and the question to which it related, were deferred while further consideration of the material took place, and evidence for the voir dire prepared. The scope of the claim for privilege was refined, and ultimately was restricted to documents listed in a document entitled "First, Second And Seventh Defendants' Discovery Folder 33 Schedule of Documents in respect of which a claim for privilege is pressed" ("the Scheduled V33 Documents"). The defendants sought an order for return and delivery up of all copies of the Scheduled Documents, and an injunction prohibiting the plaintiff's representatives from making any further use of them. However, in the defendants' submissions in reply, that claim was abandoned in respect of some of the Scheduled V33 Documents. 2 In addition, the defendants claim and the plaintiff disputes privilege in respect of three documents comprised in VD213. Background 3 On 30 July 2007, the parties agreed upon categories of documents for discovery. On 12 November 2007, the first and second defendants made affidavits verifying their list of documents, which was served on 21 November 2007. That list included, in Part 1 of Schedule 1 (that is to say, documents over which no claim for privilege was made), the Scheduled V33 Documents. Most of the Scheduled V 33 Documents were described in the verified list of documents as "Email from Deborah to Julienne", and they correspond with that description, although many include as attachments, or forward, correspondence between one or both of Deborah and Julienne and their solicitors, or drafts prepared for their solicitors. 4 On 4 December 2007, by agreement between all parties, copies of documents in respect of which no claim of privilege had been made – including the Scheduled V33 Documents – were provided to the plaintiff's solicitor. No claim for privilege was made in respect of them until the issue emerged in cross-examination, nigh on three years later, on 12 November 2010. Privilege and waiver 5 The first question in whether, apart from any question of waiver, the Scheduled V33 Documents were privileged. In light of the conclusion to which I have ultimately come, it is unnecessary to consider in detail whether each of the documents was entitled to privilege under s 118 or s 119. Whether all of them were may be disputable. However, communications between a client and a third party for the purposes of obtaining professional legal services in litigation are privileged under s 119(a), and it makes no difference that the third party is another client of the same solicitor. In my view, at least most if not all of the Scheduled V33 Documents were prima facie privileged on that basis. In any event, I proceed on the basis that all the disputed documents were so privileged. 6 The second, and dispositive, question is whether that privilege has been lost. I am satisfied, having regard to the evidence of the defendants' solicitor Mr Thackeray, that he intended to claim privilege in respect of all documents in V33 between 33-082 and 33-603, which description includes, but is not limited to, all the Scheduled V33 Documents. Indeed, on the original of the discovered documents, there is a post-it note containing an instruction to make such a claim. However, for whatever reason, that claim was not made at the time of discovery. On Mr Thackeray's evidence, I am satisfied that the circumstance that no such claim was made was attributable to some oversight. Nonetheless, it is clear that the intended claim of privilege extended to a significant number of documents which could not have been entitled to privilege. 7 In Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027, Slade LJ (with whom Woolf LJ and Sir George Waller agreed) said (at 1045-1046): In all cases where inspection has been given in the course of discovery, he submitted, the court should follow the Briamore decision [1986] 1 WLR 1429. This provides a simple practical rule. It places the onus on the party giving discovery, who should ensure that only documents in respect of which no claim of privilege is made should be disclosed. It avoids the practical problems involved in attempting to restore the previous status quo by prohibiting a party and his experts from using information obtained in the normal course of discovery. With one important reservation, I would entirely accept the submissions summarised in the immediately preceding paragraph. Care must be taken by parties to litigation in the preparation of their lists of documents and no less great care must be taken in offering inspection of the documents disclosed. Ordinarily, in my judgment, a party to litigation who sees a particular document referred to in the other side's list, without privilege being claimed, and is subsequently permitted inspection of that document, is fully entitled to assume that any privilege which might otherwise have been claimed for it has been waived. Let there be no doubt about that. My one reservation is this. I do not think that after inspection has taken place in the course of discovery, the court is inevitably and invariably powerless to intervene by way of injunction in exercise of the equitable jurisdiction exemplified by the Ashburton , Goddard and Herbert Smith cases if the particular circumstances warrant such intervention on equitable grounds. … 8 His Lordship proceeded to summarise the applicable principles as follows: In my judgment, the relevant principles may be stated broadly as follows. (1) Where solicitors for one party to litigation have, on discovery, mistakenly included a document for which they could properly have claimed privilege the court will ordinarily permit them to amend the list under RSC, Order 20, r 8, at any time before inspection of the document has taken place. (2) However, once in such circumstances the other party has inspected the document in pursuance of the rights conferred on him by RSC, Order 24, r 9, the general rule is that it is too late for the party who seeks to claim privilege to attempt to correct the mistake by applying for injunctive relief. Subject to what is said in (3) below, the Briamore decision [1986] 1 WLR 1429 is good law. (3) If, however, in such a last mentioned case the other party or his solicitor either (a) has procured inspection of the relevant document by fraud, or (b) on inspection, realises that he has been permitted to see the document only by reason of an obvious mistake, the court has the power to intervene for the protection of the mistaken party by the grant of an injunction in exercise of the equitable jurisdiction illustrated by the Ashburton , Goddard and Herbert Smith cases. Furthermore, in my view it should ordinarily intervene in such cases, unless the case is one where the injunction can properly be refused on the general principles affecting the grant of a discretionary remedy, for example, on the ground of inordinate delay: see Goddard's case [1986] 3 WLR 734, 745E-F per Nourse LJ. 9 In Meltend Pty Ltd & Rosenbaum v Restoration Clinics of Australia Pty Ltd & Marzola (1997) 75 FCR 511, Goldberg J held that there had been a waiver where a document was included in Part 1 of Schedule 1 of the list of documents, and said (at 524G): But once documents have been disclosed to an opposite party as part of the formal process of discovery and inspection, in circumstances involving no criticism of that party, I consider that fairness requires that that party be not disadvantaged in the use it can make of those documents. 10 His Honour explained (at 526F-G): The conclusion I have reached is consistent with the obligations which are undertaken by parties and their legal advisers in relation to discovery. The obligation is on the party giving discovery to determine what documents are discoverable and what documents are able to be inspected. Any claim for legal professional privilege should be taken at the time an affidavit or list in relation to discovery is filed. A party seeking inspection should be entitled to assume that the discovering party has carried out the process of discovery properly and in accordance with relevant principles. Otherwise parties will be placed in difficult situations if documents can be withdrawn from inspection after an initial inspection with the result that there is an inability to use information properly obtained on discovery. If parties are to be able to change their mind about the privilege attaching to a document after it has been inspected the process of discovery has the potential to become unworkable. In the absence of obvious mistake apparent to an inspecting party and fraud I consider that the appropriate principle to apply 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, 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. 11 In Unsworth v Tristar Steering & Suspension Australia Ltd [2007] FCA 1081, Gyles J reviewed the authorities, which his Honour considered somewhat conflicting, and concluded (at [9]): A single judge of this Court is in a difficult position given the current state of authority. It is not possible to reconcile all of the statements that have been made. However, for the purposes of this case, even if I were to apply the more restricted approach of Goldberg J, I favour maintenance of the privilege. The disclosure was inadvertent in every sense of the word and, in my opinion, an inspecting solicitor (and barrister) must have appreciated the probability of the documents having been included in the draft bundle by mistake as soon as the nature of each of the documents and the contents of them were appreciated. If it be relevant, I find that the solicitors for the respondent so concluded in the absence of evidence to the contrary. 12 A somewhat different approach was taken by Rogers J (as he then was) in Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538 (at 541), holding that where a litigant was bound by a court to comply with a compulsory accelerated discovery process, and inadvertently or unintentionally included a protected document in the list of documents which were subsequently produced and inspected, the privilege which was otherwise attached to it was not necessarily thereby waived, and that the court must reconcile the requirement for the speedy resolution of disputes and the interests of justice in determining whether it was fair in all the circumstances of the case to allow the claim for privilege nonetheless to be maintained. His Honour there said: The court … must reconcile the requirement for the speedy resolution of disputes and the interests of justice … [and] decide whether it is fair in all the circumstances of the case to allow the plaintiff/client privilege to be maintained. 13 The difference is that this approach allows a greater degree of flexibility and discretion; but it is important to note that it occurred in the context of an accelerated discovery process in the Commercial List. 14 My view remains, as summarised in Biseja Pty Ltd v NSI Group Pty Ltd [2006] NSWSC 1497, at [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 Accordingly, in my view, the crucial question is whether there was an "obvious mistake" within the meaning of the authorities to which I have referred. In this respect, it is important to bear in mind that the question is not whether the disputed documents were "obviously privileged", but whether their disclosure was an "obvious mistake". These are quite distinct concepts, because a party may voluntarily disclose a privileged document for a myriad of reasons. 16 In Guinness Peat Properties, there was in dispute a single document – a letter from the defendants to their insurers setting out their views on the merits of some of the claims against them. It was included in a file which otherwise comprised solely correspondence between a plaintiff and the defendants, which had been described in Part 1 of Schedule 1 as a file of correspondence between those parties. The disputed document was the only document in that file which did not correspond with that description. In those circumstances, it is unsurprising that there was held to be an "obvious mistake". 17 In Derby & Co Ltd v Weldon (No 8) [1991] 1 WLR 73, the Court of Appeal (Dillon LJ, Butler-Sloss and Leggatt LJJ agreeing) applied Guinness Peat Properties and concluded – even less surprisingly - that there was an obvious mistake where the 14 documents in dispute or at least some of them, bore post-it notes bearing the words "privileged" at the time of inspection, and the inspecting solicitors disregarded counsel's advice to raise the matter with the disclosing solicitors, but instead sought copies of them. 18 In Meltend, the disputed document was described as a copy of a facsimile from the respondent's accountant to the respondent. The list included other documents emanating from those accountants. While his Honour found the document to be prima facie privileged, he also concluded that its disclosure was not an "obvious mistake", because first, the document was not on its face obviously privileged (such as might be an advice from counsel), and secondly, though it bore a date subsequent to the institution of proceedings, that did not point unequivocally to its being a privileged document, particularly where it emanated from a non-legal source and was directed to a non-legal person. 19 In my view, having regard to the prima facie entitlement of an inspecting party to assume that the discovering party has carried out the process of discovery properly and in accordance with relevant principles, the disclosure - or failure to claim privilege - in this case was, although mistaken, not obviously so. I reach that conclusion for the following reasons. First, in the defendants' extensive list of documents, Part 2 of Schedule 1 (documents in respect of which a claim for privilege was made) ran to some 50 pages. This bespeaks a careful and thorough consideration of whether privilege should be claimed. Secondly, while I accept that some of the disputed documents were obviously prima facie privileged, that is not the test; the prima facie position resulting from their inclusion in Part 1 of Schedule 1 was that no claim for privilege was made, and that there had been an intentional waiver. Thirdly, many others of the disputed documents were only arguably privileged; "obvious" was not an appropriate characterisation of any claim they might have had to privilege. Fourthly, the description of the Scheduled V33 Documents in the list of documents as emails between the defendants did not obviously suggest that they were privileged. Fifthly, in V33 the Scheduled V33 Documents were inter-mixed with documents in respect of which a claim for privilege could not be sustained. Sixthly, other similar documents (emails between the defendants) were, elsewhere in the list of documents, not made the subject of a claim for privilege. Seventhly, not only was privilege not originally claimed; in addition, copies were provided by the defendants' solicitors when requested. Although the plaintiff's solicitors did briefly raise a query concerning the provision of copies of certain documents in volume 34, in respect of which a claim for privilege had been made in the list of documents, no such claim had been made in respect of the Scheduled V33 Documents; nor did the defendants' solicitors advert to any mistake when they reviewed the documents, including V 33, to answer a request for particulars; nor did they advert to it when at least 10 documents from V33 were included in the court book; nor did they advert to it when the defendants' very extensive affidavit evidence, which must have required reference to the documents, was prepared; nor did they advert to it when aspects of the disputed documents were referred to in opening, nor did they do so earlier in cross-examination. When the defendants' lawyers did not advert to this mistake for so long, it is very difficult to conclude that the plaintiff should have recognised that their disclosure was an obvious mistake. 20 What these factors would have conveyed to solicitors for the plaintiff is (1) that apparently considered claims for privilege were made in respect of a large number of documents; (2) that the Scheduled V 33 Documents were intermingled with documents that could not have been the subject of a claim for privilege; (3) that documents which appear to be in the same category, both in terms of the timeframe of their generation and their nature in being correspondence between the defendants, or between the defendants and their solicitors, were, in other volumes, not the subject of a claim for privilege; and (4) that, although there were a number of triggers which might have prompted the discovering party's solicitors to recognise that there had been a mistake, they did not do so - telling against the proposition that the inspecting party ought to have been expected to recognise that there had been a mistake. 21 At first, I was inclined to the view that the failure of the plaintiff to call a solicitor to give evidence that it did not occur to him or her that this was a mistake was very telling – as it was, so it would seem, to Gyles J in Unsworth v Tristar Steering and Suspension Australia Limited. However, the circumstance that the plaintiff's solicitors have changed since discovery was given and since inspection took place, deprives that submission of much of the force it would otherwise have had. Given that the present application has arisen at short notice, and notwithstanding that there was an adjournment for one day to permit preparation for it, I do not think that in those circumstances it requires evidence to explain away why a former solicitor for the plaintiff was not, within that time, called or an affidavit obtained from him. 22 I do not draw any inference adverse to the former plaintiff's solicitor from the circumstance that, on 24 June 2008, he raised, appropriately, a question as to whether a claim for privilege was maintained over certain documents in folder 34. Those were documents in respect of which a claim for privilege had been notified, but copies of them were nonetheless provided with the copied discovered documents. In those circumstances, where a claim had been notified, there was a significant flag that raised for the plaintiff's solicitor the possibility that there had been a mistake in providing a copy of them. But here, no such claim had been notified in connection with V33, and no flag indicating a similar course appeared. 23 Thus, having regard to the factors to which I have referred, I am not satisfied, even in the absence of evidence to the contrary (cf Unsworth), that it must have been apparent to inspecting solicitors that the disputed documents had been disclosed by mistake. It was at least an equally open explanation that there had been a deliberate decision not to claim privilege in respect of them, and, given the obligations of a party giving discovery, the inspecting party was entitled so to assume. 24 Accordingly, in my judgment, any privilege subsisting in the disputed documents has been lost by (1) their disclosure in Part 1 of Schedule 1 of the verified list of documents, (2) the making and delivery of copies of them by way of production for inspection, and (3) the failure to assert the claim for privilege at any earlier stage, including when some of the disputed documents were included in the court book and the tender bundle, and referred to in opening or at an earlier stage of cross-examination. 25 Moreover, I think it would be practically impossible for the plaintiff's counsel in this case to segregate in their mind, and disregard for the purposes of further cross-examination, information and knowledge derived from the material the subject of this claim and other information. To grant the relief sought - namely an injunction restraining them from using the privileged information - would require them to tread on egg shells throughout the remainder of the cross-examination. Whatever might have been the position had this application been made earlier, I think it is just too late, for the claim for privilege fairly to be maintained now. 26 As to the claim for privilege in respect of the three documents comprised in VD213, the first of those documents is replicated in one of the Scheduled V33 Documents and is, therefore, covered by my ruling on those documents that any privilege has been lost. If it were not so covered, I would have held that the communication between Ms Grace and Dr Grace of the letter which Ms Grace had sent to Mr Snelgrove would not have waived any privilege in that letter, being the email sent at 2023 on 31 July. However, the covering email from Dr Grace to Ms Grace, sent at 2343 on 31 July, does not appear to have a dominant litigious purpose, and would not be entitled to privilege. 27 The other two documents in VD 213, in my view, have a litigious purpose within s 119(a), and are entitled to privilege under s 119(a), and I uphold the claim for privilege in respect of them. Conclusion 28 I am satisfied that the defendants, by their solicitor, intended to claim privilege in respect of the Scheduled V33 Documents. While I am satisfied that the disclosure of these documents, or the failure to claim privilege in respect of them, was a mistake, I am not satisfied that it was one that would have been obvious to the plaintiff's representatives. In my view, therefore, any privilege formerly subsisting in the Scheduled V33 Documents has been lost by waiver. 29 The first of the 3 documents in VD 213 is also covered by the ruling in the preceding paragraph. I uphold the claims for privilege in respect of the second and third documents in VD 213. ********** 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.