IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE	
CIV-2020-454-40
[2021] NZHC 221	

BETWEEN	COURTESY MOTORS LIMITED
Plaintiff	
AND	ENDEAVOUR COMMERCIAL LIMITED
Defendant	

Hearing:	On the papers	
Appearances:	J Maassen for plaintiff/respondent G Mason for defendant/applicant	
Judgment:	19 February 2021	

JUDGMENT OF COOKE J

[1]	By application dated 18 December 2020 Endeavour Commercial Ltd (ECL) applies to set aside certain claims of privilege made by the plaintiff, Courtesy Motors Ltd (CML) in relation to particular documents. The application is opposed.

[2]	When the matter was discussed at a telephone conference before the Associate Judge a timetable was set for the exchange of submissions on the basis that the application would be determined on the papers. Although the matter was initially to be addressed by the Associate Judge, it has now been referred to me as Duty Judge.

[3]	The application relies on ss 53, 54 and 65 of the Evidence Act 2006. I also deal with the matter as an application pursuant to r 8.25 of the High Court Rules 2016.

The substantive claims

[4]	CML’s substantive claim puts in issue whether, in late 2020, the parties entered into a new agreement to lease from 1 May 2020 in respect of premises already leased
COURTESY MOTORS LIMITED v ENDEAVOUR COMMERCIAL LIMITED [2021] NZHC 221 [19 February 2021]

by ECL to CML in Levin. CML’s case is that the parties did not reach agreement. ECL says that they did. CML commenced this proceeding in August 2020 seeking declaratory relief to the effect that there is no enforceable agreement to lease. ECL has filed and served a defence and counterclaim seeking a declaration as to the terms of the lease it says exists.

[5]	When CML filed a formal affidavit of documents it claimed privilege in respect of the two documents that are the subject of this application:

(a)	as document P1, being a copy of a draft deed of lease bearing the signature and initials of one of CML’s directors, Mr Gordon Powley; and

(b)	as  document  P3,  being  a  copy  of  the  draft   deed  bearing  both Mr Powley’s signature and initials and notes made by CML’s solicitor.

[6]	In support of its application challenging CML’s claims to privilege in respect of those two documents, ECL has filed and served an affidavit sworn by one of its directors, Mr Warren Diffey. In support of its opposition, CML has filed and served two affidavits, the first sworn by Mr Powley, and the second sworn Mrs Melanie Sargent, a partner in Wadham Partners, the company’s solicitors.

The factual position

[7]	ECL leased to CML the property from which it operated its business. The lease expired on 30 April 2020. Well before then the parties had entered into discussions about a new lease, primarily through Messrs Diffey and Powley. By early 2020 those discussions were well advanced. Whether or not the parties had reached agreement on issue for trial.

[8]	In any event, on 20 February 2020, ECL’s solicitors, CS Law, wrote to CML attaching a draft deed of lease. On receipt of that letter Mr Powley signed and initialled the draft. He says that he intended to seek advice from Mrs Sargent before asking his fellow director, Mr Peter Cutts, to execute it.

[9]	On 27 February 2020 Mr Powley emailed Mrs Sargent attaching P1, the draft lease, now of course signed and initialled by him, and saying:

Hi Melanie,

This is a new lease with Mr Diffey for our Levin premises, 336–340 Oxford Street, Levin (not our most trusting landlord). We have already agreed on a five year term and amount, he has not offered a right of renewal.

Would you please check the new lease carefully for Courtesy Motors Ltd … for change to special clauses that may have changed to his advantage (the building now is thirty years plus in age).

[10]	Mrs Sargent says that she reviewed the draft and in the course of doing so made a series of notes on a copy that she must have printed out in preparation for giving CML oral advice.

[11]	Negotiations between the parties continued. Mr Powley says that the implications of the Covid-19 pandemic then altered the views that he and Mr Cutts had about whether, and the terms on which, they wished to renew the lease. As a result, the negotiations petered out, the parties adopted their opposing positions in relation to the existence or otherwise of an enforceable agreement, and CML commenced this proceeding.

[12]	Mrs Sargent’s evidence is that the copy of the draft lease on her file which had not only been signed and initialled by Mr Powley but which now also incorporated her notes (P3) “… was included inadvertently in the initial disclosure”. Mrs Sargent’s affidavit continues:

[13]	Instead of returning the document, Mr Mason and Mr Rowan then relied on that document in a Statement of Defence and Counterclaim noting that Mr Powley had signed the document but did not identify that Mr Cutts had not and nor had the document been executed in accordance with the requirements of CS Law.

[14]	The inadvertent disclosure arose because of an electronic error by Cloud sharing between the barrister and solicitors acting for Courtesy Motors Limited. That resulted in the creation of a folder where the lease document identified as [P3] was not the unmarked lease being the unmarked-up lease sent by Mr Rowan. Instead, erroneously [P3] was the lease document with my working notes plainly shown identified as [P3].

[15]	When the error was noted, I wrote requesting the return of the document of [P3] immediately. A copy of that dated 25 September 2020 is annexed hereto and marked as Exhibit C (page 44).

[16]	All of the documents over which privilege is claim concern communications between Courtesy Motors Limited and me for the purpose of giving legal advice.

[13]	In his affidavit, Mr Diffey says:

I confirm that after Gordon Powley, a director of the Plaintiff, and I had negotiated an agreement to lease, my solicitors, C S Law, forwarded by post a draft deed of lease under cover of a letter dated 20 February 2020, a copy of that letter and draft lease is attached marked “A”. This is the version as provided by the defendant in its initial discovery marked [EC6].

[14]	This confirms that what the plaintiff sent to the defendant on 20 February 2020 was an unmarked draft.

[15]	Mr Diffey goes on to say that on receipt of the plaintiff’s initial disclosure he noted that the plaintiff had disclosed  a  version  of  the  deed  of  lease  signed  by Mr Powley, which also had Mrs Sargent’s notes on it, and continues:

6.	It seemed strange to me for it to be signed as the Plaintiff was denying in the proceeding that there was an agreement. Gordon and I have been dealing with leases for property since the last century so signing and returning it was normal practice for Gordon. This time it got signed and was not returned.

7.	The Plaintiff had provided a copy of its counsel John Maassen’s opinion dated 28 May 2020 which did not refer to Gordon Powley having signed the lease. A copy of that opinion is attached and marked “E”.

8.	It did not occur to me when I saw document [P3] that it had been mistakenly disclosed. There was nothing to indicate that this was the case.

[16]	In due course ECL entered an appearance by filing and serving a defence and counterclaim in which it expressly referenced P3.

[17]	At this point, CML raised the issue  of  privilege  in  relation  to  P3.  Wadham Partners wrote to Cullinane Steele on 25 September 2020 saying:

We provided the documents [P3] inadvertently with our bundle in our initial disclosure. It is a privileged communication regarding solicitor and client

work on the file. Please return the document. The document has no relevance to an objective assessment of the parties’ intentions based on communication between the parties. if you do not return the document and accept there is privilege we will apply to the Associate Justice and seek costs and file a complaint against you and Mr Mason under CCR 2012 13.9.4.

Assessment

[18]	Privilege is governed by sub-pt 8 of pt 2 (ss 53–67) of the Evidence Act 2006 which largely  codifies the common law.  For present purposes, the starting point is  s 54 which concerns legal professional privilege. Section 54(1) provides:

A person who obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was—

(a)	Intended to be confidential; and

(b)	Made in the course of and for the purposes of—

(i)	the person obtaining professional legal services from their legal adviser; or

(ii)	the legal advisor giving such services to the person.

[19]	The unmarked draft lease sent by ECL’s solicitors to CML’s directors under cover of their letter of 20 February 2020 is clearly an open document, and not a document in respect of which either party can claim privilege. The question is whether privilege can be claimed in relation to the copies of the document that were written on by CML’s representatives.

P1: The Executed Copy

[20]	By signing and initialling the copy of the document Mr Powley effectively created a new document (P1). He emailed it to Wadham Partners on 27 February 2020. The issue is whether CML is entitled to claim privilege in respect of P1. The test is whether the document was created for the purposes of seeking legal advice.

[21]	I do not accept Mr Maassen’s submission that this document was created for that purpose. The act of copying, or transmitting a document to a solicitor for the

purpose of advice does not mean that a document becomes privileged.1 That document is an open document irrespective of who had possession of it. The document was not created for the purpose of obtaining legal advice. When a person alters a document for the purposes of getting legal advice — for example by writing a question on the document sent to their solicitor, then privilege can attach to that document.2 It depends on the purpose for which the alteration was made, and in particular whether it was made for the purpose of obtaining advice under s 54(b). But it is the alteration that is made to the document, rather than its transmittal, that may give rise to a claim of privilege.

[22]	In his affidavit Mr Powley says that he initialled and signed the lease whilst also intending at the same time to send it for legal advice. He says:

Preparing the email and partially executing the lease were together a single process that I followed for Courtesy Motors in which obtaining legal advice was a core component…

[23]	I do not accept that the act of executing the document can be said to have been an act done for the purposes of obtaining legal advice. Neither does Mr Powley say that in this evidence. I accept that the document was likely to be transmitted for the purpose of obtaining advice, but the execution of it could not be. It follows that P1 is not privileged.

P3: The Annotated Copy

[24]	The copy of the document on which Mrs Sargent then made notes needs to be analysed as a separate document. I accept that copy was a document in respect of which the CML was entitled to claim privilege. It clearly falls within s 54(1) of the Evidence Act. I do not understand Mr Mason to contend otherwise. In the case of P3 the issue is whether by including it in its initial disclosure to ECL CML waived any claim to privilege.

1	Simunovich Fisheries Ltd v Television New Zealand Ltd [2008] NZCA 350 at [162] and [169];
Pearce v Foster (1885) 15 QBD 114 (CA) at 118–119.
2	Or at least the written annotation, although conceptually it assists in thinking of this as a newly created separate document with the annotation.

[25]	Section 65 of the Evidence Act deals with waiver. Section 65(1) confirms the common law position that privilege may be waived expressly or impliedly. Section 65(2) continues:

(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.

[26]	That principle is qualified by s 65(4) which provides:

(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.

[27]	Both counsel refer to the analysis of mistake provided by Asher J in Body Corporate 191561 v Argent House Ltd who said:3

I conclude that the mistake must be a mistake as to the act of disclosure itself rather than the implications of it. Thus, a mistake in the handing over of a group of documents which were thought to contain all non-privileged material, but which unbeknownst to the discloser contained privileged material, would be the sort of mistake envisaged. It would be a voluntary but mistaken act. It would be unintentional. However, if the mistake was a deliberate handing over of a document without a consideration that it was privileged, or forgetting that it was privileged, that would not be the sort of mistake covered by the section.

[28]	I do not accept Mr Mason’s submission that there has been no explanation in the evidence outlining a mistake of the kind referred to. Mrs Sargent said that the disclosure by Wadham Partners on behalf of CML was inadvertent and unintended. She explains that disclosure occurred as a consequence of a mistake made when electronic copies of the documents were created when the documents were provided to counsel. The electronic copy of the lease was created using P3 rather than the unexecuted copy. This evidence is not contradicted, or challenged.

[29]	In his evidence Mr Diffey says that it did not occur to him that the document had been mistakenly disclosed. But it is not, or is no longer a requirement to show

3	Body Corporate 191561 v Argent House Ltd (2008) 19 PRNZ 500.

that the recipient was aware that there has been a mistake.4 That is not referred to in  s 65(4). If another lawyer becomes aware that privileged information may have been inadvertently provided r 13.9.4 of the Lawyers and Conveyancers Act (Lawyers: Contacting Client Care) Rules 2008 is engaged and there is a professional obligation to inform the other lawyer and to return the documents. But even if the lawyer is not aware there has been a mistake s 65(4) still operates.

[30]	I am satisfied, therefore, that the annotated copy of the lease (P3) is privileged, that it was inadvertently disclosed, and that privilege remains in that document.

Outcome

[31]	The application is granted in relation to P1, but declined in relation to P3.

[32]	It follows that the application is successful in relation to one document, and unsuccessful in relation to the other. In those circumstances it would seem that any issue in relation to costs would likely involve costs lying where they fall.

Cooke J

Solicitors:
Wadham Partners, Palmerston North for plaintiff Cullinane Steele Ltd, Levin for defendant

4	Compare Lyttelton Port Company Ltd v Aon New Zealand Ltd [2017] NZHC 2215.