Westgem Investments Pty Ltd in Its Own Right Trustee for Hossean Pourzand and Jenny Maria Pourzand ATF the Helen Trust v Commonwealth Bank of Australia Ltd [No 2]
[2018] WASC 71
•6 MARCH 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WESTGEM INVESTMENTS PTY LTD IN ITS OWN RIGHT TRUSTEE FOR HOSSEAN POURZAND AND JENNY MARIA POURZAND ATF THE HELEN TRUST -v- COMMONWEALTH BANK OF AUSTRALIA LTD [No 2] [2018] WASC 71
CORAM: TOTTLE J
HEARD: 13 OCTOBER 2017 AND ON THE PAPERS
DELIVERED : 6 MARCH 2018
FILE NO/S: CIV 2722 of 2012
BETWEEN: WESTGEM INVESTMENTS PTY LTD IN ITS OWN RIGHT TRUSTEE FOR HOSSEAN POURZAND AND JENNY MARIA POURZAND ATF THE HELEN TRUST
First Plaintiff
HOSSEAN POURZAND IN ITS OWN RIGHT TRUSTEE FOR THE HELEN TRUST & THE SHERIN TRUST & THE POURZAND TRUST
First Named Second PlaintiffJENNY MARIA POURZAND IN ITS OWN RIGHT TRUSTEE FOR THE HELEN TRUST & THE SHERIN TRUST & THE POURZAND TRUST
Second Named Second PlaintiffPAKWEST PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR NEWPORT SECURITIES PTY LTD & TRUSTEE FOR VARIOUS OTHER COMPANIES
Third PlaintiffNEWPORT SECURITIES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) ATF THE PAKWEST TRUST THE NEWPORT FAMILY TRUST & THE LUKE SARACENI FAMILY TRUST
Fourth PlaintiffOAKCURE PTY LTD OWN CAPACITY AND TRUSTEE FOR THE PARRY TRUST
Fifth PlaintiffSEAPORT PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR THE SEAPORT TRUST
Sixth PlaintiffLUKE SARACENI
Seventh PlaintiffMAYPORT NOMINEES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR THE MAYPORT UNIT TRUST
Eighth PlaintiffQUEEN STREET PROPERTIES PTY LTD IN ITS OWN RIGHT TRUSTEE FOR THE QUEEN STREET PROPERTIES
Ninth PlaintiffGRAND EDITION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) IN ITS OWN RIGHT TRUSTEE FOR THE FARAH INVESTMENT TRUST NO 4
Tenth PlaintiffLMS HOLDINGS PTY LTD ATF THE SARACENI FAMILY TRUST
Eleventh PlaintiffTOKYO CITY PTY LTD ATF THE TOKYO CITY TRUST
Twelfth PlaintiffMAREE SARACENI PTY LTD ATF THE TOKYO CITY TRUST AND THE LUKE SARACENI FAMILY TRUST
Thirteenth PlaintiffMAREE ANN SARACENI
Fourteenth PlaintiffSINGLE HOLDINGS WA PTY LTD ATF THE TUART INVESTMENTS UNIT TRUST
Fifteenth PlaintiffSARACEN PROJECT MANAGEMENT PTY LTD ATF THE SARACEN PROJECT MANAGEMENT TRUST
Sixteenth PlaintiffCARDUP INDUSTRIAL LAND HOLDINGS PTY LTD IN ITS OWN RIGHT TRUSTEE FOR THE CARDUP INDUSTRIAL LAND TRUST AND THE CARDUP INDUSTRIAL LAND TRUST NO 2
Seventeenth PlaintiffGOLDCUP NOMINEES PTY LTD ATF THE PAKWEST TRUST
Eighteenth PlaintiffGOLDEN WEST PROPERTIES PTY LTD ATF THE POURZAND FAMILY TRUST THE OZRA TRUST THE GOLD HOUSE TRUST AND JENNY'S TRUST
Nineteenth PlaintiffAND
COMMONWEALTH BANK OF AUSTRALIA LTD
First DefendantWESTPAC ADMINISTRATION 2 LTD
Second DefendantWESTPAC ADMINISTRATION 3 LTD
Third Defendant
Catchwords:
Legal professional privilege - Waiver - Implied waiver by service of expert report - Issue waiver - Disclosure waiver - Turns on own facts
Legislation:
Nil
Result:
Application partly successful
Category: B
Representation:
Counsel:
First Plaintiff : Mr R Newlinds SC & Mr W Edwards
First Named Second Plaintiff : Mr R Newlinds SC & Mr W Edwards
Second Named Second Plaintiff : Mr R Newlinds SC & Mr W Edwards
Third Plaintiff : Mr R Newlinds SC & Mr W Edwards
Fourth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Fifth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Sixth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Seventh Plaintiff : Mr R Newlinds SC & Mr W Edwards
Eighth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Ninth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Tenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Eleventh Plaintiff : Mr R Newlinds SC & Mr W Edwards
Twelfth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Thirteenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Fourteenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Fifteenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Sixteenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Seventeenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Eighteenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
Nineteenth Plaintiff : Mr R Newlinds SC & Mr W Edwards
First Defendant : Mr J Thomson SC & Mr E Gisonda
Second Defendant : Mr J Thomson SC & Mr E Gisonda
Third Defendant : Mr J Thomson SC & Mr E Gisonda
Solicitors:
First Plaintiff : Jackson McDonald
First Named Second Plaintiff : Jackson McDonald
Second Named Second Plaintiff : Jackson McDonald
Third Plaintiff : Jackson McDonald
Fourth Plaintiff : Jackson McDonald
Fifth Plaintiff : Jackson McDonald
Sixth Plaintiff : Jackson McDonald
Seventh Plaintiff : Jackson McDonald
Eighth Plaintiff : Jackson McDonald
Ninth Plaintiff : Jackson McDonald
Tenth Plaintiff : Jackson McDonald
Eleventh Plaintiff : Jackson McDonald
Twelfth Plaintiff : Jackson McDonald
Thirteenth Plaintiff : Jackson McDonald
Fourteenth Plaintiff : Jackson McDonald
Fifteenth Plaintiff : Jackson McDonald
Sixteenth Plaintiff : Jackson McDonald
Seventeenth Plaintiff : Jackson McDonald
Eighteenth Plaintiff : Jackson McDonald
Nineteenth Plaintiff : Jackson McDonald
First Defendant : King & Wood Mallesons
Second Defendant : King & Wood Mallesons
Third Defendant : King & Wood Mallesons
Case(s) referred to in judgment(s):
Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475
Australian Securities & Investment Commission (ASIC) v Southcorp Ltd [2003] FCA 804
Brisconnections Finance Pty Ltd (Subject to a Deed of Company Arrangement) (Receivers and Managers Appointed) v Arup Pty Ltd [2017] FCA 590
Cantor v Audi Australia Pty Ltd [2016] FCA 1391
Clough v Tameside and Glossop Health Authority [1998] 2 All ER 971
Cole v Dyer [1999] SASC 272; (1999) 74 SASR 216
Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341
Crawford v Bailey (Unreported, NSWSC , 26 October 1990)
Dingwall v Commonwealth of Australia [1992] FCA 1043; (1992) 39 FCR 521
DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) FCR 499
Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1
Sevic v Roarty [1998] NSWSC 462; (1998) 44 NSWLR 287
TOTTLE J:
Introduction
These reasons concern the plaintiffs' applications for orders that the defendants produce for inspection the following categories of documents:
(i)privileged documents, and documents redacted to remove irrelevant material, provided to Mr Peter Byford, an expert witness instructed by the defendants' solicitors to provide a report that the defendants will tender at the trial due to commence on 3 April 2018;
(ii)privileged documents in respect of which the plaintiffs argue that privilege has been lost by 'issue waiver'; and
(iii)documents, that with limited exceptions the plaintiffs accept are privileged, in respect of which the plaintiffs argue privilege has been lost because the documents have been referred to in witness statements that the defendants will tender at the trial ('disclosure waiver').
The application was supported by an affidavit sworn on 18 August 2017 by Mr Thomas Wilson of the plaintiffs' solicitors. In opposition to the application the defendants relied upon affidavits sworn on 2 and 12 October 2017 by Mr James Wang of the defendants' solicitors.
The documents provided to Mr Byford of which the plaintiffs seek production are listed in Appendix 1. The plaintiffs have not listed the documents the subject of 'issue waiver'. The documents falling within the third category, being documents referred to in witness statements, have been organised in in two tables: tables D and E. Subject to the limited exceptions of documents in respect of which the claimed privilege is challenged, table D lists privileged communications passing between the defendants' lawyers and the defendants or third parties and table E lists internal documents that have been redacted because they disclose requests of legal advice or the substance of legal advice that was provided. There are 59 documents in table D and 104 documents in table E.[1] There is some overlap between the documents listed in tables D and E and those listed in Appendix 1. The plaintiffs also submit that a number of the table D and E documents are the subject of issue waiver.
The subject matter of the litigation
[1] The documents are listed in rows. Some rows list multiple documents, eg, several emails in a chain. For simplicity I will refer to documents by reference to the row number and this reference incorporates all documents in that row.
The substantive proceedings principally involve a related series of disputes between two developers (the principal plaintiffs, Mr Luke Saraceni and Mr Hossean Pourzand) and their financiers (the defendant banks) in connection with the high rise office/retail development in Perth known as 'Raine Square'. Westgem Investments Pty Ltd is the corporate vehicle owned by Mr Saraceni and Mr Pourzand which was used to carry out the development. One of the financiers, Bankwest (Commonwealth Bank of Australia), also had dealings with Westgem in its capacity as a prospective tenant of the Raine Square building and this is the subject of a specific claim in these proceedings.
The Byford documents
Mr Byford was instructed by the defendants' solicitors to prepare a report for use at the trial. It is accepted that the documents of which the plaintiffs seek production were originally the subject of legal professional privilege. The questions to be decided are: has the privilege been waived by the service of Mr Byford's report; and should the parts of the documents redacted on relevance grounds be disclosed.
The facts
Mr Byford was instructed to express opinions on questions relating to the time and costs involved in completing the construction of the Raine Square development on the basis of certain hypotheses, and on the conduct of the superintendent appointed under the building contract. For this purpose the defendants' solicitors provided Mr Byford with a large volume of documents. Mr Byford prepared a report dated 24 August 2017 (the E3A report). The documents were provided to Mr Byford in electronic form. In appendix 1.3 to the E3A report Mr Byford listed the documents provided to him for the purposes of preparing the report.
Appendix 1.3 included some documents which were redacted to conceal privileged material but the redactions were 'inoperable'. Unknowingly Mr Byford viewed the privileged material. The plaintiffs do not press for production of the privileged documents that were viewed inadvertently by Mr Byford. Appendix 1.3 included other documents over which legal professional privilege was claimed which were provided to Mr Byford in unredacted form but which have been provided to the plaintiffs in redacted form. It is these documents which are the subject of the application for production.
In a letter addressed to the defendants' solicitors dated 4 October 2017 Mr Byford stated:[2]
•The documents relied upon by him in the formation of the opinion expressed in the E3A report were those expressly referenced in the report or in one of the appendices to it.
•He had not relied on any of the privileged documents in the formation of the opinion expressed in the E3A report.
•The privileged documents had not influenced the content of his report.
Applicable legal principles
[2] Attachment JYW – 29 to the affidavit sworn on 12 October 2017 by Mr James Wang.
In Australian Securities & Investment Commission (ASIC) v Southcorp Ltd Lindgren J said: [3]
Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents … [provided by a party's lawyers to the experts] … at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents. (citations omitted)
[3] Australian Securities & Investment Commission (ASIC) v Southcorp Ltd [2003] FCA 804 [21].
And observed that:[4]
It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report. (citations omitted)
[4] Australian Securities & Investment Commission (ASIC) v Southcorp Ltd [21].
In Mann v Carnell the High Court stated that waiver of privilege occurs where the conduct of a client is inconsistent with the confidence preserved by the privilege; there is no overriding principle of fairness operating at large.[5] The court's assessment of the perceived inconsistency between the conduct and the maintenance of the confidentiality may, however, be informed by considerations of fairness.[6] The way in which the parties formulated their arguments means that it is helpful to refer to the case law that preceded the decision in Mann v Carnell.
[5] Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 [29].
[6] Mann v Carnell [29].
In Attorney-General (NT) v Maurice the court (Gibbs CJ, Mason, Brennan, Deane & Dawson JJ) considered whether legal professional privilege in 'source materials' used to prepare a Claim Book for the purposes of an aboriginal land rights claim was waived when the Claim Book was lodged, distributed and referred to in the course of a hearing.[7] Mason and Brennan JJ expressed the principle governing waiver as follows:[8]
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.'
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: see Great Atlantic Insurance Co v Home Insurance Co.
Hence, the implied waiver inquiry is at bottom focused on the fairness of imputing such a waiver. (citations omitted)
[7] Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475.
[8] Attorney-General (NT) v Maurice (487 - 488).
In Goldberg v Ng the High Court considered whether disclosure of a privileged communication to a third party for a limited and specific purpose, and on terms that the third party would treat the information so disclosed as confidential, involved a waiver of privilege.[9] The Court was divided upon whether in the circumstances privilege was waived but as was recorded by the plurality in Mann v Carnell, 'the reasoning of all members of the Court was inconsistent with the proposition that any voluntary disclosure to a third party waives privilege'.[10]
[9] Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83.
[10] Mann v Carnell [30] (Gleeson CJ, Guadron, Gummow and Callinan JJ).
In Crawford v Bailey, Enderby J held that legal professional privilege in a letter of instruction to a medical expert that posed questions for the expert to answer had been waived when his report that referred to the questions was tendered. [11] The question to be resolved by Enderby J was a narrow one but his observations about the requirements of fairness in this context are of more general application. After referring to the judgment of Gibbs CJ in Maurice, his Honour said:[12]
Courts have to be conducted so that they give the appearance of doing justice as between the parties. If the principle is correct that evidence led by one side in Court is entitled to be challenged by the other side; then when the evidence consists of expert opinions based on factual assumptions, that the other side is entitled, subject to proper principle and proper exceptions, to have available to it all the material that was used by the expert as the basis of his opinions.
…
[The witness] was only able to give his evidence and form his opinions and express them in his report because he was told certain things by the solicitors instructing him. If he is later called by those solicitors to give evidence and his report is tendered in evidence, then Counsel on the other side is entitled to see, if he wishes, all the material that was conveyed to him and that he may have had regard to. Fairness requires no less.
Once the step is taken to call the expert and expose him and his report to testing by cross-examination, the party calling him cannot determine by a claim of privilege, what the cross examiner may see and what he may not see.
In this case the defendant has chosen to waive privilege for some materials but not to waive privilege for something else. This something else was the letter.
To me, it seems that the information contained in the letter is innocuous, but that is not for me to judge. That is for the judgment of the cross examiner. In my judgment, a legitimate sense of grievance would arise in the case of a party who is given a right, determined by his opponent, to look at some of the material which the doctor may have had regard to but is not a given right to look at others. (emphasis added)
[11] Crawford v Bailey (Unreported, NSWSC, 26 October 1990).
[12] Crawford v Bailey (9 - 10).
In Dingwall v Commonwealth of Australia Foster J held that the disclosure of documents to a potential witness as part of the material being placed before him to enable an expert report to be provided did not by that act necessarily result in a waiver of legal professional privilege.[13] His Honour held that the doctrine of waiver (as explained by the High Court in Maurice) required that there be an indication that the documents were used in the preparation of the report in a way that could be said to influence the content of the report.
[13] Dingwall v Commonwealth of Australia [1992] FCA 1043; (1992) 39 FCR 521.
In Clough v Tameside and Glossop Health Authority Bracewell J held that where an expert in his report referred in passing to material supplied to him by a party's solicitor as part of the background documentation in the case on which his expert opinion was sought any privilege in that material was waived upon the service of the report on the other party.[14] Bracewell J said:[15]
An expert must state the facts or assumptions on which the opinion was based and should not omit to consider material facts which detract from any concluded opinion. An essential element of the process is for a party to know and to be able to test in evidence the information supplied to the experts in order to ascertain if the opinion is based on a sound factual basis or on disputed matters or hypothetical facts yet to be determined by the courts.
If an expert has discounted some evidence supplied to him, he may, at the conclusion of the case, be held wrong to have done so and his opinion may thereby be invalidated. Equally, he may have assumed an incorrect significance for a particular piece of material. It is only by proper and full disclosure to all parties, that an expert's opinion can be tested in court: in order to ascertain whether all appropriate information was supplied and how the expert dealt with it. It is not for one party to keep their cards face down on the table so that the other party does not know the full extent of information supplied. Fairness dictates that a party should not be forced to meet a case pleaded or an expert opinion on the basis of documents he cannot see.
[14] Clough v Tameside and Glossop Health Authority [1998] 2 All ER 971.
[15] Clough v Tameside and Glossop Health Authority (976 - 977).
The reasoning of Bracewell J was reflected in the submissions made by the plaintiffs.
In Sevic v Roarty the New South Wales Court of Appeal was required to consider whether legal professional privilege in a folder of documents provided to the defendant's expert, Dr Tinning, for the purposes of preparing a report, had been waived by the service of the report.[16] The interaction of the provisions of the Evidence Act 1995 (NSW) and the common law principles complicated the question. Sheller JA decided that the plaintiff's entitlement to see the documents provided to the doctor was governed by the Evidence Act and that under the Act legal professional privilege had not been waived. His Honour was, however, of the view that had the common law principles applied privilege would have been waived. There appears to have been no evidence as to which of the documents Dr Tinning had considered. Powell JA considered that it was not necessary to resort to the provisions of the Evidence Act and held that privilege in the documents had not been waived. In his Honour's judgment the decisive factors were that Dr Tinning's report was disclosed pursuant to an order of the court, thus it was not a voluntary disclosure, and the proceedings had not reached the stage at which the defendant had sought to tender the report. Fitzgerald AJA held that Dr Tinning's report was inadmissible and therefore there was no unfairness in refusing an order for production of the documents.
[16] Sevic v Roarty [1998] NSWSC 462; (1998) 44 NSWLR 287.
The defendants' senior counsel placed considerable reliance on the decision of Doyle CJ in Cole v Dyer.[17] In that case Doyle CJ was required to consider whether references to facts disclosed in two witness statements made by a party in an engineer's report commenting on a road traffic accident amounted to a waiver of legal professional privilege. Rules 38.01(7) and 38.01(8) of the Supreme Court Rules (SA) provided, in effect, that an expert report could not be adduced in evidence unless particulars identifying the material upon which the expert based his or her opinion were provided. Doyle CJ considered the authorities, including Maurice, Goldberg, Dingwall and Sevic at some length. His Honour considered that the English cases, the most recent of which at the time was Clough, proceeded on a basis that differed from that determined by the High Court and put them to one side. Doyle CJ considered that legal professional privilege in the plaintiff's witness statements had not been waived. A primary consideration in his Honour's reasoning was that the report contained the particulars required by the rules. Reflecting the state of authority at the time of the judgment, Doyle CJ observed '[a]s the ultimate question is one of fairness, it is not possible to lay down a universal rule that will determine whether or not waiver is to be imputed'.[18] It is clear, however, that his Honour was of the view that if an expert had not relied on material the subject of privilege, no waiver of privilege in that material is to be imputed. Doyle CJ added some general observations. Relevantly, his Honour said:[19]
These days courts require and encourage the maximum disclosure of material before trial. It is in the interests of justice and efficiency that the trial should begin with each party having a full understanding of the case of the other party. But legal professional privilege remains as an important doctrine. A rule that privilege is waived if material is submitted to an expert for use in connection with an expert report, would be a very substantial intrusion on legal professional privilege. And such an intrusion would be for little gain, in terms of justice or efficiency, if particulars of any matter relied upon by the expert must be provided. The party to whom the report is disclosed will be able to identify privileged material upon which the expert has based the expert's opinion.
Disposition
The privileged documents
[17] Cole v Dyer [1999] SASC 272; (1999) 74 SASR 216.
[18] Cole v Dyer [46].
[19] Cole v Dyer [56]
I have concluded that legal professional privilege in the subject documents has been waived. The matters that lead me to that conclusion are as follows.
First, subject to the principle stated in Mann v Carnell there is no universal rule that governs the situation one way or the other. To the extent to which considerations of fairness bear upon the issue, as Fitzgerald AJA observed in Sevic, 'fairness is a concept with a subjective component on which reasonable minds can differ'.[20]
[20] Sevic v Roarty (310B).
Second, there is a degree of inconsistency in the defendants' approach to the disclosure of the subject documents. The defendants must be taken to have been willing to waive privilege in the documents had Mr Byford relied upon them but unwilling to waive the privilege if Mr Byford did not rely on them. Against that background imputing a waiver of privilege in the documents not relied upon by Mr Byford is not, in my judgment, 'a very substantial intrusion on legal professional privilege'.
Third, the defendants' solicitors must have considered the subject documents to be at least potentially relevant to the questions on which Mr Byford was asked to express opinions for otherwise they would not have included them in the materials sent to Mr Byford.
Fourth, in the context of documents provided to an expert for the purposes of preparing a report for litigation, considerations of fairness weigh heavily in the assessment of the inconsistency between the disclosure to the expert and the maintenance of the confidentiality. In that respect that a party was prepared to waive privilege if the documents were relied upon by the expert is a factor of some significance.
Fifth, I have reservations about determining questions of waiver by reference to statements made by an expert as to whether the expert relied on the content of privileged material for the purpose of forming opinions or whether the privileged material influenced the content of the report. There is potential unfairness in this approach. It denies the cross‑examiner the opportunity to test the expert's opinion by exploring whether the expert was wrong to disregard the material upon which he or she says no reliance was placed or which had no influence on the formation of the relevant opinion. Further in my view there is inherent unfairness in taking a witness's own statement as to what he or she relied upon in forming opinions or as to what may have influenced the formation of those opinions as the criterion by reference to which waiver is determined when such statements cannot be tested properly without resort to the privileged materials.
Having regard to these factors I consider that the defendants' conduct in providing the subject documents to Mr Byford is inconsistent with the maintenance of the confidentiality of those documents. In my view legal professional privilege in those documents was lost when Mr Byford's report was served notwithstanding Mr Byford's statements to the effect that the contents of those documents were not relied upon by him or that they did not influence the formation of his opinions. In making this observation I am not to be taken as casting any doubt upon Mr Byford's integrity.
Documents redacted for relevance
Issues about redactions made to conceal irrelevant and confidential content in other documents have been resolved by the defendants permitting nominated representatives of the plaintiffs' solicitors to inspect the material in the first instance. The two documents which remain in contest are minutes of meetings. In my view in the first instance the same practical approach should be taken to resolve the dispute about these two documents. If the parties are unable to resolve the dispute in that way I will hear from them further.
Issue waiver
The plaintiffs apply for production of documents that are withheld on the grounds of legal professional privilege relating to the issues set out in Appendix 2 to these reasons.
The plaintiffs contend that the paragraphs of the defendants' defence and counterclaim relevant to these issues lay open the defendants' states of mind and that in turn lays open any legal advice that informed those states of mind.
The pleadings
The pleadings on which the application was argued were the third further amended second substituted statement of claim and the defence to the third further amended second substituted statement of claim and amended counterclaim.[21] Excluding particulars these pleadings extend to over 700 pages. The pleadings have been amended subsequently but not in a way that affects this application. Sacrificing precision in the interests of brevity I will summarise out those aspects of the pleadings that bear upon the issue waiver question.[22] To provide context it is necessary to begin with a brief overview of the allegations in the statement of claim to which the relevant paragraphs of the defence respond.
Multi-Option Facility Agreement
[21] I will refer to the pleadings as the statement of claim and the defence and counterclaim and will use the abbreviations SC and D and C when referring to paragraphs in the statement of claim, defence, and counterclaim.
[22] The full text of the relevant paragraphs of the defence and counterclaim are reproduced in Appendix 3.
At the centre of the dispute is an agreement made on or about 23 April 2008 entitled 'Multi-Option Facility Agreement' (MOFA) pursuant to which the banks (the Financiers) lent money to Westgem to enable it to develop Raine Square.[23] Bankwest was the Facility Agent under the MOFA. Those who guaranteed Westgem's obligations relevantly included Mr Saraceni (the seventh plaintiff), Mr and Mrs Pourzand (the second plaintiffs), and Oakcure (the fifth plaintiff).
[23] SC [56].
The MOFA was varied from time to time. For present purposes it is sufficient to note it was varied on 30 June 2010 by a deed entitled 'Fourth Deed of Variation' and further varied on 31 August 2010 by a deed entitled 'Fifth Deed of Variation'. On 22 September 2010 the parties entered a Deed of Amendment and Restatement (Restated MOFA) which provided, amongst other things, for the provision of additional securities including a mortgage (the Seaport Share Mortgage) by Mr Saraceni of his shareholding in Seaport (the sixth plaintiff).[24]
[24] SC [92], [94] and [98.4.9].
The plaintiffs allege that Bankwest and the Financiers conducted themselves in ways that constituted breaches of their MOFA obligations. The plaintiffs allege that the same conduct constituted a breach of the Banking Code of Practice (the Code) which they say governed Bankwest's dealings with Westgem[25] and constituted breaches of various statutory prohibitions against unconscionable conduct and misleading or deceptive conduct.
MOFA terms
[25] SC [186] - [190].
The terms of the MOFA the plaintiffs allege were breached included terms that:
(i)Bankwest would not allege an Event of Default or purport to exercise rights under the MOFA arising on an Event of Default in respect of events that were not an Event of Default.[26]
(ii)Bankwest would not allege an Event of Default or purport to exercise rights under the MOFA arising on an Event of Default in respect of events which it did not have reasonable grounds to form the opinion that there was an Event of Default.[27]
(iii)The Financiers would not be entitled to insist upon performance of a contractual obligation by Westgem if the Financiers had caused or materially contributed to the non-performance of that obligation.[28]
(iv)The Financiers would not be entitled to rely upon an Event of Default if and to the extent to which they had caused or materially contributed to the occurrence of it.[29]
(v)Bankwest would act reasonably in determining a date acceptable to it by which the first plaintiff was required to enter into certain lease arrangements (Leasing Covenant Reasonableness Term).[30]
(vi)Bankwest would afford Westgem a reasonable opportunity to provide information as to whether a Cost Overrun had occurred and reasonably consider any information provided by Westgem in connection with a claimed Cost Overrun.[31]
Contractual Code and statutory breaches alleged by the plaintiff
[26] SC [193].
[27] SC [193A].
[28] SC [194.1].
[29] SC [194.2].
[30] SC [197].
[31] SC [227].
The plaintiffs allege that Bankwest and the Financiers asserted that Westgem had breached the terms of the MOFA and committed Events of Default.
For the purposes of this application two groups of asserted breaches are relevant:
•Leasing Covenant Breach Assertions (the Leasing Covenant Breach Assertion and the Second Leasing Covenant Breach Assertion); and
•Cost Overrun Assertions (the First Alleged Cost Overrun Assertion and the Second Alleged Cost Overrun Assertion).[32]
Leasing Covenant Breach Assertions
[32] These gave rise to 'Cost Overrun Determinations' and 'Cost Overrun Notifications'.
The plaintiffs allege that the Leasing Covenant Breach Assertion and the Second Leasing Covenant Breach Assertion constituted, amongst other things:
(i)a breach of the Code because in asserting the breaches Bankwest failed to act fairly and reasonably and/or failed to have any proper regard to the terms of the MOFA;[33]
(ii)a breach of the terms of the MOFA;[34] and
(iii)unconscionable conduct in contravention of s 12CC of the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act).[35]
Cost Overrun Assertions
[33] SC [219.1].
[34] SC [219.2] - [219.3].
[35] SC [219.4].
The plaintiffs allege that the First Cost Overrun Assertion and the Second Cost Overrun Assertion constituted, amongst other things:
(i)a breach of the Code because Bankwest failed to act fairly and reasonably and in an ethical manner and/or failed to have any proper regard to the terms of the MOFA;[36]
(ii)a breach of the terms of the MOFA referred to above because Bankwest: did not give Westgem a reasonable opportunity to provide information in relation to whether a cost overrun had occurred; did not give reasonable consideration to the terms of the MOFA as to how a cost overrun was to be determined; and, did not give reasonable consideration to whether calculations of Ralph Beattie Bosworth (RBB) of the cost to complete had been performed adequately or in accordance with the MOFA;[37]
(iii)unconscionable conduct in contravention of s 12CC of the ASIC Act;[38]
(iv)conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA of the ASIC Act and/or s 10 of the Fair Trading Act 1987 (WA) (the FTA).[39]
The 'issue waiver' defences
[36] SC [236.1] and [272.1].
[37] SC [236.2] and [272.2].
[38] SC [236.3] and [272.3].
[39] SC [237] and [272].
The defences which the plaintiffs allege involve 'state of mind' pleas and implied reliance on legal advice are as follows.
First, the defendants plead that the Leasing Covenant Breach Assertions and the Cost Overrun Determinations and Notifications were 'were honest claims of right, not representations of fact, express or implied'.[40]
[40] D [219(a)], [236(a)], [237], [252(a)], [272(a)] and [273(a)].
Secondly, in response to the plaintiffs' claims based on the Cost Overrun Assertions, amongst other matters, the defendants plead that:
(i)[I]f (which is denied) Bankwest was under an obligation to give any reasonable consideration to the terms of the MOFA as to how a Cost Overrun was determined, or the notice requirements for making demand for payment of a Cost Overrun, it discharged this obligation.[41]
(ii)[I]f (which is denied) Bankwest was under an obligation to give any or any reasonable consideration to whether the calculation of RBB of the cost to complete had been performed adequately or in accordance with the MOFA, it discharged this obligation.[42]
(iii)Westgem represented that it accepted that there had been a First Cost Overrun and a Second Cost Overrun and that in reliance on the representation the Financiers, amongst other things: permitted further drawdowns, refrained from taking enforcement action and refrained from considering whether to terminate or terminating the facility provided pursuant to the MOFA. The defendants plead that Westgem is estopped from denying that the Cost Overruns occurred and denying the occurrence of an Event of Default.[43]
[41] D [233(e)] and [250(d)].
[42] D [233(f)] and [250(e)].
[43] D [238A] - [238D] and [274A] - [274F].
Thirdly, in response to an allegation in the statement of claim that the Financiers did not disclose to Mr and Mrs Pourzand, Oakcure or Mr Saraceni certain 'unusual features' of the security documents and that the failure to do so constituted breaches of the Code, misleading or deceptive conduct or unconscionable conduct, the Financiers say that:
•Mr and Mrs Pourzand and Mr Saraceni provided them with 'Independent Advice Waiver Certificates';
•By the Independent Advice Waiver Certificates Mr and Mrs Pourzand and Mr Saraceni represented to the Financiers and caused the Financiers to believe, (in summary), that Mr Saraceni and Mr and Mrs Pourzand had been given the opportunity to read the security documents and to take legal and financial advice and that they were entering the security documents freely and of their own will and not in reliance on anything said to them by the Financiers.[44]
[44] D [388A] and [388B].
Fourthly, the defendants plead that the Financiers entered into the Fourth and Fifth Deeds of Variation and the Restated MOFA in reliance on representations by the guarantors to the effect that Westgem was in default under the MOFA and that in reliance on those representations and acknowledgements the Financiers: executed the Restated MOFA, continued to advance money to Westgem, and did not enforce their rights against Westgem under the MOFA.[45]
[45] D [450] - [455].
Fifthly, the defendants allege that Mr Saraceni, Westgem and Seaport failed to disclose certain matters concerning Seaport's interest in a project known as the Vasse Newtown Project in circumstances in which the Financiers reasonably expected that the matters would be disclosed. The Financiers also allege that by entering into the Restated MOFA various misleading representations were made by Mr Saraceni as to the financial capacity of Westgem to meet its obligations under the Restated MOFA. The Financiers say that had there been disclosure of the matters that had not been disclosed and had the misleading representations not been made they would not have provided additional funding and would not have entered the Restated MOFA.[46]
Applicable legal principles
[46] C [43] - [51].
The essential principle is that stated in Mann v Carnell to which I have already referred.
In DSE (Holdings) Pty Ltd v Intertan Inc, Allsop J (as his Honour then was) stated how the principle applies in the context of 'issue waiver':[47]
[T]he party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication. (original emphasis)
[47] DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) FCR 499 [58].
In Commissioner of Taxation v Rio Tinto Ltd the Full Court of the Federal Court (Kenny, Stone & Edmonds JJ) approved the statement of principle articulated by Allsop J as set out above, and following reference to the authorities observed:[48]
These authorities show that, where issue or implied waiver is made out, the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication.
[48] Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 [52].
The question in Rio Tinto was whether the Commissioner had waived legal professional privilege in legal advice taken into consideration in making the decisions under challenge. The court said:[49]
Further, in exposing his states of mind and the basis for it, the Commissioner would not ordinarily act in a manner inconsistent with the maintenance of privilege over legal advice relevant to his attaining a state of satisfaction or exercising his discretion in a particular way … Even though such communications may contribute to the decision-making, the mere reference to this fact by a decision-maker in the course of defending a judicial review application or on a taxation appeal is not inconsistent with the maintenance of the privilege: compare Webb v Commissioner of Taxation(1993) 44 FCR 312 at 317 per Cooper J and Lovegrove at [24] per Pullin J. This is because the decision-maker (here the Commissioner) would not put such legal advice in issue merely by saying that the advice was relevant or contributed to his decision. There would be no issue waiver because the decision-maker would not have done anything inconsistent with the maintenance of privilege. The situation might be otherwise if the decision-maker puts the contents of the legal advice in issue by specifically relying on the contents of the advice (and not merely the fact of the advice) to vindicate his claimed state of satisfaction or exercise of discretion.
[49] Commissioner of Taxation v Rio Tinto Ltd [67].
The inquiry into whether a party has adopted inconsistent positions in relation to documents over which a claim for legal professional privilege is made is a fact based inquiry and other cases in which implied waiver has been considered can only provide limited guidance unless they arise out of similar facts.[50]
[50] Commissioner of Taxation v Rio Tinto Ltd [45].
In Cantor v Audi Australia Pty Ltd Bromwich J reviewed the authorities on issue waiver and observed:[51]
The above line of authority makes it clear that quite specific inconsistency is necessary to establish waiver. Even reference to legal advice, without more, will not suffice. The inconsistency must be reasonably manifest.
[51] Cantor v Audi Australia Pty Ltd [2016] FCA 1391 [99].
The observations of Lee J in Brisconnections Finance Pty Ltd (Subject to a Deed of Company Arrangement) (Receivers and Managers Appointed) v Arup Pty Ltd about the nature of complex commercial decision making are relevant.[52] His Honour's observations were made in the context of the decisions of a Due Diligence Committee but they are equally relevant in other commercial settings. His Honour said:[53]
It is a commonplace that in complex commercial decision-making, one might have regard to, among other things, legal advice, without seeking to deploy the advice or use that advice inconsistently with its confidential character. Indeed, speaking generally, it is very difficult to conceive of a circumstance where a conclusion drawn (or complex decision made) by a due diligence committee would not, at least at some level, be informed by legal advice (given the usual composition of due diligence committees and role of such committees to ensure a prospectus or other disclosure document contains the information required by the Corporations Act 2001 (Cth), does not contain a false, misleading or deceptive statement nor omit material information).
An outline of the parties' submissions
[52] Brisconnections Finance Pty Ltd (Subject to a Deed of Company Arrangement) (Receivers and Managers Appointed) v Arup Pty Ltd [2017] FCA 590.
[53] Brisconnections Finance Pty Ltd v Arup [49].
The plaintiffs' principal submissions were to the following effect:
(i)The defendants' pleadings had laid open to scrutiny the contents of privileged communications in relation to the issues pleaded.
(ii)The defendants should not be permitted to contend that they had made reasonable determinations and honest claims but withhold from scrutiny any legal advice they received in connection with those matters.
(iii)Whilst recognising the fact specific nature of the inquiry the plaintiffs argue that the pleadings in this case closely parallel those found in a number of cases in which an issue waiver has been found.
(iv)Legal advice about the matters the subject of the pleading is directly relevant to the matters in issue and there is likely to be significant forensic benefit from the production of such documents.
The defendants' principal submissions were to the following effect:
(i)The governing principle requires not only that a person's state of mind be put in issue but an express or implied assertion that the state of mind is supported by or based upon legal advice and there is reliance on the advice itself not merely the fact of the advice. The defendants have not made any assertion about legal advice received by them.
(ii)The defendants have provided a detailed list of documents over which legal professional privilege is claimed but the plaintiffs have not identified any particular documents as documents over which the privilege has been waived. The defendants argue that it is more difficult for the plaintiffs to succeed on an implied waiver argument when they have not identified any particular documents that are said to be the subject of the waiver.
(iii)The defendants' 'honest claim of right' pleas did not put in issue any state of mind because properly understood all the defendants are saying is that the claims would be understood by others, who assessed them objectively, as honest claims not as representations of fact.
Disposition - issue waiver
In my view the defendants' pleadings do not give rise to a waiver of legal professional privilege as contended by the plaintiffs. I have reached that conclusion because the defendants have not put the content of any legal advice in issue by placing reliance, expressly or impliedly, on any such advice. It follows from the fact that the defendants have not put the content of advice in issue that there is no inconsistent conduct on their part in relation to the privileged documents.
There is one matter that I should add. I have a reservation about the defendants' submission that the pleas of 'honest claim of right' and the pleas concerning the reasonableness of certain conduct do not invite a consideration of the defendants' state of mind and are intended to do no more than convey that, assessed objectively, the defendants' claims were honest and reasonable. My reservation is that it is difficult to exclude subjective considerations when the concepts of fairness or reasonableness are at play. I am conscious, however, that at this stage of the proceedings my understanding of the issues is far from complete and how the pleas fit in with the defendants' case will no doubt become apparent to me in due course. In approaching the issue waiver argument I have proceeded on the basis that the pleas do put in issue the defendants' state of mind, though, as I have said, the defendants have not put the content of legal advice in issue.
Table D and E documents
It is convenient to set out Mr Wang's description of tables D and E and the consideration given by him to the documents in those tables. In his affidavit sworn on 2 October 2017 he deposed as follows:
87Table D (Attachment JYW-13) identifies the documents which have been partially redacted to mask:
(a)confidential communications between lawyer and client prepared for the dominant purposes of giving or receiving legal advice and services;
(b)confidential communications passing between lawyer and third parties, and confidential information or documents brought into existence, for the dominant purpose of preparing for existing litigation; and/or
(c)the substance of the legal advice or services sought, given or received where this is contained in the same communication as paragraph (a) above. For example, where the substance of legal advice is referenced in one or more emails in a chain of emails which also contain the type of communication I describe in paragraph (a) above.
88In relation to each of the documents listed in Table D where privilege is maintained and the redaction is pressed by the Banks:
(a)I have reviewed the witness statement or statements in which the document is referred to and confirm that the relevant witness(es) does not refer to the parts of the document that have been redacted and the Banks do not rely upon it; and
(b)I have reviewed the documents, and confirm that the redacted parts do not render the unredacted content of the documents unintelligible or incorrect (or misleading).
89Table E (Attachment JYW-14) identifies documents in respect of which the redaction masks the substance of a request for legal advice from one of the Banks' employees, or a consultant or agent of the Banks and / or substance of legal advice provided to the Banks through their employees, consultants or agents.
90In relation to each of the documents listed in Table E where the privilege is maintained and the redaction is pressed by the Banks:
(a)I have reviewed the witness statement or statements in which the document is referred to and confirm that the relevant witness(es) does not refer to the parts of the document that have been redacted and the Banks do not rely upon it; and
(b)I have reviewed the documents, and confirm that the redacted parts do not render the unredacted content of the documents unintelligible or incorrect (or misleading).
For the purposes of the application tables D and E were expanded to include the submissions of the parties on each document and the paragraphs of the witness statements referring to the documents. In addition to the submissions included in the expanded table I had the benefit of oral submissions from the plaintiffs' counsel on a sample selection of the documents.
In their submissions the defendants categorised the documents further as those following:
A.Repetition of plaintiffs' submissions at 13 October 2017 hearing in respect of Schedule AA;[54]
[54] The Byford documents.
B.Repetition of plaintiffs' submissions at 13 October 2017 hearing in respect of Schedule B; [55]
C.Documents in respect of which the plaintiffs challenge the defendants' claim for privilege;
D.Defendants alleged to have put the relevant witness' state of mind in issue;
E.Disclosure waiver – witness has referred to an email for the sole purpose of demonstrating receipt of third party communication;
F.Disclosure waiver – witness refers to receiving the particular document;
G. Disclosure waiver – witness refers to reviewing the unredacted parts of the particular document;
H.Disclosure waiver – witness refers to an email attaching a document containing redactions (but does not refer to the attachment); and
I.Documents which should no longer be in issue between the parties.
Disposition
[55] Documents the subject of issue waiver.
This aspect of the plaintiffs' application invites the court to make evidentiary rulings in advance of the trial. The advantage of doing so is that it will reduce the inevitable delay to the trial process that dealing with evidentiary issues entails. Weighed against that advantage, however, is the difficulty that the rulings are made without the benefit of the parties' openings and before any evidence is adduced, in short, in a forensic vacuum. This difficulty, and the risk that any rulings made now may have to be reconsidered as the evidence unfolds, were factors recognised by both sides.
I have considered each document in table D and the relevant paragraphs of the witness statements. I have also considered a sample of the table E documents. For the reasons to which I have just referred the preferable course is not to make rulings on the documents at this stage. That said, however, having spent time considering the documents it may be of some benefit to the parties if I convey my provisional views.
So far as the table D documents are concerned (excluding those table D documents that are listed in Appendix 1) my provisional assessment is that it is not apparent from the witness statements that the defendants have deployed the documents in a way that is inconsistent with the maintenance of the privilege.
Many of the statements that are said to give rise to a waiver are statements that the witness received or reviewed in a document containing privileged material. On the basis of my review the statements are part of the narrative account of the witness's role in events. They do not involve any inconsistency in the defendants' conduct that gives rise to a waiver of privilege. This is because the statements do not suggest, expressly or impliedly, that the contents of the documents, or more specifically the privileged contents, were of some particular significance either because they gave rise to a particular state of mind (or to a state of mind upon which reliance is placed by the defendants) or that they had some other significance.
It is difficult, and perhaps risks unfairness, to provide a general response to the parties' detailed submissions on references in witness statements to documents that are said to have put the state of mind of a witness in issue. My provisional assessment, however, is that the references in statements to documents that are said to have this effect do not, in fact, involve a deployment of the privileged material in a manner that is inconsistent with the maintenance of privilege.
My provisional views about the table E documents considered by me accords with my provisional views about the table D documents.
The disputed claims for privilege
The plaintiffs dispute the defendants' claims for privilege to documents 26, 27 and 38 in table D and documents 1, 8, 9, 11, 16, 21, 23, 27, 34, 42, 53, 72 and 90 in table E.
No point of principle is involved in these challenges.
The defendants submit that the plaintiffs' challenge to the privilege claims in relation to documents 26, 27 and 38 is based on a misapprehension of which emails forming part of an email chain are the subject of the privilege claim. Having looked at the redacted documents I accept the defendants' submission and uphold the claim for privilege.
The plaintiffs' challenge to the privilege claims in relation to documents 1, 8, 9, 11, 16, 21, 23, 27, 34, 42, 53, 72 and 90 in table E rests upon the proposition that the documents were not prepared for a privileged purpose. That is not contested. What is sought to be protected, however, is the content of privileged communications that was recorded or referred to in the primary document which has been redacted. The defendants refer to this as the 'underlying communications'. I am satisfied that the claims for privilege in the underlying communications should be upheld.
Appendix 1
| No. | Document ID | Type | Date |
| 1. | BKW.001.017.0232 | | 11.01.2010 |
| 7. | BKW.302.015.5894 | | 25.05.2009 |
| 8. | BKW.331.009.2908 | | 05.05.2009 |
| 9. | BKW.331.012.6187 | | 08.05.2009 |
| 10. | BKW.401.001.0794 | | 20.11.2008 |
| 11. | BKW.501.002.2614 | | 22.04.2009 |
| 12. | BKW.501.002.2618 | Letter | 22.04.2009 |
| 13. | BKW.501.002.2621 | Deed | 22.04.2009 |
| 14. | BKW.501.002.6874 | | 02.10.2009 |
| 16. | BKW.501.003.1722 | 333 Report | 21.12.2009 |
| 17. | BKW.501.003.5019 | 333 Report | 01.02.2010 |
| 19. | BKW.501.004.5555 | | 05.05.2010 |
| 23. | BKW.531.005.7740 | Meeting Minutes | 01.12.2010 |
| 25. | BKW.600.008.0117 | Meeting Minutes | 18.08.2010 |
| 26. | BKW.600.013.5853 | | 03.10.2009 |
| 28. | BKW.700.007.6210 | Legal Report | 22.04.2009 |
| 29. | BOS.005.001.0066 | | 03.02.2010 |
| 30. | BOS.005.001.0068 | | 03.02.2010 |
| 31. | BOS.501.002.5358 | | 21.01.2010 |
| 32. | BOS.512.004.1284 | | 22.05.2010 |
| 33. | BOS.713.001.6527 | | 09.02.2010 |
| 34. | KDM.516.005.0018 | Gowdie Report | 29.01.2011 |
| 35. | KDM.516.008.0037 | | 27.04.2011 |
Appendix 2
Pleaded issues giving rise to a waiver of legal professional privilege
| Issue | Defence and Counterclaim paragraphs putting in issue Defendants' state of mind | Relevant time period |
| Leasing Covenant Breach Assertion and Second Leasing Covenant Breach Assertion | [219(a)] - Leasing Covenant Breach Assertion and Second Leasing Covenant Breach Assertion were honest claims of right | November 2008 to March 2009 |
| First Cost Overrun Determination and Notification | [233(e)] and [233A] - Bankwest reasonably considered the terms of the MOFA as to how a Cost Overrun was to be determined and the notice requirements for making a demand for payment of a Cost Overrun | July 2009 |
| [233(f)] and [233A] - Bankwest reasonably considered whether the calculation of RBB of the cost to complete had been performed adequately or in accordance with the MOFA | July 2009 | |
| [236(a)] and [237] - First Cost Overrun Determination and First Coast Overrun Notification were an honest claim of right | July 2009 | |
| Second Cost Overrun Determination and Notification | [250(d)] - Bankwest reasonably considered the terms of the MOFA as to how a Cost Overrun was to be determined and the notice requirements for making a demand for payment of a Cost Overrun | September 2009 |
| [250(e)] - Bankwest reasonably considered whether the calculation of RBB of the cost to complete had been performed adequately or in accordance with MOFA | ||
| [252A] - Second Cost Overrun determination was an honest claim of right | September 2009 | |
| [272(a)] - Second Cost Overrun Notification was an honest claim of right | September 2009 | |
| Second Default Notice, Third Default Notice and Fourth Default Notice | [272(a)] - Second to Fourth Notices were an honest claim of right | October - November 2009 |
| 18 November 2009 Letter Agreement and consideration of further enforcement action, including terminating the Facility | [238B]-[238C] - Westgem represented to the Defendants and caused them to believe that Westgem accepted that there had been a First Cost Overrun which the Defendants relied and acted upon | July 2009 to 18 November 2009 and at the time of each subsequent action referred to in Defence, [238C] |
| Second Cost Overrun Representations | [274E]-[274F] - Second Cost Overrun Representations caused Defendants to believe that Westgem accepted that the [sic] had been a cost overrun which belief the Defendants relied and acted upon | September 2009 to September 2010 |
| Claims by MOFA Guarantors as to MOFA Securities | [388A]-[388B] - Defendants believed and relied upon the Independent Advice Waiver Certificate Representations in entering into the MOA and making facilities available under the MOFA | April 2008 onwards |
| Fourth and Fifth Deed of Variation and Restated MOFA | [450]-[453] - In reliance on the Fourth and Fifth Deed of Variation Representations and Restated MOFA Acknowledgements, the Finance parties executed the Restated MOFA, continued to advance money to Westgem under the Restated MOFA and did not enforce rights consequent upon events of default under the MOFA | |
| [455] - Westgem and the Finance Parties proceeded on the common assumption that Westgem was in default under the MOFA from 5 March 2010 | From 5 March 2010 | |
| Saraceni Group's interest in Vasse Newtown Project | Counterclaim, [45]-[61] - As at the time of entry into the Restated MOFA and Seaport Share Mortgage, the Financiers assumed that: (a) funds capable of application to the discharge of Westgem's liability to the Financiers would be available from the sale of the Saraceni Group's interest in the Vasse Newton Project; and (b) Seaport continued to have a 66.67% interest in the Vasse Newtown Project. | September 2010 |
Appendix 3
Pleadings appear in the sequence that they appear earlier in these reasons. Where the table contains bold and non-bold text, the non-bold text is provided for context and the bold text indicates the 'state of mind' assertions.
| Paragraph number | Pleading |
| D [219(a)] | As to paragraph 219, the Financiers say as follows: (a) the Leasing Covenant Breach Assertion and the Second Leasing Covenant Breach Assertion were honest claims of right, not representations of fact, express or implied. |
| D [236(a)] | As to paragraph 236, the defendants say as follows: (a) the First Cost Overrun Determination and the First Cost Overrun Notification were assertions of an honest claim of right, not representations of fact, express or implied. |
| D [237] | The defendants deny paragraph 237, and say that the First Cost Overrun Determination and the First Cost Overrun Notification were assertions of an honest claim of right, not representations of fact, express or implied. |
| D [252A] | The defendants say further as to paragraph 251 that the Second Cost Overrun Determination was an assertion of honest claim of right, not a representation of fact, express or implied. |
| D [272(a)] | As to paragraph 272, the defendants say as follows: (a) the Second Cost Overrun Notification, the Second Default Notice, the Third Default Notice and the Fourth Default Notice were assertions of an honest claim of right, and were not representations of fact, express or implied. |
| D [273(a)] | As to paragraph 273, the defendants: (a) say that the Second Cost Overrun Notification was an assertion of an honest claim of right, not a representation of fact, express or implied. |
| D [233(e)] | As to paragraph 233, the defendants: (e) say that if (which is denied) Bankwest was under an obligation to give any or any reasonable consideration to the terms of the MOFA as to how a Cost Overrun was to be determined, or the notice requirements for making demand for payment of a Cost Overrun, it discharged this obligation. |
| D [250(d)] | As to paragraph 250, the defendants: (d) say that if (which is denied) Bankwest was under an obligation to give any or any reasonable consideration to the terms of the MOFA as to how a Cost Overrun was to be determined, it discharged this obligation. |
| D [233(f)] | As to paragraph 233, the defendants: (f) say that if (which is denied) Bankwest was under an obligation to give any or any reasonable consideration to whether the calculation of RBB of the cost to complete had been performed adequately or in accordance with the MOFA, it discharged this obligation. |
| D [250(e)] | As to paragraph 250, the defendants: (e) say that if (which is denied) Bankwest was under an obligation to give any or any reasonable consideration to whether the calculation of RBB of the cost to complete had been performed adequately or in accordance with the MOFA, it discharged this obligation. |
| D [238A] - [238D] | Further as to the whole of the claims pleaded in Section E3 of the TFASSSOC, the defendants refer to the following conduct: (a) the calculation by Westgem of a Cost Overrun pleaded in paragraph 227A(j) to (kk) above; (b) Westgem's communication of its acceptance of a Cost Overrun pleaded in paragraph 236(c) above; (c) Westgem's adoption of construction figures which included and exceeded the amount of the Cost Overrun forecast pleaded in paragraph 227A(i) above as to which the defendants refer to paragraphs 227A(kk) above, and 245D(d), 245J(ba) and 245J(g) below; (d) Westgem's payment on about 4 August 2009, of $4.7 million to Bankwest as Facility Agent in respect of the First Cost Overrun and without disputing its obligation to make such payment (as to which the defendants refer to paragraph 239(c) below); (e) Westgem's request for, and Bankwest making available, the Bridging Finance Facility in order to assist with such payment; and (f) Westgem's acknowledgment by the 18 November 2009 Letter Agreement that the First Cost Overrun had occurred and that it was obliged to pay it down (as to which the defendants refer to paragraph 238H below). 238B In the circumstances pleaded at paragraph 238A above, by its conduct, Westgem represented to the defendants and caused them to believe that Westgem accepted that there had been a First Cost Overrun. 238C The defendants relied upon and acted on the belief pleaded in paragraph 238B in that the Financiers: (a) permitted further drawdowns, as pleaded at paragraph 227C above and 270A to 271 below; (b) refrained from causing the Security Trustee to take further enforcement action against Westgem; and (c) refrained from considering whether to terminate or terminating, the Facility. 238D In the premises pleaded in paragraphs 238A to 238C above, it would be unconscionable to allow Westgem and the MOFA Guarantors to resile from the representation pleaded in paragraph 238B above, such that Westgem and the MOFA Guarantors are estopped from: (a) denying that the First Cost Overrun occurred; and (b) denying the occurrence of Events of Default referred to in the First Default Notice. |
| D [274A] - [274F] | Further, and in any event, as to the whole of the claims pleaded in Section E4 of the TFASSSOC, by reason of the Westgem Second Cost Overrun Agreement: (a) Westgem is bound by the findings of the Project Certifier (RBB Findings) and 333 (333 Findings) following their respective reviews quantum of the Second Cost Overrun; and (b) Westgem is barred from maintaining any action against the Finance Parties (or any of them) which is inconsistent with the RBB Findings or the 333 Findings, including any action founded on the alleged Second Alleged Cost Overrun Contraventions pleaded at paragraphs 272 or 273 of the TFASSSOC. 274B Further, and in any event, as to the whole of the claims pleaded in Section E4 of the TFASSSOC, the Defendants say that pursuant to the 18 November 2009 Letter Agreement and on its proper construction, Westgem and the MOFA Guarantors: (a) acknowledged the occurrence of the Second Cost Overrun; (b) compromised and released all or any claims arising by reason of the Financiers' assertion of the Second Cost Overrun or any assertion by the Financiers of an Event of Default related to the Second Cost Overrun; and (c) are thus barred from asserting any claim arising in connection with the Second Cost Overrun including, without limitation, any Second Alleged Cost Overrun Contravention pleaded at paragraphs 272 or 273 of the TFASSSOC. 274C Further, by the 18 November 2009 Letter Agreement, each of Westgem and the MOFA Guarantors represented to the defendants that: (a) the Second Cost Overrun had occurred; (b) in accordance with the provisions of the MOFA, and as provided in the 18 November 2009 Letter Agreement, Westgem would pay down the Second Cost Overrun; and (c) they would provide, or cause to be provided, the First Additional Securities, (together, the 18 November 2009 Letter Agreement Representations). 274CA Further, under clause 5.1 of the Fourth Deed of Variation and the Fifth Deed of Variation, which were executed by the parties as deeds, Westgem and the MOFA Guarantors represented to the defendants that as set out in the Fifth Default Notice, Westgem was currently in default under the MOFA by way of the Events of Default set out in the Fifth Default Notice (together, the Fourth and Fifth Deed of Variation Representations). 274D Further as to the whole of the claims pleaded in Section E4 of the TFASSSOC, the defendants refer to the following conduct by which Westgem represented and acknowledged that it accepted the occurrence of the Second Cost Overrun and its obligation to pay down that cost overrun: (a) the Westgem Second Costs Overrun Acknowledgment; (b) the Westgem Second Costs Overrun Agreement; (c) the 18 November 2009 Letter Agreement and 18 November 2009 Letter Agreement Representations; (ca) the Fourth and Fifth Deed of Variation Representations; (d) the provision of the Additional Guarantees and Second Ranking Securities as pleaded in paragraph 245N; (e) the December 2009 agreement by Westgem to provide tranched payments as pleaded in paragraph 245M(f); (f) the payment by Saraceni and Pourzand of $5 million to Bankwest as Facility Agent in respect of the Second Costs Overrun, as pleaded at paragraph 245O(a); (g) the 5 February 2010 acknowledgment by Westgem that the First and Second Costs Overruns had occurred as pleaded at paragraph 245O(b); (h) the Superintendent's representation to Salta on behalf of Westgem that the costs figures conformed to those in the RBB Findings and 333 Findings, as pleaded at paragraph 245O(c); and (i) Westgem's January 2010 letter to Salta in which it adopted the construction costs stated in the RBB Findings and 333 Findings, as pleaded at paragraph 245H(y), (together, the Second Cost Overrun Representations). 274E In the circumstances of the conduct pleaded at paragraphs 274C and 274D above, by its conduct Westgem represented to the defendants and caused them to believe that Westgem and the MOFA Guarantors accepted there had been a Second Cost Overrun. 274F The defendants relied upon and acted on the representations and belief pleaded in paragraph 274E above, in that the Financiers: (a) permitted further Drawings, as pleaded at paragraph above; (b) refrained from requesting the Security Trustee to take further enforcement action against Westgem and the MOFA Guarantors; (c) refrained from considering the termination of or terminating the Facility; and (d) granted extensions of the Facility from 30 June 2010 to 30 September 2010. |
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