Adelaide Steamship Co Ltd & Anor v Janis Hunars Spalvins & Ors [1998] FCA 144 (2 March 1998)

Last Updated: 4 March 1998

FEDERAL COURT OF AUSTRALIA

EVIDENCE - client legal privilege - waiver - subpoena for production of documents - whether common law principles apply - relevance of the Evidence Act 1995 (Cth) to ancillary processes - adaptation of common law to take account of statute.

Evidence Act 1995 (Cth) ss 118, 119, 122, 126

Federal Court Rules O15 r15, O33 r 11

CASES

Abigroup Ltd v Akins (Bainton J, Supreme Court of New South Wales, 2 October 1997, unreported) Not Foll

Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd [1996] HCA 15; 70 ALJR 603 Refd

Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475 Dist

B T Australasia Pty Ltd v State of New South Wales (1996) 140 ALR 268 Cons

Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 Appl

British-American Tobacco Co Ltd v Philip Morris Ltd (1996) 36 IPR 36 Cons

Director of Public Prosecutions v Kane, (Hunt CJ (CL), Supreme Court of New South Wales, 10 September 1997, unreported) Foll

Esso Australia Resources Ltd v Commissioner of Taxation (Foster J, 21 November 1997, unreported) Not Foll

Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83 Dist

Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 Dist

KC v Shiley Incorporated, (Tamberlin J, 11 July 1997, unreported) Cons

Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 Refd

Newcastle Wallsend Coal Co Pty Ltd v Court of Coal Mines Regulations,(New South Wales Court of Appeal, 12 September 1997, unreported) Cons

R v Swaffield, (High Court, per Toohey, Gaudron and Gummow JJ, 20 January 1998, unreported) Appl

Re Z (1996) 20 Fam LR 651 Not Foll

Relationships Australia v Pasternak (1996) 20 Fam LR 604 Cons

Rhone-Poulenc Rorer Inc v The Home Indemnity Company [1994] USCA3 1060; 32 F 3d 851 (3rd Cir. 1994) Refd

Sparnon v Apand Pty Ltd (1996) 68 FCR 322 Cons

Telstra Corporation v Australis Media Holdings [No 1] (1997) 41 NSWLR 277 Foll

Telstra Corporation v Australis Media Holdings & Ors [No 2] (1997) 41 NSWLR 346 Foll

Towney v Minister for Land and Water Conservation for New South Wales (1997) 147 ALR 402 Foll

Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 132 ALR 645 Cons

WSGAL Pty Ltd v Trade Practices Commission [1992] FCA 510; (1992) 111 ALR 126 Appl

The Adelaide Steamship Co Limited and Australian Securities Commission v Janis Gunars Spalvins, Michael James Kent, Neil Leslie Branford, Kenneth William Russell, Michael Stevenson Gregg, Deloitte Haskings & Sells and Deloitte Ross Tohmatsu

SG 65 of 1997

Olney, Kiefel and Finn JJ

Brisbane (Heard in Adelaide)

2 March 1998

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 65 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL Court OF AUSTRALIA

BETWEEN:	the ADELAIDE STEAMSHIP CO LIMITED AND AUSTRALIAN SECURITIES COMMISSION Appellants
AND:	JANIS GUNARS SPALVINS first Respondent
AND:	michael james kent second respondent
AND:	neil leslie BRANFORD third respondent
AND:	kenneth william russell fourth respondent
AND:	MICHAEL STEVENSON GREGg FIFTH RESPONDENT
AND:	Deloitte haskins & sELLS SIXTH RESPONDENT
AND:	DELoitte ross tohmatsu SEVENTH RESPONDENT
JUDGE(S):	OLNEY, KIEFEL and finn JJ
DATE OF ORDER:	2 march 1998
WHERE MADE:	brisbane

THE COURT ORDERS that:

1. Leave to appeal be granted.

2. The appeal be allowed in part.

3. The orders of 1 August 1997 be set aside.

4. The Australian Securities Commission produce to the Court within 14 days any document containing the advices given by Mr Whitington QC to the Commisison in about August/September 1996 as to the course to be taken in pleadings, such disclosure to be limited to that topic.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 65 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL Court OF AUSTRALIA

BETWEEN:	the ADELAIDE STEAMSHIP CO LIMITED AND AUSTRALIAN SECURITIES COMMISSION Appellants
AND:	JANIS GUNARS SPALVINS first Respondent
AND:	michael james kent second respondent
AND:	neil leslie BRAnFORD third respondent
AND:	kenneth william russell fourth respondent
AND:	MICHAEL STEVENSON GREGG FIFTH RESPONDENT
AND:	DELOITTE HASKINS & SELLS SIXTH RESPONDENT
AND:	DELOITTE ROSS TOHMATSU SEVENTH RESPONDENT
JUDGE(S):	OLNEY, KIEFEL and finn JJ
DATE:	2 march 1998
PLACE:	brisbane (heard in adelaide)

REASONS FOR JUDGMENT

THE COURT:

In ancillary proceedings concerning subpoenas issued by the respondents for production of documents by the Australian Securities Commission ("the ASC"), his Honour the primary Judge determined that the legal professional privilege of the ASC in certain advices or communications had been waived and that documents ought to be produced. The issue of the subpoenas followed an application made by the ASC to amend the statement of claim and allegations by the respondents as to the timing of that decision. The references to the advices said to constitute waiver, at least by implication, were made by ASC officers in affidavits in which they explained how the question of the proposed amendment had come about.

The central issue on this appeal is whether questions relating to loss of legal professional privilege ought to be determined by applying principles derived from the common law as it has developed to date, or from provisions of the Evidence Act 1995 (Cth) ("the Act").

The provisions of Part 3.10 Division 1 ("client legal privilege") of the Act are concerned with proceedings where evidence is adduced and are not expressed to apply to ancillary processes such as discovery or the inspection of subpoenaed documents. Difficulties may arise in practice because the Act approaches the question of the privilege, and its loss, in significantly different ways from the common law. For example the common law might require documents to be produced in an ancillary process because privilege did not attach to them, notwithstanding that they could not later be tendered in evidence because of the different scope the Act gives to client legal privilege: see Esso Australia Resources Ltd v Commissioner of Taxation (Foster J, 21 November 1997, unreported). Similarly, a document may be able to be adduced in a proceeding because it has lost privilege for the Act's purposes yet it may not be required to be produced in an ancillary process because it remains privileged at common law: see Abigroup Ltd v Akins (Bainton J, Supreme Court of New South Wales, 2 October 1997, unreported). The responses to those inconsistencies in approach have however diverged, and three quite distinct positions have been taken. The first has been to apply the principles of the Act "derivatively" to ancillary processes, modifying the common law so as to accord with the Act: see Telstra Corporation v Australis Media Holdings [No 1] (1997) 41 NSWLR 277; Towney v Minister for Land and Water Conservation for New South Wales (1997) 147 ALR 402; KC v Shiley Incorporated, (Tamberlin J, 11 July, 1997 unreported); Director of Public Prosecutions v Kane, (Hunt CJ (CL), Supreme Court of New South Wales, 10 September 1997, unreported) and see also Newcastle Wallsend Coal Co Pty Ltd v Court of Coal Mines Regulations,(New South Wales Court of Appeal, 12 September 1997, unreported).

The second, while not purporting to modify the common law as such, accepts that it is appropriate to have regard to the principles of the Act when exercising relevant discretions under rules of court regulating ancillary processes, for example O 15 r 15 of the Federal Court Rules: see Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 132 ALR 645; B T Australasia Pty Ltd v State of New South Wales (1996) 140 ALR 268; Sparnon v Apand Pty Ltd (1996) 68 FCR 322; Relationships Australia v Pasternak (1996) 20 Fam LR 604 (and see also British-American Tobacco Co Ltd v Philip Morris Ltd (1996) 36 IPR 36 at 44).

The third position taken is to hold that as the Act does not apply to ancillary processes, the common law to that extent is preserved unmodified and is to be applied: Abigroup Ltd v Akins, above; Esso Australia Resources Ltd v Commissioner of Taxation, above (and see also Re Z (1996) 20 Fam LR 651).

In this appeal it is necessary to determine which, if any, of the above positions ought to be adopted.

Background - The Proceedings

The application and statement of claim were filed in April 1994 by the ASC in the applicant company's name ("Adsteam"). The focus of the statement of claim, as amended in September 1994, was dividends declared and paid by the company for the 1990 year and totalling $228M. The essential allegation, as recorded by the primary Judge, was that there had been an overstatement of profit in the company's accounts and that its investments in four subsidiary companies had not been accurately recorded. As a result dividends had not been paid out of profits. The respondents denied that this had been the case or that they knew or ought to have known of this state of affairs. In the alternative they raised, by way of defence, their belief as to the value of the net assets of the subsidiary companies, and that it exceeded the value of Adsteam's investment as disclosed in its accounts (which we understand to be what is referred to in the material as the "other value" argument) and that repayment had been possible.

The matter was listed for hearing in April 1995, but that trial date was lost when the auditors of the company sought judicial review of the decision of the ASC to commence the proceedings. That litigation concluded in December 1996. Shortly prior to its conclusion officers of the ASC commenced preparing the amendments proposed to the statement of claim with which the Court is presently concerned. By those amendments the ASC sought to raise a case that the respondents knew or ought to have known that the "real value" of the company (the "valuation" issue) was such that there were not sufficient profits to sustain the interim and final dividends for the year in question (his Honour's summary). His Honour observed that this issue might extend to the value of not only Adsteam itself but perhaps the whole of the Adsteam group.

In affidavits later filed by officers of the ASC it was explained that Counsel's advice had been obtained in connexion with the preparation of the original statement of claim and that, at that time, there was no intention to plead a case which had regard to the overall value of the assets of the group. The possibility that the respondents might raise some question relating to the value of the company's investments was however appreciated at a fairly early stage, particularly since examinations had taken place. The view taken by the ASC was that this would not provide a ground of defence but that if such an issue were raised, it would be dealt with by way of reply along with its responses to other issues. The issue relating to the valuation of the whole of the Adsteam group of companies was the subject of a report by an accountant, Mr Lonergan. He had undertaken a valuation in May 1991, which was provided to the directors. Following his examination by the ASC in March 1994, he prepared another report. This, together with the transcript of his examination which concluded in February 1996, was made available to the respondents in March 1996. The ASC then decided to plead matters relating to the value of the group as a ground for relief, rather than by way of reply. This followed a conference held between Senior Counsel and Mr Dugan, one of the ASC officers concerned with the litigation.

On 17 March 1997 the ASC filed a motion seeking leave to amend the statement of claim. At this point no explanation was offered as to how the issue had arisen and why it had arisen so late in the proceedings. Directions were given by the Court on 8 April 1997 requiring the ASC to file any further material upon which it intended to rely in support of its application for leave to amend and requiring the parties to file submissions. In submissions, although not in any affidavits, the respondents took issue with what they apprehended were tactics undertaken by the ASC in connexion with a late application for amendment. It is not necessary to detail these allegations here. Further affidavits were filed by the ASC officers concerned, dealing with the history of the matter and containing reference to the receipt of advice from Counsel. Subpoenas were then issued by the respondents for the production of documents, including legal advices and notes of communications, alleged to have been the subject of those references.

The References to the Privileged Material

The alleged disclosures in question on the appeal are confined to two parts of the affidavit of the ASC officer Mr Dugan filed on 18 July 1997, it being common ground that other findings made by his Honour as to waiver of privilege were made as a result of misunderstandings as to what was being pursued by the respondents. We add that although only the first, second and third respondents now maintain an interest in the appeal, we shall for convenience refer to their submissions as those of "the respondents".

The first area of disclosure concerned views which Mr Dugan said he had formed about the "other value" argument and which the respondents might raise by way of defence:

"7. In forming that opinion, I gave consideration to matters raised by the examinees in response to the assertion that there was an over statement of profit because of the failure to properly account for the Transactions. In particular, I gave consideration to a contention the general gist of which was that even if the loans and investments the subject of the Transactions did not have the value of the figures recorded in the Applicant's books and records, there was nevertheless considered to be an excess of value over the figures recorded in the Applicant's books and records in respect of assets elsewhere within the group of companies known as the Adsteam group. It was first contended that the consolidated accounts of the group reflected sufficient overall value to support the dividend. It was further contended that there was also additional value in assets held by the group which could have been revalued to further compensate for any shortfall arising from the need to write down or account for the Transactions. I refer to these contentions as the "other value" argument.

8. It was my view that the other value argument was not available or sustainable at law. On the authorities, as I understood them, it was necessary to focus on the parent company's profit. If the parent company wished to access reserves based on other value, it would be necessary for it to recognise accretions in value by way of investments in or receiveables due from its subsidiaries by making appropriate entries to its asset revaluation reserve ("ARR"). This would have required an appropriate revaluation exercise. There would then need to be a specific overt appropriation from this balance sheet item ARR then to the profit and loss account ("P&L"). My belief was that there was no relevant recognition of any incremental value in the subsidiary company ARRs, nor the parent's ARR, nor an appropriation from the parent's ARR to the P&L."

Mr Dugan was speaking of the view he formed at about the time the statement of claim was first drawn. He received advices around this time:

"9. In late August 1993, I caused briefs to be sent to counsel at the independent bar and received counsel's opinion in September 1993.

10. In September 1993, I commenced drafting the statement of claim. The drafting process continued until April 1994. I was the person charged with the primary responsibility to draft pleadings. I was assisted by Mr Bampton, who commenced employment with the ASC as a consultant on 1 November 1993, and counsel Mr Whitington. At no time during the drafting process did I have any thought or intent of pleading anything other than the Transactions. At no time did I have any intention of relying upon an overall valuation of all assets of the Applicant.

11. I anticipate that it was possible but far from certain that the other value argument as foreshadowed in the examinations may be raised as a defence. It was my opinion that that argument was not available for reasons set out in paragraph 8 above.

12. It was my view that, if respondents raised the other value argument by way of defence, it would be met by way of reply. I believed that, if the argument was raised, it could in fact be met because of the belief I held that it was not available for the reason set out in paragraph 8 above and in any event, my belief that there was in fact no such other value. My belief was based primarily on two facts; namely

(a) that in early March 1991, the directors of the Applicant caused write-downs to the group's value of in excess of $1B and further write-downs occurred later that year, and

(b) the valuation performed by Mr Lonergan on the engagement of the applicant at the request of the Applicant's financiers in 1991 of the Applicant and its subsidiaries and the wider Adsteam Group which gave a negative value to the Applicant as at 31 December 1990.

One other potential defence which I contemplated was that the respondents might seek to be excused from any liability by reason of the breaches being technical due to the alleged existence of other value. I believed that this defence would also be met by way of reply based on my belief that there was in fact no real other value.

13. I believed that the other value argument might not be raised by way of defence for the very same reasons why I considered such a defence could be met - namely the 1991 write-downs and the Lonergan valuation. I also believed that the respondents' legal advisers may arrive at the same legal conclusion - that it was not an answer in law to plead other value.

14. I formed the views set out in paragraphs 8 and 11 to 13 above following discussions with other employees of the ASC and reading advices of and conferring with external legal advisers. No one within the ASC who was involved in the matter suggested any contrary view to my opinions referred to in this paragraph and paragraphs 8 to 13 above."

The second alleged disclosure arises later in Mr Dugan's affidavit, when he offered an explanation as to how the possibility of a reply came to be converted to amendments to the statement of claim in late 1996. He said:

"27. Following the Full Court's decision on 28 August 1996, but prior to the directions hearing of 6 September 1996, I believed that in due course it was likely that our application for further particulars of the defences would be heard and would be successful and as a result that we would receive further particulars of the defences insofar as they raised or referred to other value (together with an expert's report thereon). Until that time, we could not properly plead a detailed reply on other value. However, I believed that it might be necessary to amend the current reply to plead as fully as possible on the issue in the interim.

28. Also between 28 August and 6 September 1996, I attended upon counsel, Mr Whitington QC. The purpose of the conferences was to discuss the structure and ultimately the detail of amendments to the reply contemplated by me as set out in the previous paragraph.

29. Mr Whitington QC provided me with certain recommendations on the question whether the matters I contemplated pleading in the amended reply be pleaded in the reply or in the statement of claim. This was the first time since the institution of the action that anyone discussed with me the possibility of pleading matters relating in any way to other value in the statement of claim rather than the reply, or that I gave consideration to doing so.

30. While my personal view remained that these matters be pleaded by way of reply, following receipt of Mr Whitington's advice, I discussed the question with Mr Bampton. The decision was made by Mr Bampton with my acceptance ...that the matter be pleaded in the statement of claim rather than the reply."

Mr Bampton was the other officer concerned in the litigation and who had filed an affidavit in the proceedings. On this occasion the advices in question appear to have been oral.

The Decision Appealed From

The process undertaken by his Honour was to determine questions of privilege in considering the applications to set aside the subpoenas. Order 33 rule 11 provides that where the Court requires production of documents, by subpoena or otherwise, it will not compel production except to the Court for the purpose of ruling on the objection. In the event that legal professional privilege was found to have been maintained with respect to the documents, the subpoenas could be seen to have no utility.

The approach taken by his Honour to the question of implied waiver of privilege, was that referred to by Gibbs CJ in Attorney-General (NT) v Maurice [1986] HCA 80; (1986) 161 CLR 475, 481 namely one which had regard to the "double elements" of implied intention and of fairness and consistency. The latter element was said to arise particularly where, as is here alleged, there had been partial disclosure. In that respect Gibbs CJ had observed that where a certain point of disclosure was reached, an end to the privilege may be required to prevent unfairness or the likelihood that the court and the other party would be misled if only part were revealed, but privilege with respect to the balance maintained (see also Goldberg v Ng [1995] HCA 39; (1995) 185 CLR 83). It is, in particular, this notion of fairness in procedure upon which the respondents rely.

In connexion with the reference to counsel's opinion in paragraph 9, his Honour considered that since the statement of claim, which was drafted after receipt of the opinion, contained no reference to the valuation issue, the inference to be drawn was that the opinion concerned the contents of the statement of claim and that this accorded with, or supported, Mr Dugan's views. His Honour concluded that privilege had been waived and that disclosure ought to be made of the documents listed in the subpoenas:

"3. All documents containing a statement of or references to the consideration of Mr Dugan of the matters referred to in paragraph 7 of the Dugan affidavit.

4. All documents containing a statement of or reference(s) to the view and belief of Mr Dugan deposed to in paragraph 8 of the Dugan affidavit.

5. All documents comprising:

(a) The briefs sent to counsel at the independent bar, and

(b) Counsel's opinion obtained in September 1993,

referred to in paragraph 9 of the Dugan affidavit.

...

7. All documents containing a statement of or reference(s) to the belief of Mr Dugan deposed to in paragraphs 12 and 13 of the Dugan affidavit".

His Honour the primary Judge also held that the reference in paragraph 14 of the affidavit to "advices of and conferring with external legal advisers" effected a waiver of those communications and that paragraph 8 of the schedule to the Dugan subpoenas ought be answered. It was in these terms:

"8. All documents which contain a statement of or reference(s) to:

(a) the formation of views;

(b) discussions with other employees of the ASC;

(c) advices of and notes of conferences with external legal advisers; and

(d) the opinions of persons within the ASC involved in the matter

deposed to in paragraph 14 of the Dugan affidavit."

The references in paragraphs 28 and 29 of the affidavit were regarded by his Honour as removing "the last vestiges of legal professional privilege". The references were central, in his Honour's view, to the issue concerning when the ASC was in a position to plead its valuation issue. His Honour considered that it could be seen from paragraphs 28 and 29 that the amendments to the statement of claim now sought arose as a result of conferences with counsel and upon his advice. In his Honour's view the ASC ought not to be permitted to put forward that advice as the basis for the need for leave, and at the same time refuse to disclose it. Those parts of the subpoenas which his Honour concluded ought then be answered were in these terms:

"14 All documents which contain a statement of or reference(s) to the beliefs of Paul Dugan as deposed to in paragraph 27 of the Dugan Affidavit.

15. All documents which contain a statement of or reference(s) to the content of attendances by Paul Dugan on counsel Mr Whitington QC.

16. All documents which contain a statement of or reference(s) to the recommendations of Mr Whitington QC deposed to in paragraph 29 of the Dugan Affidavit.

17. All documents containing the advice or statements of or reference(s) to the advice of Mr Whitington QC referred to in paragraph 30 of the Dugan affidavit.

18. All documents containing a statement of or reference(s) to the decision made by Mr Bampton that the matter be pleaded in the statement of claim rather than the reply referred to in paragraph 30 of the Dugan affidavit.

19. All documents which contain a statement of or reference(s) to the discussion with Mr Bampton deposed to in paragraph 30 of the Dugan Affidavit."

The Evidence Act 1995 (Cth)

As we have already observed, Part 3.10 of the Evidence Act (Cth) 1995 is concerned with privileges, in the context of the giving of evidence. Division 1 of the Part deals with "Client legal privilege". In Telstra Corporation v Australis Media Holdings & Ors [No 2] (1997) 41 NSWLR 346, 349 McLelland CJ summarised the operation of the Division in this way: sections 118-120 prohibit the adducing of evidence resulting in disclosure of certain confidential material on the ground of client legal privilege if certain conditions are fulfilled; and sections 121-126 operate to remove evidence from the prohibitions in ss 118-120 if certain further conditions are fulfilled. Section 118 provides:

"118. Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:

(a) a confidential communication made between the client and a lawyer; or

(b) a confidential communication made between 2 or more lawyers acting for the client; or

(c) the contents of a confidential document (whether delivered or not) prepared by the client or a lawyer;

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client."

Section 119 provides, in connexion with litigation, that privilege extends to confidential communications made or the contents of a confidential document prepared for the dominant purpose of the client being provided with professional legal services.

Section 122 provides for loss of client legal privilege in circumstances amounting to waiver. Subsections (1) to (4) relevantly provide:

122. (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 office under, an Australian law - to the Minister, or the Minister of 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 State or Territory, administering the law, or the part of the law, under which the body is established or the office is held."

Section 126 also provides:

"126. If, because of the application of section 121, 122, 123, 124 or 125, this Division does not prevent the adducing of evidence of a communication or the contents of a document, those sections do not prevent the adducing of evidence of another communication or document if it is reasonably necessary to enable a proper understanding of the communication or document."

Section 121 provides that nothing in the Division prevents the adducing of evidence of a communication or document that affects a right of a person.

We make the following observations, at this point, as to s 122. We have not had the benefit of submissions on the extent of operation of s 122(1), although we consider it of some relevance to the topic of "issue waiver" raised by the respondents. There seems to us no reason for construing the term "consent" in s 122(1) as referring only to express consent, even if the formula "with the express or implied consent", which appears in s 122(4), is not used. It is unnecessary for us on this appeal to comment further on the extent to which common law doctrines, such as estoppel, might operate to preclude the client or party concerned from denying that the relevant consent was given.

Secondly, subject to the particular exceptions listed, s 122(2) and (4) enquire whether there has been a knowing and voluntary, or a consensual, disclosure of the "substance of the evidence", that evidence containing the confidential communication or the contents of the confidential document of which s 118 and s 119 speak. The test is a quantitative one, which asks whether there has been sufficient disclosure to warrant loss of the privilege. If what is disclosed falls short of the test posed by the section, there is no waiver. Importantly, the subsections are not concerned with any principle of "fairness" such as that developed by the common law and by which waiver may be imputed. It should, additionally, be said of the subsections' quantitative test that its application may result in privilege being lost in respect of a discrete part or aspect of a confidential communication or confidential document where the matter disclosed only relates to, or else relates sufficiently to, that part or aspect. This appeal in fact illustrates this point.

Although it does not assume relevance in these proceedings, it is to be observed that the admission of evidence containing privileged material is not necessarily foreclosed by the terms of s 122(2). Whilst it provides that its reception is not prohibited where its requirements are met, the court has power to refuse to admit evidence on the grounds referred to in s 135.

Implied waiver at Common Law

Maurice's case and Goldberg v Ng made plain that whether fairness demands an end to the privilege and consequential disclosure will depend upon the circumstances of the case, in the context of the litigation between the parties and bearing in mind that privilege is considered a substantive doctrine of the common law. Consideration will usually then be required not only of the extent of the disclosure, but also of the use to which it has been put, especially in so far as it has affected the other party, and to the possible effect if privilege is maintained of the balance. In Maurice's case Gibbs CJ, Mason and Brennan JJ referred to the possibility of inaccurate perceptions being created by the balance of the communication remaining protected (482, 487-8). In particular as Gibbs CJ (481-2) and Dawson J (497) observed, it would be unfair to allow a party to use part of a document and claim privilege as to the remainder where it dealt with a single subject matter.

On the present appeal reference was also made to, and the respondents sought to rely upon, what was described as "issue waiver". In our view however it is no more than a particular manifestation of the principles applying either to waiver by disclosure or to implied consent to disclosure. The usual type of case said to illustrate issue waiver at common law is one in which, in order to establish a particular right, claim, or defence a party who previously has been legally advised, or has provided advice, needs to show that the advice so given did, or did not, have a particular character, for example that it was or was not negligent where the claim is for professional negligence against the adviser: see Kershaw v Whelan [1996] 1 WLR 358; that it was not based on full information or was not meaningful, in an undue influence claim: see Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 at 130-131; see also Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 and Brusewitz v Brown [1923] NZLR 1106 or that it did not address or properly address a matter which, if addressed or properly addressed, would defeat or call into question the right or claim asserted as in claims where the applicant has to demonstrate he or she acted with or without adequate knowledge of a matter: see Thomason v The Council for the Municipality of Campbelltown (1939) 39 SR (NSW) 347; Hongkong Bank of Australia Ltd v Murphy [1993] 2 VR 419; Pickering v Edmunds (1994) 63 SASR 357. In other words the cases are ones in which, in the substantive proceeding brought, the privilege holder has put in issue the very advice received. We observe in passing that it is questionable whether advice can properly be said to be in issue in a proceeding merely because it may be relevant to an issue in it: see Rhone-Poulenc Rorer Inc v The Home Indemnity Company [1994] USCA3 1060; 32 F 3d 851 (3rd Cir. 1994) at 863; save, perhaps, where the proceeding is between client and legal adviser and the advice is relevant to the adviser's defence of that proceeding: see Lillicrap v Nalder & Son [1993] 1 WLR 94.

For the most part, we would have thought that the conclusions reached in the types of case to which we have referred, could be accounted for on the basis of fairness in the sense in which that term is used in Maurice's case, at least where it could not be said that the case was in fact one of implied consensual waiver.

The Operation of the Act and the Common Law

As we have already noted, the provisions of the Act are not expressed to, and in our view do not, apply to processes that are ancillary to a proceeding in which evidence is sought to be given or determined. They were not proposed to apply to those proceedings by the Australian Law Reform Commission (`the ALRC') in its reports concerning the Act (see ss 118-126 and the reference to `adducing evidence' and Report No 38, ALRC, para 199 and cll 106-108 of the draft bill annexed to that report). Similar conclusions were drawn in Towney v Minister for Land and Water Conservation for the State of New South Wales; Telstra Corporation v Australis Media Holdings [No 1]; and Trade Practices Commission v Port Adelaide Wool Company Pty Ltd. The question whether the provisions should nevertheless be applied in substance to such processes, notwithstanding that they do not do so of their own force, is an important one. There are, as we have said, significant differences between the provisions of the Act and the principles of the common law. In the scope given to client legal privilege, s 118 adopts a "dominant purpose" test (as proposed by Barwick CJ, in dissent, in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 678) and not the common law's "sole purpose" test, for protecting communications made in documents prepared for the purpose of the lawyer giving legal advice to a client. And as we have earlier explained, s 122 contains its own test to determine when the privilege is lost, one which differs from and is inconsistent with that applied by the common law in allowing for loss by partial disclosure: see also Telstra Corporation [No 2] at 349. These are not the only differences: see for example the discussion in GR Roberts, "Client Legal Privilege", (1996) 70 Law Inst Jo 54.

The ALRC in Report No 38 apparently accepted that a consequence of its recommendations being limited in their application to the giving of evidence in the courtroom could be that situations might arise where access to documents actually could be obtained by ancillary processes, for example discovery, where those documents would be protected by client privilege in the courtroom: see para 199. It seemed not to regard such a state of affairs as "unreasonable". While some judges both of this court and of the Supreme Court of New South Wales have agreed in substance with the consequence noted by the ALRC: see Esso Australia Resources Ltd v Commissioner of Taxation; Abigroup Ltd v Akins; others have refused to countenance it: see Towney v Minister for Land and Water Conservation for the State of New South Wales; Trade Practices Commission v Port Adelaide Wool Company Pty Ltd. Thus in the Telstra Corporation [No 1] case (279-80), McLelland CJ in Eq said:

If principles of client legal privilege...applicable to the adducing of evidence were to differ from those applicable to ancillary processes, the consequences would be anomalous, conducive to confusion and disorder in the preparations for and conduct of proceedings, and verging on the absurd. The adducing of evidence of a hearing and ancillary processes are functionally linked. Moreover, both may occur at the same time and place....If different principles of client legal privilege were applied to the operation of the production of the document on the one hand, and the adducing of evidence in the application on the other, in situations of this kind, quite impractical consequences could ensue.

As we noted at the beginning of these reasons, some judges have felt able to avoid those consequences by having regard to the principles of the Act when exercising relevant discretions under rules of court regulating ancillary processes: see Trade Practices Commission v Port Adelaide Wool Co Pty Ltd. The limitations of this approach have been the subject of judicial comment: see Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 at 405.

We accept, necessarily, that in ancillary processes it is the common law that determines the availability of a client legal privilege claim. In our view the issue that needs to be faced is what are the common law principles that are to be so applied. With the greatest respect to those who have expressed the contrary view (see for example Esso Australia Resources Ltd v Commissioner of Taxation) we do not consider that those well known decisions of the High Court dealing generally with the common law to which we have earlier referred conclude the matter. In those decisions the High Court considered the common law in settings unencumbered by the Act. In our view such is the significance of the Act's provisions in this that their advent has created an entirely new setting to which the common law must now adapt itself, and adapt itself in such a way as to "include [the Act] as a fundamental part of its fabric": see G Calabresi, A Common Law for the Age of Statutes, 86, Harvard UP, Cambridge, 1982; R v Swaffield, (High Court, per Toohey Gaudron and Gummow JJ, 20 January 1998, unreported); on the analogical use of statutes in developing common law principles, see "Statutory Modelling of Torts", by French J in Mullany, Torts in the Nineties and the references therein; Bennion, Statutory Interpretation, 2nd edn 369-370.

Our reasons for concluding that this adaptation is necessary are as follows. First, while it is the case today that claims to legal professional privilege are most commonly made in civil litigation in ancillary processes particularly on discovery, the privilege itself evolved as an exception to testimonial compulsion at trial and was then applied derivatively to ancillary processes as these emerged and developed: see Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 126; Telstra Corporation v Australis Media Holdings Ltd [No 1] at 279. In this sense, as McLelland CJ noted in the Telstra case, the principles applicable at the trial provide the paradigm and any change to the paradigm "should rationally be reflected in the derivatives" (279). For this reason alone we would consider it to be "undesirable to have two streams as it were, one legislative and the other judicial" (R v Swaffield, 44) capable of producing differing results depending upon the adventitious circumstance of when in the trial process the privilege claim is made.

Secondly, even if there is not uniform agreement as to the policies informing, and the purposes of, the privilege (see the discussion in the ALRC's Report No 26 paras 877-878, 881; and also McNicol, Law of Privilege, 46ff) we can see no principled reason for ascribing differing policies and purposes, and hence differing attributes, to the privilege depending upon whether or not the privilege is claimed when evidence is being adduced at trial. In the absence of such reason, the legislatively prescribed attributes of the privilege ought be reflected in those of the common law in jurisdictions where the two operate in tandem.

We acknowledge that a consequence of this view is that the "sole purpose" test of Grant v Downs ought not to be applied as part of the common law in Evidence Act jurisdictions. Given that the "dominant purpose" test is the legislatively prescribed one where evidence is to be adduced, we can see no reason for a different test in ancillary processes. We would add that the reasoning in Grant v Downs provides no justification for the maintenance of a difference in approach. Rather its premise is to the contrary.

Thirdly, impractical consequences could ensue if differing principles were to be applied by the Act and by the common law as McLelland C J in Eq indicated in the Telstra [No 1] case. This of itself provides some reason for assimilating the Act's principles into the common law.

There is one further matter we should note. The effect of our decision is that Part 3.10 Division 1 of the Act should, through the common law, be applied derivatively to ancillary proceedings. We do not need to express a concluded view on the questions (a) whether that Division in fact codifies the law on client legal privilege and (b) whether the common law in Act jurisdictions ought in consequence be regarded as limited in its content to the principles in Division 1. We need however to emphasise that, insofar as previously established principles of the common law are now inconsistent with the Act and its purposes, they are to be taken as being modified correspondingly so as to avoid such inconsistency. Disclosure waiver falls into this category. We emphasise this for this reason. Mr Bennett QC submitted that s 122 of the Act should not be seen as precluding resort in all circumstances to the common law in cases of waiver, especially in circumstances where the protection of the common law is claimed to be more extensive than that of the Act. Reliance was placed upon that presumption in statutory construction against interference with fundamental rights accepted by O'Connor J in Potter v Minahan [1908] HCA 63; (1908) 7 CLR 277 at 304 and reaffirmed by the High Court, in Coco v R [1994] HCA 15; (1994) 179 CLR 427 (and see Pearce and Geddes, Statutory Interpretation in Australia, 4th edn, paras 5.16-5.17). The cases on "issue waiver", it is said, fall outside the purview of s 122 but should nonetheless survive despite this. There are a number of answers to this.

We do not consider that guidance can properly be had from the principle of construction referred to. The Act, no less than the common law, seeks to maintain the privilege and for relatively similar public interest reasons. While the incidents and possible applications of its principles are not coextensive with those of the common law - the Act has its own considered scheme of the privilege - the fortuitous circumstance that in a particular instance the common law's principles may give a greater scope to the privilege than the Act's does not provide reason of itself for the survival of the common law's principles. Rather it merely illustrates the potential undesirability of having the two streams referred to in Swaffield's case. Further, we are not convinced that the so-called issue waiver cases amount to more than examples of disclosure waiver of the Maurice variety and, perhaps more usually, of implied consent waiver. These two manifestations of waiver have, in our view, now been displaced directly and derivatively for ancillary processes, by s 122(2) and (4) and s 122(1) of the Act. We would add that s 122 does not provide the sole basis upon which privilege may be lost. It may be the case, for example, that the principles contained in other sections of the Act, and we refer specifically to s 126 and to the difficultly worded s 121(3), may in a given instance result in the loss of privilege in circumstances where the common law would have procured a like outcome. We are of the view that the circumstances of this case raise only an issue of disclosure waiver in any event. We do not regard the legal advices to which access is sought as having relevantly been put in issue by the actual claim that has been made in the principal proceedings. They may explain the action taken by the applicants, which is to say why the pleading amendment was sought. Such, characteristically, is the case of much privileged legal advice. But their contents cannot affect the success or otherwise of the substantive claim sought to be made if the amendment is allowed. In this sense they have not been put in issue.

It follows, in our respectful view, that the test properly to be applied in this case was that posed by the Evidence Act and that unmodified common law principles should not have been applied. For completeness, however, we address the latter question at the conclusion of our reasons.

Section 122(2): Whether Disclosure

The question posed by sub-s 122(2), which needs to be addressed, is whether the substance of the evidence, namely the confidential communication or contents of a confidential document providing the legal advice, has been disclosed. In the context of the subpoenas here, the question is simply as to whether, and how much of, the legal advice contained in or noted in documents held by the ASC has been made apparent.

There was another question raised by the ASC which needs to be dealt with. It was submitted before his Honour the primary Judge, and again on this appeal, that the ASC ought not to be held to have disclosed any advice because it was, effectively, forced into a position where reference to them was obliged. His Honour rejected any notion that there was any compulsion operating and we respectfully agree. This conclusion coincidentally is the same whether one applies the principles of the common law or of the Act. The disclosure here must be taken to have been voluntary. The discussion which follows also disposes of the additional argument by the ASC that the respondents were engaged in a fishing expedition, from which we take it that the Court was asked to infer that the subpoena process was being wrongly utilised.

At the point when the allegations against the ASC officers were made by legal representatives for some of the respondents, the ASC's contention that the respondents were fishing might have had some force. An issue in respect of the future hearing of the application for leave to amend had not arguably, been properly raised. That point was however passed when the ASC filed affidavits of the officers concerned. But it cannot in our view be said that they were compelled to do so. What the allegations had pointed up was the need for the ASC to explain the delay. It was, particularly in the context of litigation such as this, an obvious matter requiring explanation, given that the court was being asked to exercise its discretion to permit late amendment. The extent to which it was gone into, and as to whether it ought to include Counsel's advice, either as part of a chronology of events or for what they said, was a matter for the ASC to determine. When the ASC filed the affidavit of Mr Dugan, questions as to Mr Dugan's plans to plead the valuation issue and as to whether he might have, or indeed did, consider doing so in the original statement of claim, were raised. How important they might really be on the application for leave, and whether the respondents would press their allegations, is not a matter of concern on this appeal. Whilst the hearing of the application to amend will be only interlocutory, it has been said that in a proper case subpoenas might issue for the purpose of adducing evidence in opposition to an interlocutory application: WSGAL Pty Ltd v Trade Practices Commission [1992] FCA 510; (1992) 111 ALR 126.

With respect to the first part of Mr Dugan's affidavit, the first respondent's submission, which the second and third respondents adopted, treated the advices referred to in paragraph 14 as the same as those in paragraph 9. The respondents' case then was that the advices read by Mr Dugan, and which assisted him in forming his view that an other value defence was not viable, were those provided in September 1993 at or shortly prior to the time when he commenced drafting the statement of claim. It is not plain to us that this is so, and it is also to be noted that paragraph 14 speaks not only of written advices, but of those given at some points in conference. His Honour, notably, did not approach these references to privileged communications in this way. His Honour considered them separately.

In paragraph 9 the substance of the opinion is not in our view disclosed. It has been said that a mere reference to legal advice will not amount to disclosure: see Kirby J in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd [1996] HCA 15; 70 ALJR 603, 607. Here it goes little further. His Honour the primary Judge reasoned that the contents of the opinion of September 1993 might be inferred from the fact that no issue relating to value had been pleaded in the statement of claim. We are unable, with respect, to agree. It is quite possible, given the timing of the advices, that the topic of what to plead and not to plead was gone into. It cannot however be said to follow from that that the opinion of September 1993 was substantially disclosed. The statement in paragraph 9 was, as his Honour the primary Judge said, "enigmatic".

The oral and written advices referred to in paragraph 14 can be seen as connected with the formation of Mr Dugan's view that an other value argument was not a strong, and therefore not a likely, defence. He does not however say what the advice was. Whilst it can be said to have had some connexion with the topic, it does not follow that the advice was concerned with the subject of Mr Dugan's opinion. It is not apparent what aspect of the topic it concerned. By way of example, there might have been advices as to aspects of the examinations and the references there to the other value issue, but it is impossible to discern from the affidavit just what was said. Even if one were to conclude that the advices concerned the subject, it could not be said that the substance of them has been made apparent.

The second aspect of Mr Dugan's affidavit however does involve disclosure of the contents, and the substance, of the advice of Mr Whitington QC. By reference to the second sentence of paragraph 29 and the first of paragraph 30 it may be seen that the advice was to the effect that matters relating to other value ought to be pleaded in the statement of claim rather than by way of reply. If a document recorded those advices it might be liable to production, subject to the framing of an order limiting the disclosure to those advices. Other advices given in conferences between 28 August and 6 September 1996 have not been the subject of disclosure and are exempt from the operation of s 122.

Additional observations: the common law applied

In this case we are able to add that we do not consider a different result would have been reached if the common law principles of fairness were to be applied. In the case of the lastmentioned disclosure, waiver would have been imputed since the advices were to be relied upon by the ASC for their timing and for what they said. The assertion by Mr Dugan that there was no prior advice to that effect would not afford the respondents an opportunity to range through the ASC's advices to check its correctness. In the case of paragraphs 9 and 14, it could not in our view be said that the advices were "deployed" by the ASC in any real sense. Mr Dugan's views were formed by reference to a number of sources and it is his view which is put forward as relevant to the ASC's case on the application to amend.

Orders

On the view we have taken of the matter it has not been necessary to deal with questions as to the width of his Honour's orders, save as is necessary to give effect to the privilege lost with respect to Counsel's advice concerning the method of pleading. In our view any such order ought to be confined to the advices disclosed and should not permit the respondents access to other advice, subject of course to any further application, in good faith, for example under s 126. We take it from the parties' advices, earlier mentioned, that there is not seen to be any need for the continuation of other orders made by his Honour. In these circumstances, appropriate orders would be to allow the appeal, set aside the orders made on 1 August 1997 and order instead that the ASC produce for the respondents' inspection, within 14 days, any document containing the advices given by Mr Whitington QC to the ASC in about August and September 1996 as to the course to be taken in pleadings, such disclosure being limited to advices on that topic.

The orders we propose in connexion with costs is that there be no order as between the ASC and the first to third respondents, but that the ASC pay the costs of the remaining respondents. We would permit the parties an opportunity to address this question and that relating to the costs below. Any such submissions in writing ought to be lodged with the Court within fourteen days.

I certify that this and the preceding twenty-one (21) pages are a true copy of the Reasons for Judgment herein of the Honourable Justices Olney, Kiefel and Finn

Associate:

Dated: 2 March 1998

Counsel for the Appellants:	Mr T Gray QC with him Mr Whitington and Mr Blue
Solicitor for the Appellants:	Australian Securities Commission
Counsel for the First Respondent:	Mr D Bennett QC and Mr White
Solicitor for the First Respondent:	Thomson Playford
Counsel for the Second and Third Respondents	Mr A Besanko QC
Solicitor for the Second and Third Respondents:	Finlaysons
Counsel for the Fourth and Fifth Respondents:	Mr J Allsop
Solicitor for the Fourth and Fifth Respondents:	Phillips Fox
Counsel for the Sixth and Seventh Respondents:	Mr D Robertson
Solicitor for the Sixth and Seventh Respondents:	Mallesons Stephen Jaques
Date of Hearing:	10 November 1997
Date of Judgment:	2 March 1998