Christopher Murray v RentWorks Limited [2001] NSWIRComm 132 | Case summary

(b) the terms or possible terms of any Shareholders Agreement in Rentworks Limited; (c) the possible, proposed or actual termination of employment or contract for services of MacDome Pty Ltd or Christopher Murray with Rentworks Limited; (d) the rights or entitlements of Christopher Murray or MacDome Pty Ltd on the termination of any contract of employment or contract for services with Rentworks Limited, whether under any Shareholders Agreement or otherwise; (e) the sale or disposition, or possible sale or disposition of shares or equity in Rentworks Ltd, including but not limited to the tax consequences or treatment of such a sale or disposition. 4 The applicants claimed client legal privilege in relation to a number of documents produced in response to the summons. 5 The respondents have accepted that the documents would ordinarily attract privilege of that character but they claim that that privilege has been waived. 6 The respondents' claim for waiver of privilege by the applicants was grounded in two particulars (pars B3(ix) and (xxi) ) of the Grounds set out in the Summons for Relief, said by the applicant to demonstrate unfair conduct of the respondents, and on a number of statements made in the first applicant's affidavit dated 6 May 1999. 7 The twenty one particulars in par B(3) relied on by the respondent to demonstrate unfair conduct, included: ix) The failure by the respondents to require or advise the second applicant to obtain legal advice prior to executing the PriceWaterhouseCoopers letter of engagement. xxi) The application of a minority shareholder discount factor of 15% in circumstances where the first applicant was forced to resign from his office at the first respondent by the conduct of the fourth respondent. 8 Paragraph 75 of the first applicant's affidavit was said by the respondents to be related to par B(3)(ix), and pars 61 and 70 to par B(3)(xxi). 9 The relevant extracts from the first applicant's affidavit of 6 May 1999 are set out below: 61. On 25 May 1998, during one of my trips to Australia, I approached Mr Kinghorn at his RAMS office and we had the following conversation: I said: "I am going to resign from RentWorks for a number of reasons. The primary reason is that I do not want any further involvement with Rob Medway. There has been a lack of support over the past several months and I believe he is trying to push me out of the company. I have been blocked out of involvement in the business of RentWorks and undermined to a number of staff." … 70. On 28 July 1998, I met with Mr Kinghorn at RentWorks' offices and handed him my letter of resignation and the transfer notice and said: "As you know it is my intention to resign. I have prepared a transfer notice under clause 2.4." I had the resignation and transfer notice laid out in front of me on the desk and gestured to the transfer notice as I said this. Mr Kinghorn did not look surprised, but said words to the following effect: "No, I don't want to accept that. What we'll do is get Price Waterhouse to value the shares in accordance with the agreement. We'll use the Price Waterhouse valuation. We're better off leaving it up to the experts. Price Waterhouse are a large international firm and we'll provide them with all the information they need and they'll come up with the right results. Once the valuation is done, I will give you an undertaking that we will purchase MacDome's shares." Mr Kinghorn did not look at the transfer notice. I accepted what Mr Kinghorn said, and replied: "Okay, well here's my resignation but I do not want Robert Medway to be involved in providing the information to Price Waterhouse because I don't trust him to provide the correct information." Mr Kinghorn said: "Okay, he will not be involved." I did not want Mr Medway involved in the valuation process as I did not have confidence in his business ethics based on my experience over the eight years in which I had worked with him. There were a number of benefits associated with the clause 2.4 sale process including the fact that MacDome nominated the sale price, the process was potentially expedited and there was no 15% minority shareholder discount. I did not, however, further pursue the transfer process under clause 2.4 at that point as my relationship with Mr Kinghorn at that state was harmonious and I trusted him to act honourably towards me. 75. On about 4 September 1998, I received a letter of engagement from PWC. The letter of engagement did not set out the valuation methodology. Subject to acceptance of the letter of engagement and the timely provision of information, PWC indicated in the letter that they would endeavour to finalise the valuation report by 9 October 1998. I signed the PWC letter of engagement on behalf of MacDome in early September 1998. I did not obtain legal advice prior to signing the letter of engagement. A copy of the letter of engagement is annexed and marked "N". 10 The first applicant says he did not receive legal advice in relation to the letter of engagement dealt with in par 75. That letter of engagement dealt with the engagement of PriceWaterhouseCoopers in relation to the valuation of shares held by MacDome Pty Ltd in accordance with the RentWorks Shareholders Agreement. 11 Correspondence from Harmers Workplace Lawyers to Baker & McKenzie relating to a Summons for Production, was tendered by the respondents, without objection, to support the respondent's claim as to waiver. 12 The first letter, dated 7 February 2001, contained, inter alia, a list of eighteen documents spanning the dates 13 July 1998 to 17 September 1998 as to which client legal privilege was claimed. 13 The second letter, dated 23 March 2001, provided further details of the nature of the privilege claimed, and included the following statement, the only part of that letter tendered by the respondents: We also confirm that the legal advice received by our clients related to the termination of their arrangements with RentWorks Limited. We note that we have already provided you with an itemised list of the documents for which privilege is being claimed in a letter dated 7 February 2001. 14 It was said by Mr Salgo, solicitor, for the respondents that it can be seen by that categorisation that it relates to the termination of the arrangement; that the documents could not seem to relate to (a) and (b) but to (c)(d) or (e) of the Summons to Produce. 15 I note that the acceptance of exhibits tendered related to these interlocutory proceedings only, not the substantive proceedings or to any other notice of motion. Background 16 The background set out in the respondent's submissions as to their claim as to waiver of privilege by the applicants did not seem to be in issue, at least in relation to these interlocutory proceedings. It was there stated: 1. The Applicants Christopher Murray ("Murray") and MacDome Pty Limited ("MacDome") seek, inter alia, payment of such sum of money as the Commission considers just in the circumstances of the case, together with interest thereon (claim 5 in the Summons for Relief). 3. The claims made by Murray and MacDome arise out of the relationship between the parties to June or July 1998. Murray provided services to the first respondent, Rentworks Limited ("Rentworks"). MacDome, a company apparently controlled by Murray was a shareholder in Rentworks. J A Kinghorn & Co Pty Limited ("J A Kinghorn") and Thumdart Pty Limited ("Thumdart") were, together with MacDome the other shareholders in Rentworks to 30 June 1998. 3. Robert Medway is named as personal respondent. He was at relevant times a person who provided executive services to Rentworks and a director of Thumdart. 4. The conduct of the respondents which is alleged to be unfair or to render the terms of a Shareholders Agreement in Rentworks unfair comprises 21 different allegations. Those allegations include: The failure by the respondents to require or advise the second applicant to obtain legal advice prior to executing the PricewaterhouseCoopers letter of engagement. (Ground 3(ix). The application of a minority shareholder factor of 15% in circumstances where the first applicant (Murray) was forced to resign from his office at the first respondent (Rentworks) by the conduct of the fourth respondent (Medway). (Ground 3 (xxi). 5. The applicants case includes that Murray "resigned" from Rentworks on 28 July 1998 in a meeting with John Kinghorn. This is the resignation said to have been forced on Murray by the conduct of Medway. 6. Immediately preceding this resignation Murray was receiving legal assistance from the law firm Cutler Hughes & Harris. They assisted him in drafting a letter of resignation to Rentworks. This is asserted by Murray in his affidavit. [par 68] Consideration Submissions - Applicant 17 Written submissions filed by the applicant were supplemented orally by Mr I Neil of counsel. 18 Any question relating to legal professional privilege that arises at the point of pre-trial production upon order is determined in accordance with the common law, and not the Evidence Act 1995: Esso Australia Resources Ltd v Commissioner of Taxation (Esso) (1999) 74 ALJR 339, and, as to waiver, Mann v Carnell (Mann) (1999) 74 ALJR 378. Mann concerned a slightly different circumstance than that with which the Court is here confronted. Mann concerned a special instance of the fact of disclosure of otherwise confidential communication to a third party. 19 Obviously there is no express waiver of privilege here. The question of whether a waiver should be implied depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production: Attorney-General (NT) v Maurice (Maurice) (1986) 161 CLR 475 at 481. Thus, a party may refer to a privileged communication in a pleading or affidavit, and not lose the privilege, unless the content of the communication is revealed: Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481, 489, 497; see also Mann v Carnell (1999) 74 ALJR 378 at 384. 20 For the respondent to succeed in its claim that there has been waiver of privilege by the applicants, it must be shown that not only have the applicants put into issue their state of mind in their summons and supporting affidavit, but that in those documents the applicants rely upon legal advice to support that proposition. 21 The applicant relied upon the test enunciated by Dawson J in Maurice (161 CLR at 496-497): Legal professional privilege exists to secure confidentiality in communications between a legal adviser and his client but it can have no application in relation to a document the purpose of which is to communicate information to others. Of course, what is contained in such a document may reveal some confidential communication between a legal adviser and his client, but if it does do so and so waives privilege, the waiver is of the privilege in the anterior communication and not in the document itself. Thus, if in a pleading the contents of a privileged communication are set out then the privilege attaching to that communication may be waived by the pleading. But for this to happen the content of the communication itself must be revealed. The mere reference to the occasion, such as a conversation or a letter, without reference to its content will not constitute a waiver of the privilege: Buttes Oil Co v Hammer (No 3) (70); Roberts v Oppenheim (71). 22 What one must do in applying the test set out by Dawson J (161 CLR at 497) is to ascertain whether in any document, here the applicants' summons and the affidavits made in support thereof, reference has been made, not to the fact of legal advice and not to the occasion of that legal advice, a conversation or a letter or something of that kind, but rather to the content of that communication. 23 Waiver of privilege will follow only if the reference is a reference to the content of that otherwised privileged communication. There are no references to any privileged communication of the kind caught by the summons with which the Court is here concerned that falls within that class. 24 There is the second area in which it might be said that legal professional privilege could be lost. 25 Privilege may be lost "if a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, fairness to the other party may mean this assertion is a waiver of privilege": Cross on Evidence 6th Aust ed, 2000, page 669, adopting the formulation of Hodgson J in Standard Chartered Bank of Australia v Antico (1993) 36 NSWLR 87, at 94-95; see also Farrow Mortgage Services Pty Ltd (in liq) v Webb [(1996) 39 NSWLR 601 at 620]. 26 An instance may well arise where one party puts into issue that party's state of mind and then puts into issue the content of legal advice that is, in fact, or might fairly be said to be, associated with that state of mind. In that circumstance it may well be that privilege has been waived upon those two grounds. 27 The principle in practice was discussed in a judgment of Sheller J sitting as a member of the Court of Appeal in Farrow Mortgage Services Pty Limited (In Liq) v Webb (Farrow) (1996) 39 NSWLR 601 at 620. The respondent had raised the question of whether on particular dates there were reasonable grounds to believe that a particular company might not be able to pay its debts as and when they fell due. If that assertion was upheld it would constitute a defence of the claim made. 28 The proposition that was argued was that essentially by putting its state of mind into issue the respondent had waived its privilege in connection with in effect any advice that might bear upon that state of mind. What the respondents had not done was to go on to put into issue an allegation that its state of mind was relevantly influenced by the content of a privileged communication. They had only taken the first step, not the second and it was that argument that doomed the appellant's argument before the Court of Appeal. 29 The way in which the question was approached in Farrow Mortgage Services Pty Limited is illustrative of the limits to which the principle goes. They are limits which have not been reached by the applicants in the present case. 30 There has been some correspondence between the respective solicitors in which this question is discussed. The respondents have identified those portions of the material put on by the applicant, which are said to give rise to waiver on either one of the two grounds addressed above. The particulars upon which the respondents rely are those given in B(3)(ix) and (xxi). One only has to consider those allegations to observe that they fall in none of the classes which might be said to effect a waiver of privilege on the principles outlined earlier. Paragraphs 60, 70 and 75 of the first applicant's affidavit are the paragraphs which are said to effect the waiver. When those paragraphs are considered in the light of the principles, it will be seen that they do not effect a waiver of that privilege that is otherwise admitted. Submissions - Respondent 31 Mr Salgo, solicitor, on behalf of the respondents, also supplemented written submissions orally. He submitted that the applicant's submission had inaccurately articulated the respondents' submissions as to the basis of the waiver. The respondents do not say what fell from the applicants in their submissions is in any fundamental sense wrong. They say it does not meet the case about issue waiver or state of mind waiver. The waiver that the respondents assert is not a waiver of the type dealt with in cases like Maurice where there has been some disclosure by conduct of privileged advice or material related to the advice which is said to render it unfair that the whole of the document could not be produced. The waiver the respondents assert is a species of waiver known as "issue waiver" where the assertion by a party through a pleading or in evidence of their state of mind to which their legal advice is or may be material, renders it unfair that there be no access to that material by the other party in the litigation. 32 The main cases the respondents relied upon are Telstra Corporation Ltd & Anor v BT Australasia Pty Limited & Anor, (Telstra) [(1998) 156 ALR 634 affirmed in Perpetual Trustees (WA) Ltd v Equuscorp Pty Limited (Equuscorp) (1999) FCA 925 [unreported 7 September 1999] and Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (Ampolex) [(1995) 37 NSWLR 405 at 411]. The principle is summarised in those leading authorities: (i) In cases in which the state of mind of a party is in issue, evidence can be called to establish the terms of legal advice relevant to that party's state of mind provided to that party. ( Telstra at 645). (ii) if a company has exposed to scrutiny (a) corporate state of mind, being a state of mind to which their legal advice is likely to have contributed … (they) cannot withhold the advice from their opponent. ( Ampolex at 411); (iii) where … a party relies on a cause of action, an element of which is the party's state of mind … 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 the state of mind. ( Telstra at 648.) 33 In Equuscorp the Court comments that it can be seen that this is not a situation in which there has been a mere pleading of reliance. There is an added ingredient of evidence that legal advice was sought and obtained at a relevantly material time. 34 The principle does not rely on any disclosure of legal advice as part of the waiver. What it relies on is the placing into issue of a party's state of mind which would render it unfair not to have relevant legal advice made available in testing that state of mind. If a person says "I took this course of conduct because I had legal advice", that of course is one species of waiver that could be attracted by the proposition in Telstra at p 648, but if a party, without referring to legal advice says "I took this course because Mr Medway's conduct forced me to and that was unfair", and at the same time he was receiving legal advice about the termination of the relevant relationship, then nothing could be more focal to the testing of the applicant's position than to know what the communications were in relation to legal rights. 35 There are in essence two strands of assertions of state of mind that give rise to this application. The first strand is illustrated by ground 3(ix) of the Summons. 36 Mr Murray's evidence is that the PriceWaterhouse letter of engagement was circulated to Mr Murray sometime shortly before September 1998 and was executed in early September 1998. At ground (ix) Mr Murray complains that he did not have advice from the respondent that he ought obtain legal advice prior to executing that document. That carries with it the obvious assertion that had he had legal advice he would have done something different. His complaint is that things proceeded unfairly because of the absence of legal advice and there is an assertion at par 75 in his affidavit which repeats that. 37 The point the respondents make coming out of that is that what Mr Murray is there saying is that is a complaint that he did not take legal advice and that the respondents did something to render his contract or arrangement unfair by letting him proceed without legal advice and by not encouraging him to get it in relation to PriceWaterhouseCooper's letter of engagement. 38 Mr Murray complains he did not receive legal advice about signing what he says is an unfair letter. It is known from correspondence that at the same time he had received legal advice and that the legal advice related to the termination of his engagement by the first respondent. In light of the authorities it is clear enough from this material that Mr Murray has placed his state of mind in relation to his lack of legal advice and what he did or would have done in relation to legal advice, front and centre, by a combination of the summons and the affidavit. 39 The second complaint comes under what Mr Murray alleges about his state of mind as his reason for terminating the arrangement he had with RentWorks at an earlier time. That complaint is set out at ground 3 (xxi) of the summons. There was a discount applied to the valuation of his shares beneath what the per share value was. He says what makes that discounting unfair is the circumstance that he was forced to resign from the position by the conduct of the fourth respondent, Mr Medway and this is not a termination that occurred in the ordinary course. 40 The linking paragraphs in the affidavit are para 61 and para 70. 41 The point is that there is an unfairness alleged against the first respondent that Mr Medway forced him out. 42 For the applicants to succeed on this ground they will have to show that what they say is true and Mr Medway's conduct forced Mr Murray from RentWorks and that obviously puts the reasons for departure again front and centre and the litigation goes beyond what the applicant is saying - that there was a particular state of mind that Mr Murray had based on the behaviour of Mr Medway which was critical, which caused the departure which has led to the litigation. That is contested. The respondents say there was no such conduct by Mr Medway and that Mr Medway's conduct, such as it was, did not lead to the termination and did not lead to the relevant unfairness. 43 The respondents want to test that in part by evidence of the circumstances relating to the termination including what is said to be legal professional advice. 44 The letter from Harmers to Baker & McKenzie dated 7 February 2001 lists eighteen documents involved in this application, spanning the period 13 July 1998 to 17 September 1998. Mr Murray in par 70 of his affidavit puts the conversation of resignation by Mr Murray to Mr Kinghorn, as having occurred on 28 July 1998. It was 4 September 1998 when Mr Murray says he received the letter of engagement from PriceWaterhouseCoopers. 45 If that chronology is put into the context of the letter from Harmers, it shows that, in the fifteen days before Mr Murray resigned he was receiving legal advice and that advice continued up to around the time that the PriceWaterhouseCoopers letter was executed by Mr Murray. There are two file notes (documents numbered 17 and 18 dated 10 and 17 September) which post date the PriceWaterhouseCoopers letter but by inference they relate to the same matters. There would be nothing untoward in a solicitor making a file note recapping a matter when it has passed. 46 Mr Murray complains about unfairness in his pleadings and his affidavit. In two relevant respects that unfairness relies entirely on his state of mind, one being that he was forced out of RentWorks by Mr Medway's onerous and unfair conduct. It will be hard to test that without recourse to the materials that may exist. The other is his claim that he had no legal advice and that he was not asked to get legal advice prior to signing the PriceWaterhouseCoopers letter of engagement. Obviously that is a complaint that makes no sense when he says he would have acted the same way that he did. The respondents want to test two things. One is whether he got legal advice and secondly whether his state of mind was such as to suggest that he would have, [but] even if he did not there may have been all sorts of considerations bearing on Mr Murray in July and August 1998. What the respondents do know is that he is a man who has got $5,000,000 for a minority shareholding in the first respondent and he is now after many millions more. 47 It is obviously the key to the position the respondents will take - to look at the legal advice and in particular the instructions from Mr Murray and the full flow of communication to test that. It is a plea for factual and procedural fairness on the respondents' part. 48 In cases like this the respondent can never know what is in the legal advice but the respondents can take it as high as it was taken in Telstra, which is a state of mind is asserted - a state of mind is critical to the complaint made and legal advice on and around the topic was being received at the same time. This case is a stronger case that Telstra because the respondents have a statement from the solicitors for the applicant telling them that the privileged documents cover the topic of the termination of arrangements between the parties. Applicant in Reply 49 Mr Neil made two fundamental replies to the respondents' submissions. They arise from a better understanding following those submissions of the basis upon which the respondents assert that privilege has been waived by the applicant. 50 First, the summons for production issued against Cutler Hughes and Harris does not ask for documents which relate to the matters which the respondents suggested arise from sub-para 3(ix). That summons does not in terms or by any more generous reading of it, of itself ask for documents relating to advice given about the terms of the PriceWaterhouseCooper's letter of engagement. Secondly, if it had done so, the answer would have been there are none to produce. There are no such documents. 51 To the extent that the argument is said to concern documents embodying legal advice relating to the terms of the PriceWaterhouseCooper's letter of engagement then as to the proposition advanced by the respondents, the debate has been an interesting but entirely wrong one if it does not arise on the terms of the summons itself. 52 As to the respondents' position in relation to sub-para 3(xxi) and those portions of the first applicant's affidavit which are said to relate to that, there was a slightly different position the applicants wished to put before the Court. It is conceded that the language of the Cutler Hughes and Harris summons is wide enough to embrace any documents embodying legal advice relating to those matters, that is relating to, as Mr Salgo described them, the first applicant's state of mind as to the reasons for which he resigned. 53 Mr Salgo's submissions in this area overlook at distinction which is quite fundamental to any consideration of the relevant principles. 54 (Mr Neil said he was now addressing both the formulation that he had advanced of those principles, which he submitted was the correct formulation of them, and as to what he contended was the incorrect formulation upon which the respondents rely.) 55 In consideration of this principle it would fall upon this distinction: if one adopted the view that the principles required that a party should put into issue his or her state of mind in circumstances where that state of mind was in fact likely to be or was influenced by legal advice, then such a proposition would not go to the next step that the respondents require and compel that party to waive privilege in any documents relating to that level of advice. 56 The crucial distinction lies between advice on the one hand, advice which might be said to influence a state of mind put in issue by a party and on the other hand communications made by that party or otherwise for the purpose of obtaining that advice. As an illustration, if the applicant were to have communicated with his legal advisers and said "my reasons for resigning were one, two and three", on any view of the principle that communication would not be discoverable. It would be privileged because it does not fall within the principle advanced by Mr Salgo and once that distinction is borne in mind then it can be seen that the respondents' position falls away. 57 That that is so is borne out upon a more careful consideration of the authorities to which Mr Salgo referred. The respondents have taken the authorities on which they relied further than they can in fact go. Insofar as those authorities constitute decisions of the Federal Court then this Court is not bound by them. In relation to Telstra (156 ALR at 634), the Court should be more inclined to follow the reasoning of Beaumont J than that of the majority as it more closely conforms to the orthodox application of the relevant principle. 58 In truth the position of the majority is that their Honours do not differ materially on the principle involved but do on their appreciation of the facts upon which that principle is to be analysed. His Honour Beaumont J was not able to find on the facts before him that there was any legal advice which fell within the category. The majority, as a matter of fact, find that there was advice which fell within that category, that is advice which was as a matter of fact material to the formation of the relevant state of mind and affected the quality of the party's consent or assent to the relevant transaction. 59 If one takes that back to the grounds upon which the respondents rely the point becomes even clearer. The first relates to advice about the letter of engagement and the Court has heard not only were documents of that kind not sought, if they were the answer would have been there are none and none would have been produced. 60 If one looks at the second class of documents that the respondents now seek, the proposition seems to be that where the applicant puts at issue his reasons for resigning and then any legal advice relating to that becomes or loses itself in privilege. 61 It can easily be seen when one is looking at a case which looks at the quality of consent or assent to a particular transaction and seeks to suggest that it is initiated by some undue influence or misrepresentation about material or something of that kind it is easy to see how the formation of the relevant state of mind might be influenced by legal advice and if legal advice was an influence upon the transaction. If one is looking at the reasons for resignation the position is obviously very different. A legal consequence of resignation is something about which one might expect someone to seek legal advice but not the reasons themselves. The reasons themselves are anterior to any circumstances in which one would ordinarily expect someone to take legal advice. Perpetual Trustees is precisely on the same point. Their Honours find as a matter of fact that the respondent sought and obtained legal advice about the relevant transaction, and were for that reason influenced to follow the majority in Telstra. They did so applying the same derivative notion of the Common Law as did the majority in Telstra which has since been struck down by the High Court. Further Reply - Respondent 62 There is a misunderstanding in Mr Neil's mind, in relation to advice he gives from the Bar table that there were no documents of legal advice in relation to the PriceWaterhouseCooper letter of engagement and had that been sought none would have been produced. 63 The respondents certainly do not pin the flag on the advice about Price Waterhouse retainer. They pin the flag to the proposition that the state of mind of the applicants having been shown in these proceedings in relation to this case, all PriceWaterhouseCooper's material which is suggestively relevant and enables the respondents to test that in relation to termination and entitlements, falls within the ambit of the initial waiver in relation to that issue. 64 Secondly, the applicants seek to draw a distinction between advice given and instructions given. They say well advice might be capable of waiver but how does one get to instructions? What is being discussed is not waiver of privilege in relation to a particular document that was based on advice. It is issue waiver. If there is a waiver in relation to the issue and the issue is the state of mind of Mr Murray with respect to Mr Medway's unfair conduct then privilege is waived on the issue. The respondents are entitled to have all documents without a claim to privilege in relation to that issue. 65 Thirdly, in relation to the suggestion made by the applicants to urge the Court to at least consider the possibility of departing from the course of the Full Federal Court, this is not a case where there are in effect in existence two strands of authority. There is only one. The fact that there are cases around where only a single letter or single document had privilege waived in relation to them says nothing about the issue waiver cases, and in relation to the issue waiver cases there is only one strand of authority that being the strand the respondents have been asking the Court to take into account. 66 Mr Neil at least impliedly suggested that Esso had been determined after the cases the respondents rely upon, and therefore these cases are somehow deprived of some utility. That could not be further from the truth. Telstra expressly came to the same conclusion based on consideration of the Common Law and of s 122 of the Evidence Act and it in fact adopted as the preferred option the Common Law position. Applicant - Further Reply 67 In his reply Mr Salgo made explicit the very distinction to which Mr Neil was seeking to point earlier. What the respondents want in relation to the second area, the non PriceWaterhouseCooper's material is not only documents which relate to legal advice which might influence a state of mind, which might on one arguable view of it fall at least within the wider and erroneous view of the principles, but they also want documents in which the state of mind was disclosed in the course of seeking legal advice, and one can search in vain in each of the cases to which he has referred, which goes to that point. That would be the most astonishing erosion of the confidence which is the fundamental and underlying principle of close communication between a party and his or her legal adviser confer. Consideration 68 In Mann v Carnell (74 ALJR at 384) it was said that: 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. 69 It was said by Mason and Brennan JJ in Attorney-General for the Northern Territory v Maurice [(1986) 161 CLR 475 at 487 and 488] that: Legal professional privilege is an ancient doctrine which has assumed a life of its own. Succinctly stated, the privilege protects from disclosure "communications made confidentially between a client and his legal adviser for the purpose of obtaining or giving legal advice or assistance": Reg. v Bell: Ex parte Lees (49), per Gibbs J. The raison d'etre of legal professional privilege is the furtherance of the administration of justice through the fostering of trust and candour in the relationship between lawyer and client. … When the privilege applies, it enables the client to keep the communication from disclosure and interferes with the public's "right to every man's evidence": Cobbett's Parliamentary History (1812), vol 12, p 675. Because of this conflict between the public interest in ensuring the availability of all relevant evidence in a particular case and the public interest in the administration of justice through effective legal representation, the privilege is confined within strict limits: Grant v Downs (51), per Stephen, Mason and Murphy JJ. The limiting effect of legal professional privilege on the availability of evidence otherwise relevant is confined, inter alia, by the doctrine of waiver. A litigant can of course waive his privilege directly through intentionally disclosing protected material. He can also lose that protection through a waiver by implication. An implied waiver occurs when, by reason of some conduct on the privilege holder's part, it becomes unfair to maintain the privilege. The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication. … In order to ensure that the opposing litigant is not misled by an inaccurate perception of the disclosed communication, fairness will usually require that waiver as to one part of a protected communication should result in waiver as to the rest of the communication on that subject-matter: see Great Atlantic Insurance Co v Home Insurance Co (52). Hence, the implied waiver inquiry is at bottom focused on the fairness of imputing such a waiver. 70 The essence of the issue as to waiver of legal professional privilege was considered by the New South Wales Court of Appeal (Gleeson CJ, Clarke JA and Sheller J) in Benecke v National Australia Bank [(1993) 35 NSWLR 110 at 116] as set out in the judgment of Clarke JA (and agreed to by Gleeson CJ and ShellerJ) was that: In her amended summons the appellant claimed that her case had been settled without her consent and added a contention that the lawyers on both sides were apparently acting in concert. In her affidavit in support, sworn on 23 October 1992, she unequivocally asserted that Ms Beazley had compromised the proceedings contrary to her express instructions that the matter proceed to trial. … The appellant, in making her assertions that her lawyers compromised the proceedings without her consent, opened up the question of the authority of the lawyers to act as they did and thereby waived her privilege. I take this to be clear as a matter of legal principle on grounds of basic fairness. 71 In Pickering v Edmunds [(1994) 63 SASR 357 at 362], Duggan J set out briefly the main features of a number of authorities either relevant to or referred to in these proceedings and went on to say: Accordingly a waiver of legal professional privilege will be readily inferred where a client brings proceedings for professional negligence against his or her solicitor: see eg Lillicrap v Nalder & Son [1993] 1 WLR 94; [1993] 1 All ER 724. … Another example is to be found in Thomason v Municipality of Campbelltown (1939) 39 SR (NSW) 347; 56 WN 108 where the widow of a workman who was killed in the course of his employment brought an action at common law to recover damages for the loss sustained by reason of her husband's death. It was claimed by the defendant that the plaintiff, knowing she had an option, had previously decided to proceed against the defendant under the Workers' Compensation Act 1926 (NSW). It was established that she had received legal advice to the effect that she had an option to sue at common law or under the Act. One of the reasons why the Court of Appeal decided that there had been a waiver of privilege in respect of all legal advice which the plaintiff had been given (two solicitors advised her at different times) was because the nature of the action which she had brought made the advice relevant. … Mr Clayton also placed reliance on Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419. In that case the plaintiff asserted in its statement of claim that it was induced to enter into an assignment agreement by reason of representations and warranties made by one of the defendants. The plaintiff claimed legal professional privilege in respect of letters and memoranda containing instructions to or advice from its solicitors in relation to the matter. The defendants argued that where a party, by its pleading, directly or indirectly puts in issue the content and substance of legal advice it received about a particular matter, it cannot raise legal professional privilege to prevent proof of that advice. It was claimed that the advice was critical to the issues of reliance, bona fides and knowledge and that all matters relating to the transaction including legal advice given to the plaintiff prior to the execution of the agreement should be disclosed. Smith J held that privilege had been waived. He said that if the documents were not disclosed there would be a real possibility that the fact-finding task of the court would be seriously comprised and a further possibility of it being misled. His Honour follows Thomason's case and Torcasio Developments Pty Ltd v County Park Developments Pty Ltd (unreported, Supreme Court, Vic, Byrne J, 9 September 1991). 72 His Honour then turned to the facts of the case before him: The setting aside of the 1982 deed is one of the major forms of relief sought by the respondents. The statement of claim alleges that the execution of the deed was procured by duress and that the respondents were acting under the mistaken belief that the deed of trust dated 21 October 1980 was void for illegality or otherwise unenforceable in their favour. This information, it is said, came from the first appellant. In the defence of the first and second appellants it is claimed that the 1982 deed was "entered into after the plaintiffs had received independent legal advice from Messrs Stratford and Co … Paragraph 6 of the reply states: "… the plaintiffs admit receiving advice from Messrs Stratford and Co but say that in the light of the matters pleaded in the statement of claim such advice does not defeat the claim of the plaintiffs herein." The effect of these pleadings and, in particular the statement of claim, is that the respondents have put in issue their state of mind and knowledge as to the legal effect of the 1980 deed of trust as at the time of executing the 1982 deed. According to their pleadings this view of the legal position resulted in their executing the 1982 deed. They agree, however, that they received legal advice from Messrs Stratford and Co before entering into the deed. A waiver of legal professional privilege cannot be implied simply because the pleadings made such advice relevant. The possibility that the court might be restricted in its capacity to determine the truth is part of the price which must be paid for the advantages of legal professional privilege. It is only when the conduct of the party entitled to the privilege and considerations of fairness outweigh the competing considerations concerned with the exercise of the privilege that a waiver will be implied. In the present case the conduct of the respondents is such as to make the issue of their appreciation of the legality or otherwise of the trust deed of crucial importance in the case. An effective trial on that issue could not take place in the absence of evidence as to what legal advice they received on the matter. Furthermore the appellants would be unfairly deprived of the opportunity to put material before the court on this key issue. It is true that the respondents did not raise directly the legal advice they received. However they did put in issue their understanding of the legal effect of the earlier deed based on information they had received. 73 In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd [(1995) 37 NSWLR 405 at 411 ff], Giles CJ CommD, considered waiver of privilege where legal advice was at issue in relation to allegations concerning state of mind: Ampolex submitted that the documents in the hands of GPG Nominees, Allied and Sir Ronald Brierley, if ever attracting privilege, had lost their privilege when GPG Nominees and Allied alleged that they had purchased the notes in the belief induced by Ampolex that the notes were convertible on the basis set out in the trust deed and endorsed on the notes; alternatively, the allegation by Ampolex that GPG Nominees and Allied had particular beliefs as to its (Ampolex's) state of mind had the same result. According to the submission, GPG Nominees and Allied had opened up for investigation and testing the source of and basis for their belief, and inspection could not be denied of documents relevant thereto, or alternatively the allegation by Ampolex did the same. … Confining attention to the allegation made by GPG Nominees and Allied (the alternative of the allegation made by Ampolex may raise other considerations, and I prefer to put it aside), having exposed to scrutiny their corporate states of mind, being states of mind to which their legal advice is likely to have contributed, GPG Nominees and Allied can not withhold the advice from their opponent. I emphasise that the legal advice is likely to have contributed to the states of mind of GPG Nominees and Allied, as was plain from the dates of and descriptions of the documents: were that not so, the principle may not have applied. … By their pleading GPG Nominees and Allied raised an issue in the proceedings. They thereby became obliged to give discovery of documents relevant to the issue, and documents with apparent relevance to the issue could be subpoenaed. 74 The headnote to Wardrope v Dunne [(1996) 1 Qd R 224] is in the following terms: The defendants alleged that they and their insurer were induced to compromise the plaintiff's action for damages for personal injuries by his fraudulent misrepresentations and claimed a declaration that the compromise was lawfully repudiated. The plaintiff declined to admit that the compromise was induced by his representations and applied for an order that the defendants discover and produce for inspection the written advice and recommendations relating to settlement of the action furnished to the insurer by its solicitors. Held, granting the application, that when the contents of a privileged communication became the subject of a legitimate and reasonable issue in litigation, such as the state of mind of a party who had received that communication, then the privilege was lost. Accordingly the documents in question were no longer privileged and the order sought would therefore be made. Thomason v the Council of the Municipality of Campbelltown (1939) 39 SR (NSW) 347, 358-359; Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419, 436, 439; Data Access Corporation v Powerflex Services Pty Ltd [1994] AIPC 91-112 at 38,715 followed. Attorney-General (NT) v Maurice (1986) 161 CLR 475, 481-482 considered. 75 Further details are found in the course of the judgment of Derrington J (at 225 and 226): Of necessity, the application [for discovery] has been modified to refer only to the documents relied on by Mr Johnston of Suncorp, the officer handling this claim and authorising the compromise. He has deposed to having received and considered the plaintiff's documents containing the alleged misrepresentations, and his affidavit continued: "3. I received certain recommendations from Mr Maurice Miller the solicitor acting for the Corporation in relation to the settlement of the action. … … It is to the recommendations received from Mr Miller and upon which Mr Johnston said that he was induced to authorise the settlement that the application is now confined. … The principal instruction derived from the authorities on waiver of privilege is that fairness is the determinant in those cases, and it may be regarded as a factor here if that is open. They may also be of some assistance here by analogy. They show that when the contents of a privileged communication becomes a genuine issue in the action, then the privilege is lost because of the need for full enquiry as to the issue. In that case, it is because the party claiming privilege has opened the issue that the waiver is implied; but waiver is the process by which the loss of privilege has occurred and it is a different matter from the reasoning as to why it should be lost. This is seen from the observations of Gibbs CJ in Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 at 481-482, … The same basic principle is relevant to this issue, that is, whether the original privilege has been lost because the state of mind of Mr Johnston, which may or may not have been influenced by the privileged material, is in issue. In the resolution of that issue it is necessary to investigate all relevant matters in his mind at the time in order to determine whether he was so induced by the alleged representations at all. Cognate to this is the question whether other factors constituted the inducement. The recommendations of Mr Miller and the terms of all advice concerning the recommendations which Mr Johnston says provided the material upon which he made his decision is obviously highly relevant to the enquiry. It would be grossly unjust to the plaintiff to deny him access to it in order to investigate and test the claim. 76 In Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd (Perpetual Trustees) [1999] FCA 925, the Full Court (Ryan, Carr and Marshall JJ) dealt with an application for leave to appeal from orders made at first instance in the Federal Court of Australia, which orders upheld a claim of professional privilege in respect of various documents produced on subpoena by a firm of solicitors which formerly acted for the applicant (Equuscorp) in the principal proceedings. Equuscorp had pleaded reliance on representations set out by it in par 16 of its statement of claim: The 24 documents whose production Equus resists are listed in the schedule to an affidavit sworn by Mr Mark Leaker on 17 March 1999. Many of those documents are described as being undated. However, those that are dated fall squarely within the period referred to in para 16 of the statement of claim. … Mr Leaker confirms that 19 of the 24 documents in issue were created "within the context" of the professional relationship existing in May and June 1990 in which Equuscorp engaged the solicitors in relation to the provision by Equus of security for the production of the film. It can be seen that this is not a situation in which there has been a mere pleading of reliance. There is the added ingredient of evidence that legal advice was sought and obtained at a relevantly material time. … In our view, the facts of the present matter reflect the requisite degree of unfairness. Equus complains that it relied on the specified representations when it executed the security document. It says that the words "letter of credit" appearing in that document do not faithfully record the common intention of the parties and that the words were used under a mutual mistake of fact. There is evidence, that at the relevant time or times, ie shortly before executing the security document, Equus sought and obtained legal advice. In our opinion, in those circumstances, it would be relevantly unfair for Equus to be allowed to maintain legal professional privilege. Equus' state of mind is central, at the very least, to its claim for rectification - see Ampolex - a case cited with apparent approval by Beaumont J in his dissenting reasons in Telstra. It had been earlier said: The substantial injustice which we would identify as resulting if leave to appeal were refused lies in the difficult situation in which Perpetual would be placed in preparing for trial without access to the legal advice obtained by Equus before and at the time when it executed the security document - a matter referred to by Smith J as "trial by ambush" in HongKong Bank of Australia Ltd v Murphy [1993] 2 VR 419 at 438. 77 In Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Limited [2001] NSWIRComm 73 (00/5227, 9/4/01), Boland J considered the imputed waiver/raising of state of mind issue in relation to discovery of documents evidencing legal advice. That case involved a reliance on representations situation and on the facts in that case, Boland J found that privilege had been waived. I am indebted to his Honour's canvassing in depth of relevant decisions in which this issue has been considered. 78 In relation to this case, particular 3(B)(ix) alleges that the respondents' conduct was unfair in that they did not require or advise the second applicant to obtain legal advice prior to the applicant executing the letter of engagement. 79 In par 75, the first applicant sets out a sequence of events, including the reception of a letter of engagement, with reference to some specific statements/lacks in the letter, the signing of the letter by the first applicant and a statement "I did not obtain legal advice prior to signing the letter". 80 I do not accept as correct the respondents' contentions that the particulars set out at par B(3)(ix) and repeated at par 75 of the first applicant's affidavit carry with them the obvious assertion by the applicant that had the applicant had legal advice he would have done something different, or that in them the applicant complains that matters proceeded unfairly because of the absence of legal advice. 81 In many applications made under s 106 and its predecessors, a claim of unfairness is grounded on assertions that the respondent did not advise the applicant to seek legal advice, or even that the applicant did not have legal advice simpliciter. 82 It seems to me that the applicants advance that (alleged) omission as instancing per se the unfairness of the respondents' approach to the applicants. I think it is a big step to contend on that basis, as the respondents do, that in making such statements, that the first applicant has placed his state of mind in issue in relation to his lack of legal advice by a combination of the material in the summons and the affidavit. 83 It does not seem to me that the applicants have put in issue their understanding of the legal effect of the letter of engagement. What is in issue is a factual issue which goes to a claim by the first applicant that he was not advised by the respondents to get legal advice and he did not receive legal advice as to the letter of engagement. It does not go to his state of mind resulting from legal advice received. He does not say, either in par B(3)(ix) or in par 75, that that letter is unfair, though a claim that he did so is the basis of one of Mr Salgo's submissions. 84 It may be that once the substantive proceedings are under way, that matter may be sought to be revisited, for different reasons, in the light of the statement in the letter from Harmers dated 23 March 2001. That letter, at this time, is, of course evidence only in these interlocutory proceedings. 85 I now turn to the second basis on which it was claimed by the respondents that privilege had been waived. 86 The essence of what was considered in Telstra Corporation Ltd v BT Australasia Pty Ltd (156 ALR 634 at 647) was expressed in the majority judgment of Branson and Lehane JJ to be: 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. 87 Their Honours later turned to make some comments about the scope and effect of the principle they had stated after consideration of a number of decisions including Maurice, Thomason, Pickering, Ampolex, Benecke and United States Surgical Corp v Hospital Products International Pty Ltd, those comments included the following: Nor is it a consequence of the principle that whenever a person's state of mind is relevant to an issue in proceedings, privilege is taken to be waived in relation to legal advice that may have played part in the formation of that state of mind (so that the principle does not, for example, deny the authority of Kennedy v Lyell (1883) 23 Ch D 387; Lyell v Kennedy (No 2) (1883) 9 App Cas 81). It is unnecessary and inappropriate, having said those things, to attempt to define exhaustively the scope of the principle. Where, however, a party relies on a cause of action, an element of which is the party's state of mind (including the quality of the party's assent to a transaction) the party is taken to have waived privilege in respect of legal advice which the party had, before or at the time of the relevant events, material to the formation of that state of mind. 88 In this case the claims of the first applicant as to the part played by Mr Medway in the first applicant's resignation, do not rest on assertions of reliance upon representations by Mr Medway as per Telstra (156 ALR at 647) but upon actions by Mr Medway and the conclusions drawn by the first applicant from those actions. 89 In particular B(3)(xxi), and in pars 61 and 70, the applicant did not say he resigned "in reliance on" actions or a representation (the position of the applicant in Telstra) by Mr Medway, but because of (my emphasis) the applicant's negative perceptions as to Mr Medway's conduct after some years working with him. That situation does not, in my view, have the effect of putting in issue a matter which cannot fairly be assessed without examination of relevant legal advice. 90 The applicant had a certain opinion in regards to Mr Medway, that opinion being said by the applicant to be based, as detailed by him, on events and experience over a period of eight years of working with Mr Medway. Even if the applicant was engaged in discussions with his legal advisers about his termination, I do not see that his reasons for not wishing Mr Medway involved, can only be fairly assessed by allowing the respondent to examine the legal advice the applicant was receiving at that time (see Telstra at 647). 91 At this stage of the proceedings it seems to me that the allegations of the first applicant in par 61 and par 70 go to straight forward matters of fact that the first applicant says formed the basis of his decision to resign from RentWorks, the primary reason for so doing being specified concerns as to the first applicant's involvement with Mr Medway. Those allegations against Mr Medway will have to be supported by evidence, which, of course, will be open to be tested by the respondents, who deny there was such conduct by Mr Medway. 92 I do not see that either particular B3(xxi) and/or pars 61 and 70, while they do relate to the first applicant's perceptions of Mr Medway's conduct, are said to be influenced other than by the first applicant's personal experiences with Mr Medway. 93 In my view, caution needs to be exercised when the matter of issue waiver is being considered. In cases such as Maurice, Ampolex etc, specific documents were being considered. A difficulty as to issue waiver is that what is sought is not any particular document but all documents relating to a particular issue, on the basis of a state of mind having been revealed as to that issue. 94 A claim that there has been a waiver of privilege is comparatively easy to decide in situations such as that considered in Benecke. It is not so easy when the respondent, as in this case, seeks waiver to be implied as to a state of mind which is said to be evinced by a negative, ie the applicant said he did not have legal advice as to the letter of arrangement, therefore it was to be implied that he was saying he would have in some way acted differently if he had legal advice. It was contended by the respondents that indeed he had had legal advice. 95 Caution is also suggested by what was said by Derrington J [(1996) 1 Qd R at 225] that "waiver is the process by which the loss of privilege has occurred and it is a different matter from the reasoning as to why it should be lost". 96 It is not enough to know that the applicant has either a certain state of mind or that the applicant has received legal advice. What has to be revealed in the process such as the summons, pleadings or affidavits are two things: first, that the party has a certain state of mind as to an issue in the proceedings and, secondly, that that state of mind has been influenced by legal advice, which advice, other than by waiver, express or implied, would be privileged. 97 I am not satisfied that both of those requirements to ground a finding of waiver of professional privilege have been substantiated by the respondents in these interlocutory proceedings. 98 The very fact that proceedings have been commenced in a tribunal through process that bears a solicitor's name and address could lead to it being virtually certain that before that initiating process had been filed, the applicant or plaintiff had received legal advice and that advice would continue to be sought and received as the process moved on. 99 I accept what was said by Beaumont J, dissenting, in Telstra (156 ALR at 639): It seems unlikely that there could be any absolute rule that, whenever it appears, pre-trial, that a party's state of mind may be relevant to an issue, privilege is lost, even if it also appears that the party may have sought legal advice in that connection at the material time. I respectfully agree with the following observations of McLelland J in United States Surgical Corp v Hospital Products International Pty Ltd (13 October 1981) (as reported in Ritchie's Supreme Court Procedure (NSW) at 8546-7): Jordan CJ [in Thomason ] cannot have intended to lay down as a proposition of general application that whenever the making or contents of a privileged communication becomes an issue in proceedings, privilege cannot be successfully claimed for the purpose of those proceedings, as this would be inconsistent with his Honour's discussion (at 353 of the same judgment) of what was said by Lord Arkin in Minter v Priest [1930] AC 558 even if the proposition were limited to proceedings to which the person entitled to privilege was a party. … 100 I have based my consideration as to issue waiver on the two particulars relied on by the respondents and on the specific paragraphs of the first applicant's affidavit said by the respondents to relate to those particulars. It may be that when all the evidence of the applicants is before the Court that a different picture will emerge. 101 I have not felt it necessary to examine the disputed documents reproduced in a working bundle by the applicant, because the first question to be decided by the Court is whether waiver of privilege as to an issue has occurred in the first place. It is, in my view, only when the answer to that question is "yes" that examination of the documents might be nessary. 102 At this stage of these proceedings I am attracted to the opinion expressed by Beaumont J (156 ALR at 639): In the absence of any suggestion of express or actual waiver, the question remains whether, in the present circumstances, the law should imply or impute a waiver. In my opinion, it should not, at least not at this stage of the proceedings. Whether, at a later stage, particularly at the trial itself, the circumstances are then such that the law should imply or impute a waiver is another question, for resolution at that time and in the light of those circumstances. 103 In Ampolex (37 NSWLR at 412), Giles CJ CommD accepted that "no doubt in some circumstances it may be appropriate to defer inspection of documents produced under subpoena, possibly even discovered documents, until the hearing has commenced (see, for example, National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 at 385-386; Science Research Council v Nasse [1980] AC 1028 at 1078, 1086) …" . Because of the imminence of the hearing (three weeks later), he rejected the submission of the respondents that it was premature to conclude that fairness required that Ampolex have access to the documents and that inspection should be delayed. 104 The hearing of the present application is set to commence in December which allows some six months for further developments in this matter. 105 Access to the documents, claimed by the respondents to be the subject of "issue waiver", is denied at this time. 106 The application may be renewed by the respondents, if still thought appropriate, at a later stage of proceedings.

Christopher Murray v RentWorks Limited

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