Friday, September 16, 2011

Waiver of privilege in a pleading - Towercom Pty Ltd v Fahour [2011] VSC 455

The matter of Towercom Pty Ltd v Fahour [2011] VSC 455 was an appeal from an Associate Judge to Macaulay J of the Supreme Court of Victoria. In the proceeding the defendant alleged that the plaintiff caused it loss by selling a property at an undervalue. The defendant sought disclosure of an expert report prepared for the plaintiff. The expert report was said to be the report which arrived at the loss alleged in the statement of claim. The only element from the report that was disclosed in the statement of claim was the loss, being the difference between the sale price and the alleged market value.

The defendant sought disclosure of the report under s26(1) of the Civil Procedure Act 2010 (Vic) (the CPA) and, by reason of the refusal to disclose, sought an order under s29. The plaintiff claimed privilege over the report, but the defendant said that privilege had been waived by inclusion of the loss figure from the report in the statement of claim.

The Court held that the inclusion of the loss figure was not inconsistent with the maintenance of privilege, and therefore declined to order its disclosure. I have included a discussion and extracts of this matter below.
The Court noted at [6] that waiver of privilege at common law is governed by the principles in Mann v Carnell [1999] HCA 66, and under the Evidence Act 2008 (Vic) (the Evidence Act) by s122.  Macaulay J noted at [7] that in both sources, the 'essential question' is as follows:
'has Towercom [the plaintiff] acted in a way that is inconsistent with it objecting to the production of the valuation opinion on the basis that doing so would disclose the contents of a confidential document prepared for the dominant purpose of it being provided with legal services for litigation?'
Macaulay J considered that because a pleading contains allegations of material facts, rather than evidence, the inclusion of a value (being a material fact) from an expert report does not amount to a waiver of privilege, unless the pleading discloses the existence of the opinion and its substance. Macaulay J relied upon the need for a solicitor to certify a proper basis for making an allegation in a pleading to justify the non-disclosure.

Macaulay J considered the common law position first, at [10] to [16]:

10 First, I turn to the common law. Adopting the principles as stated in Mann v Carnell, the question is whether Towercom acted inconsistently with the maintenance of confidentiality in the valuation by saying, in effect: ‘I will tell you what I propose to prove market value to be. But I will not presently disclose to you the document which is the basis of me saying I will be able to prove that value, because it is confidential’. 
11 In my view, it is not inconsistent with the maintenance of confidentiality in a valuer’s opinion of market value, supplied confidentially to a solicitor to provide a proper basis for alleging a fact in a pleading, to plead that value. 
12 It is important to recognise the stage the proceeding has reached. An allegation of material fact is not a statement of evidence. It is not meant to be evidence. It is only an allegation of fact. 
13 A solicitor must have, and now must certify that he or she has, a proper basis for making an allegation in a pleading. However, that circumstance does not convert the pleading of a material fact, the proper basis for which is to be found in an expert opinion shown to the solicitor, into the disclosure of evidence or the substance of evidence or even the substance of the opinion. That is so unless, on the face of the pleading, the pleading goes beyond merely asserting a material fact and asserts the existence of the opinion and its substance.
14 Here, the defendant relies upon two things: first, the pleading of the material fact and, secondly, an acknowledgement that a confidential valuation, most probably the basis for that allegation, actually exists. 
15 But the existence of such an opinion should be inferred in every case, particularly now, where an assertion of fact is made which, by its nature, depends upon expert opinion. And, it is not to act inconsistently with the maintenance of confidentiality in a document to admit its existence, even though it may be inferred that the document is the foundation for a solicitor to be able to certify that proper basis exists for pleading a fact. 
16 In my view, Fahour’s argument amounts to saying this; ‘because you acknowledge you have a document that supplies the proper basis for asserting a material fact, the assertion of that material fact is inconsistent with preserving any confidentiality in the document’. I disagree. I do not consider that the plaintiff acted inconsistently under the Mann v Carnell principles.
Macaulay J then went on to consider the position under the Evidence Act at [17] to [19]:
17 I then turn to s 122 of the Evidence Act. Section 122 relevantly provides:  
“(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118,119 or 120.
(3) Without limiting subsection (2), a client or party is taken to have so acted if-
(a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or
(b) the substance of the evidence has been disclosed with the express or implied consent of the client or party.”
[emphasis added].
Towercom ‘taken to have so acted’ because it has consensually disclosed the substance of the evidence or of a document? In my view Towercom is not to be taken to have so acted. 
19 I do not hold that view because of any absence of consent, or because the plaintiff has acted under compulsion in having to plead market value to properly particularise its loss, as was argued for Towercom. Rather, it is because the assertion of market value in the particulars of loss is not disclosure of the substance of evidence or the substance of a document, and does not purport to be. It is the assertion of a fact for which it was once assumed, and now must be certified, there is a proper basis for the making of it. The evidentiary basis for the assertion of the fact, for which the solicitor certifies there is a proper basis, remains to be seen.
This matter is interesting because of the application of the proper basis certification (a requirement in s42 CPA) to the rationale of waiver. That is, because solicitors must now certify that they have a proper basis for each allegation in a pleading, there ought to be an expert report available to justify the material facts which ought to be be founded or justified by expert evidence. The fact that there is an expert report available to do this does not automatically result in the waiver of privilege in the report, unless the substance of the opinion in the report was disclosed.

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