Colin Campbell (Chemicals) Pty Ltd v The Members of Lloyd's Syndicate QBE Casualty 386
[2014] VSC 655
•18 December 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 2833
| COLIN CAMPBELL (CHEMICALS) PTY LTD (ACN 000 045 590) | Plaintiff |
| v | |
| THE MEMBERS OF LLOYD'S SYNDICATE QBE CASUALTY 386 (DAC 386) & ORS (according to the attached schedule) | Defendants |
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JUDGE: | ALMOND J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 July 2014 |
DATE OF JUDGMENT: | 18 December 2014 |
CASE MAY BE CITED AS: | Colin Campbell (Chemicals) Pty Ltd v The Members of Lloyd's Syndicate QBE Casualty 386 & Ors |
MEDIUM NEUTRAL CITATION: | [2014] VSC 655 |
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APPEAL – Evidence – Discovery – Legal professional privilege – Implied waiver – Issue waiver – Whether primary decision maker erred by finding waiver of privilege – Whether pleaded case inconsistent with maintenance of privilege – Confidential documents not laid open to scrutiny – Insufficient reasons – Associated waiver based on conduct – Appeal allowed – Decision varied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | P G Cawthorn QC C G K Madder | Thomson Geer |
| For the Defendants | M B Loughnan QC A J Golding | William Roberts Lawyers |
HIS HONOUR:
By application made before Efthim AsJ, the plaintiff (‘Campbell’) sought production of certain documents listed in the list of documents of the fourth, fifth and seventh defendants (collectively ‘the 2011 Underwriters’) over which legal professional privilege was claimed (‘the Documents’).[1] His Honour granted the application and ordered that the Documents be produced to Campbell for inspection.[2]
[1]Documents numbered 799–855, 864–877, 879, 882–1001, 1003–1005 and 1012–1065 in the list of documents dated 16 December 2013 filed by the 2011 Underwriters.
[2]Colin Campbell (Chemicals) Pty Ltd v The Members of Lloyd’s Syndicate QBE Casualty (Unreported, Supreme Court of Victoria, Efthim AsJ, 27 May 2014) (‘Reasons for Judgment’), and order made 3 June 2014.
By notice of appeal dated 10 June 2014, the 2011 Underwriters appeal from his Honour’s decision.
Background
The relevant background is set out in his Honour’s reasons as follows:
…
2.The plaintiff seeks indemnity under a policy of insurance with the 2011 Underwriters in connection with its business of manufacture and distribution of herbicides, pesticides, insecticides and other chemicals for use in the agriculture industry. Four claims by pear growers have been made against the plaintiff, (one known as the Zurcas claim), for fungal outbreaks discovered whilst the pears were in storage. The Zurcas claim resulted in a judgment of the County Court delivered on 20 February 2012 against the plaintiff.
3. The 2011 policy of insurance contained the following conditions:
15.3The Assured must, at its own expense, provide the Underwriters with all assistance and cooperation reasonably required by the Underwriters to enable the Underwriters to determine the Assured’s entitlement to indemnity under the Policy, and in the investigation, settlement and/or defence of any Claim.
15.4The Underwriters reserve the right, but do not have an obligation, to take control of and conduct in the Assured’s name the investigations, settlement or defence of any Claim. The Underwriters shall be entitled to prosecute for their own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings and in the settlement of any such Claim and the Assured shall give all such information and assistance as the Underwriters may require.
15.5A Claim against the Assured will only be defended if in the opinion of the Underwriters there is a reasonable prospect of success and after taking account of the commercial considerations and economics of defending such Claim. (emphasis added)
4. The policy also contained “prior circumstances” exclusions as follows:
12.GENERAL EXCLUSIONS APPLICABLE TO ALL SECTIONS OF THE POLICY
This Policy does not cover liability —
12.1in respect of any Claim first made before the inception of this Policy
12.2arising from a potential Claim or circumstance known to the Assured and which the Assured knew or ought reasonably to have known prior to inception of this Policy might result in a Claim against the Assured
12.3in respect of any Claim or potential Claim or circumstance which has or ought to have been notified under any other policy of insurance issued prior to the inception date of this Policy.
…
12.16For loss of use of tangible property which has not been physically damaged or destroyed resulting from
12.16.1a delay in or lack of performance by or on behalf of the Assured in respect of any contract or agreement, or
12.16.2the failure of the Assured’s Product to meet the level of performance, quality, fitness or durability warranted or represented by the Assured, but this exclusion does not apply to loss of use of other tangible property resulting from physical damage to or destruction of the Assured’s Product after such Product has been put to use by any person or organisation other than the Assured.
5.On 29 February 2012, McCabe Terrill, solicitors, advised the plaintiff that they had been appointed by the 2011 Underwriters to act in respect of the policy regarding claims made against the plaintiff in defence of the Zurcas claim in the County Court.
6.A document headed “Waiver” addressed to McCabe Terrill and dated 1 March 2012, was signed by the director of the plaintiff. It states:
I acknowledge that:
1.Indemnity for the claims against the Insured by K & S Coolstores Pty Ltd is being investigated by the underwriters of the Insured’s Public and Products Liability Insurance Policy No. B0753/PK.110120600.
2.McCabe Terrill are the lawyers who act for the underwriters and they have and will continue to advise them on all matters relevant to the issue of indemnity.
3.Under the policy the underwriters have agreed to manage the conduct of the claims on a reserved rights basis. Their decision to manage the conduct of the claims:
(a)does not mean that the Insured is entitled to be covered under the Policy or that the underwriters have elected to indemnify the Insured; and
(b)does not otherwise jeopardise the rights of the underwriters under the Policy or at law.
The insured irrevocably consents to McCabe Terrill communicating to underwriters all information, facts, matters, circumstances and documents relating to the claims even though a solicitor/client relationship exists between McCabe Terrill and the insured.
The insured waives any privilege that exists between McCabe Terrill and the insured as against the underwriters relating to the communications referred to in the previous paragraph. The insured otherwise maintains all privilege that exists between McCabe Terrill and the Insured.
7.McCabe Terrill, subsequently entered an appearance, retained experts and counsel, attended mediation and instructed at the hearing of the Zurcas proceeding.
8.On 20 February 2013, Judge Lacava of the County Court of Victoria gave judgment and ordered damages to be paid by the plaintiff to Zurcas in the sum of $160,000.00 and to pay to K & S Coolstores Pty Ltd (where the pears had been stored) $6,072.00 together with interests and costs. On 26 February 2013, his Honour also ordered that the plaintiff pay Zurcas’ costs of and incidental to the proceeding on a party/party basis up to 24 September 2012 and thereafter on an indemnity basis.
9.By letter dated 28 February 2013, the 2011 Underwriters denied liability for the Zurcas claim because it alleged that a potential claim was known and/or notified during the 2010 policy period. The general exclusion clause 12 of the policy was relied on.
10.By letter dated 31 March 2013, the 2011 Underwriters denied liability for the remaining claims made against the plaintiff by Ashcorn Pty Ltd, Valley Star Pty Ltd and Chris and Mary Georgopoulos.
11.The plaintiff claims that it has suffered and will suffer damage by reason of the 2011 Underwriter’s conduct. It claims damages, interest pursuant to statute and a declaration that it is entitled to be indemnified under the 2011 policy in respect of these four claims plus costs.
12.As to the issue before me, the plaintiff submits that there are four bases, success on any one of which, support the production of documents:
-the engagement of McCabe Terrill, solicitors, was both by the 2011 Underwriters and the plaintiffs so that they were joint clients;
-there has been an issue waiver because of the way the matters are pleaded, including pleas in the Defence and Counterclaim to the effect that the 2011 Underwriters mistakenly assumed or believed that they were obliged to indemnify the plaintiff;
-waiver of privilege documents by the production, without objection, of other privileged documents which makes reference to the ones the production of which is sought; and
-suing for costs, part of which involved or comprise advice, which amounts to a waiver of privilege in the advice.
His Honour ordered production of the Documents on the ground of issue waiver based on the matters pleaded in paragraphs 49, 50, 55 and 56 of the 2011 Underwriters’ Defence.
The pleadings and Reasons for Judgment
The 2011 Underwriters plead, in substance, that:
(a)prior to the inception of the 2011 policy, Campbell represented that there were no incidents or claims likely to lead to a claim that needed to be reported to the 2011 Underwriters during the last five years, which constituted a misrepresentation; and that had Campbell not made the misrepresentation, they would not have entered into the 2011 policy or would not have done so for the same premium and on the same terms (paragraph 49);[3]
(b)prior to the inception of the 2011 policy, Campbell failed to disclose that there were incidents or claims likely to lead to a claim that needed to be reported to the 2011 Underwriters during the last five years, which constituted a breach of Campbell’s duty of disclosure, and had the non-disclosure not occurred, they would not have entered into the 2011 policy or would not have done so for the same premium and on the same terms (paragraph 50);[4]
(c)acting in reliance on representations of Campbell (by its conduct in accepting the 2011 Underwriters conditions for the assumption of the defence of legal proceedings, including the reservation of the 2011 Underwriters’ rights) they assumed that in taking over or continuing with the conduct of Campbell’s defence of the claims, Campbell would not assert or allege that their rights in respect of the 2011 policy (in particular the right to deny a claim) had been affected (paragraph 55);[5] and
(d)on the basis of and acting in reliance upon that assumption, the 2011 underwriters did not refrain from assuming or continuing with the conduct of Campbell’s defence to the claims made against Campbell in the Zurcas proceedings (paragraph 56).[6]
[3]The 2011 Underwriters defence and counterclaim filed 12 August 2013 (‘Defence’), [49(a)–(f)].
[4]Ibid, [50(a)–(f)].
[5]Ibid, [55(a)–(i)].
[6]Ibid, [56(a)–(i)]; see also [25(e), (f), (g)] and [54].
In his Reasons for Judgment, his Honour dealt with issue waiver as follows:
48.The plaintiff submits that the question of the knowledge of the 2011 Insurance Underwriters of the rights to indemnify is raised in the defence and counterclaim. In those circumstances, issue waiver is said to arise, precluding resistance from production of the entire McCabe Terrill file.
49. Section 122(2) of the Evidence Act2008 (Vic) provides:
122 Loss of client legal privilege—consent and related matters
(1)This Division does not prevent the adducing of evidence given with the consent of the client or party concerned.
(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.
…
(5)A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because—
(a) the substance of the evidence has been disclosed—
(i)in the course of making a confidential communication or preparing a confidential document; or
(ii) as a result of duress or deception; or
(iii) under compulsion of law; or
(iv)if the client or party is a body established by, or a person holding an office under, an Australian law—to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or part of the law, under which the body is established or the office is held; or
(b)of a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person; or
(c)of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court.
…
50.It is clear that a waiver will arise where the party claiming privilege has acted inconsistently with the maintenance of privilege. The principle was explained by the High Court in Mann v Carnell,[7] where Gleeson CJ, Gaudron and Callinan JJ said that:
[7]See Mann v Carnell (1999) 201 CLR 1, [29].
Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law." This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. 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.
51.It is submitted that there has been an issue waiver because the maintenance of the claim for privilege is inconsistent with the assertions of the 2011 Underwriters in the proceeding. In DSE Holdings (Pty Ltd) v Intertan Inc,[8] Allsop J (as he then was) said:
[8](2003) 127 FCR 499, 95.
… It is the inconsistency between the act by the holder of the privilege and the confidentiality of the communication which destroys the privilege. I would have thought that it is too broad a statement to say that a pleading of a state of mind to which legal advice is or might be materially relevant is an adequate surrogate for the expression of principle in Mann v Carnell. That inconsistency will arise in the kind of circumstances thrown up in Thomason, Barilla, and Benecke, in the undue influence cases, and as dealt with by McLelland J in United States Surgical, Hodgson J in Standard Chartered, the Full Court in Adsteam at [72] above, the Court of Appeal in Bayliss v Cassidy (No 2) and Beaumont J in Telstra.
52.In Liquorland Australia Pty Ltd v Anghie and Ors,[9] Byrne J also expressed a similar view to Allsop J when his Honour said:
[9](2003) 7 VR 27.
To my mind, the putting in issue by the client of its relevant state of mind, whether it be one of reliance or otherwise, is merely the starting point for an examination of the waiver question. The chronological coincidence of the legal communication and the establishment of that state of mind does not of itself determine the question. The application of the test of unfairness, as expounded by the High Court, involves an examination of the precise nature of this pleaded state of mind and of the impact of the particular communication upon it. It is only where this examination shows that there will arise an unfair inconsistency between the position of the client setting up this state of mind and its maintenance of the privilege that waiver will arise and, then, only to the extent necessary to avoid the unfairness.
53.Senior counsel for the 2011 Underwriters conceded that her clients’ state of mind might be in issue but asserted that there was no waiver of privilege regarding any legal advice received to form the state of mind.[10] It was submitted that the law will only intervene if that actual legal advice that underpinned the statement (sic) of mind was put in issue or if the 2011 Underwriters made some reference to it in the pleadings.
[10]Transcript 139 [of the hearing of the application before Efthim AsJ].
54.In Commissioner of Taxationv Rio Tinto Ltd,[11] the Commissioner conceded that he considered privileged documents to reach a relevant state of satisfaction when exercising his discretion. It was asserted by the tax payer that the Commissioner had put in issue his state of mind when justifying the refusal to exercise discretion not to impose penalties on the tax payer. The Full Federal Court held that the Commissioner had acted inconsistently with the maintenance of privilege, thereby impliedly waiving it.
[11](2006) 151 FCR 341.
55.The Full Court considered numerous cases regarding issue waiver. Their Honours were of the view that each case turned on its own facts. In arriving at final decision Kenny, Stone and Edmund JJ said that:[12]
[12]Ibid, [61]–[67].
61Both before and after Mann, the governing principle required a fact‑based inquiry as to whether, in effect, the privilege holder had directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defence. In DSE at 519 [58], Allsop J put the matter somewhat more descriptively, saying waiver arises when “the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication”. (emphasis original)
…
67… the decision-maker (here the Commissioner) would not put such legal advice in issue merely by saying that the advice was relevant or contributed to his decision. There would be no issue waiver because the decision-maker would not have done anything inconsistent with the maintenance of privilege. The situation might be otherwise if the decision‑maker puts the contents of the legal advice in issue by specifically relying on the contents of the advice (and not merely the fact of the advice) to vindicate his claimed state of satisfaction or exercise of discretion.
56.The 2011 Underwriters submit that they did not make any reference to confidential communications in their pleading. They did not refer to any legal advice, let alone the contents of any legal advice. In Schulman v Abbott Tout Lawyers (a firm) t/a Abbott Tout Solicitors,[13] Flick J upheld a claim of privilege in a case which involved the applicant claiming losses suffered as a result of negligent advice given by the respondent. At the same time that the applicant received that negligent advice, it was also obtaining advice from other lawyers. The respondent sought production of documents pertaining to the advice from the other lawyers. Flick J said:
[19]But the difficulty confronting the submission of inconsistency sought to be advanced by the Respondent is that the Applicants in their Further Amended Statement of Claim have not expressly referred to or made any statement inconsistent with maintaining the privilege otherwise attaching to their separate advice. Indeed, it would perhaps be surprising had they done so. There is no statement in the Further Amended Statement of Claim which expressly or impliedly refers to the obtaining of legal advice – other than that provided by the Respondent firm of solicitors.
57.Here, the fact that 2011 Underwriters do not refer to the advice, does not necessarily mean that there has not been a waiver of privilege. The 2011 Underwriters have put into issue their state of mind. That is the starting point. It would be unfair if the 2011 Underwriters can put into issue their state of mind and maintain privilege over the documents that go to this very issue. The correspondence between the parties indicates that such advice exists. It should, therefore, be made available.
[13][2010] FCA 308.
Applicable principles
The appeal is brought by notice under r 77.06 of the Supreme Court (General Civil Proceedings) Rules 2005 (Vic). The appeal is in the nature of a re-hearing which will ordinarily require the appellant to demonstrate there was an error on the part of the primary decision maker if no further evidence has been admitted and there has been no change in the law.[14] Where an appeal relates to a matter of practice and procedure (which is the case here), an appellate court will exercise particular caution in reviewing the decision.[15]
[14]Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194, 203-204 [14].
[15]Setka v Abbott [2014] VSCA 287, [29]–[30].
Grounds of appeal
By their notice of appeal, the 2011 Underwriters raised 7 grounds of appeal. It is convenient to deal with grounds 1 to 4 together.
Grounds 1 to 4 – issues raised in pleadings, inconsistency and unfairness
Grounds 1 to 4 of the notice of appeal are as follows:
1.The learned Associate Judge erred in law in holding that the fourth, fifth and seventh defendants had waived privilege in respect of the relevant documents by reason of their conduct, namely the raising of the issues by them in paragraphs 49, 50, 55 and 56 of their defence filed 9 August 2013 (Conduct);
2.The learned Associate Judge erred in law in holding that the fourth, fifth and seventh defendants had by the Conduct waived privilege because it would be unfair for them to maintain privilege over the documents;
3.The learned Associate Judge erred in law in failing to consider, or properly consider whether the Conduct was inconsistent with the maintenance of privilege by the fourth, fifth and seventh defendants;
4.The learned Associate Judge erred in law in failing to hold that the Conduct was not inconsistent with the maintenance of privilege by the fourth, fifth and seventh defendants;
…
Paragraphs 49 and 50
Paragraphs 49 and 50 of the Defence engage the statutory defences available to insurers under s 28 of the Insurance Contracts Act 1984 (Cth) to the effect that, had Campbell not made the relevant misrepresentation and the non-disclosure (to the effect that there were no incidents or claims during the last five years) the 2011 Underwriters would not have entered into the 2011 policy or would have done so on different terms, and their liability in respect of the claim should be reduced accordingly.
The 2011 Underwriters submit that: these defences do not put in issue the 2011 Underwriters’ state of mind in a way which is inconsistent with the maintenance of privilege in the documents; in making out these defences the 2011 Underwriters will have to demonstrate what they would have done had they known of the matters not disclosed; and it is not necessary to prove a state of mind to make out these defences.
Campbell submits that the state of mind of the 2011 Underwriters is relevant because the 2011 Underwriters have put in issue, on the pleadings, how they would have conducted themselves had they known of the prior circumstances.
In my view, there is nothing in the 2011 Underwriters’ pleaded case in paragraphs 49 and 50 which has put in issue or which would necessarily lay open for scrutiny any confidential communications. At trial, there will need to be a factual inquiry as to whether there was a misrepresentation or non-disclosure, and if so, what the 2011 Underwriters would have done (in the hypothetical circumstance) had the misrepresentation and non-disclosure not occurred. What will necessarily be laid open for scrutiny will be the contents of non-privileged documents such as the application for insurance, and the answers given by the insured to questions posed by the insurer at the relevant time on the relevant application forms. The contents of these documents will found any misrepresentation or non-disclosure. What the insurers would have done will necessarily lay open for scrutiny other non-privileged documents such as guidelines and perhaps records and evidence of past practice.
Whether by taking the defences in paragraphs 49 and 50 the 2011 Underwriters have put in issue their state of mind, is in my view open to doubt. But even if these defences do put in issue a hypothetical state of mind of the insurers (by putting in issue what the insurers would have done) this does not answer the question whether in relying on defence the 2011 Underwriters have directly or indirectly put in issue the contents of privileged documents in a way that is inconsistent with the maintenance of confidentiality in those documents.
This case is not like an undue influence case where the alleged undue influence on a person’s state of mind may be countered by evidence that the person received independent legal advice from a third party,[16] or a case where a plaintiff alleges that litigation has been compromised contrary to instructions which will necessarily raise for consideration confidential communications between the plaintiff and the legal advisors,[17] or where plaintiffs put in issue the question whether they relied on their solicitors’ advice during a period in which they were advised by other solicitors.[18]
[16]Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 (‘Rio Tinto’), [48]-[49] citing Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347, 358-359 (Jordan CJ, Halse Rogers and Bavin JJ agreeing); see also discussion on undue influence cases in DSE Holdings (Pty Ltd) v Intertan Inc (2003) 127 FCR 499 (‘DSE’), [46].
[17]Benecke v National Australia Bank (1993) 35 NSWLR 110.
[18]Maher v Millennium Markets Pty Ltd [2004] VSC 82, [24]-[25].
All of these factual situations produce the requisite inconsistency because the contents of otherwise privileged communications are put squarely in issue which amounts to conduct inconsistent with maintenance of their confidentiality.[19]
[19]Rio Tinto (2006) 151 FCR 341, [47]-[52]
In my view, there is no evident inconsistency between the alleged defences in paragraphs 49 and 50 of the defence and the maintenance of confidentiality which would give rise to issue waiver. Indeed, if it were so, on Campbell’s case it would follow that there would be issue waiver in relevant confidential communications every time an insurer took a defence under s 28 of the Insurance Contracts Act.
Paragraphs 55 and 56
Relevantly, in paragraphs 55 and 56, the 2011 Underwriters allege that:
(a)acting in reliance on representations of the plaintiff, they assumed that in taking over or continuing with the conduct of the plaintiff’s defence of the claims, the plaintiff would not assert or allege that their rights in respect of the 2011 policy, in particular that the right to deny a claim, had been affected; and
(b)acting in reliance upon that assumption, they did not refrain from assuming or continuing with the conduct of the plaintiff’s defences to the claims made against the plaintiff in the Zurcas proceedings.
Senior Counsel for the 2011 Underwriters conceded before the Associate Judge that these paragraphs might put in issue the 2011 Underwriters’ state of mind. Before me, Senior Counsel repeated that concession. In my view, it was open for the Associate Judge to find that the 2011 Underwriters had put in issue their state of mind on the issues raised in paragraphs 55 and 56. Indeed, that finding is not challenged on appeal.
But putting in issue a state of mind does not of itself answer the question. The key question is not merely whether the 2011 Underwriters put their state of mind in issue but whether in doing so they have directly or indirectly put the contents of otherwise privileged communications in issue in the proceeding, in a way that is inconsistent with the maintenance of privilege.
All cases turn on their own facts, but nevertheless, reference to some cases is illustrative. In Rio Tinto, the Full Court of the Federal Court held that there had been issue waiver because the Commissioner of Taxation, in giving requested particulars to a taxpayer, disclosed eight privileged documents which the Commissioner said evidenced the matters taken into account in reaching a state of satisfaction and exercising his discretion. This had put the contents of the eight documents in issue or had necessarily laid them open to scrutiny which gave rise to an inconsistency between the making of the statements and the maintenance of the privilege.[20]
[20]Rio Tinto (2006) 151 FCR 341, [72].
The Full Court made two important observations:
(a)the mere acknowledgement of the relevance of privileged documents to key issues in the proceeding does not amount to an act inconsistent with the maintenance of privilege;[21] and
(b)had the particulars in that case merely disclosed that the Commissioner took into account legal advice in reaching his state of satisfaction and exercising his discretions such disclosure would not have been inconsistent with the maintenance of privilege.[22]
[21]Ibid, [71].
[22]Ibid, [73].
This case does not have anything akin to an acknowledgment of the relevance of privileged documents to the making of the assumption nor is there any disclosure by the 2011 Underwriters that they took into account any legal advice in making the assumption or continuing the assumption. It is not suggested that the 2011 Underwriters made an implied assertion in their defence about the contents of the confidential communications.
It seems to me that the issue comes down to whether the 2011 Underwriters have (to adopt the language of Allsop J in DSE) made an assertion or brought a case which is either about the contents of the privileged communication or which necessarily lays open a confidential communication to scrutiny such that there is an inconsistency between the 2011 Underwriters’ conduct and the maintenance of the confidentiality. This investigation is informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.[23]
[23]DSE (2003) 127 FCR 499, [58]; Rio Tinto (2006) 151 FCR 341, [61].
The 2011 Underwriters have put in issue their state of mind, namely whether they made assumptions based on:
(a)the acknowledgment in a document described as the ‘waiver document’ which was signed by a director of Campbell which relevantly states:
Under the policy the underwriters have agreed to manage the conduct of the claims on a reserved rights basis. Their decision to manage the conduct of the claims:
(a)does not mean that the Insured is entitled to be covered under the Policy or that the underwriters have elected to indemnify the Insured; and
(b)does not otherwise jeopardise the rights of the underwriters under the Policy or at law.[24]
(b)documents which contained further reservations of their rights.[25]
[24]Reasons for Judgment, [6].
[25]Defence, [25].
The foundation of the allegations that the 2011 Underwriters made assumptions is, on its face, non-confidential communications. In substance the alleged assumptions are that Campbell would not assert or allege that the 2011 Underwriters’ rights in respect of the 2011 policy, in particular their right to deny a claim, had been affected.
I am not satisfied that the assumptions pleaded in the defence necessarily lay open to scrutiny legal advice that the 2011 Underwriters may have obtained at some stage about the effect of the signed acknowledgement in the ‘waiver document’ or the other documents pursuant to which the 2011 Underwriters purported to reserve their rights.
The 2011 Underwriters do not allege nor does it necessarily follow that the assumptions or the continuation of the assumptions were based on or affected by legal advice. There is no necessary connection between the formation of the assumptions or the continuation of the assumptions and any legal advice. It is possible that there was legal advice given to the 2011 Underwriters which may or may not have influenced the formation or continuation of the assumptions. But the mere possibility or even probability is not enough. The signed acknowledgment in the ‘waiver document‘ and the benefit of additional correspondence reserving the 2011 Underwriters’ rights may have been the only factors which led them to assume that they could conduct the litigation on behalf of the insured without jeopardising their right to deny indemnity if they saw fit.
In the circumstances, in my respectful view, it was not open for the Associate Judge to find that the pleaded defences necessarily lay open the 2011 Underwriters’ legal advice to scrutiny. For completeness, I note that the Associate Judge found that ‘the correspondence between the parties indicates that such advice exists’.[26] Presumably this is a reference to the correspondence referred to earlier in the Reasons for Judgment, which suggests that certain advice had been obtained.[27] In my view, this has more to do with document management than issue waiver. The consequences of provision of correspondence by the solicitors for the 2011 Underwriters to Campbell are considered below under the heading ‘Associated waiver’.
[26]Reasons for Judgment, [57].
[27]For example, Reasons for Judgment, [30], [34], advice in relation to a product efficacy exclusion; Reasons for Judgment, [34], (potentially) the prior known circumstances exclusion.
In my view, the Associate Judge erred in finding (in substance, if not in form) that inconsistency was established between the pleaded defence and maintenance of confidentiality in the privileged communications. It follows that grounds 1 and 4 of the appeal are made out.
Restitution
In the same vein Campbell submitted that the 2011 Underwriters, by claiming restitution for legal fees and disbursements in their counterclaim,[28] must be contending that they paid these amounts in the mistaken belief and on the assumption that they were obliged to do so. This, Campbell contends, puts in issue the 2011 Underwriters’ state of mind such that all documents relating to the formation of that state of mind are discoverable.
[28]Previously defined as ‘Defence’, see [8]–[10].
In my view this submission has no substance. The restitution allegations in substance merely state that the 2011 Underwriters had no liability to Campbell pursuant to the 2011 policy and should never have paid for the legal costs. It would therefore be unjust and unfair for Campbell to retain the benefit of such payments, there being no entitlement to indemnity and thus a total failure of consideration for the payments.[29]
[29]Defence, [8]–[10]; Appeal Book, 102-103.
In my view the claim of restitution does not necessarily lay open for scrutiny any confidential communications of the 2011 Underwriters. Without knowing precisely how the 2011 Underwriters propose to advance their case for restitution I am not prepared to find that the pleading necessarily puts in issue the 2011 Underwriters’ state of mind but even if it does, that will not determine the question of inconsistency. In my view, there is no demonstrated inconsistency between prosecuting the claim for restitution and the maintenance of confidentiality in advice that the 2011 Underwriters may have obtained about this issue at some stage in their conduct of the matter.
The evidence before the Associate Judge supports this conclusion. Ms Mullins, solicitor, deposes on behalf of the 2011 Underwriters that the paid costs, legal fees, disbursements and other costs and expenses the subject of the restitution claim were for the benefit of Campbell and excluded any fees relating to the provision of advice to the 2011 Underwriters as to whether Campbell is entitled to any indemnity under the relevant insurance policy.[30] Ms Mullins’ evidence was not challenged before the Associate Judge and there is no reason not to accept it.
[30]Affidavit of Larina Mullins affirmed 18 February 2014, Appeal Book, 374-379.
Consideration of fairness
The 2011 Underwriters submit that the Associate Judge erred in law by applying a test of fairness to determine whether privilege had been waived, whereas the correct test is whether the relevant conduct is inconsistent with the maintenance of the privilege.
I am not persuaded that his Honour did in fact apply a test of fairness. It is clear from the Reasons for Judgment read as a whole, that his Honour set out the relevant authorities to the effect that the waiver is brought about by the inconsistency between the conduct of the holder of the privilege and maintenance of the confidentiality of the communication. His Honour did not apply some overriding principle of fairness operating at large.
It is true that in his Honour’s conclusion his Honour stated ‘[i]t would be unfair if the 2011 Underwriters can put into issue their state of mind and maintain privilege over the documents’[31] without specifically using the word ‘inconsistency’. But it is clear from the preceding paragraphs that his Honour is cognisant of the correct test and it is clear from paragraph 57 of the Reasons for Judgment that his Honour substantively applied it when he contradistinguished two facts: the fact that the 2011 Underwriters had ‘put into issue their state of mind’ and the fact that they sought to ‘maintain privilege over the documents that go to [that] very issue’.[32] In this fashion, his Honour endeavoured to demonstrate inconsistency without using the word itself. In my view, this approach is a reflection of style and is not in itself indicative of error. I do not accept that his Honour erroneously considered issue waiver on the basis of ‘unfairness’ in isolation from ‘inconsistency’. It follows that ground 2 of the appeal is not made out.
[31]Reasons for Judgment, [57].
[32]Ibid, [57].
His Honour’s analysis does, however, raise for consideration the issue of sufficiency of reasons. In my view, the Associate Judge failed to properly consider whether the conduct was inconsistent with the maintenance of privilege in the confidential communications, and ground 3 of the appeal is therefore made out. This is dealt with later in these reasons under Ground 6.
In summary, I am satisfied that the appellants have demonstrated vitiating error with respect to grounds 1, 3 and 4.
Ground 5 – no express or implied assertion of the communications in the defence
Ground 5 of the notice of appeal is as follows:
5.The learned Associate Judge erred in law in holding that the fourth, fifth and seventh defendants had waived privilege despite their being no express or implied assertion of the content of the confidential communications, the subject of the plaintiff’s application for production to it, in paragraphs 49, 50, 55 and 56 of the defence filed 9 August 2013.
The 2011 Underwriters submit that it is essential that a party asserting issue waiver demonstrate that the pleading makes reference, expressly or impliedly, to a confidential communication. They submit that the finding by the Associate Judge (that there was no reference to legal advice in the pleadings) precludes a finding of the requisite inconsistency in this case. I am not persuaded by this submission. His Honour found that the fact that the 2011 Underwriters do not refer to the advice in their pleadings does not necessarily mean that there has not been a waiver of privilege. I respectfully agree. The circumstances which may lead to issue waiver are not so narrowly confined. What the authorities require for establishing issue waiver is inconsistency between the conduct of the party claiming the privilege, and maintaining the confidentiality of the relevant confidential communication. Commonly, issue waiver will arise where reference is made in a pleading to a confidential communication, but not always. It is but one example of inconsistent conduct. Making an assertion, bringing a case, laying confidential communications open for scrutiny are other examples. It is sufficient if the nature of the matters put in issue in the pleading by the holder of the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect, such that it would be unfair to maintain the confidentiality of the communication. His Honour made reference to the relevant passages in Mann v Carnell,[33] DSE[34] and Liquorland Australia Pty Ltd v Anghie,[35] and in doing so articulated the proper test.[36]
[33](1999) 201 CLR 1.
[34](2003) 127 FCR 499.
[35](2003) 7 VR 27.
[36]See Reasons for Judgment, [50]–[52].
Ground 6 – adequacy of the Associate Judge’s reasons
Ground 6 of the notice of appeal is as follows:
6.If the learned Associate Judge was correct in holding that the Conduct could give rise to such unfairness that the fourth, fifth and seventh defendants may not maintain privilege over the relevant documents, his Honour erred in law in failing to consider, or properly consider, the matters upon which the necessary unfairness had arisen.
The 2011 Underwriters submit that the learned Associate Judge did not adequately set out in his reasons ‘the matters upon which the necessary unfairness had arisen’ by the raising of the issues in paragraphs 49, 50, 55 and 56 of the Defence.
In Intertransport International Private Ltd v Donaldson and Liquid Bulk Solutions Pty Ltd, it was observed by Chernov JA that:[37]
Consideration of whether the reasons given for judgment are adequate is, of course, independent from consideration of the correctness of the decision and whether they are adequate will depend on the circumstances of the case. As Nettle J.A. explained in Wakool Shire Council v Walters:
The degree of detailed reasoning required to be provided in support of a determination depends upon the nature of the determination, the complexity of the issues, whether the issues are of fact or law or mixed fact and law and the function to be served by giving reasons, namely, that the parties may know the basis on which the matter has been decide and to enable a court of appeal to determine whether there has been error.
But reasons will be adequate notwithstanding that they are brief if they reveal the steps in the thinking process of the court by which it reached its decision: see Kiama Construction Pty Ltd v Davey. It may be that the basis for the decision can be inferred from the whole of the reason for judgment, having regard to the circumstances of the case.
[37][2005] VSCA 303, [19] (Eames and Ashley JJA agreeing) (citations omitted).
In relation to issue waiver, the Associate Judge referred to the relevant paragraphs of the pleading, the submissions of the respective parties and the relevant authorities and then found as follows:[38]
Here, the fact that the 2011 Underwriters do not refer to the advice, does not necessarily mean that there has not been a waiver of privilege. The 2011 Underwriters have put into issue their state of mind. That is the starting point. It would be unfair if the 2011 Underwriters can put into issue their state of mind and maintain privilege over the documents that go to this very issue. The correspondence between the parties indicates that such advice exists. It should therefore be made available.
[38]Reasons for Judgment, [57].
In my respectful view the Reasons for Judgment do not adequately disclose the basis on which the issue waiver matter has been decided.
The conclusion that ‘[i]t would be unfair if the 2011 Underwriters can put into issue their state of mind and maintain privilege over the documents that go to this very issue’[39] (emphasis added) together with a generalised reference to ’correspondence which indicates that such advice exists’[40] is insufficient. In Rio Tinto, the Full Federal Court said that a court is bound to analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of the privilege.[41] Bearing in mind that the determination in this matter affects substantive rights of the 2011 Underwriters, in my view, further elaboration was necessary to explain how the 2011 Underwriters’ conduct, in raising the statutory defences in paragraphs 49 and 50 and the assumptions defence in paragraphs 55 and 56, is said to be inconsistent with the maintenance of the privilege in the confidential communications.
[39]Ibid.
[40]Ibid.
[41](2006) 151 FCR 341, [45].
Ground 7 - Extent of waiver
Ground 7 of the notice of appeal is as follows:
7If the learned Associate Judge was correct in holding that the fourth, fifth and seventh defendants had waived privilege by reason of the Conduct, his Honour erred in law in failing:
a.to consider or properly consider the extent to which the waiver had arisen so as to avoid unfairness to the plaintiff;
b.to consider, or properly consider whether privilege could be maintained over the whole, or some, of the privileged documents;
c.to hold that the waiver was limited to the extent of only those of the relevant documents which refer to legal advice regarding the Assumptions referred to in paragraphs 55 of the defence filed on 9 August 2013.
In light of my finding that the 2011 Underwriters have not waived privilege by reason of the Conduct (as defined in ground 1) it is unnecessary to address ground 7.
Additional contentions
Campbell filed a notice of contention[42] citing additional grounds upon which the decision of the Associate Judge to order that the documents be produced should be affirmed. Submissions were made with respect to the following matters.[43]
[42]Notice of contention dated 16 June 2014, Appeal Book, 6–8.
[43]During oral submissions, Senior Counsel for Campbell indicated that paragraph one of the notice of contention would not be pressed.
Joint privilege
Campbell submitted that they were joint clients with the 2011 Underwriters and therefore there was no privilege in the solicitor’s file.
In my view, the Associate Judge did not err in his conclusion that Campbell and the 2011 Underwriters were not joint clients for the reasons given in paragraphs 13 to 25 of the Reasons for Judgment.
Loss of client legal privilege under s 124 of the Evidence Act 2008 (Vic) requires that the parties have before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter:
124 Loss of client legal privilege—joint clients
(1)This section only applies to a civil proceeding in connection with which 2 or more parties have, before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter.
His Honour found that Campbell and the 2011 Underwriters had not ‘jointly retained a lawyer in relation to the same matter’.[44] I respectfully agree. The 2011 Underwriters retainer of McCabe Terrill to advise whether it was liable to indemnify Campbell was not in relation to the same matter as the subsequent retainer to act as solicitors for Campbell in the defence of the Zurcas proceeding.
[44]Reasons for Judgment, [25].
His Honour relied, inter alia, on Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray,[45] a decision of the New South Wales Court of Appeal of Mason P. This case involved insurer retained solicitors, which also became the insured’s solicitors when the solicitors filed a defence in legal proceedings on behalf of the insured. Relevantly, Mason P (with whom Handley JA and Brownie AJA agreed) observed:[46]
[45][2004] NSWCA 151.
[46]Ibid, [55]–[57].
55It does not follow that everything disclosed to a solicitor by one client can be divulged by the solicitor to the other client. The policy condition about the insured's duty to assist its insurer was closely examined in Nicholson on the basis that strong language would be required before rights of confidentiality and undivided loyalty owed by the solicitor to the insured client and the client-legal privilege touching that relationship could be ousted (see at 499). Penlington J cited with approval the remarks of McTague J in Marshall v Adamson [1936] 4 DLR 383 at 385 where he said:
Even in the circumstances of this case, the insured is entitled to assume that his communications to the solicitor, who is the solicitor for the insurance company, will be accorded the same treatment as his communications to his own personal solicitor. The company may have a right (I do not even say it has a right) to allege that it is not liable as a result of disclosure so made, but it should not be permitted to attempt to prove non-liability by the evidence proposed to be adduced here. To hold otherwise would be to open the door to a great deal of abuse in insurance cases. It must be held that such evidence is not admissible.
56Penlington J rejected the submission that both the insured and insurer had a common interest in the information given by Mr Van Eden to the lawyer.
57This framework of analysis is consonant with other Australian cases that were not considered in Nicholson. In my view, there is no doubt that Turks became the respondent insured's solicitor when, on instructions from the insurer, they filed a defence in the plaintiff's proceedings (see also Garry F S Boyce t/as Hunt and Hunt Lawyers, C I & D Industries, FAI General Insurance Co Ltd v ACN 010 087 573 Pty Ltd [1999] QCA 524; [2000] 11 ANZ Ins Cas 61-464). It follows that any information divulged confidentially by the insured to the solicitor would attract client-legal privilege whether or not the insurer was also a client. On top of that, the solicitor would have been under duties of confidentiality and undivided loyalty to the insured client not to divulge that information to the insurer without permission to the extent that the information was adverse to the insured's interests, unless of course the policy conditions clearly overrode any such obligation (see esp FAI and TSB Bank plc v Robert Irving & Burns (a firm) (Colonial Baltica Insurance Ltd, third party) [2000] 2 All ER 826. See also ACN 007 838 584 Pty Ltd v Zurich Australian Insurance Ltd [1997] SASC 6338; (1997) 69 SASR 374).
In this case, McCabe Terrill became the solicitors for Campbell soon after they were retained by the 2011 Underwriters to act in respect of the policy regarding the defence of the Zurcas claim, and certainly by the time McCabe Terrill entered an appearance. His Honour observed that, pursuant to the waiver document, the plaintiff acknowledges that McCabe Terrill, as lawyers for the 2011 Underwriters, would continue to advise the 2011 Underwriters on all matters relevant to the issue of indemnity and waived any privilege existing in communications between McCabe Terrill and the plaintiff concerning the facts, matters and circumstances relating to the Zurcas claim. The waiver document reflects that there is a distinction between the retainers. I note the waiver document itself purports, among other things, to waive rights of Campbell. It does not purport to waive rights of the 2011 Underwriters. There is no substance in this contention.
Effect of continuing to act and waiver of privilege
Campbell alleges that the 2011 Underwriters made an election to indemnify Campbell by taking over the conduct of the Zurcas proceeding with knowledge of its right to deny indemnity for known circumstances.
Campbell relied on email exchanges, and an attendance note in correspondence in support of this contention. These documents were referred to by his Honour in paragraphs 26 to 34 of his Reasons for Judgment. It is not necessary to refer to the content of these communications. Suffice to say, Campbell submitted that there was insufficient evidence to support the contention of the 2011 Underwriters that there had not been an election. Campbell relied on the High Court decision in Khoury v Government Insurance Office of New South Wales[47] to contend that the 2011 Underwriters did not have a basis on which to deny indemnity until they heard the evidence of Mr Derrick, director of Campbell and a witness in the Zurcas proceeding. His Honour held that the question of whether the 2011 Underwriters had enough information to make an election was not a question he should determine without cross-examination and consideration of all the evidence.[48] That was an issue to be raised at trial. Likewise, his Honour found that the 2011 Underwriters’ contention that there was no obligation to indemnify the plaintiff and therefore an election could not arise (because there was never any liability under the policy) was a matter which was an issue for the trial.[49] In my view, this approach was plainly open and an entirely proper disposition of an interlocutory application.
[47](1983) 165 CLR 626, 633.
[48]Reasons for Judgment, [39].
[49]Ibid, [42].
Finally, his Honour concluded that it is Campbell that raised the issue of election not the 2011 Underwriters, and concluded there was no waiver of privilege by the conduct of the 2011 Underwriters in these circumstances.[50] I discern no error in this aspect of his Honour’s reasons.
[50]Ibid, [44].
Associated waiver
The 2011 Underwriters (by their solicitors McCabe Terrill) provided copies to Campbell of the following written communications in March 2013:
(a)An email dated 13 April 2012 from Barry Josephs, consultant with McCabe Terrill to Rachael Arnold, principal of McCabe Terrill, which states relevantly:
From communications with JLT, the insured’s broker, it appears that the current (and apparently relevant) policy involves a change to underwriters from the previous 2 years. The claims against the insured have real potential and it now appears as though there might be an indemnity issue. On Monday we will file and serve defences on behalf of the insured in the 2 proceedings currently issued. That will protect its interests for the moment. In the course of obtaining instructions for the defences, I have also tried to obtain as much information form the insured relating to the indemnity issue. I have therefore tried to do that without involving brokers too much. The information I was seeking has now been provided.[51]
[51]Appeal Book, 257.
(b)An email dated 13 April 2012 from Rachael Arnold to Barry Josephs in response, which states relevantly:
I understand the brokers (lloyd + partners) don’t consider there to be an indemnity and for you to be instructed by them, to protect the insured. I think you just need to clarify. Any queries, just give me a call.[52]
[52]Appeal Book, 257.
(c)A file note of a telephone attendance on 3 August 2012 between Samir Vyas and CAT (apparently Craig Terrill of McCabe Terrill), which states relevantly:
Samir said that he had spoken to the relevant underwriter. The underwriter was not prepared to take a “known circumstances” point because the notification of circumstances does not relate to the two parties who have issued proceedings. Underwriters will take the known circumstances point if and when Valley issues and pursues its claim, the details of which would be classed as “known circumstances”.
Samir said that we were to proceed to defend the matter currently on foot as we have no other option.
Samir asked us to consider the produce efficacy exclusion and whether it might have application.[53]
[53]Appeal Book, 268.
(d)An email dated 7 September 2012 from Barry Josephs to Craig Terrill, which states relevantly:
I know you are meeting Samir later.
Please find attached letter sent by me to him earlier.
Also attached is a memo and docs relating to the product efficacy issue. Definitely factual matrix is relevant and not pleadings. This combined with confirming batch certificates for the products just provided by the insured together with inconsistent wording would render the exclusion inapplicable.[54]
[54]Appeal Book, 269.
(e)An email dated 18 September 2012 (4:11pm) from Barry Josephs to Matthew Barrett, which states relevantly:
Please see attached email from Dawes and Vayr confirming mediation details.[55]
[55]Appeal Book, 285.
(f)An email dated 18 September 2012 (8.07pm) from Barry Josephs to Matthew Barrett, which states relevantly:
Please see attached our letters of advice to our client dated 7, 17 and 18 September 2012 and our client’s settlement instructions in response.[56]
[56]Appeal Book, 286.
(g)An email dated 18 September 2012 (8.53pm) from Barry Josephs to Matthew Barrett, which states relevantly:
One final issue is the insured’s deductible which is AUD$10000 costs exclusive. I have spoken to Geoff Derrick and outlined our view about trying to settle Zurcas tomorrow by way of a contribution on behalf of Colin Campbell. I told him the limit of our instructions for tomorrow and he is agreeable to proceeding that way and to paying the deductible to any contribution to a resolution.[57]
(h)An internal handwritten file note of McCabe Terrill dated 25 February 2013 of a telephone attendance upon Steve Lynch.[58]
(collectively the ‘Disclosed Documents’).[59]
[57]Appeal Book, 287.
[58]Appeal Book, 289.
[59]Affidavit of Larina Mullins affirmed 18 February 2014, [10], Appeal Book, 378; see also Affidavit of Claire Gitsham sworn 16 January 2014, [7(e), (h), (i), (k), (l)], Appeal Book, 122.
Understandably his Honour found that he did not need to decide this issue as he had already determined that the documents would be released to the plaintiff.[60] In light of my findings thus far, it is necessary for me to determine this issue.
[60]Reasons for Judgment, [72].
In substance, Campbell submits that, not only is it entitled to rely on the Disclosed Documents, but it is evident from the Disclosed Documents that the whole of the relevant material has not been produced. Accordingly, Campbell seeks production of the documents referred to in the Disclosed Documents. The 2011 Underwriters submit that provision of the Disclosed Documents was not authorised and that they would not have sought to rely on the Disclosed Documents as evidence to advance their defence. In support of this submission, they rely upon an affidavit of Larina Mullins, sworn 18 February 2014, in which Ms Mullins deposes that the 2011 Underwriters did not instruct McCabe Terrill to provide the Disclosed Documents to Campbell nor to waive any claims of privilege over them.[61] In his affidavit sworn 18 February 2014 in response to the Mullins affidavit, Neil Francis Hannan deposes that at no time prior to service of the Mullins affidavit had there been any claim made by the 2011 Underwriters that they had not intended to disclose the documents to Campbell.[62]
[61]Affidavit of Larina Mullins affirmed 18 February 2014, [11], Appeal Book, 378.
[62]Affidavit of Neil Hannan sworn 18 February 2014, [13], Appeal Book, 382.
Senior Counsel for the 2011 Underwriters in oral argument submitted that the disclosure of the documents occurred as a result of a slip and made reference to the decision of the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd,[63] in which case documents discovered as a result of a mistake were ordered to be returned or delivered up.[64]
[63](2013) 250 CLR 303 (’Expense Reduction Analysts’).
[64]For the precise form of orders see Expense Reduction Analysts at 325-6.
In Expense Reduction Analysts, the High Court outlined the relevant law:[65]
According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege).[66] It may be express or implied. In most cases concerning waiver, the area of dispute is whether it is to be implied. In some cases waiver will be imputed by the law[67] with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. The courts will impute an intention where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.[68]
In Craine v Colonial Mutual Fire Insurance Co Ltd,[69] it was explained that “’[w]aiver’ is a doctrine of some arbitrariness introduced by the law to prevent a man in certain circumstances from taking up two inconsistent positions…It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’. In Mann v Carnell,[70] 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.
[65]Expense Reduction Analysts (2013) 250 CLR 303, 315-316.
[66]Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305, 326; [1920] HCA 64; Grundt v Great Boulder Pty Ltd Gold Mines Ltd (1937) 59 CLR 641, 658; [1937] HCA 58.
[67]Goldberg v Ng (1995) 185 CLR 83, 95-96; [1995] HCA 39.
[68]Mann v Carnell (1999) 201 CLR 1, 13 [29]; [1999] HCA 66.
[69](1920) 28 CLR 305, 326.
[70](1999) 201 CLR 1, 13 [29].
The facts of this case are distinguishable from those considered in Expense Reduction Analysts, where it was undisputed that the documents had been discovered by mistake.[71] Here, the question is whether the 2011 Underwriters have acted in a way that is inconsistent with the 2011 Underwriters objecting to production and use of the Disclosed Documents.
[71]Expense Reduction Analysts, 324.
Though the issue is not free from difficulty, in my view the 2011 Underwriters have acted in a way that is inconsistent with the 2011 Underwriters objecting to the adducing of the evidence in the Disclosed Documents. The provision of the Disclosed Documents (or copies) was not inadvertent or effected by mistake. As his Honour notes in his Reasons for Judgment, the Disclosed Documents were not provided to the plaintiff under compulsion and were produced by solicitors to their client.[72]
[72]Reasons for Judgment, [71].
Both sides listed the Disclosed Documents in their list of documents in this proceeding as subject to ‘joint privilege’ as between Campbell and the 2011 Underwriters. Putting to one side the question of whether that characterisation is correct (about which I express no view), provision of documents or copy documents so characterised would not have signalled to the solicitor for Campbell that the disclosure (as between Campbell and the 2011 Underwriters) was inadvertent or could reasonably be suspected to be inadvertent. Further, this characterisation (as being subject to ‘joint privilege’) is subsequent to conduct which is consistent with Campbell and the 2011 Underwriters taking the view that no privilege existed between each other as joint privilege holders with respect to the Disclosed Documents. There is no evidence of any request being made for their return. No application has been made to restrain their use. Furthermore, some of the documents have been relied upon by Campbell in its Reply and Defence to the Counterclaim dated 30 August 2013.[73] I am satisfied that any client legal privilege with respect to the Disclosed Documents has been lost.
[73]Reply and defence to counterclaim dated 30 August 2013, [8(x), (xii) and (xvi)], Appeal Book, 106-119.
Senior Counsel for the 2011 Underwriters also sought to rely on s 122 of the Evidence Act 2008 (Vic) to deny a waiver of privilege. Section 122 relevantly provides:
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.
Section 122(3)(a) provides that a party is taken to have acted inconsistently with that party objecting to the adducing of evidence where they have ‘knowingly and voluntarily’ disclosed the substance of the evidence to another person. This deeming provision will not be engaged if the elements of s 122(4) are satisfied.
Senior Counsel particularly relied on s 122(4), in effect submitting that there is no loss of privilege by knowing and voluntary disclosure where there has been an unauthorised disclosure of documents. This submission was supported by the evidence of Ms Mullins, who deposed that the 2011 Underwriters did not instruct McCabe Terrill to release the documents to Campbell, nor to waive any claims of privilege over them.
But s 122(4) does not completely answer the point raised by the 2011 Underwriters. It addresses one aspect of potential inconsistency. It does not deal with the question of whether the client or party has continued to act in a way which is inconsistent with that client or party objecting to the adducing of the evidence (or the maintenance of privilege).
Even if it is accepted that the 2011 Underwriters’ privilege in the documents was not lost at the initial point of disclosure (by operation of s 122(4)), in my view, this does not determine the effect of the subsequent conduct of the disclosing party. The Disclosed Documents were disclosed in March 2013. As outlined earlier, the 2011 Underwriters and their lawyers have not since sought to restrain the use of the documents, nor have they sought to have the documents returned. Indeed, some of the Disclosed Documents have found their way in to Campbell’s pleadings. Whilst it is unclear precisely when the 2011 Underwriters discovered that the documents had been disclosed, they must be taken to have known that some of the documents had been disclosed when Campbell filed its Reply and Defence to Counterclaim on 30 August 2013, and certainly by the time submissions were filed on 19 February 2014 in relation to the hearing before the Associate Judge.
In taking no steps to recover or limit the use of the Disclosed Documents, the 2011 Underwriters have, over many months, acted in a way inconsistent with the maintenance of privilege over the documents.
In this way, any client legal privilege that may still have subsisted in the documents, following their initial deliberate, but unauthorised, disclosure, has, in my view, been lost by the subsequent conduct of the 2011 Underwriters in failing to protect their privilege, such conduct being wholly inconsistent with the maintenance of privilege in the Disclosed Documents.
This finding has the further consequence that the documents referred to in the Disclosed Documents, which are necessary to a proper understanding of the Disclosed Documents, are also required to be produced.[74] Without the attachments the reader is left to speculate on the content of the communication. In my view, the attachments are essential to a proper understanding of the relevant Disclosed Documents.
[74]British American Tobacco v Cowell (2002) 7 VR 524, [121].
In the circumstances I will order production of:
(a)the ‘attached letter’, and the ‘attached...memo and docs relating to the product efficacy issue’ referred to in the 7 September 2012 email from Barry Josephs to Craig Terrill;[75]
(b)the ‘attached email’ referred to in the email dated 18 September 2012 (4.11pm) from Barry Josephs to Matthew Barrett;[76] and
(c)the ‘attached...letters of advice dated 7, 17 and 18 September 2012’ and ‘our client’s settlement instructions in response’ referred to in the email dated 18 September 2012 (8.07pm) from Barry Josephs to Matthew Barrett.[77]
[75]Appeal Book, 269.
[76]Appeal Book, 285.
[77]Appeal Book, 286.
Conclusion
In my opinion, the appeal should be allowed on grounds 1, 3, 4 and 6. It is unnecessary to decide ground 7. The decision of the Associate Judge should be varied to require production of documents limited to the documents referred to in the Disclosed Documents, specified in paragraph 76 of these reasons. It follows that the orders of the Associate Judge requiring production of all of the documents should be set aside and orders should be made in lieu thereof to give effect to these reasons.
SCHEDULE OF PARTIES
S CI 2013 2833
BETWEEN:
COLIN CAMPBELL (CHEMICALS) PTY LTD (ACN 000 045 590)
Plaintiff
-and
THE MEMBERS OF LLOYD'S SYNDICATE QBE CASUALTY
386 (DAC 386)
First Defendant
-and-
THE MEMBERS OF LLOYD'S SYNDICATE AEGIS (AES 1225)
Second Defendant
-and-
THE MEMBERS OF LLOYD'S SYNDICATE NOVAE (NVA 2007)
(for the 2010/2011 policy year)
Third Defendant
-and-
THE MEMBERS OF LLOYD'S SYNDICATE NOVAE (NVA 2007)
(for the 2011/2012 policy year)
Fourth Defendant
-and-
MEMBERS OF LLOYD'S SYNDICATE CHAUCER (CSL 1084)
Fifth Defendant
-and-
JARDINE LLOYD THOMPSON PTY LTD (ACN 009 098 864)
Sixth Defendant
-and-
THE MEMBERS OF LLOYD'S SYNDICATE ARCH (AAL 2012)
Seventh Defendant
1