Take care not to waive privilege when pleading your case

Legal professional privilege provides vital protection to communications passing between lawyer and client. It is no surprise, then, that the issue of waiver of privilege is often hotly contested. In a recent decision, the Victorian Court of Appeal considered whether the way a party had pleaded its case had resulted in an implied waiver of privilege. The Court’s decision provides a useful analysis of the law relating to waiver and the potential circumstances in which a pleading can give things away.

The dispute

The applicants, Viterra Malt Pty Ltd and its related companies, had entered a contract for sale of a malting business to the first respondent, Cargill Australia Ltd. The sale completed in October 2013. The dispute, which has been set down for trial this year, arose from Cargill’s allegations that Viterra failed to disclose certain matters about Viterra’s business practices prior to the sale. Cargill alleged that, as a result of these omissions, Viterra breached certain warranties relating to the sale and engaged in misleading and deceptive conduct in contravention of the Australian Consumer Law.

In its defence, Viterra alleged that Cargill had sufficient knowledge of the matters which Viterra had allegedly failed to disclose to Cargill. Viterra also made a separate claim that Cargill’s executives represented to Viterra that the undisclosed matters did not exist and that the warranties under the sale were true and correct. The upshot of this was that if Viterra was found to have engaged in misleading and deceptive conduct then Cargill’s executives themselves had engaged in that same conduct.

Both sides alleged waiver of privilege by the other and applied to the Supreme Court for access to relevant documents.

Cargill alleged that Viterra had, by pleading a case against Cargill’s executives, waived privilege over certain categories of documents evidencing the executives’ knowledge of Viterra’s business practices. Cargill succeeded in this application and documents were produced for inspection.

On its part, Viterra alleged that Cargill, by pleading its knowledge of the undisclosed matters relating to Viterra’s business practices, had waived privilege over documents giving rise to such knowledge. An associate judge heard Viterra’s application on this point and ultimately dismissed it. On appeal before a trial judge at first instance, the judge upheld this decision. The trial judge ruled that any confidential communications regarding Viterra’s business practices might have been relevant to the issues pleaded, but they were not of such connection — there being insufficient ‘centrality’ — to the pleaded issues that the communications’ privilege had been waived.

The present appeal, Viterra Malt Pty Ltd v Cargill Australia Ltd,[1] concerned the trial judge’s decision.

On appeal

In a joint decision, Whelan, Kyrou and McLeish JJA granted leave to appeal but dismissed Viterra’s appeal.

The key issue on appeal was whether the trial judge erred in holding that for waiver of privilege to be inferred from a pleading regarding state of mind — here, Cargill’s knowledge of Viterra’s business practices — the party alleging waiver must establish that the contents of the privileged documents are central to the state of mind pleaded.

For the Court of Appeal, the starting point to such enquiry was statute. Specifically, section 122(2) of the Evidence Act 2008 (Vic), which states:

‘Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120 [being the provisions protecting privileged communications from being adduced in evidence]’.

Section 122(2) applies not only to adducing evidence but also to giving information or producing documents, including in the context of discovery.

Are the case authorities of any assistance?

On appeal, both parties took the Court to a number of case authorities. The Court gave two caveats as to the limited utility of resorting to such decisions:

‘The first is that, notwithstanding that the High Court has made it clear that the common law and s 122(2) are closely related, the question to be asked is the statutory test posed by s 122(2) … 
Secondly, as the cases themselves make clear, there is no settled list of kinds of action which, by their very nature, give rise to implied waiver: each case must depend on its own facts and circumstances and drawing generalisations from other cases may be dangerous’.[2]

For that reason, their Honours sought to step back from any analysis which focused excessively on the trial judge’s use of certain terminology when reaching the earlier decision; although the trial judge referred to the need for ‘centrality’ in any relationship between the privileged documents and the pleaded knowledge of matters which might involve such documents, the Court of Appeal reiterated the importance of section 122(2) and its own wording.

Their Honours then added:

‘Notwithstanding the need for caution on that account, it can be said that a pleading of reliance [on a representation], without more, will not usually manifest inconsistency with the maintenance of client legal privilege in communications relevant to that state of mind’.[3]

The Court of Appeal analysed the various case authorities presented in argument on appeal. Their Honours noted that while one particular decision — that of Allsop J in DSE (Holdings) Pty Ltd v Intertan Inc[4] — ‘has commanded wide acceptance as a statement of the general operation of the principle’ of waiver of privilege albeit in a way that is ‘still a gloss on the statutory language’,[5] other cases seemingly conveying alternative tests for waiver of privilege ‘may do little other than to explain the results reached in the particular cases in which they were applied’.[6]

As such, concepts such as the ‘centrality’ of a document to a party’s state of mind (as in Telstra Corporation Ltd v BT Australasia Pty Ltd[7]) or the notion of a privileged document ‘materially affecting or contributing to’ a party’s state of mind (as in DSE (Holdings) Pty Ltd v Intertan Inc[8]) ought not be taken as qualities to be found or tests to be met in order to make good a case for waiver. As the Court stated, ‘[t]he preferable course is … not to apply any alternative test but the language of the statute’.[9]

The Court’s decision

Turning to Viterra’s application, their Honours held that there would be nothing inconsistent in Cargill on the one hand maintaining privilege over possible documents in which it sought legal advice on any undisclosed matters relating to the business sale and, on the other hand, pleading ignorance of such matters and pleading reliance on Viterra’s failure to disclose. Their Honours noted:

‘It is entirely to be expected that a party pleading a misleading or deceptive conduct case arising from a commercial transaction will have received legal advice regarding the transaction before its consummation. [Viterra’s] argument would suggest that privilege is waived by [Cargill] pleading such a case. The authorities show that something more is required’.[10]

The closer connection — that certain ‘something more’ — that Viterra sought to draw between the pleadings and the privileged documents was the inference, arising from the pleadings, that Cargill’s lawyers were an integral part of the pre-sale process. However, the Court of Appeal did not draw such an inference, noting a number of shortcomings, namely:

  • the provision of legal advice had not been expressly pleaded;
  • the provision of legal advice could not be inferred from Cargill’s pleadings; and
  • the documents which Cargill disclosed in discovery did not lead to such an inference.

Their Honours, to conclude the point, held that ‘nothing in Cargill’s pleading has put its legal advice in issue or laid it open to scrutiny’.[11]

In dismissing Viterra’s appeal, their Honours noted that their decision was limited to the question of whether privilege had been waived by virtue of the pleadings; it did not question whether such privilege might still be waived by the conduct of the trial.

Comment

The Court of Appeal’s decision is a reminder of the importance of the wording of section 122(2) of the Evidence Act to the question of waiver of privilege. The decision also illustrates a situation where waiver was sought but not obtained at the stage of pleadings, with the Court highlighting a number of factors that ultimately swayed its decision against a conclusion of waiver.


[1]: [2018] VSCA 118.

[2]: Ibid [43]–[44].

[3]: Ibid [73].

[4]: (2003) 127 FCR 499.

[5]: Viterra Malt Pty Ltd v Cargill Australia Ltd [2018] VSCA 118, [73].

[6]: Ibid [74].

[7]: (1998) 85 FCR 152.

[8]: (2003) 127 FCR 499.

[9]: Viterra Malt Pty Ltd v Cargill Australia Ltd [2018] VSCA 118, [76].

[10]: Ibid [78].

[11]: Ibid [80].