In these proceedings the plaintiff bank is seeking to recover under what the bank asserts is a letter of guarantee given by the Bathurst of Bishop in respect of some $40 million of loans made by the bank to the Anglican Development Fund Diocese of Bathurst, which I shall call "The Fund". The proceedings are complex and involve many parties, and the hearing before Hammerschlag J commenced on Tuesday this week.
What is presently before the Court is a dispute concerning whether legal professional privilege in respect of two documents has been waived by the bank with the consequence that the documents must be produced in answer to a notice to produce served on the bank by the defendant's solicitors. Mr Blake SC (with Mr Edwards) appears for the first to twenty-third defendants, and Mr Aspinall of counsel appears for the bank on this application. This application has required an adjournment of the proceedings before Hammerschlag J and hence there is a need for brevity and a speedy determination.
The waiver is said to arise by reason of the banks' pleadings and the content of paras 36, 48, 49, 54, 55, 56 and 59, 60 of the affidavit of Mr Graeme John Grundy dated 23 December 2014. Mr Grundy was the bank manager dealing with the Bathurst Diocese and its representatives in connection with the facility pursuant to which the loans were made by the bank.
The documents in question are listed in the schedule and are identified as document 4 and document 12. In relation to 4, only two parts of the document are the subject for the claim for privilege. I shall refer to document 12 and the parts of document 4 which are the subject of the claim for privilege as "the disputed documents". Copies of the disputed documents, with the privilege portions highlighted, have, in accordance with the regime put in place by Hammerschlag J yesterday afternoon been provided to me for inspection. I have read the documents. I am satisfied that the documents meet the requirement for a claim for legal professional privilege.
The affidavit of Ms Claudine Salameh dated 15 April 2015 annexes a copy of the letter which is said by the bank to constitute the guarantee and a related letter. Mr Blake submits that the privilege that otherwise attaches to the documents has been waived because
1. of the bank pleading that the defendants are estopped by representations made to the bank from the asserting that two particular Ordinances, one called a "Finance Ordinance", and the other "the Anglican Development Fund Ordinance" were not valid Ordinances: see paras 38Z to 38GG and 38XX to 38AAA of the bank's Amended Commercial List Statement; and,
2. because of the evidence of the evidence of Mr Grundy, to which I have referred, and which I would summarise as him saying that because of the letter of guarantee he assumed and was reassured that the Fund had the power to borrow or raise the money that the bank was proposing to lend and that the Ordinances were valid. He also deposes to the fact that no-one had informed him that the Ordinances might be invalid or had been made without power
Mr Blake submitted that the assertions in the pleadings have put the contents of the disputed documents in issue or have "necessarily laid them open to scrutiny" within the meaning of that phrase used in Rio Tinto Ltd v Commissioner of Taxation [2005] FCA 1336 with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege.
Mr Blake submitted that Mr Grundy has put in issue his state of mind as the responsible officer of the bank and that there would be unfairness of the kind referred to in Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236 per Hodgson JA at [48] in which his Honour said
"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."
I accept that by its pleading the bank has opened up for examination and testing the source and basis for its assumption that the finance Ordinance and the ADF Ordinance were valid Ordinances and whether the bank was induced by the actions of the defendants to make that assumption. I accept that by his evidence Mr Grundy has opened up for investigation a question of whether the letter of acknowledgement induced him to believe that the Fund had power to borrow and/or raise money and whether the Ordinances were valid Ordinances.
Mr Aspinall did not dispute the tests set down in Archer per Hodgson JA with whom Campbell JA agreed. Mr Aspinall also drew attention to the case of Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371 per Cowdroy J in which his Honour referred to Mann v Carnell [1992] 201 CLR 1 and other cases including Rio Tinto and Fort Dodge Australia Pty Ltd v Nature Vet Pty Limited [2002] FCA 371 and then set out in paras 33 and 34 of Australian Agricultural the following summary of the law:
"[33] The above authorities establish that the conduct of a party will be inconsistent with the maintenance of privilege if the nature and extent of legal advice has been raised, whether directly or by necessary implication, by that party as an issue in the proceedings. This will usually occur where a state of mind has been positively pleaded in circumstances where legal advice given would be specifically pertinent to the formation of that state of mind or where a party's understanding of their legal position is critical to their defence.
[34] However, I cannot accept the submission of AACo that any positive defence mounted by AMP which raises its state of mind necessarily constitutes a waiver of privilege. In my opinion, in order to waive privilege a party must assert a belief which is likely to have been, or is explicitly said to have been, materially dependent upon legal advice given to that party. In that case the proof or otherwise of the belief is dependent upon the legal advice and accordingly privilege is waived. This is the position in cases where the dispute relates to a party's understanding of its legal position at a given point in time, such as Thomason, Rio Tinto, Ampolex and Fort Dodge."
If the advice contained in document 12 and the advice referred to in document 4 related to the Ordinances or either of them, I think it would be appropriate to treat the privilege as waived; that is not however the position.
Attention was drawn to the fact that the disputed documents were forwarded to Mr Grundy in 2006 before the facility was finished. That, said Mr Blake, reinforced his claim that documents should be made available.
Document 4 refers to the existence of legal advice, but document 12 contains advice. I have examined it, and it clearly relates to a loan made by the bank to a Queensland Anglican entity. It does not deal at all with the Ordinances the subject of these proceedings or the Fund, nor does it deal with letters of the acknowledgment, which was another strand of the argument put by Mr Blake.
Applying the test adopted in Archer the bank here has not made express or implied assertions about the content of privileged communications, whilst at the same time seeking to maintain privilege. The only basis then for there to be a waiver is the bank is making assertions about its state of mind or Mr Grundy's state of mind in circumstances where the confidential information is likely to have affected that state of mind.
Given that the focus of attention in the pleadings to which I have referred and Mr Grundy's affidavit to which I have referred is the specific Ordinances - and given that the discovered documents do not deal with the New South Wales Anglican structure, or its Ordinances, that different legislation pertains in Queensland to that in New South Wales, and having regard to the content of the two documents, I am not satisfied that they are likely to have affected Mr Grundy's state of mind in relation to the matters pleaded by the bank or dealt with by Mr Grundy in his affidavit.
It may be that since Mr Grundy was provided with the disputed documents, it could be inferred that they were relevant to the bank's decision, or may have been relevant in some way to the bank's decision to lend, but it is not the lending itself which is in issue here, it is whether in lending the bank believed that the two Ordinances were valid and that the Fund therefore had power to borrow or raise funds and whether the defendants induced that belief.
Accordingly, I am not persuaded that the bank has waived the privilege and I decline to order the production of the documents.
[2]
Amendments
22 April 2015 - Amendment to one word in [3]
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Decision last updated: 22 April 2015
Parties
Applicant/Plaintiff:
Commonwealth Bank of Australia
Respondent/Defendant:
The Right Reverend Ian Palmer, Bishop of the Diocese of Bathurst