Nicolaou v Truman Facilities Pty Limited

Judgment 1The plaintiffs in these proceedings are: (1) Anastasios Nicolaou, a medical practitioner; (2) Asclepius Medical Services Pty Limited ("Asclepius"), a company of which Dr Nicolaou was a director and which was incorporated in pursuit of his medical practice; and (3) Stephanos Investments Pty Limited as trustee for the Nicolaou Family Trust ("NTF"), of which Dr Nicolaou was also a director. The first defendant is Truman Facilities Pty Limited ("Truman"), Dr Nicolaou's accountant. The second to ninth defendants were the partners in the law firm, Diamond Conway. 2An amended statement of claim recites that in 2007 Dr Nicolaou entered into a venture with his brother, Loucas, to acquire a day hospital at Granville known as "Healthwoods." This involved the purchase of the Healthwoods practice and the land on which it was situated. Loucas was to acquire a 25% interest in the business and the property. 3To that end, on the advice of Truman, Dr Nicolaou's 75% interest in the property was purchased by NFT, and the other 25% by Loucas (also through a family trust). Asclepius was incorporated to conduct the business, the shareholding being apportioned as to 75% to NFT and the remaining 25% to Loucas. Diamond Conway was engaged to provide legal services in relation to the venture. The purchase was completed in June 2007. 4In 2010, disputes arose between the brothers and they fell out. This led to proceedings in this court instituted in November of that year. Dr Nicolaou commenced proceedings against Loucas under s 66G of the Conveyancing Act 1919. Loucas sued the plaintiffs for repayment of certain loans to Dr Nicolaou and Asclepius, and payments of rent on the property. In February 2011, these proceedings were settled on the basis that the plaintiffs were to pay $1,500,000.00 to Loucas, in return for which he transferred to them his share in Asclepius and the property and released them from all claims. They also incurred substantial legal costs, said in the amended statement of claim to be in the order of $192,000.00. Diamond Conway represented the plaintiffs in those proceedings. 5Put shortly, the plaintiffs claim that Truman, in advising about the structure to give effect to the venture, should have warned Dr Nicolaou of the risk of a dispute arising with his brother, and should have advised him either to obtain legal advice about that matter or to enter into an agreement addressing that risk. The case pleaded against Diamond Conway is in similar terms: that they should have advised the plaintiffs of the risk of a dispute between the brothers and put in place an appropriate agreement. The defendants are alleged to have been in breach of those duties, as a result of which the plaintiffs were required to pay a much greater sum than would have been the case if an appropriate agreement had been entered into. 6Before me is a motion brought by Truman against the plaintiffs in relation to discovery. Truman seeks an order, pursuant to UCPR r 21.5, that the plaintiffs make available to it certain documents in respect of which they claim client legal privilege. As refined at the hearing of the motion, these are documents relating to advice and legal services afforded to the plaintiffs by Diamond Conway in relation to the litigation with Lucas. The plaintiffs claim privilege in respect of them on three bases under the Evidence Act 1995: legal advice (s 118), litigation (s 119) and settlement negotiations (s 131). The last of those bases is not in dispute. At issue is the claim for privilege under ss 118 and 119. At the hearing of the motion Diamond Conway was represented, but did not seek to be heard. 7Counsel for Truman, Mr McLure, submitted that the plaintiffs had waived that privilege by bringing these proceedings, thereby conducting themselves in a way which was inconsistent with their maintaining it: s 122(2) of the Evidence Act. That notion of inconsistency was fleshed out by the High Court in Mann v Carnell [1999] HCA 66, 201 CLR 1 at [28] - [29] (13), as follows: "Waiver of privilege at common law [28] At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that 'waiver' is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client's version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer's evidence as to advice given to the client will be received. [29] Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is 'imputed by operation of law'. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. ... 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." (Footnotes omitted) 8The focus of Mr McLure's argument was the issue of causation. In the amended statement of claim (para 14) it is pleaded that, if Dr Nicolaou had been given appropriate advice by Truman, the risk of a disagreement with Loucas would have been addressed by an agreement whereby Loucas would be required to sell to Dr Nicolaou his shares in Asclepius for the amount he had invested for the purchase of the business and the property, or for the value of his share of the company, the business and the property at the relevant time. Alternatively, Dr Nicolaou would have refused to allow Loucas any interest in the venture and would have kept for himself the whole of the interest in both the property and the business. 9The issue of causation is dealt with in the amended statement of claim at para 25 ff. In summary, the plaintiffs plead that, if the postulated agreement had been entered into, neither the s 66G proceedings nor Loucas's proceedings would have arisen, Loucas's claim for rents on the property would not have arisen, and loans and interest claimed by him would have been paid or have been the subject of negotiated alternative arrangements. The settlement is said to have been entered into because the plaintiffs were exposed to legal costs in respect of the dispute, together with costs and loss of value associated with the winding up of Asclepius and/or the forced sale of the property and the assets of the business (para 35). If the agreement had been entered into, Dr Nicolaou and NFT would have been liable to pay the amount assessed in accordance with it, estimated at no more than $123,700.00 (para 27), and Dr Nicolaou and Asclepius would have been liable to pay the loans, with interest, due to Loucas, an amount of about $651,000.00. The plaintiffs would not have incurred legal fees for the s 66G proceedings or Loucas's proceedings (para 36). 10In an affidavit Dr Nicolaou deposed to the matters of dispute which arose with Loucas by about mid 2010. Among other things, these related to the management and operation of the practice, to Loucas's role in the enterprise, including his desire to become a director, to the remuneration of both of them, to Dr Nicolaou's gambling and to money which he had borrowed from Loucas and from the company. As a result, Dr Nicolaou decided that he might need to buy Loucas's interests in the practice. It was then that he consulted Diamond Conway about the matter. In July 2010 Diamond Conway proposed a memorandum of understanding between the brothers, and in the following month advised that there should be a "formal agreement or deed" setting out arrangements between them. It was during this period, Dr Nicolaou deposed, that Diamond Conway first provided advice of that kind. 11In the light of this material and the pleadings, Mr McLure submitted, it is clear that there are issues not only as to duty and breach but also causation of the loss claimed. 12In the passage from Mann v Carnell cited above, reference was made to the waiver of privilege inherent in proceedings brought by a client against his or her lawyer for professional negligence. It was put this way by the United Kingdom Court of Appeal in Paragon Finance Pty Limited v Freshfields [1999] 1 WLR 1183 at 1188 D-G: "When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence." 13These propositions are uncontroversial. The issue in the present case is the scope of the privilege, that is, the extent to which the confidential relationship between the plaintiffs and Diamond Conway has been brought into the public domain. Here Mr McLure relied upon an earlier decision of the Court of Appeal in Lillicrap and another v Nalder & Son (a firm) [1993] 1 All ER 724. 14In that case the plaintiffs were property developers, who had retained the defendant firm of solicitors to act for them in a series of transactions. They brought proceedings in respect of one of those transactions, the purchase of a property, complaining that the solicitors had negligently failed to advise them of the existence of a right of way over the land. In the event, the solicitors admitted negligence but put causation in issue, asserting that the plaintiffs would have continued with the purchase of the land even if they had known of the existence of the right of way. On that issue, they relied on evidence of six other transactions in which they had previously acted for the plaintiffs where the plaintiffs had proceeded despite their advice about various risks involved. 15It is not necessary to recount the procedural steps whereby the matter came before the Court of Appeal. It is sufficient to say that the question for the court was whether the solicitors should be able to use documents relating to the other transactions because, on the face of it, they were the subject of solicitor/client privilege. It was held that they could. It had been argued for the plaintiffs that each transaction amounted to a separate retainer of the solicitors, and that the proceedings had waived privilege only in respect of the particular retainer which was the subject of them. That argument was rejected. 16Dillon LJ (at 728-9) noted that, where a solicitor acts for a developer, the "precise scope" of that solicitor's duty "will depend, inter alia, upon the extent to which the client appears to need advice." His Lordship postulated a hypothetical case of a solicitor who did not advise the client to check the contract plan against the boundaries on site because, at the time of the relevant transaction, the solicitor knew from previous retainers that it was the normal practice of his experienced client to do so. In the event of a claim by the client against that solicitor, his Lordship had "no doubt that the client would not be entitled to say that any waiver of privilege only applied to privilege in respect of the final transaction, which was the transaction in a suit, and did not extend to waiver of what had emerged during earlier transactions." 17His Lordship set out the following passage from the judgment under appeal: "A client who sues his solicitor invites the court to adjudicate the dispute and thereby, in my judgment, waives privilege and confidence to the extent that is necessary to enable the court to do so fully and fairly in accordance with the law, including the law of evidence. I suspect that at the fringes each case will depend on its own facts. Normally, the waiver will extend to facts and documents material to the cause of action upon which the plaintiff sues and to the defendant's proper defence to that cause of action. The bringing of a claim for negligence in relation to a particular retainer will normally be a waiver of privilege and confidence for facts and documents relating to that retainer, but not without more for those relating to other discrete retainers." His Lordship continued: "I agree with that. The waiver can only extend to matters which are relevant to an issue in the proceedings and, privilege apart, admissible in evidence. There is no waiver for a roving search into anything else in which the solicitor ... may have happened to have acted for the clients. But the waiver must go far enough not merely to entitle the plaintiff to establish his cause of action but to enable the defendant to establish a defence to the cause of action if he has one. Thus it would extend to matters under earlier retainers, as in the hypothetical example I have given, which established that the experience of the client was to the knowledge of the solicitor such that the solicitor was not in breach of duty as alleged. The relevance in the present case is not to the establishing of negligence on the part of the solicitors, for that is now admitted. But it goes to the question of causation of loss." 18Russell LJ agreed, noting (at 731) that the "live issue to be tried" was "whether the damage allegedly suffered by the plaintiffs was caused by the admitted negligence of the defendants." His Lordship recognised that the concept of legal professional privilege was "plainly in the public interest", and added: "However, in my judgment, once it is conceded that there is implied waiver of privilege when proceedings are instituted against a solicitor, I can see no warrant for the submission that the waiver is confined to the documents and communications between solicitor and client within the specific retainer forming the subject matter of the proceedings. The parameters of the retainer, to my mind, erect an artificial barrier. In my judgment, by bringing civil proceedings against his solicitor, a client impliedly waives privilege in respect of all matters which are relevant to the suit he pursues and, most particularly, where the disclosure of privileged matters is required to enable justice to be done." 19Farquharson LJ adopted the same approach in a brief concurring judgment (at 732-3). 20Mr McLure referred to the decision of Hoeben J (as he then was) in Artistic Builders Pty Ltd v Nash [2009] NSWSC 102, a decision relating to discovery in proceedings for professional negligence brought against two firms of solicitors. The nature of the breach of duty alleged against them need not be examined. Mr McLure relies upon his Honour's rejection of an argument on behalf of the plaintiffs that there is no difference in principle between proceedings by a client against a former solicitor and other cases in which a question of legal professional privilege arises. His Honour cited the passages from Paragon Finance v Freshfields and Lillicrap v Nalder & Son which I have set out above. At [56] of his judgment, his Honour expressed the opinion that "claims by clients against former solicitors should be treated differently to other actions where one of the parties may have received legal advice and access is sought by another party to that legal advice." His Honour added at [62]: "As was recognised in Lillicrap and Paragon Finance, once it is accepted that litigation by clients against former solicitors of necessity opens up to public scrutiny a wider range of documents which would otherwise be subject to client legal privilege, relevance determines which documents have lost privilege and which retain it." 21At [58], his Honour made it clear that he saw no tension between the English approach and the test of conduct inconsistent with the maintenance of the privilege spelled out in Mann v Carnell and enshrined in s 122 of the Evidence Act. Indeed, he noted that when the High Court, at [28], referred to the institution of proceedings for professional negligence against a lawyer as an example of such inconsistent conduct, Lillicrap was cited in a footnote as such a case. 22Lillicrap was considered and distinguished in Paragon Finance. In the latter case the defendant's solicitors, Freshfields, had acted for the plaintiffs in a series of commercial transactions and in obtaining related policies of insurance. Later the insurers declined to meet claims by the plaintiffs under those policies. Freshfields continued to act for them, but later withdrew and were replaced by new solicitors, Slaughter & May. The claims were settled. The plaintiffs sued Freshfields for negligence, claiming the costs of pursuing the insurance claims, the shortfall in their recovery and the fees of Slaughter & May. Freshfields contested liability, causation and quantum, putting in issue how the plaintiffs had dealt with the insurers, to which the advice of Slaughter & May was obviously relevant. 23The question for the Court of Appeal was whether, for that reason, Freshfields were entitled to disclosure of confidential communications between the plaintiffs and Slaughter & May on the basis that they had impliedly waived their privilege. The court held that they were not. The judgment of the court was delivered by Lord Bingham of Cornhill CJ. After explaining the rationale of legal professional privilege in the passage which I have cited above, his Lordship continued (at 1188-9): "Thus, on the present facts, by bringing these proceedings the plaintiffs impliedly waived any claim to legal professional privilege in relation to confidential communications between them and Freshfields concerning the transactions briefly described above, up to the moment when Freshfields ceased to act. That is not in issue. The question is whether the plaintiffs have also impliedly waived any claim to legal professional privilege in relation to confidential communications between them and Slaughter & May relating to the pursuit and settlement of claims arising from those transactions. Approaching this question as one of pure principle, we conclude that they have not. The plaintiffs have not sued Slaughter & May. They have not invited the court to adjudicate on any question arising from their confidential relationship with Slaughter & May, and so have not brought that confidential relationship into the public domain. They have done nothing to release Slaughter & May from the obligation of confidence by which they are bound. They have chosen to subject their relationship with Freshfields to public scrutiny, but not their relationship with Slaughter & May. They are not seeking to pick and choose among the confidential communications passing between themselves and Slaughter & May: none of them is (so far) in the forensic arena." 24His Lordship went on to refer to a number of authorities, including Lillicrap. After referring to passages from each of the judgments in that case, he said (at 1190): "Both sides relied before us on this authority. The defendants relied on the references to justice and fairness, and contended that these considerations (as in the case of express waiver) provided the correct test. But the language of Russell and Farquharson LJJ cannot be read without some limitation; otherwise, legal professional privilege would disappear altogether, even as between plaintiffs and solicitors advising them in their proceedings against former solicitors, where the interests of justice call for disclosure. The ruling of the court must, in our judgment, be read with reference to the subject matter of the appeal before the court. We have no doubt that the court was right to rule that the plaintiffs' implied waiver extended to earlier transactions handled for them by the same solicitors. We do not understand the court to have gone further than that, and it was quite unnecessary for it to do so." 25Mr McLure distinguished Paragon Finance on the basis that the issue there was privileged communications between the plaintiffs and new solicitors, not those against whom the proceedings had been brought. The approach of the court in Lillicrap, he argued, is applicable to the present case. 26In addition to this general submission, Mr McLure mounted a specific argument related to the plaintiffs' claim for the costs of the proceedings in this court. Tax invoices for those costs are annexed to Dr Nicolaou's affidavit. Mr McLure acknowledged authority that a party claiming costs who seeks taxation of them does not thereby waive privilege in respect of the source documents, although the maintenance of that privilege might limit the evidence available to the taxing officer in the event of a dispute: the decision of McHugh J in Giannarelli v Wraith [No 2] (1990-91) 171 CLR 592, at 602-5. However, he relied on the decision of the Victorian Court of Appeal in Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2007] VSCA 224. 27That case arose from a joint undertaking by the two companies to recover hydrocarbons from Bass Strait and process them at facilities at Longford. They entered into an operating agreement whereby the expenditure of the undertaking was to be borne by them equally, unless it related to "injury, loss or damage ... caused by the gross negligence or willful misconduct" by Esso in the direction and supervision of the undertaking. "Expenditures" were defined to include "costs of litigation or arbitration ... ." Following an explosion and fire at the Longford facility in 1998, BHP brought a claim against Esso for a very large sum for breach of contract and negligence. Esso, for its part, commenced proceedings against BHP seeking recovery under the operating agreement of half of the expenditure it had incurred as a result of the accident. This included reimbursement of half its costs in defending itself at a Royal Commission into the event, and against criminal charges and civil claims arising from it. 28The issue with which the court was concerned was whether, pursuant to an order for mutual discovery, Esso was obliged to disclose documents relating to its claim for reimbursement of legal costs, in respect of which it claimed legal professional privilege. The court upheld the decision of the judge at first instance that Esso had impliedly waived that privilege and was bound to disclose the documents. The judge had noted an acknowledgment by Esso's counsel that the relevant documents were "the best, and possibly the only, evidence" by which it could demonstrate the reason for the costs, the nature of them and the reasonableness of them: at [8]. 29At [14], the court referred to Lillicrap, including the statement by Russell LJ, cited above, that a client who brings civil proceedings against his solicitor impliedly waives privilege in respect of relevant matters and, "most particularly, where the disclosure of privileged matters is required to enable justice to be done." The court continued at [15]: "It could hardly be doubted that disclosure of Esso's privileged documents is required 'to enable justice to be done' between itself and Esso. In its written submissions before the primary judge, Esso acknowledged that in order to succeed on its counterclaim it would need to prove in respect of each 'claimed expenditure' on legal costs that it was - (a) incurred as a result of the Longford incident; (b) made 'for the joint undertaking' within the meaning of the operating agreement; (c) reasonably incurred; and (d) not incurred as a result of Esso's gross negligence." 30At [16], the court referred to the test of inconsistency enunciated in Mann v Carnell, noting the statement of the High Court that that test should be "where necessary informed by considerations of fairness." The court then stated its conclusion, citing and distinguishing Giannarelli v Wraith, at [18]-[19]: "[18] Esso's counterclaim puts in issue whether its expenditure on legal costs fell within the operating agreement and that, in turn, depends on the nature and purpose of the legal work which occasioned the payments. The documents in question are plainly relevant to these issues. By making its claim for reimbursement, Esso made an assertion about the contents of the documents. Esso thereby laid the documents open to scrutiny. It would plainly be inconsistent for it now to maintain a claim for confidentiality in respect of them, ... . [19] Nor do we doubt the correctness of his Honour's decision to distinguish Giannarelli v Wraith [No. 2] (Giannarelli ) from the present situation. The claim by Esso is not analogous to the submission of a bill of costs for taxation. Here, Esso's conduct in claiming reimbursement of its costs created the relevant inconsistency. In Giannarelli , on the other hand, no inconsistency arose by the submission of the bill of costs for taxation. Any incompatibility, if it was to arise, would arise later, when privileged documents were sought to be tendered. At that point the party would be required to elect whether to waive the privilege. That would be an express waiver. Here, however, the waiver was not express but implied. It was not dependent upon any election by Esso subsequent to the launching of its case." 31In summary, Mr McLure's argument, expressed in a written submission in reply, is that the advice which the plaintiffs received from Diamond Conway in relation to the Loucas litigation is central to the plaintiffs' case that the omission to advise them about the risk of a dispute with Loucas caused the ensuing litigation and the costs associated with it. That case puts in issue the advice they received in relation to the Loucas dispute. They cannot pick and choose which incidents of that relationship they wish to expose to the court's scrutiny. They cannot choose to expose the issues of duty and breach of duty, but conceal from forensic scrutiny the issue whether the losses claimed were caused by the alleged breach. 32I have given these submissions careful consideration, but I am persuaded by the submissions of Mr Parker SC, who appeared with Mr Emmett for the plaintiffs, that they must be rejected. Drawing upon Mann v Carnell, the crucial question is whether the plaintiffs' pursuit of their claim, in which there is a live issue as to causation, is inconsistent with the maintenance of the confidentiality of their communications with Diamond Conway in the Loucas proceedings. Lillicrap does not support Mr McLure's position. As Mr Parker put it, the examination of the prior dealings in that case was necessary because it "informed the scope of what was required to be done in the subject retainer." The causation with which the Court of Appeal was concerned was the need for the plaintiffs to show that, if properly advised, they "would on the balance of probabilities have acted otherwise": per Dillon LJ at 729. 33That is not this case. Disputes between Dr Nicolaou and Loucas began in 2010, three years after the solicitors were retained. What Truman seeks is the exposure of confidential communications in relation to what Mr Parker described as "subsequent tasks the solicitors were asked to do, namely, act in the dispute." Nothing in those communications could "inform the true scope" of what the solicitors were asked to do at the time of their original retainer. Nothing in later dealings with Loucas could cast any light on how the plaintiffs might have acted if they had been advised differently in 2007. 34Mr Parker relied on Paragon Finance, drawing a parallel between it and the present case. He argued that, for present purposes, the fact that the issue in that case was privilege attaching to communications with solicitors other than the defendants was immaterial. As he put it, if Dr Nicolaou had engaged new solicitors in the Loucas litigation he could clearly resist disclosure of his communications with them. The mere fact that he pursued that litigation with the same solicitors, in a different, later retainer, did not mean that the privilege was lost. 35I agree. It may well be that the material Mr McLure seeks is relevant to the issue of causation, but it is clear from the authorities that relevance is not sufficient to establish an implied waiver of privilege. That question was examined by Allsop J (as he then was), with extensive reference to English cases, including Lillicrap and Paragon Finance, and Australian authority, in DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384, 127 FCR 499. That was not a case of professional negligence by lawyers; it was a commercial dispute between two corporations. The facts are very different from the present case, but there is a passage in the judgment of Allsop J upon which Mr Parker relied to elucidate his argument. 36Each party had filed motions contending that the other party, by its pleading and by steps taken in the conduct of the proceedings, had waived legal professional privilege. Their dispute concerned the construction of a share acquisition agreement, and turned upon whether it was the common intention of the parties that certain accounts fell within the scope of the agreement. Allsop J expressed the issues raised by the motions in this way at [2]: "The two issues the subject of debate are (a) whether the respondents by merely joining issue in their defence with an allegation made by the applicant that they (together with the applicant) had a certain state of mind so put their own state of mind in issue as to waive privilege on legal advice relevantly connected with the formation of their state of mind; and (b) whether the applicant (who concedes that it has waived privilege on relevant legal advice contemporaneous with the formation of its state of mind) must disclose (and continue to disclose without temporal limit) legal advice about its state of mind in connection with the transactions the subject of the proceedings, which would include communications in the conduct of these proceedings concerning that subject matter." 37His Honour answered both questions in the negative: [3]. The passage upon which Mr Parker relied is at [126]-[127]: "[126] A pleading of state of mind is raised. It is accepted that there are opened for scrutiny by that pleading confidential and privilege (sic) communications materially affecting or contributing to that state of mind. The inconsistent act is the propounding of the issue which, it is accepted, opens up, or makes relevant ... an examination of the confidential communication. [127] Later, in the propounding of a suit to vindicate its rights, being the context in which the above waiver takes place, the applicant consults with its lawyers about the case. I assume that these later confidential and privileged communications will address or have addressed the pleadings and the earlier privileged (though now waived) communications. There is plainly a relationship between the two groups of communications. However, there is no inconsistency between raising the issue of state of mind and maintaining the confidence of the later communications in and about the advising on, and running of, the case. Nor is there any unfairness. The inconsistency or unfairness arises from the putting in issue of a state of mind and maintaining confidence in communications which were relevant to the formation of that state of mind. (Or, putting the matter as I would prefer to put it - the inconsistency or unfairness arises from laying open to scrutiny the communication and maintaining confidence in the communication.) The later communications were, and are, irrelevant to, and had, and could have had, no part to play in the formation of the earlier state of mind. 38As to the costs of the Loucas proceedings, Mr Parker distinguished Esso v BHP. In that case Esso sought reimbursement of legal costs under a contract between the parties. To do so, as appears from [15] of the judgment, it had to establish the contractual prerequisites of its entitlement, including that the costs were reasonably incurred. 39In the present case, of course, the plaintiffs do not plead entitlement to reimbursement of costs as a contractual right. The costs are pleaded as part of the damage suffered by them as a consequence of the defendants' breach of duty. It is not in issue that the costs were incurred, and reasonably incurred, in connection with the Loucas proceedings. No waiver of privilege can be inferred from this aspect of the claim. 40Generally, Mr McLure accepted that the likely relevance of confidential material to the issue of causation, of itself, was insufficient to establish waiver of privilege. Rather, he relied upon it as a factor bearing upon considerations of fairness which, as the High Court recognised in Mann v Carnell, inform the perception of inconsistency between the conduct of the plaintiffs and maintenance of the confidentiality of their dealings with Diamond Conway in relation to the Loucas proceedings. However, for the reasons advanced by Mr Parker, I am not persuaded that there is such inconsistency. 41Accordingly, I find that the plaintiffs' client legal privilege in respect of Diamond Conway's conduct of the Loucas proceedings has not been waived. I should add, as Mr Parker pointed out, that this decision is founded upon the pleadings. Developments in the trial might cause the issue to be revisited. 42For these reasons I would dismiss Truman's motion. However, there are other prayers in the motion which, as I understand it, have been put to rest by the agreement of the parties after the hearing upon a list of documents in dispute. I would prefer to ensure that there is no outstanding matter before making a formal order. If necessary, I shall also hear the parties on costs.