(2) that, even if there is no common interest, the communication of the statements was a confidential limited waiver which did not result in a waiver of privilege.

(2) that, even if there is, the BT companies have intentionally waived that privilege by disclosing the statements to SAFA knowing that SAFA have already waived privilege in respect of the statement of Bell dated December 1998 and the draft affidavit dated 19 December 1998, or alternatively, that in all the circumstances there should be an imputed waiver by operation of law in the interests of fairness; and

(3) that regardless of the issues as to waiver and fairness, the contents of Bell's statements are central to SAFA's claim for rectification so that any privilege in them has been lost.

Although both parties argued the question whether the BT companies and SAFA had a common interest in this action, it is neither necessary nor appropriate to determine that issue. It is not necessary because, whether or not a common interest exists, the question whether there has been an express waiver is capable of ready resolution and it is necessary, in any event, to determine whether there should be an implied waiver. It is not appropriate because a complete examination of the question whether a common interest exists requires full reference to the terms of the confidential Settlement Deed between SAFA and the BT companies. The original draft of these reasons included reasons dealing with the common interest question and I had reached a conclusion on that issue. But it is quite impossible to publish useful reasons which will not breach the confidentiality of the terms of the Settlement Deed. This is one instance when it is not appropriate to make any disclosure of the terms of a confidential document even to legal advisers with an obligation to preserve the confidence. However, the terms of the Settlement Deed were disclosed to Ms Harris, who appeared for BNZ, on the hearing of this application It was plainly necessary for her to see the terms of the Settlement Deed for the purpose of arguing the question of common interest.

If a common interest exists, it follows there can be no express waiver because the statements had been provided on a confidential basis in order to pursue the common interest.

For the reasons which follow, if there is no common interest, the fact that the BT companies intentionally and deliberately delivered copies of the statements to SAFA did not, I think, constitute an express waiver of privilege. An express waiver requires an intentional act with knowledge of the right to claim privilege: Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; (1920) 28 CLR 305 at 326; Commonwealth v Verwayen (1990) 170 CLR 394; Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 75 FCR 511 at 522 - 523. It is quite apparent that the BT companies did not intend to waive privilege. Both the BT companies and SAFA believed that they had a common interest in the outcome of this litigation so that the delivery of their documents to SAFA would not constitute a waiver of privilege. There was, therefore, no express waiver of privilege.

Without intending to define in advance the circumstances in which waiver of privilege will be implied, it can be said that it occurs when, by reason of some act or omission on the part of the person entitled to the benefit of the privilege, it becomes unfair to maintain the privilege: Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475 at 481, 487 - 488, 492 - 493, and 497 - 498. These observations were approved in Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83 at 96 - 97 and in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at 14. The privilege will be waived in those circumstances in the interest of fairness, notwithstanding that it was not intended: Wigmore on Evidence (McNaughton rev 1961) Vol 8, para 2327, quoted with approval by Gibbs CJ and by Mason and Brennan JJ in Maurice (supra) at 481, 488 and by Deane, Dawson and Gaudron JJ in Goldberg v Ng (supra) at 96. In that respect, it is a waiver imputed by operation of law: Goldberg v Ng (supra) at 95, Mann v Carnell (supra) at 13. For that reason, implied waiver is sometimes more accurately called "imputed waiver". Implied waiver is a principle which applies objectively and irrespective of the subjective intention of the party who holds the privilege. It is a principle to be sparingly applied: Newcrest Mining (WA) Ltd v The Commonwealth (1993) 40 FCR 507 at 509.

In this context, fairness means, among other things, that the opposing litigant is not misled: Maurice (supra) per Gibbs CJ at 481 and per Mason and Brennan JJ at 488 who said:

"The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication. Professor Wigmore explains:

'[W]hen his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder.' (Wigmore, Evidence in Trials at Common Law (1961), vol. 8, par. 2327, p. 636.)

In order to ensure that the opposing litigant is not misled by an inaccurate perception of the disclosed communication, fairness will usually require that waiver as to one part of a protected communication should result in waiver as to the rest of the communication on that subject-matter: see Great Atlantic Insurance Co. v. Home Insurance Co. [1981] 1 WLR 529."

It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of privilege: Mann v Carnell (supra) at 13. "What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large": Mann v Carnell (ibid).

It is a necessary corollary of the principle of fairness as it operates in this context that the implied waiver may extend to associated material. As Gibbs CJ observed in Maurice (supra) at 481:

"... the question whether a waiver should be implied depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production."

See also Dawson J at 497 - 498. If, as Mason and Brennan JJ state in the passage quoted above, the holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of a protected communication, it follows that other associated material may, according to circumstances, have to be disclosed: see the rest of their Honours' remarks at 485.

What is fair by way of disclosure will ultimately depend on the relevant circumstances: Maurice (supra) per Dawson J at 498 and Goldberg v Ng (supra) at 97. However, it can be said that disclosure to a third party for a limited specific purpose will not necessarily lead to a loss of privilege as against an opposing litigant: Mann v Carnell (supra) at 14 and the cases there cited. It follows that, as these statements were disclosed by the BT companies for the limited purpose of permitting SAFA to use them in this litigation for what both the BT companies and SAFA believed was a common interest in the outcome of the action, the delivery of the statements did not, for that reason, constitute an implied waiver.

The question nevertheless remains whether different considerations affect the privilege attached to the two statements of Mr Bell so that the privilege must be waived in the interests of fairness.

BNZ submits that the interests of fairness require an implied waiver on the part of the BT companies in the case of the two statements of Mr Bell. It grounds that submission on the fact that the BT companies have provided the documents to SAFA knowing that SAFA had already in 1998 expressly waived privilege in respect of both a statement made by Bell in December 1998 and a draft affidavit to be sworn by him. The circumstances in which that waiver occurred in 1998 are these.

In its first version of the statement of claim dated 1 December 1999 and in some of the later versions of it, SAFA had, to the extent necessary, applied for an extension of time pursuant to s 48 of the Limitation of Actions Act 1936. It asserted that the material facts on which it relied were the terms of a statement given by Mr Bell to a solicitor acting for SAFA on 2 and 3 December 1998 which concerned the circumstances of and the terms of the agreement alleged to have been made on 24 July 1985: see para 61 of earlier forms of the statement of claim. In December 1998 the BT companies were not defendants in this action. On 31 January 2000, when the BT companies were defendants in this action, SAFA had discovered in its list of documents

(1) a draft of a statement by Bell dated December 1998;

(2) notes by a solicitor employed by SAFA who had prepared Bell's first statement; and

(3) a draft affidavit of Bell dated 19 December 1998.

All of these documents have been produced to BNZ and BNZ holds copies. No claim for privilege was made in respect of any one of them.

The principles relating to fairness have been mentioned already. Fairness requires that an opposing party is not misled. Thus, as a general rule, it would not be fair to allow privilege to be waived with respect to a portion of a document or a conversation without requiring disclosure of the rest of it, at least if the document or conversation dealt with one subject matter: Burnell v British Transport Commission (1956) 1 QB 187; Great Atlantic Insurance Co v Home Insurance Co (supra) at 536; and Maurice (supra) per Gibbs CJ at 482, Mason and Brennan JJ at 488, and Dawson J at 497. In Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corporation [No 2] [1981] Com LR 138 at 139, Mustill J took the broader view that:

"... where a party chooses to deploy evidence which would otherwise be privileged the court and the opposition must, in relation to the issue in question, be given the opportunity to satisfy themselves that they have the whole of the material and not merely a fragment."

That view was approved by the Court of Appeal in Great Atlantic Insurance Co v Home Insurance Co (supra).

The fact that SAFA waived privilege in respect of the statement made by Mr Bell in December 1998 and in the draft affidavit for swearing by him dated 19 December 1998 (I will for convenience refer to both as "the 1998 statements"), means that BNZ has been informed of Mr Bell's then recollection of the events in 1985. It is possible that BNZ will be misled, and thereby unfairness occur, if it is provided with the first statement of Mr Bell but does not receive the two later statements. The absence of the two later statements might result in quite an inaccurate perception of the tenor of the evidence he might give or of particular facts to which he refers. The possibility of differences between the 1998 statements and the later statements is perhaps greater, given the fact that Mr Bell is being asked to recall events which, in 1998, had occurred 13 years earlier. The later statements may modify the earlier 1998 statements. I acknowledge that, if Mr Bell's evidence departed from his 1998 statements, he could be cross-examined on his prior inconsistent statement and his actual statement might be tendered pursuant to s 28 of the Evidence Act 1929. However, the question whether privilege in the later statements is waived by operation of law should not, I think, be determined by forensic tactics or strategy but by the principles of fairness which apply in this context. Another possibility is that Mr Bell's later statements may include facts concerning the telephone conversation on 24 July 1985 and the events flowing from it which are not disclosed in the earlier statement and which might be detrimental to the case of SAFA. Those facts might never be capable of being ascertained by BNZ. That will give rise to even greater unfairness.

When determining whether the later two statements should be produced, I do not regard all of the statements as if they were one document. Plainly, if they were, the later statements would have to be produced. Although they are not one document, to the extent that they represent Bell's recollection of the relevant evens, they all relate to the same issue. Because privilege has been waived in respect of the 1998 statements, fairness requires that the later statements are also made available to BNZ so that it can ascertain whether Bell's recollection remains the same or is greater or less or is otherwise qualified. If the statements are not made available, BNZ might have a completely wrong picture of the evidence which Bell might give and thereby be misled. To adapt the already quoted remarks of Mustill J in Nea Karteria, to supply the 1998 statements but not the later statements is to provide a fragment, albeit a substantial fragment, but not the whole of the material.

For these reasons, both of the later statements should be made available to BNZ so that it is not misled and no unfairness results. However, it must be recognised that Mr Bell's latest statements may contain privileged communications quite unrelated to this litigation. In order to avoid disclosure of such privileged information, the documents should be inspected by a judge or master before an order is made for production of the statement. If the statements are otherwise relevant but contain some privileged material which is quite unrelated to this litigation, that portion of each statement can be masked.

Mr Wells QC, who appeared for SAFA, contended that the decision in Health & Life Care Ltd v Price Waterhouse [1997] SASC 6306; (1997) 69 SASR 362 mitigated against the conclusion I have reached. But that case is plainly distinguishable on its facts.

For all of these reasons, and primarily in order to avoid the possibility of BNZ being misled, the interests of fairness require disclosure of the latest statement made by Mr Bell subject to inspection of the document by a judicial officer before production to BNZ. As the 1998 statements extend over the whole transaction referring, among other things, to a series of connected events, it would be misleading if what might be a more complete account or an amended account is not made available. The statements are privileged communications while in the possession of the BT companies and their legal advisers. There is an implied waiver because the BT companies, knowing that BNZ have a copy of the 1998 statements of Mr Bell, provided SAFA with copies of his later statements.

In the course of argument, counsel for all three parties stated that I was at liberty to inspect the two statements of Mr Bell if I thought it necessary or appropriate for the purpose of deciding this application. For the reasons just given, it is appropriate to do so. I have, therefore, inspected the later statements made by Mr Bell.

Before summarising the content of the later statements, it is important to note what is contained in the statement made in December 1998 and in the draft affidavit dated 19 December 1998. In those documents, Mr Bell recounts the circumstances in which the BT companies proposed the issue of zero coupon bonds to BNZ and to SAFA, he notes the terms on which the bonds would be issued, and he narrates the circumstances in which the terms of the bonds were agreed by SAFA and BNZ, the telephone conversation on 24 July 1985 as well as the circumstances leading to it and the events which followed it. He also states what he believes was agreed in that conversation on 24 July 1985 and refers to other facts which reinforce his belief.

The second statement was obtained on 16 and 17 March. Broadly speaking, the statement covers the same ground as the earlier statement and affidavit. However, it contains a great deal more detail. In addition, it gives details of his prior experience, the structure of the relevant BT companies, the legal advisers to the BT companies and his own relationship with BT. He also sets out his understanding of the structure of SAFA and BNZ. I do not think that this additional material is privileged. Some of it is simply more detail of what was contained in his December 1998 statement on the structure of the BT companies and of BNZ. If it is privileged, it can be masked. I will hear the parties on that issue. As for the balance, it covers the same subject matter and fairness requires that it be produced for inspection.

The third statement is a more detailed account of the events of 24 to 31 July 1985. It was obtained on 18 April 2000. It includes the telephone conversation of 24 July 1985 and the events which followed it. It is a more detailed account but, as it covers a matter which is critical to the issues in this action which is also dealt with in the first statement, the interests of fairness requires disclosure. That conclusion is reinforced by the fact that the statement made on 16 and 17 March 2000 bears an endorsement

"Bell subsequently requested we amend it and there was a subsequent ph (sic) call on 18 April 2000 incorporated in this statement".

Plainly, the March 2000 statement would be misleading if the April 2000 statement is not also available.

Fairness does not, however, require disclosure of the statements of the other witnesses. I do not understand BNZ seriously to contend otherwise.

Finally, Ms Harris, who appeared for BNZ, relied on the principle that, where documents would otherwise be properly the subject of a claim for legal professional privilege, that privilege is lost, if the documents relate, directly or indirectly, to an issue in the action: Thomason v Municipality of Campbelltown [1939] NSWStRp 10; (1939) 39 SR(NSW) 347 at 358 - 359; HongKong Bank of Australia Ltd v Murphy [1993] VicRp 83; [1993] 2 VR 419 at 436; Data Access Corporation v Powerflex Services Pty Ltd [1994] AIPC 91-112; Wardrope v Dunne [1996] 1 Qd R 224 at 226. Given the conclusion that BNZ is entitled to a copy of the statement of Mr Bell, it is unnecessary to deal with this issue. However, it is convenient to dispose of it.

In Standard Chartered Bank of Australia Ltd v Antico (1995) 36 NSWLR 87 at 94 - 95, Hodgson J suggested that the above principle is expressed too broadly. He said that it would be consistent with Maurice to formulate the principle in Thomason v Campbelltown Municipal Council (supra) in this way:

"If a party, by pleadings or evidence, expressly or impliedly makes an assertion about the content of confidential communications between that party and a legal adviser, in fairness to the other party it may mean that this assertion has to be taken as a waiver of any privilege attaching to the communication."

See also Byrne J in Torcasio Developments Pty Ltd v Country Park Developments Pty Ltd (Unreported, Supreme Court of Victoria, 3 September 1991). The observations of Hodgson J were noted by Davies J in Bayliss v Cassidy (No 2) [2000] 1 Qd R 464 at 468 and expressly approved by Williams J at 475 in that case. The Full Court in this State has also suggested that the principle should not be too broadly stated: Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co [1997] SASC 6712; (1997) 70 SASR 166 at 193. For the purposes of dealing with this issue, it matters not which is the correct formulation of the principle.

The argument seeks to elevate the principle, however it is correctly expressed, beyond its true operation. The central issue in this action is whether SAFA is entitled to rectification of the terms of the side letter. An important element of that issue is the telephone conversation on 24 July 1985 to which Mr Bell was a party. Although his statement concerns, among other things, what was said in the course of that conversation and what occurred in consequence of that conversation, his belief as to the effect of the conversation is not the issue in the proceedings. It is simply one of presumably three statements giving accounts of the conversation by each of the participants in that conversation. The position is to be contrasted with the cases above where a person had received advice and put in issue the content of that advice. BNZ is not, therefore, entitled to the statement of Mr Bell on this ground.

For these reasons, I will order that BNZ is entitled to production of the two further statements of Mr Bell but not of the other four statements inadvertently delivered to Finlaysons.