FEDERAL COURT OF AUSTRALIA

DSE (Holdings) Pty Limited v Intertan Inc [2003] FCA 384

EVIDENCE – practice – legal professional privilege – alleged implied waiver by pleading in a defence – extent of operation of any relevant waiver

Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152   considered

Mann v Carnell (1999) 201 CLR 1   considered and applied

Perpetual Trustees (WA) Ltd v  Equuscorp Pty Ltd [1999] FCA 925 (Full Court)   considered

Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501   considered

BP Australia Pty Limited v Nyran Pty Ltd [2002] FCA 1302 (per Nicholson J)   referred to

Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49   applied

Northern Territory v GPAO (1999) 196 CLR 553   applied

Lillicrap v Nalder & Son [1993] 1 WLR 94   considered

Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow [1995] 1 All ER 976   considered

Kershaw v Whelan [1996] 1 WLR 358   considered

The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 192 ALR 561   applied

Paragon Finance Plc v Freshfields [1999] 1 WLR 1183   considered

Hayes v Dowding [1996] PNLR 578   referred to

Thomason v The Council of the Municipality of Campbelltown (1939) 39 SR (NSW) 347   considered

Mathisen v Wallarah Coal Co Ltd (1937) 37 SR 530   considered

In re Coomber [1911] 1 Ch. 723   referred to

Inche Noriah v Shaik Allie Bin Omar [1929] A.C. 127   referred to

Barilla v James (1964) 81 WN (Pt 1) (NSW) 457   considered

United States Surgical Corp v Hospital Products International Pty Limited (McLelland J unreported 11 October 1981, Equity Division No 2094/81)   considered

Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87   considered

Attorney General (NT) v Maurice (1986) 161 CLR 475   referred to

Ampolex Limited v Perpetual Trustee Co (Canberra) Limited (1995) 37 NSWLR 405   considered

Benecke v National Australia Bank (1993) 35 NSWLR 110   referred to

Torcasio Developments Pty Ltd v Country Park Developments Pty Ltd (Byrne J Supreme Court of Victoria, 9 September 1991)   referred to

Bayliss v Cassidy (No 2) [2000] 1 Qd R 464   considered

Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419   referred to

Farrow Mortgage Services Pty Ltd v Webb 39 (1996) NSWLR 601   referred to

Southern Equities Corporation Ltd (In Liq) v Arthur Andersen & Co (1997) 70 SASR 166   referred to

Data Access Corporation v Powerflex Services Pty Ltd [1994] AIPC 91-112   not followed

Wardrope v Dunne [1996] 1 Qd R 224   not followed

Liquorland (Australia) Pty Ltd v Anghie [2003] VSC 73   referred to

Goldberg v Ng (1995) 185 CLR 83   referred to

Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360   considered

Akins v Abigroup Ltd (1998) 43 NSWLR 539   referred to

Esso Australia Resources Limited v Federal Commissioner of Taxation (1998) 83 FCR 511   referred to

Equuscorp Pty Ltd v Kamisha Corp Ltd (1999) ATPR 41-697   considered

John Tanner Holdings Pty Ltd v Mortgage Management Ltd (2001) 182 ALR 201   referred to

Pickering v Edmunds (1994) 63 SASR 357 at 362   referred to

Randell v Rockliff (1999) 9 Tas R 85   referred to

Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044   referred to

Garratt’s Ltd v Thanga Thangathurai [2002] NSWSC 39   referred to

United Rural Enterprises v Lopmand [2002] NSWSC 1142   referred to

BP Australia Ltd v Stallwood [2000] WASC 75   disapproved

Ideas Plus Investments Ltd v National Australia Bank Ltd [2002] WASC 167   disapproved

South Australian Government Financing Authority v Bank of New Zealand (No 2) [2002] SASC 10   referred to

Gough v Gilmour Holdings Pty Ltd v Caterpillar of Australia (No 1) [2001] NSW IRComm 147   referred to

Mathieson v Booth [2000] VSC 89   referred to

Henderson v McCafferty [2002] 1 Qd R 170   referred to

Woodside Petroleum Development Pty Ltd v H & R E & W Pty Ltd, (Anderson J unrep 3 October 1997 WASC)   referred to

Western Australia v Southern Equities Corporation Ltd (1996) 69 FCR 245   referred to

Commonwealth of Australia v Temwood Holdings Pty Ltd [2002] WASC 107 at [10]   considered

Cross on Evidence, Butterworths, Sydney, 2000 pars  [25010] – [25020]

Mathieson and Page “Implied Waiver of Privilege” (2000) NZLJ 355

DSE (HOLDINGS) PTY LIMITED v INTERTAN INC (AND ANOR)

N 3011 of 2002

ALLSOP J

30 APRIL 2003

SYDNEY

THE COURT ORDERS THAT:

1.               Paragraph numbered one in the notice of motion filed by the applicant, dated 10 February 2003 and filed in Court on 11 February 2003, be dismissed.

2.               Paragraph numbered one in the notice of motion filed by the respondent, dated 10 February 2003 and filed in Court on 11 February 2003, be dismissed.

3.               The balance of the said motions (including any question of costs) stand over to a date to be fixed.

4.               Subject to further order, the time for filing of any application for leave to appeal from these orders or any of them be extended to seven days from the pronouncement of judgment on the balance of the orders sought in both of the notices of motion referred to above.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

Issues

1                     There are two notices of motion before me, one filed by the applicant, one by the respondents.  I have heard full argument on two aspects of the notices of motion which are discrete.  The two aspects raise issues as to the extent of waiver of legal professional privilege brought about by pleading, and by steps taken, in the conduct of a proceeding.

2                     The two issues the subject of debate are (a) whether the respondents by merely joining issue in their defence with an allegation made by the applicant that they (together with the applicant) had a certain state of mind so put their own state of mind in issue as to waive privilege on legal advice relevantly connected with the formation of their state of mind; and (b) whether the applicant (who concedes that it has waived privilege on relevant legal advice contemporaneous with the formation of its state of mind) must disclose (and continue to disclose without temporal limit) legal advice about its state of mind in connection with the transactions the subject of the proceedings, which would include communications in the conduct of these proceedings concerning that subject matter.

My Views – a summary

3                     For the reasons which follow, the answers which I give to (a) and (b) in [2] above are, ‘no’ and ‘no’.

4                     The matter was fully and helpfully argued, for which I am grateful to counsel and solicitors.  The extent of argument has required me to examine the question of implied waiver in some detail.  I have come to the view that the authorities in this Court may require me to be guided by what the majority of the Full Court of this Court said in Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152, as necessarily modified by Mann v Carnell (1999) 201 CLR 1, esp 13 at [27] and [29]; as to which course see generally Perpetual Trustees (WA) Ltd v  Equuscorp Pty Ltd [1999] FCA 925 (Full Court), Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 (per Hely J) and BP Australia Pty Limited v Nyran Pty Ltd [2002] FCA 1302 (per Nicholson J).

5                     My own view is that Mann v Carnell evinces more than a modification of the approach of the majority in Telstra and amounts to a rejection of that approach and that the notion of inconsistency of conduct by the holder of the privilege and the maintenance of the confidence in question (though informed where relevant by notions of fairness) works a narrower and more confined operation for implied waiver than as expressed by the majority in Telstra.

6                     However, the rejection of the applicant’s claim (at this stage of proceedings – pleadings) that the respondents have waived privilege on their relevant contemporaneous legal advice probably does not turn on resolving these issues.  Rather, it turns on my rejection of the proposition that a mere denial of an assertion that the holder of the privilege had a certain state of mind will suffice to lead to a waiver of privilege.  This conclusion is conformable with the views of the majority in Telstra, but it is also strongly informed by the principle enunciated in Mann v Carnell.  In so concluding, I have not followed a number of single judge decisions. 

7                     The rejection of the respondents’ claim involves the rejection of the proposition that once privilege is waived on communications contributing to the formation of a pleaded state of mind, no communication on that subject matter ever again attracts or retains privilege.  In my view a proper understanding of the principle involved in implied waiver gainsays this conclusion.

8                     The resolution of the two paragraphs of the notices of motion does not require any more precise identification of the documents in question than can be gained from an appreciation of the issues as expressed above.

The Pleadings

9                     The subject matter of the proceedings was described by the applicant in written submissions in terms agreed, for the purposes of the motions, by the respondents, as follows:

1.                 The proceedings arise out of a Share Acquisition Agreement (“the Agreement”) between the Applicant and the Respondents entered into on 10 April 2001.  The Agreement was completed on 30 April 2001.

2.                 The proceedings were commenced on 2 April 2002.

3.                 Under the Agreement the Applicant bought and the Respondents sold all the shares in InterTAN Australia Limited (“the Company”) for a price of $114,139,649 subject to adjustment in accordance with the Agreement.

4.                 One important term of the Agreement required the calculation of a figure known as the Net Asset Correction.  This figure represents the difference between the Net Assets as disclosed in the December Accounts (as defined) and the Net Assets as recorded in the Completion Accounts (as defined).

5.                 The Applicant contends that this figure is -$7,686,237 and that after allowing for the Intra-Group Debt (as defined) in favour of the Respondents, $3,644,758 is payable to the Applicant as the post-completion adjustment.

6.                 A critical issue is whether the accounts known as the December Corporate Pack are the December Accounts within the meaning of the Agreement.  The Applicant contends they are.  The Respondents contend they are not.  This issue is significant because it is by reference to the December Accounts that the Net Asset Correction is calculated.  The Net Asset Correction is a figure which is calculated by reference to the Balance Date Net Assets (as defined).  That term directs attention to the Net Assets of the Company as at the Balance Date (defined as 31 December 2000) as disclosed in the December Accounts.

7.                 The Respondents contend that the December Corporate Pack does not constitute the December Accounts within the meaning of the Agreement, that there are no December Accounts within the meaning of the Agreement and that the Net Asset Correction cannot be calculated.  Alternatively, the Respondents contend that the Net Asset Correction is $3,801,232 in favour of the Applicant and that the Applicant is obliged to pay the Respondents a post-completion adjustment of $240,247 or, alternatively, the Completion Date Intra-Group Debt in the amount of $4,041,479.

8.                 The Applicant claims that, on a proper construction of the Agreement, the December Corporate Pack is the December Accounts.

9.                 Alternatively, if it is not, the Applicant claims that the parties acted upon the basis that the December Corporate Pack is the December Accounts and are estopped from denying that they are.

10.             Alternatively, the Applicant says the Agreement is liable to be rectified so as to produce the result that the December Corporate Pack is the December Accounts.

11.             Alternatively, the Applicant says the Respondents made representations and gave warranties which were misleading and deceptive or likely to mislead and deceive contrary to s 995 of the Corporations Act 2001 (“the Act”) and that the Applicant is entitled to damages for the breach or, alternatively, an order varying the Agreement under s 1325 of the Act.

12.             Alternatively, the Applicant says that the Respondents are in breach of warranty and that the Applicant is entitled to damages for the breach of warranty.

10                  Some further reference to the pleading is required.  Relevant paragraphs of the statement of claim and defence, sufficient to provide an understanding of the context of the dispute are as follows:

(a)      In [17] of the statement of claim, the applicant alleges (which is denied) that in the negotiations the respondents represented to the applicant that:

(a)            if the Applicant purchased the Shares that the Respondents would make the representations and give the warranties referred to in paragraph 28 below; and

(b)            the Negotiations were being conducted on the basis that the representations by the Respondents referred to in paragraph 28 were true.

Particulars

The representation arises out of the conduct of the Respondents in the Negotiations proffering to the Applicant various drafts of the proposed agreement containing the representations and the warranties alleged in paragraph 28, and those warranties and representations.

(b)      In [19] of the statement of claim, the applicant alleges that the negotiations were conducted on the basis of assumptions held by both the applicant and the respondents that the “December Corporate Pack”:

(a)   showed a true and fair view of the assets and liabilities and financial position of the Company as at 31 December 2000; and

(b)   was the December Accounts for the purposes of the draft agreements; and

(c)    would be the December Accounts for the purposes of any concluded agreement.

In response to [19] of the statement claim the respondents plead as follows in the defence as filed:

(a)              the Respondents say that the December Corporate Pack was provided to the Applicant in relation to the Proposal;

(b)              the Respondents say that the December Corporate Pack did not and cannot constitute the stand alone accounts of the Company (as defined in the Claim);

(c)               the Respondents say that the Applicant was also provided with Corporate packs for July to November 2000 which related to the Company and Technotron; and

(d)              the Respondents otherwise deny the allegations in paragraph 19 of the Claim.

(c)      In [20] of the statement of claim, the applicant alleges (which is denied) that the above (denied) common assumptions were caused or contributed to by the conduct of the respondents, in the respondents negotiating by reference to the financial information in the December Corporate Pack and in knowing that the applicant believed the assumptions to be correct and not informing it that the assumptions were not correct.

(d)      In [38] of the statement of claim, the applicant alleges (which is denied) that it relied on certain representations about the December accounts, in particular that the December Corporate Pack constituted the December Accounts.

(e)      In [49] of the statement of claim the applicant alleges, in aid of its rectification suit, that at the time of the execution of the agreement:

(a)          The common intention of the parties as manifested in particular in the conduct referred to in paragraph 19 above was that the December Corporate Pack would constitute the December Accounts within the meaning of the Agreement; and

(b)          The parties believed (mistakenly, if the Respondents’ construction is correct (which is not admitted)) that the definition of December Accounts in the Agreement produced the consequence that the December Corporate Pack was the December Accounts within the meaning of the Agreement.

The respondents put these last matters in issue with a simple denial.

Governing Legal Principles

11                  At this interlocutory stage in the proceedings, the common law governs the disposition of the issues raised by the notice of motion:  Mann v Carnell (1999) 201 CLR 1 at [27], [41], [143] and [144]; Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 at [17], [18] to [28], [64]; and Northern Territory v GPAO (1999) 196 CLR 553.

12                  Waiver at common law occurs where the party entitled to the privilege performs an act which is inconsistent with the maintenance of the confidentiality, assessment of such inconsistency being informed, where necessary, by considerations of fairness; though the assessment is not by reference to some overriding principle of fairness operating at large:  Mann v Carnell, supra at [29].

13                  The circumstance of waiver with which these applications are concerned is that which can be brought about by the contents of pleadings. The expression often used, as in argument on the motions, was “putting in issue” the confidential (and privileged) communication.  It is but an illustration of the circumstances in which implied waiver may occur.  (See generally Cross on Evidence [25010]-[25020].) 

14                  The overriding guiding principle is that stated in Mann v Carnell, supra at [29].  The expression of that principle and the subordination of the notion of “fairness” to possible relevance in the assessment of the inconsistency between the act and the confidentiality of the communication produces, it seems to me, an important change to the existing law.  In order to explain why I think this to be so it is necessary for me to examine the pre-existing authorities.  This will also illuminate the operation of the principle as expressed in Mann v Carnell at [29], and the importance of the recognition that it is the inconsistency between the relevant act of the holder of the privilege and the maintenance of the confidence that is essential, not a broad balancing process based on fairness.

15                  It is convenient to begin with a consideration of some recent English decisions for the reason that these cases reflect the relationship between notions of “fairness” and “inconsistency” and highlight the effect of the predominance of the latter. 

The English cases

16                  The Court of Appeal in England in Lillicrap v Nalder & Son [1993] 1 WLR 94 dealt with a suit by a client against his former solicitor.  The Court found an implied waiver by the client in relation to all communications which were relevant to an issue in the proceedings.  The plaintiff conceded that there was an implied waiver in respect of the retainer in connection with which the alleged negligence occurred, but resisted the claim that privilege in respect of other retainers had been waived in circumstances where those other retainers were said to be relevant to causation.  Various passages in the judgment have assumed importance in later cases.  For this reason I set them out.  Dillon LJ, at 99, agreed with the expression of principle enunciated by May J (as his Lordship then was) at first instance:

I return to what I regard as the heart of the matter – waiver.  A client who sues his solicitor invites the court to adjudicate the dispute and thereby, in my judgment, waives privilege and confidence to the extent that is necessary to enable the court to do so fully and fairly in accordance with the law including the law of evidence.  I suspect that at the fringes each case will depend on its own facts.  Normally the waiver will extend to facts and documents material to the cause of action upon which the plaintiff sues and to the defendant’s proper defence to that cause of action.  The bringing of a claim for negligence in relation to a particular retainer will normally be a waiver of privilege and confidence for facts and documents relating to that retainer, but not without more for those relating to other discrete retainers.

17                  Dillon LJ continued at 99:

The waiver can only extend to matters which are relevant to an issue in the proceedings and, privilege apart, admissible in evidence.  There is no waiver for a roving search into anything else in which the solicitor or any other solicitor may have happened to have acted for the clients.  But the waiver must go far enough, not merely to entitle the plaintiff to establish his cause of action, but to enable the defendant to establish a defence to the cause of action if he has one.  Thus, it would extend to matters under earlier retainers, as in the hypothetical example I have given, which established that the experience of the client was, to the knowledge of the solicitor, such that the solicitor was not in breach of duty as alleged.

18                  Russell LJ said at 101:

[O]nce it is conceded that there is implied waiver of privilege when proceedings are instituted against a solicitor, I can see no warrant for the submission that the waiver is confined to the documents and communications between solicitor and client within the specific retainer forming the subject matter of the proceedings.  The parameters of the retainer, to my mind, erect an artificial barrier.  In my judgment, by bringing civil proceedings against his solicitor, a client impliedly waives privilege in respect of all matters which are relevant to the suit he pursues and, most particularly, where the disclosure of privileged matters is required to enable justice to be done.  This is another way of expressing the view that May J. expressed in his judgment in the passage to which Dillon L.J. has referred.

19                  Farqharson LJ said at 102-3:

The defendants seek to show in the particulars of the six other transactions that, even if proper advice had been tendered, the plaintiffs would have ignored it as they had done in the past; in other words, the issue is one of causation.  For my part, I would have difficulty in holding that the defendants should, as a matter of principle, be prevented from adducing evidence which is relevant to that issue.  A proper interpretation of the waiver in this case is, in my judgment, one that embraces not only the documents and advice arising from the Heligan Manor transaction, but also documents or information otherwise subject to privilege which are relevant to the issues between the parties and which it would be unfair to exclude.  Whether the evidence sought to be adduced by the defendants is relevant to the main issue is, in the last analysis, a matter for the trial judge.  We are here concerned with whether the documents should be excluded as a matter of principle.  I accordingly say nothing about the weight of that evidence but, looking at it as a matter of principle in the circumstances of this case, I would hold that the bringing of the present proceedings by the plaintiffs involved the waiver of the privilege attaching to the documents created in the six transactions.  

20                  Colman J, in Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow [1995] 1 All ER 976, examined these expressions in Lillicrap in the light of considerations of the kind expressed in Mann v Carnell.  In Nederlandse Reassurantie the plaintiff purchased share capital in three insurance companies.  To advise it in this acquisition the plaintiff assembled a team of advisers, including lawyers.  After completion, the plaintiff discovered large unanticipated exposures due to insufficient retrocession cover.  It sued its non-legal advisers, claiming negligence in the advice given by these parties.  The defendants asserted that the bills of costs of Herbert Smith, the solicitors, revealed that that firm was giving advice of a general nature going to the commercial advisability of entering into the agreement, going beyond legal advice, strictly speaking.  Colman J expressed views on the width of the protection of the privilege (see especially at 982-84).  Colman J then addressed waiver.  He referred to the judgments in Lillicrap and certain United States authorities (and, if I may respectfully say so, neatly encapsulated important elements of the debate on the motions before me) and expressed the position in terms conformable with Mann v Carnell though recognising the importance of “unfairness” dictated by Lillicrap.  After citing passages from Lillicrap, Colman Jsaid at 986-87:

The true analysis of what the courts are doing in such cases of so-called implied waiver of privilege is, in my judgment, to prevent the unfairness which would arise if the plaintiff were entitled to exclude from the court’s consideration evidence relevant to a defence by relying upon the privilege arising from that solicitor’s duty of confidence.  The client is thus precluded from both asserting that the solicitor has acted in breach of duty and thereby caused the client  loss and, to make good that claim, opening up the confidential relationship between them and at the same time seeking to enforce against the same solicitor a duty of confidence arising from their professional relationship in circumstances where such enforcement would deprive the solicitor of the means of defending the claim.  It is fundamental to this principle that the confidence which privilege would otherwise protect arises by reason of the same professional relationship between the parties to the litigation.  The underlying unfairness which the principle aims to avoid arises because the claim is asserted and the professional relationship opened for investigation against the very party whose duty of confidence is the basis of the privilege. It is against the unfairness of both opening the relationship by asserting the claim and seeking to enforce the duty of confidence owed by the defendant that the principle is directed.

[emphasis added]

Mr Hapgood emphasises the principle as being one of avoiding the unfairness and injustice which would arise from the assertion of privilege, even against a defendant who owed no duty of confidence in relation to the communications in question.  He relies on a number of decisions of American courts, notably Hearn v Rhay (1975) 68 FRD 574 in which Neill CJ of the United States District Court, Eastern District of Washington, having referred to the circumstances in which waiver of privilege had been applied in the United States courts, said this (at 581):

‘All of these established exceptions to the rules of privilege have a common denominator; in each instance, the party asserting the privilege placed information protected by it in issue through some affirmative act for his own benefit, and to allow the privilege to protect against disclosure of such information would have been manifestly unfair to the opposing party.  The factors common to each exception may be summarized as follows:  (1) assertion of the privilege was a result of some affirmative act, such as filing suit, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defence.  Thus, where these three conditions exist, a court should find that the party asserting a privilege has impliedly waived it through is own affirmative conduct.’

This approach has been followed in other American cases, amongst them Conkling v Turner (1989) 883 F 2d 431 at 434 (United States Court of Appeals, 5^th Circuit).

If the reasoning in Hearn v Rhay was of general application it would involve a fundamental inroad into the scope of legal professional privilege.  Waiver of privilege would operate if it could be established that the communications between the plaintiff and his solicitor were likely to be evidentially relevant to an issue and it would be unfair if the defendant did not have access to them in order to assist his defence.  But, as I have already explained, the foundation of the waiver is not merely that the assertion of privilege leads to the inaccessibility of evidence relevant to a defence. It is the inconsistency of the plaintiff on the one hand opening the professional relationship to the inspection of the court and on the other hand seeking to enforce confidentiality so as to exclude communications to which the professional relationship between the same parties has given rise. Thus, whatever the United States courts now regard to be the scope of waiver of privilege, the reasoning in Hearn v Rhay certainly does not represent English law.

[emphasis added]

21                  The apparent restriction of the possible application of waiver to the “same professional relationship between the parties to the litigation” may not be entirely conformable with the essential principle of inconsistency.  Nevertheless, the emphasis of Colman J on inconsistency, and fairness as part of that, reflects, to a significant degree, Mann v Carnell.

22                  In Kershaw v Whelan [1996] 1 WLR 358, Ebsworth J found that privilege had been waived in respect of communications with previous solicitors, not parties to the suit.  The plaintiff was disabled.  His father died.  The plaintiff’s former stepmother then required (against the plaintiff’s wishes) the plaintiff to leave the erstwhile family home and enter an institution.  The defendant solicitor gave advice to the widow stepmother in connection with the deceased’s estate which advice was disadvantageous to the plaintiff.  The plaintiff claimed that the defendant solicitor acted for him as well.  This was denied by the defendant solicitor.  The statute of limitations was raised by the defendant.  The plaintiff claimed that he did not discover, and could not with the exercise of due diligence have discovered, the relevant facts until a relevant later time.  The defendant sought discovery of the files of other solicitors whom the plaintiff had consulted in proceedings in connection with the father’s estate.  Ebsworth J expressed the view (at 369) that Colman J confined Lillicrap.  Whether or not Colman J did so may be open to debate.  (See in this regard Mathieson and Page “Implied Waiver of Privilege” (2000) NZLJ 355, 356.)  Ebsworth J expressed herself as adopting and applying the reasons of Dillon LJ and Russell LJ in Lillicrap, referred to at [17] and [18] above and said the following at 370:

Waiver is not lightly to be inferred; although privilege is an aspect of the law of evidence and not of constitutional rights it is firmly established in our law for sound reasons of public policy.  The wording of section 32 of the Limitation Act 1980, unlike section 14, does not contain any references to legal or other advice but I adopt the passage in the judgment of Dillon LJ in Lillicrap v Nalder & Son [1993] 1 W.L.R. 94, 99 I have already quoted and concluded that the plea of deliberate concealment has had the effect of waiving privilege in respect of such documents as go to the issue.  As Russell LJ said in Lillicrap v Nalder & Son [1993] 1 W.L.R. 94, 101:

“by bringing civil proceedings against his solicitor, a client impliedly waives privilege in respect of all matters which are relevant to the suit he pursues and, most particularly, where the disclosure of privileged matters is required to enable justice to be done”.  [Emphasis added]

In Lillicrap v Nalder & Son the material was held in files of the same solicitors in respect of discrete transactions; I can see no difference in principle where his present solicitors hold files of the clients’ earlier solicitors in relation to discrete but essentially related factual matters.

23                  Thus, Ebsworth J saw the relevance of matters to the suit brought by the holder of the privilege as the essential attribute causing the waiver.

24                  It should be noted, by way of interpolation at this point, that legal professional privilege in Australia is not a mere matter of evidence; it is a rule of substantive law and an important, indeed fundamental, common law right or immunity:  The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 192 ALR 561 at [9], [11], [44], [85], [86] and [132] and the other High Court cases there cited.  This is important to recognise in appreciating the operation of inconsistency, as opposed to some more broad ranging notion of fairness informed, perhaps, by the balancing of competing interests in the administration of justice.  The confidentiality is in the nature of an entitlement or a right to keep the communications immune from disclosure; it is acting inconsistently with it that destroys that fundamental entitlement:  Mann v Carnell, supra at [29] and Daniels, supra.

25                  In Paragon Finance Plc v Freshfields [1999] 1 WLR 1183 the Court of Appeal once again dealt with the question of the extent of the implied waiver.  The defendant solicitors had acted for the plaintiffs in a series of mortgage securitisation transactions and in obtaining related insurance.  Claims under the policies were made; disputes with the insurers ensued, which disputes were settled; new financing and securitisation structures were then put in place.  The plaintiffs retained new solicitors during the course of settling the claims.  The plaintiffs sued the former solicitors claiming the costs of pursuing the claims, the shortfall in recovery and the new solicitors’ fees.  The question arose as to the production of communications between the plaintiff and the new solicitors regarding pursuit and settlement of the insurance claims.  The defendants put in issue liability, causation and quantum and alleged contributory negligence and failure to mitigate.  That is, the defendants put in issue the quality of the conduct of the plaintiffs in how they had dealt with the insurers, and, so, necessarily the advice of the second solicitors about those matters.  Clearly, on the issues joined between the parties, the second solicitors’ advice was relevant.  The documents were described by Lord Bingham of Cornhill CJ on behalf of the Court (his Lordship, and Brooke LJ and Chadwick LJ) in the following terms at 1186-87:

The present issue concerns, and concerns only, confidential communications between the plaintiffs and Slaughter & May and counsel concerning claims made by the plaintiffs against the insurers and the pursuit and settlement of those claims.  The documents now in issue are referred to in paragraph 5(a) to (m) of the first schedule to a summons issued by Freshfields dated 8 June 1998.  Nothing turns on the details of those documents.  It is common ground that they are relevant to issues in these proceedings, and it is common ground that some of them are protected from disclosure by legal professional privilege unless that privilege has been impliedly waived. There is no question of express waiver.

26                  After explaining the nature and basis of legal professional privilege and touching upon the issue of express waiver, Lord Bingham explained the rationale of implied waiver in circumstances where a solicitor is sued.  It is appropriate to set out the passage, because it identifies, in clear terms, the essential place of the notion of inconsistency of conduct identified as central by the High Court, and also because it highlights the role of the party alleged to have waived in bringing forward the issue.  His Lordship said at 1188:

When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them.  Since court proceedings are public, the client brings that formerly confidential relationship into the public domain.  He thereby waives any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound.  This is an implication of law, the rationale of which is plain.  A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality.  He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it.  He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence.  But, since the implied waiver applies to communications between client and solicitor, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware.

[emphasis added]

27                  It was held that the plaintiffs had not brought their relationship with the second solicitors before the court for public scrutiny.  After referring to Dillon, Russell and Farquharson LJJ in Lillicrap, Lord Bingham said at 1190:

But the language of Russell and Farquharson LJJ cannot be read without some limitation; otherwise, legal professional privilege would disappear altogether, even as between plaintiffs and solicitors advising them in their proceedings against former solicitors, where the interests of justice call for disclosure.  The ruling of the court must, in our judgment, be read with reference to the subject matter of the appeal before the court. We have no doubt that the court was right to rule that the plaintiffs’ implied waiver extended to earlier transactions handled for them by the same solicitors.  We do not understand the court to have gone further than that, and it was quite unnecessary for it to do so.

28                  The Court also expressly approved the paragraph of Colman J in Nederlandse Reassurantie set out at [20] above commencing with the words “The true analysis”.  The Court then examined the judgment of Ebsworth J in Kershaw.  The Court cited the passage from Ebsworth J’s reasons set out at [22] above and commented thereon as follows at 1192-93:

We would not wish to exclude the possibility that there may be factual situations in which a plaintiff who sues his solicitor may be taken to have impliedly waived privilege in respect of written legal advice from other lawyers which he agreed to that solicitor seeing for the purposes of the matter on which he was currently seeking advice from him.  But, with respect to the judge, we ourselves do see a difference in principle between the two situations which the judge was considering. On the facts of the present case, the plaintiffs have undoubtedly brought their previously confidential relationship with Freshfields in to the public domain, and fairness requires that Freshfields should be free to rely on any communications passing between them and the plaintiffs relevant to their defence of that claim.  They are already privy to those communications. But, as already pointed out, the plaintiffs have not brought their relationship with Slaughter & May into the public domain.  That relationship remains confidential. The plaintiffs have done nothing to breach it.  And far from enabling Freshfields to rely on material to which they are already privy, the ruling for which Freshfields contend would make documents available to them of which the contents are unknown.

If the question were one of balancing the requirements of fairness and justice in the instant proceedings against any legitimate interest a plaintiff might have in maintaining the confidentiality of a confidential relationship there might be much to be said for the  result reached by the judge in the Kershaw case [1996] 1 W.L.R. 358 but Reg. v Derby Magistrates’ Court, Ex parte B. [1996] A.C. 487 makes plain that in the context of legal professional privilege no such balance is involved.  This authority is important, not only for its clear restatement of principle, but also as illustrating in graphic terms the all but absolute nature of this privilege in the absence of waiver.  If ever there was a case in which the interests of justice militated in favour of disclosure that surely was it.

29                  The last paragraph quoted from Lord Bingham’s reasons, especially the reference to R v Derby Magistrates’ Court; Ex parte B [1996] AC 487, reflects the place that the fundamental nature of the privilege, not just as a matter of evidence, has in the principle governing waiver.

30                  I would take their Lordships to have, in substance, rejected the proposition, explicit within the judgment of Ebsworth J in Kershaw, that relevance was the determining criterion.

31                  Lord Bingham then approved of an unreported judgment of Blackburne J in Banque Bruxelles Lambert SA v Simmons and Simmons (unrep 23 November 1995) where the defendant solicitors, sued for negligence by the erstwhile client plaintiff, were refused access to the privileged documents of the plaintiff’s in-house lawyer as relevant to the allegation of contributory negligence raised by the defendants.  The following passage in Blackburne J’s judgment was expressly approved as a correct reading of Lillicrap and as a correct enunciation of the relevant principle.

In my judgment the waiver applies only to communications between the client and the solicitor whom he is suing and not to privileged communications between the client and some other solicitor, and I do not consider that the decision in the Lillicrap case [1993] 1 W.L.R. 94, properly understood, is intended to establish any wider principle.  Mr Hart submitted that the touchstone is that the waiver extends, to take the words of Russell L.J., to ‘all matters… relevant to the suit… to enable justice to be done, or to take the words of Farquaharson L.J., ‘to documents and information … relevant to the issue between the parties and which it would be unfair to exclude’ so that it can extend to privileged communications between the client and another solicitor (unconnected with the defendant solicitor) bearing on the issue in the suit.  If that were correct it is difficult to see why the waiver should not equally extend to privileged communications between a client and his solicitor where the client is suing someone who was not his solicitor and who owed no duty of confidence in relation to any communication passing between them.

32                  Thus, it was clear that the Court of Appeal was rejecting the wide criterion of relevance to issues in the suit commenced by the claimant (such that it would cause unfairness) as the essential determinant of the principle.

33                  Further, the Court expressly overruled the decision of Jonathan Parker J in Hayes v Dowding [1996] PNLR 57 where an implied waiver was found. Lord Bingham said at 1193:

In reaching that conclusion the judge relied heavily on Australian and United States authority.  Neither party before us sought to contend that this case was correctly decided, and we are satisfied that it was not.  The authorities on which the judge principally relied do not represent the law in this country, and the decision must be overruled.

34                  I will return to the discussion of the relevant Australian authorities relied on by Jonathan Parker J in Hayes v Dowding at an appropriate point in my discussion of the Australian position, which follows presently.  It is sufficient to note here that the authorities in question are ones which are single judge decisions and which are, in my respectful view, not reflective of the law in Australia.

35                  The Court also disapproved of some expressions of opinion (obiter) of Moore-Bick J in X Corporation Ltd v Y (unrep. 16 May 1997) in which waiver was assessed by reference to relevance to issues and fairness.

The Australian position

36                  In Thomason v The Council of the Municipality of Campbelltown (1939) 39 SR (NSW) 347, the Full Court of the New South Wales Supreme Court (Jordan CJ delivering reasons, with which Halse Rogers and Bavin JJ concurred) dealt with the question as to waiver of legal advice that had been given to the widow of a deceased worker.  Mrs Thomason sued on behalf of herself and her infant daughter to recover compensation for the death of her husband as a result of the alleged negligence of the Council, which had been the late Mr Thomason’s employer.  The material pleas of the defendant Council included a plea based on s 63 of the Workers’ Compensation Act 1926 (NSW) (the WC Act) which provided for an election (requiring a specified degree of knowledge to be effective) between proceeding by way of application for determination under the WC Act and proceeding independently of that Act for damages.  The defendant’s plea stated:

…the plaintiff herself and by her agents well knowing her right to proceed at her own option under the said Act for compensation or independently of the said Act for damages exercised on her own behalf and on behalf of the said Joan Thomason her option to proceed and proceeded against the defendant under the said Act for compensation,…

whereby, it was said Mrs Thomason’s and her daughter’s rights were discharged and satisfied.

37                  At the trial, it was proved that Mrs Thomason had instituted proceedings  under the WC Act by filing at the Workers’ Compensation Commission a signed “Application for Determination” (being the prescribed initiating process) which included, beneath her signature, as part of the printed form (though with the name “Vincent John Brady” included in typescript) the following:

I have been advised by my solicitor Mr. Vincent John Brady as to my rights under s. 63 of the Workers’ Compensation Act, 1926-1929, and am aware that if the injury resulting in the death of the deceased was caused by the personal negligence or wilful act of the employer or of some person for whose act or default the employer is responsible, I may take proceedings independently of the Workers’ Compensation Act, 1926-1929, in respect of myself and other dependants.  I do not however, desire to take proceedings independently of the Workers’ Compensation Act, 1926-1929, and hereby elect to claim the benefits prescribed by that Act.

Mrs Thomason’s signature also appeared below this adjacent to the date, 29 November 1937.

38                  It is important to understand what then happened. There was no reply filed directly raising what might, conceivably, have been a claim that no such advice was given or that it was somehow defective.  The latter course would have directly pleaded the nature and quality of the advice, almost certainly waiving privilege on its content.  Nor did counsel for the defendant Council content himself with the tender of the signed Application for Determination.  The trial judge allowed the defendant’s counsel to cross-examine Mrs Thomason as to what passed between her and Mr Brady, and another solicitor on a separate occasion, about the advice given concerning s 63 of the WC Act.  The defendant also called Mr Brady, whom the trial judge permitted to be examined as to the advice which he had given to the plaintiff as to her rights. This course was taken over the objection of counsel for Mrs Thomason who said all such material was privileged. 

39                  At this point, it is crucial to place Thomason in context.  Shortly prior to the trial in Thomason, an identically constituted Full Court (once again Jordan CJ writing the judgment) decided Mathisen v Wallarah Coal Co Ltd (1937) 37 SR 530 concerning s 63 of the WC Act and the knowledge required for the election there provided for.  Jordan CJ distilled certain propositions from pre-existing High Court authority about this question which included the following set out at 532:

…

(2)      Nothing short of the institution or continuance of a litigious proceeding against the employer under the Act can debar the worker from pursuing any common law right which he may have to sue his employer in negligence or trespass.

(3)   The institution or continuance of a litigious proceedings under the Act does not prevent the prosecution of the common law right unless it is proved that the litigious proceeding was instituted or continued with knowledge of the existence of the common law right as an available alternative.

       This is involved in the other crucial word “option”.  Even the recovery by the worker, in full, of everything recoverable under the Act does not prevent him from subsequently proceeding at common law, unless such knowledge is proved.

(4)   If a litigious proceedings for compensation is commenced or continued with such knowledge, this constitutes an irrevocable bar to the worker’s common law rights.  The worker, in such case, cannot discontinue the litigious proceeding and sue at common law.

[emphasis in original]

40                  Jordan CJ then went on to discuss the subtleties within the emphasised passage in (3) above, concluding with a suggestion for legislative reform to remove the section’s “obscurity”.  (A suggestion taken up by the legislature: see Act No 36, 1938, s 5.  Such  reform was inapplicable to Mrs Thomason’s case.)  The obscurity to which Jordan CJ referred was displayed by the series of rhetorical questions posed by his Honour at 533-34 about the emphasised portions of the third proposition set out above:

Is it sufficient to prove that the worker had knowledge of the facts which in law give rise to his common law right of action, or is it necessary to prove also that he knew that those facts did, as a matter of law, give rise to a cause of action?  If the latter, how much acquaintance with the law of negligence or of wilful trespass is it necessary to sheet home?  Is it necessary to establish that the worker had a general acquaintance with the law of negligence, including contributory negligence and the doctrine of the last chance, where the facts make it relevant, or is it sufficient to establish that the worker knew of the facts which pointed to his injury having been caused by some default on the part of the employer or his servants, and had a general notion that, if he was injured through the fault of another person, he could sue him for damages?  It would appear to be necessary to treat the latter as sufficient, unless the defence based upon a knowledge of alternatives is to become wholly illusory.

Where statutory negligence is involved, is it necessary to prove that the worker knew the provisions of the by-law alleged to have been broken?

Where it is proved that the Commission has undertaken the responsibility, under s. 39 of the Act, of advising the worker as to his common law rights, is it a good answer that the advice was inadequate, and must the case be allowed to go to the jury if the worker swears that he did not understand it?

Is it necessary to prove that the worker knew that the rights to proceed under the Act and at common law respectively were alternatives, in the sense that he could not prosecute both, or is it necessary to prove, also, that he knew that they were alternatives, in the sense that the prosecution of the one would irretrievably prevent recourse to the other?  The passage already cited from the judgment of Latham C.J. perhaps suggests the former, but it may be sufficient to prove that the worker knew that the common law remedy was available, and unnecessary to prove that he knew that the remedies were mutually exclusive.

41                  Thus at the time of the trial of Mrs Thomason’s cause there was considerable doubt as to what was necessary for the election in question to be proved.  The signed Application for Determination might not have been sufficient.  This, I think, explains why counsel for Mrs Thomason, Mr Miller, did not take the course referred to by Jordan CJ in Thomason at 353.  It would have been a matter for the jury to decide whether the signed document was insufficient to prove what was necessary for s 63, bearing in mind the third proposition enunciated in Mathisen and the obscurities in the reach of the third proposition discussed by Jordan CJ in Mathisen.  This approach of Mr Miller is reflected in the submission of Mr Evatt KC (leading Mr Miller) to the Full Court that, “there was no sufficient evidence of any election”, citing Mathisen: see Thomason, supra at 350.  It was thus argued that Mrs Thomason was merely suing a negligent employer, that she had signed the document in question and instituted the Commission proceedings in question, but that there was insufficient evidence of her state of knowledge of the available alternative to provide a defence under s 63 of the WC Act. The defendant had to prove that knowledge and it had no right of access to privileged communications to do so.

42                  The first basis upon which Jordan CJ concluded that the evidence was rightly allowed was the express waiver by the terms of the signed document of that part of the conversation with Mr Brady.  In that respect, what was then said about implied waiver may be seen as obiter.  (Although, the basis of express waiver may not have dealt with the cross-examination of Mrs Thomason about her conversations with the other solicitor.)  Jordan CJ then turned to the question of implied waiver.

43                  The argument of the respondent Council to the appeal on the implied waiver question was expressed by Jordan CJ at 354 as follows:

[T]hat the plaintiff had accepted an issue tendered by the second plea as to whether she had exercised an option to proceed against the defendant for workers’ compensation in preference to proceeding at law for damages, and that this involved the ascertainment as part of the issues in the case of what information had in fact been communicated to her.

44                  Jordan CJ’s reasoning expressed at 358-59 was as follows:

[I]t was necessary under the second plea for the defendant to prove, if it could, what knowledge the plaintiff had as to her legal rights; and this was knowledge which she was not likely to possess unless she derived it from a legal adviser.  Hence, in effect, one of the issues in the case was what advice if any the plaintiff had received from her legal advisers as to her alternative legal rights. In these circumstances,since the fact and nature of the advice is an issue in the case, I am of opinion that privilege cannot be raised to prevent the proof of the advice.  The position is analogous to that which arises in a suit in Equity to set aside a transaction on the ground of undue influence.  In such a suit, it has always been the practice for the defendant to cross-examine the plaintiff with a view to proving that the plaintiff had competent legal advice when he entered into the transaction, and to call and examine the legal adviser if he is available; and I have never known it to be suggested that such evidence is inadmissible on the ground of the plaintiff’s privilege:  cf. In re Coomber [1911] 1 Ch. 723 at 725; Inche Noriah v Shaik Allie Bin Omar [1929] A.C. 127 at 130-1.

[emphasis added]

45                  It might be concluded from what his Honour said (in particular in the emphasised passage, at [44] above) that the mere existence of an issue on the pleadings (raised by whomsoever) and the relevance of the privileged communications to that issue were sufficient to see privilege impliedly waived.  The issue in Thomason was, strictly, raised by the defendant.  So, it might be said, so long as someone in the proceedings raises an issue (upon which there is joinder) which throws up the need to understand a privileged communication, the privilege in the communication is lost.  That is how the respondent’s argument on appeal in Thomason was framed, see [43] above.  I do not think that Jordan CJ went so far. 

46                  The analogy upon which Jordan CJ drew was the undue influence suit, in which suits any evidence of legal advice of the plaintiff was said to be admissible.  His Honour made reference to In re Coomber [1911] 1 Ch. 723, 725 and Inche Noriah v Shaik Allie Bin Omar [1929] A.C. 127 at 130-31, in the latter of which cases it was clear that the defendant called the evidence of the advice given to the plaintiff.  This analogy is important.  It demonstrates Jordan CJ drawing on a body of cases in which, at the very least, the plaintiff puts his or her own state of mind in issue as a relevant matter to be passed upon in the case.  The claim of undue influence has at its heart the influence of the donee.  Highly relevant, indeed likely central, to the assessment of the operation of that influence will be whether the donor may have been freed of that influence by independent advice.  That may well be something that the defendant has to prove (and perhaps plead), in particular if the donor and donee fall within one of the presumptive relationships.  It would matter not which party in the suit was required to plead, or did plead, the existence and nature of the advice, or which party chose to lead the evidence.  The reason why the plaintiff cannot retain the confidentiality in the advice is to be analysed with an eye to substance not form.  By bringing the suit the plaintiff lays out for examination, dispute and resolution the extent of the ascendancy or influence of the donee on him or her and on his or her capacity to come to a decision free from such ascendancy or influence.  If there has been legal advice given to the donor about the transaction, the suit will almost certainly involve an assessment of the effect of that advice, along with all other relevant matters, upon the existence, degree and operation of the ascendancy or influence on the mind, decision making processes and capacity of the donor.  If the plaintiff brings such a suit in circumstances where such advice has been given, it is difficult to see how he or she can avoid the conclusion that he or she is, by the claim in the suit, opening up that legal advice for scrutiny, irrespective of the question as to who bears the procedural responsibility for pleading the advice, or as to who bears or assumes the forensic task of proving the advice.

47                  The advice in Thomason was in an analogous position, as Jordan CJ said.  No practitioner who was aware of the form of the Application for Determination set out at [37] above could have been under any doubt that Mrs Thomason’s claim for negligence involved dealing with the question of the extent of her knowledge about the available legal alternatives. It was, in a sense, going to be as much a part of her cause at common law as a solicitor’s advice would be a part of an undue influence suit in equity.  Although, it is true, not embedded at the heart of the suit as advice would be in relation to the issues of ascendancy and influence, nevertheless it was, in the precise statutory context and in a practical and substantial way, a central matter to be dealt with in order that Mrs Thomason succeed in her claim.

48                  The proper analysis, it seems to me, is not that the plaintiff “accepted an issue tendered by the (defendant’s) second plea” as argued by the respondent to the appeal, but that by commencing the cause in negligence, in circumstances where that could only be done if the plaintiff’s state of knowledge about her legal rights when she commenced her claim for statutory compensation was of a particular character, the plaintiff was acting inconsistently with the maintenance of the confidentiality of advice which was in all likelihood to be the only source of her knowledge about those matters.  As a matter of substance she was bringing the cause in the plain and well understood circumstances that a central issue in the proceedings was, and would be, her state of knowledge about her rights as explained to her by Mr Brady. 

49                  A similar issue arose in Barilla v James (1964) 81 WN (Pt 1) (NSW) 457.  That was a landlord and tenant case. The assignees of the lessors gave the tenants a notice to quit after the expiry of the lease and while they were holding over.  The notice did not comply with the requirements of Part III of the Landlord and Tenant Act 1899 (NSW), dealing with recovery of possession of prescribed premises (the protected tenancy provisions).  However the lease purported to be a lease complying with s 5A of that Act, which would, if correct, have taken the lease out of the purview of Part III.  The counterpart of the lease executed by the lessees’ solicitor, who had been employed and retained by the lessees independently of the lessors, contained a signed certificate under subs 5A(2) indicating that he had carried out the duties imposed on him under subs 5A(2).  Subsection 5A(2) was in the following terms:

(2)   A solicitor or clerk of petty sessions certifying to a lease for the purposes of subsection one or (1A) of this section -

(a)   shall explain the lease to the lessee, special reference being made to the circumstances in which the lease may be terminated by the lessor, the notice required for that purpose, and whether or not the rent payable may be varied at will by the lessor;

(b)   shall examine the lessee touching his knowledge of the lease;

(c)    if he thinks fit may so examine the lessee separately and apart from any other person; and

(d)   if he is satisfied that the lessee understands the true purport and effect thereof and freely and voluntarily executes the same, shall certify in writing upon the lease that the lease has been so explained, and that he has examined the lessee and is satisfied as hereinbefore required, and that the lessee has executed the lease in his presence.

A certificate purporting to be signed by a solicitor or clerk of petty sessions for the purposes of subsection one or (1A) of this section shall be admissible in evidence in any proceedings and shall, in all courts and upon all occasions whatsoever, be prima facie evidence of the particulars certified in and by the certificate.

50                  In ejectment proceedings in petty sessions, it was proved that the solicitor explained the matters required by subs 5A(2) to one, but not the other, of the lessees.  The solicitor had also not been present when the second lessee signed the lease.  In examining whether the solicitor could be called by the lessor, Asprey J said the following at 475:

[I]n these circumstances it would not be open for a lessee to object to his solicitor being called by a lessor to give evidence as to what took place as between the solicitor and his client-lessee in fulfilling the requirements of sub-s. (2) on the ground of legal professional privilege for the reasons, firstly, that, having himself raised the issue that what took place between himself and the solicitor did not constitute a proper fulfilment of the solicitor’s duties under sub-s. (2), the lessee must be said to have himself raised the fact and nature of the advice as an issue in the case, and in these circumstances a claim of privilege could not be successfully invoked to prevent proof of the advice actually given(see Thomason v The Council of the Municipality of Campbelltown (1939) 39 S.R. (N.S.W.) 347 at pp 358-59. per Jordan C.J., Halse Rogers and Bavin JJ. concurring); secondly, if the lessee himself went into the witness box and gave his version of the occurrences in question, I would be of the opinion that the lessee had effectively waived any right to raise the ground of legal professional privilege against his solicitor giving evidence as to those matters (see Thomason’s Case (1939) 39 S.R. (N.S.W.) at pp 354-355, 358 and Wigmore on Evidence (McNaughton rev., 1961), vol. 8, par. 2327, especially at p 638) as I am of the opinion that if the lessee offered his own testimony as to a part of any communication to his solicitor that would constitute a waiver of the privilege as to the whole of that communication; and thirdly, that when the lessee alleged a breach of the performance of his solicitor’s duties to him in relation to s. 5A (2), the privilege is waived as to all communications relevant to that issue.

[emphasis added]

51                  The two references to Thomason by Asprey J and the two reasons expressed by Asprey J reflect the two bases of reasoning of Jordan CJ in Thomason: the express waiver, being Asprey J’s second reason incorporating the reference to pages 354-5 and 358 of Thomason, and the implied waiver, being Asprey J’s first reason incorporating the reference to pages 358-59 of Thomason.

52                  The importance of the expression of views of Asprey J on implied waiver is the role of the party claiming the privilege raising the fact, nature and centrality of what took place in the (otherwise privileged and confidential) communication as an issue in the case.  That was how Asprey J interpreted Thomason on this point; in my respectful view, correctly so.

53                  The problem was, if I may say so, lucidly and shortly dealt with by McLelland J (as his Honour then was) in United States Surgical Corp v Hospital Products International Pty Limited (unreported 11 October 1981, Equity Division No 2094/81 – see Ritchie’s Supreme Court Practice (NSW) Vol 2 Practice Decisions [13,023] at pp 8545-47). There his Honour was faced with a very similar argument to that put to me by the applicant here about the consequence of the respondent’s denials of the applicant’s pleading of knowledge.  The context of the dispute is best expressed in McLelland J’s own words:

The defendants submit that the state of knowledge from time to time of the plaintiff and its legal advisers of the activities of the defendants relied upon to support the plaintiff’s claim to relief, and the legal advice given to the plaintiff from time to time as to its rights in relation to those activities are matters in issue by virtue of the defence of laches pleaded by all defendants.  The defendants rely in this regard on what was said in the Thomason case, supra, at 358-9. …

[emphasis added]

54                  McLelland J, after setting out the passage from the judgment of Jordan CJ in Thomason at 358-9, said the following:

Jordan CJ cannot have intended to lay down as a proposition of general application that whenever the making or contents of a privileged communication becomes an issue in proceedings, privilege cannot be successfully claimed for the purpose of those proceedings, as this would be inconsistent with his Honour’s discussion (at 353 of the same judgment) of what was said by Lord Atkin in Minter v Priest [1930] AC 558 even if the proposition were limited to proceedings to which the person entitled to privilege was a party.

The key to the proper limits of the principle propounded by Jordan CJ is I think to be found in the judgment of Asprey J (with whose reasons on this aspect of the case Walsh J agreed) in Barilla v James (1964) 81 WN (NSW) (Pt 1) 457.  In that case the question arose whether the validity of a certificate given by a solicitor under s 5A(1)(d)(v)(c) and s 5A(2) of the Landlord and Tenant (Amendment) Act 1948 could be challenged on the ground that the matters so certified did not in fact occur.

55                  McLelland J then set out the extract from Asprey J’s judgment referred to at [51] above, and continued:

In the Thomason case, the plaintiff was asserting a right to claim damages in a statutory context which rendered it implicit in such an assertion that the plaintiff had not effectively exercised her option to take the alternative course, notwithstanding that on the pleadings, the onus of proving the effective exercise by the plaintiff of that option, and in an evidentiary sense the onus of proving the plaintiff’s knowledge of her legal rights, in each case rested on the defendant.  So that it may be that the criterion that the otherwise privileged party must have himself raised the fact and nature of the advice as an issue in the case is too rigidly stated.  Nevertheless, before the privilege can be said to have been lost on this principle, one must at least be able to identify some element or feature of the claim made, or the evidence adduced, by the party otherwise entitled to the privilege, which would render reliance on the privilege unjust.

There is in my opinion no such element or feature in the present case as things stand at the moment.

[emphasis added]

56                  I respectfully agree with his Honour’s distillation of Thomason.  As to his Honour’s statement of principle, it is now, in the light of Mann v Carnell, necessaryto express the principle in terms of inconsistency, in the sense earlier referred to, not merely injustice.

57                  It may be, as Hodgson J (as his Honour then was) said in Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87, 94, that there will be undue influence cases where there will be no waiver of legal advice – where, for instance, there is no assertion that there was other than adequate legal advice.  I need not deal with this.  Nevertheless, Hodgson J, in Standard Chartered, after discussing Thomason and the width of what Jordan CJ said, in particular about undue influence cases, said at 94-5: 

If a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, then fairness to the other party may mean that this assertion has to be taken as a waiver of any privilege attaching to the communication.

58                  It is unnecessary to explore the existence or extent of any such qualification to what Jordan CJ said in Thomason about undue influence or cases such as In re Coomber.  It is sufficient to understand, I think, that in most undue influence cases (and in Thomason when its circumstances are appreciated) the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.  Read with an understanding of the effect of the then governing influence of Attorney General (NT) v Maurice (1986) 161 CLR 475 on the views of Hodgson J, the above expression of the matter is consistent with the expression of principle by Hodgson J in Standard Chartered.

59                  In Ampolex Limited v Perpetual Trustee Co (Canberra) Limited (1995) 37 NSWLR 405 Giles CJ Comm D drawing on Thomason, said at 411:

[H]aving exposed to scrutiny their corporate states of mind, being states of mind to which their legal advice is likely to have contributed, GPG Nominees and Allied can not withhold the advice from their opponent.  I emphasise that the legal advice is likely to have contributed to the states of mind of GPG Nominees and Allied, as was plain from the dates of and descriptions of the documents: were that not so, the principle may not have applied.

60                  That expression by Giles CJ Comm D also drew on the approval by Clarke JA (with the agreement of Gleeson CJ and Sheller JA), in Benecke v National Australia Bank (1993) 35 NSWLR 110, 116, of the passage of Jordan CJ in Thomason at 358-59.  It should be noted that Giles CJ Comm D refers to laying open to scrutiny the state of mind, not laying open to scrutiny the communication.  In that respect his Honour’s expression is, I think, significantly wider than as expressed by Hodgson J in Standard Chartered or by me at [58] above.

61                  It is possible that the above expression of principle at [58] above may be seen to be a little wider than that expressed by Hodgson J because, leaving aside the influence of Maurice, his Honour limited the principle to express or implied assertions about the contents of the confidential communication.  This was certainly the case in Benecke and Barilla, but it may not be seen to be so in cases such as Inche Noriah  or Thomason.  Thus, I would express the matter as including the laying open of the confidential communication to necessary scrutiny, and by so doing (that is by expressly or impliedly making an assertion about the contents of the communication or laying the communication open to scrutiny) the inconsistency enunciated by Mann v Carnell is brought about.  But it is the existence of that inconsistency that is important.

62                  I do not think it useful to analyse further how Hodgson J or Giles CJ Comm D chose to express themselves.  The governing principle is that which has been expressed in Mann v Carnell at [29].  Examination, too closely, of other cases runs the risk of transforming factual questions of judgment into (inconsistent) statements of principle.  However, having said that, I would not see any expression of the matter by me as fundamentally different from that of Hodgson J in Standard Chartered.

63                  The views of Hodgson J have been echoed by Byrne J in Torcasio Developments Pty Ltd v Country Park Developments Pty Ltd (Supreme Court of Victoria, 9 September 1991).  Torcasio was cited by Davies JA in Bayliss v Cassidy (No 2) [2000] 1 Qd R 464 where his Honour said at 468:

[I]t is only where the client directly or indirectly puts in issue the substance of the privileged communication that the privilege is lost and then only insofar as it is necessary to do justice between the parties.

64                  The expression of principle by Hodgson J was expressly approved by the Queensland Court of Appeal in Bayliss v Cassidy (No 2), supra at 467-8, 473 and 475.

65                  Torcasio was applied by Smith J in Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419, 436.

66                  The New South Wales Court of Appeal in Farrow Mortgage Services Pty Ltd v Webb (1996) 39 NSWLR 601 at 620 (per Sheller JA, with whom Waddell A-JA agreed) approved the expression of principle of McLelland J in United States Surgical.  The New South Wales Court of Appeal, earlier in Benecke, supra, approved the passage of Jordan CJ in Thomason at 358-9.

67                  In Bayliss v Cassidy (No 2), supra the argument was put that the governing principle was wider.  At 467 the following argument is set out:

The proposition advanced was that where documents would otherwise be properly the subject of a claim to legal professional privilege, that privilege is lost if the documents relate, directly or indirectly, to an issue in the action.

…

The Applicant submits that his Honour erred in failing to give effect to a recognized exception to legal professional privilege, where the legal advice is directly relevant to an issue in the case, either because:

(a)          the legal advice is itself in issue; or

(b)          the legal advice is immediately relevant to an issue.

68                  It was submitted in Bayliss v Cassidy (No 2) that the breadth of those propositions was supported by, amongst other decisions, Thomason, Torcasio, and Hongkong Bank v Murphy.  For the reasons I have expressed, the first two cases did not do so, nor, properly understood as to its context, did the third. However, support was also more legitimately drawn for those propositions from Data Access Corporation v Powerflex Services Pty Ltd [1994] AIPC 91-112 (Heerey J) and Wardrope v Dunne [1996] 1 Qd R 224 (Derrington J).  I will come back to these cases.  They were the two Australian cases relied upon by Jonathan Parker J in Hayes v Dowding, see [33] and [34] above.

69                  I have sought to deal with the principles in a way which reveals their historical development in Australia.  It is now necessary to examine further appellate authority, which must, nevertheless, be viewed in the light of Mann v Carnell.

70                  Prior to Mann v Carnell, the principles at common law in Australia were authoritatively explained in A-G v Maurice and Goldberg v Ng (1995) 185 CLR 83.  In Ng,speaking of imputed waiver, Deane, Dawson and Gaudron JJ said at 95-96:

The circumstances in which a waiver of legal professional privilege will be imputed by operation of law cannot be precisely defined in advance. The most that can be done is to identify a number of general propositions. Necessarily, the basis of such an imputed waiver will be some act or omission of the persons entitled to the benefit of the privilege.  Ordinarily, that act or omission will involve or relate to a limited actual or purported disclosure of the contents of the privileged material. When some such act or omission of the person entitled to the benefit of the privilege gives rise to a question of imputed waiver, the governing consideration is whether “fairness requires that his privilege shall cease whether he intended that result or not (Wigmore on Evidence (McNaughton rev 1961), vol 8, par 2327, quoted with approval by Gibbs CJ and Mason and Brennan JJ in Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481, 488).  That does not mean, however, that an imputed waiver must completely destroy the privilege.  Like an express waiver, it can be limited so that it applies only in relation to particular persons, materials or purposes.

[emphasis added]

(It is important to recognise that their Honours identified the act of the person entitled to the privilege as an element of the general propositions.)

71                  The Full Court of this Court dealt with the question in Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152.  It is necessary to understand not only what was at issue in those proceedings, but also the preceding and succeeding course of authority.  Telstra was preceded by Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360 (Adsteam).  In Adsteam the Court held that the common law principle of waiver was modified derivatively by the Evidence Act 1995 (Cth).  In this respect, Adsteam was followed by the Full Court in Telstra and by the New South Wales Court of Appeal in Akins v Abigroup Ltd (1998) 43 NSWLR 539.  Later, a five member bench of the Full Court of this Court in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1998) 83 FCR 511 and the High Court, on appeal, Esso Australia Resources Limited v Federal Commissioner of Taxation (1999) 201 CLR 49, and in Mann v Carnell, rejected this approach.  Pre-trial discovery is governed by the common law, unaffected by the Evidence Act.

72                  In Adsteam in a passage dealing with the common law (unaffected by statute) the Court said at 372:

In other words the cases are ones in which, in the substantive proceeding brought, the privilege holder has put in issue the very advice received.  We observe in passing that it is questionable whether advice can properly be said to be in issue in a proceeding merely because it may be relevant to an issue in it:  see Rhone- Poulenc Rorer Inc v The Home Indemnity Company (3^rd Cir 1994) 32 F (3d) 851 at 863; save, perhaps, where the proceeding is between client and legal adviser and the advice is relevant to the adviser’s defence of that proceeding:  see Lillicrap v Nalder & Son [1993] 1 WLR 94; 1 All ER 724.

[emphasis added]

73                  This statement of principle was in accordance with Thomason, Barilla, United States Surgical and Standard Chartered and the views later expressed in Bayliss v Cassidy (No 2).

74                  In Telstra, supra, Beaumont J in particular (in dissent on the issue of implied waiver) relied on this part of the Full Court’s reasons in Adsteam.

75                  In Telstra the applicant had pleaded that it entered into an agreement in reliance on misleading or deceptive conduct of one of the respondents, the State of New South Wales.  The agreement in issue was a large and complex commercial agreement between the State of New South Wales and the applicant, a subsidiary of a large foreign international telecommunications company.  The applicant had had, as one would expect, the assistance of its own lawyers before entering into the agreement.  The State claimed, at the pre-trial discovery stage, that privilege had been waived by the applicant on that advice because the advice went to the applicant’s state of mind in connection with entry into the agreement and the pleading of reliance made state of mind in connection with the entry into the agreement an issue.  The advice was relevant to that issue.  Reliance was placed by the State in particular on Ampolex.

76                  The majority (Branson and Lehane JJ) found waiver.  Beaumont J dissented.  The relevant reasoning of the majority on this point is to be seen from the beginning of page 165 to the end of the first paragraph on page 168.  Their Honours there were elucidating principle unaffected by the Evidence Act.  That this is so is made clear by the sentence later on page 168 in its context that:

It follows that, in such cases, the position has changed little, if at all, following the introduction of the Act.

77                  Beaumont J also dealt with this issue on common law principles, before addressing the effect of the Evidence Act:  see Telstra, supra at 157-160.

78                  Thus, Branson and Lehane JJ, and Beaumont J, came to different conclusions about the implied waiver issue, applying different principles, but after each addressed the unaffected common law.

79                  Thus, with respect, I cannot agree with the views of Heerey J in Equuscorp Pty Ltd v Kamisha Corp Ltd (1999) ATPR 41-697 at 42,894 that he was free to follow Beaumont J rather than Branson and Lehane JJ because of the effect of the Full Court of this Court in Esso.  That was also the view of the Full Court which overruled Heerey J in Perpetual Trustees (WA) v Equuscorp Pty Ltd [1999] FCA 925 at [9].  (I will deal in due course with my substantive agreement with his Honour for other reasons, if it be open for me to act on my own views.)

80                  Conti J, likewise, in John Tanner Holdings Pty Ltd v Mortgage Management Ltd (2001) 182 ALR 201, followed Beaumont J in preference to Branson and Lehane JJ in Telstra.  The passages in Beaumont J’s reasons applied by his Honour were taken from Beaumont J’s treatment of the common law.  It is true, as Conti J pointed out, that the Full Court in Esso summarised the implied waiver principle at 519 as follows:

The common law position is that where there is no intentional waiver of privilege, the question whether waiver should be imputed depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that the material, or material associated with it, is privileged from production:  Attorney-General (NT) v Maurice (1986) 161 CLR 475; Goldberg v Ng (1995) 185 CLR 83.

However that statement of principle must be taken to have been at least overtaken by what the High Court said in Mann v Carnell, especially at [29].

81                  Whether or not I should consider myself obliged by Mann v Carnell to apply a principle inconsistent with Branson and Lehane JJ in Telstra, I think it would be wrong to prefer Beaumont J’s exposition of the common law unaffected by the Evidence Act to the exposition of Branson and Lehane JJ on the same subject matter because the later Full Court and the High Court overruled their Honours on the relevance of the Evidence Act derivatively to the content of the common law.  Indeed, I am bound by Perpetual Trustees, supra not to do so.

82                  I turn to Telstra and, first, the views of Branson and Lehane JJ.  Their Honours commenced with Thomason.  They explained that the defendant raised the question of legal rights.  (As I have earlier expressed, whilst that is strictly so, I think that this is not the correct perspective from which to analyse Thomason.)  Their Honours referred to Hongkong Bank and cited the following (at 165) from the judgment of Smith J:

In this case, if the plaintiff is permitted to rely on a claim for privilege for the documents in question, the fact-finding task of the court will be seriously compromised.  There is a real possibility of the court being misled.

83                 Their Honours then referred to a passage from the judgment of Duggan J in Pickering v Edmunds (1994) 63 SASR 357 at 362 which reflected an approach very similar to that of Giles CJ Comm D in Ampolex.  Duggan J said:

In the present case the conduct of the respondents is such as to make the issue of their appreciation of the legality or otherwise of the trust deed of crucial importance in the case.  An effective trial on that issue could not take place in the absence of evidence as to what legal advice they received on the matter.  Furthermore the appellants would be unfairly deprived of the opportunity to put material before the court on this key issue.  It is true that the respondents did dot raise directly the legal advice they received.  However they did put in issue their understanding of the legal effect of the earlier deed based on information they had received.

84                  Their Honours then referred to the passage from Ampolex set out at [59] above.  They referred to the essential role of fairness described in Maurice and Ng.  At 166 their Honours stressed fairness as the operative principle in the court’s role in determining the controversy.  However, it should be noted that even in the light of that principle, their Honours stressed the active role of the party claiming the privilege.  In this respect they said at 166:

In the three classes of cases the law implies a consent to the use of the privileged material, or, what is in reality the same thing, a waiver of the privilege, if by reason of some conduct of the party otherwise entitled to the privilege, it would be unfair to the other party, in a way which goes to the integrity of the legal process, for the privilege to be maintained.

[emphasis added]

85                  Their Honours then set out at 166-7 their views once “reliance” had been pleaded:

Where, as in this case, a party pleads that he or she undertook certain action “in reliance on” a particular representation made by another, he or she opens up as an element of his or her cause of action, the issue of his or her state of mind at the time that he or she undertook such action.  The court will be required to determine what was the factor, or what were factors, which influenced the mind of the party so as to induce him or her to act in that way.  That is, the party puts in issue in the proceeding a matter which can not fairly be assessed without examination of relevant legal advice, if any, received by that party.  In such circumstances, the party, by putting in contest the issue of his or her reliance, is to be taken as having consented to the use of relevant privileged material, or to put it another way, to have waived reliance on the privilege which such material would otherwise attract.

86                  Those views and that conclusion were in conformity with the views of Duggan J in Pickering v Edmunds and Giles CJ Comm D in Ampolex.  Their Honours also said that they drew support from the passage from the judgment of McLelland J in United States Surgical at [55] above.

87                  Their Honours concluded this issue at 167 and 168 with the following passages:

Within that framework, the conduct of a party which leads to the implication of consent to the use of otherwise privileged material, or to an implied waiver of such privilege, in undue influence cases, legal professional negligence cases and, in my view, the “state of mind” cases, is that of raising for determination in legal proceedings, as an element in the cause of action relied upon, an issue incapable of fair resolution without reference to that material.

…

[S]ome comments should be made, obvious as some of them may be, about the scope and effect of the principle just stated.

…

Nor is it a consequence of the principle that whenever a person’s state of mind is relevant to an issue in proceedings, privilege is taken to be waived in relation to legal advice that may have played part in the formation of that state of mind (so that the principle does not, for example, deny the authority of Kennedy v Lyell (1883) 23 Ch D 387; Lyell v Kennedy (No 2) (1883) 9 App Cas 81).  It is unnecessary and inappropriate, having said those things, to attempt to define exhaustively the scope of the principle.  Where, however, a party relies on a cause of action, an element of which is the party’s state of mind (including the quality of the party’s assent to a transaction) the party is taken to have waived privilege in respect of legal advice which the party had, before or at the time of the relevant events, material to the formation of that state of mind.

88                  Beaumont J, on the state of the authorities then existing (Maurice and Ng) saw unfairness as the touchstone of the applicable principle.  His view in that regard, at the state the proceedings had reached (pleadings), was encapsulated in the following:

At this stage, BT has made no use of the legal advice in the proceedings.  The advice is not pleaded by BT as an ingredient of its claim.  BT does not assert that it relied, or did not rely, on the advice.  It is difficult to see how, or why, BT could have pleaded the advice. It could not bear upon the question whether the conduct of the State or Telstra was misleading.  It may, depending upon the actual situation, bear upon the question of BT’s reliance.  Questions of degree may be involved, but the advice is not, obviously central to that issue in the same way as the advice given by the solicitor on the election was, obviously, central to the plea in Thomason, at least as the issues in Thomason had evolved in the course of the trial.

89                  His Honour thus saw the centrality of the solicitor’s advice in Thomason as determinative.  Likewise his Honour noted that in Benecke the erstwhile client in her originating process alleged a lack of instructions in her lawyers to settle.  Plainly the central issue opened by the plaintiff was the content of the confidential communication between the client and her lawyers.

90                  Beaumont J dealt with Ampolex at 158 as follows:

Another example of the state of mind of the client being central to an issue where Thomason was applied, is Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405.  There, the plaintiff claimed rectification of a deed for mistake. Yet in the present case, BT’s state of mind is not central to its claims in that sense.  Relevantly, the central question in the principal proceeding will be whether the conduct of the State or Telstra was misleading.

With respect, this analysis is not entirely accurate.  The issue before Giles CJ Comm D was not Ampolex’s claim for rectification and so waiver by Ampolex, but rather the claim by the defendants that they purchased the convertible notes in the belief induced by Ampolex (ie reliance) that the conversion rate was 6:1. There was an alternative submission based on Ampolex’s pleading of the defendant’s state of mind;  see generally 37 NSWLR at 411 A-B.  Giles CJ Comm D, however, dealt with the matter on the basis of the allegations raised by the defendants as to their own state of mind and reliance.

91                  Beaumont J concluded that nothing had arisen to demonstrate any unfairness.  He referred to McLelland J in United States Surgical, Asprey J in Barilla and the passage in the Full Court judgment in Adsteam at [72] above.

92                  The difference between Beaumont J and the majority in Telstra (and probably also between the dictum of the Full Court in Adsteam set out at [72] above and the majority in Telstra) was the centrality of the confidential communication to the litigation.  Beaumont J emphasised the need for the advice itself to be put in issue, not merely that a state of mind was in issue in respect of the formation of which state of mind the communication was, or could be likely seen as, a material factor.  This notion of the centrality of the communication is reflected in Hodgson J’s expression of view in Standard Chartered, see [57] above, as specifically adopted by the Queensland Court of Appeal in Bayliss v Cassidy (No 2).

93                  The centrality of the communication to the issues underlay what the Full Court said in Adsteam.  Their Honours there did not think that relevance to an issue (that is, an issue raised by the holder of the privilege) was enough.

94                  It should be noted that in Southern Equities Corporation Ltd (In Liq) v Arthur Andersen & Co (1997) 70 SASR 166 (a case to which the Court in Telstra was not apparently referred) the majority of the Full Court of the South Australian Supreme Court expressed the matter somewhat more narrowly than Duggan J in Pickering:  see Bleby J (with whom Matheson J agreed) at 193.

95                  The enunciation of principle by the Full Court of this Court in Esso and by the Full Court in Telstra, might be seen, at the very least, as having been overtaken by Mann v Carnell.  It is the inconsistency between the act by the holder of the privilege and the confidentiality of the communication which destroys the privilege.  I would have thought that it is too broad a statement to say that a pleading of a state of mind to which legal advice is or might be materially relevant is an adequate surrogate for the expression of principle in Mann v Carnell.  That inconsistency will arise in the kind of circumstances thrown up in Thomason, Barilla, and Benecke, in the undue influence cases, and as dealt with by McLelland J in United States Surgical, Hodgson J in Standard Chartered, the Full Court in Adsteam at [72] above, the Court of Appeal in Bayliss v Cassidy (No 2) and Beaumont J in Telstra.

96                  Conformably with the necessary existence of inconsistency from Mann v Carnell, and with the overwhelming requirement for an act on behalf of the holder of the privilege in the manner already alluded to, the expressions of views by Heerey J and Derrington J in Data Access Corporation v Powerflex Services Pty Ltd (1994) AIPC 91-112 at 38,745 and Wardrope v Dunne [1996] 1 Qd R 224, 226, respectively, that the privilege may be lost by the raising of an issue by the other party to the case is not correct, in my respectful view.

97                  More importantly, it would seem to me that the view that relevance to an issue is the proper test is, as a general proposition, difficult to reconcile with Mann v Carnell.  To the extent that this can be extracted from Data Access Corporation, Wardrope v Dunne, Pickering v Edmunds, Ampolex, and the majority in Telstra, I have difficulty seeing that it is consistent with Mann v Carnell at [29].

98                  In this respect (like Conti J in John Tanner v Mortgage Management, supra at 206 and Byrne J in Liquorland (Australia) Pty Ltd v Anghie [2003] VSC 73 at [41]), if I were free to do so I would act on my agreement with what was said by Heerey J in Equuscorp Pty Ltd v Kamisha Corp Ltd, supra at p 42,894 where his Honour (also not following the majority in Telstra) said:

In claims under s 52 where the misleading and deceptive conduct alleged takes the form of misrepresentations to the plaintiff, it will usually be essential to plead reliance. This will be an essential link in the chain of reasoning establishing that the plaintiff suffered loss and damage " by the conduct of " the defendant so as to be entitled to damages under s 82. If the view of the majority in Telstra is correct, it would seem to follow inexorably that the mere pleading of reliance would remove privilege in respect of all legal advice which the plaintiff received concerning the conduct complained of. I do not think that can be right. The bare fact of asserting reliance does not expressly or impliedly assert that the plaintiff relied, or did not rely, on some privileged communication. As Beaumont J points out, it is not possible to predict the course a trial may take. A privileged communication may be subsequently referred to in a way that makes its continued protection unfair. But, at the moment, I have to consider the issue at an interlocutory stage. It is true that legal advice could be relevant in determining whether a plaintiff in fact relied on the misrepresentations complained of. But the whole point of legal professional privilege is that, for public policy reasons, material is excluded which might be relevant, indeed highly relevant. No balancing exercise is involved. If legal professional privilege applies, privilege trumps relevance.

99                  If it were open to me I would give effect to these views.  The above is conformable, in my view, with Mann v Carnell, with the expressions of principle in the cases referred to at [94] above and with the expression of principle in England. 

100               The authorities do not end there.  In Perpetual Trustees v Equuscorp, supra, (decided before Mann v Carnell in the High Court) a Full Court of this Court held that the question of common law waiver was governed by the expression of principle in Telstra, supra at 165-168.  The Full Court overruled Heerey J in the respects with which I have expressed my agreement with him.  The Full Court applied the principles expressed by the majority in Telstra.

101               In Randell v Rockliff (1999) 9 Tas R 85, Wright J expressed agreement with Beaumont J in Telstra and the Full Court in Adsteam, disagreeing with the majority in Telstra and the Full Court in Perpetual Trustees v Equuscorp on the issue of implied waiver.

102               In Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044 (also before the High Court in Mann v Carnell) Hodgson CJ in Eq (as his Honour then was) said the following at [11]-[12]:

[11]     Alternatively, it could be suggested that by raising as a significant matter Mr. Lawrence's belief on this question, the plaintiff must be deemed to have consented to the adducing of evidence relevant to the question whether he did in fact hold this belief, and whether any such belief would be reasonable. That approach has some support from the decision of the majority of the Full Federal Court in Telstra Corporation Ltd. v. BT Australia Pty. Ltd. (1998) 156 ALR 634. In that case, the defendant pleaded that it undertook certain action in reliance on a certain representation; and the majority of the Full Court held that it thereby opened up as an element of the cause of action, an issue which could not fairly be assessed without examination of relevant legal advice. The majority of the Full Court considered that in such circumstances, the party is to be taken as either having consented to the use of the relevant privileged legal advice or communications, or to have waived reliance on the privilege which such material would otherwise attract.

[12]      Accepting that the decision of the majority in that case correctly interprets and applies s.122(1), it seems to me still that the question of whether the advancing of a person's state of mind is to be taken as consenting to the giving of evidence of confidential communication, or as waiving privilege, is a matter of degree in each case. It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver. It seems to me that, on the basis of all those matters at least, the Court has to make a judgment as to what is reasonable, and what is fair in the particular case.

103               It is clear from these passages that his Honour was of the view that more was involved in the assessment than merely the putting of the matter in issue.

104               In Garratt’s Ltd v Thanga Thangathurai [2002] NSWSC 39, Bergin J dealt with loss of privilege under the Evidence Act 1995 (NSW).  Her Honour referred to many of the cases, recognised the question was one of degree and accepted the guidance in Wayne Lawrence.

105               In Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 (a case decided after Mann v Carnell in the High Court) Hely J dealt with a positive pleading by the defendant of estoppel by convention and representation.  The estoppel by convention involved the proposition that a clause in a lease had a particular operation, that being the belief of the defendants.  The estoppel by representation case involved the belief by the defendants or reliance by the defendants in or upon statements by the applicants to the effect of the operation of the relevant clause.  As Hely J noted at [7]:

Nature Vet thus propounds a positive case that it entered into the contract with Fort Dodge on the faith of representations by Fort Dodge as pleaded in (a) - (d) above. In so doing, Nature Vet raises as an issue in the proceedings its state of mind with respect to those matters at the time of entry into the contract, and at the time of entering into the lease to Bioproperties.

[emphasis added]

106               The issue before Hely J was expressed by his Honour as follows at [9]:

[W]hether Nature Vet has waived privilege in relation to any contemporaneous legal advice with respect to any of the four matters ((a) - (d) above) which form the basis of the alleged estoppels…

107               Hely J stated the following principle, citing Giles CJ Comm D in Ampolex:

…Where a party makes allegations raising the issue of its state of mind, to which legal advice is likely to have contributed, the party cannot continue to claim legal professional privilege for that advice:…

108               His Honour then referred to the passage from the majority judgment in Telstra referred to at [85] above, and Perpetual Trustees.

109               For the reasons which I have expressed, I have some difficulty with the above as the guiding authorities.

110               In United Rural Enterprises v Lopmand [2002] NSWSC 1142 Campbell J dealt with loss of privilege under s 122 of the Evidence Act 1995 (NSW).  His Honour, with the assistance of only brief argument, applied Telstra with the assistance of what Hodgson CJ in Eq said in Wayne Lawrence.

111               In BP Australia Pty Ltd v Nyran Pty Ltd [2002] FCA 1302 Nicholson J approached the issue applying the majority in Telstra and Hely J in Fort Dodge.

112               Thus, conformably with what was said by the Full Court in Perpetual Trustees v Equuscorp, and by Hely J and Nicholson JJ in Fort Dodge and BP Australia v Nyran, respectively, the law on implied waiver may be seen as expressed by the majority of the Full Court in Telstra.  So to conclude flows from an obligation to apply the Full Court’s decision in Perpetual Trustee (albeit decided before Mann v Carnell) and from comity with Hely and Nicholson JJ.  My own view is that Mann v Carnell and the earlier seminal decisions point to a more restricted principle, which, though not easy to apply in any given circumstance, is not sufficiently expressed by the views of the majority in Telstra, by Giles CJ Comm D in Ampolex, or Duggan J in Pickering.

113               Nevertheless, I will approach the matter on the same basis as Hely J approached it, with the necessary recognition from Mann v Carnell that inconsistency is the key to understanding the application of the principle.

The Application of Principles Here and the Submissions of the Parties

The Applicant’s Motion – Order 1

114               The proposition here is that by denying an allegation as to their state of mind the respondents have put in issue their state of mind and to the extent that the respondents received legal advice which may be seen to have materially contributed to the state of mind asserted against them by the applicant, privilege is waived.

115               I reject that submission.  The act of mere denial by the respondents of an assertion by the applicants is not an act by the respondents which expressly or impliedly makes an assertion about the contents of any privileged communication or which necessarily lays any such communication open to scrutiny.  There is no act of the respondents inconsistent with the maintenance of the confidentiality. There is a joinder of issue on a question of fact to which the privileged communication can be seen as relevant.  That is insufficient in my view for it to be concluded that there exists the necessary inconsistency enunciated by Mann v Carnell.

116               None of Ampolex, Telstra and Fort Dodge dealt with circumstances other than a positive case being raised by the holder of the privilege.  Thomason and the undue influence cases are to be understood in the way I have set out above, and in the way elucidated more succinctly than I by McLelland J in United States Surgical.  To the extent that Data Access or Wardrope v Dunne or BP Australia Ltd v Stallwood [2000] WASC 75 or Ideas Plus Investments v National Australia Bank Ltd [2002] WASC 167 might be seen to sanction the loss of privilege merely from issues raised by the other side in litigation being put in issue that view is unsupported by authority and not conformable with the need for an inconsistency between an act of the holder of the privilege and the maintenance of the confidentiality and privilege.  To the extent that Data Access, Wardrope v Dunne, BP Australia v Stallwood and Ideas Plus Investments rely, or might be seen to rely, upon Thomason for that conclusion, I think that such reliance is misplaced.  Thomason is not authority for the proposition that mere joinder of issue on an assertion by the other side raising state of mind waives privilege.

117               Significant reliance was placed in argument by the applicant upon the views of Master Sanderson in BP Australia Ltd v Stallwood [2000] WASC 75.  The learned Master said the following at [12]-[13]:

12.    Turning to waiver of privilege by pleading, it is possible to identify at least five situations where pleading can give rise to an implied waiver of privilege.  These are:

1.        Where a document otherwise privileged is reproduced in the pleading.

2.        The pleading puts the privileged communication in issue where for instance an allegation is denied based upon a privileged communication.

3.        The party claiming privilege raises an issue which cannot be fairly determined without reference to the privileged material.  This is perhaps a limited instance of the wider principle that privilege cannot operate to compromise the court’s fact finding task.

4.        A party’s state of mind or knowledge is an issue and legal advice is relevant in the formation of the state of mind.

5.        Legal advice becomes an issue in the action.

13.        I think these principles emerge from the following cases:  Data Access Corp v Powerflex Services Pty Ltd (1994) AIPC 91-112; Wardrope v Dunne [1996] 1 Qd R 224; Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 156 ALR 634; Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] FCA 925; Ampolex v Perpetual Trustee Co (1995) 37 NSWLR 405; Southern Equities Corporation Ltd v Arthur Andersen (1997) 70 SASR 166.

118               These propositions are, in my view, too widely stated for the reasons I have already given.  Elements of each of 3, 4 and 5 can be found within the judgment of the majority in Telstra, but expressed elementally as the learned Master did, they widen the scope of the principle beyond Telstra, and certainly beyond Mann v Carnell.

119               In Ideas Plus Investments Master Sanderson squarely decided that it was irrelevant who raised the question: once the privileged communication became an issue (or relevant to an issue) in the proceedings such that fair determination of the proceedings required disclosure, there was waiver.  I cannot agree that the authorities and the relevant principles so dictate.

120               Other Australian authorities were relied on as to this question of the importance of the relevant act of the party holding the privilege, in particular South Australian Government Financing Authority v Bank of New Zealand (No 2) [2002] SASC 10, Gough v Gilmour Holdings Pty Ltd v Caterpillar of Australia (No 1) [2001] NSW IRComm 147, Mathieson v Booth [2000] VSC 89, Henderson v McCafferty [2002] 1 Qd R 170, Woodside Petroleum Development Pty Ltd v H & R E & W Pty Ltd, (Anderson J, unrep 3 October 1997 (WASC)), and Western Australia v Southern Equities Corporation Ltd (1996) 69 FCR 245.  None however is either binding or persuasive to the contrary of my rejection of the approach in Data Access, Wardrope, Stallwood and Ideas Plus Investments.

121               My views in this respect are in conformity with those of Wheeler J in Commonwealth of Australia v Temwood Holdings Pty Ltd [2002] WASC 107 at [10] where her Honour said:

…On the other hand, a party may necessarily put its state of mind in issue in the proceedings by, for example, pleading reliance upon some representation or other or by seeking rectification of the contract for mistake; or a state of mind may be put in issue by some evidentiary assertion which is clearly relevant to the issues between the parties. In these latter types of case, fairness clearly requires the waiver of the privilege in relation to legal advice which may have contributed to that state of mind. It is to be noted, however, that it is the conduct of the party who possesses the privilege which is capable of waiving it. It is not apparently open to another party to litigation to force waiver of a party's legal professional privilege by making assertions about, or seeking to put in issue, that party's state of mind.

122               It is not just a matter of looking at unfairness upon the pleadings as filed.  The reasons of the majority in Telstra must be read in the light of the issue before it – a positive pleading of reliance by BT, being the moving party to the suit.  It was not a case based on a mere denial of an assertion.  The substance of the matter here is that the applicant is raising an issue about its, and the respondents’, state and states of mind.  In joining issue with that assertion the respondents are not undertaking (yet) any act inconsistent with the maintenance of the privilege and there is no unfairness (yet) in any sense in that maintenance.  It may be that in due course the respondents take steps in seeking to vindicate themselves which do raise such inconsistency or unfairness.  None exists now.

The Respondents’ Motion – Order 1

123               As I have said, the applicant has accepted the waiver of privilege on communications concerning its state of mind by reason of the pleadings.  The contentions of the respondents about the asserted further consequences of this waiver were as follows:

39.         The Applicant has accepted that it has waived privilege over at least some of the documents listed in Schedule 1 Part 2 of its list of documents.  (See the letters from Clayton Utz to Allens Arthur Robinson dated 10 December 2002 and 4 February 2003.)  However, the Applicant appears to assert that imputed waiver of privilege is limited to the production of documents which evidence, record or contain legal advice (including a request for such advice) provided to the Applicant prior to the Agreement being entered into.

40.         The Respondents submit that in doing so, the Applicant has taken too narrow a view of the scope of the imputed waiver.  The imputed waiver is as to the Applicant’s state of mind prior to and at the time of entry in to the relevant transactions.  That would include, but is not limited to, legal advice after the dispute had arisen the Applicant might have communicated to its legal advisers information bearing upon its state of mind at the time of the transactions.  Such communications would be relevant to the Applicant’s state of mind at the relevant time even though brought into existence subsequently and ought to be covered by the imputed waiver.

124               The applicant’s essential contention in answer to this was as follows:

59.  The Applicant contends that the principle of imputed waiver is limited to legal advice which the party had, before or at the time of the relevant events, material to the formation of its state of mind (see Telstra v BT supra at 168A)

125               I think the applicant is correct.  The reasons for judgment in Telstra do not dictate that privilege is forever lost on all communications concerning the subject matter of reliance or state of mind.  That, it seems to me, is to misunderstand the notion of unfairness discussed by the majority in Telstra and the notion of inconsistency in Mann v Carnell.

126               A pleading of state of mind is raised.  It is accepted that there are opened for scrutiny by that pleading confidential and privilege communications materially affecting or contributing to that state of mind. The inconsistent act is the propounding of the issue which, it is accepted, opens up, or makes relevant, in the sense discussed by the majority in Telstra, an examination of the confidential communication.

127               Later, in the propounding of a suit to vindicate its rights, being the context in which the above waiver takes place, the applicant consults with its lawyers about the case.  I assume that these later confidential and privileged communications will address or have addressed the pleadings and the earlier privileged (though now waived) communications.  There is plainly a relationship between the two groups of communications.  However, there is no inconsistency between raising the issue of state of mind and maintaining the confidence of the later communications in and about the advising on, and running of, the case. Nor is there any unfairness.  The inconsistency or unfairness arises from the putting in issue of a state of mind and maintaining confidence in communications which were relevant to the formation of that state of mind.  (Or, putting the matter as I would prefer to put it – the inconsistency or unfairness arises from laying open to scrutiny the communication and maintaining confidence in the communication.)  The later communications were, and are, irrelevant to, and had, and could have had, no part to play in the formation of the earlier state of mind.

128               The submission to the contrary by the respondents misunderstands, with respect, the notion of “relevance” adverted to by the majority in Telstra, supra at 167 A-B:  It is the relevance to the formation of the state of mind, not the relevance to the suit that contains the issue of the formation of the state of mind, which brings about the unfairness.  This is made clear by what the majority said in Telstra supra at 168 in the last sentenced in the passage quoted at [87] above:  “legal advice which the party had, before or at the time of the relevant events, material to the formation of that state of mind”.  A communication does not cease to be privileged because its subject matter is an earlier non-privileged occasion or circumstance. The later communication is concerned with the preparation of a case.  What is then said does not contribute to the earlier formation of the state of mind.  The pleading of the state of mind may throw open to scrutiny the earlier communications relevant to formation of the state of mind; but they do not throw open for scrutiny the later communications about preparing the case.

Conclusions and Orders

129               For these reasons I would dismiss paragraphs numbered 1 in the notices of motion filed by both the applicant and the respondents each dated 10 February 2003 and each filed in Court on 11 February 2003.

130               Various other orders were sought by the applicant in its motion.  The respondents indicated at the hearing a desire to file further evidence on those matters.  I have been provided with helpful submissions on those further orders.

131               The convenient course to take is to stand the balance of the motions (including the question of costs) over to a date to be fixed, initially for directions.  Given that it may be more convenient, if any application for leave to appeal is to be made, for all matters to be the subject of one application, subject to hearing the parties in due course, I will extend the time for filing an application for leave to appeal against the orders that I propose to make until seven days from the pronouncement of judgment on the balance of the matters raised by the two notices of motion.

Associate:

Dated:              30 April 2003