Citicorp Aust Ltd & Ors v Cirillo & Anor No. Scgrg-85-1481

CITICORP AUSTRALIA LIMITED, C.W. CONSTRUCTION PTY LTD (Receivers and Managers Appointed), JOHN HAROLD HEARD AND STEPHEN ELLIOTT YOUNG
v
VINCENZO GIOVANNI CIRILLO AND COBWELD INDUSTRIES PTY LTD
[2000] SASC 219

Appeal from a Master

1................ DUGGAN J....... The third and fourth plaintiffs (Heard and Young) were appointed by the first plaintiff (Citicorp) as receivers and managers of the second plaintiff, CW Construction Pty Ltd, pursuant to Citicorp’s rights under a debenture.

On 2 May 1985 the plaintiffs commenced an action against the defendants seeking various declarations as to the ownership of an excavator which the plaintiffs alleged had been pledged by CW Construction Pty Ltd in favour of Citicorp pursuant to the debenture. In due course, an injunction was granted on the application of the plaintiffs restraining the first defendant from disposing of the excavator. The first defendant, Mr Cirillo, asserted that the excavator was his personal property. The original action has now been discontinued, but there remains an outstanding claim by Mr Cirillo who is seeking damages from the plaintiffs pursuant to the undertaking as to damages which was provided as a condition of the granting of the injunction.
This appeal is against an order made by a master requiring the first defendant to deliver up to the solicitors for the plaintiffs copies of a letter which the solicitor for the first defendant was permitted to inspect as part of the discovery and inspection process. The plaintiffs assert that the letter contains information protected by legal professional privilege and that privilege was claimed in respect of it, but that it was handed to the first defendant’s solicitor as a result of an oversight. The first defendant, who is the appellant on this appeal, argues that the information in the letter is not privileged; that, in any event, there was a waiver of privilege; and that the relevant part of the letter discloses an abuse of the process of the court, thus giving rise to a further reason for denying the claim of privilege.
The learned master held that legal professional privilege attached to the portion of the letter which was claimed to be privileged. He was of the view that this part of the letter comes within the class of privileged documents described by Lockhart J in Trade Practices Commission v Sterling (1978) 36 FLR 244 at 245 as:
“Notes, memoranda, minutes or other documents made by the client or officers of the client or the legal adviser of the client of communications which are themselves privileged, or containing a record of those communications, or relate to information sought by the client’s legal adviser to enable him to advise the client or to conduct litigation of his behalf.”
The learned master went on to say that if he was wrong in holding that privilege could attach to a portion of a letter such as this, it could nevertheless be said that privilege attached to the entire letter or document despite the fact that its contents included material which was not privileged.
The master, as he was bound to do, applied the sole purpose test in determining whether the letter and, in the alternative, the specific communication which the plaintiffs wished to keep confidential, was protected by legal professional privilege. However, after he gave judgment, the High Court delivered its decision in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 168 ALR 123. In that case the majority of the court ruled that the dominant purpose test favoured by Barwick CJ in Grant v Downs (1976) 135 CLR 674 should replace the sole purpose test in those Australian jurisdictions where the matter is not dealt with by statute. Barwick CJ formulated the dominant purpose test in the following passage (677):
“... a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.”
The dominant purpose test acknowledges that the existence of other purposes for the communication does not necessarily lead to a loss of privilege. In the Esso case Callinan J expressed the view that whether a purpose is a dominant purpose was to be determined objectively, although the subjective purpose of the person responsible for the communication will always be relevant and often decisive. (168 ALR para [172]).
In my view the dominant purpose of the letter was to seek instructions from Citicorp which were to be passed on to the solicitors who were acting for Citicorp and the other plaintiffs in relation to various matters arising out of the affairs of C.W. Construction Pty Ltd (In Liquidation). The plaintiffs Heard and Young were acting as the agents of Citicorp for this purpose. Although it is not necessary for my decision, I am also of the view that the relationship between the plaintiffs and the employment of a common solicitor would attract common interest privilege to the communications between them. (Buttes Gas & Oil Co v Hammer (No. 3) [1980] 3 All ER 475).
The letter begins with a reference to the fact that Citicorp had instructed Heard and Young to discontinue all legal actions in relation to C.W. Construction Pty Ltd. The writers then advise that they have awaited the outcome of certain third party litigation relating to the receivership and that they have attempted to meet with Mr Cirillo to resolve all issues. The letter continues:
“We therefore provide the following updated details of each legal action and our recommendations concerning same.”
The letter goes on to deal with various matters under individual headings. The first two matters discussed are those in respect of which privilege is specifically claimed. They are discussed under the headings of “Poclain Excavator - Mr V Cirillo” and “Heytrack (Australia) Pty Ltd” respectively. Under the first heading there is a discussion concerning the injunction in relation to the excavator. Reference is made to instructions given by Citicorp concerning the injunction. The recommendation of the solicitors for the plaintiffs as to the future of the litigation is recorded and the authors of the letter request instructions in relation to this aspect. Under the heading “Heytrack (Australia) Pty Ltd” the instructions to be given to the plaintiffs’ solicitors in relation to current litigation in the Supreme Court of Victoria is discussed. These two matters take up approximately two pages of the four page letter. Letters containing advice from Finlaysons, the solicitors for the plaintiffs, were attached to the original letter. A claim for privilege in respect of these letters has not been challenged.
The letter goes on to discuss an action instituted by the Corporate Affairs Commission against Mr Cirillo which was unsuccessful and an action contemplated by Australian Guarantee Corporation Ltd against him. It appears that this information was provided as general background material relevant to Mr Cirillo as a person who was then involved in litigation with Citicorp and which was or could have been relevant to the tactics to be adopted in relation to the proceedings which Citicorp had commenced against Mr Cirillo.
The next topic dealt with in the letter relates to investigations into an asset over which C.W. Construction Pty Ltd held a debenture and a discussion as to whether a claim in relation to it should be pursued. The remaining topics which occupy half a page of the letter are of a formal nature advising that summaries of the receipts and payments of the receivers and managers are attached and advising the amount due for the fees and disbursements of the writers of the letter. The letter concludes:
“We look forward to receivng your instructions in respect of the above matters.”
The major part of the letter is taken up with a discussion about litigation which is afoot and the letter provides information which is relevant in one way or another to that litigation. In my view the dominant purpose in its writing was to obtain instruction on these matters which would then be passed on to the plaintiffs’ solicitors. I am of the opinion that legal professional privilege attaches to the letter as a whole although, as I have pointed out, the privilege is not claimed in respect of the entire contents of the letter.
The learned master decided, in the alternative, that privilege could be claimed in respect of those parts of the letter which relate to the Poclain Excavator and Heytrack. This part of his decision was based on the assumption that, even if privilege did not arise in relation to the other paragraphs of the letter, it was appropriate to apply the test of privilege to those parts of the letter which deal with these issues. The practical effect of so doing would be to sever the privileged portions from the letter as a whole.
It was argued by the defendant that this course was not open to the court. Reliance was placed on the following passage in the judgment of Smith J in Hong Kong Bank of Australia Ltd v Murphy & Ors [1993] 2 VR 419 at 430:
“Further, High Court authority does not in my view support the proposition relied upon by HongKong Bank that privilege can attach to part of a document. The propositions advanced by the High Court advert to the whole document in question and the purpose of its creation. Severance was considered in Waterford v The Commonwealth (1987) 163 CLR 54 by Mason and Wilson JJ. at p 66, and Dawson J. at p 103, but this occurred in the context of the Freedom of Information Act 1982 (Cth) which expressly provided for severance of passages that gave rise to claims of privilege for a document. Deane J. asserted that the common law permitted severance of a distinct part of a document that contained otherwise privileged material, at p 85, but this was not consistent, in my view, with the views expressed by other members of the court or earlier High Court decisions.”
In most cases where written communications are under consideration, the question will be whether the privilege exists in relation to the entire document. However, it is relevant to bear in mind that it is the communication which is privileged. Whereas the entire document is usually relevant in determining whether the communication is privileged, I think it will be relevant in some cases where extraneous material is included in a document to consider whether part of the document can nevertheless be regarded as a privileged communication. There is no reason in principle, for example, why parts of a solicitor’s diary should not attract privilege when other parts do not or why some entries or notes in books of account should attract privilege while others do not. The practice of the profession acknowledges the appropriateness of claiming privilege in respect of parts of a document, although I acknowledge the force of the argument of Ms Maharaj, for the first defendant, that practices such as this cannot create legal principle. But, if it is possible to characterise part of a document of communication then, subject to the dominant purpose test being fulfilled in relation to it, I can see no reason why the rationale for the existence of the privilege should not apply also to that situation.
The learned author of Bray, Digest of the Law of Discovery, (2nd ed. 1910) would seem to support such an approach in Article 49:
“The privilege covers statements of fact in the communication, but there may be a particular fact which is so unconfidential as to be outside the privilege.”
Much depends on whether it is practical, in the circumstances, to sever part of the contents of the document and consider it as a communication within itself. This is an approach approved by Deane J. in Waterford’s case (p 85):
“If privileged material was contained in one distinct part of a document and non-privileged material was contained in another, protection of the confidentiality of the privileged part of the document would not, as the Act (Freedom of Information Act, 1982 (Cth)) itself recognizes (see, e.g. ss 22, 33(3), 33A(3), 34(3), 35(3), 36(4), 58(2), 64(2) and (4)), ordinarily require that that part which was not covered by privilege should also be immune from production: see, e.g. Ainsworth v Wilding [1900] 2 Ch. 315, at p 325; Great Atlantic Insurance Co. v Home Insurance Co. [1981] 1 WLR 529 at p 534; [1981] 3 All ER 485 at pp 488-489; Brambles Holdings Ltd v Trade Practices Commission [No 3] (1981) 58 FLR 452 at pp 459, 462. If it were not possible to classify the contents of the document into distinct parts, it would be necessary to determine whether the contents as a whole were outside the protection of legal professional privilege for the reason that, notwithstanding the professional legal advice, they did not satisfy what has conveniently, if somewhat loosely, been referred to as ‘the sole purpose’ test: see Grant v Downs (1976) 135 CLR 674 at p 688. That test looks to the purpose for which the contents of a document were brought into existence. To adapt the words of Stephen, Mason and Murphy JJ. in Grant v Downs, a document (or a severable part of a document) will not be protected by legal professional privilege if it ‘would have been brought into existence ... in any event’ for purposes other than that which attracts legal professional privilege: and cf., eg., the Birmingham & Midland Motor Omnibus Co. Case [1913] 3 KB at p 860; Longthorn [1959] 1 WLR at p 534; [1959] 2 All ER at p 36; Comment, ‘Agents’ Reports and the Attorney-Client Privilege’, University of Chicago Law Review, vol. 21 (1954), 752, at pp. 754-755.”
If the passages in the letters which are the subject of the claim for privilege in the present case constituted the sole contents of a letter between these parties, there would be little doubt, in my view, that they would attract legal professional privilege. As they are referred to in a letter which deals with other topics, it is relevant when considering this alternative approach to consider whether they are in a distinct part of the document which can be severed. If it is appropriate to sever them, then the other parts of the document remain relevant in determining whether the dominant purpose test for the severed part is met. If it is, then I think it is proper to permit the privilege to be claimed in respect of those parts of the letter.
In my view, the learned master acted correctly in ruling that those parts of the letter which deal with the Poclain Excavator and Heytrack (Australia) Pty Ltd are protected by legal professional privilege. Next, it was argued that the statements made in the letter when discussing the Poclain Excavator constituted an abuse of the process of the court, thus disentitling the plaintiff to the protection of the privilege. Considerations relevant to determining whether the privilege is excluded for such a cause are discussed by Lander J in Rouse & Ors v IOOF Australia Trustees (1999) 202 LSJS 71. I respectfully adopt the views which he expresses in the following passage of his judgment (p 88):
“The rationale underlying legal professional privilege is that it assists and enhances the administration of justice: Grant v Downs (1976) 135 CLR 674 at 685.
A communication to facilitate a crime or fraud does not attract the protection of legal professional privilege.
In R v Cox and Railton [1884] 14 QBD 153 at 165 Stephen J said:
‘The question, therefore is, whether, if a client applies to a legal adviser for advice intended to facilitate or to guide the client in the commission of a crime or fraud, the legal adviser being ignorant of the purpose for which his advice is wanted, the communication between the two is privileged? We expressed our opinion at the end of the argument that no such privilege existed.’
In Southern Equities Corporation Limited (In Liq) v Arthur Andersen & Co (1997) 70 SASR 166 Doyle CJ said at 174:
‘... fraud in this context embraces a range of legal wrongs that have deception, deliberate abuse of or misuse of legal powers, or deliberate breach of a legal duty at their heart.’
Documents brought into existence to pervert the course of justice are not protected by legal professional privilege: Carpar v Commissioner of Police (1994) 34 NSWLR 715. Communications designed to frustrate a court order are not privileged: Re Bell; ex parte Lees (1980) 30 ALR 489.
Whether an abuse of process is fraud as explained by Doyle CJ in Southern Equities Corporation (In Liq) v Arthur Andersen & Co or whether it is in a category of its own, in my opinion, a communication designed to ensue its result does not attract legal professional privilege. That is because an abuse of the court’s process is the antithesis of assisting or enhancing the administration of justice.
If these communications or documents contain evidence of an abuse of process then, in my opinion, they would not be protected.
It is not enough that a party simply asserts that the privilege does not attach to a communication because of fraud: Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 516. The party must be able to point to evidence or material which prima facie establishes the fraud, although there is no obligation on the party to prove the existence of the fraud. There must be some evidence or material which gives colour to the charge: Commissioner of Australian Federal Police v Propend Finance Pty Ltd and Others (1997) 188 CLR 501.”
I have read the letter carefully with the defendants’ argument on this issue in mind. It is inappropriate to refer to the contents of the relevant part of the letter in any detail because of the claim of privilege, but I am of the opinion that the argument must be rejected. The strength of the available evidence in relation to a particular issue is discussed in the letter, but what is stated falls far short of establishing that the plaintiffs pursued a baseless claim or that they misled the court in any way. I agree with the master’s conclusion that the privilege was not excluded on this ground.
The next question for consideration is whether there was a waiver of privilege in relation to the whole of the letter. Mr Marsden of Finalysons, who has the conduct of the matter on behalf of the plaintiffs, has sworn an affidavit setting out circumstances relevant to this aspect of the matter.
The letter was included in a list of documents filed by the plaintiffs on 10 November 1997 and in a further list of documents filed by the plaintiffs on 11 March 1999. In both lists privilege was claimed by the plaintiffs over the portion of the letter which is the subject of the dispute as to privilege.
The first inspection by the first defendant’s solicitor of documents included in the first list of documents took place late in 1997. The plaintiffs produced to him a copy of the letter in which the parts which are the subject of the claim for privilege were masked out.
The plaintiffs filed a further list of documents on 19 July 1999. There were in excess of 1000 documents in various files. The files contain the third and fourth plaintiffs’ copies of the letter which is the subject of the claim of privilege and an additional photocopy of the complete letter. These unmasked copies of the letter were mistakenly included in Part 1 of the first schedule of this list of documents and privilege was not claimed in relation to them.
The solicitor for the first defendant inspected the documents referred to in this further list of documents at the office of Finlaysons in the week commencing 19 July 1999. The copies were included in the documents the solicitor was given to inspect. The solicitor, Mr Marrone, said he saw the unmasked letter for the first time on 20 July. In an affidavit filed in the proceedings he said it did not occur to him that the letter was privileged. He asked for and was given a copy of the letter. The solicitor who gave him the copy did not realise a claim for privilege had been made in respect of it. These oversights came to the attention of Finalysons on 28 July while Mr Marrone was inspecting documents at their offices. He inspected the document again that day.

The master summarised the argument for the first defendant which asserted that there were three occasions upon which the plaintiffs waived privilege in respect of the letter:
“Ms Layton submitted that there were three occasions upon which the plaintiffs waived privilege in respect of the letter. The first was when the first list of documents was discovered and inspection of the masked copy of the letter was undertaken by Mr Marrone on 4 December 1997. It was argued that the plaintiffs did not appropriately claim privilege in respect of the document because it had not been included in Part 2 of the First Schedule. I reject this submission. Although technically the document was not included in the correct part of the list of documents, there was a clear claim for privilege at the end of the description of the document in Part 1 of the Schedule.
The second occasion of waiver occurred on 19 and 20 July 1999 when respectively the fourth list of documents was filed and served and Mr Marrone took inspection of documents. No claim for privilege was made in respect of the letter or any copies thereof and a copy of the letter was obtained on inspection on 20 July 1999. The third occasion occurred when Mr Marrone attended the plaintiffs’ solicitors office on 28 July 1999 to inspect documents and saw an unmasked copy of the letter.”
After considering the arguments on the issue the learned master decided that there had been no waiver of privilege.
I agree with the conclusion of the master that the failure to include the letter in Part 2 of the first schedule did not alter the fact that the plaintiffs were making a claim of privilege in relation to the letter and that there was no waiver of privilege arising out of the failure to claim privilege under the appropriate part of the schedule. This was merely a matter of form. I agree that there was a clear and specific claim for privilege for this document, albeit in Part 1 of the schedule. Privilege was claimed in the lists of documents filed on 10 November 1997 and 11 March 1997 respectively.
The other arguments relating to waiver require a more detailed analysis of the appropriate law and the circumstances of the case. In certain circumstances, legal professional privilege in documents can be waived by the solicitor acting for a party. (Meltend Pty Ltd and Anor v Restoration Clinics of Australia Pty Ltd & Ors (1997) 75 FCR 511 at 523). In the present case the plaintiffs’ solicitors were acting as agents for their clients in attending to discovery. It appears that they were given the authority to decide on whether to claim privilege on behalf of their clients. In my view they had the authority to waive privilege in respect of particular documents if they thought it was appropriate.
An express waiver of privilege involves an intentional communication which amounts to waiver (State Bank of South Australia v Smoothdale(No 2)Ltd (1995) 65 SASR 224 at 227). In the circumstances of the present case, I do not think it can be said that the handing over of the document on the two occasions in the office of Finlaysons amounted to an intentional disclosure of the protected material. The plaintiffs’ solicitors had twice indicated that a claim of privilege was being made in respect of the letter. On a previous occasion they had provided a masked copy. The failure to again claim privilege in the later list of documents and the inadvertent handing over of the document on the occasions referred to do not, in my view, support the first defendant’s argument that there was an express waiver.
Ms Maharaj relied upon Meltend’s case in support of the argument that there had been an express or implied waiver. The facts of that case are distinguishable in important respects from those of the present case. In Meltend’s case there had been no claim of privilege in the list of documents and the document had been provided for inspection. The solicitor who acted for the party in possession of the document considered whether privilege should be claimed and decided it was not privileged. Accordingly, the privilege was not claimed. Goldberg J. said (p 523):
“... there was only inadvertence or mistake in that he did not direct his attention to the correct principle or the relevant facts although he did direct his attention to the issue whether the letter should be the subject of a claim for privilege. In my view inadvertence in the sense to which I have referred is not enough on its own to reinstate and maintain the privilege where a decision has been made not to claim the privilege.”
But was there an implied waiver of privilege in the present case? The law will impute a waiver of privilege where the conduct of the privilege holder renders it unfair to maintain the privilege (Attorney-General for the Northern Territory v Maurice & Ors (1986) 161 CLR 475 at 488, 497). In Goldberg v Ng (1996) 185 CLR 83 at 95 Deane, Dawson and Gaudron JJ said:
“The circumstances in which a waiver of legal professional privilege will be imputed by operation of law cannot be precisely defined in advance. The most that can be done is to identify a number of general propositions. Necessarily, the basis of such an imputed waiver will be some act or omission of the persons entitled to the benefit of the privilege. Ordinarily, that act or omission will involve or relate to a limited actual or purported disclosure of the contents of the privileged material. When some such act or omission of the person entitled to the benefit of the privilege gives rise to a question of imputed waiver, the governing consideration is whether ‘fairness requires that his privilege shall cease whether he intended that result or not’ Wigmore on Evidence (McNaughton rev 1961), vol 8, par 2327, quoted with approval by Gibbs CJ and by Mason and Brennan JJ in Attorney-General(NT) v Maurice (1986) 161 CLR 475 at 481, 488. That does not mean, however, that an imputed waiver must completely destroy the privilege. Like an express waiver, it can be limited so that it applies only in relation to particular persons, materials or purposes.”
The principle of fairness could hardly be invoked by a party who procured inspection of the document by fraud or in the knowledge that access was being given to it as a result of a mistake. However, the circumstances in which the court will refuse to impute a waiver when there has been inadvertent disclosure are not limited to such circumstances. In Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538 Rogers J held that privilege had not been waived in a case where a litigant was bound by the court to comply with an accelerated compulsory discovery process and inadvertently discovered a protected document in the list of documents. (See also Ulgera Gap Nominees Pty Ltd & Ors v Elders Limited & Ors (1996) 188 LSJS 374).
I return then to the facts of the present case. I have said that the privilege was claimed in respect of the relevant passages in the letter in the first two lists of documents dated 10/11/97 and 11/3/99 respectively. The description of the document in these lists reads:
“Copy letter from JH Heard /SE Young, Joint Receivers and Managers, Allert Heard & Co to GA Lawrie, Manager, Citicorp Australia Ltd attaching copy CW Construction Pty Ltd (Receivers and Managers Appointed) summary of receipts and payments from date of appointment 14 January 1985 to 29 April 1988, Allert Heard & Co trust account statement of receipts and payments on behalf of Citicorp Australia Ltd for the period 31 January 1986 to 29 April 1988, except portion subject to privilege (Part II, First Schedule).”
On 24 November 1997 Mr Marrone wrote to Finalysons concerning the discovery made by their clients. He noted that the plaintiffs had claimed privilege in relation to portions of documents discovered, but complained that the list of documents failed to provide sufficient details of the grounds upon which privilege was claimed and failed to provide an adequate description of the documents to enable an assessment to be made whether privilege could apply. The letter goes on to state:
“Furthermore where privilege has been claimed as to portion of documents, all of the documents have not been produced for inspection despite privilege being claimed as to portion of those documents only.”
The letter which is the subject of the present application is identified in Mr Marrone’s letter as one of the documents in question.
The solicitors for the plaintiffs replied as follows:
“With respect to your third request on page 3 of your letter relating to the partly privileged documents we respond as follows:
·.. We informed you prior to you inspecting the documents on Thursday, 20 November 1997 that those documents were not available for inspection at that stage;
·.. We are presently preparing those documents for you to inspect. We expect that they will be available for inspection by the afternoon on Thursday, 4 December 1997.”
It would appear that Mr Marrone inspected documents at Finalysons’ office on 4 December 1997. According to the affidavit of Mr Marsden dated 31 August 1999, Mr Marrone was shown a masked copy of the letter when he inspected the documents in late 1997. In his affidavit of 9 September 1999 Mr Marrone does not dispute that he inspected this copy. He said there were 1737 documents which had been discovered at this stage and he did note that in some documents he inspected paragraphs had been masked out.
A further list of documents was filed by the plaintiffs on 11 March 1999 and privilege was claimed in respect of the letter in the same manner as set out above in the case of the list of documents of 10 November 1997.
The next reference to the letter in a list of documents was in the list filed on 19 July 1999. This list was prepared in obedience to an order made by a master on 1 July 1999 requiring that it be filed and served within fourteen days of the date of the order. Clerks working under the supervision of a solicitor employed by Finlaysons prepared the list. According to the affidavit evidence they were working under pressure to complete the list in time and the supervising solicitor did not realise that a claim for legal professional privilege had been made in respect of the letter, a copy of which was included in the discovery which was then being made. No claim was made for privilege in relation to the copy in the list of documents provided to the first defendant on this occasion. The copy was included in the documents made available to Mr Marrone to inspect at the inspection which took place during the week commencing 19 July 1999. As I have pointed out, it was in the course of this inspection of documents that Mr Marrone requested a copy of the letter. A photostat copy of the letter was provided by a solicitor who was unaware that privilege had been claimed previously in relation to parts of the letter. Mr Marsden states in his affidavit that this was the only document in respect of which Mr Marrone requested a copy during the period of inspection during the week.
In Mr Marrone’s affidavit of 9 September 1999 he states that while he was inspecting the documents on 19 July 1999 he read the letter and asked one of the solicitors if he could have a copy so that he could work on it overnight. He was given a copy. He said that on 21 July 1999 he sought counsel’s advice about the letter. He said that on 28 July 1999 he was in Finlaysons’ office continuing his inspection of the documents and was advised by one of the solicitors to cease the inspection because it was necessary to determine whether privilege had been claimed in respect of any of the documents. According to Mr Marrone, he then drew the solicitor’s attention to the existence of a photocopy of the original signed letter. Mr Marrone stated in his affidavit:
“... I say that the Heard letter is not privileged. Further at the time of inspecting the Heard letter on 20th July 1999 I did not recall inspecting a masked copy of the Heard letter when I first inspected the first set of documents discovered by the plaintiffs in December 1997. By July 1998 I had inspected thousands of documents and it was impossible for me to recall all documents which I had previously inspected.”
There is, of course, no suggestion that the document was obtained by fraud. Furthermore, I accept Mr Marrone’s statement that he has no recall of inspecting a masked copy of the letter. Mr Marrone does not state in his affidavits whether, at the time of the inspection in the week commencing 19 July, he made any connection between the document, a copy of which he requested, and the document which had been the subject of a partial claim of privilege in two earlier lists of documents. However, it is unnecessary to form any view on this last mentioned aspect. It is sufficient to point out that privilege had been claimed in relation to the letter in two earlier lists of documents and that Mr Marrone had been shown a masked copy of the letter. He had shown an interest in documents which had been the subject of a partial claim of privilege. I make no criticism of Mr Marrone. However, someone with this information might reasonably infer that privilege had been claimed in respect of the document and that no waiver of privilege had taken place in relation to the relevant parts of the letter. I accept that Mr Marrone might not have directed his attention to this issue because of the volume of documents he inspected.
The failure to claim privilege in the later list of documents and the inclusion of the document with those to be inspected resulted from inadvertence. The same can be said about the supply of the photocopy of the letter. It might also be said that there was an oversight on Mr Marrone’s part in not connecting the letter which he was given to inspect with the document in respect of which earlier claims for privilege had been made and with the masked copy of the letter which he was handed on an earlier occasion. However this may be, I am of the opinion that considerations of fairness require the conclusion that privilege in relation to the parts of the letter which are claimed to be protected was not waived. This is not a case in which it is too late to restore the status quo (Hooker’s case at 543).
It was somewhat faintly argued that a waiver of privilege in respect of the letter should be imputed by reason of the fact that the pleadings put in issue the state of mind and knowledge of the plaintiffs. The proposition thus stated is untenable (Southern Equities Corporation Ltd (In Liq) v Arthur Andersen & Co (1997) 70 SASR 166 at 193). As Bleby J said in that case:
“There must be something more from which it can be shown that the legal advice in question was relevant in the formation of that state of mind or belief or that the advice itself in some way becomes an issue in the action. This may be apparent from the pleadings or from some other document which has been produced in the course of discovery; it may be revealed by answers to interrogatories, or it may be self-evident from the description of the document in question contained in the list of documents. In some cases it may not become apparent until a witness is giving evidence at the trial.”
Ms Maharaj directed by attention to various paragraphs in the pleadings in the present case which she said supported the argument of the first defendant. It might be that the state of mind of the plaintiffs would be relevant to some aspects of the present litigation, but it is not established on the material before me that the communication which is the subject of this application is linked in such a way to the state of mind of the plaintiffs or one of them that a waiver of privilege should be imputed.
The appeal will be dismissed.

[2000] SASC 219

6 July 2000