Anderson v Holding Redlich

[2003] VSC 303

RULING - Legal professional privilege - Waiver by disclosure in discovery - Whether associated waiver - Whether waiver by issue - State of mind of party and existence of legal advice put in issue by party relying on privilege

1 The plaintiff has sued each of the defendants, being a number of his former solicitors, inter alia for the negligent management of his personal injury proceedings in New South Wales. In August 2000 those proceedings were dismissed for want of prosecution. The defendants contend that the plaintiff sought and obtained the dismissal of his own proceedings, that he did so in order to pursue his claim against the defendants which he had already commenced in Victoria, and that he acted unreasonably in relation to his New South Wales proceedings and failed to mitigate his loss.

2 By subpoena duces tecum dated 5 August 2003, the first named defendant sought the production of the file of former solicitors for the plaintiff, Kuek & Associates.

3 Upon counsel for the defendants seeking the Court's leave to review the contents of the file after it was produced, counsel for the plaintiff, Mr Selimi, objected to inspection of the file on the ground of legal professional privilege.

4 On 6 August 2003, I heard lengthy argument in relation to that question. It was my intention to indicate my decision this morning, being 7 August 2003, and give reasons for decision at some later time. I think it important however, that I give those reasons now as they are likely to have some bearing on the way in which the trial is to be conducted by each of the parties.

5 At the outset of the submission made on behalf of the first named defendant by Mr Noonan, he drew my attention to three documents which had been the subject of discovery by the plaintiff and which he said constituted a waiver of privilege. Such a waiver, he submitted, affected the privilege claimed with respect to the file. The documents discovered were:

(i) a letter dated 29 January 1999 from Kuek & Associates to the fourth named defendant, Messrs Turner Freeman which is to be found in the court book at page 1543. (This letter was probably not privileged, it being a letter from the plaintiff's former solicitors to a party in the proceeding);

(ii) a diary note from Gabrielle dated 26 November 1999 purporting to summarise a consultation between the author thereof and the plaintiff and his son, Brent Anderson, which is to be found in the court book at page 1757;

(iii) a letter dated 6 April 2000 from Kuek & Associates to the plaintiff which is to be found in the court book at page 799.

6 For convenience I shall refer to these three documents as involving waiver of privilege by "disclosure".

7 Mr Selimi quite properly conceded that the three documents to which I have referred had been the subject of waiver and as I indicated to him during the course of argument, I was satisfied that his concession was appropriate.

8 The decision of Goldberg J. in Meltend Pty Ltd & Rosenbaum v Restoration Clinics of Australia Pty Ltd & Marzola[1] dealt with the very same issue, namely documents which had been discovered by a party and which were held by his Honour to have been the subject of waiver by virtue of their discovery. I think it unnecessary to dwell on the principles as discussed by his Honour because, as I have said, Mr Selimi properly conceded that there had been waiver by virtue of their disclosure in discovery.

9 Mr Noonan also submitted that by virtue of the way in which the plaintiff had opened the case there had been a waiver of privilege as to legal advice received by the plaintiff. The plaintiff's counsel, Mr Selimi, in answer to questions that I raised with him during the course of his opening, explained that it will be the plaintiff's case that at no material time during 1999 or 2000, and prior to the dismissal of the New South Wales proceedings in August 2000, had the plaintiff received legal advice as to his prospects of success in relation to those proceedings. For convenience I shall refer to that alleged waiver as a waiver of privilege by "issue", a term that is used in some of the authorities that I have considered.

10 The plaintiff's state of mind bears upon the reasonableness of his conduct in relation to the dismissal of his personal injury claim in New South Wales. The defendants have pleaded that the plaintiff, in seeking or allowing the dismissal of his claim, failed to mitigate his loss. Although a reply has been foreshadowed but not yet filed, the case for the plaintiff was opened on the basis that the plaintiff acted reasonably in relation to the dismissal of his personal injury claim. The plaintiff does not seek to explain his state of mind by legal advice but by the absence of legal advice which he claims could not be obtained. The defendants challenge this assertion and suggest there was legal advice which the plaintiff received.

11 Mr Noonan made it clear that he was not suggesting there had been a waiver of all of the documents in the file that had been produced pursuant to the subpoena. He submitted that there had been a waiver of privilege in relation to only those documents which either dealt with the subject matter of any of the three documents which had been disclosed and to which I have referred, or to any document which answered the assertion made by counsel for the plaintiff in opening. In respect of the opening, Mr Noonan submitted that there had been a waiver by issue that the plaintiff had not received any legal advice concerning the New South Wales proceedings during the relevant period.

12 The first argument for the first named defendant was that as a consequence of the waivers by disclosure, privilege in relation to the subject matter of each of those documents had been waived, and that the waiver extended to other documents which dealt with the same subject matter. Such a waiver is sometimes described as waiver by implication or associative waiver.[2]

13 In relation to the waiver by issue, the argument was that by the plaintiff having foreshadowed in opening that the plaintiff would testify that he had no legal advice during the relevant period as to his prospects of success in the New South Wales proceedings, he had waived any right to rely on legal professional privilege in relation to any advices that he may have in fact received contrary to the assertion made in opening.

14 I was referred to a number of authorities in the course of submissions and I was provided with a written submission on behalf of the first named defendant which I have found of great assistance. I have considered a number of other authorities overnight and this morning. There is, in my view, considerable uncertainty about the issue of when privilege is waived and when it is not, both in the context of waiver by disclosure and waiver by issue. The difficulty, it is said, largely arises in the application of principle to particular circumstances.

15 Waiver of privilege by implication through disclosure arises where the conduct of the party in whom the privilege reside makes it unfair or inconsistent to maintain the confidentiality which the privilege is designed to protect. See Attorney-General for Northern Territory v Maurice[3]; Goldberg v Ng[4]; Mann v Carnell[5]; Great Atlantic Insurance Co v Home Insurance[6]; and General Accident Fire & Life Assurance Corp Ltd v Tantor (The Zephyr).[7]

16 In relation to the question of waiver by disclosure and associated waiver, I must apply the law in accordance with its recent exposition by the Victoria Court of Appeal in British American Tobacco Australia Services Limited v Cowell[8] (hereafter B.A.T.). The Court, comprising Phillips, Batt and Buchanan JJA. made these observations to which I should refer:

"As we apprehend it, where legal professional privilege is waived in relation to one piece (or part) of advice, the privilege is impliedly waived in relation to another if and only if that other is necessary to a proper understanding of the first. As established by the High Court at least since Mann v Carnell, the test in such cases is whether it would be inconsistent for a party to rely upon and so to waive legal professional privilege in respect of the one without also being taken to have waived privilege in respect of the other. For example, there is no such inconsistency in waiving privilege in relation to the Clayton Utz letter of 7 July 1992 and maintaining privilege in relation to the advice previously provided in December 1985. It may be a matter for adverse comment, but it is not a matter of implied waiver. The letter of 7 July 1992 was complete in itself and there was no need to make reference to the earlier advice in order to properly understand the letter of 7 July 1992. So it is too in relation to Mr Maher's own letter of 9 March 1998 seeking advice from Mallesons. His request for advice can be readily understood without recourse to any previous legal advice beyond the enclosures. Mallesons were plainly being asked to undertake a review of the advice given by Clayton Utz on 7 July 1992. They were asked whether that advice was 'still accurate and complete'. But as for other previous legal advice, as mentioned by Mr Maher 'to the effect that there was no legal obligation on the company or its officer to retain documentation which may be related to issues arising in legal proceedings where no such proceedings were on foot', there was no need simply to understand the letter of 9 March 1998 to expose to scrutiny the terms of that previous legal advice. Mallesons were being asked to advise in the context of the previous legal advice described in the letter of 9 March and whether that description of it was accurate or not was of no immediate concern. Their brief was to advise on it as described and mere reference to it did not amount to an implied waiver of privilege in respect of the earlier advice itself."][9] (emphasis mine)

17 The Court referred to a letter from the defendant's legal advisors which had been disclosed by the defendant and which said in part:

"I confirm that there is no specific obligation on you to retain documents for the purpose of legal proceedings where no proceedings have been commenced. You are entitled to destroy any document subject to the legislative requirements, but as you have been advised previously, the Court may draw an adverse inference from the destruction of such documents, depending on the circumstances of the destruction."[10]

"Again, the mere reference by Mallesons to the defendants having been advised previously to like effect was no more than a reiteration of Mr Maher's own letter of instructions, at least in the absence of evidence that Mallesons had that advice. The exhibiting of Mr Maher of Mallesons' letter to his affidavit and the reference in that letter to previous advice did not serve to waive, by implication or otherwise, legal professional privilege in respect of that earlier advice."[11]

19 In light of the manner in which the Victorian Court of Appeal has applied the principles of waiver, the correct approach that I should take to the three disclosed documents is to ask whether or not it is necessary to have regard to any material in the file which is the subject of privilege for a proper understanding of the advice given or referred to in the three documents.

20 In relation to the first of the documents to which I referred, namely the letter from Kuek & Associates dated 29 January 1999, in summarising the advice which they said the plaintiff had received from Mr Charles Francis S.C. stated that Mr Francis had advised that on the material that he has seen:

"1. Mr Anderson has a good claim in the personal injuries case. 2. Mr Anderson has a good claim against his former solicitors for negligence. 3. However, Mr Anderson ought to finalise his personal injuries trial in the Sydney District Court and thereafter pursue his claim in negligence in Victoria. Directions have been given by the Supreme Court of Victoria in respect of the negligence suit and it is not likely that the trial of the negligence suit can be heard before the end of this year."

21 It is not entirely clear what is meant by some of the expressions used in the passage that I have quoted. In those circumstances, there ought to be recourse to the file for the purpose of determining if there is any material which would clarify what was meant by the expressions used by the author of the letter in explaining to the fourth named defendant the nature of the advice which Mr Francis had provided.

22 In relation to the second document, which is the diary note, a similar question arises. Gabrielle, the author of the note, states:

"We discussed the matter further and I said to him that if he were to pursue the Supreme Court case in Victoria without first finalising the New South Wales case, he stood the great risk of the defendants in the Supreme Court case successfully arguing that he had not mitigated his loss. This is because there is no clear evidence that he has made all reasonable attempts to recover damages in the New South Wales case. I advised him that the only way to establish that he has mitigated his damages is to obtain judgment in New South Wales and try to enforce the judgment. Alternatively, he must get an advice from a senior barrister in New South Wales that his case in New South Wales is hopeless and should be discontinued. I said that the barrister can then be an expert witness in his Supreme Court case in Victoria."

23 It may well be that there is other material relating to the advice that is recorded in this diary note which will clarify or further explain the nature of that advice and in particular what was meant by the word "finalise". Similar considerations arise in relation to the third document.

24 For the reasons that I have just given, I think it is appropriate that the Kuek & Associates file be examined for the narrow purpose of determining whether or not there is any other material which will enhance an understanding of the advices given or referred to in the disclosed documents.

25 I turn then to the second basis on which Mr Noonan sought access to the file, namely waiver by issue.

26 There is a line of authority to the effect that where a party purses an issue which directly raises that party's state of mind and as a consequence the legal advice that party received, privilege is waived in relation to such advice. See Thomason v Municipal Council of Campbelltown[12]; HongHong Bank of Australia Ltd v Murphy & Ors;[13]' Ampolex Ltd v Perpetual Trustees Company (Canberra) Ltd[14]; Benecke v National Australia Bank[15]; Telstra Corporation Ltd & Anor v B.T. Australasia Pty Ltd. & Anor [16] and Cross on Evidence.[17] The matter was comprehensively reviewed by Byrne J. in Liquorland (Australia) Pty Ltd & Australian Liquor Group Ltd v Michael Lee Anghie & Roger Christian Steinpreis,[18] his Honour concluding that where, by its pleadings, a party puts its state of mind in issue, privilege may be waived with respect to legal communications which contributed to its state of mind. Alsop J. in DSE (Holdings) Pty Ltd v Intertan Inc[19] reached a similar conclusion after also carefully and extensively considering the authorities.

27 The question of "issue waiver" was considered by Bongiorno J. in Yvonne May Walker-Shipley v The State of Victoria and Child and Family Service Ballarat Inc[20] in which the plaintiff sought an extension of a relevant limitation period pursuant to s. 23A Limitation of Actions Act 1958. His Honour found that the plaintiff had put in issue in the proceedings the state of her knowledge as to the material facts relevant to the cause of action she claimed. The defendants argued that by bringing her application and by referring in her affidavits to various sources of information, expressly or by implication, in relation to documents which might be otherwise the subject of legal professional privilege, she had either waived such privilege entirely or waiver of such privilege should be imputed to her by operation of law. After referring to the authorities to which I have also referred his Honour stated:

"There is a basic inconsistency between maintaining legal professional privilege in respect of communications between a lawyer and a client and the client's obtaining much of the information which informs her state of mind from that lawyer when that state of mind is central to the litigation being pursued. A client in that position cannot, as a matter of fairness, selectively report such communications for the purpose of demonstrating ignorance of certain facts at a particular time whilst maintaining the confidentiality of the rest of her communication with her lawyer."[21]

28 The plaintiff relies upon the B. A. T. case and submits there has been no waiver by operation of law. Waiver should not, his counsel submitted, be imputed as a result of any conduct of the plaintiff. Notwithstanding that the documents in the B.A.T. case, the subject of the claim of privilege, were relevant to the defendant's state of mind, and that it appears that the defendant's intentions and bona fides were in dispute, the Court of Appeal concluded that privilege had not been waived in relation to the documents in dispute. The Court in its judgment stated:

"It is a nice point, of course, whether the oral evidence of Mr Maher was properly relied upon in this context, given that most of that evidence came in cross-examination. After all, what should be relevant is surely the use to which the party waiving privilege is seeking to put the documents, rather than the use sought to be made of them by the other side. Be that as it may, the description of the purpose to which the documents were being put, which we have quoted from His Honour's ruling, does not seem to us to advance the case for implied waiver. That Mr Maher was relying upon the policy as long-standing or as predating the instigation of the hold order of November 1990 does not impliedly waive privilege in respect to the advice given at that earlier point whether to establish the document retention policy in the first place or in review of it or indeed to change it. The defendant's claim was to have been acting upon legal advice when it came to destroy documents at the conclusion of the Cremona litigation and the Harrison proceeding, a claim patently substantiated by exhibits GFM3 and GFM4. If the plaintiff wished to challenge that claim, putting in issue if for instance the legal advice had been obtained bona fide or whether it was perhaps mere window dressing in an effort to justify what otherwise was known to be unjustifiable, then that was a matter for the plaintiff to pursue and to pursue as she wished. If the plaintiff sought to establish such contentions out of the documents of the defendant, then she would have to do so from such documents as were already in her possession, or of which she could compel production, whether by notice to produce to the defendant or whether by subpoena justiciable or by others such as the solicitors and for the reasons already advance, in seeking to compel production the plaintiff could not establish implied waiver of privilege by means of letters which were exhibits to Mr Maher's affidavit. Indeed, as His Honour recognised earlier in his ruling: 'Privileged documents are not available for inspection merely because they might throw light on the strength or weakness of the case as to specific issues, or generally'. In ruling, His Honour went on to describe Mr Maher as having asserted in his evidence that before destroying documents, legal advice had been first sought and given, and that the legal advice received from Mallesons in 1998 was consistent with legal advice that had previously been received, but as already indicated, that evidence carried the question of implied waiver no further. The Judge mentioned also that Mr Maher had 'rejected any suggestion that the decision to destroy documents had been taken for the purpose of prejudicing later proceedings and' that 'that purpose was sought to be masked by the receipt of legal advice which was received to support a contention of innocent intention'. That the legal advice had been sought to dress up, as it were, the destruction of the documents and to conceal by an overlay of the so-called innocent intention what otherwise had been done quite deliberately for the purpose of prejudicing later proceedings was the contention of the plaintiff but obviously it was not a contention with which Mr Maher agreed. Even if expressly rejected by him (and the cross-examination does not appear to have been so specific) we cannot see how his rejection of the contention could serve to expose to scrutiny documents for which otherwise legal professional privilege was claimed. If the plaintiff's contention had any basis, then the defendant's claim to privilege in respect of earlier advice upon which the plaintiff was seeking to rely, might redound to the disadvantage of the defendant by way of adverse inference, but that was not how the matter was being put. The question of adverse inferences was always a possibility. What was at stake here was the claim to legal professional privilege and for the reasons given, it seems to us that the production of the correspondence which became the exhibits did not expose to scrutiny 'the many other instances of the defendants seeking and receiving legal advice as to its document retention policy'." In ruling, his Honour said: 'The documents to which waiver might apply are not confined to those of precisely the same character as the documents which create the waiver, in this case, letters formally requesting advice and letters of advice but would extend to such related documents as might be indirectly relevant, in that they might provide insight into the contents, circumstances and consistency of advice which was requested and received at other times on those topics. See ; at 696'. Young was a case on relevance rather than on waiver. Anyway, the July 1992 advice, it will be recalled, was only about the statutory requirements related to document retention. Those points aside, what His Honour said here was, with respect, to depart from the earlier statement of principle. The privileged documents are not available 'merely because they might throw light on the strength or weakness of the case as to specific issues or generally'. It was the plaintiff who sought to explore 'the contents, circumstances and consistency of the advice' and in the defendant's exposing to scrutiny the advice obtained in 1998 from Mallesons, there was nothing to justify the conclusion that the defendant had waived privilege with respect to any earlier advice."

The concept of fairness which the trial Judge in B.A.T. relied upon to resolve the question of waiver was also considered by the Court of Appeal in these terms:

"It is true that fairness is not uncommonly referred to in this context, but it is fairness as informing curial ascertainment of consistency as was said in Mann v Carnell by Gleeson CJ., Gaudron, Gummow and Callinan JJ.: 'What brings about the waiver is the inconsistency which the Courts, where necessary, informed by considerations of fairness, perceive between the conduct of the client and the maintenance of the confidentiality, not some overriding principle of fairness operating at large'."[23]

29 The Court of Appeal in B.A.T. referred to a passage from the judgment of Justices Mason and Brennan in Attorney-General v Maurice and then noted:

"In seeking to support the ruling below, the plaintiff submits that the question of waiver in the present circumstances depended not at all upon the material exhibited to Mr Maher's affidavit, but simply upon the matters put in issue. The defendant, it was said, had put in issue the legitimacy of its purpose in implementing its document management strategy and the fact that such strategy was based upon legal advice. So much may be accepted but it does not follow, as the plaintiff then submitted, that 'considerations of fairness require that a party putting in issue in a proceeding a matter which cannot be fairly assessed by the Court without examination of the material over which that party claims privilege must be taken to have either consented to the uses of the relevant privileged material or to have waived reliance on the privilege'. As already indicated, the mere reference to legal advice may make the legal advice relevant, but it says nothing as to the waiver of privilege. No doubt, if a party claiming to have acted upon legal advice then relies upon privilege to protect that advice from scrutiny, the claim will be less than persuasive: but that does not mean that the privilege has been waived by implication. Hence the error, in our opinion, in His Honour's referring to the insight that the documents in question might provide into the 'content, circumstances and consistency of the advice which was requested and received'. That may have been so, but it did not mean, therefore, that the privilege had been waived."[24] (emphasis mine)

30 I have no doubt by the manner in which the plaintiff's case was opened that the plaintiff has put in issue the question of the plaintiff's state of mind in acting as the plaintiff did in relation to the proceedings in New South Wales which were dismissed in mid-2000. Furthermore, it has been suggested by counsel for the plaintiff in opening that the course followed by the plaintiff was followed in part because the plaintiff had not had the benefit of any legal advice. The three documents to which I have already referred, on their face, suggest that such an assertion may not be correct, but that is not to the point.

31 Time has not permitted a more careful examination of the authorities to which I have referred, but the approach adopted in those cases appears difficult to reconcile with the recent pronouncement of the Court of Appeal in B.A.T. It may be that cases where a party's cause of action or their pleadings raise that party's state of mind as an issue and that party places reliance upon legal advice as explaining or contributing to that state of mind are to be distinguished from cases where a party's state of mind, and legal advice relied upon, though relevant to an issue such as discovery, are not a part of that party's cause of action or defence and are not pleaded. Here it is the defendants who claim the existence of legal advice which may be relevant to the plaintiff's state of mind, whilst the plaintiff denies the existence of such advice. Whether such distinctions call for a different approach to that reflected in the line of authority to which I have referred, I need not decide, in light of the clear exposition of principle in B.A.T. The statement of principle and its application by the Court of Appeal is unambiguous. A party does not by implication waive privilege in respect to legal advice because it puts in issue the legitimacy of its purpose for conducting itself in a particular way as a consequence of that legal advice. The plaintiff's assertions that he had no legal advice available to him and that his conduct was therefore reasonable does not constitute an implied waiver of privilege with respect to any legal advice that might in fact have been given.

32 I am bound to conclude having regard to the approach taken in the B.A.T. case that access is not permitted to the privileged portions of the plaintiff's former solicitor's file for the purpose of ascertaining whether there is legal advice which may bear upon the assertion made in opening and upon the plaintiff's state of mind.

33 For these less than perfect reasons, it is my intention to look at the file for the limited purpose of determining whether or not there is any other material which will facilitate a clearer understanding of the advices which are the subject of reference in the documents to which I have referred.

34 That is not to say that the course that is subsequently followed in the trial may not alter the present state of affairs. It remains to be seen whether by anything that hereafter occurs the defendants would be entitled to renew their request for access to the file.

[1] (1997) 75 FCR 511; 145 ALR 391.

[2] See Phipson, Sidney (1984), Phipson on evidence (13th ed.), London, Maxwell & Sweet at paragraph 15-20, Attorney-General (N.T.) v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 498 per Dawson J.

[4] [1995] HCA 39; (1995) 185 CLR 83.

[5] [1999] HCA 66; (1999) 201 CLR 1.

[6] [1981] 2 All ER 485.

[7] [1984] 1 All ER 35.

[8] [2002] VSCA 197.

[9] See B.A.T. Footnote 8 at paragraphs 121-122.

[10] See B.A.T. Footnote 8 at paragraph 123.

[11] See B.A.T. Footnote 8 at paragraph 124.

[12] (1939) 39 SR (NSW) 347.

[13] [1993] VicRp 83; (1993) 2 VR 419.

[14] (1995) 37 NSWLR 405.

[15] (1993) 35 NSWLR 110.

[16] (1998) 85 FCR 152.

[17] Heydon, J.D. (2000), Cross on evidence (6th ed.), Sydney, Butterworths.

[18] [2003] VSC 73.

[19] [2003] FCA 384.

[20] [2003] VSC 178.

[21] See Walker-Shipley v The State of Victoria Footnote 20 at paragraph 10.

[22] See B.A.T. Footnote 8 at paragraphs 126 - 128.

[23] See B.A.T. Footnote 8 at paragraph 129.

[24] See B.A.T. Footnote 8 at paragraph 130.