Gough & Gilmour v Caterpillar of Australia

Gough & Gilmour v Caterpillar of Australia - [2001] NSWIRComm 147 - NSWIRComm 2001 case summary — Zoe

[6]

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

[11]

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.

[22]

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.

[23]

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.

[30]

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?

[50]

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."

[57]

On Thursday 14 June 2001 a draft affidavit of Mr Robinson of Harmers Workplace Lawyers, solicitors for the applicants, was given to the respondents. That affidavit attached documents from the Harmers' file which would otherwise have been privileged. 2. On that day Mr Hall QC indicated that provision of part of the file gave rise to a question of whether there had been a partial waiver, which as a matter of fairness required waiver of the balance of the Harmers' file. Mr Kimber SC indicated, by way of response, that the applicants would give consideration to the question of associated waiver of the balance of the file: T791 L 3-6. 3. That evening the applicants determined, in light of that argument, that privilege in the balance of the file would be waived by the tender of the Robinson affidavit and gave the respondents access to the balance of the file. 4. On Friday 15 June 2001 the respondents claimed that in light of the waiver of the whole of the Harmers' file the applicants could not retain privilege in the material in the files of other solicitors (Ellen Beerworth and Gilbert and Tobin) to the extent that material went to the applicants 'state of mind'. 5. The applicants reject the submission that the filing of the Robinson affidavit would lead to waiver of privilege in the contents of the Beerworth and Gilbert & Tobin files. 6. The first thing to note is that any claim for waiver of privilege must be based on the material which was tendered as annexures to the Robinson affidavit, and not on the whole of the file. The balance of the file was released as a consequence of a call for release of 'associated material'. There cannot be a call for release of yet further material based on the further material released as that would be to put the applicants to associated waiver on associated waiver. 7. It is the applicants' submission that any associated waiver of privilege arising from the tender of the Robinson affidavit would extend to other documents on the Harmers' file at that time, but not to documents held on other solicitors files.

At a glance

Court

Decision date

Before

Source

Judgment (72 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (14)

Cited By (4)