Moustapha v Nelson

HER HONOUR: This is an application by notice of motion filed 16 October 2019 by the first plaintiff (Mr Fouad Ahmad) and the second plaintiff (Overlook Tiles Pty Ltd) (collectively, the plaintiffs) seeking orders setting aside a subpoena filed 18 September 2019 issued to Mr Barry Morris and a notice to produce dated 18 September 2019 and filed on 2 October 2019 issued by the defendant to the first and second plaintiffs. The notice of motion seeks those orders setting aside the subpoena and the notice to produce respectively on the basis that each constitutes a fishing expedition, seeks production of documents which are subject to legal professional privilege and seeks documents which are not relevant to any fact in issue between the parties. The motion also seeks the costs of the motion on an indemnity basis or, alternatively, on a party/party basis.

In support of the notice of motion, the plaintiffs have read two affidavits affirmed by the plaintiffs' solicitor Ms Mona Youssef – an affidavit affirmed 2 September 2019, and an affidavit affirmed 16 October 2019.

The defendant resists the application and has, on this application, read an affidavit sworn 20 September 2019 variously described as affirmed or sworn by the defendant/cross-claimant's solicitor, Mr Fred David, on 20 September 2019. The defendant has tendered, not for the truth of its contents but for the fact that the document has deposed to the matters contained therein, an affidavit sworn 11 July 2019 of Ms Mona Youssef (see Exhibit 1 in these proceedings).

At the hearing of the application to set aside the subpoena and the notice to produce, the plaintiffs did not raise any issue in relation to the suggestion that the subpoena and notice to produce constitute respectively a fishing expedition and, as I understand, it that basis for seeking the setting aside of those compulsory processes is not pursued.

The issue before the court on the present application was confined to the question of whether or not there has been an implied waiver of legal professional privilege in the documents sought to be produced under the subpoena and the notice to produce.

I say that is the sole issue because, although the written submissions filed by the defendant on this application did make complaint as to whether or not the plaintiffs had adequately established or identified the documents which are subject to the claim of legal professional privilege, ultimately, the defendant sought to resist the application solely on the basis of implied waiver and, therefore, it is not necessary to explore issues such as whether, for example, working drafts of documents held by the expert or proposed experts would be the subject of legal professional privilege in the current case (see New Cap Reinsurance Corporation Ltd (In Liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258 at [29]-[30] per White J and Hunter Quarries Pty Limited v Morrison; Badior v Morrison [2017] NSWCCA 326 at [301]).

The background to the present application is that these proceedings were commenced by a statement of claim filed on 3 March 2017. The substance of the claim is for restitution for works carried out or services provided or a share of the profit made by the defendant as a result of the resale of property owned by the defendant in Lindfield.

The plaintiffs’ pleading, as I understand it, has included, since it was filed, a claim for restitution based upon a quantum meruit.

It does not appear to be disputed that the pleading has been amended a number of times (including, for example, on 1 November 2017).

On 7 August 2017, Rein J ordered that the plaintiffs file and serve their evidence by 13 November 2017 and that the defendant file and serve its evidence by 16 February 2018. The plaintiffs’ lay evidence was not served within that period of time. Ultimately, as I understand it, extensions were granted for the time for the filing by the plaintiffs’ evidence to, on successive occasions, 23 March 2018 and then to 9 May 2018.

On 13 April 2018, the plaintiffs’ solicitor sought a further extension of the time for service of the plaintiffs’ evidence and attached a request for expert evidence directions in relation to the matter. That request sought directions granting leave for the plaintiffs to engage, as an expert, Mr Barry Morris, who was there described as a building and construction consultant and quantity surveyor, to provide an expert report as to the value of the plaintiffs’ quantum meruit and claim for damages. The form of request for expert evidence directions required certification, amongst other things, that there has been proper consideration as to what expert is required in order that the proceedings can be dealt with justly, cheaply and expeditiously.

On 18 April 2018 the matter came before Registrar Walton for directions. On that occasion, when the time for service of the plaintiffs’/cross-defendants’ evidence was extended to 9 May 2018, Registrar Walton made what is commonly referred to as a guillotine order; namely, that the plaintiffs/cross-defendants not rely on any evidence served after 9 May 2018 without the leave of the court. The transcript on that occasion records Counsel for the plaintiffs informing Registrar Walton that the expert had already been retained in anticipation, and directions were made by Registrar Walton to serve any expert report from Mr Morris by 6 June 2018.

In her affidavit affirmed 2 September 2019 in support of the current application, Ms Youssef has deposed that the plaintiffs’ original expert, Mr Barry Morris, was retained on 11 May 2018 (at [2]). (This is one of the inconsistencies or “oddities” to which the defendant’s Counsel has pointed to and which the defendant’s Counsel has indicated the defendant wishes to test in cross-examination in due course on the application for leave to rely out of time on an expert’s report by a Mr Sims.)

In evidence there is before me a copy of an email sent on 20 June 2018 by the plaintiffs’ solicitor to the defendant’s solicitor indicating that the plaintiff would be seeking relief from the court to explain the delay pertaining to the service of the plaintiffs’ expert report through a supporting affidavit.

On 6 July 2018, the plaintiffs’ solicitor sent an email to the defendant’s solicitor advising, amongst other things, “that the expert report of Mr Morris will be finalised and served on or before 18 July 2018”.

In her affidavit affirmed 2 September 2019 Ms Youssef deposes that Mr Morris, “proffered a draft report” on 16 July 2018 which was received in her office on 20 July 2018 (at [3]). In that affidavit, Ms Youssef said (at [4] to [6]):

On 25 July 2018, the plaintiffs’ solicitor forwarded an email to the defendant’s solicitor which included the statement, “[f]urther, we will be serving the Expert Report early next week”. The defendant notes that this email was sent five days after the time at which Ms Youssef deposed to in her 2 September 2019 affidavit (at [4]) that the plaintiffs reviewed the report in detail and considered that the draft report did not sufficiently comply with the principles in Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 as to the proper explanation of the expert as to his rationale and methodology. It is, thus, submitted, given that the 25 July 2018 email was sent after the review which apparently occurred on 20 July 2018, that this correspondence must reflect an estimate which had then been made of the amount of time it would take to rectify Mr Morris’s report.

In her affidavit sworn 11 July 2019 (Exhibit 1 in this application), Ms Youssef swore (at [6]):

The defendant points to a perceived inconsistency in the explanation given in the 2 September 2019 affidavit (at [5]-[6]) and submits this is difficult to reconcile with the communication on 25 July 2018.

Ms Youssef has annexed to her 2 September 2019 affidavit a copy of a letter that she caused to be sent to Mr Morris on 19 September 2018. That letter includes, relevantly, the following:

(Pausing here, I note that the defendant has pointed out that while this correspondence with the proposed expert has been annexed, other correspondence with the proposed expert has not been annexed.)

Ms Youssef has deposed that, on 25 September 2018, the plaintiff commenced to search for a replacement expert and refers in her 2 September 2019 affidavit to the 11 July 2019 affidavit at [7], where she has deposed that:

Paragraph 6 states that the report of Mr Morris was not finalised due to a “dispute as to his instructions” (as adverted to above).

In her 2 September 2019 affidavit, Ms Youssef deposed that on 5 October 2018, the plaintiff located its current expert, Mr Glen Sims, and states (at [10]):

From [11]-[16], Ms Youssef deposes to: the sending of a letter of instruction, including supporting material, to Mr Sims on 5 October 2018; to correspondence with Mr Sims including in relation to a request on 1 November 2018 for further material by Mr Sims; to the sending of the further request for documents to Mr Sims on 5 November 2018; Mr Sims’ confirmation of 16 November 2018 that he would require up to four weeks to complete the report due to deadlines and to his request for a copy of the structural and architectural plans; and Ms Youssef’s contact with the plaintiffs in relation thereto on 16 November 2018.

On 9 October 2018, the matter came before Parker J. On that occasion his Honour was informed by Counsel appearing for the plaintiffs that the subject of the expert evidence (which was not yet served) was to quantify the quantum meruit claim and that Counsel did not have instructions about the new expert as yet. It was said that, given what had fallen from his Honour, Counsel intended to have the expert evidence on the next occasion so that that could be revealed and also a timetable for the supplementary lay evidence as well, to the extent that there was going to be some. What his Honour had raised there was for a timetable or a time limit to complete the interlocutory matters so the matter could proceed to a hearing in the ordinary course.

On 25 October 2018, the matter came back before Parker J and his Honour on that occasion indicated that he was going to treat the matter “as if the guillotine had already been formed”. His Honour said (at T3.42):

His Honour also said (at T.3.48):

On that occasion, his Honour was informed that an application in relation to that evidence (the expert evidence) would probably be made in six weeks’ time when that evidence was prepared (see T 4.33).

Ms Youssef’s affidavit of 2 September 2019 then deposed to certain communications with Mr Sims and annexed some copies of those communications (see [17], [19] and [20]) but not all. In particular, there is a reference at [18] of her affidavit to confirmation from Mr Sims on 27 November 2018 that he had received full payment for the report. That communication, if in writing, has not been annexed to the affidavit, and at [21] Ms Youssef deposes that on 24 January 2019 Mr Sims sent her an email attaching the expert report. That is not annexed to the affidavit. Ms Youssef deposes:

Pausing here, one of the matters raised by the defendant in submissions is the fact that some of the correspondence, but not all of the correspondence, with Mr Sims as to the time of the completion of his expert report has been deployed on the current application.

It is noted that on 27 February 2019, the plaintiffs submitted an online request for an order that the expert report be served on the defendant by 15 March 2019. The reasons for submitting that request included that, “[o]ur expert report is near finalisation and as our client is overseas we will require extra time to obtain instructions”.

On 4 March 2019, the matter came back before the registrar and Counsel appearing for the plaintiffs sought until 29 March 2019 to put on a further notice of motion in the matter.

As extracted above, at [26] of her 2 September 2019 affidavit, Ms Youssef refers to a [10] of her 11 July 2019 affidavit (see Exhibit 1). In her earlier affidavit, [9]-[10] provide:

When the report of Mr Sims was served on 5 July 2019 it was a report dated 11 February 2019.

On 15 July 2019, the plaintiffs filed a notice of motion seeking leave to rely upon the 11 February 2019 report. That notice of motion has been listed for hearing on 14 November 2019 before Slattery J for that day with an estimate of half a day.

The notice to produce was issued on 18 September 2019 and the subpoena was issued on the same date.

The defendant’s submission is that the documents sought in the notice to produce and the subpoena are required for the purpose of testing the evidence Ms Youssef will seek to be rely upon at the hearing on 14 November 2019, hence the listing in advance of that motion and the present application to set aside a notice to produce and the subpoena.

The subpoena issued to Mr Morris seeks the following documents:

The notice to produce issued to the defendant/cross claimant requires the following items:

The defendant submits that the plaintiffs seek to explain their delay in serving the expert report of Mr Sim broadly on the grounds that: first, as to the period prior to mid-September 2018, Mr Morris was unable, through no fault of the plaintiffs, to serve a compliant expert report properly explaining his reasoning; second, as to the period between October 2018 and March 2019, that Mr Sims, through no fault of the plaintiffs, was late in producing his draft report; and third, as to the period between March and July 2019, that the plaintiffs attempted to locate documents sought by Mr Sims but were unable to provide the documents he required.; and that the plaintiffs’ written submissions dated 1 November 2019 rely upon the two affidavits of Ms Youssef, read by the plaintiffs, as seeking to explain the reasons for the delay “so as to dispel any notion that the Plaintiffs were not taking reasonable steps to progress the preparation of their evidence”. The defendant submits that the two affidavits of Ms Youssef of 2 September 2019 and 11 July 2019 contain sometimes “contradictory assertions, the accuracy and validity of which the defendant is entitled to test”.

The plaintiffs submit that the documents in question, being communications with expert witnesses or proposed expert witnesses or notes prepared by expert witnesses for the sole purpose of preparation of their expert evidence in these proceedings are clearly the subject of legal professional privilege pursuant to s 118 of the Evidence Act 1995 (NSW) (Evidence Act) and the common law doctrine of privilege, and in this regard what is said in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 6 at [17]-[24]:

As noted earlier, the defendant does not now press the complaint as to the inadequacy of the affidavit proffered in respect of the privilege claim. The defendant maintains that privilege was waived when the plaintiffs served the 2 September 2019 affidavit submitting that what has occurred in this case is a species of what has been called “disclosure waived” and rely upon, amongst other things, the articulation of that principle in Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 at 488; [1986] HCA 80 where Mason and Brennan JJ said:

Reference has been made to s 122(2) of the Evidence Act which provides that the privilege does not apply if the plaintiffs have acted in a way which is “inconsistent with the client or party objecting to the adducing of evidence”, and reference is made to the discussion of authorities in relation to disclosure waiver in Ford Motor Company of Australia Limited v Tallevine Pty Ltd (as trustee for the Thornleigh Trading Trust) [2018] NSWSC 136 at [5]-[13].

In DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499; [2003] FCA 384, Allsop J (as the Chief Justice then was) referred to the situation where (at [58]):

See also Traderight (NSW) Pty Ltd (ACN 108 880 968) v Bank of Queensland Limited (ACN 009 656 740) (No 14) and 13 related matters [2013] NSWSC 211 per Ball J at [10] and [12]:

In Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; [2006] FCAFC 86, the Full Court of the Federal Court, after reviewing a number of authorities, said (at [52]):

The defendant maintains that in the present case there is an analogy with the situation in Banksia Mortgages Ltd v Croker [2010] NSWSC 535 where an affidavit sworn by the defendant’s lawyer referred to privileged emails and the content (see as set out at [29] and [30] of the decision of Schmidt J). In that case, Schmidt J considered what had been said by Austin J in ASIC v Rich [2004] NSWSC 923 in relation to the question of waiver (see [32] and [33]) and then said (at [34]-[35]):

At [36], her Honour noted an argument put by the defendants in that case that it was relevant that the affidavit was not to be further relied on in the proceedings and said that that was not determinative of the question which laid between the parties. Her Honour noted (at [37]-[38]):

Her Honour concluded that the disclosure there in question had been made by affidavit on which the defendants relied to their advantage in order to resist summary judgment, but that was a voluntary disclosure, and that there could be no question that it was known to be a voluntary disclosure of the communication. In the circumstances, her Honour was persuaded that fairness could not permit the defendants to have partially revealed the relevant communication to their advantage and made a claim for privilege in relation to the balance of the communication.

The plaintiffs rely upon what was said in Hastie Group Ltd (in liq) v Moore [2016] NSWCA 305 as to legal principles relating to legal professional privilege from [48] to [60], and the statements made at [53]-[58] by Beazley P, as her Excellency then was, and Macfarlan JA:

The submission for the plaintiffs is, in the present case, that Ms Youssef’s 2 September 2019 affidavit was filed to explain a delay in case preparation. It is submitted that the reference to the communications with the former expert, Mr Morris, and the current expert, Mr Sims, was for the purpose of indicating the fact that those communications were taking place and not their disclosure. It is submitted that disclosure of the fact of those communications was not inconsistent with the maintenance of privilege.

It is said that the plaintiffs obviously had to explain the delay in the preparation or production of the expert evidence and the relevant explanations made in the 2 September 2019 affidavit. It is said that such explanation was for a particular purpose and that the affidavit was for the sole purpose of showing diligence by the plaintiffs. It was said that the reason for the affidavit informs an understanding of whether or not the references in the affidavit to the communications to the expert are inconsistent with maintenance of the privilege.

In particular, it is submitted that the affidavit is not “angled” to the substance of communications with the expert but is clearly to show that the communications were in fact taking place and that is the import or intent of the affidavit, including in the context of the assertion that the affidavit was put on in order to seek leave to rely upon Mr Sims’ report. It is said that the fact of the communications is what is being put into evidence and not their content.

It is said that, combined with the purpose of the affidavit being proffered for the purpose of this application, reference to that material is not inconsistent with the maintenance of privilege, that the plaintiffs are merely seeking to comply with the “procedural position” of the court to require leave, which position the parties have adopted, although there has not been a guillotine order made as such.

The position of the defendant is that there are a number of "oddities" in relation to the communications or the contemporaneous correspondence which raise genuine questions which the defendant wishes to explore at the hearing of the motion on 14 November 2019 before Slattery J. In particular, the defendant wishes to explore the proposition that Mr Morris could not produce an expert report in compliance with the Makita principles through no fault of the plaintiffs and that, Mr Sims was “slow in producing his report” and needed further documents to produce it.

It is said that the explanations put forward by Ms Youssef are not entirely consistent with the contemporaneous communications and with the earlier explanations proffered.

The oddities of the chronology have been identified. The issues that the defendant seeks to explore, and says that this material will be relevant, relate to the terms of the proposed retainer, the letter of instruction or versions of it, whether Mr Morris was able to produce a compliant report, and whether and when the plaintiffs' representatives formed the view that all possible efforts had been exhausted to obtain a compliant report from him.

As to Mr Sims' report, what is sought to be tested is the explanation for the delay in the provision of that report and the need for further documents.

It is submitted that if there is a distinction between disclosure of the fact of communication and disclosure of the substance of the communication, as submitted by the plaintiffs, that the position here is of no or very little difference from that which happened in Banksia Mortgages Ltd v Croker [2010] NSWSC 535 where there had been disclosure of some of the communications and not all.

In response, the plaintiffs submit that there needs to be some s 56 of the Civil Procedure Act 2005 (NSW) element involved here. It is submitted that the question that arises on the present application is "what is all this about” and “to what end” the defendant is seeking the documents.

It is submitted that it is not consistent with the just, quick and cheap resolution of the real issues in the dispute to have a lengthy cross-examination of Ms Youssef in relation to her explanations of delay or any "oddities" in the evidence.

It is submitted, further, that the defendant is more than capable of opposing the application without any of the documents now being sought. Emphasis is placed on the rationale for the implied waiver rule being as to fairness, and it is submitted that that should narrow the issue.

It is also submitted that seeking documents that are prima facie privileged may cause prejudice to the plaintiff.

It was submitted that if I were minded not to allow the application to set aside the subpoena and notice to produce, I should stay the order in relation to production until after there had been a determination on 14 November 2019 as to whether or not there could be leave for cross-examination of Ms Youssef on her affidavits.

That, however, would subvert the purpose of the listing of the application today in advance of that notice of motion, since the defendant wishes to have access to the documents in order to prepare for such a cross-examination, and it would seem to be a rather circular argument to stay it until determination of whether there can be cross-examination, which would then of itself lead to further delay if the application for cross-examination is permitted.

As against that, it is submitted by Counsel for the plaintiffs that it would subvert the question whether or not cross-examination should be permitted in order to make the documents available at this stage.

It is submitted that if the documents are to be made available at this stage, then only a redacted version of the documents should be produced, which would evidence the fact of communication on particular dates and not the content of the communication. And it is said that the defendant would be able to then access the documents as a matter of fairness and utility for the purposes that have been sought, but not the documents that go beyond that.

It is submitted that the "minutiae of the documents" are not at the heart of the application on 14 November 2019 and there is no nexus or utility in the defendant obtaining access to all of the documents.

I am of the opinion that the reference to the communications and the annexing of some but not all of the communications has put in issue the following matters which are relevant or may be relevant to questions of delay, and therefore relevant to questions of whether or not leave should be granted for the plaintiffs now to rely upon Mr Sims' expert report.

Firstly, as to the date of retainer of Mr Morris and, equally, of Mr Sims, that that could be dealt with by provision of a letter of instruction, or versions of it, but also as to whether or not Mr Morris was able to produce a compliant report, and whether and when the plaintiffs formed the view that all possible efforts had been exhausted to obtain it.

It seems to me that as it is inconsistent with the maintenance of a claim for privilege for the plaintiffs to seek to rely on those communications in order to explain the delay and therefore explain the basis on which leave is sought to rely upon the expert report, in particular issues such as whether the delay was referable to a dispute as to costs or as to the form of the report or as to the contents of the report and the instructions to the expert, as well as the drafts provided to the solicitors for the plaintiffs, will inform the issues sought to be relied upon by the plaintiffs in relation to the plaintiffs' application for leave.

I do, however, consider that the subpoena in its terms goes beyond what can be said to be the subject of an implied waiver.

I am not prepared to allow the provision of redacted documents in respect of which I find that there has been an implied waiver, and I am not prepared to stay the orders pending the determination of an application for leave to cross-examine Ms Youssef on 14 November 2019, because I do not consider, for the reasons that I have adverted to already, that that would be consistent with the just, quick and cheap resolution of the real issues in dispute.

As to whether or not there is utility in reliance on these documents, at the end of the day I am not determining today the application that it will be before the court on 14 November 2019.

The plaintiffs have chosen to rely upon certain material in support of an application for leave to adduce Mr Sims' expert report out of time. They have voluntarily chosen to do so, and in circumstances where there has been an implied waiver of certain documents in respect of which legal professional privilege would otherwise subsist as a result. That is their choice.

I therefore am not prepared to make the orders sought in the notice of motion filed 16 October 2019, but I am prepared to limit the documents to which the defendant may have access under the subpoena issued to Mr Morris.

In my opinion, the subpoenaed documents to which the defendant should be permitted access will be as follows: all letters of instruction, or variations thereof, issued to Mr Barry Morris concerning a report to be prepared by him for use in these proceedings, or communications between Mr Morris and the plaintiffs' solicitors attaching any draft report prepared by Mr Morris and correspondence in relation to that draft report, including any correspondence in relation to a dispute as to costs or as to the form of the proposed expert's report.

As far as the notice to produce is concerned, I consider that that is limited to the matters in respect of which there has been an implied waiver of privilege, and I would not read down that notice to produce.

So far as the subpoena is concerned, I outlined in Rinehart v Rinehart [2018] NSWSC 1102, the relevant legal principles in relation to whether or not a subpoena should be set aside or can be read down (at [43]-[54]):

Thus, for the reasons above, I make the following orders: