Industrial Relations Commission of New South Wales in Court Session CITATION : Finemore AO v Resarta Pty Ltd (No 2) [2002] NSWIRComm 193 APPLICANT Ronald Stanley Finemore AO RESPONDENTS First Respondent PARTIES : Resarta Pty Limited Second Respondent Toll (FHL) Limited formerly called Finemore Holdings Limited Third Respondent Toll Holdings Limited FILE NUMBER: IRC 7532 of 2001 CORAM: Marks J CATCHWORDS : Waiver of privilege - Unfair contract proceedings - Reply filed by respondents alleges improper and unlawful conduct by former directors of two respondent corporations - Applicant wishes to show documentation to three named former directors referring to legal advice given in connection with transactions allegedly involving improper conduct - Held in the circumstances that waiver of privilege should be imputed. LEGISLATION CITED : Industrial Relations Act 1996 s106 Attorney Geneal (NT) v Maurice (1986) 161 CLR 475 Mann v Carnell (1999) 201 CLR 1 Telstra Corporation v B T Australasia (1998) 85 FCR 152 CASES CITED : Hongkong Bank ofAustralia Ltd v Murphy (1993) 2 VR 419 United States v Woodall (1970) 438 (2d) 1317 Southern Equities Corporation Ltd (in liquidation) v Arthur Andersen & Co (unrep. SASC 6373, 23 September 1997) Hardcastle v Advanced Mining Technologies Pty Ltd (2001) FCA 1846 J A Farrow Mortgage Services v Webb 1996) 39 NSWLR 601 at 608-9 HEARING DATES: 07/11/2002 DATE OF JUDGMENT: 08/14/2002 APPLICANT Mr J J E Fernon of counsel SOLICITORS Atanaskovic Hartnell LEGAL REPRESENTATIVES: RESPONDENTS Mr N C Hutley SC of counsel SOLICITORS Clayton Utz, Melbourne Victoria JUDGMENT: INDUSTRIAL RELATIONS OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Wednesday 14 August 2002 Matter No IRC 7532 of 2001 RONALD FINEMORE AO v RESARTA PY LTD & ORS (No 2) Application under s106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT ON WAIVER OF PRIVILEGE 1 By summons filed in this Court on 19 November 2001 the applicant Ronald Stanley Finemore AO has sought certain relief against three named respondents pursuant to the provisions of s 106 of the Industrial Relations Act 1996 ("the Act"). The proceedings seek a finding of unfairness and consequent orders directed to certain transactions including a service agreement, an employment agreement, a call option deed and a "Letter Agreement". 2 The first respondent Resarta Pty Ltd is alleged in the summons to be a wholly owned subsidiary of the second respondent Toll (FHL) Ltd formerly called Finemore Holdings Ltd ("FHL"). FHL is a wholly owned subsidiary of the third respondent Toll Holdings Ltd ("Toll"). The summons alleges that the applicant established a trucking business as an owner/operator in 1964 which grew and became known as Finemores Transport Pty Ltd ("Finemores"). The ownership of the Finemore group ultimately resided in the second respondent and the applicant was appointed Managing Director of that company in about 1986. The continued involvement of the applicant in the second respondent was considered by its Board of Directors during the course of the calendar year 1999. In February 1999 the Board resolved to approve certain arrangements which included in particular the foreshadowed appointment of the applicant as Executive Chairman later that year and the financing of the purchase of a property for use by the applicant at no cost to him. The Board resolved to utilise the first respondent as a vehicle to purchase the property which was to be used by the applicant. Through its accountant, the second respondent had obtained legal advice concerning the acquisition of the property utilising the first respondent for this purpose. 3 On 25 November 1999 the applicant entered into a service agreement and a call option deed which had been prepared on the advice of solicitors to give purported effect to the arrangements earlier made. 4 In December 1999 there were discussions between a solicitor retained by the applicant and an internal lawyer employed by the second respondent about the service agreement and call option deed pursuant to which a further arrangement was made said to be evidenced by a letter dated 20 December 1999. As a result of these further arrangements the applicant entered into an employment agreement with the first respondent. 5 There was an agreement reached in February 2000 between the applicant and FHL that restraint of trade clauses imposed on the applicant under the service agreement and the employment agreement would be varied to enable him to carry on a tyre retreading and retailing business that he had in fact carried on personally since 1979. 6 The summons alleges that in May 2000 Toll advised FHL that it desired to acquire it. Following negotiations between representatives of both companies a scheme of arrangement was entered into pursuant to which Toll acquired all of the shares in FHL. The share acquisition was completed on 2 March 2001. The discussions between the parties also concerned the continued involvement of the applicant after the take-over. The summons alleges that the Managing Director of Toll, Mr Little informed the applicant that he was to remain for a period of six to twelve months during a transition process and that his contract would then "be paid out in full". This arrangement was said to have been evidenced by conversations and exchanges of documentation and electronic communication between solicitors acting for both companies. 7 As a result of discussions between Mr Little and the applicant agreement was reached that the applicant would cease his employment with FHL on 2 July 2001. The summons asserts that a difference arose between the applicant and Mr Little, presumably representing FHL, as to the entitlements due to the applicant on termination of his involvement with FHL pursuant to the various agreements reached between them. This appears, from the summons, to have culminated in disagreement as to whether or not the applicant remained employed by FHL, whether he was permitted to carry out his duties and fulfil his obligations as a director of FHL and the like. The summons alleges that there were negotiations proceeding from early July 2001 until October 2001 between the parties and their respective legal advisers to endeavour to resolve the matter. The first and second respondents instituted proceedings against the applicant in the Supreme Court of Victoria by summons filed on 22 October 2001. The Victorian proceedings allege that the employment agreement was invalid and void by reason of a breach of certain provisions of the Corporations Law and contained certain allegations affecting the service agreement, the call option deed, the Letter Agreement and the employment agreement to the effect that they are void or voidable at the option of FHL and that FHL thereby avoided these agreements. The summons filed in this Court further alleges that in the Victorian proceedings FHL and Resarta contend that the service agreement, call option deed and the employment agreement were "not in the interests of FHL and/or Resarta" and that it was imprudent and contrary to the provisions of the Corporations Law and the listing rules of the Australian Stock Exchange for FHL and Resarta to have entered into them. 8 The summons in these proceedings asserts that the conduct of FHL and Resarta in and about the issue of the Victorian Court proceedings, the allegations contained in the initiating summons in those proceedings and the relief sought constitutes conduct of FHL and Resarta which is unfair, harsh and unconscionable for the purposes of s 106 of the Act. 9 The respondents filed a reply to the applicant's summons for relief. This is a document which is required to be filed pursuant to the Rules of this Court and which contains a summary of the matters of fact and law relied upon by the respondents in reply to the applicant's summons. 10 The reply asserts that each of the directors of the first respondent owed a fiduciary and/or statutory duty to it to exercise their powers and discharge their duties in good faith and in the best interests of the first respondent, to ensure that the first respondent complied in all respects with the provisions of the Corporations Law and the listing rules of the Australian Stock Exchange and to conduct themselves in certain similar respects. The reply contains the same assertions with respect to each of the directors of the second respondent. The reply attacks the arrangements made in November and December 1999 pursuant to which the first and second respondents and the applicant entered into a service agreement and call option deed and an employment agreement and refers to advice given to the first and second respondents and to the applicant by legal practitioners. It is asserted that the applicant and each of the directors breached certain provisions of the Corporations Law, the listing requirements of the Australian Stock Exchange and that the directors breached their duties and obligations by reason of the arrangements and documentation entered into and that the applicant is liable to compensate both the first and second respondents (who are plaintiffs in the Supreme Court proceedings) by reason of any losses sustained. Damages are also sought for breaches of the Trade Practices Act and the Fair Trading legislation of Victoria and New South Wales. 11 The reply also attacks the agreement of the Board of Directors of FHL to allow the applicant to carry on the tyre business previously referred to. 12 Proceedings in this Court are currently within the "case management" process. The applicant is in the course of filing affidavit material on which he relies for his case in chief. The applicant came into possession of a number of documents, fifteen of which have been the subject of these interlocutory proceedings. Some of these documents are conceded by the applicant to be the subject of legal privilege in favour of FHL. They consist of legal advice or reference to legal advice obtained by FHL in and in connection with the various documents and transactions which are relied upon by the applicant and attacked by the respondents in their reply in these proceedings. The applicant has not, as far as I am aware, formally explained the circumstances under which he came into possession of these documents which I have been told from the bar table are copies of relevant letters of advice or documents referring to that advice. The applicant seeks to have this documentation shown to named persons who were formerly directors of FHL and Resarta at the time that those companies considered and eventually entered into the agreements made with the applicant which are attacked by the respondents in their reply. It was asserted by the applicant that in these circumstances the Court should waive any legal privilege accruing to the benefit of the respondents with respect to these documents. This application was opposed by the respondents who submitted, in effect, that there was no good reason why, at this stage of the proceedings, and having regard to the state of the proceedings, that the respondents should be deemed to have waived their privilege. THE RELEVANT PRINCIPLES 13 A convenient starting point is the discussion of Gibbs CJ in the High Court of Australia in Attorney General (NT) v Maurice (1986) 161 CLR 475. At 481 his Honour said: "There was of course no express waiver in the present case and there is nothing to suggest that the claimants had any actual intention to waive privilege in the source documents. The principle applicable in these circumstances seems to me to be well stated in Wigmore , op.cit., par 2327. 'In deciding it, regard must be had to the double elements that are predicated in every waiver, ie, not only the element of implied intention, but also the element of fairness and consistency. A privileged person would seldom be found to waive, if his intention not to abandon could alone control the situation. There is always also the objective consideration that when 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. He may elect to withhold or to disclose, but after a certain point his election must remain final.' The decisions in which this question has been considered seem to me to be particular applications of the rule that in a case where there is no intentional waiver the question whether a waiver should be implied depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production. Thus it has been held that the privilege in respect of a document is not waived by the mere reference to that document in pleadings ( Roberts v Oppenheim (1884) 26 Ch.D 724; Buttes Oil Co v Hammer [No 3] [1981] QB 223 at pp 252,268) or in an affidavit ( Lyell v Kennedy (1884) 27 Ch.D 1 at p 24; Infields, Ltd v P Rosen & Son [1938] 3 All ER 591 at 597; Tate & Lyle "International Co Ltd v Government Trading Corporation", The Times, 24 October 1984), although the position will be different if the document is reproduced in full in the pleading or affidavit: Buttes Oil Co v Hammer [No 3] [1981] QB at p 252. These cases may be explained by saying that it is not unfair or misleading to refer to a document in a pleading or affidavit which is not put into evidence but that if the document is set out in full the privilege is waived. A fortiori, of course, privilege in respect of materials used in drawing a pleading or an affidavit and not referred to therein, would not lose their privilege because they had been used in that way." 14 A more recent formulation by the High Court is to be found in Mann v Carnell (1999) 201 CLR 1. 15 In a joint judgment Gleeson CJ, Gaudron, Gummow and Callinan JJ when dealing with waiver of privilege at common law 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. ( Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 at 70; Larratt v Bankers & Traders Insurance Co Ltd (1941) 41 SR (NSW) 215 at 226; The Commonwealth v Verwayen (1990) 170 CLR 394 at 406, 422, 467, 472). 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. ( Cross on Evidence (5th Aust ed (1996) par 25005; Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 497-498). 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 ( Benecke v National Australia Bank (1993) 35 NSWLR 110), 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. ( Lillicrap v Nalder & Son (a firm) [1993] 1 WLR 94; [1993] 1 All ER 724). 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" (eg , Goldberg v Ng (1995) 185 CLR 83 at 95). This means that the law recognises the inconsistency and determines is 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." 16 Their Honours in the material extracted above distinguish between an inconsistency between "conduct" and the maintenance of the confidentiality informed by "considerations of fairness" and "some overriding principle of fairness operating at large." It is obvious that the "conduct" referred to must be conduct having a relevant nexus with proceedings before the court. Some of the authorities in this area assist in focussing attention on the necessary nexus. The privileged material must relate to an issue in the proceedings. See, for example, the discussion on this aspect by Beaumont J in the Federal Court of Australia in Telstra Corporation v B T Australasia (1998) 85 FCR 152 at 156 et seq, and the cases therein cited. 17 The "conduct" which is asserted to trigger the waiver of privilege implied at common law may vary from physical conduct, an omission to pursue a particular course or, more relevantly for these proceedings may be associated with allegations contained within pleadings or other court process documents which create issues which require determination by a court. 18 Whilst I have been referred to a large body of material by counsel appearing in the proceedings, and in particular by Mr Fernon of counsel who appears for the applicant in the substantive proceedings, I wish to focus on two decisions which I feel are of assistance in the proper determination of this interlocutory matter. The first is a decision of Smith J in the Supreme Court of Victoria in Hongkong Bank of Australia Ltd v Murphy (1993) 2 VR 419. That litigation concerned the circumstances surrounding and the efficacy of the assignment by a mortgagee of certain rights under a mortgage. The plaintiff assignee alleged that the assignor had made certain representations and warranties upon which it relied. It had sought legal advice about the transaction prior to the assignment being effected. The defendants were trustees of a trust which was a co-mortgagee and submitted that it was critical to the issue as to whether the plaintiff had relied upon representations and warranties allegedly given and that it was critical that the court had before it evidence of all communications about the transaction including the legal advice obtained by the plaintiff. In canvassing the authorities Smith J referred to the passage from Wigmore extracted by Gibbs CJ in Maurice to which I have earlier referred. His Honour then made reference to a United States decision in the following terms: "The issue was considered in the United States of America in the case of United States v Woodall (1970) 438 F (2d) 1317. The appellant in appealing against sentence asserted that his pleas were invalid because they were not intelligently made. He argued that he lacked knowledge of the sentence consequences. At the heart of his argument was the assertion that he did not know what sentences would result. The issue arose as to whether evidence was admissible about what information the appellant had had about sentence consequence. In particular the question arose as to whether his discussions with his legal advisers could be given in evidence, notwithstanding that those discussions were privileged. The United States Court of Appeal, 5th Circuit, after referring to the authority of Wigmore (and also McCormick on Evidence , para 87 at p 106) concluded that the privilege should be regarded as waived by the course of action taken by the appellant. It stated in strong words, at p 1326: 'Courts earnestly pursuing reality would be hard put to justify a rule that would allow a defendant circumstanced as Woodall here to assert that his solemn pleas of guilty were negated for lack of accurate information of sentence consequences, then permit him to run a procedural play that would block the development of the plain truth which shows his own attorney told him exactly what he could expect. Not only does this specious sophistry fail to protect confidential relationships, it trifles with the truth - it scoffs at justice - and we reject it flatly." (436-7) 19 His Honour then determined that on the state of the pleadings the communications between the plaintiff and its lawyers "are and will be an issue in the case." Smith J expressed the opinion that there was no reason in principle why waiver cannot be invoked prior to the trial of the proceedings and concluded that he was satisfied that in all the circumstances it would be unfair to the defendants in the action to place them in the position of preparing for trial without access to documents that the plaintiff had conceded would be discoverable at trial and which would be considered by the plaintiff in its preparation for the proceedings. 20 His Honour then commented: "'Trial by ambush' has been condemned for many years. To allow the claim of privilege here would permit such a trial. Further, the communications form part of the circumstances from which the rights and liabilities of the parties arise. They directly affect the rights of the parties: cf. Davies v Nyland (1974) 10 SASR 76 at p 90; Greenwood v Fills (1961) 29 DLR 260. Weighing the importance of the right against the alleged unfairness in its exercise, I am satisfied that the plaintiff should be treated as having impliedly waived the privilege. Further support for this conclusion may be found in the matter of Re Bell; Ex parte Lees (1980) 30 ALR 489. An issue arose about whether the solicitor for the mother of the child whose custody was in question could be compelled to give evidence about instructions he had received from her about how to get in touch with her. Stephen J, in his reasons for judgment, at pp 498-9, held: '… to allow a claim to legal professional privilege in the particular circumstances of this case is to subvert the purpose of that privilege, which is to further and not to impeded the administration of justice.' Later his Honour said, at p 500: 'She was, in effect, seeking to use the processes of the law to protect her interest in the matrimonial home while at the same time acting in defiant disregard of its processes in relation to the custody of Tanya. To confer upon her communication of her address the protection of legal professional privilege would be to allow that privilege to be used for a purpose alien to its whole purpose and history.' Wilson J, with whom Aickin J concurred, stated, at p 507: 'To extend privilege to such a communication does nothing in the circumstances to facilitate "the perfect administration of justice". On the contrary, it enables the continuance of a contempt of court, and bears on its face the taint of illegality.' In this case, if the plaintiff is permitted to rely on a claim of privilege for the documents in question, the fact-finding task of the court will be seriously compromised. There is a real possibility of the court being misled. It is to avoid such a situation, where the court is likely to be misled, that the privilege attaching to 'without privilege' statements has been lifted: Bentley v Nelson [1963] WAR 89; Pitts v Adney (1961) 78 WN(NSW) 886; McFadden v Snow (1951) 69 WN (NSW) 8. " 21 The next decision to which I wish to refer in some detail is that of the Full Court of the Supreme Court of South Australia in Southern Equities Corporation Ltd (in liquidation) v Arthur Andersen & Co (unreported SASC 6373, 23 September 1997). In those proceedings the plaintiff company which was in liquidation sued its former auditors, Arthur Andersen & Co alleging negligence in the carrying out of an audit of it and other companies. During the discovery process the plaintiff SECL claimed privilege with respect to a number of documents and objected to producing them accordingly. The claim for privilege was disputed by the defendant Arthur Andersen on two bases, one of which only is relevant for the purpose of these reasons for judgment. SECL claimed that it would not have entered into certain transactions if the accounts dealing with those transactions had been properly audited by the defendant because those accounts did not give a true and fair view of the state of affairs of the SECL group. It was submitted by the defendant that these allegations put in issue the corporate state of mind of SECL about those accounts and the transactions dealt with in those accounts and that on this basis it was unfair for SECL to withhold legal advice that it had received about those transactions and that accordingly, any privilege should have been waived. 22 In the court, Matheson J agreed in the judgment of Bleby J that the court should not imply a waiver of privilege. Doyle CJ came to a contrary view. 23 After discussing relevant principles Bleby J said: "In my opinion the cases show that it is not sufficient merely to demonstrate that a party's state of mind or knowledge is in issue in order to succeed on an application that documents privileged from production on the ground of professional privilege be produced. If that were the case, privilege would almost always be waived in cases of misrepresentation, negligence and misleading and deceptive conduct where questions of a plaintiff's reliance or state of mind was in issue, and a list of documents showed that at or about the relevant time the plaintiff had some sort of legal advice which might have had some bearing on the plaintiff's state of mind. There must be something more from which it can be shown that the legal advice in question was relevant in the formation of that state of mind or belief or that the advice itself in some way becomes an issue in the action. This may be apparent from the pleadings or from some other document which has been produced in the course of discovery; it may be revealed by answers to interrogatories, or it may be self-evident from the description of the document in question contained in the list of documents. In some cases it may not become apparent until a witness is giving evidence at the trial. In this case, it is clear from the Chief Justice's analysis of the Statement of Claim that the state of mind of SECL concerning the adequacy of the accounts is a relevant issue. However, mere exposure to scrutiny of the corporate state of mind as to a belief in the existence or otherwise of a profit, and whether the accounts truly and fairly stated the position, does not necessarily assume the existence of legal advice as to the nature of the various transactions or that such advice could have had any bearing on the relevant state of the corporate mind. There is nothing in the pleadings or in any other information placed before this Court to suggest that relevant legal advice existed which could have had a bearing on that state of mind. The only information before the Court comprises the several lists of documents themselves which, whilst identifying particular documents and their date, give no indication as to which of the many transactions they might relate, or whether they contain the sort of information which could be at all relevant in informing the corporate mind. In my opinion, something more than that is needed before a court can impute waiver of the substantive right to privilege that SECL has. That is not to say, of course, that some of the documents listed may not have been relevant and may not yet be the subject of an imputed waiver of legal professional privilege. However, in my opinion there is insufficient information before the Court to justify the order for production that is sought, and I would therefore dismiss the appeal. It may well be, however, that some of the documents in question were relevant to the formation of the corporate state of mind. Where a party has in fact had access to privileged legal advice in forming its state of mind or belief, it will not always be apparent from the pleadings or other material that it has done so. Sometimes it may not be revealed until cross-examination of a witness at the trial. It could, of course, make a crucial difference to the outcome, and it is better that such matters be revealed at an early stage rather than at trial. Revelation at trial will cause surprise, and possibly substantial disruption to the trial in a variety of possible ways. In order to prevent that occurring it behoves a party claiming privilege to disclose or describe documents properly according to the exigencies of the issues raised on the pleadings or through other documents. 24 All members of the court cited with approval the approach adopted in Hongkong Bank v Murphy, previously referred to. 25 At all times the applicant has asserted that waiver of privilege should be imputed with respect to the documents in issue to enable him to make copies available to three former directors of FHL. Those directors were said to have previously had access to the documents in their capacity as directors of that company. The directors named are John Lever, Max Luff and Neville Cleary. The purpose of access being granted to these directors is to enable them to give evidence in the form of affidavit evidence concerning each of the transactions attacked by the respondents in the manner referred to in the reply filed in these proceedings. It is clear that in the reply the respondents attack each of the directors in connection with decisions taken by the Board of Directors in relation to each of the impugned transactions. Messrs Lever, Luff and Cleary are named as directors in the reply. The reply refers to both fiduciary and statutory duties which each of the directors owed to FHL. Those duties were alleged to have been breached by the directors including the three named directors and the applicant in connection with the entry into the transactions by FHL. There is evidence that the applicant absented himself from the meetings of the directors which determined that FHL should enter into each of the transactions. Is it fair in these circumstances that the applicant should be denied the opportunity of showing to each of the three named directors documentation to which they had access in connection with their participation in the meetings of the Boards of Directors which were held and which considered the impugned transactions? In my view it is apparent that it would be grossly unfair to deny the applicant and each of the named directors the opportunity of giving evidence in these proceedings about what matters were considered by the directors in connection with deliberations of the directors of FHL leading up to and concerning the entering into each of the impugned transactions without reference to the fact that professional advice had been obtained and the nature and extent of that advice as was made available to them. This is particularly so because of the allegations made by the respondents that the directors breached their fiduciary and statutory duties to FHL by determining that the company should enter into the transactions. 26 Although FHL and Resarta retained privilege in any legal advice obtained when that advice was disclosed to the directors, it must be borne in mind that: "the company can only manifest its acts and intentions by the actions and declarations of human beings", being the directors of the company. (per Sheller JA Farrow Mortgage Services v Webb (1996) 39 NSWLR 601 at 608-609.) It was the directors who ultimately bore responsibility for the obtaining of legal advice and for the manner in which that legal advice was utilised. If it was utilised or considered in connection with the deliberations of the directors in connection with the impugned transactions, the legal advice arguably is related to an issue in the proceedings fairly and squarely raised by the respondents in the reply filed by them. 27 Accordingly, applying the principles from the authorities which I have extracted above, and adopting the approach contained in those principles I would conclude that in fairness there should be an imputed waiver of privilege attaching to any document containing or referring to legal advice which the directors Messrs Lever, Luff and Cleary respectively were given, shown or referred to in connection with the carrying out of their duties as directors of FHL in connection with or leading up to the entry into of each of the transactions sought to be impugned by the respondents' reply. 28 In written submissions the respondents conceded that putting a matter in issue in proceedings may result in a party being said to have engaged in conduct which would justify a court determining that there had been an implied waiver of privilege. However, as I understand the written submissions the respondents submit that with respect to some of the documents, they do not relate to any matter put in issue in the reply or to any matter put in issue in the proceedings generally and with respect to others "the respondents have never conducted themselves in a manner inconsistent with the maintenance of that privilege." In making this latter submission the respondents had emphasised the fact that in some way unexplained the applicant came into possession of the documents "surreptitiously". It is true that there is no evidence in strict terms as to the manner in which the applicant came into possession of the documents. An affidavit sworn by Adam Thomas Martin who was, at all relevant times, the legal manager with the Finemore group of companies and who became, after the takeover, the legal manager for the Toll group of companies expressed surprise that the applicant was in possession of legal advice which had been obtained by FHL through Mr Martin in his role as in-house counsel. This is to be contrasted with an explanation provided on behalf of the applicant. During the course of proceedings I was given on behalf of the applicant, and with the consent of the respondents' counsel, a bundle of documents. Included within that bundle was a copy letter of 17 May 2002 from the applicant's solicitors Atanaskovic Hartnell addressed to the Melbourne office of Clayton Utz, the respondents' solicitors which contained a document entitled "Factual submissions in relation to documents in respect of which privilege is claimed….". That document which admittedly is intended to make a submission only seeks to explain the circumstances under which the applicant came into possession of each of the documents. It is alleged that the relevant documents were, in the main, given to the applicant by Mr Adam Martin who, as I have said, was at that stage in-house legal manager with the Finemore group of companies. The applicant said that he put each of the documents on his personal employment-related file. Whether or not this assertion is accurate, I do not need to decide. Certainly it is at odds with the inferences which I have been asked to draw from the affidavit of Mr Martin who swore that with respect to some of the documents he was "surprised" that the applicant had a copy of them. The situation is that there is no evidence that the applicant came by the documents "surreptitiously" or that he acted improperly. In my view it is not appropriate to deny access to the documents in the manner sought solely by reference to the circumstances in which the applicant came to be in possession of them. 29 In the course of oral submissions Mr N Hutley SC who appeared for the respondents at the hearing on 11 July 2002 highlighted the "odd circumstances" which applied to the manner in which the claim for waiver of privilege arose in these proceedings. Certainly, the circumstances seem to be one step removed from what Mr Hutley described as the "classic case" typified by the circumstances considered in the many authorities in this area. The waiver is not sought to allow the use of documentation by the applicant, but by witnesses whom the applicant hopes will give evidence supportive of his position in the proceedings. Notwithstanding this additional dimension to that normally encountered in proceedings of this kind, I am not persuaded that the in-principle approach which I have previously indicated I prefer to take should not apply in determining the issues between the parties. 30 I should also refer for completeness to a submission made by Mr Fernon that the provisions of s 198F of the Corporations Act 2001 assist in the determination of the proceedings. Section 198F is in the following terms: 198F. Right of access to company books (1) Right while director A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding: (a) to which the person is a party; or (b) that the person proposes in good faith to bring; or (c) that the person has reason to believe will be brought against them. Note: Section 290 gives the director a right of access to financial records. (2) Right during 7 years after ceasing to be director A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding: (a) to which the person is a party; or (b) that the person proposes in good faith to bring; or (c) that the person has reason to believe will be brought against them. This right continues for 7 years after the person ceased to be a director of the company. (3) Right to take copies A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings. (4) Company not to refuse access A company must allow a person to exercise their rights to inspect or take copies of the books under this section. (5) Interaction with other rules This section does not limit any right of access to company books that a person has apart from this section. 31 It is arguable that this section would not operate to allow the former directors Messrs Cleary, Luff and Lever to inspect and take copies of the books of FHL because there is no indication that any of them is a party to any legal proceeding or that any of them has any reason to believe that a legal proceeding will be brought against them. Arguably, however, the section would allow the applicant to inspect and take copies of "the books of the company" for the purpose of the legal proceeding. 32 The provisions of s 198F raise problems in construction. I refer to the observations of Emmett J in the Federal Court of Australia in Hardcastle v Advanced Mining Technologies Pty Ltd (2001) FCA 1846. In addition to the matters raised by his Honour it will be necessary to determine what is comprehended within the expression "the books of the company" and as to whether these might include legal advice obtained by a company from time to time. In view of the approach which I have taken on general law principles, it is not necessary that I consider the application of this section. Because of the approach which I have taken it is also not necessary that I determine whether privilege attaches to some of the documents, a matter of contention between the parties. 33 However it is necessary that I refer to the remaining area of contention namely whether waiver of privilege should be implied with respect to all of the documents. Each of the documents is described in some detail in affidavits sworn by Mr Martin. Documents numbers 20, 28, 29, 30, 32 and 44 would seem on a prima facie basis to relate to impugned transactions. In particular, document 20 relates to employment arrangements which, although allegedly never implemented, would arguably provide background information concerning the employment arrangements ultimately entered into. 34 Documents 96, 98, 99, 100, 105 and 109 appear to post-date the transactions and, presumably, would not have been considered by the three named directors in connection with events leading up to and the entry into of any of the impugned transactions. Accordingly, on a prima facie basis, they would not relate to any issue raised in the reply and would therefore not be subject to waiver of privilege on the in-principle approach which I have formulated. The information contained with respect to documents 486 and 491 is less clear because they concern the tyre agreements, and I do not feel comfortable in expressing even a tentative view with respect to this documentation. It seems to me that there is a pragmatic mechanism which might be adopted in order to assist in resolving conclusively the application of the in-principle approach which in my opinion should apply to these proceedings without further recourse to the Court. It is clear from the affidavit of Mr Martin that he was involved in all of the documentation in dispute and was involved as in-house counsel for FHL with respect to each of the transactions. I would propose that the parties address each of the documents in the manner which I have outlined with a view to endeavouring to reach agreement on those which fall within the area where waiver of privilege should be imputed. I see no reason why the legal representatives of each of the parties should not have access to Mr Martin in the conduct of this exercise. Although Mr Martin is the current Legal Manager of the Toll Group, he was the in-house Legal Manager and presumably in-house counsel for the Finemore group. As I understand the authorities in-house counsel are subject to the same high standards of ethical conduct imposed on external legal representatives. This is particularly so in circumstances where the Toll group is seeking to impugn transactions entered into by the Finemore group at a time when Mr Martin was in-house counsel for the Finemore group. If the parties are unable to reach agreement on all of the documents by utilising the in-principle approach which I have previously set out I propose granting liberty to apply at short notice so that any unresolved difficulty may be determined by the Court. 35 Finally, the respondents raised an issue with respect to one document over which legal professional privilege was not claimed but on the basis that it was commercially sensitive and irrelevant. Prima facie that document does not appear to be relevant to any of the issues raised in the reply, although because it relates to the take-over, relevance may emerge in some other way or at some later stage. I do not apprehend that the fact that the document is commercially sensitive will pose any problem because of the constraints which exist at general law about the use which may be made of such documents. I do not propose to make any particular order with respect to this document which is numbered 90. 36 However, consistent with the manner in which the case for waiver was put by the applicant I propose making orders limiting the waiver of privilege. I would propose, for consideration by the parties, that waiver of privilege with respect to those documents which are to be the subject of agreement or in default of agreement further order of the Court operate only in favour of access being given by the applicant's legal advisors to Messrs Cleary, Luff and Lever for the purpose of enabling them to prepare for and to give evidence in these proceedings. 37 If the parties are able to reach agreement they should produce short minutes of order. In the event that agreement cannot be reached then the matter will be the subject of liberty to apply as earlier indicated. No argument as to costs was addressed and I shall reserve costs. ORDERS 38 I make the following orders: 1. The proceedings are stood over with liberty to apply at short notice. 2. Costs are reserved. _________________________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.