Court decision

Professional indemnity: No waiver of privilege based on denial in pleadings

By Anna Hendry and Jacqi Marshall / 20 October 2021

A recent Queensland District Court matter, Lu v Fenson Legal Pty Ltd & Anor [2021] QDC 253, highlighted the risk of waiving legal professional privilege (LPP) via denials in pleadings.

Background

The plaintiff in the matter alleged that her former solicitors provided her with negligent advice in relation to her acquisition of an apartment in Melbourne. She alleged they failed to advise her of the cooling-off period and, had she been aware of that right, she would have terminated the contract within that period.

The defendants defended the claim on the basis that: 

  • they did advise the plaintiff of her rights in relation to the cooling-off period; and 
  • the plaintiff had experience in the purchase and sale of residential properties and was aware of cooling-off provisions.  

The plaintiff denied both of these allegations. The defendants issued notices of non-party disclosure to a number of solicitors who had previously acted for the plaintiff in property transactions, seeking documents in relation to advice previously given to the plaintiff in relation to cooling-off provisions.

The Queensland District Court matter centred on the plaintiff’s objection to the notices of non-party disclosure. The plaintiff objected on the basis that the documents requested were protected by LPP. The defendants argued that the plaintiff impliedly waived privilege over the requested documents by her denial in her reply to the defendants’ defence. Specifically, they contended that the plaintiff’s denial gave rise to an implied waiver, because her assertion that the defendants’ failure to advise her of the cooling-off period caused her loss, was inconsistent with her having received advice about cooling-off periods in the past.

Judgment

District Court Judge Porter noted that the application came down to one issue - would legal professional privilege in documents falling within the scope of the notice of non-party disclosure have been waived by the plaintiff’s reply?

Judge Porter’s findings are summarised as follows:

  1. If a waiver of LPP was to be established, it must be established from the bare denial in the reply of the allegation that the plaintiff “was aware of cooling-off provisions”. This put in issue the plaintiff’s state of mind, i.e. her knowledge of the existence of a legal right to terminate a residential property contract in a cooling-off period.
  2. There was nothing in the plaintiff’s reply which directly or indirectly put the contents of any privileged communication in issue, nor any assertion or allegation by the plaintiff which necessarily exposes privileged communications to scrutiny.
  3. The defendants had established that legal advice on cooling-off periods might be relevant to the state of mind in issue, but no more than that. This alone was insufficient to amount to a waiver of LPP by the plaintiff.

Take away points

Judge Porter commented that, “Particular care must be exercised when considering whether an implied waiver arises where the holder of the privilege is responding to an allegation by the other party in a pleading. The potential for the other party to contrive a waiver of privilege by tactical pleading arises in such a situation".

This decision serves as a reminder to parties in professional indemnity matters to be mindful of maintaining LPP when drafting pleadings. Judge Porter’s remarks highlight the potential for other parties to deliberately word pleadings in a calculated effort to draw out a waiver of LPP from another party by way of an admission or denial. Litigants should take care to avoid any pleadings which place privileged communications in issue.
 

Authors
Anna Hendry
Partner
Anna is a Partner who advises exclusively in insurance litigation, acting on behalf of major public liability insurers, workers’ compensation insurers and self-insurers, compulsory third party insurers and professional indemnity insurers.
Jacqi Marshall
Senior Associate
Jacqi is a Senior Associate in HopgoodGanim’s Insurance practice.

What’s new

Subscribe
Receive email updates of our new publications.