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- Unreported Judgment
Lu v Fenson Legal Pty Ltd QDC 253
DISTRICT COURT OF QUEENSLAND
Lu v Fenson Legal Pty Ltd & Another  QDC 253
FENSON LEGAL PTY LTD ACN 608 884 233 TRADING AS FENSON & CO LAWYERS
Brisbane District Court
15 October 2021
23 September 2021
Porter QC DCJ
EVIDENCE – ADMISSIBILITY – EXCLUSIONS: PRIVILEGE – CLIENT LEGAL PRIVILEGE – LOSS OF PRIVILEGE – IMPLIED WAIVER – where plaintiff claims damages against first and second defendants for breach of contract and negligence – where defendants issued a notice of non-party disclosure on plaintiff’s former solicitors, seeking disclosure of documents – whether documents over which privilege has been claimed are privileged – whether there has been an implied waiver over the documents – whether implied waiver arises where the holder of the privilege responds to an allegation by the other party in a pleading
Sale of Land Act 1962 (Vic), s. 31
Uniform Civil Procedure Rules 1999 (Qld), rr 242, 245, 246, 247
Lillicrap v Nalder & Son (A Firm)  WLR 94
Paragon Finance Plc. (Formerly National Homeloans Corporation Plc.) v Freshfields (a firm)  1 WLR 1183
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd  QSC 144
Steven Issa v Michael Issa & Anastazija Balaz  NSWSC 1387
The Queensland Local Government Superannuation Board v Allen  QCA 325
D. de Jersey QC for the Plaintiff
A. Nicholas for the First and Second Defendants
Canaan Lawyers for the Plaintiff
Hyland Law for the First and Second Defendants
- The plaintiff (Ms Lu) alleges the defendants provided negligent advice to her in relation to a contract to acquire an off the plan apartment to be built in Melbourne, by failing to advise her about the “cooling off period”, which is provided for in such transactions in Victoria by s. 31 Sale of Land Act 1962 (Vic) (SLA). Ms Lu alleges that negligence caused her loss because, if she had been aware of that right, she would have terminated the contract within that period.
- The defendants defend that claim primarily on the basis that they did advise Ms Lu of her rights under s. 31. More relevantly, by paragraph 12A of the defence, they also allege that Ms Lu “had experience in the purchase and sale of residential properties and was aware of the cooling off provisions”. By paragraph 12A of her reply, Ms Lu denied both propositions as untrue and added that those allegations (presumably if true) did not discharge the defendants’ duties to advise on the Melbourne transaction.
- The defendants issued Notices of Non-Party Disclosure to a number of solicitors who the defendants had grounds to believe had acted for Ms Lu in previous property transactions. Relevantly to this application, on 23 August 2021, the defendants issued a notice of non-party disclosure (the Notice) under r 242 Uniform Civil Procedure Rules 1999 (Qld) (UCPR) to Ms Lu’s former solicitors, Chan Lawyers, seeking disclosure of three categories of documents:
- (a)First, documents dated prior to 23 June 2011 being correspondence held by them on behalf of the plaintiff in relation to a purchase of 28 Clear Water Bay Avenue, Clear Island Waters, including any correspondence between them regarding cooling off periods;
- (b)Second, documents prior to 21 May 2012 being correspondence held by them on behalf of the plaintiff in relation to her purchase of 22303/21 Elizabeth Avenue, Broadbeach, including any correspondence between them regarding cooling off periods;
- (c)Third, between 2003 and August 2021 being correspondence held by them on behalf of the plaintiff in relation to any other purchases by the plaintiff.
- The plaintiff objected to the Notice on 30 August 2021 and sought leave, pursuant to r 245(2) UCPR, to object to the production of the categories of documents sought. The plaintiff also seeks an order that the Notice be stayed pursuant to r 246 UCPR. There were three grounds stated in the objection: lack of relevance, the documents sought by the notice were covered by legal professional privilege, and confidentiality. During argument, the issues were significantly narrowed.
- Ms Nicholas (who appeared for the defendants) conceded that the scope of the Notice should be narrowed to the following: Correspondence regarding cooling off periods for the identified properties and any other properties Chan Lawyers may have acted in for Ms Lu until April 2016. The effect of that concession was to limit the documents sought to correspondence which might tend to prove or disprove that Ms Lu had previously been advised about provisions like s. 31 SLA by Chan Lawyers.
- Because of that limitation on the scope of the Notice, Mr de Jersey QC (who appeared for the plaintiff) accepted that the documents that are likely to respond to the (narrowed) Notice would be covered by legal professional privilege. Counsel agreed that the real issue for the Court was whether there had been an implied waiver of privilege over those documents. Ms Nicholas also conceded that the confidentiality objection stood or fell with the implied waiver issue.
- I was ultimately uncertain whether Mr de Jersey accepted that documents responding to that Notice would be relevant to issues on the pleadings. However, if he did not concede that, I find that they would be relevant. I must judge that matter on the pleadings as they stand. (Despite the suggestion in paragraph 12A of the reply that the allegations might not be relevant, no application to strike out paragraph 12A of the defence was made.) The documents described by the narrowed notice are relevant to the factual issue raised on paragraphs 12A of the defence and the reply.
- Further, the allegations are relevant more broadly to causation (though the proposition is not expressly articulated in the defence). It is arguable that if Ms Lu was experienced in purchasing residential property and had previously been advised about provisions like s. 31 SLA, that might tend to prove that, even if she was not advised by the defendants about s. 31 SLA, she would have enquired with the defendants about that matter if she wished to withdraw from this contract. Accordingly, if the defendants’ allegations are correct, that might tend to prove that Ms Lu did not in fact decide during the cooling off period provided by s. 31 SLA that she wished to withdraw from the contract (as she alleges), because if she had, she would have queried the defendants about doing so. That is not to say that the defendants’ proposition is correct, merely that the allegation in paragraph 12A of the defence is relevant to causation.
- The application therefore comes down to one issue: would legal professional privilege in documents falling within the narrowed scope of the Notice have been waived by Ms Lu’s reply? In my view, the answer to that question is no.
- Ms Nicholas, for the defendants, argued that the plaintiff impliedly waived privilege over the requested documents by reason of the denial of paragraph 12A of the defence. She contended that the plaintiff’s denial gave rise to an implied waiver, because her assertion that the defendants’ failure to advise her of the cooling off period caused her loss is inconsistent with her denying having knowledge of cooling off periods and having received advice about them in the past. Ms Nicholas summarised this argument at paragraph 33 of her Outlines as follows:
The plaintiff’s claims against the defendants are inconsistent with any assertion that her communications with Chan Lawyers about cooling off periods are privileged. She has put in issue not only the issue of what advice she received from the defendants about cooling off periods, but also the causative connection between what the defendants allegedly failed to do, and what would have happened had she received the alleged advice from the defendants. What advice she had previously received about the operation of cooling off periods when purchasing property in the past, and how she then acted, is relevant to this dispute. It is relevant to what any other independent solicitor would have advised her. It is critical to the determination of the counterfactual in this negligence claim. The plaintiff has laid the documents sought by the defendants open to scrutiny by her pleading. It follows that there has been, on the plaintiff’s own pleading, an implied waiver of privilege.
- As an argument that the requested documents are relevant, the above analysis is sound. As an argument that it amounts to a waiver of privilege, however, it encounters difficulty.
- The first point to note is that this aspect of the case does not attract the authorities which deal with waiver in the context of a positive case by a plaintiff which necessarily puts into issue the whole of any legal advice given to the plaintiff in relation to the issues raised in the proceedings. Well-known examples include where a plaintiff alleges undue influence (where independent legal advice is a complete answer to the claim) or where a plaintiff sues a solicitor for negligent advice. In the latter case, of course, the plaintiff cannot be heard to give his or her version of the advice, but prevent the solicitor from giving his or her version by raising legal professional privilege against the solicitor. Both are situations where the conduct of the plaintiff in advancing the claim puts in issue the content of legal advice.
- Obviously, Ms Lu could not raise legal professional privilege to prevent the defendants pleading and proving their version of the advice allegedly given to her about s. 31 SLA. However, Ms Lu has not sought to do so. The alleged waiver relied upon by the defendants does not arise from that context because the advice sought by the defendants is not advice given by the defendants, nor is it advice which informs, or is relevant to, the scope or content of advice given by the defendants.
- If waiver is to be established, it must be established from the bare denial in the reply of the allegation that Ms Lu “was aware of cooling off provisions”. This amounts to a denial which puts in issue Ms Lu’s state of mind: here, her knowledge of the existence of a legal right to terminate a residential property contract in a cooling off period in other jurisdictions.
- The authorities on implied waiver in the context where a state of mind is put in issue were comprehensively reviewed by Flanagan J in Sanrus Pty Ltd v Monto Coal 2 Pty Ltd  QSC 144. The case concerned the interpretation of a clause in a joint venture agreement. The plaintiffs submitted that the clause created an obligation, inter alia, on the defendants to use all reasonable steps to develop Stage 1 of a mining project. The defendants disagreed with that interpretation and contended, relevantly, that the parties shared a common assumption that until economic viability of the whole project was established, neither party was obliged to proceed with Stage 1.
- The plaintiffs argued that this defence was pleaded in a way which put in issue the state of mind of the officers of Monto Coal, and that this state of mind was likely informed by legal advice. Further, the plaintiffs contended that during evidence-in-chief, the defendants’ witnesses also put in issue their state of mind as to the conventional assumption alleged. Both the pleadings and the evidence were said to have the effect of impliedly waiving legal professional privilege in legal advice relevant to that state of mind. The plaintiffs’ ultimate submission was summarised by his Honour as follows:
 The plaintiffs submit that the defendants have put their state of mind in issue both on the pleadings and in their conduct of the case, being a state of mind concerning the content of the defendants’ rights and obligations, or matters in respect of which legal advice would ordinarily be important and it would be unfair for the defendants to plead and prosecute that case without laying open to scrutiny legal advice that bears upon that state of mind.
- His Honour first reviewed relevant principles. He observed, relevantly:
 In relation to issue waiver specifically, the defendants submit that the following principles may be derived from the authorities.
- (a)The mere fact that a party puts its state of mind in issue on the pleadings does not give rise to an implied waiver of privilege: Federal Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 at ; The Queensland Local Government Superannuation Board v Allen  QCA 325 at  (Burns J, McMurdo P (at ) and Philippides JA (at ) agreeing).
- (b)There will be no waiver of privilege where a party merely joins issue with an allegation made by the opposing party that he, she or it possessed a particular state of mind: Allen at .
- (c)There will be an issue waiver when a party has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence: Rio Tinto at ; Arup at ; Allen at , ;
- (d)But it is not enough to establish a waiver of privilege that the state of mind asserted relates to a legal position and it is likely that a party obtained legal advice in respect of that legal position: Ferella v Offıcial Trustee in Bankruptcy (2010) 188 FCR 68 at  ; Archer Capital 4A Pty Ltd v Sage Group PLC (No 3)  FCA 1160; 306 ALR 414 at  (both cited with approval, Macquarie Bank Ltd v Arup Pty Ltd  FCAFC 117 at , 36], ); and see Viterra Malt Pty Ltd v Cargill Australia Ltd  VSCA 118 at -, noting that the ‘Undisclosed Matters’ included questions of contractual performance: [19(a)]);
- (e)The ultimate question is whether, as part of the privilege holder’s case, an assertion has been made that lays open the privileged communication to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege: Allen at . Put another way, the question is whether it would be unfair in the sense explained by the majority of the High Court in Mann v Carnell to permit reliance on legal advice for forensic advantage while at the same time preventing the opposing party from having access to it: Allen at .”
 The principles summarised in paragraphs (a), (b), (c) and (e) of the defendants’ written submissions are not in dispute. The principle identified in paragraph (d) is, however, in dispute.
- His Honour then turned to an analysis of the authorities in support of the proposition in paragraph (d). His Honour referred to the competing submissions on this issue (which need not be set out here) and concluded (footnotes omitted):
 As is apparent from Rio, the mere fact that legal advices are relevant to an issue in the case including a person’s state of mind, does not amount to implied waiver. To similar effect are the observations by the Full Court of the Federal Court in Macquarie Bank Limited v Arup Pty Limited:
“The correct approach was succinctly described by Yates J in Ferella & Anor v Official Trustee in Bankruptcy (2010) 188 FCR 68 at  in the following terms:
‘… However the question is not simply whether the holder of the privilege has put that person’s state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communications in issue: see [Rio Tinto] at .
Indeed, even the fact that the holder of the privilege makes clear that the advice was relevant or contributed to a particular course of conduct would not be sufficient to waive the privilege unless, possibly, the contents of the legal advice (and not merely the fact of the advice) are specifically put in issue by relying on the contents of the advice to vindicate a claimed state of mind: [Rio Tinto] at .’”
- His Honour considered further authority relied upon by both counsel, but ultimately adhered to the proposition in paragraph  of his reasons.
- To similar effect is the analysis of Burns J, with whom McMurdo P and Philippides JA agreed, in The Queensland Local Government Superannuation Board v Allen  QCA 325, where his Honour held (footnotes omitted):
 In the application of the above principles to a given case, the court must analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of privilege in the relevant communication. Because the result of any such analysis will turn on the particular context and circumstances of the case at hand, other cases in which implied waiver has been considered provide only limited assistance. Nonetheless, some broad themes have emerged from the case law in relation to particular kinds of conduct. One of those themes concerns what is sometimes referred to as “issue waiver”, that is to say, conduct in connection with the prosecution or defence of a litigated claim by reason whereof an otherwise privileged communication is put in issue. That may be because the privilege holder has advanced a claim, mounted a defence or in some other way placed reliance on the privileged communication to advance its interests in the litigation.
 In cases of this kind, it has been held that where “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”, the privilege in the communication will be waived. It has also been held that it “is not apparently open to another party to litigation to force waiver of a party’s legal professional privilege by making assertions about, or seeking to put in issue, that party’s state of mind”. Indeed, that is just another way of saying that implied waiver can only come about through the acts or omissions of the privilege holder, and not the party seeking to destroy the privilege. Waiver cannot be contrived by such a party, whether by the contents of that party’s pleading or otherwise. Lastly, it has been held that the question is not whether the privilege holder has put their state of mind in issue in the proceeding but whether the contents of an otherwise privileged communication have either directly or indirectly been put in issue by the privilege holder. That may occur where a party pleads reliance on the contents of legal advice to justify a claimed state of mind but it will not occur where the party is merely joining issue with an allegation made by the opposing party that he, she or it possessed a particular state of mind. The “mere fact that a party pleads a cause of action that includes their state of mind as a material fact, or otherwise puts their state of mind in issue in the proceedings, does not necessarily give rise to an implied waiver in respect of legal advice that may have been received by the party, even if that legal advice may be relevant to the party’s state of mind”. In the end, the question is whether, as part of the privilege holder’s case, an assertion has been made that lays open the privileged communication to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege. As Hodgson JA held in Council of the New South Wales Bar Association v Archer:
“It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. 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.”
- The difficulty confronting the defendants is that there is nothing in the reply which directly or indirectly puts the contents of any privileged communication in issue, nor any assertion or allegation by Ms Lu which necessarily exposes the privileged communication to scrutiny. A fortiori where the allegation relied upon by the defendants is one which is a response by Ms Lu to an allegation of a state of mind by the defendants, and further, where that state of mind is only circumstantially relevant to the issue of reliance and causation which arises on the pleadings.
- In my view, this is a case where the defendants have established that legal advice on cooling off periods might be relevant to the state of mind in issue, but no more than that. As is demonstrated by the underlined statements in the above cases, that is insufficient to amount to waiver of privilege by Ms Lu. I would add that particular care must be exercised when considering whether an implied waiver arises where the holder of the privilege is responding to an allegation by the other party in a pleading. The potential for the other party to contrive a waiver of privilege by tactical pleading arises in such a situation.
- Ms Nicholas referred to Steven Issa v Michael Issa & Anastazija Balaz  NSWSC 1387 and to two cases referred to therein: Paragon Finance Plc. (Formerly National Homeloans Corporation Plc.) v Freshfields (a firm)  1 WLR 1183 and Lillicrap v Nalder & Son (A Firm)  WLR 94. I do not consider that any of these cases leads to a different outcome on this application. It is sufficient to explain only briefly why.
- First, although some of the cases analysed in Sanrus and Allen were cited in these cases, there was no detailed analysis of those cases in Issa. Rather, the analysis in Issa focused on the two English authorities to which Ms Nicholas referred.
- Second, while the Court concluded in Issa that implied waiver had occurred, that finding was made in circumstances where the Court found that the holder of the privilege directly put the content of any privileged communication in issue by positively pleading, as effective plaintiff, that the defendant solicitors did not provide her with an opportunity to obtain legal advice about two deeds from identified solicitors who had previously acted for her in relation to the proceedings the subject of the deeds.
- Third, the result of the two English cases is generally consistent with the analysis in Sanrus and Allen. In Lillicrap, the Court prevented a plaintiff suing its solicitors from relying on previous advice given by those solicitors to the plaintiff in analogous circumstances. This case is explicable by reference to the approach where a plaintiff sues its own solicitors and seeks then to raise privilege against them. In Paragon, on the other hand, the privileged material sought related to advice from solicitors other than the defendant solicitor, and the claim for waiver was rejected. (Frankly, from the summary of the facts in Paragon set out in Issa, it is difficult to see how the claim for waiver could have succeeded.)
- I order that the Notice be set aside. I will hear the parties as to costs, bearing in mind the default position, under r 247(3), is that each party bears its own costs.
 Notice of Non-Party Disclosure filed 23 August 2021 at pp. 2-3.
 This point is at least impliedly made by paragraph 22 of the defence, though the proposition could be more clearly articulated in the pleading.
 Outline of Submissions on Behalf of the First and Second Defendants at paragraph 32.
- Published Case Name:
Lu v Fenson Legal Pty Ltd & Anor
- Shortened Case Name:
Lu v Fenson Legal Pty Ltd
 QDC 253
Porter QC DCJ
15 Oct 2021