Northern Inland Credit Union Limited v Temenos Australia Operations Pty Ltd

By a notice of motion filed on 4 July 2024, the defendant, Temenos Australia Operations Pty Ltd (Temenos), seeks unredacted disclosure of two documents over which the plaintiff, Northern Inland Credit Union Pty Ltd (NICU), has claimed legal professional privilege.

The proceedings concern a contract by which Temenos agreed to provide what is described as a core banking system (CBS) to NICU, which is an electronic system that processes daily banking transactions and posts updates to accounts and other financial records.

NICU alleges that Temenos made several precontractual representations described in its list statement as the “Readiness Representations”, the “Capacity Representations” and the “Deployment Representation” concerning Temenos’s ability to install the CBS within a period of approximately 9 months. NICU claims that it relied on those representations in entering into the contract, that the representations were misleading and deceptive in contravention of s 18 of the Australian Consumer Law (ACL) and that as a consequence it is entitled to recover damages under s 236 of the ACL.

In entering into the contract, NICU was required to comply with the Australian Prudential Regulation Authority Prudential Standards CPS 231 Outsourcing (CPS 231). Among other things, that standard sets out (in para 29) the matters that must be addressed by any outsourcing agreement, such as the CBS.

In connection with the transaction, NICU obtained legal advice on final versions of the documents comprising the contract. It also engaged KPMG to provide advice on whether it had complied with the requirements of CPS 231. In connection with that engagement, it provided KPMG with a copy of that legal advice.

The legal advice and a draft of KPMG’s report formed part of the due diligence material considered by the board of NICU in deciding to enter into the contract.

On the question of reliance, Mr Derek McIntyre, the Chief Executive Officer of NICU, has affirmed an affidavit dated 23 April 2024 in which he gives the following evidence:

NICU has claimed privilege over the legal advice and those parts of KPMG’s report which disclose the substance of that advice. Temenos seeks unredacted versions of those two documents. It does so on two bases. First, it submits that, by serving Mr McIntyre’s affidavit, which states that the board relied on the due diligence material (which included the two documents), NICU waived privilege in the legal advice. Second, it submits that NICU waived privilege in the legal advice by disclosing an email dated 1 March 2019 from Mr David Cook, who was an employee of NICU, to Mr Quang Dang of KPMG in which Mr Cook said:

NICU accepts that there has been a waiver of privilege to the extent that the legal advice deals with the issues in the case. However, it submits that there has not been a waiver of privilege in the whole advice. It submits in an open offer that it made before the hearing of the notice of motion that it would be appropriate for the Court to make orders in the following terms:

It is not necessary to set out the principles relating to waiver in any detail. They were stated in these terms by Gleeson CJ, Gaudron, Gummow and Callinan JJ in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 at [29] where their Honours said:

Although the dispute between the parties was framed in their written submissions as a dispute about whether NICU’s conduct in serving Mr McIntyre’s affidavit, and in what was said to be a disclosure of the substance of the advice by Mr Cook, amounted to a waiver, it is plain from the concession made by NICU that the real issue is the extent of the waiver and, in particular, whether NICU should be required to produce the whole advice even though much of it may be irrelevant to the issues in the proceedings.

I accept that in this case it is appropriate to order production of only that part of the legal advice which is relevant to the issues in the case.

In many cases, such an order will be inappropriate. It is generally not appropriate to permit a party to go through a document and to redact parts of it that are said to be irrelevant leaving an incomprehensible patchwork of sentences and paragraphs. Generally, the obligation to give discovery of a document applies to the whole document: see Telstra Corp Ltd v Australis Media Holdings (Supreme Court (NSW), McLelland CJ in Eq, 10 February 1997, unrep) cited with approval in Lewis v Lewis (2021) 105 NSWLR 487; [2021] NSWCA 168 at [95] per Leeming JA (Meagher and Payne JJA agreeing). The same is true where the question is one of waiver. However, an exception is sometimes made where a document deals with different subject matters, only one of which is relevant — such as, minutes of a board meeting.

In the present case, it may be inferred that the principal subject of the legal advice was whether the agreement complied with the requirements of CPS 231. It is unlikely that the legal advice addressing that issue will be relevant to the issues in this case. It is true that Mr McIntyre says that the due diligence material was “prepared based on representations made in the Temenos Presentation … and other documents provided by Temenos”. But it is important to understand that the due diligence material included papers prepared by Mr McIntyre and other employees of NICU. Mr McIntyre should not be interpreted as saying that the legal advice was prepared on the basis of that presentation and other documents.

It is also true that normally there will be the required inconsistency between an assertion that a party relied on a document and the maintenance of a claim that the document is confidential so as to attract a claim of privilege. But here, there is no reason to think that there is a connection between the advice and the representations that Temenos is said to have made and its reliance on those representations. It appears that the advice is concerned with whether the contract complied with the requirements of CPS 231 whereas the question of reliance relates to representations concerning Temenos’s capacity to perform the contract and within a certain timeframe. It would be unfair in those circumstances to require production of the whole advice if little or none of it has anything to do with reliance on the representations.

The same is true of the email. At most, the email purports to disclose legal advice to the effect that NICU was not entitled to rely on pre-contractual representations. It does not disclose the substance of legal advice on other matters.

Accordingly, in my opinion, it is appropriate to place limits on the extent to which NICU should be required to disclose the contents of the legal advice. However, the disclosure should not be limited to the question whether NICU was entitled to rely on pre-contractual representations. It should extend to all aspects of the advice that are relevant to the issues in the proceedings.

Each party has enjoyed some success in relation to the motion. It is appropriate in those circumstances that the costs of the motion be costs in the cause.

The orders of the Court therefore are: