Baulderstone Hornibrook Pty Ltd v Queensland Investment Corporation [2011] NSWSC 127 (4 March 2011)

Last Updated: 14 April 2011

Supreme Court New South Wales

Case Title:	Baulderstone Hornibrook Pty Ltd v Queensland Investment Corporation
Medium Neutral Citation:	[2011] NSWSC 127
Hearing Date(s):	22 & 23 February 2011
Decision Date:	04 March 2011
Jurisdiction:
Before:	Hammerschlag J
Decision:	Referee's report rejected
Catchwords:	PRACTICE AND PROCEDURE - EVIDENCE - waiver of privilege - where solicitors agreed not to maintain privilege in certain file notes - extent of waiver brought about by the arrangement properly construed - where questions related to the production of documents including the extent of the waiver referred to a referee for investigation and report - whether the report should be adopted or otherwise
Legislation Cited:	Evidence Act 1995 (NSW) Building and Construction Industry Security of Payment Act 1999 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Civil Procedure Act 2005 (NSW)
Cases Cited:	Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 Vetter v Lake Macquarie City Council (2001) 202 CLR 439 H v Schering Chemicals Ltd [1983] 1 All ER 849
Texts Cited:
Category:	Procedural and other rulings
Parties:	Baulderstone Hornibrook Pty Limited - Plaintiff Queensland Investment Corporation - Defendant
Representation
- Counsel:	Counsel: S.A. Kerr SC with T.J. Breakspear - Plaintiff J.E. Sexton SC with N.J. Kidd and W.A.D. Edwards - Defendant
- Solicitors:	Solicitors: Clayton Utz - Plaintiff Allens Arthur Robinson - Defendant
File number(s):	2007/266669
Publication Restriction:

Judgment

1. The plaintiff/cross-defendant and the defendant/cross-claimant (or "QIC") are parties to a substantial building and construction dispute arising out of a Design and Construct Contract dated 5 June 2003 for the redevelopment of a shopping centre at Blacktown, NSW ("the Contract"). They have had many interlocutory skirmishes, including about discovery and production of documents. This is another.
   
2. In par 115 of its Technology and Construction List Statement, the plaintiff contends that the Principal's Representative under the Contract ("APP") did not act independently in performing certain functions which it was to perform and which are described in cl 23.1(d) of the Contract. Those functions concern granting extensions of time, certification of payments, certification of Practical Completion and valuation ("cl 23.1(d) functions"). The plaintiff contends that the defendant and others on its behalf, including solicitors acting for it, influenced the Principal's Representative so to act.
   
3. On 7 March 2008, by consent, the Court made orders requiring both parties to give discovery in categories. The plaintiff was to discover, amongst others, documents in the following category (described as Category 2):
   

Documents which set out, refer to, record, describe or consider:

(a) the functions of the Principal's Representative which are described in clause 23.1(d) of the Contract as certification functions;

(b) the performance or purported performance of the functions of the Principal's Representative described in (a) above;

(c) the manner in which the Principal's Representative was to interact or was in fact interacting with QIC, WT, RCP and [BHK] in the performance of the functions described in (a) above; and

(d) the interaction between the Principal's Representative (on the one hand) and any or all of QIC, WT, RCP and [BHK] (on the other hand) in the performance of the functions described in (a) above

4. WTT is a firm of quantity surveyors. RCP is a management consultant. The plaintiff asserts that they acted as the defendant's agent.
   
5. The plaintiff initially contended that file notes made by the defendant's solicitors, Allens Arthur Robinson (variously referred to as Allens and AAR) should have been discovered under Category 2. The defendant took the stance that its solicitors' file notes were not in its control, custody or possession and needed to be subpoenaed from its solicitors.
   
6. The defendant's solicitors, however, sensibly agreed to waive the requirements for a subpoena and, by a letter dated 14 August 2009 ("the August letter") proposed an arrangement (which was agreed to) in terms which included the following:
   

We will review the file notes within Allens' possession and produce any such file notes which are relevant to the first tranche categories of discovery and which are not the subject of a valid claim for privilege by QIC. Consistent with our client's approach to discovery, QIC would not seek to maintain privilege in file notes recording communications with APP, RCP or WTP in relation to the functions described in clause 23.1(d) of the Contract (emphasis added).

7. I will refer to the emphasised words as "the formulation".
   
8. There is no issue that under this arrangement the defendant waived privilege which it would otherwise have had under s 118 of the Evidence Act 1995 (NSW) to object to production of the documents so described.
   
9. Allens then produced documents on the footing that the waiver does not extend to documents recording communications between Allens and QIC to which APP, RCP or WTP were not party or communications between (and internal to) Allens lawyers whether or not these were in relation to the functions described in cl 23.1(d) of the Contract. Put positively, the view was that the waiver was restricted to file notes made to record communications between the solicitors on the one hand and APP, RCP or WTP on the other.
   
10. During the course of the redevelopment project the plaintiff made claims on the defendant under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("SOPA") in respect of which claims the Principal's Representative carried out certain functions, in addition to the cl 23.1(d) functions. In producing documents under the arrangement the defendant took the position that for a document to be covered by the waiver, the communication which it recorded had to have been for the dominant purpose of a cl 23.1(d) function and not for the dominant purpose of dealing with SOPA claims. Some documents produced were redacted to extract records of communications which did not satisfy this test.
    
11. The plaintiff takes a wider view of the ambit of the waiver. Its position is that any solicitor's file note which recounts, reflects or describes a communication between an Allens solicitor (or for that matter anyone else) on the one hand and APP, RCP or WTP on the other in relation to cl 23.1(d) functions, amounts to a recording by the solicitors of a communication with the named parties within the formulation. So for example, if an Allens solicitor, in the course of seeking counsel's opinion recounted the substance of a communication which he or she understood another Allens solicitor (or anyone else) had had with APP, RCP or WTP this would be a recording of communications within the formulation.
    
12. Perhaps somewhat unusually (given that the division between the parties concerns an interlocutory step) they agreed, and the Court ordered, that there should be referred to a referee for enquiry and report under Pt 20, r 20.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) relevantly the following questions (which the referee referred to as Questions 1 and 2):
    

[W]hether the Defendant/Cross Claimant is entitled to claim privilege over the redacted material in the file notes listed in Schedule 1 of the Plaintiff's Notice of Motion dated 11 October 2010;

[W]hether the Defendant/Cross Claimant has provided all file notes created by partners, solicitors or other employees of Allens Arthur Robinson that fall within the categories of discovery and were agreed to be provided pursuant to Allens Arthur Robinson's letter dated 14 August 2009

13. On 1 December 2010, after enquiry which included the taking of oral evidence from Mr Young of the defendant's solicitors, the referee Mr AP Whitlam QC, reported.
    
14. It is not necessary to set out the entirety of the report. The pertinent paragraphs are the following:
    

[19] Ascertaining the true meaning of the expression " file notes recording communications with APP, RCP or WTP in relation to the functions described in clause 23.1(d) of the Contract " is critical to the disposition of questions 1 and 2 in this reference.

QIC submitted:

"Properly understood, the waiver of privilege set out in the AAR 14 August 2009 letter did not include a waiver of privilege over those parts of the AAR file notes that record communications between QIC and AAR (to which APP, RCP or WTP were not party) ( QIC Exclusive Communications ) or communications between AAR lawyers ( Internal AAR Communications ) whether or not those parts of file notes refer to the contents of communications had with APP, RCP or WTP in relation to certification functions".

The word " recording " was said to be narrower than the words used to identify the relevant documents in category 2. Further, it was argued that a file note made of a QIC Exclusive Communication or an Internal AAR Communication was made to record that communication. It was a record of that communication, not of some other communication.

[20] Once it is understood that QIC is waiving its privilege in respect of the file notes of its solicitors, I see no reason to accord the words " recording " such a strained construction. After all, the word " communications" is not restricted to oral communications. File notes might record contents of written communications too. If a note of internal discussions or of discussions with a client records in any way communications of the type described, it would be covered. The waiver was not expressed to be limited to contemporaneous notes of conversations with persons such as Mr Aquilina. On the other hand, in light of the history of QIC's discovery, it was plainly enough intended by AAR that the scope of the waiver would be confined in subject matter to the " functions described in clause 23.1(d)" .

[23] The initial identification of the file notes to be considered was undertaken by a paralegal. Whatever instructions may have been given to her, the exercise must have been flawed from the outset because AAR's view of the scope of the waiver was, in my opinion, fundamentally wrong. Taken with the astonishing fact that only 500 file notes were initially identified as potentially relevant out of a mass of material in 45 boxes, it may readily be inferred that many types of file notes were simply not examined at all because on their face they were seen to be QIC Exclusive Communications, Internal AAR Communications, Activity Notes or Task Lists in the way described by Mr Young.

[26] Many of the redactions are explained as relating to what Mr Young calls SOPA Assistance Functions, which he is at pains to distinguish from certification functions in respect of payment claims under the Contract. This approach is muddled. During its discovery QIC was frequently anxious to maintain that distinction for the purpose of asserting a " dominant purpose " in respect of a specific " communication ". But here production by AAR is not concerned with any such purpose. The obligation to produce turns on the scope of the agreed waiver. A communication that relates in any way to both types of payment claim will be covered by the waiver. Common sense suggests that there is likely to be an overlap in many communications on this topic (emphasis added).

[30] If my construction of the waiver is correct, it follows that the redactions in the 57 file notes will need to be reconsidered. I have, of course, seen the redacted material and I must be careful not to disclose the contents which were provided to me in confidence. However, I give a hypothetical example. Mr Young had a conversation with Mr Aquilina concerned solely with what are undeniably certification functions. Nothing else was discussed. He made no contemporaneous note. Immediately afterwards he spoke to another person, repeating the substance of his discussion with Mr Aquilina and made a contemporaneous note of that part of their conversation. Then, in my opinion, that file note will be caught by the waiver contained in AAR's letter of 14 August 2009.

[35] In my opinion, QIC is not entitled to claim privilege over all the redacted material referred to in question 1.

15. There are competing motions before the Court concerning the referee's findings and conclusions set out above.
    
16. By motion dated 28 January 2011, the plaintiff seeks adoption of the report, together with orders requiring production of the documents which should be produced if the report is adopted.
    
17. By motion dated 22 February 2011, the defendant moves that the findings in the referee's report in relation to the operation of the formulation be rejected so as to result in questions 1 and 2 both being answered yes. Alternatively it seeks orders that its discovery not include making available to the plaintiff for inspection AAR file notes:
    

(a) to the extent to which they record communications between solicitors of AAR and representatives of QIC or communications between solicitors of AAR and other solicitors of AAR (in each case being communications to which APP, RCP or WTP were not a party); or

(b) to the extent to which the file notes refer to but are not a contemporaneous record of communications with APP, RCP or WTP; or

(c) to the extent to which the file notes record communications with APP, RCP or WTP the subject matter of which is not a function described in clause 23.1(d) of the Contract (noting that the Defendant may have regard to the dominant purpose of each particular communication in determining that question).

18. The plaintiff submitted that the report should be adopted because the referee's conclusion as to the meaning of the formulation is a matter involving the meaning of words which is a question of fact, and generally, a referee's finding of fact should not be re-agitated in the Court; see Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].
    
19. I do not accept this submission.
    
20. Even if the meaning of words is to be regarded as a question of fact, the substance of the referee's report, presently relevant to the dispute, concerns the effect and ambit of the waiver brought about by the formulation. This is a question of law: see Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at [450]. Additionally, the report is sought to provide a foundation for consequential orders for production, which requires the Court to invoke its compulsory processes, a matter entirely in its hands. It would be inappropriate for those processes to be invoked on a mistaken premise whether factual or legal. To do so would be inimical to the overriding purpose of the UCPR to facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated by s 56 of the Civil Procedure Act 2005 (NSW).
    
21. It is convenient first to deal with question 2 because the defendant correctly did not persist in the untenable contention that for a document to relate to the exercise of cl 23.1(d) functions, the communication must have been for the dominant purpose of the exercise of those functions. The document need do no more than record a communication which is in relation to such a function.
    
22. For its part, the plaintiff correctly did not seek to sustain the referee's conclusion in par 26 of the report that a communication that relates in any way to both types of payment claim will be covered by the waiver. Clearly the communication must relate to the exercise of cl 23.1(d) functions in a manner relevant to a fact in issue - otherwise it is not discoverable; see UCPR Pt 21, r 21.2(4). I accordingly reject the report in this respect. The defendant is entitled to maintain privilege which it has in file notes which do not so relate to the exercise of cl 23.1(d) functions.
    
23. For the following reasons, I also reject the report with respect to the referee's finding as to the ambit of the waiver.
    
24. The meaning of the formulation is to be gauged by what a reasonable person would have understood it to mean, having regard to the language used, the surrounding circumstances known to the parties and the objects which they were intending to secure. Neither party put anything to the contrary.
    
25. To my mind, a solicitor's file note recording a communication has an ordinary meaning and connotation. It means a note which a solicitor makes of a communication with someone else which he or she has (or witnesses) and which is made for the purpose of creating a memorial of that communication. It does not in its ordinary meaning mean a documentary recounting or reporting in a communication to a third person of a conversation or other communication which the solicitor has had with the someone else (in this case APP, RCP or WTP).
    
26. This conclusion can also be reached by a different process of reasoning.
    
27. Firstly, leaving aside the requirement for the communications to be in relation to cl 23.1(d) functions (which has been dealt with above), where the formulation refers to communications with APP, RCP or WTP this is undoubtedly a reference to communications between the solicitors and those persons. What is to be produced are the solicitor's file notes recording communications with others. This means communications between the solicitors on the one hand and APP, RCP or WTP on the other. The formulation is not concerned with solicitors' file notes which record communications which the solicitors have with any one but APP, RCP or WTP or with communications which anyone other than them has had with APP, RCP or WTP.
    
28. Secondly, the formulation is not concerned with a solicitors' file notes which record communications with persons other than APP, RCP or WTP but which reports a communication with APP, RCP or WTP. This would not be a recording of a communication between the solicitors and APP, RCP or WTP but a reporting of such a communication.
    
29. By way of example, a file note of a conference between solicitors and counsel, which recounts a conversation that the instructing solicitor had at some time had with APP, RCP or WTP does not "record" a communication between that solicitor and APP, RCP or WTP. Rather, it records a communication with counsel in which the occurrence of a communication between the solicitor and the relevant designated person is reported.
    
30. Thirdly, the August letter was written against the background of the orders of 7 March 2008. Category 2 distinguishes between recording on the one hand and referring to or describing on the other hand. The formulation is restricted to recording. The documents sought by the plaintiff would be covered if the formulation had covered communications referred to or described rather than recorded. It does not. The August letter was also written against the background of an assertion that the solicitors themselves were protagonists in unduly influencing the Principal's Representative.
    
31. Finally, I think that the word "recording" in the formulation contemplates a memorial which would be regarded as an original or primary source, that is a document which is in effect a register of information, provided by someone with direct knowledge of the fact recorded ( cf H v Schering Chemicals Ltd [1983] 1 All ER 849 at 852, per Bingham J).
    
32. Although one would expect in the ordinary case that such documents would be contemporaneous, or close to contemporaneous, this is not necessarily the case.
    
33. At par 20 of the report the referee stated, "Once it is understood that QIC is waiving its privilege in respect of the file notes of its solicitors, I see no reason to accord the words " recording " such a strained construction."
    
34. To my mind the question was what documents are covered by the words of the formulation on their proper construction. I would, with respect, doubt the efficacy of the referee's reasoning which propelled him to conclude that the defendant's construction of the words in the formulation was "strained" by positing their application to a category of documents (i.e. solicitor's file notes) which application itself depended on the meaning of those very words.
    
35. The defendant put a separate submission that if the August letter had the effect for which the plaintiff contends it was written in error, because the subjective intention of the defendant was otherwise. An affidavit by Adrian Zanatta, senior legal advisor and in-house solicitor to the defendant, sworn 14 February 2011, was sought to be read. In it Mr Zanatta deposes to his subjective understanding of the meaning of the August letter which was sent on his instructions. The plaintiff objected to admission of the affidavit on the basis that it is irrelevant, a matter in which I said I would rule in the judgment. It was not put by the defendant that the words used in the August letter were not intended to be used or that they should be given a meaning other than their ordinary meaning. I consider Mr Zanatta's subjective understanding as to the legal effect of the words conveyed to the plaintiff to be irrelevant. I accordingly reject the affidavit.
    
36. It follows that the plaintiff's motion insofar as it seeks adoption of the report and orders dependent upon adoption, must be dismissed. It follows further that the defendant's motion succeeds to the extent that the referees report is rejected but not so as to result in an unqualified yes to both questions answered by the referee or in orders in the precise terms in its motion.
    
37. Having regard to my conclusions, the defendant will no doubt have to revisit its discovery.
    
38. I will hear the parties on the form of orders required in the light of my findings and otherwise for the further management of the proceedings. I will also hear them on costs.
    

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