The path to discovery never does run smoothly. But in a recent case, the High Court has criticized parties to proceedings for going off on a tangent, and incurring unnecessary costs to resolve an issue which the Supreme Court had jurisdiction to resolve. In a Judgment handed down on 6 November 2013 in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd, the High Court ordered a firm of solicitors who had inadvertently received legally privileged documents in the course of the discovery process, to return them. The Court also discussed the duties of a Solicitor who receives privileged documents in the course of litigation.

The Facts

Armstrong Strategic Management and Marketing Pty Ltd, (the Armstrong parties) commenced proceedings in the District Court against Expense Reduction Analysts Group Pty Ltd. Marque Lawyers acted for the Armstrong parties and Norton Rose Fullbright Australia (Norton Rose) acted for Expense Reduction. During the Court-ordered discovery process (which involved a due diligence of around 60,000 documents in electronic form), Norton Rose served a List of Documents and discs on Marque Lawyers. The List of Documents listed some documents as privileged and some as non-privileged. Norton Rose subsequently informed Marque Lawyers that 13 documents (which consisted of correspondence between Norton Rose and their client Expense Reduction) were subject to client legal privilege and had been inadvertently disclosed. Nine of those documents had been listed as both privileged and non-privileged. Norton Rose did not intend them to be listed as non-privileged. Marque Lawyers declined to return the documents to Norton Rose on the basis that any privilege attaching to them that been waived and there was no obligation on Marque Lawyers to return them.

The Lower Court Proceedings

Norton Rose filed a Motion in the Equity Division of the Supreme Court, seeking an injunction and other relief, to prevent Marque Lawyers from relying on the documents and to seek the return of the privileged documents. There was no issue that the documents were in fact privileged . Following a three day hearing, her Honour held that 9 of the 13 documents (those were listed as both privileged and non-privileged) had been inadvertently disclosed because Norton Rose had intended to claim privilege on them by listing them as ‘privileged’ in the List of Documents. The Court ordered Marque Lawyers to return the disks to Norton Rose so that those privileged documents could be taken out. Marque Lawyers returned those 9 documents.

Marque Lawyers then appealed to the Court of Appeal (COA), which in its lengthy judgment, allowed the appeal on the basis that the mistakes made by Norton Rose in the course of the discovery process would not have been ‘obvious to a reasonable solicitor’. The Court (referring to the 1987 English COA case of Guinness Peat Properties Ltd v Fitzroy Robinson Partnership) referred to an ‘obligation of conscience’ on the receiving party and the equitable jurisdiction of the Court to grant an injunction where there has been an ‘obvious mistake’. The Court considered the concept of waiver both at common law and in the Evidence Act, which states that the question to ask in determining whether privilege has been waived is whether ‘the party concerned has acted in a way which is inconsistent with the client or party objecting to the production of a document’. The COA held that there was no obligation of confidence on the Armstrong parties and that privilege had been waived for a number of reasons including the fact that the list of documents would have been carefully checked and the mistake was not obvious. The COA also seemed to take the view that it was too late to grant an injunction as inspection had already occurred.

The High Court Decision

Norton Rose appealed to the High Court (HC). The HC held that all of the 13 documents had been disclosed inadvertently and unintentionally and there had been no waiver of privilege.

The HC said that the issue of waiver should never have been raised as Norton Rose requested the return of the documents as soon as it became aware of the mistake and any argument about waiver is a legal and technical argument which should have been argued in the main proceedings. Noting the English courts’ approach to use their power in equity to allow injunctions where privileged documents have been disclosed and inspected, the HC considered the new approach by English courts to case management - that where a party inadvertently allows a privileged documents to be inspected, the receiving party can only rely on it with the court’s permission.

The HC went on to say that the courts in NSW should actively engage in case management in order to achieve the ‘overriding purpose’ of the Civil Procedure Act (CPA) to “facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings” and the various provisions in the CPA in determining the dictates of justice. This involves the Court permitting the mistake to be corrected by ordering pleadings to be amended and  the return of privileged documents if the receiving party refuses to hand them back. The HC said that the Supreme Court should have ordered Norton Rose to amend its List of Documents, to exclude the privileged documents and there was no evidence that Marque Lawyers would have been prejudiced by returning the privileged documents. This was a minor issue in relation to discovery which detracted the parties from the real issues in dispute between them and led to outlay of considerable expense and squandered the Court’s resources. The HC also highlighted the positive duty on parties to litigation and their solicitors, to facilitate the purposes of the CPA. Filing a motion for the court to rule on waiver and to provide injunction relief was said to be inconsistent with that duty.

The HC allowed the appeal and ordered Marque Lawyers to return the 4 remaining documents they held to Norton Rose and to pay Norton Rose’s costs of the ‘tangential litigation’.

Comment

There is clearly a professional and ethical obligation on a legal practitioner, who receives privileged documents to return them. In this case, the High Court made reference to Rule 31 of the Australian Solicitors’ Conduct Rules, which were adopted by the Law Council of Australia. Rule 31 deals with the duty of a solicitor to return material which is known or reasonably suspected to be confidential, where a solicitor is aware that its disclosure was inadvertent. The rule has been adopted in Queensland and South Australia and NSW intends to adopt it shortly.

Please contact John Van De Poll and Uma Kotecha if you have any questions.

John Van de Poll, Partner
T: +61 9390 8406
E: jvp@holmanwebb.com.au

Uma Kotecha, Lawyer (qualified England and Wales)
T: +61 2 9390 8416
E: uma.kotecha@holmanwebb.com.au