WHAKATANE DISTRICT COUNCIL V BAY OF PLENTY REGIONAL COUNCIL HC ROT CIV-2007-463-000606

WHAKATANE DISTRICT COUNCIL V BAY OF PLENTY REGIONAL COUNCIL HC ROT CIV-2007-463- 000606 13 March 2008IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY CIV-2007-463-000606UNDER the Judicature Amendment Act 1972 IN THE MATTER OF of the Local Government Act 2002 BETWEEN WHAKATANE DISTRICT COUNCIL Applicant AND THE BAY OF PLENTY REGIONAL COUNCIL Respondent Hearing: 11 March 2008 (Heard at Auckland) Appearances: D J Neutze and V T M Bruton for the Applicant J G Miles QC for the Respondent Judgment: 13 March 2008JUDGMENT OF DUFFY J [Re Admissibility of Document]This judgment was delivered by Justice Duffy on 13 March 2008 at 11.50 am, pursuant to r 540(4) of the High Court Rules Registrar/Deputy Registrar Date:Counsel: J G Miles QC P O Box 4338 Auckland for the Respondent Solicitors: Brookfields P O Box 240 Auckland for the Applicant Cooney Lees Morgan (K J Catran) P O Box 143 Tauranga for the Respondent[1] The applicant seeks leave to file a further affidavit of Sheri Bartlett in support of its application for judicial review. Leave is required because the proceeding has been set down and the hearing is to commence next week. [2] The time for filing the applicant's evidence has long passed. In terms of the timetabling directions made for this proceeding, the applicant was to file its evidence in chief by 30 November 2007 and its evidence in reply by 31 January 2008: see Minute of Ronald Young J, 16 October 2007. The application for leave to file the evidence out of time was filed only last week on 4 March 2008. [3] The respondent opposes the applicant's application. It does so for two reasons. First, the affidavit is late and is well outside the timetable directions for filing evidence of the applicant. Secondly, and more importantly, the only purpose of the affidavit appears to be to introduce an attachment that is a letter between the respondent and its legal advisers (the "disputed document"). A document such as this would ordinarily enjoy the benefit of legal privilege. However, the applicant has come into the hands of the applicant and the applicant wants to use the document as evidence in the proceeding. The respondent asserts that the disputed document cannot be used in this way and invites the Court to invoke its inherent jurisdiction and its equitable jurisdiction to prevent the applicant from using the document. [4] The applicant submits that the disclosure of the disputed document to the applicant strips the document of its legally privileged character. It is necessary, therefore, to examine how this document came to be disclosed. [5] Because of the urgent nature of these proceedings various short-cuts were taken in order to have the proceeding ready for hearing as expeditiously as possible. One of the short-cuts was the avoidance of the formal discovery process. In its place there has been informal discovery with the parties providing each other with copies of documents relevant to the proceeding. As can often happen in such circumstances, a step taken to hasten the progress of the proceeding has led to a dispute, which has taken up valuable time that the parties could have spent preparing for next week's hearing.[6] Because no affidavits of documents were prepared, there was no formal statement by either party as to what discoverable documents would be withheld from inspection on the ground they were legally privileged. The disputed document was included in the documents provided by the respondent to the applicant as part of the informal discovery. [7] The respondent has filed an affidavit from Tania Waikato in support of its opposition to the applicant's application for leave to introduce the second Bartlett affidavit. In her affidavit Ms Waikato deposes that the disputed document, along with copies of some other legally privileged communications, was released inadvertently and that immediately on realising this occurrence, the respondent wrote to the applicant on 27 November 2007 attempting to repair the situation. The correspondence that passed between the parties on this topic is attached to Ms Waikato's affidavit. [8] The correspondence reveals that the respondent asserted that the documents retained their legal privilege and sought undertakings from the applicant that the documents would be returned to the respondent and not be used for the applicant's purpose. The applicant responded by asserting that legal privilege was now waived and no undertaking as sought by the applicant was provided. However, when the applicant filed its evidence in chief on 30 November 2007, it had not attempted to introduce the disputed document into evidence. It had made use of another of the respondent's privileged documents that was also inadvertently disclosed in the informal discovery. This document relates to another topic and has no impact on how the disputed document should be dealt with. The applicant also did not attempt to introduce the disputed document in its reply evidence which was filed at the end of January and in early February of this year. [9] The respondent submits that once it saw the applicant had not attempted to use the disputed document as evidence to support the applicant's case, there was no need to take any formal action to protect the disputed document. It relies on Guiness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 2 All ER 716 (CA);Corporate Group Holdings Ltd v Corporate Resources Group Ltd [1991] 1 NZLR 115.[10] The applicant submits that its receipt of the disputed document means the respondent has waived its right to legal privilege for the document and the document is available for use by the applicant. The applicant cites as authority for this proposition Guiness Peat Properties Ltd; Corporate Group Holdings Ltd; and s 65 of the Evidence Act 2006. The applicant further submits that if the respondent wanted to protect the disputed document and prevent its use in Court, it should have taken formal steps to do so. In other words, the respondent should have sought an injunction from this Court restraining the applicant from using the disputed document and ordering its delivery up to the respondent. [11] It is correct that the release of a legally privileged document to an opponent in litigation will result in the loss of legal privilege. That was the position at common law (since Calcraft v Guest [1898] 1 QB 759) and it is now provided for in s 65 of the Evidence Act 2006. However, the loss of legal privilege does not automatically mean that a document that has been legally privileged becomes available for use in evidence. There is clear authority that a legally privileged document that has come into the hands of an opposing party can still be prohibited from use in evidence. [12] Courts of equity have always acted to protect confidential information. As part of this Court's equitable jurisdiction, it can act to protect confidential information through prohibiting its use. In general, the equitable cause of action of breach of confidence can be invoked to protect information: a) which has the necessary quality of confidence about it (that is it is secret or known to only a limited few); b) when the information is imparted in circumstances importing an obligation of confidence; and c) there has been an unauthorised use of the information: see Coco v A N Clarke (Engineers) Limited (No 2) 1969 RPC 41. An additional aspect of the third element of this cause of action is that the unauthorised use of theinformation will be to the detriment of the party to whom the information belongs. However, proof of detriment is not always necessary. This was recognised in Cocoat 48. [13] In a number of cases the Courts have called upon the protection equity provides for confidential information in order to resolve the problems that arise when legally privileged information is disclosed unintentionally. Cases in which the availability of equity to protect legally privileged information that has been unintentionally disclosed include Lord Ashburton v Pape [1913] 2 CH 469; Goddard v Nationwide Building Society [1987] 1 QB 670; Guiness Peat Properties Ltd; andCorporate Group Holdings Ltd. [14] There is nothing in s 65 of the Evidence Act that changes the law in this regard. The loss of legal privilege through disclosure should not be seen as the final word on the availability of that information for use. As was recognised inLord Ashburton v Pape, there is a need to distinguish between loss of legal privilege and the protection equity provides to confidential information: (at 476-477):There is here a confusion between the right to restrain a person from divulging confidential information and the right to give secondary evidence of documents where the originals are privileged from production, if the party has such secondary evidence in his possession. The cases are entirely separate and distinct. If a person were to steal a deed, nevertheless in any dispute to which it was relevant the original deed might be given in evidence by him at the trial. There would be no objection to the admissibility of the deed in evidence to say you ought not to have possession of it. His unlawful possession would not affect the admissibility of the deed in evidence if otherwise admissible. So again with regard to any copy he had. If he was unable to obtain or compel production of the original because it was privileged, if he had a copy in his possession it would be admissible as secondary evidence. The fact, however, that a document where the original copy is admissible in evidence is no answer to the demand of the lawful owner for the delivery up of the document, and no answer to an application by the lawful owner of confidential information to restrain it from being published or copied.[15] Later, in Goddard v Nationwide Building Society May LJ at 270 reconciledLord Ashburton v Pape and Calcraft v Guest in the following way:If a litigant has in his possession copies of documents to which legal professional privilege attaches, he may nevertheless use such copies as secondary evidence in his litigation; however, if he has not yet used the documents in that way, the mere fact that he intends to do so is no answer toa claim against him by the person in whom the privilege is vested for delivery up of the copies or to restrain him from disclosing or making any use of any information contained in them.[16] In Guiness Peat Properties the authorities were further reviewed and the following points of principle stated:1. Where solicitors for one party to litigation have on discovery mistakenly included a document for which they could properly have claimed privilege in Part 1 of Schedule 1 to a list of documents without claiming privilege the Court will ordinarily permit them to amend the list any time before inspection of the document has taken place. 2. However, once in such circumstances the other party has inspected the document in pursuance of the rights conferred on him by RSC Ord 24 r 9, the general rule is that it is too late for the party who seeks to claim privilege to attempt to correct the mistake by applying for injunctive relief. 3. If, however, in such a last mention case the other party or his solicitor either: a) has procured inspection of the relevant document by fraud; or b) on inspection realises that he has been permitted to see the document only by reason of an obvious mistake, the Court has the power to intervene for the protection of the mistaken party by the grant of an injunction in exercise of the equitable jurisdiction illustrated by the Ashburton,Goddard and Herbert-Smith cases. Furthermore, in my view it should ordinarily intervene in such cases, unless the case is one where the injunction can properly be refused on the general principles affecting the grant of a discretionary remedy for example on the ground of inordinate delay. Possibly there may be other exceptions to the general rule set out in (2) above. However, in my judgment the exception set out in (3) above suffices to cover the present case, save where it is too late to restore the previous status quo I do not think the law should encourage parties to litigation or their solicitors to take advantage of obvious mistakes made in the course of the process of discovery.[17] It is clear from the case law that once a document that would ordinarily attract privilege is intentionally listed in the non-privileged documents' section of an affidavit of documents and the document is made available for inspection it will then available for use by the recipient. However, the unintentional or inadvertent release of a legally privileged document can result in a Court imposing an obligation of confidence on the recipient of the document, which prohibits the recipient fromusing the document. This is more likely when it will have been obvious to the recipient that the document is one for which legal privilege would normally be invoked. Reliable evidence of this fact would be the listing of the document as legally privileged in an affidavit of documents. Key factors to obtain this protection appear to be the recipient having noticed the document was one for which legal privilege was claimed and the disclosure occurred in circumstances that would impose an obligation of confidence on the recipient. Such circumstances include the disclosure occurring through fraud or mistake. [18] The case law has not involved the disclosure of a legally privileged document in circumstances like the present. What is different in this case is the fact the disclosure occurred in the context of an informal discovery process where no affidavits of documents were prepared and, therefore, there is no express claim for legal privilege of which the applicant was aware. [19] I think it is best to approach the disputed document as if it were the subject of a claim for breach of confidential information. Until the disputed document was released to the applicants the respondents had treated it as legally privileged. The very nature of legal privilege will mean that information, which is passed between a client and his or her legal advisor, will be private, secret and known to only a few persons. Hence it will have the necessary character of confidentiality to meet the first limb of the test to establish a breach of confidence. If the disclosure has been inadvertent it will meet the third limb of the test as the disclosure will have been unauthorised. [20] An inadvertent disclosure of a legally privileged document in the context of informal discovery seems to me to be a circumstance that would import an obligation of confidence on the recipient. Hence the second limb of the breach of confidence test is met. It is clear from the case law that the inadvertent disclosure of a legally privileged document in the course of inspection of discovered documents has been treated as a circumstance importing an obligation of confidence. The only difference with informal discovery is that there is no express notice to the recipient that the document is one for which legal privilege is claimed.[21] In the context of informal discovery, the choice of informal discovery means that both parties have by agreement abandoned the usual processes that would ensure that each received proper notice of the other's privilege claims. Since both parties have elected to adopt this course of action they should accept the consequences that can arise from it. The nature of a communication between client and legal adviser should at the least suggest to an unintended recipient that the document is one for which legal privilege could be claimed. This should in turn suggest to the recipient that the disclosure requires further investigation as it may be because legal privilege has been waived but equally it could indicate an inadvertent disclosure of a legally privileged document. [22] A helpful test I think is to ask what would the reaction of both parties have been if at the time they elected to have informal discovery the issue of identification of inadvertently disclosed legally privileged documents had been raised. I think that before the disclosure had occurred and each party was still only at risk of this occurrence their reaction would have been to say that the very nature of communications between the opposing party and that party's lawyers would be enough to inform them that the documents were legally privileged. In other words as part of the informal nature of the discovery process each party would forego having express notice of privilege claims. Implied or constructive notice, to be derived from the nature of the documents, would be enough. I am sure that it would be an implied term of any informal discovery process that the failure to record what documents were legally privileged should not be a barrier subsequently to one of the parties seeking to retrieve a legally privileged document that had been inadvertently disclosed. [23] I also consider that the nature of circumstances where the parties are acting under urgency and opt for informal discovery is such that the Courts should view those circumstances as importing an obligation of confidence on the parties when it comes to protecting a party's inadvertently disclosed legally privileged information. In circumstances where the parties are acting under urgency and with a clear will to have a proceeding ready for hearing as soon as possible, equity, as a matter of good faith, would require them to make allowance for inadvertent disclosure of legally privileged information. Provided the documents are obviously of a type for whichlegal privilege is usually claimed and the party responsible for the inadvertent disclosure acts promptly to retrieve them this seems to me to be they very type of circumstance where equity would protect a document's confidentiality. [24] In this case the nature of the documents should have informed the applicant that they were legally privileged. The respondent acted promptly, once the inadvertent disclosure was realised, to repair the situation. The present stance of the applicant seems to me to have come about simply because it has received the respondent's confidential information and now wants to use it to the applicant's advantage. Had it been asked at the outset of the informal discovery process, when it was at risk of inadvertent disclosure of its legally privileged information, I am sure the applicant would have sought the implied form of protection I have described. [25] The applicant submits that in this case the time gap between the inadvertent disclosure in September 2007 and the respondent's letter of 27 November 2007 to the applicant is too great. However, I do not think that is so. First, there is no evidence to contradict the evidence of Ms Waikato that the disputed document was disclosed inadvertently and once that was realised immediate action was taken to rectify the disclosure. Given the pressures under which the parties would have been working I can understand how it could have taken between September 2007 and 27 November 2007 to realise there had been an inadvertent disclosure. Once it was realised, the respondent acted immediately. It follows that there has been no inordinate delay of a type that would disqualify the respondent from the benefit of the Court's equitable protection. [26] Another criticism the applicant makes of the respondent is that it did not apply for an injunction to protect the confidentiality of the disputed document. I consider that in the circumstances of this case, the respondent's actions in writing to the applicant's solicitors were sufficient to establish that the respondent wanted to retain the confidential nature of the document. It is correct that one method of acting to protect the confidentiality of a legally privileged document that has inadvertently been released is through an application for an injunction. However, I think that to have expected the respondent to apply for an injunction in this case would be unrealistic. The judicial review proceeding is being heard under urgency. Thediscovery of the inadvertent release of the document occurred on 27 November 2007 at the latest. The applicant was to file its evidence in chief by 30 November 2007. I consider that the respondent was entitled to wait until the applicant filed its evidence. When the respondent saw the applicant had not used the disputed document in its evidence in chief, that would have engendered in the respondent a sense of security that the inadvertently disclosed legally privileged information was not going to be used by the applicant. This sense of security would have been confirmed when the document did not appear in the applicant's evidence in reply. [27] It is true that the undertaking the respondent sought from the applicant was never provided. But, once the applicant had filed its evidence there was no active threat of the disputed document being used. I think that the respondent was entitled to assume then that the disputed document would not be used. Since discovered material cannot be used for other purposes, the respondent was also entitled to assume that the information in the disputed document would not go beyond the applicant. In such circumstances there was no pressing need for the respondent to apply for an injunction. It follows that I think the respondent has acted in a realistic and responsible way. I also think that it is appropriate for me to take notice of the likely difficulties the respondent would have faced in obtaining an injunction hearing in the Rotorua Registry of this Court in December. Court hearing time at that time of the year for the hearing of urgent applications is at a premium. Unnecessary injunction applications should not be encouraged. Until such time as the respondent saw an attempt to use the disputed document in the proceeding, the respondent was entitled to assume that the applicant was not going to use it. Hence there was no need for the respondent to take any action. [28] There is an additional factor to which I should have regard. In this case the Court's leave is required before the disputed document can be used. This is due to the timetable directions and the proceeding being set down. The applicant has received the disputed document in circumstances that impart an obligation of confidence on it. It is appropriate that this Court act to protect the confidentiality of the document. In the circumstance where the Court's leave is required for the disputed document to be filed as evidence, it would be wrong for the Court to act in a way which would countenance the misuse of the respondent's confidentialinformation. Accordingly, I decline leave to file the affidavit. I also direct, since the matter has come to this Court's attention, that the disputed document and all copies of it that the applicant has made be returned to the respondent forthwith. Since the respondent has been successful, it is entitled to costs.Result[29] The applicant is refused leave to file the second Bartlett affidavit. [30] The applicant is directed to return to the respondent all copies of the disputed document. [31] The parties have 21 days from the issuing of this judgment to file memoranda on costs. Duffy J