FEDERAL COURT OF AUSTRALIA

Seven Network Limited v News Limited (No 10)

1.                  That the application by the sixteenth and twenty-second respondents for access to the documents identified in paragraph 2 of the judgment be dismissed.

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

REASONS FOR JUDGMENT

A PRIVILEGE CLAIM

1                     The sixteenth and twenty-second respondents (‘Optus’) have issued two notices to produce directed to the applicants (‘Seven’).  The notices to produce seek the production of certain documents recording legal advice given to Seven.  Optus seeks orders requiring Seven to produce the documents for inspection.  Seven resists such orders on the ground that the documents are subject to client legal privilege.  Optus says that Seven has waived any privilege that otherwise exists in respect of the legal advice recorded in the documents.

2                     Argument thus far has been confined to three categories of documents:

·        The first category consists of a single document, described in an email admitted into evidence as a ‘much fuller legal overview’ (‘the Overview’).  The email was sent on 2 October 2001 by Mr Steven Wise, then the Chief Executive Officer of i7 Ltd (a division of the first applicant) to Mr Kerry Stokes, the Executive Chairman of the first applicant (‘Seven Network’).

·        The second category comprises documents recording legal advice provided to Seven in 2001 or early 2002 relating to the date upon which Optus’ right to terminate the so-called Channel Production and Supply Agreement (‘CPSA’) arose.

·        The third category comprises documents recoding legal advice provided to Seven during the same period relating to the possible loss by Optus of any right to terminate the CPSA by reason of Seven having itself lost the rights to broadcast Australian Football League (‘AFL’) matches on pay television.

The terms of the notice to produce covering categories two and three are set out in Schedule A to this judgment.

3                     Seven has claimed privilege in respect of the Overview on the ground that:

‘the document was prepared by [Seven’s solicitors] for the sole purpose of providing legal advice to [Seven] regarding their entry into the first variation agreement and is thereby subject to legal professional privilege’.

Seven has claimed privilege on similar grounds in respect of a number of documents said to contain advice relating to the loss of its AFL rights or to the date on which Optus’ right to terminate the CPSA arose.

4                     There is no dispute between the parties that privilege attaches to the communications contained in these documents, unless that privilege has been waived.  (As was pointed out in Mann v Carnell (1999) 201 CLR 1, at [16], per Gleeson CJ, Gaudron, Gummow and Callinan JJ, legal professional privilege applies to communications, not the pieces of paper on which they are written.)  I have not been invited to inspect the relevant documents, doubtless because I am hearing the substantive proceedings.

background

5                     The CPSA was entered into on 30 June 1998 between (relevantly) the second applicant (‘C7’) and the sixteenth respondent (‘Vision’).  The CPSA required C7 to provide to Vision a sports programming service for broadcast on Vision’s pay television service.  AFL matches constituted an important element of the programming to be provided by C7 to Vision. 

6                     The CPSA was to continue until 31 December 2008, unless terminated earlier in accordance with its terms.  Clause 16.2 of the CPSA allowed Vision to terminate the agreement in the event of C7 losing the pay television rights to AFL.  Clause 16.2(a) provided as follows:

‘Vision may, by notice in writing to [C7], terminate this agreement with effect immediately on receipt of that notice by [C7], if [C7] or a related body corporate does not have, or loses, the pay television rights to AFL games for any reason’.

7                     The CPSA also contained a number of express representations and warranties by each of the parties (cl 15).  Clause 27 provided that the terms of the CPSA constituted the entire agreement between the parties as to its subject matter.  It further provided that the CPSA superseded any prior agreement between the parties and any prior representations made by a party. 

8                     By September 2001, it was clear that C7 would not retain the AFL pay rights, although different views had been expressed as to the precise date when C7 could be said no longer to have, or to have lost, the rights.  On 28 September 2001, Optus set out in a letter the terms upon which Vision and C7 were prepared to vary the CPSA.  The letter recited that the parties had expressed different views as to Vision’s right to terminate the CPSA under cl 16.2.

9                     The letter included a new cl 8A to be inserted into the CPSA.  Clause 8A provided for an ‘exclusivity period’ in the following terms:

‘During a period from 27 September 2001 to 31 December 2001:

(a)               Vision must not, and must procure that its related bodies corporate do not, solicit, encourage, initiate or participate in discussions or negotiations with; or make any offers to any person other than C7 or its related bodies corporate; or enter into any contract, arrangement or understanding … with any person other than C7 and its related bodies corporate; and

(b)               Vision must, and must procure that its related bodies corporate, immediately cease any existing negotiations or discussions with; decline any offer made to it; and terminate any offers made by it to any person other than C7 or its related bodies corporate,

in relation to the supply, sub-licensing or other incorporation into the Optus pay television platform of any sports channel …’

10                  Clause 10 of the letter provided that the parties to the CPSA ratified and confirmed the CPSA as amended by the terms of the letter.

11                  On 2 October 2001, Mr Wise sent an email to Mr Stokes advising him that C7 had negotiated a ‘deal’ with Vision for the provision of C7 for the next three months ‘as per their desire to undertake a review of the pay business’.  The email set out certain terms of the ‘deal’, including Optus’ agreement not to terminate the CPSA before 1 January 2002.  The email stated that the documents were ready for signing:

‘but will require your approval.  We have much fuller legal overview attached for you’.

Mr Wise recommended in the email that C7 sign the variation agreement.  It is common ground that, shortly thereafter, Mr Stokes approved the terms of the variation agreement (referred to hereafter as the ‘First Variation Agreement’).

SEVEN’S PLEADED CASE

12                  Seven pleads that prior to entering into the First Variation Agreement, Optus made certain representations to Seven Network and C7.  The key representation for present purposes is pleaded in par 632 of the Fourth Further Amended Statement of Claim (the ‘Statement of Claim’). Paragraph 632 is as follows:

‘Prior to entry into the First Variation Agreement, SingTel Optus [the twenty-second respondent] and Optus represented to Seven Network and C7 that if Seven Network and C7 entered into the First Variation Agreement, Optus would not solicit, encourage, initiate, or participate in discussions or negotiations with any person other than C7 or its related bodies corporate or enter into any contract, arrangement or understanding in relation to the supply, sub-licensing or incorporation into the Optus pay television platform of any sports channel (other than in respect of the supply of broadcasts of AFL matches or NRL match [sic]) in the period from 27 September 2001 to 31 December 2001.

Particulars

            This representation was made:

(i)                 orally by representatives of SingTel Optus and Optus in a meeting with representatives of Seven Network and C7 in a telephone conference call on 28 September 2001 between Morgan Slope and Chris Keely of SingTel Optus and Optus, Anthony Foley of Baker & McKenzie, solicitors for SingTel Optus and Optus, and Michael Parshall and Kate Jordan of Clayton Utz, solicitors for Seven Network and C7.

(ii)               by the letter dated 28 September 2001 from Singtel Optus (then known as Cable & Wireless Optus Limited) to C7 which was subsequently executed as the First Variation Agreement.’

13                  It is said that Seven Network and C7, in reliance upon that representation, executed the First Variation Agreement and also refrained from insisting that Optus execute a term sheet which would have provided for a longer term agreement between Seven and Optus (par 633).

14                  Paragraph 588 of the Statement of Claim is as follows:

‘The Initial Exclusivity Clause [that is, cl 8A] was a condition of the Optus Channel Supply Agreement, in that:

(a)               At the time of entering into the First Variation Agreement, C7 was in a reasonable bargaining position to enter into an agreement with Optus to replace [CPSA], as:

(i)                 if Optus terminated the [CPSA] and did not enter into a replacement agreement with C7, then Optus would have a substantial gap in its sports programming which would be likely to cause it to lose subscribers.  Although Optus had been in negotiations for the supply of the Fox Sports channels to replace the C7 Channels, no arrangements had been finalised; and

(ii)               if Optus did not terminate the [CPSA], then Optus would risk affirming the [CPSA].

(b)               Clause 8A was an important protection negotiated by Seven Network and C7 to preserve C7’s bargaining position for the replacement of the [CPSA] and to maintain the status during the First Exclusivity Period [that is, 27 September 2001 to 31 December 2001].  By virtue of clause 8A, at the end of the First Exclusivity Period the position of C7 would be as before: Optus would be reluctant to have a cessation of sports programming in its service, and Optus had no alternative source of supply.  Without clause 8A, Optus could acquire sports programming from C7 during the First Exclusivity Period, whilst negotiating with an alternative supplier to supply sports programming at the end of the First Exclusivity Period.

(c)               Seven Network and C7 would not have entered into the First Variation Agreement unless assured of a strict performance of clause 8A.’

15                  Seven also pleads that during the exclusivity period provided for by cl 8A of the CPSA (as inserted by the First Variation Agreement), Optus negotiated with Foxtel for the supply of Fox Sports channels (par 589).  This conduct is said to have breached the terms of cl 8A (par 607).

mr stokes’ evidence

16                  Mr Stokes signed a total of four witness statements, each of which, subject to certain exclusions, has been admitted into evidence.  In addition, Mr Stokes was cross-examined by the various respondents over a period of thirteen hearing days.

17                  In his second statement, Mr Stokes recounted a telephone conversation with Mr Wise shortly before the latter sent his email of 2 October 2001 (par 9).  According to Mr Stokes (par 9), the conversation was to the following effect:

‘[Mr Wise:]     The negotiations with Optus have been progressing well.  Our people are all confident from what Optus has told them that Optus will agree to a three year deal for the supply of C7 channels at $17 million a year.  However, the SingTel directors won’t approve the deal until a review of Optus’ commitment to the pay TV business has been completed.  We have negotiated a three month interim agreement with an exclusive dealing period which preserves the status quo while the review is being completed.  I think the exclusivity period is an important sign of their good faith about entering into the three year deal.

[Mr Stokes:]   If Optus is really likely to enter into the three year deal and we are not wasting our time, then it makes sense to proceed with or interim agreement.  Send the details through to me and I will give you a response’.

18                  Mr Stokes says (par 11) that when he read Mr Wise’s email, he noted the reference to an exclusive dealing period.  He understood this to mean that, under the interim agreement, Optus and its related companies would be precluded from discussing, negotiating or agreeing to acquire any sports channel for pay television, except broadcasts of National Rugby League and AFL matches from the 2002 season onwards, from any other person than C7.

19                  Mr Stokes further says (par 12) that he would not have agreed to C7 entering into the First Variation Agreement without the exclusivity period, for two main reasons:

‘(a)      first, I considered it to be an important sign of Optus’ good faith that it intended to finalise the three year deal that had already been agreed with C7 once the review of its pay TV business was complete … ; and

(b)              second, the exclusivity period precluded Optus and its related companies from securing supply of any sports channel for pay television from a source other than C7, and in particular from Foxtel or Fox Sports, during the [First Variation Agreement].  As we had been advised in December 2000 that C7 had not retained the pay TV rights for the AFL from the 2002 season, there was a period of twelve months from that time (during which we still had the right to televise AFL matches on C7) for Optus to negotiate with us.  I thought the exclusivity period would preserve C7’s negotiating position.  If Optus terminated the [CPSA] before securing an alternative source of general Australian sporting content for its pay television platform it would have a gap in its programming which could cause it to lose subscribers and it would in a weak position from which to negotiate favourable terms for sporting content to fill that gap.  On the other hand, if Optus did not terminate the [CPSA] I understood that it could lose any right of termination it had.  To my mind, these factors were likely to make the three year deal proposed by C7 attractive to Optus because under that deal it could secure the sporting content it needed without risk.  The importance of the exclusivity period was that it preserved this situation, and prevented Optus from using the three month interim agreement as an opportunity to secure sporting content from a source other than C7 and then terminating the [CPSA]’.

20                  Optus relied on Mr Stokes’ evidence in par 12(b) of his second statement and evidence given by him in cross-examination to support the contention that Seven had waived any privilege in the documents production of which was sought in the notices to produce.

optus’ submissions

21                  Optus submitted that the linchpin of Seven’s damages claim against it is the allegation that but for Optus’ conduct, Seven and Optus would have entered into a new three-year channel supply agreement in accordance with a term sheet that had been negotiated between the executives of each of the parties in September 2001.  The term sheet provided for a new channel supply agreement commencing on 1 October 2001 and expiring on 30 September 2004.  The minimum licence fee was $17 million in the first year, increasing to $19 million in the third year.  Optus contended that it was essential for Seven to show that but for Optus’ conduct, Seven would have insisted upon the parties executing the new three year agreement.  Mr Bannon SC submitted on behalf of Optus that the causal link had been referred to in Seven’s opening, in the Statement of Claim, in the ‘counter-factual assumptions’ made by one of the experts (whose report is not yet in evidence) and in Mr Stokes’ evidence.

22                  It follows, so Optus contended, that Seven’s case requires the Court to consider what would have happened, absent Optus’ alleged conduct, at particular points of time:

·        Assuming Optus made the alleged misrepresentations in September 2001 and assuming that the First Variation Agreement had not been executed, what would have happened?  Would Seven and Optus have entered into a new three year deal?  This (so it was argued) puts in issue Mr Stokes’ state of mind in authorising the First Variation Agreement.  Was the exclusivity representation important?  Was Mr Stokes relying on legal advice in forming his state of mind?

·        Assuming the First Variation Agreement was entered into (as in fact it was), what would have happened absent conduct by Optus which allegedly breached the exclusivity provision (cl 8A)?  Would the parties have entered into a new three year agreement in these circumstances?  This (so it was argued) again requires Mr Stokes’ state of mind to be established, as well as that of other executives of Seven who might have been involved.

23                  In relation to the Overview, Mr Bannon submitted that among Seven’s witnesses, it was only Mr Stokes’ mind that was relevant to what would have happened but for the alleged representations made by Optus.  Mr Stokes’ evidence in cross-examination showed that he expected that a lawyer would have examined the proposed First Variation Agreement.  Mr Stokes had also accepted that the Overview had been made available to him.  Moreover, he had acknowledged that the document appeared familiar and that it was quite possible he had looked at it at about the time it was sent to him.

24                  Mr Bannon pointed out that the parties are in dispute as to whether Mr Stokes’ state of mind was as he claimed in his evidence.  Optus’ position is that the exclusivity period was not in truth important to Mr Stokes and that he was motivated to approve the First Variation Agreement by considerations that were quite independent of any exclusivity representations.

25                  Mr Bannon contended that the evidence given thus far in the proceedings shows that the legal advice probably contributed to Mr Stokes’ state of mind, either because he read it or because Mr Wise (or some other executive) drew his attention to it.  Accordingly, it was inconsistent for Seven to maintain privilege in the legal advice and at the same time advance a case that the exclusivity representations were an essential element in Mr Stokes’ decision to enter into the First Variation Agreement.  Moreover, it was unfair to Optus for Seven to maintain that position, since Optus was precluded from testing an important claim in Seven’s case in the light of all available evidence.  The Overview plainly informed the thinking of Seven and, in particular, that of Mr Stokes at the relevant time.

26                  In relation to the legal advice concerning the termination date under the CPSA, Mr Bannon said that there was an inconsistency between Mr Stokes’ evidence, to the effect that he thought that Optus’ right to terminate arose in October 2001, and Seven’s assertion in correspondence with Optus that the right to terminate did not arise until the end of February 2002.  Mr Bannon submitted that legal advice was likely to have contributed to the various positions asserted by Seven and Mr Stokes.  Accordingly, that advice must be relevant as to whether Mr Stokes, or other executives at Seven, believed that Seven was in a position of bargaining strength in relation to Optus.  It was also unfair that Seven should be allowed to claim privilege in respect of the relevant legal advice, given that that advice had informed Seven’s thinking.

THE PRINCIPLES

27                  Division 1 of Part 3.10 of the Evidence Act 1995 (Cth) (the ‘Evidence Act’) is concerned with client legal privilege.  Section 118 provides that evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of a confidential communication made between the client and a lawyer for the dominant purpose of the lawyer providing legal advice to the client (see also s 119).  Section 122(1) provides that Div 1 of Part 3.10 does not prevent the adducing of evidence given with the consent of the client concerned.  Nor does Div 1 prevent (subject to certain exceptions) the adducing of evidence if the client has ‘knowingly and voluntarily disclosed to another person the substance of the evidence’: s 122(2).

28                  The circumstances in which client legal privilege or legal professional privilege may apply are not limited to the adducing of evidence in the course of a hearing in court: Mann v Carnell, at [19].  The privilege may be invoked in pre-trial proceedings, such as discovery, or in the course of a hearing but independently of the adducing of evidence.  The High Court has held that s 118 of the Evidence Act is limited to the adducing of evidence and does not apply to the discovery of confidential communications made between lawyer and client either directly or by a derivative modification of the common law: Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49.  Section 122 is similarly confined, since it is expressed as a qualification to the prohibitions for which Div 1 provides elsewhere.  It follows that in the absence of legislation or rules of court, common law principles govern waiver of legal professional privilege at any stage prior to the adducing of evidence.

29                  In the present case, it is necessary to take into account Federal Court Rules (‘FCR’), O 33 r 11.  Rule 11 provides as follows:

‘Privilege

(1)       Where the Court, by subpoena or otherwise, orders any person to produce any document or thing, and any person makes and substantiates sufficient lawful objection to production on grounds of privilege, the Court shall not compel production of that document or thing except production to the Court for the purpose of ruling on the objection.

(2)       Where a question is put to a person in the course of examination, and any person makes and substantiates sufficient lawful objection on grounds of privilege to the question being answered, the Court shall not compel an answer to the question.

(3)       Subrule (1) applies where an order is made for production to, and subrule (2) applies where a question is put to a person in the course of examination before the Court or any officer of the Court, or any examiner, or other person authorized to receive evidence, whether on a trial or hearing or on any other occasion.

            …

(5)       In this rule:

            ground of privilege means a ground on which a person may rely to make an objection under Part 3.10 of the Evidence Act 1995.’

30                  Subrule (5) of O 33 r 11 was inserted into the FCR in 2002 in conformity with a recommendation made by the Australian Law Reform Commission: Evidence (Report No. 38, 1987), App A; Seven Network Ltd v News Ltd [2005] FCAFC 125 (Seven (FC)), at [12], per Branson J.  The effect of subrule (1), when read with subrule (5), is to apply Div 1 of Part 3.10 of the Evidence Act, rather than the common law, to a claim of client legal privilege in the circumstances identified in subrule (1).  Div 1 includes s 122, which therefore determines whether privilege has been waived in those circumstances.

31                  In the present case, orders for discovery were made which required the preparation of lists of documents, including the advices in respect of which Seven has claimed privilege (‘the Advices’).  Optus has now issued notices to produce in the course of the trial requiring Seven to produce the Advices to the Court. 

32                  A notice to produce has, in substance, the same coercive effect as a subpoena: O 33 r 12 (as to the effect of a subpoena see O 27 rr 2(1), 6(4)).  It is clear enough that O 33 r 11(1) is intended to apply where a notice to produce is issued in the course of a trial – that is, at a time when the Court is authorised to receive evidence.  As Branson J noted in Seven (FC), at [17], the effect of O 33 r 11:  

‘is to remove the obligation that would otherwise arise in these circumstances for an objection to the production of the document to be determined according to common law principles’.

33                  In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152, Telstra sought production, by way of discovery, of documents which were subject to claims of legal professional privilege.  The Court held, following earlier Full Court authority, that s 122 of the Evidence Act had a ‘derivative’ application to pre-trial discovery.  (That proposition is no longer good law: Esso v FCT.)  A majority of the Court (Branson and Lehane JJ) held (at 164) that ‘consent’ in s 122(1) includes circumstances in which legal professional privilege would be regarded as waived by reason of conduct on the part of the privilege holder which would render it unfair for the privilege to be maintained.  The majority considered (at 166) that the common law imputed a waiver of privilege:

‘if by reason of some conduct of [the privilege holder], 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’.

34                  Branson and Lehane JJ also expressed the view (at 164) that ‘consent’ in s 122(1) of the Evidence Act includes the common law concept of imputed consent flowing from considerations of fairness.  Their Honours observed (at 164) that:

‘unless “consent” has a meaning more extensive than actual, voluntary consent, it is difficult to see what s 122(1) adds to the opening words of s 118.  And it may be observed that if s 122(1) of the Act is construed as being concerned only with intended or voluntary consent, Div 1 of Pt 3.10 of the Act will have effected a dramatic change in the pre-existing common law with respect to legal professional privilege’.

35                  In Mann v Carnell, the High Courtrestated the common law principles governing waiver of legal professional privilege.  The joint judgment pointed out (at [28]) that ‘waiver’ is a vague term that often requires further definition according to the context.  Their Honours said (at [28]-[29]) that:

‘It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege.  Examples include disclosure by a client of the client’s version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer’s evidence as to advice given to the client will be received. 

Waiver may be express or implied.  Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.  When an affirmative answer is given to such a question, it is sometimes said that waiver is “imputed by operation of law”.  This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege.  …  What bring about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.’  (Emphasis added; citations omitted.)

36                  Telstra v BT was decided before Mann v Carnell and Esso v FCT.  As I have noted, the Full Court therefore proceeded on what has been held to be the erroneous assumption that Div 1 of Part 3.10 of the Evidence Act applies derivatively to pre-trial procedures.  The majority also proceeded on the basis of what might be described as an incomplete statement of principle, in that the judgment assumes that common law waiver is essentially informed by considerations of fairness (as distinct from the inconsistency formula adopted in Mann v Carnell, at [29]).

37                  Nonetheless, Telstra v BT has been widely accepted as laying down the correct general approach to the construction of s 122 of the Evidence Act.  In Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297, a case in which the Supreme Court Rules applied the Evidence Act 1995 (NSW) to pre-trial procedures, Gzell J (with whom Bryson JA and Windeyer J agreed) said (at [31]) that the interpretation put forward in Telstra v BT ‘must be correct’.  Gzell J also cited (at [33]) a number of single judge decisions to the same effect: see also DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499, at [102]-[111], per Allsop J.

38                  There is, however, a second aspect to the approach taken by the majority in Telstra v BT that is material to the present case.  Branson and Lehane JJ held (at 165) that common law waiver has the following operation:

‘in cases in which the state of mind of a party [is] in issue in the proceedings, … evidence [can] be called to establish the terms of legal advice, relevant to that party’s state of mind, provided to that party’. (Emphasis added)

39                  Their Honours developed this analysis (at 166-167) as follows:

‘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.’

Later they said (at 168) that:

‘Where, … 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.’

Clearly enough, these holdings were informed by considerations of fairness which the majority considered underpinned common law waiver (see at 164).  However, their Honours also said (at 167) that it was not:

‘a consequence of the principle [stated at 166-167] 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 [a] part in the formation of that state of mind ’.

40                  In Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044, Hodgson CJ in Eq accepted that the majority in Telstra v BT correctly applied s 122(1) of the Evidence Act.  Nonetheless, his Honour expressed the view (at [12]):

‘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 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.’

41                  Wayne Lawrence was decided before Mann v Carnell.  It is therefore not surprising that Hodgson CJ in Eq took as his reference point ‘what is reasonable, and what is fair in the particular case’.  It would seem to be clear enough, however, that Hodgson CJ in Eq considered that more was required for a waiver of privilege than simply putting a state of mind in issue in circumstances where legal advice might be relevant to the formation of that state of mind: DSE v Intertan at [103], per Allsop J.

42                  In Chen, Gzell J quoted the observation of Hodgson CJ in Eq with apparent approval.  He also expressed the view (at [41]) that treating the question of waiver as a matter of degree was unlikely to be materially different from the sort of question that needs to be asked in order to determine whether there is inconsistency between the conduct of a party and the maintenance of client legal privilege as discussed in Mann v Carnell.  Gzell J said (at [41]) that in a case in which reliance on representations is alleged, the following questions need to be explored:

‘Were representations made to the party by or on behalf of the opponent?  Does the party say that he or she relied upon the representations and altered his or her course of conduct?  Is reliance upon the representations a central, or merely peripheral, aspect of the party’s case?  Is it likely that the party received legal advice that had a bearing on the allegation of reliance?  Was it likely that the legal advice might raise doubts as to the allegations of reliance or any loses [sic] or damage alleged to have been suffered?’

43                  In DSE v Intertan, Allsop J considered (at [95], [109]) that the inconsistency principle articulated in Mann v Carnell has the consequence that privilege will not be waived by a party merely because the party raises its state of mind as an issue and legal advice is likely to have contributed to that state of mind.  His Honour appears to suggest (at [58], [61]) that the inconsistency required by Mann v Carnell will be present only where the party entitled to the privilege brings a case which is either about the contents of the privileged communication or necessarily lays open a confidential communication to scrutiny.  However, his Honour recognised (at [62]) the danger of elevating the facts of particular cases into principles which might supplant or modify the governing principle laid down in Mann v Carnell.

44                  The current position concerning s 122 of the Evidence Act, as I see it, is as follows:

(i)                  Telstra v BT holds that s 122 of the Evidence Act is to be read as incorporating common law principles of waiver.  I am bound by that holding.

(ii)                The majority in Telstra v BT interpreted the scope of common law waiver by reference to the guiding principle of fairness.  That interpretation has now been overtaken by the authoritative statement of principle in Mann v Carnell at [29].  That is, what brings about waiver of privilege of common law is the inconsistency which courts, where necessary informed by considerations of fairness, perceive between the conduct of the client and the maintenance of confidentiality, not some overriding principle of fairness.

(iii)               It follows that, despite what was said in Telstra v BT (at 166-167), the fact that the client pleads reliance on a representation does not necessarily result in the waiver of privilege in any legal advice that may be relevant to ascertaining the party’s state of mind.  To put the matter another way, the mere fact that legal advice may be material to an issue in the proceedings, even one raised by the client, does not establish that the conduct of the client is inconsistent with maintaining confidentiality in the privileged communications.

45                  Mr Bannon’s submissions, in substance, appeared to accept propositions (ii) and (iii).  He said that he was content to adopt the formulation of Hodgson CJ in Eq in Wayne Lawrence (see [42] above) as the correct approach to the construction of s 122 of the Evidence Act.  That formulation, as I have noted, qualifies the statement of principle in Telstra v BT.

46                  The application of the principle stated in the High Court in Mann v Carnell isnot free from difficulty.  The High Court gave two examples (at [28]) of waiver of privilege resulting from inconsistency between the conduct of a client and maintenance of confidentiality in the privileged communications.  The first is the disclosure by a client of the client’s version of a communication with his or her lawyer, which disclosure entitles the lawyer to give an account of the communication (Benecke v National Australia Bank (1993) 35 NSWLR 110).  The second is the institution of proceedings by the client for professional negligence against his or her lawyer, in which case the lawyer’s evidence as to the advice given to the client will be received: Lillicrap v Nalder & Son [1993] 1 All ER 724.  These illustrations, although obviously not intended to be exhaustive, perhaps suggest that their Honours may have seen the inconsistency principle as having a relatively narrow application.  In any event, it is not entirely clear that what might be described as the evaluative approach suggested in Wayne Lawrence, and adopted in Chen, precisely reflects the content of the inconsistency principle.

47                  Seven’s written submissions suggested that it was unnecessary to determine whether the reasoning in Telstra v BT continues to apply in an unmodified sense following the decision in Mann v Carnell.  Given thosesubmissions and Optus’ willingness to accept the statement of principle in Wayne Lawrence, I am content to proceed on the basis that that statement provides appropriate guidance in the present case.

48                  It follows that, on this approach, the waiver of legal professional privilege on the grounds of implied consent will involve questions of degree.  As Optus said in their submissions in reply, the Court will have to take a number of factors into account. These include:

·        the centrality (or otherwise) to the proceedings of the issue to which the privileged communications are said to relate;

·        if the issue involves a state of mind or belief, the likelihood that legal advice played a significant part in the foundation of that state of mind or belief; and

·        whether there is any apparent inconsistency between the position taken by the party claiming privilege (whether at the trial or earlier) and the likely contents of the privileged communications.

APPLICATION Of PRINCIPLES

THE OVERVIEW

49                  The Statement of Claim does not refer to any legal advice received by Seven and, in particular, does not refer to the Overview.  Nor is there any pleading, comparable to the defence filed in Thomason v Council of the Municipality of Campbelltown (1939) 39 SR (NSW) 347, that puts Seven’s knowledge of its legal rights in issue.

50                  Optus’ waiver case in relation to the Overview rests essentially on two matters.  First, Seven’s allegation that it relied on the ‘exclusivity’ representation by Optus when entering the First Variation Agreement.  Secondly, it rests on Mr Stokes’ evidence, particularly his evidence in cross-examination that the Overview was made available to him and that it was quite possible that he had looked at it.

51                  The major difficulty confronting Optus’ argument is that it is not apparent what legal advice could have contributed to Seven’s reliance on the exclusivity representation.  It is clear enough that Seven received advice about the First Variation Agreement.  On the evidence, it is also probable that Mr Stokes saw a summary of that advice.  I also accept that there is a factual issue between Seven and Optus as to whether Mr Stokes was motivated to approve the First Variation Agreement, as he claimed, by the exclusivity representation or by other factors.  What is not established, in my opinion, is that it is likely that legal advice contributed to Mr Stokes’ state of mind or, for that matter, to the state of mind of anybody else at Seven, when approving Seven’s entry into the First Variation Agreement.

52                  Mr Bannon submitted that the legal advice provided in relation to the First Variation Agreement was likely to have drawn attention to the difference between a contractual term (cl 8A) and a representation.  He also contended that the advice was likely to have pointed out the significance of cl 27 of the CPSA (which provided that the terms of the CPSA were to supersede any prior representations).  In particular, he suggested that the legal advice probably would have addressed the effect of cl 27 in relation to the exclusivity representation allegedly made by Optus.

53                  It is of course possible that Seven’s legal advice did address these issues.  However, on the material before me I cannot conclude that this is likely.  There is nothing in the evidence to suggest that the two particular issues identified by Mr Bannon were of concern to Seven at the time that the Overview came into existence, nor that advice was sought specifically in relation to them.  Unlike a case where the evidence might suggest that legal advice was given to a party on an issue bearing directly on that party’s alleged state of mind, in this case, the relevance of the advice must lie in the realm of speculation.  I should add that it is difficult to see how par 12(b) of Mr Stokes’ second statement (reproduced in par 19 above) advances matters from Optus’ perspective.  The subparagraph merely records Mr Stokes’ reasons for believing that the exclusivity period provided Seven with a commercial advantage in relation to its negotiations with Optus.

54                  The principles governing the construction of s 122 of the Evidence Act have to be applied to a wide variety of factual situations.  The facts of earlier decisions should not be converted into legal principles.  Having said this, I do not think that there is any inconsistency between the conclusion I have reached and cases to which Mr Bannon referred.

55                  In Chen, for example, a special condition in a lease, which had been the subject of legal advice, negated the very representation upon which a lessee claimed to have relied.  In Wyadra Pty Ltd v Mailler (No 2) [2005] NSWSC 88 (Gzell J), the cross claimants alleged that they had believed they would be entitled to purchase a property if they continued to negotiate with the vendor in good faith.  This expectation was said to have continued for a period of over two years, during which time there had been ‘considerable communications to and from their former solicitors’.  The circumstances in each of these cases were different from those relating to the Overview.

56                  It follows, in my opinion, that Optus has not made out its case that client legal privilege in the Overview has been waived by Seven.

Optus’ right to terminate

57                  Optus’ first submission was that Seven’s affirmative case had resulted in it waiving its privilege in legal advices relating to the date on which Optus became entitled to terminate the CPSA.  However, there is nothing in Seven’s pleadings that would justify that conclusion.  The Statement of Claim does not plead that Seven had received any advice in relation to the termination date under the CPSA.  Nor does the Statement of Claim allege that Seven’s officers had formed a particular view on that question. 

58                  Mr Bannon pointed out that Mr Stokes had said in evidence that his understanding was that the termination date was in December 2001.  Mr Stokes agreed that this understanding had informed the contents of par 12(b) of his second statement.  Mr Stokes also said that he knew that Seven had been contending to Optus that Optus had no right to terminate the CPSA until the end of February 2002.  When asked whether the representations made to Optus were false, Mr Stokes replied that there were other opinions held within Seven as to the termination date.  It was one of those opinions, communicated to him by Mr Wise, that provided the basis for negotiations with Optus.  Mr Stokes said that his opinion concerning the termination date was not shared by everybody within Seven and that there were valid reasons for what they put.

59                  Mr Bannon submitted that it was clear that legal advice had contributed to the opinions within Seven concerning the termination date and that these opinions, in turn, were relevant to whether Seven believed that it was in a position of bargaining strength when it came to dealing with Optus in late 2001.  He further suggested that any legal advice relating to the termination date was relevant to ‘causation’, apparently in the sense that it would bear on whether Seven, in truth, held the view that the exclusivity period was an important element in its dealings with Optus in late 2001.  The advice, so he argued, was ‘inseverably linked’ to the advice that Seven should enter the First Variation Agreement.

60                  I must confess to some difficulty in understanding why Mr Stokes’ evidence would lead to a waiver of privilege attaching to advice relating to the termination date.  The evidence suggests that it was in Seven’s commercial interests to put forward a termination date that was later rather than earlier.  The evidence also indicates that different views were indeed held within Seven and that (as Mr Stokes said) the more uncertainty about the date, the better for Seven’s negotiating position.

61                  I accept that it is likely that Seven received legal advice on the termination date and that such advice was received during the period of negotiations with Optus.  It is also clear that the parties are in dispute as to whether Seven relied upon the exclusivity representation, as it alleges.  But it seems to me that any legal advice as to the termination date is peripheral to that question.  Seven may or may not have acted consistently with its legal advice in representing to Optus that the termination date was in February 2002.  That representation, which was apparently designed to assist in Seven’s negotiations with Optus, is not necessarily inconsistent with Seven relying on the exclusivity representation.  It is true that the CPSA contained no exclusivity provision and that, if it continued until February 2002, no such provision would have been in force.  Yet, as Seven submitted, that fact does not necessarily negate Seven’s asserted belief, in the context of complex negotiations on a range of issues, that the exclusivity representation was important to it.  In short, I see no inconsistency between Seven maintaining its position that it relied on the exclusivity period and seeking to preserve confidentiality in the legal advice relating to the termination date.

62                  Optus submitted that the legal advice relating to the termination date was relevant to the allegation in Optus’ cross-claim that Seven’s representation that Optus could not terminate the CPSA until February 2002 was misleading and deceptive.  It seems to me that the short answer to this submission is the conclusion reached by Allsop J, after an extensive review of the authorities, in DSE v Intertan, at [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 contention] that the privilege may be lost by the raising of an issue by the other party to the case is not correct’.

In so far as Optus relied on the fact that in Thomason an issue was raised by the defendant on the pleadings, I adopt Allsop J’s comments in DSE v Intertan, at [48] to the effect that in substance the plaintiff in that case had put in issue her knowledge as to her legal rights. 

63                  To the extent that Optus relied on voluntary disclosure of the legal advice received by Seven in the course of Mr Stokes’ evidence in cross-examination, I accept Seven’s submission that the evidence does not disclose the substance of that legal advice: see Nine Films and Television Pty Ltd v Ninox Television Ltd (2005) 65 IPR 442 at [21], [26] per Tamberlin J.

advice concerning the loss of optus’ right to terminate

64                  The argument did not distinguish between legal advice on the loss of Optus’ right to terminate and advice on the date on which Optus acquired the right to terminate the CPSA.  For much the same reasons as I have already explained, I do not think that Seven has waived client legal privilege in any legal advice received on this topic.

conclusion

65                  I conclude that Seven has not waived privilege in the three categories of confidential communications that have been the subject of argument.  Accordingly, I propose to dismiss Optus’ application for orders requiring Seven to produce the three categories of documents for inspection.

Associate:

Dated:              30 November 2005

SCHEDULE A

NOTICE TO PRODUCE

To the Applicants:

The Sixteenth and Twenty-second Respondents require you to produce the following documents for the purpose of evidence on Tuesday 25 October 2005 at 10:14am:

1.         All documents constituting or recording or evidencing legal advice provided to or available to the Applicants or either of them in the period 1 January 2001 to 31 March 2002 in connection with the dispute between C7 Pty Limited (“C7”) and Foxtel, Telstra Corporation, Telstra Multimedia, News Corporation and News Limited or any of them concerning access to the Foxtel/Telstra broadband cable (the “Cable”) together with any documents constituting or recording or evidencing instructions on which such advice was based, being advice in relation to the following:

(a)                the prospects of obtaining access to the Cable or the terms on which such access would or might be obtained including price;

(b)               the likely terms on which access to the Cable would be obtained;

(c)                the likely cost of any access to the Cable;

(d)               the likely date on which access would be obtained;

(e)                the likely date on which the terms of access would be determined;

(f)                 the costs, including legal costs, of continuing to seek access to the Cable or continuing to seek a determination as to the terms on which access would be obtained;

(g)                whether the applicants should cease attempting to obtain access to the Cable or attempting to obtain a determination as to the terms on which access would be obtained;

including without limitation:

i.          the advice referred to by Mr Stokes at T-175.23 – T-1760; and

ii.          the advice referred to by Mr Stokes at T-1908.4 – 1909.18

2.         All documents constituting or recording or evidencing legal advice provided to or available to the Applicants or either of them in the period of 1 January 2001 to 31 March 2002 in relation to the date upon which Optus’ right to terminate the Channel Production and Supply Agreement with C7 as a consequence of the loss of the AFL rights would arise together with any documents constituting or recording or evidencing instructions on which such advice was based including, without limitation:

(a)                the advice directly or indirectly informed the view expressed by Mr Stokes in the following sentence in paragraph 12(b) of his second statement dated 30 November 2004: As we had been advised in December 2000 that C7 had not retained the pay TV rights for the AFL from the 2002 season, there was a period of twelve months from that time (during which we still had the right to televise AFL matches on C7) for Optus to negotiate with us;

(b)               the advice referred to by Mr Stokes at T-1810.3 – 11;

(c)                the advice referred to by Mr Stokes at T-1865.1 – T-1869.24.

3.         All documents constituting or recording or evidencing legal advice provided to or available to the Applicants or either of them in the period of 1 January 2001 to 31 March 2002 in relation to the possibility that Optus would or might lose any right to terminate the Channel Production and Supply Agreement with C7 as a consequence of the loss of the AFL rights by failing to serve a notice of termination on or before a particular date together with any documents constituting or recording or evidencing instructions on which such advice was based including, without limitation:

(a)                the advice which directly or indirectly informed the view expressed by Mr Stokes in the following sentence in paragraph 12(b) of his second statement dated 30 November 2004: On the other hand, if Optus did not terminate the Optus Channel Supply Agreement I understood that it could lose any right of termination it had;

(b)               the advice referred to by Mr Stokes at T-1866.35 – T1867.20.

4.         …

Dated 21 October 2005

________________________
Diana Angela Chang
Solicitor for the Sixteenth and
Twenty-Second Respondents.