BrisConnections Finance Pty Limited (Receivers and Managers appointed) v... [2016] FCA 438 | Case summary

Legal professional privilege & waiver - the principles to be applied 14 As maintained by Senior Counsel in a written Outline of Submissions filed on behalf of Macquarie Bank, it is "uncontroversial that a party may waive a claim for legal professional privilege": Mann v Carnell [1999] HCA 66, (1999) 201 CLR 1. 15 It is unnecessary for present purposes to re-canvass in great detail the principles to be applied when resolving a claim that privilege has in fact been waived. But it is nevertheless prudent to at least refer to the basic principle and instances where that principle has been applied. 16 The basic principle is that a waiver of privilege may occur in those circumstances where a client otherwise entitled to claim privilege has engaged in conduct inconsistent with the maintenance of the confidentiality that the privilege protects. Thus, in Mann v Carnell, Gleeson CJ, Gaudron, Gummow and Callinan JJ observed: Waiver of privilege at common law [28] At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. 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. [29] 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 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 maintenance of the confidentiality; not some overriding principle of fairness operating at large. That which this formulation leaves open is the identification of that conduct which may be relied upon to make out any "inconsistency between the conduct of the client and maintenance of the confidentiality…". As noted by Sackville J in Seven Network Ltd v News Ltd [2005] FCA 1721 at [46], (2005) 227 ALR 704 at 715 the "application of the principle stated in the High Court in Mann v Carnell is not free from difficulty…". 17 The conduct of the client that may found an argument as to a waiver of privilege may be found in a variety of sources, including the giving of evidence in a court proceeding as to (for example) the instructions given to a barrister (Benecke v National Australia Bank (1993) 35 NSWLR 110); the institution of proceedings against a legal adviser for professional negligence; negotiating an agreed statement of facts for use in forthcoming proceedings (Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 45 at [41] to [43] per Mortimer J); or the reference in pleadings to communications from legal advisers (e.g., SA E.Med Pty Ltd v Calvary Health Care Adelaide Ltd (No 2) [2011] FCA 835). 18 Instances of the basic principle being applied to circumstances in which it has been suggested that a client has engaged in conduct inconsistent with maintaining the confidentiality of otherwise privileged advice, include cases that have accepted the following propositions: it is not necessary for there to be a "specific reference" in a pleading to legal advice for a waiver to occur: Hancock v Rinehart [2013] NSWSC 1978 at [22] per Brereton J. "The test for waiver is not whether the pleadings made any express or implied assertions about the content of the privileged communications, pleaded either as a material fact or as a particular to any material fact, which might be inconsistent with maintenance of the privilege": Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd [2015] VSCA 101 at [34], (2015) 321 ALR 191 at 205 per Dixon AJA (Mandie JA agreeing). It is sufficient if a pleading implicitly puts in issue the content of an otherwise privileged communication or otherwise acts inconsistently with maintaining the privilege; it is not sufficient to found a waiver of privilege that the contents of a privileged communication may be relevant to an issue to be resolved: Council of the New South Wales Bar Association v Archer [2008] NSWCA 164 at [48], (2008) 72 NSWLR 236 at 252 per Hodgson JA. See also: Seven Network Ltd [2005] FCA 1721 at [44], (2005) 227 ALR 704 at 715 per Sackville J; Schulman v Abbott Tout Lawyers [2010] FCA 308 at [10] per Flick J; and it is not sufficient to found a waiver of privilege that a pleading puts in issue the state of mind of the person claiming the privilege: Ferella v Official Trustee in Bankruptcy [2010] FCA 766 at [65], (2010) 188 FCR 68 at 81 per Yates J. Similarly, after referring to Ferella, Wigney J in Archer Capital 4A Pty Ltd v Sage Group PLC (No 3) [2013] FCA 1160 at [24], (2013) 306 ALR 414 at 421 to 422 observed that it was "tolerably clear that the mere fact that a party pleads a cause of action that includes their state of mind as a material fact, or otherwise puts their state of mind in issue in the proceeding, does not necessarily give rise to an implied waiver in respect of legal advice that may have been received by the party, even if that legal advice may be relevant to the party's state of mind". "[I]t is too broad a statement to say that a pleading of a state of mind to which legal advice is or might be materially relevant is an adequate surrogate for the expression of principle in Mann v Carnell": DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384 at [95], (2003) 127 FCR 499 at 526 per Allsop J (as his Honour then was). What is necessary to found a waiver of privilege is conduct that directly or indirectly puts the content of the privileged communication in issue: Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86, (2006) 151 FCR 341. In rejecting a submission that privilege had been waived by replying to a request for particulars and in dismissing the appeal, Kenny, Stone and Edmonds JJ relevantly concluded: [65] In any event, even if his Honour was correct in holding that, by the SFIC, the Commissioner raised an issue in the substantive proceeding as to his states of mind, this alone would not provide a proper basis for 'issue waiver'. As the previous examination of the authorities shows, the question is not whether the Commissioner has put his state of mind in issue but whether he has directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, either in making a claim or by way of defence. Put another way, to adapt Allsop J's language in DSE, has the Commissioner (being the privilege holder) made an assertion as part of his or her case in the litigation that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege? The making of express or implied assertions about the content of a privileged communication may, for example, be inconsistent with maintaining the privilege: Council of the New South Wales Bar Association v Archer [2008] NSWCA 164 at [48], (2008) 72 NSWLR 236 at 252 per Hodgson JA. Expressed differently, in Bennett v Chief Executive Officer, Australian Customs Service [2004] FCAFC 237, (2004) 140 FCR 101 at 120 Gyles J referred to the decision in Mann v Carnell and concluded: [68] … The test looks to inconsistency between the disclosure that has been made by the client on the one hand and the purpose of confidentiality that underpins legal professional privilege on the other. It is not a matter simply of applying general notions of fairness as assessed by the individual judge. The authorities to which I have referred show that it is well established that for a client to deploy the substance or effect of legal advice for forensic or commercial purposes is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege. Tamberlin J agreed with Gyles J. 19 Not surprisingly, many of the authorities pull together one or other of the above factors when reaching a conclusion on whether or not privilege has been waived. Although it is possible from the decided cases to distil judicial expressions relating to factors to be taken into account, each is directed to a common attempt to identify that conduct which puts a client in a position of acting inconsistently with the maintenance of a continued claim for confidentiality. 20 Thus, for example, the same insistence upon the client directly or indirectly putting in issue the content of an otherwise privileged communication was expressed by Hodgson JA in Archer as follows: [48] … It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind. And, in Ferella, Yates J observed: [65] In Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 a Full Court of this court held (at [45]) that where implied waiver is alleged, a court is bound to analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of the privilege. The Full Court later observed (at [52]) that the waiver will be established where the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Thus where the contents of the otherwise privileged communication is put in issue that act will be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication. However the question is not simply whether the holder of the privilege has put that person's state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue: see at [65]. Indeed, even the fact that the holder of the privilege makes clear that the advice was relevant or contributed to a particular course of conduct would not be sufficient to waive the privilege unless, possibly, the contents of the legal advice (and not merely the fact of the advice) are specifically put in issue by relying on the contents of the advice to vindicate a claimed state of mind: at [67]. 21 At the end of the day, however, "questions of waiver are matters of fact and degree": Osland v Secretary, Department of Justice [2008] HCA 37 at [49], (2008) 234 CLR 275 at 298 to 299 per Gleeson CJ, Gummow, Heydon and Kiefel JJ. See also: Coles Supermarkets [2014] FCA 45 at [26] per Mortimer J.

Has there been waiver of privilege - the pleadings 22 The written submission advanced by Senior Counsel on behalf of Macquarie Bank is that "Arup's conduct has necessarily created an inconsistency between Arup's pleaded case and the maintenance of its claims for privilege". The submission is that "Arup's case necessarily 'lays open to scrutiny' the contents of the legal advice that Arup received in relation to the legal effect of the Engagement Agreement and NSBT Contract and third parties' ability to rely on Arup's traffic forecasts". "Arup's misleading or deceptive conduct claim", it is submitted, "necessarily puts in issue Arup's understanding as to the legal effect of the Engagement Agreement and the extent to which third parties could rely on Arup's traffic forecasts." An assessment of Arup's conduct, it is submitted, "is to be informed by considerations of fairness". An alternative submission advanced on behalf of Macquarie Bank is that consideration must be given to "matters such as the centrality of Arup's reliance on the alleged representations …". 23 The conduct on the part of Arup which is thus relied upon by Macquarie Bank as exposing the waiver is exclusively to be found within the Notice of Cross-Claim. No other conduct is relied upon. 24 But when the terms of the Cross-Claim are examined there is nothing which founds either an express or an implied waiver of privilege. 25 There is nothing to be found within paras [61] to [64] of the Cross-Claim. Those paragraphs simply set forth a pleading that the Sponsor Group Representation was made and an alleged failure on the part of the Sponsor Group to "take all reasonable steps to ensure that the Applicants were bound by the Limitation of Liability". Those paragraphs do not contain any allegation - either expressly or impliedly - that puts in issue the content of any privileged communication that may have been received by Arup. 26 Nor is anything to be found within paras [65] to [67] of the Cross-Claim. Those paragraphs simply set forth a pleading that the Sponsor Group knew that the Applicants had formed the view that the Applicants "were not bound by the Limitation of Liability" and a failure on the part of the Sponsor Group to disclose that knowledge to Arup. Again, those paragraphs do not contain any allegation - either expressly or impliedly - that puts in issue the content of any privileged communication. 27 Paragraph [68] of the Cross-Claim is simply a conclusory allegation that the conduct "was misleading or deceptive or likely to mislead or deceive". 28 Any foundation for the Macquarie Bank submission that there has been a waiver of privilege must thus be found (if at all) in paras [69] and [70], namely those which plead that Arup performed services "[i]n reliance on the conduct of the Sponsor Group…" and thereby "suffered loss by reason of the misleading or deceptive conduct of the Sponsor Group". 29 By way of illustrating its submission, Macquarie Bank maintains that the Cross-Claim only sounds in "loss" if it be assumed that Arup was of the view that the Applicants were bound by the Engagement Agreement and, in particular, the Limitation of Liability. Arup in both its oral and written submissions accepts this assumption. As stated in its written submissions, "Arup's case is that it believed that the Applicants were, at all relevant times, bound by the Limitation of Liability". Arup accepts that it can only make out its claim to have suffered "loss" which was causally connected to its reliance on the Sponsor Group Representation or the Sponsor Group Silence if it be assumed that Arup was of the view that the Engagement Agreement was binding on the Applicants. If Arup was not of that view, it would not have suffered any "loss" in "reliance on the conduct of the Sponsor Group…". 30 It is this very assumption which is seized upon by Macquarie Bank. Paragraphs [69] and [70] of the Cross-Claim, it is submitted, necessarily put in issue Arup's state of mind and implicitly put in issue any legal advice Arup may have received. Any legal advice, so it is submitted on behalf of Macquarie Bank, implicitly puts in issue Arup's view as to whether or not the Engagement Agreement was legally binding upon the Applicants. 31 In support of this submission, Senior Counsel placed reliance upon SA E.Med Pty Ltd v Calvary Health Care Adelaide Ltd (No 2) [2011] FCA 835. The Applicant in that case had pleaded a number of causes of action, including a claim for rectification of a contract. Included in the Statement of Claim was a reference to a number of documents, including a letter from the Applicant's solicitors to a representative of the Respondent. Although it was not clear from the Statement of Claim whether the applicant was relying upon common mistake or unilateral mistake, Besanko J was of the view that it was clear that the applicant was "alleging that at the time of the execution of the written contract it was labouring under a mistake as to the provisions it contained". The actual intention of the applicant needed to be examined. His Honour referred to negotiations leading to the execution of the contract and continued: [8] … The documents are identified in the Statement of Claim and include a letter from the applicant's solicitors, Donaldson Walsh, to a representative of the respondent dated 22 September 2006 'with the Agreement Document'. Furthermore, a number of the other documents pleaded by the applicant are exhibited to Dr Wolianskyj's affidavit. It is plain from those documents and from the descriptions of some of the documents over which privilege is claimed that Donaldson Walsh were advising the applicant throughout the negotiations and that their advice included advice as to the term of a proposed new contract. Three or four examples will suffice to illustrate the reason I have reached this conclusion. … [27] To my mind this is a clear case of waiver. The applicant by its plea of rectification alone has necessarily laid open to scrutiny the communications between it and its solicitors on 21 September 2006 and 22 September 2006. Alternatively the answers in this case to the questions posed by Gzell J in Chen firmly support a conclusion of waiver. In the particular circumstances of this case there has also been a waiver in relation to the communications between 5 June 2006 and 17 September 2006. Those particular circumstances are that the applicant is advancing those negotiations and its consistent stance throughout the negotiations in support of its case as to what occurred on 21 September 2006. In that case, and unlike the facts of the present case, the applicant in its pleadings had expressly referred to documents from its legal advisers and by claiming rectification had put in issue the factual question of whether it was labouring under a mistake. On the facts of the present case, it is not considered that paras [68] and [69] of the Cross-Claim "lay open to scrutiny" any legal advice Arup may have received in respect to whether the Engagement Agreement was binding upon the Applicants. That conclusion is founded not so much upon the absence of any express reference in paras [68] and [69] of the Cross-Claim to any communication between Arup and its legal advisers but more upon the fact that para [69] does no more than plead reliance. In SA E.Med, the applicant necessarily had to expose to examination the mistake relied upon to found the claim for rectification. 32 Reliance was also placed by Macquarie Bank on the caution expressed in Vic Hotel against focussing too narrowly on whether "the pleadings made any express or implied assertions about the content of the privileged communication, either as a material fact or a particular to any material fact": [2015] VSCA 101 at [29], (2015) 321 ALR at 203. That was the mistake the Court of Appeal concluded had been made by the primary Judge. All that was called for, the Court concluded, "was for an orthodox application of the principles in s 122 of the Evidence Act and in Mann…". 33 The submission, however it be expressed on behalf of Macquarie Bank, is rejected. 34 Paragraphs [69] and [70] of the Cross-Claim do no more than plead reliance upon the Sponsor Group Representation and the Sponsor Group Silence and the fact that such reliance occasioned loss. Those paragraphs do not contain any express reference to any legal advice that may have been received; nor do those paragraphs contain any implicit assertion as to whether or not legal advice had been received. Nor do those paragraphs contain any express or implied assertion about the content of any legal advice that Arup may have received. Any legal advice that Arup may have received as to whether the Engagement Agreement was or was not binding on the Applicants may well be relevant to resolving its pleading of reliance. But mere relevance is not of itself sufficient to found a waiver. Each case, as was observed in Rio Tinto, "turns on its own particular facts": [2006] FCAFC 86 at [47], (2006) 151 FCR at 354. On the facts of the present case, Arup, by pleading reliance, has not engaged in any conduct inconsistent with maintaining the legal professional privilege of any advice it may have received which is relevant to the question of reliance. 35 Even if an alternative approach be pursued, such as the so-called "evaluative approach" of Gzell J (with whom Bryson JA and Windeyer J agreed) in Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297, the same conclusion would be reached. Any legal advice received by Arup may well be centrally relevant to its reliance on the Sponsor Group Representation and the Sponsor Group Silence. But that is not enough to constitute waiver. 36 There is considered to be no "unfairness", to the extent that such a consideration may aid in reaching a conclusion on waiver, in a party preserving the confidentiality of a privileged communication where there has been no express or implied disclosure of any advice received or part of any such advice. As noted by Gyles J in Bennett, it "is not a matter simply of applying general notions of fairness as assessed by the individual judge": [2004] FCAFC 237 at [68], (2004) 140 FCR at 120. Albeit deprived of such a forensic advantage as access to privileged communications may well have afforded, the members of the Sponsor Group otherwise remain free to test the allegation of reliance by such other means as may be available. 37 It is thus concluded that the Cross-Claim and paras [69] and [70] in particular do not expose any conduct on the part of Arup that is inconsistent with maintaining the confidentiality of legal advice that may have been received. Those paragraphs certainly do not constitute an express waiver of privilege. Indeed, Macquarie Bank did not so submit. Nor do those paragraphs constitute an implied waiver of privilege. 38 That conclusion is sufficient to dispose of the Macquarie Bank Interlocutory Application. 39 It should nevertheless further be noted that acceptance of the Macquarie Bank submission would come perilously close to, if not amount to, a proposition that a mere pleading of reliance would itself be sufficient to constitute a waiver of privilege.

BrisConnections Finance Pty Limited (Receivers and Managers appointed) v Arup Pty Limited

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