Do you impliedly waive privilege in your legal advice by putting in issue your state of mind? Generally speaking, two distinct approaches emerged, a broad view and a narrower view, but recently the narrower view has prevailed. The NSW Court of Appeal recently signalled however that it might be prepared to take a broader view of issue waiver when a party has put in issue his or her state of mind.
Broad vs narrow
- If the Court of Appeal’s comments are followed, framing a case might be enough to inadvertently waive privilege.
An example of the broad view is the decision in Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152. BT claimed that Telstra had engaged in misleading and deceptive conduct which induced it to enter into an agreement. Telstra then sought discovery of legal advice received by BT, on the basis that the advice went to BT’s state of mind when it entered into the agreement. Even though BT did not refer to any legal advice, the Court found that privilege had been waived.
The High Court then handed down its decision in Mann v Carnell (1999) 201 CLR 1. By focusing on the notion of inconsistency, Mann v Carnell caused a shift away from the broad formulation in Telstra. For example, in Liquorland (Australia) Pty Ltd v Anghie (2003) 7 VR 27 Justice Byrne held that the putting in issue of a relevant state of mind (one of reliance or otherwise) is merely the starting point for an examination of whether privilege has been waived. The chronological coincidence of the legal communication and the establishment of that state of mind does not of itself determine the question.
The Comments in Archer
Council of the New South Wales Bar Association v Archer  NSWCA 164 concerned the application of waiver in the context of certain provisions of the Legal Profession Act 1987 (NSW). In that case Justice Hodgson (with Justice Handley agreeing) made certain general obiter observations about the common law principles of issue waiver:
“What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client’s state of mind, in circumstances where there were confidential communications likely to have affected that state of mind” [emphasis added].
Is this a return to the broad view in Telstra, and perhaps a widening of the scope of that principle beyond Telstra and certainly beyond Mann v Carnell?
“Likely to have affected”
Previous cases referred to the likelihood of legal advice having contributed to a state of mind in the context of the dates and descriptions of specific known documents. But what does “likelihood” mean here? It could have two meanings:
- it could qualify the existence of confidential communications; or
- it could qualify the probability of those communications having affected the privilege holder’s state of mind.
If it refers to the likelihood of the existence of the documents, a court would then need to determine the likelihood that a party has obtained legal advice, which would throw up some practical problems:
- Should a court assume that a large corporate entity is more likely to have received legal advice than an individual litigant?
- An affidavit of documents might not reveal the existence of legal advice because of the practice of using a general catch-all to describe privileged documents, so a notice to produce might be necessary – but neither of these will reveal if oral advice has been taken. How then should a court determine if it has been?
If “likely” is intended to qualify the impact of a privileged communication on the privilege-holder’s state of mind, additional complex questions arise:
- Is the test an objective or subjective one?
- What degree of likelihood is required?
- How is the test to be applied where there is more than one decision-maker, for example, several company directors?
A return to the broad old days?
It may be that the comments of the Court of Appeal in Archer were intended to be read more narrowly. This would be consistent with earlier decisions of Justice Hodgson appearing to support the narrow view.
The narrow view certainly has much going for it as a matter of principle; not only does it protect the status of privilege as an essential common law right, it is consistent with the test in Mann v Carnell. The necessary unfairness stems from the inconsistency which would arise if a privilege-holder were allowed on the one hand to use privileged material to advance his or her position, while at the same time asserting privilege over that material.
If, however, the Court is signalling that it is prepared to reconsider the position, and the broader view were to become accepted again, there could be serious ramifications for litigants. It could be that merely pleading a cause of action which is based on reliance (for example, a section 52 TPA claim) could be said to be inconsistent with a claim for privilege, even though the privilege-holder has not disclosed part of legal advice – indeed, he or she would not be seeking to rely on any advice.
It is clear that, nearly a decade after Mann v Carnell, the profession would benefit from a clarification of these issues at appellate level.
Original article by Clayton Utz