Solicitors ordered to pay the costs of their clients’ unreasonable resistance to inspection of subpoenaed documents

Introduction

The Supreme Court of New South Wales in Boorman v Glaxo Wellcome Australia Pty Ltd [2017] NSWSC 576 has ordered a firm of solicitors to pay to their clients costs which the clients were ordered to pay to an opposing party because the clients had unreasonably resisted inspection of subpoenaed documents on the solicitors’ advice.

Background

The clients were New South Wales and Queensland plaintiffs in separate but related proceedings brought against a pharmaceuticals manufacturing company for damages in tort. Each plaintiff had, on various dates in the 1970s and 1980s, undergone a myelogram to obtain images of the spine and parts of the nervous system. Each plaintiff alleged that he or she had been given an injection into the spinal column of Myodil, an oil-based contrast medium manufactured by the defendant, and that the Myodil had caused a condition known as adhesive arachnoiditis which had resulted in the nerves clumping together and causing symptoms which included severe pain in the lumbar spine and lower limbs.

As against each plaintiff, the defendant pleaded that the claim was statute-barred. Court orders were made in each proceeding that the defendant’s limitation of actions defence be heard separately from and determined in advance of all other questions in the proceedings and that each plaintiff should file a reply and statements of evidence with respect to the limitation defence. Replies and witness statements were subsequently filed.

A subpoena was issued to the plaintiffs’ solicitors directed to obtaining evidence of the dates at which the plaintiffs had gained knowledge that they may have had a cause of action against the defendant. The subpoena required production of all documents comprising or evidencing communications (including memoranda of advice) made on or before a specified date between the solicitors and any barrister briefed by the solicitors on behalf of the plaintiffs, and relating or referring to the proposed or possible commencement by one or more plaintiffs of legal proceedings for damages for injury as a result of being injected with Myodil.

The plaintiffs’ solicitors resisted producing for inspection many of the documents, claiming that they were subject to client legal privilege. Finally, almost a year after the subpoena was returnable, and some eight months after the defendant had filed a notice of motion seeking access, the plaintiffs agreed to allow inspection of the disputed documents.

The remaining issue was the question of costs. The defendant sought an order that the plaintiffs pay its costs of having had to litigate for access to the documents. It also sought orders that, under s 99 of the Civil Procedure Act 2005 (NSW) which imposes liability on legal practitioners for unnecessary costs, the plaintiffs’ solicitors pay to the plaintiffs the costs ordered against the plaintiffs.

Decision

The costs application was dealt with by Fagan J.

Had there been an “issue waiver” of client legal privilege?

His Honour approached the matter by first deciding whether the New South Wales plaintiffs had waived client legal privilege by acting in a way that was inconsistent with maintaining an objection to production of the subpoenaed documents for inspection under ss 122(2) and 131A(1) of the Evidence Act 1995 (NSW).

His Honour examined the New South Wales plaintiffs’ replies in which they sought an order for extension of the limitation period for their respective causes of action under the Limitation Act 1969 (NSW). His Honour also examined the New South Wales plaintiffs’ replies and witness statements which set out the knowledge which they claimed to have had of the existence of a cause of action against the defendant. His Honour then set out (at [35]-[40]) the principles of “issue waiver” of client legal privilege and, having regard to those principles, concluded that the New South Wales plaintiffs’ conduct was inconsistent with the maintenance of client legal privilege. The key points made by his Honour (at [41]-[43]) were as follows:

• The plaintiffs were prosecuting claims for extension of time which involved positive assertions that they had not acquired knowledge of matters essential to their respective causes of action over protracted intervals during which they were under legal advice with respect to those very causes of action. This was a clear case of issue waiver.
• It would be obviously unfair for the plaintiffs to rely upon their witness statements, which were silent as to any advice from their solicitors and as to any instructions provided to the solicitors over the relevant intervals, while preventing the defendant from inspecting documents which had come into existence during those times and would evidence or constitute communications which could contradict the impression conveyed by the witness statements. Accordingly, the plaintiffs’ advancement of their claims for extension of time was inconsistent with their objection to produce for inspection the otherwise privileged documents caught by the subpoena.
• In opposing access to the subpoenaed documents, the plaintiffs had relied upon the ‘abject silence’ of their witness statements with respect to any solicitor-client communications during the period critical to their state of knowledge about causes of action and had asserted that such ‘abject silence’ could not constitute implied waiver of privilege. However, this submission involved a misconception of the law relating to issue waiver because the conduct inconsistent with maintaining the privilege was the advancing, by pleading and by a claim for relief, of a case which depended upon the proposition that relevant knowledge was not acquired through communications with solicitors. The position would have been the same if no witness statements had been served.

As regards the Queensland plaintiffs, after examining the pleadings and witness statements of those plaintiffs in the light of the relevant Queensland limitation of actions legislation and the common law which governed the Queensland plaintiffs’ production of the subpoenaed documents for inspection, his Honour said (at [49]) that his findings regarding issue waiver by the New South Wales plaintiffs and concerning their conduct inconsistent with the maintenance of client legal privilege were equally applicable to the Queensland plaintiffs.

Accordingly, his Honour found that the plaintiffs were not justified in resisting production of the documents for inspection and that they should be ordered to pay the defendant’s costs of and incidental to the notice of motion for access.

Was the plaintiffs’ resistance without reasonable cause in circumstances where the solicitors were responsible?

Fagan J then had to decide whether the plaintiffs’ solicitors should be ordered to pay to the plaintiffs the costs which the plaintiffs were ordered to pay to the defendant. This decision depended upon whether the plaintiffs’ resistance to production of the subpoenaed documents and the resulting incurrence of costs by the defendant in prosecuting its notice of motion had occurred “without reasonable cause, in circumstances for which a legal practitioner is responsible” as provided by s 99(1)(b) of the Civil Procedure Act. His Honour (at [51]-[54]) said as follows:

• The plaintiffs as laymen would not have known whether production of the documents could be resisted and so their stance in opposition to the defendant’s notice of motion must have been taken upon the advice of their solicitors.
• While the effect of the implied waiver was not universal so as to open up the files of the solicitors without regard to any demonstration of connection of their content with the factual issues raised by the proceedings, the plaintiffs had based themselves upon a misconception about the effect of their witness statements being silent with respect to solicitor-client communications and so had substantially refused any production for nearly a year after the subpoena was returnable and eight months after the defendant had filed its notice of motion for access. They had not merely sought to oppose the defendant’s access to solicitor-client communications which were irrelevant or peripheral to the issues raised by their extension of time applications.
• Examples of the documents in respect of which access had been resisted had been tendered on the hearing of the costs argument and it was readily apparent that these documents had a significant bearing upon the knowledge which each plaintiff acquired of the existence of a cause of action against the defendant, prior to dates which were critical to their claims for extension of time. It should have been clear to the plaintiffs’ solicitors that it would be unfair for the plaintiffs to rely upon their witness statements, which implicitly conveyed the impression that no material communication with their solicitors advanced their knowledge of their causes of action, while withholding such documents, and that the issues raised by the plaintiffs’ replies could not fairly be litigated while access to these documents was denied. By the standard of the reasonably competent solicitor, the plaintiffs’ solicitors should have been aware that their clients had acted in the litigation inconsistently with maintaining client legal privilege over, at least, the significant number of documents tendered by way of example and that the defendant’s notice of motion for access should not have been opposed.

Accordingly, his Honour ordered that the plaintiffs’ solicitors pay to the plaintiffs the entirety of the costs which the plaintiffs were required to pay to the defendant.