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[2018] VSC 99
Supreme Court of Victoria
2018-03-07
MACAULAY J
Original judgment source is linked above.
APPEAL - Judgment of an Associate Judge refusing an application for production of documents over which privilege was claimed - Supreme Court (General Civil Procedure) Rules 2015, r 77.06 - Legal professional privilege - Implied waiver - Whether by reason of its pleaded claims the plaintiff put the existence and extent of its knowledge in issue so as to lay open to scrutiny privileged communications evidencing or bearing upon that knowledge - Evidence Act 2008, s 118, 122 - Thomason v Campbelltown Municipal Council ; considered - ; considered - ; applied - ; applied - No error - Appeal dismissed.
For the Plaintiff/Defendant by Counterclaim and the First and Second Third Parties
1 In the sale of a business for $420 million, one can safely assume that the parties to it will obtain a range of legal advice services from lawyers, across the various stages of the transaction. In this case, such a transaction is the setting for protracted battles between buyer and seller over the release of otherwise privileged communications between lawyer and client.
2 On 17 November 2017, an Associate Judge dismissed an application by the defendants (Viterra parties) that the plaintiff and first and second third parties (Cargill parties) produce for inspection certain documents over which the Cargill parties claimed legal professional privilege. The Viterra parties have appealed that decision.
3 Production of documents was sought during the pre-trial process of discovery in the context of a claim that the Viterra parties breached warranties or engaged in misleading and deceptive conduct in the sale of a business to the Cargill parties.
4 An appeal from an Associate Judge under r 77.06 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules), as this is, is in the nature of a rehearing. In the absence of further evidence or a change in the law, ordinarily some error (factual, legal or discretionary) on the part of the Associate Judge must be shown before appellate power may be exercised.[1] Should a judge decide that an Associate Judge made an error, the judge is then to give the judgment or decision that he or she thinks ought to have been given, or which ought now to be given.
5 A question has been raised in this appeal, however, as to whether further evidence may be admitted on the hearing of the appeal. Rule 77.06.9(2)(a) empowers this Court, on hearing the appeal, to 'receive further evidence upon questions of fact, whether by oral examination in court, by affidavit, or by deposition taken by an examiner.' The Viterra parties seek leave to introduce fresh evidence on the hearing of the appeal. The Cargill parties object to that evidence being admitted into evidence, but do not object to me receiving the documents to rule upon their admissibility in the course of deciding the substantive issues.
6 Accordingly, the questions before me, in logical order, are:
7 For reasons given below, I think those questions should be answered as follows:
8 Throughout these reasons, except where it is necessary to differentiate between specific entities within a group, I will refer to the Cargill parties collectively as 'Cargill' and the Viterra parties collectively as 'Viterra'.
9 Viterra owned a company, Joe White Maltings (JWM) which conducted a malt business (Business). Cargill Australia, one of the Cargill parties, purchased JWM from one or more of the Viterra parties for $420 million pursuant to an Acquisition Agreement executed on 4 August 2013. Completion of the Acquisition Agreement took place on 31 October 2013.
10 Before the Acquisition Agreement was made, Viterra had provided to Cargill an information memorandum in May 2013 in connection with the proposed sale of JWM (Information Memorandum). Between May 2013 and the signing of the Acquisition Agreement on 4 August 2013, Cargill made an indicative offer to purchase JWM and carried out due diligence into the Business. That due diligence process involved, among other things, Cargill being granted access to documents by Viterra through an online data room. It also involved some direct discussions between representatives of each group.
11 Between the date of the Acquisition Agreement and the date of completion on 31 October 2013, Cargill sent two letters to Viterra (dated 22 and 29 October 2013) querying certain alleged practices by JWM in the supply of malt to its customers and the certification of the specification of the malt. Viterra responded to those letters by two letters of their own dated 25 and 30 October 2013.
12 It was in that context that the sale was then completed on 31 October 2013.
13 Cargill was assisted in the purchase of JWM by lawyers, both internal and external. The external firm of lawyers acting for Cargill in the transaction was Allens. Cargill was also assisted by financial advisers, Goldman Sachs.
14 The communications which Viterra seeks to have produced for its inspection are communications in the course of the sale transaction between representatives of Cargill and its lawyers (both its internal lawyers and Allens), and between Cargill or its lawyers and Goldman Sachs.
15 The privilege claimed by Cargill is that which is protected by s 118 of the Evidence Act 2008 (Vic) (the Act),[2] being communications or documents made or prepared for the dominant purpose of a lawyer providing legal advice to a client. On the appeal, the grounds for the primary claim for privilege are not challenged; neither were they challenged in the application below. Rather, it is now asserted by Viterra that the privilege has been lost in respect of producing documents for inspection during discovery because Cargill (the client) acted in a way that is inconsistent with it objecting to the disclosure of the communication.[3]
16 The principal argument for Viterra is that, by the very claims pleaded in their statement of claim, Cargill has put the existence and extent of its knowledge of the 'Undisclosed Matters' (as defined in Cargill's statement of claim at paragraph [19]) in issue so as to lay open to scrutiny privileged communications which evidence or otherwise bear upon that knowledge.[4] The 'Undisclosed Matters' are, in substance, the alleged practices and policies of JWM supplying to its customers out-of-specification malt and inaccurate certificates of analysis concerning that malt, and the financial impact those practices and policies had on the Business.
17 Having regard to the relevant legal principles, it is contended that by putting their knowledge of those matters in issue, Cargill has thereby waived any privilege in the communications pertinent to that knowledge, including the communications otherwise protected by s 118 of the Act.
18 It is therefore necessary to detail the claims pleaded by Cargill at some length.
19 Cargill's statement of claim is lengthy and alleges several causes of action. It is only necessary to summarise the pleading of the claim for misleading and deceptive conduct and, to a lesser extent, breach of warranty.
20 It is pleaded that in or around May 2013, Viterra provided Cargill with the Information Memorandum in connection with the proposed sale of the Business.[5] The Information Memorandum is alleged to have contained various statements (called the 'Information Memorandum Statements').[6] I will not set all of them out, but they include that JWM's:
21 After reference to the indicative offer to purchase the Business by letter dated 7 June 2013,[7] Cargill's pleading goes on to address alleged misrepresentations during the due diligence period.
22 It is alleged that between 14 June 2013 and 3 August 2013, Viterra disclosed data room documentation which contained information about JWM's historical and forecast financial and operational performance (called the 'Data Room Statements').[8]
23 It is also alleged that certain verbal statements were made by Viterra, in answer to questions by representatives of Cargill as to how JWM dealt with quality problems when they arose. The answer, allegedly, was to the effect that JWM supplied customers with a wide range of specifications enabling malt to be reassigned to another customer in the event it did not meet a target specification, that JWM was able to blend malt into a wide variety of specifications, and that its plant was sufficient to produce malt to customer specifications. These were called the '18 July 2013 Statements'.[9]
24 Further verbal statements are alleged to have been made by Viterra on 19 July 2013 to the effect that one factor supporting JWM's earning base was its high quality malt and that it had a good record of communicating with its customers. These were called the '19 July 2013 Statements'.[10]
25 Next, Cargill alleges certain matters it says Viterra did not disclose either in the Information Memorandum or during the due diligence: that is, the 'Undisclosed Matters'.[11] Those matters, which are of considerable significance to the arguments on the appeal, are that:
(a) JWM routinely, and without informing customers, supplied malt that did not comply with contractual requirements and specifications, and supplied certificates of analysis that misstated the results of testing (Viterra Practices);
(b) those Viterra Practices were recorded in and endorsed by policies of the Business (Viterra Policies); and
(c) JWM's financial performance was substantially underpinned by its practice of supplying malt to customers pursuant to the Viterra Practices and Viterra Policies that did not comply with relevant customer contracts.
26 Cargill further alleges that before 4 August 2013, Viterra neither withdrew nor qualified the Information Memorandum Statements, the Data Room Statements, the 18 July 2013 Statements or the 19 July 2013 Statements.[12]
27 Cargill then allege the making of the Acquisition Agreement on 4 August 2013 and the relevant terms - in particular, the warranties - of that agreement.[13] The pleaded warranties include, in substance, that Viterra was not in any material default in any material contract and that the Data Room Statements were up to date and had been collated in good faith and with reasonable care.
28 The pleading then turns to further misrepresentations alleged to have been made after the making of the Acquisition Agreement on 4 August 2013 but before its completion on 31 October 2013. It alleges that through letters sent in late October 2013, representatives of Cargill informed representatives of Viterra that JWM executives had recently disclosed that JWM had supplied to customers non-specified malt, malt with gibberellic acid in breach of customer contracts, and certificates of analysis which misstated results of analytical testing. The letters sought information as to whether those practices had occurred, and if so, their frequency, the measures taken to ensure compliance with customer requirements and the impact of any corrective measures on the ability of the Business to perform its obligations. The letters were referred to as the 'October 2013 letters'.[14]
29 Cargill alleges that, in response to the October 2013 letters, Viterra made statements (in two letters and during a telephone call) advising Cargill that:
30 Cargill further alleges that the responses, called the 'October 2013 responses', failed to disclose the extent of the Viterra Practices and failed to disclose the Viterra Policies.
31 Cargill then pleads that, in combination, the various statements so far alleged and the failure to disclose the Undisclosed Matters conveyed the representations that are critical to the alleged misleading and deceptive conduct.[16] That is, it alleges that by making the Information Memorandum Statements, disclosing the financial and operational information in the Data Room Statements, making the 18 July 2013 Statement and 19 July 2013 Statement and failing to disclose the Undisclosed Matters, Viterra conveyed the following representations (individually and collectively called the 'Financial and Operational Performance Representations'):
32 Cargill alleges the same representations were conveyed in the Acquisition Agreement's warranties (the 'Warranty Representations').[17]
33 Drawing the abovementioned representations together, Cargill alleges that in reliance on the Financial and Operational Performance Representations and, further or alternatively, the Warranty Representations, Cargill Australia entered into the Acquisition Agreement.[18]
34 Cargill next alleges that the Financial and Operational Performance Representations and the Warranty Representations were false.[19]
35 Turning to the October 2013 responses, Cargill alleges that those responses conveyed representations that in substance:
38 To complete the cause of action, Cargill alleges that by reason of the alleged misleading and deceptive conduct it suffered loss and damage.[24] That loss and damage is particularised as follows:
The difference between the purchase price and the true value of the business and the shares. Alternatively, the difference between the purchase price and the price that Cargill Australia would have paid for the business and the shares if the Financial and Operational Performance Representations, the Warranty Representations and further or alternatively the Pre-Completion Representations had not been made.
39 It is to be noted that the pleading does not expressly allege the existence or content of any legal advice provided to Cargill by its lawyers, or any communication at all between Cargill and its lawyers.
What brings about waiver of legal professional privilege?
40 Over the years there have been many cases in which judges (both single judges and judges sitting on appeal) have conducted a comprehensive review of cases dealing with the applicable principles for waiver of legal professional privilege.[25] I do not intend to conduct a similar survey. Instead, I will state as succinctly as I can - by reference to some key passages from the leading cases, and also by reference to other explanatory propositions - the principles I take to be binding on a single judge of this Court.[26]
41 The key principle, and the rationale for it, was stated by the High Court of Australia in Mann v Carnell, in these terms:
42 Several things may be highlighted immediately from this passage:
(a) legal professional privilege exists to protect the confidentiality of communications;
(b) it is only the privilege holder who may relinquish the privilege; and
(c) what brings about the waiver is the inconsistent conduct of the privilege holder.
43 The cases that survey earlier authorities contain the product of judges' endeavours to synthesise and refine subsidiary principles which would enable a consistent and principled determination, in a given circumstance, of whether particular conduct is inconsistent with the maintenance of the confidentiality. In particular, there are those which concern conduct that is inconsistent with the maintenance of the confidentiality because of the very bringing of a claim or the way in which it is asserted or pleaded. It is that circumstance that is relied upon in the present appeal.
44 In DSE (Holdings) Pty Ltd v Intertan Inc,[29] a frequently quoted decision in this context, Allsop J (as he then was) undertook a thorough review of the cases as at 2003. His Honour embarked on a detailed discussion of the seminal decision of Jordan CJ in Thomason,[30] in which the Chief Justice had drawn an analogy between the case before him and a claim brought in undue influence. At [58], Allsop J said:
45 It may be noted that Allsop J's formulation contains two limbs or two means by which an inconsistency can arise: first, by making an assertion (express or implied) or bringing a case which is about the contents of the confidential communication; and, secondly, by making an assertion or bringing a case that necessarily lays open the confidential communication to scrutiny.
46 In Vic Hotel the Court of Appeal took up the first of those two limbs, saying:[31]
These authorities show that, where issue or implied waiver is made out, the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication.
It is plain enough that the majority in Mann also saw the 'issue waiver' cases as a species of waiver, to which the same basic principle applied. Their Honours' analysis in Spalvins emphasises, as does the majority in Mann, that waiver comes about because the privilege holder's conduct is inconsistent with the continued confidentiality of the communication because he or she has put in issue the character or contents of the communication in pursuing a right or claim, or has created a situation where another party must reasonably do so by way of a defence.
47 In other words, the Court of Appeal emphasised that the means by which a party might act inconsistently with the confidentiality of a privileged communication need not be confined to an express or implied assertion about the contents of the legal advice.
48 In that context, the Court of Appeal relied[32] on Allsop J's statement in paragraph [58] of DSE (extracted above) and, in the very next passage, took up his Honour's reference to loss of privilege by the second of the two limbs mentioned; that is, a loss of privilege because the privilege holder 'necessarily lays open the confidential communication to scrutiny.' The Court of Appeal then adopted what the Full Court said in Rio Tinto (also relying upon Allsop J's formulation):[33]
Both before and after Mann, the governing principle required a fact-based inquiry as to whether, in effect, the privilege holder had directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defence. In DSE at 519 [58], Allsop J put the matter somewhat more descriptively, saying waiver arises when 'the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication' (emphasis original).
...
As the previous examination of the authorities shows, the question is not whether the Commissioner has put his state of mind in issue but whether he has directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, either in making a claim or by way of defence. Put another way, to adapt Allsop J's language in DSE, has the Commissioner (being the privilege holder) made an assertion as part of his or her case in the litigation that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege?
...
The question is whether, by his particulars, the Commissioner made an assertion as part of his case that puts the contents of the privileged scheduled documents in issue, or necessarily lays them open to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege. To answer this, the relevant assertions must be considered in their proper context.[34]
49 Consistently with the principles espoused in Mann v Carnell, DSE, Rio Tinto and Vic Hotel - and the authorities on which they are based - I understand the following propositions to apply:
(a) Legal professional privilege is an important common law right (not just a rule of evidence).[35]
(b) That right is only destroyed if the right-holder acts inconsistently with the maintenance of the privilege: that is, the relevant inconsistent act needs to be the act of the right-holder, not some other person.[36]
(c) It follows that the combination of the relevance of the confidential material to an issue in the case, and the forensic unfairness that may follow if the material is not made available to the other party, does not of itself bring about waiver: it is the inconsistent act of the right-holder that does that.[37]
(d) Accordingly, the task for this Court is not to make a choice between one public interest or right over another, or to balance 'fairness and justice' against the right-holder's interest in the maintenance of confidentiality. Instead, the task is deciding whether the important common law right has been lost by the right-holder's act of waiver.[38]
(e) The right can be waived even though the right-holder did not subjectively intend to waive it: that is, the waiver can be imputed objectively from the inconsistent acts of the right-holder.[39]
(f) Inconsistency refers to a contradiction between the confidential nature of the communication, on the one hand, and the act of the privilege holder which necessarily lays open the communication to scrutiny, on the other: so inconsistency is the test for waiver because it exposes the contradictory act which effects the waiver.[40]
(g) Relevant inconsistency is found in the making of an assertion (express or implied) or the bringing of a case either about the contents of a confidential communication or which necessarily lays open the confidential communication to scrutiny.[41]
(h) In either event, it is the contents of the privileged communication which the assertion or the case must be about or which is necessarily laid open to scrutiny - not merely some 'state of mind' to which legal advice might be relevant.[42]
(i) Putting a state of mind in issue, even together with a likelihood that legal advice was obtained that might be relevant to the issue (for example, by showing chronological coincidence[43]), is not necessarily enough. The privileged communication must itself be 'central' to the case.[44]
(j) An assessment of whether an act is in fact contradictory and inconsistent may involve questions of judgment and degree.[45]
(k) Because it does not involve a 'balancing exercise' between competing public interests, the waiver of privilege is not determined by the application of a general test of fairness;
(l) Rather, as Mann v Carnell explains, where necessary, considerations of fairness may inform the Court's perception of the essential ingredient of inconsistency[46] - it follows, considerations of fairness are subordinate to the essential test of inconsistency.
50 From Mann v Carnell and subsequent authorities, it seems to me that the interaction between inconsistency and fairness in determining whether privilege has been waived may be viewed this way:
51 The specific category of documents over which production was sought before the Associate Judge was described in paragraph 1 of Viterra's summons dated 18 May 2017. That is, Viterra sought:
... all documents over which they have claimed privilege which record or evidence the knowledge of the Cargill Parties, in the period up to and including 31 October 2013, of the Undisclosed Matters (as defined in paragraph 19 of the Further Amended Statement of Claim dated 2 April 2015 (the FASOC)), including all documents which record or evidence the knowledge of the Cargill Parties of:
(a) JWM supplying malt to customers that did not comply with contractual requirements and specifications;
(b) JWM supplying certificates of analysis to customers that misstated the results of analytical testing on the malt, so that the certificate reported that the malt complied with contractual requirements and specifications when it did not;
(c) the Viterra Policies (as defined in paragraph 19 of the FASOC); and
(d) the effect of the Viterra Practices (as defined in paragraph 19 of the FASOC) on JWM's financial and operational performance and JWM's ability to produce and sell malt:
(i) in the volumes and to the specifications required by customers; and
(ii) in the volumes and for the returns reflected in the Financial and Operational Information (as defined in paragraph 19 of the FASOC),
Save for documents brought into existence after 31 October 2013 for the dominant purpose of the Cargill Parties obtaining legal services with respect to this proceeding (or anticipated proceeding, as the case may be).
52 Her Honour's reasons for refusing the application were published 17 November 2017.[47] After setting out the affidavit material upon which she relied, her Honour noted the basis upon which Viterra sought production of the documents:
The Viterra Parties seek production of the above documents on the basis that any privilege in those documents has been waived by reason of the Cargill Parties having placed their knowledge of the alleged Viterra Practices and Viterra Policies in issue, so as to lay open to scrutiny privileged communications which evidence or otherwise bear upon that knowledge. In the Viterra Parties' written outline of submissions, these documents are said to concern the Cargill Parties' knowledge of the Undisclosed Matters.[48]
53 The Associate Judge then set out the various arguments run before her by Viterra and Cargill. It is of importance for what follows that her Honour noted what she described as the gravamen of Cargill's submission, namely, that 'the Viterra parties have not established why this proceeding is anything more than a common garden variety misrepresentation case, noting that legal professional privilege is an important common law amenity'.[49]
54 Her Honour's conclusion may be taken from the following passages (citations omitted):
It follows that the mere pleading of reliance as an element of the cause of action does not impliedly waive the privilege attaching to communications between the applicant and its lawyer ...
55 Reference was made by her Honour in that passage to an earlier ruling, called the 30 March ruling, in which she had dealt with an application by the third parties to the proceeding (including one of the Cargill parties) for production of documents by Viterra. Viterra had, in turn, resisted production on the basis of legal professional privilege. Earlier in her Reasons the Associate Judge had described this current application as the 'mirror image' of the application made by the third parties culminating in the 30 March ruling.
56 In the 30 March ruling, the Associate Judge found that privilege had been waived and had ordered the production of the documents to the third parties. One of the planks in Viterra's argument on this appeal was to say that her Honour's decision below should have had the same result as the 30 March ruling because the relevant pleading by Viterra against the third parties was in all relevant respects identical to the pleading by Cargill against Viterra - that is, it was simply a 'pass through' of Cargill's pleading against them.
57 Viterra's notice of appeal contains nine grounds. However, in oral submissions, Viterra identified the one key issue as being:
..whether the Associate Judge' erred in failing to hold that by reason of the claims pleaded in the statement of claim the Cargill parties put the existence and extent of their knowledge of the Undisclosed Matters in issue so as to lay open to scrutiny privileged communications which evidence or otherwise bear upon that knowledge.[51]
58 In oral submissions three principal subsidiary reasons were advanced as to why the judgment miscarried and its reasoning was flawed. These reasons were that the Associate Judge erred by:
(a) relying on an arbitrary categorisation of Cargill's pleaded case as a 'common garden variety' or 'standard' misrepresentation claim rather than focusing on the test for inconsistency and applying orthodox principles of s 122 of the Act and Mann v Carnell;[52]
(b) holding that there must be 'something more' than a mere plea of a state of mind, if by that her Honour meant something more than inconsistency of the kind referred to in Mann v Carnell;[53] and
(c) finding that Cargill had done no more than plead its state of mind by alleging reliance as an element of the cause of action when, in fact, the very nature of the pleaded misrepresentation case embedded an implicit allegation that Cargill was ignorant of the Undisclosed Matters, such that, even before alleging reliance, the pleading put the extent of Cargill's knowledge of those matters in issue so as to lay open the privileged communications to scrutiny.
Should this Court permit fresh evidence on the hearing of the appeal?
59 Viterra seeks leave to adduce three further pieces of evidence: Cargill's Reply dated 8 December 2017 filed in response to Viterra's Amended Defence, and two further affidavits filed by Janet Whiting, solicitor for Cargill, both dated 29 January 2018. The proposed fresh evidence post-dated the hearing before the Associate Judge and, logically, was not available to be put before her Honour.
60 Viterra seeks to adduce the Reply because, by the allegations it contains, Viterra claims it is even clearer that Cargill is putting in issue its state of mind (and thus the privileged documents revealing that state of mind) in the way Cargill frames its case. Viterra seeks to adduce the additional affidavits because they are said to further clarify the nature of the documents that make up the disputed class, and the subject-matters they concern.
61 I will postpone my analysis of those documents until I have addressed the substantive arguments on the appeal. But, in summary, for the reasons given at [142(a)] below, I will not give leave for the proposed new evidence to be admitted.
62 I address first the argument that the Associate Judge erred by categorising Cargill's claim as a 'common garden variety' or 'standard' misleading and deceptive conduct case. The real allegation here is that, in doing so, her Honour distracted herself from examining for inconsistency and made an erroneous assumption that the mere pleading of a misleading and deceptive conduct case, as a category, would not generally effect a waiver of legal professional privilege.
63 It is difficult to separate this complaint from Viterra's second argument, namely that her Honour erred by erecting a test that required a party to do 'something more' than merely putting in issue a state of mind before a waiver of legal professional privilege could be identified.
64 Viterra submits that an inconsistency of the kind referred to in Mann v Carnell can arise simply from the case that is mounted - of whatever nature - seen in the context of the relevant surrounding facts. There is no warrant, it argues, for any exclusion of a particular species of case from those in respect of which a waiver of legal professional privilege can arise on the basis of some arbitrary categorisation. So much may be accepted.
65 However, a fair examination of the Reasons does not reveal any such denial of Viterra's waiver contention simply upon a categorisation of the case as a misleading and deceptive conduct case, or because 'something more' than inconsistency was required. First, it is clear from her Honour's use of the words 'ordinarily' and 'turn on their own facts and circumstances' that she was not applying some categorical approach. Secondly, her Honour explained her reference to 'a "common garden variety" misleading and deceptive conduct case', and the need for 'something more' (both appearing at [37] of the Reasons), by what she then went on to say in the very next paragraph, extracted at [54] above.
66 At [38] of the Reasons her Honour, correctly in my view, acknowledged sound propositions supported by the authorities, namely that:
(a) legal professional privilege is a significant common law right, being the launching point of the High Court's analysis in Mann v Carnell (extracted at [41] above);
(b) knowledge or some other state of mind being introduced as a relevant issue through a pleading is merely the starting point in determining whether there has been a waiver, a proposition supported by Rio Tinto (and endorsed in Vic Hotel as extracted in [46] above) where it was said:
..even if his Honour was correct in holding that, by the SFIC, the Commissioner raised an issue in the substantive proceeding as to his state of mind, this alone would not provide a proper basis for an "issue waiver";
(c) beyond merely putting knowledge in issue, what is required to effect the waiver is conduct that is 'inconsistent with the maintenance of the privilege', a proposition supported by what was said in Rio Tinto at [65], namely that:
The question is not whether the Commissioner has put his state in mind in issue, but whether he has ... to adapt Allsop J's language in DSE ... made an assertion as part of his or her case in the litigation that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege.
67 In the light of the principles adopted in that paragraph, it is apparent that her Honour did not distract herself from focusing on an orthodox application of s 122 of the Act and Mann v Carnell, namely an examination of whether there was an inconsistency between the claim advanced by Cargill on the one hand, and its maintenance of legal professional privilege in respect of confidential communications with its lawyers on the other.
68 Viterra was critical of her Honour's reference to a 'tacit understanding', prefacing the statement about a common garden variety misleading and deceptive case. I agree with the submission that such an understanding, if established, would be an irrelevant consideration to the determination of the issue at hand. But in its full context, I do not think it is right to view the statement as any operative consideration in the reasoning. It appears more in the nature of an 'aside' or a remark that simply introduces the fact that was taken into account, namely the nature of the claim that was brought.
69 The more prominent issue to which attention was given on the hearing of the appeal was the one encapsulated in the third complaint: whether the Associate Judge erred in holding that Cargill had done no more than plead reliance on the Undisclosed Matters, and that doing so was not enough to effect waiver of legal professional privilege.
70 In aid of all of their arguments, but most particularly the last one, Viterra undertook a detailed analysis of the claims pleaded by Cargill in the statement of claim. Viterra's argument is that by the particular way the misrepresentation case was pleaded, Cargill had embedded in the very assertion of the conveyed representation an allegation as to its statement of mind - that is, that it was wholly ignorant of the Undisclosed Matters before entering the Acquisition Agreement, and only partially aware of them at completion.
71 In other words, the argument is that Cargill makes an implied assertion about its state of mind in alleging the representation, before one even gets to the plea of reliance upon that representation.[54] So put, Viterra argues it is not merely by pleading reliance that Cargill puts its state of mind in issue in such a way as to necessarily lay open the privileged communications to scrutiny - rather, its pleading of the representation itself has that effect, and does so even more compellingly than by the pleading of reliance.
72 The argument was most concisely put by Viterra in its oral submissions on the appeal as follows:
The case we mounted below and we mount here is that Cargill's claims are predicated on an embedded allegation that the Cargill parties were not aware of the Undisclosed Matters at all in the period leading up to the execution of the Acquisition Agreement on the date early in August - 4 August - and that they were only aware of the Undisclosed Matters to a very limited extent as a result of communications in October before they settled. Their allegation is that they were not told or otherwise aware of those matters, and that allegation is pervasive throughout multiple elements of Cargill's claims.
It's fundamental and essential to the allegation of misrepresentation. Without that allegation that these matters were not disclosed to it and it was not aware of it, there could be no misrepresentation case. Without those allegations implicit and embedded in the pleading, there could be no allegation of misleading and deceptive conduct at either stage. So they don't have a cause of action without proving that allegation.
Without proving that allegation, they can't prove falsity, and without proving that allegation, they can't prove any reliance. Reliance is the least of the relevant matters that make this fundamental to the pleading. Now, in mounting a case of that kind, there is an inconsistency that arises in the sense described in Mann v Carnell. It's asserting a case based on lack of knowledge and lack of disclosure to it of these matters, but then seeking to use claims for privilege to shield from production documents which evidence or otherwise bear out just what knowledge they in fact have ...[55]
73 I put to one side for the present time Cargill's argument that this contention of an embedded allegation of state of mind, separate to any pleading of reliance, is a case that was not advanced before the Associate Judge. Cargill maintains that Viterra's argument below was confined to arguing that state of mind had been put in issue by the plea of reliance alone. For that reason, Cargill argues, the Associate Judge focused her reasoning on the question as to whether, by the plea of reliance on the representations inducing entry into the agreement and completion of the agreement, Cargill acted inconsistently with the maintenance of the privilege.
74 Accordingly, Cargill argues, it is inappropriate for this Court now to assess her Honour's decision for error for not having considered some different means by which state of mind is said to have been put in issue. If necessary I will consider later whether Viterra's argument is in fact a new argument and what consequence that should have.
75 As I understand it, Viterra's argument goes like this:
76 A similar line of reasoning is advanced in relation to the allegation of the Pre-Completion Representation said to have induced Cargill's completion of the Acquisition Agreement.[59] Here, the argument differs in that the allegations made by Cargill are that after the due diligence phase and in the pre-completion phase it addressed some specific questions to Viterra about the existence of the Viterra Practices (thereby implying they had some degree of awareness of those matters) but was given information that the practices had only occurred to an insignificant extent.[60]
77 Again, Viterra argues that, for the alleged October 2013 responses to have conveyed a representation that the Viterra Practices only occurred to an insignificant extent, it must be assumed (and therefore implicitly asserted) that Cargill did not know of the occurrence of the practices beyond that insignificant extent. That is, by making the allegation of a representation of that kind, Cargill necessarily puts in issue its state of knowledge of the extent of the Undisclosed Matters at that time.
78 Viterra then adds to these propositions evidence of the existence and nature of the communications between Cargill and its lawyers both during the due diligence phase and in the pre-completion period. It does so to make it appear likely, if not highly likely, that the content of those communications would reveal the actual knowledge Cargill possessed at each phase about the existence and extent of the Viterra Practices and the Viterra Policies.
79 For example, the affidavit of Monique Carroll sworn 18 May 2017 reveals from non-privileged sources that on a given day, or in a given period, there was an email, meeting, question and answer exchange, etcetera, about 'malt quality'. Then, by reference to the schedule of privileged documents, Ms Carroll's evidence shows that the relevant event was preceded, accompanied or followed by communications involving lawyers (in combination, usually, with commercial people) over which privilege is claimed. Those communications were described in Cargill's schedules by reference to topic headings suggesting that the communications would relate to or touch upon the same issues that arose from the 'event'; for example, due diligence about malt quality and processes.
80 A good example of this kind of evidence can be seen at [33] and [34] of Ms Carroll's 18 May affidavit. It shows that on 22 and 23 October David Mattiske of Viterra spoke by telephone to Philippa Purser of Cargill about Cargill's 22 October letter. The evidence then shows that between 20 October and 23 October various privileged communications occurred where the ascribed topic suggests they concerned the preparation of the letter, and the phone call, and the outcome of the phone call. The topic of some communications, for example, included 'advice in relation to malt quality issues' and 'advice in relation to sale and completion'.
81 In my view, this evidence shows that some, perhaps many, of the confidential communications listed are probably relevant to the issue of what and to which extent Cargill knew about an Undisclosed Matter, namely the practice of supplying out of specification malt.
82 From this foundation, Viterra's argument continues that evidence of the existence and extent of Cargill's knowledge of such matters must bear upon the capacity of the representations to mislead or deceive it because (as argued) without Cargill's ignorance of those matters being established, the representations could not have had a misleading or deceptive quality.
83 It follows from all of this, so Viterra argues, that the very making of the allegations of misrepresentation impliedly asserts the content of the confidential communications between Cargill and its lawyers. More particularly it impliedly asserts that those communications would reveal that Cargill was not informed of or did not possess knowledge about the existence of the Undisclosed Matters. Alternatively, and perhaps even more forcefully, Viterra argues that the very nature of the misrepresentation alleged necessarily lays open for scrutiny those confidential communications.
84 Cargill flatly rejects this reasoning. It says the argument that commences with the proposition that it made an allegation of misrepresentation and ends with the conclusion that the allegation so made necessarily lays open to scrutiny the content of its confidential communications with its lawyers is simply wrong.
85 To support its argument that state of mind is relevantly put in issue by the pleading of representation, rather than just reliance, Viterra refers to a statement by Nettle JA (as he then was) in Steutal v Kimple Pty Ltd.[61]
86 That case had nothing to do with waiver of legal professional privilege. What was of interest in that case was the proposition that the state of knowledge of the recipient of a communication can have a bearing on whether the communication conveys a misrepresentation - a question that is separate from and anterior to the causation issue of whether the recipient relied upon the representation and suffered loss.
But as Chernov, J.A. makes plain, conduct is only misleading or deceptive if it is capable of inducing error. Whether it is misleading or deceptive is therefore a question of fact to be determined in the context of the known facts and circumstances. In the end, conduct cannot be characterised as misleading or deceptive unless it conveys a misrepresentation. And if the circumstances of its communication, and the state of knowledge of the recipient, are such as to prevent misrepresentation, it matters not that in other circumstances the result could have been different.[62]
88 The important phrase there, of course, is 'and the state of knowledge of the recipient'. Viterra appears to rely upon Steutal to explain how the state of knowledge of the recipient can be relevant to an assessment of whether a representation has a misleading or deceptive quality: a link in its chain of reasoning supporting the conclusion that the relevant representations in this case could only be misleading if Cargill was ignorant of certain matters.
89 In response, Cargill is at pains to explain the particular context in which the statement of Nettle JA was made, seeking to lessen the significance or relevance of it to the present case.
90 In Steutal, the plaintiff had purchased a business from the vendor-defendant. The defendant had represented that the turnover of the business had been between $190,000 and $195,000 for each of the previous four years. Before buying it, the plaintiff had begun to operate the business and did so for about four months. In that period, the vendor told the purchaser that the turnover for the then current year would be 'down a little bit'. It turned out later that the turnover for that year had dropped to around $170,000, a more than 10 per cent difference.
91 The question was whether the representation that the turnover would be 'down a little bit' was misleading and deceptive.
92 Agreeing with Chernov JA, Nettle JA found that in light of the circumstances, including what the purchaser knew from his experience of operating the business, the statement 'down a little bit' had not been shown by the plaintiff purchaser to be capable of inducing error and therefore was not misleading and deceptive.
93 The relevant matters known to the purchaser included that the business had been on the market for 12 months, the managers had lost interest, and the effect of that loss of interest was that customers were being turned away. Accordingly, Nettle JA concluded:
Judged in context, the essence of it was not so much the "little bit" as it was the downturn the result of managerial indifference. Taken advisedly, the epithet "little bit" was more likely to be understood as an ironic emphasis of the significance of the decline in turnover than as quantification of it. At least in the case of someone of [the purchaser's] training and experience, it is improbable that such a statement would be perceived as an encomium of continuing financial stability.[63]
94 It is not a novel proposition that the state of knowledge of the target of a representation may be a factor taken into account, in appropriate circumstances, for determining whether a representation had a capacity to induce error. Such knowledge can constitute a feature of the external context in which the impugned conduct must be assessed.[64]
95 But as this example shows, there is a real potential for overlap between the knowledge of the recipient relevant to the question whether the conduct was misleading and deceptive, and the knowledge of the recipient relevant to the question of causation and reliance.
96 From the Steutal principle, Viterra argues that not only could the knowledge of Cargill be relevant to whether the Financial and Operational Performance Representation was capable of inducing error; the representation could only be capable of inducing error if Cargill was in fact ignorant of the existence (or extent) of the Undisclosed Matters at the material times. Viterra says that because that is so, the very formulation of the representation impliedly asserts that ignorance.
97 Taking it further, so the argument proceeds, because Cargill makes that assertion, then all potential sources of evidence that would bear upon the truth of the assertion become relevant. One of the potential sources of evidence that would bear upon whether Cargill was ignorant of the Viterra Practices would be the privileged communications between Cargill and its lawyers which occurred at the very time the due diligence process was taking place. A measure of the likelihood that those communications would contain evidence bearing upon the issue of Cargill's knowledge can be gleaned from the timing of the communications, the topics of the communications and the participants in the chain of communication (often emails). The degree of likelihood that the communications would touch upon Cargill's knowledge is even more apparent in the later, pre-completion period when the October 2013 letters and the October 2013 responses explicitly centred on aspects of the Viterra Practices.
98 It is now necessary to subject Viterra's argument to the test of inconsistency as stated in Mann v Carnell, more particularly explained in Rio Tinto and endorsed in Vic Hotel. Adapting it to the current circumstances it is this: has Cargill made an assertion (express or implied) or brought a case, which is either about the contents of the confidential communications or which necessarily lays open the confidential communications to scrutiny?
99 I have already observed that this formulation contains two limbs. I gather that Viterra does not so much focus its argument on the first limb, namely that Cargill has made some express or implied assertion which is about the contents of the confidential communications between it and its lawyers. Rather, Viterra focuses its arguments on the second limb, namely that by asserting the misrepresentations or, more generally, by bringing this particular claim for misleading and deceptive conduct, Cargill has necessarily laid open the confidential communications to scrutiny.
100 To form a view on this question, it can be helpful to compare the situation in this case with situations in other cases where a waiver has been found. Before turning to some examples, it is useful, however, to bear in mind two insights. The first is that in this area, 'questions of degree, and thus of judgment, are necessarily involved because, as the High Court has emphasised, whether the privilege has been abused, with the consequence that the law imputes a waiver regardless of actual intention, depends upon the particular circumstances'.[65] The second is that one should take care when examining other cases not to mistake factual questions of judgment for statements of principle.[66]
101 In Rio Tinto, the Commissioner of Taxation sought to maintain legal professional privilege over documents contained in four schedules of documents (identified as A, B, C and D) in a legal proceeding in which Rio Tinto had appealed the Commissioner's decision that dividend payments made by the company arose out of dividend stripping. As required by the Court, the Commissioner filed a statement of facts, issues and contentions (SFIC) in response to Rio Tinto's appeal. When answering a request for further and better particulars of its SFIC, namely the facts, circumstances and matters taken into account in reaching the impugned decision, the Commissioner responded by specifying only the documents contained in two of the four schedules, namely C and D. In other words, the only material upon which the decision was reached were the contents of privileged communications.
102 The Full Court held that the Commissioner had waived the privilege because he asserted that the basis of the impugned decision was the content of the privileged documents. It is thus apparent that Commissioner had asserted that the confidential documents were more than merely relevant to the making of the decision; he asserted that they were central to it. It could readily be seen that an examination of the content of those documents was forensically indispensable to any challenge to the decision itself.
103 In that way, as the Court held, the Commissioner made an assertion about the contents of the documents that put those contents in issue or necessarily laid them open to scrutiny.[67]
104 It is important to understand how the question of waiver arose on the facts in Vic Hotel. It is an unusual case in which the assertion of the privilege holder put in issue the knowledge of the other party - not its own knowledge - to lay open to scrutiny the contents of its own legal advice.
105 In December 2008, DC Payments made a contract with Vic Hotel whereby Vic Hotel agreed to host DC Payments' ATM machine for five years (to September 2013). Under the agreement, that term was to be automatically renewed, unless notice was given otherwise, for a further five years.
106 In August 2011, DC Payments obtained legal advice to the effect that the renewal clause under that agreement was unenforceable. That legal advice was disclosed to senior managers within DC Payments.
107 In September 2013, the initial five year term expired. If the renewal clause was enforceable, the second five year time rolled over; if it was not enforceable, it did not roll over and the agreement came to an end.
108 Shortly thereafter, in November 2013, Vic Hotel ceased using DC Payments' ATM machines at its premises. Ceasing to use the machines would have breached the agreement assuming that it remained in force. DC Payments purported to terminate the agreement with Vic Hotel on the basis of Vic Hotel's alleged 'repudiation' of the agreement.
109 Some time prior to November 2013 the senior managers of DC Payments (referred to earlier) had moved from DC Payments to its competitor in the ATM business, Next Payments.
110 DC Payments brought a proceeding in which it alleged that Next Payments had tortiously procured and induced Vic Hotel to cease using the ATM machine with the knowledge that by doing so Vic Hotel would breach its obligations to DC Payments under their agreement. By its pleading, DC Payments specifically alleged that the Next Payments' knowledge of Vic Hotel's obligations under its agreement was derived from the knowledge of the various senior managers who had transferred between the two companies.
111 In its defence, Next Payments claimed that at all material times it believed that DC Payments' contract with Vic Hotel was limited only to five years, referring to the 2011 legal advice that DC Payments had received to the effect that the renewal clause was likely to be unenforceable. In other words, Next Payment alleged that, in November 2013, because of the legal advice of which it was aware through the knowledge of the former DC Payments' senior managers, it did not believe that Vic Hotel would be in breach of its obligations under any subsisting agreement.
112 Because of the intentional nature of the tort, the existence of Next Payments' knowledge and belief about the legal effect of Vic Hotel ceasing to use the ATM machines lay at the heart of DC Payments' claim against Next Payments.
113 DC Payments made an application to the court for two things: first, that Next Payments be precluded from adducing evidence of the legal advice on the basis that it was protected by legal professional privilege; and, secondly, that Next Payments' pleading of its knowledge based on that advice be struck out. A trial judge granted DC Payments' application, but that decision was overturned in the Court of Appeal.
114 Apparently, the trial judge had reduced the relevant test to this question: do the pleadings of DC Payments expressly refer to a privileged communication as a material fact or particularise a material fact by reference to an otherwise privileged communication? The Court of Appeal said that by requiring the privileged communication to be referred to in a pleading as either material fact or a particular thereof, the judge had stated the test for putting the contents of the privileged communication in issue too narrowly.[68]
115 I have already set out above the test that the Court adopted (see [48] above). Applying that test to the case at hand, the Court first noted the allegation that Next Payments knew of the terms of the contract, the breach of which it had allegedly procured -
...what is presently significant is that DC Payments alleges that the information available to the senior managers was the source of this knowledge. Such knowledge is expressly alleged from the fact that Next Payments' senior management learned of, or knew about, the terms of merchant agreements when DC Payments employed them.[69]
116 Having made that observation, the Court dealt with the argument made by DC Payments that all that it had done by its pleading was to put in issue a state of mind to which a privileged communication was merely relevant rather than put in issue a state of mind which necessarily opened that privileged communication up for scrutiny. As to that, Dixon AJA (with whom Mandie and Beach JJA agreed) said this:
DC Payments mischaracterises the issue. The relevance of the legal advice to the state of Next Payments' mind is not in dispute. I accept that merely putting a state of mind in issue will not, of itself, give rise to waver of privilege in respect of legal advice that is relevant to the existence of that state of mind. But that is not this case. The state of mind that is put in issue concerns an understanding of legal rights, not simply knowledge of terms recorded in a contract. The particular knowledge or understanding that is alleged to constitute Next Payments' state of mind is that particular conduct by Vic Hotel would breach its agreement with DC Payments. The implicit premise in DC Payments' allegation by paragraph 16 is that the breach of the relevant contractual term was breach of an enforceable legal obligation. It is that premise that is put in issue between the parties by DC Payments in respect of the knowledge of Next Payments, as paragraph 17 makes clear. On that issue, Next Payments had particular knowledge that determined its state of mind at the relevant time.[70] (emphasis added)
117 The issue was neatly described by Beach JA, adding a few short observations of his own, but otherwise agreeing with Dixon AJA, where he said:
In any event, when one concentrates on the issue raised by the respondent's pleading of the tort of inducing a breach of contract, one sees that there is an inconsistency of the kind referred to in s 122(2) of the Evidence Act 2008 preventing the respondent from relying upon legal professional privilege to prevent the relevant employees of Next Payments from giving evidence concerning their beliefs about the content of the legal advice received by the respondent so far as it concerns their knowledge of the existence of binding contracts between DC Payments and the other applicants (Vic Hotel and the Randhawas).[71] (emphasis added)
118 As I see it, the knowledge of the senior managers about the terms of the Vic Hotel contract was pleaded by DC Payments to assert a belief on the part of Next Payments that was essential for the tort of inducing breach of contract. Yet it also sought to prevent Next Payments producing evidence, by reference to the knowledge of the same senior managers about the contents of the legal advice, that it did not have that belief. This conduct by DC Payments was inconsistent with what it had alleged because by bringing the case it did, it put centrally in issue the belief of the senior managers about enforceable and subsisting legal obligations of Vic Hotel under the agreement. Examining the belief of the senior managers about those legal obligations was indispensable to resolving the very claim which DC Payments brought. In other words, by making the knowledge of the senior managers about the legal obligations of Vic Hotel under the agreement so central to the claim of inducing breach of contract, DC Payments necessarily laid open to scrutiny any legal advice those managers were aware of that bore upon that same knowledge.
119 In Thomason v Campbelltown Municipal Council the Full Court of the New South Wales Supreme Court (Jordan CJ delivering reasons with which Halse, Rogers and Bavin JJ concurred) held that the plaintiff, Mrs Thomason, had waived legal professional privilege over legal advice she had received merely by commencing a common law claim for damages. By that claim she sought damages for herself and her infant daughter arising from the death of her husband as a result of the alleged negligence of the council.
120 The circumstances giving rise to this seemingly unusual result were comprehensively explained by Allsop J in DSE between [36] and [48] of the reasons for judgment. In short, Mrs Thomason had previously commenced a statutory claim for compensation arising from her husband's death. In doing so she was required to, and did, sign a declaration to the effect that she had received legal advice about her rights under the relevant workers' compensation legislation, and also her right to bring proceedings independently of the Act if the death of the deceased was caused by the negligence of an employer. In effect, she had an option to bring either of the two proceedings, but commencing the statutory claim would amount to an election not to commence a common law claim.
121 As the law then stood, a defendant to a common law claim who wished to plead the election of the plaintiff as a bar to the claim was required to prove that the election was made with a particular quality of legal knowledge about the option. That meant, in effect, that the defendant needed to establish the precise content of Mrs Thomason's legal advice.
122 Of course, the pleadings in Mrs Thomason's common law claim said nothing about her previous legal advice. But Allsop J explained why the mere bringing of the common law claim in those circumstances brought about the waiver of the legal professional privilege Mrs Thomason otherwise enjoyed over the advice she had received:
... by commencing the cause in negligence, in circumstances where that could only be done if the plaintiff's state of knowledge about her legal rights when she commenced her claim for statutory compensation was of a particular character, the plaintiff was acting inconsistently with the maintenance of the confidentiality of advice which was in all likelihood to be the only source of her knowledge about those matters. As a matter of substance she was bringing the cause in the plain and well understood circumstances that a central issue in the proceedings was, and would be, her state of knowledge about her rights as explained to her by [her solicitor].[72] (emphasis added)
123 These cases, and others, demonstrate the way in which courts have employed notions of 'centrality' and 'necessity' as a means of assessing whether an inconsistency arises between the assertion of a claim and the maintenance of the privilege. So as to respect the important right of legal professional privilege, for a waiver of that privilege to be imputed, the courts have insisted upon there being such a close alignment between the issue raised by the privilege holder on one hand, and the contents of the privileged communication on the other, that a contradiction or inconsistency arises in asserting the claim while yet maintaining the privilege.
124 That close alignment is sometimes expressed in the authorities as centrality - that is, for inconsistency to be found, the content of the confidential legal advice should be seen as central to the particular state of mind which the privilege holder has asserted in or by the claim.[73] Elsewhere, that close alignment has been described by reference to a relation of necessity, as in Allsop J's formulation, 'necessarily lays open for scrutiny'. Using that as the hallmark of inconsistency, there should be a relation of necessity, inevitability or indispensability between recourse to the contents of the confidential communication and the resolution of the question that the privilege-holder has put in issue.
125 This is why mere relevance of the confidential communication to the issue is not enough. The confidential communication has to be sufficiently central to the issue that the content of the communication is necessarily opened up by the assertion of the issue.
126 I think these qualities can readily be seen in each of the cases I have just discussed: Rio Tinto, Vic Hotel and Thomason. But in my judgment, that quality cannot be seen in the facts of this case.
127 In my view the content of the confidential communications between Cargill and its lawyers during both the due diligence and pre-completion phases of the transaction travel no further than being relevant (or potentially relevant) to the state of mind impliedly raised by Cargill's pleading. Those communications are not central to any issue directly or indirectly raised by the pleadings either alone or when viewed in the context of the evidence adduced in support of the application. Put another way, Cargill's state of mind, put in issue either by the pleading of the representations themselves or by the pleading of reliance on those representations, does not, as a matter of necessity, lay open to scrutiny the privileged communications.
128 Do I accept Viterra's argument about an 'embedded assertion' in the misrepresentation case, or is Cargill correct in submitting that only the plea of reliance opens up an issue of Cargill's state of mind?
129 Ultimately, whether knowledge is opened up by the representation case or by the plea of reliance, the question is whether the confidential legal communications are so central to the knowledge thereby put in issue that the pleading of the representation or reliance necessarily opens the communications to scrutiny, and thereby brings about an inconsistency with the maintenance of the privilege.
130 But I accept, for the sake of argument, that from the way in which it has pleaded its misrepresentation case, Cargill has made an implied assertion that it began and remained in ignorance about the Viterra Practices and Policies, as the foundation for the assertion that the combined effect of Viterra's positive statements and its failure to qualify them was capable of bearing a misleading and deceptive character. Despite accepting that proposition, in my view the reasoning to that conclusion is somewhat laboured and strained. It is certainly not a direct path of reasoning.
131 And I also accept that the timing, description and nature of numerous confidential documents suggest that they probably contain evidence that bears upon the issue of whether and to what extent Cargill knew of the Viterra Practices and Policies. I have already referred to a specific group of documents above by way of example.
132 But even accepting these propositions, neither from the pleadings nor from the evidence has it been established that Cargill's knowledge or ignorance of the Viterra Practices and Policies is an issue to which the contents of the privileged communications are central or for the resolution of which those communications must necessarily be laid open. In my view that holds true whether Cargill's state of mind is put in issue by the pleading of reliance or the pleading of the misrepresentation itself, but I will consider each.
133 First let me consider the pleading of reliance. Viterra did not put much faith in the argument that Cargill's pleading of reliance amounted to an act that was inconsistent with the maintenance of the privilege. But it did not expressly abandon it.
134 It is trite law that the impugned representation need only be a cause of the inducement, not the only cause. As far as the pleadings reveal, or from inferential reasoning, it does not seem likely that the confidential communications between Cargill and its lawyers caused Cargill to be ignorant of the Viterra practices so as to induce it to enter or complete the Acquisition Agreement. Nor was it contended that the communications were likely to have that character.[74]
135 Along with other evidence, those communications may be relevant to the merits of Cargill's claim in that they could provide evidence of the state of mind that induced Cargill to enter or complete the agreement. But there is nothing to suggest, by the way the claim is put, that such legal communications were either central to the formation of the view that induced Cargill to enter the agreement or that they are necessary to resolving the issue of whether Cargill did rely on that view. For that reason there is nothing in Cargill's conduct in pleading its reliance on the asserted representations that appears to me inconsistent with it adhering to its right to maintain confidentiality.
136 Next, let me assume that, to make good its misrepresentation case, Cargill has implicitly asserted it did not know about the Viterra practices and policies, or only knew of them to a limited extent.
137 Again, Cargill has not expressly asserted that any communication with its lawyers contributed to a belief that Viterra had not engaged in the relevant practices and policies. Neither do I consider that Cargill can be taken to have implicitly asserted that communications with its lawyers contributed to such a belief. Indeed, the subject matter of the relevant knowledge or belief is not inherently 'legal'. Cargill is more likely to have formed its views about the existence of these practices from sources designed to elicit operational facts, that is, from its commercial due diligence investigations.
138 So, at most, I would infer as a matter of probability that some confidential communications around the time Cargill was doing its due diligence or making its pre-completion enquiries (seeking information and forming its views) would reveal Cargill's knowledge and views on those operational subjects. Cargill might have even sought legal advice about the consequence of the information it had received in light of the contractual framework of the Acquisition Agreement. In other words, the communications may have forensic value for exposing the existence of the relevant state of mind without having played any causal role in the state of mind itself.
139 But in my view, to the extent they may reveal that knowledge, those communications are not central to, nor are they necessarily laid open for scrutiny by, the allegation that Viterra made a misrepresentation that, for its efficacy, assumes a lack of knowledge on the part of Cargill as the representee. Most likely, the confidential communications will only be a potential secondary source (among others) for proof of the primary fact. That is not to say that a confidential communication that only evidences a state of mind without actually causing it could never be central to or necessarily opened to scrutiny by an allegation of the state of mind, but generally it will be more difficult for such a communication to have that character.[75]
140 As seen, I have applied essentially the same reasoning in analysing the argument whether it is based on a plea of reliance or based on the plea of misrepresentation itself. That simply underscores the point made above that there is a substantial overlap between a state of mind that is relevant to whether a representation has a capacity to be misleading and deceptive and one that is relevant to whether a misrepresentation has in fact induced an error.
141 Finally, while there may be a degree of forensic disadvantage to Viterra in not having access to documents that are likely to be relevant to the question of Cargill's knowledge, it does not appear to me at this stage that such disadvantage reaches a degree of forensic unfairness that warrants the conclusion that there is an inconsistency in Cargill making its claim while at the same time maintaining the privilege.
142 I will briefly address four further issues that have been raised:
(a) Should I allow the additional evidence? I will not give leave to allow the Reply to be admitted on the hearing of the appeal. I make that decision without having read it. The whole argument turns on the case pleaded by Cargill and the assertions made expressly or impliedly in it. In my view, subtle changes could alter the analysis. It is inappropriate on the appeal to be analysing a case with anything other than the precise assertions at that time of hearing below. A further complication is that there is a debate whether the version of the defence to which the Reply responds was before her Honour in only a 'proposed' form. Regardless of whether it was or was not, it is my view I should not consider the Reply. As to whether the further affidavit evidence should be admitted, it falls into a different category than the Reply although I also conclude I should not admit it. I have made that decision having looked at the material. I viewed it to assess whether it assisted in clarifying my understanding of the nature or contents of the documents that are the subject of dispute. In my view those further affidavits make no material difference to my understanding from what I had gleaned from the evidence before the court below. Accordingly, I do not exercise my discretion to allow the admission of those affidavits into evidence on the appeal.
(b) Is 'embedded assertion' a new argument? Certainly, a new emphasis was placed upon it on the appeal. The argument was not put below in the elaborate form it was put on appeal. In hindsight, one may see some traces of it below, but it would be difficult to be critical of the Associate Judge for not recognising it in the way it was put before me. For that reason it would seem artificial to find that her Honour was in error for not dealing with it. But assuming she was in error for not dealing with it, in my view her consideration of that argument ought not have made a difference. I would make the same decision as the Associate Judge made even having considered it.
(c) What bearing should the 30 March ruling have on my consideration? Whether the Associate Judge was correct in deciding that Viterra had waived its privilege by pleading its third party action is irrelevant to my consideration in this matter. Her Honour appeared to consider that case as having stronger merit because, there, Viterra alleged that the third parties failed to tell it of the Viterra Practices and then sought to use privilege to stop the third parties producing the documents that evidenced that they did. Perhaps, in that respect, that scenario bears shades of similarity to Vic Hotel. And this is an area where judgment may be affected by degrees of difference. But I do not have to decide that case.
(d) Does the case for breach of warranty give rise to any different considerations? Viterra did not argue that its case based on breach of warranty had any stronger prospects than its case based upon the pleading of misleading and deceptive conduct or should otherwise succeed where the other fails. Nor can I see that it does or should. The argument on that basis shares the same fate as the one that has been more fully discussed in these reasons.
143 In the result, I am not ultimately persuaded that the Associate Judge made any identifiable error of fact, law or reasoning in arriving at her decision. Nor, looking at the decision as a whole in the context of all the evidence, do I think that it must have been infected by some otherwise unidentified error.
144 Even if I am wrong on that conclusion, and I should have found that the Associate Judge did make an error that enlivens my power to consider what decision should have been made, I would arrive at the same decision her Honour reached. For reasons I have explained, Cargill is entitled to maintain its claim for legal professional privilege to resist having to produce the relevant documents for inspection.
[1] Hou v Westpac Banking Corporation [2015] VSCA 57, [44] (Beach and Whelan JJA) approving Ferguson J (as she then was) in Oswal v Carson [2013] VSC 355, [11] in turn citing Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, [14]; see also Fanniesab Pty Ltd v Futistasera Pty Ltd [2016] VSC 359, [10] (Digby J).
[4] Viterra parties' written submission [1].
[25] HongKong Bank of Australia Ltd v Murphy [1993] VicRp 83; [1993] 2 VR 419 (Smith J); Pickering v Edmunds (1994) 63 SASR 357; Southern Equities Corp Ltd (In Liq) v Arthur Andersen & Co [1997] SASC 6712; (1997) 70 SASR 166 (Bleby J) ('Southern Equities'); Telstra Corp Ltd v BT Australasia Pty Ltd [1998] FCA 901; (1998) 85 FCR 152 (Beaumont J) ('Telstra'); Mann v Carnell [1999] HCA 66; [1999] 201 CLR 1 ('Mann v Carnell'); Liquorland (Australia) Pty Ltd v Anghie [2003] VSC 73; (2003) 7 VR 27 (Byrne J) ('Liquorland'); DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 ('DSE'); Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 ('Rio Tinto'); Archer Capital 4A Pty Ltd v Sage Group Plc (No 3) [2013] FCA 1160; (2013) 306 ALR 414 ('Archer'); Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd [2015] VSCA 101; (2015) 321 ALR 191 ('Vic Hotel'). See also Dr Ronald J Desiatnik, Legal Professional Privilege in Australia (LexisNexis Butterworths, 3rd ed, 2016); Andrew Eastwood, 'Do you waive privilege by pleading reliance?' (2012) 86 Australian Law Journal 545.
[26] I am bound to follow the decisions of the Victorian Court of Appeal and those of the High Court and, in the absence of binding authority to the contrary, ought to, in the interest of comity, follow decisions of courts of high standing in other Australian jurisdictions unless those decisions are plainly wrong; See Favelle Mort Ltd v Murray [1976] HCA 13; (1976) 133 CLR 580, 591; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.
[27] Mann v Carnell [1999] HCA 66; [1999] 201 CLR 1, [13], [28], [29] (citations omitted).
[28] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303, [31]-[32] (French CJ, Kiefel, Bell, Gageler and Keane JJ) ('Expense Reduction'); See also Vic Hotel [2015] VSCA 101; (2015) 321 ALR 191, [32] (Dixon AJA).
[30] Thomason v Campbelltown Municipal Council [1939] NSWStRp 10; (1939) 39 SR (NSW) 347 ('Thomason').
[31] Vic Hotel [2015] VSCA 101; (2015) 321 ALR 191, [37], [38].
[34] Ibid [39], citing the Full Federal Court in Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [61], [65] and [68] (citations omitted).
[35] Daniels Corporation v ACCC [2002] HCA 49; (2002) 192 ALR 561, [11] ('Daniels'); Austral Dutch Kaolin Pty Ltd v Hanjin P & C Co Ltd [2011] FCA 638, [22] (Greenwood J) ('Austral Dutch'); Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [41].
[36] Mann v Carnell [1999] HCA 66; [1999] 201 CLR 1, [38].
[37] Colman J in Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow (No 1) [1995] 1 All ER 976, cited in DSE [2003] FCA 384; (2003) 127 FCR 499, [20] and approved in Paragon Finance plc v Freshfields [1999] EWCA Civ 955; [1999] 1 WLR 1183 ('Paragon Finance') see DSE, [28].
[38] DSE [2003] FCA 384; (2003) 127 FCR 499, [28] quoting Lord Bingham in Paragon Finance [1999] EWCA Civ 955; [1999] 1 WLR 1183; DSE, [98] citing Equuscorp Pty Ltd v Kamisha Corp Ltd [1999] FCA 681; (1999) ATPR 41-697 Heerey J, 42, 894 ('Equuscorp v Kamisha'); Carter v Managing Partner, Northmore Hale Davy & Leake (1995) 183 CLR 121, per Brennan J at 128.
[39] Mann v Carnell [1999] HCA 66; [1999] 201 CLR 1, [29].
[40] In DSE [2003] FCA 384; (2003) 127 FCR 499, [95] Allsop J said: 'It is the inconsistency between the act of the holder of the privilege and the confidentiality of the communication that destroys the privilege'. See also Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [65].
[41] DSE [2003] FCA 384; (2003) 127 FCR 499, [58]; Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [52]; Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; (1998) 81 FCR 360, 371.
[42] DSE [2003] FCA 384; (2003) 127 FCR 499, [60], [92], [95], [98] citing Equuscorp v Kamisha [1999] FCA 681; (1999) ATPR 41-697, Heerey J, 42, 894; Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [65]; Vic Hotel [2015] VSCA 101; (2015) 321 ALR 191, [39].
[43] Liquorland [2003] VSC 73; (2003) 7 VR 27, [41].
[44] Archer [2013] FCA 1160; (2013) 306 ALR 414, [115] (Wigney J); Telstra [1998] FCA 901; (1998) 85 FCR 152, 157-8 (Beaumont J; Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [57]; DSE [2003] FCA 384; (2003) 127 FCR 499, [52], [89], [90], [92], [93].
[45] Telstra [2003] FCA 384; (2003) 127 FCR 499, 158 (Beaumont J).
[46] Mann v Carnell [1999] HCA 66; [1999] 201 CLR 1, [29].
[47] Cargill v Viterra Malt (No 3) [2017] VSC 650 ('Reasons').
[50] Reasons, [37], [38], [39], [42].
[51] Viterra parties written submission [1].
[52] The Viterra parties highlighted [30], [33] and [37] of the Reasons.
[53] The Viterra parties highlighted [37] of the Reasons.
[54] The pleading of which appears in the statement of claim at [29] (inducing entry into the Acquisition Agreement) and [36] (inducing completion of the agreement).
[55] Cargill Australia Ltd v Viterra Malt, Transcript of Hearing 12 February 2018 Pages 15 and 16.
[61] [2005] VSCA 312 ('Steutal').
[62] Steutal [2005] VSCA 312, [45] (citations omitted).
[63] Steutal [2005] VSCA 312, [47].
[64] Colin Lockhart, The Law of Misleading or Deceptive Conduct (LexisNexis, 4th ed, 2014) [3.21]-[3.22].
[65] Telstra [1998] FCA 901; (1998) 85 FCR 152, 158 (Beaumont J). His Honour's dissenting judgment in that case has nevertheless been widely referred to since.
[66] DSE [2003] FCA 384; (2003) 127 FCR 499, [62] (Allsop J).
[67] Rio Tinto [2006] FCAFC 86; (2006) 151 FCR 341, [72].
[68] Vic Hotel [2015] VSCA 101; (2015) 321 ALR 191, [34].
[72] DSE [2003] FCA 384; (2003) 127 FCR 499, [48].
[75] A distinction that was relevant for Bleby J in Southern Equities [1997] SASC 6712; (1997) 70 SASR 166, 193.
Cargill Aust Ltd & Ors
Viterra Malt Pty Ltd & Ors
(2006) 151 FCR 341
(2015) 321 ALR 191
(2000) 203 CLR 194
(1994) 63 SASR 357
(1997) 70 SASR 166
(1998) 85 FCR 152
(2003) 7 VR 27
(2003) 127 FCR 499
(2013) 306 ALR 414
(1976) 133 CLR 580
(2007) 230 CLR 89
(2013) 250 CLR 303
(2002) 192 ALR 561
(1995) 183 CLR 121
(1998) 81 FCR 360