The Minister of Education v Reidy Mckenzie Limited [2015] NZHC 1555

The Minister of Education v Reidy Mckenzie Limited [2015] NZHC 1555 [6 July 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2015-404-560[2015] NZHC 1555UNDER the Companies Act 1993BETWEEN THE MINISTER OF EDUCATIONFirst PlaintiffTHE SECRETARY FOR EDUCATIONSecond PlaintiffAND REIDY MCKENZIE LIMITEDDefendantHearing: 16 June and 2 July 2015Counsel: PC Murray and RJ Gibson for plaintiffsJW Turner for defendantJudgment: 6 July 2015JUDGMENT OF FAIRE JThis judgment was delivered by me on 6 July 2015 at 4:30 pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors: Meredith Connell, AucklandKensington Swan, AucklandDaniel Overton & Goulding, Auckland (T Goulding)ContentsIntroduction ............................................................................................................ [1]The Evidence Act application ................................................................................ [6]Background ................................................................................................................The negligence proceedings [11]The disclosure of the documents [17]Defendant's statements of financial position in court [29]Issues .................................................................................................................... [33]Does s 57 privilege apply? ................................................................................... [37]Were the communications made in connection with an attempt to settle a dispute? (s 57(1)(b)) [43]Did the parties intend that the communications would be confidential?(s 57(1)(a)) [50]Does the common law exception to s 57 apply? .................................................. [59]Was the s 57 privilege waived? ............................................................................ [91]Section 65(2): voluntary disclosure [94]Section 65(3)(a): putting the privileged communication in issue in a proceeding [103]Conclusion.......................................................................................................... [111]Orders ................................................................................................................. [113]Costs ................................................................................................................... [114]Introduction[1] In the substantive proceeding the plaintiffs apply for orders:(a) granting them leave pursuant to s 288(5) of the Companies Act 1993 to commence a proceeding against the defendant; and(b) that the defendant be put into liquidation pursuant to either s 241(4)(a) or (d) of the Companies Act.[2] The application for leave under s 288(5) is made for reasons pleaded in paragraph 5 of the statement of claim as follows:The first and second plaintiffs are prospective creditors of the defendant company.PARTICULARS(a) The plaintiffs (in conjunction with the applicable school Boards of Trustees) are plaintiffs in the following extant High Court proceedings to which the defendant company is a defendant:(i) CIV-2012-404-4010 (re Otahuhu Intermediate School);(ii) CIV-2012-404-6140 (re Alfriston School);(iii) CV-2012-404-1269 (re Pukekohe Intermediate School);(together, the Schools Proceedings)(b) The Schools Proceedings concern a number of schools that are owned by the Crown (the Schools) and the plaintiffs sue on behalf of the Crown;(c) The defendant company undertook building works at the Schools (the Works).(d) The Works were defective and require extensive repairs;(e) The plaintiffs claim in the Schools Proceedings that:(i) The defects in the Works were caused by the negligence of the defendant company;(ii) The defendant company is liable to the plaintiffs in tort for the costs of the necessary repairs to the Works;(f) The total quantum of the claims in the Schools Proceedings is over $1.9 million;(g) The plaintiffs will rely on the Statement of Claim in the Schools Proceedings as if they were set out here in full.[3] The statement of claim pleads the particulars of the company's allegedinability to pay its debts as follows:6. The defendant company is unable to pay its debts.PARTICULARS(a) The defendant company has traded at a loss in the financial years ended 31 March 2011, 2012, 2013 and 2014;(b) The defendant company has incurred total losses in the last four financial years in excess of $760,000;(c) Between 2011 and 2014 the defendant company's financialposition has deteriorated significantly, from a positive equity position of $139,570 in the financial year ended 31 March 2011 to a negative equity position of $399,898 in the financial year ended 31 March 2014;(d) The value of the defendant company's liabilities exceededits assets in the financial years ended 31 March 2012, 2013 and 2014;(e) As at the last available balance date the defendantcompany's net asset position was negative $399,898;(f) The defendant company also has prospective liabilities in excess of $1.9 million respect of the Schools Proceedings;(g) As at 31 March 2014, the defendant company did not satisfy the Solvency Test in s 4 of the Companies Act 1993;(h) The defendant company has made numerous representations that it has poor trading prospects and is in a poor financial position, including:(i) 24 June 2011: Email from Bruce McKenzie, director of the defendant company, forwarded by counsel for the defendant company to counsel for the plaintiffs;(ii) 28 June 2011: Email from Mr McKenzie forwarded by counsel for the defendant company to counsel for the plaintiffs;(iii) 18 September 2013: Email from counsel for the defendant company to counsel for the plaintiffs;(iv) 31 July 2014: Memorandum of counsel for the defendant company in CIV-2012-404-4010.[4] The just and equitable grounds pleaded in the statement of claim are not further particularised.[5] The substantive proceeding has been allocated a fixture on 3 September 2015.The Evidence Act application[6] The defendant applies for orders that the plaintiffs be prevented from disclosing or relying on its financial accounts for periods ending 31 March 2012, 2013 and 2014 in this proceeding.[7] Counsel agree that determination of the admissibility of the documents referred to in the application is required in advance of any determination of the question of leave pursuant to s 288(5) of the Companies Act and the substantive proceeding.[8] The grounds advanced in support of the application are that:(a) the defendant has supplied the accounts to the plaintiffs;(b) the supply was by a party to a dispute to another party of that dispute;(c) the accounts were intended to be confidential to the plaintiffs and their advisors;(d) the accounts were supplied in connection with an attempt to settle the dispute between the parties; and(e) the defendant has privilege under s 57 of the Evidence Act 2006 in respect of the documents, and that privilege has not been waived.[9] The plaintiffs oppose the application on the following grounds:(a) the documents are not privileged under s 57 of the Evidence Act; and:(i) are not communications objectively intended to be confidential; and(ii) were not communications made in conjunction with an attempt to settle a dispute between the parties;(b) the documents are subject to a common law exception to s 57 privilege for statements of bankruptcy and insolvency; and(c) any privilege that may have applied to the documents has been waived by the defendant.[10] In my minute of 17 June 2015, I recorded counsel's agreement on theevidence to be read and received in relation to the application.BackgroundThe negligence proceedings[11] The plaintiffs initiated three High Court proceedings against the defendant, namely:(a) CIV-2012-404-4010 (re Otahuhu Intermediate School);(b) CIV-2012-404-6140 (re Alfriston School); and(c) CV-2012-404-1269 (re Pukekohe Intermediate School).[12] Meredith Connell, barristers and solicitors, act for the plaintiffs in respect of the Otahuhu Intermediate School proceedings and the Pukekohe Intermediate School proceedings. Kensington Swan, barristers and solicitors, act for the plaintiffs in the Alfriston School proceedings.[13] The defendant undertook building works at each of the schools in the three proceedings. The plaintiffs allege that the works were defective and required extensive repairs. The plaintiffs allege that the defects in the works were caused by the negligence of the defendant and that the defendant is accordingly liable to the plaintiffs in tort for the cost of the necessary repairs to the schools. The total amount claimed is in excess of $1.9 million.[14] Statements of defence have been filed by the defendant in respect of the three proceedings. The three proceedings are at different stages. The OtahuhuIntermediate School proceeding had a trial set for 3 November 2014, but that wasadjourned to allow the plaintiffs to investigate the defendant's liquidity.[15] In respect of the Alfriston School, discovery is still to be completed.[16] In respect of the Pukekohe Intermediate School, discovery has been completed and further case management conferences are in train.The disclosure of the documents[17] Following the initiation of legal proceedings against the defendant, the plaintiffs indicated to the defendant that they were willing to pursue an alternative resolution to the dispute. On 30 July 2012 Meredith Connell sent a letter marked"without prejudice" to the defendant stating the following:4. The Ministry has had to file proceedings (which are being servedwith this letter) in order to protect the Ministry's position onlimitation. However, the Ministry would prefer to see if a resolution of the issues can be reached with you without the need to progress the claim.5. We have provided you with a copy of the Prendos report, together with the statement of claim, which will enable you and your client to properly consider the issues. In addition, you and your client are welcome to attend the site to consider the defects identified in the report. If you would like to carry out a site inspection, please let us know. Please note that you cannot attend the site unless any site visit is pre-arranged.6. If you would like to take up the invitation to engage in commercial negotiations, we propose that the time for filing statements of defence be enlarged for three months to allow time to explore settlement options and to see if a commercial resolution can be reached.7. If you would like to take up the above invitation to engage in negotiations and so defer progress of the proceedings, please let us know as soon as possible and we will arrange for a memorandum to be filed with the court.[18] On 24 August 2012 Meredith Connell emailed the defendants recording anagreement "to attend an all parties without prejudice settlement meeting to discuss acommercial resolution of the matter."[19] That meeting took place on 18 September 2012. During that meeting the defendant agreed to provide the plaintiffs with its financial end of year statement. This is evident from the email dated 27 February 2013 from Meredith Connell to thedefendant's solicitor:As a result of a meeting we had with [the defendant] and [another party], we were provided with accounting information by both parties.[20] On 26 September 2012, eight days after the meeting, the defendant emailed to the plaintiffs its accounts for the financial year ending 2012 for review.[21] The accounts for the financial year ending 2013 were provided to the plaintiffs after the following events. On 27 November 2013 Meredith Connellemailed the defendant's solicitor. The email was headed "without prejudice". It refers to the "previous settlement discussions between our respective clients". The email notes that the plaintiffs' forensic accountant had completed the review of thedefendant's 2012 accounts. The email then states:1. We write regarding the above proceedings and the previous settlement discussions between our respective clients.4. In order to evaluate the accuracy of your assertion that RML is 'not worth powder and shot' the plaintiffs require a comprehensive set offinancial statements for RML for the financial year ended 31 March 2013 which address the shortcomings in the 2012 financial statements.[22] The 2013 accounts were received by the plaintiffs on 5 May 2014. Thedefendant's accountant, Mr Fell, emailed the accounts to Meredith Connell and in the text of the email referred to Meredith Connell's letter of 27 November 2013.[23] On 3 February 2014 Kensington Swan wrote the following to the defendant'ssolicitor:4. We reiterate our client's position is to deal with the issues raisedpragmatically and to enter without prejudice discussions in order to settle the dispute. As such the proceeding has been stayed (refer toJustice Faire's memorandum of 5 December 2013), until after 1 April 2014 in order for the parties to attempt a resolution.5. We trust that your client has taken the opportunity to review the expert reports, which we provided to you by courier on 6 November 2013. Accordingly, in order to progress this we invite you to respond to the issues outlined above, and we would like to meet with your client and MPL on a without prejudice basis. We look forward to hearing from you.[24] On 20 June 2014 the defendant sent its draft accounts for the financial year ending in 2014 to the plaintiffs for review.[25] On 24 June the defendant's solicitor filed a counsel's memorandum in which he stated that the parties were "actively negotiating".[26] On 22 August 2014 Meredith Connell emailed the defendant's solicitorasking for further information about the defendant's financial position.Further to our memorandum to the court seeking an enlargement regarding the trial date between our client and yours and the memo you filed in reply, the Ministry is waiting on an assessment from Deloitte's regarding thesolvency of your client so that the Ministry can make a firm decision and advise the court.[27] On 19 November 2014 the accounts for the financial year ending in 2014 were provided to the plaintiff.[28] Another settlement meeting took place on 3 December 2014. It was unsuccessful. The parties have not pursued any further settlement negotiations since.Defendant's statements of financial position in court[29] During the procedural history of the proceedings between the parties, both have referred a number of times to the financial accounts and the concerning financial state of the defendant.[30] In a memorandum dated 31 July, counsel for the plaintiffs stated the following:4. As recorded in the Court's minute dated 30 June 2014, Reidy McKenzie says that it has been winding down its operations and it has limited means, although it does not intend to go into liquidation.5. Since 2012, Reidy McKenzie has been providing its annual accounts to the Ministry, including the draft financial statements for the year ending 31 March 2014. These accounts have been regularlyreviewed by the Ministry's forensic accountants, Deloitte.6. On 18 July 2014, the Ministry received a report from Deloitte which has raised concerns over the liquidity of Reidy McKenzie. As a result, the Ministry and Deloitte need to carry out further enquiries, including whether this proceeding should be continued. It is expected these enquires will take some months.8. As such, the Ministry respectfully seeks an adjournment of the trial date of 3 November 2014 to the first quarter of 2015 and seeks for the pre-trial timetable to be enlarged accordingly.[31] Counsel for the defendant filed a memorandum on the same date, agreeing with the statements made by counsel for the plaintiffs:1. I refer to the plaintiffs' memorandum of 31 July 2014.2. The plaintiffs' concerns are justified. My client has been responsiblein making disclosure to the Ministry in respect of its financial position. It is a defendant in respect of several active proceedings brought by the Ministry.3. My client is at present taking advice in respect of its financial position and hopes to be in a position in about 6 to 8 weeks to make a decision as to its future.4. In these circumstances, my client agrees that it would most likely bewasted expenditure for the extensive plaintiffs' evidence to beprepared just yet. Accordingly, my client joins in the request for a hearing date in the first quarter of next year.[32] The parties then filed a joint memorandum dated 31 October 2014 updating the court as to the state of their negotiations:1. On 31 July 2014, Counsel for the plaintiffs filed a memorandum with the Court advising that:a. On 18 July 2014, the Ministry had received a report from Deloittes which had raised concerns over the liquidity of the second defendant; andb. Further enquiries were required to determine whether this proceeding should be continued, because the second defendant is the only remaining defendant.2. Given the uncertainty around the second defendant's liquidity, the plaintiffs' memorandum sought an adjournment of the trial date of3 November 2014 to the first quarter of 2015 as well as an enlargement of the pre-trial timetable accordingly.3. Counsel for the second defendant filed a memorandum in reply, also dated 31 July 2014, confirming that the plaintiffs' concerns in respect of the second defendant's liquidity were justified. Thesecond defendant also sought an adjournment of the trial date.4. On 8 August 2014, his Honour Justice Faire issued a minute vacating the trial date of 3 November 2014 and the pre-trial conference scheduled for 2 October 2014. His Honour also directed that the plaintiffs file and serve an updating memorandum by 31 October 2014 indicating readiness to proceed.5. Since his Honour's minute, the following progress has been made:a. The plaintiffs have provided the second defendant with a list of the information required by Deloittes to complete their enquiries into the liquidity of the second defendant company; andb. Counsel for the second defendant has advised the plaintiffs that this information will be provided very shortly.6. In these circumstances, the parties consider it premature for the proceedings to be progressed until the additional information is provided by the second defendant and can be reviewed by the plaintiffs and their experts, Deloittes. This will enable the plaintiffs to make a definitive decision about the future of this proceeding.Therefore, the parties r3espectfully seek the Court's furtherindulgence to stay the proceedings until 28 November 2014, when the parties anticipate being in a better position to update the Court definitively.Issues[33] The parties' submissions raise the following issues:(a) Whether the documents in question are subject to s 57 privilege;(b) If so, does a common law exception to s 57 apply?(c) If not, had the s 57 privilege been waived?[34] In respect of the first issue, it is first helpful to determine whether the communications in which the financial accounts were disclosed were made in an attempt to settle a dispute between the parties. If so, the next step is to determine whether the communications were intended to be confidential. I recognise that intaking this approach I first look at ss 57(1)(a) and (b) in reverse order, but in my view, this approach is more suitable to the facts of this case.[35] If privilege exists, the next step is to determine whether a common law exception that permits admission in evidence of an act of bankruptcy committed during settlement negotiations applies in the present case.[36] If the exception does not apply and privilege has been established, it is then necessary to determine whether it had been waived, wholly or partially, pursuant to s 65(2) or s 65(3).Does s 57 privilege apply?[37] The relevant Evidence Act provisions are ss 53 and 57:53 Effect and protection of privilege(1) A person who has a privilege conferred by any of sections 54 to 59in respect of a communication or any information has the right to refuse to disclose in a proceeding—(a) the communication; and(b) the information, including any information contained in the communication; and(c) any opinion formed by a person that is based on the communication or information.(2) A person who has a privilege conferred by section 60 or 64 in respect of information has the right to refuse to disclose in a proceeding the information.(3) A person who has a privilege conferred by any of sections 54 to 59and 64 in respect of a communication, information, opinion, or document may require that the communication, information, opinion, or document not be disclosed in a proceeding—(a) by the person to whom the communication is made or the information is given, or by whom the opinion is given or the information or document is prepared or compiled; or(b) by any other person who has come into possession of it with the authority of the person who has the privilege, in confidence and for purposes related to the circumstances that have given rise to the privilege.(4) If a communication, information, opinion, or document, in respect of which a person has a privilege conferred by any of sections 54 to59 and 64, is in the possession of a person other than a person referred to in subsection (3), a Judge may, on the Judge's own initiative or on the application of the person who has the privilege, order that the communication, information, opinion, or document not be disclosed in a proceeding.(5) This Act does not affect the general law governing legal professional privilege, so far as it applies to the determination of claims to that privilege that are made neither in the course of, nor for the purpose of, a proceeding.57 Privilege for settlement negotiations or mediation(1) A person who is a party to, or a mediator in, a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of any communication between that person and any other person who is a party to the dispute if the communication—(a) was intended to be confidential; and(b) was made in connection with an attempt to settle or mediate the dispute between the persons.(2) A person who is a party to a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of a confidential document that the person has prepared, or caused to be prepared, in connection with an attempt to mediate the dispute or to negotiate a settlement of the dispute.(3) This section does not apply to—(a) the terms of an agreement settling the dispute; or(b) evidence necessary to prove the existence of such an agreement in a proceeding in which the conclusion of such an agreement is in issue; or(c) the use in a proceeding, solely for the purposes of an award of costs, of a written offer that—(i) is expressly stated to be without prejudice except as to costs; and(ii) relates to an issue in the proceeding.[38] As a starting point, I adopt the general principles applicable and contained in the summary completed by Randerson J in Westgate Transport v Methanix NZ.1The claim for privilege — legal principles[20] The general principles applicable to the privilege arising from without prejudice communications are not in issue. They may be summarised for present purposes as follows:(a) The privilege is substantially based upon public policy considerations. Parties should be encouraged to settle their disputes without litigation and they should be free from concern that offers or statements made in the course of negotiations for settlement may be used against them at trial:Cutts v Head [1984] 1 All ER 597, 605-606; [1984] 2 WLR 349 per Oliver LJ, cited with approval by the House of Lords in Rush & Tompkins Ltd v GLC [1988] 3 All ER 737, 739; [1988] 3 WLR 939, 942; [1989] AC 1280, 1299.(b) Whether communications are protected as being "without prejudice" depends on the intention of the parties which maybe inferred where not expressly stated. The application of the rule is not dependent on the use of the phrase "without prejudice": Rush & Tompkins Ltd v GLC at p 740; p 942.(c) There is authority for the proposition that where an initial letter forming part of a series of negotiations is marked"Without Prejudice", privilege attaches to the rest of theletters in that series. However, the ultimate issue is one of intention in the circumstances of the case. In Cheddar Valley Engineering Ltd v Chaddlewood Homes Ltd [1992] 4 All ER 942; [1992] 1 WLR 820, the Court adopted the approach that in such a situation, the without prejudice status continues unless and until a sufficient warning is given that dealings are on an open basis. While this may be a useful and convenient rule in practice, it must in my view come back to a question of intention.(d) The privilege extends not only to offers made in the course of negotiations, but also to statements made which are reasonably incidental to the litigation: Field v Commissioner for Railways for New South Wales (1957) 99 CLR 285, 292. However, statements which have no bearing on the negotiations will not be protected: D F Hammond Land Holdings Ltd v Elders Pastoral Ltd (1989) 2 PRNZ 232, 236(CA).(e) When determining the extent and existence of the privilege, the Court takes an objective view of what formed part of the settlement negotiations or was reasonably incidental thereto rather than the subjective expectations of the parties: Field v Commissioner for Railways for New South Wales (above)1 Westgate Transport Ltd v Methanex New Zealand Ltd (2000) 14 PRNZ 81 at [20].and Waerenga Forest Partnership v P F Olsen & Co Ltd(1999) 12 PRNZ 561, 565-566.(f) The general rule is that communications made on a without prejudice basis renders those communications inadmissible in any subsequent litigation connected with the same subject-matter, whether between the same or different parties within the same litigation: Rush & Tompkins Ltd v GLC at p 741; p 942; p 1300.(g) The rule is not absolute and there are exceptions where the justice of the case requires. Some of the exceptions are referred to by Lord Griffiths in Rush & Tompkins Ltd v GLCat p 740. None are relevant to the present litigation.(h) A distinction is sometimes drawn in the cases between the discovery and production of documents claimed to be subject to without prejudice privilege and their admissibility in evidence. However, in general, the material which is the subject of the privilege should be protected both from discovery and production as well as being rendered inadmissible in evidence: Rabin v Mendoza & Co [1954] 1 All ER 247; [1954] 1 WLR 271 (CA). Even as between parties to without prejudice communications, they are not entitled to discovery against one another: Rush & Tompkins Ltd at p 743.[39] The rule is not dependent upon the use of the phrase "without prejudice". InRush & Tompkins Ltd v Greater London Council Lord Griffiths said:2 the application of the rule is not dependent on the use of the phrase"without prejudice" and if it is clear from the surrounding circumstances thatthe parties were seeking to compromise the action, evidence of the content of those negotiations will, as a general rule, not be admissible at the trial and cannot be used to establish an admission or partial admission.[40] Accordingly, where the documents are not marked "without prejudice", the parties' intention that they be treated as such can be inferred only in clear cases.3[41] It is recognised that "without prejudice":4is not a label which can be used indiscriminately so as to immunise an actfrom its normal legal consequences, where there is no genuine dispute or negotiation.2 Rush & Tompkins Ltd v Greater London Council [1988] 3 All ER 737, [1989] AC 1280 at 1299.3 O'Brien v The New Zealand Home Loan Company Ltd HC Auckland CIV-2010-404-008323, 22 July 2011 at [29].4 Unilever plc v Proctor & Gamble Co [2001] 1 All ER 783 (CA) at 795, [2000] 1 WLR 2437 at 2448.[42] In respect of the s 57(1)(a) requirement that the particular communication was intended to be confidential, the Court in Westgate Transport Ltd v Methanex New Zealand Ltd held that the parties' objective intention must be discerned fromthe terms and circumstances of the communication.Were the communications made in connection with an attempt to settle a dispute? (s 57(1)(b))[43] The plaintiffs advanced the following in support of their position that the financial accounts were provided to them outside the context of a negotiation or settlement:(a) The communications, being the financial accounts, do not include any compromise, negotiation or settlement offer from the defendant to the plaintiffs.(b) The financial accounts were provided to bolster the defendant's claimthat the plaintiffs should discontinue the proceedings because thedefendant is "not worth powder and shot", but that thisencouragement does not constitute an offer of settlement; and(c) The financial accounts were not made in connection with an attempt to settle or mediate the dispute between the parties. The defendant is required by law to prepare these financial accounts.[44] Having considered the evidence in this case, I am of the view that the parties were engaged in settlement negotiations and the defendant provided the financial accounts to the plaintiffs in an attempt to settle the dispute.[45] The letters exchanged by the parties' solicitors that I have set out abovereveal that the parties clearly viewed themselves as taking part in a negotiation working toward a potential settlement and requested an adjournment for that purpose.[46] Next, I disagree with the plaintiffs' position that because the financialaccounts themselves do not constitute an offer of settlement, or do not include any compromise or negotiation, they are necessarily excluded from the ambit of s 57(1)(b). There is no requirement that every communication made in the course of settlement discussions need be a compromise, a negotiation, or an offer of settlement. Such a finding would significantly narrow the scope of communications made in the course of settlement discussions or negotiations to which privilege willapply. There is nothing in the statutory language that supports the plaintiffs'position.[47] I find that the defendant's purpose behind providing three years' of financialaccounts was to show the plaintiffs that there is little, if any, financial benefit in pursuing the civil claims against the defendant. Although this is not an offer to pay asettlement sum, it is nevertheless an explanation of one's position, which could be used as a starting point for continued settlement negotiations. The plaintiffs do not suggest, and there appears to be, no other reason as to why the defendant would choose to continuously for three years reveal so openly its cards to the party that initiated three civil proceedings against it for a substantial financial claim, other than to advance settlement negotiations.[48] Lastly, the fact that the defendant is legally required to complete the financial accounts does not mean that by providing these documents to the plaintiffs,the documents were not "made in connection with an attempt to settle or mediate the dispute". I do not consider that the word "communication" (which is not defined inthe Act) should in this case be limited to the time of or the reason for the preparationof the financial accounts. In my view, "communication" in this case should beinterpreted as the act of disclosure of the financial accounts to the plaintiffs, who otherwise would have been unable to obtain these documents. For completion, I add that despite the fact that the defendant is legally required to complete financial accounts annually, it is under no obligation to share these accounts with persons with whom it is involved in a legal dispute.[49] I therefore find that the disclosures of financial accounts for the financial years ending in 2012, 2013, and 2014 were communications made in an attempt to settle the existing dispute between the parties.Did the parties intend that the communications would be confidential?(s 57(1)(a))[50] The crux of the plaintiffs' submissions on this point is that the court cannotascertain on the available evidence an objective intention by the parties to keep thedefendant's financial accounts confidential to the plaintiffs and their advisors.Counsel for the plaintiffs accepts that lack of the phrase "without prejudice" on adocument does not by itself exclude privilege. Counsel submits that where a party, advised by professional legal advisers, provides to the opposing party documents, none of which are labelled as "without prejudice" or as "confidential", it is a strongindicator of the fact that the parties did not objectively intend for the communications to be confidential.[51] I say at this point that in my view, such labels were unnecessary in the present case due to the operation of s 57. The parties were participating in settlement negotiations, which automatically triggered the provisions of s 57. That provision applies to all communications made in the course of a settlement negotiation, regardless of whether such communications are prefaced with the words "without prejudice" or "confidential". The defendant and its advisors were entitled to rely onthe application of s 57 during settlement negotiations, and thus labelling communications in the way contested for by the plaintiffs was unnecessary. I therefore reject the proposition that the lack of such labels on documents providedduring settlement negotiations is an indicator of the parties' objective intention forthe contents of those documents not to remain confidential.[52] Counsel also submitted that the intention to keep the documents confidential could not have been present given the contemporaneous discussions about thedefendant's financial state in open court in the Otahuhu Intermediate School proceeding.[53] To ascertain objectively the parties' intentions of making the contents of thefinancial accounts confidential, I refer to the evidence of the discussions of thedefendant's financial position with the court, set out above.[54] In the memorandum of 31 July 2014, counsel for the plaintiff refers to the fact that the defendant had provided the plaintiffs with annual financial accounts and that these have been reviewed, and as a result of those reviews, the plaintiffs are concerned about the plaintiffs' liquidity, and request an adjournment to allow theplaintiffs to assess whether the proceeding should be continued. However, the memorandum does not disclose any of the contents of the financial accounts.[55] The memorandum on behalf of the defendant's counsel on the same dayconfirms the disclosure of the accounts to the plaintiffs and the fact that there areconcerns about the defendant's financial state. This memorandum also does notdisclose the content of the accounts.[56] The joint memorandum of 31 October 2014 updates the court on the status of negotiations but again only discloses the fact that the defendant had provided the plaintiffs with the accounts, but says nothing of the contents.[57] Concerns about the defendant's liquidity do not sufficiently reveal the true contents of the financial accounts. It therefore cannot be said that mere reference in memoranda without full disclosure amounts to a lack of intention to keep the contents confidential. In a way, the fact that neither counsel disclosed the accounts to the court shows that objectively, both parties regarded the accounts as confidential.[58] As a result, I find that the defendant's financial accounts are protected by s 57 privilege.Does the common law exception to s 57 apply?[59] Both counsel are in agreement that the Evidence Act allows a common law exception that allows the court to hear evidence of an act of bankruptcy committed by one of the disputing parties in the course of negotiations. Counsel are inagreement as to the legal principles that apply. Naturally, the parties disagree on whether the exception applies to the facts of this case.[60] I set out the relevant legal principles that establish the common law exception.[61] In New Zealand Institute of Chartered Accountants v Clarke5 Keane J recognised that the Evidence Act was not a code.6 Sections 10 and 12 retain the application of the common law to the Act. His Honour was of the opinion that common law exceptions to privilege continue to apply and that the exceptions listed in s 57 are not exhaustive.7 Additionally, his Honour stated that the exceptions to therule could be thought of "not just as exceptions, but as instances beyond the true scope of the privilege."8[62] In Clarke, the court had to consider whether a signature on a letter labelled asbeing "without prejudice" was part of the strict content of the letter, or whether itwas peripheral to it. Justice Keane found that the signature lay beyond the scope of s 57 privilege.[63] That position is in accordance with one stated in Field v Commissioner for Railways for New South Wales.9 There the Court found that privilege does not necessarily apply to the entire document, and that statements that have no bearing on the negotiations will not be protected by privilege.[64] Justice Peters in Specialized Bicycle Components Inc v Sheppard Industries Ltd10 also considered that common law exceptions continue to apply to s 57. After reviewing the public policy reasons for the existence of privilege, her Honour warned against expanding the list of common law exceptions as this risks discouraging parties from entering into negotiations:5 New Zealand Institute of Chartered Accountants v Clarke [2009] 3 NZLR 264 (HC), (2009) 19 PRNZ 246.6 At [37].7 At [44].8 At [47].9 Field v Commissioner for Railways for New South Wales (1955) 99 CLR 285 at 292.10 Specialized Bicycle Components Inc v Sheppard Industries Ltd [2011] 2 NZLR 242 (HC), (2010) 20 PRNZ 174.[80] Common exceptions to the rule are listed in Unilever and were more recently considered in the Ofulue decision. In that latter case, their Lordships emphasised that exceptions to the rule were not to be too readily developed or applied, as to do so would be likely to undermine the public policy reason for the rule, namely that parties should be encouraged to resolve their differences. Their Lordships considered that exceptions to the without prejudice rule reflected circumstances in which justice clearly "required" or "demanded"admissibility (see [38] and [57] of Lord Rodger's and Lord Walker's judgments respectively).[65] Both Peters J and Keane J made passing reference to Re Daintrey, ex parte Holt.11 Justice Keane referred to that case in support for the proposition that a document otherwise subject to privilege could be used to prove an act of bankruptcy. In that case a letter was sent by the debtor to the creditor before there was a dispute.The letter was headed as being "without prejudice". The letter contained an offer ofcomposition but threatened that payment would be suspended if the offer were rejected. The court found that the letter was not subject to privilege as it was prejudicial to the creditor:12Moreover, we think that the rule has no application to a document which, inits nature, may prejudice the person to whom it is addressed. It may be thatthe words 'without prejudice' are intended to mean without prejudice to thewriter if the offer is rejected; but, in our opinion, the writer is not entitled tomake this reservation in respect of a document which, from its character,may prejudice the person to whom it is addressed if he should reject theoffer, and for this reason also we think the judge is entitled to look at thedocument to determine its character.[66] The court determined that the character of the letter in question was a notice to the creditor of an act of bankruptcy. Importantly the court stated that in order for the document to be exempt from privilege on the grounds that it proves an act of bankruptcy, the party seeking to admit an otherwise privileged communication mustshow that "if admitted, [the communication] conclusively proves the act of bankruptcy."13 (Emphasis added.)[67] The plaintiffs submit that Daintrey can be applied to this case by direct analogy between bankruptcy of private individuals and insolvency of companies. They advance two main arguments:11 Re Daintrey, ex parte Holt (1893) 2 QB 116.12 At 120.13 At 120.(a) that the financial accounts, at the time they were provided, werecontemporary representations of the defendant's financial state thatrevealed that the defendant is insolvent within the meaning of s 4 of the Companies Act 1993 and that it is unable to pay its debts in terms of s 241(4)(a) of the same Act; and(b) failure to satisfy the s 4 test is the corporate equivalent of an act of bankruptcy.[68] The insolvency test is defined in s 4 of the Companies Act:4 Meaning of solvency test(1) For the purposes of this Act, a company satisfies the solvency test if—(a) the company is able to pay its debts as they become due in the normal course of business; and(b) the value of the company's assets is greater than the value ofits liabilities, including contingent liabilities.[69] The plaintiffs submitted that the defendant's financial accounts of the lastthree years revealed an increasingly declining financial position, and that the defendant had a significant net asset deficiency in the financial year ending in 2014. In addition, the plaintiffs submitted that the contingent liabilities the defendant facesfrom the three civil proceedings only add to the defendant's financial woes. Theysubmitted that for these reasons the defendant does not satisfy the second limb of the s 4 test.[70] In respect of the second argument, the plaintiffs said that the defendant'srepresentation to the plaintiffs through the financial accounts that it was insolvent was the corporate equivalent of an act of bankruptcy under the Insolvency Act 2006. They said that each time the defendant provided a financial account, it was a tangibleact that established a real risk that creditors will not be paid due to the debtor'sinsolvency.[71] The real issue here is not one of whether the defendant is in fact solvent, but whether the provision of the financial accounts to the plaintiffs constituted a so-called "statement of insolvency", an act that was peripheral to the negotiations andan act that is beyond the scope of the privilege because it would prejudice the interests of the plaintiffs.[72] The more specific question that goes to the heart of whether the Daintreyexception applies to companies is this: if the documents in question are admitted in evidence in the liquidation proceeding, would they conclusively prove that the defendant is unable to pay its debts?[73] For reasons that follow, I consider the answer is no.[74] The plaintiffs seek to draw an analogy between acts of bankruptcy, which are governed by the Insolvency Act, and situations in which a creditor may apply to liquidate a company on the grounds of insolvency, which are governed by the Companies Act. However, the two statutes are not easily comparable.[75] Section 13 of the Insolvency Act provides when a creditor may apply for a debtor to be adjudicated bankrupt. Subsection (b) states that the debtor must have committed an act of bankruptcy (defined in ss 17 to 28 of the Act) within three months before the creditor filed the application.[76] There is no corresponding provision in the Companies Act, and the procedure for an application for liquidation is different. Section 241(4)(1)(a), pursuant to which the plaintiffs seek liquidation, provides that the court may appoint a liquidator if it is satisfied that the company is unable to pay its debts. Section 287 provides the meaning of inability to pay debts:287 Meaning of inability to pay debtsUnless the contrary is proved, and subject to section 288, a company is presumed to be unable to pay its debts if—(a) the company has failed to comply with a statutory demand; or(b) execution issued against the company in respect of a judgment debt has been returned unsatisfied in whole or in part; or(c) a person entitled to a charge over all or substantially all of the property of the company has appointed a receiver under the instrument creating the charge; or(d) a compromise between a company and its creditors has been put to a vote in accordance with Part 14 but has not been approved.[77] There are two essential requirements that must be satisfied for an application for liquidation to succeed: there must be an existing debt owed and due, and the debtor company must be unable to pay its debts.[78] Currently there is no existing debt owed by the defendant to the plaintiffs.The plaintiffs' status as creditors is entirely dependent upon the outcome of any ofthe three school proceedings. For this reason, the plaintiffs are not currently in a position to serve a statutory demand and rely on non-compliance to establish a presumption of insolvency upon which they may progress the s 241(4)(a) application. This is so because a statutory demand must be in respect of a debt that is due.14[79] This is in accordance with the general principles adhered to by the court in winding up applications. These were expressed in South Waikato Precision Engineering Ltd v Ahu Developments Ltd15 and approved by the Court of Appeal inYan v Mainzeal Property and Construction Ltd:16a) A winding up order will not be made where there is a genuine and substantial dispute as to the existence of a debt such that it would be an abuse of the process of the Court to order a winding up;b) In such circumstances, the dispute, if genuine and substantially disputed, should be resolved through action commenced in the ordinary way and not in the Companies Court;c) The assessment of whether there is a genuine and substantial dispute is made on the material before the Court at the time and not on the hypothesis that some other material, which has not been produced might, nonetheless be available;d) The governing consideration is whether proceeding with an application savours of unfairness or undue pressure.14 Companies Act 1993, s 288(1)15 South Waikato Precision Engineering Ltd v Ahu Developments Ltd HC Auckland CIV-2008- 404-970, 10 December 2008 at [22].16 Yan v Mainzeal Property and Construction Ltd [2014] NZCA 190 at 61.[80] If the financial accounts are admitted in evidence in the liquidation proceeding, the court will not be able to conclude that the defendant is insolvent because the dispute as to the existence of debt should first be resolved in the ordinary way. At least in this aspect, the financial accounts, if admitted, will not conclusivelyprove the defendant's insolvency.[81] But even if that reasoning is incorrect, the financial accounts, if admitted, will not conclusively prove that the defendant is insolvent for the purposes of s 241(4)(a).[82] The plaintiffs argued that the defendant failed to meet the test in s 241(4)(a), and relied on the well-established principles of assessing a company's solvency. Aconsideration of the company's entire financial position is required.17 The approach must be commercially realistic.18 The assessment is not limited to the cash flow limb in the s 4 test. The test is one of solvency, not liquidity, as was found by the Court of Appeal in Yan v Mainzeal Property and Construction Ltd stated the following testfor assessing the company's solvency:[59] The test is one of solvency, not liquidity. A temporary lack of liquidity may not equate to insolvency if the debtor is able to realise assets or borrow funds within a relatively short time frame in order to meet its liabilities as they fall due.[60] In Sandell v Porter, the Court was dealing with legislation referring to the ability of the debtor to meet liabilities from "his own moneys".There is no longer any such limitation in the relevant provisions of the Act. Nevertheless, the authorities recognise that the solvency of the company requires consideration of debts currently due or falling due within a relatively short time. As Barwick CJ emphasised in Sandell v Porter, the issue of solvency requires consideration of the debtor's entire financial position. A realistic commercial approach to the assessment is required.[83] The Court then stated the following at the conclusion of its finding that an application for liquidation may not proceed while there is still a disputed debt:[72] The ability of a company to pay its debts requires an overall assessment of its liabilities measured against the resources available to it in order to meet those liabilities when due.17 At [60].18 At [60].[84] The plaintiffs said that the financial accounts provided to it show that the defendant has been balance sheet insolvent throughout the whole period for which the accounts were supplied. Counsel for the plaintiffs analysed the defendant'sfinancial position in detail in the submissions and submitted that given the trajectoryof the defendant's current financial performance, there is no reason to expect it willbe able to pay its debts in the medium term.[85] In response, the defendant submiteds that the apparent failure to pass the second limb of the s 4 test is not the test which should be applied in assessing whether there has been an inability pay debts under s 241(4)(a). Counsel referred toMr McKenzie's deposition in his affidavit dated 20 March 2015 that: RML has no outstanding liabilities to normal trade creditors, includingthe Inland Revenue. As well as being current with all trade creditors, RML has an exemplary trading record, has never had a claim served on it for non- payment of debt and has never had a s 289 notice under the Companies Act 1993 served on it. It is continuing to meet all its debts as they fall due.[86] Counsel for the defendant submitted that the insolvency test for the purposes of s 241(4)(a) is one of cash flow insolvency. In support, counsel submitted that the observations made by the Court of Appeal in Yan at [59] and [60], repeated above, were made in the context of application of the cash flow test of insolvency.[87] However, an in-depth analysis of whether or not the defendant is solvent is not required here. It is suffice to say that the s 4 test for solvency requires both limbsto be satisfied. The plaintiffs' argument however focuses exclusively on theallegation that the defendant is failing to meet the second limb of the s 4 test. The plaintiffs made no submissions in respect of whether the defendant is in fact able to pay its debts as they become due. Instead, the plaintiffs have relied on a predictive analysis that asks the court to draw inferences about the defendant's ability to meetis financial obligations as they fall due from the financial trajectory drawn by the plaintiffs. This is contrasted with the evidence of the defendant that the company has never failed to pay its debts on time. In summary, the plaintiffs' reliance on only onelimb of s 4 is insufficient to fulfil the requirements of s 241(4)(a).[88] Given that the plaintiffs are currently unable to prove that the defendant is insolvent, the admission of the financial accounts into evidence will not conclusively prove that the defendant is unable to pay its debts. For this reason, the Daintreyexception does not apply in this case.[89] Before moving on to consider the issue of waiver, I address one other point submitted by the plaintiffs, namely that each time the defendant provided the financial accounts, it was a tangible act that established a real risk that creditors willnot be paid due to the debtor's insolvency. In making this submission, the plaintiffswere trying to draw analogies to the act of bankruptcy in Daintrey.[90] I reject this proposition and the analogy it seeks to draw due to the factual differences between Daintrey and the present case. In Daintrey, the parties were not in a negotiation. The letter to the creditor was a veiled threat to accept the settlement offer or face receiving nothing at all. In the present case the parties were engaged in a mutual effort to find a commercial resolution to the disputes between them. The financial accounts were supplied to allow the parties to reach a pragmatic outcomebased specifically on the defendant's financial abilities. To hold that such actionsconstitute an admission of insolvency, in absence of the ability to prove s 4 insolvency, would discourage parties in similar negotiations from achieving the outcome most suitable to their situation.Was the s 57 privilege waived?[91] The starting point for a consideration of whether the privilege has been waived is s 65, which provides:65 Waiver(1) A person who has a privilege conferred by any of sections 54 to60 and 64 may waive that privilege either expressly or impliedly.(2) A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim 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(b) institutes a civil proceeding against a person who is in possession of the privileged communication, information, opinion, or document the effect of which is to put the privileged matter in issue in the proceeding.(4) A person who has a privilege in respect of a communication, information, opinion, or document that has been disclosed to another person does not waive the privilege if the disclosure occurred involuntarily or mistakenly or otherwise without the consent of the person who has the privilege.(5) A privilege conferred by section 57 (which relates to settlementnegotiations or mediation) may be waived only by all the personswho have that privilege.[92] The issue is whether, by discussing in court the fact that the financial accounts were provided to the plaintiffs and that it is in a difficult financial position, the defendant waived, wholly or partially, the privilege it had in the documents.[93] The plaintiffs sumitted that the defendant has waived its privilege under both s 65(2) and (3)(a).Section 65(2): voluntary disclosure[94] The relevant principles of waiver under s 65(2) were set out in Houghton v Saunders where the court said:19[55] It is possible to distil the following principles from the case law:(i) Where a party's use of privileged material destroys its confidentiality, the privilege will be treated as impliedly waived, even if that was not the party's actual intention: Equiticorp Industries Group Ltd v Hawkins [1990] 2 NZLR 175 at 180.(ii) Waiver can occur pre trial: Equiticorp; Chandris Lines Ltd v Wilson & Horton Ltd [1981] 2 NZLR 600.(iii) whether "a significant part" of privileged material has been disclosed as required by s 65(2) will depend on the substance rather than the quantity of privileged material that is disclosed: Bete Fog Nozzle Inc v Delavan Ltd & Ors HC19 Houghton v Saunders (2009) 19 PRNZ 476 (HC).Auckland CIV-2008-404-000169, 18 June 2008 Rodney Hansen J at [23].(iv) disclosure of the existence of a privileged document as distinct from its contents will not normally amount to implied waiver: Equiticorp at 180; Chandris Lines at 611; Shannon v Shannon [2005] 3 NZLR 757 (CA). In so far as Tau v Durie [1996] 2 NZLR 190 may be authority to the contrary, it should not be followed.(v) deliberate disclosure of a complete copy of the privileged document will amount to waiver: Equitcorp at 180; Chandris Lines at 611.(vi) deliberate disclosure of some of the content of the privileged document will not necessarily amount to an implied waiver but may do so: Opthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA) at 154; Astrazeneca Ltd v Commerce Commission & Anor (2008) 12 TCLR 116 at [39].(vii) the test to be applied is whether in all the circumstances the conduct is inconsistent with maintaining the confidentiality of the privileged material in a way that could lead to injustice if the privilege is upheld: Opthalmological Society at 154. This test although enunciated in a pre- Evidence Act decision, is still applicable to a consideration of both s 65(2) and s 65(3)(a): Astrazeneca at [31] — [39].[95] The third, fourth, fifth and seventh principles are the most relevant to the present case.[96] The plaintiffs submitted that the substance of the financial accounts in the context in which they were communicated to the plaintiffs is that the defendant is impecunious and its financial position is worsening. Counsel submitted this formedthe "significant part" of the privileged material that was disclosed to the court. Theysaid the purpose for doing so was to alert the court to the concerns about thedefendant's solvency and the potential consequence that the Otahuhu IntermediateSchool proceeding might not proceed. The plaintiffs submitted that the disclosure isnow inconsistent with the defendant's claim for privilege.[97] The plaintiffs' second argument is that if privilege is upheld, it could lead toan injustice to the plaintiffs. They submitted that following numerous statements tothe court by both parties about the defendant's concerning financial state, it wouldnow be unfair to allow the defendant to claim privilege in proceedings brought todetermine whether it is insolvent. The plaintiffs submitted that, as a result, the courtin the liquidation proceeding would be aware of the defendant's concerns over itsfinances, yet would be unable to have regard to the most important documents in the proceeding.[98] I refer to the relevant evidence, which are the memoranda of counsel dated 31 July and 31 October 2014, set out above. I also refer to the financial accounts over which the defendants seek to retain privilege.[99] Looking at the financial accounts, I reject the plaintiffs' submission that thesubstance of the financial accounts is that the defendant is impecunious and its position is worsening. This is due to my finding above that the plaintiffs are not currently in a position to prove that the defendant is insolvent. The substance of thefinancial accounts is a breakdown of the defendant's revenue and expenses, and to provide an objective view of the company's financial state. No part of this was disclosed to the court. The memoranda filed by counsel were filed for the purpose of adjourning the trial pending inquiries by the plaintiffs and their accountants into thedefendant's financial state. The memoranda do not go beyond stating that there aregeneral concerns over the defendant's liquidity and that these are being investigated.No further elaboration was provided as to what those concerns were. Indeed, the memoranda only alert the court to the fact that the parties are collaborating in order to minimise costs and judicial time, and to narrow the issues for the trial.[100] In light of these findings, I do not consider that the conduct of the parties, and the defendant in particular, is inconsistent with maintaining confidentiality of the privileged material. Any mention of the financial accounts or the state of the company was always in general terms only and in the context of pursuing negotiations and determining the continuation of the proceedings.[101] As such, a court hearing the liquidation application would only be aware ofthe fact that there have been concerns over the defendant's liquidity, and that theplaintiffs led the enquiries into this issue. In any application for liquidation, it is expected that there are financial concerns about the party on the receiving end of theapplication. There is no injustice that would result if the financial accounts remain privileged.[102] I find that there was no waiver under s 65(2).Section 65(3)(a): putting the privileged communication in issue in a proceeding[103] The principles applicable to putting privileged documents in issue in a proceeding were reviewed in Astrazeneca Ltd v Commerce Commission.20 There Panckhurst J stated:[39] To my mind the judgments in Opthalmological Society and Shannon indicate where the boundaries of s 65(3)(a) lie. While the former espouses a test based on the Court's objective judgment as to the consistency of the claimant's conduct with maintaining the privilege, the discussion in Shannon elucidates the principles which underpin that test. The mere relevance of a privileged communication to an issue in the case provides no basis for waiver. Even a party's asserted reliance upon a privileged communication is generally insufficient. Waiver occurs where a party both asserts reliance upon the privileged communication and also seeks to inject the substance of the communication in evidence. At that point an abuse of the privilege exists. The claimant cannot have the benefit of reliance upon the substance of the advice and still seek to shield that advice from disclosure to the other side. To permit this would give rise to unfairness in the required sense, in that the party's conduct would be offensive to the trial process.[104] It follows that to show that a waiver occurred under s 65(3)(a), the plaintiffs must demonstrate that the defendant both asserts reliance upon the privileged communications and at the same time seeks to inject its substance into evidence.[105] The essence of the plaintiffs' submission is that the defendant's poor financial position has been put in issue in the procedural sense. The plaintiff submitted this occurred in the Otahuhu Intermediate School proceeding when the defendant relied upon its limited funds to not comply with court orders, and when both parties reliedon the defendant's financial position to adjourn the trial.(a) In the Otahuhu Intermediate School proceeding, the defendant did not file a statement of defence until over a year after the proceedings were20 Astrazeneca Ltd v Commerce Commission (2008) 12 TCLR 116 (HC).filed. The statement of defence was filed only after the plaintiffs applied for a default judgment.(b) The parties were ordered to engage experts to attend an experts'conference in November 2013. The defendant refused to comply withthe order. In June 2014 the defendant's solicitor advised the plaintiffsthat "it has little in the way of assets and that a judgment is likely to be of little value." This exchanged was included in full in the plaintiffs' memorandum dated 23 June 2014.(c) The parties' shared concerns about the defendant's liquidity and theneed for time to investigate these in order for the plaintiffs to determine whether the proceeding should be continued was the basisfor the parties' request of adjournment of trial in their 31 July 2014memoranda.(d) There have been three further adjournments to allow the plaintiffs toinvestigate the defendant's financial status. There has been no furtherprogress since.[106] The plaintiffs submitted the adjournments have effectively granted the defendant a stay of the proceeding, due entirely to the issue of the defendant'sfinancial stability. The plaintiffs submitted that the defendant has disclosed this information for tactical advantage, and now seeks to shield the same information with privilege.[107] I disagree with the proposition that a party can waive its privilege in respect of a communication in a purely procedural manner. There is a stark difference between:(a) producing a document, or part of a document, in evidence and relyingupon its contents in one's submissions to advance one's position inlegal proceedings; and(b) not producing the document, or any part of it, and not relying on anyof its contents in one's submissions, but merely referring to itsexistence and that an analysis of the contents is underway to assist the parties in settlement negotiations.[108] In none of the procedural steps described above did either party rely on the contents of the financial accounts. Nor did either state the outcomes of any of the enquiries that were carried out. The defendant did not, at any point, purport to assert reliance on the financial accounts nor did it seek to inject their substance into evidence in any of the procedural steps. As found above, all mentions to the court ofthe defendant's financial position were made in the context of the parties negotiatinga settlement or determining the future of the proceeding. These matters are entirely independent of the matters the court would consider in proceedings for negligence.[109] Even if this is not the case, it cannot be disputed that the actual financial accounts were never produced to the court until they became the subject of thisdecision. To quote Panckhurst J, a party's reliance on a privileged communication, orits mere relevance, are generally insufficient to establish a waiver.[110] Accordingly, I find that the defendant did not waive the privilege in the financial accounts.Conclusion[111] The defendant is entitled to orders as moved.[112] Counsel invited me to a convene a telephone conference before 25 August 2015, which is the current expiry date for the order restraining advertising so that the following matters could be discussed, namely:(a) Whether the leave application pursuant to s 288(5) should be heard before the substantive proceeding, and possibly on the date currently reserved for a fixture for the substantive proceeding, namely 3 September 2015;(b) Whether any extension should be ordered in respect of the order made in my minute of 17 June 2015 restraining advertising; and(c) What directions are appropriate for the exchange of submissions and preparation of a casebook of the pleadings and affidavits.Orders[113] I order:(a) The plaintiffs are prohibited from disclosing or relying on thedefendant's financial accounts, both draft and final, for the financialyears ended 2012, 2013 and 2014; and(b) The Registrar shall convene a telephone case management conference with counsel for the purpose of discussing the matters referred to in [112] hereof.Costs[114] The defendant's application expressly sought an order reserving the costs ofand incidental to this application. In view of that position, costs are reserved.____________________JA Faire J