Benecke v National Australia Bank: imputed waiver by criticising lawyers in proceedings to which they are strangers

Benecke v National Australia Bank (1993) 35 NSWLR 110 is one of the best known Australian cases about imputed waiver in relation to making allegations about the course of the retainer of former lawyers.  It is not, however, a case about imputed waiver in professional negligence suits against former solicitors, since this was not such a suit.  Rather, in the course of a proceeding to set aside the settlement of a previous proceeding, Ms Benecke claimed that her solicitor and the other side’s solicitor had settled her case without Ms Benecke’s authority, and gave a detailed account of her conversations with her QC.  The defendant, seeking to uphold the settlement called Ms Benecke’s former QC as its witness.  Ms Benecke’s complaint upon appeal that such evidence was privileged and should not have been admitted was rejected on the basis that Ms Benecke had waived privilege over the conversations by setting out her version of them.

Ms Benecke, who farmed mohair, borrowed from the Bank.  Something of her characteristics may be gleaned from this passage of the judgment:

‘In her written submissions Nos 1-3 “Notice of Constitutional Matters, Magna Carta and God’s Law” respectively the appellant stated that she reserved her right to argue these matters in accordance with the outcome of an appeal she is bringing to the United Nations.’

The Bank sued for possession of the security property and repayment of the loan with interest.  Her QC conceded there were problems with Ms Benecke’s counterclaim and with the extent of discovery given by her.  The QC sought to have the trial split.  The judge declined the application and ordered that the trial of all issues go on.  At that point, the matter settled confidentially more or less on the basis of a total capitulation by Ms Benecke.  The settlement was perfected by consent orders.

Subsequently, Ms Benecke claimed that her solicitor and the Bank’s solicitor had acted in concert, that they had settled without her authority, and that she had been served up ‘as a sacrifice to the Bank’.  By separate proceedings, she sought an order setting aside the settlement. She did not sue any of her lawyers.  The Bank denied Ms Benecke’s allegations, relying in part on evidence from Ms Benecke’s former QC, and to a lesser extent junior counsel.  Obviously, this represents an unusual aspect of the case: the Bank called as its own witnesses Ms Benecke’s former lawyers.  No one called Ms Benecke’s former solicitor.  On appeal, Ms Benecke argued that the trial judge should not have received the QC’s evidence, on the basis that it was privileged.

The conduct which led to the conclusion of waiver was as follows:

‘the appellant claimed that her case had been settled without her consent and added a contention that the lawyers on both sides were apparently acting in concert. In her affidavit in support, sworn on 23 October 1992, she unequivocally asserted that [the QC] had compromised the proceedings contrary to her express instructions that the matter proceed to trial.’ (p. 116B)

Citing Thomason v Campbelltown Municipal Council (1939) 39 SR (NSW) 347; 56 WN (NSW) 108, per Jordan J at 358-359; 111; Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 quoting Wigmore, Evidence in Trials at Common Law (1961) vol 8, par 2327 at 636 and 638; and Popovitch v Kasperlik 70 F Supp 376 (1947) at 381 Justice of Appeal Clarke with whom the other judges agreed, held at p. 116C that:

‘It is readily apparent, therefore, that if [the QC] had been unable to give evidence it would have been necessary for the judge to decide the case upon the uncontradicted evidence of [Ms Benecke]. The injustice of such a situation needs no emphasis from me.

However, the law did not require the judge to act in that way. The appellant, in making her assertions that her lawyers compromised the proceedings without her consent, opened up the question of the authority of the lawyers to act as they did and thereby waived her privilege. I take this to be clear as a matter of legal principle on grounds of basic fairness.’

In a concurring decision, Chief Justice Gleeson added at 112-113:

‘In the course of the second proceedings the appellant, in her originating process, and in evidence, supported her claim that the first proceedings had been settled without her consent by giving a detailed account of her discussions with senior counsel.

It would be inconsistent with the reason for the existence of the privilege to permit it to operate in the manner for which the appellant contends. But for her own actions, the privilege would have enabled the appellant to insist that nobody should be able to give evidence of the confidential communications between the appellant and her senior counsel about the settlement of the first proceedings, without the consent of the appellant. However, it did not enable the appellant to make public her version of those communications and, at the same time, to enforce silence on the part of others who disagreed with that version. The law permits the search for the truth in legal proceedings to yield, in certain circumstances, to the public interest in preserving the secrecy of communications between lawyer and client. In the present case, however, the appellant herself lifted the veil of secrecy by giving her version of the communications. Thereafter, there was no reason in principle why the pursuit of the truth should not take its course, or why the court should be inhibited in seeking to ascertain the true facts concerning those communications.’

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