Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: French CJ,Kiefel,Bell,Gageler,Keane JJ.
• Judgment Date: 06 November 2013
• Neutral Citation: [2013] HCA 46
• Court: High Court
• Docket Number: S118/2013
• Date: 06 November 2013

[2013] HCA 46

HIGH COURT OF AUSTRALIA

French CJ, Kiefel, Bell, Gageler and Keane JJ

S118/2013

Expense Reduction Analysts Group Pty Ltd & Ors

Appellants

and

Armstrong Strategic Management and Marketing Pty Limited & Ors

Respondents

Representation

N C Hutley SC with E A J Hyde and S Kanagaratnam for the appellants (instructed by Norton Rose Fulbright Australia)

I R Pike SC with C N Bova for the respondents (instructed by Marque Lawyers)

Civil Procedure Act 2005 (NSW), Pt 6.

Evidence Act 1995 (NSW), s 122.

Uniform Civil Procedure Rules 2005 (NSW), rr 21.2, 21.3.

Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited

Practice and procedure — Discovery — Parties to commercial dispute ordered to give general discovery — Documents subject to client legal privilege mistakenly listed as non-privileged in appellants' Lists of Documents — Privileged documents inadvertently disclosed to respondents' solicitors — Whether Supreme Court had power to permit amendment of Lists of Documents — Whether Supreme Court had power to order respondents' solicitors to return documents.

Confidential information — Whether correct basis of jurisdiction for court to order return of inadvertently disclosed documents.

Client legal privilege — Whether privilege had been waived — Whether appellants' actions inconsistent with maintenance of claim to privilege.

Words and phrases — ‘case management’, ‘client legal privilege’, ‘discovery’, ‘inadvertent disclosure’, ‘waiver’.

ORDER

1. Appeal allowed.

2. Application for special leave to cross-appeal dismissed.

3. Set aside orders 4 to 10 of the Court of Appeal of the Supreme Court of New South Wales made on 18 December 2012 and, in their place, order that:

(a) the appeal to that Court be dismissed; and

(b) the respondents pay the appellants' costs of the appeal to that Court.

4. Set aside order 3 of the Supreme Court of New South Wales made on 4 May 2012 and, in its place, order that the respondents pay the appellants' costs of the Amended Notice of Motion dated 24 February 2012.

5. The respondents pay the appellants' costs of this appeal and the respondents' application for special leave to cross-appeal.

6. With respect to the documents numbered 9, 10, 11 and 19 in Exhibit A Confidential in the Supreme Court of New South Wales, within seven days of the making of this order, the respondents must:

(a) deliver up all hard copies of the four documents in their possession, custody or power to the solicitors for the appellants;

(b) return any computer disk containing copies of the four documents in their possession, custody or power to the solicitors for the appellants;

(c) delete all electronic copies of the four documents; and

(d) provide written confirmation of compliance with this order to the solicitors for the appellants.

7. The interim order with respect to confidential documents made by consent on 31 October 2013 be continued.

1 French CJ, Kiefel, Bell, Gageler and Keane JJ. In 2010 the three respondents (together ‘the Armstrong parties’) commenced proceedings against the 10 appellants (together ‘the ERA parties’) in the District Court of New South Wales. They sought damages for the loss which they alleged they had suffered by reason of the ERA parties' conduct in connection with the entry into, performance and termination of agreements under which the parties established an insurance expense reduction consulting business in Australia and overseas. The proceedings were subsequently transferred to the Supreme Court of New South Wales. This appeal, however, focuses upon events tangential to the main proceedings — the inadvertent disclosure of documents subject to client legal privilege during the process of discovery.

2 At all relevant times, the Armstrong parties were represented by Marque Lawyers. At the time of the disclosure, Norton Rose Australia (as that firm was then called) acted for the individual appellants. Two of the corporate appellants were represented by another firm. However, the appellants have a common interest in the documents and Norton Rose has acted for all the ERA parties since these proceedings were brought.

3 On 22 July 2011, the parties were ordered to give verified, general discovery by a judge of the Supreme Court. That power is provided by r 21.2 of the Uniform Civil Procedure Rules 2005 (NSW) (‘the UCPR’) made under the Civil Procedure Act 2005 (NSW) (‘the CPA’). Part 6 of the CPA also gives duties and powers of case management to courts in New South Wales.

4 After Norton Rose served its clients' verified Lists of Documents and disks on Marque Lawyers, some correspondence was exchanged between the two firms. The upshot of this correspondence was a claim by Norton Rose that a number of documents, the subject of client legal privilege, had inadvertently been disclosed contrary to its clients' instructions. Marque Lawyers declined to return the documents and to give the undertaking which Norton Rose sought, not because it disputed the assertion of inadvertence, but because of its view that any privilege attaching to the documents had been waived.

5 The matter came before Bergin CJ in Eq on a motion by the ERA parties for injunctive and other relief. By the time of her Honour's decision, 13 documents remained in dispute. Her Honour found that nine of the documents were disclosed inadvertently 1. The effect of certain of the orders

made by her Honour was that the disks were to be returned by Marque Lawyers and replaced by Norton Rose, after removal of those nine documents from the disks. The Court of Appeal allowed the Armstrong parties' appeal on the basis that the mistakes in disclosure of the documents in the discovery process would not have been obvious to a reasonable solicitor and dismissed the ERA parties' cross-summons seeking leave to cross-appeal with costs 2.

6 The proceedings concerning the 13 documents were substantial. The hearing before the primary judge extended over some three days, during which evidence was given by the solicitors involved and those at Norton Rose responsible for discovery. The appeal resulted in lengthy reasons for judgment by the Court of Appeal.

7 Proceedings of this kind and length concerning a tangential issue should have been averted. There was no need to resort to an action in the equitable jurisdiction of the Supreme Court to obtain relief. That Court has all the powers necessary to deal with an issue relating to discovery and which required, essentially, that a party be permitted to correct a mistake. Those powers exist by virtue of the Court's role in the supervision of the process of discovery and the express powers given by Pt 6 of the CPA to ensure the ‘just, quick and cheap resolution of the real issues in the dispute or proceedings.’3 Those powers should have been exercised in relation to each of the 13 privileged documents for the reasons which follow.

The discovery process and the disclosure

8 Discovery by the ERA parties involved approximately 60,000 documents, a task which the primary judge understandably described as ‘huge’ 4. To undertake this task, and in order to identify documents for which privilege should be claimed, Norton Rose used an electronic database to store documents in a centralised, accessible manner. The fields within the database included document type and description. The person reviewing the documents coded them for ‘Relevance’ and ‘Privilege’. If a selection to ‘Yes’ or ‘Part’ was not

made in the Privilege field, the default position for Privilege was left as ‘No’ and the document would appear in the non-privileged section of the Lists of Documents.

9 The persons who were given the task of reviewing the documents were not very experienced in the process of discovery. Nevertheless, it has not been suggested that their level of competence was insufficient for the task. The reviewers were briefed on the issues in the proceedings and the principles relating to privilege. They were told that the clients had instructed Norton Rose that client legal privilege was to be claimed in respect of all documents to which it attached. After their review, a more senior solicitor conducted an ‘audit’ of the reviewed documents by randomly checking descriptions of documents against the printed Lists of Documents.

10 The Armstrong parties do not suggest that the electronic means utilised to sort and store the documents was inappropriate or inadequate. They make no claim as to the reasonableness of the efforts made by the ERA parties to correctly distinguish privileged and non-privileged documents. Some of the reviewers later gave evidence that they must have made an error in failing to activate the ‘Yes’ instruction, so that the database defaulted to no privilege. How the error came to be made is not to the point. The fact is that a number of privileged documents, including the 13 in question, which were not intended to be listed as non-privileged were in fact listed as such.

The claim of inadvertence and the response

11 Marque Lawyers received the disks which contained the privileged documents in question on 19 October 2011. It did not immediately inspect them, but forwarded them to the third respondent, Mr Armstrong, the following day. On 25 November 2011, Ms Hannah Marshall, a Senior Associate of Marque Lawyers, commenced the process of inspection of the documents. From looking at annotations made by Mr Armstrong, she was able to observe that a number of the documents appeared to relate to communications between the corporate ERA parties and lawyers. Ms Marshall, after consulting with the responsible partner of Marque Lawyers, Mr Michael Bradley, wrote to Norton Rose pointing to an apparent inconsistency, whereby client legal privilege had been claimed with respect to some but not all...