Dowling v Dowling
[2015] VSC 412
•12 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT - LIST C
S CI 2014 02463
| JAMES ANTHONY DOWLING | Plaintiff |
| v | |
| JOHN MICHAEL DOWLING and others according to the schedule attached | Defendants |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 July 2015 |
DATE OF JUDGMENT: | 12 August 2015 |
CASE MAY BE CITED AS: | Dowling v Dowling |
MEDIUM NEUTRAL CITATION: | [2015] VSC 412 |
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PRACTICE AND PROCEDURE – Client legal privilege – Waiver of privilege – Paragon Finance plc v Freshfields (a firm) [1999] 1 WLR 1183 - Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd [2015] VSCA 101 – Evidence Act2008 (Vic) ss 55, 122 – Supreme Court (General Civil Procedure) Rules 2005 r 29.01.1 – Civil Procedure Act 2010 (Vic) s 26.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Booth | Browne & Co Solicitors and Consultants |
| For the First to Fifth Defendants | Mr J Nixon | Hargrave Ambrose & Co |
| For the Sixth Defendant | No appearance. | Lander & Rogers |
| For the Seventh Defendant | Mr C Juebner | Minter Ellison |
HER HONOUR:
Introduction
The seventh defendant filed a summons on 27 April 2015, and an amended summons on 15 July 2015. The amended summons sought inspection of eight documents listed in the plaintiff’s amended list of documents dated 14 July 2015 and a declaration that any privilege over the documents had been waived. By summons filed 1 June 2015, the first to fifth defendants also sought an order that the plaintiff produce the eight documents for inspection. The plaintiff opposed both summonses. The sixth defendant did not seek to be heard in relation to either summons.
A reference to ‘the defendants’ in this judgment is a reference to all defendants except the sixth defendant.
The seventh defendant’s summons was heard on the morning of 23 July 2015 and the first to fifth defendants’ summons was heard that afternoon. The summonses were heard separately, although they canvassed similar factual and legal issues. The seventh defendant had been given a copy of one of the documents over which the plaintiff asserted privilege on the condition that it not be provided to the other defendants or third parties. Accordingly, in order to keep that document confidential, the hearings for the summons occurred separately. However, it is efficient and appropriate to deal with both summons in this judgment given they canvas similar factual and legal issues and concern the same eight documents.
Summary
For the reasons outlined below, the Court declines the defendants’ applications to inspect the documents. Privilege has not been waived in respect of the documents.
Background
The plaintiff issued proceedings against the first to fifth defendants by writ filed on 21 May 2014. The first to fifth defendants are the brothers of the plaintiff. The plaintiff and the first to fifth defendants are in dispute as to the plaintiff’s separation from the family’s various agricultural businesses.
On 5 September 2014, Croft J made orders giving the plaintiff leave to file and serve an amended writ and statement of claim joining a law firm, Hargraves Solicitors, and also an accounting firm, Belmores, as defendants to the proceeding. The law firm had been representing the first to fifth defendants in the proceeding. The law firm became the seventh defendant and ceased to represent the first to fifth defendants in the proceeding.
The plaintiff filed an amended writ on 26 September 2014. The plaintiff’s claim against the seventh defendant is made in contract and in tort. It claims the seventh defendant had a duty of care and breached it by failing to act in the interests of the plaintiff in relation to all work and services performed for him, to exercise all the skill, care and diligence of a competent solicitor, and to act in good faith and fidelity towards the plaintiff. In particular, the plaintiff alleges that the seventh defendant had a conflict of interest in acting for the plaintiff and the first to fifth defendants regarding the plaintiff’s separation of his interest in the relevant operations and assets, that it did not adequately analyse or advise the plaintiff to obtain independent financial or accounting advice and, in particular, an independent valuation of the relevant assets and certain financial information.
The plaintiff claims that the breaches of the seventh defendant caused him loss and damage, in particular, if, as the first to fifth defendants contend, the plaintiff has no further entitlement from them by virtue of the second intergenerational family deed executed in July 2012 (‘the Deed’). The plaintiff alleges that the seventh defendant encouraged and permitted the plaintiff to enter into the Deed. It is alleged that this would not have been the case if the seventh defendant had not been found guilty of breaches of contract and negligence.
The seventh defendant filed a defence on 12 November 2014. It denies breaches of contract and denies it breached its duty of care. The defence states, inter alia, that if the seventh defendant is found to be liable, then the loss and damage was caused by or contributed to by the conduct, negligence or fault of the plaintiff himself (paragraph 28 of the defence). It alleges that the plaintiff failed to:
(a) seek any, or adequate, independent legal or other advice prior to entering into the Deed (or an earlier deed);
(b) make enquiries or to obtain financial and other information regarding the relevant assets and operations; and
(c) undertake enquiries or adequate enquiries as to the value of his interest in the relevant assets and operations as a result of the separation of interests.
The first to fifth defendants filed a defence and counterclaim on 18 August 2014, and then an amended defence and counterclaim on 3 September 2014. The first to fifth defendants claim that the separation was documented in the Deed and in two variations made on 28 August 2012 and 1 November 2012. They claim that the plaintiff has received all his entitlements and further, that the plaintiff owes them money pursuant to the Deed and its variations.
It is common ground that prior to the proceedings there was a period where:
(a) the seventh defendant had provided legal advice to the plaintiff as well as the first to fifth defendants;
(b) that one solicitor of the seventh defendant provided advice to the plaintiff regarding the separation of his interests from his brothers;
(c) concurrently, another solicitor of the seventh defendant provided advice to the first to fifth defendants; and
(d) concurrently, the firm representing the plaintiff in these proceedings (‘the instructing firm’) provided the plaintiff with legal advice.
It is useful to outline some of the relevant dates below regarding the eight documents.
March 2012 Plaintiff retains the seventh defendant to provide legal advice regarding the Deed and other matters (paragraph 23 of the amended statement of claim dated 26 September 2014, paragraph 23(a) of the seventh defendant’s defence dated 11 November 2014). July 2012 Deed executed by plaintiff and first to fifth defendants. 13-15 August 2012 Instructing firm communicates with plaintiff’s wife (see description of documents nos 531-533 of the plaintiff’s amended list of documents). 15-16 August 2012 Email chain between the plaintiff’s wife and the third defendant’s wife, forwarded to the instructing firm (see description of document no 534). 16 August 2012 File notes of conference between plaintiff, his wife and instructing firm (see description of document nos 535, 536). 21 August 2012 Letter of advice to plaintiff and his wife from instructing firm (see description of document no 537, the 21 August letter). This was provided within a week to the seventh defendant. 28 August 2012 Memorandum from solicitor at seventh defendant representing plaintiff to solicitor at seventh defendant representing first to fifth defendants regarding variation of terms of Deed (see description of document no 193). 1 November 2012 First to fifth defendants allege agreement with plaintiff to further variations of Deed (this allegation is denied by the plaintiff). 11 December 2012 Letter of advice from the instructing firm to the plaintiff and his wife (see description of document no 538).
It is common ground that the 21 August letter was on the file that the seventh defendant maintained in respect of the plaintiff. In the course of discovery, the instructing firm requested and obtained the original file with the letter on it. The documents in this file were discovered by the plaintiff and are listed in the plaintiff’s amended list of documents at document nos 71-266, save for the 21 August letter.
On 2 February 2015, the seventh defendant’s solicitors received the plaintiff’s list of documents. Between 11 February and 25 March 2015, correspondence was exchanged between the solicitors for these parties regarding privilege. It is unnecessary to detail that confidential correspondence here. It is annexed in confidential exhibits to Mr Greg Carfoot’s affidavit sworn 4 February 2015. The exhibits should remain confidential.
By consent orders, the plaintiff filed an amended list of documents on 14 July 2015. The amended list of documents itemises the eight documents over which privilege is asserted. They are document nos 531-538 of the list of documents. Further, the amended list of documents also amended clause 5(b) of the original list of documents. Clause 5(b) became clause 6(b) in the amended list of documents. It is reiterated below and the changes are underlined:
(b) bundle of documents individually identified below which are subject to legal advice privilege because they contain confidential communications between the plaintiff and his solicitors for the purpose of seeking or giving legal advice which were brought into existence prior to this proceeding but in relation to the dispute which is the subject of this proceeding. The plaintiff also contends that these documents are not relevant to any issue in dispute.
[list of the eight documents follows.]
The plaintiff does not seek to maintain privilege as between himself and the seventh defendant in relation to document No 537 above. [The 21 August letter.] The reason being, that it was a document containing legal advice which he provided to … of the seventh defendant during the course of a solicitor-client relationship with … and for the purpose of obtaining legal advice from … upon the same issue. Privilege in the document and its contents was not waived by its provision to … and has not been waived by the plaintiff subsequently. It remains privileged in the seventh defendant’s hands and cannot be disclosed to any other person (including the parties to this litigation) without the plaintiff’s express permission. He does however maintain privilege as between himself and all of the first to sixth defendants over documents 531-538.
The legal issues for determination were as follows.
(a) Is the evidence relevant?
(b) If so, does privilege apply?
(c) If so, has it been waived?
These issues are each discussed below.
Is the evidence relevant?
Section 55 of the Evidence Act2008 (Vic) addresses relevance. It states:
(1)The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of fact in issue in the proceeding.
(2)In particular, evidence is not taken to be irrelevant only because it relates only to:
(a)the credibility of a witness; or
(b)the admissibility of other evidence; or
(c)a failure to adduce evidence.
Rule 29.01.1(3) of the Supreme Court (General Civil Procedure) Rules 2005 states:
Without limiting rules 29.05 and 29.07, for the purposes of this order, the documents required to be discovered are any of the following documents of which the party giving discovery is after a reasonable search, aware at the time discovery is given –
(a) documents on which the party relies;
(b) documents that adversely affect the party’s own case;
(c) documents that adversely affect another party’s case;
(d) documents that support another party’s case.
The Civil Procedure Act 2010 (Vic) was not referred to in the course of argument by the parties in relation to this application. Section 26(1) of that Act provides that parties:
must disclose to each party the existence of all documents that are, or have been, in that person’s possession, custody or control –
(a) of which the person is aware; and
(b) which the person considers, or ought reasonably consider, are critical to the resolution of the dispute.
The law on relevance is well-established. Case law in relation to s 55 is summarised by a leading Australian commentator.[1] Relevantly, some of the principles are as follows:
[1]Stephen Odgers, Uniform Evidence Law (Thomson Reuters, 11th ed, 2014) 201.
(a) The definition of relevance has a broad interpretation and the test is whether evidence could (rather than would) effect the assessment of probability of the existence of a fact in issue in the proceeding.
(b) ‘Where a judge is in doubt whether a connection exists between the evidence and a “fact in issue” but is satisfied that a reasonable fact-finder could properly find such a connection, the evidence is relevant evidence’.[2]
(c) There must be a rational connection between the evidence and facts in issue. Evidence will not be relevant if the only issue to which it relates is a ‘question of law’.[3]
[2]Ibid 202.
[3]Ibid 205.
The correspondence referred to above clarifies that the eight documents were originally included in the plaintiff’s list of documents but were not itemised as relevant because they were covered in the privilege section, namely, Schedule 1, Part 2, paragraph 5(b). As evident from the correspondence above, the plaintiff’s amended list of documents sought to deny the relevance of these documents.
Plaintiff’s submissions
The plaintiff submitted that the documents were not relevant to any issue in dispute because:
(a) the existence or relevance had not been pleaded; and
(b) even it was, it could not be relevant as the defendants rely on the Deed.
Defendants’ submissions
The seventh defendant submitted that the 21 August letter was relevant to the issue of causation and in particular, the plaintiff’s state of mind at around the time he entered into the Deed.
The defendants submitted that the 21 August letter was relevant because the plaintiff in his reply to paragraphs 17A and 17B of the first to fifth defendants’ defence dated 24 June 2015 (his reply), asserted that he did not authorise the Deed and was not sufficiently advised by the seventh defendant about the Deed and there was a misrepresentation.
Paragraphs 17A and 17B of the first to fifth defendants’ defence allege a variation of the Deed on terms set out in a memorandum from the solicitor at the seventh defendant representing the plaintiff to the other solicitor at the seventh defendant representing the first to fifth defendants. The particulars relied upon for the alleged agreement to vary the Deed are certain documents and a conversation between the two solicitors. Paragraph 17B alleges that, further or in the alternative, to the Deed representing full and final settlement of all matters between the plaintiff and first to fifth defendants, that upon the exchange of contracts for the transfer of a particular property to the plaintiff (as per paragraph 5 of the memorandum), the Deed as varied represented full and final settlement of all matters between the plaintiff and the first to fifth defendants.
In paragraph 4 of his reply, the plaintiff states that insofar as paragraph 17A raises any allegation of material fact against him, it is denied. In paragraph 5 of his reply, the plaintiff denies authorising or consenting to the agreement. This denial clearly relates to the alleged 28 August 2012 variation agreement. In the alternative, the plaintiff pleads in paragraph 6, that if such an agreement was authorised by him (which is denied) then he was not sufficiently advised by the seventh defendant (or the particular solicitors) of the consequences and effect of it, and /or it resulted from a breach of the seventh defendant’s fiduciary duties to the plaintiff and is voidable; and/or the agreement was procured by a misrepresentation by the seventh defendant (and/or its particular solicitors) to the plaintiff in or to the effect that they (or either of them) did not disclose to the plaintiff the true value or extent of the assets the subject of the alleged conversation, and is liable to be set aside and that appropriate orders for restitution be made. The seventh defendant submitted that this was a back-handed allegation against it.
Counsel for the first to fifth defendants submitted that the plaintiff had included the eight documents in his list of documents and accordingly the plaintiff’s initial position was that they were now relevant. Counsel submitted that the plaintiff had a stunning change in position by now asserting that the documents were not relevant.
Application
The 21 August letter is relevant to the issues in dispute between the plaintiff and the first to fifth defendants. In order to maintain the confidentiality of the 21 August letter, the Court does not elaborate on why it is relevant.
The 21 August letter is not relevant to the plaintiff’s state of mind at the time he entered into the Deed as it is dated approximately one month after the Deed. It does not evidence the plaintiff’s state of mind as at the time of entering into the Deed. The issue concerning the plaintiff’s state of mind is also referred to in the waiver section below.
The 21 August letter is relevant to the issues raised in the plaintiff’s reply to the first to fifth defendant dated 24 June 2015.
The question is whether, as a consequence of the allegations against the seventh defendant in the reply, the 21 August letter also becomes relevant to the issues in dispute between the plaintiff and the seventh defendant even though his reply is not addressed to the seventh defendant and the allegations have not been pleaded in the claim against the seventh defendant. His reply, as currently pleaded, is not relevant to the dispute, as currently pleaded, between the plaintiff and seventh defendant.
In relation to the reference made in submissions that the plaintiff had originally included (but not itemised) reference to the 21 August letter in his list of documents in the privileged section, and then in the amended list of documents (itemised), the Court notes that it is appropriate that there is reference to the 21 August letter in the list of documents as it is relevant to the issues between the plaintiff and first to fifth defendants.
Does privilege apply?
At the hearings of the summonses, it was sensibly conceded that the documents were privileged. The Court has inspected the documents and is satisfied that they are privileged.
Has privilege been waived?
Defendants’ submissions
The defendants submitted that issue waiver pursuant to s 122(2) had occurred. That is, the plaintiff had acted inconsistently with the maintenance of the privilege pursuant to s 122(2). The defendants relied solely on issue waiver as opposed to disclosure waiver. They content that privilege was waived by the commencement of the proceedings against the seventh defendant.
The seven defendant submitted that the issue waiver cases that were relevant to this determination were the cases that concerned actions against law firms for negligence.
The seventh defendant submitted that it was not possible to waive privilege selectively. That is, if the plaintiff waived privilege, it has been waived against the whole world. The first to fifth defendant submitted that in circumstances such as this, namely of issue waiver, the plaintiff had waived privilege so that all parties are entitled to inspect the documents.
As discussed above, the 21 August letter was disclosed to the seventh defendant. The seventh defendant had been acting for both the plaintiff and the first to fifth defendants. Accordingly, the provision of the 21 August letter to the seventh defendant, meant that the 21 August letter was provided not just to the solicitor who had been advising the plaintiff previously, but also to the seventh defendant more generally. At the hearing, the Court enquired with the first to fifth defendant’s counsel as to whether this meant that the solicitor of the seventh defendant who had been advising the first to fifth defendants had not in fact seen the 21 August letter.
At the hearing of the summonses, counsel for the seventh defendant informed the Court that, the solicitor of the seventh defendant, who had been advising the first to fifth defendants, had not seen the 21 August letter. If that solicitor had seen the letter, then disclosure waiver may also have been an issue. He had not and disclosure waiver was not argued at the hearing by either counsel for defendants.
Plaintiff’s submissions
In paragraph 37 of its submissions, the plaintiff states that client legal privilege is an important common law immunity that is not lightly to be abrogated.[4]
[4]Liquorland (Australia) Pty Ltd v Anghie (2003) 7 VR 27, 30 [11] (Byrne J) (‘Liquorland’).
The plaintiff submitted that to establish there has been waiver the defendants needed to show that the privileged communications contributed to or affected the relevant state of mind and that it would be unfair for the plaintiff to withhold those communications from the defendant.
The plaintiff submitted that, at best, the 21 Aug letter showed the plaintiff’s state of mind at the time of entering into the Deed. The 21 August letter and other documents were brought into existence weeks after the Deed was executed. Further, the plaintiff submitted there had been no relevant unfair inconsistency.
The plaintiff also submitted that it was possible to waive privilege selectively.
Applicable principles
Section 122 of the Evidence Act states:
…
(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 evidence because it would result in a disclosure of a kind referred to in s 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 issue to another person; or
(b)the substance of the evidence has been disclosed with the express or implied consent of the client or party.
…
Under the common law, as with s 122(2), the question as to whether there has been an implied waiver is one answered by whether there has been inconsistency. The High Court considered this issue, using law firm negligence cases as an example, in Mann v Carnell[5] (a case concerning disclosure waiver). Gleeson CJ, Gaudron, Gummow and Callinan JJ held:
It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include… the institution of proceedings for professional negligence against a lawyer, in which the lawyer’s evidence as to advice given to the client will be received.[6]
[5](1999) 201 CLR 1.
[6]Ibid 13 [28] [Citations omitted].
In respect of issue waiver, it is possible that simply by instituting proceedings, a party may waive legal professional privilege.[7]
[7]Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd [2015] VSCA 101, [30] quoting Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2007] VSCA 224, [14].
As to whether there has been a waiver, each case depends on its circumstances.
The policy reason behind issue waiver in cases of law firm negligence is outlined by Bingham CJ in Paragon Finance plc v Freshfields (a firm): [8]
When a client sues a solicitor who has formerly acted for him, complaining that a solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rational of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence. But, since the implied waiver applies to communications between solicitor and client, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware.[9]
[8][1999] 1 WLR 1183 (‘Paragon Finance’).
[9]Ibid 1188.
An action in negligence against a law firm does not necessarily have the consequence that the plaintiff waives legal professional privilege in respect of advice received from other law firms. Paragon Finance concerned a negligence case against Freshfields and the parties agreed that there was an implied waiver of privilege in relation to the communications between the plaintiff and Freshfields. What was in issue was whether there was also a waiver over communications between the plaintiff and its new solicitors, Slaughter and May. It was common ground that the documents sought were relevant to the proceedings:[10]
The question is whether the plaintiffs have also impliedly waived any claim to legal professional privilege in relation to confidential communications between them and Slaughter & May relation to the pursuit and settlement of claims arising from those transactions. Approaching this question as one of pure principle, we conclude they have not. The plaintiffs have not sued Slaughter & May. They have not invited the court to adjudicate on any question arising from their confidential relationship with Slaughter & May, and so have not brought that confidential relationship into the public domain. They have done nothing to release Slaughter & May from the obligation of confidence by which they are bound. They have chosen to subject to their relationship with Freshfields to public scrutiny, but not their relationship with Slaughter & May. They are not seeking to pick and choose among the confidential communications passing between themselves and Slaughter & May; none of them is (so far) in the forensic arena. It is open to Freshfields, by way of defence, to rely on any communication passing between themselves and the plaintiffs; to hold that the plaintiffs have impliedly waived privilege in relation to confidential communications between themselves and Slaughter & May would be, not to enable Freshfields to rely on communications of which they are already aware, but to disclose to them communications of which they have no knowledge… the plaintiffs are correct in submitting that the judge’s conclusion is inconsistent with the principles which govern implied waiver of legal professional privilege. [11]
[10]Ibid 1187.
[11]Ibid 1188-1189.
Chief Justice Bingham referred to the judgment of Blackburne J in Banque Bruxelles Lambert SA v Simmons & Simmons,[12] noting it was a correct understanding of the relevant principle:[13]
In my judgment the waiver applies only to communications between the client and the solicitor whom he is suing and not to privileged communications between the client and some other solicitor, and I do not consider that the decision in the Lillicrap case… is intended to establish any wider principle. Mr Hart submitted that the touchstone is that waiver extends…. To ‘all matters….relevant to the issue between the parties and which it would be unfair to exclude’ so that it can extend to privileged communications between the client and another solicitor (unconnected with the defendant solicitor) bearing on the issue in the suit. If that were correct it is difficult to see why the waiver should not equally extend to privileged communications between a client and his solicitor where the client is suing someone who was not his solicitor and who owed no duty of confidence in relation to any communication passing between them.
[12]Unreported, High Court of Justice of England and Wales, 23 November 1995.
[13]Paragon Finance, 1193, Banque Bruxelles Lambert SA v Simmons and Simmons (a firm) (Unreported, Blackburne J, 23 November 1995) 40.
The issue of fairness is relevant in considering whether there has been an inconsistency in the conduct of the party asserting privilege. Chief Justice Bingham noted in respect of the issue of fairness:
Fairness is an important part of the reason why a solicitor who is sued cannot be required to respect the confidentiality of his relationship with the client who is suing him; but, save as between the client and the solicitor he is suing, fairness is not the touchstone by which it is determined whether a client has or has not impliedly waived his privilege.[14]
[14] Paragon Finance [1999] 1 WLR 1183, 1194.
In Mann v Carnell, High Court has emphasised that the issue is not fairness at large:
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. [15]
[15](1999) 201 CLR 1, 13 [29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ). The High Court has subsequently held that these considerations apply with equal force to s 122(2) of the Evidence Act 1995 (NSW) although Mann v Carnell was a case concerning waiver at common law, see, Expense Reduction Analyst Group v Armstrong 250 CLR 303, 316 [31].
In Liquorland, Byrne J stated that unfairness (in the context of issue waiver):
…is typically characterised as an inconsistency between the position of the client seeking a finding as to an issue upon which the privilege communication had a bearing and, at the same time, withholding the content of the communication from that opponent and the court. This will usually involve the consideration of what is the precise issue and how it is said that the communication impacts upon the issue.[16]
[16]Liquorland (2003) 7 VR 27, 39 [32].
Where state of mind is in issue, waiver will arise only where there has been unfair inconsistency:
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.[17]
[17]Ibid 42 [41].
In Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd,[18] Dixon AJA (with Mandie and Beach JJA agreeing) held:
It is the privilege holder’s conduct that effects waiver. Here, waiver is not the consequence of the privilege holder’s disclosure of confidential communications to the senior managers; it is the consequence of the issue that was pleaded. Where the privilege holder puts into issue the state of mind of another who is aware of the confidential communications, the waiver of the privilege is in relation to the issue.[19]
[18][2015] VSCA 101 (‘Vic Hotel’).
[19]Ibid [35].
His Honour went on to cite the Full Court of the Federal Court in Commissioner of Taxation v Rio Tinto Ltd:[20]
…the question is not whether the Commissioner has put his state of mind in issue but whether he has directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, either in making a claim or by way of defence. Put another way, to adapt Allsop J’s language in DSE, has the Commissioner (being the privilege holder) make an assertion as part of his or her case in the litigation that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege?[21]
[20](2006) 151 FCR 341, 359 [61].
[21] Vic Hotel [2015] VSCA 101, [39], Commissioner of Taxation v Rio Tinto (2006) 151 FCR 341, 360
Justice Dixon went on to say that the relevant state of mind is at the time the party engaged in the conduct attacked by the pleading:
It is self-evident that a person might, on reading a term of a contract, honestly and reasonably believe that particular conduct by a party to the contract would be in breach of the term. It is equally self-evident that the same person might change his or her mind – and be of a different state of mind – if informed that legal advice was that although the conduct would be in apparent breach of the contractual term, the term was unenforceable…. The relevant state of mind will be that held by the actor when engaging in the conduct attacked by the pleading, and it cannot be reasonably, or fairly identified by reference to only part of the information that was available to the actor prior to the relevant time. All of the relevant information available to the actor at the relevant time is put in issue.
…
I accept that merely putting a state of mind in issue will not, of itself, give rise to a waiver of privilege in respect of legal advice that is relevant to the existence of that state of mind.[22]
[22]Ibid [43] [Emphasis added].
Considering whether the content of privileged communications were likely to have impacted upon a party’s statement of mind, Byrne J observed it would be difficult to suppose that the sort of letter which a legal advisor might have written to a party prior to the issue in dispute could have a bearing up the state of mind.[23]
[23] ANZ v ANZCover Insurance Pty Ltd (No.2) [2005] VSC 221, [7].
It is insufficient merely to assert state of mind as an issue. In Southern Equities Corp Ltd (in liq) v Arthur Andersen & Co,[24] Bleby J noted:
In my opinion the cases show that it is not sufficient merely to demonstrate that a party’s state of mind or knowledge is in issue in order to succeed on an application that documents privileged from production on the ground of legal professional privilege should be produced. If that were the case, privilege would almost always be waived in cases of misrepresentation, negligence and misleading and deceptive conduct where questions of a plaintiff’s reliance or state of mind was in issue, and a list of documents showed that at or about the relevant time the plaintiff had some sort of legal advice which might have had some bearing on the plaintiff’s state of mind. 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.[25]
[24]Southern Equities Corporation Ltd v Arthur Andersen & Co (1997) 70 SASR 166
[25]Ibid.
In Vic Hotels, the Court of Appeal held that it was unfair for the respondent to make an allegation that an applicant was informed of its legal rights through disclosure of terms to senior managers while denying the applicant an opportunity to allege that they knew the terms created no legally enforceable obligation in circumstances where the respondent had disclosed to the applicant’s senior managers that it had legal advice to that effect. Justice Dixon held this information was relevant and ‘necessarily contributes to determining the state of mind that must be established by [the respondent] to succeed in its claim.’[26]
[26]Vic Hotel [2015] VSCA 101, [53].
His Honour went on to state:
To allow the identified error to go uncorrected would impose substantial injustice on the applicants. This is a plain case. The effect of the order will be to prevent [the applicant] from adducing evidence relevant to its state of mind. The injustice in permitting [the respondent] to refer to those parts of its communications with the senior managers that advance its case on state of mind while precluding [the respondent] from referring to other parts of those communications on the issue is manifest.[27]
[27]Ibid [59].
Waiver need not be to all the world but may be limited. The plaintiff’s counsel drew the Court’s attention to the Goldberg v NG.[28]In particular, to the dissent judgment by Toohey J which stated:
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.[29]
…
The concept of limited waiver of professional privilege is well accepted. Where some uncertainty has arisen is the point at which ideas of fairness or unfairness intrude. Where the issue is one of limited waiver considerations of fairness do not arise.[30]
[28](1995) 185 CLR 83.
[29]Ibid 96.
[30]Ibid 109.
The majority held that:
Where two or more distinct procedures are related in a sense that there is general correspondence between the parties and they arise out of either the same dispute or closely connected disputes, conduct in relation to one proceeding or procedure, whether anticipated or already commenced, can found an imputed waiver for the purposes of all the proceedings and procedures.[31]
[31]Ibid 84.
Application of principles
In this case, the plaintiff is not seeking to maintain privilege over documents which disclose incidents of the relationship between he and his former solicitors (the seventh defendant). Rather, he is seeking to maintain privilege over a communication between he and other solicitors (the instructing firm) and which he shared with the seventh defendant on a privileged basis. (It is common ground between the plaintiff and seventh defendant that privilege was not waived by the plaintiff providing the 21 August letter to the seventh defendant whilst the seventh defendant was providing him with legal advice.)
In this matter, the 21 August letter was not a document generated by the law firm being sued (ie. the seventh defendant) but a document generated by the instructing firm. The 21 August letter was however on the seventh defendant’s file because it had been provided by the plaintiff or his agent in the course of seeking legal advice.
The action against the seventh defendant, former solicitors, did not automatically give rise to a waiver in respect of the plaintiff’s other solicitors (the instructing firm).
There has been no unfair inconsistency that would give rise to waiver in respect of the seventh defendant. As discussed above, the 21 August letter is not relevant to the state of mind of the plaintiff at the relevant time (entering into the Deed).
There has been no unfair inconsistency that would give rise to waiver in respect of the first to fifth defendants. The plaintiff has acted consistently with maintaining privilege in respect of those defendants.
Remaining documents
The parties sensibly focused submissions on the 21 August letter. It was not asserted that privilege had been waived in those documents other than via a waiver over the 21 August letter.
Conclusion
The eight documents continue to remain privileged. The defendants’ summonses are dismissed for the reasons above.
The Court will hear the parties on costs and the form of orders proposed. It is anticipated that this will include orders regarding the confidentiality of the transcript of the hearing of the seventh defendant’s summons in this matter and any ancillary orders necessary to maintain the confidentiality of the eight privileged documents.
SCHEDULE OF PARTIES
| JAMES ANTHONY DOWLING | Plaintiff |
| v | |
| JOHN MICHAEL DOWLING | First Defendant |
| CHRISTOPHER JAMES DOWLING | Second Defendant |
| TERENCE JOSEPH DOWLING | Third Defendant |
| ANTHONY CLEMENT DOWLING | Fourth Defendant |
| DANIEL THOMAS DOWLING | Fifth Defendant |
| ACN 007 062 866 PTY LTD (ACN 007 062 866) trading as BELMORES | Sixth Defendant |
| HARGRAVES SOLICITORS (a firm) | Seventh Defendant |
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