MITCHELL v MURPHY [2019] NZHC 3257

MITCHELL v MURPHY [2019] NZHC 3257 [11 December 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-965[2019] NZHC 3257BETWEEN HOWARD BRENT MITCHELL ANDLYNNE MARY MITCHELLPlaintiffsAND CLARE DIANA MURPHY as trustee of theVICTOR SYDNEY TRUSTFirst DefendantIAN BRUCE KEMPSecond DefendantBARFOOT & THOMPSON LIMITEDThird DefendantHearing: 14-18, 21-22, 30 October and 1 November 2019Appearances: S Wroe and M Ibram for the PlaintiffsD Collecutt for the First DefendantNo appearance by or on behalf of the Second and ThirdDefendantsJudgment: 11 December 2019JUDGMENT OF GORDON JThis judgment was delivered by meon 11 December 2019 at 4.00 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors: Rainey Law, AucklandGanda & Associates, AucklandCounsel: S Wroe, AucklandD Collecutt, AucklandIntroduction[1] The first defendant, Clare Murphy, sought a pre-trial order that the plaintiffs,Howard and Lynne Mitchell (the Mitchells), had impliedly waived privilege in respectof communications with their solicitor at the time of the purchase of a property (thesubject of the substantive dispute), pursuant to s 65 of the Evidence Act 2006 (the Act).[2] I heard the application at trial after the opening submissions for the Mitchellsbut before evidence commenced. I determined that privilege had not been waived. Inow set out my reasons.Background[3] The Mitchells brought proceedings against Mrs Murphy for contractualmisrepresentation and misleading and deceptive conduct under the Fair Trading Act1986.1 The Mitchells purchased a townhouse from Mrs Murphy, which they claim isa leaky home. The Mitchells say Mrs Murphy, through her real estate agent,represented that the property was not a leaky home (and that it was built with extracare and included superior features as compared to other units in the block) despitebeing aware of a history of leaks in the townhouse in question and other townhousesin the complex of seven townhouses.[4] Mrs Murphy's primary defence is based on cl 22 of the sale and purchaseagreement (SPA), which purports to exclude any warranties or representations, andstates that the sale is on an "as is, where is" basis. That clause provides:Purchaser acknowledgment22.1 The purchase acknowledges that:(a) the dwelling has been built with a plaster cladding system;(b) prior to entering into this agreement the purchaser has beenadvised to and has had the opportunity to make independentenquiry in respect of the construction, the cladding andweathertightness issues.1 The Mitchells also brought a claim under the Fair Trading Act against the second defendant, IanKemp, who provided the pre-purchase inspection report, and against the third defendant, Barfootand Thompson Ltd. The latter claim settled prior to trial. Neither of those claims is relevant forpresent purposes.22.2 Notwithstanding anything in this agreement the vendor provides norepresentations or warranties in respect of the matters set out inclause 22.1(a) and (b) and the vendor shall not be liable for anyclaims, costs, losses, damages or liabilities whatsoever suffered orincurred by the purchaser in relation to the matters set out inclause 22.1 and relating to the construction of the property, thecladding system and the weathertightness thereof.22.3 The purchaser agrees that the purchaser is purchasing the property onan as is and where is basis and the vendor warranties in clause 7.1 and7.3 of this agreement shall apply to the matters set out in clause 22.1.2[5] Mr Mitchell, in his first brief of evidence (dated 22 July 2019), referred to thereceipt of legal advice as follows:[First version]13. Lynne and I decided that we would make an offer $1,150,000. Lynneand I had used Fortune Manning as our solicitors over the years. Wecalled and told them that we were going to make an offer on theproperty. I spoke to a solicitor called Anita Wan who had acted for uspreviously in the sale of a commercial property. Anita advised thatanother solicitor would be acting for us in this instance but we got theimpression if [sic] was under her oversight. I asked Anita to sendthrough some clauses for the agreement.14. On 21 November 2016 I sent the real estate agent a copy of the clauseswhich Anita had sent me. 319. The agreement was signed on 1 December 2016 I called FortuneManning to discuss the agreement before I signed. The solicitor andI had a short conversation, just a few minutes. This solicitor was ajunior solicitor working under Anita Wan, I believe she was recentlyqualified. We discussed the reduced due diligence period and shorttiming for the escape clause. I think she mentioned clause 22. It didnot ring any serious alarm bells for us give the highly positive viewwe already had of the property.[6] In a second (replacement) brief of evidence (dated 19 August 2019), [13] and[14] were retained but [19] was amended to read as follows:[Second version]2 The parties agreed that the word "not" should be inserted after the word "shall" so as to read " shall not apply ".3 The three clauses were: a due diligence clause; a clause providing that the agreement wasconditional upon the sale of the Mitchells' property; and a vendor escape clause. The agent,Ms Goodall, then incorporated those three clauses into the SPA and added cl 22 and sent the draftagreement to the Mitchells.19. The agreement was signed on 1 December 2016 I called FortuneManning before I signed the agreement. I spoke to Anita Wan, whowas the junior solicitor assisting us with this purchase and thecontemporaneous sale of our other property. We discussed the termsof the agreement. The agreement did not ring any serious alarm bellsfor us given the highly positive view we already had of the propertyso I signed it and returned it to Joss Goodall [the agent].The law[7] Mrs Murphy relied on both s 65(2) and (3)(a) of the Act, which provide:65 Waiver(2) A person who has a privilege waives the privilege if that person, oranyone with the authority of that person, voluntarily produces ordiscloses, or consents to the production or disclosure of, anysignificant part of the privileged communication, information,opinion, or document in circumstances that are inconsistent with aclaim of confidentiality.(3) A person who has a privilege waives the privilege if the person—(a) acts so as to put the privileged communication, information,opinion, or document in issue in a proceeding; or[8] In the substantive trial, Mrs Murphy says that under s 50 of the Contract andCommercial Law Act 2017 (CCLA) it is fair and reasonable that cl 22 is conclusivebetween the parties. The Mitchells therefore cannot sue on any pre-contractualrepresentations. Section 50 provides:50 Statement, promise, or undertaking during negotiations(1) This section applies if a contract, or any other document, contains aprovision purporting to prevent a court from inquiring into ordetermining the question of—(a) whether a statement, promise, or undertaking was made orgiven, either in words or by conduct, in connection with or inthe course of negotiations leading to the making of thecontract; or(b) whether, if it was so made or given, it constituted arepresentation or a term of the contract; or(c) whether, if it was a representation, it was relied on.(2) The court is not, in any proceeding in relation to the contract,prevented by the provision from inquiring into and determining anyquestion referred to in subsection (1) unless the court considers that itis fair and reasonable that the provision should be conclusive betweenthe parties, having regard to the matters specified in subsection (3).(3) The matters are all the circumstances of the case, including—(a) the subject matter and value of the transaction; and(b) the respective bargaining strengths of the parties; and(c) whether any party was represented or advised by a lawyer atthe time of the negotiations or at any other relevant time.[9] Section 50 of the CCLA therefore provides the relevant context in which todetermine whether the privileged communication was put in issue in the proceeding.SubmissionsMrs Murphy[10] Mr Collecutt, for Mrs Murphy, submitted that the Mitchells had waivedprivilege in the communication with their solicitors by referring to it in Mr Mitchell'sbrief of evidence. He submitted that the Mitchells were seeking to downplay thenature of their legal advice and were trying to pick and choose the aspects of the legaladvice that are disclosed; and further that they had put the nature of the legal advicethey received in issue in the proceeding.[11] He submitted that the Mitchells were effectively seeking to inject the substanceof the communication with the "junior solicitor" in evidence and/or create an inferenceas to the defective or inadequate nature of the advice as:(a) the solicitor is referred to as a "junior solicitor"(b) the advice is referred to as having been given during a "shortconversation, just a few minutes" (later said to be 24 minutes byreference to time records which were disclosed by the Mitchells); and(c) the advice in relation to cl 22 of the SPA "did not ring any serious alarmbells" for the plaintiffs.[12] Accordingly, he submitted that the evidence had been drafted to enable theinference to be drawn that the advice given was insufficient to make the Mitchellsaware and they did not understand that no warranty was being given as to construction,cladding and weathertightness issues; that they had been advised to make their owninquiries on these issues; and that they were buying the property on an "as is, whereis" basis.[13] There has been waiver under s 65(3)(a), Mr Collecutt submitted. The Mitchellscannot put the legal advice in issue in this proceeding or seek to have the benefit ofreliance upon the substance of the advice and yet still seek to shield that advice fromdisclosure to Mrs Murphy.[14] In relation to s 65(2), he submitted that, whilst Mr Mitchell amended the firstbrief of evidence, that original brief is still able to come before the court. Mr Collecuttreferred to r 9.14(d) of the High Court Rules 2016, which provides that a party maycross-examine any party to a proceeding on a brief, served under those rules, that isinconsistent with a statement previously made by that party. And, he said, the firstbrief is inconsistent with the second, amended, brief of evidence.[15] Accordingly, Mrs Murphy sought orders that:(a) Privilege has been waived in relation to the content of the legal adviceobtained by the Mitchells in relation to cl 22 of the SPA;(b) Anita Wan, the junior solicitor who the Mitchells consulted, giveevidence as to the actual advice that she gave the Mitchells in relationto cl 22 of the SPA; and(c) Any written advice provided by Ms Wan and/or her firm, FortuneManning, in relation to cl 22 of the SPA, be discovered.The Mitchells[16] In response, Ms Wroe, for the Mitchells, submitted, first, in relation to s 65(2),that the Mitchells had not disclosed a "significant part of the privilegedcommunication". The brief discloses the content of the communication in a limitedway. The first brief refers to the "reduced due diligence period and short timing forthe escape clause" and cl 22; the second brief refers simply to "the terms of theagreement". She submitted that this is not a significant part of the communication. Inany event, any significant disclosure (denied) was not made "in circumstances that areinconsistent with a claim of confidentiality". Hence, she submitted, the s 65(2) waiverargument must fail.[17] Secondly, in relation to s 65(3), Ms Wroe submitted that the privilegedcommunication was not put in issue the proceeding. The issue in the proceeding,Ms Wroe submitted, is whether the Mitchells obtained legal advice, and the nature andextent of that advice. That is relevant to s 50(3)(c) of the CCLA and the "fair andreasonable" assessment the Court is required to make. The content or substance of thecommunication is not relevant.[18] Ms Wroe did not accept that, by implication, the Mitchells were seeking tomake submissions about the content of the legal advice. She had not opened the caseon that basis and she said that she did not intend to close on the basis that juniorsolicitors give low quality, defective advice. She noted that the seniority of Ms Wanis a matter of public record, whether or not it is in Mr Mitchells' brief of evidence.[19] Accordingly, Ms Wroe submitted that privilege was not impliedly waived.DiscussionSection 65(2) — Have privileged communications been disclosed in circumstancesthat are inconsistent with a claim of confidentiality?[20] First, there must be a voluntary disclosure. The Act does not define, or giveguidance as to, when a disclosure is voluntary.4 However, it is apparent that, in thiscase, there was voluntary disclosure by Mr Mitchell; he referred, as a plaintiff, to theprivileged communication in his brief of evidence, which was served on Mrs Murphy.4 Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence: Act and Analysis (ThomsonReuters, Wellington, 2018) at [EV65.05(1)].[21] Secondly, there must be disclosure of a significant part of the privilegedcommunications. What is a "significant part" is a matter of the substance, rather thanthe quantity, of material disclosed.5[22] Disclosure of the existence of a privileged document as distinct from itscontents will not normally amount to implied waiver.6 Mere passing mention inpleadings may not suffice.7[23] Both counsel relied on Astrazeneca Ltd v Commerce Commission.8 In thatcase, Astrazeneca challenged the lawfulness of a notice to supply information anddocuments issued by the Commerce Commission under the Commerce Act 1986.Astrazeneca claimed that the alleged conduct which prompted the service of the noticewas exempted from the operation of the Commerce Act by s 53 of the New ZealandPublic Health and Disability Act 2000.[24] There was a preliminary issue in the case concerning waiver of legalprofessional privilege. Astrazeneca maintained that the Commerce Commission hadwaived privilege with reference to legal advice contained in, but excised from, amemorandum put in evidence by the Commission. The memorandum had beenprovided by the investigator to the Chair of the Commerce Commission. It ran to33 paragraphs and set out s 53(2) of the New Zealand Public Health and Disability Act2000. There then followed a paragraph of about five lines which was excised. It wascommon ground that the excised paragraph contained legal advice concerning s 53.[25] In Astrazeneca, Panckhurst J held that privilege had not been waived. The casewas run under s 65(3)(a) but Panckhurst J also referred to s 65(2) as follows:[42] It has crossed my mind whether s 65(2) of the Evidence Act, by whichprivilege is waived through disclosure of a significant part of a privilegedcommunication, may be more relevant than s 65(3)(a). However, I amsatisfied that this is not the case. In the first place there was no expressdisclosure of the advice. But, arguably, by implication at least, there wasdisclosure. The implication being that [the excised paragraph] containedadvice to the effect that s 53(2) posed no bar to the issue of the notice. But5 Houghton v Saunders [Privilege] (2009) 19 PRNZ 476 (HC) at [55(iii)].6 At [55(iv)].7 Tau v Durie [1996] 2 NZLR 190 (HC) at 194.8 Astrazeneca Ltd v Commerce Commission (2008) 12 TCLR 116 (HC).even assuming this much, and for essentially the same reasons as appear in theprevious two paragraphs [the advice related to a matter of statutoryinterpretation; and no material reliance on the legal advice nor injection of thesubstance of that advice into the proceedings], I consider a waiver of privilegeis not indicated.[26] Similarly, in this case, there was no express disclosure of the advice.[27] As to whether there was disclosure by implication, I turn to Mr Collecutt'ssubmission that the Mitchells have invited inferences as to the defective or inadequatenature of the legal advice, thereby speaking to the substance of the advice; and hissubmission that such disclosure is disclosure of a significant part of the privilegedcommunication. Mr Collecutt relied on this Court's comments in Tau v Durie that aparty cannot expect to put forward the existence of legal opinion, with an inferenceinvited as to favourable content, and refuse to disclose the document.9[28] However, in that case, the Court continued that the matter is a question ofdegree; there is no "inexorable standard".10 I do not consider there is an implicationas to the advice given in this case. The "no serious alarm bells" comment is made inthe context of Mr Mitchell's statement that he had already formed a highly positiveview of the property. Therefore, I do not consider that "any significant part" of theprivileged communication was disclosed.[29] If, contrary to the view I have reached, there was disclosure of a significantpart of the privileged communication, the disclosure must be inconsistent with a claimof confidentiality. The test is whether, in all the circumstances, the conduct isinconsistent with maintaining the confidentiality of the privileged material in a waythat could lead to injustice if the privilege is upheld.11 A fact-specific inquiry isrequired.12[30] In my view, the material was not disclosed in circumstances inconsistent witha claim of confidentiality. It is the first brief of evidence that refers to cl 22.Rule 9.14(a) of the High Court Rules provides that nothing pertaining to the exchange9 Tau v Durie, above n 7, at 194.10 At 194.11 Houghton v Saunders [Privilege], above n 5, at [55(vii)].12 McDonald and Optican, above n 4, at [EV65.05(3)], n 2979.of briefs in those Rules "deprives any part of that party's right to treat anycommunication as privileged".13 Briefs can be amended, including to avoid waiver ofprivileged materials from occurring, and, indeed, Mr Mitchell has amended his briefof evidence. The amendment having been made prior to trial, the initial reference tocl 22 is not inconsistent with maintaining the confidentiality of the privileged materialin a way that could lead to injustice if the privilege is upheld.Section 65(3)(a) — Have privileged communications been put in issue in theproceeding?[31] In Astrazeneca, this Court held, in relation to s 65(3)(a) of the Act, that:14[39] The mere relevance of a privileged communication to an issue inthe case provides no basis for waiver. Even a party's asserted reliance upon aprivileged communication is generally insufficient. Waiver occurs where aparty both asserts reliance upon the privileged communication and also seeksto inject the substance of the communication in evidence. [32] Mr Collecutt placed some reliance on Tau v Durie, which was decided prior toenactment of the Act. In that case, McGechan J stated:15It is all in the end a matter of fairness. A party cannot expect to put forwardthe existence of legal opinion, with inference invited as to favourable content,or part of a legal opinion which is favourable, and refuse to disclose theopinion document, or the remainder of it, so enabling the position to bechecked. If a party positively advances it, the party must disclose it. Merepassing mention in pleadings may not suffice to call the doctrine into play. Iagree immediately that the assertion of the existence of legal opinion by aplaintiff and the simple admission or denial of its existence by a defendantordinarily would not require that defendant to disclose. There are questionsof degree. I do not accept that there is some inexorable standard which arisesfrom some perceived need for invariable certainty.However, the statement of claim contains rather more. In paras 35 as toimproper purpose, 37 as to predetermination and bias, and 39 as tounreasonableness, there are pleadings met in the statement of defence bydenials plus affirmative assertions. The affirmative assertions by the firstdefendant are these. He says:13 Capital + Merchant Finance Ltd v Perpetual Trust Ltd [2015] NZHC 1233 at [20].14 Astrazeneca Ltd v Commerce Commission, above n 8, citing Ophthalmological Society of NewZealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA); and Shannon v Shannon [2005]3 NZLR 757 (CA).15 Tau v Durie, above n 7, at 194–195." further that he obtained and relied on an independent legal opinion on hispowers to preside."[33] In my view, that case does not assist Mr Collecutt. The Mitchells do not assertreliance on the privileged communication. If there was any doubt, Ms Wroe's explicitstatement of the Mitchells' position as referred to in [18] above makes that clear. Nor,for the reasons already discussed in relation to s 65(2), did Mr Mitchell seek to injectthe substance of the communication in evidence.[34] I come back to the particular issue in the proceeding against which waiver isto be considered. The issue is whether it is "fair and reasonable", under s 50 of theCCLA, for Mrs Murphy to rely on cl 22 of the SPA. The onus is on Mrs Murphy.Section 50(3)(c) provides that whether any party was represented or advised by alawyer at the relevant time is relevant in assessing the "fair and reasonable" aspect.What is relevant to s 50(3)(c) is whether or not legal advice was obtained not thesubstance of the advice.[35] The Court of Appeal recently held, in Bushline Trustees Ltd v ANZ Bank NewZealand Ltd, that the nature and extent of the advice obtained is relevant to the inquiryunder the predecessor to s 50.16 In that case, there had been no waiver of privilege. Asolicitor had been instructed to provide legal advice on swap terms. In the High Court,Edwards J stated that "[i]t may be inferred from the execution of a solicitor's certificatethat Mr England [the solicitor] did in fact do just that".17[36] The Court of Appeal referred to Mr England's advice as being of a"mechanical, formal, nature".18 Mr Collecutt sought to argue that the statement by theCourt of Appeal that "the nature and extent of legal advice provided to a customer isrelevant when making the fair and reasonable assessment"19 should be read to alsoinclude the content or substance of the advice.16 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2019] NZCA 245 at [251].17 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd [2017] NZHC 2520, [2018] NZCCLR 19 at[136].18 Bushline Trustees Ltd v ANZ Bank New Zealand Ltd (CA), above n 16, at [271].19 At [251].[37] I do not accept that submission, at least in the context of this hearing. Thenature and extent of the advice is before the Court. Mr Mitchell's brief addresses that.I am not persuaded that the substance of the advice is relevant.Results[38] For the above reasons, privilege has not been waived.___________________________________Gordon J