Tavcol Pty Ltd v Valbeet Pty Ltd

1. [1]

   HIS HONOUR: These reasons are concerned with two notices of motion. One is filed by the plaintiff, and one by the defendant. Each seeks access to documents produced on subpoena by third parties. Each opposes the application of the other. In each case, the basis of the opposition is privilege.

A preliminary question

1. [2]

   In some cases, the claim of privilege is based on s 119 of the Evidence Act 1995 (NSW). In other cases, it is based on the common law. There was a preliminary question as to which source of privilege is relevant. Mr Weinberger of Counsel, who appeared with Ms Knox of Counsel for the defendant (Valbeet) submitted that the question was to be decided according to the principles established by the common law. At first, Ms Painter of Senior Counsel, who appeared with Mr Notley of Counsel for the plaintiff (Tavcol) appeared to contest this proposition. Eventually, I think, she accepted that it was correct. Regardless, since the point is of some significance, for reasons that will become apparent, I shall deal with it.

2. [3]

   As I have said, the documents were produced by third parties in answer to subpoenas served upon them. Those parties did not object to production, as contemplated by UCPR r 1.9. Nor did they object to inspection of the documents pursuant to s 131A of the Evidence Act.

3. [4]

   UCPR r 1.9 reads as follows:

4. [5]

   In the circumstances of this case, subr 1(a) is applicable.

5. [6]

   It seems to me to be clear that, for the purposes of subr (3), the “person [who] may object to producing a document on the ground that the document is a privileged document” must be the person, referred to in subr 1(a), who is ordered by subpoena to produce the document to the Court.

6. [7]

   Where the objection is taken by the person who is subject to the subpoena, then the objection is to be resolved by reference to Part 3.10 of the Evidence Act. That follows from the definitions of “privileged document” and “privileged information” in the Dictionary to the Rules.

7. [8]

   Section 131A of the Evidence Act reads as follows:

8. [9]

   Effectively, s 131A extends the operation of UCPR r 1.9, where the production of a document “would result in the disclosure of a [privileged] communication… document…”. Again, however, the objection is one to be made by the person who is the subject of the “disclosure requirement”: in this case, as is clear from subs (2)(a), the subpoena.

9. [10]

   A number of decisions at first instance appear to have overlooked the finer detail of the requirements of r 1.9 and s 131A. Brereton J referred to some of those decisions (relating to r 1.9) in Carbotech-Australia Pty Ltd v Yates [2008] NSWSC 1151. In that case, his Honour concluded (as I have done) that where the objection to production is not made by the person producing the document, r 1.9 does not apply. He held that the question of inspection is governed by the common law: see his Honour’s reasons at [10], [11].

10. [11]

    White J considered a number of decisions dealing with s 131A in Singtel Optus Pty Ltd v Weston (2011) 81 NSWLR 526, at [25], [26]. His Honour concluded at [27] that where the objection to inspection is taken by the person required to produce the document on subpoena, the objection is to be decided by reference to the Evidence Act. However, his Honour held at [28], where the objection to disclosure is made by someone other than the respondent to the subpoena, the question of privilege is to be resolved according to the principles developed by the common law. In reaching that conclusion, his Honour referred to what Allsop P (with whom Hodgson JA and Sackville AJA agreed) said in State of New South Wales v Public Transport Ticketing Corporation [2011] NSWCA 60 at [32]:

11. [12]

    In this case, having regard to the time at which the objection to inspection is taken and the identity of those taking it (specifically, the fact that those taking it are not those who produced the documents), I conclude that the questions of privilege that each party raises are to be resolved by applying the relevant common law principles. Does that make a difference? In Singtel Optus, White J said at [29] that “[i]n the circumstances of this case there is no different outcome…”. However, as his Honour observed, “[t]his will not always be so”.

12. [13]

    Section 119 of the Evidence Act reads as follows:

13. [14]

    The expressions “confidential communication” and “confidential document” are defined in s 117 of the Evidence Act. Those definitions read as follows:

14. [15]

    In New Cap Reinsurance Corporation Ltd (In Liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258, White J pointed to what in some circumstances will be a significant distinction between privilege under s 119 and privilege at common law. His Honour said at [18] to [20]:

15. [16]

    In Australian Securities and Investments Commission v Southcorp Ltd (2003) 46 ACSR 438, a case dealing with privilege at common law, Lindgren J set out his understanding of the relevant principles at [21]:

16. [17]

    Barrett J expressed a similar view in Ryder v Frohlich [2005] NSWSC 1342 at [11], [12]:

17. [18]

    As Biscoe AJ pointed out in Natuna Pty Ltd v Cook [2006] NSWSC 1367 at [8], the decision in Ryder turned on the common law, not on s 119 of the Evidence Act.

18. [19]

    The distinction to which White J adverted at [18] of New Cap Reinsurance, and that is found at [21](3) of Lindgren J’s judgment in ASIC v Southcorp, is significant in this case. That is because some of the documents in controversy in this case are “documents generated unilaterally by [an] expert witness, such as working notes, field notes, and… drafts of … report[s]”.

19. [20]

    The essence of legal professional privilege at common law is that the communication (whether written or oral) should have been made for one of the requisite purposes - obtaining legal advice; or obtaining advice or evidence in connection with litigation, either reasonably anticipated or in fact commenced - and that the purpose should be “dominant”. The “dominant purpose” test was established by the majority decision in Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49.

20. [21]

    A number of decisions on the “dominant purpose” test indicate that “dominant” does not mean merely “primary” or “substantial”, but “clearly paramount”. See Spigelman CJ (with whom Sheller JA and MW Campbell AJA agreed) in Sydney Airports Corporation Ltd v Singapore Airlines Ltd [2005] NSWCA 47 at [7], citing, among other decisions, that of Batt JA (with whom Charles JA and, relevantly Callaway JA agreed) in Mitsubishi Electric Australia Pty Ltd v Victorian Workcover Authority (2002) 4 VR 332 at [10].

21. [22]

    The relevant purpose is to be determined objectively. Nonetheless, the subjective intention of the person responsible for the creation of the document (or the making of the communication) is not irrelevant, as Spigelman CJ pointed out in Sydney Airports Corporation at [6].

22. [23]

    In many – perhaps most – cases, the relevant purpose will be that of the person who creates the document or make the communication, as Batt JA recognised in Mitsubishi Electric at [14] (and compare Spigelman CJ in Sydney Airports Corporation at [20]). However, as Batt JA said in Mitsubishi Electric at [14] (and the primary judge in Sydney Airports Corporation in fact found), where an expert report is brought into existence because a solicitor has commissioned it, the relevant purpose will be that of the solicitor (see also Hartogen Energy Ltd v Australian Gas Light Co (1992) 36 FCR 557 at 568-569; Gas Light compare Barwick CJ in Grant v Downs (1976) 135 CLR 674 at 677).

23. [24]

    Brereton J dealt with the question of proof of purpose in Hancock v Rinehart (Privilege) [2016] NSWSC 12 at [32]. His Honour said that “the best direct evidence [of purpose] will be that given by the person whose purpose is in question”. His Honour accepted that purpose could be inferred from the document. He said, however, that to use the document as the sole evidence in support of a claim for privilege “would be contrary to well-established practice” and “grossly unfair to the other party”. I set out that paragraph:

24. [25]

    His Honour had noted at [7] that a claim for privilege must be proved, not merely asserted, and that “a mere sworn assertion… does not suffice”. His Honour said (omitting citations):

25. [26]

    His Honour returned to both themes at [35(2)]:

26. [27]

    Those observations are of direct relevance in the present case, because the evidence of each side, in opposition to the claim for inspection by the other, was lamentably defective. Such direct evidence as there was was hopelessly conclusory and, objection being taken, was rejected.

Tavcol’s application for access

1. [28]

   Tavcol leases the Collector Hotel at Parramatta from Valbeet. It says that Valbeet failed to maintain the premises in a sound and watertight condition, and failed to keep the mechanical installations and services forming part of the premises in proper working order. It seeks rectification of the alleged defects, and damages. There is a separate but presently irrelevant issue, relating to Valbeet’s failure to provide consent to a development application.

2. [29]

   The allegations in relation to the state of the premises have caused the parties to commission expert reports, dealing with the defects and of course dealing with the question of economic loss.

3. [30]

   The proceedings were commenced in November 2012. Defects, particularly in relation to water penetration, had manifested themselves for at least two years before proceedings were commenced. They were the subject of correspondence and discussion between the parties and their representatives. Tavcol commissioned expert reports before proceedings were commenced, and provided copies to Valbeet. Valbeet sought to commission expert reports in reply.

4. [31]

   By the time the notices of motion were heard, the disputes had been very substantially narrowed. The documents in respect of which Tavcol sought, and Valbeet opposed, access were:

   1. (1)

      a draft report prepared by Mr Hines of SGA Property Consultancy (SGA) addressed to Valbeet’s lawyers, and dated 5 March 2014;

   2. (2)

      working notes prepared by Mr Barry, a building consultant then employed by a company known as Partridge Partners, during or immediately following meetings with Valbeet’s lawyers, held for the purpose of discussing a draft report on which he was working at the instruction of those lawyers;

   3. (3)

      four iterations of Mr Barry’s draft report prepared between August 2012 and January 2014;

   4. (4)

      staff timesheets of Partridge Partners;

   5. (5)

      a letter from a Mr Jones of Kellyville Plumbing to Valbeet’s lawyers dated 15 August 2014; and

   6. (6)

      Kellyville Plumbing’s tax invoice to Valbeet’s lawyers dated 15 September 2014.

5. [32]

   The draft reports of Mr Hines and Mr Barry were never finalised. Hence, no reports by them have been served as evidence to be relied upon.

6. [33]

   Mr Jones’ report has been finalised and served, and is to be relied upon.

7. [34]

   As to the draft report of Mr Hines, the only evidence as to its commissioning is that between October 2013 and May 2014, Valbeet’s lawyers instructed SGA, specifically asking that Mr Hines inspect the Collector Hotel and provide a report dealing with the allegedly defective mechanical services. That evidence was given on information and belief by a solicitor in the employ of Valbeet’s lawyers. She identified her informant.

8. [35]

   Ms Painter objected to even that evidence, on the basis (picking up what Brereton J had said) that what was required was direct evidence, not hearsay evidence. She relied also on what Brennan CJ had said in Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 513-514. In that case, the question was one of access to a document obtained pursuant to a warrant. That context is important. By reference to it, Brennan CJ said that the question was not one of review of executive action – the issue or execution of the warrant – but of the claim for privilege, which was “a distinct controversy” between the parties. His Honour said that:

9. [36]

   Ms Painter also relied on what Brereton J had said in Hancock (Privilege) at [35(2)] – that there must be “sworn direct evidence – not inadmissible hearsay or opinion”. She submitted, further that there should have been, but was not, “direct evidence… given by the person whose purpose is in question”: Brereton J in Hancock (Privilege) at [32].

10. [37]

    I do not accept that hearsay evidence may not be relied upon. The application is interlocutory in character. It is accordingly subject to s 75 of the Evidence Act, which renders admissible (although it says nothing about the weight of) hearsay evidence if there is evidence of the source:

11. [38]

    I do not think that it follows from what Brennan CJ said in Propend that a decision on an application for access to a document, resisted on the ground of privilege, is final rather than interlocutory. When one looks at the whole of the relevant portion of his Honour’s reasons, the distinction drawn was one between judicial review of executive action on the one hand, and decision of a controversy between parties – as to privilege – on the other. Further, his Honour pointed out that the Court was required to act on “admissible evidence”, and his Honour’s following words “not upon hearsay” were clearly intended to stand in contrast to (properly) admissible evidence.

12. [39]

    Nor, in my view, should the reasons of Brereton J in Hancock (Privilege) be read as suggesting that hearsay evidence is inadmissible on an interlocutory application such as the present one. His Honour referred to “inadmissible hearsay…”: that is to say, hearsay, the reception of which would not be saved even by the application of s 75 of the Evidence Act.

13. [40]

    Thus, in my view, the solicitor’s evidence as to the content of the instructions given by others to SGA was admissible.

14. [41]

    However, the solicitor’s affidavit went further. She sought to give manifestly inadmissible conclusory evidence, again based on information and belief, as to the purpose of the retainer of SGA. That evidence was inadmissible because it was mere assertion. It did not expose the facts that were said to support the conclusion of which (she said) she was informed by someone else. That seems to me to be a reasonably good illustration of “evidence” falling within the description “inadmissible hearsay”. (It could also be described as “inadmissible opinion” evidence.)

15. [42]

    Mr Pope, the solicitor on the record for Valbeet who had given instructions to SGA, gave no evidence (either directly or through the solicitor who swore on information and belief) of facts that would support the claim of legal professional privilege. Nor did any other of the lawyers named as having been involved in the retainer of SGA. Mr Hines gave no evidence whatsoever; nor did anyone else from SGA.

16. [43]

    Mr Weinberger submitted that it could be inferred, from the circumstances in which SGA was retained, the time at which it was retained and the purpose of the retainer (to prepare a report), that the report was required for use in connection with the then current litigation. No doubt, that inference is available. However, I am disinclined to draw inferences in favour of a party who could have proved the relevant facts by direct evidence, but neither did so nor explained the reason for failing to do so. On the contrary, as it seems to me, where that party hides behind evidence given on information and belief from someone not involved in the relevant transaction at the time, and does not explain the unavailability of the witnesses who could give direct evidence, the Court should, rather, infer that their evidence was unlikely to have assisted the party. See Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418.

17. [44]

    Mr Weinberger submitted that it was obvious that the SGA report had been commissioned for purposes connected either with then reasonably anticipated legal proceedings or providing legal advice. However, no one has said that. Valbeet owned what presumably are valuable commercial premises. It was being told by its tenant, in no uncertain terms, that there were serious defects in those premises. It was no doubt in Valbeet’s interest to have its own expert reports as to the alleged defects, so that it could take appropriate steps to protect its investment.

18. [45]

    Thus, whilst it might be possible to infer (as Mr Weinberger submitted I should) that a purpose of commissioning SGA to provide a report was to enable Valbeet’s lawyers to give it legal advice, or for use in possible litigation, it does not follow that this was the only, or at least a dominant (clearly paramount) purpose. Again, this is a matter that could and should have been proved by direct evidence. Again, I do not see why the Court should draw inferences where the party who could have given evidence has neither done so nor explained its failure to do so.

19. [46]

    I should add that the Court cannot but be aware that reports are often commissioned by lawyers even though they may be required for purposes that are not all (or at all) privileged. The facts in Sydney Airport Corporation themselves show this. The report commissioned by an in-house lawyer employed by the corporation was required both for the purposes of legal advice and for other, non-privileged, purposes. There was no evidence to enable the Court to identify any one of those purposes as “dominant”. In those circumstances, the claim for privilege failed.

20. [47]

    It follows, in my view, that the claim for privilege in respect of Mr Hines’ draft report has not been made good. I add that the same result would follow even if, contrary to what I have said, the position fell to be analysed by reference to s 119 of the Evidence Act.

21. [48]

    I note that Mr Weinberger submitted that I could look at the documents for the purpose of deciding the factual questions relevant to the claim for privilege. I agree that I could do so. However I do not propose to take that course. If there had been evidence on the topic then, consistently with what Brereton J said in Hancock (Privilege) at [32], it might be appropriate to look at the documents to confirm the impression otherwise gained from the evidence. But where the documents themselves are put forward as effectively the sole evidence in support of the claim, it would be inconsistent with practice, and “grossly unfair”, for the Court to rely on them. That unfairness would enliven the general discretion given by s.135 of the Evidence Act.

22. [49]

    Further, but only if the position is to be analysed according to the common law, there is another reason why there would be no privilege in the draft report. That is because, as Lindgren J said in ASIC v Southcorp at [21(3)], “[d]ocuments generated unilaterally by [an] expert witnesses, such as working notes, field notes, and the witness’s own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications”. I accept that there may be cases where a draft expert report might expose communications of the relevant kind. However, there is no evidence that the draft report of Mr Hines would fall into that category, rather than into the more general category to which Lindgren J referred.

23. [50]

    I turn to Mr Barry’s working notes. His (then) employer, Partridge Partners, was instructed on varying dates between September 2011 and November 2013 (again, this evidence comes on information and belief from the solicitor, who was not personally engaged in the process of instructing that company). Partridge Partners was first retained before proceedings were commenced. That retainer was to respond to an expert report from a Mr McDonald that Tavcol had provided to Valbeet. It is common ground that Mr McDonald’s report referred to the Expert Witness Code of Conduct (even though there were then no extant proceedings), and also that he has now prepared two reports which have been served on the basis that Tavcol intends to call Mr McDonald to give evidence. Mr Barry prepared a draft report.

24. [51]

    Mr Barry said, of his notes, that they were prepared by him either during or immediately following meetings with Valbeet’s lawyers, and that the meetings were for the purpose of discussing his draft report. However, as I have said, his report was not finalised, and no report from him has been served.

25. [52]

    There is no evidence as to when the meetings in question took place. Mr Barry (who presumably could have identified their dates) did not do so. Nor did the lawyers involved in the meetings do so, although one would have thought they would have records that would have enabled them to do so. All that is known is that the instructions to Mr Barry (or to Partridge Partners) were given at various times between September 2011 (before proceedings were commenced) and November 2013 (after).

26. [53]

    Again, it might be said that the circumstances in which the report was commissioned suggest that it was required for some privileged purpose. However, the evidence is no more informative than was equivalent evidence in the case of the retainer of SGA, or Mr Hines’ draft report (see what I have said at [44] to [46] above).

27. [54]

    Of course, I am presently dealing with the meeting notes rather than the various drafts of the report. However, the various drafts of the report cannot be ignored. If the report was not prepared for a privileged purpose (perhaps more accurately, if the evidence does not show, on the balance of probabilities, that it was prepared for a privileged purpose), it is difficult to understand why the notes of meetings to discuss the draft report might record privileged communications.

28. [55]

    In those circumstances, I conclude that Valbeet has not made good the case that Mr Barry’s notes of his discussions with its lawyers are privileged. That conclusion reflects in fact the manifest inadequacies in the evidence, and my disinclination to draw inferences where a party could have, but did not, adduce proper evidence.

29. [56]

    Again, having regard to the deficiencies in the evidence, I do not think it appropriate to go to the documents for resolving matters that Valbeet could and should have proved by its own direct evidence.

30. [57]

    I turn to the draft reports. As to two of those reports – those numbered 18 and 20 in the relevant Schedule – Valbeet’s solicitor has sworn that she “reviewed these documents in their electronic format, and confirm[s] that they contains [sic] track changes authored [sic] by [Valbeet’s lawyers] and also Mr Barry”. Thus, as to those two documents, there is evidence that to disclose them would disclose communications made between the lawyers and Mr Barry.

31. [58]

    There is no equivalent evidence in respect of the other two draft report reports (numbered 16 and 19 in the Schedule).

32. [59]

    The difficulty however is that to which I have referred already. There is no acceptable evidence of the dominant purpose for which the draft reports were prepared. Thus, there is no basis for concluding that communications in relation to those draft reports, even assuming them to have been “confidential”, are for a privileged purpose.

33. [60]

    That is enough to dispose of the claims at common law (and also, were it applicable, under the Evidence Act). Again, in the case of the draft reports (with the possible exception of numbers 18 and 20), to the extent that the position is governed by the common law, it would be covered by what Lindgren J said in ASIC v Southcorp at [21(3)].

34. [61]

    I turn to Mr Jones’ letter to Valbeet’s lawyers and the tax invoice from Kellyville Plumbing to Valbeet’s lawyers. There is no evidence as to the subject of either of those documents, or as to why they might attract privilege, save that Kellyville Plumbing was retained (well after proceedings were commenced) to prepare a report concerning the water penetration defects alleged by Tavcol. Again, Mr Weinberger submitted that I could rely on inferences. Again, I do not propose to draw inferences when the party asking me to do so could have led direct evidence, but did not do so.

35. [62]

    I acknowledge that there is some distinction between these documents and the previous ones, because the time at which Kellyville Plumbing was retained makes it more likely than not that the retainer was dominantly at least, for the purpose of providing expert evidence to be used in the litigation. However, that does not get over the problem that there is no evidence as to the content of the two documents in question to suggest that inspection of them might divulge privileged material.

Valbeet’s application for access

1. [63]

   The dispute concerns two categories of documents. One is documents prepared by Loss Management International (LMI), a firm of loss assessors retained by Tavcol to assist in the preparation of its insurance claim. The other relates (as matters have evolved) to a chart prepared by Mr Adam Giliberti in January 2013, and his file note prepared on 31 January 2013.

2. [64]

   LMI produced a bundle of documents, including emails passing between it (or its representative Mr Steve Smith), Mr Neil Honan of Tavcol, and partners in or employees of the law firm Coleman and Greig. Emails passing between those people had been redacted. They were generally emails forming part of a chain. The early emails in the chain were between Mr Honan and representatives of Valbeet, seeking information about the repair of the defects that Tavcol alleged.

3. [65]

   There was no evidence as to the basis of the claim for privilege in respect of the redacted LMI documents, apart from what could be gleaned from the documents themselves. The only thing that can be gleaned is that they were communications between Tavcol’s representative Mr Honan, Tavcol’s loss assessor Mr Smith of LMI, and a law firm then apparently retained by Tavcol.

4. [66]

   It may be that the emails between Tavcol and Valbeet had been passed on to Coleman and Greig for advice. They may have been passed on for the information of the relevant partners or employees. The evidence does not disclose the purpose of the communications. The only evidence is that, at the time, LMI was preparing Tavcol’s insurance claim, and apparently Coleman and Greig had been retained in connection with that.

5. [67]

   In the absence of direct evidence, I do not propose to infer that the communications were for a privileged purpose, or that disclosure of the communications would result in the loss of some otherwise available privilege.

6. [68]

   I turn to Mr Giliberti’s documents. As to the chart, he said only that it was prepared in January 2013 “after I received instructions from the solicitors for the plaintiffs”. He sought to give some evidence, in wholly inadmissible and conclusory form, as to his understanding of the purpose of preparation of the chart. However, objection being taken, that evidence was rejected.

7. [69]

   The only remaining evidence as to purpose is thus some post hoc propter hoc inference, based on the temporal sequence of instruction and preparation. In the absence of direct evidence, I do not propose to infer that the chart was prepared for some protected purpose, or that its disclosure would result in the revelation of otherwise privileged communications.

8. [70]

   The file note was said to record Mr Giliberti’s notes of matters discussed at a meeting with Tavcol’s legal advisors and its representatives Mr and Mrs Honan. Mr Giliberti said that in the course of that meeting the lawyers “provided Mr and Mrs Honan with legal advice”. He did not say that his note recorded any of that legal advice. In those circumstances, I think that the common sense approach is to direct that the notes be produced for inspection, but on the basis that if, unrevealed by the evidence, they did record privileged material, they could and should be redacted.

Conclusion

1. [71]

   The result is that each notice of motion has succeeded, to the extent it was pressed. If the parties wish to bring in formal orders I will make them; otherwise, they may take their course on the basis of what I have said.

2. [72]

   In the ordinary way, there should be orders that the applicant in each motion have its costs, and that those costs be set off. I so order.

3. [73]

   If a party wishes to contend for some different costs orders, it may do so, by arrangement with my Associate, at some convenient time in the future. Any such application is to be notified in writing to my Associate and to the other party by 5 August 2016.