South Australian Government Financing Authority v Bank of New Zealand

SOUTH AUSTRALIAN GOVERNMENT FINANCING AUTHORITY
v
BANK OF NEW ZEALAND and BT AUSTRALIA (HK) LTD
[2002] SASC 56
Full Court Nyland J, Martin and Gray JJ
Application for leave to Appeal

Nyland J I agree with the reasons given by Gray J for the order of the court made on 7 February 2002 whereby the application was dismissed.
Martin J I agree with the reasons given by Gray J for dismissing the application for leave to appeal.
Gray J This is an application for leave to appeal against a decision of a single judge of this court on an interlocutory issue. On 18 January 2002[1] Debelle J rejected a claim for legal professional privilege and ordered that documents be produced. Leave to appeal was refused by Debelle J on 29 January 2002[2]. This court refused leave on 7 February 2002. I now publish my reasons.
[1] [2002] SASC 10
[2] [2002] SASC 22
The primary issue raised before this Court was whether there had been implied or imputed waiver of legal professional privilege with respect to the documents.
Background
This litigation relates to events that occurred during the mid 1980’s. Proceedings were issued in 1999. The trial is due to commence on 4 March 2002. That date was set in September 2001. The matter is a substantial commercial cause. Subject to the resolution of the dispute about production the parties are ready for trial.
The plaintiff, the South Australian Government Financing Authority (“SAFA”), issued proceedings against the Bank of New Zealand (“BNZ”). Later SAFA joined BT Financial Group Limited and BT Australia (HK) Ltd (collectively referred to as “BT”) as second and third defendants in the proceedings. SAFA and BT subsequently reached agreement and the action against BT was discontinued. In his reasons, Debelle J described the litigation in the following terms:
“This action concerns a so-called “side letter” written by SAFA modifying the terms and conditions of certain bonds issued by SAFA in 1985. SAFA had engaged BT and BTAHK to advise it concerning the issue and marketing of the bonds. BTAHK had engaged Messrs Linklaters & Paines, solicitors, to act for it on some aspects of the bond issue. The bonds were first issued to BTAHK which immediately sold them to BNZ. BNZ was party to the negotiations as to the terms of the bonds. The bonds were redeemed at SAFA’s option in April 2000. The present dispute concerns the redemption price of the bonds. Broadly speaking, SAFA seeks to recover about $15 million.
One of the main issues in the action is a claim by SAFA for rectification of the side letter. SAFA alleges that the side letter does not correctly reflect what had been agreed on 24 July 1985 in the course of a telephone conversation between Mr Ian Bell, an employee of BT, Mr Coakley, an employee of BNZ, and Mr Ruse, an employee of SAFA.”
His Honour made the following findings with respect to the agreement between SAFA and BT:
“Initially, the only parties to this action were SAFA and BNZ. Later, SAFA joined both BT companies as defendants. However, SAFA and the BT companies have now compromised their differences. The compromise is contained in a confidential deed dated 23 July 2001 (“the Settlement Deed”). It was a term of the Settlement Deed that SAFA should discontinue the proceedings against the BT companies. On 25 July 2001 SAFA discontinued the proceedings against the BT companies.”
His Honour then discussed the Settlement Deed which included:
“Clause 2.8 of the Settlement Deed provided that the BT companies should make available to SAFA, for inspection and copying, copies of certain privileged documents held by the BT companies. They were
(1)copies of all privileged documents still in the possession or control of the BT companies created in 1985 in relation to the bond issue; and
(2)the statements (if any) of seven named witnesses (“the statements”).
Clause 2.8 opens with the following words:
‘For the purpose of conducting the Proceedings against BNZ, the BT Companies shall make available to SAFA for inspection and copying by its solicitors (subject to common interest privilege vesting in SAFA and the BT Companies).’
The clause then identifies the privileged documents just mentioned.”
The Application for Production
The application for production of documents was made on 21 September 2001.[3] It was accepted that the documents were originally the subject of legal professional privilege. They were statements taken by BT’s solicitors from Mr Bell in preparation for the litigation. Disclosure of the documents to SAFA pursuant to the terms of the Settlement Deed had been made. However inadvertent disclosure of the documents was made by BT’s solicitors to BNZ’s solicitors. When it was learned that the disclosure was inadvertent, BNZ’s solicitors sealed the documents and gave undertakings that any person who had seen the documents would not disclose or use their contents, pending further order of the court.
[3] Production was sought of a number of documents including witness statements of Mr Bell. This application for leave relates only to Mr Bell’s statements. They are referred to in these reasons as “the documents”.
BNZ did not rely on inadvertent disclosure to support its submission of waiver. The application for production was advanced on the basis that privilege had been waived by the provision of the witness statements to SAFA. Further it was submitted that if common interest privilege existed then it had been impliedly or imputably waived.
Debelle J found it unnecessary to decide whether common interest privilege existed. He took the view that both BT and SAFA believed that common interest privilege existed and that the documents were provided by BT and accepted by SAFA on this basis. Given this circumstance Debelle J held that there had been no express waiver of privilege. He then proceeded to consider whether there had been an implied or imputed waiver on the assumption that common interest privilege existed.
The Ruling
Debelle J took the view that unfairness arose such that there had been an implied or imputed waiver of privilege. As a result an order for production was made. His Honour’s findings of unfairness were as follows:
“The fact that SAFA waived privilege in respect of the statement made by Mr Bell in December 1998 and in the draft affidavit for swearing by him dated 19 December 1998 (I will for convenience refer to both as “the 1998 statements”), means that BNZ has been informed of Mr Bell’s then recollection of the events in 1985. It is possible that BNZ will be misled, and thereby unfairness occur, if it is provided with the first statement of Mr Bell but does not receive the two later statements. The absence of the two later statements might result in quite an inaccurate perception of the tenor of the evidence he might give or of particular facts to which he refers. The possibility of differences between the 1998 statements and the later statements is perhaps greater, given the fact that Mr Bell is being asked to recall events which, in 1998, had occurred 13 years earlier. The later statements may modify the earlier 1998 statements. I acknowledge that, if Mr Bell’s evidence departed from his 1998 statements, he could be cross-examined on his prior inconsistent statement and his actual statement might be tendered pursuant to s 28 of the Evidence Act 1929. However, the question whether privilege in the later statements is waived by operation of law should not, I think, be determined by forensic tactics or strategy but by the principles of fairness which apply in this context. Another possibility is that Mr Bell’s later statements may include facts concerning the telephone conversation on 24 July 1985 and the events flowing from it which are not disclosed in the earlier statement and which might be detrimental to the case of SAFA. Those facts might never be capable of being ascertained by BNZ. That will give rise to even greater unfairness.
When determining whether the later two statements should be produced, I do not regard all of the statements as if they were one document. Plainly, if they were, the later statements would have to be produced. Although they are not one document, to the extent that they represent Bell’s recollection of the relevant events, they all relate to the same issue. Because privilege has been waived in respect of the 1998 statements, fairness requires that the later statements are also made available to BNZ so that it can ascertain whether Bell’s recollection remains the same or is greater or less or is otherwise qualified. If the statements are not made available, BNZ might have a completely wrong picture of the evidence which Bell might give and thereby be misled. To adapt the already quoted remarks of Mustill J in Nea Karteria, to supply the 1998 statements but not the later statements is to provide a fragment, albeit a substantial fragment, but not the whole of the material.
For these reasons, both of the later statements should be made available to BNZ so that it is not misled and no unfairness results. However, it must be recognised that Mr Bell’s latest statements may contain privileged communications quite unrelated to this litigation. In order to avoid disclosure of such privileged information, the documents should be inspected by a judge or master before an order is made for production of the statement. If the statements are otherwise relevant but contain some privileged material which is quite unrelated to this litigation, that portion of each statement can be masked.”
Approach to Applications for Leave
In Glenauchen Pty Ltd v Circuit Finance Pty Ltd[4] the Full court observed that the court's practice has been:
“to grant leave to appeal only if a question of general principle arises. The court will usually consider whether there is reason to doubt the correctness of the decision under consideration. However, in the end the court must act as the interests of justice require.”
[4] [2001] SASC 61 at [3]; see also Citicorp Australia v Cirillo [2000] SASC 374 at [6].
This accords with the practice in other jurisdictions. In BHP Petroleum Pty Ltd v Oil Basins Ltd[5] Fullagar J spoke of the practice in Victoria:
“As this is an application for leave to appeal from interlocutory orders, the authorities show that this Court should address itself to two questions, as follows: (1) whether the correctness of the orders of Murray J is attended with sufficient doubt to warrant their being reconsidered on appeal; and (2) whether substantial injustice will be caused to the applicant (O.B.L.) if the orders of Murray J stand: see, for example Niemann v Electronic Industries Ltd [1978] VR 431, at p. 433, per McInerney J, and at pp 441-442, per Murphy J. At p 441, Murphy J said, inter alia:
‘If the order was correct then it follows that substantial injustice could not follow. If the order is seen to be clearly wrong, this is not alone sufficient. It must be shown, in addition, to effect a substantial injustice by its operation.’ ”
Mr Bell’s Statements
[5] [1985] VR 756 at 758
The circumstances surrounding the taking of Mr Bell’s statements are reasonably clear. BT sought to take advantage of taxation benefits available under Australian and other countries’ taxation laws. This involved engaging in transactions within Australia and overseas to obtain a deferral of the recognition of income for tax purposes. The bond issue was such a transaction. It was against this background that Mr Bell became involved as one of the officers of BT which advised SAFA with respect to the proposed issue of bonds. Mr Bell was a director of BT’s corporate finance division. The corporate finance division through BT’s New Zealand branch sought entities in New Zealand which were interested in tax deferral investments. One such entity was BNZ. BT approached BNZ with respect to the proposed bond issue. BNZ was interested in a bond issue but was concerned about the number of years of deferral. Extensive negotiations occurred in an effort to resolve this issue. This led to the preparation of the side letter.
SAFA discovered a draft affidavit of Mr Bell (“the draft affidavit”) which addressed the events immediately preceding the preparation of the side letter. The draft included the following:
“-As stated in paragraph 31.2 above, the sole reason for the amendment of the Bonds by the side letter was to allow BNZ to defray the impact of tax rate increases, and in return for SAFA providing the extension of time the cost to SAFA for that 5 year period would be reduced.
-On or about 24 July 1995, the exact date I cannot now recall, Lloyd Coakley, on behalf of BNZ, agreed to the solution that after the 10 year period BNZ would only receive the 12 month Australian Treasury Bond rate less the margin finally agreed at 0.20%.
-This deferral solution was central to the entire negotiations. Lloyd Coakley had informed me during one of our numerous telephone conversations that it was the only way that the Bond issue would have occurred because BNZ’s Board were extremely concerned about tax rate implications and that without a tax rate indemnity BNZ’s Board would not have approved the Bond issue.
-BNZ’s basic problem with entering into the Bond agreement was a risk of tax rate changes and the deferral was the only solution to their problem.
-Having been intimately involved in the negotiation process, it is my opinion that the whole Bond issue was undertaken by BNZ and SAFA on the basis of the accumulated value of the zero coupon Bond for the 10 year period at the yield of 12.05%. Thereafter its yield was to be the 12 month Australian Treasury Bond rate for the 5 year period of deferral less the margin of 0.20%.
-The side letter was negotiated at this time and signed by SAFA on 31 July 1985. Now shown to me and marked with the letters ‘IFB16’ is a copy of that letter. There was not sufficient time to amend and print the Bonds and security printed in time for settlement so it as agreed to effect the amendments by way of a side letter and type a reference to the side letter on the form of the security printed Bonds.
-An interest rate swap agreement was entered into between SAFA and BTAL on 2 August 1985, under which SAFA, for the period commencing 1 August 1985 to 25 July 1996, converted its fixed interest rate exposure under the Bonds to a floating interest rate determined by reference to a bank bill swap rate. The purpose of the interest rate swap agreement was to convert SAFA’s fixed interest rate obligations with respect to the zero coupon Bonds to a floating interest rate obligation.
-During negotiations of the side letter it was my understanding that the parties were clear as to the terms of this agreement. Given this, I have difficulty in understanding why the side letter of 31 July 1985 is written in the way it is unless the definition of ‘option redemption price’ in clause 4 of the side letter overrides the definition in the terms and conditions of the Bonds and applies to both clauses 2 and 3.
-When providing instructions for the drafting of the side letter, consistent with my discussions with SAFA and BNZ, and during the course of the subsequent negotiations I believe that the side letter was to be interpreted on the basis of the definition of ‘option redemption price’ in clause 4(a) applies for the whole letter including SAFA’s redemption right and that the option redemption price is defined by [the] formula in clause 3. As stated previously, the whole Bond issue was intended to wind up after 10 years. It was only extended another 5 years at the request of BNZ at the 12 month Australian Treasury Bond less 0.20% which was undertaken purely for BNZ’s convenience.
-The side letter was formulated in haste to enable the issue of the Bonds to proceed on time. It is my belief that all parties intended clause 4(a) of the side letter to apply to the calculation of the Optional Redemption Price were SAFA to exercise its option under Condition 5 (C) or BNZ to exercise its option under Condition 5(D) with the Optional Redemption Price, in both instances, being determined in accordance with the formula in clause 3 of the side letter. If it is found that the side letter does not reflect this then I respectfully submit that the Bonds should be rectified to reflect the agreed intentions of both parties, namely that:
SAFA’s option to redeem the Bonds under Condition 5(C) would, in respect of the 2 tranches, be deferred from 25 April 1995 and 25 April 1996, be respectively, to 25 April 2000 for both tranches. This would provide BNZ with the ability to [reduce the] impact of tax rate increases occurring on redemption of the Bonds; and
. SAFA’s condition to the deferral of its redemption right was that the fixed applicable [rate] under the terms and conditions of the Bonds would change, after 25 [April] 1995 and 25 April 1996, for each tranche of the Bonds, from the fixed interest rate [of] 12.05% to a floating interest rate determined by reference to the Australian Treas[ury] Bond Rate less 0.20% irrespective of whether BNZ or SAFA exercised its option [to] redeem the Bonds.
-The agreed intention of all parties to the negotiations was for the formula provided for in the side letter to apply to both SAFA’s option and BNZ’s option.”
In 1998 SAFA obtained a written statement from Mr Bell. The statement provided material information concerning the circumstances in which the side letter was prepared. SAFA also had in its possession notes of a conference held with Mr Bell at about the same time. The draft affidavit, the 1998 statement and the conference notes were all discovered and produced by SAFA to BNZ. Legal professional privilege was waived.
The Earlier Interlocutory Proceedings
It is necessary to digress to discuss an earlier interlocutory application. BT applied to strike out parts of SAFA’s statement of claim. Amongst the complaints advanced was a suggested lack of proper pleading with respect to a claim for an extension of time. It was said that relevant material facts had not been pleaded. The matter came before a master who dismissed the application. An appeal from the master was dismissed on 8 August 2000[6]. During the course of submissions on the appeal from the Master SAFA indicated that it was prepared to provide further particulars with respect to the claim for an extension of time. SAFA identified as a new material fact information that had been obtained from Mr Bell. The relevant history of the matter is recorded in the reasons for the dismissal of the appeal[7]:
[6] [2000] SASC 264
[7] [2000] SASC 264 at [29]
“Paragraph 61 of the Statement of Claim has been the subject of a proposed amendment. The following extract includes parts of the proposed amendment.[8]
[8] Notice of this proposed amendment was given during the course of the hearing of this Appeal. The full
test of the amendment is not set out.
... SAFA claims an extension of time pursuant to Section 48 of the Limitation of Actions Act, 1936 (SA).
Particulars
Facts material to SAFA's case were not ascertained by it until a time after the expiration of the period of limitation but less than twelve months before the commencement of these proceedings, namely on 2 and 3 December 1998.
The material facts so ascertained were the terms of a statement given by Mr Bell to a solicitor acting for SAFA on 2 and 3 December 1998 as to: the circumstances of the agreement alleged in paragraph 31 hereof; and the terms of the agreement alleged in paragraph 31 hereof;
...
For reasons that I set out hereunder, I consider that the proposed plea is sustainable, although further particulars should be provided. In these circumstances, I will allow the proposed amendment to paragraph 61. My reasons address the proposed paragraph 61.
I was provided with a copy of Mr Bell's statement as a document referred to in the pleading and forming part of the pleading.
Paragraph 61, together with Mr Bell's statement, left me with the clear impression that the plaintiff was asserting that a number of facts material to the plaintiff's case were not ascertained by him within the 12 month period prior to the issue of proceedings ("the material facts").
In the course of submissions, this was confirmed by counsel for the plaintiff. He indicated that there were three categories of material facts. First, material facts of which the plaintiff was totally unaware. He instanced matters between BT and BNZ. Second, material facts where the plaintiff had inferred that certain events had occurred but it was now aware, from Mr Bell's statement, that the events had occurred. The third matter identified was Mr Bell's availability as a witness for the plaintiff and that he could speak to matters as known to the defendants. Counsel indicated that the plaintiff was prepared to provide further particulars specifying the material facts within each of the categories mentioned above.
...
It is alleged that the existence and contents of Mr Bell's witness statement were material to the appellant's case in the sense that the witness statement represented available evidence that could be called in support of the plaintiff's case. In these circumstances, accepting the accuracy of the plaintiff's assertions, the test enunciated by Sola Optical has been satisfied.”

As a result of the earlier interlocutory proceedings BT and BNZ were aware that SAFA proposed to lead Mr Bell’s evidence in support of its case against BNZ and that SAFA had disclosed and waived privilege over the statement that had been obtained from Mr Bell.
Disclosure of Mr Bell’s Earlier Witness Statements
As earlier observed, SAFA discovered and produced Mr Bell’s statement of December 1998, the notes of the conference with Mr Bell, and the lengthy draft affidavit and facsimile. A memorandum that accompanied the draft affidavit was also discovered. The draft affidavit recorded in greater detail certain matters addressed in Mr Bell’s 1998 statement. This discovery was made whilst both BT and BNZ were parties to the action. BT was on notice that SAFA had made discovery, produced and waived privilege with respect to these documents. This discovery gave the appearance that disclosure was being made of the evidence proposed to be led from Mr Bell.
It is apparent that BT was involved in the arrangements that led to Mr Bell assisting SAFA. The facsimile memorandum from SAFA to Mr Bell, dated 16 December 1998, referred to the draft affidavit and to a “draft SAFA letter”. With respect to the draft SAFA letter the following appears in the facsimile:
“The letter does not address the issues we discussed today but deals with compensating you for your legal c[osts] seeking advice, your time costs and out of pocket expenses. Please let me know if it is OK on the basis of leaving to one side the issue of arrangements between SAFA, you and BTAL. On this I have thought I [bit...] and would appreciate you seeking Allen’s advice in 3 areas as to providing you with the necessary comfor[t],
(a) what you would require[d] purely from SAFA;
(b) what you would require purely from BTAL; and
(c)what you would require from both BTAL and SAFA, assuming (a) and (b) was not achievable.
As discussed I would then see it as a matter for SAFA to organise it with BTAL, initially on the basis of [o...] (b) and then working back through option (c) and (a).”
Although the arrangement is not entirely clear it is apparent that SAFA was negotiating with BT in regard to Mr Bell’s “requirements”. In the circumstances, it is reasonable to infer that BT had a level of awareness about the nature and extent of Mr Bell’s cooperation with SAFA.
BT corresponded with BNZ in regard to the claim for common interest privilege. On 4 September 2001 the solicitor for BT advised the solicitor for BNZ:
“Prior to 24 July 2001 SAFA, our clients, the former second and third defendants (collectively, ‘the BT Companies’) and the former Third Party settled the proceedings as between themselves. As a result [of] the settlement, SAFA and the BT companies ceased to be adversaries and commenced to have a common interest as against BNZ.”
As earlier observed as a term of the Deed of Settlement BT had agreed to make available witness statements to SAFA. These witness statements included the further statements of Mr Bell. It is these further statements that were the subject of the order for production and the subject of the application for leave to appeal.
At the time BT made Mr Bell’s further statements available to SAFA it understood that the statements would not be forwarded to BNZ. Accordingly BT was on notice that by providing the further statements to SAFA, SAFA would be in possession of further information from Mr Bell, but that BNZ would not.
Debelle J reviewed the further statements of Mr Bell. Counsel for SAFA did not dispute the accuracy of His Honour’s summary of the content of the further statements. That summary was as follows:
“Before summarising the content of the later statements, it is important to note what is contained in the statement made in December 1998 and in the draft affidavit dated 19 December 1998. In those documents, Mr Bell recounts the circumstances in which the BT companies proposed the issue of zero coupon bonds to BNZ and to SAFA, he notes the terms on which the bonds would be issued, and he narrates the circumstances in which the terms of the bonds were agreed by SAFA and BNZ, the telephone conversation on 24 July 1985 as well as the circumstances leading to it and the events which followed it. He also states what he believes was agreed in that conversation on 24 July 1985 and refers to other facts which reinforce his belief.
The second statement was obtained on 16 and 17 March. Broadly speaking, the statement covers the same ground as the earlier statement and affidavit. However, it contains a great deal more detail. In addition, it gives details of his prior experience, the structure of the relevant BT companies, the legal advisers to the BT companies and his own relationship with BT. He also sets out his understanding of the structure of SAFA and BNZ. I do not think that this additional material is privileged. Some of it is simply more detail of what was contained in his December 1998 statement on the structure of the BT companies and of BNZ. If it is privileged, it can be masked. I will hear the parties on that issue. As for the balance, it covers the same subject matter and fairness requires that it be produced for inspection.
The third statement is a more detailed account of the events of 24 to 31 July 1985. It was obtained on 18 April 2000. It includes the telephone conversation of 24 July 1985 and the events which followed it. It is a more detailed account but, as it covers a matter which is critical to the issues in this action which is also dealt with in the first statement, the interests of fairness requires disclosure. That conclusion is reinforced by the fact that the statement made on 16 and 17 March 2000 bears an endorsement
‘Bell subsequently requested we amend it and there was a subsequent [phone] call on 18 April 2000 incorporated in this statement’.
Plainly, the March 2000 statement would be misleading if the April 2000 statement is not also available.”
It is unclear whether the further statements should be characterised as forming part of the one proof, the balance of the proof being the earlier statements that had been discovered and the subject of the waiver of legal professional privilege. If not then they are statements touching on the same subject matter.
Unfairness
It was submitted that BT’s conduct led to unfairness. That unfairness was said to have arisen from the fact that SAFA proffered material as being the evidence to be led from Mr Bell but then held back further information from Mr Bell expanding upon the issues discussed in the disclosed material and being material relevant to the issues to be litigated.
The relevant legal principles have been addressed by the High Court. In Mann v Carnell[9] Gleeson CJ, Gaudron, Gummow and Callinan JJ said:
“At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that ‘waiver’ is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client’s version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or 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.
Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is ‘imputed by operation of law’. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister’s version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.”
[9] (1999-2000) 201 CLR 1 at 13
The issue of imputed waiver was also discussed in Attorney-General (N.T.) v Maurice & Ors[10]. Traditional owners had filed with the Aboriginal Land Commissioner and handed to the other parties a claims book in which particulars of the claim and certain supporting material was set out. During the course of the proceedings the claimants made incidental reference to the contents of the claims book. It was argued that legal professional privilege had been waived in relation to the source materials that had been used in the preparation of the claims book.
[10] (1986) 161 CLR 475
The court held that privilege had not been waived. Gibbs CJ concluded that the fairness test used for partial disclosure should be used when deciding wether there had been waiver of the associated material. Mason and Brennan JJ considered the fairness test to be relevant but not necessarily conclusive and Dawson J approved a fairness criterion to be applied in cases of potential associated waiver. Gibbs CJ said[11]:
[11] (1986) 161 CLR 475 at 481-482
“It is not difficult to see that where a document deals with a single subject-matter it would be unfair to allow a party to use part of the document and claim privilege as to the remainder. So it has been held that where cross-examining counsel asked a witness whether he had said certain things in a written statement, examining counsel was entitled to require the whole statement to be put into evidence: Burnell v British Transport Commission. Similarly, where a party disclosed a document which contained part only of a memorandum which dealt with a single subject-matter, and then read the document to the judge in the course of opening the case, it was held that privilege was waived as to the whole memorandum: Great Atlantic Insurance Co v Home Insurance Co. In that case Templeman LJ said:
‘... the rule that privilege relating to a document which deals with one subject matter cannot be waived as to part and asserted as to the remainder is based on the possibility that any use of part of a document may be unfair or misleading, that the party who possesses the document is clearly not the person who can decide whether a partial disclosure is misleading or not, nor can the judge decide without hearing argument, nor can he hear argument unless the document is disclosed as a whole to the other side. Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased.’
The same test must be applied in deciding whether the use in legal proceedings of one document impliedly waives privilege in associated material. In Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corporation [No 2] Mustill J dealt with this question and suggested the following test:
‘... where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood.’
...
If Hobhouse J was correct in saying that there is no waiver of associated material until that material is adduced in evidence it follows in the present case that privilege in the source material has not been waived. In my opinion however the rule is not so inflexible; the question is whether the disclosure or use of material that has been made renders it unfair to uphold the privilege in the associated material, and although the question whether the material that has been disclosed has been used in evidence is relevant, it is not decisive.”
Mason and Brennan JJ said[12]:
“The limiting effect of legal professional privilege on the availability of evidence otherwise relevant is confined, inter alia, by the doctrine of waiver. A litigant can of course waive his privilege directly through intentionally disclosing protected material. He can also lose that protection through a waiver by implication. An implied waiver occurs when, by reason of some conduct on the privilege holder’s part, it becomes unfair to maintain the privilege.
The holder of the privilege should not be able to abuse it by using it to create an inaccurate perception of the protected communication. Professor Wigmore explains:
‘[W]hen his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder.’[13]
In order to ensure that the opposing litigant is not misled by an inaccurate perception of the disclosed communication, fairness will usually require that waiver as to one part of a protected communication should result in waiver as to the rest of the communication on that subject-matter [14].
Hence, the implied waiver inquiry is at bottom focused on the fairness of imputing such a waiver.”
[12] (1986) 161 CLR 475 at pp487-488
[13] Wigmore, Evidence in Trials at Common Law (1961), vol 8, par 2327, p 636.
[14] see Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529; [1981] 2 All ER 485
Dawson J addressed the issue in the following terms:
“This is a difficult area of the law, but it is clear enough that an implied waiver may be required by fairness notwithstanding that it was not intended. It would not be fair to allow privilege to be waived with respect to a portion of a document or a conversation without requiring disclosure of the rest of it, at least if the document or conversation dealt with the one subject-matter[15]. So much may be obvious, but legal professional privilege is concerned with protecting the confidentiality of a relationship and if that confidentiality is abandoned by a particular disclosure it may be necessary in fairness, whether further disclosure was intended or not, to require disclosure extending beyond the particular communication: see Wigmore on Evidence[16]. The cases are not entirely consistent and perhaps what is fair by way of disclosure must ultimately depend upon the relevant circumstances.”
[15] see Burnell v British Transport Commission [1956] 1 QB 187 and Great Atlantic Insurance Co v Home Insurance Co. [1981] 1 WLR 529 at 536; 1981 2 All ER 485 at 490
[16] McNaughton rev (1961), vol VIII, par 2327.
In Newcrest Mining (WA) Ltd v Commonwealth of Australia[17] French J considered the issue of the waiver of privilege with respect to associated material. French J adopted the fairness test as referred to in Maurice[18].
“In evidence Mr Carter has disclosed that in deciding to proceed with expenditure on the lease, BHP Minerals took into account legal advice it had received from Ward Keller, a firm of solicitors based in Darwin. Having regard to the disclosure of significant elements of legal advices that had been received, legal professional privilege was waived in relation to the balance. Thus a fuller picture of the considerations operating on the decision-making processes of BHP Minerals can be obtained for the purposes of the estoppel plea. This approach accords with principles enunciated by the High Court in Attorney-General (NT) v Maurice[19].”
French J then cited the passages of Gibbs CJ and Mason and Brennan JJ referred to earlier in these reasons and continued:
“A dispute has arisen in the present case in relation to certain documents produced under subpoena by Plutonic and Norgold. Privilege is claimed by them for these documents on the basis that they ‘contain communications of legal advice in relation to mining to mining leases held by the Coronation Hill Joint Venture’. Their character and prima facie entitlement to such privilege is not in issue. The question which arises here is whether there is to be attributed to Plutonic and Norgold an implied waiver of the privilege by virtue of the disclosures already made by their co-joint venturer and manager in proceedings brought for their benefit. The documents in question, it should be noted, span dates from 1984 through to 1989. They include some documents already disclosed by Newcrest and BHP Minerals including an important letter of advice from Ward Keller dated 14 June 1984.
The threshold question is whether the principle of implied waiver can extend to materials associated with those disclosed by one party, but in respect of which the privilege vests in another who has a common interest in proceedings brought by the disclosing party. Given that the underlying rationale of implied waiver is one of fairness which can overcome the established rationale of legal professional privilege, I think the answer to that threshold question is yes - in principle. The extension of the principle is one, however, to be sparingly applied.”
[17] (1992-1993) 40 FCR 507
[18] at 508
[19] (1986) 161 CLR 475
United Kingdom commentators have recently discussed the issue of waiver of associated documents. Phipson provides:[20]
“Whether a party who has waived privilege in certain material before the trial should be required to produce the associated documents at that stage depends on the circumstances. It will usually only be where a party has made clear in advance his intention to rely on the material at trial that the position can be resolved before trial. There are obvious advantages in time and costs in the issues being resolved before trial. But where there is uncertainty as to what use if any will be made of the material at trial, it may not be right to deal with it prior to trial.”
In R v Secretary of State for Transport, ex p. Factortame[21], Auld LJ discussed the issue in the following terms:
“Much will depend, of course, on the indication given by the party waiving privilege before trial whether he intends to rely upon the privileged material at the trial and, if so, for what purpose. If he does intend to put it in evidence, there is an obvious advantage in both parties knowing where they stand before trial. It enables each of them to determine whether and how to proceed with the litigation and to avoid costly adjournments for further discovery and consequential work which otherwise would occur if the point had to be determined at trial. Where, however, there is uncertainty as to the use, if any, a party intends to make at trial of disclosed privileged material, the resolution of the opposing party’s claim to further and associated discovery may have to await the trial, with all the tactical and costly disadvantage that that might be to the party concealing his hand.
...
Much depends upon whether the party making partial disclosure seeks to represent by so doing that the disclosed documents go to part or the whole of an ‘issue in question’, the expression used by Mustill J in the passage from his judgment in Nea Karteria that I have cited. The issue may be confined to what was said or done in a single transaction or it may be more complex than that and extend over a series of connected events or transactions. In each case the question for the Court is whether the matters in issue in the document or documents in respect of which partial disclosure has been made are respectively severable so that the partially disclosed material clearly does not bear on matters in issue in respect of which material is withheld. The more confined the issue, for example as to the content of a single document or conversation, the more difficult it is likely to be to withhold, by severance part of the document or other documents relevant to the document or conversation.”
Conclusion
[20] Phipson on Evidence (15th ed); Sweet & Maxwell: London, 2000 at 22-20.
[21] (1997) 9 Admin LR 591

As has been observed by a number of commentators, difficult questions arise when determining whether imputed or implied waiver has arisen in a particular circumstance. This matter is another example of the difficulty.
In the circumstances, BT’s conduct was associated with identified unfairness. The circumstances included the following:
As a result of the settlement between BT and SAFA, BT ceased to be an adversary with SAFA and had commenced to have “a common interest as against BNZ”.
At the time of settlement, BT understood that SAFA had advised the court that it would call Mr Bell as a witness. BT understood that SAFA had produced to BNZ three statements outlining Mr Bell’s proposed evidence.
Pursuant to the settlement agreement BT provided SAFA with further statements of Mr Bell on the understanding that these would be kept confidential from BNZ.
In providing further statements to SAFA, BT was on notice that BNZ would have only part of the story. Unbeknownst to BNZ, part of Mr Bell’s account was being withheld. In that sense, BNZ was being mislead. BNZ believed that it had Mr Bell’s complete account when in fact there was more.
No reason has been identified to doubt the correctness of the decision of Debelle J. His Honour applied well settled principles and correctly concluded that there had been implied or imputed waiver. No point of general principle arises. The interests of justice do not require a grant of leave.
LIST OF CITATIONS AS THEY APPEAR IN THE JUDGMENT
1[2002] SASC 10
2[2002] SASC 22
3 Production was sought of a number of documents including witness statements of Mr Bell. This application for leave relates only to Mr Bell’s statements. They are referred to in these reasons as “the documents”.
4 [2001] SASC 61 at [3]; see also Citicorp Australia v Cirillo [2000] SASC 374 at [6].
5 [1985] VR 756 at 758
6 [2000] SASC 264
7 [2000] SASC 264 at [29]
8 Notice of this proposed amendment was given during the course of the hearing of this Appeal. The full
test of the amendment is not set out.
9 (1999-2000) 201 CLR 1 at 13
10 (1986) 161 CLR 475
11 (1986) 161 CLR 475 at 481-482
12 (1986) 161 CLR 475 at pp487-488
13 Wigmore, Evidence in Trials at Common Law (1961), vol 8, par 2327, p 636.
14 SEEe Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529; 1981] 2 All ER 485
15 see Burnell v British Transport Commission [1956] 1 QB 187 and Great Atlantic Insurance Co v Home Insurance Co. [1981] 1 WLR 529 at 536; 1981 2 All ER 485 at 490
16 McNaughton rev (1961), vol VIII, par 2327.
17 (1992-1993) 40 FCR 507
18 at 508
19 (1986) 161 CLR 475
20 Phipson on Evidence (15th ed); Sweet & Maxwell: London, 2000 at 22-20.
21 (1997) 9 Admin LR 591

[2002] SASC 56

7 February 2002