More or less. Gallifreyans seem to have some kind of low-level telepathy going on all the time. However, he usually has to make physical contact (see Tennant scanning Madame DePompadour's mind in Girl in the Fireplace and Donna Noble's departure episode, Journey's End).

And I'd be fine with that explanation for the episode in question. I'm going to ignore it one way or the other... ;\)