B & Ors v. Auckland District Law Society, Court of Appeal - Privy Council, May 19, 2003, [2003] UKPC 38

Resolution Date:May 19, 2003
Issuing Organization:Privy Council
Actores:B & Ors v. Auckland District Law Society
 
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Privy Council Appeal No. 34 of 2002

(1) B and Others and

(2) Russell McVeagh McKenzie Bartleet & Co. Appellants

v.

(1) Auckland District Law Society and

(2) Gary J. Judd Respondents

FROM

THE COURT OF APPEAL OF NEW ZEALAND

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 19th May 2003

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Present at the hearing:-

Lord Hope of Craighead

Lord Hobhouse of Woodborough

Lord Millett

Lord Scott of Foscote

Lord Walker of Gestingthorpe

[Delivered by Lord Millett]

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This appeal is brought by Russell McVeagh McKenzie Bartleet & Co, an Auckland law firm, ("the firm") and a number of its present and former partners. They appeal from a judgment of the Court of Appeal of New Zealand given on 16 October 2001 which reversed a judgment of the High Court of New Zealand (Paterson J) dated 6 July 2000. The present appeal is largely a contest between the firm and the Auckland District Law Society ("the Society"). Partners in the firm are members of the Society.

The main issue is whether the Society is entitled under Section 101(3)(d) of the Law Practitioners Act 1982 ("the 1982 Act") to require the firm to produce privileged documents for the purpose of an inquiry into allegations of professional misconduct. This turns on whether the Act, which gives the Society power to call for documents from practitioners under investigation, overrides any claim to legal professional privilege which may subsist in them. The judge held that it does not. By a majority (Gault, Keith and McGrath JJ) the Court of Appeal held that it does. Elias CJ and Tipping J dissented.

The Facts.

The facts are fully set out in the judgments below and it is unnecessary for their Lordships to rehearse them at length. The material facts may be summarised as follows.

The individual appellants are legal practitioners who are or have been the subject of complaints to the Society. They include not only present and former partners in the firm but also the solicitor and senior counsel who acted for the firm in defending proceedings brought against it. These arose out of the failure of partnerships formed by the firm for clients for the purpose of investment in bloodstock. The partner in the firm who had acted in the formation and promotion of the partnerships was a Mr Carran. Following the demise of the partnerships, proceedings against the promoters and their professional advisers were brought in the High Court of New Zealand by many of the investors. All the proceedings were ultimately settled out of court.

Between 1996 and 1998 the Society received nearly 180 complaints against the firm and individual practitioners. They concerned not only formation of the partnerships but also the conduct of the firm's defence of the proceedings which followed their failure. Their Lordships should say at once that the Society has since disposed of most of the complaints without bringing charges. Nevertheless at the end of 2001 some 39 complaints against 13 practitioners were still outstanding.

The earliest of the complaints was made by Mr McElrea, a former partner who had retired from the firm to become a District Court judge. He had been asked to contribute a substantial sum towards the settlement of the proceedings against the firm and was concerned at the prospect that its professional indemnity insurance might be invalidated by Mr Carran's wrongdoing. He made a confidential report to the Society under the New Zealand Law Society Code of Ethics. In it he alleged that Mr Carran, who by then had ceased to be a partner in the firm, had been guilty of serious professional misconduct. He made no complaint against the firm itself or any other person. He invited the Society to ask the firm for copies of all relevant documents, including privileged material relating to its professional indemnity insurance. Mr McElrea has been given leave to intervene (by written submissions only) in the present appeal in order to support the Society.

The Society duly established a Complaints Committee to investigate the matters complained of and appointed Mr Stuart Ennor QC as counsel to assist the Committee. He was a highly respected and trusted member of the bar of New Zealand. He has unfortunately since died.

In March 1997 the Society wrote to the firm about the complaint which it had received from Mr McElrea. The Society's letter referred only to his complaint; it did not mention others which the Society had since received. For its part the firm was not then or for some time thereafter aware of any other complaints against the firm or its partners. By its letter the Society requested the firm to provide it on a voluntary basis with copies of the documents mentioned by Mr McElrea. Their Lordships note that the Society was not yet seeking to exercise its statutory powers.

The firm replied to the Society's request by letter dated 7th April 1997. The letter is of central importance in this case and their Lordships consider that the material parts of the letter should be set out in full. They read as follows:

"May we assure you of the firm's willingness to assist and co-operate in the Society's investigation in respect of Mr Carran. There are, however, preliminary issues which need to be dealt with, which we outline in this letter.

... there is still litigation on foot against the firm in respect of the bloodstock partnerships. For this reason, the confidentiality of all of the information held by the firm is very important. A number of the documents which the firm can produce are privileged in this litigation.

We understand that the Society has appointed Mr Ennor to investigate the complaint. We propose that we should make the privileged documents available to Mr Ennor on the express basis that, in doing so, privilege is not waived, and that the documents will not be further copied by Mr Ennor. Could you please advise whether the Society is prepared to deal with the privileged documents in that way."

Mr Ennor replied on 14th April 1997 stating that he was happy to proceed "in the first instance" as suggested in the firm's letter.

In its letter the firm had indicated that it wished to involve Mr Anthony Lusk QC in the process of providing the material. He was the senior counsel who had appeared for the firm and its partners in the proceedings brought against them. At the time of the exchange of letters he was overseas, but on his return he and Mr Ennor reached an agreement which supplemented the terms of the letter of 7th April.

The documents were handed over to Mr Ennor on 14th May 1997. It is common ground for the purpose of this appeal that they were all covered by legal professional privilege. In some cases the privilege was that of the firm itself or its partners; in others it was that of its clients.

In September 1997 the Society provided the firm with copies of other complaints which had been made against it. Paterson J found that until then the firm was unaware of any complaint against the firm itself or any of its partners other than Mr Carran.

Subsequently, in response to a request from Mr Ennor for further assistance, Mr Lusk wrote on 1 April 1998 that he would have difficulty in providing it without disclosing information which he had received from Mr Carran when interviewing him in his capacity as counsel both for the firm and for Mr Carran personally. He pointed out that such information was subject to legal professional privilege and that neither he nor the firm could waive Mr Carran's personal privilege. He said that he had no doubt that Mr Carran would never have agreed to the interviews at all or to have them recorded if there were any suggestion that the information could later be made available to the Society or become evidence against him in a disciplinary hearing conducted in public.

The second respondent Mr Gary Judd QC was appointed counsel for the Society in May 1998. He took over the investigations into the complaints, though Mr Ennor continued to play a part for a while. Mr Judd was given possession of Mr Ennor's files, though he was not at this stage advised of the arrangements between Mr Ennor and Mr Lusk regarding the documents which the firm had supplied.

The firm did not become aware of Mr Judd's involvement until June 1998. Mr Lusk was concerned to learn that the documents had been passed to Mr Judd and wrote on 15 July 1998 to Mr Ennor to say that the privilege which the firm had been at pains to protect had become a significant issue. He asked for an assurance that the Society would observe the terms on which the documents had been provided.

Mr Lusk's letter was passed to Mr Judd, who replied on 27 July 1998 that he had until then been unaware that the firm had "attempted to impose" any constraints in relation to the documents. As it happened, however, he had made no copies of any of them since they had come into his possession, although he had referred to them and quoted from them in his reports to the Society. He said that he considered that he "stood in the shoes of" Mr Ennor and that like him he was happy "in the first instance" to hold the documents on the terms of the firm's letter of 7th April 1997, that is to say that he had

"received these documents on the express basis that, in doing so, privilege (in respect of the bloodstock partnership litigation) is not waived, and that the documents will not be further copied."

Mr Lusk did not accept that Mr Judd stood in Mr Ennor's shoes. The arrangements, he said, were personal to Mr Ennor. Mr Judd replied that if the were personal to Mr Ennor then they did not bind him. This brought matters to a head. The firm called for the return of the documents. The Society refused to return them and served formal notices under section 101(3) of the Act, one requisitioning some of the documents already in its possession and the other requisitioning further documents to which legal professional privilege also attached.

The present proceedings followed. The firm...

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