Plaintiff v First Defendant

1 In this case the Fourth Defendant, Next Payments Pty Ltd ('Next Payments') contends that by its pleading in its statement of claim the Plaintiff, DC Payments Australasia Pty Ltd ('DC Payments'), has waived legal professional privilege in relation to certain legal advice (the 'Legal Advice').

2 DC Payments maintains a claim for legal profession privilege in relation to the Legal Advice.

3 Next Payments does not challenge the existence of the privilege, but says that the privilege has been waived. The only basis upon which Next Payments contends that there has been a waiver of privilege is the pleading of the statement of claim. It says that by this pleading the Plaintiff DC Payments has put into issue the state of mind of Next Payments and the legal advice is relevant to that state of mind.

4 The First Defendant ('Vic Hotel'), operated by the second and third defendants, entered an agreement with the plaintiff to this proceeding, DC Payments for the installation and operation of an ATM at its premises in Warrnambool, Victoria. DC Payments agreed to supply to Vic Hotel an ATM, to collect all transaction surcharge revenue from the ATM and to pay a monthly rebate to Vic Hotel for each cash withdrawal transaction above a threshold number of transactions per month (the 'ATM Supply Agreement').

5 In 2013, after a period of 5 years, Vic Hotel ceased operating DC Payment's ATM at their premises, and installed a Next Payments ATM. DC Payments alleges that this was in breach of its agreement with Vic Hotel, and pleads a case in breach of contract against it and the second and third defendants.

6 It is common ground that in or around 2011, DC Payments sought legal advice in relation to the validity or enforceability of the clause of its agreements relating to the 'renewal' period on which it now relies in its claim against Vic Hotel (the 'Renewal Clause'). Certain members of the senior management of DC Payments (the 'Managers'), namely Mr Timothy Wildash, Mr Mark Beddoe and Mr Tyson Lester, became aware of the legal advice given as to the validity and enforceability of the Renewal Clause. The Managers later became employed by the Fourth Defendant, Next Payments.

7 The issue before the Court is whether DC, by filing and serving its pleadings contained in its Amended Statement of Claim dated 14 July 2014 (the 'Statement of Claim') has waived privilege over communications which are referred to in paragraph 16(a) of the Defendants' defence dated 20 August 2014 (the 'Defence').

8 It is common ground that the relevant communications pleaded in the Defence relate to, or constitute, legal advice concerning the question of whether the Renewal Clause contained in the ATM Supply Agreement is valid and enforceable.

9 This matter arises from an interlocutory application brought on by DC Payments, by its summons dated 23 July 2014, seeking to prevent the use of the Legal Advice obtained by it in the substantive proceeding, as well as striking out certain parts of the defence and an affidavit filed which refer to the Legal Advice. In particular DC Payments seeks to prevent Next Payments (and the other defendants) referring to or adducing evidence of the Legal Advice relevant to the validity of the Renewal Clause. By its claim of privilege, DC Payments seeks to prevent the Defendants from:

1. referring to the legal advice disclosed to the Managers as to the enforceability of the Renewal Clause;

2. Pleading material matters that were centrally relevant to the state of mind of DC Payments, which was informed by the Legal Advice imparted to the Managers about the enforceability of the Renewal Clause;

3. Adducing any evidence as to what the Managers were told about the enforceability of the Renewal Clause.

10 The principal questions that arise in relation to DC's claims in the substantive proceeding, as against Vic Hotel, are:

1. Whether the ATM Supply Agreement was for a term of 5 years (as alleged by Vic Hotel), or a term of 10 years (as alleged by DC Payments). DC Payment's contention is that a clause contained in its standard terms and conditions document bound Vic Hotel so that at the end of 5 years the agreement would automatically be 'renewed' for an 'extended period' of 5 years ('Renewal Clause') unless

1. Vic Hotel provided DC Payments with notice 180 business days prior to the end of the "initial period" of 5 years of an intention to renew for a period of less than 5 years; and
2. DC Payments agreed to the agreement continuing for a further period of less than 5 years;

2. If the Renewal Clause formed part of the ATM Supply Agreement and the agreement was for a term of 10 years as alleged by DC Payments, whether the claim for breach fails because:

1. DC Payments is estopped from denying that the agreement was for a 5 year term only or from relying on the Renewal Clause;
2. The agreement is void, voidable or unenforceable because of DC Payment's misleading or deceptive conduct;

1. The agreement is voidable, and have been rescinded, on the basis of DC Payment's misrepresentations; and

1. DC Payments has engaged in unconscionable conduct.

11 The terms, validity, and enforceability of the ATM Supply Agreement are central issues in the proceeding. Among other things, the Defendants allege that DC Payments represented to them that the agreement was for a term of 5 years, and that the Renewal Clause was never brought to their attention.

12 Next Payments is also a supplier of ATMs, and a commercial rival of DC Payments.

13 DC Payments pleads a claim against Next Payments of tortiously inducing a breach of contract. It does so on the basis that Next Payments knew that the Vic Hotel would breach its ATM Supply Agreement with DC Payments if it allowed any other ATM on its premises, including an ATM operated by Next Payments, and ceased operating DC Payment's ATM. DC Payments alleges that Next Payments induced Vic Hotel to breach its contract with DC Payments, and assisted Vic Hotel to do so.

14 In its Statement of Claim, DC Payments pleads at paragraph 16(a) that:

Next Payments knew that Vic Hotel would be in breach of its obligations to the plaintiff under the Vic Hotel agreement if Vic Hotel were to terminate the Vic Hotel agreement before the end of the Term otherwise than as provided for by the agreement.

15 The particulars to that paragraph specifically identify the Managers, who were employees or agents of Next Payments who were previously employed by DC Payments and who were aware of the nature of the terms and conditions of the ATM Supply Agreement. These Managers were:

• Timothy Wildash, the current Managing Director of Next Payments, formerly the Managing Director and Chief Executive Officer of DC Payments; and

• Mark Beddoe, currently employed by Next Payments, formerly the Head of Products and General Manager of Pre-Paid Cards at DC Payments.

16 At paragraph 17 of its Statement of Claim, DC Payments refers to 'the knowledge pleaded in paragraphs 15 and 16 above'. The relevant knowledge is pleaded to be that held by Next Payments that Vic Hotel would be in breach of its obligations to DC Payments if Next Payments took various steps in relation to Vic Hotel.

17 At paragraph 18 of its Statement of Claim, DC Payments pleads that Next Payments 'intended to persuade, procure or induce Vic Hotel to breach the Vic Hotel agreement'.

18 Similar pleadings are made in the Statement of Claim in relation to the agreement between DC Payments and the second and third defendants, the Randhawas:

• At paragraph 35 of its Statement of Claim, DC Payments alleges that Next Payments knew that the Randhawas would be in breach of their obligations to DC Payments if the Randhawas were to terminate the agreement before the end of the Term;

• At paragraph 36 it is alleged that with the knowledge that the Randhawas would be in breach, Next Payments took various steps; and

• In paragraph 37, that by this conduct Next Payments 'intended to persuade, procure or induce [the Randhawas] a breach of their agreement with DC Payments.

19 DC Payments also alleges in its Statement of Claim that Next Payments has engaged in conduct with the intention of inducing breaches of contract with a range of other merchants. At paragraph 41(c) of the Statement of Claim, DC Payments pleads that 'Next Payments knows that:

(c) if any merchant allows the placement of any other ATM (or like equipment) on its premises during the Term of its agreement with the plaintiff, the merchant is in breach of the agreement.'

20 Also put in issue by the Statement of Claim is the relevant knowledge of Next Payments at the time of the allegedly offending conduct. Paragraph 12 alleges the conduct occurred in November 2013 in relation to Vic Hotel. Paragraphs 34-36 allege the conduct occurred in February-March 2014 in relation to the second and third defendants. Paragraphs 41 and 42 allege ongoing conduct in relation to other of DC Payment's customers.

21 In the Defence dated 20 August 2014, the Defendants refer to the content of allegedly privileged documents and communications being legal advice going to the validity or enforceability of aspects of the Renewal Clause.

22 Paragraph 16(a)(ii) of the Defence identifies and relies upon the Legal Advice obtained by DC Payments in late 2010 or early 2011. The particulars to that paragraph identify the Legal Advice communicated to DC Payments by:

23 The relevant Legal Advice is also referred to in paragraphs 16(a)(iii), 20V(d), 39Q(d) and 40(b)(iii) of the Defence.

24 The Reply and Defence to Counterclaim of the Plaintiff dated 22 August 2014 contains the following subparagraphs contained in paragraphs 16(b) and (c)(i)- (iii):

(b) as to paragraph 16(a)(iii), the plaintiff says that any disclosure of advice received by the plaintiff to its employees or agents is not knowing and voluntary disclosure of advice and does not waive the plaintiff's legal professional privilege over the advice either at common law or pursuant to section 122(2) of the Evidence Act 2008 (Vic);

(c) as to paragraph 16(a)(iv), the plaintiff:

1. says that each of Timothy Wildash, Tyson Lester and Mark Beddoe had ongoing obligations of confidence to the plaintiff following the termination of their employment with the plaintiff, including in respect of the content of any legal advice received by the plaintiff about which each of them became aware while employed by the plaintiff;
2. says that the content of documents and communications over which the plaintiff claims legal professional privilege, where such privilege has not been waived, did not form part of the knowledge of Next Payments and cannot be imputed to Next Payments;
3. otherwise denies paragraph 16(a)(iv).

25 Rule 47.04 of the Supreme Court (General Civil Procedure) Rules (the Rules) provides for a preliminary question to be tried before the Court, in circumstances where, properly used, the procedure would offer an effective, cost-efficient, timely and just means of disposing of points of contention.[1]

26 The following question was formulated for preliminary determination:

Whether, in relation to the defendants' [amended] defence dated [20] August 2014:

1. paragraphs 16(a)(ii)-(iv);
2. paragraph 20V(d);

1. paragraph C (the fourth bullet point) of the particulars to paragraph 40(b)(iii);

or any and which of them, disclose the content of a document and communications which are the subject of legal professional privilege which has not been waived at common law or which has not been lost by operation of s 122 of the Evidence Act 2008.

27 It is not in dispute that the document and communications referred to in the above paragraphs of the defence attract legal professional privilege. The matter to be determined in answering the preliminary question is solely whether, by its pleadings, DC Payments has waived its privilege over that advice at common law, and/or whether the privilege has been lost by operation of s 122 of the Evidence Act 2008 (Vic) (the 'Evidence Act').

28 The Fourth Defendant, Next Payments, submits that by its pleadings, DC Payments has put into issue the state of mind of Next Payments as to knowledge of the validity or invalidity of the Renewal Clause of the ATM Supply Agreement.

29 Knowledge of a potential breach of the terms of the ATM Supply Agreement was claimed as an essential element of the tort of inducing breach of contract, when combined with proof of conduct which had this effect.

30 It was submitted that the relevant state of mind included whether the action of Vic Hotel, by ending the ATM Supply Agreement with DC Payments before the end of an 'extended' or 'renewal' period, constituted an actionable breach of contract. Next Payments' state of mind is alleged to be constituted by the knowledge of various of its employees, who acquired the knowledge while previously employed by DC Payments.

31 The knowledge is said to have been obtained in this way: In or around 2011, DC Payments sought legal advice in relation to the validity or enforceability of the Renewal Clause of its ATM Supply Agreement relating to the "extended" or "renewal" period on which it relies.

32 The Fourth Defendant submitted that the Managers of Next Payments, in particular Mr Timothy Wildash, Mr Mark Beddoe and Mr Tyson Lester, all became aware of advice given as to the validity and enforceability of the Renewal Clause during the time they were employed with DC Payments.

33 Next Payments claims that the advice given as to the validity and enforceability of the Renewal Clause would be relevant to the state of mind those individuals - and therefore ultimately Next Payments - as to whether the ending of the ATM Supply Agreement, before the end of the extended period, amounted to a breach of contract.

34 Next Payments submits that DC Payment's pleadings to the effect that Next Payments knew that Vic Hotel would be in breach of its ATM Supply Agreement with DC Payments if it terminated the agreement before the end of the extended or renewal period, as an essential component of its plea claiming an inducement of breach of contract, puts the state of mind of Next Payment's state of mind directly into issue.

35 Insofar as the advice received by relevant employees is privileged, Next Payments submits that the privilege has been waived by DC Payments bringing directly into issue in this proceeding the knowledge of Next Payments and those specific employees as part of its case.

36 Next Payments also contends that it would be unfair to prevent it from defending itself, and indeed virtually impossible for a defence to be mounted, except by reference to the Legal Advice which formed the basis for what Next Payments says is a state of mind which, if found to have been reasonably held at the time of the impugned conduct, would provide Next Payments with an answer to the inducing breach of contract claim made against it.

37 In these circumstances, the Defendants submit that DC Payments ought not to be permitted to maintain a privilege claim over the Legal Advice in circumstances where DC Payments is positively pleading the state of mind of a party likely to be, or in fact, affected by the Legal Advice.

38 The Plaintiff says that its pleadings do not make express or implied assertions about the content of privileged communications.

39 The mere fact that the Plaintiff's pleading puts in issue the state of mind of the Defendants is not sufficient to justify a finding that by its conduct in pleading its case in the way it has in its statement of claim, the Plaintiff has acted in a manner which is inconsistent with the maintenance of legal profession privilege over the Legal Advice.

Waiver at Common Law and under the Evidence Act

40 Both at common law, and pursuant to s 122 of the Evidence Act, legal profession privilege can be waived in two ways: where a party consents to the adducing of privileged material into evidence, or where a party has, by their conduct, acted inconsistently with a subsequent objection to the material being adduced.

41 Section 122 of the Evidence Act relevantly provides:

122 Loss of client legal privilege-consent and related matters

(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.

(3) Without limiting subsection (2), a client or party is taken to have so acted if -

(a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or

(b) the substance of the evidence has been disclosed with the express or implied consent of the client or party.

(4) The reference in subsection (3)(a) to a knowing and voluntary disclosure does not include a reference to a disclosure by a person who was, at the time of the disclosure, an employee or agent of the client or party or of a lawyer of the client or party unless the employee or agent was authorised by the client, party or lawyer to make the disclosure.

42 Section 122(2) of the Evidence Act was introduced as part of the 2008 amendments to uniform evidence legislation in Australia, and is intended to import into the Evidence Act 2008 (Vic) the common law test for waiver.[2] As the law has developed, there is now a close alignment between the common law and s 122(2) in relation to waiver of legal profession privilege.

43 In Mann v Carnell,[3] the High Court stated the principles applicable to waiver of legal professional privilege under the common law in the following terms:[4]

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 ...

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, when 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.

44 These observations are reflected in s 122 of the Evidence Act. In order to establish implied waiver under this provision there must be an inconsistency between the privilege-holder's conduct and the maintenance of the confidentiality which the privilege is intended to protect.

[d]epending on the circumstances of the case, considerations of fairness may be relevant to a determination of whether there is such inconsistency.[5]

46 Thus there is now a close alignment between the common law test for waiver and that provided for under the Evidence Act.

47 The law has evolved in this area since 1998.[6]

48 A starting point are certain entrenched principles as to waiver of legal professional privilege which remain to this day:

• legal privilege can only be waived by the party whose privilege it is;

• privilege being an important and fundamental common law right [7] is not waived unless there is clear conduct or language which displays an intention to waive the privilege either expressly or by necessary implication;[8]

• the party asserting waiver bears the burden of proof of that issue.[9]

49 As was observed in Amcor v Barnes No 2,[10] legal professional privilege in its present form has its foundation in public policy. It was developed by the courts to promote the administration of justice. The rationale is that the privilege encourages clients to be frank with their lawyers about their legal affairs. This in turn assists lawyers to give accurate advice based on a complete knowledge of the facts. It also assists lawyers prepare for and conduct litigation on behalf of the client so that a court hearing the matter is in a position to hear the best case a party is properly able to advance, and dispense justice accordingly. The privilege also assists parties to litigation to make realistic assessments of their position upon legal advice founded upon a full appreciation of the relevant facts. This in turn has a part to play in achieving an appropriate compromise of proceedings, where this outcome is the best course. This too has an important part to play in case management and the administration of justice.

50 Dawson J in Baker v Campbell[11] expressed the rationale for the rule in the following terms:

[I]ts justification is to be found in the fact that the proper functioning of our legal system depends upon a freedom of communication between legal advisers and their clients which would not exist if either could be compelled to disclose what passed between them for the purpose of giving or receiving advice. This is why the privilege does not extend to communications arising out of other confidential relationships such as those of doctor and patient, priest and penitent or accountant and client.

The restriction of the privilege to the legal profession serves to emphasize that the relationship between a client and his legal adviser has a special significance because it is part of the functioning of the law itself. Communications which establish and arise out of that relationship are of their very nature of legal significance, something which would be coincidental in the case of other confidential relationships. It has been found necessary that professional guidance in the complex processes of the law should be uninhibited by the possibility that what is said to enable advice to be sought or given might later be used against the person seeking the advice.

51 Legal professional privilege is thus a very powerful privilege.[12] It enables lawyers and their clients to make frank assessments about their legal position and their prospects in legal proceedings. This can only be properly undertaken if the confidence of the communications is able to be protected.

52 The common law developed to recognise two forms of legal professional privilege - the advice privilege and the litigation privilege. These are now enacted in ss 118 and 119 of the Evidence Act, as follows:

Legal advice

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of-

(a) a confidential communication made between the client and a lawyer; or

(b) a confidential communication made between 2 or more lawyers acting for the client; or

(c) the contents of a confidential document (whether delivered or not prepared by the client, lawyer or another person-

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

Litigation

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of-

(a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or

(b) the contents of a confidential document (whether delivered or not) that was prepared-

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

53 Two appellate decisions of note have considered whether a pleading which puts in issue a party's state of mind gives rise to a waiver of legal professional privilege. Telstra Corporation Ltd v BT Australasia Pty Ltd[13] and Chen v City Convenience Leasing Ltd[14] were both cases which pleaded causes of action claiming damages for misleading or deceptive conduct.[15] In such cases, a necessary element that must be pleaded in cases where the impugned conduct is alleged to have induced entry into a transaction, is reliance by the plaintiff on that conduct. The matter that arose for consideration in these two cases was whether, in pleading reliance, the plaintiff in each case waived legal profession privilege in relation to legal advice obtained in connection with the transaction. The question[16] was whether the plaintiff in each case had waived privilege in the legal advice because it put its "state of mind" in issue.

54 In Telstra Corporation Ltd v BT Australasia Pty Ltd a majority of the Full Court of the Federal Court (Branson and Lehane JJ, with Beaumont J in dissent) held that BT Australasia had waived privilege in the relevant documents.

55 In relation to a case where reliance is pleaded, Branson and Lehane JJ said:[17]

Where, as in this case, a party pleads that he or she undertook certain action "in reliance on" a particular representation made by another, he or she opens up as an element of his or her cause of action, the issue of his or her state of mind at the time that he or she undertook such action. The court will be required to determine what was the factor, or what were factors, which influenced the mind of the party so as to induce him or her to act in that way. That is, the party puts in issue in the proceeding a matter which can not fairly be assessed without examination of relevant legal advice, if any, received by that party. In such circumstances, the party, by putting in contest the issue of his or her reliance, is to be taken as having consented to the use of relevant privileged material, or to put it another way, to have waived reliance on the privilege which such material would otherwise attract [Emphasis added].

[and]

Where, however, a party relies on a cause of action, an element of which is the party's state of mind (including the quality of the party's assent to a transaction) the party is taken to have waived privilege in respect of legal advice which the party had, before or at the time of the relevant events, material to the formation of that state of mind.

56 In dissent, Beaumont J expressed the view that it was unlikely that there could be an absolute rule that whenever a party's state of mind may be relevant to an issue, privilege is lost.[18] On the facts of the case before him, his Honour held:[19]

At this stage, BT has made no use of the legal advice in the proceedings. The advice is not pleaded by BT as an ingredient of its claim. BT does not assert that it relied, or did not rely, on the advice. It is difficult to see how, or why, BT could have pleaded the advice. It could not bear upon the question whether the conduct of the State or Telstra was misleading. It may, depending on the actual situation, bear upon the question of BT's reliance. Questions of degree may be involved, but the advice is not, obviously, central to that issue in the same way as the advice given by the solicitor on the election was, obviously, central to the plea in Thomason, at least as the issues in Thomason had evolved in the course of the trial.

57 In Chen v City Convenience Leasing Ltd, Gzell J (with whom Bryson JA Windeyer J agreed) held there had been a waiver of privilege based on the pleadings. In the course of his reasoning, Gzell J referred to a decision of Hodgson CJ in Eq in Wayne Lawrence Pty Ltd v Hunt,[20] where the learned Chief Justice in Equity said:

It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communications that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver.

58 Gzell J continued on the issue in Chen:[21]

1. The width of the statement in Telstra has been the subject of criticism by single judges (Equuscorp Pty Ltd v Kamisha Corp Ltd [1999] FCA 681; (1999) ATPR 41-697 at 42,894, John Tanner Holdings Pty Ltd v Mortgage Management Ltd [2001] FCA 194; (2001) 182 ALR 201 at 206, Liquorland (Australia) Pty Ltd v Anghie [2003] VSC 73; [2003] 7 VR 27 at 42, DSE at 502, 526,Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 1296 at [40], [43]). The proposition is that Mann requires a narrower statement of principle. As Allsop J said in DSE at [5]:

"My own view is that Mann v Carnell evinces more than a modification of the approach of the majority in Telstra and amounts to a rejection of that approach and that the notion of inconsistency of conduct by the holder of the privilege and the maintenance of the confidence in question (though informed where relevant by notions of fairness) works a narrower and more confined operation for implied waiver than as expressed by the majority in Telstra."

1. I doubt that a different result will follow from the sort of question referred to in Wayne Lawrence and the sort of question that needs to be answered in order to determine whether there is inconsistency between the conduct of a party and maintenance of client legal privilege as discussed in Mann. In a case like the present one in which reliance upon representations is alleged, questions such as the following need to be explored: Were representations made to the party by or on behalf of the opponent? Does the party say that he or she relied upon the representations and altered his or her course of conduct? Is reliance upon the representations a central, or merely peripheral, aspect of the party's case? Is it likely that the party received legal advice that had a bearing on the allegation of reliance? Was it likely that the legal advice might raise doubts as to the allegations of reliance or any loses or damage alleged to have been suffered?

59 However, in my opinion, although there is a clear public interest in a Court having before it all relevant evidence to fairly adjudge the case before it, there can in some cases also be a competing public interest in the maintenance of legal profession privilege. However, the issue of competing issues of this kind is resolved by the law of privilege itself. As Brennan J observed in Carter v Northmore Hale Davy & Leake:[22] "Although the public interest in having all relevant evidence available is, to an extent, defeated by the privilege, there is no occasion for the courts to undertake a balancing of public interests: the balance is already struck by the allowing of the privilege."

60 To like effect in Equuscorp Pty Ltd v Kamisha Corp Ltd,[23] Heerey J said on the issue:

The bare fact of asserting reliance does not expressly or impliedly assert that the plaintiff relied, or did not rely, on some privileged communication ... It is true that legal advice could be relevant in determining whether a plaintiff in fact relied on the misrepresentations complained of. But the whole point of legal professional privilege is that, for public policy reasons, material is excluded which might be relevant, indeed highly relevant. No balancing exercise is involved. If legal professional privilege applies, privilege trumps relevance.

61 Further, in my opinion, the question, when waiver is alleged to arise, is not whether the privilege holder has put his state of mind in issue, but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue, say by a plea that the relevant person relied on the contents of a legal advice.[24]

62 This was the approach taken in the decision of the Full Court of the Federal Court (Kenny, Stone and Edmonds JJ) in Federal Commissioner of Taxation v Rio Tinto Ltd, where the Court, after reviewing the authorities, said:[25]

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. [Emphasis added]

63 To like effect is the approach taken by Hodgson JA in NSW Bar Association v Archer[26] where his Honour confirmed that waiver should not be determined by questions of possibilities or degrees of relevance in the following passage:[27]

It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind.

64 Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd[28] was another misleading or deceptive conduct case where the applicant pleaded a claim for recovery of reliance loss. The respondent submitted that the applicant had, by its pleading, impliedly waived privilege in legal advice which may have informed the issue of reliance. In dismissing the claim of waiver, Greenwood J held:[29]

The principle to be applied is to ask whether the conduct of the party enjoying the benefit of the privilege is inconsistent with the maintenance of the confidentiality attaching to the communications between that party as client and the lawyer thus effecting a waiver of the privilege (as a matter of objective assessment of the conduct rather than the subject intention of the client) ... Such a judgment is, of course, to be made in the context of the circumstances of the case informed by any considerations of fairness ... Since the governing principle is one of inconsistency of conduct relevantly informed by considerations of fairness, then the question on the facts becomes whether the conduct of simply pleading a cause of action in which reliance is in issue, is conduct inconsistent with the maintenance of the confidentiality. As legal professional privilege is an important common law right or common law immunity ... and common law principles apply to these interlocutory questions ... a party ought not to be denied that right as a result of an implied construct simply by pleading a claim to a remedial right based upon a cause of action in which a state of mind is put in issue unless the party expressly pleads reliance upon a privileged communication as a material fact (or particularises a material fact by reference to an otherwise privileged communication) or the very nature of the claim itself demonstrates clear inconsistency of treatment such as where a client sues his or her lawyer for negligence asserting a sequence of instructions and at the same time seeks to deny, on the ground of legal professional privilege, the disclosure by his or her lawyer of those communications in the forensic analytical process. [Emphasis added]

65 Greenwood J in Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd also made observations as to Commissioner of Taxation v Rio Tinto Ltd, citing it as:[30]

... an example of inconsistency of treatment as the Commissioner sought to assert legal professional privilege in circumstances where the Commissioner had relied upon documents otherwise protected by privilege in a schedule supporting the reasons for the Commissioner's decision in question. The Full Court, Kenny, Stone and Edmonds JJ at [72] observed that the Commissioner had put the contents of eight identified privileged documents in the schedule in issue. In Rio Tinto, the Court concluded at [67] and [72] that the Commissioner had gone beyond making a mere reference to privileged communications and had put in issue the contents of legal advice in the eight documents. That distinction is central to the principle identified at [52] in these terms:

[The] 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.

66 Greenwood J in Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd also made observations that were critical in relation to the approach taken in Telstra Corporation v B T Australasia, noting that:[31]

In Rio Tinto, the Court also noted that whilst the majority in Telstra Corporation v B T Australasia highlighted the conduct of the privilege holder, its references to fairness as the governing principle was misplaced having regard to the observations in Mann v Carnell. In DSE (Holdings) Pty Ltd v Intertan Inc and Anor [2003] FCA 384; (2003) 127 FCR 499, Allsop J observed that the isolation of the principle of inconsistency of conduct in Mann v Carnell rather than an "overriding principle of fairness operating at large" (Mann v Carnell at [29]) represented a rejection of the statement of principle in Telstra Corporation v B T Australia and represented "an important change to the existing law": DSE (Holdings) v Intertan Inc at [14]. See also Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371.

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 and thus the documents comprehended by category 8 identified by the respondent are not susceptible of discovery.

67 In the Matter of Idoport Pty Ltd (in liq) (recs apptd); NAB v Sheahan[32] Ward J summarised the authorities on issue waiver and state of mind as follows:

1. The fact that documents over which privilege is claimed are materially relevant to a pleading of state of mind is not alone sufficient to compromise the assertion of privilege (DSE [2003] 384; [2003] FCA 384; (2003) 127 FCR 499; Seven Network Limited v News Limited (No 10) [2005] FCA 1721).
2. Where a party raises a positive case in which that party's state of mind is in issue (such as a case of undue influence or for rectification of a contract or to establish reliance on a representation or state of affairs) that behaviour is more likely to be considered inconsistent with the maintenance of privilege (Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (1995) 37 NSWLR 405; Telstra; Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501) particularly where the state of mind is an understanding of legal rights.
3. Issue waiver is unlikely to be made out where the party alleging waiver is the party that put the state of mind into issue, as "it is the conduct of the party who possesses the privilege which is capable of waiving it. It is not apparently open to another party to litigation to force waiver of a party's legal professional privilege by making assertions about, or seeking to put in issue, that party's state of mind" (Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 at [10] per Wheeler J.)
4. Where a particular state of mind is asserted against the party claiming privilege, merely joining issue and denying that state of mind does not amount to conduct inconsistent with the maintenance of privilege over documents which may be relevant to the formation of that state of mind (DSI [2003] 384; [2003] FCA 384; (2003) 127 FCR 499.
5. Merely putting a state of mind into issue, in the sense of referring to the formation of a particular view, is not, by itself, inconsistent with the maintenance of privilege over documents which may be relevant to the formation of that state of mind (Rio Tinto; and see Rich v Harrington [2007] FCA 1987; (2007) 245 ALR 106 at [25], where good faith and reasonableness were put in issue but there was no waiver in respect of legal advice in relation to the decisions in question).
6. Nor is it enough, once state of mind is put in issue, to refer to the fact of privileged documents which may be relevant to the formation of the said state of mind (Rio Tinto).
7. If, in explaining or justifying the state of mind, a party puts into issue the content of communications such as by identifying the "bases of satisfaction and exercises of discretion as the matters evidenced in the schedule documents", then such an assertion goes further than merely acknowledging their relevance to the issue and is inconsistent with the maintenance of privilege as "it necessarily lays them open to scrutiny" (Rio at [72] per curiam).
8. Waiver of privilege over legal documents does not arise where there is insufficient connection between the belief asserted by the party and the legal advice concerned, such as where the belief asserted by the party is with respect to commercial considerations and primarily informed by commercial, rather than legal, advice (Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371).
9. For completeness, although it is seemingly not relevant in the present case, even where privilege is waived in relation to documents which go to the formation of a state of mind, privilege may still be maintained over subsequent documents which, though related to or referring to that state of mind, had no part to play in the formation of the earlier state of mind (DSE [2003] 384; [2003] FCA 384; (2003) 127 FCR 499).

68 More recently, the law as stated in Mann v Carnell, when considered against s 122(2) of the Evidence Act, was stated by the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd[33] in the following passage:[34]

In Mann, it was said that it is considerations of fairness which inform the court's view about an inconsistency which may be seen between the conduct of a party and the maintenance of confidentiality, though 'not some overriding principle of fairness operating at large'.

Those considerations, articulated in relation to waiver at common law, apply with equal force in relation to the statutory question posed by s 122(2) of the Evidence Act, and made applicable by s 131A of that Act to the determination of a question of waiver of client legal privilege arising in the context of pre-trial discovery. That question is whether the client or party concerned 'has acted in a way that is inconsistent with the client or party objecting to' the production of a document.

69 I am bound by the decision of the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd which in turn departs from the approach in Telstra Corporation Ltd v BT Australasia Pty Ltd and Chen v City Convenience Leasing Ltd.

70 Following recent authority, the question then boils down to whether the pleadings advanced by a party make express or implied assertions about the content of privileged communications while at the same time the pleading party seeks to maintain the privilege. If so, an inconsistency with maintenance of legal professional privilege arises, such that it would be unfair to maintain the privilege, and it will be lost by waiver.

71 In this case in relation to inconsistency, more particularly, the first question becomes, do the pleadings of DC expressly refer to a privileged communication as a material fact or particularise a material fact by reference to an otherwise privileged communication?

72 If so, the second question becomes, in these circumstances, is such conduct inconsistent with the maintenance of the privilege, such that it would be unfair to maintain the privilege?

73 However, it needs to be noted that because waiver of privilege may occur in different ways, the material to which a court has reference in determining the question of waiver will depend upon the circumstances of each case. For example, the situation referred to by Greenwood J in Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd where the very nature of the claim itself may demonstrate clear inconsistency of treatment, "such as where a client sues his or her lawyer for negligence asserting a sequence of instructions and at the same time seeks to deny, on the ground of legal professional privilege, the disclosure by his or her lawyer of those communications in the forensic analytical process" may well give rise to an effective waiver, depending on the facts of the case.

74 The tort of inducing a breach of contract is an intentional tort.

75 Requisite knowledge is an aspect of the intention. Next Payments must have induced or procured the doing of what it knew would be a breach of contract.[35] Next Payments must have known of the contract and had sufficient knowledge of its terms to know that what it induced or procured Vic Hotel to do would be in breach of that contract.[36]

76 As Lord Hoffmann said in OBG Ltd v Allan; Douglas v Hello! Ltd; Mainstream Properties v Young:[37]

To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act, which, as a matter of law or construction of the contract, is a breach. You must actually realise that it will have this effect.

77 Accordingly, by way of defence, if an alleged tortfeasor holds the reasonable belief at the time of the allegedly tortious act that the impugned conduct will not have the effect of bringing about a breach of contract then no tort has been committed.

78 Accordingly, DC Payment's plea of inducing breach of contract puts in issue the state of mind of Next Payments at the relevant time.

79 The Legal Advice may well be relevant to this issue.

80 However, for the purposes of determining whether there has been a waiver of the privilege attaching to the Legal Advice will turn on whether the pleading of DC Payments in its statement of claim expressly refer to a privileged communication as a material fact or particularise a material fact by reference to an otherwise privileged communication.

81 The Plaintiff's statement of claim does not make express or implied assertions about the content of privileged communications, either as a material fact or as a particular to any material fact pleaded.

82 Although the Plaintiff's pleading, which makes a claim for inducing breach of contract, puts in issue the state of mind of the Fourth Defendant, this in itself is not sufficient to justify a finding that by its conduct in pleading its case, the Plaintiff has acted in a manner which is inconsistent with the maintenance of legal profession privilege over the Legal Advice.

83 Accordingly, there is no inconsistency between the case as pleaded by the Plaintiff in its statement of claim and the maintenance of its privilege in respect of the Legal Advice.

84 The preliminary question stated for determination is:

Whether, in relation to the defendants' [amended] defence dated [20] August 2014:

1. paragraphs 16(a)(ii)-(iv);
2. paragraph 20V(d);

1. paragraph C (the fourth bullet point) of the particulars to paragraph 40(b)(iii);

or any and which of them, disclose the content of a document and communications which are the subject of legal professional privilege which has not been waived at common law or which has not been lost by operation of s 122 of the Evidence Act 2008.

85 I will hear the parties on the question of consequential orders and orders as to costs which should be made.

[1] Bridge and Marine Engineering Pty Ltd v Taylor (No 2) [2005] VSC 154 [15].

[2] The Explanatory Memorandum to the Evidence Amendment Bill 2008 (Cth) made clear that the purpose of amending s 122 was to "align the provision more closely with the common law test for loss of privilege as set out in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1." See also Komatsu Marketing Support Australia Pty Ltd v Marsh Pty Ltd [2012] NSWSC 163 at [26]. See esp ALRC Report 102 'Uniform Evidence Law', Recommendation 6-5.

[3] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1

[4] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 [28] - [29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ)

[5] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 [34].

[6] See: Andrew Eastwood 'Do you waive privilege by pleading reliance?' (2012) 86 ALJ 545.

[7] Amcor v Barnes No 2 [2011] VSC 204 at [14]-[15]. See also DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 1191 [30] (Allsop J).

[8] Nine Films and Television Pty Ltd v Ninox Television Limited [2005] FCA 356, [5]; see also Hodgson v Amcor Ltd (No 4) (2011) 32 VR 568, [23]-[24]; Expense Reduction Analysts Group v Armstrong Strategic Management and Marketing [2013] HCA 46; (2013) 303 ALR 199, [30].

[9] Hodgson v Amcor Ltd (No 4) (2011) 32 VR 568, [13]-[15]; QUBE Logistics (Vic) Pty Ltd v Wimmera Container Line Pty Ltd [2013] VSC 695, [20].

[10] Amcor v Barnes No 2 [2011] VSC 204, [14]-[15].

[11] Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52, 128 [21].

[12] See: Emilios Kyrou (as he then was) paper delivered in Melbourne, 15 December 2003.

[13] Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152.

[14] Chen v City Convenience Leasing Ltd [2005] NSWCA 297.

[15] Including the equivalent of s 18 Australian Consumer Law.

[20] Lawrence Pty Ltd v Hunt [1999] NSWSC 1044, [12].

[21] Chen v City Convenience Leasing Ltd [2005] NSWCA 297, [40]-[41].

[22] Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121, 128.

[23] Equuscorp Pty Ltd v Kamisha Corp Ltd [1999] FCA 681; [1999] ATPR 41-697 at 42,894.

[24] See: Andrew Eastwood 'Do you waive privilege by pleading reliance?' (2012) 86 ALJ 545, 551.

[25] Federal Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341, [52].

[26] NSW Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236.

[27] NSW Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236 [48].

[28] Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd [2011] FCA 638.

[29] Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd [2011] FCA 638 [22].

[30] Austral Dutch Kaolin Pty Ltd v Hanjin P&C Co Ltd [2011] FCA 638 [23].

[31] Telstra Corporation v B T Australasia [24] and [25].

[32] In the Matter of Idoport Pty Ltd (in liq) (recs apptd); NAB v Sheahan [2012] NSWSC 58, [67].

[33] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 303 ALR 199 ( French CJ, Keifel, Bell, Gageler and Keane JJ).

[34] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 303 ALR 199 [31]-[32] ( French CJ, Keifel, Bell, Gageler and Keane JJ).

[35] Short v The City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148 160 (Isaacs J).

[36] Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd [1995] FCA 1368; (1995) 58 FCR 26, 43.

[37] OBG Ltd v Allan [2007] UKHL 21; [2008] 1 AC 1 [39].