BP Australia Pty Limited v Nyran Pty Limited

REASONS FOR JUDGMENT 1 A motion is brought for the respondent seeking production by the applicant for inspection of all documents referred to in the schedule to the motion. Orders are also sought in the motion that the applicant produce a proper description of its discovered documents that it claims are subject to legal professional privilege or any other privilege by sufficiently stating the grounds of privilege claimed in accordance with O 15 r 6 of the Federal Court Rules but no issue arises on that issue. 2 The first paragraph to the schedule to the motion refers to: "All documents in the possession, custody or control of the Applicant which contain, record or evidence: (a) legal advice (including in-house legal advice) received by the Applicant (or any related body corporate within the meaning of the Corporations Act) during the period 1 January 1999 to 20 February 2002; or (b) instructions given to any legal adviser requesting or facilitating the provision of legal advice to the Applicant (or any related body corporate within the meaning of the Corporations Act) during the period 1 January 1999 to 20 February 2002." The matters identified are: "(1) any entitlement of the Respondent (Gull) in the event it did not wish to take supply of fuel from the Applicant (BP) at prices nominated by BP in price negotiations, or if new prices were not agreed during a price negotiation or price negotiation period; (2) the prices that would apply between BP and Gull if new fuel prices as specified by BP were not agreed during a price negotiation or price negotiation period; (3) the clean fuels quality premium (CFQP) that would apply between BP and Gull if a new CFQP was not agreed during a price negotiation or price negotiation period; (4) the meaning or effect of clauses 19, 20, 21, 22 or 42 of the Fuel Supply Agreement (FSA); (5) the meaning or effect of any proposed amendment to clauses 19, 20, 21, 22 or 42 of the FSA, including the proposed amendments thereto set forth in: (A) a document dated 10 December 1999 sent to Gull by BP; (B) a facsimile dated 8 May 2000 from BP to Gull; (C) a facsimile dated 2 August 2000 from BP to Gull; (which specified documents are referred to in the pleadings); (6) the meaning or effect of clauses 20, 21, 22, 23, 24 or 47 of the Restated Fuel Supply Agreement (RFSA); (7) the meaning or effect of clauses similar or corresponding to any of the aforesaid clauses of the RFSA being those proposed in earlier drafts of the RFSA or in correspondent between the parties in the negotiation of the RFSA, including those proposed in: (A) the first draft of the RFSA provided by BP to Gull on 29 November 2001; (B) an email dated 21 December 2001 from BP to Gull; (C) the draft of the RFSA forwarded by BP to Gull on 15 January 2002 (which specified documents are referred to in the pleadings)." 3 It is necessary to refer to the pleadings. The applicant's Further Amended Statement of Claim puts in issue the state of mind of the applicant. This appears in pars 12B and 27A (unilateral mistake), 20 (alleged common mistake), 22 and 23A (alleged reliance by applicant on truth of representation). The respondent claims that the applicant, by thus raising its state of mind in the pleadings, has waived any privilege that may otherwise have been claimed for legal advice up to the date that RFSA (as defined in the description of matters in the first paragraph of the schedule to the motion) was signed in February 2002. Therefore it is said for the respondent that the applicant should produce all such documents sought including legal advice addressing issues in dispute in respect of which the party's state of mind is important. This is a claim by the respondent for the imputation of waiver. There is no express or intentional waiver on the part of the applicant in this respect. Discharge of onus of proof of legal professional privilege 4 The case for the respondent is also brought on a further basis. It is said that the applicant has failed to discharge the onus of establishing privilege in relation to the documents in issue and that, if this is so, it will not be necessary to determine the issue of imputation of waiver. Seeking to discharge its onus, the applicant first tendered an affidavit of M/s O'Brien. Following submissions by the respondent in respect of this affidavit the tender was withdrawn. On behalf of the applicant an affidavit of Mr Wang sworn on 16 October 2002 was then tendered. Following further submissions on behalf of the respondent, in relation to which the applicant was heard, rulings were made generally allowing objections made on behalf of the respondent to certain paragraphs of Mr Wang's affidavit, which otherwise remains in evidence. Following that ruling it was stated for the applicant that consideration was being given to calling each of the lawyers who had been involved with the preparation of the documents to prove the circumstances in which they were made. The lawyers are in most if not all cases persons who are or were at the relevant date engaged by BP. It is therefore accepted on behalf of the applicant that it is necessary for it to adduce appropriate evidence that these in-house legal advisers brought the communications into existence in circumstances which would attract legal professional privilege; that is, the communication arose as a result of the employer consulting the employee in a professional capacity; were in relation to professional matters; were made in confidence and arose from the relationship of lawyer and client: Southern Equities Corporation Ltd (in liquidation) v Arthur Andersen & Co (No 6) (Debelle J, 23 November 2001, unreported) citing Dawson J in The Attorney-General for the Northern Territory v Kearney (1985) 158 CLR 500 at 530 - 531 and Waterford v The Commonwealth of Australia (1987) 163 CLR 54 at 95 - 96. 5 In relation to the documents in issue in relation to the issue of the discharge of the onus of establishing the claim for legal professional privilege, the respondent now does not require that claim to be proved in respect of any documents in the list in the schedule to the affidavit of Mr Wang of 16 October 2002 after document 75. That is, it is accepted that the onus in respect of legal professional privilege is established in relation to all documents after document 75. The issue of the discharge of onus is therefore confined to documents numbers 1 - 75 in that list. The respondent also accepts that the draft witness statements are subject to the claim of legal professional privilege which need not be separately proved. 6 Upon the tendering of the affidavits of the lawyers today, being five in number, counsel for the respondent informed the Court it was not intended to cross-examine on them and that the respondent now accepted that the applicant had discharged the requisite onus of proof. There is therefore nothing further requiring resolution on that issue. Imputation of waiver 7 On the issue of imputation of waiver a preliminary question arises as to whether the issue of imputation of waiver falls to be considered in accordance with the provisions of the Evidence Act 1995 (Cth) ("the Act") or in accordance with the common law. 8 The relevant section of the Act is s 122. In subs (1) it provides that Division of the Act in which it appears does not prevent "the adducing of evidence" given with the consent of the client or party concerned. In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 it was held by the majority (Branson and Lehane JJ, Beaumont J dissenting) that "consent" for the purposes of s 122(1) includes imputed consent. This view was reached by the majority by following the decision of the Full Court of the Federal Court in Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360. The relevant ratio decidendi of the Adelaide Steamship case was that the common law principles so far as they are inconsistent with the Act had been modified (as they are applied in courts in which the Act is operation) so as to avoid the inconsistency. Consequently, s 122(1) was to be understood in terms of the common law. However, in ESSO Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49 the reasoning in Adelaide Steamship was disapproved so far as it related to that effect arising from inconsistency. Both in that authority and in its reasons in Mann v Carnell (1999) 201 CLR 1 the High Court accepted that in the application of s 122 (as well as ss 118 and 119 of the Act) the reference in them to "adducing of evidence" has the consequence that the sections operate only in such event and are not applicable to a request for the making available of documents for inspection. In the present case the issue has arisen as an interlocutory matter. Although it is during the course of the hearing it is not the occasion for the "adducing of evidence". Consequently, it is to the common law that reference must be made to determine the issue of imputed waiver upon which the case for the respondent is placing reliance. 9 The circumstances in which such imputation will arise has been formulated on a number of occasions and it is appropriate to look at the substance of those statements. In Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347 at 358 - 359 Jordan CJ said in relation to a case where one of the issues was what advice the plaintiff had received from her legal advisers as to her alternative legal rights, that "since the fact and nature of the advice is an issue in the case, I am of the opinion that privilege cannot be raised to prevent the proof of the advice". This principle was applied in Benecke v National Australia Bank (1993) 35 NSW 109. In Ampolex v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 Giles CJ Comm D held that the principle extended to a situation where parties had made allegations raising the issue of their corporate states of mind, being states of mind to which their legal advice is "likely to" have contributed. He based his finding of likelihood on inference from the dates of and descriptions of the documents. In the absence of which he considered the principle may not have applied. The description expressly identified a letter from a legal firm enclosing an opinion of a certain date from senior counsel concerning rights of conversion attaching to notes being the subject of the dispute in the proceeding. 10 In Telstra Corporation at 168 the majority concluded that: "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." That view was reached after a review of authority at 165 - 167. In addition to the decisions in Thomason and Ampolex the majority referred to Hong Kong Bank of Australia Ltd v Murphy [1993] 2 VR 419 at 439 and Pickering v Edmunds (1994) 63 SASR 357 at 362. The former was a case where issues were raised concerning legal advice received. The latter was where the plaintiff's knowledge of the legal effect of a deed was in issue. The majority also referred to the decision of the High Court in Attorney-General (NT) v Maurice (1986) 161 CLR 475 and Goldberg v Ng (1995) 185 CLR 83. In Ampolex Giles CJ Comm D had accepted that imputation of waiver is ultimately founded on the fairness considered in Maurice's case and not by reference to the actual intention of a party who made use of the material. With the exception of Benecke's case (where the appellant herself was found to have lifted the veil of secrecy by giving the version of the communications) the majority in Telstra considered that the other cases were ones in which, unless waiver of the privilege had been imputed to a party, the fact finding task of the court with respect to issues raised by that party would have been compromised. The majority stated (at 166): "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." In reaching this view, however, the majority accepted that the decisions of the High Court in Maurice and in Goldberg did not themselves directly support that view which found its support rather in the principles behind undue influence and legal professional negligence cases (discussed at 166). 11 The decision of the majority in Telstra came before a further Full Court in Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd (Ryan, Carr and Marshall JJ, 7 September 1999, unreported). The Full Court in Perpetual Trustees accepted that the authorities show the underlying principle for imputed waiver is that there has been some conduct on the privilege holder's part whereby it becomes unfair to maintain the privilege: par [15]. It could see no basis for distinguishing the matter before it from the situation which arose in Telstra, but rather considered that the situation before it was an even clearer case of imputed waiver because not only was there "a mere pleading of reliance" but there was an added ingredient of evidence that legal advice was sought and obtained at a relevantly material time. This evidence appeared in the schedule to an affidavit. The decision of the Full Court in Perpetual Trustees was made following the decision of a five member Full Court of the Federal Court in ESSO Australia Resources Limited v Federal Commissioner of Taxation (1998) 159 ALR 664 which itself had held that Adelaide Steamship was wrongly decided (the view ultimately accepted by the High Court on appeal). 12 There is a recent decision of a single judge in Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd (Hely J, 24 April 2002, unreported) where contravention of a special condition of a contract was alleged; in the alternative rectification was sought. Additionally, there was an allegation of misleading and deceptive conduct. In defence there was a plea of estoppel by way of convention and estoppel by representation. The effect of the defence was that the defendant propounded a positive case that it entered into the contract on the faith of representations and in so doing it raised an issue in the proceedings of its state of mind with respect to the matters relied upon at the time of entering into the contract and an associated lease. The issue of waiver was raised and Hely J pointed out that what brought about the waiver was the inconsistency which the courts, where necessary informed by considerations of fairness, perceived between the conduct of the client and maintenance of the confidentiality, not some overriding principle of fairness operating at large: Mann at 13. Hely J accepted that 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: Ampolex. He referred to the decision of the majority in Telstra and to the decision in Perpetual Trustees. He found it was clear from a chronology before him that contemporaneous legal advice was given to Nature Vet by its solicitors with respect to the condition in its draft form and its final form. Accordingly, he concluded that that party had waived privilege in relation to contemporaneous legal advice in respect of the matters raised in the relevant portion of the defence which bears upon the matters. 13 For the applicant it is submitted that in determining what conduct attracts imputed waiver by attracting the application of the principle of unfairness, something more is required than a mere pleading of reliance on a state of mind. This is the view which, to some extent, Beaumont J expressed in dissent in Telstra. There BT had not put in issue the varied advice received but had relevantly made a claim that it had been misled in the negotiation of a commercial transaction. The result, said Beaumont J (at 159), was that any legal advice given to it was not a central feature of its claim, notwithstanding that it was conceivable that it might arise as an aspect of the conduct of the case at the trial in proving reliance. There was, therefore, not the centrality to the case for legal advice as had occurred in Thomason or the issue which had arisen at trial in Benecke. In his view, nothing had emerged from the pleadings to demonstrate unfairness and as questions of degree and thus of judgment were involved, waiver could not be imputed at that stage of the proceedings in Telstra. 14 Special leave was granted for appeal from this decision to the High Court of Australia. In the course of granting leave Gleeson CJ referred to the gap between filing of pleadings and conducting a case in such a manner as by filing witness statements or affidavits or giving evidence that would produce the consequence that there was a consent to the revelation of legal advice. McHugh J raised the question whether the principle could be relied upon when it applied only when the party who claimed privilege was the moving party. Although the appeal was heard, the matter settled prior to delivery of judgment. Nevertheless, it is contended for the applicant the special leave was granted on the point on which the applicant's case relies and which is reflected in the reasoning of Beaumont J in dissent in Telstra. 15 For the applicant it is also contended that the decision of the Full Court in Perpetual Trustees applying the reasoning in Telstra cannot be binding here because it was in part overruled by the High Court in ESSO Australia. As has been seen, however, the overruling of Adelaide Steamship in ESSO does not affect the reasoning of the Full Court in Perpetual Trustees and, in any event, did not address the ratio of the criteria for imputation of waiver but rather the determination of the relevant law. 16 The applicant's case also submits that the decision of Hely J in Fort Dodge is in error. 17 In my opinion I remain bound by the decisions of the Full Court in both Perpetual Trustees and in Telstra on the point in issue. Absent a determination on the issue by the High Court (which would have occurred had the appeal in Telstra not been settled), I consider that the present law is as enunciated by the majority in Telstra and applied by the Full Court in Perpetual Trustees and by Hely J in Fort Dodge. That is, the pleading which puts in issue a state of mind which is an issue which cannot fairly be assessed without examination of relevant legal advice leads to imputation of waiver of privilege which such material would otherwise attract. That is the position here arising from paragraphs 12B, 20, 22, 23A and 27A of the Further Amended Statement of Claim. 18 I agree with the applicant's submission that it nevertheless remains for the Court to determine whether in each particular case there is evidence of legal advice likely to have contributed to the state of mind which is in issue. I do not agree with the submission (which seeks to reintroduce the argument on the effect of the authorities) that the evidence before the Court must show that contemporaneous legal advice was given "on the precise issue". What must be shown is the likelihood of legal advice having contributed to the issue of the state of mind. 19 I accept the submission for the respondent that the Court can receive no relevant guidance in this respect from par 9 of the affidavit of Mr Wang of 16 October 2002 in which he describes the documents listed in the schedule to his affidavit by reference to a number of what are called discreet general subject matters. Even if these were the subject of cross-examination they do not assist in resolving the issues of principle otherwise arising in this ruling. 20 The affidavit of Mr Wang in its schedule discloses in relation to the documents contemporaneity of legal advice. The descriptions of the document are not, it must be said, in the form before the Court in Ampolex at 419. That is, they do not specifically spell out the subject matter of the advice. Nevertheless, the contemporaneity is apparent. The evidence of the requisite contemporaneity also appears in the affidavits of the five lawyers involved in the preparation of the document. I infer from all these sources of evidence that the requisite contemporaneity of legal advice is established. 21 I note that, as with Perpetual Trustees (at par [12]), this is not a case where there has been "a mere pleading of reliance" because there is the added ingredient of evidence that legal advice was sought and obtained at a relevantly material time. Formulation of orders 22 The next question is how the Court should proceed in relation to this issue. In Fort Dodge Hely J at [17] considered that a practical way of giving effect to his conclusion was for him to direct the solicitor for the defendant party held to have waived privilege to file and serve an affidavit stating that he or she has inspected the relevant documents; attaching a copy of those documents in which any material in relation to which there has been a waiver of privilege in terms of the ruling is exposed but material which remains the subject of legal professional is masked and stating that the masked material does not relate to or bear upon the matters to which the ruling related. He further stated that if the solicitor was in any doubt as to the side of the line on which any part of the document fell the matter should be referred to him for determination. For the respondent here it is submitted that no affidavit should be filed but that the documents should be considered by the presiding judge. In my view it is preferable to follow the procedure adopted by Hely J in Ford Dodge. That would give the Court the benefit of the views of the applicant. It would not preclude the Court from inspecting masked material if, in the context of the material disclosed, that appeared necessary either in the view of the Court or on the submission of the respondent. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.