Nicholas Richard Whitlam v Insurance Australia Group Limited

[2005] NSWSC 96

CITATION:	Nicholas Richard Whitlam v Insurance Australia Group Limited [2005] NSWSC 96
HEARING DATE(S):	01/02/05, 02/02/05
JUDGMENT DATE :	2 February 2005
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Waiver by defendant of legal professional privilege.

CATCHWORDS:	Practice and Procedure - Evidence - Waiver of legal professional privilege
LEGISLATION CITED:	Fair Trading Act (1997) (NSW) Trade Practices Act (1974) (Cth)
CASES CITED:	Attorney General (NT) v Maurice (1986) 161 CLR 475 Benecke v National Australia Bank (1993) 35 NSWLR 110 Goldberg v Ng (1995) 185 CLR 83 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 1084 Telstra v BT Australasia Pty Ltd (1998) 85 FCR 152 Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347 United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2002] NSWSC 1142 Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044
PARTIES:	Nicholas Richard Whitlam (Plaintiff) Insurance Australia Group (Defendant)
FILE NUMBER(S):	SC 50035/04
COUNSEL:	Mr A Bannon SC, Mr J Stephenson (Plaintiff) Mr T Bathurst QC, Mr A Leopold (Defendant)
SOLICITORS:	Watson Mangioni (Plaintiff) Mallesons Stephen Jaques (Defendant)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 2 February 2005 ex tempore
Revised 23 February 2005

50035/04 Nicholas Richard Whitlam v Insurance Australia Group Limited

JUDGMENT

Overview

1 The position which faced the Court at the commencement of the final hearing was that both parties had telegraphed an intention to seek particular orders on motions filed by them. The plaintiff's motion for further discovery had been filed on 25 January 2005. The defendant's notice of motion filed on the same date sought discovery of particular categories of documents. The defendant's motion may be reasonably described as a responsive motion.

2 What occurred was that for reasons of efficiency, towards the end of the first day of hearing the Court indicated to the parties that a draft judgment had been prepared and that rather than actually hand down the judgment it seemed appropriate to indicate to both parties what it was that the judgment was likely to contain and to see whether or not the parties overnight could agree in some fashion so that these motions would not have to further be disputed.

3 At the commencement of the second days hearing this morning, Mr Bannon, leading counsel for Mr Whitlam, made plain what had occurred overnight and generally outlined what the plaintiff's approach to discovery would be during the balance of the hearing. Both parties seem to be content, therefore, for me presently to deliver the judgment foreshadowed late yesterday.

4 Before doing so, it has to be accepted that the judgment is to be read in the light of what passed between counsel and the Court at the commencement of the hearing today.

5 I commence by dealing with the plaintiff's motion filed on 25 January 2005. That motion sought the following orders regarding discovery and inspection from the defendant:

“1. That IAG give discovery and allow inspection of all documents recording or relating to any advice provided to IAG in respect of a payment, or possible payment, of a retirement benefit to Mr Whitlam, including without limitation:

(a) advices prepared by Mallesons Stephen Jaques;

(b) advices prepared by counsel including without limitation Mr Bathurst QC;

(c) instructions to counsel; and/or

(d) file notes recording or referring to legal advice.

2. That IAG give discovery and allow inspection of all documents recording or relating to any advice provided to IAG in respect of the litigation between the Australian Securities and Investments Commission and Mr Whitlam, including without limitation:

(a) advices prepared by Mallesons Stephen Jaques;

(b) advices prepared by counsel including without limitation Mr Bathurst QC;

(c) instructions to counsel; and/or

(d) file notes recording or referring to legal advice.

6 Written submissions had been received from both parties in relation to the motion.

The principles

7 There is no serious issue as to the relevant principles.

· In Telstra v BT Australasia Pty Ltd (1998) 85 FCR 152 at 167, Branson and Lehane JJ referred to the principle that whenever a person’s state of mind is relevant to an issue in the proceedings, privilege is taken to be waived in relation to legal advice that may have played a part in the formation of that state of mind.

· In Telstra, Branson and Lehane JJ stated at page 165 as follows:

“At common law it has also been held, in cases in which the state of mind of a party was in issue in the proceedings, that evidence could be called to establish the terms of legal advice, relevant to that party’s state of mind, provided to that party. Thus in Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347, where it was necessary for the defendant to prove what knowledge the plaintiff had as to her legal rights, Jordan CJ held that privilege could not be invoked to prevent proof of relevant legal advice provided to her.”

· Also at page 165 of their joint judgment, Branson and Lehane JJ stated:

“The decisions of the High Court in Attorney General (NT) v Maurice (1986) 161 CLR 475 and Goldberg v Ng (1995) 185 CLR 83 are cases concerning imputed waiver of privilege. In each case the party whose privilege was in issue had made some relevant use of the privileged material: the issue was whether such use constituted an implied waiver of the privilege. The High Court held in each case that such issue was to be determined by reference to considerations of fairness, and not by reference to the actual intention of the party who had made use of the material.

A similar approach was taken by the Court of Appeal in Benecke v National Australia Bank (1993) 35 NSWLR 110. In that case Gleeson CJ stated (at 111-112):

“The law permits the search for truth in legal proceedings to yield, in certain circumstances, to the public interest in publicising the secrecy of communication between lawyer and client. In the present case, however, the appellant herself lifted the veil of secrecy by giving the version of the communications. Thereafter there was no reason in principle whey the pursuit of truth should not take its course, or why the Court should be inhibited in seeking to ascertain the true facts concerning those communications.”

8 As the defendant's counsel have submitted there has been significant elaboration on the principles outlined in Telstra, particularly to be found in Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044, at [12] [a decision of Hodgson CJ in Eq., as his Honour then was], which has since been referred to with apparent approval on a number of occasions - see, e.g., United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2002] NSWSC 1142, at [14]; and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 1084, at [14]. In Wayne Lawrence Hodgson CJ in Eq. said:

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

9 Ultimately each of the factors referred to by Hodgson J requires to be weighed against the particular template thrown up whenever questions of waiver of legal professional privilege or client legal privilege are raised in a particular context.

The instant proceedings and context

10 It is inappropriate to repeat the record. The terms of the amended summons filed on 25 January 2005 are clear. The latest amended defence to the summons filed on 17 Dec 2004 does not require any extensive repetition.

11 The Court has had the additional benefit of receiving detailed written overview submissions from both parties in relation to the matter to be litigated during the final hearing. Those submissions are of particular assistance in throwing up the particular focus likely to be litigated in terms of the pleaded issues.

12 The particular issues which appear to raise the relevance of legal advice concern the plaintiff’s claim that he was induced to retire promptly from his positions as chairman of the board of IAG and as a director of the company by reason of alleged representations made by members of the board to the effect that if he retired he would be paid his full retirement benefit under the policy than being considered. His case is, inter alia, that IAG thereafter acted unconscionably, not only in delaying payment of any retirement benefit, but then in failing to pay the correct amount of the benefit. The amended summons further includes claims grounded upon alleged breaches of section 82 of the Trade Practices Act1974 and/or section 68 of the Fair Trading Act 1997 and there are claims that the conduct of IAG was oppressive to, unfairly prejudicial to or unfairly discriminatory against Mr Whitlam in contravention of section 233 of the Corporations law.

13 It is clear from many of the documents to be found in IAG's proposed tender bundle that legal advice obtained for IAG has not been fully disclosed. In some cases partial disclosure of the substance of some of the legal advice received by IAG appears to have been disclosed.

14 In general terms, a careful examination of the materials to which the plaintiff has drawn attention makes clear, as I see it, that there has been a waiver of legal professional privilege concerning legal advice taken by IAG concerning its decision as to whether to pay a retirement benefit to Mr Whitlam in what amount and at what time and for what reasons. The materials before the Court make entirely clear that the board of IAG claims to have deferred its decision as to whether to pay a retirement benefit to Mr Whitlam in accordance with the Retirement Benefit Policy, initially because of the shareholders resolution which, if adopted, would have prevented the payment of that benefit to him without shareholder approval, and then as a result of the commencement of proceedings by ASIC and in the light of an opinion obtained from senior counsel as to the implications of those proceedings. Pointing to one only of the places where this claim is advanced by ASIC or its chairman or by others, I refer to the letter of 11 October 2002 from Mr Strong the then chairman of IAG to Mr Whitlam [plaintiff’s bundle of documents volume 2: document 2-235].

15 Further, the document behind tab 42 of IAG's proposed tender bundle, being a report or 4 November 2002 by the Group General Counsel, entitled "Mr Whitlam-Retirement Benefit", deals in a number of places with matters concerning the board's reasons for deferring the decision in respect of Mr Whitlam's retirement benefits in late 2001 is suggested as still remaining relevant. Hence one finds a number of statements in this document where matters have been "masked for legal professional privilege". That formulation is to be found on page 2 and in the attachment 1 in the paragraphs numbered 5, 6, 8 and 11. Legal professional privilege has been waived in relation to each of these matters as it seems to me. Likewise, it seems to me that the same privilege has been waived in the same document in the attachment entitled 'chronology' in relation to the entry for 29 October 2001.

16 Further, it seems to me quite clear that against the principles earlier set out, legal professional privilege has been waived in relation to advice provided by Mr Bathurst QC on 29 October 2001 and to the brief provided to Mr Bathurst in respect of that advice.

17 Likewise [although there may be an overlap on the particular advice referred to], legal professional privilege has been waived concerning the content of the additional advice being referred to in the last paragraph on the first page of the minutes of the meeting of the board held on 4 December 2001 [appearing behind tab 38 in the defendant's proposed bundle of documents] and also concerning the matter masked at the top of the second page of the same document. Finally, there has also been a waiver of legal professional privilege in relation to the advices given by Mallesons and by Mr Walker SC [referred to on page 2 of the letter of 23 April 2001 from Mallesons to ASIC and to the Group Secretary and General Counsel of NRMA Insurance Group Limited to be found behind tab 15 of the defendant’s proposed tender bundle].

18 I should make clear that I reject as misconceived the proposition put forward by IAG that in the context of the pleaded issues there is a distinction of significance to the legal professional privilege waiver point by reason of the suggestion that only the conduct of the defendant’s board seen as a ‘corporate organ’ is relevant, as opposed to the obvious relevance in relation to the pleaded issues of the state of mind of then directors of IAG at particular point in times.

19 There is also a very significant case management consideration which requires to be taken into account. The application for access to this wider material has been pressed extremely late, truly at the doorstep of the final hearing. The parties have placed before the Court detail of the past consent orders with respect to discovery and the correspondence which has passed between the parties over an extended period in relation to discovery. It is plain enough from the correspondence that the parties reached an accord in a number of areas. Importantly, IAG agreed not to press its request for Mr Whitlam to give discovery of documents relating to proceedings brought by ASIC on the express basis that Mr Whitlam narrowed his discovery requests.

20 Mr Black has deposed as follows:

“5. Prior to the letter dated 24 December 2004 from Watson Mangioni to Mallesons, the plaintiff has not sought discovery of the further categories of document specified in paragraphs 1-2 of the plaintiff’s motion dated 20 January 2005. Many documents falling within those categories have already been discovered, subject to IAG’s claim for legal professional privilege, as falling within category 3 of the discovery categories ordered by Justice Bergin on 27 August 2004 (Annexure “F”). Other documents which do not fall within that or any other discovery category, including legal advices provided to IAG management concerning the day-to-day conduct of these proceedings, will not have been discovered.

6. The making of orders for further discovery less than one week prior to the commencement of these proceedings, as sought in paragraphs 1-2 of the motion dated 20 January 2005 filed by Mr Whitlam, will have a significant impact on IAG’s preparation of the proceedings for hearing. This is because, if orders for further discovery were made as sought by Mr Whitlam, it would be necessary to:

(a) again review voluminous correspondence files held by IAG and Mallesons relating to Mr Whitlam’s retirement period over the period of four years from February 2001 to date (which had already been reviewed by Mr Morris and me for the purposes of giving discovery in respect of the orders made by Justice Bergin on 27 August 2004 and 12 November 2004);
(b) review voluminous correspondence files relating to the conduct of these proceedings held by IAG and Mallesons, since advice given by Mallesons as to the conduct of these proceedings may well relate to the payment or possible payment of a retirement benefit to the plaintiff, which is the central issue in the proceedings; and
(c) carefully review and mask all privileged documents, since I am instructed that IAG will seek to protect legal professional privilege which it claims in respect of documents falling within the further discovery categories sought by Mr Whitlam.”

21 In relation to the so-called compromise as to discovery categories, I am prepared to proceed upon the basis that at the time when the Court made the orders regarding discovery on 27 August 2004, Mr Whitlam's Counsel told the court that he reserved all his rights in relation to seeking further discovery from IAG. While that may be the case there is simply no excuse for the fact that Mr Whitlam left it so very late to press his motion for the documents in respect of which legal professional privilege is said to have been waived. Case management considerations are extremely significant and to allow the hearing date to be fixed and only to pursue the further discovery when the matter was before the Court at the Court’s request for discussion of routine housekeeping matters, is to my mind simply unacceptable.

22 To my mind, subject to only one matter, the above described circumstances in the present context present an appropriate reason for the Court limiting the orders as to further disclosure to the materials earlier referred to in this judgement. The proviso really concerns an election by the plaintiff. The election is either to abide the process of the above described limitation orders or alternatively to abide orders which would provide that the hearing date would have to be vacated upon the basis that the plaintiff pay the defendant’s costs of and occasioned by the vacated hearing. Presumably the proceedings would be listed for hearing on a date when the parties had completed all their new discovery.

The IAG motion

23 There is also before the Court a notice of motion filed by IAG seeking discovery of the following categories of documents:

24 There is before the court a notice of motion filed by IAG seeking discovery of the following categories of documents:

“2. The plaintiff give discovery and allow inspection of the following categories of documents:

(a) The transcripts of any examination under s19 of the Australian Securities and Investments Commission (“ASIC:”) Act of:


(i) the plaintiff; and

(ii) other witnesses in proceedings no 4421 of 2001 in the Supreme Court of New South Wales brought by ASIC against the plaintiff (“ASIC proceedings”);


(b) the tender bundle and all exhibits in the ASIC proceedings;

(c) All correspondence between ASIC on the one hand and the plaintiff or Watson Mangioni on the other referring to the allegations made by ASIC against the plaintiff in the ASIC proceedings;

(d) All witness statements given by the plaintiff and all other witnesses in the ASIC proceedings;

(e) The transcript of the cross examinations of the plaintiff and all other witnesses in the ASIC proceedings; and

(f) All submissions made by ASIC on the one hand and the plaintiff’s legal representatives on the other in the ASIC proceedings, including but not limited to any written outlines of argument and any written outlines of submissions.”

25 To my mind the notice of motion requires to be dismissed for the reasons given by Mr Whitlam in his written submissions which are presently adopted.

1. The defendant (“IAG”) seeks to demonstrate the relevance of the discovery sought from the plaintiff by reference to paragraphs C.88, C.89 and C.93 of the amended summons and paragraphs 41 and 60(b) of the defence.

2. Paragraph C.88 of the amended summons refers to the allegations in the ASIC proceedings. The only documents relevant to the allegation contained in paragraph C.88 are the pleadings in the ASIC proceedings.

3. Paragraph C.89 of the amended summons refers to the consideration of the Draft Minutes allegation by IAG and it is only IAG’s knowledge of the ASIC proceedings and the documents within IAG’s own possession, custody and power that are relevant to the allegation in that paragraph.

4. Similarly it is primarily IAG’s knowledge of the ASIC proceedings together with the terms of the judgments in those proceedings that is relevant to the allegation contained in paragraph C.93 of the Amended Summons that the conduct of IAG in delaying payment of the Retirement Benefit constituted unconscionable conduct.

5. In relation to paragraph 41 of the defence, the only discovery relevant to the allegations contained in that paragraph are the pleadings and judgments delivered in the ASIC proceedings and possibly the documents within IAG’s own possession, custody and power relating to the ASIC proceedings.

6. Paragraph 60(b) of the defence contains an allegation that IAG did not have access to evidence available to and/or led by ASIC in the proceedings. The discovery sought by IAG is irrelevant to that allegation.

[paragraphs 1- 6 from the submissions of 30 Jan 2005 called "Plaintiff’s outline written submissions in response to the defendant’s outline written submissions in support of its application for further discovery from the plaintiff"]

I certify that paragraphs 1 - 25
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 2 February 2005
revised 23 February 2005

___________________
Susan Piggott
Associate

23 February 2005