First Plaintiff v First Defendant

EVIDENCE -- Client legal privilege - Waiver of privilege - Whether the plaintiffs knowingly and voluntarily, or with their express or implied consent, disclosed the substance of the evidence within the meaning of ss 122(2) and 122(3) Evidence Act 2008 (Vic) - Meaning of 'voluntarily' - Whether a contractual term requiring the plaintiff to obtain a legal opinion to acquire a contractual entitlement means that the plaintiff did not 'voluntarily' disclose the substance of the evidence - Test for determining disclosure of the substance of the evidence - Whether reference in the plaintiffs' pleadings to a legal opinion that the plaintiffs had reasonable prospects of success of their claims amounted to disclosure of the substance of the evidence under s 122(3) - Whether disclosure of the conclusion of the legal opinion lead to disclosure of the legal opinion - Relevance of considerations of 'fairness' when determining if the substance of the evidence has been disclosed under s 122(3) - Loss of client legal privilege

**1 In November 2012, the first and second defendants (the 'vendors') entered into an agreement with the second plaintiff for the sale of their Australian specialty cheese manufacturing business ('Business Sale Agreement'). Under the terms of the Business Sale Agreement, part of the purchase price (an amount in excess of $2.3 million described as the Deferred Amount), would be held by a third party stakeholder (the third defendant, Mr Trumble) for a period of time in the event that the purchaser made a claim against the vendors.

2 Clause 4 of the Business Sale Agreement sets out an agreed regime regarding how the Deferred Amount was to be dealt with, including circumstances in which Mr Trumble was required to retain the Deferred Amount and the circumstances in which he was required to release it.

4.2 Release of Deferred Amount when Bona Fide Claim

If, before the Deferred Amount Expiry Date, the Purchaser makes a Bona Fide Claim against a Vendor for breach of a Sale Document (including for a breach of Warranty) and:

(a) the parties or a court have agreed or determined the relevant amount (if any) payable in relation to that Bona Fide Claim; or

(b) where the parties or a court have not agreed or determined the relevant amount (if any) payable in relation to that Bona Fide Claim and the Purchaser has issued proceedings within 30 days after making the Bona Fide Claim (either before or after the Deferred Amount Expiry Date),

Then:

(i) the amount (if any) equal to the Deferred Amount plus the Deferred Amount Accrued Interest, less the amount subject of a Bona Fide Claim by the Purchaser, will be released to the Vendors on the Deferred Amount Expiry Date; and

(ii) the balance will be retained by the Deferred Amount Holder until the amount (if any) of the Claim is agreed or determined, at which time the amount of the Claim so agreed or determined or the Deferred Amount plus the Deferred Amount Accrued Interest (whichever is less) will be paid to the Purchaser and any balance (including any remaining Deferred Amount Accrued Interest) will be paid to the Vendors.

a Claim or Claims by the Purchaser against a Vendor for breach of a Sale Document (including breach of Warranty), for which it has obtained a legal opinion from senior counsel with not less than 10 years' experience at the Bar that the Purchaser has reasonable prospects of success of that Claim in a court of relevant jurisdiction.[1]

the date being six months after the Completion Date.

**4 At the same time as entering into the Business Sale Agreement, the vendors, the second plaintiff and Mr Trumble entered into the Deferred Amount Deed ('Deed'). Under the Deed the parties agreed that at the completion of the sale of the business, the Deferred Amount would be paid to Mr Trumble to be held in escrow in accordance with the terms of the Deed. Clause 3.1 of the Deed regarding the release of the Deferred Amount is in substantially the same terms as clause 4.2 of the Business Sale Agreement.

5 In December 2012 the second plaintiff nominated the first plaintiff ('Lactalis') to be substituted as purchaser of the business, and the sale of the business to Lactalis was completed and the Deferred Amount was paid to Mr Trumble.[2]

6 The effect of clause 4.2 of the Business Sale Agreement (and clause 3.1 of the Deed) is that Mr Trumble is required to retain the Deferred Amount (in whole or part) if the purchaser makes a Bona Fide Claim against a vendor before the Deferred Amount Expiry Date. In order for Mr Trumble to be required to continue to retain the Deferred Amount or part of the Deferred Amount, it is necessary for the purchaser to make a Bona Fide Claim against a vendor, being a claim 'for which it has obtained a legal opinion from senior counsel with not less than 10 years' experience at the Bar that the Purchaser has reasonable prospects of success of that Claim in a court of relevant jurisdiction.'[3]

7 On 3 June 2013, Lactalis gave notice to the vendors and to Mr Trumble of its Bona Fide Claims,[4] the quantum of which exceeds the Deferred Amount (including interest).[5]

8 On 28 June 2013, the plaintiffs commenced this proceeding and made claims for breach of warranties and claims in respect of indemnities under the Business Sale Agreement, initially by a general indorsement of the writ and subsequently in a statement of claim dated 1 August 2013.[6] The claims relate to listeria contamination which allegedly occurred at the manufacturing plant sold as part of the business and in cheese produced at the plant.

9 In their pleadings, the plaintiffs allege that they obtained a legal opinion from senior counsel with not less than 10 years' experience at the Bar that Lactalis has reasonable prospects of successfully prosecuting a claim for the breaches alleged ('the opinion').[7]

10 On about 18 July 2013, the vendors served a notice to produce on the plaintiffs seeking production of the opinion.

11 By summons filed 30 July 2013, the vendors seek an order that the plaintiffs comply with the notice to produce. The plaintiffs rely on an affidavit of Scott Craig Chesterman, sworn 25 July 2013, in which Mr Chesterman deposes that the opinion is protected from production on the grounds of client legal privilege on the basis that it is a confidential document prepared by legal counsel for the purpose of contemplated litigation.[8] The vendors contend that the plaintiffs have waived privilege over the opinion. The plaintiffs contend there has been no waiver of privilege in the circumstances of this case and that they should not be required to produce the opinion to the vendors for inspection.**

Evidence Act provisions

**12 Section 131A(1) of the Evidence Act 2008 (Vic) ('Victorian Act') relevantly provides, if a person is required by a disclosure requirement (which includes a notice to produce) to produce a document which would result in the disclosure of the document or its contents and the person objects to providing that document, the court must determine the objection by applying the relevant provisions of Part 3.10 with any necessary modifications as if the objection to providing the document were an objection to the giving or adducing of evidence.[9]

13 Part 3.10 of the Victorian Act includes s 119 and s 122 which deal with client legal privilege and the loss of that privilege.

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of -

(a) ...

(b) the contents of a confidential document (whether delivered or not) that was prepared -

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

...

(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.

(3) Without limiting subsection (2), a client or party is taken to have so acted if -

(a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or

(b) the substance of the evidence has been disclosed with the express or implied consent of the client or party.

...

16 The defendants submit that the plaintiffs have waived privilege over the opinion by:

(a) entering into the provisions of the Business Sale Agreement and the Deed which each require the purchaser to obtain a legal opinion from senior counsel of not less than 10 years' experience at the Bar that it has reasonable prospects of success of its claim;

(b) disclosing the substance of the legal opinion in the indorsement of the writ and in the statement of claim.

Did the plaintiffs waive privilege by entering into the Business Sale Agreement and the Deed containing the relevant clauses?

**17 The defendants submit that the plaintiffs' entry into the provisions of the Business Sale Agreement and the Deed (which each provide in effect that the purchaser agrees that establishing a Bona Fide Claim is a pre-condition to any entitlement to prevent the release of (all or part of) the Deferred Amount to the vendors) is conduct that is inconsistent with the plaintiffs objecting to the production of the opinion. According to the defendants, by agreeing to those provisions, the plaintiffs must be taken objectively to have understood that, should there be a dispute between the parties of the kind which has arisen, the purchaser would need to provide the opinion in order to establish the necessary event to trigger the relevant clause.

19 By entering into the Business Sale Agreement and the Deed, the parties agreed on a mechanism which could be deployed in the event of a claim arising in the future, and in respect of which claim the purchaser might choose to obtain an opinion in order to satisfy the definition of Bona Fide Claim, and prevent the release of all or part of the Deferred Amount to the vendors.

20 In my view, until a step was taken by the purchaser under the relevant clause, there could be no question of waiver of client legal privilege. At the time of entry into the agreement, the opinion did not exist and the purchaser had not elected to trigger the clause to prevent the release of any part of the Deferred Amount. Setting up a regime for future use if the occasion should arise falls short of implied waiver of client legal privilege.

21 It follows that I do not accept that merely by entering into the Business Sale Agreement and the Deed, which contain the clauses under consideration, that the plaintiffs have 'acted in a way that is inconsistent with' the plaintiffs' objection to the production of the opinion for the purposes of s 122(2).**

Did the plaintiffs waive privilege by disclosing the substance of the opinion in their pleadings?

22 The defendants submit that by alleging in the plaintiffs' pleadings that the plaintiffs have obtained an opinion stating that they have reasonable prospects of successfully prosecuting a claim for breach of certain warranties and indemnities contained in the Business Sale Agreement:

(a) the plaintiffs knowingly and voluntarily disclosed the substance of the opinion (s 122(3)(a)); or

(b) the substance of the opinion has been disclosed with the plaintiffs' express or implied consent (s 122(3)(b)).

23 In the indorsement of claim, the plaintiffs allege:

1. On 31 May 2013, the Plaintiffs obtained a legal opinion from senior counsel with not less than 10 years' experience at the Bar that the First Plaintiff has reasonable prospects of successfully prosecuting a claim for breaches of the Warranties referred to in paragraphs 32 and 33 above (the Warranty Claim) in a court of relevant jurisdiction.

24 In the statement of claim, the plaintiffs allege:

1. On 31 May 2013, the Plaintiffs obtained a legal opinion from senior counsel with not less than 10 years' experience at the Bar that Lactalis has reasonable prospects of successfully prosecuting a claim for breaches of the Warranties pleaded in paragraphs 72, 73, 75 and 76 and the indemnities in paragraphs 79 and 80 above (the Bona Fide Warranty Claims) in a court of relevant jurisdiction.

**25 The warranties incorporated by reference to other paragraphs of the pleadings are to the effect that:

• the stock sold under the Business Sale Agreement is of good and merchantable quality and fit for the purpose for which it is used;

• the first defendant has not manufactured or supplied goods that are or have been defective;

• no goods in a state ready for supply in the course of the business were defective;

• the vendors are not in breach of any environmental law or in breach to an extent which would have a materially adverse effect on the operation of the business; and

• the vendors comply with all applicable laws.[10]

26 The plaintiffs submit that by referring to the opinion in the pleadings, the plaintiffs have not acted inconsistently with their objection to production of the opinion on grounds of privilege and there has been no implied waiver of privilege in the circumstances of this case.

27 Many of the authorities relied upon by the parties with respect to the issue of disclosure applied common law principles of waiver as set out by the High Court in Mann v Carnell[11] in the following terms:**

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.[12]

**28 In Mann v Carnell, the Court also noted that the provisions of s 122 of the Evidence Act 1995 (Cth) ('Commonwealth Act') as to the circumstances in which privilege may be lost were not identical to the corresponding common law principles, which the High Court in Osland v Secretary, Department of Justice[13] observed may have the effect that privilege may be lost in circumstances which are not identical to the circumstances in which privilege may be lost at common law.[14]

29 In Fenwick v Wambo Coal Pty Ltd (No. 2),[15] the Court considered the current version of s 122 of the Evidence Act 1995 (NSW) ('NSW Act') (which is identical to s 122 of the Victorian Act). White J said:**

The amendments made to s 122 of the Evidence Act in 2007 (commencing in 2009) by the introduction of subs (2) more closely aligned s 122 to the common law principles of waiver enunciated in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1. But the Australian Law reform Commission did not seek to make the principles identical. In its report leading to the amendment (Australian Law Reform Commission, Uniform Evidence Law, Report 102 (2006)) it reaffirmed that client legal privilege should be lost wherever there is voluntary production (see paras [14.146] and [14.147]). Section 122(3) is not merely a guideline for the application of s122(2), but a prescription that subs (2) is taken to be satisfied if the requirements of subs (3) are met.[16]

30 I respectfully agree that s 122(3) is a prescription that subs (2) is taken to be satisfied if the requirements of subs (3) are met and is not merely a guideline for the application of s 122(2). A party is taken to have acted in a way that is inconsistent with the party objecting to the adducing of the evidence if either subsection (a) or (b) is satisfied. Accordingly, as it applies to the circumstances of this case, it is necessary to determine whether the plaintiffs knowingly and voluntarily disclosed the substance of the opinion in their pleadings (s 122(3)(a)) or whether the substance of the opinion has been disclosed with their express or implied consent (s 122(3)(b)).

**31 In my view, there is no question that the plaintiffs made the disclosure knowingly. The solicitor for the plaintiffs deposed that the disclosure was 'necessary in order to establish the basis for the Plaintiffs' claims.'[17] Absent special facts, the plaintiffs must be taken to have known the disclosure was made in their pleadings. Indeed, counsel for the plaintiffs did not submit otherwise.

32 On the question of whether the disclosure was made voluntarily, counsel for the plaintiffs submitted that it cannot be said that the plaintiffs truly disclosed the substance of the opinion 'voluntarily' since the plaintiffs were required to make reference in their pleadings to the receipt of a relevant opinion in order to establish one of the necessary pre-conditions set out in the Business Sale Agreement.

33 The meaning of the word 'voluntarily' was considered in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd.[18] Rolfe J observed:**

I assume that the word 'voluntarily' is intended to mean something other than 'under compulsion of law' which appears in par (c). I think the distinction is that the disclosure was made voluntarily, in the sense that it was not made by way of mistake, it being possible that a disclosure may be made 'knowingly' yet by way of mistake and, accordingly, perhaps not voluntarily.[19]

34 In Odgers Uniform Evidence Law,[20] the learned author cites Ampolex and states:

It has been held that the word 'voluntary' in s 122(2) is intended to mean something other than not 'under compulsion of law' (in s 122(5)(a)(iii) as it currently is). Voluntary disclosure under a mistaken belief as to what is being disclosed would not necessarily result in loss of the privilege. Indeed it has been observed that a voluntary disclosure is a disclosure that was not made by way of mistake.[21]

**35 The disclosure in the pleadings arose neither by mistake or by compulsion of law, but merely as a consequence of the course taken by the plaintiffs in endeavouring to pursue certain contractual rights. This course was taken by the plaintiffs deliberately. I accept for the purpose of argument that the reason that the opinion was obtained and the purpose for referring to it in the pleadings was to satisfy the precondition under clause 4.2 of the Business Sale Agreement. I also accept for the purpose of argument that it mattered not whether the opinion was right or wrong or that as a result of its contents the plaintiffs had a particular state of mind and acted in a particular way. These matters may well explain why the plaintiffs acted the way they did and provide some context but in my view they do not detract from the voluntariness of the actions.

36 Further, in the absence of any evidence to suggest otherwise, it can be inferred that the plaintiffs have provided instructions to their legal advisers to make the allegations set out in the pleadings. In the circumstances, in my view, the references to the opinion in the pleadings were made with their express or implied consent.

37 It remains for me to determine whether the plaintiffs have 'disclosed the substance of the evidence'.

38 The plaintiffs relied on Adelaide Steamship Co Limited v Spalvins,[22] and submitted that reference to 'the substance of the evidence' in s 122(3) of the Victorian Act imports a quantitative test which involves an inquiry as to whether there has been sufficient disclosure to warrant loss of the privilege.

39 In Spalvins, the Full Court of the Federal Court (Olney, Kiefel and Finn JJ) considered ss 122(2) and 122(4) of the Commonwealth Act (the then equivalent of ss 122(3)(a) and 122(3)(b)) of the Victorian Act)[23] and observed:**

[S]ubject to the particular exceptions listed, s 122(2) and (4) inquire whether there has been a knowing and voluntary, or a consensual, disclosure of the 'substance of the evidence', that evidence containing the confidential communication or the contents of the confidential document of which ss 118 and 119 speak. The test is a quantitative one, which asks whether there has been sufficient disclosure to warrant loss of the privilege. If what is disclosed falls short of the test posed by the section, there is no waiver.[24]

**40 While important aspects of Spalvins were overruled by the Full Court of the Federal Court in Esso Australia Ltd v Commissioner of Taxation,[25] it has not been overruled on this point. I accept that the appropriate test is whether there has been sufficient disclosure to warrant loss of the privilege.

41 Senior counsel for the defendants submitted that, by pleading that they have obtained a legal opinion that the first plaintiff 'has reasonable prospects of successfully prosecuting a claim for breaches' of certain warranties and indemnities, the plaintiffs have done more than simply make reference to the legal opinion; they have stated the conclusion of the opinion and thus its substance.

42 Counsel for the plaintiffs submitted that the language of the indorsement of the claim and the statement of claim merely mirrors the language of the relevant provisions of the agreements and the substance of the opinion has not been disclosed.

43 Some of the authorities relied upon by the parties with respect to the extent of disclosure involved common law principles of waiver. Others involved the application of the statutory provisions.**

44 In Bennett v Chief Executive Officer, Australian Customs Service,[26] the Full Court of the Federal Court considered whether a letter from the Australian Customs Service, which referred to an advice received from its solicitor, constituted waiver of the legal professional privilege in the advice under common law. After considering the principles set out in Mann v Carnell,[27] and the observations of Rolfe J in Ampolex,[28] Tamberlin J observed:

Various expressions are used in the formulation of principles relating to waiver of legal professional privilege, such as references to 'the substance', 'effect', or 'content' of the advice. The weight of the authorities, in my view, supports the conclusion that the disclosure of the conclusion reached in or course of action recommended by, an advice can amount to waiver of privilege in respect of the premises relating to the opinion which has been disclosed, notwithstanding that this reasoning is not disclosed.[29]

45 In Secretary, Department of Justice v Osland,[30] the Court of Appeal considered whether disclosure of the conclusion of legal advice waived privilege under common law over the whole advice. After a careful review of the relevant authorities, the Court expressed the view that the authorities did not establish any general rule that disclosure of the conclusion of legal advice amounted to waiver in respect of the whole advice.[31] Maxwell P adopted the position as stated by Tamberlin J in Bennett and stated:

Disclosure of the conclusion (or the gist, substance or effect) of legal advice may, or may not, amount to a waiver of privilege in respect of the advice as a whole. Whether it does in a particular case will depend on whether, in the circumstances of the case, the requisite inconsistency exists, between the disclosure on the one hand and the maintenance of confidentiality on the other. In Bennett, the majority of the Full Federal Court judged that there was inconsistency and hence waiver; in British American Tobacco Australia Services Ltd v Cowell[32] (discussed below), this court judged that there was not. In each case, there was a disclosure of the gist or substance of advice given. That opposite conclusions were arrived at is simply a reflection of the different circumstances of the respective cases.[33]

46 In Osland v Secretary, Department of Justice,[34] the High Court expressly adopted the reasoning of Maxwell P and observed:

Whether, in a given context, a limited disclosure of the existence, and the effect, of legal advice is inconsistent with maintaining confidentiality in the terms of advice will depend upon the circumstances of the case. As Tamberlin J said in Nine Films and Television Pty Ltd v Ninox Television Ltd (45), questions of waiver are matters of fact and degree. It should be added that we are here concerned with the common law principle of waiver, not with the application of s 122 of the Evidence Act 1995 (Cth) which, as was said in Mann v Carnell (46), has the effect that privilege may be lost in circumstances which are not identical to the circumstances in which privilege may be lost at common law (47).[35]

47 In Commissioner of Taxation v Rio Tinto Limited, the Full Court of the Federal Court emphasised the importance of applying the principles to the individual facts of each case in the following terms:

Where, as here, one party alleges that another has impliedly waived legal professional privilege, 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. In concluding that the Commissioner had waived the privilege in the eight contested documents, the docket judge in fact applied the 'inconsistency' principle of Mann, as he was obliged to do: see Rio Tinto (2) at [20]. Plainly enough, the inquiry that it mandates focuses on the facts of the particular case. It follows that other cases in which implied waiver has been considered provide limited guidance unless they arise out of similar facts.[36]

Cases applying the Evidence Act

48 In Ampolex, the court was required to consider a public disclosure by Ampolex in the following terms: 'there is a dispute about the conversion ratio. Ampolex maintains that the correct ratio is 1:1 and has legal advice supporting this position.'[37] Rolfe J held that the statement amounted to a waiver of privilege in the legal advice under s122(2) of the Commonwealth Act because the statement disclosed the substance of the legal advice. In a subsequent application made in the High Court for a stay of Rolfe J's decision, Kirby J said:

Ampolex stated that it had 'legal advice supporting its position'. Rolfe J concluded that this statement was, within s 122, disclosure of the 'substance of the evidence'. The disclosure suggested, to reasonable inference, that the legal advice supported Ampolex's stated position. Ampolex drew attention to the limits of 'substance' suggested by such decisions as Derby & Co Ltd v Weldon (No 10.)[38] I agree that a mere reference to the existence of legal advice would not amount to a waiver of its contents. Rolfe J appears to have acknowledged this distinction by later rulings to which I was taken during the course of argument. But at least in respect of the substance of the legal advice supporting Ampolex's assertion about the correct ratio, which is in contest here, it is strongly arguable that the public reference to the supporting legal advice, waived the privilege as to the precise contents of the legal advice on that point. I cannot say that the ruling is attended by such doubt as to promise a substantial prospect of a grant of special leave to appeal to this court. On the contrary, on my present understanding of the facts and as a tentative view, the opinion expressed in the ruling seems arguably correct.[39]

**49 In Spalvins, the Full Court of the Federal Court concluded that an affidavit disclosed the contents and substance of the advice of senior counsel under s 122(2) of the Commonwealth Act by disclosing advice that certain matters ought to be pleaded in a statement of claim rather than by way of reply. The deponent deposed that he formed a view that an argument in respect of an issue was not sustainable and that he formed that view after 'reading the advices of and conferring with external legal advisors.' He further deposed 'while [his]...view remained that these matters be pleaded by way of reply, following receipt of [senior counsel's] advice...' it was decided to plead the matter in the statement of claim. Even though counsel's reasoning was not disclosed, this was held to constitute disclosure of the substance of the advice.

50 In BT Australasia Pty Ltd v State of New South Wales & Telstra Corporation Ltd (Judgment No 7),[40] Sackville J held that disclosures made in financial statements that the party had obtained legal advices to the effect that the proceedings were soundly based in legal principle, had considerable strengths, that there were substantial difficulties with the State's cross-claim and that it had good prospects of effectively resisting it, constituted disclosure of the substance of the advice under s 122 of the Commonwealth Act.

51 In NRMA Ltd v Morgan (No 2),[41] Giles JA held that where a solicitor deposed that '[c]ounsel have advised that the Third Cross-Claim may not, in certain circumstances, permit the Second Defendant's to claim contribution from the Third Defendant and for more abundant caution the Second Defendant should seek the leave of the Court to file a Cross-Claim,' the disclosure, albeit in summary form, of what counsel had advised constituted disclosure of the substance of that communication under s 122(2) of the NSW Act.[42]

52 In SVI Systems Pty Ltd v Best & Less Pty Ltd,[43] Einfeld J concluded that when s 122(2) of the Commonwealth Act 'is referring to the substance of advice, it is not talking about the, as it were, "bottom line" of the advice, but to what its content is and possibly even the reasoning which led to it.'[44]

53 In Singapore Airlines Ltd v Sydney Airports Corporation Ltd,[45] (in relation to ss 122 and 123 of the NSW Act), McDougall J held in the case of an expert's report, it is not correct to say that the advice could be separated from the assumptions and reasoning process on which it was based. His Honour held that the substance of the advice necessarily involved not only the conclusions but also the relevant factual bases (either as determined by the expert or as assumed) and the reasoning process of the expert proceeding from those factual bases to the conclusions reached.[46]

54 In Priceline Pty Ltd v JHY Nominees Pty Ltd & Ors,[47] a real estate agent advised in a letter that:**

We have discussed the matter with the Lessor and sought advice from their solicitors. Putting the argument with respect to the notice...to one side for the moment, the option was exercised out of time, and the Lease cannot be renewed in any event.

Croft J observed that on a careful reading of this paragraph a conclusion with respect to the legal advice is never stated, and after considering the extent of disclosure, held that there had not been sufficient disclosure of the kind contemplated by the provisions of sub-ss 122(2) or 122(3) of the Victorian Act.

55 In Fenwick (in relation to s 122(3) of the NSW Act), after reviewing many of the cases, White J observed that in SVI Systems there was limited reference made to authority and that the decision in Singapore Airlines was expressly confined to disclosure of experts reports. White J noted it is difficult to reconcile the various cases, (most of them on the previous s 122(2) of the NSW or Commonwealth Act) as to what will constitute disclosure of the substance of a privileged communication. His Honour concluded, however, that the balance of authority is that at least an express or implied summary of legal advice received amounts to disclosure of the substance of the advice.[48] I respectfully agree with these observations and the conclusion.

**56 While acknowledging that other cases provide limited guidance unless they arise out of similar facts, it seems to me that the disclosure in the pleadings in this case constitutes disclosure of the substance of the opinion. If asked to identify the substance of counsel's opinion, the likely response would be to the effect pleaded, namely that counsel has advised that the company has reasonable prospects of successfully prosecuting the respective claims for breaches of warranties and indemnities.

57 Considered quantitatively, in my view, there is sufficient disclosure of the opinion in the pleadings to constitute disclosure of its substance.

58 Under s 122(3), unlike the position at common law, it is not necessary to further consider whether disclosure of the substance of the legal advice produces the requisite inconsistency between disclosure on the one hand and maintenance of the confidentiality on the other. If the requirements of s 122(3) are met, (and the disclosure was not made in circumstances set out in s 122(4) and s 122(5)), the parties are taken to have acted in a way that is inconsistent with the parties objecting to the adducing of the evidence. It is not contended that any of the circumstances set out in s 122(4) and s 122(5) of the Victorian Act apply. In my view, the requirements of s 123(3) are met in this case.**

**59 In deference to the arguments of counsel, I will refer briefly to the issue of fairness. Counsel for the plaintiffs submitted that considerations of fairness together with the primary consideration of whether the plaintiffs had acted inconsistently indicated that the plaintiffs should not be compelled to produce the opinion.

60 As stated previously, once either subsection (a) or (b) is satisfied in s 122(3), a party is taken to have acted in a way that is inconsistent with the party objecting to the adducing of the evidence. It is not necessary additionally to consider whether the party has acted inconsistently under s 122(2), nor is there an 'overriding principle of fairness operating at large.'[49]

61 Further, the test for determining whether the 'substance of the evidence' has been disclosed under s 122(3) is not whether it would be unfair or not to require disclosure of the opinion. If there has been a knowing and voluntary, or a consensual, disclosure of the communication, the question of whether the 'substance of the evidence' has been disclosed requires the court to evaluate the degree of disclosure. It seems to me that considerations of fairness may, in a given case, inform the analysis of whether a disclosure was made knowingly, voluntarily or consensually. However, in my view, it is unlikely that there would be circumstances where it would be necessary to take into account considerations of fairness in the process of determining whether the substance of the evidence has been disclosed.

62 The plaintiffs submitted that it would be 'unfair' to the plaintiffs to require them to disclose the opinion to the defendants because it could not have been the objective intention of the parties that the purchaser would be compelled to produce the opinion to the vendors in order to require the Deferred Amount to be retained. The plaintiffs submitted that if the parties to the agreements had desired that an opinion referred to in the definition of 'Bona Fide Claim' should be available for inspection by the vendors, it would have been easy for them to have included a provision to that effect in the agreement; that on the contrary, the parties agreed that it was sufficient, in order to require the continued retention of the Deferred Amount that an opinion from senior counsel of the requisite standing and to the requisite effect be obtained.

63 I am not persuaded by this submission. Whilst I accept that it would have been easy to include a term to the effect that an opinion be made available for inspection by the vendors, it would also have been easy for the parties to have included a term to the effect that the vendors would not press for disclosure of any opinion relied upon for the purpose of establishing a Bona Fide Claim. For this reason, I consider the terms of the Business Sale Agreement and Deed are neutral on this issue.

64 In any case, the contractual terms are not relevant to determining, and cannot affect whether, the 'substance of the evidence' has been disclosed for the purposes of s 122(3). The plaintiffs agreed on the relevant terms of the Business Sale Agreement and the Deed. The plaintiffs elected to rely on the opinion (at least in part). Had they seen fit to do so, the plaintiffs could have obtained and relied upon an opinion prepared solely for the purpose of satisfying the requirements of the definition of Bona Fide Claim presented in a form which did not create any concern should the relevant contents have been required to be disclosed.

65 The question of whether the plaintiffs have obtained an opinion that satisfies the definition of a Bona Fide Claim (namely whether the purchaser has a claim or claims for which it has obtained a legal opinion from senior counsel of the requisite standing 'that the purchaser has reasonable prospects of success of that Claim in a court of relevant jurisdiction') has been squarely put in issue on the pleadings.

66 It may be that the defendants will seek to defend this aspect of the proceeding on the basis that the plaintiffs have not obtained an opinion which meets the requirements of the definition. In my view, even if considerations of fairness were relevant to whether the substance of the evidence has been disclosed, in this case, such considerations would favour disclosure of the opinion to enable the defendants to meaningfully evaluate whether the opinion does meet the requirements of the definition and to plead accordingly.

67 However it does not necessarily follow that the whole of the opinion is to be made available to the defendants for inspection. For the purpose of deciding this application, it has not been necessary to look at the opinion. The opinion may contain advice on matters unrelated to the claims made in relation to the warranties and the indemnities. In my view, waiver has been established only to the extent of the legal advice (including the reasoning) on those points relevant to the prospects of success of the pleaded claims for breach of warranties and indemnities. To the extent that the opinion may relate to other matters, the contents may be redacted. This is to give effect to the policy that the courts will endeavour to protect a client's legal professional privilege and will allow inspection only to the extent of any waiver that is established.[50]

68 In the circumstances, I will make an order requiring production of the opinion for inspection with such redactions as are necessary to reflect these reasons.**

I certify that this and the 20 preceding pages are a true copy of the revised reasons for Judgment of Almond J of the Supreme Court of Victoria delivered on 2 September 2013.

[1] Business Sale Agreement, clause 1.1 definition of 'Bona Fide Claim'.

[2] Affidavit of Scott Chesterman, sworn 25 July 2013 ('Chesterman affidavit'), [4] - [5], [7].

[3] Business Sale Agreement, clause 1.1 definition.

[4] Chesterman Affidavit , [13]-[14] and Exhibit SCC-6.

[5] Chesterman affidavit, [16] and Exhibit SCC-8.

[6] Indorsement of Claim, [32]-[36], Statement of Claim, [63]-[86].

[7] Indorsement of Claim, [37] , Statement of Claim, [87].

[8] Chesterman Affidavit, [12], [19].

[9] Victorian Act, s 131A(2)(e). By virtue of s 4(1)(b), the Victorian Act applies to this proceeding.

[10] Indorsement of Claim, 7(i), [32], [33] and [37]; Statement of Claim [72], [73], [75], [76] (warranties) and [79] and [80] (indemnities), and [87].

[11] [1999] HCA 66; (1991) 201 CLR 1 ('Mann v Carnell') (Gleeson CJ, Gaudron, Gummow and Callinan JJ).

[12] Ibid, 13 [29]. For a useful discussion as to the relevance of common law cases on the question of waiver of privilege under s 122 of the Victorian Act, see Matthews v SPI Electricity Pty Ltd [2013] VSC 33 (13 February 2013) 10-11 [31] - [36].

[13] [2008] HCA 37; (2008) 234 CLR 275 ('Osland v Secretary, Department of Justice').

[14] Mann v Carnell, [1999] HCA 66; (1991) 201 CLR 1, 11, [23]; Osland v Secretary, Department of Justice, [2008] HCA 37; (2008) 234 CLR 275, 298-299 [49]. The version of the Commonwealth Act under consideration in Mann v Carnell provided for circumstances where the substance of the evidence was disclosed by a party knowingly and voluntarily or with that party's consent but did not have a provision equivalent to s122(2) of the Victorian Act dealing with inconsistency.

[15] [2011] NSWSC 353 ('Fenwick').

[18] (1996) 40 NSWLR 12 ('Ampolex').

[20] Stephen Odgers, Uniform Evidence Law, (Lawbook , 10th ed, 2012).

[21] Ibid, 673-674 (citations omitted). Odgers states that the approach in Ampolex was followed in Director of Public Prosecutions v Kane (1997) 140 FLR 468; BT Australasia Pty Ltd v NSW (No 8) (1998) 154 ALR 202, 208-209 (Sackville J) and Doran Constructions Pty Ltd (in liq), Re [2002] NSWSC 215; (2002) 194 ALR 101; [202] NSWSC 215 [116]-[117] (Campbell J).

[22] [1998] FCA 144; (1998) 81 FCR 360 ('Spalvins').

[23] It should be noted that the version of ss 122(2) and 122(4) of the Commonwealth Act under consideration in Spalvins was not the same as ss 122(3)(a) and 122(3)(b) of the Victorian Act. In particular, s 122(2) of the Commonwealth Act did not contain a deeming provision. For present purposes, however, the differences in language are immaterial. The Commonwealth Act has since been amended and is now identical to the Victorian Act.

[24] Spalvins[1998] FCA 144; , (1998) 81 FCR 360, 371 (emphasis added).

[25] [1998] FCA 1655; (1998) 83 FCR 511, 526 (Black CJ and Sundberg J), 525 (Finkelstein J). The High Court approved the Full Court's judgment in Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49, 59-63 [18] - [28] (Gleeson CJ, Gaudron and Gummow JJ). See also Secretary, Department of Justice v Osland (2007) [2007] VSCA 96, 391 [36] (Maxwell P).

[26] [2004] FCAFC 237; (2004) 140 FCR 101 ('Bennett').

[27] Mann v Carnell, [1999] HCA 66; (1991) 201 CLR 1, 13 [29].

[28] Ampolex, (1996) 40 NSWLR 12, 19 (emphasis added).

[29] [2004] FCAFC 237; 2004 140 FCR 101, 105 [13] (emphasis added). Cf Gyles J 119 [65].

[30] [2007] VSCA 96.

[32] [2002] VSCA 197; (2002) 7 VR 524.

[33] [2007] VSCA 96, 394 [49].

[34] [2008] HCA 37; (2008) 234 CLR 275.

[35] [2008] HCA 37; (2008) 234 CLR 275, 298-299 [49] (Gleeson CJ, Gummow, Heydon and Kiefel JJ), 312-313 [97] - [98] (Kirby J), 321 [131] (Hayne J) (citations omitted).

[36] [2006] FCAFC 86; (2006) 151 FCR 341, 354, [45].

[37] Ampolex, (1996) 40 NSWLR 12, 15.

[38] [1991] 1 WLR 660, 668; [1991] 2 All ER 908, 917; cf Goldberg v Ng [1995] HCA 39; (1995) 132 ALR 57, 64; [1995] HCA 39; 69 ALJR 919, 924, 932.

[39] Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd & Ors [1996] HCA 15; (1996) 137 ALR 28, 33 [10].

[40] [1998] FCA 294; (1998) 153 ALR 722.

[41] [1999] NSWSC 694.

[42] [1999] NSWSC 694 [16].

[43] (2000) FCA 1507 ('SVI Systems').

[45] [2004] NSWSC 380 ('Singapore Airlines').

[47] [2010] VSC 61, 16 [8], [38] - [39].

[48] Fenwick, [2011] NSWSC 353 [12].

[49] Mann v Carnell, [1999] HCA 66; (1991) 201 CLR 1, 13 [29]. See also Matthews v SPI Electricity Pty Ltd [2013] VSC 33 (13 February 2013) 10-11 [36] - [37] in which Derham As J states that '[f]airness has become a subsidiary consideration; it may be relevant to the court's assessment of inconsistency in some contexts but not in others' (citations omitted).

[50] Ampolex Ltd v Perpetual Trustee Co Ltd (Canberra) & Ors [1996] HCA 15; (1996) 137 ALR 28, 35 (Kirby J).