Equuscorp Pty Ltd v Kamisha Corp Ltd

The litigation 4 The claim of Equus arises out of the financing of a film initially called "Night of the Leopard", but released under the title "Double Impact". The owner of the film was Balmedie. The public was invited to subscribe for units issued pursuant to a Trust Deed of which Perpetual Trustees was trustee. In very broad outline, the scheme was that investors would become "Production Contractors" of the film. Balmedie agreed to pay to investors a certain minimum fee called the "Base Production Services Fee" and to provide the security for those fees. The first respondent Kamisha Corporation Limited ("Kamisha") agreed with the investors to carry out the actual production work as their agent. As part of the arrangements, Equus provided to Perpetual Trustees a document described as a "letter of credit" as security for some $9.6m due to the investors by Balmedie. 5 In the present proceeding, the statement of claim of Equus includes the following (this summary being taken from Perpetual Trustees' outline of submissions): a. representations were made to the applicant being: i. the Trustee and Kamisha would accept from Equus a performance guarantee as security for the performance of Balmedie's obligations; ii. it was not necessary for Equus to provide security in the form of a letter of credit; iii. the payment of the production services fee would be made in accordance with the terms of the Trust Deed; iv. on each occasion on which the payment of the base production services fee fell due, Equus would only need to seek funding for the amount to which it was entitled under the loan arrangements with the productions contractors and the amount of money to be provided under the performance guarantee; v. that Davis had authority to act on behalf of the Trustee, and on behalf of Kamisha during the negotiations with Equus. b. The applicant was induced by the representations to enter into the security contract and security document on or about 29/6/90. (par 19) c. As a result of the common intention of the parties or mutual mistake, reference to "Letter of Credit" should be rectified. (pars 21 and 22) d. In reliance upon the representations, Equus advanced funds totalling $8,375,000. (par 23) e. The representations were misleading and deceptive in contravention of s 52 Trade Practices Act 1974 (Cth). (pars 70-71) f. As a result the applicant has suffered loss and damage. (par 74) 6 Counsel for Kamisha relied on the decision of a Full Court of this Court in Telstra Corporation Limited v BT Australasia Pty Ltd (1998) 156 ALR 634. That case concerned an interlocutory motion for production of documents which were the subject of claims of legal professional privilege. The trial judge refused the motion but a Full Court (Lehane and Branson JJ, Beaumont J dissenting) allowed an appeal. The substantive claim was for damages for misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth). In essence, the majority took the view that the applicant, by pleading reliance on the respondents' alleged misrepresentation, had opened up the question of its corporate state of mind and had thereby, within the meaning of s 122(1) of the Evidence Act 1995 (Cth), consented to the disclosure of any legal advice relating to their negotiations with the respondents. Their Honours said (at 647): "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." 7 Beaumont J (at 638) considered the matter both at common law and under s 122(1). His Honour referred to the High Court authorities Attorney-General (NT) v Maurice (1986) 161 CLR 475 and Goldberg v Ng (1995) 185 CLR 83, and elicited from them the following proposition: "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." 8 Applying that common law principle to the instant case, Beaumont J said (at 639): "In my opinion, nothing has emerged at this stage to demonstrate any unfairness in BT's insistence upon its right to claim privilege. Whether this will change in the light of subsequent events, including the conduct of the trial, will be a matter for decision at that time and in the light of those circumstances. At the present pre-trial stage, the only relevant act or omission of BT is its pleading, which does not mention any legal advice. It should be noted that the court was not, itself, invited to inspect any of the privileged documents." 9 As to the Evidence Act, Beaumont J thought that s 122(1) did not apply. There was no actual or express consent. No waiver should be imputed or any consent implied. 10 The High Court granted special leave to appeal in Telstra and the appeal was argued on 3 December 1998. However, before a decision could be given, the whole case was settled. 11 Ordinarily, of course, a single judge would be bound by the decision in Telstra. However, the majority in that case followed the decision of an earlier Full Court in Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 which held that although the Evidence Act did not apply to questions of legal professional privilege in interlocutory proceedings, nevertheless the common law must be taken to have been modified by analogy. The Court in Telstra was invited not to follow Spalvins but the majority rejected that submission: 156 ALR 643-644. As a consequence, the ratio decidendi of the case is limited to the application of the common law as though it were identical to s 122(1): 156 ALR at 649. 12 But in a decision handed down on 22 December 1998, a five member Full Court held that Spalvins was wrongly decided: Esso Australia Resources Ltd v Federal Commissioner of Taxation (1998) 159 ALR 664. Therefore, for present purposes, I have to apply the common law unaffected by s 122(1). In the words of Black CJ and Sundberg J at 670: "The common law position is that where there is no intentional waiver of privilege, the question whether waiver should be imputed depends upon whether it would be unfair or misleading to allow a party to refer to or use material and yet assert the material, or material associated with it, is privileged from production." 13 In claims under s 52 where the misleading and deceptive conduct alleged takes the form of misrepresentations to the plaintiff, it will usually be essential to plead reliance. This will be an essential link in the chain of reasoning establishing that the plaintiff suffered loss and damage "by the conduct of" the defendant so as to be entitled to damages under s 82. If the view of the majority in Telstra is correct, it would seem to follow inexorably that the mere pleading of reliance would remove privilege in respect of all legal advice which the plaintiff received concerning the conduct complained of. I do not think that can be right. The bare fact of asserting reliance does not expressly or impliedly assert that the plaintiff relied, or did not rely, on some privileged communication. As Beaumont J points out, it is not possible to predict the course a trial may take. A privileged communication may be subsequently referred to in a way that makes its continued protection unfair. But, at the moment, I have to consider the issue at an interlocutory stage. It is true that legal advice could be relevant in determining whether a plaintiff in fact relied on the misrepresentations complained of. But the whole point of legal professional privilege is that, for public policy reasons, material is excluded which might be relevant, indeed highly relevant. No balancing exercise is involved. If legal professional privilege applies, privilege trumps relevance. 14 For those reasons I uphold the claim of privilege. I will hear submissions to be made as to the form of orders and costs. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.

Associate: Dated: 21 May 1999 Counsel for the Applicant: Mr G Beaumont QC and Ms P Tate

Solicitor for the Third Respondent: Middletons Moore & Bevins