Australian Institute of Fitness Pty Limited v Australian Institute of Fitness (Vic/Tas) Pty Limited (No 2) [2015] NSWSC 994 (24 July 2015)

Last Updated: 24 July 2015

Supreme Court New South Wales

Case Name:	Australian Institute of Fitness Pty Limited v Australian Institute of Fitness (Vic/Tas) Pty Limited (No 2)
Medium Neutral Citation:	[2015] NSWSC 994
Hearing Date(s):	16 July 2015
Date of Orders:	24 July 2015
Decision Date:	24 July 2015
Before:	Sackar J
Decision:	See [46]
Catchwords:	PRACTICE AND PROCEDURE – legal professional privilege – waiver – privileged material referred to in affidavit – whether conduct inconsistent with maintenance of privilege – whether material must be read before privilege waived
Legislation Cited:	Evidence Act 1995 (NSW)
Cases Cited:	Akins v Abigroup Ltd [1998] NSWSC 254; (1998) 43 NSWLR 539 Australian Institute of Fitness Pty Limited v Australian Institute of Fitness (Vic/Tas) Pty Limited [2015] NSWSC 635 Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 DSE (Holdings) Pty Ltd v Intertan Inc Esso Australia Resources Ltd v Commissioner of Taxation [1998] FCA 1655; (1998) 83 FCR 511 Ferella v Official Trustee in Bankruptcy [2010] FCA 766; (2010) 188 FCR 68 Giannarelli v Wraith (No 2) [1991] HCA 2; (1991) 171 CLR 592 Gillies v Downer EDI Ltd [2010] NSWSC 1323 Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3 Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 NRMA Ltd v Morgan (No 2) [1999] NSWSC 694 Waugh Asset Management v Merrill Lynch [2010] NSWSC 197 Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377
Texts Cited:	N/A
Category:	Procedural and other rulings
Parties:	2014/85141 (Licence Fee Proceedings) Australian Institute of Fitness Pty Limited - Plaintiff Australian Institute of Fitness (Vic/Tas) Pty Limited - Defendant 2014/299981 (Sage Proceedings) Australian Institute of Fitness Pty Limited – Plaintiff Sage Institute of Fitness Pty Limited – First Defendant Australian Careers Institute Pty Limited – Second Defendant Robert Hornsey – Third Defendant Vicki Tuchtan – Fourth Defendant Paul Kinghorn – Fifth Defendant 2014/300068 (Oppression Proceedings) Australian Institute of Fitness (Vic & Tas) Pty Limited – Plaintiff Australian Institute of Fitness Pty Limited) – First Defendant Australian Institute of Fitness (NSW) Pty Limited – Second Defendant Australian Institute of Fitness (WA) Pty Limited – Third Defendant Australian Institute of Fitness (QLD) Pty Limited – Fourth Defendant Australian Institute of Fitness (SA & NT) Pty Limited – Fifth Defendant
Representation:	2014/85141 Counsel: Mr D Pritchard SC – Plaintiff Mr MS Osborne QC – Defendant Solicitors: Watson Mangioni - Plaintiff B2B Law - Defendant 2014/299981 Counsel: Mr D Pritchard SC – Plaintiff Mr MS Osborne QC with Mr J Tomlinson – First to Fifth Defendants Solicitors: Watson Mangioni - Plaintiff B2B Law – First to Fifth Defendants 2014/300068 Counsel: Mr MS Osborne QC with Mr J Tomlinson – Plaintiff Mr D Pritchard SC – First Defendant Mr R Yezerski – Second to Fifth Defendant Solicitors: B2B Law – Plaintiff Watson Mangioni – First Defendant Yeldham Price O’Brien Lusk – Second to Fifth Defendants
File Number(s):	2014/851412014/2999812014/300068
Publication Restriction:	N/A

JUDGMENT

1. The background to these proceedings and the relationships between the various parties are described in my judgment in Australian Institute of Fitness Pty Limited v Australian Institute of Fitness (Vic/Tas) Pty Limited [2015] NSWSC 635 at [1]- [11]. Terms used in these reasons bear the same definitions as when used in those reasons. In brief, these proceedings concern three matters being heard together. The three matters are referred to as the “Licence Fee Proceedings”, the “Sage Proceedings” and the “Oppression Proceedings” respectively. This application concerns materials referred to in an affidavit of a Mr Kym Weir sworn on 31 March 2015, which are said to be privileged.
2. By notice of motion filed on 17 June 2015, the Victorian Parties seek access to what they allege is the legal advice disclosed and referred to in [45]-[49] of Mr Weir’s affidavit and invoices issued by Watson Mangioni (WM) referred to in [42] and [44]-[49] of Mr Weir’s affidavit, in addition to the solicitors’ files to which those invoices relate. The Victorian Parties also initially sought access to unredacted copies of other documents in the proceedings, but that application was not pressed.
3. The relevant paragraphs read as follows:

44 All of the Watson Mangioni invoices which I have approved (including the invoices referred to in the particulars to paragraph 135A of the Oppression FASOC) have related to legal expenses incurred by the Institute, for the benefit of the Institute, and I have accordingly approved their payment by the Institute.
45 As to the Watson Mangioni invoice referred to in particular (i) to paragraph 135A of the Oppression FASOC, that invoice related to advice to the Institute on its legal position as regards Hornsey’s commencement of the Sage fitness business, which ultimately led to proceedings being commenced in the Federal Court of Australia, and which now comprise the Sage Proceedings in this Court. I consider that the Sage Proceedings were properly commenced, as further explained in paragraphs 137-141 of my Affidavit sworn 10 March 2015 titled ‘Affidavit of Kym Weir (“Oppression Affidavit”)’ (my Oppression Affidavit). I consider that those legal fees were properly incurred by the Institute, for the benefit of the Institute.
46 As to the Watson Mangioni invoices referred to in particular (ii) to paragraph 135A of the Oppression FASOC, those invoices related to advice to the Institute on its legal position as regards various matters in dispute between the Institute and Hornsey and the other Victorian Parties from time to time, many of which led to the issue of default notices by the Institute to AIF Vic/Tas. Among other things, that advice included advice as regards the recovery of the varied licence fees which AIF Vic/Tas was not paying, and advice as regards the registration and threatened use by AIF Vic/Tas of its own registered training organisation (RTO) accreditation, both of which now comprise part of the Licence Fee Proceedings. I consider that the Licence Fee Proceedings were properly commenced, and that the RTO matter was properly included in the Licence Fee Proceedings, as further explained in paragraphs 5-16 and 59-73 of my Oppression Affidavit. I consider that those legal fees were properly incurred by the Institute, for the benefit of the Institute.
47 As to the Watson Mangioni invoice referred to in particular (iii) to paragraph 135A of the Oppression FASOC, that invoice related to advice to the Institute on its legal position as regards Hornsey’s workplace misbehaviour. I consider that those legal fees were properly incurred by the Institute, for the benefit of the Institute.
48 As to the Watson Mangioni invoices referred to in particular (iv) to paragraph 135A of the Oppression FASOC, those invoices related to advice to the Institute in connection with the Licence Fee Proceedings. I consider that the Licence Fee Proceedings were properly commences, as further explained in paragraphs 59-73 of my Oppression Affidavit. I consider that those legal fees were properly incurred by the Institute, for the benefit of the Institute.
49 As to the Watson Mangioni invoices referred to in particular (v) to paragraph 135A of the Oppression FASOC, those invoices relate to advice to the Institute in connection with the Sage Proceedings. I consider that the Sage Proceedings were properly commenced, as further explained in paragraphs 137-141 of my Oppression Affidavit. I consider that those legal fees were properly incurred by the Institute, for the benefit of the Institute.

Use of Mr Weir’s affidavit in the proceedings

4. One of the allegations made in the Oppression Proceedings is that the Institute is conducting the Sage Proceedings not for its own benefit, but for the benefit of the majority shareholders. It is also alleged that the subject matter of the Licence Fee Proceedings constitutes a breach of an obligation on the Institute to act with good faith and loyalty towards AIVT.
5. On the first day of the trial, reference was made by counsel for the Victorian Parties to a number of WM invoice cover pages. These cover pages disclosed that WM had been billing AIF regarding legal services concerning “member disputes”, which the Victorian Parties say is not something the Institute should be paying for, or obtaining funds from its shareholders to fund.
6. Following a dispute regarding whether these allegations were put squarely in the pleadings, a Further Amended Statement of Claim was filed. This included [135A], a paragraph which alleges that shareholder loans were raised to fund legal expenses incurred not for the benefit of the Institute but for the benefit of the majority shareholders or other persons, in relation to the dispute with Mr Hornsey.
7. No amended defence has been filed by any party.
8. On 31 March 2015 WM emailed the solicitors for the Victorian Parties and served on them the relevant affidavit of Mr Weir.
9. Mr Weir’s affidavit was [affirmed/sworn] in his role as Chairman of the Institute. He responded directly to the Amended Statement of Claim. He deposes at [41]-[49] that he received the invoices from WM, reviewed them, and authorised their payment. In [45]-[49] Mr Weir addresses each of the categories of WM invoices referred to in [135A] of the Further Amended Statement of Claim.

Contentions of the Victorian Parties

10. The Victorian Parties submit that, in addressing the invoices, Mr Weir has:
    • Disclosed the ambit or substance of the advice obtained in relation to each of the classes of invoice;
    • Disclosed what effect the work or advice had, in relation to conduct squarely in issue between the parties, namely whether or not those proceedings were “properly” issued;
    • Asserted the Institute’s corporate state of mind, as affected by the advice received, namely that he, on behalf of the Institute, “considered” the work to be “for the benefit of the Institute” and that the proceedings or dispute notices were “proper”;
    • Asserted implicitly that the Institute’s conduct was vindicated or justified by reason of the work or advice received.
11. For those reasons, the Victorian Parties submit that privilege has been waived insofar as it attached to the documents referred to in Mr Weir’ affidavit.

The submissions of the Institute

12. The Institute says that it is disingenuous to submit that there was no obligation on the Institute, express or implied, to put forward evidence in which it stated its defence to [135A] of the Further Amended Statement of Claim. As a consequence, they submit that the relevant evidence was served under compulsion of law.
13. The Institute says that the allegation in [135A] has nothing to do with anyone’s state of mind. It is, they say, an allegation that the legal expenses are not the Institute’s legal expenses and relate to particular kinds of disputes. The Institute says that the fact they resist the allegation says nothing about the substance of any privileged communication and does not put the content of any privileged communication in issue. They say the fact that the Institute received legal services about each of the issues identified in Mr Weir’s affidavit is obvious and not capable, on its own, of waiving privilege regarding communications created in the course of the provision of those legal services.
14. The Institute says that privilege is not lost by an opposing party raising an issue. For example, a party claiming costs who seeks taxation of them does not thereby waive privilege in respect of the source documents, although maintenance of that privilege might limit the evidence available to a taxing officer in the event of a dispute (see Giannarelli v Wraith (No 2) [1991] HCA 2; (1991) 171 CLR 592 at 602-5 per McHugh J). In this case, the Institute says it is in an even stronger position because it simply denies an assertion by the Victorian Parties that the costs were improperly incurred.
15. The Institute says Mr Weir’s affidavit explains the subject matter of the legal services. It says that if there is a dispute about whether those matters are properly matters in relation to which the Institute should be incurring legal expenses, then the parties can have that dispute. This, it says, is perfectly consistent with maintaining privilege in the relevant communications. Similarly, the Institute says there would be no waiver if the Institute made submissions about what should properly be inferred from non-privileged material about the propriety of legal services.
16. The Institute submits that the position is not changed by the fact Mr Weir gives evidence about his state of mind by saying he considered the invoices were properly incurred for the benefit of the Institute. The Institute says this evidence merely makes explicit a belief implicit in Mr Weir’s conduct in approving the expenses. The Institute says that the material in Mr Weir’s affidavit is purely defensive and does not maintain a positive case inconsistent with the maintenance of privilege.
17. The Institute accepts that the position may be different in circumstances where a party mounts a positive case on the basis of legal advice, because that will involve an express or implied assertion about the content of the legal advice. However, the Institute observes that the content of the advice must be put in issue. In this case, the Institute says it has not gone so far as to say that particular advice, or any particular privileged communication, affected his state of mind.
18. The Institute also says that if the position of the Victorian Parties is correct, a mere assertion that legal fees had been properly incurred in response to an allegation of impropriety would be enough to lose the benefit of privilege in respect of the provision of legal services to defend that very claim.
19. Furthermore, the Institute submits that there can be no waiver before the relevant parts of Mr Weir’s affidavit are read. First, the Institute submits that it is only when Mr Weir’ evidence is deployed in the proceedings that any relevant inconsistency could arise. Before that time, the Institute says, it has not sought to gain any forensic advantage.
20. Second, the Institute says that the affidavit was served under legal compulsion and thus there can be no waiver. In that regard, the Institute says that even if Mr Weir’ affidavit had gone so far as to disclose the substance of the legal advice, there would be no waiver.
21. Finally, the Institute submits that no matter what view the Court takes, the Court should refuse to order the production of the WM files. The Institute says those files are not reasonably necessary in order to understand the WM invoices. Second, the Institute says that the cost of production would be enormous.

Supplementary submissions

22. Both parties were granted leave to file brief supplementary submissions following the hearing.
23. In its supplementary submissions, the Institute drew a distinction between the present case and cases involving documents produced on discovery, and issues concerning waiver that arise in the context of discovery. The Institute accepted that once an affidavit or statement is served by one party on another, the receiving part is free to deploy the affidavit in the proceedings. The Institute argues, however, that that does not waive privilege in any other documents.
24. The Institute contends that discovery is inherently a different process to that concerned in the present case. In the case of discovery, the Institute says, there are formal mechanisms to ensure that a claim of privilege can be made. The Court rules require the parties to make an election as to whether a party will assert privilege, but do not compel the production of documents. The Institute says the same cannot be said of affidavits served pursuant to an order made by the Court.
25. The Victorian Parties say that the effect of s 122(5)(a)(iii) of the Evidence Act 1995 (NSW) is that, if the affidavit itself were privileged, there would be no loss of that privilege if it were filed and served following directions of the Court. However, in this case the Victorian Parties say there has been no disclosure of a privileged communication under compulsion of law. In the alternative, the Victorian Parties submit that there was nothing to compel the Institute to serve an affidavit that made disclosures in the terms in [45]-[49].

Legal principles

Conduct inconsistent with maintenance of the privilege

26. There is no dispute between the parties as to the relevant legal principles. It is agreed that the fundamental question is whether it is inconsistent with the maintenance of the privilege for the Institute to advance, by way of evidence, the statements in Mr Weir’s affidavit of 31 March 2015.
27. In Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [29] it was said that (footnotes omitted):

Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.

28. At [24] of DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 (Intertan), Allsop J (as his Honour then was) considered at [24] that:

24 It should be noted, by way of interpolation at this point, that legal professional privilege in Australia is not a mere matter of evidence; it is a rule of substantive law and an important, indeed fundamental, common law right or immunity: Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 77 ALJR 40 at 42-43 [9], 43 [11], 49 [44], 56 [85], 56 [86] and 65-66 [132]; [2002] HCA 49; 192 ALR 561 at 564 [9], 565 [11], 573-574 [44], 583 [85], 583-584 [86] and 596 [132] and the other High Court cases there cited. This is important to recognise in appreciating the operation of inconsistency, as opposed to some more broad ranging notion of fairness informed, perhaps, by the balancing of competing interests in the administration of justice. The confidentiality is in the nature of an entitlement or a right to keep the communications immune from disclosure; it is acting inconsistently with it that destroys that fundamental entitlement: Mann v Carnell at 13 [29] and Daniels.

29. His Honour went on to say:

95 The enunciation of principle by the Full Court of this Court in Esso and by the Full Court in Telstra, might be seen, at the very least, as having been overtaken by Mann v Carnell. It is the inconsistency between the act by the holder of the privilege and the confidentiality of the communication which destroys the privilege. I would have thought that it is too broad a statement to say that a pleading of a state of mind to which legal advice is or might be materially relevant is an adequate surrogate for the expression of principle in Mann v Carnell. That inconsistency will arise in the kind of circumstances thrown up in Thomason, Barilla, and Benecke, in the undue influence cases, and as dealt with by McLelland J in United States Surgical, Hodgson J in Standard Chartered, the Full Court in Adsteam at [72] above, the Court of Appeal in Bayliss v Cassidy (No 2) and Beaumont J in Telstra.
96 Conformably with the necessary existence of inconsistency from Mann v Carnell, and with the overwhelming requirement for an act on behalf of the holder of the privilege in the manner already alluded to, the expressions of views by Heerey J and Derrington J in Data Access Corporation v Powerflex Services Pty Ltd at 38,745 and Wardrope v Dunne at 226, respectively, that the privilege may be lost by the raising of an issue by the other party to the case is not correct, in my respectful view.

30. It is clear that privilege is not lost simply because a party raises an issue: Intertan at [96]. Similarly, a party cannot be forced to waive privilege on account of the opposing party making assertions about or seeking to put in issue the opposing party’s state of mind. In Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 at [10], Wheeler J observed:

10 It is not unusual for a person, in giving evidence about a series of events, to include information about the person's state of mind at a relevant time as part of the narrative leading up to the relevant events. Often, the state of mind is strictly irrelevant to any question in the proceedings, but no objection is taken to it since it is merely part of the background and causes no prejudice to any party. An assertion of that kind would not, in my view, suffice to put the party's state of mind truly "in issue" in the proceedings so as to make it necessary to consider what legal advice may have contributed to the state of mind. On the other hand, a party may necessarily put its state of mind in issue in the proceedings by, for example, pleading reliance upon some representation or other or by seeking rectification of the contract for mistake; or a state of mind may be put in issue by some evidentiary assertion which is clearly relevant to the issues between the parties. In these latter types of case, fairness clearly requires the waiver of the privilege in relation to legal advice which may have contributed to that state of mind. It is to be noted, however, that it is the conduct of the party who possesses the privilege which is capable of waiving it. 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.

31. See also Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377 at [67].
32. The parties accept the position will be different where a positive case is mounted on the basis of legal advice. In Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 at [52]- [53] the Full Court of the Federal Court considered that:

53 In recent years, Full Courts of this Court have twice given detailed consideration to the application of implied (or issue) waiver. Amongst the matters considered by the Court in Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; (1998) 81 FCR 360 (“Spalvins”) was whether the primary judge had correctly held that the Australian Securities Commission (“ASC”) had waived privilege in relation to communications referred to in certain affidavits relied on by the ASC to justify a pleadings amendment. (To the extent that Spalvins is contradicted by Esso regarding the application of the Evidence Act 1995 (Cth), Spalvins does not of course state the law (see [43] above).) Referring to two decisions of the High Court preceding Mann (namely, Maurice and Goldberg), the Court (Olney, Kiefel and Finn JJ) postulated, at 371, that issue waiver was “no more than a particular manifestation of the principles applying either to waiver by disclosure or to implied consent to disclosure”. The Court continued, also at 371:

“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 NSWLR 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 the matter: see Thomason v Campbelltown Municipal Council [1939] NSWStRp 10; (1939) 39 SR (NSW) 347; Hongkong Bank of Australia Ltd v Murphy [1993] VicRp 83; [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 (3rd Cir [1994] USCA3 1060; 1994) 32 F (3d) 851 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; 1 All ER 724.”

As we have seen, this correctly summarises the effect of previous authorities, such as Thomason, United States Surgical and Benecke. Referring to the observation of Kirby J in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 70 ALJR 603 at 607 that a mere reference to legal advice will not amount to disclosure, the Spalvins Court found that, for the most part, the ASC had done no more than this and had not, therefore, waived privilege.

33. In Ferella v Official Trustee in Bankruptcy [2010] FCA 766; (2010) 188 FCR 68 at [65]- [66], Yates J considered that:

In Federal Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 a Full Court of this Court held (at [45]) that where implied waiver is alleged, a court is bound to analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of the privilege. The Full Court later observed (at [52]) that the waiver will be established where the privilege holder 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. Thus where the contents of the otherwise privileged communication is put in issue that act will be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication. 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 communication in issue: see at [65]. 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: at [67].
Significantly, in the present case, paragraph 23 of the defence does not plead reliance by the respondent on legal advice in coming to the position that the respondent was not in a position to take the steps alleged by the applicants or that those steps would be inappropriate. Indeed, the respondent does not plead the existence of any legal advice or any awareness of such advice. In these circumstances I am unable to discern how it can be the case that the pleading of paragraph 23 of the defence makes any assertion, expressly or impliedly, about the contents of an otherwise privileged communication. The pleading of paragraph 23 of the defence does not constitute an implied waiver of the privilege that has been claimed.

34. In Esso Australia Resources Ltd v Commissioner of Taxation [1998] FCA 1655; (1998) 83 FCR 511 Finkelstein J considered the history of legal professional privilege at 557-8:

Legal professional privilege, the oldest of the privileges for confidential communications known to the common law, dates back to the sixteenth century. In its original formulation it was restricted in its operation to an exemption from testimonial compulsion. Its objective was to protect the "oath and honour" of the lawyer who was bound to keep confidential the instructions of his client: see Holdsworth, A History of English Law, vol 9, pp 201-202; Wigmore, Evidence (McNaughton Revision) (1961), par 2290; Baker v Campbell (1983) 153 CLR 52 at 126-127.
By the nineteenth century it was accepted that all communications by a client to his lawyer for the purpose of obtaining legal advice were protected from compulsory disclosure, whether by· testimony or by the production of documents, at least in the case where that advice had been sought in relation to existing or anticipated litigation.
The classic statement of the policy that lies behind the privilege is that of Lord Brougham LC in Greenough v Gaskell [1833] EngR 333; (1833) 39 ER 618 at 620-621:

"The foundation for the rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.
But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice which cannot go on, without B the aid of men skilled in jurisprudence, in the practice of the courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings. If the privilege did not exist at all, every one would be thrown upon his own legal resources. Deprived of all professional assistance, a man would not venture to consult any skilful persons or would only tell his counsel half his case."

See also Anderson v Bank of British Columbia (1876) 2 Ch D 644 at 649;
Southwark & Vauxhall Water Co v Quick (1878) 3 QBD 315; Wheeler v Le C
Marchant (1881) 17 Ch D 675 at 681-682.

35. In NRMA Ltd v Morgan (No 2) [1999] NSWSC 694 Giles J said:

[9] Mr Heydon submitted that there was disclosure of the substance of the documents in para1 because of Mr Kennedy's words, "I instructed counsel to advise on this liability", meaning the liability of Mr Heydon to AT. I do not think that is so. Mr Kennedy's words said no more than what it would have been necessary to say in order to claim client legal privilege and that cannot work a loss of the privilege. In any event, his words did no more than indicate that there existed a confidential communication between himself and counsel on the subject of advising on the liability and did not, in my opinion, disclose the substance of the communication.

Whether material must be read before privilege waived

36. The parties accepted that Akins v Abigroup Ltd [1998] NSWSC 254; (1998) 43 NSWLR 539 (Akins) (Mason P with whom Priestley JA and Rolfe A-JA agreed) supported the proposition that where disclosure of privileged documents is compelled by law, privilege will not have been waived. There was controversy between the parties as to whether, on the basis of Akins, service of an affidavit, as opposed to reading an affidavit at trial, will be sufficient to waive privilege.
37. In Gillies v Downer EDI Ltd [2010] NSWSC 1323 at [44]- [46], Garling J made the following observations concerning Akins:

44 The unredacted ATO Letter was provided to Ms Wheatley, apparently by Corrs (although it does not form part of the original list of briefing materials), and was relied upon by Ms Wheatley in preparing her expert report. That report was then served on Mr Gillies pursuant to an order of this Court.
45 It may be arguable that Ms Wheatley’s expert report is itself open to a claim by Downer for client legal privilege on the basis of s 122(5)(a)(iii), and so incapable of being the means by which Downer loses privilege over the ATO Letter. There is support for such a proposition in Akins v Abigroup Ltd [1998] NSWSC 254; (1998) 43 NSWLR 539 at 552, per Mason P; and Sevic v Roarty [1998] NSWSC 462; (1998) 44 NSWLR 287, particularly at 293 per Sheller JA.
46 That line of authority should be treated with some caution for the following reasons:

(a) It has recently been subject to criticism from the Full Court of the Federal Court of Australia in Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283 at [24]- [27] per Branson, Sundberg & Allsop JJ; and by the Court of Appeal in Dubbo City Council v Barrett [2003] NSWCA 267 at [20] per Young CJ in EQ.
(b) Sevic v Roarty applied an earlier version of s 122, the terms of which are different from the current section. The relevant sub-paragraph at that time provided:

“(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:
...
(c) under compulsion of law,
...”

(c) Section 131A, which was introduced by the Evidence Amendment Act 2007 and came into force on 1 January 2009, and thus did not exist at the time of the decisions of Akins and Sevic, effectively requires the Court to determine a pre-trial claim for privilege as though the claim was made in the course of adducing evidence at trial. It seems at least arguable that, for the purposes of determining whether privilege is lost, there should no longer be a distinction between an expert report served pursuant to case management orders prior to the commencement of a trial and the calling of witnesses, and an expert report relied upon during the trial once a witness has been called;
(d) The consequences of the decision in Sevic were most impractical from the perspective of the efficient running of the litigation, including the proper and efficient preparation for trial and the taking of evidence at the trial. Those consequences do not fit comfortably with modern case–management practices, and in particular the “... just, quick and cheap ...” principle to which litigation is subject in this Court.

38. In Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3 at [24]- [25] the Court observed that:

24 Whilst on the approach that we have taken it is unnecessary to analyse Smoothdale, Akin and Sevic in detail, it appears to us that there is a real issue as to the correctness of those decisions, at least insofar as they deal with the question of waiver at common law by service of statements (or affidavits) of witnesses in advance of the trial.
25 The difficulty with the approach in Smoothdale is highlighted by the approach of Barrett J in Austress v Marlin [2002] NSWSC 958 in which his Honour distinguished cases such as Smoothdale on the basis that they were concerned with use in one proceedings of a statement or an affidavit filed and served in another. Barrett J, on the other hand, was dealing with the question whether a party could tender, as an admission, parts of an affidavit sworn by the opposing party in the same proceeding. Barrett J said, buttressed by ample authority, that this could be done, because it was within the range of permitted use – the purpose of the proceedings. Barrett J was undoubtedly correct. Thus, it is necessary to posit a limited waiver, within a broad framework of the conduct of proceedings, which may bring about the result (as in Austress) that it is in the other side’s power to destroy the privilege entirely by putting the statement or affidavit into evidence or examining or cross examining on its contents.

39. In Waugh Asset Management v Merrill Lynch [2010] NSWSC 197 (Waugh Asset Management) McDougall J made the following remarks:

22 Mr Scotting submitted that in this case there was no relevant question of waiver (I repeat, a different point to that taken by him in his written outline), because privilege did not exist once Mr Stutchbury's statement had been served. I am prepared to accept that privilege in Mr Stutchbury's statement was lost once it was served on Waugh. But this application does not concern privilege in Mr Stutchbury's statement. It concerns privilege in documents that are said, in effect, to inform, or to be relevant to, an aspect of what Mr Stutchbury says in that statement, but which are not specifically identified or referred to in it. The issue that was raised originally seems to me to be the correct one: namely, that the question is whether the evidence that Mr Stutchbury gave (or, more accurately, if called will give) is relevantly inconsistent with (for the purposes of s 122) or constitutes a waiver of (for the purposes of the common law) privilege in those antecedent documents. It does not seem to me to be in any way relevant to a resolution of that question that the document said to effect the inconsistency, or the waiver, (at least, through its service) is not itself privileged.
23 Accordingly, in my view, the objection taken by Merrill Lynch at the preliminary level is well founded. Of course, if Mr Stutchbury's statement is given into evidence, then a different analysis would be required. It would then be necessary to go to the merits of the application and to see whether, in the light of the issues in that case and the use in a forensic sense, sought to be made of the relevant part of Mr Stutchbury's evidence, there is either inconsistency or waiver. But we are not yet at that stage, and may never get there.

Consideration

40. Putting aside for the moment the question of whether disclosure was compelled by force of law, I do not consider that Mr Weir’ affidavit puts in issue the legal advice he received. He does not mention the advice. He does not outline how he formed the view the invoices were properly incurred, nor does he mention any regard he had to or reliance he placed upon any legal advice he received. To say that such reliance is implicit in his conduct would be speculative. On the other hand, the weight of his opinion if the affidavit is read is problematic to say the least. But that is not a matter for consideration at the moment.
41. Upon reflection, I do not consider that a reasonable reading (for what it is worth) of Mr Weir’s affidavit disclosed the substance of the advice, and hence gives rise to the necessary inconsistency. Mr Weir, who is not a lawyer, expresses a view that he thought the fees were properly incurred. On that basis alone, the Victorian Parties submit that privilege has been waived. I do not agree.
42. If the affidavit is read without objection, it may be that in cross examination a question of waiver will arise. That will be judged if and when it occurs and at the time it occurs.
43. The second issue, in the light of my reasons, strictly does not need to be decided. However, I accept I am bound by Akins v Abigroup. There has been no application made for any preliminary ruling under s 192A of the Evidence Act, so on the basis of that authority the question of waiver will not arise until the affidavit is sought to be read or deployed in the proceedings. This is not a case where there is a discovered document which is said to be the source of a waiver. The argument that a waiver has arisen is mounted solely on the basis of evidence yet to be read.
44. This authority raises the question (to which there appears to be no satisfactory answer) of whether a party would have to wait until trial and the reading of the evidence before progressing an argument on the basis of waiver. If may well be that a party could seek an indication of whether or not an affidavit filed and served will be read at trial and then seek a preliminary ruling.
45. I do not find the distinction between an affidavit and a document discovered (raised in the Institute’s submissions) easy to rationalise. However, whatever concerns I might have about Akins v Abigroup are not to the point, and it would be inappropriate for me to comment further.
46. Issues like these will have to be dealt with in a practical way. Due regard must always be given to such a fundamental privilege as the one under consideration. But essential case management will sometimes require a proactive approach in ensuring fairness to both sides. Service of an affidavit does at least inform the opposing party of both the substance and form of the proposed evidence. It would be a nonsense and unthinkable for a trial, given the costs usually involved, to be unduly interrupted with the belated production of documents. If a waiver has occurred or occurs, say, during cross examination, a trial judge will have to assess the circumstances of any particular case to consider whether a special costs order may or may not be necessary in the circumstances.
47. In this case the motion should be dismissed. If necessary I will hear the parties on costs. Otherwise I would ask parties to prepare short minutes reflecting these reasons.

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