Industrial Court of New South Wales CITATION: Stat Medical Pty Limited v ConMed Linvatec Australia Pty Limited. [2007] NSWIRComm 304 APPLICANT PARTIES: Stat Medical Pty Limited RESPONDENT ConMed Linvatec Australia Pty Limited FILE NUMBER(S): 884 of 2006 CORAM: Marks J CATCHWORDS: Implied waiver of professional privilege - applicant in unfair contract proceedings under s 106 referred in affidavit to being heavily reliant on solicitor's advice before entering into agreement - claim based in part on unequal bargaining position - held applicant had waived privilege - orders for production of documents Evidence Act 1995 Part 3.10, s 122 LEGISLATION CITED: Industrial Relations Act 1996 s 106 Industrial Relations Commission Rules 1996 Rules 160, 161 Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86, 151 FCR 341 CASES CITED: Southern Equities Corporation Ltd (in liquidation) v Arthur Andersen and Co (1997) SASC 6373 Tynan Motors Pty Ltd v Mazda Australia Pty Ltd [2003] NSWIRComm 146 HEARING DATES: 6 December 2007 DATE OF JUDGMENT: 14 December 2007 APPLICANT Mr D Shoebridge of counsel Solicitors: Employment Lawyers Mr A Barwick LEGAL REPRESENTATIVES: RESPONDENT Mr P Braham of counsel Mr Y Shariff of counsel Solicitors: Clayton Utz Mr J Catanzariti JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Marks J Friday 14 December 2007 Matter No IRC 884 of 2006 Stat Medical Pty Limited v ConMed Linvatec Australia Pty Limited Application under s 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT ON WAIVER OF PRIVILEGE [2007] NSWIRComm 304 1 These are proceedings brought under s 106 of the Industrial Relations Act 1996 by the applicant Stat Medical Pty Ltd in which it is sought to have declared unfair a contract made between it and the respondent, ConMed Linvatec Australia Pty Ltd. The proceedings are constituted by an amended summons. The summons makes it clear that the contract is a distributor agreement by which the applicant distributed certain products provided by the respondent. The proceedings arise out of the termination of that contract by the respondent. 2 The amended summons contains particulars of the manner in which it is alleged that the contract is unfair. They are directed to the provisions of the contract dealing with notice of termination and the consequences of termination. Importantly, also, there is an allegation that the contract was unfair "in that it permitted the Respondent to use a dominant bargaining position over the Applicant in setting the terms of the contract and in making any variations to the contract." 3 In an affidavit sworn by the sole director and shareholder of the applicant in support of the applicant's case in the proceedings, Mr Allan Roberts referred to the fact that he had obtained some tax or financial advice from a particular organisation who recommended that he also obtain some legal advice from Tillyard and Callanan Solicitors. The affidavit said, "I obtained legal advice from and met with Mr Callanan of Tillyard and Callanan Solicitors in the period early November 2001 to about the middle of December 2001. As I had no prior business experience, I was heavily reliant upon the financial and legal advice that I obtained in relation to the written Distributor Agreement. When I met with Mr Callanan, I provided instructions to him that, based upon the conversation I had with Mr Jennings ….that the Respondent was not prepared to negotiate on the termination clause in the written Distributor Agreement." Mr Jennings was said to be the General Manager of the respondent's Australian operations. 4 Furthermore, Mr Roberts deposed that at some time in November 2001, Mr Callanan commenced to communicate directly with representatives of the respondent with respect to certain proposed modifications to the Distributor Agreement. 5 By notice to produce, the respondent's solicitors sought that the applicant produce all documents which, in general terms, related to or recorded the instructions which Mr Roberts had given to Mr Callanan as referred to in that paragraph of his affidavit and all documents relating to communications between Mr Callanan and Mr Roberts recording, referring to or relating to the termination clause in the distributor agreement, again as referred to in the affidavit. The applicant resisted the production of these documents claiming that they were privileged. The respondent has moved the Court seeking production of the documents. That motion has been resisted by the applicant. 6 Counsel for both parties were in agreement that by reason of the provisions of Rule 161 of the Industrial Relations Commission Rules 1996, a party is not required to produce under a notice to produce a document which is privileged. However, whether a document is privileged is defined in Rules 160 and 161 so as to import the application of Part 3.10 of the Evidence Act 1995. The relevant section of the Evidence Act is 122, which is in the following terms. 122 Loss of client legal privilege: consent and related matters (1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made: (a) in the course of making a confidential communication or preparing a confidential document, or (b) as a result of duress or deception, or (c) under compulsion of law, or (d) if the client or party is a body established by, or a person holding an office under, an Australian law-to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held. (3) Subsection (2) does not apply to a disclosure by a person who was, at the time, an employee or agent of a client or party or of a lawyer unless the employee or agent was authorised to make the disclosure. (4) Subject to subsection (5), this Division does not prevent the adducing of evidence if the substance of the evidence has been disclosed with the express or implied consent of the client or party to another person other than: (a) a lawyer acting for the client or party, or (b) if the client or party is a body established by, or a person holding an office under, an Australian law-the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held. (5) Subsections (2) and (4) do not apply to: (a) a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person, or (b) a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to a proceeding or an anticipated or pending proceeding in an Australian court or a foreign court. (6) This Division does not prevent the adducing of evidence of a document that a witness has used to try to revive the witness's memory about a fact or opinion or has used as mentioned in section 32 (Attempts to revive memory in court) or 33 (Evidence by police officers). 7 There was no dispute that the advice given by Mr Callanan was privileged. The only dispute was whether or not the Court would imply or impute a waiver of the privilege in accordance with the well-known common law principles. Those principles have been the subject of appellate court consideration, most recently by the Full Court of the Federal Court of Australia in Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86, 151 FCR 341. That judgment discusses in some detail the history of the common law doctrine of waiver and a number of earlier decisions. I shall not attempt to canvass the various principles or the course of litigation that has led to what should now be regarded as an established approach to their application. As the Full Court said in Rio Tinto, "….waiver comes about because the privilege holder's conduct is inconsistent with the continued confidentiality of the communication because he or she has put in issue the character or contents of the communication in pursuing a right or claim, or has created a situation where another party must reasonably do so by way of a defence." (At FCR 357). 8 The Full Court also made clear that "A mere reference to legal advice will not amount to disclosure". (At FCR 357) 9 At [61] of the judgment in Rio Tinto, the Court said, in part, "….the governing principle required a fact-based inquiry as to whether, in effect, the privilege holder had directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defence. In DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at [58], Allsop J put the matter somewhat more descriptively, saying waiver arises when, 'the 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.' (Emphasis in original)." 10 Given the principles that I have outlined above, albeit briefly, it is necessary to examine what was said by Mr Roberts in his affidavit in the context of the proceedings. 11 The applicant asserted that all that Mr Roberts has done has drawn attention to the fact that he obtained legal advice prior to the applicant entering into the distributor agreement. It was emphasised that the affidavit makes no reference to the impact that the advice had on Mr Roberts' state of mind. 12 Difficulties will always arise in considering whether the appropriate circumstances exist in which it is appropriate to apply the common law principles of waiver. This difficulty is compounded where application is made for the waiver of privilege at an early stage in the proceedings before all of the issues have been necessarily clarified. I adverted to this in Tynan Motors Pty Ltd v Mazda Australia Pty Ltd [2003] NSWIRComm 146 when discussing the decision of the Full Court of the Supreme Court of South Australia in Southern Equities Corporation Ltd (in liquidation) v Arthur Andersen and Co (1997) SASC 6373. At [19] and following I discussed the contrary views expressed by Bleby and Matheson JJ on the one hand and that of Doyle CJ in dissent on the other occasioned in part by concerns about the then state of the proceedings. 13 Contrary to the position asserted by the applicant, I read the reference by Mr Roberts that he "was heavily reliant" upon the legal advice that he obtained as enabling me to conclude that that advice had impacted upon his state of mind at the time that he ultimately agreed, on behalf of the applicant, to enter into the written distributor agreement. Furthermore, I agree with the respondent's submission that the amended summons, having sought to declare the contract unfair in part because of the respondent's dominant bargaining position with respect to its terms and any variation, the fact that the applicant had sought legal advice in relation to the contract is arguably a significant matter when considering the nature and extent of any dominant bargaining position, and its consequences. 14 It follows that I agree with the respondent's submissions that the applicant, by reason of the material in the affidavit of Mr Roberts, has created circumstances relating to the asserted dominant bargaining position and concerning reliance or otherwise on the contents of the distributor agreement and, in particular, negotiations with respect to the termination clause which goes beyond a mere referral to the fact of having received legal advice. In all of the circumstances it must follow that the nature of that advice ought, as a matter of fairness to the respondent in the conduct of these proceedings, be disclosed. A "heavy reliance" arguably impacts upon Mr Roberts' state of mind. 15 For these reasons I find that the material contained within the affidavit of Mr Roberts constitutes circumstances in which waiver of the legal professional privilege contained in the advice of Mr Callanan should be implied. Consequently, the respondent's motion should succeed. 16 The parties agreed that costs should follow the event. Orders 17 I make the following orders: 1) That the applicant comply with the respondent's notice to produce dated 17 January 2007. 2) That the applicant pay the respondent's costs of the motion assessed in default of agreement. 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.