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Pro-Invest Australian Hospitality Opportunity (St) Pty Ltd v Tactical Project Management Pty Ltd[2024] QSC 101

Pro-Invest Australian Hospitality Opportunity (St) Pty Ltd v Tactical Project Management Pty Ltd[2024] QSC 101

SUPREME COURT OF QUEENSLAND

CITATION:

Pro-Invest Australian Hospitality Opportunity (St) Pty Ltd v Tactical Project Management Pty Ltd [2024] QSC 101

PARTIES:

PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LTD AS TRUSTEE FOR THE PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY TRUST (BRS SPRING HILL) TRUST ABN 51 713 049 610

(Plaintiff)

v

TACTICAL PROJECT MANAGEMENT PTY LTD ACN 153 807 464 AS TRUSTEE FOR THE TPM UNIT TRUST ABN 45 673 805 105

(Defendant)

and

THWAITE CONSULTING GROUP PTY LTD

ABN 76 090 810 816

(Third Party)

FILE NO/S:

BS 2710 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

23 May 2024

DELIVERED AT:

Brisbane

HEARING DATE:

8 May 2024

JUDGE:

Bowskill CJ

ORDERS:

Orders will be made, substantially in the terms proposed by the defendant and the third party in relation to their applications for further disclosure, subject to amendment to reflect these reasons and further submissions from the parties in relation to some aspects of the order, including as to costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – DISCOVERY AND INSPECTION OF DOCUMENTS – PRODUCTION AND INSPECTION OF DOCUMENTS – GROUNDS FOR RESISTING PRODUCTION – PRIVILEGE – CLIENT LEGAL PRIVILEGE – WAIVER OF PRIVILEGE – where the plaintiff claims, in part, damages against the defendant for legal costs incurred, and ordered to be paid by, the plaintiff in relation to separate proceedings brought against it by Built Qld Pty – where, in support of its claim, the plaintiff obtained an expert report from a solicitor and costs assessor, and provided unredacted copies of its solicitors’ invoices to the expert for that purpose – where the plaintiff disclosed, to the parties in this proceeding, redacted copies of the invoices on the basis that the redacted narratives would reveal privileged communications – whether legal professional privilege has been waived in respect of the redacted parts of the invoices by the provision of them to the expert – whether the plaintiff has also waived privilege in the documents referred to in the narratives in the invoices, having opened up the question of the amount and reasonableness of its legal costs by its claim in this proceeding – whether, in addition, the plaintiff has, to date undertaken proportionate and reasonable searches for the purposes of disclosure

Uniform Civil Procedure Rules 1999 (Qld), rr 223(2), 470

Benecke v National Australia Bank (1993) 35 NSWLR 110

British Racing Drivers’ Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667

Gray v Sirtex Medical Ltd (2011) 193 FCR 1

Partakis-Stevens v Sihan [2023] EWHC 1051

The Queensland Local Government Superannuation Board v Allen [2016] QCA 325

COUNSEL:

A Stumer KC for the plaintiff

J O'Regan for the respondent

H Clift, with H Lilley, for the third party

SOLICITORS:

Thomson Geer Lawyers for the plaintiff

Thynne + Macartney Lawyers for the respondent

Clyde & Co for the third party

  1. [1]
    The plaintiff, Pro-Invest, is a developer of Holiday Inn Express hotels in Australia.  It decided to construct such a hotel in Spring Hill.   The defendant, Tactical, was engaged by Pro-Invest as the project manager.  Tactical, in turn, engaged the third party, Thwaite, as its mechanical services consultant, to provide advice on the engineering design and construction of mechanical services for the project (including the air conditioning system).  Pro-Invest alleges that, at the relevant time, Holiday Inn Express hotels were part of the InterContinental Hotels Group (IHG) and were required to be designed and constructed in accordance with IHG’s engineering standards, which included a requirement for a mechanical services system capable of independently heating and cooling individual guestrooms. Pro-Invest alleges that Tactical was aware of this requirement.
  2. [2]
    As part of its role, Tactical invited a construction company, Built Qld Pty Ltd (Built), to tender for the project. The invitation to tender included a mechanical services specification, prepared by Thwaite, which was capable of meeting the required independent heating/cooling function. When Built provided its tender submission to Pro-Invest, it identified that it had “offered an alternative Air Conditioning system based on VRF type arrangement”, which was said to be less expensive.  Drawings of Built’s proposed air conditioning system were provided to Tactical.  Pro-Invest alleges that Tactical ought to have noted, from the drawings and subsequent email exchanges with both Thwaite and Built, that Built’s proposal did not provide for the necessary independent heating/cooling function.  Pro-Invest further alleges that Tactical failed to inform it that the Built proposal did not include that function and, in that way, either represented to Pro-Invest that the proposal did include the function or omitted to inform Pro-Invest that the proposal did not include the function.  Pro-Invest alleges that it relied on the representation and the omission in deciding to proceed with the Built proposal and in entering into the design and construct contract with Built.
  3. [3]
    As it turns out, the mechanical services system installed by Built could not perform the independent heating/cooling function.  Tactical, as project manager, gave a direction to Built to fix or replace the system, so that it could perform this function (referred to in other parts of the material as the “mechanical direction”). A dispute then arose between Pro-Invest and Built – as to whether the function was a requirement of the contract (Built said it was not) or whether the direction was a variation.
  4. [4]
    Built carried out the work, to give effect to the direction, and then sued Pro-Invest to recover the price of completing the work, as well as delay damages. Pro-Invest successfully defended the claim at first instance; but Built prevailed following an appeal:  Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2022] QCA 266.  Pro-Invest unsuccessfully applied for special leave to appeal to the High Court.  Pro-Invest says it had to pay Built almost $5 million as a result (including interest).  Pro-Invest incurred substantial legal costs of its own in relation to the proceeding and also became liable for the costs of Built, following the successful appeal.
  5. [5]
    By this proceeding, Pro-Invest seeks to recover from Tactical both the amounts it paid to Built (for damages and interest) as well as “costs arising out of the Court Proceedings, including subsequent appeals”, by way of damages for breach of contract and/or negligence and/or for misleading and deceptive conduct. 
  6. [6]
    Tactical defends that claim, and also counterclaims against Pro-Invest on the basis that it engaged in misleading and deceptive conduct by making representations to Tactical that Built’s proposal complied with or was otherwise acceptable under IHG’s standards, and that Pro-Invest did not require Tactical to review the proposal for compliance.  Tactical alleges that, in reliance on those representations, it did not cause the proposal to be reviewed for compliance with IHG’s standards (and that, but for the representations, it would have done so).  Tactical has joined Thwaite as a third party to the proceeding, alleging breach of contract, negligence and misleading and deceptive conduct.
  7. [7]
    What is presently before the Court is an interlocutory dispute about disclosure.  Both Tactical and Thwaite have filed applications seeking further disclosure. The applications essentially mirror one another, and were dealt with efficiently by the parties, without duplication of submissions. To the extent leave was required to bring the applications, because there were previously trial dates set (cf UCPR r 470), there was no objection and leave is granted.
  8. [8]
    The issues to be determined are as follows:
    1. Whether, in the manner in which it has undertaken disclosure so far, Pro-Invest has undertaken proportionate and reasonable searches of its documents and records, as required by the agreed document management plan (paragraph 2 of both applications);
    2. Whether Pro-Invest should be required to disclose documents relating to the actual costs incurred to upgrade the mechanical services system so that it is capable of the independent heating/cooling function and (additional) documents relating to the costs of installing such a system at the outset of the project (paragraph 2(b) of both applications);
    3. Whether Pro-Invest should be required to disclose (additional) correspondence and documents exchanged between it and the IHG in relation to IHG’s requirements for the mechanical services component of the project, and in relation to the independent heating/cooling function (paragraphs 2(c) and (d) of both applications);
    4. Whether Pro-Invest should be required to disclose (additional) documents relating to the factors it relied upon in deciding to enter into the design and construct contract with Built, including the documents listed in paragraph 2(e) of Tactical’s application);
    5. Whether Pro-Invest should be required to disclose unredacted copies of the invoices it relies on, on the basis that it has waived privilege in the redacted parts, by providing unredacted copies of the invoices to its expert (paragraph 2(a) of Tactical’s application; paragraph 2(a) of Thwaite’s application); and
    6. Whether Pro-Invest should be required to disclose copies of any documents relating to the narratives contained on those invoices, given the nature of its claim in this proceeding (paragraphs 4 and 5 of Tactical’s application; paragraphs 4 and 5 of Thwaite’s application).[1]

Has Pro-Invest undertaken proportionate and reasonable searches?

  1. [9]
    The evidence from Pro-Invest’s solicitor, Mr Cross, is that, so far, disclosure has been undertaken (only) by searching across the bundle of documents collated for the purpose of the Built v Pro-Invest proceeding and the email accounts of Mr Davis and Mr McBirnie.[2]  More recently, there have been limited searches of emails sent or received externally by Mr Ronald Barrott (who it seems is the CEO of Pro-Invest, and may have been the relevant decision-maker – which is of particular significance to the issue of reliance[3]), but not internally; and a search of the emails of Mr Sherlock, the managing director of Pro-Invest.[4]
  2. [10]
    The point made by Tactical and Thwaite on this application is that it is not sufficient for Pro-Invest to have searched only across a bundle of documents collated for a different proceeding, in circumstances where there are different allegations, issues and parties involved in this proceeding.
  3. [11]
    It is also submitted that reviewing only electronic documents stored on the Aconex document management platform, and some email accounts, is not sufficient for two reasons: first, because there may be hard copy documents that are relevant (for example, notes made on a copy of an agenda at a meeting); and second, because there may be relevant documents held on other servers or computers of Pro-Invest (apart from the Aconex platform, which, on the evidence, only started to be used for the project in November 2015, which is after the particularly relevant events[5]). 
  4. [12]
    The third point is that the searches of email accounts are inadequate:  in part, because the solicitor, Mr Cross, cannot say how the searches were conducted (that is, what search terms were used); and, otherwise, because of the limitations of the searches undertaken (for example, that Mr Barrett’s internal emails were not searched). 
  5. [13]
    The amount of Pro-Invest’s claim overall is not entirely clear, but Tactical submits it may be in the vicinity of $10 million (and Pro-Invest did not contend otherwise). In that context, Tactical submits that it is both reasonable and proportionate to require Pro-Invest to do more than it has done to date.
  6. [14]
    Pro-Invest submits that what it has done is consistent with the obligation under the agreed document management plan to undertake reasonable and proportionate searches and, in any event, it is no more than speculation that there might be any other relevant documents because:
    1. the documents collated for the Built proceeding include all the project documents on Aconex, which Mr Cross described in his oral evidence as a construction industry software system;
    2. those documents included the emails of Mr Davis and Mr McBirnie in relation to the project – Mr Davis was the key person dealing with “everything” in relation to the project for Pro-Invest, so it is likely relevant documents will have been contained within his emails; and
    3. the Built proceeding is very closely related to the current proceeding.
  7. [15]
    As to whether Pro-Invest should be ordered to search hard-copy documents, Pro-Invest relies upon paragraph 6(d) of the disclosure statement of Mr McBirnie provided in the Built proceeding,[6] which is an unsworn statement that Mr McBirnie did not cause searches to be undertaken of hard copy files or records maintained by Pro-Invest “as no hard copy files or records have been kept which are not duplicates of electronic documents that have been provided elsewhere”.  In the face of that statement, counsel for Pro-Invest submits that it is not reasonable or proportionate to require Pro-Invest to review hard-copy documents.
  8. [16]
    Counsel for Pro-Invest did not strongly argue against the proposition that Mr Barrott’s email account should be comprehensively reviewed.
  9. [17]
    I am persuaded that what Pro-Invest has done to date is not sufficient to meet its obligation of disclosure, albeit as adapted by the agreed document management plan.  As convenient as it might have been, and while the proceedings might be “closely related”, it is not sufficient to have searched across a bundle of documents collated for a separate proceeding which involves different parties and different allegations and issues (including the competing allegations of misleading and deceptive conduct, and reliance, on the part of Tactical, Pro-Invest and Thwaite in the various claims and crossclaims).   I also accept that it is appropriate to require Pro-Invest to search for and review:
    1. documents stored electronically other than on the Aconex document management platform that may be relevant (particularly having regard to the timing issue mentioned above); 
    2. hardcopy documents, in the narrow category identified in the draft order (that is, authored or annotated by Mr Barrott or Mr Davis) that may be relevant (as I do not regard the unsworn statement, in another proceeding, that there are no such documents as an adequate answer);
    3. the email account of Mr Barrott – comprehensively; and
    4. documents (both within the existing documents collated for the Built proceeding, and any other relevant documents identified as a result of (a), (b) and (c) above) which contain both the terms “mechanical services” and “budget”,

and disclose any further documents that are directly relevant to an allegation in issue in the proceeding.

  1. [18]
    As to paragraph [17](d) above, I am persuaded it is appropriate to include that because it is apparent from Mr Cross’ affidavit (29 April 2024), at [36], that when he went back and reviewed documents, which had not been disclosed (on the basis that they were not relevant), using particular search words (“chilled” and “VRF” – which would seem to be fairly fundamental having regard to the allegations), he found further documents which should be disclosed.  I am therefore not persuaded by Pro-Invest’s submission that it is unlikely further searches, for words I accept are also relevant to the allegations in issue, would not produce documents which should be disclosed.

Actual costs

  1. [19]
    There are two elements to this next category of documents sought to be disclosed:
    1. documents relating to the actual costs incurred to upgrade the mechanical services system, so that it is capable of the independent heating/cooling function; and
    2. documents relating to the costs of installing a mechanical services system capable of the independent heating/cooling function at the outset of the project.
  2. [20]
    Pro-Invest seeks to recover from Tactical the amount it paid to Built “to give effect to the Court of Appeal’s reasons”, which includes $940,942 for the price of complying with the mechanical direction and $151,203 for rectification of the ground floor air conditioning system.[7]  Tactical denies the claim, including because, it says, the amounts claimed “include costs that would have been incurred by the Plaintiff in any event, had the Head Contract required Built to instal mechanical services that included the Independent Heating/Cooling System or had the Plaintiff directed Built to install mechanical services that included the Independent Heating/Cooling System prior to the initial construction of the mechanical services by Built”.[8]  The claim is passed through by Tactical to Thwaite, and Thwaite likewise denies it.
  3. [21]
    Thwaite and Tactical press for disclosure of documents in the two categories above.
  4. [22]
    Pro-Invest accepts it was required to disclose documents in the second category, relating to the costs of installing a compliant system from the outset, and says it has done so. 
  5. [23]
    Pro-Invest opposes any order that it disclose documents relating to the actual costs to upgrade the mechanical services system because that is irrelevant.  Pro-Invest says that the loss and damage claimed by Pro-Invest in this proceeding is constituted by the amounts it in fact paid to Built, and that the “actual costs” incurred by Built to upgrade the mechanical services system are not relevant to that head of damage.
  6. [24]
    In pressing for disclosure of documents relating to the “actual cots”, Thwaite submits (and Tactical adopts the submission) that it is entitled to interrogate the reasonableness of the amount paid by Pro-Invest to Built (to upgrade the mechanical services system) and to do that by reference to an analysis of the documents relating to the actual costs incurred to upgrade the system.
  7. [25]
    This issue, like the others, has been agitated through correspondence.  In a letter to the solicitor for Pro-Invest dated 5 April 2024,[9] Thwaite’s solicitor refers to the disclosure by Pro-Invest of reports from quantity surveying experts retained by Pro-Invest and Built in the Built proceeding, who dealt with the costs associated with the mechanical direction.  Thwaite’s solicitor states that, to consider and comment on what it would have cost to install a mechanical services system capable of the independent heating/cooling function at the outset, Thwaite’s quantity surveyor requires:
    1. the supporting documents relied on by Mr Hardiman and Mr Watson (the quantity surveying experts who provided reports in the Built proceeding) to calculate the actual costs of the mechanical direction – that is, the underlying documents required to calculate the actual costs associated with upgrading the system so that it is capable of the independent heating/cooling function; and
    2. documents relating to the amount it would have cost to install such a system from the outset of the project.[10]
  8. [26]
    Beyond saying “it is not relevant”, because its claim is for the amount it paid to Built, Pro-Invest did not advance an argument as to why it is unreasonable, or without a proper foundation, for Thwaite’s quantity surveying expert to require the underlying documents relied upon by the experts whose evidence was, I infer, the basis for arriving at the figure Pro-Invest was required to pay to Built.  It is not apparent to me why it would not be relevant; and I can see no proper basis for Pro-Invest to refuse to disclose those underlying documents.  Having regard to the solicitors’ letter, though, the scope of the order to be made in relation to the first category ought to be narrowed to reflect paragraph 3.11(a) of the letter dated 5 April 2024.
  9. [27]
    As for the second category, whilst disclosure of such documents has already been made, it may be the case that, with the further searches to be ordered, additional documents are found.  Therefore, it is appropriate to include this in the orders also.

IHG documents

  1. [28]
    An issue to be determined in the proceeding is whether the IHG standards were a requirement of the project and whether the independent heating/cooling function was a requirement of the project.  Thwaite submits (and Tactical adopts the submission) that the documents disclosed by Pro-Invest so far do not include documents relating to these issues.  This may be because of the (narrow) scope of the documents previously reviewed.  Consequent upon the conclusion reached in relation to the first issue, it is appropriate to make the orders sought for disclosure of the IHG documents.

Reliance documents

  1. [29]
    Tactical seeks further disclosure of documents relevant to the disputed issue of Pro-Invest’s reliance on the alleged misleading conduct of Tactical, on the basis that what Pro-Invest has done to date is inadequate (the first issue above).  Consequent upon the conclusion reached in relation to the first issue, it is also appropriate to make the orders sought for disclosure of the categories of documents listed in paragraph 2(e) of Tactical’s application (the reliance documents).

Affidavit if no documents exist?

  1. [30]
    A related question is whether Pro-Invest should be required to file a disclosure statement in the form of an affidavit, of the kind contemplated by UCPR r 223(2) and paragraphs 11 to 13 of the agreed document management plan, if Pro-Invest does not disclose documents falling into the categories I have described as IHG documents and reliance documents (paragraph 3 of both applications).  There are two issues that arise: first, that what is sought by the applications goes further than what is contemplated by paragraph 12 of the document management plan (in terms of content), and second, that a disclosure statement under the document management plan is not required to be sworn.
  2. [31]
    I am not persuaded by Thwaite or Tactical, because no reasons were advanced, that there is a basis to go beyond what the parties have agreed, in the document management plan, in terms of a disclosure statement.  I will order that a disclosure statement be provided, as agreed, but not in the form of an affidavit of a kind contemplated by UCPR r 223(2).

Should Pro-Invest be required to disclose unredacted copies of the invoices?

  1. [32]
    As already explained, part of Pro-Invest’s claim for damages against Tactical – in respect of which Thwaite is joined as a third-party – concerns the legal costs that Pro-Invest incurred in relation to the Built v Pro-Invest proceeding and the legal costs which it was ordered to pay to Built in relation to that proceeding.
  2. [33]
    In support of its claim, Pro-Invest has obtained an expert report from Mr Walter, a solicitor and costs assessor.  As explained in [4.1] of the report, Mr Walter was briefed to prepare an expert report “in respect of that part of the costs incurred or expended by Pro-Invest as Defendant in [the Built proceeding] attributable to the issues relating to the Mechanical Direction given in respect of changes to the mechanical ventilation system (ie the air conditioning and heating system) constructed and forming part of the Project”.
  3. [34]
    At [4.3] of the report, Mr Walters sets out the documents he was given and which he considered.  They include, at items 15-18, invoices for professional legal services rendered and costs incurred in the proceeding from 30 June 2018 to 31 May 2022; an excel spreadsheet tabulating those invoices; and invoices for professional legal services rendered and costs incurred in the appeal by Built to the Court of Appeal and an application for special leave to appeal by Pro-Invest to the High Court.
  4. [35]
    At [8.2] of the report, Mr Walters says that in order for him to determine a reasonable assessment of Pro-Invest’s costs in defending that part of Built’s claim arising from the mechanical direction “it is necessary … to consider all of the material referred to in paragraph 4.3 of this report, to derive a proportion or percentage of the work as is incidental to the issue of the Mechanical Direction, and to apply an apportionment of the legal work undertaken to the Costs”.  He also says, in this paragraph, that he has not conducted an assessment of Pro-Invest’s solicitors’ file. 
  5. [36]
    Mr Walters reiterates, in [8.5] of the report, that he has considered the invoices in determining the appropriate proportion of costs attributable to the mechanical direction.  He identifies the invoices at [9.30] and then at [9.31] says “[n]ecessarily I have examined the Invoices in order to formulate my opinion about the fairness and reasonableness thereof”.  Earlier in the report, at [7.5], Mr Walters identifies the reasonableness of the quantum of costs as relevant.
  6. [37]
    At [9.45] of the report, Mr Walters identifies some specific “disallowances” – namely, GST, a particular amount said to have been “incorrectly or inadvertently claimed” in five particular invoices, and an overall reduction of 2.5% “to allow for the vicissitudes of legal practice…”.   Mr Walters then goes on, in the paragraphs numbered 11 and 12 to explain how he arrived at a percentage figure representing the proportion of the costs of the proceeding attributable to the mechanical direction issue.
  7. [38]
    The invoices provided to Mr Walters were not redacted in any way. However, Pro-Invest has disclosed to the parties in this proceeding only redacted copies of the invoices, on the basis that the redacted narratives would reveal privileged communications.[11]
  8. [39]
    The issue is whether that privilege has been waived, by the provision of the unredacted invoices to Mr Walters.  In that regard, the relevant principles were summarised by Lindgren J in Australian Securities and Investment Commission v Southcorp Ltd (2003) 46 ACSR 438 at [21], as follows:
  1. “(1)
    Ordinarily the confidential briefing or instructing by a prospective litigant’s lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege …
  2. (2)
    Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client’s lawyers and the expert witness, ordinarily attract the privilege …
  3. (3)
    Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness’s own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications …
  4. (4)
    Ordinarily disclosure of the expert’s report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents …
  5. (5)
    Similarly, privilege cannot be maintained in respect of documents used by an expert to form an opinion or write a report, regardless of how the expert came by the documents …
  6. (6)
    It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report…”.[12]
  1. [40]
    Thwaite and Tactical submit that it is appropriate to infer, from the parts of the report already referred to, that Mr Walters used the unredacted invoices in a way that could be said to influence the content of the report.  Mr Walters says, more than once, that he considered the invoices and, at [9.31], he states that “necessarily” he has examined the invoices “in order to formulate my opinion about the fairness and reasonableness thereof”.
  2. [41]
    Pro-Invest submits it is not reasonable to draw that inference, having regard to the ultimate basis on which Mr Walters expressed a view as to the proportion of the costs attributable to the mechanical direction – which was by reference to a percentage, calculated having regard to the quantum of the claim, the pleadings, the closing submissions, the court time at trial, the witness statements and expert reports and the costs submissions.  In effect, Pro-Invest submits the appropriate inference is that Mr Walters would not have had regard to the unredacted narratives; and that to say he “considered” the invoices is not to say that the invoices influenced the content of his report.
  3. [42]
    I do not accept Pro-Invest’s submission in that regard.  It is inconsistent with what Mr Walters has himself said, particularly in [9.31] of the report.  It is also inconsistent with Mr Walter’s ability to form a view about the amount to be deducted, on the basis it was incorrectly or inadvertently included on five invoices.  It is reasonable to infer that Mr Walters not only had regard to all the information available to him on the face of the invoices, but also that that information influenced the content of the report, at least to some extent, such that it would be unfair for Pro-Invest to rely on the report without disclosing the unredacted invoices.
  4. [43]
    In any event, the answer to the next question also supports disclosure of the unredacted invoices.

Should Pro-Invest be required to disclose the documents referred to in the narratives in those invoices?

  1. [44]
    In addition to the unredacted invoices, Tactical and Thwaite also seek disclosure of the documents referred to in the narratives in those invoices.  It was said that, in practical terms, this would amount to the whole of Pro-Invest’s solicitors’ file in relation to the Built v Pro-Invest proceeding.  The argument for disclosure is put on two bases:  first, implied waiver; and second, because of the need for an assessment of the costs claimed as damages.  Both points are related.  As to the first, Tactical and Thwaite submit that Pro-Invest has chosen, by this proceeding, to put in issue the amount and reasonableness of its legal costs incurred in relation to the Built proceeding; it has “opened up the question” of the amount and reasonableness of those costs, which can only be properly assessed by the documents on its file, and, in that way, it has waived privilege in those documents.[13]  As to the second, Thwaite and Tactical submit that it is at least arguable that, where legal costs are claimed as damages, the appropriate measure, depending on the circumstances, is those costs as assessed on the standard basis, rather than on the basis of a full indemnity for all the costs incurred.
  2. [45]
    In this respect also, I am persuaded that Pro-Invest should be required to disclose the documents referred to in the narratives in the invoices.  It has, in my view, impliedly waived privilege in those documents by opening up the question of the amount and reasonableness of its costs incurred in the Built v Pro-Invest proceeding, a point which is reinforced by the argument – to be had at trial – about the proper measure of legal costs as damages.
  3. [46]
    Pro-Invest protests that it has not put in issue the content of any privileged communications (between Pro-Invest and its lawyers, in relation to the Built v Pro-Invest proceeding).[14]  That much may be accepted.  However, what Pro-Invest has done, by this proceeding is to “necessarily lay open the confidential communication to scrutiny”[15] – resulting in a forensic unfairness if its claim for damages comprising its legal costs in the Built v Pro-Invest proceeding is allowed to proceed without disclosure of documents that will enable scrutiny of the amount and reasonableness of those costs.
  4. [47]
    This conclusion can be reconciled with the public policy which underpins the availability of legal professional privilege.  In Benecke v National Australia Bank (1993) 35 NSWLR 110 at 111, Gleeson CJ (then of the New South Wales Supreme Court) said:

“The rule that prevents an unauthorised disclosure of confidential communications between a client and a legal adviser, when such communications are for the purpose of obtaining legal advice, or for use in existing or anticipated litigation, constitutes a restriction upon the capacity of courts to ascertain the truth in certain circumstances.  That restriction, however, is regarded as acceptable on the ground that it promotes the public interest and assists the administration of justice, by facilitating the representation of clients by legal advisers.  It does this by encouraging uninhibited communication. Thus, in cases where the rule operates, one aspect of the public interest is preferred against another (discovering the truth).”[16]

  1. [48]
    Here, it might be said that the privilege has done its work, in the context of the Built v Pro-Invest proceeding.  Now, in this proceeding, where Pro-Invest seeks to recover its legal costs incurred in that proceeding, and so has opened up the question of the amount and reasonableness of those costs, that privilege must yield, as a matter of “basic fairness”.[17]
  2. [49]
    As to the second point, on the basis of the authorities referred to, it is arguable, as Thwaite and Tactical submit, that where legal costs are claimed as damages, what is recoverable is the costs assessed on the standard basis (or perhaps, on the indemnity basis, depending upon the circumstances – but nonetheless, following an assessment).  That is not a matter to be determined, finally, on this interlocutory application.  It is a question of law to be agitated at the trial.  But for present purposes – disclosure – the point raised by Thwaite and Tactical is, in my view, arguable.  That is apparent having regard to British Racing Drivers’ Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667 at 681 and 691-692 and Partakis-Stevens v Sihan [2023] EWHC 1051 at [59]-[61].  As articulated in the latter case at [60], the policy underpinning the principle is that where a (allegedly) wronged party seeks to recover legal costs incurred in another proceeding by way of damages:

“… it is difficult to see the justification for saying that the party in breach ought to be liable for costs incurred by the wronged party which exceed those which the court has decided are reasonable and proportionate,[18] unless the conduct of the other party justifies an award of indemnity costs.  If the wronged party chooses to instruct lawyers who undertake work which is more extensive and expensive than that which the court has determined is reasonable and proportionate, it is difficult to see why the party in breach should have to subsidise that additional cost”.

  1. [50]
    Pro-Invest relies upon Gray v Sirtex Medical Ltd (2011) 193 FCR 1 at [24] and [41] to contend that in a case such as the present, what a party in Pro-Invest’s situation is entitled to recover, if it succeeds in its claim, is all the costs it has incurred.  This decision does not persuade me that the point sought to be argued by Thwaite and Tactical is not arguable, having regard to the English decisions.  In any event, the statement of principle accepted in Gray at [24], by reference to Berry v British Transport Commission [1962] 1 QB 306, refers to costs “reasonably expended”.[19]  Even apart from the question of assessment, it is apparent that a party defending a claim such as this is entitled to challenge the reasonableness of the legal costs incurred. 
  2. [51]
    As is apparent from the Partakis-Stevens case, in England the authorities are not all one way; so this remains a somewhat contested issue.  But for present purposes, I do not need to reach a concluded view about it – only to be satisfied the point is arguable, which I am.
  3. [52]
    Thwaite and Tactical submit that they should be permitted to scrutinise the costs incurred by Pro-Invest, now claimed as damages, and should be permitted to do so by engaging an expert costs accessor.  For that reason, disclosure of the documents referred to in the invoices (which, it is accepted, may be the whole of the solicitors’ file) is required.
  4. [53]
    On the other hand, Pro-Invest submits that, even if Thwaite and Tactical are correct about the measure of damages (which is not conceded by Pro-Invest), in order to scrutinise the amount and reasonableness of its legal costs claimed as damages there is no need to look at all the documents on Pro-Invest’s solicitors’ file.  Although counsel for Pro-Invest did seem to accept that a costs assessor, who began their task by reference to the invoices, but found they still had unanswered questions, may ask to see particular things.
  5. [54]
    Thwaite, however, relies on evidence from its proposed expert costs assessor, Mr Dudman, who says that in order for him to provide an opinion, in relation to the reasonableness of the costs incurred on a gross sum basis, he requires access to Pro-Invest’s solicitors’ file.[20]
  6. [55]
    In my view, having reached the conclusion that, by opening up the question of the amount and reasonableness of the legal costs it incurred in the Built v Pro-Invest proceeding, Pro-Invest has waived privilege in the documents referred to in the narratives in the invoices; and in light of the evidence that in order for an expert costs assessor to properly form an opinion about the reasonableness of those costs (let alone, an assessment on the standard basis) it would be necessary to review those documents from the solicitors’ file, it is appropriate to order that they be disclosed.

Proposed structure of orders 5 and 6

  1. [56]
    The last matter to deal with is the structure of orders 5 and 6, as proposed by Thwaite and Tactical.  This structure provided for Pro-Invest to disclose the documents just discussed to the defendant’s and third-party’s expert costs assessor (it seems to be contemplated, at least by Tactical’s application, that there will be a joint expert appointed by the defendant and the third party) and then, to the extent that expert considers it necessary to their opinion to refer to such documents in their report, for Pro-Invest to consent to the expert disclosing those findings and documents in their report.  As explained by counsel for Thwaite, that structure was proposed essentially for the benefit of Pro-Invest. But, as submitted by counsel for Pro-Invest, it is a structure that does not work.  If the documents remain protected by legal professional privilege, they are not disclosable and no “hybrid” arrangement such as contemplated should be ordered.  If, however, privilege has been waived, they are disclosable and there is no basis on which to make the orders in the form proposed by Thwaite and Tactical.
  2. [57]
    Another issue raised was whether there really should be a two-stage process, with the defendant and third party’s expert(s) first being required to undertake their task only by reference to the invoices and then, if they were to say they need to see specific things, that could be addressed.  The difficulty with that is two-fold.  First, there is already evidence from Thwaite’s expert cost assessor that he does need to review the solicitors’ file; and second, as a matter of principle, the conclusion that I have reached is that privilege in the documents referred to in the narratives in the invoices, relied upon to support the claim to recover the legal costs incurred in relation to the Built proceeding, has been waived.  Accordingly, it is appropriate to order that those documents be disclosed.

Orders

  1. [58]
    The defendant and third party provided a draft order at the time of the hearing of their applications.  For the reasons given, I am largely satisfied it is appropriate to make orders in those terms.  There are some matters in respect of which changes are required to the draft (to reflect my decision) or further submissions are required, namely:
    1. the time period contemplated in orders 2 and 3 and (what will become) order 5;
    2. whether order 2(a) ought to be amended to replace the words “may be relevant to” with “may be directly relevant to”;[21]
    3. whether orders 2(b) and (c) ought to be amended to add the words “that may be relevant to [or may be directly relevant to] the issues in dispute in the current proceeding”;
    4. the addition of a qualifier, in the opening words of order 3, to make it clear that the documents are to be disclosed, to the extent they are identified by the further searches to be ordered under order 2 (where that is the case – which I anticipate might be for paragraphs (c), (d) and (e) of order 3);
    5. the addition of a qualifier to order 3(b)(i), consistent with paragraph 3.11 of the letter from Thwaite’s solicitor of 5 April 2024 – either to refer to the supporting documents relied upon by Mr Hardiman and Mr Watson, or to refer to the “underlying documents required to calculate the actual costs…”;
    6. the amendment of order 4, to require the provision of a disclosure statement in a form required by the agreed document management plan;
    7. the amendment of proposed orders 5 and 6, to reflect the decision I have made that the documents relating to the narratives contained in the invoices are to be disclosed, and in those circumstances there is no basis for the structure presently proposed; and
    8. to remove proposed order 7 (which relates to particulars, which I have not dealt with).
  2. [59]
    I will therefore give the parties an opportunity to consider these reasons, and the matters just mentioned, and provide a further form of order for my consideration.  I will also hear the parties in relation to the costs of the applications.

Footnotes

[1]For completeness, I note there is also a paragraph 2(f) in Tactical’s application, which it was not necessary to deal with as Pro-Invest had already agreed to provide the documents requested in that paragraph (and all that remained was a date for that to occur).  It was also unnecessary to deal with a further application (paragraph 6) by both Tactical and Thwaite for particulars.

[2]See the affidavit of Cross (29 April 2024) at [4] and the oral evidence at transcript p 9.  See also the Disclosure Statement for the Plaintiff, signed by Mr Sherlock, managing director of Pro-Invest, on 30 November 2023 (exhibit HPC-03 to the affidavit of Cross (8 May 2024)), although this was said to be incorrect, in so far as it refers to searches of the email accounts of Mr Sherlock himself.

[3]See, for example, paragraphs 27 and 54 of the amended defence and counterclaim.

[4]Affidavit of Cross (8 May 2024) at [4].

[5]The contract with Built was entered into in April 2015 (paragraph 17 of the amended statement of claim).

[6]Exhibit HPC-01 to the affidavit of Cross (29 April 2024).

[7]Paragraphs 23A(c) and (f) and paragraphs 37(a) and (d) of the amended statement of claim.

[8]Paragraph 54 of the amended defence and counterclaim.

[9]Affidavit of Marais, exhibit AJM-59, p 307 of the exhibits.

[10]Ibid, at p 307 of the exhibits.

[11]See Carey v Korda (No 2) (2011) 85 ACSR 331 at [66]-[69].

[12]Emphasis added; references omitted.

[13]Referring to Benecke v National Australia Bank (1993) 35 NSWLR 110 at 111-112 per Gleeson CJ and at 115-116 per Clarke JA.

[14]Relying upon The Queensland Local Government Superannuation Board v Allen [2016] QCA 325 at [71], and the reference in that paragraph to Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236 at [48] per Hodgson JA; and contrasting Benecke v National Australia Bank (1993) 35 NSWLR 110, where it is said the client did put in issue the content of the privileged communications (by contending prior litigation had been compromised by lawyers acting contrary to instructions).

[15]See again The Queensland Local Government Superannuation Board v Allen [2016] QCA 325 at [71].

[16]Emphasis added.

[17]Benecke v National Australia Bank (1993) 35 NSWLR 110 at 116 per Clarke JA.

[18]By reference to provisions equivalent to UCPR rr 702 and 703 (standard and indemnity costs) as well as UCPR r 5.  See also part 3.4, division 7 of the Legal Profession Act 2007 (Qld).

[19]Cited also in Talacko v Talacko (2021) 272 CLR 478 at [60].

[20]Affidavit of Marais, exhibit AJM-49, at p 241 of the exhibits.

[21]Cf UCPR r 211(1)(b).

Close

Editorial Notes

  • Published Case Name:

    Pro-Invest Australian Hospitality Opportunity (St) Pty Ltd v Tactical Project Management Pty Ltd

  • Shortened Case Name:

    Pro-Invest Australian Hospitality Opportunity (St) Pty Ltd v Tactical Project Management Pty Ltd

  • MNC:

    [2024] QSC 101

  • Court:

    QSC

  • Judge(s):

    Bowskill CJ

  • Date:

    23 May 2024

  • White Star Case:

    Yes

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2024] QSC 10123 May 2024Applications for further disclosure: Bowskill CJ.
Primary JudgmentSC2710/21 (No citation)06 Jun 2024Form of orders and costs: Bowskill CJ.
Notice of Appeal FiledFile Number: CA 8805/2402 Jul 2024Notice of appeal filed.
Appeal Determined (QCA)[2025] QCA 1014 Feb 2025Appeal allowed: Mullins P (Flanagan JA agreeing), Brown JA agreeing separately.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
ASIC v Southcorp (2003) 46 ACSR 438
1 citation
Jump To
Cite 1 - (2003) 46 ACSR 438
Benecke v National Australia Bank (1993) 35 NSWLR 110
5 citations
Jump To
Cite 1 - (1993) 35 NSWLR 110
Cite 2 - (1993) 35 NSWLR 110
Cite 3 - (1993) 35 NSWLR 110
Cite 4 - (1993) 35 NSWLR 110
Cite 5 - (1993) 35 NSWLR 110
Berry v British Transport Commission (1962) 1 QB 306
1 citation
Jump To
Cite 1 - (1962) 1 QB 306
Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd(2022) 13 QR 148; [2022] QCA 266
1 citation
Jump To
Cite 1 - [2022] QCA 266
Carey v Korda (No. 2) (2011) 85 ACSR 331
1 citation
Jump To
Cite 1 - (2011) 85 ACSR 331
Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236
1 citation
Jump To
Cite 1 - (2008) 72 NSWLR 236
Gray v Sirtex Medical Ltd (2011) 193 FCR 1
2 citations
Jump To
Cite 1 - (2011) 193 FCR 1
Cite 2 - (2011) 193 FCR 1
Queensland Local Government Superannuation Board v Allen [2016] QCA 325
3 citations
Jump To
Cite 1 - [2016] QCA 325
Cite 2 - [2016] QCA 325
Cite 3 - [2016] QCA 325
Talacko v Talacko (2021) 272 CLR 478
1 citation
Jump To
Cite 1 - (2021) 272 CLR 478

Cases Citing

Case NameFull CitationFrequency
Pro-Invest Australian Hospitality (ST) Pty Ltd v Tactical Project Management Pty Ltd [2025] QCA 10 2 citations
1

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