Grocon Group Holdings Pty Limited v Infrastructure NSW

Relevant legal principles

The principles relating to implied waiver were most recently examined by the Court of Appeal in GR Capital Group Pty Ltd v Xingfeng Australia International Investment Pty Ltd [2020] NSWCA 266. After referring to the relevant authorities, including the decision of the High Court in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66, Macfarlan JA (with whom McCallum JA and Simpson AJA agreed) summarised the principles in these terms (at [57]): (1) The test is one of inconsistency between the privilege holder's conduct and its maintenance of the privilege, not one of general fairness or of relevance to an issue in the proceedings. (2) Enquiring whether the privilege holder has made express or implied assertions about the contents of the confidential communications, and whether its conduct has therefore "laid open the communications to scrutiny", assists in ensuring that the court's focus is on inconsistency rather than simply relevance. If the privilege holder is understood to be asserting something about the contents of the communications, it is but a short step to conclude that it would be inconsistent for it to prevent those contents being scrutinised. (3) On the other hand mere relevance of the content of the privileged communications to an issue raised in the proceedings by the privilege holder does not equate to inconsistency - something more is needed. It is of the essence of legal professional privilege that, if maintainable, it entitles a party to withhold potentially relevant documents from inspection by the other party. (4) The determination of whether there has been an express or implied assertion about the contents of privileged communications giving rise to a relevant inconsistency is an evaluative decision to be made after consideration of the whole of the circumstances of the case. No hard and fast rules can be formulated. Those circumstances will include the degree of relevance of any advice to the issues in the proceedings, the centrality of the relevant issues in the proceedings and the likelihood of advice having been given, informed, as the High Court said in Mann v Carnell, by considerations of fairness. (5) Having considered all those circumstances, the court must decide whether it would be inconsistent with the privilege holder's conduct for it to maintain privilege. The line between relevance to an issue and inconsistency in this context may be very fine and therefore one on which views might well differ.
Although Macfarlan JA expressed the test as inconsistency between the privilege holder's conduct and its maintenance of the privilege, it is important to bear in mind what that means. The statement that a communication is privileged is the statement of a legal conclusion arising from a number of essential features of the communication. One of those features is the confidential nature of the communication. As Gleeson CJ, Gaudron, Gummow and Callinan JJ explained in Mann v Carnell at [29], the loss of the privilege arises from conduct that is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect: 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.
In Mann v Carnell, the question was whether the disclosure of the communication to a third party was inconsistent with the maintenance of the confidentiality. In GR Capital, as in the present case, the question was whether the making of an allegation or the giving of evidence on the same issue as the privileged communication was inconsistent with the maintenance of the confidentiality.
There are suggestions in the way the test is sometimes formulated that the inconsistency can only arise where the allegation or evidence makes an express, or more often, implied assertion about the contents of the privileged communication: see, for example, Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160; (2013) 306 ALR 414 at [22] per Wigney J. Certainly, as Macfarlan JA recognised in para (2) of his summary in GR Capital, an implied assertion about the contents of an otherwise privileged communication will normally be sufficient to amount to a waiver. Whether, however, it is necessary for there to be a waiver is less clear.
In GR Capital, Xinfeng Australia International Investment Pty Ltd (Xinfeng) commenced proceedings in 2018 against GR Capital Group Pty Ltd and The One Capital Group Pty Ltd (the Judgment Debtors) seeking to recover a loan of $10 million plus interest. The Judgment Debtors filed a cross-claim, claiming that the $10 million was part of a larger incomplete transaction. On the first day of the hearing, the Judgment Debtors consented to judgment against them for $10 million, to dismissal of the cross-claim and to an order against them for indemnity costs. In 2019, the Judgment Debtors filed a notice of motion seeking to set aside the consent orders on the basis that, at the time of agreeing to them, they were unaware that the transaction was illegal (because it allegedly involved a transfer of money from China to Australia in contravention of Chinese foreign exchange regulations). Xinfeng then issued a subpoena to the former solicitors of the Judgment Debtors seeking the production of any documents containing legal advice given about the proceedings. The Judgment Debtors applied to have the subpoena set aside on the basis that the documents were subject to legal professional privilege.
At first instance, Ward CJ in Eq held that by asserting that it had made a mistake about the alleged illegality, the Judgment Debtors had waived privilege "in legal advice that goes to the merits of the claim(s) made in the proceedings".
The Court of Appeal thought that, in adopting that approach, her Honour had stated the test of inconsistency too broadly. As Macfarlan JA explained (at [59]): … there would be an inconsistency between the Judgment Debtors asserting on the one hand that they were ignorant of the possibility of an illegality defence when they consented to the orders made on 18 October 2018 and on the other hand maintaining privilege in respect of legal advice concerning the existence of such a defence. … His Honour continued: The circumstances in which that consent was given are important in this respect. The consent was proffered by the Judgment Debtors on the first day of an expedited final hearing of the proceedings in which the Judgment Debtors' pleadings were, it can be presumed, drawn and settled by the Judgment Debtors' lawyers. A reasonable bystander would in my view regard it as inconsistent for the Judgment Debtors to assert that on that day and at that time they were ignorant of the possibility of an illegality defence and at the same time claim to be entitled to keep to themselves what, if anything, their lawyers who were then acting for them and conveying their consent to the Court had told them about the possibility of such a defence. Implicitly, they were "laying that advice out for scrutiny".
In oral submissions, Ms Mirzabegian SC, who appeared for Grocon, placed considerable emphasis on this passage as demonstrating that what was required was a likelihood that legal advice was given at the time the consent judgment was agreed. But, in my opinion, that reads too much into the passage. The timing of likely legal advice was relevant because the Judgment Debtors claimed that they were ignorant of the illegality defence at the time they agreed to the consent orders. By claiming that they were ignorant of the defence they were impliedly asserting that no one had told them about the defence. It would be inconsistent for them to give that evidence and to maintain confidentiality in legal advice on that question. But that inconsistency only extended to advice given in the context of the proceedings. It would not, for example, extend to any advice given to them at any time in relation to Chinese foreign exchange regulations or the restrictions they imposed on the transfer of money to Australia. Advice not given in connection with the consent orders may have been forgotten or superseded, and consequently the necessary inconsistency would not arise. I do not understand Macfarlan JA to be saying any more than that in the quoted passage.
Two other cases to which the parties attached particular significance should be mentioned.
The first is the decision of the Court of Appeal in Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297. In that case, the plaintiffs leased to the first defendant a ground floor shop to be used as a convenience store. Following termination of the lease, they commenced proceedings in the District Court to recover unpaid rent. The defendants filed a cross-claim alleging that they had been induced to enter the lease by false representations and seeking recission of the lease. The representations were that an air-conditioner and loading dock would be available for the defendant's uninterrupted use. Those representations were said to be false because the air-conditioner had been installed by a predecessor in title to the plaintiffs' interests without the approval of the building's owners corporation or the approval of the local council and the loading dock was on common property.
The trial judge found that the representations were made, that they were misleading and that the defendants had relied on them. Accordingly, she gave judgment for the defendants. During the course of the trial, Mr Gebara, the second defendant, who it appears was a director of the first defendant and principal witness for the defendants, was cross-examined on whether he had received legal advice on what areas were common property and what areas formed part of the leased premises and on a special condition in the lease, the effect of which was that the plaintiffs did not warrant that the air-conditioner was installed with the body corporate's approval or council approval and the defendants could not raise any claim in connection with the use of the air-conditioner. On each occasion, the trial judge upheld objections to those questions on the basis of legal professional privilege.
One issue on appeal was whether the defendant had waived legal professional privilege in advice on those matters. On that question, Gzell J (with whom Bryson JA and Windeyer J agreed) said (at [41]): In a case like the present one in which reliance upon representations is alleged, questions such as the following need to be explored: Were representations made to the party by or on behalf of the opponent? Does the party say that he or she relied upon the representations and altered his or her course of conduct? Is reliance upon the representations a central, or merely peripheral, aspect of the party's case? Is it likely that the party received legal advice that had a bearing on the allegation of reliance? Was it likely that the legal advice might raise doubts as to the allegations of reliance or any losses or damage alleged to have been suffered?
Applying that test, his Honour concluded that privilege had been waived: 45 Because of the presence of the special condition, apparently inconsistent with a continued assertion of reliance upon Mr Lui's representations as to the air-conditioning, and Mr Gebara's inspection of a plan clearly depicting the loading bay as common property, it was likely that the legal advice given to Mr Gebara prior to the execution of the lease might raise doubts as to the continued assertion of reliance upon the representations and the entitlement to relief under the Fair Trading Act 1987. 46 In my opinion, the circumstances of this case established that the conduct of Mr Gebara in maintaining his assertion of reliance upon the representations of [the plaintiffs], was inconsistent with the maintenance of confidentiality with respect to the legal advice he received. In the interests of fairness, client legal privilege for the advice ought not to be maintained and waiver of that privilege is to be imputed by operation of law. …
It followed that the evidence was wrongly excluded and the case required a retrial.
The second decision is Macquarie Bank Limited v Arup Pty Limited [2016] FCAFC 117. In that case, the applicant (BrisConnections) sued Arup Pty Limited in respect of allegedly misleading traffic forecasts on which BrisConnections relied in taking various steps in relation to the Airport Link toll road in Brisbane. Arup had been engaged by the consortium responsible for building the toll road (the Sponsor Group) (which included the appellant, Macquarie Bank) to provide the traffic projections. Arup filed a cross‑claim against the Sponsor Group alleging that it had engaged in misleading and deceptive conduct by (1) representing to Arup that it would take "all necessary steps" to ensure that BrisConnections would be bound by a limitation of liability clause, limiting Arup's liability to $10 million; and (2) failing to disclose that it knew that BrisConnections had formed the view that it was not bound by the limitation of liability. Arup contended that in reliance on the representation and failure to disclose, it performed various services under the engagement agreement and as a result suffered loss.
The Sponsor Group sought discovery from Arup of documents falling within the following categories: 1. documents recording, evidencing or referring to consideration by Arup of certain provisions of the Engagement Agreement … including the Limitation of Liability; and 2. documents recording, evidencing or referring to advice sought or obtained by Arup in relation to certain provisions of the Engagement Agreement … including the Limitation of Liability. Included in documents falling within those categories were a number of documents over which Arup claimed legal professional privilege.
Macquarie Bank challenged the claim for privilege on the basis that there had been an implied waiver. The primary judge rejected that challenge. In dismissing an application for leave to appeal against that decision, the Full Court said: 34 It was contended by Macquarie that Arup's misleading or deceptive conduct claim put in issue Arup's understanding as to the effect of the relevant agreements, and the extent to which third parties could rely on Arup's traffic forecasts. In other words, the Cross-Claim could only succeed if Arup proves that it was of the view that BrisConnections were bound by the Engagement Agreement, and in particular, the Limitation of Liability. 35 This we accept, as did the primary judge …. However, it cannot be said that the question of reliance must have been informed by or addressed in the legal advice that Arup received. Arup's descriptions of the basis for its claims for legal professional privilege do not indicate such, which descriptions merely generically refer to 'legal advice in relation to the reliance statement in the [Engagement Agreement]', 'legal advice in relation to third party use of data', and 'legal advice in relation to the draft [NSBT Contract]'. There is no other evidence to indicate the extent of the legal advice; and certainly no evidence that the legal advice was likely or necessarily related to any question of reliance as pleaded in the Cross-Claim. It cannot be said that Arup necessarily 'la[id]… open to scrutiny' the advice that it received in relation to that matter, … And later: 41 This proceeding merely involves the pleading by Arup of reliance and the discovery of privileged documents. Whilst such documents are relevant to the proceeding (and hence discoverable), this is not sufficient to constitute waiver. If it were, then as the primary judge observed, this would 'come perilously close to, if not amount to, a proposition that a mere pleading of reliance would itself be sufficient to constitute a waiver of privilege' …
In commenting on the decision in Chen, the Full Court cited with approval the following passage from the judgment of Wigney J in Archer Capital 4A at [22]: In my opinion, there may be no difficulty with the evaluative approach in … Chen if the questions that are posed are seen as no more than questions that might assist in determining the ultimate question, namely, whether the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. In my view, however, the questions have a tendency to distract or deflect attention from that test. …
One feature of the decision in Macquarie Bank which is difficult to accept is that the answer to enquiries of the type currently before the Court may depend on the description of the documents in respect of which privilege is claimed. The Full Court appears to have thought that because it was not apparent from the description of the documents in respect of which privilege was claimed that any of them concerned the question of reliance, it could not be said that Arup laid open to scrutiny those documents by raising that question.
Only the privilege holder knows the actual contents of the advice. Where the inconsistency is said to arise from the subject matter of the communication in respect of which privilege is claimed, it seems to me appropriate not to start with the communications but with the basis on which the inconsistency in said to arise. If the court is satisfied that it would be inconsistent for a privilege holder both to make a particular allegation or give evidence of a particular matter and claim privilege over legal advice concerning the same subject-matter, then it should tailor the order for production by reference to that subject-matter, leaving it to the privilege holder to produce any documents falling within that description. It should not start with the document over which privilege is claimed and its description. The former approach was the one taken by the Court of Appeal in GR Capital, and I should follow it.
It is not easy to reconcile the decisions in Chen and Macquarie Bank. The Court of Appeal referred to both of them in GR Capital without criticism or approval. It may be that they are examples of the point made by Macfarlan JA that the line between relevance to an issue and inconsistency in this context may be very fine and one of which reasonable views might well differ. In any event, the approach I propose to take is the one outlined in GR Capital, a decision which is binding on me.

Waiver of advice given by Mr Easy

Mr Easy gives extensive evidence of what Grocon did and could have done. When giving that evidence, he often gives evidence of what he believed about various matters as an explanation of why certain things were, or would have been, done. The following are some examples: 1. In para 49 of his affidavit sworn on 22 October 2020 (his first affidavit), Mr Easy says that "I understood, through my discussions with Mr Matheson in particular, that Oxford needed to know what they could build as part of the Office Component - namely, the size and scale of the development - and they required comfort and certainty that the Sight Lines Resolution Notice would be issued and their investment in the CB [Central Barangaroo] Development would proceed". Mr Matheson was Head of Investments at Oxford, which was the lender to Grocon. 2. In para 78 of his first affidavit, Mr Easy, when discussing a proposal that Oxford acquire the rights to the office component of the development, says "it was my view at the time that if Grocon could secure the Authority's consent to Oxford then Aqualand and Scentre would follow and provide their consent too". 3. In para 40 of his affidavit sworn on 8 September 2022 (his second affidavit), Mr Easy says "In my view, and in Mr Grollo's view as communicated to me in regular conversations, the Oxford Transaction was more favourable to Grocon than the proposed Aqualand Transaction". The "Oxford Transaction" is a reference to the transaction by which Oxford was to acquire the office component of the development from Grocon, subject to certain conditions precedent, which were never satisfied. The "Aqualand Transaction" was a proposed transaction by which Aqualand was to acquire Grocon's rights in respect of the Central Barangaroo development; 4. In para 70 of his second affidavit, Mr Easy says "I recall that in conversations with Mr Grollo in or around this time [June 2019] that Mr Grollo shared my view on the benefits of Plan B, as described in paragraphs 67 to 69". "Plan A" was a reference to a proposal for Grocon to sell all its development rights in relation to Central Barangaroo to Aqualand. "Plan B" was a reference to a plan to obtain third party refinancing to pay out an existing short-term loan (at a high interest rate) and provide sufficient additional funding until a Sight Lines Resolution Notice was issued. The details of "Plan B" are not presently relevant. It was pursued with assistance of Deloitte and, as ultimately formulated involved negotiations to obtain financing from Nomura; 5. In para 82 of his second affidavit, Mr Easy says "I recall that the matters referred to in my email to Mr Smart above were consistent with my view as to the progress of the various options that Grocon was pursuing at the time, which was that …". The paragraph goes on to describe those views; 6. In para 86 of his second affidavit, Mr Easy, when discussing an agreement he describes as "the Supplemental Term Sheet" between Grocon and Oxford, says "I saw it as an administrative instrument designed to facilitate the completion of the Aqualand Transaction. I did not consider that it bound Grocon to do anything, and certainly not to complete the Aqualand Transaction".
In addition, in para 95 and following of his second affidavit, Mr Easy gives evidence of what steps Grocon could and would have taken if the Authority had issued a Sight Lines Resolution Notice. Mr Easy says that his evidence is based on "my understanding of the specific terms in the contracts between Grocon, the Authority, Aqualand, Scentre and Oxford on the basis of my training, knowledge and experience". He then gives specific evidence of what Grocon (and he) would have done and explains how those steps were consistent with specific contractual rights and obligations Grocon had.
In my opinion, by giving the evidence of the views he has formed on particular matters, Mr Easy has waived privilege in any communication that records his views on those matters. It does not matter that Mr Easy may not be understood as making an express or implied assertion about the existence or content of legal advice. What is inconsistent is for Mr Easy both to express a view on a particular matter (such as what view someone formed, what someone needed to know or would do, whether one transaction was more favourable than another, whether a particular event was likely and the meaning or effect of a particular contract or contractual right or obligation) and to assert that communications recording his views on those matters remain confidential. The fact that the relevant communications may have consisted of legal advice or were made for the purpose of Grocon obtaining legal advice does not alter the position.
On the other hand, I do not think that the waiver goes beyond communications relating to the specific matters on which Mr Easy expresses his views. The fact, for example, that Mr Easy says in his second affidavit, in a paragraph which is introductory in nature, that his evidence is based on his understanding of the specific terms in the contracts between Grocon, the Authority, Aqualand, Scentre and Oxford does not mean that he has waived privilege on all communications that are relevant to the meaning of those contracts. It is not sufficient that the communication relates generally to the contracts referred to by Mr Easy. Nor is it sufficient that the communication is relevant to Mr Easy's understanding of a particular matter. The communication must record Mr Easy's views on a specific matter about which he has expressed a view in his affidavits. It is only then that the necessary inconsistency arises.

At a glance

Court

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Before

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Judgment (7 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (7)

Cited By (3)