Fort Dodge Australia Pty Limited v Nature Vet Pty Limited

REASONS FOR JUDGMENT 1 Fort Dodge Australia Pty Limited ("Fort Dodge") was the owner of premises at Glenorie which were used as a laboratory for the manufacture of animal viral vaccines. On 8 June 2001 Fort Dodge agreed to sell the property to Nature Vet Pty Limited ("Nature Vet"). The contract was completed by transfer on 29 June 2001. Special Condition 43 of the contract provides as follows: "In consideration of the agreement to sell by the Vendor, the Purchaser for itself and its related corporations hereby covenants with the Vendor and its assigns that for a period of 10 years from the date of completion it will not use nor will it permit any of its related corporations to use the Property for the purpose of the manufacture of animal viral vaccines." 2 On 11 September 2001 Nature Vet entered into a lease with Bioproperties (Australia) Pty Limited ("Bioproperties") of part of the property. Fort Dodge claims that Nature Vet and Bioproperties intend that Bioproperties will use the property for the purpose of manufacturing animal viral vaccines. 3 Fort Dodge commenced proceedings against (inter alia) Nature Vet and Bioproperties. In these proceedings Fort Dodge contends that Nature Vet breached Special Condition 43 by entering into the lease with Bioproperties, thereby permitting the property to be used for the purpose of the manufacture of animal viral vaccines, contrary to the terms of the restrictive covenant. In the alternative, Fort Dodge claims that the contract for sale should be rectified so as to embody the true contractual intention of the parties by the insertion of the words "or permit the property to be used" after the words "will not use" in Special Condition 43. 4 Fort Dodge also alleges that Nature Vet engaged in misleading or deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth), by representing to Fort Dodge over a period preceding entry into the contract of sale that if Nature Vet were to purchase the Glenorie property it would not permit the property to be used for the purpose of the manufacture of animal viral vaccines, nor would it lease the property to Bioproperties, whereas in truth, Nature Vet intended to lease the property to Bioproperties from at least September 2000. 5 In its defence, Nature Vet pleads an estoppel by way of convention (pars 57-59), and an estoppel by representation (pars 60-64). In each case it is alleged that Fort Dodge is estopped from: (a) contending that Special Condition 43 has (or if rectified would have) the operation for which Fort Dodge contends in the proceedings; (b) alleging that but for Nature Vet's conduct Fort Dodge would not have entered into the contract and completed the sale of the property to Nature Vet; and (c) claiming any of the relief sought in the proceedings. 6 The estoppel by convention defence is based upon an assertion that from 26 April until 14 August 2001 Nature Vet and Fort Dodge conducted the relationship between them upon the basis of an agreed or assumed state of facts. The estoppel by representation is based upon an assertion that on or about 26 April 2001 Fort Dodge represented those same facts to Nature Vet, and in reliance upon that representation, Nature Vet entered into the contract, gave Special Condition 43 and entered into the lease in favour of Bioproperties. Fort Dodge allegedly represented to Nature Vet that: (a) Nature Vet for a period of ten years from the date of completion of the contract would be obliged not to use, nor to permit any of its related corporations to use, the property for the purpose of the manufacture of animal viral vaccines; (b) entry by Fort Dodge and Nature Vet into the contract, and performance of their obligations under the contract, would not be, and/or would not require either of them to act, in contravention of the Trade Practices Act 1974; (c) Nature Vet's covenant in Special Condition 43 would not bind third parties (other than related corporations); and (d) performance by Nature Vet of its obligations under the contract, would not prevent it from permitting successors in title or assignees of the property (other than related corporations) from using it for the purpose of the manufacture of animal viral vaccines. 7 Nature Vet thus propounds a positive case that it entered into the contract with Fort Dodge on the faith of representations by Fort Dodge as pleaded in (a) - (d) above. In so doing, Nature Vet raises as an issue in the proceedings its state of mind with respect to those matters at the time of entry into the contract, and at the time of entering into the lease to Bioproperties. 8 Nature Vet has discovered certain documents and its solicitors, Coleman & Greig, have produced certain other documents on subpoena over which claims of legal professional privilege are made by Nature Vet. Certain of the discovered documents over which legal professional privilege is claimed were also produced by Westpac on subpoena, but it is no longer alleged that the provision of those documents by Nature Vet to Westpac operated as a waiver of any privilege. It is now accepted that legal professional privilege attached to the documents for which privilege is now claimed at the time of their creation, and the issue for determination is whether by pleading the defences to which I have referred, Nature Vet has impliedly waived that privilege. 9 During the course of the argument, it became common ground that the question for my determination is whether Nature Vet has waived privilege in relation to any contemporaneous legal advice with respect to any of the four matters ((a) - (d) above) which form the basis of the alleged estoppels. It also became common ground that if privilege has been waived, then the onus is on Nature Vet to produce masked copies of the documents which would expose the material with respect to which privilege had been waived, whilst maintaining the confidentiality of the balance of the documents. It has therefore not been necessary for me to examine any of the documents with respect to which privilege has been claimed, and it was not submitted by either party that I should do so. 10 The issue is one of waiver of privilege at common law, rather than by reference to s 122 of the Evidence Act 1995 (Cth) ("the Act"). However, there is little difference between the issue as to whether a party has given its implied "consent" to the disclosure of the substance of the evidence over which privilege is claimed (as that term is used in s 122 of the Act and whether a party's conduct amounts to an imputed waiver at common law: Garratt's Ltd v Thanga Thangathurai [2002] NSWSC 93 per Bergin J at [51]. 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: Mann v Carnell (1999) 201 CLR 1 at 13. 11 By its pleading, Nature Vet has introduced as an issue in the proceedings its state of mind at relevant times in relation to the matters referred to in par 60(a)-(d) of the defence. Nature Vet thus opened up for examination and testing the source of, and basis for, that state of mind. Where a party makes allegations raising the issue of its state of mind, to which legal advice is likely to have contributed, the party cannot continue to claim legal professional privilege for that advice: Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405. 12 In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152Branson and Lehane JJ said at 166-167: "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." See also Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] FCA 925. 13 Counsel for Fort Dodge helpfully prepared a chronology, a copy of which is attached, which synthesises the documents for which privilege is claimed (in bold type) with the documents particularised as the basis for the estoppels in question. It is clear from that chronology that contemporaneous legal advice was given to Nature Vet by its solicitors with respect to Special Condition 43 in its draft form and in its final form. 14 The introduction by Nature Vet of the issue as to its state of mind with respect to the matters referred to in par 60(a)-(d) of the defence into the proceedings is inconsistent with the continued maintenance of confidentiality of contemporaneous legal advice as to those matters. It is beside the point that Nature Vet may have introduced this issue into the proceedings in response to claims by Fort Dodge that Special Condition 43 of the contract does not mean what it appears to say, or that it should be rectified so as to produce that result. 15 Accordingly, I conclude that Nature Vet has waived privilege in relation to contemporaneous legal advice with respect to the matters raised in par 60(a)-(d) of the defence or which bears upon those matters. 16 The conduct on the part of Nature Vet which is inconsistent with the maintenance of the privilege is the raising of the matters to which I have referred by Nature Vet's defence. In those circumstances, it is not appropriate to defer Fort Dodge's entitlement to inspect the documents as to which privilege has been waived until some later stage in the proceedings. There is no suggestion on the part of Nature Vet that it proposes to resile from the defences which it has raised, and which result in the waiver of the privilege. 17 A practical way of giving effect to this conclusion is for me to direct that the solicitor for Nature Vet should file and serve an affidavit: (a) that he or she has inspected the documents in bold in the attached chronology; (b) attaching a copy of those documents in which any material in relation to which there has been a waiver of privilege in terms of this ruling is exposed, but material which remains the subject of legal professional privilege is masked; (c) stating that the masked material does not relate to or bear upon the matters referred to in par 60(a)-(d) of the defence. 18 If the solicitor is in any doubt as to the side of the line on which any part of the documents falls, then the matter should be referred to me for determination. If there is any practical difficulty associated with the direction which I propose, I will hear argument on that question. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.