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[2001] NSWIRComm 147
Industrial Relations Commission (NSW)
2001-07-01
Boland J, Hodgson CJ, Mr J, Mr P
Original judgment source is linked above.
Industrial Relations Commission of New South Wales in Court Session
CITATION : Gough & Gilmour v Caterpillar of Australia (No. 7) [2001] NSWIRComm 147 FIRST APPLICANT Gough & Gilmour Holdings Pty Limited
SECOND APPLICANT Harcourt David Gough
PARTIES : THIRD APPLICANT Anthony Lansley Gilmour
FIRST RESPONDENT Caterpillar of Australia Limited
SECOND RESPONDENT Caterpillar Inc. FILE NUMBER: IRC 5227 of 2000 CORAM: Boland J Unfair contract - Interlocutory proceedings - Legal professional privilege - Whether Industrial Relations Commission Rules 1996 displace common law in favour of Evidence Act in relation to legal professional privilege as it applies to discovery process - Imputed waiver - State of mind - Whether privilege in relation to material other than legal advice may be waived - Implied waiver - Whether by putting into issue their awareness of legal position applicants impliedly waived privilege in respect of legal advice - Partial waiver - Knowing and voluntary disclosure of privilege material CATCHWORDS : Practice and Procedure - Interlocutory proceedings - Legal professional privilege - Whether Industrial Relations Commission Rules 1996 displace common law in favour of Evidence Act in relation to legal professional privilege as it applies to discovery process - Imputed waiver - State of mind - Whether privilege in relation to material other than legal advice may be waived - Implied waiver - Whether by putting into issue their awareness of legal position applicants impliedly waived privilege in respect of legal advice - Partial waiver - Knowing and voluntary disclosure of privilege material Copyright Act 1968 (Cth) LEGISLATION CITED : Evidence Act 1995 (NSW) Industrial Relations Act (NSW) 1996 Industrial Relations Commission's Rules 1996 Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 Attorney-General for Northern Territory v Maurice (1986) 161 CLR 475 Burnell v British Transport Commission [1956] 1 QB 187 Data Access Corporation v Powerflex Services Pty Ltd (1994) AIPC 91-112 Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49, (1999) 168 ALR 123 General Accident Fire and Life Assurance Corporation Ltd v Tanter [1984] 1 WLR 100 CASES CITED : George Doland Limited v Blackburn Robson Coates & Co [1972] 1 WLR 1338, [1972] 3 All ER 959 Grant v Downs (1976) 135 CLR 674 Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529, [1981] 2 All ER 485 Mann v Carnell (1999) 201 CLR 1, (1999) 168 ALR 86 Murray v Rentworks Ltd [2001] NSWIRComm 132 Nea Karteria Co Ltd v Atlantic and Great Lakes Steamship Corporation [No 2] [1981] Com LR 138 Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 Wayne Lawrence Pty Limited v Hunt & Ors t/a Hunt, Musgrave & Peach (Unreported, Hodgson CJ in Eq, Supreme Court of New South Wales, 19 October 1999), [1999] NSWSC 1044 HEARING DATES: 06/20/2001 DATE OF JUDGMENT: 07/09/2001
APPLICANT: Mr M J Kimber SC with Mr I Taylor and Mr A B Gotting of counsel Solicitor: Mr J Robinson Harmers Workplace Lawyers LEGAL REPRESENTATIVES: RESPONDENT: Mr P M Hall QC with Mr W T Houghton QC and Mr M Connock of counsel Solicitor: Mr A Gooch Mallesons Stephen Jaques
JUDGMENT: - 34 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: BOLAND J 9 July, 2001 Matter No IRC 5227 of 2000 Gough & Gilmour Holdings Pty Limited & ors v Caterpillar of Australia Limited & ANOR Application under s 106 of the Industrial Relations Act 1996 Interlocutory Judgment No. 7 - Legal Professional Privilege -
1 Further to my Interlocutory Judgment No. 3 of 9 April 2001 ([2001] NSWIRComm 73) and Interlocutory Judgment No. 6 of 8 June 2001 ([2001] NSWIRComm 135) as well as a ruling made on transcript on 15 June 2001 regarding legal professional privilege, the doctrine continues to be an issue in the proceedings.
2 Interlocutory Judgment No.3 concerned the question of imputed waiver of legal professional privilege. In that judgment I said: 48 The question in the present proceedings, therefore, is whether it would be fair to the respondent and conducive of ascertaining the truth, to allow the applicants to maintain privilege over any legal advice that may have contributed to their state of mind that, for example, the dealership agreements would not be terminated by 90 days' notice other than on performance grounds of a significant nature or in the event of serious and wilful misconduct on the part of the applicants? What must be balanced against this is the "high status of professional privilege and the careful protection which the law affords it".
49 It seems to me that it would be quite unfair against the respondent for the applicants to contend that, notwithstanding the provision in the dealership agreements going to notice of termination, it was their understanding or belief, based on representations made by the respondent, that their investments in the Caterpillar dealership were secure and that the dealership was of a long term nature, and then rely on the shield of privilege to prevent the respondent from testing the basis for that state of mind, including any relevant legal advice which may have influenced that state of mind. 50 I have come to the conclusion and make a finding that, as a matter of principle, the applicants, or any one of them, should not be entitled to maintain privilege over any relevant confidential communication within the meaning of s 118 or s 119 of the Evidence Act 1995 (NSW) which may have contributed to their state of mind in contending or alleging that an: (a) understanding or belief based on representations made to them that the respondent's right to terminate the dealership under the "with or without cause" 90 day termination provision of the dealership agreements only operated in "with cause" situations, namely, serious and wilful misconduct or sustained and significant poor performance; (b) outlay of extraordinary capital investment and the reinvestment of dividends at various times since 1989 was made on the belief or understanding in (a) above; (c) understanding or belief based on representations made to them that their investments in the Caterpillar dealership were secure and of a long term nature, notwithstanding the termination provisions in the dealership agreements referred to in (a) above. 51 The conclusion I have reached may be taken as encompassing any confidential communication that the applicants may have received in the period either prior to the dealership agreements being entered into or subsequently, which impacted on the understandings or beliefs referred to above. This may include confidential communications provided in relation to finance, undertaking investments or for tax-planning purposes, subject to it being directly relevant to any conduct or decision made by the applicants, or any one of them, in reliance on their understandings or beliefs referred to above. But my conclusion does not encompass any confidential communication sought by the applicants as a consequence of the respondent's decision, first conveyed to the applicants in June 1999, of an intention to terminate the dealership and confirmed by the subsequent termination notice in October 2000, unless it can be shown that the privilege applying to such advice has been lost. If it is contended in respect of any legal advice that privilege has been lost in relation to advice post-June 1999, it may be that I will need to understand the nature of the advice before making any ruling about whether legal professional privilege applies. I so find.
3 In Interlocutory Judgment No. 6 I dealt again with the issue of privilege. The issue arose in relation to the following:
5 The parties made oral submissions and supplemented these with written submissions, the last of these being the applicants' submissions in reply received in Chambers on Monday 2 July 2001. Before going to the respondents' three propositions I should refer to an aspect of the applicants' submission in reply going to the applicability of the Evidence Act 1995 (NSW) to the various issues of legal professional privilege that have arisen in these proceedings.
6 In Interlocutory Judgment No.3 I arrived at the conclusion that in light of the majority decision in Telstra it made no difference whether I applied the common law or the relevant provisions of the Evidence Act to the privilege issues I was called upon to decide. I note that in Wayne Lawrence Pty Limited v Hunt &Ors t/a Hunt, Musgrave & Peach (Unreported, Hodgson CJ in Eq, Supreme Court of New South Wales, 19 October 1999); [1999] NSWSC 1044 his Honour took a similar view in relation to an application by the defendant to inspect certain documents relating to dealings between the plaintiff and its former solicitors and a claim on behalf of the plaintiff resisting such inspection. After canvassing the position as he saw it under s 122 of the Evidence Act, Hodgson CJ in Eq said: Turning to the situation at common law, I think substantially the same position holds. The common law position approaches questions of consent and waiver without the necessity of fitting those questions into the words of s 122; but I think it is fair to say that, if one approaches s 122 in the way in which the majority did in Telstra Corporation v BT Australia (sic), there is very little difference between the two positions.
7 Following Interlocutory Judgments No.s 3 and 6, as new issues relating to privilege arose during the course of proceedings I again raised with the parties the applicability of the Evidence Act. The respondents contended that in relation to ancillary processes, including discovery, the common law applied and not the Evidence Act, consistent with the High Court's decision in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49; (1999) 168 ALR 123. The applicants, as I understood their position, agreed with this contention.
8 In their written submissions in reply on the privilege issue, the applicants submitted that Part 22 of the Industrial Relations Commission's Rules 1996 alters the position in respect of the application of the common law to the discovery process. This was because "privileged document" is defined in r 160 (c) as a document that " could not be adduced in the proceedings over the objection of any person, by virtue of the operation of Part 3.10 of the Evidence Act 1995". The applicants submitted that "Accordingly, questions of privilege arising at the discovery stage are governed by the provisions of the Evidence Act and not the common law." The applicants also adhered to their view put in submissions as summarised by the Court in Interlocutory Judgment No. 3, that the provisions of the Evidence Act applied to privileged documents sought by way of summons. 9 I am not sure that by merely referring to the Evidence Act to define the meaning of a "privileged document" in the context of discovery, the Commission's Rules displace the common law in the manner contended by the applicants. I would wish to hear from the respondents before making any final ruling on the matter.
10 In any event, even if the applicants are correct on this point, if one adopts the approach in Telstra, as I did in Interlocutory Judgments 3 and 6, the common law test of "fairness" applies notwithstanding that the Evidence Act might be applicable in circumstances where it is contended that privilege is waived under the doctrine of imputed waiver.
11 I turn now to deal with each of the applicants' three propositions.
Imputed Waiver 12 The approach I have taken thus far to this vexed question of imputed waiver of legal professional privilege is, I believe, consistent with the authorities. In Attorney-General (NT) v Maurice (1986) 161 CLR 475 Mason and Brennan JJ explained at 487-488 the doctrine of implied or imputed waiver as follows: 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. 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. Professor Wigmore explains: "(W)hen his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder." (Wigmore, Evidence in Trials at Common Law (1961), vol 8, par 2327, p 636.) 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 . Hence, the implied waiver inquiry is at bottom focused on the fairness of imputing such a waiver.
13 Deane J, in the same case, said at 492-493: Waiver of legal professional privilege by imputation or implication of law is based on notions of fairness. It occurs in circumstances where a person has used privileged material in such a way that it would be unfair for him to assert that legal professional privilege rendered him immune from procedures pursuant to which he would otherwise be compellable to produce or allow access to the material which he has elected to use to his own advantage. Thus, ordinary notions of fairness require that an assertion of the effect of privileged material or disclosure of part of its contents in the course of proceedings before a court or quasi-judicial tribunal be treated as a waiver of any right to resist scrutiny of the propriety of the use he has made of the material by reliance upon legal professional privilege. 14 In Mann v Carnell (1999) 201 CLR 1 at 13; (1999) 168 ALR 86 at 94, the High Court (Gleeson CJ, Gaudron, Gummow and Callinan JJ) said: At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client's version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer's evidence as to advice given to the client will be received. Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank , the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. 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.
15 In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 the majority of the Full Court of the Federal Court (Branson and Lehane JJ, Beaumont J dissenting) said that where a party relies on a course of action an element of which is the party's state of mind, including the quality of the party's assent to the 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. The majority said at 166-167: The quality of any particular legal advice, and the extent, if any, to which it was causative of loss and damage, can only properly be assessed once it is placed in the context of the totality of legal advice received by the client. The client, by bringing the proceeding, is taken to have consented to the use of the privileged material, or to have waived reliance on the privilege which would otherwise attach to such material. Reliance on the privileged nature of the material would, in the circumstances, be unjust and would inhibit the proper functioning of the legal process. 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. 16 Within the overarching principles determined by the High Court on this question of imputed waiver and following, in particular, the approach adopted by the majority in Telstra, I have taken the view that where the applicants, or any one of them, have pleaded, or it was their evidence that, in embarking on a course of conduct, they relied on certain representations or assurances made to them by the respondents (or either one of them), and which are critical to the outcome of the case, the applicants have put into issue their state of mind in embarking on that course of conduct. Where a party has put their state of mind into issue the majority in Telstra said: "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 cannot be fairly assessed without examination of relevant legal advice.
17 Thus, for example, the second applicant says that it was his understanding or belief, based on representations made to him by the respondents, that if he did not enter negotiations with a third party to sell his shares in the dealership business, the dealership would be cancelled but that if did he enter the negotiations and failed to get a fair value for his shares, the dealership would not be cancelled.
18 The respondents submitted this was a critical issue in the proceedings because the second applicant contended in his evidence that in the face of these representations he believed he had no option, including implicitly any legal option, but to enter negotiations to sell his shares. The respondents submitted that given the second applicant claimed in the proposed third further amended summons that the representations or assurances made to him in relation to the sale of shares amounted to unfair conduct within the meaning of s 106 of the Act, they are entitled to test the second applicant's state of mind at the time he decided to enter negotiations to determine whether in fact he believed he did have other options, including a legal avenue, to avoid having to enter those negotiations. It was submitted that, if there was legal advice to the second applicant at some time prior to October 2000 (the time when the second applicant says he learned of s 106 as a potential remedy), which informed him of legal options, that advice should be available to the respondents so that they are accorded fairness and to the Court so that it is not misled, and an effective trial on the issue may take place. In my ruling given on transcript on 15 June 2001, I concurred with that submission. As a consequence of that ruling, certain legal advice obtained by the applicants from the law firm Beerworth & Associates was produced to the respondents.
19 The respondents, however, submitted that where the applicants pleaded or put into evidence that they undertook certain action in reliance on a particular representation made by the respondents, it is not only relevant privileged material in the form of legal advice that may have contributed to the applicants' state of mind in respect of which privilege is waived, but also any relevant communication between the applicants and their legal advisers that bears on the applicants' state of mind at the relevant time. Thus, if an executive of the first applicant were to have a telephone conversation with the first applicant's legal adviser bearing on the applicant's state of mind regarding a fact in issue, it is submitted that privilege over that communication has been imputedly waived.
20 I have been most reluctant to impute waiver beyond what I regard the authorities as explicitly permitting. This has meant hitherto, that where I have accepted there has been imputed waiver of privilege, I have limited access to those communications that may be said to have contributed to or influenced the applicants' state of mind. This, necessarily, has excluded communications reflecting or recording the applicants' state of mind such as a telephone conversation recorded in writing by an applicant's legal adviser as to what the applicant may have said, which reflects that applicant's state of mind on a relevant issue at a relevant time.
21 The respondents contend that it is unfair to them and may have the effect of misleading the Court, if the whole picture as to the applicants' state of mind on a relevant issue is not revealed. The applicants on the other hand, submit that even on the wider view expressed by the majority in Telstra regarding the doctrine of imputed waiver, it is only relevant legal advice that may be required to be produced and not communications reflecting or recording a party's state of mind.
22 The reason I have been most reluctant in this case to go beyond ruling that it is only the legal advice in respect of which the privilege is imputedly waived, is the fundamental importance of the doctrine of legal professional privilege. As Gibbs CJ said in Maurice at 480: "Without the privilege, no one could safely consult a legal practitioner and the administration of justice in accordance with the adversary system which prevails at common law would be greatly impeded or even rendered impossible."
23 In Mann v Carnell, at 201 CLR 35 to 39 McHugh J contended that the ambit of legal professional privilege should be confined to only the extent that is necessary to meet its rationales. In doing so his Honour referred to Grant v Downs (1976) 135 CLR 674 at 685 where Stephen, Mason and Murphy JJ said: The rationale of this head of privilege [lawyer-client communications made for the purpose of giving or obtaining legal advice], according to traditional doctrine, is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor. 24 McHugh J also referred to the rationale for the head of privilege that protects communication from a third party to the client or the lawyer made in connection with the litigation. His Honour went on to say at 36-37: Important though these rationales are, they nevertheless represent an exception to the common law's pursuit of the truth. Legal professional privilege is "the product of a balancing exercise between competing public interests" ( Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 583 per Kirby J), those competing public interests being the rationales for the privilege on the one hand and the search for truth on the other hand. In Attorney-General (NT) v Maurice , Mason and Brennan JJ described the principle (at 487) thus: "Because of [the] 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 , per Stephen, Mason and Murphy JJ." That being so, in my opinion any common law doctrine which would extend the scope of legal professional privilege must not go beyond the rationales for the privilege. Any extension of the scope of the privilege beyond that which is necessary for its rationales to be realised is an abrogation of the common law's basal pursuit of the truth which is not justified by any countervailing consideration. 25 I refer to what McHugh J said in Mann v Carnell for the purpose of highlighting the competing considerations of pursuit of the truth and legal professional privilege. This is the very dilemma I am confronted with in these proceedings. If I were to rule, in the context of imputed waiver in these proceedings, that communications between the applicants and their legal advisers, other than the legal advice that may have influenced the applicants' state of mind, is not subject to privilege am I endangering the rationale of legal professional privilege? On the other hand, if I rule that such communications are subject to privilege, am I abrogating the pursuit of truth?
26 Where I have ruled that under the doctrine of imputed waiver that a communication between the applicants and their legal advisers is no longer subject to privilege, it seems to me that, if I were also to rule that privilege had been waived in respect of any other communication between the applicants and their legal advisers bearing relevantly on the applicants' state of mind, I am encroaching no further on the rationale underpinning legal professional privilege than I otherwise have already. In other words, by ruling that privilege has been waived in respect of certain legal advice from the solicitor to the client, which may have influenced the client's state of mind, I have thereby intruded on the confidence between solicitor and client. To further rule that communications from the client to the solicitor in respect of the same matter that is the subject of the legal advice, does not, in my opinion, amount to any greater intrusion than is already the case.
27 Moreover, an analogy might be drawn with those cases where privilege has been waived in respect of part of a communication and access is sought to the whole communication. In Maurice, at 482 Gibbs CJ referred with approval to a statement of Templeman LJ in Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 at 538-539; [1981] 2 All ER 485 at 492: …the rule that privilege relating to a document which deals with one subject matter cannot be waived as to part and asserted as to the remainder is based on the possibility that any use of part of a document may be unfair or misleading, that the party who possesses the document is clearly not the person who can decide whether a partial disclosure is misleading or not, nor can the judge decide without hearing argument, nor can he hear argument unless the document is disclosed as a whole to the other side. Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased. 28 Based on this analogy it could be said that a party, having gained access to certain legal advice given to the other party by his or her legal advisers because privilege had been imputedly waived, should also have access to related relevant material in respect of which privilege is claimed, otherwise there is risk of injustice.
29 The conclusion I have, therefore, reached is that where: (a) There has been a communication passing between the applicants or any one of them and a lawyer for the dominant purpose of enabling the lawyer to provide legal advice to the applicants or where there have been communications between lawyers or the applicants and a third party (including the applicants' employees and agents) made for the dominant purpose of providing or receiving legal services in connection with pending or anticipated litigation; and (b) The communication includes legal advice that may have contributed to the applicants' state of mind; and (c) It has been ruled by the Court or conceded by the applicants that, in respect of the legal advice, privilege has been waived on the basis that the applicants or any one of them has put in issue his state of mind, privilege is waived in respect of the whole of the communication except those parts or aspects of the communication that may contain other legal advice and material, related to that other legal advice, that does not bear on the issue of state of mind. 30 Thus, for example, if one of the applicants sought, or caused to be sought, legal advice from a lawyer and privilege has been determined to have been waived under the imputed waiver rule in respect of the legal advice, any privilege attaching to relevant associated communications between the applicant and the lawyer, before or after the giving of the legal advice, is also waived. 31 This formulation, which requires all three requirements to be met, is I think, in the circumstances, an appropriate compromise between the competing considerations of maintaining privilege and seeking out the truth.
32 The second broad proposition upon which the respondents rely is that where a party, by pleadings or evidence, makes an assertion regarding their awareness or otherwise as to what is their legal position, privilege is waived as to any communication between the party and his or her legal advisers regarding that legal position.
33 In his oral submissions on the issue Mr M Connock of counsel for the respondents said: It has been expressly put in issue, and used in support of an application for substantive relief, that the applicants were unaware of their legal position until it was said in the affidavit of October 2000 … in circumstances where it is now clear that advice to Gough & Gilmour was given much earlier than that. So the party seeks to pray in aid of substantive relief an ignorance of legal rights in one form or another. Therefore, it must be, it is submitted, that implied waiver will operate in respect of documents relevant to an awareness of the legal position at the time. 34 It cannot be the case, in my opinion, that simply because the applicants make a statement in their evidence or pleadings regarding their awareness or otherwise of their legal position in respect of a fact in issue in the proceedings, that privilege may be said to have been waived. There has to be something more to it if privilege is to be regarded as impliedly or imputedly waived. In my view the respondents would have to show that the circumstances fell within the 'state of mind' class of case or the implied waiver doctrine as espoused in Maurice and Mann v Carnell.
35 As I understand Mr Gough's evidence it was that following the conversation with Mr Curfman on 8 June 1999, he was left with the clear impression that unless he entered into negotiations to sell the business, the first respondent would cancel the dealership agreements. At par 272 of Mr Gough's affidavit of 31 January 2001 he deposed that: It was my understanding, based on the conversations referred to above, that unless G&G entered negotiations to sell its business to a purchaser nominated by C of A, we would face the cancellation of the dealership agreement. As such, we felt we had no alternative but to enter negotiations with the potential purchaser or purchasers selected by C of A.
36 At par 383A of his affidavit, Mr Gough deposed that: During this same period [October 2000] G&G became aware, for the first time, of s 106.
37 At par 333 of his affidavit, Mr Gough deposed that he had a conversation with Mr Owens, the Chairman of the second respondent in February 2000: At the end of the conversation with Mr Owens, I was left with no doubt whatsoever that CofA expected G&G to do a deal with ACE, even if the terms offered by ACE were unreasonable, and that G&G would face cancellation unless this occurred. In other words, it was then clear to me that CofA had no intention of honouring its repeated assurances to me that G&G would only be required to sell on fair and reasonable terms and that CofA would assist G&G to achieve such an outcome.
38 At pars 128 and 129 of his affidavit of 31 January 2001 Mr Gilmour stated: On 26 October 2000, G&G was served with notices from C of A dated 25 October 2000, purporting to terminate our Sales and Service Agreement, Distribution Agreement for Engines, Parts and Service and Product Support Agreement for Engines, Parts and Service, on 90 days notice.
On our instructions, our solicitors commenced these proceedings on 27 October 2000. I first learnt of s 106 of the Industrial Relations Act in mid October 2000. 39 The state of mind of the second and third applicants as to their position regarding negotiations to sell the business, is summed up at par 31 of the proposed third further amended summons, which states: The second and third applicants were led to believe by the first respondent that unless they entered negotiations with Westrac to sell the business, they would face the cancellation of the dealership. In the circumstances, they felt they had no alternative but to enter negotiations to sell their shares in the first applicant.
40 This state of mind changed on 7 February 2000, following the conversation with Mr Owens. From then on Mr Gough believed that not only did he have no choice other than to enter negotiations to sell his shares but now he had no choice other than to sell, regardless of whether he achieved fair value, or the dealership would be cancelled. 41 Mr Jamie Robinson, a partner with Harmers Workplace Lawyers, gave evidence that on 11 June 1999 his firm raised with Mr Gilmour and other executives employed by the first applicant "the possibility pursuant to section 106 of the Industrial Relations Act (NSW) 1996 of challenging Caterpillar's stated objective of having the Second Applicant leave the dealership." There was also evidence from the second applicant that on or about 8 June 1999 Beerworth & Associates were engaged to provide advice to the applicants regarding possible remedies under trade practices legislation and Gilbert & Tobin had also been engaged to provide legal advice on termination of the dealership.
42 The respondents submitted that they are entitled to know whether the applicants were advised that they did in fact have a legal alternative to entering negotiations and what the nature of that advice was. That is, whether they had legal advice that they could (or could not) challenge what was allegedly an initial ultimatum given in June 1999 by the first respondent (whether expressed or implied) that if the applicants did not enter negotiations to sell their interests in the dealership it would be cancelled and, after February 2000, a further ultimatum that regardless of what price they received, if the applicants did not sell their interests, the dealership would be cancelled. The respondents contended that this was a critical issue, because if the applicants were aware of a legal option prior to October 2000 but chose not to exercise it, this may have implications for any findings relating to unfairness as well as to questions of compensation if this were to ultimately arise.
43 The applicants contended, firstly, that even if it could be said that they had put in issue legal advice as to their position regarding the sale of the business, it was only advice regarding s 106 of the Act and not legal advice at large. Secondly, that the Court would not need to determine whether the second and third applicants knew of s 106 at any particular point of time and so legal advice as to their options in respect of the sale of the business is not a matter in issue in the proceedings.
44 I do not think there is any doubt that one of the matters put into issue is the awareness of the applicants as to their legal position on being advised to sell their interests in the dealership. The applicants asserted in their pleadings and evidence that they were not aware prior to October 2000 (or perhaps a few months earlier) of their legal position in the face of the respondents' alleged ultimatums. On the other hand, there was evidence that legal advice was sought and/or provided to the applicants as early as June 1999.
45 In these circumstances, by asserting a belief that there was no alternative but to enter negotiations and that they were not aware of an alternative (in the form of s 106) until October 2000 (or thereabouts), the applicants have put into issue the question of legal advice regarding s 106 that may have been received by them between 8 June 1999 and October 2000. Evidence that there was legal advice in relation to the termination of the dealership gives rise to the prospect of an inconsistency, I think, between the conduct of the applicants and maintenance of the confidentiality of the legal advice regarding options available to the applicants in the face of a threat to cancel the dealership.
46 This is not, in my opinion, a marginal issue. The applicants have contended that initially they were led to believe they had no choice other than to enter negotiations to sell the business but that if they could not achieve a fair value, the dealership would not be cancelled. However, the applicants contended that after February 2000 the respondents reneged on these alleged assurances and put the applicants in the position that if they did not sell, regardless of what price they achieved, the dealership would be cancelled. The applicants contended that this amounted to unfairness and seek orders from the Court that, in effect, seek to have the dealership agreements maintained, albeit subject to significant amendments to overcome what the applicants assert are unfair provisions. In the alternative, the applicants seek compensation.
47 The applicants seek to make out a substantial case based on the alleged unfair conduct of the respondents. In doing so, the applicants have pleaded that they were put in the position by the respondents of having no alternative, and were not aware of any legal alternative until the latter half of 2000, other than to enter negotiations to sell and, later, to sell regardless of whether they achieved a fair price. There is evidence that the applicants did in fact receive legal advice about their alternatives. In assessing whether there was unfairness and what might be an appropriate remedy, if any, it is necessary for the Court to consider not only the conduct of the respondents but also the conduct of the applicants. Given that, on the one hand, the applicants have contended they did not become aware of their legal position regarding alternatives until at least twelve months after the first of the alleged ultimatums were given to them regarding the sale of the business but on the other hand the evidence is that they received legal advice contemporaneously with the first of the ultimatums, it is only fair and reasonable that the respondents and the Court know when legal advice was given that bears on the question of alternatives and what that advice was.
48 I think, therefore, what the respondents contend about the legal advice in relation to s 106 is correct. The question of the applicants' knowledge and belief as to their legal rights and options in the context of their pleadings and evidence that they had no alternative but to sell the business is directly relevant to what the Court is required to determine.
49 In Data Access Corp v Powerflex Services Pty Ltd (1994) AIPC 91-112 at 38,714 the issue of legal professional privilege arose in a claim for breach of copyright in relation to computer programs. The allegations contained in the applicant's amended statement of claim included a pleading that certain acts involving alleged infringements of copyright "were done flagrantly and with knowledge of the applicant's copyright". The allegation was denied in the defence. The flagrancy of an infringement was relevant for the purposes of assessing damages for infringement under the Copyright Act 1968 (Cth). The applicants sought to have produced for inspection certain legal advice and correspondence listed in the respondent's Affidavit of Particular Discovery. The advice and correspondence included legal advice from a solicitor expert in computer copyright law to the respondents in response to a request for advice as to whether their product would breach the applicant's copyright. The advice "was quite pessimistic as to the respondent's prospects of avoiding committing an infringement of copyright". Heerey J said that "the advice raises doubts as to whether an infringement action could be successfully defended."
50 Importantly, his Honour went on to say: 5. On that basis I think the applicant succeeds in its argument that the raising of the issue of flagrancy, in the pleading which I have mentioned, makes the advice relevant. The principle is covered by the decision of Smith J of the Supreme Court of Victoria in Hong Kong Bank of Australia Limited v Murphy (1993) 2 VR 419 at 435 and following. In particular, his Honour refers to a decision of the Full Court of the Supreme Court of New South Wales in Thomason v The Council of the Municipality of Campbelltown (1939) 39 SR (NSW) 347. An issue raised on the pleadings may have the effect that documents which would otherwise be subject to legal professional privilege lose that privilege because they have been, as the saying goes, pleaded into relevance. Thomason 's case shows that such a situation is not confined to the case where the party seeking to assert privilege raises a positive case. In Thomason the plaintiff brought a Lord Campbell's Act claim and the defendant pleaded election, that is to say, the old statutory defence that the taking of worker's compensation benefits with requisite knowledge defeated a common law claim. Evidence was admitted of communications between the plaintiff and her legal advisers because they went to the question of her knowledge. 6. It seems here that the issue of flagrancy has been raised on the pleadings and the question of the respondent's knowledge and belief as to the legal rights of the applicant are directly relevant. That there are no doubt other issues of fact and law in the case does not, as the respondents' counsel argued, make the issue of flagrancy merely a "marginal" one. 7. There is another basis on which I think the privilege has been lost, namely implied waiver. The leading case on waiver is the decision of the High Court in Attorney General for Northern Territory v Maurice (1986) 161 CLR 475 The members of the High Court there stressed the element of fairness. In the judgment of Mason and Brennan JJ at p.487 their Honours said: "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."
51 I think this case is helpful in confirming that the approach I have taken in these proceedings is correct.
52 The outstanding question I have to determine is whether the applicants have waived privilege in respect of legal advice they may have received on alternatives other than s 106 of the Act. The respondents submitted, of course, that they have waived this privilege, because of the evidence and pleadings to the effect that the applicants believed they had no alternative but to sell the business, which the respondents submitted, impliedly includes any legal alternative whether it was pursuant to s 106 or some other remedy under trade practices legislation, for example.
53 There is evidence that the applicants sought and received legal advice from Beerworth & Associates and from Gilbert & Tobin relating to termination of the dealership. If this advice goes to s 106, then it comes within the scope of what I have already had to say. If it is advice on legal options other than s 106 I do not see why, in the context of waiver, it should be regarded any differently from what I have said about advice going to s 106.
54 The applicants referred to the decision by Glynn J in Murray v Rentworks Ltd [2001] NSWIRComm 132 where her Honour, in the context of imputed or implied waiver of privilege, highlighted the important distinction between a mere statement made in a pleading or in evidence on the one hand, and on the other hand putting a matter into issue in a pleading or in evidence. I respectfully agree with the distinction her Honour makes. It seems to me, however, that the conclusion is unavoidable that where a party claims in its pleadings and evidence it was not aware of its legal position in respect of a matter that may have an important bearing on the outcome of the proceedings, and the evidence suggests the party did receive legal advice, that legal advice has been put in issue; it gives rise to an inconsistency between the conduct of the applicants and the maintenance of confidentiality of the relevant legal advice.
55 In the circumstances of the present case, I think fairness demands that where: (a) There has been a communication passing between the applicants or any one of them and a lawyer on or after 8 June 1999 and before 27 October 2000 for the dominant purpose of enabling the lawyer to provide legal advice to the applicants or where there have been communications in the same period between lawyer or the applicants and a third party (including the applicants' employees and agents) made for the dominant purpose of providing or receiving legal services in connection with pending or anticipated litigation; and (b) The communication includes legal advice in relation to alternatives or options available to the applicants in the face of an express or implied threat by the respondents, or either one of them, to cancel the dealership, privilege is waived in respect of the whole of the communication except those parts or aspects of the communication that do not bear on the alternatives or options referred to in (b) hereof.
Partial Waiver 56 The third broad proposition upon which the respondents rely is that where there had been an intentional waiver of a privileged communication between an applicant and legal adviser A, it would be unfair to the respondents if privilege were maintained over other relevant communications that bear on the applicants' state of mind or on an assertion regarding their awareness or otherwise as to what is their legal position, notwithstanding that the other communications are between the applicant and legal advisers B and C. 57 It is necessary to explain how this issue arose and this is neatly summarised in the applicants' submissions on the matter:
58 In Maurice, Gibbs CJ said at 484: The case is not one in which the disclosure of a document, or the giving of evidence, without the disclosure of associated material, would give a partial or misleading picture, or would otherwise prejudice or embarrass the appellant in the conduct of the case. 59 Whilst Gibbs CJ did not define what he meant by 'associated material' it would appear that in the context of what he was required to determine in Maurice he meant the background or source materials of the Claim Book. In other words, materials that were part of or had some intrinsic connection with the document in respect of which privilege has been waived and without which a partial or misleading picture might be created. It does not seem to me that his Honour's judgment is to be read so as to require disclosure of any or all privileged documents that may have some bearing on the subject matter dealt with in the document in respect of which privilege has been waived. 60 At 488 Mason and Brennan JJ said: The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication. Professor Wigmore explains: "(W)hen his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder.' (Wigmore, Evidence in Trials at Common Law (1961), vol 8, par 2327, p 636.)" 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 . Hence, the implied waiver inquiry is at bottom focused on the fairness of imputing such a waiver.
61 The proposition that may be drawn from their Honours' judgment is that partial waiver of a privileged communication would usually result in waiver of the rest of that communication on the matter that was the subject of the partial waiver. It does not go so far as to require waiver of a communication which, while it may address the same subject matter of the communication in respect of which there has been partial waiver, is a separate communication emanating from a different source.
62 In Maurice at 482, Gibbs CJ referred to a statement by Mustill J in Nea Karteria Co Ltd v Atlantic and Great Lakes Steamship Corporation [No 2] ([1981] Com LR 138 at 139) which was as follows: …where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood.
63 This statement by Mustill J cannot, with respect, be taken at face value to mean that if a party adduces in court material that would otherwise be privileged, that party must produce all of the material that may be relevant to the issue in question. Mustill J held that where a party puts to a witness in cross-examination a previous statement of the witness in which he made reference to a statement of another person in respect of which privilege could be claimed, that latter statement has not thereby become part of the material before the court and so remains privileged. However, where a lawyer gave evidence that he conducted an interview on the basis of a list of questions prepared by the plaintiff's solicitors, privilege had thereby been waived in respect of those questions. Mustill J said at 140: It seems to me that the written questions were, so to speak, part of the meeting. They were in a sense an agenda for the meeting. They formed the basis for one-half of the exchange between lawyer and the seaman. Evidence to that effect having been given by the lawyer, it seems to me that privilege must have been waived for those questions. And I think the interests of justice, which I believe to underlie the authorities on this part of the case, demand that the opposition and the court should have an opportunity to satisfy itself as to the accuracy of the evidence given by the lawyer as to the way in which he conducted the interview.
64 The earlier quoted statement of Mustill J as to the requirement to release "the whole of the material relevant to the issue in question" was made in the context of a discrete episode where privilege relating to what a seaman had said in an interview with a lawyer had been waived and the issue for Mustill J was whether privilege in respect of the whole of the interview, including the questions put to the seaman, should be waived. This seems to be quite different to the issue in the present proceedings. I note in Nea Karteria that Mustill J was also asked to determine whether privilege had been waived in respect of the instructions by the English solicitors to the Greek lawyer who conducted the interview with the seaman. Mustill J held that those "instructions did not play a part in the meeting" and therefore privilege had not been waived. Thus, Mustill J saw a definite limit to what material might be the subject of waiver of privilege.
65 Gibbs CJ in Maurice also referred to a decision by Hobhouse J in General Accident Fire and Life Assurance Corporation Ltd v Tanter [1984] 1 WLR 100 and questioned whether Hobhouse J was correct in saying that there is no waiver of associated material until that material is adduced in evidence. Gibbs CJ regarded the rule as "not so inflexible". However, there was no criticism of another statement by Hobhouse J at 115, where his Honour said: …once evidence is adduced it gives rise to a right to cross-examine freely and fairly with regard to the transaction in respect of which the document is adduced or the evidence is called. The principle applies to the introduction of both the documentary and oral evidence. Fairness requires that the opposite party shall be entitled to investigate by cross-examination the transaction and therefore be entitled to ask for and see documents that are relevant to that transaction. But the requirements of fairness do not go beyond that; no conclusion is to be drawn from the use by Mustill J. or indeed by the Court of Appeal, of language such as "the whole of the material" or "the whole of the material and not merely a fragment" to extend the principle beyond the actual transaction so as to include the matters which are merely referred to in the relevant communication (my emphasis). That is the essence of the decision of Mustill J and any other conclusion would be a departure from his decision. 66 It is also to be noted that the statement of Mustill J, quoted by Gibbs CJ in Maurice, was said by Mustill J to be consistent with Burnell v British Transport Commission [1956] 1 QB 187. Burnell was concerned with whether, by waiving privilege in respect of part of a statement, privilege was waived in respect of the whole of the statement.
67 In Burnell, Denning LJ (with whom the other members of the Court agreed), said at 190: It seems to me that the judge was correct, because although this statement may well have been privileged from production and discovery in the hands of the Transport Commission at one stage, nevertheless when it was used by cross-examining counsel in this way, he waived the privilege certainly for that part that was used; and in a case of this kind, if the privilege is waived as to part, it must I think, be waived also to the whole. It would be most unfair that cross-examining counsel should use part of the document which was to his advantage and not allow anyone, not even the judge or the opposing counsel, a sight of the rest of the document much of which might have been against him.
68 In Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529; [1981] 2 All ER 485 Templeman LJ, after referring to what Mustill J had said in Nea Karteria, said at [1981] 1 WLR 538; [1981] 2 All ER 492: I agree and would only add that it would not be satisfactory for the court to decide that part of a privileged document can be introduced without waiving privilege with regard to the other part in the absence of informed argument to the contrary and there can be no informed argument without the disclosure which would make argument unnecessary. Counsel for the plaintiffs attempted to distinguish the decisions in Burnell v. British Transport Commission and George Doland Limited v. Blackburn Robson Coates & Co. on the grounds that it was necessary in those cases for the whole statement to be disclosed in order that the consistency of the testimony of a witness could be scrutinised. In my judgment, however, the rule that privilege relating to a document which deals with one subject matter cannot be waived as to part and asserted as to the remainder is based on the possibility that any use of part of a document may be unfair or misleading, that the party who possesses the document is clearly not the person who can decide whether a partial disclosure is misleading or not, nor can the judge decide without hearing argument, nor can he hear argument unless the document is disclosed as a whole to the other side. Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased. 69 Nea Karteria, Burnell, George Doland Limited v Blackburn Robson Coates &Co [1972] 1 WLR 1338; [1972] 3 All ER 959 and Great Atlantic Insurance Co dealt only with the position where there had been a disclosure of part only of a privileged communication during the course of a hearing; they did not deal with the position of those documents that may be "associated" with documents that have been produced.
70 It seems to me, therefore, that what the cases say on this question of partial waiver is, with respect, summed up succinctly by Mason and Brennan JJ in Maurice at 488, namely: 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. 71 However, in my opinion, this principle does not go "beyond the actual transaction so as to include the matters which are merely referred to in the relevant communication" (General Accident Corporation v Tanter, per Hobhouse J at 115).
72 In applying the principle to the present proceedings, Mr Robinson made an affidavit, with annexures, that represented a knowing and voluntary waiver of privilege in respect of certain communications between the applicants and Harmers Workplace Lawyers. He was cross-examined on his affidavit. Mr Robinson's affidavit referred to certain legal advice that Harmers had given to the applicants. These communications may be regarded as the "transaction" in respect of which fairness required the applicants to produce the rest of the communication regarding that transaction. In fact, Mr Robinson's affidavit and the annexures did reveal the whole of the communications between the applicants and Harmers on the relevant subject matter. However, the affidavit and annexures also referred to certain communications between the applicants and other legal advisers. I regard these other communications to be outside the transaction in respect of which privilege should be waived. I do not consider that the requirements of fairness should result in privilege being waived in respect of communications between the applicants and legal advisers other than Harmers, merely because those communications are referred to in communications between the applicants and Harmers in respect of which privilege has been waived.
73 The communications between the applicants and legal advisers, other than Harmers, are entirely separate transactions and, in my opinion, cannot be seen as forming part of a discrete series of communications in the context of the partial waiver rule. In any event, it is open to the respondents to contend that, consistent with my earlier rulings regarding the application of the imputed waiver rule and 'awareness of legal position', privilege has been waived in respect of all or part of relevant communications between the applicants and legal advisers such as Beerworth & Associates and Gilbert & Tobin.
74 The applicants in their written submissions in reply raised the question of whether the provisions of the Evidence Act apply in circumstances where privilege has been waived in respect of material put into evidence in the Robinson affidavit and the annexures to it. Assuming for the moment that the Evidence Act does apply, s 122 requires knowing and voluntary disclosure of the substance of the evidence by the privilege holder before it could be said privilege had been waived. Putting aside the fact that the decision in Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 was overturned by the High Court in Esso Resources Ltd v Federal Commissioner of Taxation on the ground that the Evidence Act did not apply to the discovery stage, the Full Court of the Federal Court (Olney, Kiefel and Finn JJ) in Adelaide Steamship held that the test under s 122(4) of that Act was a quantitative one. At 426 the Full Court also said: It should, additionally, be said of the subsections' quantitative test that its application may result in privilege being lost in respect of a discrete part or aspect of a confidential communication or confidential document where the matter disclosed only relates to, or else relates sufficiently to, that part or aspect.
75 Having examined the affidavit of Mr Robinson and his evidence in the proceedings, it does not seem to me that the applicants have knowingly and voluntarily disclosed the substance of the legal advice that may have been provided by Beerworth & Associates or by Gilbert & Tobin. The material does no more than refer to the legal advice that the applicants sought and/or received from these two firms but it does not disclose its substance.
76 The parties are directed to confer on the rulings in this judgment. The matter is relisted for directions at 10.00 am on Friday 20 July 2001.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Gough & Gilmour
Caterpillar of Australia
(1998) 152 ALR 418
(1986) 161 CLR 475
(1999) 201 CLR 49
(1999) 168 ALR 123
(1976) 135 CLR 674
(1999) 201 CLR 1
(1999) 168 ALR 86
(1998) 85 FCR 152
(1997) 188 CLR 501
(1993) 2 VR 419