Mathieson v Booth [2000] VSC 89

Supreme Court of Victoria|2000-03-22|Before: Mandie J

PRACTICE AND PROCEDURE - application to inspect privileged documents -waiver of legal professional privilege - documents relevant to state of mind in estoppel claim.

By summons dated 16 February 2000, the defendants seek an order that the plaintiffs make available for inspection certain relevant documents discovered by the plaintiffs which are protected by legal professional privilege. The defendants contend that privilege has been waived.

The plaintiffs' claims in this proceeding are based upon a written agreement dated 29 June 1994 ("the Agreement") whereby the plaintiffs and the defendants agreed, in short, to a re-arrangement of the interests in various corporate and trust entities which owned a number of hotels and other commercial real estate. The statement of claim alleges that by the Agreement, among other things, it was agreed that if prior to 12 June 1995 the firstnamed plaintiff Mathieson gave notice in writing to the firstnamed defendant Booth that Mathieson had obtained a specified letter of offer of new finance to pay out certain "NAB facilities", then Booth would, on or before the date on which that new finance was provided, procure the release of certain properties from mortgages which secured the NAB facilities and transfer certain shares and units to Mathieson (and certain other steps would also occur) - I will refer collectively to all of these steps as "the said acts". The statement of claim alleges that Mathieson obtained the specified letter of offer of finance and duly notified Booth thereof.

Paragraph 36 of the statement of claim alleges that the plaintiffs and the defendants agreed to vary the Agreement in the following manner as particularised:

(a) orally by a conversation between Mathieson and Booth on or about 15 June 1995 in which it was agreed that the date for performance of the said acts would be extended to 30 May 1997, that the NAB facilities would be retained and "that it would not be necessary for Mathieson to comply again with clause 11.3 of the Agreement";

(b) in writing by a letter dated 22 June 1995 from the defendants' solicitors to the plaintiffs' solicitors, by a letter dated 26 June 1995 from the plaintiffs' solicitors to the defendants' solicitors and by a memorandum from Booth to Mathieson dated 29 November 1995.

Counsel for the plaintiffs said that the two letters between solicitors were relied upon only to establish the extension of time to 30 May 1997 and not the other aspects of the alleged variation. It is apparent that the contents of the conversation are relied upon as to the other aspects of the alleged variation, in particular, the agreement "relieving Mathieson of the obligation to procure finance to pay out the NAB facilities". It is not clear what the plaintiffs seek to make of the memorandum of 29 November 1995 (but see and compare particular (b)(ii) of paragraph 46 of the statement of claim).

The plaintiffs rely in the alternative upon an estoppel. By paragraph 43 of the statement of claim, the plaintiffs plead that "Booth created an assumption in the minds of the plaintiffs that the Agreement had been varied as alleged in paragraph 36" and (as particularised) that the assumption was created "by the conversations and writings alleged in the particulars to paragraph 36". By paragraph 44 it is alleged that the plaintiffs acted in reliance upon that assumption: various acts of reliance are set out by way of particulars including the expenditure by Mathieson of substantial sums in relation to the Palace Hotel (one of the properties agreed to be released from the mortgages). The statement of claim goes on to plead other elements of the estoppel cause of action.

The privileged documents which the defendants seek to inspect are numbered 29 to 41 in the plaintiffs' list of privileged documents. (I note that the summons refers only to documents 31 to 41 but no point was made of this.) The documents comprise correspondence passing between the plaintiffs and their solicitors after the alleged conversation between Mathieson and Booth on 15 June 1995, such correspondence occurring in June, July and October 1995, March 1996, June 1996 and February 1997 at times when the parties were considering a draft amending agreement.

The defendants submitted that the critical issue was whether the conduct of the plaintiffs was inconsistent with the maintenance of their claim to privilege (see Mann v Carnel [1999] HCA 66; (1999) 168 ALR 86, 94) and that in considering that issue a court should be informed by considerations of fairness. They contended that there were two aspects of inconsistency. The first contention was that the plaintiffs had made a partial disclosure of privileged communications in order to establish the plaintiffs' version of what was agreed on 15 June 1995. It was argued that this had occurred by reason of the plaintiffs' reliance upon their solicitors' letter to the defendants' solicitors dated 26 June 1995 and also by virtue of a further letter dated 3 March 1997 enclosing an amending agreement, which letter stated in part:

"We have documented the general agreement reached in accordance with the matters raised in a letter from [your solicitors] and other matters discussed between you and Bruce Mathieson."

The defendants submitted that in order to advance their case the plaintiffs had sought to disclose some communications with their lawyers but to keep secret related communications and that this would be unfair and misleading (see A-G (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475, 481).

In my opinion, the defendants' first contention is misconceived. The question whether the Agreement was varied as alleged is to be determined objectively and primarily upon a consideration of the content of the relevant oral and written communications passing between the parties directly or on their behalf. The plaintiffs are not entitled in proving the variation to rely upon communications passing between them and their solicitors - nor do they seek to do so. The plaintiffs' solicitors' letter of 31 March 1997 cannot be used to establish the plaintiffs' version of what was agreed in June 1995 and, to the extent that the plaintiffs' solicitors state in their letter what their instructions are, there is not thereby, without more, any waiver of privilege any more than would be the case with any letter written by solicitors based upon instructions from their client.

The second contention by the defendants was that the plaintiffs, in their estoppel cause of action, had squarely put their state of mind in issue by pleading their reliance upon an assumption (created by the defendants) that the Agreement had been varied in the manner alleged by the plaintiffs. It was submitted that the plaintiffs, having put their (or Mathieson's) state of mind on and after 15 June 1995 in issue, it would be unfair to permit the plaintiffs to rely on their solicitors' letters of 26 June 1995 and 3 March 1997, without being required to disclose the related communications by them to their solicitors. There was a further and wider submission that the allegations of an assumption, and of reliance upon that assumption, were of themselves inconsistent in the circumstances with the retention of privilege in relevant contemporaneous communications by the plaintiffs with their solicitors. Further, it was said that these communications had been "pleaded into relevance" (see Data Access Corporation v Powerflex Services Pty Ltd (1994) AIPC 91-112, per Heerey J at 38,715) and that the court might be misled if the documents were not available (see HongKong Bank of Australia Ltd v Murphy [1993] VicRp 83; [1993] 2 VR 419, 439 per Smith J).

In my opinion, the wider submission of the defendants has substance; not that the privileged communications have been expressly pleaded into relevance, but that it would be unfair when the plaintiffs rely upon their state of mind, the continuing assumption that the agreement had been varied, and their acting in reliance upon that assumption, to permit the plaintiffs to maintain privilege in respect of contemporaneous communications passing between them and their legal advisers and relating to the subject of variation of the Agreement which might bear upon the questions of existence of that assumption and of reliance thereon (cf Wardrope v Dunn [1996] 1 Qd.R.224, 226-7).

The parties agreed that the court should inspect the documents in issue (and two further documents) in order to determine whether they were relevant to the issues of "assumption" and "reliance". Having inspected the documents, I am conscious that the court is not in the best position at this stage to fully understand or determine their relevance. However, doing the best I can, I am of the view that they are all relevant to the questions of the existence of a continuing assumption and of reliance upon that assumption, in the sense that they appear either to be relevant or might lead to a relevant train of inquiry. Whether they tend to support the case of the plaintiffs or of the defendants I do not, and do not need to, determine.

Being of the view that the plaintiffs' conduct in advancing the said elements of the estoppel cause of action is inconsistent with the maintenance of privilege in the documents in issue, and that it would be unfair to permit retention of privilege in the circumstances, I will order that documents 29-41 and the two additional documents be made available for inspection by the defendants.

At a glance

Court

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Before

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Judgment (18 paragraphs)

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Cases Cited (2)