Seketa v Gadens Lawyers
[2021] VSC 245
•12 May 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISON
MAJOR TORTS LIST
S ECI 2020 00324
| STEFAN SEKETA | Plaintiff |
| v | |
| GADENS LAWYERS, A FIRM & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 April 2021 |
DATE OF JUDGMENT: | 12 May 2021 |
CASE MAY BE CITED AS: | Seketa v Gadens Lawyers & Ors |
MEDIUM NEUTRAL CITATION: | [2021] VSC 245 |
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EVIDENCE — Client legal privilege — Waiver — Whether privilege in respect of discovered documents waived pursuant to Evidence Act 2008, ss 122(2), 131A — Defendant claiming privilege denies falsely and maliciously defaming plaintiff — Whether there is an issue waiver by the defendant particularising its denials — Whether maintenance of privilege inconsistent with reliance on the particulars — What amounts to ‘something more’ for inconsistency to give rise to waiver of privilege — Waiver of privilege not found — Evidence Act 2008 (Vic) s 122(2); Mann v Carnell (1999) 201 CLR 1; DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499; Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371; Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd (2015) 321 ALR 191; The Queensland Local Government Superannuation Board v Allen [2016] QCA 325; Viterra Malt Pty Ltd v Cargill Australia Ltd (2018) 58 VR 333.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr SK Wilson QC with him Mr BJ Murphy | Thomson Geer |
| For the First and Second Defendants | No appearance | Minter Ellison |
| For the Third Defendant | Ms G Coleman | Corrs Chambers Westgarth |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 2
Evidence............................................................................................................................................... 7
Plaintiff’s submissions..................................................................................................................... 8
C&L submissions............................................................................................................................. 13
Consideration.................................................................................................................................... 16
Conclusion......................................................................................................................................... 25
HIS HONOUR:
Introduction
The plaintiff applies by summons filed on 26 March 2021 for an order that the third defendant (‘C&L’) produce for inspection documents claimed to be subject to client legal privilege (‘privilege’). The application is expressly made with reference to s 122 of the Evidence Act 2008 (Vic) (‘Evidence Act’), making waiver of privilege over the documents the issue.
The summons as filed contained two limitations. First, it limited the production of documents for inspection to documents in Part 2 of Schedule 1 of C&L’s unsworn affidavit of documents served (but not filed) on 10 November 2020. Since then C&L has filed an affirmed affidavit of documents made on 13 April 2021 and a Supplementary affidavit of documents made on 15 April 2021. Application was made to amend the summons so that it applied to all the documents referred to in those affidavits as being the subject of a claim to privilege. There was no opposition to that application, and it is in therefore unnecessary to formally amend the summons. It will be taken to refer to all the documents subject to the claim for privilege capable of being waived in the circumstances.
The second limitation was confining the issue to the question of waiver of privilege by expressly referring to s 122 of the Evidence Act. That express reliance implied that the documents were properly established to be privileged. In contrast to this limitation, in an Outline of Argument filed the day before the hearing, the plaintiff contended that C&L had not discharged its burden of proving that the documents claimed to be privileged were properly the subject of that privilege.[1] By contrast, in an Outline of Submissions also filed the day before the hearing, C&L limited its argument to the issue of waiver of privilege on the assumption that privilege over the documents in questions was established, or at least accepted.
[1]Plaintiff’s Outline of Argument filed 26 April 2021, [24] – [25].
I raised this issue with Mr SK Wilson QC, who appeared with Mr BJ Murphy for the plaintiff, and after some discussion, and submission by Ms G Coleman of Counsel who appeared for C&L, Mr Wilson stated that he was content to proceed on the assumption that the allegedly privileged documents were proved to be privileged. Thus the issue for decision is the issue of waiver of privilege, with a possible subsidiary question whether in determining that issue I should exercise my discretion to inspect the privileged documents.[2]
[2]See s 131 of the Evidence Act.
Background
The plaintiff is and was a registered building practitioner within the meaning of the Building Act 1993 (Vic) (‘Building Act’) and a director of ACN 122 909 040 (ACN 122 909 040) (In Liquidation) (formerly known as Modscape Pty Ltd) (‘Company’).
The first defendant (‘Gadens’) carries on business as a commercial law firm and has acted for C&L since at least 22 August 2016. The second defendant (‘Denehy’) is and was a partner of Gadens and acted for C&L.
By the Statement of Claim the plaintiff alleges that a letter published by Gadens and Denehy, on behalf of C&L, to the Victorian Building Authority (‘VBA’), dated 22 October 2018 (‘Letter’) contained words which were false and was published maliciously. The plaintiff claims to have suffered loss and damage by reason of having to incur professional fees and disbursements to rebut the allegations made in the Letter.
The plaintiff’s pleading of the words of the Letter alleged to be false and published maliciously are (as set out in the statement of claim):
... our client submits that both Modscape and its director, Mr Seketa no longer satisfies the financial probity requirements of section 171E of the Act. Further, section 180 is relevant. A printout of our search results of the VBA website is enclosed.
Our client respectfully requests that the VBA considers suspending the registration of Mr Seketa on the basis that he is no longer a fit and proper person to practice as a building practitioner.”
The particulars of the allegations of falsity and malicious publication are as follows:
Particulars of Falsity
The plaintiff was a registered building practitioner and not applying to be become registered building practitioner.
As at 22 October 2018, the plaintiff’s financial probity was sound and otherwise compliant with section 171E of the Building Act 1993.
The plaintiff refers to the findings of the VBA dated 19 December 2019. A copy of this document is available for production upon request. In particular, the reasons of the VBA reveal that the VBA did not enquire as to the plaintiff’s financial probity or otherwise.
Particulars of Malice
(a) The plaintiff was a director of the Company which was in dispute with C&L.
(b)On or about 17 October 2018, the Company was placed into administration by its directors.
(c)C&L failed to recover monies it alleges was due and payable to it by the Company prior to the Company going into administration.
(d)C&L is an unsecured creditor of the Company.
(e)The said words contained in the letter were sent within days of the Company being placed into administration and without the defendants making any enquires about the plaintiff’s finances and before the administrators reported to the creditors.
(f)The plaintiff has continued to operate as a registered building practitioner since the Company went into administration.
(g)In the premises, Gadens and Denehy published the said words on behalf of C&L knowing they were false or recklessly, not caring whether they were true or false in order to persuade the Victorian Building Authority to suspend the plaintiff’s registration as a registered building practitioner so as to deny him the ability to earn an income in his chosen profession because C&L was unable to recover a debt owed by the Company.
C&L admits the Letter was published to the VBA but denies the Letter contained false statements and was published maliciously. The particulars of the denials are relied on by the plaintiff to establish inconsistency between the denials of the falsity of the Letter, and of malice, and the maintenance of privilege over the documents claimed to be privileged. The actual form of the particulars of the denial of falsity and malice are relevant (‘the Particulars’):
It can be inferred that the letter dated 22 October 2018 from Gadens to the Victorian Building Authority did not contain false statements and was not published maliciously from, inter alia, the following:
6.1On 1 May 2015, the third defendant and the Company, as defined in the SoC, entered into an agreement in relation to the sale and purchase of a display suite.
6.2In or around August 2016, the third defendant and the Company were in dispute under the agreement about the Company’s obligation to buy back the display suite from the third defendant.
6.3On 4 June 2018, the arbitrator appointed by the parties delivered an award recording that the Company pay the third defendant the sum of $382,638 (excluding GST).
6.4On 2 August 2018, the third defendant served the Company with a statutory demand pursuant to section 459G of the Corporations Act 2001 (Cth) (the Corporations Act) in the sum of $382,638 (excluding GST).
6.5On 23 August 2018, the Company commenced proceedings in the Supreme Court of Victoria to set aside the statutory demand, which was dismissed on 10 October 2018.
6.6The Company was presumed to be insolvent under section 459C of the Corporations Act because it failed to comply with the statutory demand by 17 October 2018, which was the timeframe prescribed under section 459F(1)(a)(ii) of the Corporations Act.
6.7On 17 October 2018, the Company entered into voluntary administration.
6.8Section 179(2) of the Building Act 1993 (Vic) (the Building Act) provides that the Victorian Building Authority may make inquiries to determine whether a ground exists for taking disciplinary action.
6.9Disciplinary action in relation to a registered building practitioner includes suspension of registration for not more than 3 years either wholly, or as a partial suspension in relation to a specified matter under section 178(f) of the Building Act.
6.10Section 179(1)(0) provides that it is a ground for which disciplinary action can be taken against a registered building practitioner if a ground for immediate suspension exists in relation to the practitioner.
6.11Section 180(a) provides that a ground for immediate suspension of the registration of a registered building practitioner exists if the practitioner is an officer of a body corporate that is subject to external administration under the Corporations Act.
6.12At all material times, the third defendant acted without malice in that it had an entitlement, statutory or otherwise, to request that the Victorian Building Authority investigate whether Mr Seketa satisfied the financial probity requirements to become and therefore remain registered as a builder on the ground that he was an officer of a company that was an externally administered body corporate within the meaning of the Corporations Act.
6.13Further, section 179(1)(g) provides that it is a ground for which disciplinary action can be taken against a registered building practitioner if the Victorian Building Authority believes on reasonable grounds that the practitioner is not a fit and proper person to practice as a building practitioner.
6.14At all material times, the third defendant acted without malice in that it had an entitlement, statutory or otherwise, to request that the Victorian Building Authority investigate whether Mr Seketa was a fit and proper person to practice as a building practitioner on the ground that he was an officer of a body corporate that was subject to external administration under the Corporations Act.
In the plaintiff’s reply to the C&L defence, an attempt is made to apply the reply to the defences of Gadens and Denehy to the C&L defence (parri passu), which does not entirely work. It seems that the following matters are raised in answer:
(a) the plaintiff did not breach any of the financial probity requirements referred to in section 171E of the Building Act, which is only relevant to applications for registration under the VBA;
(b) the VBA does not provide that if a registered building practitioner fails to meet any of the requirements of section 171E then they are no longer a fit and proper person;
(c) section 179 of the Building Act provides a list of items which are grounds for disciplinary action against a registered building practitioner; however, the requirements of section 171E of the Act is not one of the grounds listed;
(d) section 180 of the Act sets out grounds for immediate suspension. One is being a director of a company under external administration.
(e) section 180A of the Act states that the VBA may suspend a registered building practitioner under section 180 of the Act; however, suspension is not mandatory and in lieu thereof the VBA can elect to issue a show cause notice under section 182 of the Act (which it did in this case); and
(f) in the premises the statement in the Letter that “Mr Seketa no longer satisfies the financial probity requirements of section 171E of the Act” is false.
(g) C&L acted maliciously in publishing the Letter because the events that followed publication of the Letter showed C&L’s malice towards the plaintiff:
(i) C&L commenced proceeding S ECI 2018 02963 to set aside a Deed of Company Arrangement (‘DOCA’) entered into in accordance with a vote of creditors of the Company;
(ii) C&L was offered and rejected an open offer to pay it an amount which would more than match what it would receive in the liquidation plus its costs of the proceeding, but rejected it;
(iii) after the company was ordered to be wound up and Mr Michael Caspaney was appointed its liquidator, Mr Caspaney said in evidence under cross-examination in the Federal Court of Australia (in an application by members of the Company to compel Mr Caspaney to call a meeting of creditors) that for C&L ‘It’s not about the money for them; it’s about bringing people to account ...’;
(iv) the Letter was sent on the instructions of C&L to punish the plaintiff, as a director of the Company, for putting the Company into administration and not paying the debt to C&L, or as an attempt to induce the plaintiff to cause payment of the Company’s debt due to C&L, or to cause the plaintiff to be deregistered as a builder thereby denying him his ability to earn his livelihood.
(v) before publishing the Letter, C&L failed to make any or any proper enquiries into the full circumstances of the relevant facts pertaining to the matters the subject of the VBA inquiry and determination and published the same without any honest belief in or with reckless disregard to the truth or falsity of its contents, as they applied to the plaintiff;
(vi) after publishing the Letter, C&L attempted to pressure the VBA (by follow up emails sent by Gadens and Denehy) to act expeditiously against the plaintiff in relation to the complaints in the Letter; and
(vii) Gadens and Denehy forwarded to Mr Caspaney, as liquidator of the Company, copies of the Letter and follow up emails when that information was irrelevant to the liquidation of the Company, whereby it can be inferred that C&L was seeking to obtain a collateral financial advantage and/or punish the plaintiff for being party to the Company being put into administration.
C&L asserts privilege over documents itemised in its affidavit of documents made on 13 April 2021, and in its supplementary affidavit of documents made on 15 April 2021, on the basis that the documents contain confidential communications between Gadens, as the lawyers for C&L, and C&L (including C&L’s employees and agents) for the dominant purpose of providing legal advice to C&L. From the description of the documents, which are emails between Gadens and Denehy and C&L and its employees, and their attachments, some of the communications appear to be in connection with the complaint to, and related correspondence with, the VBA (‘C&L Documents’).
Evidence
The plaintiff relies of the affidavit of Justin Healy Quill sworn on 15 March 2021 and the affidavit of Stefan Seketa sworn on 23 April 2021 (‘Seketa’s affidavit’). Seketa’s affidavit gives evidence of the matters relied upon by him to establish the inconsistency said to give rise to a waiver, to which I refer under the heading of the ‘plaintiff’s submissions’.
C&L relies on the affidavits of documents affirmed by Mr Zhang on 13 and 15 April 2021 (‘First and Second Affidavit of Documents’) and the affidavit of Richard Alexander Leder affirmed on 15 April 2021.
Plaintiff’s submissions
The plaintiff contends that in asserting the Letter did not contain false statements and was not published maliciously, C&L has acted inconsistently with the maintenance of confidentiality in relation to the C&L Documents, and that this gives rise to a waiver of privilege under s 122 of the Evidence Act. C&L has positively denied the Letter included words that were false and published maliciously and thus put into issue its state of mind about whether it was entitled to instruct its lawyers to report to the VBA that the plaintiff was in breach of the of the Building Act with reference to the operation of the Corporations Act.
C&L has provided detailed particulars with reference to numerous legal concepts regarding insolvency and the operation of the Corporations Act and Building Act. It stands to reason that prior to instructing its solicitors to send the Letter to the VBA it would have developed an understanding of the matters set out in the Particulars as a result of legal advice (the Particulars set out above at [10]). The formation of C&L’s state of mind in this regard and understanding of its legal position before instructing its solicitors to send the Letter to the VBA is therefore critical to its defence.[3]
[3]IOOF Holdings Ltd v Maurice Blackburn Pty Ltd [2016] VSC 311 at [48(2)] (‘IOOF’).
C&L’s affidavit of documents affirmed 13 April 2021, shows that at 4:57pm on 17 October 2018 (being the same day the Company was placed into administration), Denehy, acting on behalf of C&L, emailed Mr Zhang of C&L, attaching “completed ASIC Form 505: External Administration or Controllership Appointment of an administrator or controller in respect of Modscape” and a “ASIC Historical Company Extract for Modscape Pty Ltd.” A copy of Denehy’s email to Mr Zhang is itemised and described at item 1 of Part 2 of Schedule 1 in the affidavit of documents, that is, as a document over which privilege is claimed.
Three further emails passed between Gadens and C&L between 17 October 2018 and 22 October 2018 (noting the intervening weekend of 20 and 21 October 2018). On the face of the description of the emails, they appear to relate to the Company being placed into administration and the preparation of a letter to the VBA.
It is established that the making of express or implied assertions about the content of privileged communications or documents is inconsistent with seeking to maintain privilege in those communications or documents.[4] It is not necessary for there to be a ‘specific reference’ in a pleading to privileged communications or documents for waiver to occur.[5]
[4]Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371 at [33] and [34] (‘Australian Agricultural’).
[5]Hancock v Rinehart [2013] NSWSC 1978 [22] per Brereton J; see also Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd (2015) 321 ALR 191, 205 [34] per Dixon AJA (Mandie JA agreeing).
In support of these contentions, the plaintiff relies on the decision of Cowdroy J in Australian Agricultural Company Limited v AMP Life Limited[6] where his Honour said:
The above authorities establish that the conduct of a party will be inconsistent with the maintenance of privilege if the nature and extent of legal advice has been raised, whether directly or by necessary implication, by that party as an issue in the proceedings. This will usually occur where a state of mind has been positively pleaded in circumstances where legal advice given would be specifically pertinent to the formation of that state of mind or where a party’s understanding of their legal position is critical to their defence.[7]
However, I cannot accept the submission of AACo that any positive defence mounted by AMP which raises its state of mind necessarily constitutes a waiver of privilege. In my opinion, in order to waive privilege a party must assert a belief which is likely to have been, or is explicitly said to have been, materially dependent upon legal advice given to that party. In that case the proof or otherwise of the belief is dependent upon the legal advice and accordingly privilege is waived. This is the position in cases where the dispute relates to a party’s understanding of its legal position at a given point in time, such as Thomason, Rio Tinto, Ampolex and Fort Dodge.
[6][2006] FCA 371.
[7]Ibid [33].
The plaintiff maintains that there is conduct of C&L prior to and after the Letter was sent that is material to the waiver of privilege.
Prior to the Letter being sent, C&L’s affidavit of documents affirmed on 13 April 2021 reveal that C&L’s solicitors sent Mr Zhang of C&L an email at 4.57pm forwarding an internal email between the solicitors (sent at 3.09pm on 17 October 2017) and attaching among other documents a Form 505 that had been lodged with the ASIC. It is to be noted that this Form 505 was lodged with the ASIC at 14:17:05 on 17 October 2018. It is not clear from the description of the documents in the affidavits of documents at what time and indeed how C&L’s solicitors obtained a copy of the Form 505. The Form 505 notified the appointment of Barry Wight and Rachel Burdett-Baker of Cor Cordis as Administrators of the Company pursuant to a resolution of Directors of the Company dated 17 October 2018.
It is inconceivable that the Form 505 would have been processed and available to a party who searched the records of ASIC. In these circumstances and on the available evidence it is open to infer that C&L’s solicitors were provided with a copy of the Form 505 by the Administrators, which would be irregular to say the least. If that is the case, then presumably there would be correspondence with Cor Cordis that would be discoverable and also strengthens the case that C&L was motivated to do whatever it possibly could to injure the plaintiff for deciding to place the Company into external administration. I note that Counsel for the plaintiff suggest that this, and other matters mentioned below, were anomalies that might persuade the Court to exercise its discretion under s 133 to inspect the C&L Documents so as to get a picture of the true facts. It appears to me, however, that the so called ‘anomalies’ are irrelevant to the argument that there has been a waiver of privilege and relate to a subsidiary contention that there has been a failure to make full discovery. No such application is before me.
The Letter was sent to the VBA by C&L’s solicitors within days of C&L being made aware of the Company appointing administrators. On 29 October 2018, after the Letter was sent, C&L’s solicitors sent a version of the Letter to the Administrators appointed by the directors of the Company and copied to the plaintiff. There are differences between the Letter that was sent to the VBA by C&L’s solicitors and the letter that was sent to the Administrators and copied to the plaintiff. The differences are, first, that the letter sent to the VBA has six numbered paragraphs (and attaches documents relating to the appointment of the Administrators) whilst the letter sent to the Administrators has seven numbered paragraphs; and second, that the Letter sent to the VBA is addressed to a particular person (Mr Gilmore) whilst the letter sent to the Administrators is addressed simply to the VBA. The seventh numbered paragraph refers to the appointment of the Administrators on 17 October 2018 and refers to attached documents relating to that appointment. There is no explanation for the difference and it would appear that one of the letters has not been discovered by the defendants. This was said to be another anomaly. It also appears to be irrelevant to the argument that there has been a waiver of privilege and relates to a subsidiary contention that there has been a failure to make full discovery.
The plaintiff contends that, by sending the version of the Letter to the Administrators, C&L was hoping to influence the administrators in some way so as to hold the plaintiff to account for deciding, with his fellow director, to appoint the Administrators and, because the plaintiff was the only registered builder for the Modscape Group of companies, to attempt to inflict substantial harm on their businesses.
On 20 December 2018, an overwhelming majority of the creditors of the Company voted in favour of a proposed deed of company arrangement (DOCA). On 21 December 2018, C&L commenced Supreme Court of Proceeding S ECI 2018 02963 seeking to set aside the DOCA and in lieu thereof applied that the Company be wound up in insolvency. In the lead up to the hearing of the application in that proceeding, the plaintiff offered C&L 105% of what it would receive in a liquidation, which C&L refused. Given the prospect of protracted litigation the directors of the Company decided to agree to the appointment of a liquidator. In February 2019, the Supreme Court of Victoria appointed Mr Michael Caspaney as liquidator.
In August 2019 C&L, by its solicitors, was communicating with Mr Caspaney in relation to liquidation of the Company. In the course of doing so, C&L’s solicitors sent to Mr Caspaney a copy of the Letter. The liquidator stated in a proceeding brought by members of the Company in the Federal Court of Australia to compel Mr Caspaney to call a meeting of creditors of the Company (the ‘Meeting Proceeding’) that he understood C&L’s motivation regarding the Company entering external administration was not about the money but “it’s about bringing people to account”.
The plaintiff contends that C&L instructed its solicitors to engage with Mr Caspaney, in his capacity as liquidator, in circumstances where it was not interested obtaining a commercial outcome but rather to seek vengeance against the Company and the plaintiff. C&L’s state of mind in that regard puts into issue its denial that the Letter included words that were false and published maliciously. Properly understood, the republication of the Letter was based on the same state of mind informed by the legal advice C&L ‘would have received’ prior to the letter being sent to the VBA, thereby putting into issue its state of mind and acting in a manner that is inconsistent with maintaining privilege over the documents claimed to be privileged.
The plaintiff contended that the conduct of C&L after the sending of the Letter confirms the contemporaneous waiver, in that C&L would not have sent a copy of the Letter on to the Administrators of the Company, and subsequently to the liquidator, unless their mind was so informed by relevant legal advice to do so.
As a matter of completeness, I note that according to Seketa’s affidavit:
(a) the Meeting Proceeding resulted in Registrar Allaway ordering the liquidator to convene and hold a meeting of creditors of the Company;
(b) that decision was appealed by the liquidator to a judge of the Court, O’Callaghan J, who dismissed the appeal;
(c) the liquidator then applied for leave to appeal O’Callaghan J’s decision, which was refused by Anderson J;
(d) a meeting of creditors was held on 17 December 2019 at which a resolution was passed removing Mr Caspaney as liquidator and appointing in his stead a Mr Goodin;
(e) on 22 December 2019, C&L commenced proceedings (S ECI 2020 04723) seeking orders, amongst other things, to enjoin the appointment of Mr Goodin as the liquidator of the Company. This proceeding was later discontinued by C&L. Mr Goodin remains the currently appointed Administrator of the DOCA;
(f) on 26 February 2021, the winding up of the Company was terminated by an order made by the Federal Court in proceeding VID69/2021 pursuant to s 482(1) of the Corporations Act 2001 (‘the Act’) and section 90-15 of Schedule 2 of the Insolvency Practice Schedule (Corporations) of the Act.
C&L submissions
C&L submits that the plaintiff’s summons should be dismissed with costs. Its submission is summarised in three broad propositions which Ms Coleman, as counsel for C&L developed:
(a) there has been no conduct by C&L Holdings inconsistent with it maintaining privilege;
(b) the fact that the state of mind of C&L Holdings is in issue in this proceeding is not enough to establish a waiver of privilege; and
(c) even if C&L Holdings’ state of mind being in issue were sufficient to establish waiver, it would not open up for scrutiny all the privileged communications referred to in the affidavits of documents filed by C&L Holdings, as sought by the plaintiff.
None of the matters given as particulars of the denial by C&L relates to legal advice it received, or correspondence with its lawyers. C&L has not pleaded any justification of its state of mind by reference to the substance or effect of legal advice received.
Legal professional privilege is an important common law right, and implied waiver of the right is not to be lightly imposed. It is the privilege holder’s conduct only that effects waiver and the focus is on that party’s conduct.[8] The Courts will only impute an intention to waive privilege where ‘the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect’.[9]
[8]Vic Hotel Pty Ltd v DC Payments Australasia Pty Ltd (2015) 321 ALR 191 at [35] (Dixon AJA, with whom Mandie and Beach JJA agreed) (‘Vic Hotel’).
[9]Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303 at [30] (French CJ, Kiefel, Bell, Gageler and Keane JJ); [2013] HCA 46, [30].
Privilege in a communication will only be waived where the privilege holder makes an assertion (express or implied), or brings a case, which is either about the contents of an otherwise privileged communication ‘or which necessarily lays open the confidential communication to scrutiny.[10] The Court of Appeal has doubted that it is open to another party to litigation ‘to force waiver of a party’s legal professional privilege by making assertions about, or seeking to put in issue, that party’s state of mind’.[11] Further, it is well established that:
[10]DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at [58] (Allsop J) (‘DSE’), cited with approval by the Court of Appeal in Viterra Malt Pty Ltd v Cargill Australia Ltd (2018) 58 VR 333 at [50] (Whelan, Kyrou and McLeish JJA) (‘Viterra’).
[11]Vic Hotel, [35].
(a) merely putting state of mind in issue is not enough for privilege to be waived in respect of communications relevant to that state of mind;[12]
(b) mere relevance of the of the privileged communication to the pleaded issue is also insufficient; and[13]
(c) where the privilege holder’s state of mind is an issue in a proceeding, the taking of advice and the content of that advice will be facts beyond the reach of the other party unless the privilege holder has attempted to boost its case by reliance on the advice in some way, for example by justifying its position (or state of mind) by reference to the substance or effect of legal advice it has received.[14]
[12]Viterra (2018) 58 VR 333, [67].
[13]Viterra (2018) 58 VR 333, [75].
[14]The Queensland Local Government Superannuation Board v Allen [2016] QCA 325 at [73] (Burns J, with whom McMurdo P and Philippides JA agreed).
So, for example, in Viterra, the Court of Appeal observed that a pleading of reliance in a misleading or deceptive conduct case, without ‘something more’, will not usually manifest inconsistency with the maintenance of client legal privilege in communications relevant to that state of mind.[15] The Court of Appeal continued:
The applicants have sought documents which record or evidence the knowledge of the Cargill parties of the Undisclosed Matters. That would extend to documents in which Cargill sought legal advice from its lawyers about matters arising in the due diligence and bearing on the Undisclosed Matters. But there would be nothing inconsistent in maintaining privilege in relation to such documents, while asserting ignorance of the Undisclosed Matters and reliance as pleaded. This is not a case where the nature of the pleading makes it inconsistent to withhold privileged communications about the transaction, notwithstanding that those communications might reveal something of Cargill’s state of mind. It is entirely to be expected that a party pleading a misleading or deceptive conduct case arising from a commercial transaction will have received legal advice regarding the transaction before its consummation. The applicants’ argument would suggest that privilege is waived by pleading such a case. The authorities show that something more is required.
[15]Viterra (2018) 58 VR 333, [73].
While the plaintiff’s pleading puts in issue C&L Holdings’ state of mind, and confidential communications between Gadens and C&L on this issue would be relevant, the authorities set out above show that this is not enough for privilege to be waived. This case is missing the ‘something more’ required for waiver to be established. Nothing asserted in C&L’s defence relates to the contents of an otherwise privileged communication. It has not referred to legal advice it relied on or received in relation to the publication of the Letter, or otherwise put confidential communications with its lawyers in issue. It has not sought to justify its state of mind by reference to the substance or effect of legal advice received. There has been no conduct by C&L inconsistent with, let alone ‘plainly inconsistent’ with, the maintenance of privilege over the documents listed in Schedule 1, Part 2 to each of the First and Second Affidavit of Documents.
The plaintiff seeks access to all documents listed in Schedule 1, Part 2 to each of the First and Second Affidavit of Documents. But – assuming the plaintiff were successful in establishing issue waiver – this could only open ‘for scrutiny by that pleading confidential and privilege communications materially affecting or contributing to that state of mind’.[16] So, for example, in DSE, Allsop J stated:
Later, in the propounding of a suit to vindicate its rights, being the context in which the above waiver takes place, the applicant consults with its lawyers about the case. I assume that these later confidential and privileged communications will address or have addressed the pleadings and the earlier privileged (though now waived) communications. There is plainly a relationship between the two groups of communications. However, there is no inconsistency between raising the issue of state of mind and maintaining the confidence of the later communications in and about the advising on, and running of, the case. Nor is there any unfairness. The inconsistency or unfairness arises from the putting in issue of a state of mind and maintaining confidence in communications which were relevant to the formation of that state of mind. (Or, putting the matter as I would prefer to put it – the inconsistency or unfairness arises from laying open to scrutiny the communication and maintaining confidence in the communication.) The later communications were, and are, irrelevant to, and had, and could have had, no part to play in the formation of the earlier state of mind.
[16]DSE (2003) 127 FCR 499, [126].
All the communications enumerated in Schedule 1, Part 2 of the Second Affidavit of Documents, and items 7-8 of Schedule 1, Part 2 of the First Affidavit of Documents, are communications which post-date the publication of the Letter. The plaintiff has failed to articulate how these subsequent communications are relevant at all to the formation of the earlier state of mind. Further, the communications referred to in paragraph A of Schedule 1, Part 2 of the First Affidavit of Documents are communications relating to the advising on and running of this proceedings. These plainly fall outside the scope of any issue waiver.
Consideration
The issues raised by the plaintiff’s application are governed by the provisions of the Evidence Act 2008 (Vic) (‘Evidence Act’), in particular Part 3.10, Division 1, which applies to interlocutory proceedings.[17] The plaintiff claims that C&L has lost the privilege in the C&L Documents by the operation of s 122. For present purposes, only sub-s 122(2) need be considered. It provides:
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 sections 118, 119 or 120.[18]
[17]Evidence Act 2008 (Vic) ss 4(1)(b) and 131A.
[18]The exceptions in s 122(5) are not relevant to the present case.
The origin of this sub-section is the provision in the same terms introduced into the Commonwealth and New South Wales Uniform Evidence Acts following the Australian Law Reform Commission Report 102, prepared with the New South Wales and Victorian Law Reform Commissions.[19] Because the Victorian Act post-dated those amendments, the sub-section appeared in the Victorian legislation from enactment.
[19]The Report was tabled in the Victorian and NSW Parliaments in February 2006, before the enactment of the Victorian Evidence Act.
The object of the sub-section was to adopt the approach of the High Court in Mann v Carnell, in which case Gleeson CJ, Gaudron, Gummow and Callinan JJ stated:[20]
What brings about the waiver is inconsistency, which the courts, where necessary informed by the consideration of fairness, perceive, between the conduct of the client and the maintenance of the confidentiality; not some overriding principle of fairness operating at large.
[20](1999) 201 CLR 1; [1999] HCA 66.
The relevance of the origin of the formulation is that the common law cases on the question of waiver of privilege continue to be relevant to the question arising under s 122 of the Evidence Act.[21] Under the test propounded in Mann v Carnell it is inconsistency between the conduct of the client and the maintenance of the confidentiality that the privilege is intended to protect which effects a waiver of the privilege. The test for imputed waiver had previously been expressed in terms of fairness: see Attorney-General (NT) v Maurice (1986) 161 CLR 475 (‘Maurice’) at 481 per Gibbs CJ, 487–8 per Mason and Brennan JJ, 492–3 per Deane J, and 497–8 per Dawson J. Fairness has become a subsidiary consideration; it may be relevant to the court’s assessment of inconsistency in some contexts but not in others.[22]
[21]Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 [32] (French CJ, Kiefel, Bell, Gageler and Keane JJ); [2013] HCA 46, [32].
[22]AWB Limited v Cole (No 5) (2006) ALR 651; [2006] FCA 1234 at [130] per Young J; Perhaps an ‘unfair inconsistency’: Liquorland (Australia) Pty Ltd v Anghie (2003) 7 VR 27, [41]; Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303 [31] (French CJ, Kiefel, Bell, Gageler and Keane JJ); [2013] HCA 46, [31].
In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited[23] the plurality of the High Court brought the whole issue of waiver under s 122 back to its basics when they said:
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)[24]. 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[25] 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[26].
[23](2013) 250 CLR 303 [30] (French CJ, Kiefel, Bell, Gageler and Keane JJ); [2013] HCA 46, [30].
[24]Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326; [1920] HCA 64; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 658; [1937] HCA 58.
[25]Goldberg v Ng (1995) 185 CLR 83 at 95-96; [1995] HCA 39.
[26]Mann v Carnell (1999) 201 CLR 1 at 13 [29]; [1999] HCA 66.
The Court went on to say that the law looks chiefly to the conduct and position of the person who is said to have waived privilege, in order to see whether that person has ‘approbated’ so as to prevent them from ‘reprobating’. The Court stated that its observations applied both to waiver at common law and to s 122(2).[27]
[27](2013) 250 CLR 303, [31]–[32]; Viterra (2018) 58 VR 333, [42].
There are many varying circumstances in which waiver in the relevant sense may occur in relation to privileged communications. In this case it is what is usually described as ‘issue waiver’ and that is an intention to waive privilege implied from the conduct of, or imputed as a matter of law to, the party concerned. The authorities concerning waiver of privilege show, and Court of Appel made clear in Viterra, that there is no settled list of kinds of action which, by their very nature, give rise to implied waiver: each case must depend upon its own facts and circumstances and drawing generalisations from other cases may be dangerous.[28]
[28]Viterra (2018) 58 VR 333 [44]; citing eg, Archer Capital 4A Pty Ltd v Sage Group plc (2013) 306 ALR 414, 422 [26]; Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341, 358–9 [60] (‘Rio Tinto’).
The decision in Australian Agricultural Company Limited v AMP Life Limited,[29] relied upon by the plaintiff, is an instance of a claim to issue waiver, arising from a pleading of the respondent’s (‘AMP’) corporate state of mind in its defence to a claim of misleading or deceptive conduct and misrepresentation. The proceeding concerned the fallout after a sale by tender of the Stanbroke Pastoral Company by AMP to Nebo. The Applicant (AACo) was the losing bidder. During the tender process AMP engaged an expert (Rabo) to give advice on the bids. In giving that advice, Rabo was privy to legal advice given to AMP and the Rabo advice was given in the light of that legal advice. A subpoena to Rabo resulted in the production of privileged communications. The issue was whether by AMP pleading reliance on certain legal advices in forming its opinion that the Nebo offer was superior to the AACo offer, and thus pleading its corporate state mind in its defence, it had waived the privilege over the legal advice. AACo’s proposition was:
that where a party propounds a positive case that it possessed a certain state of mind, it opens up for examination and testing by the Court any evidence as to its actual state of mind. AACo submits that a defence which specifically invokes a positive state of mind is inconsistent with the maintenance of privilege over documents which contributed to that state of mind. As a consequence, AACo submits AMP has necessarily waived privilege in relation to its legal advice.[30]
[29][2006] FCA 371.
[30]Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371, [12].
It can be seen that this argument is similar to the argument put in this case.
AMP responded that AACo had raised the bona fides of AMP’s decision. AACo had alleged that AMP deliberately took into account matters which were not proper commercial considerations because of its desire to accept the offer by Nebo, and that it disclosed relevant matters to Nebo which it failed to disclose to AACo. AMP submitted that AACo invoked AMP’s corporate state of mind as an issue, and that AMP’s defence merely responded to AACo’s allegations by denying its claims and setting out the actual basis upon which AMP’s decision was made. AMP submitted therefore that:
(a) AMP was entitled to plead its defence in this manner without waiving legal professional privilege; and
(b) it was incorrect that any response to AACo’s pleadings beyond a mere denial is conduct inconsistent with the maintenance of legal professional privilege;
(c) a waiver only arises where the holder of a privilege makes an assertion concerning the content of the privileged communication and that its defence makes no reference to any such communications.
Cowdroy J considered the main authorities relied on (Thomason v The Council of the Municipality of Campbelltown;[31] Telstra Corporation Ltd & Anor v BT Australasia Pty Ltd & Anor;[32] Mann v Carnell;[33] Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd;[34] BP Australia Pty Ltd v Nyran Pty Ltd;[35] DSE Holdings Pty Limited v Intertan Inc & Anor;[36] Rio Tinto Ltd v Commissioner of Taxation;[37]) and stated his conclusions as set out above at [20]. However, Cowdroy J went on to say:
In the present case, the belief pleaded by AMP is not intimately connected with the legal advice given to it at the time…AMP’s defence does not make assertions as to the content of legal advice given to it; nor does AMP’s defence state that its decision to accept the tender of Nebo was based upon legal advice… AMP does not assert a belief in particular legal requirements or consequences, which could be reasonably expected to have been predicated upon legal advice, in which case legal advice might be material evidence in the proceedings. Rather, AMP has pleaded its belief with respect to the best commercial option which was open to it, a belief informed primarily by commercial advice from Rabo. In these circumstances I do not consider that AMP’s pleadings are inconsistent with the maintenance of its legal professional privilege.
[31](1939) 39 SR(NSW) 347.
[32](1998) 85 FCR 152.
[33](1999) 201 CLR 1.
[34][2002] FCA 501.
[35][2002] FCA 1302.
[36][2003] FCA 384.
[37][2005] FCA 1336.
Even though the Particulars given in this case must have depended on some legal understanding of the terms of the Building Act (albeit partly mistaken) and the Corporations Act, that does not necessarily result in an inconsistency between:
(a) maintaining the privilege in respect of legal advice or communications about those Acts and the content of the Letter; and
(b) reliance on the matters set out in the Particulars.
It is true that C&L’s state of mind is brought into issue by the positive averments in the Particulars, mainly in the last paragraph of the Particulars where it is said that:
…the third defendant acted without malice in that it had an entitlement, statutory or otherwise, to request that the Victorian Building Authority investigate whether Mr Seketa was a fit and proper person to practice as a building practitioner on the ground that he was an officer of a body corporate that was subject to external administration under the Corporations Act.
It must also be the case that the content of the Letter depended on legal advice given by Gadens and Denehy to C&L. That makes the privileged documents that perhaps contain legal advice relevant, but does not necessarily lay them open to scrutiny. As C&L submitted, none of the matters given as particulars of the denial by C&L relates to legal advice it received, or correspondence with its lawyers. C&L has not pleaded any justification of its state of mind by reference to the substance or effect of legal advice received.
The importance of applying the inconsistency test as stated in s 122 of the Evidence Act, and danger of following general statements of principle from other cases, was explained by the Court of Appeal in Viterra:[38]
[72] The above review of the cases makes it plain that there is a single test to be applied, being that in s 122(2) of the Evidence Act 2008. Assistance in understanding and applying that test may be derived from Mann v Carnell and other authorities applying either the common law or the statutory provision. However, each case will depend upon its own facts and circumstances and the drawing of general principles beyond the statement of the inconsistency test may risk departing from the terms of the statute.
[73] Notwithstanding the need for caution on that account, it can be said that a pleading of reliance, without more, will not usually manifest inconsistency with the maintenance of client legal privilege in communications relevant to that state of mind. It can also be seen that the observation of Allsop J in DSE as to the circumstances in which privilege will be waived, while still a gloss on the statutory language, has commanded wide acceptance as a statement of the general operation of the principle.
[74] Beyond that, however, the three alternative tests to which reference has been made may do little other than to explain the results reached in the particular cases in which they were applied. So, the language of ‘centrality’ was employed by Beaumont J in Telstra to explain why he considered that maintaining confidentiality in the relevant documents was not inconsistent with the pleading. The language of ‘all relevant communications’ was used in Vic Hotel to explain why permitting recourse to only some of the documents bearing on the pleaded issue was inconsistent with that pleading. The reference to documents ‘materially affecting or contributing to’ the party’s state of mind in DSE was a way of describing the documents which were held to be subject to inspection in Telstra.
[75] In none of these instances was the language as originally used employed to propound a test for identifying when privilege was waived. It instead described the outcome of the application of the test to the case at hand. To the extent that the judge in the present matter might be interpreted as propounding an alternative test, such an approach should not be adopted. But the better reading of the reasons for judgment suggests that the judge was simply seeking to explain why mere relevance of the privileged communication to the pleaded issue is insufficient for a waiver.[39]
[76] The preferable course is therefore not to apply any alternative test but the language of the statute….
[38]Viterra, (2018) 58 VR 333, [72] – [76].
[39]Reasons [125]. (Being a reference to the primary Judge’s reasons published as Cargill Australia Ltd v Viterra Malt Pty Ltd [No 7] [2018] VSC 99.)
Nonetheless, the decision in Viterra establishes the following broad propositions:
(a) merely putting state of mind in issue is not enough for privilege to be waived in respect of communications relevant to that state of mind;[40]
(b) mere relevance of the privileged communication to the pleaded issue is also insufficient;[41] and
(c) ‘something more’ than these matters is required.[42]
[40]Viterra, (2018) 58 VR 333 [67].
[41]Viterra (2018) 58 VR 333, [75].
[42]Viterra (2018) 58 VR 333, [78].
It seems to me to be correct to state, as C&L submitted, that where the privilege holder’s state of mind is an issue in a proceeding, the taking of advice and the content of that advice will be facts beyond the reach of the other party unless the privilege holder has attempted to boost its case by reliance on the advice in some way, for example by justifying its position (or state of mind) by reference to the substance or effect of legal advice it has received.[43] This also seems to follow from the analysis in Viterra.[44] The ‘boost’ to which Burns J referred in The Queensland Local Government Superannuation Board v Allen is the ‘something more’ that is referred to by the Court in Viterra.[45]
[43]The Queensland Local Government Superannuation Board v Allen [2016] QCA 325 at [73] (Burns J, with whom McMurdo P and Philippides JA agreed).
[44]Viterra, (2018) 58 VR 333, [76]-[78].
[45]Viterra, (2018) 58 VR 333, [78].
The question in this case is whether the pleadings of C&L, in particular its denial of the falsity of the relevant pleaded paragraphs of the Letter, and the denial of the allegation of malice, and the particularisation of those denials, are plainly inconsistent with the maintenance of the confidentiality in the C&L Documents which the privilege is intended to protect. I agree with the submissions of C&L that privilege in a communication will only be waived where the privilege holder makes an assertion (express or implied), or brings a case, which is either about the contents of an otherwise privileged communication or which necessarily lays open the confidential communication to scrutiny.[46] This statement is a direct quote from the conclusions of Alsop J (as he then was) in DSE (Holdings) Pty Ltd v Intertan Inc,[47] and quoted in Viterra.[48]Alsop J went on to say:
...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.
[46]DSE (2003) 127 FCR 499 at [58] (Allsop J) (DSE), cited with approval by the Court of Appeal in Viterra (2018) 58 VR 333 at [50] (Whelan, Kyrou and McLeish JJA) (Viterra).
[47](2003) 127 FCR 499, [58].
[48]Viterra (2018) 58 VR 333, [50].
The plaintiff maintains that the Particulars show, inevitably, that the C&L’s lawyers (Gadens and Denehy) must have been integrally involved in the formulation of the Letter. Seeing as they wrote the Letter, that must be so. It is further submitted that it can be inferred from that proposition, and from the description of some of the C&L Documents, that Gadens and Denehy had provided advice material to the formation of C&L’s state of mind as set out in the particulars. It is inevitable in the context of this case that C&L has received the advice and assistance of its lawyers, given that it is the lawyers that sent the Letter and signed the pleading.
The plaintiff’s argument suggests that privilege is waived by pleading a denial and supporting the denial with particulars that set out certain facts and other matters of construction of the Building Act. It may be that some of the C&L Documents are relevant to the issue of C&L’s state of mind, namely whether it knew that statements in the Letter were false and it intended by the letter to materially injure the plaintiff. But nothing asserted in C&L’s defence relates to the contents of an otherwise privileged communications. The defence does not refer to legal advice relied on or received in relation to the publication of the Letter, or otherwise put confidential communications with its lawyers in issue. C&L has not sought to justify its state of mind by reference to the substance or effect of legal advice received.
As I have said, the authorities show that something more than putting the party’s state of mind in issue and the relevance of any legal advice is required. But there is nothing more than the facts and assertions set out in the Particulars and the fact that Gadens wrote the Letter. If that was sufficient to give rise to an inconsistency between reliance on the Particulars and maintenance of the privilege, then in any case where a claim in a proceeding depends upon a communication by a lawyer to another person on behalf of a client that would be enough to expose to scrutiny the privileged advice that surrounds that communication. As a general proposition, the authorities to which I have referred show that cannot be correct.
In my view, nothing in C&L’s pleading has put any legal advice relating to the content of the Letter in issue or laid it open to scrutiny. For these reasons, there is no inconsistency between the assertions in the Particulars and the maintenance of the privilege. The plaintiff has not made out the claim for waiver of privilege in respect of the C&L Documents, and it is unnecessary to consider the arguments concerning the documents that post-date the Letter or to exercise the Court’s discretion under s 133 of the Evidence Act to inspect the C&L Documents.
Conclusion
For the above reasons the plaintiff application by summons filed on 26 March 2021 will be dismissed. Unless there is some extraneous matter that would affect the usual order for costs, I consider the plaintiff should pay C&L’s costs of the summons. Before making the order I will give the plaintiff an opportunity to address the question whether there is any good reason why the costs should not follow the event.
SCHEDULE OF PARTIES
| S ECI 2020 00324 | |
| BETWEEN: | |
| STEFAN SEKETA | Plaintiff |
| - v - | |
| GADENS LAWYERS, A FIRM | First Defendant |
| ANDREW DENEHY | Second Defendant |
| C&L INTERNATIONAL HOLDINGS PTY LTD (ACN 163 004 395) | Third Defendant |
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