National Australia Bank Ltd v C & O Voukidis Pty Ltd

The privileged material

1. In her affidavit sworn 3 November 2013 the Fourth Defendant relevantly said: 9. As to the content of the Cross claim, although I am a solicitor, I only practise in the area of personal injury and I am not familiar with the legal issues that can arise in banking cases. 10. From approximately September 2010 until about 10 June 2014,1 was represented in these proceedings by Carneys Lawyers and I relied on those lawyers to advise me on the issues that may be raised by me in these proceedings. 11. The file in these proceedings was not delivered to my present solcitors (sic) until 18 July 2014. 12. I was never advised by Carneys Lawyers as to the existance (sic) of or operation of the Code of Banking Practice (Code) and I was never advised of the obligations that the Plaintiff had and has under the Code. For that reason, I did not instruct Carneys to investigate whether I had any rights as against the Plaintiff by reason of breaches of the Code, because I never knew I had such rights. 13. I now believe that I have rights as against the Plaintiff by reason of the provisions of the Code and I have now incorporated a claim based on breaches of the Code by the Plaintiff ( Para 18 - 20 of the Proposed Amended Cross claim). 14. Further to the above, I was not advised by my previous lawyers of the operation of the Contracts Review Act of any rights that I may have pursuant to that Act. 15. I am not familiar with how the principles of unconscionablity (sic) may arise in circumstances as they exist in my case. I relied on my lawyers representing me in this case to advise me of my rights and potential defences and claims in relation to the circumstances surrounding this claim. My prevous (sic) lawyers never advised me to make a claim of the type set out in paragraphs 5-17 of my proposed Amended Cross claim. 16. In relation to the claim at paragraphs 21 - 33 of my proposed Amended Cross Claim, the information regarding the circumstances of the sale was information provided to me by my husband on or about September 2014 and prior to him providing me with that information was was (sic) unaware of the matters set out in those paragraphs, save that I was aware of the fact of the sale of the properties as set out at paragraph 22 of my proposed Amended Cross Claim.
2. The day after the receipt of this affidavit the solicitors for the Bank issued a subpoena to Carneys Lawyers who were the Fourth Defendant's previous solicitors. A copy of it was sent to the Fourth Defendant's present solicitors, Spinks Eagle Lawyers.
3. An agreement was subsequently reached not to press all of the categories of documents sought to be produced. The final position with documents sought under the subpoena is as follows: 1. All Documents recording communication with or instruction from Olga Voukidis in the period between 3 April 2012 to 1 July 2014 relating to: (a) The circumstances of execution of the First Guarantee, the Third Guarantee, the Second Portfolio Facility and Second Portfolio Facility documents. (b) The mortgages granted by her in favour of the Plaintiff in support of the First Guarantee, Third Guarantee or Second Portfolio Facility (or release thereof) over property situated at: (i) 5 Appian Way, Burwood, NSW; or (ii) 37 Thompson Street, Drummoyne, NSW; or (iii) 344 Elizabeth Drive, Vincentia, NSW. 2. All documents recording or evidencing advice (whether written or oral) provided to Olga Voukidis during the period between 3 April 2012 and 1 July 2014 relating to: … (b) The grounds of defence available to Olga Voukidis in answer to the Plaintiff's demands under the facilities identified in paragraph 1(a) above or the mortgages identified in 1(b)(ii)-(iii) above, or otherwise in these proceedings; (c) The causes of action that were available to Olga Voukidis against the Plaintiff (including by way of cross-claim) in these proceedings; (d) The existence of or operation of the Code of Banking Practice and/or the obligations of the Plaintiff under the Code; (e) The operation of the Contracts Review Act and any rights that Olga Voukidis may have pursuant to that Act; (f) The principles of unconscionability and their application against the Plaintiff; (g) The sale of property located at level 11, 50 Clarence Street, Sydney, and 4 car parking spaces owned by Koombari Pty Ltd in or about November or December 2011.
4. Neither the Fourth Defendant nor Carneys Lawyers nor Spinks Lawyers sought to set aside the subpoena. Rather, a claim for privilege was made by the Fourth Defendant over the material sought to be produced. The Plaintiff accepted that the material was privileged but asserted that privilege had been waived by those parts of the Fourth Defendant's affidavit that are set out above and the service of that affidavit.
5. The only issue for determination is whether privilege has been waived by the Fourth Defendant.

Submissions

1. The Plaintiff submitted in reliance on s 122(2) of the Evidence Act 1995 (NSW) and on the basis of such authorities as Standard Chartered Bank of Australia v Antico (1993) 36 NSWLR 87, Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1, Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 140 FCR 101 and Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236 that privilege had been waived.
2. The Plaintiff submitted that it would not be fair for the Fourth Defendant to be able to withhold production of the documents because to do so would be inconsistent with her reliance on them in the affidavit. The Plaintiff submitted that it did not matter that the affidavit was not relied upon. The fact that it had been served was sufficient to waive the privilege.
3. The Fourth Defendant submitted that there had not been disclosure of the kind that would warrant waiver of privilege over the documents. Reliance was placed on the judgments in Re Colonial Mutual Life Assurance Society v Department of Resources and Energy (1987) 12 ALD 251 and the first instance judgment in Bennett v Chief Executive Officer of the Australian Customs Service [2003] FCA 53; (2003) 77 ALD 375.
4. The Fourth Defendant further submitted that the disclosure of the information in the Fourth Defendant's affidavit was for the purpose of the Motions in relation to striking out portions of the defence and for leave to amend her cross-claim. When reliance on that affidavit was abandoned the Fourth Defendant said that there could be no unfairness by a refusal to hold that privilege had been waived.
5. Subsequent to the time this question of waiver of privilege was argued I delivered judgment on the Notices of Motion that gave rise to the affidavit and the subpoena. In that judgment I declined to permit the Fourth Defendant to amend her cross-claim, and I struck out portions of the existing cross-claim and portions of the defence. The net result was that matters involving the Contracts Review Act, undue influence, unconscionability, the sale at an undervalue of the property and the breach of the Banking Code are no longer issues for trial in the proceedings.
6. I gave the parties the opportunity to make any further submissions as a result of the judgment delivered on 13 March 2015. Neither party indicated by the time stipulated or at all any desire to make further submissions.

Legal principles

1. Section 122(2) of the Evidence Act provides: 122 Loss of client legal privilege: consent and related matters ... (2) Subject to subsection (5), this Division 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 section 118, 119 or 120.
2. Nothing in sub-s (5) is relevant for present purposes.
3. In Standard Chartered Bank of Australia v Antico Hodgson JA said (at 93-95): Turning to the other matter argued, the question of waiver and/or fairness, it seems to me that since Attorney General for the Northern Territory v Maurice [(1986) 161 CLR 475] it is clear that fairness is central to the question of whether the conduct of a client is to be taken as waiving legal professional privilege. … If a party by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and the legal advisor, 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.
4. In Mann v Carnell the joint judgment of Gleeson CJ, Gaudron, Gummow and Callinan JJ said at [34]: Disclosure by a client of confidential legal advice received by the client, which may be for the purpose of explaining or justifying the client's actions, or for some other purpose, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect. Depending upon the circumstances of the case, considerations of fairness may be relevant to a determination of whether there is such inconsistency.
5. In Council of the New South Wales Bar Association v Archer Hodgson JA said at [48]: …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.
6. Campbell JA agreed with Hodgson JA on that point. Handley AJA said at [72]: …The current test established by Mann v Carnell (1999) 201 CLR 1, 29 is that of inconsistency. Where the client raises an issue such as undue influence, election, or seeks an extension of the limitation period the client may be making assertions about his or her state of mind based on legal advice. In such a situation as that described by Hodgson JA in para [48] I am inclined to think, in agreement with Hodgson JA, that the raising of the issue will waive the privilege without more.
7. In Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275 the joint judgment of Gleeson CJ, Gummow, Heydon and Kiefel JJ said at [45]: Waiver of the kind presently in question is sometimes described as implied waiver, and sometimes as waiver "imputed by operation of law". It reflects a judgment that the conduct of the party entitled to the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. Such a judgment is to be made in the context and circumstances of the case, and in the light of any considerations of fairness arising from that context or those circumstances.
8. The joint judgment also noted at [49] that the Court was there concerned with the common law principle of waiver and not with the application of s 122 of the Evidence Act, because at the relevant time Victoria had not adopted the uniform Evidence Act. The joint judgment simply noted what was said in Mann v Carnell that s 122 may have the effect that privilege may be lost in circumstances which are not identical to the circumstances in which privilege may be lost at common law. Nevertheless, it seems to me that the statement of principle at [45] does not differ from what had been said in Mann v Carnell and in Archer in terms of the test for the waiver of privilege. That also appears to have been the view of the Court of Appeal in Cooper v Hobbs [2013] NSWCA 70 at [69]-[70].
9. In Bennett v Chief Executive Officer in the Full Court, Tamberlin J said: [13] Various expressions are used in the formulation of principles relating to waiver of legal professional privilege, such as references to 'the substance', 'effect', or 'content' of the advice. The weight of the authorities, in my view, supports the conclusion that the disclosure of the conclusion reached in or course of action recommended by, an advice can amount to waiver of privilege in respect of the premises relating to the opinion which has been disclosed, notwithstanding that this reasoning is not disclosed. By way of illustration, if there is a disclosure that a client has been advised that interpretation 'A' is preferable to interpretation 'B' of a legislative provision, then even if there is no disclosure of the reasoning leading to that conclusion, the reasoning and content of the advice may be waived, including the factual premises and circumstances leading to that conclusion. [14] Disclosure of one conclusion but not others in an advice does not necessarily amount to waiver in respect of the non-disclosed conclusions. However, if the conclusions and reasoning are so interconnected that they cannot be separated or isolated, then it may be that the whole of the advice on which all those conclusions are based, must be considered to have been waived.
10. Gyles J said: [62] The primary judge thus drew a distinction between the conclusion expressed in legal advice on the one hand and the reasons for that conclusion on the other and took the view that disclosure of the conclusion does not involve disclosure of the reasons. In my opinion, that is an error on a question of law. It is contrary to established authority to which the primary judge was apparently not referred. [63] The point can be appreciated most clearly by considering the first sentence of paragraph 9 of the letter in question which was as follows: 'AGS has advised Customs that your client is not correct in asserting that he is not subject to the Act and Regulations if he makes public statements about Customs-related matters in his capacity as President of the COA.' [64] A very similar question arose in Australian Unity Health Ltd v Private Health Insurance Administration Council [1999] FCA 1770. In a statement of reasons provided by an administrator a particular policy was explained and it was said that the policy was defined in a particular Council rule. It was then said: 'Separate legal advice supporting PHIAC's view of this rule has been received. A copy of that advice is attached.' A copy of the advice was not in fact attached and, when a copy was sought, privilege was claimed. Goldberg J held that the statement made did waive legal privilege. His Honour said (at [18]): 'It seems to me that by stating the respondents' view of the rule, and that legal advice supports that view, the existence of legal advice is being disclosed, the contents of which say that it supports the respondent's view of the rule.' [65] I agree with that reasoning. The voluntary disclosure of the gist or conclusion of the legal advice amounts to waiver in respect of the whole of the advice to which reference is made including the reasons for the conclusion. The primary judge was in error in drawing a distinction between conclusion and reasoning in the context of such a disclosure.
11. Gyles J rejected a submission that those authorities had been impliedly superseded by what was said in Mann v Carnell. His Honour said at [66]: [66] It was submitted for the respondent that the authorities to which I have referred preceded Mann v Carnell (1999) 201 CLR 1 and are superseded by that decision. It was submitted, in particular, that the primary judge correctly applied what was said by the majority in Mann v Carnell at [29] and [34] as to waiver only arising if disclosure is inconsistent with the confidentiality that the privilege serves to protect. In my opinion the decision in Mann v Carnell does not implicitly overrule the line of authority to which I have referred. The question in that case was whether a particular kind of limited disclosure waived the privilege. The reasoning in that case casts no doubt as to the principles applicable to a situation where disclosure is made by one party to a dispute to another party to that dispute and in the absence of any special arrangements as to confidence.
12. Given that the majority in the Full Court of the Federal Court considered that Madgwick J erred at first instance in relation to waiver of privilege, the Fourth Defendant's reliance on Madgwick J's decision is misplaced.
13. The Fourth Defendant emphasised the fact that what was said by her was said in the context of an application to amend her cross-claim. She accepted that if the affidavit had been relied upon in that application privilege would have been waived to enable an examination of those documents and cross-examination on them. That is because it would have been unfair to make the statements and not disclose the documents. However, the Fourth Defendant submitted, the only reason the Bank now wants access to the documents is to impugn the credit of the Fourth Defendant. This is because what was said by her in the affidavit does not go to any fact in issue in the proceedings.
14. The Fourth Defendant also relied upon the fact that what is said in the affidavit does not disclose the advice that was given. Rather, the Fourth Defendant asserted only that she was not given advice about the matters concerned. It was in that context that the Fourth Defendant relied on decisions that held there was no waiver where all that was disclosed was the conclusion of the advice without disclosing the reasons for it. The Fourth Defendant relied on Mann v Carnell because of what was disclosed in that case but was not held to amount to a waiver.
15. The Fourth Defendant submitted also that because her counsel on her instructions accepted that the affidavit she swore was wrong, the Bank could achieve nothing further by having documents on which to cross-examine. In other words, the Bank would already be able to cross-examine the Fourth Defendant about swearing an affidavit that was wrong (no admission made that it was false). In that way there was no unfairness in the documents not being made available.

Consideration

1. It cannot be a proper basis to suggest that privilege has not been waived simply because the only use to which the subpoenaed documents would be put would be to impugn the Fourth Defendant's credit. In Liristis v Gadelrabb [2009] NSWSC 441 Brereton J said at [5]: I do not understand it ever to have been a proper objection to a subpoena that it seeks documents relating only to credit. Indeed, one of the fundamental distinctions between the processes of subpoenas for production and discovery is that subpoenas, unlike discovery, may be used to obtain documents relevant only to questions of credit, for the purpose of assisting cross-examination as to credit. It is true that in Fried v National Australia Bank (2000) 175 ALR 194, Weinberg J in the Federal Court of Australia said that it was inappropriate to permit a subpoena to stand which does little more than to trawl for documents that may be used to impugn the credit of a particular witness. I do not disagree with that observation, but that is not to say that it is inappropriate to permit a subpoena to stand that seeks documents that may be used to impugn the credit of a particular witness, as distinct from merely trawling for such documents. The concept of "trawling" in this context is the same as that of "fishing". It is not fishing to seek documents when there are reasonable grounds to think that fish of the relevant type are in the pond or, as it has been expressed in other cases, that it is "on the cards" that relevant documents (even if they are relevant only to credit) will be elicited by the subpoena.
2. The Fourth Defendant relies on s 102 of the Evidence Act which provides that credibility evidence about a witness is not admissible. However, that does not take account of s 103 which provides that the credibility rule does not apply to evidence adduced in cross-examination of a witness if the evidence could substantially affect the assessment of the credibility of the witness. One of the matters to which the Court may have regard in sub-s(2) is whether the evidence tends to prove that the witness knowingly or recklessly made a false representation when the witness was under an obligation to tell the truth. That was certainly the position in the present case.
3. It may be accepted that the particular purpose for which the subpoena required the production of documents was what was said in the affidavit for the purpose of justifying leave to amend the Fourth Defendant's cross-claim. As I have noted, the Fourth Defendant accepts that it would have been unfair had she sought to rely on that affidavit. That concession impliedly accepts that privilege was waived in that regard. The question is, however, whether the privilege can be waived for one purpose but not another and whether once waived it remains waived. It is relevant to consider that matter in a context where none of the matters about which the Fourth Defendant seemingly made disclosure remain as issues at the final hearing.
4. In Mann v Carnell the joint judgment said at [29]: …What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
5. The joint judgment also referred to a number of English cases and noted at [32]: … in the circumstances of those cases, disclosure to a third party for a limited and specific purpose did not lead to a loss of the privilege as against a person opposed in litigation.
6. In Osland the appellant had been convicted of murdering her husband after enduring violence at his hands. After unsuccessful appeals, she petitioned the Governor for a pardon based on the prerogative of mercy. The Attorney-General, to whom the petition was referred, obtained advice from three Senior Counsel. The Attorney-General thereafter announced that the petition had been denied. He issued a press release saying (inter alia): I appointed a panel of three senior counsel, Susan Crennan QC, Jack Rush QC and Paul Holdenson QC, to consider Mrs Osland's petition. This week I received a memorandum of joint advice from the panel in relation to the petition. The joint advice recommends on every ground that the petition should be denied. After carefully considering the joint advice, I have recommended to the Premier that the Governor be advised to deny the petition.
7. The appellant argued that there had been a waiver of privilege with respect to the advice from the senior counsel.
8. The joint judgment said this at [48]: The evident purpose of what was said in the press release was to satisfy the public that due process had been followed in the consideration of the petition, and that the decision was not based on political considerations. The three eminent lawyers who gave the advice were appointed following consultation with the State Opposition. They were external to the Department. Their advice covered all the grounds upon which the petition was based. They recommended denial of the petition. Their advice was carefully considered, and the petition was denied. The Attorney-General was seeking to give the fullest information as to the process that had been followed, no doubt in order to deflect any criticism, while at the same time following the long-standing practice of not giving the reasons for the decision. This did not involve inconsistency; and it involved no unfairness to the appellant. If she had a legal right to reasons for the decision, then she still has it. If she had no such right, the press release did not deprive her of anything to which she was entitled. What the Attorney-General said did not prevent the appellant from making public her petition, or any part of it, as and when she desired.
9. They then went on to say: [49] Whether, in a given context, a limited disclosure of the existence, and the effect, of legal advice is inconsistent with maintaining confidentiality in the terms of advice will depend upon the circumstances of the case. …[Q]uestions of waiver are matters of fact and degree.
10. I accept in the present case that what was disclosed was disclosed to the opposing party. However, it was disclosed for a limited purpose in a particular context, namely, for the purpose of being allowed to amend a pleading to include causes of action on which the Fourth Defendant said she had received no advice. For other reasons the Fourth Defendant has been denied the opportunity to pursue those causes of action.
11. When considerations relating to waiver are based on inconsistency and relevant unfairness, it is difficult to see how privilege has been waived in the present case. There is no inconsistency for the issues in question remaining in the proceedings. It may be accepted that a subpoena can be issued to challenge credit alone. However, that credit is able to be challenged because of the clear and unqualified statement made by the Fourth Defendant's counsel on instructions that what was contained in the affidavit was wrong. Even if it is accepted as being unfair to the Bank not to have the precise documents to show why the statements in the affidavit were wrong, the issue is not concerned with an overriding principle of fairness operating at large. The enquiry is between the issue to be determined and the inconsistency of the maintenance of the privilege.
12. The position in the present case may be contrasted with that in Banksia Mortgages Ltd v Croker [2010] NSWSC 535. In that case the solicitor had sworn an affidavit to resist a summary judgment application against his client. In the affidavit he referred to what were privileged emails and discussions with his client, and said that what was set out in the affidavit was based on that material. The Plaintiff sought access to the emails at a later stage of the proceedings.
13. Schmidt J said: [35] The necessary consequence of the disclosure of part of the communications received from Mrs Croker by email, is that the maintenance of a claim for privilege in the emails at this stage of the proceedings, is inconsistent with that earlier disclosure. The result of the course taken is that as well as what is contained in the affidavit being disclosed, the privilege which attached to Mrs Croker's email communications with her solicitor as to those matters was also waived by the filing and service of Mr Mitry's affidavit. While the emails were confidential communications which were privileged and to which s 119 of the Evidence Act attached, once their contents were disclosed, or partially disclosed as they were, that privilege was lost. [36] It was argued for the defendants that it was relevant that the affidavit was not to be further relied on in the proceedings. That is not determinative of the question which lies between the parties. [37] At common law, the question of waiver of legal professional privilege is concerned with notions of fairness between the conduct of the client and the maintenance of the privilege (see Mann v Carnell [1999] HCA 66 ; (1999) 201 CLR 1). Where there is conduct which is inconsistent with the maintenance of the privilege, it does not matter that the privilege holder did not subjectively intend to lose the benefit of the privilege (see Federal Cmr of Taxation v Rio Tinto Ltd [2006] FCAFC 86 ; (2006) 151 FCR 341 at [p 343]). … [39] The disclosure here in question was made by affidavit on which the defendants relied to their advantage in order to resist summary judgment. That was a voluntary disclosure. In terms of s 122(3) of the Evidence Act, there can thus be no question that there was knowing and voluntary disclosure of the communication and that none of the exceptions under s 122(5) arise in those circumstances. [40] While the defendants may themselves not wish to rely further on the affidavit, what was disclosed is plainly relevant to what remains in issue between the parties and that is material on which the plaintiff may wish to rely at the further hearing, even if the defendants do not. In these circumstances fairness could not permit the defendants to have partially revealed Mrs Croker's communication to their advantage and to now claim privilege in relation to the balance of the communication. … [42] Here there was disclosure by the lawyer of the client's email communications, on the instructions of the client, in order to achieve the benefit of resisting an order for summary judgment. It follows that as a matter of fairness between these parties, it may not now be asserted that this disclosure may be ignored, or that it did not constitute a waiver of the privilege lying in those email communications. (emphasis added)
14. In that case the privileged emails had been used for the purpose of resisting summary judgment. They were self-evidently relevant for the final hearing of the case, and it would have been unfair not to hold that privilege had been waived.
15. Similarly, in Weston (as special purpose liquidator of One.Tel Ltd) v News Ltd [2010] NSWSC 1288 Barrett J held that by the Plaintiff putting forward certain privileged documents before the Court to obtain an extension of time for service of the Statement of Claim, there had been a waiver of privilege although it was an ex parte application with no right of the Defendant to be heard. However, because the Defendant had the right to have any such order discharged, there was a well-founded expectation that the decision based on that material would become the subject of an interlocutory proceeding of an adversarial kind.
16. In both cases, the privileged material had been used to the party's advantage. In the present case it has not been used and it is not relevant to any remaining issue in the proceedings. I do not consider that its disclosure by the service of the affidavit brings about any inconsistency that results in waiver of the privilege.
17. In my opinion, privilege has not been waived.

Amendments 20 March 2015 - No amendment made 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: 20 March 2015