Jacups v The Fidelity Fund Management Committee of the Law Society of NSW

1. [1]

   On 25 June 2021, the plaintiff, Graham Jacups, filed a Summons commencing proceedings against The Fidelity Fund Management Committee of the Law Society of NSW (“the Management Committee”) and the Law Society of NSW (“the Law Society”).

2. [2]

   The plaintiff seeks orders that would, in effect, overturn a decision of the Management Committee to refuse his claim against the Legal Practitioners Fidelity Fund, pursuant to Part 4.5, Divisions 4 and 5 of the Legal Profession Uniform Law (NSW) (“LPU Law”), relating to the conduct of the plaintiff’s former solicitor, Douglas Knaggs.

The Plaintiff’s Claim on the Fidelity Fund

1. [3]

   The plaintiff first made a claim on the Fidelity Fund on 7 October 2020 alleging a defalcation of trust monies by Mr Knaggs. Mr Knaggs is now deceased. The defalcation is said to have occurred in 2003 and 2004.

2. [4]

   At the time of the alleged defalcation, the applicable legislation was the Legal Profession Act 1987. This Act was repealed by the Legal Profession Act 2004, which was in turn repealed by the Legal Profession Uniform Law Application Act 2014 (“the Application Act”). The Application Act brought into effect in NSW the LPU Law.

3. [5]

   Both the repealed Acts, and the Application Act, insofar as fidelity matters are concerned, do not differ in any substantial way. The Law Society was and is obliged to establish and maintain a Legal Practitioners Fidelity Fund.

4. [6]

   Section 74 of the Legal Profession Act 1987 and s 426 of the Legal Profession Act 2004 provided that the Law Society Council could delegate all or any of its functions in relation to the Fidelity Fund to a Management Committee. Section 119 of the Application Act enabled such a delegation to be made in identical terms.

5. [7]

   Although for the purposes of this judgment there will be no different result, the better view is that by reason of the transitional provisions set out in Schedule 9 of the Application Act, this claim is to be dealt with as though it was made under the LPU Law.

6. [8]

   The first defendant in these proceedings is the delegate of the second defendant for the purpose of decision-making about claims made on the Fidelity Fund. Once the Management Committee makes a decision as the delegate of the Law Society, the decision is that of the Society.

7. [9]

   It is that decision against which a claimant, if dissatisfied, has a statutory right of appeal: s 247 of the LPU Law. The designated tribunal for such an appeal is this Court: s 11(3) of the Application Act.

8. [10]

   The plaintiff here has exercised that right of appeal and brought these proceedings.

9. [11]

   Under ss 247(4) and (5) of the LPU Law, this Court may, to the extent it considers it relevant, review the merits of the claim on any such appeal. When determining any appeal, the Court may affirm, vary, or set aside a decision. Where it sets aside a decision, the Court may substitute its decision for that made by the Law Society (through its delegate) or else may remit the matter to the Law Society for further consideration and decision.

10. [12]

    In exercising its power under the LPU Law, the Court is not engaged in the exercise of its supervisory function or judicial review. Rather, it is undertaking a hearing de novo including on the merits so far as relevant, and then affirming, varying or setting aside the initial decision: see Wang v The Law Society of NSW [2020] NSWSC 1741 (“Wang 2020”).

11. [13]

    It is in regard to this context that it is appropriate to examine the issues outlined below.

Notice to Produce

1. [14]

   On 11 October 2021, the plaintiff served a Notice to Produce, issued in accordance with r 34.1 of the Uniform Civil Procedure Rules 2005 (“UCPR”), on both defendants. The Notice to Produce required production, by 1 December 2021, of:

2. [15]

   In negotiations with the defendants, the plaintiff narrowed the category of documents he was seeking to only require documents “in the possession of the Fidelity Fund Committee… when making its findings”.

3. [16]

   The Notice to Produce required production of two other categories of documents which are not relevant for present purposes. Only paragraph 1 is in issue.

4. [17]

   On 25 November 2021, the solicitor for the defendants, David Courtenay, wrote to the Common Law Registrar of this Court and produced two bundles of documents in answer to the Notice to Produce. I will refer to the two bundles as “Bundle A” and “Bundle B”, and to Mr Courtenay’s letter as “the Production Letter”.

5. [18]

   In the Production Letter, Mr Courtenay described Bundle A as “documents in respect of which general access should be granted to all parties”. On 1 December 2021, general access to Bundle A was granted.

6. [19]

   In relation to Bundle B, Mr Courtenay made claims on behalf of the defendants for client legal privilege. Those claims have been challenged and are the subject of this judgment.

Letter to Legal Services Commissioner

1. [20]

   Separately, Mr Courtenay attached to the Production Letter a letter to the Office of the Legal Services Commissioner dated 24 June 2009 (“the OLSC Letter”).

2. [21]

   Mr Courtenay claimed that, although the OLSC Letter was responsive to the Notice to Produce, the OLSC Letter was produced in a redacted form to protect the identities of persons referred to in the letter that have no connection with these proceedings.

3. [22]

   On the hearing of the Notice of Motion, the plaintiff accepted that, on the basis that the redacted parts of the letters are clearly irrelevant to any issue, the OLSC Letter was properly redacted. In those circumstances, I will not make any orders allowing the inspection or copying of the unredacted OLSC Letter.

Objections to Inspection and Copying of Bundle B

1. [23]

   Bundle B comprises of:

   1. (1)

      six advices collectively labelled “Annexure G”; and

   2. (2)

      a memorandum of advice accompanied by two further advices which together I will refer to as “Annexure I”.

2. [24]

   The defendants claimed client legal privilege, pursuant to s 118 of the Evidence Act 1995 (NSW), in respect of all of Bundle B. For reasons which will be explained, the Management Committee’s claim in respect of Annexure I was more recently limited to those parts which have been “redacted” in a version of Annexure I sent to my chambers on 18 January 2022 (“the January 2022 version”).

3. [25]

   Alternatively, the defendants submit that paragraph 1 of the Notice to Produce requires the production of documents that are not relevant to these proceedings and, therefore, the paragraph should be set aside.

The Notice of Motion

1. [26]

   On 3 December 2021, the plaintiff filed a notice of motion seeking orders that would, in effect, grant access by the plaintiff to unredacted copies of the documents produced by the defendants which were subject initially to claims for client legal privilege by the defendants.

2. [27]

   The plaintiff’s motion came before me in the Duty list on 13 December 2021.

Relevance of the Documents

1. [28]

   For reasons which will become apparent, it is convenient to deal first with the defendants’ contention that paragraph 1 of the Notice to Produce requires the production of irrelevant documents and should be set aside.

2. [29]

   During the course of the hearing on 13 December 2021, Mr Courtenay noted that the parts of Annexure I which were struck through, although in the documents provided, were not intended to be relied upon by the Management Committee in its consideration of the plaintiff’s claim. In those circumstances, I suggested to the parties that those parts of the documents could be redacted as they were not responsive to the Notice to Produce. That suggestion was adopted by Mr Courtenay and was not then disputed by Mr King. Accordingly, some parts of Annexure I which have been redacted, as identified at [75] and [76] below, need not be produced to the plaintiff.

3. [30]

   That was not the only concern raised during the hearing regarding the relevance of the documents the subject of paragraph 1 in the Notice to Produce to the proceedings in this Court. Ultimately, the defendants submitted that an appeal under s 247 of the LPU Law is to be conducted de novo and, in those circumstances, how and why the Management Committee initially disposed of the plaintiff’s claim is irrelevant. Therefore, the defendants say, documents that were before the Management Committee are not relevant to a fact in issue in this Court. The defendants submitted on that basis that paragraph 1 of the Notice to Produce, which requires the production of irrelevant documents, should be set aside.

4. [31]

   In accordance with orders I made on 13 December 2021, the defendants filed written submissions dated 18 January and 8 February 2022 in relation to the question of whether paragraph 1 of the Notice to Produce should be set aside. The plaintiff filed written submissions dated 4 February 2022.

5. [32]

   In their written submissions, the defendants broadly repeated the oral submission made at the hearing. In addition, they submitted that the advices in Annexure I contain “reports” of underlying facts which constitute inadmissible opinions about those facts (s 76(1) of the Evidence Act) and, therefore, production should not be required.

6. [33]

   The plaintiff submits the documents in Annexure I contain “disinformation and incomplete information” which are “highly relevant” in explaining why the Management Committee erred in rejecting the plaintiff’s claim. The plaintiff also says the documents have “an adjectival and substantive relevance both directly and indirectly… and may assist this Court in determining whether an injustice has occurred sufficient to engage the Court’s review attention”.

7. [34]

   The plaintiff further submits that this Court, in conducting a de novo hearing, should “at least have the same material that was before the [Management Committee]”. Furthermore, it may be open to this Court to remit the matter to the Management Committee for further investigation. In those circumstances, the plaintiff says, relying upon Wang 2020, that the material which was before the Management Committee will be relevant in identifying any error of principle in the decision which was made.

8. [35]

   The plaintiff says the defendants have wrongly identified the opinion rule as a reason for excusing production. He says the documents may be relevant, and therefore may properly be required to be produced, even though they are not necessarily admissible.

9. [36]

   Section 247 of the LPU Law provides:

10. [37]

    Three classes of appeal commonly found are: appeal in the strict sense; appeal de novo; and appeal by way of rehearing, as described in Lacey v Attorney‑General (Qld) (2011) 242 CLR 573; [2011] HCA 10 at [57]. However, as the majority in that case recognised, appeals are creatures of statute and no taxonomy is likely to be exhaustive. In other words, it is necessary to have regard to the specific words of the enactment to understand the task of the appellate court in conducting any appeal.

11. [38]

    Previous decisions of the Court of Appeal and this Court have treated an appeal under the preceding legislative provisions to s 247 of the LPU Law, s 90D of the Legal Profession Act 1987 (NSW) and s 452 of the Legal Profession Act 2004 (NSW), as a de novo review of the merits of the claim made upon the Fidelity Fund: Law Society of New South Wales v Glenorcy Pty Ltd (2006) 67 NSWLR 169; [2006] NSWCA 250, [14]; and Wang v Council of the Law Society of New South Wales (2009) 72 NSWLR 226; [2009] NSWSC 67, [7].

12. [39]

    A recent decision of this Court has similarly treated s 247 as requiring this Court to conduct a de novo merits review. Beech-Jones J (as his Honour then was) observed in Wang 2020 at [2] ff:

13. [40]

    It may also be observed that s 247(5)(b) only permits this Court to vary the Management Committee’s decision, set aside and remake the decision, or set aside and remit the matter for reconsideration, “if [the Court is] satisfied that the reasons for varying or setting aside the [Management Committee]’s decision are sufficiently cogent to warrant doing so”. That does not require any finding to be made that the Management Committee erred in rejecting the plaintiff’s claim.

14. [41]

    Evidence is relevant if it could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding: Evidence Act, s 55.

15. [42]

    Section 233 of the LPU Law relevantly provides:

16. [43]

    It will therefore be necessary on this appeal for the plaintiff to prove that:

    1. (1)

       he suffered pecuniary loss;

    2. (2)

       there was a default by a law practice; and

    3. (3)

       the plaintiff’s loss was caused by that law practice’s default.

17. [44]

    The plaintiff’s Summons contains the following grounds:

18. [45]

    It is clear from the Summons that the plaintiff, in accordance with his right to a de novo review of the Management Committee’s decision, is primarily concerned with the Management Committee’s findings of fact and mixed fact and law. The plaintiff does not make any claim for judicial review or claim that the Management Committee erred in some legal or procedural way. The plaintiff’s case can be distinguished from Wang 2020, in which the plaintiff had filed a summons which “reflects a view that was taken that the form of review provided by s 247 is effectively judicial review [and therefore] focused upon the matters that the Law Society allegedly did or did not consider in making its decision to reject the plaintiff’s claim”: at [2].

19. [46]

    What documents were before the Management Committee when it made its decision in respect of the plaintiff’s claim seems to be to be entirely irrelevant to the determination of a claim under s 233, given the contents of the plaintiff’s Summons and in circumstances where the matter is being heard de novo.

20. [47]

    The principles that apply to an application to set aside a subpoena apply equally to an application to set aside a notice to produce: Xinfeng Australia International Investment Pty Ltd v GR Capital Group Pty Ltd [2020] NSWSC 620, [34]. The general principles are well known and do not need to be repeated here at length.

21. [48]

    Bell P recently observed in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 at [65] ff:

22. [49]

    It is worth noting also that a notice to produce will not be set aside even if the documents produced in response are not necessarily admissible: Maddison v Goldrick [1976] 1 NSWLR 651, 663.

23. [50]

    In this case, I have had the benefit of inspecting the documents which are said by the defendants to have “an adjectival and substantive relevance both directly and indirectly”. I consider that, because the hearing of the plaintiff’s claim is a de novo one, the documents considered by, or which were before, the Management Committee in the course of considering the plaintiff’s claim are not relevant to, and will not materially assist on, any identified issue.

Client Legal Privilege

1. [51]

   In case I am wrong about the relevance of the documents required to be produced by paragraph 1 of the Notice to Produce, I make the following observations in relation to the defendants’ claims for client legal privilege.

2. [52]

   The plaintiff submitted that the advices contained in Annexure G are copies of advices originally provided to the Law Society. The plaintiff, in reliance on Barnes v Commissioner of Taxation [2007] FCAFC 88; 242 ALR 601, says that the dominant purpose for creating copies of the advices and providing them to the Management Committee was for a purpose other than providing legal advice, namely the purpose of the administration of the Fidelity Fund and, more particularly, the disposition by the Management Committee of the plaintiff’s claim.

3. [53]

   The plaintiff further submits that any privilege attaching to the advices in Bundle B has been waived because copies of those advices were provided by the Law Society to the Management Committee which, in the circumstances, is “another person” within the meaning of that term in s 122(3)(a) of the Evidence Act.

4. [54]

   In relation to Annexure I, the plaintiff submits that Mr Courtenay’s evidence is not sufficient to prove that the advices were prepared for the dominant purpose of providing legal advice to the Management Committee as opposed to more general advice about the plaintiff’s claim.

5. [55]

   The plaintiff also submits that, to the extent that two of the advices in Annexure I, which were addressed to “the Presiding Administrator”, were previously privileged, they no longer are because any privilege was waived at the time the advices were disclosed by the Presiding Administrator to the Management Committee.

6. [56]

   At the hearing of the motion, having inspected the documents, I informed the parties of my view that the advices contained in Annexure G are the subject of proper claims for client legal privilege and that that privilege has not been waived. I therefore did not seek submissions from the defendants in relation to those documents.

7. [57]

   In relation to Annexure I, the defendants submit that the advices contain factual information concerning the plaintiff’s claim but, also, advice regarding the way that relevant legislation should be applied by the Management Committee in disposing of the plaintiff’s claim.

8. [58]

   During the course of the hearing, however, Mr Courtenay accepted the proposition that the dominant purpose of those advices was to provide the Management Committee with information upon which it could make its decision. As a result of that and other exchanges which occurred during the course of the hearing, the defendants limited the claims for client legal privilege to only those parts of the documents that were redacted in the January 2022 version which was provided to my Chambers and the plaintiff pursuant to Court directions.

9. [59]

   Because the Notice to Produce constitutes a disclosure requirement in accordance with s 131A of the Evidence Act, the Court is obliged to determine the defendants’ objection by applying the provisions of Part 3.10 of the Evidence Act except for ss 123 and 128.

10. [60]

    Section 118 of the Evidence Act provides:

11. [61]

    The plaintiff’s reliance on Barnes v Commissioner of Taxation is misplaced. That case involved the application of common law principles rather than the presently relevant Evidence Act provisions and on that basis is distinguishable.

12. [62]

    In those circumstances, regard should be had instead to the following statement by Full Court of the Federal Court in Carnell v Mann (1998) 89 FCR 247 at 254:

13. [63]

    The same principle is applicable to the production of documents in answer to a Notice to Produce. Copies and originals of documents are equally protected from production unless the privilege is lost.

14. [64]

    Brereton J (as his Honour then was) said in Re Optimisation Australia Pty Ltd [2016] NSWSC 1581 at [37]-[38]:

15. [65]

    I have concluded that the advices contained in Annexure G are properly subject to claims for client legal privilege. I have come to this conclusion after exercising my discretion to inspect the documents in accordance with the ordinary procedure described in National Employers’ Mutual General Insurance Association Ltd v Waind & Hill [1978] 1 NSWLR 372. Upon inspection, it became clear that the advices in Annexure G are formal written legal opinions by practising barristers providing legal advice with regard to the proper interpretation and application of laws relevant to the determination of claims made upon the Fidelity Fund.

16. [66]

    Section 122 of the Evidence Act deals with waiver and relevantly provides:

17. [67]

    I do not consider that the Law Society, being the client for which the legal advice contained in Annexure G was originally obtained, has acted inconsistently with the defendants’ present objection to the production of the advices. The advices were provided by the Law Society to the Management Committee on a confidential basis in the course of its acting as the delegate to determine the plaintiff’s claim. As I have said, they are obviously formal written legal opinions and, as such, it is unsurprising that there is no evidence that the Law Society or the Management Committee disclosed them more broadly.

18. [68]

    Specifically, I do not consider that the Law Society and the Management Committee are “other persons” to which s 122(3) might apply. The two entities are clearly intertwined. The Fidelity Fund is administered by the Law Society, which collects contributions from practitioners that capitalise the Fidelity Fund. Furthermore, although the Fidelity Fund is referred to independently of the Law Society in the LPU Law and the Application Act, the Law Society Council is specified in that Act as the “fidelity authority” and the Law Society is required to maintain and manage the Fidelity Fund: ss 15-16, Pt 9 Div 1. The Law Society and the Management Committee have a common interest in the proper administration of the Fidelity Fund. The first defendant is the delegate of the Council of the Law Society for that purpose.

19. [69]

    Graham J said in Seven Network Limited v News Limited [2005] FCA 864 at [56]:

20. [70]

    The same principles may be applied to the Law Society and the Management Committee. They are so intimately connected to each other that the disclosure of legal advice between them does not amount to a waiver of client legal privilege.

21. [71]

    In his affidavit, Mr Courtenay’s description of the advices marked Annexure I is, relevantly, that they were written by a solicitor employed by the Law Society who is also a Manager of the Fidelity Fund, or another solicitor under their supervision, and “[concerned] the plaintiff’s claim”. Mr Courtenay also provided the date each advice was given, being between one and three months before the Management Committee’s decision in respect of the plaintiff’s claim.

22. [72]

    That description of itself, and without more, does not ground a claim for client legal privilege. There was no identification or description of the parts that have more recently been redacted in the January 2022 version. Nor, importantly, is there any evidence regarding the role of the in-house solicitors that gave the advice.

23. [73]

    I have, in those circumstances, in the exercise of my discretion compared the redacted version against the unredacted version so as to determine the scope of the proposed redactions, and whether they constitute legal advice.

24. [74]

    There are four redactions in the first advice in Annexure I. The first redaction covers a report of a past decision by the Management Committee to proceed with the plaintiff’s claim, notwithstanding the passing of time since the impugned actions of Mr Knaggs. That is not legal advice and accordingly is not privileged from production.

25. [75]

    The remainder of the first redaction, the second redaction and the third redaction cover sections of the advice struck through. Broadly, they contain: a statement of the issues to be decided in connection with the plaintiff’s claim; a bare reference to judgments of the Supreme Courts of NSW and Victoria; and a chronology of events relevant to the plaintiff’s claim. Again, I do not consider that those parts contain any legal advice.

26. [76]

    The fourth redaction covers another section of the advice which is struck through. As opposed to the other redacted parts of the advice, this section mostly contains legal advice. The legal advice is comprised of extracts from the legal advice contained in Annexure G and, also, some further analysis by the solicitor that authored this particular advice. The exception is, however, the proposed resolutions from the bottom third of page 16 to the end.

27. [77]

    Except for the first one and a half pages, the whole of the second advice is redacted. The redacted part contains four draft resolutions for consideration by the Management Committee. The draft resolutions do not themselves constitute legal advice subject to client legal privilege. However, some introductory comments explaining the legal basis upon which each draft resolution may be adopted are properly subject to a claim for client legal privilege.

28. [78]

    One section of the third advice, regarding an issue as to whether Mr Knaggs acted dishonestly, has been redacted. Except for the first and last paragraphs of that section, the redacted part is properly subject to a claim for client legal privilege because it contains extracts from the legal advice contained in Annexure G and, also, some further legal analysis by the solicitor that authored this particular advice.

29. [79]

    As noted above, the defendants produced and provided to my Chambers a proposed “redacted” version of Annexure I. The defendants complied with this order on 18 January 2022, at which time they also provided another “unredacted” version of Annexure I. This was the consequence of orders made by the Court to enable me to inspect the documents if I exercised my discretion to do so.

30. [80]

    In his submissions dated 4 February 2022, the plaintiff says that Mr Courtenay provided the unredacted version of Annexure I to the plaintiff. The plaintiff submits that the defendants’ conduct, through their solicitor Mr Courtenay, amounts to a waiver of any claim for privilege in respect of the documents in Annexure I: Evidence Act, s 122(2)-(3).

31. [81]

    In their reply submissions dated 8 February 2022, the defendants dispute that an unredacted version of Annexure I was ever provided to the plaintiff, including in January 2022. Even if it was produced, they say the documents were produced “accidentally” or, alternatively, that privilege was “expressly reserved” in the context of a continuing dispute with respect to the defendants’ claim for privilege.

32. [82]

    It is unclear to me whether the plaintiff has been provided with an unredacted version of any of the documents in respect of which the defendants make a claim for privilege. In the absence of any evidence, I cannot be satisfied that by this alleged disclosure the defendants have waived privilege.

33. [83]

    But even if I found that disclosure had occurred because Mr Courtenay had sent the unredacted copies of the advice in Annexure I to the lawyers for the plaintiff, I could only conclude that such disclosure was unintended and accidental. That is the only inference which I can draw from the following:

34. [84]

    Accordingly, I am satisfied that if the documents were disclosed over the January 2022 period by Mr Courtenay to the lawyer for the plaintiff, any such disclosure was unintentional or mistaken and did not constitute a waiver of the privilege of the defendants.

Conclusion

1. [85]

   In light of the foregoing reasoning, I conclude that paragraph 1 of the Notice to Produce should be set aside. If I be wrong, then I conclude that the advices in Annexure G are privileged from production on the basis of client legal privilege, and that parts (but not all those claimed by the defendant) of the documents within Annexure I are properly the subject of client legal privilege which has not been waived.

2. [86]

   A copy of Annexure I which indicates those parts which I consider to be properly subject to client legal privilege has been placed in an envelope on the file marked, “Approved redacted version of Annexure I. Not to be opened without an order of a Judge of this Court.” A further copy of Annexure I has been provided to the defendants.

Orders

1. [87]

   I make the following orders:

   1. (1)

      Notice of Motion dated 3 December 2021 dismissed.

   2. (2)

      Order that paragraph 1 of the Notice to Produce filed 11 October 2021 be set aside.

   3. (3)

      Costs are the defendants’ costs in the cause.