EVEREST SERVICED APARTMENTS LIMITED v BODY CORPORATE 511909 [2022] NZHC 1925

EVEREST SERVICED APARTMENTS LIMITED v BODY CORPORATE 511909 [2022] NZHC 1925[8 August 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-1191[2022] NZHC 1925BETWEEN EVEREST SERVICED APARTMENTSLIMITEDPlaintiffAND BODY CORPORATE 511909First DefendantSTRATA TITLE ADMINISTRATIONLIMITEDSecond DefendantHearing: 21 July 2022Appearances: L H Mau and A Robinson for PlaintiffS Maloney for First DefendantNo appearance for Second DefendantJudgment: 8 August 2022JUDGMENT OF ASSOCIATE JUDGE JOHNSTONThis judgment was delivered by me on 8 August 2022pursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] This is an opposed interlocutory application by the plaintiff, Everest ServicedApartments Ltd ("Everest"), pursuant, inter alia, to r 8.25 of the High Court Rules2016 for an order or orders requiring the first defendant, Body Corporate 511909 ("theBody Corporate"), to provide further discovery.[2] The application concerns collateral waiver, and the issue is when a waiver ofprivilege in respect of a document can extend beyond the document itself to relateddocumentation.Background[3] The Body Corporate is the body corporate for a unit title complex in centralAuckland known as Park Residences (the Complex). It engages the second defendant,Strata Title Administration Ltd ("Strata"), and another company, Park ResidencesManagement Ltd ("Park"), in relation to the discharge some of its responsibilities assuch.[4] Everest was formerly a property management concern, engaged byapproximately 50 unit title holders in the Complex — or rather the owners ofapproximately 50 units — to manage those units, letting them on behalf of the ownerson generally short-term rentals.[5] Everest alleges that the Body Corporate wanted to stop it — Everest —operating in the Complex, and that it ultimately achieved that by the implementationof an "unlawful campaign". The net result, Everest says, is that it was obliged to closeits business, which it did at the conclusion of the financial year ending 31 March 2019.It sues the Body Corporate (and Strata) claiming approximately $3,000,000 indamages, plus interest and costs.[6] Everest pleads five causes of action. The first is breach of s 9 of theFair Trading Act 1986, in which it asserts that the Body Corporate's actions weredeceptive and misleading. It pleads three economic torts, causing loss by unlawfulmeans, conspiracy to injure and unlawful means conspiracy. Its final cause of actionis injurious falsehood.[7] Central to Everest's claim is an accusation that the Body Corporate was acting,and knew it was acting, unlawfully, when it relied on its own body corporate rules toimpose certain obligations on Everest. The contention is that the Body Corporateasserted, incorrectly and unlawfully, that, according to the rules, Everest was requiredto provide daily lists of the parties to whom units were let.[8] By this means, Everest seeks to establish that the Body Corporate had thenecessary intention to establish the torts on which it relies.[9] This proceeding was commenced on 20 June 2019. It is set down for aseven-day fixture commencing on 30 October 2023. Everest's evidence is due to beserved on 2 September 2022. As far as I am aware, the only outstanding interlocutorymatter is this application.[10] I pause at this point to record the way in which one aspect of the applicationhas been clarified. In its notice of interlocutory application dated 29 April 2022,Everest sought:(a) a declaration that privilege has been waived in relation to the Adviceitself (defined in paragraph 5(b) below), and any correspondence orother document in connection with that Advice;(b) that the Body Corporate reviews the documents over which it hasclaimed legal advice privilege and reconsider whether a claim ofprivilege can be maintained in light of such declarations;(c) that the Body Corporate provide:(i) a supplementary affidavit explaining the process undertakento complete the review; and(ii) open versions of any documents over which privilege hasbeen waived.[11] Counsel were diverted as a result of Everest's apparent application for adeclaration. As Mr Maloney submitted, technically, a declaration, whether at commonlaw or under the Declaratory Judgments Act 1908, is a final remedy and out of placein an interlocutory application.[12] I enquired of Ms Mau whether in fact Everest was seeking a declaration in thatsense. She confirmed that it was simply inviting the Court to conclude that theBody Corporate had waived privilege as a foundation for seeking the orders sought in(b) and (c).Letter of advice[13] On 15 November 2018, the Body Corporate's solicitors, Price Baker Berridge,wrote to Strata providing advice as to whether or not the Body Corporate was entitledto rely on r 24 of its rules to demand that Everest supply the information alreadyreferred to. It is common ground between the parties that the letter was written toStrata in the company's capacity as the Body Corporate's agent, and that it was theBody Corporate that had the right to claim or waive any privilege in respect of theletter.[14] It is also common ground that Price Baker Berridge's letter of advice wasprovided in a professional context and that prima facie the Body Corporate wasentitled to claim privilege in respect of it.[15] For Everest Ms Mau submits that the Body Corporate waived privilege byvoluntarily disclosing the document:27. The elements of waiver (as set out at paragraph 24) are clearly madeout:(a) the Body Corporate itself voluntarily produced the Advice toEverest when:(i) on 31 July 2020, it produced the Advice to Everestwithin three separate documents as part of its initialdiscovery;(ii) on 10 November 2021, it produced the Advice to Everest ina further document as part of its supplementary discovery;(b) the Body Corporate's agent, Strata, produced the Advice toEverest and others when:(i) on 29 November 2018, Strata emailed the Advice toGraham Peterson, the property manager of unit 2403which was leased to Everest, knowing that the Advicewas then passed to Everest;(ii) on 19 November 2021, Strata produced the Advice toEverest in a further document as part of itssupplementary discovery;(c) the Body Corporate was informed of Strata's production ofthe Advice and did nothing to countermand those acts or recallthe Advice;(d) on those occasions, the Body Corporate produced ordisclosed, or consented to the production or disclosure of theAdvice in full;(e) on those occasions, the production or disclosure was incircumstances wholly inconsistent with a claim ofconfidentiality.28. By disclosing the Advice, in full, it is as clear as it can be that theBody Corporate has waived its privilege in the Advice.[16] On behalf of the Body Corporate Mr Maloney adopted a somewhat unorthodoxposition in relation to the question of whether there had been a waiver of privilege forthe letter of advice. On the one hand he submitted that there had been no waiverbecause any disclosure had been inadvertent. On the other hand, he said that the letterhad been at large for so long and had been circulated so widely that it would beunrealistic for the Body Corporate to seek to maintain privilege in respect of it.[17] Section 65(4) of the Evidence Act 2006 provides that there is no waiver if aparty entitled to maintain privilege in respect of a document discloses it "involuntarilyor mistakenly or otherwise without the consent of the person who has the privilege".In my view, subs (4) has no application in a situation such as this where the disclosureof the document was deliberate, even although the party disclosing it may have beenoblivious to the consequences of doing so.[18] Involuntary or mistaken disclosure appears to me primarily to cover accidentaldisclosure (such as where a party or its solicitors accidently disclose copies of bothopen and privileged material in the discovery process). This was touched on byAsher J in Body Corporate 191561 v Argent House Ltd, where his Honour said:1I conclude that the mistake must be a mistake as to the act of disclosure itselfrather than the implications of it. Thus, a mistake in the handing over of agroup of documents which were thought to contain all non-privilegedmaterial, but which unbeknownst to the discloser contained privilegedmaterial, would be the sort of mistake envisaged. It would be a voluntary butmistaken act. It would be unintentional. However, if the mistake was adeliberate handing over of a document without a consideration that it wasprivileged, or forgetting that it was privileged, that would not be the sort ofmistake covered.[19] As Ms Mau submits, there is no evidence that, following conscious disclosureof the document on the Body Corporate's behalf by its agent, the Body Corporate atany stage sought to object (at least until such time as discovery took place in this case).This puts the case well outside of the parameters of one in which a principal has notconsented to its agent's disclosure of an otherwise privileged document.[20] Had I reached the conclusion that s 65(4) did apply, so that the Body Corporatehad not waived its entitlement to claim privilege in respect of the letter, the period oftime that has elapsed since its disclosure would raise an additional issue, asMr Maloney conceded. In circumstances where material which attracts the protectionof privilege has been disclosed inadvertently, but a substantial period of time haselapsed before a claim of privilege is made, the length of time may be a relevantconsideration in determining whether or not privilege has been waived. That is a factorthat may reasonably be taken into account in assessing whether a person has produceda document in circumstances that are "inconsistent with a claim of confidentiality".2At common law, the question was whether there had been conduct inconsistent withmaintaining the confidentiality of privileged material in a fashion that may lead toinjustice if the privilege were to be upheld.3 The passage of a substantial period oftime does not automatically result in a conclusion that privilege has been waived,given the underlying mischief to which privilege is directed. Nevertheless, lapse oftime is a factor that may be taken into account under s 65(2).1 Body Corporate 191561 v Argent House Ltd (2008) 19 PRNZ 500 (HC) at [42]; See also CourtesyMotors Ltd v Endeavour Commercial Ltd [2021] NZHC 221.2 Evidence Act 2006, s 65(2).3 Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145(CA) at [38].[21] Be that as it may, in my view, the Body Corporate has waived privilege inrespect of the Price Baker Berridge letter.[22] That brings me to the issue of whether the Body Corporate's waiver ofprivilege in respect of the Price Baker Berridge letter requires it to disclose any relatedmaterial.Alleged collateral waiver[23] Ms Mau submitted that, by waiving privilege in respect of the letter, theBody Corporate had effectively waived privilege in respect of any related privilegeddocumentation sufficiently connected with that letter, so that if the letter was viewedin isolation that would convey a misleading picture. On that basis, she sought theorders set out in the notice of application quoted above.[24] Ms Mau began her submissions by referring to the commentary in Cross onEvidence as to the scope of collateral waiver. The passage to which she referred wasin the following terms:4Collateral waiver has a broad effect. It extends further than requiringdisclosure of all records of the particular communication with respect to whichprivilege has been waived. Collateral waiver will also apply to all otherprivileged communications and documents dealing with the same issue. Aparty will not be entitled selectively to waive privilege for only some of thematerial relating to the relevant issue, and thus rely on material favourable toits case, while keeping unfavourable material confidential. The issues in thiscontext are the specific propositions that the party offering privileged materialin evidence seeks to support with the privileged material offered.[25] It is noteworthy that, in seeking to identify the scope of collateral waiver, thetouchstone that the authors turn to is reliance.[26] It is a party's reliance on a document in respect of which it has waived privilegein the context of the litigation that ultimately triggers the prospect of collateral waiverand related material.4 Mathew Downs (ed) Cross on Evidence (online ed, LexisNexis) at [EVA65].[27] Ms Mau relied on three cases, NZX Ltd v Ralec Commodities Pty Ltd;5Capital + Merchant Finance Ltd v Perpetual Trust Ltd6 and Westgate Town Centre Ltdv Auckland Council.7[28] In NZX Ltd Dobson J dealt with NZX's application for further discoveryfounded on Ralec's waiver of privilege in respect of certain documents withoutextensive reference to s 65 of the Evidence Act, noting only that s 65 was not intendedsubstantively to change the common law.[29] Dobson J identified the issue in these terms:8NZX's solicitors confirmed that with Ralec that open discovery of numerousemails involving requests for, and provision of, legal advice had not beeninadvertent. Thereafter, NZX pressed for disclosure of all other documentscontaining legal advice that had been created on the same range of topics. Thiswas advanced as a first aspect of NZX's second application for particulardiscovery, filed on 5 December 2014.[30] Then, as Ms Mau emphasised, Dobson J went on to state what his Honourplainly viewed as the overarching principle in these terms:9Holding a party to its waiver of legal professional privilege on a topic in suchcircumstances is essentially an issue of fairness; an inspecting party cannotsatisfy itself that selective disclosure does not leave the inspecting party (andpotentially the Court) with an incomplete and potentially misleadingimpression of the full extent of advice that had been received on the topic.10[31] From that point, Dobson J examined the material in respect of which privilegehad been waived under four topic headings and determined whether additionaldiscovery was to be ordered, and its scope.[32] As already said, Dobson J's analysis did not focus on s 65, and nor was thereany discussion of the sense in which the material in respect of which privilege hadbeen waived was relied on by Ralec. His Honour's reasoning appears to proceed on5 NZX Ltd v Ralec Commodities Pty Ltd [2015] NZHC 241.6 Capital + Merchant Finance Ltd v Perpetual Trust Ltd [2015] NZHC 1233.7 Westgate Town Centre Ltd v Auckland Council [2021] NZHC 858.8 At [103].9 At [104].10 Shannon v Shannon [2005] 3 NZLR 757 (CA) at [62] – a pre-Evidence Act 2006 decision, butthe codification in s 65 is not intended to change the substantive law on waiver of privilege.the basis that, having waived privilege in respect of any document, a party becomesobliged to disclose all closely related documentation, so as to ensure that the materialin respect of which privilege has been waived does not present a misleading picture.Viewed in that way, I accept that NZX Ltd can be seen as supportive of the widerproposition advanced on Everest's behalf by Ms Mau in this case.[33] Turning to Capital + Merchant Finance, Ms Mau submitted that, there, Katz J" explained that collateral waivers can occur to allow privileged documents to beconsidered in context, a principle known as the "cherry-picking rule". This aims toprevent parties from waiving privilege for documents that further their argument,while maintaining a privilege for documents that may weaken their argument. Katz Jconcluded that where a collateral waiver applies, the party will be required to discloseany further privileged material that is relevant to the same issue for which theprivileged material was deployed".11[34] That, in my view, is a fair summary. What is noteworthy is that there is anassumption in Ms Mau's summary, which faithfully reflects the flavour of Katz J'sjudgment, that, in order for the collateral waiver to apply so as to avoid any "cherrypicking", the material in question must be deployed by the disclosing party inadvancing the case.[35] Finally, as to West Gate Town Centre, Ms Mau recorded that, there, theAuckland Council disclosed a report prepared by legal advisers without reservingprivilege. Wiley J concluded that privilege in the report had been waived. His Honourwent on to conclude that there had also been a collateral waiver of documents referredto in the report because there seemed to be some commonality between the issuesaddressed in the pleadings and the documents in which privilege was claimed. Again,that appears to be an accurate summary.[36] Wylie J's concluded:12Where privilege in a principal document is waived, waiver generally extendsto all connected documents, and the enquiry becomes whether there is a11 At [29].12 Westgate Town Centre Ltd v Auckland Council, above n 7, at [49].commonality of issues addressed by the connected documents.13 A party to aprivileged communication is not entitled to make selective disclosure that canleave the inspecting party, and potentially the Court, with a misleadingpicture.14[37] West Gate Town Centre probably articulates the principle of collateral waiverin the strongest terms, and is therefore most helpful from the plaintiff's perspective.This is because, as Ms Mau submitted, there, counsel told the Court that the Councilwas not seeking to rely on the report in the litigation because it was not relevant to anyissue in the case and therefore there was no possibility of unfairness or injustice.[38] Wiley J rejected this as a foundation for declining to make the orders sought.In his Honour's view, it was inappropriate to speculate as to whether the plaintiffswould be left with a misleading picture if the documents were not made available,given the Court had not inspected the relevant documents.15[39] Seemingly, then, the Court relied solely on the commonality between thepleadings and the documents, concluding that they were likely to be helpful to theCourt and the other parties as to their understanding of the substantive issue.16[40] It is not obvious to me that that approach is in accordance with the underlyingprinciples or the authorities. Essentially, this is because in a situation where the Courtcan be satisfied that the disclosing party will not be relying on the document ordocuments in question, there can be no question of unfairness or injustice.[41] Mr Maloney submits that the doctrine of collateral waiver requires the Courtto determine that in the context of the litigation the disclosing party will be relying onor, to use the word most commonly used in the authorities, deploying, any documentin respect of which it has waived privilege. Then the Court considers if the deploymentof that document or those documents may be misleading unless it is required todisclose any closely related document or documentation.13 Pacific Pine Products Ltd v KRTA Ltd HC Gisborne CP34/89, 24 June 1993 at [28]-[30].14 NZX Ltd v Ralec Commodities Pty Ltd, above n 5.15 At [51].16 At [51].[42] The seminal case in relation to collateral waiver is the judgment of Mustill J inNea Karteria Maritime Co Ltd v Atlantic and Great Lake Steam Ship Corp where hisHonour said: 17Where a party is deploying in Court material which would otherwise beprivileged, and the opposite party and the Court must have an opportunity ofsatisfying themselves that what the party has chosen to release from thatprivilege represents the whole of the material relevant to the issue in question.To allow an individual item to be plucked out of context would be to riskinjustice its real weight or meaning being misunderstood.[43] Mr Maloney went on to refer to other authorities to similar effect, includingKós J's judgment in McGuire v Wellington Standards Committee (No 1) wherehis Honour said:18It does not follow from the unqualified disclosure of part of the chain ofcommunication that the entirety of communication between client andcounsel, from the day of their first acquaintance, must be produced.[44] And also, that:19the mere fact of disclosure of privileged material did not mean, ipso facto,that other parties had a right to production or admission of associatedundisclosed material. The exercise is far more nuanced than that.[45] As Mr Maloney submitted, Kos J went on to suggest a two-stage test to assesswhether it is necessary in the interests of justice for the Court to make an orderrequiring the production of any material related to a document or documents in respectof which privilege has been waived. The two-stage test involved asking whether thematerial in question was truly relevant to an issue in the proceeding and if so, whetherin the absence of an order requiring discovery of any related material, there would bean injustice.[46] His Honour said that it was necessary to ask the second of those questions:20 because only if it is necessary to avoid real injustice should privilegebeyond what has already been disclosed be held to have been waived. And17 Nea Karteria Maritime Co Ltd v Atlantic and Great Lake Steam Ship Corp (No. 2) [1981] ComLR 138 at 139.18 McGuire v Wellington Standards Committee (No 1) [2014] NZHC 1159 at [23].19 At [26].20 At [27].then, the extent of production or admission will be restricted to what isnecessary adequately to ameliorate that injustice.[47] To the extent that there are apparent inconsistencies between the analysescontained in cases such as Nea Karteria Maritime and Guire on the one hand andWestgate Town Centre on the other, rather than assume that the judges in those casesnecessarily adopted different views, I am inclined to think that context influenced notonly the outcomes but the terms in which the principles involved were articulated.[48] To illustrate this, I refer to another case referred to by Mr Maloney,BIL New Zealand Treasury Ltd v PricewaterhouseCoopers New Zealand.21 As ithappens, this was a judgment of mine. Having expressed a degree of caution inrelation to making orders requiring discovery of what would otherwise be privilegedmaterial based on collateral waiver, essentially because of the importance the lawplaces on protecting rights to claim privilege, most especially in the context oflitigation, I nevertheless ordered the production of documentation related todocuments in respect of which the plaintiffs in that case had waived privilege.22[49] The terms in which I discussed the principles did not focus on deployment ofthat material. But, context is of course everything. In that case, the plaintiffs hadpleaded the documentation and expressly relied on them in the development of theircase. It was therefore unnecessary to emphasise reliance or deployment.[50] In the end, it appears to me that the preponderance of authority indicates thatin considering any application for collateral waiver the following principles should beapplied:(a) Before there can be any question of collateral waiver the Court mustfirst be satisfied that there is a primary waiver of privilege in relationto a document or documentation falling outside the circumstancesdescribed in s 65(4).21 BIL New Zealand Treasury Ltd v PricewaterhouseCoopers New Zealand [2022] NZHC 150.22 At [70].(b) It does not necessarily follow from a waiver of privilege in respect of adocument that privilege is waived in relation to any related material.(c) First, the document must be relevant to a live issue between the partiesin the litigation. This is elementary. Aside from anything else if thedocument is not relevant then it is not even discoverable.23(d) Second, the Court must also be satisfied that if it does not make an orderrequiring discovery of closely related material, that will result ininjustice or unfairness — in short there must be a reason for making anorder. The threshold for reaching this conclusion may not be high. Aparty waiving privilege in relation to an otherwise privileged documentassumes a risk that this will give rise to collateral waiver of relateddocumentation. Nevertheless, it is only if the Court concludes that afailure to order discovery of closely related material will result in aninjustice or unfairness that there is any reason for the order.(e) In assessing this, the Court may have regard to a range of considerationsincluding, by way of example only:(i) the circumstances of the waiver and whether it took place beforeor after the dispute arose or the proceeding was commenced;(ii) whether any surrounding correspondence between the parties ortheir solicitors indicates the purpose for the disclosure;(iii) whether the document is referred to in the pleadings, and if sofor what purpose;(iv) whether the disclosing party is seeking to rely on the documentin question and, if so, for what purpose;23 Evidence Act 2006, s 7.(v) whether any open correspondence that exists between theparties sheds any light on whether and for what purpose thedisclosing party is seeking to rely on the document;(vi) any affidavit evidence offered on behalf of the disclosing partyas to its intentions in that regard; and(vii) any undertakings that may be offered.[51] Such considerations are taken into account in order to enable the Court to makean assessment as to whether there is a need for an order for further discovery to avoidinjustice. There is nothing novel in that analysis. The cases contain examples ofjudges having regard to all of those considerations.[52] I have already concluded that in my assessment the Body Corporate has waivedprivilege in Price Baker Berridge's letter of 15 November 2018.[53] The circumstances in which the waiver occurred seem to have begun on29 November 2018, when Strata transmitted a copy of the letter to Everest through aproperty manager of the Complex. This took place at a time when there was clearlysome antagonism between the parties, but before the dispute in its subsequentlypleaded form had emerged, and certainly before proceedings were commenced.Accordingly, whilst it is certainly the case that the Body Corporate, through its agent,was putting the letter forward in order to demonstrate the lawfulness of the step it wastaking, it would be too much of a leap to suggest that it was relying on it in the contextof the litigation.[54] The contemporaneous correspondence exchanged at the time does not assistgreatly. There was unquestionably an issue between the parties as to precisely whatinformation the Body Corporate was entitled to demand of Everest, and both partiesappear to have been offering the views of their solicitors in relation to this. However,again, these things took place well before the litigation commenced. Whilst they wereundoubtedly relying on them in the context of a commercial engagement, it would beimpossible to suggest that they were relying on them for the purposes of the litigation.[55] Additionally, in the course of his submissions on the Body Corporate's behalf,Mr Maloney explicitly reiterated that it was not the Body Corporate's intention to relyon that evidence.[56] The letter of advice itself relates to a purely legal question, that is to say thelawfulness or otherwise of the Body Corporate's reliance on its rules to make certaindemands of Everest. To the extent that is an issue in the proceeding, that is a matterfor determination by the Court. The Body Corporate's solicitor's views as set out intheir letter of advice at the time are neither here nor there.[57] In all of those circumstances there is no reason at all to imagine that the letterof 15 November 2018 will see the light of day in the context of the proceeding. Touse the language employed by Cross and in a number of the cases, it will not bedeployed by the Body Corporate for the purposes of the litigation. Indeed, in myassessment, it would not even be admissible for that purpose.[58] In those circumstances, my judgment is that there is no reason for the Court tomake the order sought because there will be no prospect of injustice in the litigation.The Body Corporate will not be advancing any contention as to its state of mind basedon the advice it received. Accordingly, even if there was related correspondence orother documentation that passed between the Body Corporate and its solicitors inwhich it was informed for example, that the actions it proposed to take were unlawful,the Body Corporate's maintenance of privilege in relation to that material would notbe the cause of an injustice in the sense required by the principles relating to legalprivilege and collateral waiver.[59] For those reasons, the plaintiff's application is dismissed.[60] Not having heard from counsel in relation to costs I reserve those. Mypreliminary view is that the Body Corporate as the successful party is entitled to acosts award on a 2B basis. With that indication I expect that counsel will be able toagree on costs. If not, any party seeking costs may file a memorandum in the usualway within 10 working days of the date of this judgment. Any response is to be filedand served within a further 10 working days. If necessary I will deal with costs on thepapers.Associate Judge JohnstonSolicitors/Counsel:Russell McVeagh, AucklandPrice Baker Berridge, AucklandE St John, AucklandCase Officer:Catherine Koo