Farm assist Limited (in Liquidation) v Secretary of State for Environment Food & rural Affairs [2008] EWHC 3079 (TCC)

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
[2008] EWHC 3079 (TCC)Case No Case No: HT-07-119Venue Royal Courts of Justice, Strand. London, WC2A 2LL
Between
Farm assist Limited (in Liquidation)ClaimantSecretary of State for Environment Food & rural AffairsDefendant
Before
THE HON. MR. JUSTICE RAMSEYAndrew Spink QC, Robert-Jan Temmink and Saul Margo (instructed by Yates Barnes) forthe ClaimantJonathan Action Davis QC and Paul Gott (instructed by Nabarro LLP) for the DefendantHearing date: 20th November 2008
[1]The Hon Mr Justice Ramsey : Introduction In these proceedings FAL contends that an agreement entered into as a result of a settlement brought about by mediation should be set aside for economic duress. It was evident in the course of interlocutory and case management hearings that there were a number of issues relating to privilege which should be dealt with at this stage so that the effect of those issues on disclosure and on documentary and witness evidence could be resolved now.[2]Directions were given for a procedure to identify such issues followed by written submissions in which the parties could set out their contentions on those issues, in advance of oral submissions at the hearing.[3]Before and during the course of the hearing, the parties were able to agree the appropriate order for disclosure in relation to a number of categories of documents which had previously been in issue.[4]In particular, the parties have agreed that there should be standard disclosure of documents relating to quantity surveying and accountancy documentation to include, on the part of FAL, insolvency documentation, as follows:(1) the quantity surveying and accountancy documentation and advice over which privilege is expressly claimed in the Amended Defence and Counterclaim upon which DEFRA aver the offer of £575,000 and the deductions in Appendix 1 were based;(2) the quantity surveying and accountancy documentation and advice from 2001-2003 over which privilege now appears to be claimed by DEFRA in correspondence;(3) the quantity surveying, accountancy and insolvency documentation prepared for and the advice provided to FAL, its officers and/or Mr Hepworth, who was the Managing Director of FAL, from 2001-2003;(4) the quantity surveying, accountancy and insolvency documentation prepared for and the advice provided to FAL, its officers and/or Mr Hepworth immediately before and during the mediation;(5) the quantity surveying, insolvency and accountancy documentation prepared for and the advice provided to FAL, its officers and/or Mr Hepworth from 25 June 2003 until 25 February 2005; save for those documents for which legal advice privilege could be claimed. Disclosure of legal advice privilege[5]In this judgment I deal with the major remaining issue between the parties which concerns DEFRA's contention that FAL should give disclosure of the following documents referred to in paragraphs 13(4) and 13(5) of DEFRA's submissions:(1) The legal advice given to FAL, its officers and/or Mr Hepworth on the interpretation of the contract dated 13 March 2001, the merits of the claims for money, the offers to be made to DEFRA, the response to be made to DEFRA's offers and the options available to FAL from 2001 until 25 June 2003;(2) The legal and/or insolvency advice provided to FAL its officers and/or Mr Hepworth from 26 June 2003 until 29 March 2007.[6]These paragraphs raise the issue of whether FAL was obliged to disclose documentation which would otherwise be covered by legal advice privilege both before and after 25 June 2003, the date of the mediation.[7]DEFRA submits that FAL's claim to set aside the mediation settlement because of economic duress, leads to an implied waiver of any legal advice privilege because the state of mind of Mr Hepworth, acting on behalf of FAL, is put in issue. FAL submits that there is nothing in the claim for duress which gives rise to an implied waiver and that it can maintain its claim to legal advice privilege. The ingredients of economic duress[8]The ingredients of actionable duress were summarised by Dyson J in DSND Subsea v. Petroleum Geo-Services [2000] BLR 530 at 544, para 131 as follows:
"... there must be pressure, (a) whose practical effect is that there is compulsion on, or lack of practical choice for, the victim; (b) which is illegitimate; and (c) which is a significant cause inducing the claimant to enter into the contract: see Universal Tankships Inc of Monrovia v. International Transport Workers' Federation [1983] 1 AC 366 at 400B-E and Dimskal Shipping Co SA v. International Transport Workers' Federation [1992] 2 AC 152 at 165 G. In determining whether there has been illegitimate pressure, the Court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining."
[9]DEFRA relied on two aspects of those ingredients which, it submitted, required the Court to consider the state of mind of Mr Hepworth. First, DEFRA stated that there must be pressure which has the effect of compulsion on or lack of practical choice for Mr Hepworth. Secondly, DEFRA referred to the issue of whether Mr Hepworth affirmed and sought to rely on the Contract.[10]DEFRA says that it is apparent that FAL instructed solicitors from about 2001 and that they received legal advice at and before the mediation all of which contributed to Mr Hepworth's state of mind. Equally DEFRA says that the reason for the delay between 24 June 2003 and 29 March 2007 must be explained and is relevant to the issue of whether FAL affirmed and sought to rely on the contract. Implied waiver in English law[11]The possible circumstances in which there may be an implied waiver of legal privilege in proceedings can be divided into two categories. First there are cases where the nature of the proceedings themselves amount to an implied waiver. Secondly there are cases where the implied waiver derives from a particular allegation raised in the proceedings.[12]In this case, it is necessary to review the law concerning implied waiver both in relation to proceedings for economic duress and in relation to the particular allegations raised in this case. Lillicrap v Nalder[13]The question of implied waiver of privilege arose in the case of Lillicrap v. Nalder [1993] 1 WLR 94 in which a property developer sued a solicitor for negligent advice on the purchase of a property. The solicitor wished to rely on previous retainers, in which the developer had ignored advice, so as to challenge the developer's assertions that, with proper advice, the developer would not have purchased the property.[14]Dillon LJ, adopted the formulation of the scope of waiver set out by May J at first instance, as follows at 99:
"A client who sues his solicitor invites the court to adjudicate the dispute and thereby, in my judgment, waives privilege and confidence to the extent that is necessary to enable the court to do so fully and fairly in accordance with the law including the law of evidence. I suspect that at the fringes each case will depend on its own facts. Normally the waiver will extend to facts and documents material to the cause of action upon which the plaintiff sues and the defendant's proper defence to that cause of action. The bringing of a claim for negligence in relation to a particular retainer will normally be a waiver of privilege and confidence for facts and documents relating to that retainer, but not without more for those relating to other discrete retainers"
[15]Dillon LJ then added at 99:
"The waiver can only extend to matters which are relevant to an issue in the proceedings and, privilege apart, admissible in evidence. There is no waiver for a roving search into anything else in which the Solicitor or any other solicitor may have happened to have acted for the clients. But the waiver must go far enough, not merely to entitle the plaintiff to establish his cause of action, but to enable the defendant to establish a defence to the cause of action if he has one. Thus, it would extend to matters under earlier retainers, as in the hypothetical example I have given, which established that the experience of the client, was, to the knowledge of the solicitor, such that the solicitor was not in breach of duty as alleged."
[16]Russell LJ expressed the test in this way at 101: "...by bringing civil proceedings against his solicitor, a client impliedly waives privilege in respect of all matters which are relevant to the suit he pursues and, most particularly, where the disclosure of privileged matters is required to enable justice to be done. This is another way of expressing the view that May J expressed in his judgment in the passage to which Dillon LJ has referred.''''[17]Farquharson LJ said this at 102 to 103:
"For my part, I would have difficulty in holding that the defendants should, as a matter of principle, be prevented from adducing evidence which is relevant to that issue. A proper interpretation of the waiver in this case is, in my judgment, one that embraces not only the documents and advice arising from the Heligan Manor transaction, but also documents or information otherwise subject to privilege which are relevant to the issues between the parties and it would be unfair to exclude."
NRG v. Bacon & Woodrow[18]In Nederlandse Reassurantie Groep Holding NV v. Bacon & Woodrow {1995] 1 All ER 976 a Dutch corporation obtained advice from lawyers and other professionals before purchasing share capital in insurance companies. After the purchase the corporation discovered that it was exposed to large losses and began proceedings in negligence against its non-legal advisors.[19]Colman J held that such claims did not give rise to an implied waiver in relation to privileged communications between the corporation and its legal advisors. He said: "The true analysis of what the courts are doing in such cases of so-called implied waiver of privilege is, in my judgment, to prevent the unfairness which would arise if the plaintiff were entitled to exclude from the court's consideration evidence relevant to a defence by relying upon the privilege arising from the solicitor's duty of confidence. The client is thus precluded from both asserting that the solicitor has acted in breach of duty and thereby caused the client loss and, to make good that claim, opening up the confidential relationship between them and at the same time seeking to enforce against that same solicitor a duty of confidence arising from their professional relationship in circumstances where such enforcement would deprive the solicitor of the means of defending the claim. It is fundamental to this principle that the confidence which privilege would otherwise protect arises by reason of the same professional relationship between the parties to the litigation. The underlying unfairness which the principle aims to avoid arises because the claim is asserted and the professional relationship opened for investigation against the very party whose duty of confidence is the basis of the privilege. It is against the unfairness of both opening the relationship by asserting the claim and seeking to enforce the duty of confidence owed by the defendant that the principle is directed.''''[20]He referred to the decision in Hearn v. Rhay (1975) 68 FRD 574 in the United States District Court, Eastern District of Washington where Neill CJ had said this:
"All of these established exceptions to the rules of privilege have a common denominator; in each instance, the party asserting the privilege placed information protected by it in issue through some affirmative act for his own benefit, and to allow the privilege to protect against disclosure of such information would have been manifestly unfair to the opposing party. The factors common to each exception may be summarized as follows: (I) assertion of the privilege was a result of some affirmative act, such as filing suit, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defense. Thus, where these conditions exist, a court should find that the party asserting a privilege has impliedly waived it through his own affirmative conduct.'"
[21]Colman J said this:
"If the reasoning in Hearn v. Rhay was of general application it would involve a fundamental inroad into the scope of legal professional privilege. Waiver of privilege would operate if it could be established that the communications between the plaintiff and his solicitor were likely to be evidentially relevant to an issue and it would be unfair if the defendant did not have access to them in order to assist his defence. But, as I have already explained, the foundation of the waiver is not merely that the assertion of privilege leads to the inaccessibility of evidence relevant to a defence. It is the inconsistency of the plaintiff on the one hand opening the professional relationship to the inspection of the court and on the other hand seeking to enforce confidentiality so as to exclude communications to which the professional relationship between the same parties has given rise. Thus, whatever the United States courts now regard to be the scope of waiver of privilege, the reasoning in Hearn v. Rhay certainly does not represent English Law."
Hayes v. Dowding[22]In Hayes v. Dowding [1996] PNLR 578 there were disputes over the running of a private company which were compromised by the plaintiffs' solicitors. The plaintiffs sought to upset the compromise on the basis that they had been induced by a misrepresentation. The Defendants sought disclosure of privileged documents, particularly those passing between the plaintiffs and their solicitors.[23]In Hayes v. Dowding Jonathan Parker J took the view that the principles set out by Colman J in NRG v. Bacon & Woodrow based on Lillicrap v. Nalder went further than was necessary for the decision in NRG v. Bacon & Woodrow . He said at 589:
"As I read the judgment of Dillon LJ, in accepting the judge's formulation of the scope of the waiver Dillon LJ was accepting (a) that the fact which gives rise to the implication of waiver is the fact that the plaintiff has invited the court to adjudicate on the particular issue and (b) that implicit in that invitation is an acceptance on the part of the plaintiff that in making its adjudication the court must have access to all the evidential material which is required to enable it to do so fully and fairly. ... In my judgment the decision in Lillicrap v. Nalder is authority for the proposition that it is not a necessary condition of an implied waiver of privilege by a plaintiff that the documents in question should be privileged as between the plaintiff and the defendant. As I read the decision in Lillicrap v. Nalder, the principles expressed by the Court of Appeal in that case are applicable to privileged communications between a plaintiff and a third party."
[24]Jonathan Parker J. went on to consider the Australian decision in Wardrope v. Dunne [1996] 1 Qd R 224 where Derrington J had said at 226:
"The same basic principle is relevant to this issue, that is, whether the original privilege has been lost because the state of mind of Mr Johnston, which may or may not have been influenced by the privileged material, is in issue. In the resolution of that issue it is necessary to investigate all relevant matters in his mind at the time in order to determine whether he was so induced by the alleged representations at all. Cognate to this is the question whether other factors constituted the inducement. The recommendations of Mr Miller and the terms of all advice concerning the recommendations which Mr Johnson says provided the material upon which he made his decision is obviously highly relevant to the enquiry. It would be grossly unjust to the plaintiff to deny him access to it in order to investigate and test the claim. Notwithstanding the high status of professional privilege and the careful protection which the law affords it, when the contents of a privileged communication become the subject of a legitimate and reasonable issue in the litigation, then the privilege is lost"
[25]In Hayes v. Dowding Jonathan Parker J concluded at 593 to 594:
"Moreover, as I indicated earlier, Derrington J's decision and his reasoning is, in my judgment, entirely consistent with and covered by the decision of the Court of Appeal in Lillicrap v. Nalder. The same consideration applies, in my judgment, to the decision in the American case of Hearn v. Rhay considered by Colman J in NRG v. Bacon & Woodrow. It appears from the reports of those cases - although I must make it clear that in relation to Hearn v. Rhay I have only seen the report of the NRG case - that the principles of implied waiver based upon the contents of the pleadings in the action are substantially the same in each of the three jurisdictions."
Paragon Finance[26]In Paragon Finance Plc and Others v. Freshfields [1999] 1 WLR 1183 the defendants had acted for the plaintiffs in a series of transactions and in obtaining related insurance. Subsequently the insurers declined to meet claims and the plaintiffs instructed new solicitors who compromised the claims. The plaintiffs commenced proceedings against the defendants for negligence. In those proceedings the defendants sought disclosure of privileged documents between the plaintiffs and the new solicitors relating to the pursuit and settlement of claims.[27]In giving the judgment Lord Bingham of Cornhill CJ said at 1188:
"When a client sues a solicitor who has formerly acted for him, complaining that the solicitor has acted negligently, he invites the court to adjudicate on questions directly arising from the confidential relationship which formerly subsisted between them. Since court proceedings are public, the client brings that formerly confidential relationship into the public domain. He thereby waives any right to claim the protection of legal professional privilege in relation to any communication between them so far as necessary for the just determination of his claim; or, putting the same proposition in different terms, he releases the solicitor to that extent from the obligation of confidence by which he was formerly bound. This is an implication of law, the rationale of which is plain. A party cannot deliberately subject a relationship to public scrutiny and at the same time seek to preserve its confidentiality. He cannot pick and choose, disclosing such incidents of the relationship as strengthen his claim for damages and concealing from forensic scrutiny such incidents as weaken it. He cannot attack his former solicitor and deny the solicitor the use of materials relevant to his defence. But, since the implied waiver applies to communications between client and solicitor, it will cover no communication to which the solicitor was not privy and so will disclose to the solicitor nothing of which he is not already aware."
[28]Lord Bingham reviewed the authorities and said this at 1193:
"We need not linger on Hayes v. Dowding [1996] PNLR 578, a case in which the plaintiffs were held to have impliedly waived their right to legal professional privilege by bringing proceedings even though the proceedings were not against any legal adviser. In reaching that conclusion the judge relied heavily on Australian and United States authority. Neither party before us sought to contend that this case was correctly decided, and we are satisfied that it was not. The authorities on which the judge principally relied do not represent the law of this country, and the decision must be overruled."
[29]Lord Bingham then referred to a decision in X Corporation v. Y (unreported) 16 May 1997 in which he said that the judge appeared to have accepted that privilege might be taken to be waived if it would be unfair to allow a client to maintain it. He then added at 1194:
"If that is a correct reading of the judge's decision, we consider that he went too far. Fairness is an important part of the reason why a solicitor who is sued cannot be required to respect the confidentiality of his relationship with the client who is suing him; but, save as between the client and the solicitor he is suing, fairness is not the touchstone by which it is determined whether a client has or has not impliedly waived his privilege."
Commentaries[30]I was referred to commentaries on the law in Matthews & Malek on Disclosure (3rd Edition), Thanki on the Law of Privilege and Phipson on Evidence (16th Edition).[31]In Matthews & Malek at para 11-64, the authors refer to a principle that "where information which is otherwise privileged itself constitutes a material fact in the proceedings, it is not privileged from disclosure.'''' On analysis the cases establish no general principle. A pleading of slander required the names of the people present even if that list were the same as the list of witnesses which would be privileged. Letters between solicitors and a client were not privileged where the issue was one of the authority of the solicitors.[32]The authors then state:
"Where in litigation allegations are made by a party concerning his state of mind (e.g. in entering an agreement) to which legal advice contributed, that party cannot withhold the advice on grounds of privilege, but this is because of implied waiver, rather than because no privilege attached in the first place."
[33]In support of this proposition they cite at footnote 402 Wardrope v. Dunne and Ampolex Ltd v. Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405. They add " Hayes v. Dowding [1996] PNLR 578 (overruled on another point in Paragon Finance Plc v. Freshfields [ 1999] 1 WLR 1183 . CA)[34]Similarly in Thanki at para 4.64 a "material fact" exception is also referred to and at para 4.65 the author states: "There may be instances where communications appear to fall within this category, but are better analysed as instances where privilege has been impliedly waived. In particular, characterising the situation as one of implied waiver may be appropriate in cases where allegations are made by a party concerning his state of mind (for example the state of mind upon entering into an agreement).''[35]The footnote to that paragraph refers to:
" Hayes v. Downing [1996JPNLR 578 (overruled on another point in Paragon Finance plc v. Freshfields [1999] 1 WLR 1183 , CA); P Matthews & H Malek, Disclosure,(2nd edn,2001), para 9.057. See also paras 5.71-5.100 below."
At para 5.71 to 5.100 the author deals with claims against lawyers and at paragraph 5.84 he states: "The solicitor cases potentially lead to unfairness because the privileged material is needed by, but prima facie unavailable to, the party to whom privilege does not belong. In other words, the material is plainly needed by the defendant in order to resist the claim. There are other cases which do not automatically involve a waiver but in practice may require a party to whom the privilege belongs to waive privilege in order successfully to argue a point.''''[36]In Phipson there is no reference to the "material fact" exception. Rather the author treats implied waiver as applying in circumstances where a party waives privilege "by doing no more than commencing proceedings or putting matters in issue in the pleadings". At para 26-58 it is stated, summarising the position following the Court of Appeal decision in Paragon Finance , that: "The position is therefore as follows. First, implied waiver of privilege only arises in litigation between solicitor and client. The client cannot claim privilege for communications between himself and the solicitor who is being sued relevant to the issues between them in the litigation. Normally, there would be no confidence in those documents as between the solicitor and client, but that does not matter. It does not matter that the communications relate to previous retainers between client and that solicitor, but Lillicrap decides no more than this. There is no basis for any inroad into the claim for privilege beyond this.''''[37]The footnote to that paragraph refers to Paragon Finance expressly overruling Hayes v. Dowding . In addition at para 26-57 it is stated that in Paragon Finance, "The basis of the argument in favour of waiver of privilege in these circumstances rested on the particular character of professional negligence actions against lawyers". The footnote to that passage states:
"Although at the extreme end, the principle was even being applied outside cases involving lawyers: see Hayes v. Dowding [1996] P.N.L.R 578, Jonathan Parker J, overruled by the Court of Appeal in Paragon, and the unsuccessful argument in NRG v. Bacon and Woodrow [1995] 1 All ER 976, relying on the broader principles appearing from US cases Hearn v. [Rhay] [1975] 68 F.R.D 574; Conkling v. Turner [1989] 883 F2d 431. Australian authority also seems to take a different view to this jurisdiction: Wardrope v. Dunne [1996] 1 Qd R 224."
[38]Unlike the reference in Matthews & Malek and Thanki to part of Hayes v. Dowding not being overruled by Paragon Finance , the editors of Phipson evidently consider that Hayes v. Dowding was overruled in full by Paragon Finance and that Wardrope v. Dunne does not represent English law. The issue between the parties.[39]DEFRA accepts that the decision of the Court of Appeal in Paragon Finance is binding on me and that, as a result, there is no implied waiver of legal advice in these proceedings as such implied waiver only arises in proceedings between a client and legal advisor.[40]DEFRA, however, submits that there is an implied waiver when a "material fact", such as the state of mind, is put in issue in proceedings. DEFRA relies on the passages and footnotes in Matthews & Malek and Thanki as correctly setting out that such waiver is to be implied in English law because part of the decision in Hayes v. Dowding . derived from Wardrope v. Dunne and Ampolex Ltd v. Perpetual Trustee Co (Canberra) Ltd. was not overruled by the decision of the Court of Appeal in Paragon Finance .[41]On that basis, DEFRA submits that FAL, by putting in issue the plea of economic duress, is requiring the Court to consider the state of mind of Mr Hepworth, in particular, in two respects: first, in relation to whether there was pressure which had the effect of compulsion or lack of practical choice on Mr Hepworth and, secondly, in relation to the issue of whether Mr Hepworth affirmed and sought to rely on the Contract.[42]FAL submits that Paragon Finance overruled the whole of the decision in Hayes v. Dowding and that there is no implied waiver as to state of mind as contended for by DEFRA. Rather, FAL says that the commentary in Phipson correctly states English law. Analysis[43]For the reasons set out below I consider that FAL is correct and that Paragon Finance overruled the whole of the decision in Hayes v. Dowding and that the commentary in Phipson more correctly states English law.[44]First, it is not possible to divide the decision in Hayes v. Dowding into two parts. The analysis by Jonathan Parker J of the concept of waiver of privilege commenced by considering the decisions in Lillicrap v. Nalder, NRG v. Bacon & Woodrow and Kershaw v. Whelan [1996] 1 WLR 358. He came to the conclusion that in Lillicrap v. Nalder Dillon LJ was accepting that implied waiver depended on the fact that the plaintiff has invited the court to adjudicate on a particular issue and that, implicit in that invitation, was an acceptance on the part of the plaintiff that in making its adjudication the court must have access to all the evidential material which is required to enable it to do so fully and fairly. In addition, he held that those principles were not limited to documents which were privileged as between the plaintiff and the defendant but applied to privileged communications between a plaintiff and a third party: see p.589 of his judgment.[45]Having summarised those principles derived from Lillicrap v. Nalder . Jonathan Parker J then considered Wardrope v. Dunne and other Australian authorities as well as Hearn v. Rhay . In doing so, he was not seeking to set out different principles but, as can be seen from p.593 of his judgment he was seeking to see whether there were common principles in English law and in those other jurisdictions. His conclusion was that the decisions in those jurisdictions were "entirely consistent with and covered by the decision of the Court of Appeal in Lillicrap v. Nalder" and that "the principles of implied waiver based upon the contents of the pleadings in the action are substantially the same in each of the three jurisdictions. "[46]The decision in Hayes v. Dowding was therefore based on the judge's view of the principles derived from the Court of Appeal decision in Lillicrap v. Nalder which he held were consistent with the principles in other jurisdictions.[47]Secondly, the overruling of the decision in Hayes v. Dowding in Paragon Finance was an overruling of the whole decision. This follows from the fact that there was only one set of principles in the decision and not two parts: one based on Lillicrap v. Nalder and the other based on the decisions in the other jurisdictions. It is also confirmed by the approach of the Court of Appeal in Paragon Finance . In overruling the decision in Hayes v. Dowding , Lord Bingham said that the decision that the plaintiffs had impliedly waived their right to legal professional privilege by bringing proceedings even though the proceedings were not against any legal adviser, was overruled as that was based on an erroneous view of the decision in Lillicrap v. Nalder . Lord Bingham also referred to the fact that "In reaching that conclusion the judge relied heavily on Australian and United States authority" and said that "The authorities on which the judge principally relied do not represent the law of this country". This shows that the decision was overruled both to the extent that it was based on Lillicrap v. Nalder and to the extent that it was based on the decisions in Australia and the United States. The commentary in Matthews & Malek and Thanki which suggests that some part of Hayes v. Dowding based on Wardrope v. Dunne was not overruled by Paragon Finance is not, respectfully, a correct analysis of the effect of Paragon Finance on the decision in Hayes v. Dowding .[48]Thirdly, in any event, the underlying reasoning in the Australian and United States authorities referred to in Hayes v. Dowding was that of fairness. That however is not a test which is applied generally in English law when deciding whether there has been an implied waiver of privilege. Whilst there might be an implied waiver in proceedings between a client and solicitor because of unfairness that does not mean that wherever there is unfairness there will always be an implied waiver of privilege: see Paragon Finance at 1194, cited above, "fairness is not the touchstone by which it is determined whether a client has or has not impliedly waived his privilege. "[49]In English law the privilege which attaches is absolute and is not overridden as a matter of policy. It is only waived in the limited circumstances set out in Lillicrap v. Nalder and Paragon Finance . As Lord Scott of Foscote said in Three Rivers DC v. Bank of England (No 6) [2005] 1 AC 610 at 646:
"...if a communication or document qualifies for legal professional privilege, the privilege is absolute. It cannot be overridden by some supposedly greater public interest. It can be waived by the person, the client, entitled to it and it can be overridden by statute (cf R (Morgan Grenfell & Co Ltd) v. Special Comr of Income Tax [2003] 1 AC 563 ), but it is otherwise absolute. There is no balancing exercise that has to be carried out: see B v. Auckland District Law Society [2003] 2 AC 736 , 756-759, paras 46-54). The Supreme Court of Canada has held that legal professional privilege although of great importance is not absolute and can be set aside if a sufficiently compelling public interest for doing so, such as public safety, can be shown: see Jones v. Smith [1999] 1 SCR 455 . But no other common law jurisdiction has, so far as I am aware, developed the law of privilege in this way. Certainly in this country legal professional privilege, if it is attracted by a particular communication between lawyer and client or attaches be to a particular document, cannot be set aside on the ground that some other higher public interest requires that to be done."
[50]Accordingly, as confirmed by the Court of Appeal decision in Paragon Finance, the implied waiver in Lillicrap v. Nalder only arises in proceedings between a solicitor and client. The rationale for an implied waiver in proceedings between a party and its solicitor is that the party cannot, as a matter of fairness, subject the confidential relationship with its solicitor to public scrutiny and at the same time seek to preserve the confidentiality of that relationship.[51]English law does not follow the approach in the United States decision in Hearn v. Rhay and in the Australian decisions such as Wardrope v. Dunne which impose a wider implied waiver based on fairness. The approach of Neill CJ in Hearn v. Rhay was to say that there is implied waiver where it would be unfair for a party to assert privilege and put in issue information protected by privilege through some affirmative act for his own benefit.[52]In Wardrope v Dunne Derrington J said that where a state of mind, such as whether a person was induced by a misrepresentation, is in issue and that state of mind may or may not have been influenced by the privileged material, it is necessary to investigate all relevant matters in that person's mind at the time, including privileged information, in order to determine whether he was induced by the alleged representations. The reason is that it would be "grossly unjust" to deny a party access to the privileged information in order that the party might investigate and test the claim.[53]Rather, English law maintains the right of a party to maintain legal privilege. Whilst a person's state of mind and also that person's actions may well have been influenced by legal advice, there is no general implied waiver of privileged material merely because a state of mind or certain actions are in issue. This means that, in the absence of disclosure of the privileged legal advice, the other party is precluded from being able to put that legal advice to a person to show that the advice influenced the state of mind or actions of that person. In many cases it could be said that privileged legal advice might be relevant to establishing an issue and that, in this way, the privileged material could be said to be put in issue. That is not the approach taken in English law. Rather, the underlying policy considerations for creating privilege to protect communications between a client and solicitor are treated as paramount even if some potential unfairness might occur.[54]The test in English law is therefore based neither on general principles of fairness nor on relevance. Implied waiver arising from particular proceedings or pleading allegations in those proceedings is, in my judgment, limited to proceedings between solicitor and client as set out in Lillicrap v. Nalder and Paragon Finance .[55]In the present case, I do not consider that the issues raised by the pleaded claim for economic duress can be said impliedly to waive legal advice privilege. The fact that FAL obtained legal advice which contributed to Mr Hepworth's state of mind before and at the mediation and might be relevant to the delay after the mediation does not, in my judgment, form any basis for implied waiver in English law.[56]I should add that this is not a case where DEFRA rely on a particular allegation by FAL which expressly puts in issue some legal advice and so gives rise to an implied waiver. At present the only implied waiver relied on by DEFRA comes, it says from pleading economic duress and putting in issue Mr Hepworth's state of mind.[57]Of course, it is always possible that in order to establish its case FAL may decide that they will expressly waive privilege or they may do so impliedly by reason of evidence which is contained in witness statements or adduced at the hearing. I am not now concerned with that position which would have to be considered on the merits, if and when it arises. Conclusion[58]For the reasons given above, in my judgment, there has been no waiver of legal advice privilege by FAL by pleading economic duress and putting in issue the material fact of Mr Hepworth's state of mind.[59]For that reason, I find that FAL has not impliedly waived privilege in and does not have to disclose:(1) The legal advice given to FAL, its officers and/or Mr Hepworth on the interpretation of the contract dated 13 March 2001, the merits of the claims for money, the offers to be made to DEFRA, the response to be made to DEFRA's offers and the options available to FAL from 2001 until 25 June 2003;(2) The legal and/or insolvency advice provided to FAL its officers and/or Mr Hepworth from 26 June 2003 until 29 March 2007.[60]Because FAL has not impliedly waived privilege, it can maintain that privilege and I do not consider that there are any grounds for DEFRA to seek to strike out any allegations. This is not a case such as that in Buttes Oil Company v. Hammer (No 3) [1981] QB 223 at 246F where Lord Denning said that a party who pleaded reliance of a document either had to disclose the document or the allegation had to be struck out. I therefore dismiss DEFRA's alternative claim to strike out the allegations of duress.

Cited in 2 later judgments