New South Wales Supreme Court CITATION : Wyadra Pty Ltd & Ors v Mailler & Ors (No 2) [2005] NSWSC 88 HEARING DATE(S) : 14/02/05, 15/02/05, 16/02/05, 17/02/05 JUDGMENT DATE : 21 February 2005 JUDGMENT OF : Gzell J DECISION : Resistance to production of privleged documents on subpoena overruled. CATCHWORDS : EVIDENCE - Client Legal Privilege - Implied waiver - Whether cross claim based on continued reliance on induced expectation inconsistent with maintenance of confidentiality Supreme Court Rules 1970 LEGISLATION CITED : Evidence Act 1995 Mann v Carnell (1999) 201 CLR 1 Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380 Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 Equuscorp Pty Ltd v Kamisha Corp Ltd (1999) ATPR 41-697 CASES CITED : John Tanner Holdings Pty Ltd v Mortgage Management Ltd (2001) 182 ALR 201 Liquorland (Australia) Pty Ltd v Anghie [2003] 7 VLR 27 DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 1296 Wyadra Pty Ltd - Plaintiff/First Cross Defendant James Gerard Helps - Plaintiff/Second Cross Defendant Richard Gerard Helps - Plaintiff/Third Cross Defendant Roslyn Allison Patterson - Plaintiff/Fourth Cross Defendant PARTIES : Judith Ellen Mailler t/as A G Helps & Co Partnership - Plaintiff/Fifth Cross Defendant Scott Kendall Mailler - First Defendant/Cross Claimant Lachlan River Farming Pty Ltd - Second Defendant/Cross Defendant Judith Ellen Mailler - Third Defendant FILE NUMBER(S) : SC 2279/04 Mr A Sullivan QC/ Mr D Stack - Plaintiffs/Cross Defendants Mr J Stoljar/ Mr T Marskell - First and Second Defendants/Cross Claimants COUNSEL : Mr G Rigon (Solicitor) - Third Defendant Deacons Lawyers SOLICITORS : Clayton Utz Lawyers Mackenzie & Vardanega Solicitors LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J MONDAY 21 FEBRUARY 2005 2279/04 WYADRA PTY LTD & ORS v SCOTT KENDALL MAILLER & ORS (NO 2) JUDGMENT 1 Towards the close of the fourth day of trial, after the close of the plaintiffs' case, except for issues with respect to a proposed amendment of the cross claim and the result of this application, the plaintiffs called on two subpoenas addressed to the former solicitors for the first and second defendants and their accountants. 2 The first and second defendants objected to production under the subpoenas in terms of the Supreme Court Rules 1970, Pt 36 r 13 which applies the Evidence Act 1995, Pt 3.10 to calls on subpoena. In each case, reliance was place upon s 118. It excludes evidence of legal advice on objection by a client. 3 In an affidavit sworn by the first and second defendants' current solicitors, privilege was claimed for, and the plaintiffs sought access to, the former solicitors' file notes, emails, draft letters and telephone messages created for the dominant purpose of advising the first and second defendants in the period from July 2001 to February 2004. 4 The Evidence Act 1995, s 122(1) provides that the Act does not prevent the adducing of evidence given with the consent of the client. 5 At common law, a client who would otherwise be entitled to the benefit of legal professional privilege, may waive that privilege and that waiver may be express or implied (Mann v Carnell (1999) 201 CLR 1 at 13). 6 There is some division in the authorities at to whether the consent to which reference is made in the Evidence Act 1995, s 122(1) includes the common law concept of implied waiver of privilege. That conflict was discussed by McDougall J, recently, in Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380 at [52], [56]. His Honour concluded that the better view was that the common law test as enunciated in Mann could be applied to the statutory concept of consent in s 122(1). I endorse that view. 7 In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152 a majority of a Full Court of the Federal Court expressed the view that where a party pleads reliance on a particular representation, state of mind becomes an element of the cause of action and that cannot be assessed, fairly, without examination of relevant legal advice. The party is to be taken as having consented to the use of relevant privileged material or, put another way, to have waived reliance on the privilege. 8 There has been a deal of criticism of the width of that statement (Equuscorp Pty Ltd v Kamisha Corp Ltd (1999) ATPR 41-697 at 42,894, John Tanner Holdings Pty Ltd v Mortgage Management Ltd (2001) 182 ALR 201 at 206, Liquorland (Australia) Pty Ltd v Anghie [2003] 7 VLR 27 at 42, DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at 502, 526, Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 1296 at [40], [43]). The proposition is that Mann requires a narrower statement of the principle. 9 In Mann at 13, the court stated the common law principle in terms of conduct inconsistent with the maintenance of confidentiality: "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 its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege… 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 the maintenance of the confidentiality; not some overriding principle of fairness operating at large." 10 The criticisms of Telstra have come and single judges of the Federal Court bound by the decision. I am not bound by Telstra and I was invited not to follow it. While bound by the decision in Mann, before reaching such a conclusion, issues of comity would arise. 11 I do not need to resolve this issue because, assuming for the purpose of the application that the more stringent statement of principle is applicable, I am of the view that the conduct of the first and second defendants was inconsistent with the maintenance of confidentiality. 12 The cross claim alleges that representations and conduct on the part of the plaintiffs between April 1999 and October 2001, induced in the first and second defendants the expectation that they would be the purchaser of Wyadra and the assets of the partnership that conducted business on the property, that so long as they continued to negotiate in good faith and were capable of raising the purchase price the property would be sold to them and not put up for public auction and the only matters remaining for negotiation were any necessary adjustments to the final price and the negotiation and execution of sale contracts. It was further alleged that between October 2001 and February 2004, in continued reliance on the expectation, the first and second defendants incurred capital expenditure on improvements to the property, terminated a share farming agreement, assumed conduct and management of all business conducted on the property and declined the opportunity to purchase another property. 13 Reliance upon the initial representations and conduct and the continued holding of the expectations are central issues in the cross claim. The conversations referred to in the pleadings were central to the extensive cross examination by counsel for the first and second defendants of the plaintiffs' witnesses. The itemisation of documents in this period for which privilege has been claimed, demonstrate the extent to which legal advice was taken. 14 The accountants for the first and second defendants told them that they knew of a solicitor who could act for them. It was the accountants who approached the solicitors on behalf of the first and second defendants. It was they who were initially in communication with the solicitors. The first defendant said that he hardly ever spoke with the solicitors until after the draft contract for sale was received. But prior to that date there were many documents passing between the solicitors and the accountants and the solicitors said that they were initially retained by the accountants and briefed in relation to the sale negotiations. 15 That the former solicitors were involved with the accountants in giving advice in the period the first and second defendants allege they were induced by representations to form an expectation, makes it likely that the advice played a part in the formation of that expectation such that the prosecution of the cross claim is inconsistent with the maintenance of the confidentiality that the privilege was intended to protect. 16 It was submitted that implied waiver is limited to privileged documents associated with the formation of an expectation and cannot extend to its continuation. I see no reason in principle for such a distinction. The first and second defendants allege that over an extended period they retained the expectation and, as a result, were induced to take a number of steps to their detriment. The evidence reveals that during that period there were considerable communications to and from their former solicitors relating to the giving of legal advice. It is highly likely, then, that legal advice played a key role in the maintenance, or otherwise, of the expectation. The prosecution of the cross claim on the basis of a maintained expectation makes it inconsistent that confidentiality should also be maintained. 17 In my view, the documents of the former solicitors identified in annexure "A" to the affidavit of Jonathan Peter McTigue sworn on 17 February 2005 to which the plaintiffs seek access are documents which fall within the Evidence Act 1995, s 122(1) as applied to a call under subpoena and must be produced. 18 The privilege claimed with respect to communications passing between the accountants, the solicitors and the first and second defendants was not based on the claim that communications with accountants are subject to client legal privilege, but upon the extended definition of the term "client" in the Evidence Act 1995, s 117(1) to include an agent of a client. It was submitted that the privilege in s 118 extended to confidential communications made between the accountants, as agents for the first and second defendants, and their former solicitors. 19 It is unnecessary for me to deal with this issue. If, as I have found, it is to be implied that the first and second defendants have waived privilege with respect to legal advice given to them, the manner in which that advice was given is immaterial. The waiver applies as well to communications between their former solicitors and their accountants as it does to communications between their former solicitors and themselves. 20 The accountants must produce those of the documents identified in annexure "C" to the affidavit of Mr McTigue with respect to which the plaintiffs seek access. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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