Judicial review of administrative decision - Waiver of legal professional privilege

Attorney-General for the Northern Territory v Kearney [1985] HCA 60; (1985) 158 CLR 500

Australian Unity Health Ltd v Private Health Insurance Administration Council [1999] FCA 1770

Benecke v National Australia Bank (1993) 35 NSWLR 110

BP Australia Ltd v Stallwood [2000] WASC 75

Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49

Hong Kong Bank of Australia Ltd v Murphy [1993] VicRp 83; [1993] 2 VR 419

Pickering & Ors v Edmunds & Ors (1994) 63 SASR 357

Southern Equities Corporation Ltd (In Liq) v Arthur Anderson & Co [1997] SASC 6712; (1997) 70 SASR 166

Vaw (Kurri Kurri) Pty Ltd v Scientific Committee [2001] NSWLEC 182

Wardrope v Dunne [1996] 1 Qd R 224

1 JOHNSON J: In this application the plaintiff seeks an order for further and better particulars pursuant to O 20 r 3 of the Supreme Court Rules and an order for discovery pursuant to O 26 r 6. In short, the plaintiff seeks access to the content of legal advice obtained by the defendant and pleaded in the amended defence filed on 2 May 2003.

2 To put the application in context, I will briefly summarise the dispute between the parties. The first and second plaintiffs are currently contracted to the defendant for the provision of lawn-mowing services at schools throughout the metropolitan area. During 2001 the defendant, through departmental representatives, decided to commence a tender process for contracting lawn-mowing and related services to government schools. The tender process was split into two rounds. The plaintiffs were advised that they had been awarded the Round 1 contracts. After the Round 2 tenders closed, the tender evaluation committee met and prepared a tender evaluation report and recommended the plaintiffs be awarded the contract. That decision was later conditionally endorsed by the State Tenders Committee ("the STC"). A short time after the decision to endorse the tender evaluation committee's recommendation, the State Supply Commission ("the Commission") decided to engage an independent consultant to review a complaint concerning the tender evaluation process which had been made by one of the tenderers. The review was carried out and a Report on Findings ("the Report") provided, which recommended that the tenders be recalled as a result of a lack of consistency between the tender evaluation process as outlined in the Request for Tender Document and the process actually applied in the assessment of tenders. The Commission then recommended to the Minister's Department that the tender be recalled on the basis of the recommendation in the Report. Consequently, the tenders were recalled.

3 In their amended statement of claim, filed 15 April 2003, the plaintiffs seek, inter alia, what is, in effect, a judicial review of the exercise of the power to recall the tender. The plaintiffs assert that the decision of the Minister to recall tenders was made in respect of the exercise of a statutory power which attracts a duty to act fairly and is reviewable.

4 The decision to recall the tenders is pleaded in par 28 of the amended statement of claim in the following terms:

"On or about 23 August 2002, the defendant accepted the Recommendation thereby proceeding on the basis of the Finding and decided to recall the tenders to supply the Services for the Schools ('the Decision to Recall')."

"In the premises pleaded above the decision to recall was an administrative decision amendable to judicial review for error of law. The decision to recall was effected by error in that there was no evidence to support the finding."

6 The relevant part of the response to that plea appears in par 28(c)(iii) of the amended defence as follows:

"As to paragraph 28 of the Amended Statement of Claim, the defendant -

(a) admits that on or about 23 August 2003 the defendant decided to terminate the tender process for Round 2 and to recall tenders for the provision of lawn mowing and related services to schools covered by the tender process ('the Decision to Terminate');

(b) does not admit that the defendant accepted the Recommendation as defined in paragraph 26 of the Amended Statement of Claim;

(c) says that in making the Decision to Terminate the defendant took into account the following matters:

(i) the recommendation in Dr Michael's report;

(ii) a recommendation by the State Supply Commission;

(iii) legal advice;

(iv) the fact that approximately 12 months had elapsed since the closing date for the submitting of tenders for Round 2;

(v) fairness to all tenders;

(d) asserts that in referring to legal advice in paragraph 28(c)(iii) of this Amended Defence, the defendant does not, expressly or by implication, waive legal professional privilege in respect of the substance or effect of that legal advice."

7 In determining whether, in the particular circumstances of a given case, there has been a waiver of privilege, it is essential to keep in mind the rationale behind the privilege. The basic principle justifying legal professional privilege arises from the public interest requiring full and frank exchange of confidence between solicitor and client to enable the latter to receive necessary legal advice: Balabel v Air-India [1988] Ch 317 at 324; see also Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 685; Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52, at 114, per Deane J. The starting point of any consideration of legal professional privilege is the premise that the privilege is a fundamental common law right which is in the public interest because it assists and enhances the administration of justice: Grant v Downs, at 685, per Stephen, Mason and Murphy JJ. Once the doctrine applies and is not excluded by the various derogations and exceptions recognised by the common law, it attaches to the communications concerned. No further balancing of public interests, for example, between that of protecting the privilege and that of securing the truth, is either necessary or possible: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, at 583, per Kirby J.

8 At common law, a person who would otherwise be entitled to the benefit of privilege may waive the privilege: Attorney-General for the Northern Territory v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 487 per Mason and Brennan JJ; Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, at 13, per Gleeson CJ, Gaudron, Gummow and Callinan JJ. It is clear from par 28(d) of the amended defence that there has been no express waiver of the privilege which would normally attach to solicitor/client communications. The issue for determination is whether there has been an implied waiver; whether an administrative decision amenable to judicial review waives legal professional privilege in advice that the decision-maker takes into account in making the decision.

9 The test to be applied in determining whether there has been an implied waiver of privilege has been differently expressed. In Attorney-General for the Northern Territory v Maurice & Ors, the High Court dealt with the issue of implied waiver of privilege in the context of a call for production of the source materials relied upon in a document which had been provided to the opposing parties. Gibbs CJ set out the test in the following terms (at 482 and also at 483):

"... where there is no intentional waiver the question whether a waiver should be implied depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production."

10 Mason and Brennan JJ held (at 487 - 488) that an implied waiver occurs when, by reason of some conduct on the privilege holder's part, it becomes unfair to maintain the privilege. The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communications. See also Deane J at 493 and Dawson J at 497, both of whom applied a test of "fairness" in determining whether waiver had occurred.

11 In Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83 Deane, Dawson and Gaudron JJ identified the test in these terms (at 95 - 96):

"When some such act or omission of the person entitled to the benefit of the privilege gives rise to a question of imputed waiver, the governing consideration is whether 'fairness requires that his privilege shall cease whether he intended that result or not' (Wigmore on Evidence (McNaughton rev 1961), vol 8, par 2327, quoted with approval by Gibbs CJ and Mason and Brennan JJ in Attorney-General (NT) v Maurice, at 481, 488)."

12 In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 the Full Court of the Federal Court also adopted unfairness as the touchstone of the applicable principle: per Branson and Lehane JJ at 165 and 166; per Beaumont J at 156 - 157.

13 However, the test of implied waiver stated in these and other authorities has, in my view, been overtaken by the decision of the High Court in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1. In Mann v Carnell, the majority of the High Court expressed the test in these terms (13):

"It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege ... . What brings about waiver is the inconsistency which the courts, where necessary informed by considerations of fairness, perceive between the conduct of the client and maintenance of the confidentiality not some overriding principle of fairness operating at large."

14 Although in dissent, McHugh J concluded that the fairness test of waiver is not of general application. His Honour observed (34):

"Notions of fairness may be factually relevant in determining whether privilege has been waived in a case like Maurice where there was partial disclosure of privileged material. In such a case, there is a clear potential for unfairness arising out of the capacity of disclosed material ... to mislead by reason of it being removed from its context ... .

However, in a case like Goldberg, concerned with whether A can assert privilege against B in circumstances where A has previously disclosed the privileged material to C, I find it difficult to see why notions of 'fairness' are relevant."

15 In light of the decision of the High Court in Mann v Carnell, I would respectfully adopt the test identified by Allsop J in DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384 after a careful analysis of the English and Australian authorities (at [12]):

"Waiver at common law occurs where the party entitled to the privilege performs an act which is inconsistent with the maintenance of the confidentiality, assessment of such inconsistency being informed, where necessary, by considerations of fairness: though the assessment is not by reference to some overriding principle of fairness operating at large."

16 It can be seen that, not only is inconsistency the cornerstone of the test rather than fairness, the inconsistency has to arise from the conduct of the party that enjoys the privilege. It is also apparent from the wealth of authority on implied or imputed waiver of privilege that the circumstances giving rise to the claim that privilege has been waived will necessarily influence the decision as to whether waiver has occurred: Attorney-General for the Northern Territory v Maurice, at 497 - 498. Even in the areas in which the issue more usually arises, such as partial disclosure and waiver brought about by the content of pleadings, the cases are not entirely consistent in outcome.

17 Despite the very large and developing area of jurisprudence as to the circumstances in which there can be waiver of legal professional privilege, neither party has been able to identify an authority precisely on point. However, useful analogy can be drawn with waiver of legal professional privilege in the context of the reports of expert witnesses: see Expert Evidence: Legal Professional Privilege and Expert's Reports (2001) 75 ALJ 258. In Dingwall v Commonwealth of Australia [1992] FCA 627; (1992) 39 FCR 521, Foster J concluded that the doctrine of waiver in the context of documents provided to an expert witness requires that there be an indication that the documents were used in the preparation of the evidentiary document in a way that could be said to influence the content of the document (at 524). In Instant Colour Pty Ltd v Canon Australia Pty Ltd, unreported; Fed C of A; Library No WAG 94 of 1991; 30 October 1995, at 56, Nicholson J held that privilege had been waived in relation to a letter of instruction to an accountant. He stated:

"The question of fairness can be tested in this way. If the letter of instruction confined the expert to preparing the report in a certain way and that instruction was not apparent because the letter remained subject to legal professional privilege, it is clear that no true understanding could be carried at in relation to the foundation of the expert's knowledge. In my view, once it is said that the letter of instruction was something from which the report has been compiled, it cannot be the case that the reference to the letter of instruction falls within the principle of Buttes case [where it was held that a bare reference to a document in a pleading does not waive any privilege attaching to it]... . It must be a reference which calls into play the aspects of fairness and results in an unintentional and implied waiver of legal professional privilege."

18 In Bourns Inc v Raychem Corporation [1999] 3 All ER 154 that basic principle was followed, but a distinction was drawn with cases where there is reliance on the document (at 166). In Interchase Corporation Ltd v Grosvenor Hill (Qld) Pty Ltd [No 1] [1999] 1 Qd R 141 Thomas J stated (at 160):

"The extent of protection applying to communications between the solicitor and the expert concerning alleged facts or hypotheses which the expert is asked to assume is, I think, a grey area. The solicitor is deliberately converting the expert into a witness. The community has some interest in ultimately being able to ensure (through the courts) that this process is not abused. It is desirable that the rules be such that the courts, or the adversary, be able to explore fairly fully the circumstances of the formation of the opinion."

19 R v Meninga (1992) 66 A Crim R 199 is a further authority in support of the proposition that if an expert report is based on otherwise privileged material, then the confidentiality to establish the privilege is destroyed. In Rozmus v Illawarra Area Health Service, unreported; SCt of NSW; 23 December 1996, the New South Wales Supreme Court held that privilege had been impliedly waived because it had been shown that the material had played a part "in the preparation of the report in a way which could be said to have influenced its content" (at 5, per Hidden J).

20 Having considered this line of authority, the learned author of "Expert Evidence: Legal Professional Privilege and Expert's Reports, at 269, observed that, applying the ratio in Mann v Carnell, there would appear to exist an inconsistency between retaining the confidentiality pertaining to the source materials and express reliance thereon in forming the very basis of the expert's report.

21 In my view, the key issues identified in the authorities on waiver of privilege in the context of expert reports are: (1) reliance on the privileged material in forming the opinion and (2) the desirability of obtaining a true understanding of the opinion evidence influenced by the privileged material. If those principles are applied to a case of judicial review of an administrative decision, the defendant having, on his own admission, taken into account the legal advice in making his decision, it is desirable that the plaintiff be able to fully explore the circumstances of the formation of the opinion.

22 Counsel for the plaintiff was at pains to emphasise that there is no assertion that the waiver arises on the pleadings. That concession is well made in view of the principle in Mann v Carnell that the inconsistency resulting in implied waiver must arise from the conduct of the party that enjoys the privilege. In this application, the plaintiffs rely solely on the events which occurred when the decision was made. The plaintiffs assert that the defendant, in taking into account the legal advice in making the relevant decision, acted inconsistently with maintaining a privilege over that advice. The consequence is that the Court should find that there has been an implied waiver. It is submitted that a contrary conclusion has the effect of depriving a party affected by the decision from exercising his or her right to judicial review of the decision because precise knowledge of the material on which the decision was based is fundamental to any challenge of the decision. The review would be flawed. That consequence creates unfairness which is a relevant consideration in applying the test for waiver.

23 It was further submitted on behalf of the plaintiffs that the effect of a finding of waiver in this case would not preclude a person from obtaining legal advice on the proper considerations to be taken into account when making a particular administrative decision. Such advice would not form part of the decision and no inconsistency would arise. Alternatively, where considerations set out in the legal advice are taken into account in making the decision, the relevant considerations can be identified rather than referring to the fact that legal advice has been relied upon.

24 In reply, counsel for the defendant submitted that maintaining the privilege would not interfere with the judicial review of the decision. Reliance is placed on the fact that the plaintiffs plead that the decision is flawed because it relied on the report which was flawed. All the defendant has done is traverse that allegation by pointing out that it did not rely only on the report. I have two difficulties with that submission. The first is that the plaintiff is not, by virtue of the operation of the privilege, able to test that plea. For example, leaving aside for the moment the other factors said to have been taken into account, if the legal advice was to the effect that the defendant was obliged to rely on the report alone, the defendant's plea would be a complete answer to the claim even though the plaintiffs are indeed correct in their assertion. The second difficulty with the submission is that the waiver is not said to arise from the pleadings, but rather the decision itself.

25 Similarly, the authorities cited by the defendant in support of its position are more relevant to cases where the issue of waiver arises on the pleadings and, in particular, where the party's state of mind or knowledge is in issue: see Telstra Corporation Ltd v BT Australasia Pty Ltd, above, at 167; Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 70 ALJR 603; Perpetual Trustees (WA) v Equuscorp Pty Ltd [1999] FCA 925.

26 The defendants also rely on the decision of Wheeler J in Temwood Holdings Pty Ltd v Western Australian Planning Commission [2003] WASCA 112. In that case, her Honour relevantly held that a mere reference to the existence of legal advice is not inconsistent with maintenance of the privilege (at [21]). Again, I believe the decision in Temwood can be distinguished. In this case, it is not the mere disclosure of the fact that legal advice has been taken which is said to give rise to a waiver, it is the inconsistency, in the context of a judicial review of the decision, of taking such advice into account, whilst at the same time failing to identify the content of the advice.

27 I am mindful that legal professional privilege is a fundamental common law right which should not lightly be interfered with. However, having considered the respective submissions, I am persuaded by the submission made on behalf of the plaintiffs that incorporating legal advice into an administrative decision is inconsistent with maintaining the confidentiality of that advice. The situation is akin to that which arises when privileged material is relied upon by an expert witness and influences the opinion expressed. The weight of authority in such cases favours a finding of waiver of privilege. In my view, in the context of a judicial review of an administrative decision, maintaining the privilege creates a level of unfairness which serves to highlight the inconsistency which is the cornerstone of the relevant test of waiver. The result is an unintentional and implied waiver of legal professional privilege over the legal advice referred to in par 28(c)(iii) of the amended defence.

28 I will hear the parties on the terms of the necessary orders.