Supreme Court
New South Wales

Medium Neutral Citation:

Adelaide Bank Limited V John Abdelkodous & Anor [2011] NSWSC 32

Hearing dates:

Monday 7 February 2011

Decision date:

10 February 2011

Jurisdiction:

Common Law

Before:

Hoeben J

Decision:

In relation to the defendants' motion of 19 May 2009 I make the following orders:

(1) The default judgment obtained by the Adelaide Bank against the defendants on 8 September 2006 is set aside.

(2) The Adelaide Bank is prohibited from taking any further action on the writ of possession which has been issued in respect of the Casula property.

(3) The defendants have leave and are to file their Defences and any Cross-Claims within 28 days of service upon their solicitors of the plaintiff's Amended Statement of Claim.

(4) The defendants are to pay the plaintiff's costs of the motion to set aside the default judgment.

Orders in respect of the defendants' motion of 21 December 2010 are as follows:

(1) That the documents produced to the Court in these proceedings by Gregory Byles, pursuant to subpoena, except for notes of and statements prepared as a result of the conferences with Mr Abdelkodous of 3 April and 7 May 2009, not be adduced in these proceedings pursuant to ss118 and 119 of the Act.

(2) That each party pay their or its own costs of the motion.

Orders in respect of the plaintiff's motion are as follows:

(1) The plaintiff has leave to file within 14 days the Amended Statement of Claim dated 4 February 2011 and exhibited at Tab 28 of the exhibit to the affidavit of Ms Magee sworn 4 February 2011.

(2) The plaintiff has leave to join as defendants to the proceedings.

(i) Combined Home Loans Pty Limited as the third defendant.

(ii) Karl Damien as fourth defendant.

(iii) Victor Abdelkodous as fifth defendant.

(3) The costs of this motion and of the Amended Statement of Claim be costs in the cause.

(4) The principal proceedings are to come before me for directions at 9.30am on Monday, 28 March 2011.

Question of the Registrar General's costs reserved.

Catchwords:

PRACTICE AND PROCEDURE - interlocutory applications in proceedings for possession of land - application to set aside default judgment - whether satisfactory explanation for delay - whether bona fide defence available - subpoena addressed to former solicitor - confidential documents produced in answer to subpoena - no claim for legal professional privilege made at time of production - whether claim for privilege waived - application of s 122(2) Evidence Act 1995 (NSW) - legal professional privilege waived in part - application to amend statement of claim - costs.

Legislation Cited:

Evidence Act 1995 (NSW)
Real Property Act 1900

Cases Cited:

Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86; (2006) 151 FCR 341
DSE (Holdings) Pty Limited v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 at [58]
Emmanuel Paneras and Anor v Eastern Suburbs Property Development Pty Limited [2009] NSWSC 105 at [51]
Grace v Grace [2010] NSWSC 1514 (Brereton J)
Hamafam Pty Limited v Saadullah [2007] NSWSC 818 at [7]
Kang v Kwan & Ors [2001] NSWSC 698 at [29]
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1

Category:

Procedural and other rulings

Parties:

Bendigo & Adelaide Bank Limited (Plaintiff)
John Abdelkodous (First Defendant)
Nadia Abdelkodous (Second Defendant)

Representation:

Counsel:
Mr AJ McInerney (Plaintiff)
Mr R Notley (Defendants)
Mr A Rogers - Registrar General
Solicitors:
Gadens Lawyers (Plaintiff)
Bransgroves Lawyers (First and Second Defendants)
Mr K O'Keefe, Solicitor for the Registrar General (Cross Defendant)

File Number(s):

2005/268447

Judgment

1HIS HONOUR:

Nature of Proceedings

The plaintiff (Adelaide Bank) commenced proceedings by Statement of Claim on 28 November 2005 against the first defendant, Mr John Abdelkodous (Mr Abdelkodous), and the second defendant, Mrs Nadia Abdelkodous (Mrs Abdelkodous) (together referred to as "the defendants").

2The proceedings concern a loan which the Adelaide Bank says it made to the defendants in the sum of $494,000 pursuant to an agreement dated 3 March 2004 secured against the home of the defendants known as 4 Ledger Close, Casula, NSW (the Casula property) by registered mortgage AA525409J.

3The Adelaide Bank obtained default judgment for possession of the Casula property against the defendants on 8 September 2006.

4There were three applications before the Court:

(a) The defendants' application to set aside the default judgment (the defendants' notice of motion, filed 19 May 2009);

(b) The defendants' application asserting a claim for client/legal privilege in respect of the file of Byles Canceri Lawyers (the defendants' notice of motion, dated 21 December 2010);

(c) The plaintiff's application that in the event that the defendants' application to set aside the default judgment is successful, it be allowed to amend the statement of claim.

Defendants' Application to set aside default judgment

5Except where otherwise indicated, the following facts are uncontroversial.

6Pursuant to a Mortgage Origination and Management Deed dated 29 September 2001 (the origination deed), Adelaide Bank appointed Combined Home Loans Pty Limited (Combined) to originate and manage loans and mortgages on its behalf. Mr Karl Damien (Damien) was the Director of Combined.

7$331,319.69 of the initial advance of $494,000 made by the Adelaide Bank to the defendants went to Victor Abdelkodous (Victor), the son of the defendants, to enable him to purchase a property known as 1 Tathra Avenue, Prestons NSW (the Prestons property).

8The defendants and/or Victor made payments on the loan between 23 March 2004 and 5 October 2005. Following the commencement of proceedings on 28 November 2005, the defendants made further payments until December 2008. A writ of possession was issued on 29 April 2009 and a Notice to Vacate was issued on 6 May 2009. The defendants filed their application to set aside the default judgment on 30 May 2009.

9In a draft defence and affidavits of May 2009, the defendants asserted that they had signed the loan agreement and the mortgage at the request of Victor to enable Victor to purchase the Prestons property. The defendants asserted that they did so because they relied upon a representation made by Victor and Damien that the Prestons property would be transferred into their names.

10In affidavits sworn in March 2010 the defendants asserted that Mr Abdelkodous had not signed the loan agreement and mortgage in 2004 and that he had been in Egypt at the time. The defendants asserted that Mrs Abdelkodous had signed the loan agreement and mortgage and that they had made payments of interest to Adelaide Bank from October 2005.

11In affidavits of August 2010 the defendants asserted that Mr Abdelkodous had not signed the home loan and mortgage in 2004 and that he had been in Egypt at the time and that Mrs Abdelkodous had signed only one document which she thought was an application for the loan but that she had not signed the loan agreement or mortgage. The defendants asserted that the signatures purporting to be theirs on the loan agreement and mortgage must have been forged.

12In draft defences and through an affidavit of Victor of 2 December 2010 the defendants asserted that Victor had forged their signatures on the loan agreement and mortgage documents in the presence of Damien. There was evidence from the Department of Foreign Affairs and from the passport of Mr Abdelkodous that he had been in Egypt between 2 December 2003 and August 2004. There was a report from a handwriting expert to the effect that there was evidence which supported the proposition that the signature on the mortgage and loan agreement was not that of Mr Abdelkodous and that it was unlikely that the signature on those documents was that of Mrs Abdelkodous.

13Rule 36.16(2)(a) of the Uniform Civil Procedure Rules 2005 (UCPR) provides that a Court may set aside or vary a judgment or order after judgment is entered if the order or judgment is a default judgment. The principles applicable for setting aside a default judgment were stated by Hislop J in Hamafam Pty Limited v Saadullah [2007] NSWSC 818 at [7] as follows:

" 7 Factors relevant to the consideration of that issue include:

(a) whether the defendants have shown a satisfactory explanation for the delay in filing a defence or moving to set aside the judgment;

(b) whether the default judgment was obtained without notice to the defendants;

(c) whether the proposed defence is asserted bona fide;

(d) whether, if the judgment was set aside, prejudice would be occasioned to the plaintiffs;

(e) whether the proposed defence presents an arguable or triable issue;

(f) whether it would be futile to set aside the judgment."

14The defendants relied upon the following matters by way of explanation for their delay in moving to have the default judgment set aside. Mr Abdelkodous was born in 1937 and Mrs Abdelkodous in 1947. Neither of them spoke English well. In his case he can understand English if it is spoken slowly and can read English but does not write it well. In her case she has difficulty understanding English, can barely read it and cannot write it. At the time that the Statement of Claim was served the defendants did not seek legal advice and were unaware that, if they did not file a defence, default judgment could be entered against them.

15Subsequent to default judgment being entered on 8 September 2006 the defendants entered into a number of arrangements with the Adelaide Bank and made payments in relation to the loan until about December 2008. As a result of these payments the Adelaide Bank did not enforce the default judgment.

16It was only when the defendants were unable to continue making payments that in April 2009 they sought legal advice and in May of 2009 as a result of that advice, an application to set aside the default judgment was filed.

17The defendants submit that this provides an adequate explanation for the delay in seeking to set aside the default judgment in that:

(i) They did not read English well, did not immediately seek legal advice and so were unaware that default judgment could be entered against them.

(ii) Immediately after they sought legal advice an application was made to set aside the default judgment.

(iii) Between September 2006 and December 2008 they were making payments to the plaintiff in respect of the loan as a result of which the plaintiff did not seek to enforce the default judgment.

(iv) As a consequence of them making payments to the plaintiff between June 2006 and December 2008 the delay in seeking to set aside the default judgment has not prejudiced the plaintiff.

18The draft defences and cross-claim which the defendants now rely upon raise the following issues:

(i) That the defendants did not sign any loan documents and did not authorise anyone to sign such documents on their behalf.

(ii) Mr Abdelkodous was overseas at the time that the loan documents were signed.

(iii) Damien and Combined, the agent of the Adelaide Bank, knew that Mr Abdelkodous was overseas at the time that the mortgage was signed and accordingly the Adelaide Bank through its agent committed a fraud by presenting the mortgage for registration.

19The defendants rely upon their affidavits, an expert handwriting report and a translation of the passport of Mr Abdelkodous to support the contentions made in their defences and the cross-claim. In the circumstances the defendants submit that the defences are bona fide and that there are arguable or triable issues for the Court to determine.

20The Adelaide Bank does not concede the factual propositions upon which the defendants base their application to set aside the default judgment. It does, however, accept that interlocutory proceedings of this kind are not an appropriate forum for extensive factual disputes of this kind to be resolved. In that regard it is prepared to accept that there is evidence available which if accepted would explain the delay between default judgment being entered and application being made to set it aside. It does not accept that this explanation is satisfactory.

21The approach by the Adelaide Bank to the factual issues is an appropriate one. An application of this kind is not suitable for a far reaching credit examination. That is a matter best left for the trial.

22That being so, it seems to me that there is sufficient evidence to satisfactorily explain the defendants' delay in seeking to set aside the default judgment. Their knowledge of English was not good and there is no evidence that they had any expertise or knowledge of loan transactions. It is apparent that they made genuine efforts to service the loan between 2004 and December 2008. I am satisfied that they had no knowledge of their legal rights until they first consulted a solicitor in April 2009. The fact that they made an application to set aside the default judgment shortly after that initial consultation supports that conclusion. I have concluded that the defendants' explanation of the delay is a satisfactory one.

23The draft defences and affidavits now relied upon by the defendants do reveal a viable defence. The position there disclosed is that the signatures on the loan and mortgage documents were forged by Victor. Victor did so with the knowledge and connivance of Damien whose company was an agent of the Adelaide Bank. Importantly, their defences have support not only from their own affidavits and that of Victor but from the passport of Mr Abdelkodous and to some extent from the conclusions of the handwriting expert.

24If the matters raised in their defences are ultimately accepted by a court, the loan agreement would have to be set aside. If the loan agreement were set aside, the mortgage is in such a form that it would secure nothing. Consequently its registration under the Real Property Act 1900 would not assist the Adelaide Bank.

25The Adelaide Bank accepts that analysis. It submits, however, that between May 2009 and December 2010 the defendants have changed their position in two major respects which have not been adequately explained. The Adelaide Bank submits that these changes are so substantial that the Court could not be satisfied as to the bona fides of the defences now relied upon by the defendants.

26The Adelaide Bank submits that it is incredible that the defendants would admit in April 2009 that they had signed the loan agreement and mortgage but would then substantially change their position by March 2010 so that they were then asserting that Mr Abdelkodous had not signed any of those documents but that Mrs Abdelkodous had done so. The Adelaide Bank submits that this incredulity is further increased when by August 2010 the defendants were both asserting that they had not signed any of the loan documents or the mortgage.

27In circumstances where each of those inconsistent positions was supported by affidavit evidence from each of the defendants, the Adelaide Bank submits that the Court could not be satisfied that the present defences are bona fide. The Bank submits that no adequate explanation has been provided by the defendants to explain their changes in position.

28The Bank accepts that the defences now relied upon by the defendants do raise a triable issue.

29I agree that the changes in position of the defendants between May 2009 and December 2010 are surprising and disturbing, particularly because of the conflict and inconsistencies in the affidavits sworn by each of them. That having been said, there is an obvious explanation for the defendants' conduct, i.e. they were initially seeking to protect Victor. As to whether that is a true explanation and as to whether the present defences can be made out, will only be determined after the defendants, and perhaps Victor, have been tested by cross-examination.

30In that regard I am mindful of the observations of Simpson J in Emmanuel Paneras and Anor v Eastern Suburbs Property Development Pty Limited [2009] NSWSC 105 at [51]:

"51 That is subject to the qualification that, if the judge hearing the application is persuaded that the proposed defence, either by reason of the sufficiency of the advanced evidence to establish the defence, or by reason of his or her assessment of the lack of credibility of the witness or witnesses to the evidence supporting the defence, would be entitled to refuse the relief sought. The former is merely another way of examining whether the defendant is able to produce evidence of a bona fide defence on the merits. The assessment of credibility of witnesses goes further. As I hope I have made clear, it would be a rare case in which relief would be refused because a judge hearing such an application concluded that the evidence was incapable of belief. But such cases are conceivable, and, in those circumstances, refusal to exercise the discretion would be an appropriate course to take."

31I have concluded that this case is not of the kind referred to by her Honour. Despite the clear unreliability of the defendants as evidenced by their affidavits, I am not prepared on an application such as this, to conclude that their evidence, insofar as it supports their present defences, is incapable of belief. In reaching that conclusion I have had regard to the fact that their present defences depend not only upon their own assertions but obtain some support from the passport of Mr Abdelkodous and from the handwriting expert. It is also not without significance that the affidavit of Victor has exposed him to serious criminal charges.

32Accordingly, I have concluded that the defendants have raised triable issues in their present defences and that these defences are bona fide. It follows that the default judgment should be set aside and appropriate consequential orders made.

33As foreshadowed in the course of argument, the defendants should pay the costs of the Adelaide Bank in relation to the application to set aside the default judgment. Firstly, it is no fault of the Adelaide Bank that default judgment was entered in the first place and now has to be set aside. Next, in making the application the defendants are seeking an indulgence from the Court. Most importantly, however, the matter has been unduly complicated and delayed by the changes in position of the defendants and the conflicting information in their affidavits. These latter matters have justified the Bank in maintaining its opposition to having the default judgment set aside.

34During the hearing of this motion the Registrar General has been represented by counsel. The Registrar General was brought into the proceedings as a result of a cross-claim by the defendants seeking to have the registration of the mortgage set aside. The resolution of that cross-claim will depend upon the outcome of the contest between the plaintiff and the defendants. Accordingly, at this stage I reserve the question of the Registrar General's costs.

35In relation to the defendants' motion of 19 May 2009 I make the following orders:

(1) The default judgment obtained by the Adelaide Bank against the defendants on 8 September 2006 is set aside.

(2) The Adelaide Bank is prohibited from taking any further action on the writ of possession which has been issued in respect of the Casula property.

(3) The defendants have leave and are to file their Defences and any Cross-Claims within 28 days of service upon their solicitors of the plaintiff's Amended Statement of Claim.

(4) The defendants are to pay the plaintiff's costs of the motion to set aside the default judgment.

Defendants' application asserting client/legal privilege

36The order sought by the defendants in this motion are:

(1) That the documents produced to the Court in these proceedings by Gregory Byles, the former solicitor for the defendants, pursuant to subpoena, not be adduced in these proceedings pursuant to s118 of the Evidence Act 1995 (NSW).

(2) Further, in the alternative, that the documents produced to the Court in these proceedings by Gregory Byles, the former solicitor for the defendants, pursuant to subpoena, not be adduced in these proceedings pursuant to s119 of the Evidence Act 1995 (NSW).

(3) Further or in the alternative, that the documents produced to the Court in these proceedings by Gregory Byles, the former solicitor for the defendants, pursuant to subpoena, not be admitted into evidence in these proceedings pursuant to s135 of the Evidence Act 1995 (NSW).

37The plaintiff opposes those orders. It asserts that privilege has been waived in respect of confidential communications and confidential documents produced by Mr Byles and that it is entitled to adduce evidence in respect of them in the proceedings.

38Except as otherwise indicated, the factual background to the production of these documents is as follows. Mr Byles from Byles Canceri Lawyers acted on behalf of the defendants between 2 April 2009 and 5 March 2010. Thereafter Geoff Lloyd of Caldwell Martin Cox Solicitors acted on behalf of the defendants.

39On 12 October 2010 Gadens Lawyers, the solicitors for the plaintiff, served a subpoena on Mr Byles. The subpoena sought production of the following documents:

"All documents held, created or received by Mr Gregory John Byles (including your file, file reference GJB:VA:914434) during the period from 2 nd April 2009 until 5 March 2010 in respect of:

(a) Mr John Abdelkodous or

(b) Mrs Nadia Abdelkodous or

(c) Supreme Court proceedings 15472/2005."

40On 13 October 2010 Gadens sent a letter to Messrs Caldwell Martin Cox who were then acting on behalf of the defendants, enclosing a copy of the subpoena. On that same day Gadens received a letter from Messrs Byles Anjos Lawyers (Mr Byles' present firm), acknowledging receipt of the subpoena and requesting additional monies to cover the costs of complying with the subpoena.

41On 19 October 2010 Mr Byles produced documents to the Court in answer to the subpoena. The subpoena was returnable before the Court on 20 October 2010. On that day a solicitor in the employ of Gadens appeared on behalf of the plaintiff in respect of the subpoena. There was no appearance by any other party to the proceedings. The Court granted general access to the documents produced by Mr Byles. On 21 October 2010 Gadens made application to the Court to uplift the documents produced under the subpoena.

42At no time before the documents were uplifted did Gadens receive any objections with respect to the subpoena.

43On 25 October 2010 Gadens received a letter from Caldwell Martin Cox enclosing a Notice of Ceasing to Act.

44On 5 November 2010 Bransgroves Solicitors were retained by the defendants to act on their behalf in the proceedings. On that date Bransgroves received a copy of the Court book prepared by Gadens and learned that Tabs 26-60 of that book comprised documents produced to the Court by Mr Byles pursuant to the subpoena.

45On 2 December 2010 Bransgroves made inquiries of Mr Byles and of Caldwell Martin Cox as to whether any objection had been taken to production of those documents to the Court in answer to the subpoena. It is common ground that no such objection was taken by either firm of solicitors. On 3 December 2010 Bransgroves advised Gadens that it considered those documents to be confidential and that it claimed privilege in respect of them under ss118 and 119 of the Evidence Act 1995 (NSW) (the Act). This motion relates to the hearing of that issue.

46It is common ground that neither Mr Byles nor Mr Lloyd consulted the defendants in relation to whether or not they wished to claim privilege in respect of the documents produced to the Court in answer to the subpoena. It is common ground that the defendants gave no instructions to waive any rights which they had to claim privilege in respect of those documents.

47The documents produced by Mr Byles pursuant to the subpoena comprised:

(a) Chronologies with a commentary.

(b) Draft statements or affidavits of Mr Abdelkodous, Victor and Mr Byles.

(d) Correspondence between Mr Byles and Victor.

(e) Correspondence between Mr Byles and counsel for the defendants.

(f) Notes of meetings and telephone discussions with the defendants and counsel for the defendants.

48The defendants submit that ss 118 and 119 of the Act create a privilege for confidential communications made and confidential documents prepared for the dominant purpose of a lawyer providing legal advice or providing legal services relating to litigation. They submit (and this is not challenged) that the documents produced in answer to the subpoena come within those sections.

49The defendants submit that by reason of the application of ss 118 and 119 of the Act, evidence of those communications and those documents cannot be adduced in these proceedings unless the privilege has been lost pursuant to ss 121-126 of the Act. The defendants submit that this has not occurred. The privilege is that of the defendants and they neither expressly nor by implication have waived their right to that privilege.

50The defendants submit that neither Mr Byles nor Mr Lloyd had the power or the right to waive a claim for legal professional privilege on their behalf. Either or both of those solicitors should have claimed that privilege when made aware of the subpoena but they did not. In that regard, the defendants rely upon the observations of Santow J in Kang v Kwan & Ors [2001] NSWSC 698 at [29]:

"It must be remembered that the privilege is that of the client. Neither solicitor nor an intermediary (who is the agent of either the client or the solicitor) can without the client's authority either consent to the material being adduced or, again without instructions, abandon that obligation that goes with a solicitor's retainer, to maintain the privilege. The powers and duties of the solicitor and the agent are not affected by the termination of the solicitor-client relationship or the agency."

51The defendants submit that s122 of the Act does not give rise to any waiver on their part. They submit that subs 122(5) of the Act provides that a client is not taken to have acted in a manner inconsistent with the client objecting to the adducing of the evidence merely because the substance of the evidence has been disclosed under compulsion of law, i.e. pursuant to a subpoena issued by the Court.

52In summary the defendants submit that Mr Byles failed to maintain legal professional privilege over the documents, the subject of the subpoena. Mr Byles was not instructed by the defendants to waive their entitlement to claim privilege in respect of those documents. Since Mr Byles was not authorised by the defendants to abandon privilege over the documents, s122 does not apply.

53As an alternative, the defendants rely upon s135 of the Act. Section 135 relevantly provides:

"135 The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:

(a)be unfairly prejudicial to a party, or

(b)be misleading or confusing, or

(c)cause or result in undue waste of time."

54The defendants submit that the documents should never have been produced to the Court without a claim for professional privilege. The fact that they were, involved a breach of duty on the part of Mr Byles and perhaps by Mr Lloyd. In those circumstances, it would be unfairly prejudicial to the defendants to allow the plaintiff to adduce any of those documents in these proceedings.

55In response the plaintiff relies upon the line of authority set out in Grace v Grace [2010] NSWSC 1514 (Brereton J). The facts of that case were that in December of 2007, as part of the discovery process, a number of documents were made available to a plaintiff. No claim for privilege was made in respect of any of them until the issue arose in the course of cross-examination almost three years later. The question before the Court was whether in those circumstances the privilege had been lost. Brereton J determined that, absent other considerations, the documents were prima facie privileged. The fact that no claim for privilege had been made in December 2007 was attributable to some oversight. His Honour also found that there had been nothing to indicate to the plaintiff's legal advisers when the documents were produced or subsequently that there had been such an oversight and that privilege should have been claimed by the defendants in respect of the documents.

56In the circumstances of that case his Honour concluded that privilege had been waived. His Honour reached that conclusion because the documents had been produced as part of a deliberate discovery process, there had been a substantial delay in making the claim for privilege and practically speaking, it would have been very difficult if not impossible, for counsel in the course of cross-examination to expunge that information from his mind.

57The facts of that case and his Honour's analysis do not assist the plaintiff.

58In these proceedings there was not an orderly discovery process but documents were produced in answer to a subpoena. It must have been obvious when the subpoena was drafted that the documents, which were the subject of the subpoena, were potentially subject to a claim for privilege. Any doubts on that issue would have been removed when the documents were actually produced.

59Within four or five days of the documents being uplifted from the Court, Gadens received notification that Caldwell Martin Cox were no longer acting on behalf of the defendants. This of itself was indicative that perhaps full attention had not been paid by the defendants' legal advisers to the subject matter of the subpoena. In any event, the claim for privilege was made shortly thereafter when Bransgroves, the new solicitors, became aware of the subpoena.

60In those circumstances, I am of the opinion that the failure by Mr Byles and Mr Lloyd to make a claim for privilege on behalf of the defendants did not involve a waiver on the part of the defendants of their right to claim privilege in respect of those documents. This is particularly so when the defendants were not consulted concerning the subpoena and were unaware of the production of THE documents.

61This does not end the matter. As I foreshadowed in the course of submissions, I proposed to read the documents produced under subpoena together with the affidavit material relied upon by the defendants in order to determine for myself whether there had been any waiver of privilege in respect of the documents under s 122 of the Act. Having now carried out that exercise, I have concluded that there has been a waiver of privilege in respect of some of the documents.

62In the course of the proceedings Mr Byles, as solicitor for the defendants, swore an affidavit on 22 May 2009. That affidavit was read in the application to set side the default judgment. In that affidavit he made reference to conferences which he had with Mr Abdelkodous on 3 April 2009 and 7 May 2009. Paragraphs 4, 5, 8, 9, 10, 17, 18, 19, 20, 21, 22, 23, 25, 26, 27, 28 and 29of the affidavit clearly set out information received by Mr Byles from Mr Abdelkodous at one of those conferences. Clearly Mr Byles was authorised by the defendants to swear that affidavit. Reference to those conferences and the setting out in the affidavit of part of the information obtained in the course of those conferences, involves a clear waiver of privilege in respect of information provided by Mr Abdelkodous to Mr Byles at the conferences.

63That such a waiver has taken place is clear from the terms of s122(2) of the Act which was intended to implement the guidance provided by the High Court in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1. At [29] Gleeson CJ, Gaudron, Gummow and Callinan JJ said:

"What brings about the waiver is the inconsistency, which the courts where necessarily informed by the consideration of fairness perceive, between the conduct of the client and the maintenance of confidentiality; "

In this case the conduct is the disclosure of part of the information conveyed in those conferences and the maintenance of confidentiality in respect of the balance of the information provided to Mr Byles at those conferences.

64In Mann v Carnell at [34] the plurality said:

"Disclosure by a client of confidential legal advice received by the client, which may be for the purpose of explaining or justifying the client's actions, or for some other purpose, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect. Depending upon the circumstances of the case, considerations of fairness may be relevant to a determination of whether there is such inconsistency."

In this case the disclosure was by the solicitor with the consent of the client for the purpose of explaining the clients' conduct and advancing the client's case.

65The Full Court of the Federal Court emphasised in Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86; (2006) 151 FCR 341 at [47] that each case turns on its own particular facts but formulated the question in the context of claimed issue waiver as whether a party had:

"[68] ... made an assertion as part of his case that puts the contents of the privileged scheduled documents in issue, or necessarily lays them open to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege."

In that case reference was made with approval to the statement of Allsop J in DSE (Holdings) Pty Limited v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499 at [58] where his Honour referred to waiver coming about when a party entitled to the privilege makes an assertion which is either about the contents of the confidential communication or which necessarily lays it open to scrutiny.

66Applying these analyses, the confidential material comprised the communications between Mr Abdelkodous and Mr Byles in the conferences of 3 April and 7 May 2009. Mr Byles with the consent of the defendants disclosed in part the contents of those conferences in his affidavit. It would be inconsistent with that disclosure and generally unfair as set out in Mann v Carnell , for the plaintiff to be deprived of access to the notes and statements in the subpoenaed documents which relate to those conferences.

67I am not persuaded that s135 of the Act prevents the plaintiff being able to adduce and rely upon the notes and statements in the subpoenaed documents relating to the conferences of 3 April and 7 May 2009. I do not see how such notes and statements would be unfairly prejudicial to Mr Abdelkodous or misleading or confusing. Quite clearly those documents could rationally affect the assessment of the probability of the existence of a fact in issue, in this case the credibility of Mr Abdelkodous and the circumstances in which the loan documents and mortgage were signed.

68It follows that while the defendants are entitled to the orders which they seek in their Notice of Motion, there should be excluded therefrom the notes of and statements prepared as a result of the conferences with Mr Abdelkodous of 3 April and 7 May 2009.

69Since both sides have partially succeeded in relation to this motion, the most appropriate order is that each party pay their or its own costs of the motion.

70Accordingly, the orders which I make in respect of the defendants' motion of 21 December 2010 are as follows:

(2) That each party pay their or its own costs of the motion.

Plaintiff's application to amend its Statement of Claim

71The defendants do not oppose this motion. Even if they had, I am satisfied that as a result of the additional information which became available in December 2010, in particular that contained in the affidavit of Victor sworn 2 December 2010, the plaintiff would be entitled to amend its Statement of Claim in the way foreshadowed.

72Since this motion was consented to by the defendants, and the need for it only arose as a result of additional information coming to hand in the course of the proceedings, the costs of that motion should abide the outcome of the principal proceedings.

73Accordingly, the orders which I make in respect of the plaintiff's motion are as follows: