Allens

Construction & Major Projects

Client Update: Security of payments and litigation privilege

26 October 2011

In brief: A recent Victorian Supreme Court decision has held that litigation privilege extends to documents prepared in anticipation of adjudication under Victorian security of payments legislation. Partner Nick Rudge (view CV) and Law Graduate Loren Atkins report.

The case

A construction dispute arose in 2007 between Dura (Australia) Constructions Pty Ltd (the builder) and Hue Boutique Living Pty Ltd (the owner). During discovery in the proceedings that subsequently occurred in October 2011, the builder claimed that the owner was required to discover documents relevant to the preparation of show cause notices and documents prepared for an adjudication between the two parties under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the SOPA). The owner claimed that litigation privilege existed over the disputed documents. The issue came before Justice Macaulay in the Victorian Supreme Court.1

His Honour held that an adjudication under the SOPA constituted an 'Australian proceeding' as defined in the Evidence Act 2008 (Vic). Similarly, it was held that an adjudicator came within the meaning of an 'Australian court' under the Evidence Act. His Honour concluded that the documents that were prepared for the adjudication were protected by litigation privilege, in accordance with section 119 of the Evidence Act.

Justice Macaulay found that documents relating to the preparation of show cause notices were also privileged under s119 of the Evidence Act. His Honour emphasised how the case turned on the issue of whether the contract had been validly terminated. As the disputed documents evidenced '...the assertions of contractual wrongdoing which are the very foundation of the issues in dispute'2 they were subject to litigation privilege protection.

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Comment

As a result of this ruling, parties to construction contracts can prepare for adjudications in the knowledge that documents created for that purpose will be privileged in any subsequent court proceeding.

It is also worth noting, given the wording in the different jurisdictions' security of payment Acts, and the existence of the uniform evidence legislation, this decision will likely be followed by courts not only in Victoria, but also in New South Wales, the Australian Capital Territory and Tasmania, which have enacted the uniform evidence legislation. The decision is also likely to be persuasive in jurisdictions where the common law rules apply.

Footnotes
  1. Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2011] VSC 477.
  2. Ibid., p 54.

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