It seemed a strange remark to me. He is one of the internal examiners of the viva process and said he has actually refused students on that basis and told them to rewrite sections. When asked about publishing he said that we shouldn't bother and "get on with the business of being a research student". I found it an odd remark to make as well as I thought I may publish 3 or so articles from the entire thesis. At this point I am kind of afraid to to be honest in case he is on the viva committee.

Thanks for the replies everyone. I have just met with my supervisor over the previously published work and he was concerned. I threw up the points that others made here and he seemed content enough.
As for the publishing and plagiarising of your own work, I am a little more concerned. The man who said it to us often acts as an internal examiner for the viva.
Thanks for the help!

Actually if I could just bug you about one more issue. In my School we have been told not to publish anything until the PhD is done. They say that we could be accused of plagiarising our own work and be denied the PhD in the viva. They have no specific examples of this happening. I was talking to a post-doc who thought this was very odd and said he would judge a candidate's possibility of employment based upon research published. as anyone come across this before?

Thanks guys for the help. I am going to speak to my supervisor later. I think I may have been panicking a little more than I should have. It was such a shock seeing the exact same thing nearly in my area, which has not been covered before at all. I think it is separate enough in one sense, in that mine has other issues dealt with and different conclusions, but parts of mine look like they could have been lifted from the other work.

I am having a bit of a crisis at the moment and any advice would be more than welcome. I am in second year of my PhD and essentially someone has just published their PhD from Germany in my exact area-a very small area of law. I had a look through the material and our stuff is similar to about 50%. I am discussing points that the other has not and also doing mine as a comparative. I have 30,000 words written so far. My work is original in that no one was doing this before but now there is a book on it, literally. Also my points on some things are different to the other person's.
Should I speak to my supervisor and try to rejig the thesis or am I better saying nothing? I may be overreacting but I just don't want this to be a problem in the viva.