Supreme Court New South Wales Medium Neutral Citation: Shoal Bay Developments Pty Ltd v Port Stephens Council [2018] NSWSC 286 Hearing dates: 27 February 2018 Date of orders: 27 February 2018 Decision date: 01 March 2018 Jurisdiction: Equity Before: Parker J Decision: Claim for privilege over documents produced on subpoena rejected, and leave to inspect the documents granted. Catchwords: EVIDENCE – Privileges – claim for legal professional privilege – claim for litigation privilege – preliminary proceedings – whether statutory provision applies to preliminary proceedings – common law definition of litigation privilege applies in preliminary proceedings EVIDENCE – Privileges – Litigation privilege – whether expert report privileged – application of "dominant purpose" test – scope of report too wide – no direct evidence on instructions to expert – direct evidence apparently available – whether claim of privilege should be upheld as matter of inference when direct evidence available – privilege claim over report dismissed EVIDENCE – Privileges – litigation privilege – where claimant asks court to inspect documents over which it claims privilege – whether appropriate for court to exercise power to inspect documents – where other party not in a position to inspect and make submissions on documents – risk of "gross unfairness" – whether inspection detracts from requirement that claimant prove privilege claim with admissible evidence – not appropriate for court to inspect documents where inspection detracts from requirement CIVIL PROCEDURE – Subpoenas – documents produced on subpoena – legal professional privilege – litigation privilege – whether documents preceding issue of expert report privileged – whether inference that communications directly relate to proceedings available – whether documents advance case of claimant – whether documents produced for purpose related to expert report – insufficient evidence that documents advance case – insufficient evidence documents prepared for purpose related to expert report – inference communications directly relate to proceedings not available – privilege claim over documents dismissed Legislation Cited: Evidence Act 1995 (NSW), ss 119, 131A(1) Cases Cited: Tavcol Pty Ltd v Valbeet Pty Ltd [2016] NSWSC 1002 Australian Securities and Investments Commission v Southcorp Ltd (2003) 46 ACSR 438 Hancock v Rinehart (Privilege) [2016] NSWSC 12 Rinehart v Rinehart [2016] NSWCA 58 Category: Procedural and other rulings Parties: Shoal Bay Developments Pty Ltd (Plaintiff) Port Stephens Council (Defendant) Representation: Counsel: A Edington (Plaintiff) E Bathurst (Defendant) Solicitors: David Vitnell (Plaintiff) Local Government Legal (Defendant) File Number(s): 2015/349406 Publication restriction: Nil JUDGMENT – EX TEMPORE Revised and issued 7 March 2018 1. In these proceedings, the plaintiffs are the proprietors of land which forms part of what is known as the Lagoons Estate at Port Stephens. The plaintiffs complain that their land is subject to flooding emanating from an adjoining development known as the Seabreeze Estate (of which the Lagoons Estate was originally part) and they claim that the defendant, the Port Stephens Council, is responsible in whole or part for that flooding. 2. In the proceedings, the plaintiffs claim that works done by the Council from the 1970s onwards on the Seabreeze Estate are responsible for the flooding and constitute a nuisance. They also contend that the Council has failed to comply with orders which were made by the Court of Appeal in earlier proceedings involving the Council and former proprietors of land in the Lagoons Estate. 3. The proceedings were commenced in 2015. In August 2016, a report was prepared by a Dr Geoff O'Loughlin as court-appointed expert into the technical issues which arise in the proceedings concerning runoff and flooding. The Council commissioned a report from a Dr Martens of Martens & Associates Pty Limited which at least in part was a response to Dr O'Loughlin's report and was completed in October 2016. The Council was not immediately entitled to rely upon the report in answer to Dr O'Loughlin's report but in December last year it obtained leave to do so from the Chief Judge in Equity. The proceedings have been fixed for hearing before a Judge of this Division in May. 4. The present application before me raises questions of inspection of certain documents that have been sought by way of subpoena from Dr Martens and his firm. The application came before me in the Call Over List earlier today but both counsel indicated they were ready to proceed with the hearing today, and in view of the impending trial date, I thought it important to hear and determine the application as quickly as possible. 5. The subpoena in question was issued on 22 January 2018. It was in broad terms, essentially requiring the production of all documents in the possession of Dr Martens and his firm concerning the Lagoons Estate and the Seabreeze Estate and associated water works, including documents related to the report prepared in October 2016. Documents were produced to the Court in answer to the subpoena and no claim for privilege was made by Dr Martens, but, an extensive claim for privilege was made by the Council. Initially, scores of documents were the subject of dispute, but as a result of negotiations between the parties and developments of their position prior to and in the course of hearing this application, there are now only 16 documents which are in dispute. These are documents for which the Council claims privilege where that privilege is contested by the plaintiffs. 6. The plaintiffs put the contest on two bases: first, they dispute that it has been established that the documents ever attracted any form of relevant privilege. Second, they contend that, even if they did once attract privilege, such privilege has been waived by the deployment of the Martens report for the purposes of these proceedings. 7. The evidence in support of the claim for privilege is sparse. Counsel accepted that the onus lay on the Council to justify the claim for privilege. For that purpose, counsel relied on an affidavit from Amy Kathleen Ryan, a solicitor employed by the firm acting for the Council in the proceedings. Ms Ryan assists Anthony John Pickup who is the solicitor who has carriage of the matter for the Council. Ms Ryan's affidavit attaches a schedule which identifies the documents which are in issue, providing a brief description of the document (all of the documents now in issue are in fact described as "email"), with a date, the parties from whom the email was sent and to whom it was sent and a document title. The table also identifies that legal professional privilege is claimed for some of the documents and litigation privilege for all of them. The affidavit contains opinions and conclusions to the effect that the documents attract privilege, but I rejected that evidence as being inadequate in form. Essentially, the case made for subsistence of privilege is based on inferences to be drawn from the descriptions in the schedule, together with some other documents which were tendered, or to which it was agreed that I could have regard, including, most importantly, the pleadings in the proceedings and the Martens report of October 2016 itself. 8. When the matter was called on before me in the Call Over List, counsel for the plaintiffs made it clear that he would object to the conclusory statements in Ms Ryan's affidavit and I afforded an opportunity to the Council to seek further time to supplement that evidence as it was. However, the application proceeded before me at 2 o'clock this afternoon without any further evidence from Ms Ryan, and as I have already noted, I rejected the conclusory parts of her affidavit in accordance with the objection which had been foreshadowed by counsel for the plaintiffs. 9. Counsel for the Council did not in her oral submissions seek to support the claim for legal professional privilege. The case was put on the basis of litigation privilege. Counsel argued that I could infer from the circumstances and from the material to which I have referred that the documents had been produced for the purposes of the conduct of this litigation. 10. Initially counsel put the claim on the basis of the relevant statutory provision, being the Evidence Act s 119. Counsel relied on s 131A(1) for a submission that the Evidence Act provisions applied to this application as preliminary proceedings. However, one of the requirements of s 131A(1) is that the person who is being required to produce the relevant document objects to its production, and counsel ultimately accepted that this requirement was not satisfied and that s 131A(1) was therefore not applicable. The argument thereafter proceeded on the basis of the common law definition of litigation privilege. 11. It appears from the evidence before me that Mr Pickup approached Dr Martens for the purpose of preparing some sort of report or reports relating to flooding at the Seabreeze Estate as early as March 2016, but Dr Martens' report refers to having been instructed to prepare the October 2016 report on 24 August 2016, which is only a couple of weeks after the report prepared by Dr O'Loughlin had been completed. There is no direct evidence of the terms of that instruction, but in Dr Martens' report he refers in a section headed "Brief" to having been instructed to provide "a technical review" of Dr O'Loughlin's report and states that the report was prepared in accordance with the expert witness code of conduct. 12. As I understood the argument for counsel for the defendants, the documents which are disputed and which pre-date the completion of Dr Martens' October 2016 report (which bears the date 19 October) should be inferred to have been generated in the course of preparing that report. 13. In Tavcol Pty Ltd v Valbeet Pty Ltd [2016] NSWSC 1002, McDougall J had to consider a claim for privilege in somewhat similar circumstances involving documents produced by an expert in the context of legal proceedings. His Honour cited various propositions from an earlier judgment of Lindgren J in Australian Securities and Investments Commission v Southcorp Ltd (2003) 46 ACSR 438. The first two of those propositions were as follows: (1) Ordinarily the confidential briefing or instructing by a prospective litigant's lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege: cf Wheeler v Le Marchant (1881) 17 Ch D 675; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246; Interchase Corp Ltd (in liq) v Grosvenor Hill (QLD) Pty Ltd (No 1) [1999] 1 Qd R 141 (Interchase) at 151 per Pincus JA, at 160 per Thomas J. (2) Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client's lawyers and the expert witness, ordinarily attract the privilege: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; 141 ALR 545; 91 A Crim R 451 (Propend); Interchase, per Pincus JA; Spassked Pty Ltd v Cmr of Taxation (No 4) (2002) 50 ATR 70 at [17]. 1. Having regard to the instructions which are recorded in the October 2016 report, I would be prepared to assume that the report itself had been prepared for the dominant purpose of the conduct of litigation, or at least when communicated to the solicitors for the Council that that would be so. However, the question for me is whether the communications which are in issue in these proceedings have the necessary connection with the litigation. 2. The documents in question involve a number of people whose role is either identified in the evidence or was agreed between the parties. Apart from Mr Pickup and Dr Martens, those involved were Mr Michael Dumas and Mr Grant Harlow, who both work for Martens & Associates; Ms Lisa Marshall, who is the Council's legal services manager, and Mr John Maretich and Ms Nilliah Sivabalan, who are engineers employed by the Council. I was informed without objection that Mr Maretich is a deponent in the proceedings, although his affidavit was not in evidence before me. One of the documents was also sent to counsel for the Council. 3. Counsel argued that the very fact that Mr Pickup had received each of these documents and that Ms Marshall was also involved in receiving most of them indicated the connection with the conduct of the litigation. However, that submission needs to be considered in the context of two other points. 4. The first is that the conclusions in the October report are significantly wider than simply a forensic response to Dr O'Loughlin's report. The report concluded, among other things, that: Whilst the Council works have significantly reduced service runoff to the lagoon, it has not completely impeded the flow of service runoff on to Lagoons Estate. 1. Under the heading "Considerations for Council", the conclusion stated: Based on our assessment, the following key issues arise: Overland flows into the Lagoons Estate are a natural occurrence, notwithstanding the development of Seabreeze Estate. The GHD works [these were works undertaken on behalf of the Council] have significantly reduced peak flow rates into the Lagoons Estate, but these remain marginally higher than those prior to the construction of Seabreeze Estate. The GHD works have significantly reduced the flow volumes entering the Lagoons Estate, but volumes remain marginally higher than those prior to the construction of Seabreeze Estate. This likely arises out of a lack of maintenance of the installed infiltration structures. However the differences between current and pre Seabreeze Estate inflow volumes to the lagoon are not significant. Matters to consider arising from the above are: In terms of changes to flood affectation within the Lagoons Estate, it is now possible to quantify the change in flood extents within the estate. From the results in table 14, the extents are not significantly different. Much of what was to be stage 3 of the Lagoons Estate development is affected by and has always been affected by overland flooding. This could be significantly reduced by formalising the flow paths through the site. Consideration could be given to the creation of strategic drainage easements in favour of the Council to reduce/remove the risk of future ongoing litigation or indeed resolve the current litigation. 1. It is apparent from these conclusions that the work done by Dr Martens and his team, however it may have commenced, ended by having a wider focus than merely a forensic response to Dr O'Loughlin's report in the current proceedings. The reference to works which might be undertaken to reduce or remove the risk of future ongoing litigation makes this completely clear. 2. The second point of importance in evaluating counsel's submission is that counsel has chosen to present this application without any direct evidence from Dr Martens or from the Council about the precise instructions that were given to Dr Martens over the period covered by the communications which are the subject of the dispute. 3. Ordinarily, one would expect, on an application of this sort, that the instructions to the expert would be part of the evidence given in support of the application. So far as I can see, it would have been a simple matter for all of the relevant instructions to have been attached to an affidavit, and this would have made it quite clear what it was that Dr Martens and his team were asked to do. In Tavcol Pty Ltd v Valbeet Pty Ltd, McDougall J expressed a reluctance to make findings in favour of a party claiming privilege as a matter of inference when more direct evidence would apparently have been available. 4. After I rejected the conclusory passages in the affidavit of Ms Ryan, I was invited by counsel for the Council to look at the documents for the purposes of drawing conclusions as to the circumstances in which they were created. 5. I accept that the Court would have power to do this, but in Hancock v Rinehart (Privilege) [2016] NSWSC 12 at [32-34] Brereton J expressed the view that to take this course and thereby permit a party claiming privilege to fill in a gap in its case presented the risk of gross unfairness to the other party, because that other party would not be in a position to see and to make submissions on the documents. His Honour suggested that cases where the Court would refer to the documents in this way would be rare, if permissible at all. He said that the power to inspect the documents: was not intended to detract from the requirement that a person claiming privilege prove, by admissible evidence, the grounds of the claim. 1. His Honour's remarks were endorsed by the Court of Appeal on appeal in Rinehart v Rinehart [2016] NSWCA 58 and by McDougall J in Tavcol v Valbeet. 2. Counsel for the Council submitted that the Rinehart case was an unusual one in that no evidence whatever was produced in support of the claim for privilege, but I do not see this as a valid point of distinction from the present case. In my view, the unfairness to which Brereton J referred would be present in this case were I to flesh out the exiguous material provided by way of description of the documents by reading them in full, when the plaintiffs, as the party opposing the claim for privilege, would not have the same advantage. I think that to conduct the application on that basis would be seriously unfair to the plaintiffs, and for this reason I declined to look at the documents for the purpose of determining whether privilege subsists in them. 3. Returning to the documents which pre-date the report, the first of those is dated 13 September 2016 and is headed: "Information regarding proposed works". A further email of 16 September 2016 is headed: "Installation of additional water level monitoring probe within Dowling Street GBT". There is a further document dated 13 September 2016 with the same heading as the first document to which I have referred and it may be a duplicate. I accept that all of these documents pre-date the completion of the report. 4. The difficulty I have, however, is that I cannot be satisfied that the subject matter of the email is limited to a forensic response to Dr O'Loughlin or is otherwise limited to the issues in the proceedings. It is reasonable to suppose that the conclusions ultimately expressed in the report of October 2016 may have been discussed beforehand between Dr Martens and his team on the one hand and the Council's advisers on the other. 5. The fact that lawyers were involved to some extent supports the inference that the communications relate directly to the issues in the proceedings, but in my view do not go far enough. For all the Court knows, the documents were sent to the lawyers because of some wider potential relevance to future claims as referred to in the conclusion which I have already quoted. The fact that one of the documents refers to an additional water level monitoring probe, reinforces this as a possibility. On a quick read of the October report, I see nothing to suggest that further testing was done for the purpose of that report. It seems to me equally plausible to suppose that the desirability of additional water level monitoring was a conclusion reached as a result of the investigation carried out by Martens & Associates and which is not necessarily limited to or even associated with the response to Dr O'Loughlin. 6. Two further documents pre-date the date of the report. Both have a heading: "Engagement of Services". Given that the documents date from shortly before the report was completed, and given the title, it seems to me to be equally possible that these documents relate to further instructions which must evidently have been given in connection with the further work that was undertaken after the report was completed. And on that basis I am not satisfied that those documents, although pre-dating the completion of the report, relate to the report itself, or more broadly to the advancement of the defendant's case in the proceedings. 7. All of the other eleven documents in issue post-date the report. Many of them are headed: "Feasibility Study". A few are headed: "Shoal Bay Developments - Feasibility Study by Martens & Associates". There are also references in some of the headings to "concept drainage solutions". 8. It is clear from these documents that Martens & Associates were actively engaged in assisting the Council with respect to drainage issues concerning the relevant sites after the completion of the report in October 2016. There is, however, no direct evidence of what instructions were given to them after the report was completed. 9. Counsel invited me to conclude from the reference to "Shoal Bay Developments" that the "feasibility study" was in some way connected with the litigation. I decline to draw that inference (which in any event might not be sufficient to satisfy the dominant purpose test). Having regard to the recommendations made in the October 2016 report, I see no reason to think that subsequent work on a "feasibility study" or on "concept drainage solutions" necessarily have any connection with the evidence to be presented on behalf of the Council in the proceedings. I would have thought that if they did, it would have been easy for the Council to have given direct evidence of that fact. Furthermore, as I understand it, the Council's application to rely on evidence from Dr Martens in the proceedings was limited to the October 2016 report. That report, I was informed without objection, will form part of a conclave process to take place in advance of the hearing scheduled for May, and it was not suggested that any further report from Dr Martens would form part of that process. 10. In the circumstances, while I accept that the disputed documents related to work done by the Council's consultant, I am not satisfied that any of the communications in question were made for the dominant purpose of advancing the Council's case in these proceedings. 11. Accordingly, I consider that the Council has failed to establish that any of the sixteen disputed documents attract litigation privilege. 12. It is, accordingly, unnecessary to consider whether, if such privilege had subsisted, it has been waived. It is sufficient for me to say, however, that I am far from satisfied on the material before me that had these documents been privileged, that privilege would necessarily have been waived, at least at this stage of the proceedings. 13. It is often difficult to determine in advance of the hearing the extent of any waiver which flows from the deployment of expert evidence. And if issues of waiver remain in relation to other documents which have been produced whose privilege status is not contested, it seems to me that those issues will probably have to be resolved at the hearing itself. 14. Although the Council has been unsuccessful on the sixteen documents which remained in issue, it is clear from the material before me that both sides' positions have altered, both prior to and in the course of the hearing of this application, and accordingly I consider that the appropriate order is that the costs of the application should be costs in the cause. 15. The orders of the Court are: 1. I make the usual order for inspection of the 24 documents initially the subject of this application other than the documents numbered 6, 7, 9, 10, 12, 18 and 19. 2. I order that the costs of the application for access be costs in the cause. ********** 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. Decision last updated: 07 March 2018