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In the matter of Idoport Pty Ltd (in liq)(recs apptd); National Australia Bank Limited (& Ors) v John Sheahan - [2012] NSWSC 58 - NSWSC 2012 case summary — Zoe
Ex parte B [1996] 1 AC 487
Re Idoport Ltd (in liq) (recs apptd) [2011] NSWSC 322
Source
Original judgment source is linked above.
Catchwords
(2008) 72 NSWLR 236
DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 384Ex parte B [1996] 1 AC 487
Re Idoport Ltd (in liq) (recs apptd) [2011] NSWSC 322
Judgment (3 paragraphs)
[1]
13
Lush v Russell (1850) 5 Exch 203
Mallalla District Council v Livestock Markets Ltd (2006) 94 SASR 258
Mann v Carnell (1999) 201 CLR 1
Massoud v NRMA Insurance Ltd (1995) 8 ANZ Insurance Cases 61-257
Noyes v Klein (1984) 3 BPR 9216
Osland v Secretary to the Department of Justice (2008) 234 CLR 275
R v Derby Magistrates Court; Ex parte B [1996] 1 AC 487
Re Idoport Ltd (in liq) (recs apptd) [2011] NSWSC 322; (2011) 83 ACSR 164
Rich v Harrington (2007) 245 ALR 106
Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Seven Network Limited v News Limited (No. 10) [2005] FCA 1721
Singtel Optus Pty Ltd v Weston [2011] NSWSC 1083
Sonnenthal v Newton (1965) 109 SJ 333
Southwark Water Co v Quick (1878) 3 QBD 315
Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87
State of NSW v Jackson [2007] NSWCA 279
Tamsco Ltd v Franklins Ltd [2001] NSWSC 1205
Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152
The Daniels Corporation International Pty Ltd v ACCC (2002) 192 ALR 561
Thomason v Campbelltown Municipal Council (1939) 39 SR(NSW) 347
Trade Practices Commission v Sterling (1979) 36 FLR 244
United States Surgical Corporation v Hospital Products International Pty Ltd (unreported, Supreme Court, New South Wales, 13 October 1981)
Waugh Asset Management v Merrill Lynch [2010] NSWSC 197
Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044
Welch v Birrane (1974) 29 P & CR 102
Wheeler v Le Marchant (1881) 17 Ch D 635
Woollahra Municipal Council v Westpac Banking Corporation (1994) 33 NSWLR 529
Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377; (2009) 262 ALR 738
Texts Cited: Butt, Land Law (4th ed, 2011)
Category: Interlocutory applications
Parties: National Australia Bank Limited (First Plaintiff)
National Markets Group Limited (Second Plaintiff)
Australian Market Automated Quotation (AUSMAQ) System Limited (Third Plaintiff)
John Sheahan (First Defendant)
Ian Russell Lock (Second Defendant)
Fulham Partners LLC (Third Defendant)
Portsmouth Partners LLC (Fourth Defendant)
Idoport Pty Limited (in liquidation) (receivers appointed (Fifth Defendant)
Representation: Counsel
J T Gleeson SC with J R Williams (Plaintiffs)
T Jucovic QC with Ms T L Wong (Third and Fourth Defendants)
Solicitors
Freehills (Plaintiffs)
Atanaskovic Hartnell (Third and Fourth Defendants)
No appearance for First, Second and Fifth Defendants
File Number(s): 11/85023
[2]
Judgment
1HER HONOUR : Before me for hearing on 1 February 2012 was an application brought by the third and fourth defendants in these proceedings (Fulham Partners LLC and Portsmouth Partners LLC) for the production and inspection of certain documents over which the plaintiffs (collectively, the NAB Parties) have claimed privilege. The application is brought on the ground that there has been an implied (or issue) waiver in respect of those privileged communications.
2The substantive proceedings involve a challenge by the NAB Parties to the validity of the appointment by Fulham and Portsmouth of the first and second defendants as receivers to certain assets of Idoport Pty Ltd (namely, its rights under a Consulting Agreement entered into with the NAB Parties in September 1996). The appointment was made under separate fixed and floating equitable charges, dated 30 March 2005, granted by Idoport to each of Fulham and Portsmouth (together, the Chargees). The NAB Parties maintain that the appointment of the receivers is invalid due to the absence of consent from the NAB Parties thereto. Under the Consulting Agreement, such consent was required but not unreasonably to be withheld. Therein lies the source of the present dispute.
3The 58 documents the subject of this application are some, but not all, of the privileged documents listed in the verified List of Documents filed by the NAB Parties on 1 August 2011 pursuant to orders for discovery made in June 2011. Those orders required discovery of particular categories of documents, relevantly including:
2. All documents referring or relating to requests by Idoport for the consent of the NAB Parties to the granting of a fixed charge over Idoport's rights and/or obligations under the Consulting Agreement [dated 13 September 1996 between Idoport and the NAB Parties], including any consideration given by the NAB Parties to those requests.
3. All documents referring or relating to requests by Michael Smith [the person originally appointed as receiver] for the consent of the NAB Parties to the granting of a fixed charge over Idoport's rights and/or obligations under the Consulting Agreement, including any consideration given by the NAB Parties to those requests.
4. All documents referring or concerning any decision by the NAB Parties to withhold consent or refuse to consider granting consent to Idoport charging its rights and/or obligations under the Consulting Agreement, including the reasons for withholding or refusing to consider granting such consent.
4It is contended by the Chargees that the NAB Parties have put in issue in these proceedings their state of mind in relation to their refusal (both in 2007 and again in 2010) to grant consent to the extension of the 2005 charges to Idoport's rights under the Consulting Agreement. The Chargees maintain that the NAB Parties have done so by seeking negative declaratory relief that necessarily puts in issue the reasonableness of the withholding of consent (which the Chargees maintain then opens up an enquiry into the actual reasons for the withholding of consent) and by alleging in their pleading that the said refusals were not unreasonable. It is contended that, in circumstances where the decision-making process (at least insofar as it is recorded in writing) took place entirely under cover of communications with the NAB Parties' legal advisers (Freehills) over which privilege has been claimed, it can be inferred that those communications are likely to have affected the formation of the NAB Parties' state of mind and its reasonableness; and therefore that the NAB Parties have engaged in conduct which is inconsistent with the maintenance of legal professional privilege over those communications thus giving rise to an issue waiver.
5The NAB Parties deny that there has been any waiver of privilege. In particular, it is contended that it is not they who have put their state of mind in issue (rather, it is the Chargees who have done so by reference to the positive allegations contained in their Defence as to the actual reasons for the NAB Parties' decision); that even if it could be said that the NAB Parties had put their state of mind in issue, no express or implied assertions have been made about the contents of the privileged communications and hence there is no inconsistency between the maintenance of the privilege and their conduct of the kind necessary to give rise to an issue waiver; and, thirdly, that there is no basis upon which the Court could conclude that the 58 documents the subject of this application (spanning an 18 month period) are likely to have contributed to the NAB Parties' state of mind (to the extent that this is in issue in the proceedings) on what is said to be a commercial (not legal) decision.
6Senior Counsel for the NAB Parties (Mr Gleeson SC) distinguishes the present case from cases in which issue waiver more commonly arises, such as professional negligence claims against solicitors, undue influence claims or claims of the kind considered in Thomason v Campbelltown Municipal Council (1939) 39 SR(NSW) 347, where (adopting the words of their Honours in Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86) , in order to establish a particular right, claim, or defence a party, who previously has been legally advised, needs to show that the advice so given did or did not have a particular character (namely that the advice did not address or properly address a matter which, if addressed or properly addressed, would defeat or call into question the right or claim asserted as in claims where the applicant has to demonstrate he or she acted with or without adequate knowledge of a matter). It is submitted by Mr Gleeson that in such cases the party's relevant state of mind is its understanding of its legal rights whereas in the present case the NAB Parties have not put in issue any understanding or belief as to their legal rights either in pleading or in seeking a declaration to the effect that their refusal of consent was not unreasonable.
7In summary, for the reasons set out below, I am not satisfied that the allegations made by the NAB Parties (or the declaratory relief sought by them) necessarily put in issue or open up for scrutiny their state of mind (as opposed to putting in issue the objective reasonableness or otherwise of their refusal to grant consent having regard to the factual circumstances at the time at which the issue of reasonableness is to be tested). Nor have they made any express or implied assertions as to the content of any legal advice received in relation to the requests made of them for consent to the extension of the charges. Having so concluded, it is not necessary for me to consider whether (from the description contained in the List of Documents or from an inspection of those documents myself) the documents now sought to be inspected would be likely to have affected the NAB Parties' subjective state of mind at the time that consent was refused. Accordingly, I dismiss the application.
Background
8The background to the present application is the litigation which was commenced by Idoport in 1998 against National Australia Bank Limited, and various of its subsidiaries and officers, in relation to the Consulting Agreement entered into in 1996 between Idoport and the NAB Parties. On the present application both parties have referred to the long and complicated history of that litigation (and it was set out in detail in an affidavit sworn on 16 August 2011 by the NAB Parties' solicitor (Mr Eastwood), a partner of Freehills who has had the conduct of the Idoport litigation as part of a team of lawyers at that firm for no little time).
9In the period from 1998-2000, three sets of proceedings were commenced by Idoport (and a related company, Market Holdings Pty Limited) (those being proceedings 50113 of 1998, 50026 of 1999, and 3991 of 2000). Idoport claimed damages for alleged breach of the Consulting Agreement, misleading or deceptive conduct and breach of fiduciary duty in excess of US$29 billion. Einstein J commenced hearing the 1998/1999 proceedings (referred to as the Idoport Proceedings) but then in January 2002 (after some 223 hearing days) dismissed the proceedings as a consequence of the failure of Idoport to comply with orders his Honour had made for the provision of security for the NAB Parties' costs. His Honour then ordered Idoport to pay the defendants' costs of the proceedings and further made an order barring Idoport from bringing fresh proceedings concerning any cause of action or the whole or any part of any claim for relief by it in the Idoport Proceedings until the costs of those proceedings had been paid in full.
10An appeal by Idoport from Einstein J's orders was dismissed with costs on 15 August 2002. Idoport was subsequently unsuccessful in an application for special leave to appeal from the Court of Appeal's decision (that application being refused with costs on 20 June 2003).
11On 30 March 2005 (and thus at a time when the Idoport proceedings had been dismissed and the barring order was in place), Idoport entered into agreements with overseas litigation funders (the Chargees) for the purpose of obtaining litigation funding (a Loan Agreement with Fulham and a Share Subscription Agreement with Portsmouth). In the context of those arrangements, on the same date it granted to the Chargees the fixed and floating equitable charges on which the Chargees have subsequently relied to appoint the first and second defendants as receivers.
12On 1 April 2005, Idoport commenced further proceedings in this Court against the NAB Parties (referred to as the MasterKey Proceedings). Those proceedings were dismissed by Bergin J, as her Honour then was, on the basis that they offended the barring order that had been made by Einstein J. An appeal from her Honour's decision was dismissed by the Court of Appeal and a subsequent application for special leave to appeal from the Court of Appeal's decision was refused with costs on 8 December 2006.
13An application for a gross sum costs order in respect of the costs of the Idoport Proceedings was heard by Einstein J in late 2006 and, on 14 February 2007, his Honour ordered that Idoport pay the NAB Parties' costs in the amount of $42,050,000 plus interest. (The amount now due under that costs order, taking into account interest, is in excess of $70 million.)
14On 3 September 2008, on the application of the NAB Parties, White J ordered that Idoport be wound up in insolvency. Mr Sherman of Ferrier Hodgson was appointed as liquidator of the company.
15The nub of the dispute which is the subject of the present proceedings arises out of steps taken by Idoport in 2007, following the dismissal of the MasterKey Proceedings but prior to the appointment of the liquidator, to extend the charges that had been granted to the Chargees in 2005 (which secured the funding that had been provided in relation to the MasterKey Proceedings) so as to cover and operate as a fixed charge over Idoport's rights and obligations under the Consulting Agreement (those rights by then being Idoport's only asset of any (or any alleged) substance).
16Clause 20.1 of the Consulting Agreement provides as follows:
The rights and obligations of each party under this Agreement are personal. They cannot be assigned, encumbered or otherwise dealt with and no party will attempt, or purport, to do so without the prior consent of the other parties ( not to be unreasonably withheld ). (my emphasis)
17Under the charges granted in favour of the Chargees, "Secured Property" expressly excluded the "Excluded Property" (defined as being Idoport's rights and obligations under the Consulting Agreement) "unless and until the circumstances in clause 3.2 or clause 3.3 occur".
18Clause 3.2 of the respective charges provided that:
If required by the Chargee, the Chargor must seek the written consent of NAB to the granting of a fixed charge in favour of the Chargee over the Excluded Property on the terms and conditions set out in this charge. If NAB consents to the granting of such a charge, then immediately upon the granting of such consent, the Secured Property shall be taken to include the Excluded Property and the Chargor shall be taken to have charged, as beneficial owner, all of its rights, title and interest in the Excluded Property to the Chargee as security for payment of the Secured Money .
19Clause 3.3 provided that:
Notwithstanding clause 3.2, whether or not NAB consents to the granting of such a charge, the Chargee may at any time by notice to the Chargor declare that the charge in 3.1 will extend to, and operate as a fixed charge over, the Chargor's rights, title and interest in the Excluded Property. Immediately upon the giving of such notice, the Secured Property shall be taken to include the Excluded Property and the Chargor shall be taken to have charged, as beneficial owner, all of its rights, title and interest in the Excluded Property to the Chargee as security for payment of the Secured Money.
20By letter dated 16 March 2006, Idoport sought the consent of the NAB Parties to the grant of a fixed charge over Idoport's rights under the Consulting Agreement in favour of the Chargees. (It did not concede that it was necessary to do so.) The NAB Parties responded (by letters dated 27 April 2006) to Idoport's request for consent, seeking additional information from Idoport. Some months after this, a response was given to the request for additional information (by letter dated 22 November 2006). (When the matter was before me on a separate application last year, to which I will shortly refer, it was contended for the NAB Parties that the response provided by Idoport was inadequate and that it failed to answer the questions that had been raised; in particular, that the information provided did not include a promise to pay the gross sum costs order in favour of the NAB Parties.)
21By notice dated 9 January 2007 (not provided to the NAB Parties at the time and in respect of which there was some dispute raised last year as to whether it had in fact been issued in accordance with the Charges), the Chargees then purported to exercise the power contained in clause 3.3 of the Charges and to declare that the Charges extended to and operated as a fixed charge over Idoport's rights under the Consulting Agreement (ie without the consent of the NAB Parties).
22By letters dated 7 and 12 February 2007, respectively, the NAB Parties (not then being on notice of any such declaration under clause 3.3 of the Charges) refused consent to the creation of a charge over Idoport's rights under the Consulting Agreement. The letters were, in substance, in identical terms. Having regard to the documentation that has been discovered by the NAB Parties (and over which no privilege has been claimed) it seems that those letters were simply forwarded in what was by then the final form of the correspondence by a senior officer of the bank to the respective company secretaries for signing, there being no indication that the signatories were involved in the decision-making process.
23The February 2007 letters noted the concern of the respective NAB Parties ("as major unsecured creditors of Idoport and as parties to the Consulting Agreement") that Idoport had purported to charge its property in favour of third parties resident outside the jurisdiction and with no prior notice to them; their view that under clause 20.1 of the Consulting Agreement their consent was required to the granting by Idoport of an assignment of or encumbrance over or dealing with its rights under that agreement; and their continued reservation of rights in relation to the conduct of Idoport in executing the charges (including with respect to whether such conduct, and in particular the agreement to clause 3.3 of the charges, amounted to a breach of the Consulting Agreement).
24As to the stated position of the NAB Parties in relation to that first request for consent, the February 2007 letters (which seem to have been treated in subsequent correspondence in 2010, and are described in Mr Gleeson's submissions on this application, as giving the NAB Parties' reasons for their refusal) state that consideration has been given to the request and that the NAB Parties "have taken into account the following matters":
the terms of the Consulting Agreement;
that Idoport has purported to charge its property in favour of third parties resident outside the jurisdiction and with no prior notice to [the NAB Parties] ...;
that there has been a long-running dispute between the parties as to the property construction of the Consulting Agreement and as to the respective parties' entitlements in relation to the Consulting Agreement;
that [the NAB Parties] are major unsecured creditors of Idoport;
that the amount of funds that Idoport can access under the Loan Agreement and the Share Subscription Agreement are not sufficient to discharge the likely quantum of Idoport's total indebtedness to [the NAB Parties];
that there has been an Event of Default under the Loan Agreement between Idoport and Fulham as a result of NSW Supreme Court Equity Division proceedings 50046 of 2005 having been dismissed and Idoport has given no details of what moneys have been drawn down under the Loan Agreement or whether that Event of Default has been waived; or whether a demand has been made for that repayment or whether Fulham has given notice to Idoport that Fulham's obligations under the Loan Agreement have been terminated;
that there has been an Event of Default under the Share Subscription Agreement between Idoport and Portsmouth as a result of NSW Supreme Court Equity Division proceedings 50046 of 2005 having been dismissed and Idoport has given no details of whether that Event of Default has been waived or whether Portsmouth has given notice to Idoport that Portsmouth's obligations under the Share Subscription Agreement have been terminated;
that the circumstances surrounding, and reasons for, Fulham and Portsmouth requesting Idoport to seek [the NAB Parties]' consent to the extension of the Charges have not been explained.
25Each of those matters on its face refers to one or more objective facts or circumstances, not to any subjective belief or opinion on the part of the NAB Parties. (It might conceivably be argued that the last bullet point involves the expression of a belief or opinion that nothing proffered in the material provided in answer to the NAB Parties' request for additional information amounted to an explanation or satisfactory explanation of the circumstances and reasons for the request but that seems a less likely reading than that it simply asserts an objective fact). In any event, the letters are silent as to the receipt, or content, of any legal advice in relation to the request for consent.
26The letters then concluded:
Having considered these matters [the NAB Parties] ... decline to give their consent to the granting of a fixed charge over the rights and obligations of Idoport under the Consulting Agreement in favour of each of Fulham and Portsmouth.
27The NAB Parties have confirmed (by their solicitors' letter dated 9 September 2011), in response to a request made by the Chargees' solicitors, that they do not (and will not) dispute for the purposes of these proceedings that at all material times on and after 30 March 2005 it was their understanding that:
(a) Idoport did not have any asset of significance, other than:
(i) potential claims against third parties (although the NAB Parties were not aware of any extant litigation on or after 30 March 2005 commenced by Idoport other than claims in relation to any rights it had arising under or in relation to the Consulting Agreement); and
(ii) its rights under, and funds received pursuant to, the:
(A) Loan Agreement ...; and
(B) Share Subscription Agreement...
(b) Idoport did not have any business activities with or affecting the NAB Parties other than business activities directed towards enforcing its rights under the Consulting Agreement through the pursuit of litigation against the NAB Parties and other related entities.
(c) Idoport did not have the capacity to pay:
(i) the costs of the MLC Proceedings [those being the proceedings commenced in 2000]; or
(ii) the costs of the Main Proceedings as subsequently fixed by the Gross Sum Costs Order,
without funding from a third party.
(d) Idoport would not be able to bring fresh proceedings concerning any cause of action or the whole or any part of any claim for relief made in the MLC Proceedings and the Main Proceedings due to the operation of the Barring Order, without first paying the costs of those proceedings in full.
28Following the appointment in September 2008 of Mr Sherman as liquidator of Idoport, on 25 November 2008 the Chargees appointed a receiver (Mr Michael Smith) over "all assets and undertakings, present and future" of Idoport. The NAB Parties did not accept that Mr Smith had been validly appointed as receiver over Idoport's rights under the Consulting Agreement and advised him that they did not intend to deal with him as purported receiver. On 19 December 2008, Freehills notified the lawyers acting for the Chargees of their contention that, in the absence of consent, any purported appointment of a receiver over Idoport's rights under the Consulting Agreement was ineffective.
29On 9 October 2009, Mr Smith (as receiver) called for expressions of interest for the sale of Idoport's rights under the Consulting Agreement. On 16 December 2009, Mr Smith wrote to the NAB Parties requesting consent to the extension of the charges to Idoport's rights under the Consulting Agreement. In his letter, Mr Smith said:
... the fact that NMG, AUSMAQ and the NAB are major unsecured creditors of Idoport is not a matter which can properly restrain them from providing consent to the extension of the Charges over the Excluded Property. Such an extension would not negatively affect NMG, AUSMAQ and the NAB, or their position as unsecured creditors of Idoport. On the other hand, if Idoport sold its rights under the Consulting Agreement, an assignee would have to deal with the blocking effect of the gross sum costs order (indeed, any such sale would envisage that occurring, as a prerequisite to the assignee enforcing the assigned rights.)
Thus, if NMG, AUSMAQ and the NAB consent to the extension of the Charges over the Excluded Property, they would assist and facilitate the possibility of the debt owing to them by Idoport being repaid.
30By letter dated 5 February 2010, Freehills responded on behalf of the NAB Parties to that request, noting that the NAB Parties did not accept that Mr Smith had been validly appointed as receiver in relation to Idoport's rights under the Consulting Agreement and asserting that he had no ability to exercise any power of Idoport under the Consulting Agreement, (including no ability to seek the consent of the NAB Parties under clause 20.1 of the Consulting Agreement). The letter further stated:
When (over three years ago) Idoport did seek our clients' written consent to a fixed charge being granted over Idoport's rights and obligations under the Consulting Agreement in favour of [the Chargees], that consent was refused on reasonable grounds; see our clients' letters dated 7 and 12 February 2007. (my emphasis)
31Mr Smith ceased to act as receiver on 2 August 2010. By Deeds of Appointment entered into on that same date, Messrs Sheahan and Lock were appointed receivers to all of the Secured Property as defined in the Charges ("all assets and undertakings, present and future" of Idoport).
32What seems (at least from a temporal perspective) to have precipitated the challenges now on foot in relation to the validity of the appointment of the receivers is that, shortly following their appointment, Messrs Sheahan and Lock caused examination summonses to be issued (in the Idoport winding up proceedings - 254047 of 2007) in November 2010 (and again in February 2011) to various senior executives of the NAB Parties for the purpose of obtaining "further information about the circumstances in which the NAB Parties declined to give their consent" to the extension of the charges to enable an assessment as to "whether the NAB Parties were acting reasonably in withholding their consent". The examinees then sought orders for the discharge of the examination summonses and, in the context of that application, declaratory relief was sought by the examinees as to the validity of the appointment of the receivers insofar as that appointment related to the rights of Idoport under the Consulting Agreement.
33The amended interlocutory process filed in the winding up proceedings (seeking the discharge of the examination summonses issued to the NAB executives and for a declaration as to the validity of the receivers' appointment), came before me for hearing on 9/10 March 2011 at which time I gave leave for the Originating Process in the present proceedings to be filed in Court on behalf of the NAB Parties. In that Originating Process, the NAB Parties seek the same declaratory relief as was sought in the winding up proceedings by the examinees.
34I proceeded to hear and determine the application in respect of the discharge of the examination summonses ([2011] NSWSC 322; (2011) 83 ACSR 164) but did not deal with the applications for declaratory relief other than to make directions in relation to the preparation of those applications for hearing.
35In my reasons for judgment when dismissing the examination summonses issued by the receivers last year, I referred (at [12]) to what was said by Young CJ in Eq (as his Honour then was) in Tamsco Ltd v Franklins Ltd [2001] NSWSC 1205 and noted that I was not satisfied that it would not be open to the parties seeking to resist the challenge to the validity of the receivers' appointment to put in issue (on the hearing of the NAB Parties' application for declaratory relief) the real reason for the refusal or withholding of consent (as opposed to the matter being determined by reference solely to the reasons that had been proffered by the NAB Parties when refusing consent). This was an observation made in the context of the submission by the NAB Parties that the claim for declaratory relief could be determined in the course of the hearing then before me (without the need for the adjournment that had been sought by the opposing parties) as the issue before the Court was simply the reasonableness of the withholding of consent on objective grounds.
36In there stating that I read the passage in Tamsco as consistent with the proposition that it was open to the receivers to seek to go behind the reasons asserted by the NAB Parties for their refusal of consent in order to determine what was the real reason for their refusal and whether that was reasonable or unreasonable, I was not purporting to make any determination as to whether, at a final hearing, the enquiry would be as to the real reasons underlying the NAB Parties' refusal of consent. Nor do I make any such determination on the present application since it seems to me that this is an issue for the trial judge to determine (and that was indeed the position taken by Senior Counsel for the Chargees, Mr Jucovic QC, during submissions on the present application). What I had intended in that passage of my earlier judgment to indicate was simply that it seemed to me arguable (on the passage sought to be relied upon in Tamsco ) that the receivers (or, for that matter, the Chargees) could open up such an area of enquiry. It was this that led me to the view that an adjournment of the (then new) proceedings seeking declaratory relief would be required and that I should proceed to hear only the applications in relation to access to the confidential affidavits and the discharge of the examination summonses, leaving the claims by the NAB executives for declaratory relief to be dealt with at the same time as those by the NAB Parties.
37The ability of Idoport to charge its rights under the relevant Consulting Agreement (with or without the NAB Parties' consent) and the question whether (if such consent were necessary) consent had unreasonably been refused, were in essence the issues identified when the matter was before me last year as underlying the respective applications by the NAB Parties and by the NAB executives for declaratory relief in relation to the receivers' appointment. (Although those issues seem to me to remain the fundamental areas of dispute between the parties, on the present application Mr Gleeson maintains that it is not necessary for the purposes of the particular declarations that have been sought by the NAB Parties for them to establish a lack of unreasonableness in their withholding of consent on the basis that it is sufficient for them to establish that the encumbrance of the rights under the Consulting Agreement was without their consent. I consider this argument later in my reasons.)
38In both the 2011 proceedings and the remaining part of the application brought by the examinees in the 2007 winding-up proceedings, the declaratory relief sought is twofold: first, a declaration in the following terms:
.... that the rights of the Fifth Defendant [Idoport] under the Consulting Agreement between the Fifth Defendant and the [NAB Parties] dated 13 September 1996 do not, by reason of any notice issued by the Third Defendant [Fulham] and/or the Fourth Defendant [Portsmouth] on 9 January 2007, or otherwise, constitute "Secured Property" pursuant to:
(a) the Fixed and Floating Equitable Charge between [Idoport] and [Fulham dated 30 March 2005; and/or
(b) the Fixed and Floating Equitable Charge between [Idoport] and [Portsmouth] dated 30 March 2005,
as that expression is defined in those Charges.
and, second, a declaration that the appointment of the first and second defendants as receivers of Idoport, insofar as that appointment relates to the rights of Idoport under the Consulting Agreement, is invalid.
39In the Statement of Claim in the present proceedings, which was filed by the NAB Parties in March last year pursuant to the directions made at the conclusion of the hearing in relation to the examination summonses, declaratory relief is claimed in the same terms as in the Originating Process. The pleading, relevantly, alleges the following:
[20] On 7 February 2007 and 12 February 2007, the NAB Parties wrote to Idoport communicating their decision not to consent to the granting of a fixed charge over Idoport's rights under the Consulting Agreement in favour of the Funders.
[21] The NAB Parties' refusal of consent as pleaded in paragraph 20 was not unreasonable.
...
[31] On 5 February 2010, the solicitors for the NAB Parties wrote to Mr Smith reiterating the refusal of the NAB Parties to Idoport's request for consent to the extension of the Charges to Idoport's rights under the Consulting Agreement.
[32] The NAB Parties' refusal of consent pleaded in paragraph 31 above was not unreasonable.
40In the particulars to paragraph [21], which are incorporated in the particulars to [32], the NAB Parties list ten matters as circumstances by reference to which they say that it was not unreasonable for them to withhold their consent. Of those particulars, Mr Gleeson acknowledges that (a) - (g) mirror the matters said in the February 2007 letters to have been taken into account by the NAB Parties in relation to the 2007 request (with some minor clarification or elaboration in one or two instances). The additional particulars in (h) - (j) are that:
(h) Idoport had provided no evidence that there was any party ready, willing and able to pay the outstanding costs owing to the NAB Parties as a pre-condition to further prosecution of Idoport's rights under the Consulting Agreement;
(i) the NAB Parties had been exposed to very significant cost and inconvenience of defending claims brought by Idoport over a period of almost 10 years, which resulted in the NAB Parties obtaining a costs order now in excess of $70 million which (at the time of the refusal) remained wholly unpaid;
(j) the Funders are litigation unders who funded the MasterKey Proceedings which Idoport sought to prosecute notwithstanding the Barring Order and in a manner held to be an abuse of process.
41In their defence, the Chargees deny that the reasons given in the February 2007 letters were the actual reasons for the NAB Parties' decision to withhold consent to the extension of the charges ([11(b)]). They allege that the actual reason for the refusal of consent in February 2007 was to deprive Idoport of the benefit of payment under the Consulting Agreement by preventing it from obtaining the means of asserting its rights to payment by the NAB Parties ([12(d)) and that the matters stated in the particulars to para [21] of the Statement of Claim are an ex post facto statement of reasons and not the actual reasons for the decision ([12(e)]). Similar allegations are made in relation to the February 2010 refusal (see [18(e) and (f)]). It is alleged that the (successive) refusals of consent were unreasonable ([12(a)]; [18(b)]) as was an alleged constructive refusal to give consent ([17(c)]).
42By Interlocutory Process filed on 3 May 2011, the Chargees seek a declaration that the NAB Parties unreasonably withheld their consent to Idoport's request to charge its rights under the Consulting Agreement to them (as well as declarations to the opposite of those sought by the NAB Parties).
43As to the status of the present proceedings: the pleadings have closed, discovery has been provided and affidavit evidence has been served by the respective parties. I am informed that the proceedings are ready for hearing.
44Mr Jucovic notes that, of the discovery provided by the NAB Parties, the only documents made available for inspection in relation to the consideration of Idoport's first request for consent to the extension of the charges (in March 2006) were copies of letters sent to and received from Idoport and a series of emails in which Mr Don Lawson (Deputy Chief General Counsel of NAB between 29 May 2006 and 14 January 2007 and Special Counsel Corporate Centre for the bank from 15 January 2007 onwards) requested the company secretaries of the respective NAB Parties (Mr Garry Nolan and Ms Michaela Healy) to sign the letters communicating the refusal of consent to Idoport (those letters by that stage already being in their final form). Tendered as part of Exhibit A on the application before me are those documents. Relevantly, Mr Lawson's emails dated 6 February 2007 to Mr Nolan and Ms Healy, attaching for signature the letter refusing consent, (in substantially the same terms) stated:
Prior to Christmas, Idoport wrote seeking the consent of the NAB Parties (NAB, NMG and AUSMAQ) to Idoport extending the charges it had previously granted to its funders, Fulham Partners and Portsmouth Partners, to include the Consulting Agreement.
In deciding whether or not to grant such consent, after consultation with Freehills , we are of the opinion that the NAB parties should not grant such consent. We attach a letter addressed to Idoport which sets out the reasons for the NAB parties (NMG and AUSMAQ) declining such consent . [emphasis as per Mr Jucovic]
We would be grateful if you could sign the letter as secretary of those companies and return the letter to us for despatch.
45The only document made available for inspection in relation to the refusal of consent in February 2010 was the letter from Mr Eastwood of Freehills to Mr Smith communicating the refusal of consent to the extension of the charges.
Legal Principles
46The affidavit verifying the NAB Parties' discovery indicates that the claim for privilege is made under ss 118 or 119 of the Evidence Act . While there has been some uncertainty in the authorities as to whether an application of the present kind is to be dealt with in accordance with common law principles or the Evidence Act 1995 (NSW) (reference being made by Mr Gleeson to the discussion in Carbotech-Australia Pty Ltd v Yates [2008] NSWSC 1151 at [6]-[13] per Brereton J; Waugh Asset Management v Merrill Lynch [2010] NSWSC 197 at [9]-[12] per McDougall J; and Singtel Optus Pty Ltd v Weston [2011] NSWSC 1083 at [24]-[27] per White J), the parties have proceeded on the basis that s 131A of the Evidence Act 1995 (NSW) applies and extends the application of client legal privilege as set out in Division 1 of Part 3.10 of the Evidence Act to pre-trial procedures including discovery. (Mr Gleeson submits that the answer to the question will not have any material bearing on the outcome of this application in any event as the principles to be applied are the same under both the Act and the common law.)
47Section 122(2) of the Evidence Act provides that Division 1 of Part 3.10 does not prevent the adducing of evidence "if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in sections 118, 119 or 120". Mr Gleeson notes that sub-section (2), in its present form, in effect encapsulates the way in which the courts had previously brought issue waiver within the then consent based limitation on the operation of legal professional privilege. (So, for example, in Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360 the Full Court of the Federal Court said, at 371, that issue waiver was "no more than a particular manifestation of the principles applying either to waiver by disclosure or to implied consent to disclosure".)
48In DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 1191, Allsop J (as his Honour then was) considered the authorities dealing with issue waiver and noted at [27] the policy behind legal professional privilege (as set out in Greenough v Gaskell (1833) 1 My & K 98, 101-102; 39 ER 618, 620-21; Anderson v Bank of British Columbia (1876) 2 Ch D 644, 689; Southwark Water Co v Quick (1878) 3 QBD 315, 317-8 and 321-22; Wheeler v Le Marchant (1881) 17 Ch D 635, 681-82; Grant v Downs (1976) 135 CLR 674 at 685; Baker v Campbell (1983) 153 CLR 52 at 118 and 130; R v Derby Magistrates Court; Ex parte B [1996] 1 AC 487, 507; and Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 at 64-5 [35]), that policy being "to promote the public interest in the encouragement of free and frank expression facilitating the representation of the client in and about the due administration of justice". His Honour emphasised at [30] that the privilege is a fundamental common law right (citing The Daniels Corporation International Pty Ltd v ACCC (2002) 192 ALR 561 at [9], [11], [44], [85], [86], [132] and the High Court cases there cited) and said that the status of the privilege "as a fundamental right and its role in one of the underpinnings of the administration of justice are related".
49At [31] his Honour said:
The recognition of the importance of the privilege assists in recognising that it will not be allowed to be undermined by an overly narrow or technical approach to questions involved, such as the identification of the relevant advice in question. It does not, however, provide a foundation for extending the protection beyond its proper bounds.
50In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 the majority in the Full Court of the Federal Court (Beaumont J dissenting) had based the operation of issue waiver in the notion of fairness, saying that "The principle that requires that in such circumstances the party not be entitled to maintain the confidentiality of such advice is one of fairness which goes to the integrity of the legal process. To allow a party to put in issue the quality of his or her consent or assent whilst, at the same time, withholding evidence relevant to that issue, would be to allow him or her unfairly to handicap the opposing party to the proceeding, and to compromise the ability of the court realistically to determine the issue".
51However, the High Court in Mann v Carnell (1999) 201 CLR 1 at [29], made clear that issue waiver arises by reason of "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" (and see Osland v Secretary to the Department of Justice (2008) 234 CLR 275 at [44]-[45]).
52It is clear that issue waiver is not now to be tested by reference to an overarching principle of fairness. In DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 384; (2003) 127 FCR 499 at 519 [58], the test as to when an implied waiver arises was expressed as being when "the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication".
53In Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86, the Court considered the usual type of case where issue or implied waiver was made out, explaining the undue influence cases as those in which "[b]y bringing the suit, the plaintiff brings the matter of influence before the court (and into the public domain)" and noting that if the plaintiff received relevant legal advice, the court would be required to assess the degree of the alleged influence on the plaintiff and the countervailing effect of the advice. Their Honours explained the Thomason case as analogous thereto (referring to DSE [2003] 384; (2003) 127 FCR 499 at 516 [46]-[47]), saying that in the Thomason Case, the plaintiff was asserting a right to claim damages in a statutory context "which rendered it implicit in such an assertion that the plaintiff had not effectively exercised her option to take the alternative course, notwithstanding that on the pleadings the onus of proving the effective exercise by the plaintiff of that option, and in an evidentiary sense the onus of proving the plaintiff's knowledge of her legal rights, in each case rested on the defendant".
54Their Honours accepted the observation by McLelland J, as his Honour then was, in United States Surgical Corporation v Hospital Products International Pty Ltd (unreported, Supreme Court, New South Wales, 13 October 1981), that "Jordan C.J. [in Thomason] cannot have intended to lay down as a proposition of general application that whenever the making or contents of a privileged communication becomes an issue in proceedings, privilege cannot be successfully claimed for the purpose of those proceedings, as this would be inconsistent with His Honour's discussion ... of what was said by Lord Atkin in Minter v Priest ; 1930 AC 558 even if the proposition were limited to proceedings to which the person entitled to privilege was a party". McLelland J there said:
So that it may be that the criterion that the otherwise privileged party must himself have raised the fact and nature of the advice as an issue in the case is too rigidly stated. Nevertheless, before the privilege can be said to have been lost on this principle, one must at least be able to identify some element or feature of the claim made, or the evidence adduced, by the party otherwise entitled to the privilege, which would render reliance on the privilege unjust.
55In Rio Tinto , confirming that issue or implied waiver is made out where 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, the Court said that:
Where the privilege holder has put the contents of the otherwise privileged communication in issue , such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication. (my emphasis)
and went on to say:
In other words the cases are ones in which in the substantive proceeding brought, the privilege holder has put in issue the very advice received. We observe in passing that it is questionable whether advice can properly be said to be in issue in a proceeding merely because it may be relevant to an issue in it: see Rhone-Poulenc Rorer Inc v Home Indemnity Co 32 F 3d 851 (3rd Cir 1994) at 863; save, perhaps, where the proceeding is between client and legal adviser and the advice is relevant to the adviser's defence of that proceeding: see Lillicrap v Nalder & Son [1993] 1 WLR 94. (emphasis per Mr Gleeson)
56At [54], the Court noted that waiver comes about because the privilege holder's conduct is inconsistent with the continued confidentiality of the communication because he or she has put in issue the character or contents of the communication in pursuing a right or claim, or has created a situation where another party must reasonably do so by way of a defence .
57In Rio Tinto , the party said to have waived privilege was the Commisioner of Taxation. At [67], the observation was made that ordinarily, in exposing his state of mind and the basis for it, the Commissioner "would not ordinarily act in a manner inconsistent with the maintenance of privilege over legal advice relevant to his attaining a state of satisfaction or exercising his discretion in a particular way". The Court said:
Even though such communications may contribute to the decision-making, the mere reference to this fact by a decision-maker in the course of defending a judicial review application or on a taxation appeal is not inconsistent with the maintenance of the privilege: compare Webb v Commissioner of Taxation (1993) 44 FCR 312 at 317 per Cooper J and Lovegrove at [24] per Pullin J. This is because the decision-maker (here the Commissioner) would not put such legal advice in issue merely by saying that the advice was relevant or contributed to his decision. There would be no issue waiver because the decision-maker would not have done anything inconsistent with the maintenance of privilege. The situation might be otherwise if the decision-maker puts the contents of the legal advice in issue by specifically relying on the contents of the advice (and not merely the fact of the advice) to vindicate his claimed state of satisfaction or exercise of discretion. (my emphasis)
58There, the waiver arose because the particulars given by the Commissioner had disclosed more than that he had taken into account legal advice in, and that the privileged documents were relevant to, reaching his state of satisfaction and exercising the relevant discretions. This was said not to be sufficient to waive privilege, even though it was accepted that the validity of the Commissioner's state of satisfaction and the exercises of his discretion were key issues in the substantive proceeding, the Court saying:
The Commissioner could have identified his bases for satisfaction and exercises of discretion by listing the matters he took into account in each case, [which, I interpose to note, is all that the February 2007 letters in this case appear to have done] but he did not do so. Instead, he identified his bases for satisfaction and exercises of discretion as the matters evidenced in the scheduled documents. In so doing, the Commissioner did more than make an assertion about the relevance of these communications. In his particulars, the Commissioner has said that he took into account the matters evidenced by numerous documents, including the eight privileged scheduled documents. In so doing, the Commissioner has made an assertion that puts the contents of these eight documents in issue, or necessarily lays them open to scrutiny, with the consequence that there is an inconsistency between the making of the assertion and the maintenance of the privilege. (my emphasis)
59In Council of the New South Wales Bar Association v Archer [2008] NSWCA 164, (2008) 72 NSWLR 236 at [47]-[48] Hodgson JA considered the question of issue waiver and said:
... If a party claims to set aside a transaction, on which the party has had legal advice, for undue influence, but makes no assertion whatsoever that there was any inadequacy in the legal advice about the transaction or in the party's relevant legal understanding of the transaction, it seems to me that the mere fact that some other element of undue influence is alleged would not necessarily mean that legal professional privilege is waived. ... If a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, then fairness to the other party may mean that this assertion has to be taken as a waiver of any privilege attaching to the communication.
It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. (my emphasis)
60His Honour went on to add, however, the following comment (on which Mr Jucovic places reliance on the facts of the present case:
In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind.
61His Honour also observed that a claim of privilege may clarify issues or lead to a clarification of issues, in that, if the pleadings and the evidence up to the time when the claim is made did not make it wholly clear whether a party was or was not making some assertion about the content of confidential communications, then that party could not pursue the claim of privilege without making it completely clear whether or not such an assertion was made.
62In Bailey v Director-General, Department of Land and Water Conservation (2009) 74 NSWLR 333, Allsop P, returning to the question of issue waiver and commenting on the notion of inconsistency in the waiver of privilege, said (at [4]):
Though fairness may have a part to play in assessing inconsistency, it is not a freestanding or overriding principle of fairness "operating at large ": Mann v Carnell (at 13 [29]). I agree with Hodgson JA in Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236 at 252 [48] cited by Tobias JA. I would also refer to what I said in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at 504 [11]-[113] (though in context of the common law). I agreed (at 519 [57]- [58]) with Hodgson J (as he then was) in Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87 as to the need to make an express or implied assertion of the content of the confidential communication. His Honour repeated these comments in Council of the New South Wales Bar Association v Archer (at 250 [47]-[48]). The importance of this repetition, after Mann v Carnell, is to reinforce the fact that the relevant issue is inconsistency, not general fairness . (my emphasis)
63I note that his Honour suggested that a review of many of the earlier decisions based on a general overriding principle of fairness and a reconsideration of them based on assessing the inconsistency with the confidentiality underlying the privilege (even informed in part by fairness) would indicate that the approaches in many of the cases discussed in DSE [2003] 384; (2003) 127 FCR 499 (at 521-529 [70]-[113]) would be difficult to sustain under Mann v Carnell .
64More recently, in Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd [2011] FCA 638; Greenwood J, at [22] considered the question whether the conduct of simply pleading a cause of action in which reliance is in issue amounted to conduct inconsistent with the maintenance of the confidentiality and said that:
... a party ought not to be denied that [important common law right or immunity] right as a result of an implied construct simply by pleading a claim to a remedial right based upon a cause of action in which a state of mind is put in issue unless the party expressly pleads reliance upon a privileged communication as a material fact (or particularises a material fact by reference to an otherwise privileged communication) or the very nature of the claim itself demonstrates clear inconsistency of treatment such as where a client sues his or her lawyer for negligence asserting a sequence of instructions and at the same time seeks to deny, on the ground of legal professional privilege, the disclosure by his or her lawyer of those communications in the forensic analytical process.
65In considering the authorities on issue waiver, I note that Mr Jucovic places weight on the fact that in Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297 (at [41], the Court of Appeal approved the following explanation given by Hodgson CJ in Eq (as his Honour was then) in Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044 at [12] of the factors to be taken into account by the Court in determining whether an implied waiver had occurred:
It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver. It seems to me that, on the basis of all those matters at least, the Court has to make a judgment as to what is reasonable, and what is fair in the particular case. (emphasis per Mr Jucovic)
66I also note that the question as to which party is raising the issue the subject of the alleged issue waiver is of relevance. In Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd [2007] FCA 933, Tamberlin J noted at [26] that where the issue in question (an allegation of bad faith) had been raised not by the party claiming privilege but by the party seeking the production of the documents, then it could not be unfair or inconsistent for the former to retain its privilege with respect to records relating to its own state of mind. (See also Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 at [10] per Wheeler J.)
67In Rio Tinto , the Court observed at [60] that the cases that have specifically considered 'issue waiver' are of limited utility, principally because each turns on its own particular facts. There, it was said that "whether or not an applicant will waive privilege in alleging reliance on misleading or deceptive conduct will, as in every instance of waiver, depend very much on the particular character of the case and how it is conducted". The fact specific nature of decisions in this area was emphasised by Counsel on the present application. Nevertheless, it seems that the following general principles can be distilled from the authorities referred to and cited above (and later in this judgment):
The purpose of a covenant against assignment without the consent of the landlord, such consent not to be unreasonably withheld, is to protect the lessor from having his premises used or occupied in an undesirable way, or by an undesirable tenant.
As a corollary of 1, a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease.
The onus of proving that consent has been unreasonably withheld is on the tenant.
It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by the reasonable man in the circumstances.
It may be reasonable for the landlord to refuse his consent to an assignment on the ground of the purpose for which the proposed assignee intends to use the premises, even though that purpose is not forbidden by the lease.
It may be permissible, though this is not clear on the authorities, to have regard to the consequences to the tenant if consent to the proposed assignment is withheld.
Subject to 1 to 6, it is in each case a question of fact, depending upon all the circumstances, whether the landlord's consent to an assignment is being unreasonably withheld.
94Mr Jucovic's submission is that where the evidentiary onus lies does not of itself determine the issue for present purposes; that issue being whether the NAB Parties have put the question of reasonableness of consent in issue by seeking a declaration that is predicated on a lack of unreasonableness. (In Rio Tinto , the explanation of Thomason's case contemplated that an issue waiver might arise even where the evidentiary onus does not lie on the party putting the relevant matter in issue - see the extract at [53] above.)
95The question is whether a declaration as to the extension of the charge to rights under the Consulting Agreement or as to the validity of the receivers' appointment is one that is necessarily predicated on the absence (or refusal) of consent not being unreasonable. In their terms the declarations sought make no reference to reasonableness (and nor do the clauses in the Charges turn on whether consent has been reasonably or unreasonably withheld). However, insofar as the allegations as to invalidity of the appointment or the extension of the charge might fall to be determined by reference to the reasonableness of consent under the Consulting Agreement, then it would be difficult for the NAB Parties to contend that reasonableness of their refusal of consent was not in those circumstances put in issue by the declarations sought.
96It seems to me that there is room for debate on that issue, since it turns ultimately on whether the claim for declaratory relief that is to be pressed is predicated on consent not having been unreasonably withheld. To the extent that it is open to the NAB Parties to press for the declarations they have sought on a basis that does not include a finding as to the reasonableness of their refusal to consent, then I agree that the fact that they had made an allegation unnecessary for the purposes of that claim would not necessarily open up the issue of reasonableness of consent at this stage (though it may do so later and it may in those circumstances be that, in order to avoid unfairness to the Chargees, the NAB Parties should be required to make clear in advance whether they elect not to press for declaratory relief on any other basis that did involve the reasonableness of their refusal to consent).
97However, even if the claim for declaratory relief of its nature opens up the question of reasonableness of the refusal to consent, for the reasons set out in relation to Mr Gleeson's second submission I am not persuaded that any need for the NAB Parties to prove that the refusal of consent was not unreasonable necessarily opens up the question of their state of mind or the legal advice they may have received and taken into account when considering the request for consent.
98The submission by Mr Gleeson (that, even if the NAB Parties are required to prove that their refusal was not unreasonable, it does not follow that by commencing proceedings they have put in issue their state of mind) is put on the basis that the NAB Parties can justify their refusal by matters not known to them at the time ( Secured Income at 611). It is submitted that the test is objective and that the mere fact of commencement of declaratory proceedings (where there has been no express allegation as to state of mind) does not involve the making of any implied assertion about the NAB Parties' state of mind. Reference is also made in this regard to Australian Maintenance and Cleaning Pty Ltd v AMC Commercial Cleaning (NSW) Pty Ltd [2011] NSWCA 103 at [64].
99(Mr Jucovic accepts as a simple proposition that the reasonableness or lack of unreasonableness of withholding consent is to be determined objectively on the evidence but maintains that the submissions made for the NAB Parties as to the objective (not subjective) reasons for refusal of consent are apt to mislead; the question being, in his submission, how the Court determines what were the reasons for refusal in a matter that might incorporate an element of subjectivity. Hence the submission that I should make no final ruling on how reasonableness might ultimately come to be determined by the trial judge.)
100In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, Mason J (as his Honour then was) said at 609:
The question then is whether the respondent capriciously or arbitrarily refused to grant a lease to the appellant, the appellant having the onus of establishing that the refusal was capricious or arbitrary because it was bound to establish the respondent's breach of contract. The respondent was not bound to give reasons for refusing to grant a lease to the appellant, though its failure to do so leads more readily to the inference that the refusal was capricious ( Frederick Berry Ltd v Royal Bank of Scotland [1949] 1 All ER 706 ; [1949] 1 KB 619 at 623).
The meaning of the word "arbitrarily" in the context of refusal of consent to an assignment of a lease has been much discussed. In Barrow v Isaacs & Son [1891] 1 QB 417 at 419, Lord Esher MR thought that it meant "wholly unreasonably". In Mills v Cannon Brewery Co Ltd [1920] 2 Ch 38 at 45, PO Lawrence J considered the authorities, including Barrow v Isaacs & Son , in which the meaning of the word had been considered, and concluded that the various synonyms assigned to it, "unreasonably", "wholly unreasonably" and "without reasonable cause", practically meant the same thing. I am inclined to agree, though I should prefer to say that "arbitrarily" connotes "unreasonably" in the sense that what was done was done "without reasonable cause". In these circumstances I doubt whether "capriciously" adds anything, except perhaps to direct attention to the motivation of the respondent.
101At 611, his Honour referred to what had been said in Lovelock v Margo [1963] 2 All ER 13 by Lord Denning MR (at p 15) that "... it is not right to say that this is an objective question, as counsel said. This matter cannot be considered without regard to the state of mind of the landlord herself as to her reasons for refusing consent. How otherwise can a lessee hope to see whether he can assign unless he knows the landlord's reasons for objection" and went on to say:
This passage seems to suggest that the landlord should be confined to reasons which are given to the lessee at or about the time of refusal of consent. To this extent, at least, the judgment cannot be reconciled with earlier authority which indicates that an omission to give reasons leads more readily to the inference that the refusal was capricious, although not to the conclusion that the refusal was necessarily capricious . Moreover, the passage seems to be at odds with a later decision of the Court of Appeal in Sonnenthal v Newton (1965) 109 Sol Jo 333, where the lower court was held to be entitled to take into account reasons not referred to at earlier stages of the case: see also Isow's Restaurants Ltd v Greenhaven (Piccadilly) Properties Ltd (1970) 213 Estates Gazette 505.
I am inclined to the view that the landlord is entitled to rely on a ground not taken at or about the time of refusal. It would be most unjust if the landlord could not take advantage of an important ground justifying refusal merely because it was not known to him at the time, eg the impending bankruptcy of the proposed assignee. In the context of this case, the reasons for allowing the respondent to advance a ground not communicated at the time of refusal are rather stronger. There is here no question of informing a lessee so that he can decide whether he should assign or not. And the general rule in contract is that a party can justify his termination or rescission of a contract by reference to grounds not taken at the relevant time ( Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359).
102In International Drilling Fluids at 518, Balcombe LJ addressed the question in the context of a refusal to grant a licence to permit the lessee to assign a lease, where the refusal was conveyed by the landlords' solicitors on the (initial) stated ground "that the investment value of our clients' interest in the property would be detrimentally affected by the proposed use". At 520 Balcombe LJ said:
An act must be regarded as reasonable or unreasonable in reference to the circumstances under which it is committed, and when the question arises on the construction of a contract the outstanding circumstances to be considered are the nature of the contract to be construed, and the relations between the parties resulting from it.
103In this regard, Mr Jucovic placed weight on Tamsco , where Young CJ in Eq (as his Honour then was) considered what was required to establish reasonableness of consent in a case which arose following the refusal of consent by a landlord under a lease which contained provision that the landlord's consent was required for various dealings by the tenant but that in certain specified circumstances the landlord would not withhold, refuse or delay its consent. Those circumstances included the satisfaction of the landlord (acting reasonably) as to particular matters. His Honour, having noted the principles in International Drilling , there addressed a submission by Counsel to the effect that refusal of consent is unreasonable if the lessor's main aim is to obtain some collateral advantage, such as surrender of the lease (for which reliance had been placed on authorities including Bates v Donaldson [1896] 2 QB 241 and Bromley Park Garden Estate Ltd v Moss [1982] 1 WLR 1019). His Honour noted at [51] the need for precision as to the real principle, identifying that by reference to what was said by Kearney J in Noyes v Klein (1984) 3 BPR 9216, 9231, namely that:
... if the landlord's refusal of consent was designed to achieve the purpose of covenant, the refusal was reasonable, but if the refusal was designed to achieve a collateral purpose or benefit wholly unconnected to the terms of the lease, then it was unreasonable
and by Williams J in Chalcedony Investments Pty Ltd v Faroud No 9 Pty Ltd (1988) ANZ Conv R431, 434, that consent is not reasonably refused where the lessor aimed "to achieve a collateral purpose wholly unconnected with the terms of the lease". (Reference was also made to Butt Land Law 4th ed (Law Book Co, Sydney 2001) at [1596] p315.)
104At [53] - [54], his Honour said:
Three points must be made about the submission:
(1) There is, indeed, no independent rule that a collateral purpose necessarily makes the refusal of the consent unreasonable. Indeed, Balcombe LJ puts it merely as an illustration of his rule 2.
(2) A collateral purpose connected with the terms of the lease is, in any event, not necessarily bad, as is made clear from the passages of the judgments of Kearney J and Williams J noted above.
(3) Just as it would be wrong of a lease to trespass on the general concept of unreasonableness in s133B of the Conveyancing Act, so would also the adoption of any other special factor, such as debilitating collateral purpose.
Accordingly, although the court has to work out what was the real and true reason for the refusal of consent , the mere fact that the landlord has in mind some collateral purpose or some back-up scheme, which is outside what is contemplated by the tenant of the assignment, does not necessarily mean that the refusal of consent will be unreasonable. (my emphasis)
105In Bromley Park Garden Estates Ltd v Moss [1982] 2 All ER 890; [1982] 1 WLR 1019, to which reference was made in Tamsco , Slade LJ at 901 noted that there had been a concession in the course of argument on the appeal that the relevant date for the purpose of considering whether or not the landlords' refusal of consent to an assignment of the tenancy was reasonable or unreasonable was not the date of the hearing but, rather, the date of the assignment (a concession that is inconsistent with the manner in which the issue was approached in Secured Income ). In so doing, Slade LJ observed that the tenant's right to proceed without consent if the landlord had unreasonably refused consent (even though it would be open to the landlord thereafter to challenge the validity of an assignment effected in such circumstances on the ground that the refusal of consent was not in fact unreasonable) would be rendered "more or less nugatory, if, in subsequently advancing such a challenge, the landlord were entitled to rely on facts or considerations which had not in any way influenced his mind at the date of the assignment, but were mere afterthoughts".
106Having expressed the view that it was rather more surprising that, when the landlords came subsequently to question the validity of the assignment in such circumstances, they should be free to rely on reasons for their refusal which had not been mentioned to the tenant "or even hinted at", Slade LJ said that in the absence of authority there was much to be said for the view that "a landlord who, by stating to the tenant one reason only for refusing his consent to an assignment, that reason being a demonstrably bad one, provokes a tenant into assigning without consent, should not thereafter be allowed to rely on unstated reasons for the purpose of attacking the validity of the assignment", though noting that authorities such as Sonnenthal v Newton (1965) 109 SJ 333, and Welch v Birrane (1974) 29 P & CR 102, appeared to establish that the court, in considering questions of reasonableness or otherwise in such a context, was not confined to the reasons expressly put forward by the landlord prior to the date of the refusal.
107Slade LJ then said:
For present purposes I am content to assume, without deciding, that this is the legal position, subject only to one proviso. It seems to me clear that, in so far as a landlord is allowed to rely on reasons which were not stated to the tenant, he can only be permitted to rely on reasons which did actually influence his mind at the relevant date, which in the present case is 17 September 1980. The decision of this court in Lovelock v Margo [1963] 2 All ER 13, [1963] 2 QB 786 clearly establishes that in cases such as the present the court has to have regard to the landlord's actual state of mind at the relevant time. The test is not a purely objective one, though no doubt inferences may be drawn as to his state of mind from his words and actions and all the other circumstances of the case. It is therefore necessary to consider what were the factors which actually influenced the plaintiff landlords in the present case, as at 17 September 1980.
108Mr Gleeson analysed in some detail the reasoning in Bromley , as it formed the foundation for the more recent cases on which reliance has been placed by Mr Jucovic, namely J. A. McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121 and Tamsco . In McBeath , in the Court of Appeal in Queensland, Kelly SPJ said at 129:
There is no difficulty in reading together cl. 2 of the lease and s. 121(1) of the Property Law Act . When so read together the requirement is that consent to an assignment is not to be unreasonably withheld in the case of a proposed respectable and responsible assign. The onus of proving that consent has been unreasonably withheld is on the lessee ( Pimms Ltd v. Tallow Chandlers Company [1964] 2 Q.B. 547, 564). It is a question of fact depending on all the circumstances whether consent is being unreasonably withheld ( International Drilling Fluids Ltd v. Louisville Investments (Uxbridge) Ltd [1986] Ch. 513, 521).
I proceed on the basis that the lessor is entitled to rely on a ground not taken at or about the time of refusal. In Secured Income Real Estate (Australia) Limited v. St Martins Investments Pty Limited (1979) 144 C.L.R. 596, 611, Mason J., as he then was, with whose reasons three other members of the court agreed, was inclined to that view. In Bromley Park Garden Estates Ltd v. Moss [1982] 1 W.L.R. 1019, 1034, it was assumed without deciding that in considering the question of reasonableness the court was not confined to the reasons for refusal expressly put forward by the landlords prior to the date of refusal but it was held that insofar as the landlords are allowed to rely on reasons for refusal which were not stated to the tenant they can only be permitted to rely on reasons which did actually influence their minds at the relevant date.
109Mr Gleeson submits that the reason that this case involved an inquiry into the true reason for refusal was that a subjective reason had been proffered in evidence. Similarly, Mr Gleeson submits that Tamsco is explicable in the context of the particular clause in the lease and the evidence before the court.
110More recently, in Yokogawa , the Court of Appeal in South Australia considered the issue of implied waiver of legal professional privilege in the context where an issue had been raised as to the reasonableness of a settlement (said to have been caused by and properly attributable to the negligence there alleged.
111Their Honours held that the issue of reasonableness was to be determined objectively, such that if reasonableness could be proved without calling evidence of the legal advice obtained in relation to the settlement, no implied waiver of legal professional privilege would arise by virtue of the inconsistent conduct of the case and that any legal advice received, which might have been relevant to the relevant party's state of mind had not been put in issue merely by denying the unconscionability of the settlement. At [107], it was noted (there in the context of an alleged implied waiver of without prejudice privilege) that "The ultimate question is whether there is an inconsistency in raising an issue but attempting at the same time to prevent a proper examination of the issue by maintaining the privilege. An assessment has to be made as to whether there is unfairness as a result of the inconsistency and, if so, the extent of that unfairness ". There, it was said to be open to the party claiming privilege to argue its case on the reasonableness of the settlement by reference to objective factors (namely, its contractual obligations to a third party, the fact of delay and the legal consequences of its failure to meet its obligations to that third party, against which background the settlement was reached. (In passing, I note that there was a recognition that an implied waiver might still occur during the course of the trial if the case was expanded beyond those circumstances (so as to rely on the course of the negotiations that had taken place in relation to the settlement), see [109].)
112For present purposes, as earlier noted, it is not appropriate for me to make any determination as to the test to be applied by the trial judge in determining the question of reasonableness. However, in circumstances where there is a line of authority (going back to Secured Income ) that reasonableness may be determined by reference to objective facts existing at the time whether known to the decision maker or otherwise, and cases which have enquired into the real reasons for the refusal may well be explicable on the particular facts there before the Court, it seems to me that it cannot be said that maintenance of the privilege at this stage of the proceeding is inconsistent with the way in which the NAB Parties have pleaded their case.
113Third, it is submitted by Mr Gleeson that even if, by commencing the proceedings, the NAB Parties are taken to have made some implied assertion about their true or real reasons for refusal, such an assertion cannot constitute a waiver of privilege unless the true or real reasons were based on the NAB Parties' understanding of their legal rights. It is noted that the allegation made by the Chargees is that the actual or real reason for refusing consent was to frustrate Idoport's ability to pursue its rights under the Consulting Agreement and it is submitted that such a state of mind (essentially mala fides ) is not one likely to have been formed or affected by legal advice (reference being made by way of contrast to Yokogawa at [66]). Mr Gleeson submits that this is not a case where the state of mind alleged is one based on an understanding of legal rights or obligations.
114In Rich v Harrington , Branson J held that a pleading that the imposition of certain restrictions on the applicant, in her capacity as a partner of the respondent firm, was in good faith and was reasonable and in the best interests of the firm did not raise any questions of reliance on legal advice. Her Honour said (at [24]):
While the respondents have (appropriately) gone beyond mere denial of Ms Rich's allegations, they have not done so in a way that gives rise to any inconsistency between their conduct and the maintenance of the confidentiality of their legal advice. The additional material pleaded by them does not put the content of their legal advice in issue by pleading their state of mind in a way that invokes reliance on the content of legal advice ; rather it identifies conduct of Ms Rich to which the respondents assert that the access restrictions were a genuine response. (my emphasis)
115Similarly, here, the pleading (and the particulars by reference to which it is alleged) that the refusals of consent were not unreasonable do not put the content of the NAB Parties' legal advice in issue nor do they plead state of mind in a way that invokes reliance on the content of legal advice.
116In Rich , at [19], Branson J rejected the submission that there was an inconsistency between the maintenance of confidentiality and the conduct of the case because "the respondents consequently seek on the one hand to ask the Court to examine their state of mind and find that they positively acted in good faith while on the other hand denying her and the Court the means properly to test that assertion". A similar submission as to the unfairness of the NAB Parties putting the reasonableness of their conduct in issue but denying the Chargees the means to test that proposition (by having conducted the decision-making process under cover of privileged communications) was here made. It should suffer the same fate as that in Rich.
117Mr Gleeson also places weight in the present case on what was said by Beaumont J in dissent in Telstra (at 157-8), for the proposition that it is only if the NAB Parties seek to assert a lack of unreasonableness by relying on the legal advice that an issue waiver would occur and that if such reliance has not yet occurred then there is no inconsistency with maintenance of the privilege:
At this stage, BT has made no use of the legal advice in the proceedings. The advice is not pleaded by BT as an ingredient of its claim. BT does not assert that it relied, or did not rely, on the advice ... Questions of degree may be involved, but the advice is not, obviously, central to that issue in the same way as the advice given by the solicitor on the election was, obviously, central to the plea in Thomason , at least as the issues in Thomason had evolved in the course of the trial.
118In conclusion on this first issue, I am of the view that (neither by the pleading that the refusals were not unreasonable nor by seeking declaratory relief that may ultimately be predicated on the lack of unreasonableness of the refusals (noting that Mr Gleeson contends that the declarations sought are not so predicated)), have the NAB Parties put in issue their state of mind or the "real" reasons underlying that refusal. I find that there has been no issue waiver.
(ii) Has there been an assertion as to the contents of the privileged communications?
119The second (and independent) basis on which it is submitted that the present application should be dismissed is that waiver is not brought about simply because a party has put its state of mind in issue (or even that it has acknowledged that legal advice received was relevant to that state of mind). Mr Gleeson notes that the governing principle is whether the privilege holder has directly or indirectly put the contents of a privileged communication in issue ( Rio Tinto at [61], quoting with approval DSE [2003] 384; (2003) 127 FCR 499 at [58]).
120Mr Gleeson submits (referring to Rio Tinto at [65]) that the question is not whether the privilege holder has put its state of mind in issue but whether it has directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, citing Rio Tinto , Seven Network Ltd at [44(iii)] (per Sackville J), and Austral Dutch Kaolin at [22], per Greenwood J.
121In Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87, Hodgson J (as his Honour then was) said at 94-95:
If a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, then fairness to the other party may mean that this assertion has to be taken as a waiver of any privilege attaching to the communication. (emphasis per Mr Gleeson)
122In Archer at [48] Hodgson JA said:
It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind.
123Mr Gleeson submits that the requirement that the party with the privilege put in issue the contents of the confidential communication stems from the need for inconsistency between the party's conduct and maintenance of confidentiality in the communication and that the cases in which issue waiver has been held to arise are ones in which the contents of the communications have a direct bearing upon the party's claim (citing Adelaide Steamship Co Ltd v Spalvins (1988) 81 FCR 360 at 371-2).
124In Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68 at [65]-[66] Yates J said:
However the question is not simply whether the holder of the privilege has put that person's state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue: see [Rio Tinto] at [65]. Indeed, even the fact that the holder of the privilege makes clear that the advice was relevant or contributed to a particular course of conduct would not be sufficient to waive the privilege unless, possibly, the contents of the legal advice (and not merely the fact of the advice) are specifically put in issue by relying on the contents of the advice to vindicate a claimed state of mind : [ Rio Tinto ] at [67]. (my emphasis)
Significantly, in the present case, para 23 of the defence does not plead reliance by the respondent on legal advice in coming to the position that the respondent was not in a position to take the steps alleged by the applicants or that those steps would be inappropriate. Indeed, the respondent does not plead the existence of any legal advice or any awareness of such advice. In these circumstances I am unable to discern how it can be the case that the pleading of para 23 of the defence makes any assertion, expressly or impliedly, about the contents of an otherwise privileged communication."
125I note that Kirby J in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 70 ALJR 603 at 607 held that a mere reference to legal advice will not amount to disclosure. Still less could a mere reference to a decision having been made after consultation with lawyers amount to a disclosure of the contents of that advice.
126It is submitted that since the NAB Parties have made no express assertion about the content of any legal communications or the terms of any legal communications and do not plead that the obtaining of legal advice was a matter which was in any way relevant to the refusal to provide consent, the present application must fail unless it can be shown that the NAB Parties have in some way, by implication or indirectly, made assertions about the contents of privileged communications. I agree.
127Secondly, it is submitted that as the NAB Parties have not put in issue the contents of the 58 privileged documents, the nature of the NAB Parties' claim is not inconsistent with their claim of privilege (Mr Gleeson citing Franks v Warringah Council [2010] NSWSC 1318 at [52] in this regard).
128Thirdly, it is submitted by Mr Gleeson that even if it be accepted that the NAB Parties have put their state of mind in issue and that they bear some onus of proving their state of mind, it does not follow that the NAB Parties have in any way made assertions as to the contents of the 58 privileged documents. He notes that the NAB Parties make no claim to have relied or acted upon any legal advice and submits that there is no basis to conclude that the NAB Parties' reasons for refusing consent, as set out in their letters of 7 and 12 February 2007, were formed on the basis of legal advice or that any reliance on those reasons involves any implied assertion as to the contents of any legal advice.
129In this regard, Mr Jucovic relies on what was said by Gzell J, sitting then in the Court of Appeal (with whom Bryson JA and Windeyer J agreed), in Chen and Ors v City Convenience Leasing Pty Ltd and Anor [2005] NSWCA 297 at [41] (having noted the passage from Wayne Lawrence (cited earlier) in which Hodgson CJ in Eq expressed the view that not every assertion of belief gave rise to an implied waiver and had set out the factors that his Honour considered must be taken into account) Gzell J said:
I doubt that a different result will follow from the sort of question referred to in Wayne Lawrence and the sort of question that needs to be answered in order to determine whether there is inconsistency between the conduct of a party and maintenance of client legal privilege as discussed in Mann . 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?
130In Chen , Gzell J considered that the presence of a special condition in the contract that was apparently inconsistent with a continued assertion of reliance upon representations as to the air-conditioning, and inspection of a plan clearly depicting the loading bay as common property, made it likely that the legal advice given to lessee 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 and hence that there had been an implied waiver in respect of that advice. The question posed by his Honour as to the likelihood of there having been legal advice that would have had an effect on the allegations of reliance must be read, in my view, in the context of the particular fact situation then before the Court.
131Mr Gleeson distinguishes Chen as a case dealing with the issue of reliance that has parallels with the Thomason kind of case, where there is an implicit assertion that nothing in the privileged communications brought to the lessee's attention the very clause in the lease that would have destroyed his reliance case. He notes that it was decided before Rio Tinto , Bailey and Archer clarified the position in relation to issue waiver (and before the relevant amendments to s 122 of the Evidence Act ).
132If state of mind, having regard to legal advice received by the NAB Parties, had been in issue then I accept that some or all of the documents now sought might have had potential relevance. (In those circumstances before permitting access to the documents I would have inspected them in order to assist in determining whether the relief presently sought should be granted.) However, in the present case, no reference has been made to any legal advice in the reasons proffered for the refusal to consent (and, as the case is presently being run by the NAB Parties, I understand there is no intention to rely on any legal advice as supporting the objective reasonableness of the refusal to consent). The statement in Mr Lawson's email to the effect that the decision was made after consultation with Freehills does not disclose the content of any legal advice therein provided to the NAB Parties. This brings me to the third basis on which Mr Gleeson contends that privilege has not been waived.
(iii) Likelihood that the privileged documents affected the NAB Parties' state of mind
133The third ground for dismissing the application (which it is said arises only if the first two are not accepted) is that it has not been shown that the 58 documents are likely to have contributed to the NAB Parties' relevant state of mind, namely their subjective reasons for refusing consent.
134Mr Gleeson notes that the 58 documents now sought to be produced for inspection cover the periods from March 2006 to February 2007 and January to February 2010. The decisions refusing consent were communicated on 7 and 12 February 2007 and 5 February 2010 respectively. It is submitted that one cannot conclude that all privileged communications in the 11 months prior to the NAB Parties' decision in February 2007 to refuse consent would have contributed to the NAB Parties' subjective reasons for refusal. It is submitted that by contending that their decision to withhold consent was not unreasonable the NAB Parties cannot be said to have made assertions as to the content of the 58 documents.
135It is submitted by Mr Gleeson that no inference as to a document's connection with the NAB Parties' state of mind can be drawn based on the fact of its discovery since discovery was ordered by categories and what was sought by the Chargees was discovery, inter alia, of all documents "referring or relating to any request by Idoport for the consent of the NAB Parties to the granting of a fixed charge over Idoport's rights and/or obligations under the Consulting Agreement". It is submitted that "Therefore any privileged document which did no more than refer to the fact that consent had been sought, even if by way of historical background, was discovered."
136A distinction is drawn between this case and cases in which it may readily be concluded that legal advice going to those rights will have contributed to the party's state of mind (such as where there is a claim in which a party alleges that it had a particular understanding of its legal rights and this may amount to an implied assertion that the legal advice it received on that issue was not inconsistent with the party's alleged understanding - undue influence cases; misleading or deceptive conduct cases involving misrepresentations as to the effect of agreements or legal rights, such as Chen ).
137Where the state of mind that is alleged to be in issue is not concerned with a party's understanding of its legal rights and obligations, Mr Gleeson submits there will usually be no reason to conclude that the party's state of mind was based on legal advice. Thus it is said that an assertion by a party about its state of mind other than its understanding of its legal rights is unlikely to amount to an assertion as to the contents of any legal advice.
138Mr Gleeson submits that (and I accept) the reasons for refusing consent, as set out in the NAB Parties' letters of 7 and 12 February 2007 and as alleged in the defence, do not involve any subjective belief or understanding of the NAB Parties' legal rights (but are based on commercial considerations) and hence it is hardly likely that any such state of mind was formed or affected by legal advice (reference being made to Yokogawa at [66] in this regard).
139Mr Jucovic submits that it is highly probable that the legal advice affected the NAB Parties' state of mind. He refers to the descriptions of the privileged documents as demonstrating the following sequence of events: that shortly after receipt of the requests for consent or any other correspondence from Idoport, legal counsel at NAB requested legal advice from Freehills; that Freehills, after consultation with a barrister, then provided advice to the NAB Parties; that Freehills drafted the communications to be sent to Idoport and Mr Michael Smith, which were sent to NAB's in-house counsel; that in the case of the 2007 refusal of consent, the documents drafted by Freehills were presented for signature by the relevant company secretaries, who appear to have had no input into either the decision to refuse consent or the reasons relied upon for the refusal; and in the case of the 2010 refusal of Consent, the response was drafted by and sent out on Freehills' letterhead.
140It is submitted that the descriptions of the privileged documents strongly support the inference that the NAB Parties' reasons for refusing consent were informed by legal advice and that the legal advisers, both internal and external, had an integral role in the NAB Parties' refusals of the requests for consent. Mr Jucovic notes that the only documents discovered by the NAB Parties that provide any evidence of the process by which the NAB Parties reached their determination are the emails from Mr Lawson to the relevant company secretaries of the NAB Parties asking them to sign the letters communicating the refusal of consent, and the evidence on which the NAB Parties seek to prove their case is by relying upon the affidavit evidence of their solicitor, Mr Andrew Eastwood of Freehills, which exhibits the letters by which the NAB Parties communicated their decision to refuse consent and the NAB Parties do not put forward any officer of the NAB Parties as a relevant participant in the decisions to refuse to grant consent.
141Mr Gleeson's response is that it would be wrong to assume that the NAB Parties' reasons for refusing consent were informed by legal advice simply by reference to the fact that NAB Parties communicated with their solicitors in relation to the request for consent and that it does not follow from the fact that the NAB Parties communicated with Freehills in relation to the request that the NAB Parties' reasons for refusal were based on legal advice or that a statement as to the NAB Parties' reasons for refusing consent involves an assertion as to the content of such advice.
142Similarly, it is submitted by Mr Gleeson that if it be the case that a draft of the NAB Parties' response was prepared by Freehills (as appears, from the description of the documents and the sequence of events to which Mr Jucovic referred, may have been the case) this nevertheless does not establish that the NAB Parties' commercial reasons for refusing consent were based on legal advice; nor does it establish that an assertion that those reasons were not unreasonable carries with it an implied assertion as to the content of any legal advice.
143Mr Gleeson contends that at the highest the description of the documents in the List of Documents may lead to an inference that the NAB Parties took legal advice before they made (or communicated) their decision to refuse consent and that to find that there was an issue waiver in this case would, in effect, be to extend the doctrine of issue waiver to all cases in which any case in which the reasonableness or bona fides of a party's conduct was in issue. I am not convinced that such a finding on the particular facts of this case would have such a far-reaching effect but in any event it is a moot point as I am not persuaded that the privilege has been impliedly waived.
144Finally, I note the emphasis placed by Mr Jucovic on the absence of communications between or with any relevant participant regarding the consideration of the requests for consent and over which privilege has not been asserted. Mr Jucovic submits that the conclusion to be drawn from the discovery is that the entire decision-making process took place within the realm of privileged communications. (That may or may not be the case. It may be, for example, that there were discussions between the respective decision-makers that were simply not recorded in writing at all; as to the likelihood of which I am not in a position to comment.) Mr Jucovic submits, seemingly as a conclusion to be drawn from the absence of non-privileged communications in relation to the reasons for the decision, that the NAB Parties' assertions regarding their reasons for refusing consent are therefore assertions about the content of the decision-making process which cannot be understood without reference to the communications over which privilege has been claimed, so as to give rise to the requisite inconsistency and unfairness to give rise to an implied waiver.
145I do not accept that it follows that because the only record of the NAB Parties' decision-making process is (or is largely) to be found in privileged communications, this means that the refusal of consent involves any implied assertion as to the content of the legal advice that may have been given during that process of consideration of the request for consent. The submissions in this regard seem to be based on a broad-reaching or overarching fairness principle of the kind now disavowed (in DSE [2003] 384; (2003) 127 FCR 499).
Conclusion
146I am not persuaded that the fact that the NAB Parties have made allegations that the refusals of consent were not unreasonable or the fact that the claim on one view may be for declaratory relief predicated on the refusals not being unreasonable has the effect that the NAB Parties have put in issue their state of mind or are required to disprove all possible other reasons that might have led to the conclusion that the refusal of consent was unreasonable.
147I accept that there is an argument open to be made at the trial to the effect that the test of reasonableness in this case requires the Court to embark upon an enquiry as to the real reasons for the decision that was made and that this may open up consideration of the NAB Parties' state of mind. However, unless that must necessarily be the case (and I was invited not to make any findings in that regard), it seems to me that the Chargees have not established the requisite inconsistency between maintenance of the privilege and the case they are conducting. In those circumstances, it is neither necessary nor appropriate in my view for me to inspect the documents in question.
148For the reasons set out above, I find that there has been no implied waiver of privilege and I dismiss the application for production to and inspection by the third and fourth defendants of the privileged documents the subject of the Notice of Motion filed on 14 October 2011. I will hear Counsel on the question of costs, as necessary.
[3]
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.
Decision last updated: 13 February 2012
Parties
Applicant/Plaintiff:
In the matter of Idoport Pty Ltd (in liq)(recs apptd); National Australia Bank Limited (& Ors)
the fact that documents over which privilege is claimed are materially relevant to a pleading of state of mind is not alone sufficient to compromise the assertion of privilege ( DSE [2003] 384; (2003) 127 FCR 499; Seven Network Limited v News Limited (No. 10) [2005] FCA 1721).
where a party raises a positive case in which that party's state of mind is in issue (such as a case of undue influence or for rectification of a contract or to establish reliance on a representation or state of affairs) that behaviour is more likely to be considered inconsistent with the maintenance of privilege ( Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (1995) 37 NSWLR 405; Telstra ; Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501) particularly where the state of mind is an understanding of legal rights.
issue waiver is unlikely to be made out where the party alleging waiver is the party that put the state of mind into issue, as "it is the conduct of the party who possesses the privilege which is capable of waiving it. It is not apparently open to another party to litigation to force waiver of a party's legal professional privilege by making assertions about, or seeking to put in issue, that party's state of mind" ( Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 at [10] per Wheeler J).
where a particular state of mind is asserted against the party claiming privilege, merely joining issue and denying that state of mind does not amount to conduct inconsistent with the maintenance of privilege over documents which may be relevant to the formation of that state of mind ( DSE [2003] 384; (2003) 127 FCR 499).
merely putting a state of mind into issue, in the sense of referring to the formation of a particular view, is not, by itself, inconsistent with the maintenance of privilege over documents which may be relevant to the formation of that state of mind ( Rio Tinto; and see Rich v Harrington (2007) 245 ALR 106 at [25], where good faith and reasonableness were put in issue but there was no waiver in respect of legal advice in relation to the decisions in question).
nor is it enough, once state of mind is put in issue, to refer to the fact of privileged documents which may be relevant to the formation of the said state of mind ( Rio Tinto ).
if, in explaining or justifying the state of mind, a party puts into issue the content of communications such as by identifying the "bases of satisfaction and exercises of discretion as the matters evidenced in the scheduled documents", then such an assertion goes further than merely acknowledging their relevance to the issue and is inconsistent with the maintenance of privilege as "it necessarily lays them open to scrutiny" ( Rio at [72] per curiam).
waiver of privilege over legal documents does not arise where there is insufficient connection between the belief asserted by the party and the legal advice concerned, such as where the belief asserted by the party is with respect to commercial considerations and primarily informed by commercial, rather than legal, advice ( Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371).
for completeness, although it is seemingly not relevant in the present case, even where privilege is waived in relation to documents which go to the formation of a state of mind, privilege may still be maintained over subsequent documents which, though related to or referring to that state of mind, had no part to play in the formation of the earlier state of mind ( DSE [2003] 384; (2003) 127 FCR 499).
68Before turning to the issues thus raised for consideration, I note that Mr Jucovic invited me to inspect the documents myself in considering the issue of implied waiver (and did not limit that invitation to the situation where I might be left to determine the matter on the third of the bases on which Mr Gleeson submits that the application for production of the privileged documents should be refused). Mr Gleeson opposed that course but accepted that, if neither of the first two grounds advanced for the NAB Parties were to be accepted, then I might form the view that it was appropriate to inspect the 58 documents in question in order to address the question whether they were likely to have contributed to the formation of the NAB Parties' state of mind as to the refusal of consent.
69As to the power of the court to inspect the documents over which privilege is claimed, Giles JA (with whom Mason P and Beazley JA agreed) in State of NSW v Jackson [2007] NSWCA 279 at [24] noted that in ruling on a claim to legal professional privilege or client legal privilege the court may inspect the relevant documents (citing Grant v Downs (1976) 135 CLR 674 at 677 and 688-9; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246-7; Woollahra Municipal Council v Westpac Banking Corporation (1994) 33 NSWLR 529 at 541-2; Esso Australia Resources Ltd v Cmr of Taxation at [52]; AWB Ltd v Cole (2006) 152 FCR 382 at 391; and referring to s 133 of the Act), and that the decision whether so to inspect the documents is discretionary ( Grant v Downs at 688-9; Mallalla District Council v Livestock Markets Ltd (2006) 94 SASR 258 at [30]). The purpose for so doing is the assistance it may provide in arriving at a conclusion as to the status of the document(s). In Wayne Lawrence, in the passage cited earlier, his Honour noted that in circumstances where the Court does inspect the legal advice in question in order to make a decision, the matters to be taken into account are the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver .
70In Jackson , Giles JA noted the observation in Esso at [52] by Gleeson CJ, Gaudron and Gummow JJ that a court 'should not be hesitant to exercise' its power to examine documents. In Jackson , however, Giles JA was of the view that where the parties had put evidence before the court (beyond the use of a verbal formula claiming privilege as expressed in Woollahra Municipal Council v Westpac Banking Corporation at [542]), the court should not unnecessarily pay regard to material which could not be known to the party challenging the claim to privilege.
71In Bailey at [62], Tobias JA considered that the critical word in the passage referred to above is "unnecessarily" and said:
If the court is unable to proceed upon the evidence, as in the present case, then in my view there is no impediment to the court exercising its undoubted discretion under s 133 to order that the document or documents be produced and inspected for the purpose of determining the question of whether privilege attaches. How the court utilises the power to inspect under s 133 will obviously depend on the circumstances of each case.
72His Honour expressed the view that the mere fact that a party resisting the claim for privilege objected to the judge exercising the power under s 133 was not of itself a legitimate reason to refuse to exercise the discretion.
73In the present case, I do not consider that inspection of the documents is necessary, in the sense indicated by Tobias JA, nor do I think it is warranted in circumstances where I am satisfied that the issue waiver can be determined without reference to the content of the documents.
Issues
74Mr Gleeson submits that there has been no implied waiver of privilege on the basis, first, that the NAB Parties have not put their state of mind in issue; second, that they have not made any assertion about the contents of the privileged documents in question; and (if neither of the first two grounds is accepted) that it has not been shown that the documents in question are likely to have contributed to the NAB Parties' relevant state of mind (namely their subjective reasons for refusing consent).
(i) Have the NAB parties made assertions as to their state of mind?
75Mr Jucovic points to the allegations made in the Statement of Claim filed by the NAB Parties (to which I have referred earlier) that the NAB Parties' conduct in refusing consent to the extension of the charges was not unreasonable and (by reference to the particulars provided of those allegations) submits that the NAB Parties seek to establish the reasonableness of the NAB Parties' conduct by reference to their state of mind at the time of refusing consent.
76It is submitted that this is evidenced by the contemporaneous reasons given by the NAB Parties to Idoport and Mr Smith for refusing such consent, noting that the particulars provided of the allegations that the refusals of consent were "not unreasonable" reproduce the same matters said in the February 2007 letters to have been taken into account by the NAB Parties to Idoport and Mr Smith at the time consent was first refused, (though those have later been supplemented by reference to further, not wholly unrelated, matters).
77Mr Gleeson submits that it is incorrect to suggest that (because there is a degree of correspondence between the reasons set out in the NAB Parties' letters of 7 and 12 February 2007 and the matters particularised in the Statement of Claim ([21])) the NAB Parties are seeking to establish the reasonableness of their conduct by reference to their state of mind at the time of refusing consent.
78It is submitted (and I accept) that whether a party makes allegations about its state of mind is to be determined by reference to the pleadings. In that regard, I do not accept that the NAB Parties have directly put in issue their state of mind. None of the matters listed in the 2007 correspondence (particularised in respect of the allegation that the refusal of consent was not unreasonable) raises any belief or opinion held by the NAB Parties, let alone one as to it legal position (which is to be contrasted with the cases to which I will refer shortly in which reasonableness fell to be tested in the context of a provision that linked a refusal of consent to the satisfaction or doubt on the part of the decision-maker as to a particular state of affairs or where the decision-maker put in evidence his or her subjective state of mind). Nor is there any allegation of good faith that might put the subjective motivation of the NAB Parties in issue.
79The NAB Parties contend that the issue as to whether or not their refusal of consent to the creation of a charge over Idoport's rights under the Consulting Agreement was unreasonable is an objective enquiry and that the NAB Parties may justify their refusal by reason of matters not relied upon or known at the time (relying upon Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 610-611). (Mr Gleeson accepts that the Chargees contend, to the contrary, that the refusal can only be justified by the actual or subjective reasons at the time of refusal but he submits, and I accept, that such a proposition forms no part of the NAB Parties' case. In that regard, Mr Jucovic maintains that whether or not the NAB Parties choose to run their case by reference to the objective reasonableness of consent, there are authorities, including Tamsco , in which the issue of reasonableness is said to give rise to an enquiry as to the actual reasons for refusal.)
80There is no doubt that, for their part, the Chargees have put state of mind in issue. They have made positive allegations that the reasons for refusing consent given in the NAB Parties' letters of 7 and 12 February 2007 were not the "actual reasons" for the NAB Parties' decision ([11(b)]) and that the "actual reasons" for the NAB Parties' refusal of consent were to deprive Idoport of the benefit of the Consulting Agreement by preventing it from obtaining the means of asserting its rights ([12(d)]); and that the matters particularised in support of the NAB Parties' contention that their refusal of consent was not unreasonable are an ex post facto statement of reasons and were not the actual reasons for the NAB Parties' decision to withhold consent ([12(e)]).
81Mr Gleeson relies on the authorities that hold that a party's privilege in a document or communication is not waived because of any allegation made by another party ( DSE [2003] 384; (2003) 127 FCR 499 at [114]-[122]; Temwood Holdings Pty Ltd at [10]; Rio Tinto at [64]; Rich v Harrington (at [25]; Hoy Mobile at [26]-[27]; Yokogawa Australia Pty Ltd v Alstom Power Ltd (2009) 262 ALR 738 at [60]-[68].
82Mr Jucovic submits that the positive allegations as to the collateral or actual purpose of the NAB Parties were properly pleaded, having regard to the requirement in the Uniform Civil Procedure Rules (Rule 14.14) for the pleading of any matters that would otherwise take the opposing party by surprise. I accept that matters of the kind alleged by the Chargees (collateral purpose or mala fides ) would need to be specifically pleaded. However, the fact that those matters have been put in issue in the proceedings and these documents may be relevant thereto is not of itself sufficient to give rise to an issue waiver. In circumstances where the NAB Parties have done no more than join issue with the positive allegations about their "actual reasons" for refusal ( Uniform Civil Procedure Rules 14.27(2)) and have made no allegation as to their subjective reasons for refusing consent (let alone by reference to the receipt of legal advice), I do not accept that the NAB Parties by reason of their pleading in [21] and [32] have put in issue their state of mind.
83The second basis on which Mr Jucovic submits that state of mind has been put in issue by the NAB Parties (related to the first) is that it is said to be central to their claim for declaratory relief. Reliance is placed by Mr Jucovic on what was said in Hume v Munro (No 2) (1943) 67 CLR 462 at 474 by Latham CJ:
... In an action for a declaration that a right alleged to be claimed by the defendant does not exist the onus rests upon the plaintiff of establishing first that a claim sufficiently definite and intelligible in its terms to be a proper subject of adjudication has been made against him by the defendant. . . Next, the plaintiff seeking a declaration denying any possible foundation for the alleged claim of right must exhaust the possibilities and show that the claim cannot possibly be supported . It is not for the defendant in such a proceeding to make a claim and to justify that claim. [emphasis per Mr Jucovic]
84Reference is also made to Massoud v NRMA Insurance Ltd ( 1995) 8 ANZ Insurance Cases 61-257 (75,873), cited by Young CJ in Eq (as his Honour then was) in Blanch v British American Tobacco Australia Services Ltd [2005] NSWSC 241, 62 NSWLR 653. In Massoud , McLelland CJ in Eq said:
...in the case of relief by way of declaratory order, the precise terms of the declaration assume particular significance in that (subject to any relevant presumption) the party seeking the declaration has the burden of proof of any matter which is a necessary element of the declaration sought (even if in proceedings by that party for relief of another kind, or in proceedings by the other party, that matter would not arise unless raised (and the burden of proof consequently assumed) by the other party). [emphasis per Mr Jucovic]
85It is submitted by Mr Jucovic that the effect of the NAB Parties' application for declaratory relief is not only to require the NAB Parties to prove the negative proposition that consent has not been unreasonably withheld (which in principle I accept would be correct if the validity of the extension of the charges or the appointment of the receivers was dependent, in the absence of consent, on that consent having been unreasonably withheld) but also (which may be open to argument, but of which I am not persuaded that, when applied to the facts of this case, is necessarily correct) that such an enquiry requires the Court to establish the real or true reasons for the withholding of consent, being the basis for the refusals at the time they were communicated.
86It is further submitted by Mr Jucovic that the corollary of this principle is that it is open to the Court to determine that the reasons given for the refusal are not in fact the true reasons of the party from whom consent has been requested (something not disputed by Mr Gleeson, though he contends that in this case where it has been put in issue by the Chargees there is no implied or issue waiver in this regard). Mr Jucovic submits that this principle has particular importance in circumstances where the refusal is designed to deprive the other party of a benefit which would otherwise accrue to it under the contract or to achieve some other collateral purpose (in which circumstances he submits consent will be found to have been unreasonably withheld).
87Mr Gleeson puts forward three reasons for the contention that the commencement of the present declaratory proceedings does not give rise to an implied or issue waiver.
88First, he points to what was said in Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 at [176]) to the effect that attention must be focussed on the precise form of the declaratory relief sought. There, Campbell J (as his Honour then was) said:
Where, as in the present case, the only remedy the plaintiff seeks is a declaration, the plaintiff's cause of action (in the sense of the facts which it must allege and prove to make out its entitlement to the relief claim - cf Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 610-611 per Brennan J) depends on the precise form of the declaration which it seeks.
89His Honour, having referred to the principles outlined in Massoud , went on at [178] to refer to Hume v Monro (No 2) as having made clear "in particular, that if the claim which a plaintiff makes is for a declaration that some particular right does not exist, the onus is on the plaintiff to exhaust the possibilities of how such a right might exist, and show that a claim that such a right exists cannot possibly be supported".
90Mr Gleeson submits that it is not the case that the NAB Parties are required to disprove all facts which would or might disentitle them to the declaratory relief sought; rather that they are required to prove only those facts which are necessary elements of the declarations sought and that the declarations sought (as set out earlier) do not in terms require the NAB Parties to establish lack of unreasonableness (even though it is alleged in the Statement of Claim that their refusal on each occasion was not unreasonable). This is put on the basis that the NAB Parties seek only declarations that the charges do not extend to the rights under the Consulting Agreement (something that Mr Gleeson contends can be proved simply by proof of the extension of the charges and the lack of consent thereto).
91In that regard, Mr Gleeson submits that the allegations as to the respective refusals not having been unreasonable are strictly unnecessary, in the sense considered in Sanpine at [181]-[185]. At [180], Campbell J noted that McLelland CJ in Eq in Massoud had contrasted a prayer for relief seeking a negative declaration with a prayer for relief seeking a positive declaration (that the insurance policy remained in full force and effect). Campbell J went on to say, in the context of the claims in Sanpine (where, inter alia, a declaration sought was that a particular joint venture agreement remained on foot), that the fact the plaintiff had made an "unnecessary" allegation (as to whether the defendant had been justified in the purported termination of the agreement) did not make any real difference on the question as to what it was required to prove (since all it had to do to obtain a declaration that the agreement remained on foot was to prove that the contract was entered into, that its terms were such that it had not come to an end through effluxion of time, and otherwise to rely upon the presumption of continuance); and that, if the defendant wished to prove that the contract had come to an end through being validly terminated, it would be for the defendant to allege and prove that matter). At [182], his Honour said:
I do not see how the plaintiff having made the unnecessary allegation makes any real difference. Of course, having made it, if at the end of the case the plaintiff is still urging the Court to make a declaration, or a positive finding, that there was no justification for the termination of the contract, the plaintiff would bear the onus of establishing it. But if it fails to discharge that onus, or if, as happened here, the plaintiff was asserting from the time of its opening submission at the hearing that it was the defendant who had the onus of proving there was a justification for termination of the contract, so far as obtaining a declaration that the contract is on foot, an injunction to restrain a breach of it, or damages for its breach, the plaintiff is back in the same situation it would have been in if it had never made the allegation in the first place. (my emphasis),
likening the situation to that in Lush v Russell (1850) 5 Exch 203 where, in a common law action for damages for wrongful dismissal, the plaintiff had included an allegation that his dismissal was "without any reasonable or probable cause whatsoever" and Parkes B said (at 207) that the averment that the dismissal was "without reasonable cause was "immaterial and surplusage" and that, on the trial of the issue, the onus would be on the defendant on the ground that he had the affirmative of the proposition to maintain and ought to justify the act of dismissal.
92Thus it is submitted by Mr Gleeson that the fact that the NAB Parties have pleaded in [21] and [32] that their refusal of consent was not unreasonable does not impose upon them the burden of proving the reasonableness of consent (although even then the observations in Sanpine would suggest that an 'unnecessary' allegation pressed at trial may still carry with it an onus of proof). It is submitted that all that the NAB Parties are required to prove to justify the declarations sought is that consent to the encumbrance has not been given and that it is for the Chargees then to establish that consent was unreasonably refused.
93Mr Gleeson relies upon International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513 at 520 and Tamsco at [49] for the proposition that the burden lies on the party alleging the consent was unreasonably refused. The propositions that had been enunciated by Balcombe LJ in International Drilling at 519 to 521, were summarised in Tamsco at [49] as follows: