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Federal Court of Australia - Full Court Decisions |
Last Updated: 25 May 2004
FEDERAL COURT OF AUSTRALIA
Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122
CORRIGENDUM
PRATT HOLDINGS
PTY LTD (ACN 004 421 961) v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA
V64 of 2003
PRICEWATERHOUSE COOPERS (A FIRM)
v COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
V 65 of
2003
FINN, MERKEL & STONE JJ
MELBOURNE
12 MAY 2004
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IN THE FEDERAL COURT OF AUSTRALIA
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VICTORIA DISTRICT REGISTRY
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BETWEEN:
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V64 of 2003
PRATT HOLDINGS PTY LTD (ACN 004 421 961) APPELLANT V65 of 2003 PRICEWATERHOUSE COOPERS (A FIRM) APPELLANT |
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AND:
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THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA
RESPONDENT |
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JUDGES:
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FINN, MERKEL & STONE JJ
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DATE:
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12 MAY 2004
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PLACE:
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MELBOURNE
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CORRIGENDUM
1 Please note the appearances in the above judgment should read as follows:
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V64/2003
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Counsel for the Appellant:
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N J Young QC with
R Peters |
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Solicitor for the Appellant:
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Arnold Bloch Leibler
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Counsel for the Respondent:
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WB Zichy-Woinarski QC with
MM Gordon |
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Solicitor for the Respondent:
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Australian Government Solicitor
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V65/2003
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Counsel for the Appellant:
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NJ Young QC with
R Peters |
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Solicitor for the Appellant:
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Price Waterhouse Coopers Legal
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Counsel for the Respondent:
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WB Zichy-Woinarski QC with
MM Gordon |
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Solicitor for the Respondent:
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Australian Government Solicitor
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Date of Hearing:
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4, 5 and 7 August 2003
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Date of Judgment:
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12 May 2004
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I certify that the preceding one (1) numbered paragraph is a true copy of
the Reasons for Judgment herein of the Honourable Justice
Stone.
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Associate:
Dated: 24 May 2004
FEDERAL COURT OF AUSTRALIA
Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122
TAXATION AND REVENUE – income tax – documents
Commissioner of Taxation entitled to have access to under Income Tax
Assessment Act 1936 (Cth) s 263 – privilege claimed
PRACTICE
AND PROCEDURE – legal professional privilege – whether privilege
can attach to documents prepared by third party at direction of principal
and
returned to principal to then give to solicitor for purpose of obtaining legal
advice – difficulty in determining dominant
purpose of principal in
instructing third party to prepare documents
Income Tax Assessment
Act 1936 (Cth), s 236 and 263(1)
Anderson v Bank of British
Columbia (1877) 2 ChD 644 discussed
Ankin v London and North
Eastern Railway Company [1930] 1 KB 527 cited
Attorney-General for the
Northern Territory v Maurice [1986] HCA 80; (1986) 161 CLR 475 cited
Australian Rugby
Union Ltd v Hospitality Group Pty Ltd [1999] FCA 1061; (1999) 165 ALR 253 cited
Baker v
Campbell [1983] HCA 39; (1983) 153 CLR 52 discussed
Balabel v Air India [1988] 1
Ch 317 discussed
Bartram v Clark [1905] VLR 442 cited
Belgravia
Investments Ltd v Canada [2002] FCJ No 870 cited
Birmingham and
Midland Motor Omnibus Company Limited v London and North Western Railway
[1913] 3 KB 850 cited
Broad v Pitt (1828) 3 Car & P 518 cited
Bunbury v Bunbury (1839) 48 ER 1146 cited
Carter v Northmore
Hale Davy & Leake [1995] HCA 33; (1995) 183 CLR 121 considered
Commissioner of
Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; (1997) 188 CLR 501
considered
Daniels Corporation International Pty Ltd v Australian
Competition and Consumer Commission [2002] HCA 49; (2002) 192 ALR 561 cited
Dick
Smith Electronics Pty Limited v Westpac Banking Corporation [2002] FCA 1040
cited
DSE (Holdings) Pty Ltd v InterTAN [2003] FCA 1191; (2003) 203 ALR 348
discussed
Du Barré v Livette (1791) Peake 108
cited
Esso Australia Resources Limited v Federal Commissioner of Taxation
of the Commonwealth of Australia [1999] HCA 67; (1999) 201 CLR 49 cited
FCT v
Citibank Ltd (1989) 20 FCR 403 cited
Grant v Downs [1976] HCA 63; (1976) 135 CLR
674 considered
Greenough v Gaskell (1833) 1 My & K 98, 39 ER 618
discussed
GSA Industries (Aust) Pty Ltd v Constable [2001] QSC 180; [2002] 2 QdR 146
cited
Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992)
36 FCR 557 cited
Health & Life Care Ltd v Price Waterhouse [1997] SASC 6306; (1997)
69 SASR 362 cited
Kennedy v Wallace [2004] FCA 332 cited
Leader
Westernport Printing Pty Ltd v IPD Instant Duplicating Pty Ltd (1988) 5 ANZ
Insurance Cases 60-856 cited
Learoyd v Halifax Joint Stock Co [1893] 1
Ch 687 cited
Macedonia Pty Ltd v Federal Commissioner of Taxation
(1987) 87 ATC 4565 discussed
Minet v Morgan (1873) LR 3 Ch App 361
cited
Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover
Authority [2002] VSCA 59; (2002) 4 VR 332 cited
Morlea Professional Services Pty Ltd v
South British Insurance Company Ltd (unreported, Supreme Court of New South
Wales, Foster J, 27 September 1984) discussed
National Employers’
Mutual General Insurance Association Limited v Waind [1979] HCA 11; (1979) 141 CLR 648
cited
Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3
NSWLR 44 considered
Parkins v Hawkshaw (1817) 2 Stark 239
cited
Pearce v Foster (1885) LR 15 QBD 114 cited
Preston v Carr
(1826) 1 Y & J 175 cited
Price Waterhouse (a firm) v BCCI Holdings
(Luxembourg) SA [1992] BCLC 583 cited
R v Bell; Ex parte Lees [1980] HCA 26;
(1980) 146 CLR 141 cited
R v Upper Boddington (1826) 8 Dow &
Ry 726 cited
Re Highgrade Traders Ltd [1984] BCLC 151
cited
Reece v Trye (1846) 9 Beav 316 cited
Southwark and
Vauxhall Water Co v Quick (1878) 3 QBD 315 cited
Taylor v Forster
(1825) 2 Car & P 195 cited
The Hopper (No 13) [1925] PD 53
cited
The Palermo (1883) LR 9 PD 6 cited
Three Rivers District
Council v Bank of England (No 5) [2003] QB 1556 cited
Three Rivers
District Council v The Governor & Company of the Bank of England [2004] EWCA Civ 218 cited
Trade Practices Commission v Sterling [1979] FCA 33; (1979) 36 FLR
244 cited
Waldron v Ward (1654) 82 ER 853 cited
Walker v Wildman
(1821) 56 ER 1007 discussed
Waterford v The Commonwealth of Australia [1987] HCA 25;
(1987) 163 CLR 54 cited
Waugh v British Railways Board [1979] UKHL 2; [1980] AC
521 cited
Wheeler v Le Marchant (1881) 17 Ch D 675 discussed
Woolley v North London Railway Company (1869) 4 CP 602
cited
PRATT HOLDINGS PTY LTD (ACN 004 421 961) v
COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
V64 of 2003
PRICEWATERHOUSE COOPERS (A FIRM) v COMMISSIONER OF TAXATION OF
THE COMMONWEALTH OF AUSTRALIA
V 65 of 2003
FINN,
MERKEL & STONE JJ
MELBOURNE
12 MAY 2004
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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V64 of 2003
PRATT HOLDINGS PTY LTD (ACN 004 421 961) APPELLANT V65 of 2003 PRICEWATERHOUSE COOPERS (A FIRM) APPELLANT |
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AND:
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THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA
RESPONDENT |
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS THAT:
1. The appeals be allowed.
2. Subparagraphs 1(b), 1(c) and 1(f) of paragraph 1 and paragraphs 2 and 3 of the declarations made on 15 January 2003 be set aside.
3. The matter be remitted to the primary judge.
4. The respondent pay the appellants’ costs of the appeals.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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V64 of 2003
PRATT HOLDINGS PTY LTD (ACN 004 421 961) APPELLANT V65 of 2003 PRICEWATERHOUSE COOPERS (A FIRM) APPELLANT |
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AND:
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JUDGES:
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DATE:
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PLACE:
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REASONS FOR JUDGMENT
FINN J:
2 What is surprising about these appeals is that the legal principle in issue can still be a matter of contest. It is well accepted that if a person prepares and then makes a documentary communication to a legal adviser for the dominant purpose of obtaining legal advice, that documentary communication attracts legal professional privilege: Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth [1999] HCA 67; (1999) 201 CLR 49. It is equally well accepted that if a person directs or authorises a third party ("an agent") to prepare and then make a documentary communication on that person’s behalf to a legal adviser for the dominant purpose of obtaining legal advice, that documentary communication by the agent attracts legal professional privilege: Australian Rugby Union Ltd v Hospitality Group Pty Ltd [1999] FCA 1061; (1999) 165 ALR 253. But it is not accepted that, if a person ("a principal") directs or authorises a third party who is not an employee of that person to prepare a documentary communication for the dominant purpose of its being communicated by the principal and not directly by the third party to a legal adviser for the purpose of obtaining legal advice, that documentary communication from the third party to the principal attracts legal professional privilege.
3 This last conclusion, which was acted upon by the primary judge: Commissioner of Taxation v Pratt Holdings Pty Ltd [2003] FCA 6; (2003) 195 ALR 717; is said to reflect the inexorable logic of decided case law. Her Honour, nonetheless, had some concern about the consequence of it, noting that (at [72]):
"... too much may turn on whether a written communication is prepared by a corporation internally, or externally by a third party, notwithstanding that the communication in either case is for the dominant purpose of obtaining legal advice and may contain the same information."
4 To hold to such an apparently arbitrary distinction becomes the more arresting now that legal professional privilege has been recognised in this country as not merely a rule of substantive law. "It is ... an important common law immunity": Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 192 ALR 561 at 565. The principal question in these appeals is whether we are, nonetheless, obliged to accept the distinction so drawn with its inevitable and obvious triumph of form over substance. I consider we are not. I would add that this country’s legal development in this area of law has been such, in my view, as to induce caution in embracing authorities from other common law jurisdictions and, most notably, from England and New Zealand.
THE SETTING AND THE DECISION APPEALED FROM
5 I have had the advantage of reading the reasons of Stone J. While I consider it appropriate to express shortly my own reasons for allowing the appeals I, nonetheless, gratefully adopt her Honour’s account of the factual setting of this matter, of the primary judge’s decision and of the appellants’ contentions.
6 The one matter I would emphasise is that, along with Stone J, I do not consider the primary judge made an actual finding as to Pratt Holdings’ purpose(s) in having the Pricewaterhouse report created. For this reason, given the view I take of the appeals, it will be necessary to remit the matter to the primary judge.
A DIVERSION
7 The primary judge described the common law of legal professional privilege in this country in the following terms (at [39]):
"[L]egal professional privilege attaches to:
(1) confidential communications passing between a client and the client’s legal adviser, for the dominant purpose of obtaining or giving legal advice (legal advice privilege); and
(2) confidential communications passing between a client, the client’s legal adviser and third parties, for the dominant purpose of use in or in relation to litigation, which is either pending or in contemplation (litigation privilege)."
8 Her Honour went on to say that different principles govern the availability of legal advice privilege and of litigation privilege.
9 Considerable attention has been given in the submissions of both parties to whether (i) there are two discrete species of this privilege having distinct provinces and differing rationales (as the respondent contends); or (ii) (as the appellants contend) there is a unified doctrine which, though having two applications i.e. advice and litigation, has a single rationale.
10 Given the view I take of the present matter it is unnecessary to enter upon this controversy. I mean no disrespect to counsel’s submissions in refraining from doing so. I would merely note that (i) the controversy itself is a well-recognised one: see the discussion in Ligertwood, Australian Evidence, par 5.13 (3rd ed, 1998); Manes, "More on Solicitor/Client Privilege: the Tug of War Continues" (1999) 78 Can Bar Rev 534; and (ii) at an appropriate level of abstraction, a common and unifying rationale can be found for both "manifestations" (to use a neutral term) of the privilege: cf Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 74; 114-116 and 128-129; Esso Australia Resources Limited, at 64-65. I would add that a major area of contemporary concern with the privilege relates to the proper province to be accorded it when legal advice is being sought or given but not in anticipation of legal proceedings: see e.g. DSE (Holdings) Pty Ltd v InterTAN Inc [2003] FCA 1191; (2003) 203 ALR 348; Kennedy v Wallace [2004] FCA 332.
11 The reason I consider it unnecessary to enter upon the controversy noted above is that the present appeals can satisfactorily be resolved without venturing beyond the legal advice context.
PRINCIPLE AND PRECEDENT
12 In the ordinary course of modern life it is commonplace for a person (natural or corporate) to have confidential communications with a professional adviser or advisers for the purposes of conducting that person’s affairs. Whatever the significance that person may attribute to a particular communication so made, such communications are not ordinarily protected from disclosure in legal proceedings or from an authority exercising coercive powers requiring production of information to it. The exceptional case is the communication made with the dominant purpose of giving or obtaining legal advice.
13 Though the need and justification for this exception has been questioned on occasion: see Kennedy v Wallace, at [58]ff; Three Rivers District Council v The Governor & Company of the Bank of England [2004] EWCA Civ 218 at [39]; it is well established. The rationale given for it is that the "privilege exists to serve the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers": Esso Australian Resources Ltd, at [35]; Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; (1997) 188 CLR 501 at 508.
14 While a privileged communication may be oral, documentary or a combination of each, the issue of privilege most frequently arises in relation to documents and in the settings of discovery and of the exercise of coercive powers to produce. For present purposes it is only necessary to refer to the principles of advice privilege as they apply to documents.
15 The primary principle, stated by Barwick CJ in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 at 677 (in what was then a dissenting view on the issue of sole vs dominant purpose), is that:
"... a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection." Emphasis added.
16 I have quoted this statement rather than one of the many others in High Court decisions which emphasise that the question for the court is whether the dominant purpose of supplying a document to a legal adviser accounts for the existence of that document, for the following reason. As the matter emphasised in the quotation indicates, the person who brings the relevant document into existence need not necessarily be the person who "communicates" the document to the legal adviser. In the cases of the State (the Crown) and of corporate entities, the common (if not characteristic) lack of identity between the actual party who prepares a document and the party whose purpose suffices as the purpose of the State or the corporation necessitates that there be a principle which does not require there to be such an identity: cf the factual setting of Waterford v The Commonwealth [1987] HCA 25; (1987) 163 CLR 54.
17 Because of the interpretation given to Barwick CJ’s statement of principle by recent English authority (see below), it is necessary that I express the following views on it. The setting for Grant v Downs involved a claim for litigation privilege. This notwithstanding, neither Barwick CJ’s statement, nor for that matter that of the majority judgment (at 682), differentiated in any operative way between advice privilege and litigation privilege for the purpose of resolving the actual issue before the Court which related to the purpose ("sole" or "dominant") necessary to attract privilege. Rather the principle formulated by Barwick CJ was intended to be declaratory of the law for the future; was stated compendiously; and had equal application to both manifestations of the privilege. Such formulations are now the commonplace in this country irrespective of whether the actual issue in a given case has involved advice privilege or litigation privilege. The reasons of Stone J amply illustrate this. Further, I consider that the Chief Justice’s related comments on what for convenience I will call the "lack of identity principle" in relation to the authorship of a documentary communication were likewise intended to have common application to both manifestations of the privilege. There is, with respect, nothing to suggest that they were intended to be confined to cases of litigation privilege. Nor, as I will indicate below, is there any reason in principle or authority why they should be so confined in this country.
18 The short question raised in these appeals can be put in the following terms: where there is no identity between the author of a document and the person whose purpose accounts for its existence, what (if any) legal relationship is required to exist between the two before the principle stated by Barwick CJ can be attracted? Is it sufficient that the author (whether as principal, agent or independent contractor) prepares the document in effectuation of the other’s purpose?
19 It may be difficult as a matter of principle or policy to see what is the additional significance of an enquiry into the parties’ legal relationship given the dominant purpose accounting for the preparation of the document in question. Nonetheless it is said authority demands there be such an enquiry with consequences fatal to these appeals.
20 Before turning to precedent, such as it is, there are two additional principles relating to documents that ought be noted. The first is that a document attracts the privilege if it was prepared with the dominant purpose of its being used as a communication with a legal adviser to obtain legal advice notwithstanding that it has not in fact been, and may never be, so used: Southwark and Vauxhall Water Co v Quick (1878) 3 QBD 515; Trade Practices Commission v Sterling [1979] FCA 33; (1978) 36 FLR 244 at 245. This principle, while obviously falling within the rationale of the privilege, qualifies to this extent the general proposition that legal professional privilege does not protect documents, as such, but protects communications between lawyer and client: Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3; (1997) 188 CLR 501 at 543.
21 The second principle which is more directly tied to the protection of communications is that the privilege extends to any document prepared by a lawyer or client from which there might be inferred the nature of the advice sought or given. Examples include communications between the various legal advisers of the client, draft pleadings, draft correspondence with the client or the other party, and bills of costs: Propend Finance, at 569.
22 I merely note in passing that each of these principles is relied upon by the appellants, the first in particular because of the emphasis it places on the creation of a documentary communication as distinct from its communication in fact.
23 When one turns to such authority as there is on the question raised by these appeals, adherence to historical assumption appears to hold sway. As I indicated at the beginning of these reasons the apparent orthodoxy is that (i) a documentary communication authored by an employee which satisfies the dominant purpose test will be privileged whether or not communicated by the employee to the legal adviser; (ii) a documentary communication authored and communicated to the legal adviser on behalf of the principal by an agent at the principal’s behest which satisfies the dominant purpose test will be privileged; but (iii) a documentary communication prepared by a third party (not being an employee or "agent") with the dominant purpose of the party procuring its creation being its being communicated by that party to the legal adviser is not privileged in the hands of the third party.
24 This last proposition is routinely accepted as being a consequence of the decision in Wheeler v Le Marchant (1881) 17 Ch D 675 notwithstanding that that case did not involve a documentary communication authored by a third party for transmission by its principal to a legal adviser to obtain legal advice: e.g. Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44. Rather it was one of a third party making a direct communication to the legal adviser at the legal adviser’s request and not as agent of the client seeking advice: Nickmar at 53-54. Unsurprisingly Cotton LJ described the claim made in Wheeler and the vice in it, in the following terms (at 684-685):
"Their case is put, as I understand it, in this way: It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word ‘representatives’. If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these persons were not representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients, the Defendants, to do certain work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor. In fact, the contention of the Respondents come to this, that all communications between a solicitor and a third person in the course of his advising his client are to be protected. It was conceded there was no case that went that length, and the question is whether, in order fully to develop the principle with all its reasonable consequences, we ought to protect such documents. ... [I]t is not necessary, in order to enable persons freely to communicate with their solicitors and obtain their legal advice, that any privilege should be extended to communications such as these."
25 In my respectful view, the above observations are not only unobjectionable given the provenance of the relevant communications in that case, they also embody what I consider to be an appropriate limitation upon advice privilege. This privilege should not be given such rein as would allow the legal adviser unilaterally to bring third party communications under the umbrella of lawyer-client communications notwithstanding that the third party was not the client’s agent for the purpose.
26 In Wheeler it was recognised that a distinct rule applied in relation to litigation privilege such that privilege would attach to third party communications with a legal adviser if made in contemplation of litigation for the purposes of giving advice or of obtaining evidence: see e.g. Nickmar, at 54; Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] VSCA 59; (2002) 4 VR 332. The somewhat distinct rationale for this particular application of privilege: see Mitsubishi Electric Australia, at 336; is not of present relevance although I note shortly that it relates to preparing a brief for litigation and as such is a "corollary of the common law mode of trial": ibid, 336.
27 In England, Wheeler has been regarded as part of a mid-nineteenth century group of English cases which established a distinct principle concerning communications between a third party (whether an employee, agent or otherwise) and a principal who intended to seek, or was seeking, legal advice. It was recently described by the English Court of Appeal in the following terms (Three Rivers District Council v Bank of England (No 5) [2003] QB 1556 at 1575):
"By the end of the 19th century it was ... clear that legal advice privilege did not apply to documents communicated to a client or his solicitor for advice to be taken upon them but only to communications passing between that client and his solicitor (whether or not through any intermediary) and documents evidencing such communications."
28 Late twentieth century English authority on legal advice privilege to which the primary judge referred has adhered to this view: see Re Highgrade Traders Ltd [1984] BCLC 151; Price Waterhouse (a firm) v BCCI Holdings (Luxembourg) SA [1992] BCLC 583; and see also Three Rivers District Council (No 5) above; Three Rivers District Council v The Governor and Company of the Bank of England [2004] EWCA Civ 218 ("Three Rivers (No 6)").
29 I mean no disrespect in not analysing those decisions in detail. However I would observe, as the judges in some of those cases have recognised: see BCCI Holdings at 590; Three Rivers (No 6); that for the most part the relevant documents would not in any event have been privileged as they were not brought into existence for such a dominant purpose as would have attracted advice privilege. The reason I have taken the course I do is because in Three Rivers (No 5) the Court of Appeal, after referring to the statement of principle of Barwick CJ in Grant v Downs, indicated (at [22]ff), that if the Chief Justice intended to refer to legal advice privilege separately from litigation privilege, he must have intended to depart from Wheeler v Le Marchant and from the law as understood at the end of the nineteenth century. As I have indicated, I do not consider that Barwick CJ was limiting his observations to litigation privilege notwithstanding that the context in Downs was that of litigation privilege: see also the formulation of majority in Downs at 682. Nor do I consider that the Chief Justice’s statement of principle is inconsistent with Wheeler given the view I take of that case, though it clearly is inconsistent with the "clear" nineteenth century law to which the English Court of Appeal referred.
30 While there is a deal of Australian authority (mostly at first instance) on third party communications with legal advisers, there is little that touches directly on the issue in dispute in these appeals. The courts have shown no propensity to depart from the actual ruling in Wheeler v Le Marchant or from the distinct litigation privilege exception to it: see e.g. Australian Rugby Union Ltd v Hospitality Group Pty Ltd, at [27]-[28]. There is one reported example at first instance of Wheeler v Le Marchant being applied, and in my view unwarrantedly extended, to prevent non-agent third party documents attracting privilege where, as here, they were supplied to the principal that requested their creation: Macedonia Pty Ltd v Federal Commission of Taxation (1987) 87 ATC 4,565 at 4,568. In contrast, there have been a number of statements of principle made at first instance which are capable of suggesting that privilege attaches to documentary communications authored by a third party for the purpose of obtaining legal advice by the party requiring their creation, but which are to be communicated by that party to the legal adviser.
31 In Morlea Professional Services Pty Ltd v South British Insurance Company Ltd (unreported, Supreme Court of NSW, Foster J, 27 September 1984) the third party communication issue arose in a fire insurance setting where the prospect of litigation "was at least likely". After noting that many of the communications in issue (which were produced by investigators and assessors) were made otherwise than as direct communications between solicitor and client, Foster J indicated:
"The submission was put in the present case, based upon the old authority of Wheeler v Le Marchant (1881) 17 Ch D 675 that documents from third parties which come into existence at the request of a legal advisor for the purpose of his giving or preparing to give advice (apart from circumstances of anticipated or actual litigation) can never be privileged. Under this submission it was sought that I exclude, in particular, experts’ reports obtained by the defendant’s solicitor himself or sent direct to the solicitor at the defendant’s request for the purpose of the solicitor advising the defendant in relation to the claim in those proceedings.
I do not consider that Wheeler’s case is authority for so wide a principle (see Cairns: The Law of Discovery in Australia, p 116). I am satisfied that if it is established that the documents came into existence for the sole purpose of the solicitor rendering advice to the client it does not matter whether the document was forwarded to the solicitor by the client or by the maker of the document at the client’s request, nor does it matter that the document was obtained direct by the solicitor from the maker at the client’s request. The essential requirement is that it came into existence for the sole purpose of the solicitor rendering advice to the client." Emphasis added.
32 In GSA Industries (Aust) Pty Ltd v Constable [2001] QSC 180; [2002] 2 QdR 146 Holmes J held that a third party report prepared by a firm of accountants for their client and which was supplied to the client before communication to the client’s solicitor attracted legal advice privilege as, at the time it was produced, the client had the dominant purpose of it being used to obtain legal advice. The trial judge in that case rejected an alternate claim based on litigation privilege as she was not satisfied that the required likelihood of litigation was anticipated at the time. Surprisingly, the primary judge in the present matter regarded Holmes J’s decision as being one based on litigation privilege.
33 What is notable about these two decisions in particular is that to the extent that they have been seen to suggest lapses (real or apparent) from orthodoxy, later judges have sought to explain or reinterpret them to accord with Wheeler v Le Marchant: see e.g. Nickmar Pty Ltd at 54-55 for its treatment of Morlea Professional Services; see also the primary judge’s consideration of GSA Industries at [48]-[51]. In my view, neither involves a departure from Wheeler insofar as direct communications between a non-agent third party and a legal adviser are concerned, and both are consistent with Barwick CJ’s principle to the extent that there can be a lack of identity between the author of a documentary communication and the party who actually communicates it to the legal adviser.
34 Beyond the above there are occasional statements (usually in dicta) describing advice privilege but in terms of sufficient generality to be of no particular assistance in resolving the present question. Illustrative of these are the observations of Batt JA in Mitsubishi Electric Australia at [9] that "[advice privilege] is not available where one of the parties to the communication is a third party who is not the agent of the client for the purpose of the communication". In that case the documents in question were reports commissioned by Mitsubishi’s solicitors and for that reason were rightly regarded as not admitting of a claim of advice privilege. Given the primary judge’s reliance on Batt JA’s observations, I would observe that they do not address a case such as the present where the author of an intended documentary communication is to provide it, not to legal advisers at their request, but to the party who commissioned it and who intends to communicate it to those advisers.
35 In the absence of binding authority, or for that matter Australian appellate authority which we should follow as a matter of comity, the present question falls to be decided by reference to principle, legal policy and to such authority of other jurisdictions as is persuasive when considered in our domestic setting.
36 Where the issue, as here, is with whether a document attracts legal advice privilege at the time it is brought into existence (as distinct from whether a copy of it is privileged when communicated at a later date: cf Propend Finance), the obvious starting point is with what was the intended use (or uses) of that document which accounted for it being brought into existence: Grant v Downes, at 692; Propend Finance, at 508. In answering that question – which is a question of fact: Waterford v The Commonwealth [1987] HCA 25; (1987) 163 CLR 54 at 66 –attention necessarily must focus on the purpose (or purposes) of the person who created the document, or who, if not its author, had the authority to, and did, procure its creation: Grant v Downs, at 677; Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992) 36 FCR 557 at 568-569; Mitsubishi Electric Australia, at 338; Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 at 1036ff.
37 In the present matter that person was, seemingly, Mr O’Halloran of Pratt Holdings. As I have already indicated her Honour did not find it necessary to make findings as to what Mr O’Halloran’s (hence Pratt Holdings’) purpose or purposes were in procuring the preparation of the Pricewaterhouse report.
38 Let it be assumed that his dominant purpose was to personally communicate that report or its contents to ABL for the purpose of obtaining the required legal advice. This assumption, I should interpolate, conceals the real difficulties that can arise in a case such as the present – a matter returned to below.
39 It is accepted that, when Pratt Holdings received the report and sent it to ABL in effectuation of its purpose, that communication with its solicitors attracted legal advice privilege. What is not accepted is that the step which was a necessary precondition to effectuating that purpose – i.e. the transmission of the report from Pricewaterhouse to Pratt Holdings for its submission to ABL – resulted in the report and its pendant documents, if I might so describe them, having or retaining the character of privileged documents in Pricewaterhouse’s hands for which Pratt Holdings could claim privilege.
40 I have already commented upon what I consider to be the patent artificiality flowing from the denial of privilege in such circumstances. If Pratt Holdings had its own and appropriately qualified accounting staff which prepared a like report, that report would have been privileged. Equally, if it had directed Pricewaterhouse to send the report directly to ABL, it would likewise be privileged as Pratt Holdings would have thus constituted Pricewaterhouse its agent to make the, or else a part of the: see Propend, at 571-572; communication by Pratt Holdings to ABL for the purpose of obtaining legal advice.
41 Pricewaterhouse was not relevantly Pratt Holdings’ agent in this matter. With all due respect to Holmes J in GSA Industries (Aust) who appears to have held to the contrary (at [22]) where accountants prepared and then passed on a report to their client who communicated it to the client’s lawyer, I do not consider that a party in the position of Pricewaterhouse "is properly to be regarded as the agent of [Pratt Holdings] for the purpose of collecting and communicating the information contained in the report". Notwithstanding the growing elasticity of meaning of the term "agent": see e.g. the discussion in Bowstead & Reynolds on Agency, 1-001 ff (17th ed, 2001); Pricewaterhouse simply did not assume such a representative function on Pratt Holding’s behalf as the agency concept presupposes: see South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611 at [136]- [137]. Pricewaterhouse did work for its client Pratt Holdings which it delivered to Pratt Holdings. I would add that the mere relabelling of Pricewaterhouse as Pratt Holdings’ "representative" does not affect the essential character of the parties’ relationship for present purposes: see the comments of Cotton LJ on this in Wheeler v Le Marchant, at 684.
42 To deny that a third party is an agent in such circumstances does not, though, provide a sufficient or principled reason for denying privilege to the documentary communication (or contents) it has authored. The important consideration in my view is not the nature of the third party’s legal relationship with the party that engaged it but, rather, the nature of the function it performed for that party. If that function was to enable the principal to make the communication necessary to obtain legal advice it required, I can see no reason for withholding the privilege from the documentary communication authored by the third party. That party has been so implicated in the communication made by the client to its legal adviser as to bring its work product within the rationale of legal advice privilege.
43 There are, in my view, clear reasons of policy that support extending the privilege to such third party authored documentary communications. Whether a natural person or a corporation, a party seeking to obtain legal advice may not have the aptitude, knowledge, skill and expertise, or resources to make adequately, appropriately or at all such communication to its legal adviser as is necessary to obtain the advice required. Such is commonplace today where advice is sought on complex and technical matters. To deny that person the ability to utilise the services of a third party to remedy his or her own inability or inadequacy unless he or she is prepared to forego privilege in the documents prepared by the third party, is to disadvantage that person relative to another who is able adequately to make the desired communication to a legal adviser by relying upon his or her own knowledge, resources, etc.
44 For the law to provide such an incentive not to utilise the services of third parties in such circumstances is to undercut the privilege itself. It would not facilitate access to effective legal advice nor would it facilitate effective communication with legal advisers for the purpose of obtaining legal advice.
45 I earlier indicated that, for the purposes of the above, I had assumed that Pricewaterhouse’s report had been prepared at Mr O’Halloran’s direction with the dominant purpose in mind of it being, or being part of, Pratt Holdings’ communication to ABL to obtain legal advice. That assumption is a large one.
46 While the question of Pratt Holdings’ purpose(s) in this matter is simply one of fact, particular care needs to be taken in evaluating evidence of purpose in a setting in which the third party performs a professional function for a principal in a non-litigation setting but in a matter in which legal advice is to be or is being sought by that principal. There is a number of reasons why this is so. First, the third-party principal relationship (be it accountant-client, assessor-client or otherwise) will not as such attract privilege to any exchanges made in it: Baker v Campbell at 66, 75, 94 and 128. For this reason alone caution needs to be taken in determining whether the parties’ relationship has a character other than the above for privilege purposes.
47 Secondly, the matter or transaction in respect of which legal advice is sought may well be one in which the principal considers it necessary or appropriate to obtain advice as well from other professional and business sources. In determining the preferred structure of a business transaction, for example, a person might consult not only a lawyer, but also one or more of an accountant, a financial planner and a merchant banker for advice: cf Kennedy v Wallace at [60]. The advices given by such other advisers will rarely be capable of attracting privilege for the reason that they will almost invariably have the character of discrete advices to the principal as such, with each advice, along with the lawyer’s advice, having a distinctive function and purpose in the principal’s decision making – albeit all of the advices may be interrelated in the sense of providing collectively a basis for informed decision by the principal. Those other advices will not later acquire the character of privileged documents in the respective adviser’s hands: cf Propend; merely because the principal subsequently makes the advices available to his or her lawyer when obtaining legal advice. Importantly, as Deane J observed in Baker v Campbell at 112, privilege does not "extend to protect things lodged with a legal adviser for the purpose of obtaining immunity from production". Neither does it extend to third party advices to the principal simply because they are then "routed" to the legal adviser.
48 Thirdly, notwithstanding the principal’s stated purpose in having a documentary communication brought into existence, the principal may have so conducted himself or herself in the matter as to indicate that the intended use of the document authored by the third party was not its communication to the legal adviser as the principal’s communication, but rather it was to advise and inform the principal concerning its subject matter, with the principal then determining (a) in what manner, if at all, the whole or part of the document would be used by the principal in making its own communication or (b) the purpose(s) for which the document could or should be used. The less the principal performs the function of a conduit of the documentary information to the legal adviser, the more he or she filters, adapts or exercises independent judgment in relation to what of the third party’s document is to be communicated to the legal adviser, the less likely it is that that document will be found to be privileged in the third party’s hands. This will be because the intended use of the document is more likely to be found to be to advise and inform the principal in making the principal’s communication to the lawyer (whether or not that communication embodied wholly or substantially the content of the document) and not to record the communication to be made.
49 I have dealt at a little length on the care that needs to be taken in determining the principal’s dominant purpose in a case such as the present for this reason. The primary judge’s narrative of the circumstance in which the documents in question were created suggests that the present is a case calling for that care. In saying this I again emphasise her Honour did not make and, on the view she took of the applicable law, did not need to make any finding as to what Pratt Holdings’ dominant purpose was in creating those documents.
CONCLUSION
50 Six of the seven categories of documents before the primary judge have been the subjects of these appeals. Given my conclusion that legal advice privilege is capable of extending to non-agent, third party authored documentary communications, the two declarations reflecting the primary judge’s conclusion that privilege does not attach to the documents in categories (1), (2), (3), (5) and (6) of the categories referred to in Stone J’s reasons must be set aside.
51 Additionally, because of the view of the privilege taken by her Honour, the primary judge did not consider whether any of the category (4) documents found not to be privileged in whole or in part might nonetheless have attracted privilege on the distinct ground that the nature of the advice sought by Pratt Holdings from ABL might be inferred from them. For this reason her Honour’s declaration in relation to the category (4) documents should be set aside to that extent.
52 I would order that (i) the appeals be allowed; (ii) subparagraphs 1(b), 1(c) and 1(f) of paragraph 1 and paragraphs 2 and 3 of the declarations made on 15 January 2003 be set aside; (iii) the matter be remitted to the primary judge; and (iv) the respondent pay the appellants’ costs of the appeals.
Associate:
Dated: 10 May 2004
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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V64 OF 2003
PRATT HOLDINGS PTY LTD (ACN 004 421 961) FIRST APPLICANT V65 OF 2003 PRICE WATERHOUSE COOPERS (A FIRM) SECOND APPLICANT |
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AND:
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THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA
RESPONDENT |
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JUDGES:
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FINN, MERKEL AND STONE JJ
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DATE:
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12 MAY 2004
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PLACE:
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MELBOURNE
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REASONS FOR JUDGMENT
MERKEL J:
53 I agree with the orders proposed by Finn and Stone JJ and with their Honours’ reasons for making those orders.
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I certify that the preceding one (1) numbered paragraph is a true copy of
the Reasons for Judgment herein of the Honourable Justice
Merkel.
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Associate:
Dated: 10 May 2004
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FEDERAL COURT OF AUSTRALIA
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VICTORIA DISTRICT REGISTRY
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ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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V64 OF 2003
PRATT HOLDINGS PTY LTD (ACN 004 421 961) APPELLANT V65 OF 2003
PRICEWATERHOUSECOOPERS (A FIRM) APPELLANT |
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AND:
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THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA
RESPONDENT |
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JUDGES:
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FINN, MERKEL & STONE JJ
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DATE:
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12 MAY 2004
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PLACE:
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MELBOURNE
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REASONS FOR JUDGMENT
STONE J:
INTRODUCTION
54 The appellants, Pratt Holdings Pty Ltd (‘Pratt’) and PriceWaterhouseCoopers (‘PW’), appeal from a decision of a judge of this Court holding that legal professional privilege did not attach to certain communications between them. The communications in question are contained in documents to which the respondent, the Commissioner of Taxation of the Commonwealth of Australia (‘Commissioner’) says he is entitled to have access by virtue of s 263(1) of the Income Tax Assessment Act 1936 (Cth) (‘Assessment Act’). That section states:
‘The Commissioner, or any officer authorized by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act, and for that purpose may make extracts from or copies of any such books, documents or papers.’
55 Although s 263 is expressed unequivocally, it is not in dispute that legal professional privilege may restrict access that would otherwise be available under theprovision; Federal Commissioner of Taxation v Citibank Limited (1989) 20 FCR 403; 85 ALR 588; Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 192 ALR 561 (‘Daniels’) at 565 per Gleeson CJ, Gaudron, Gummow and Hayne JJ. The specific issue in the appeals before this Court is whether legal professional privilege restricts the Commissioner from having access to certain documents, most of which were created by PW who, at the time, were the accountants for Pratt. According to Pratt, the documents were created in connection with Pratt obtaining legal advice from Arnold Bloch Leibler (‘ABL’) in relation to the rearrangement of corporate finances. At the time there was no litigation on foot, in preparation or contemplated.
CREATION OF THE DOCUMENTS
56 The primary judge outlined the circumstances in which the documents in dispute were created at [4]-[26] of her reasons for decision; Commissioner of Taxation v Pratt Holdings Pty Ltd [2003] FCA 6; (2003) 195 ALR 717. I gratefully adopt that outline.
‘The documents in dispute were mostly created between January 1993 and August 1994 by officers of PW and Pratt Holdings.
...
Pratt Holdings is the ultimate holding company of the companies in the Pratt Group. Between 1990 and 1995, the Pratt Group underwent a major balance sheet reconstruction and refinancing program (the reconstruction program). Mr O’Halloran, who was at that time the group’s taxation and insurance manager, advised management in the administration and implementation of the reconstruction program. From time to time, he sought legal advice on taxation and other issues raised by the reconstruction program from the group’s legal advisers, the firm of Arnold Bloch Leibler (ABL).
In the course of the reconstruction program, an issue arose concerning the taxation consequences of significant losses incurred by an entity in the Pratt Group. In this connection, in early 1992, Mr O'Halloran sought ABL’s advice on the application of the ITAA, and ABL commenced to give this taxation advice.
As part of this advising, Mr Leibler, a partner in ABL, suggested that Pratt Holdings obtain a valuation of assets from an independent accounting firm to assist in determining the exact quantum of the losses. ... Mr O’Halloran deposed that he formed the view that, if Pratt Holdings were to receive specific advice from ABL, then Pratt Holdings needed to give ABL "a detailed summary about the background and historical perspective in relation to the specific transactions giving rise to the losses and how they had been treated from an accounting prospective". In cross-examination, he said that this included "any transaction which may have taken place over a period of time, which may have had any impact on [Mr Leibler’s] final advice", as well as accounting records and income tax returns. Mr O’Halloran also formed the view that the proposed work should not be prepared in-house,
... because the matters were complex, time consuming, involved areas where accounting expertise was required and because Mr Leibler had told [him] the valuations should be independent.
In early 1993, Mr O’Halloran telephoned Mr Reardon, then a partner of Price Waterhouse (subsequently PricewaterhouseCoopers) to foreshadow the assistance that Pratt Holdings was likely to seek. Mr O’Halloran and another representative of Pratt Holdings met with Messrs Reardon and Le Huray in February 1993. Mr Reardon deposed:
I informed [Mr O’Halloran] that it was my view that there were additional issues to be considered as to the tax consequences of the transactions in addition to those which Mr Leibler had identified, as communicated to me by Mr O’Halloran during our first discussion.
In conformity with this, Mr O’Halloran stated:
I requested Mr Chris Reardon prepare a briefing paper ("the PW paper") to enable me to provide instructions to Arnold Bloch Leibler to obtain their legal advice. We discussed what additional work to the valuations PW would be required to provide in order to complete a comprehensive review.
At or shortly after this meeting, Mr O’Halloran informed Mr Reardon that he intended to use the paper that Price Waterhouse (also referred to as "PW" in these reasons) was to prepare (the PW paper) for the purpose of obtaining legal advice from ABL, and that it might be necessary for Mr Reardon to attend conferences "or otherwise assist [ABL] on behalf of the Pratt Group". Mr Reardon was to be assisted in this work by Mr Peter Le Huray, who was then a senior consultant at PW. Mr O’Halloran also informed Mr Le Huray that he intended to submit the PW paper to ABL for review and advice. As things turned out, neither Mr Reardon, Mr Le Huray nor any other person from PW attended any conference with ABL, or had any other direct dealings with the firm. In cross-examination, Mr Reardon said:
We weren’t required at those meetings and we directed all correspondence to Mr O’Halloran and he came back to us with any queries or further information that Arnold Bloch Leibler required.
Mr O’Halloran subsequently provided Mr Reardon with a memorandum of instructions dated 5 February 1993. Mr Reardon understood that the PW paper was to be "used as a medium to explain the tax implications concerning the losses incurred and as a record of the facts and documents surrounding those losses from an income tax perspective".
...
... Mr O’Halloran did not provide Mr Reardon with the details of his instructions to ABL. On the contrary, O’Halloran said that:
Although I informed Mr Reardon that the PW paper he was preparing was to enable me to brief Arnold Bloch Leibler, I did not provide him with details of my specific instructions to Arnold Bloch Leibler, nor did I specifically inform him about the matters that I had conferred with Arnold Bloch Leibler about, other than to the extent I considered it to be necessary. I did this because I considered it to be sufficient to instruct Mr Reardon on a "need to know" basis. I also considered my discussions with Arnold Bloch Leibler on behalf of the Pratt Group to be confidential. However, from time to time my instructions to Mr Reardon were expanded if either he or Arnold Bloch Leibler raised additional issues for consideration. I did not instruct Mr Reardon to hold back on the work he was doing. If he considered matters to be material, or raised further matters, then I asked that he include them. I also considered any opinions he expressed as the matter progressed. [emphasis added]
Between February 1993 and August 1994, there were numerous meetings and telephone conversations between Mr O’Halloran and others from the Pratt Group, and Messrs Reardon, Le Huray and others from PW. Mr Le Huray and his staff prepared a series of drafts of the PW paper, while others prepared drafts of the valuation. Mr Le Huray discussed the drafts with Messrs Reardon and O’Halloran. Mr Reardon or one of his team sent the relevant draft to Mr O’Halloran, who sent it to ABL. Mr O’Halloran deposed:
Mr Reardon completed a series of drafts of the PW paper and both Arnold Bloch Leibler and myself reviewed copies of the drafts. I sent the drafts to Arnold Bloch Leibler after receiving them from Mr Reardon. I did not instruct Mr Reardon to send the documents directly to Arnold Bloch Leibler, as I wanted to control the process. [emphasis added]
In cross-examination, Mr O’Halloran said that he wanted to control the flow of information to PW and to ABL. His evidence was that he wanted to determine what and when information prepared by PW was provided to ABL, and what and when the opinions of ABL’s lawyers were provided as such to PW. He conceded that, from time to time, he chose to disclose to PW the advice, as legal advice, that Pratt Holdings received from ABL, even though it may not have been necessary for him to do so.
From time to time, Mr O’Halloran conferred with ABL’s lawyers about the issues raised in the draft PW papers and, as already noted, when he considered it appropriate, he informed Mr Reardon of the opinions expressed by the lawyers.
PW sent Pratt Holdings what it referred to as a "final copy" of the PW paper on 15 October 1993 ...PW sent Pratt Holdings a further version of the PW paper under cover of a letter dated 31 August 1994. Mr O’Halloran gave a copy of the August 1994 version to ABL and asked for ABL’s advice on the issues raised by it.
Mr O’Halloran received a memorandum of advice from Mr Borensztajn of ABL in conference on 23 February 1995. Mr O’Halloran understood the memorandum to have been prepared by Ms Grodski and settled by Mr Leibler. Mr Borensztajn informed him that he too had reviewed the PW paper and the ABL advice.’
57 Her Honour found that the documents in dispute fell into seven categories:
(1) documents created by PW personnel including internal working notes (e.g., emails between PW personnel, notes on calculations and records of research), memoranda and other notes of discussions between PW personnel (e.g., Messrs Reardon and Le Huray) and Pratt Holdings personnel (e.g., Mr O’Halloran).
(2) documents created by PW personnel that were provided to Pratt Holdings including memoranda and other notes of discussions between PW personnel and Pratt Holdings personnel; final and draft versions of the PW paper; a loan valuation known as the Yoni loan valuation; the discussion paper concerning a matter raised by the accounting firm of Arthur Andersen; other letters, fax cover sheets and emails (if any) constituting communications by PW to Pratt Holdings.
(3) documents created by Pratt Holdings personnel (e.g., Mr O’Halloran) that were provided to PW including letters, memoranda, fax cover sheets and emails (if any) constituting communications by Pratt Holdings to PW.
(4) documents containing legal advice that were created by ABL and disclosed by Pratt Holdings to PW including letters and memoranda of advice prepared by ABL for Pratt Holdings and a letter of advice dated 18 December 1992 prepared by ABL and addressed to Mr Deane Howell of Frank Jones & Associates, forwarded by him to Pratt Holdings (Mr O’Halloran) and by Pratt Holdings to PW.
(5) documents created by other firms of accountants that were disclosed by Pratt Holdings to PW including a letter dated 27 May 1994 from the accounting firm of Ernst & Young, with a draft letter to the State Revenue Office;
(6) documents created by PW that were disclosed to other firms of accountants by PW including correspondence with Arthur Andersen;
(7) documents that fell within the descriptions in (1)-(6) above but have been disclosed to the Commissioner including the Yoni loan valuation, drafts of the valuation and associated papers as well as ‘source documents’.
58 The learned primary judge continued her summary of the background as follows:
‘Mr Reardon gave evidence that there may have been memoranda or notes of discussions between representatives of Pratt Holdings and PW that PW created and forwarded to Pratt Holdings for some reason, although PW did not forward such documents as a matter of course. Mr O’Halloran’s evidence was that there may have been some such memoranda or notes prepared by PW that he provided to ABL. He did not, however, instance any such case. His evidence was that:
The major correspondence I passed on to Arnold Blochs was the briefing paper itself. To the extent there were other notes of meetings that had been conveyed to me by Price Waterhouse in a form of a memo or a minute of the meeting, I can’t confirm whether I actually then passed that on to Arnold Bloch Leibler.
Mr Reardon said in cross-examination that there was no identified author in respect of a number of PW’s internal working documents, and that he could not say what was in the mind of the author of these documents when he (Mr Reardon) was not the author. Mr Reardon also said that he made notes or memoranda of discussions with Mr O’Halloran and others not only as an aide memoire but also "to convey information to the team who were assisting" him.
In his second affidavit, Mr Reardon deposed that, as far as he was concerned:
... every communication of information by [a] client to PW was confidential and PW was not able to distribute that information to others without the client’s consent. I considered PW was not at liberty to disclose to other persons information provided by Pratt Group to PW during PW’s retainer, and to the best of my knowledge, PW did not do so.
In each of their second affidavits, Messrs Le Huray and O’Halloran corroborated Mr Reardon’s evidence in this regard. The files in which PW maintained documents relating to Pratt Group’s retainer were all marked "Confidential".’
DECISION OF THE PRIMARY JUDGE
59 A fundamental issue before the learned primary judge, and the subject of these appeals, was whether privilege attached to the communications between Pratt and PW. Referring to Waugh v British Railways Board [1979] UKHL 2; [1980] AC 521 (‘Waugh’) and Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] VSCA 59; (2002) 4 VR 332 (‘Mitsubishi’) her Honour distinguished between ‘litigation privilege’ and ‘legal advice privilege’; Commissioner of Taxation v Pratt Holdings Pty Ltd [2003] FCA 6; (2003) 195 ALR 717 at [39]. Following Wheeler v Le Marchant (1881) 17 Ch D 675 (‘Wheeler’), she held that in the absence of contemplated or actual litigation, advice privilege does not subsist in a communication between solicitor or client with a third party, unless the third party is an agent of the client or solicitor for the purpose of the communication. Her Honour said, at [39] - [40]:
‘The common law in Australia is, therefore, that legal professional privilege attaches to:
(1) confidential communications passing between a client and the client’s legal adviser, for the dominant purpose of obtaining or giving legal advice (legal advice privilege); and (2) confidential communications passing between a client, the client’s legal adviser and third parties, for the dominant purpose of use in or in relation to litigation, which is either pending or in contemplation (litigation privilege).
See Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] VSCA 59; (2002) 4 VR 332 (Mitsubishi), at 335-6 [8] per Batt JA, with whom Charles and Callaway JJA agreed, and Grant v Downs, at CLR 677 per Barwick CJ. As the majority observed in Esso(at CLR 64; ALR 132-3):
The privilege exists to serve the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers.
Plainly enough, different principles govern the availability of legal advice privilege and litigation privilege: cf Waugh at AC 541-2 per Lord Edmund-Davies. One difference, which is relevant in this case, is that, unlike litigation privilege, advice privilege is not available "where one of the parties to the communication is a third party who is not the agent of the client for the purpose of the communication": see Mitsubishi at 336 [9] per Batt JA. Where, as in this case, litigation is neither pending nor contemplated, communications between a person or his legal adviser and a third party (who is not the agent of either of them) are not privileged, even though the communications were made for the purpose of giving or obtaining legal advice.’
60 Her Honour expressed some concern that the requirement that the third party be an agent for the purpose of the communication is too narrow and commented, at [72], that it,
‘apparently requires that the relevant communication pass directly between the non-client and the solicitor. A communication between a non-party and a solicitor, which passes via the client, is not apparently privileged. Upon this approach, too much may turn on whether a written communication is prepared by a corporation internally, or externally by a third party, notwithstanding that the communication in either case is for the dominant purpose of obtaining legal advice and may contain the same information.’
61 Nevertheless, the learned primary judge held that the situation in the matter before her was not materially different from the situations in Wheeler, Re Highgrade Traders Ltd [1984] BCLC 151 and Price Waterhouse (a firm) v BCCI Holdings (Luxembourg) SA [1992] BCLC 583. Her Honour followed Belgravia Investments Ltd v Canada [2002] FCJ No 870 and held that PW could not be considered a representative or agent of Pratt Holdings for the purpose of obtaining legal advice.
62 That being so, her Honour held that, even assuming the communications were confidential and made for the dominant purpose of obtaining legal advice, they were not privileged. As her Honour expressed it, at [70]:
‘PW was simply engaged to produce a paper and valuation for Pratt Holdings. It discharged its task by conveying the report and the valuation to Pratt Holdings (along with other documents) with a view to Pratt Holdings conveying the information to ABL (or with a view to Pratt Holdings conveying so much of this information as Pratt Holdings considered appropriate to convey to ABL).’
63 Applying the above analysis, the learned primary judge held that the documents in categories one, two, three, five and six (see [56] above) were not privileged. Her Honour’s approach to legal privilege made it unnecessary for her to make a finding as to the dominant purpose pursuant to which the documents were created. In relation to the documents in category four, her Honour held that legal professional privilege was not necessarily waived by disclosure to PW and then dealt with the documents individually on the basis of the view of legal professional privilege she had expressed in relation to the other categories. There was no issue in regard to the documents in category seven as those documents had already been disclosed to the respondent.
GROUNDS OF APPEAL
64 The appellants claim that her Honour erred in finding that PW was not the agent of Pratt for the purpose of making or receiving communications to or from ABL and, irrespective of that issue, erred in not finding that legal professional privilege attached to the documents for which such privilege is claimed by the appellants.
APPELLANTS’ SUBMISSIONS ON APPEAL
65 The appellants submit that her Honour’s approach to the application of legal professional privilege was misguided and that the Australian approach, most recently enunciated by the High Court in Daniels, involves a single rationale for the application of privilege. As such, there is no basis for applying different rationales for advice and litigation privilege as her Honour did. They say that, beginning with Wheeler, the English authorities have developed along a different line from that laid down in Australia. The English line divides legal professional privilege into the discrete categories of litigation and advice privilege. The difference between the two categories is that where the relevant communication is between the solicitor or client and a third party, an additional criterion, namely that of agency, must be satisfied before legal advice privilege is available; see Three Rivers District Council v The Governor & Company of the Bank of England [2003] EWCA Civ 474 (‘Three Rivers 2003’); [2003] QB 1556, applied in Three Rivers District Council v The Governor & Company of the Bank of England [2004] EWCA Civ 218 (‘Three Rivers 2004’).
66 The appellants submit that this is not the position in Australia where there is a single ‘purpose test’ approach to privilege which does not require consideration of agency. The principles expounded in Wheeler and Three Rivers 2003, they say, are inconsistent with the approach adopted by the High Court of Australia. In Australia, the purpose test is both sufficient and exhaustive so that it is incorrect to say that advice privilege must satisfy both a purpose test and a further agency test.
67 The appellants argue that the agency test applied in Wheeler is artificial and illogical, separating the communications between the solicitor and the third party from the surrounding communications. They point out that this artificiality has been recognised even in cases that have applied the test including Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44 (‘Nickmar’), Australian Rugby Union Ltd v Hospitality Group Pty Ltd [1999] FCA 1061; (1999) 165 ALR 253 (‘Australian Rugby’) and GSA Industries (Aust) Pty Ltd v Constable [2001] QSC 180; [2002] 2 Qd R 146 (‘GSA Industries’). The appellants further submit that there being one underlying policy governing legal professional privilege in Australia, abandoning the agency requirement articulated in Wheeler ‘would not unduly extend the scope of the privilege, as the communication with the third party would still have to be made or brought into existence for the dominant purpose of obtaining or giving legal advice.’
68 The appellants submit that the correct position in Australia is that if the dominant purpose criterion is satisfied and the communication is confidential then the communication is privileged irrespective of whether litigation is anticipated or pending, or whether the communication is made by an agent of the client, provided it is made ‘at the direction or with the authority of the client who holds the requisite purpose’.
69 As such, say the appellants, if Pratt, having the requisite dominant purpose, instructed PW to prepare a confidential report for Pratt to use in briefing ABL, the report would be privileged irrespective of whether it was given to ABL directly by PW or through Pratt. The appellants note this position still allows the client to be asked about the facts but does not allow the client to be asked what he or she told the solicitor were the facts. They submit that the requirement in Wheeler, that the third party, in making the communication, must be the client’s agent, is too narrow and ‘not in accordance with a substantial body of Australian and foreign authority’.
LEGAL PROFESSIONAL PRIVILEGE – RATIONALE
70 Legal professional privilege was initially protective of attorneys because they were bound by oath to keep their clients’ secrets; Waldron v Ward (1654) Style 450, 82 ER 853; Preston v Carr (1826) 1 Y & J 175 at 178-9. By the late 19th century it was accepted that the client was also protected by the privilege; Minet v Morgan (1873) LR 8 Ch App 361.
71 The position where a party other than the client and the legal professional is involved in the communication between client and solicitor has been considered on many occasions. As early as 1791 the Court of Kings Bench held that the principle applied to an interpreter interposed between a French speaking defendant and his English attorney; Du Barré v Livette (1791) Peake 108. In Walker v Wildman (1821) 6 Madd 47, 56 ER 1007, Sir John Leach VC refused to make an order that the defendant, Mrs Wildman, produce certain papers that had passed from her and from her son to her solicitor, holding that the protection applied to every communication between the client and counsel, attorney or solicitor for professional assistance. The report further states (at 47-48, 1008) that the Vice-Chancellor held
‘that the protection was the same whether the client communicated directly with his professional adviser, or through the intervention of a third person.’
72 In Bunbury v Bunbury (1839) 2 Beav 173, 48 ER 1146 Lord Langdale MR stated that Walker v Wildman had never been disputed and observed,
‘[I]t certainly appears to me that there may be very many cases in which a party, not being able himself to have a direct communication with his solicitor, is compelled to employ an intermediate agent for the purpose of thus effecting a communication of matters of a confidential nature. In such cases the necessity, which arises, of transmitting such communications through another party, renders it privileged.’
73 In 1825 it was held that the rule respecting privileged communications extended to an attorney’s clerk acting on behalf of his master because attorneys could not transact all their business in person; Taylor v Forster (1825) 2 C & P 195; see also R v The Inhabitants of Upper Boddington (1826) 8 Dow & Ry 726. The same holds true of communications made to a solicitor’s agent; Parkins v Hawkshaw (1817) 2 Stark 239. In these cases the intermediary was accepted as the alter ego of the client or of the solicitor as the case may be; the justification for adopting this approach and protecting communications made through an intermediary is that otherwise the protection afforded to the client would be nugatory.
74 Initially, legal professional privilege was restricted to communications made for the purpose of litigation and did not extend to advice outside this context. As late as 1828, in Broad v Pitt (1828) 3 Car & P 518, Best CJ was forthright that, ‘A man is not acting as an attorney when he is consulted about a deed.’ Ultimately, however, the privilege was extended to communications between lawyer and client when those communications were not in the context of litigation and became known as legal advice privilege; Greenough v Gaskell (1833) 1 My & K 98; 39 ER 618 (‘Greenough’). In Greenough at 102-3; 620-1, Lord Brougham LC explained the rationale for extending legal professional privilege beyond the context of litigation:
‘If it were confined to proceedings begun or in contemplation, then every communication would be unprotected which a party makes with a view to his general defence against attacks which he apprehends, although at the time no one may have resolved to assail him. But were it allowed to extend over such communications, the protection would be insufficient, if it only included communications more or less connected with judicial proceedings; for a person oftentimes requires the aid of professional advice upon the subject of his rights and his liabilities, with no reference to any particular litigation, and without any other reference to litigation generally than all human affairs have, in so far as every transaction may, by possibility, become the subject of judicial inquiry.
...
The foundation of this rule is not difficult to discover ... it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings. ... If the privilege were confined to communications connected with suits begun, or intended, or expected, or apprehended, no one could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous.’
75 Commenting on Greenough, Longmore LJ in Three Rivers 2003 at [8] said that the decision was not initially accepted by all, but that by 1846 even Lord Langdale MR had capitulated and accepted the position, albeit unwillingly; Reece v Trye (1846) 9 Beav 316, 318-319. At this stage it does not appear that the courts drew any distinction between the rationale for litigation privilege and that for advice privilege.
76 Reservations about the rationale for extending legal professional privilege beyond the litigation context are still occasionally expressed. In Three Rivers 2004, the Court of Appeal said at [39],
‘We have found this area of law not merely difficult but unsatisfactory . The justification for litigation privilege is readily understood. Where, however, litigation is not anticipated it is not easy to see why communications with a solicitor should be privileged. Legal advice privilege attaches to matters such as the conveyance of real property or the drawing up of a will. It is not clear why it should. There would seem little reason to fear that, if privilege were not available in such circumstances, communications between solicitor and client would be inhibited. Nearly fifty years have passed since the Law Reform Committee looked at this area. It is perhaps time for it to receive a further review.’
77 In Australia the extended doctrine has gained more solid acceptance. Difficulties in applying the rationale for litigation privilege to the extended doctrine have been recognised and resolved by expressing the rationale at a higher level of generality so that it can accommodate both aspects of legal professional privilege. In Carter v Northmore Hale Davy & Leake [1995] HCA 33; (1995) 183 CLR 121 (‘Carter’) at 161, McHugh J commented that the rationale behind litigation privilege,
‘hardly seems applicable to non-litigious communications between legal adviser and client unless the concepts of "the legal system" and "the administration of justice" are given extended and artificial meanings.’
His Honour continued however,
‘Now that this Court has held that legal professional privilege is not a rule of evidence but a substantive rule of law, the best explanation of the doctrine is that it is "a practical guarantee of fundamental, constitutional or human rights" ... . By protecting the confidentiality of communications between lawyer and client, the doctrine protects the rights and privacy of persons including corporations by ensuring unreserved freedom of communication with professional lawyers who can advise them of their rights under the law and, where necessary, take action on their behalf to defend or enforce those rights. The doctrine is a natural, if not necessary, corollary of the rule of law and a potent force for ensuring that the equal protection of the law is a reality.’
78 Stated thus, the rationale is capable of justifying both aspects of legal professional privilege. This is consistent with the approach of other members of the Court in Carter, including Brennan J who stated at 127:
‘In my opinion, the basic justification for allowing the privilege is the public interest in facilitating the application of the rule of law.
Administration of the law is not the function of the courts alone. The law is administered more frequently and more directly by legal advisers than it is by judges. Legal professional privilege ensures that the law’s writ can run effectively whenever a legal problem arises or a person seeks to chart a course of conduct in conformity with the law.’
79 The appellants’ claim that, in Australia, there is one rationale underlying legal professional privilege and a single exhaustive purpose test is supported by these comments in Carter and by other observations made by the High Court. It will suffice to refer to some of these observations. In Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 130, Dawson J said:
‘If a client cannot seek advice from his legal adviser confident that he is not acting to his disadvantage in doing so, then his lack of confidence is likely to be reflected in the instructions he gives, the advice he is given and ultimately in the legal process of which the advice forms part.’
Deane J expressed similar sentiments at 118.
80 These comments are consistent with an appreciation that the value of confidential legal advice extends beyond the context of litigation. Wilson J was clearly of that view; his Honour’s explanation, at 94-5, of the rationale for the extension of legal professional privilege beyond the context of litigation is worth quoting extensively:
‘In earlier times, of course, it has been the demands of the adversary system which enlivened the principle and nourished the notion that the privilege was a rule of evidence confined to judicial and quasi-judicial proceedings. However, I do not now think that the conception can be so limited. ... The perfect administration of justice is not confined to legal proceedings. The object and indeed the result of consulting a solicitor will often be the settlement of a dispute which otherwise may have to be fought out in court. The fostering of a professional relationship which obviates recourse to litigation is very much in the public interest. ...
Furthermore, the extension of the privilege more than a century ago ... beyond communications between the client and his professional adviser in relation to pending or anticipated litigation to embrace any communications undertaken with the object of seeking or giving legal advice serves, in my opinion, to emphasize that the public interest involved extends beyond legal proceedings. In fostering the confidential relationship in which legal advice is given and received the common law is serving the ends of justice because it is facilitating the orderly arrangement of the client’s affairs as a member of the community. Furthermore, in promoting the faithful discharge of his responsibilities and the enjoyment of his rights under the law the ends of justice are being served. It is in the public interest to encourage the service of such ends.
The multiplicity and complexity of the demands which the modern state makes upon its citizens underlines the continued relevance of the privilege to the public interest. The adequate protection according to law of the privacy and liberty of the individual is an essential mark of a free society and unless abrogated or abridged by statute the common law privilege attaching to the relationship of solicitor and client is an important element in that protection.
It is not only a matter of protection of the client. The freedom to consult one’s legal adviser in the knowledge that confidential communications will be safeguarded will often make its own contribution to the general level of respect for and observance of the law within the community.’
81 In Waterford v The Commonwealth of Australia [1987] HCA 25; (1987) 163 CLR 54 (‘Waterford’), the High Court held that legal professional privilege extended to confidential professional communications between government agencies and their salaried legal officers if made with the requisite purpose. Justices Mason and Wilson noted at 64 that legal professional privilege is the product of ‘a balancing exercise between competing public interests’ with the result that greater importance is attached to the public interest in ‘the perfect administration of justice’ than to the interest in a fair trial which would require the admission of all relevant material. Their Honours observed,
‘The growing complexity of the legal framework within which government must be carried on renders the rationale of the privilege, as expressed in Grant v Downs, increasingly compelling when applied to decision-makers in the public sector. The wisdom of the centuries is that the existence of the privilege encourages resort to those skilled in the law and that this makes for a better legal system.’
82 In Attorney-General for the Northern Territory v Maurice [1986] HCA 80; (1986) 161 CLR 475 (‘A-G v Maurice’), at 487, Mason and Brennan JJ quoted with approval, Stephen J’s comment in R v Bell; Ex parte Lees [1980] HCA 26; (1980) 146 CLR 141 at 152, that the policy behind legal professional privilege is based on:
‘...the need of laymen for professional assistance in the protection, enforcement or creation of their legal rights. They should have the benefit of that assistance, free of any restraint which fear of the disclosure of their communications with those advisers would impose.’
83 In Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia [1999] HCA 67; (1999) 201 CLR 49 (‘Esso’) at 64, Gleeson CJ, Gaudron and Gummow JJ described the policy issues underpinning legal professional privilege in the following terms:
‘Legal professional privilege (or client legal privilege) protects the confidentiality of certain communications made in connection with giving or obtaining legal advice or the provision of legal services, including representation in proceedings in a court. In the ordinary course of events, citizens engage in many confidential communications, including communications with professional advisers, which are not protected from compulsory disclosure. The rationale of the privilege has been explained in a number of cases ... . The privilege exists to serve public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers. In Waterford v The Commonwealth [1987] HCA 25; (1987) 163 CLR 54 at 64-65, Mason and Wilson JJ explained that legal professional privilege is itself the product of a balancing exercise between competing public interests and that, given the application of the privilege, no further balancing exercise is required. As Deane J expressed it in Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 114, a person should be entitled to seek and obtain legal advice in the conduct of his or her affairs, and legal assistance in and for the purposes of the conduct of actual or anticipated litigation, without the apprehension of being prejudiced by subsequent disclosure of the communication.’
84 Although the High Court in Esso adopted the ‘dominant purpose’ test in preference to the ‘sole purpose’ test accepted in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 there was no suggestion in either case that there was more than one rationale for legal professional privilege. In Grant v Downs the Court, by a majority, held that for legal professional privilege to apply it was necessary for the documents to have been created for the purpose of obtaining legal advice. The majority held that this had to be the sole purpose whereas Barwick CJ held that it was sufficient if it was the dominant purpose. In outlining their reasons however, neither the majority nor Barwick CJ drew any distinction between advice and litigation privilege. Barwick CJ, whose approach was eventually accepted in Esso, said at 677,
‘a document which was produced or brought into existence either with the dominant purpose of its author, or the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.’
For present purposes it should be noted that in this passage the Chief Justice accepted not only the criterion of dominant rather than sole purpose, but also that this purpose may be either that of the author of the document or the person who authorised its creation.
85 The High Court’s most recent consideration of the issue was in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 192 ALR 561 (‘Daniels’), where Gleeson CJ, Gaudron, Gummow and Hayne JJ said at 564:
‘It is now settled that legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communication between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings.’
86 The High Court’s exposition of the rationale for legal professional privilege is consistent with the appellants’ submission that there is a single rationale in Australia for legal professional privilege: the rationale applies to litigation privilege and to legal advice privilege. However, it does not follow from accepting a single rationale that the distinct categories of litigation and advice privilege should no longer be recognised. A single rationale or policy may well be manifested in distinct situations and categorising those situations differently may be a useful analytic device, allowing the formulation of more specific rules to assist in implementing the rationale. In any event the distinction between legal advice privilege and litigation privilege is not an issue that I need consider at this time. I agree with Finn J that this matter can be decided in the context of advice privilege. For present purposes it is sufficient if the criteria applied are consistent with the rationale for legal professional privilege as articulated by the High Court. The dominant purpose criterion was articulated by Barwick CJ in Grant v Downs and accepted by the High Court in Esso; the requirement of confidentiality is presupposed in their Honours’ remarks.
87 In itself, however, the dominant purpose requirement does not automatically determine the ambit of the privilege or lead to the conclusion for which the appellants contend. Extending legal professional privilege to protect communications made for the dominant purpose of obtaining legal advice does not require all communications between legal adviser and client to be protected. If, however, the policy implicit in the rationale for legal professional privilege is not to be subverted, the dominant purpose criterion must be applied recognising that the situations in which people need legal advice are increasingly complex and that the client may need the assistance of third party experts if he or she is to be able to instruct the legal adviser appropriately. This complexity is not peculiar to Australia: it was recognised by the Court of Appeal in Balabel v Air India [1988] 1 Ch 317 (‘Balabel’) and that Court’s illustration of it is equally applicable in the Australian context.
88 In Balabel it was argued that legal professional privilege extended to all communications between solicitor and client upon matters within the ordinary business of a solicitor which are referable to the relationship. Lord Justice Taylor (with whom Lord Donaldson MR and Parker LJ agreed) was not prepared to extend the doctrine to this extent but nevertheless took a broad practical approach. His Lordship held, at 330, that despite legal professional privilege being extended to non-litigious business, its purpose and scope remained the same, namely to enable a person to seek and be given legal advice in confidence. His Lordship continued:
‘In my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes have to be construed broadly. Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required or appropriate on matters great or small at various stages. There will be a continuum of communication and meeting between the solicitor and client. The negotiations for a lease such as occurred in the present case are only one example. Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach. A letter from the client containing information may end with such words as "please advise me what I should do." But, even if it does not, there will usually be implied in the relationship an overall expectation that the solicitor will at each stage, whether asked specifically or not, tender appropriate advice. Moreover, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context.’
89 Inherent in this approach is the recognition that a narrow view may render the protection afforded by legal professional privilege nugatory. Similarly, the courts, both in England and Australia, have accepted that it is necessary to extend privilege beyond actual communications and, as Gummow J pointed out in Commissioner of Australian Federal Police v Propend Finance Pty Limited [1997] HCA 3; (1997) 188 CLR 501 at 569, to deny access,
‘to any document prepared by a lawyer or client from which there might be inferred the nature of the advice sought or given. Examples include communications between the various legal advisers of the client, draft pleadings, draft correspondence with the client or the other party, and bills of costs.’
As the appellants submitted, if this were not so lawyers’ draft advices, research notes or file notes would never be protected; see also Daniels at 564 and 573.
90 This practical approach to preserving the efficacy of legal professional privilege is also manifested in the recognition that in the context of litigation the privilege extends not only to communications between the client and his lawyers but also to material gathered for the purpose of compiling the brief in the litigation; The Palermo (1884) LR 9 PD 6; Trade Practices Commission v Sterling [1979] FCA 33; (1979) 36 FLR 244 at 245-6; A-G v Maurice. In Wheeler at 684-5, Cotton LJ justified this aspect of privilege saying that,
‘... the solicitor is preparing for the defence or for bringing the action, and all communications he makes for that purpose, and the communications made to him for the purpose of giving him the information, are, in fact, the brief in the action and ought to be protected.’
91 However, even this broad application requires that the purpose criterion be met. In Anderson v Bank of British Columbia (1877) 2 Ch D 644 (‘Anderson’) the Court of Appeal held that a letter from a branch manager of the Bank of British Columbia to the head office setting out the full particulars of a transaction that was likely to be the subject of litigation was not privileged. The account of the transaction was requested by the head office but there was nothing to indicate that the document was required for the purpose of or in contemplation of litigation rather than merely for the purpose of enabling the head office to understand the transaction. Presumably if the report had been requested by a solicitor the Court would have been able to infer that the requisite purpose was present; but it is not necessary, however, that the request be made by the solicitor as long as the purpose test is met; Southwark and Vauxhall Water Company v Quick (1878) 3 QBD 315; Ankin v London & North Eastern Railway Company [1930] 1 KB 527 at 534; Birmingham & Midland Motor Omnibus Company Limited v London & North Western Railway [1913] 3 KB 850. The distinction is clearly illustrated in Woolley v The North London Railway Company (1869) 4 CP 602 where routine reports of a railway accident made by the company’s agents in the ordinary course of their duty were not privileged but expert reports obtained by the Company for the purpose of litigation concerning the same accident were protected; see also The Hopper (No 13) [1925] PD 53; National Employers’ Mutual General Insurance Association Limited v Waind [1979] HCA 11; (1979) 141 CLR 648.
92 It is against this background of the history and development of legal professional privilege that one must consider the proposition that the learned primary judge derived from Wheeler, namely that in the absence of contemplated or actual litigation, advice privilege does not subsist in a communication between a solicitor or client with a third party, unless the third party is an agent of the client or solicitor for the purpose of the communication; see [58] above.
93 In Wheeler, the plaintiff sought specific performance of an agreement under which the defendants were to grant a lease of land on which the plaintiff was to erect buildings. The defendants resisted production of certain letters to their solicitors from surveyors retained by those solicitors. Jessel MR at 682 summarised the background to the claim for privilege thus:
‘The solicitor being, consulted in a matter as to which no dispute has arisen, thinks he would like to know some further facts before giving his advice, and applies to a surveyor to tell him what the state of a given property is, and it is said that the information given ought to be protected because it is desired or required by the solicitor in order to enable him the better to give legal advice.
94 The Court of Appeal held that the defendants must produce the letters with the exception of those identified in affidavits by the defendants as having been prepared confidentially after the dispute between the plaintiff and the defendants had arisen and ‘for the purpose of obtaining information, evidence, or legal advice with reference to litigation existing or contemplated between the parties to this action’; Wheeler at 685 per Cotton LJ.
95 As the orders of the Court of Appeal indicate, the circumstances in which the documents were created were not entirely clear. Cotton LJ referred to this difficulty and summarised the case put by the plaintiffs as follows:
‘It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word, "representatives". If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these people were not representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients ... to do certain work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor. In fact, the contention of the Respondents comes to this, that all communications between a solicitor and a third person in the course of his advising his client are to be protected.’ [emphasis added]
96 Understood that way, it is not at all surprising that the claim was rejected. It simply did not meet the purpose criterion. The letters from the surveyors were not created for the purpose of obtaining legal advice for the client. In the absence of such purpose the rationale for legal professional privilege does not require that a communication be protected. The surveyors had been retained independently of the client and therefore the requisite purpose could not have come from the client. In the circumstances the surveyors had been retained by the solicitors on behalf of the client to do certain work but, as Wood J observed in Nickmar at 54, that purpose was not communicating with the solicitor to obtain legal advice. Had the surveyors been retained by or at the request of the client the requisite purpose may have been inferred.
97 As explained earlier, the rationale for legal professional privilege proffered by the High Court is capable of justifying both aspects of the doctrine and, to that extent, the doctrine in Australia has developed differently from in England; see [75]-[77] above. For this reason it is important to focus on the fate of Wheeler in Australia rather than in England, or indeed, in other common law countries. The case has been cited, with approval, for the proposition that confidential communications between a legal adviser or client and a third party will be privileged if made for the dominant purpose of obtaining legal advice and either the third party is the agent of the client or the communication is made in relation to litigation existing, anticipated or contemplation (the ‘Wheeler proposition’). In a number of cases the Wheeler proposition has been cited with approval but has not been in contention; Trade Practices Commission v Sterling [1979] FCA 33; (1979) 36 FLR 244 at 245-6; Hartogen Energy Ltd (in liq) v Australian Gas Light Co (1992) 109 ALR 177 at 189; Dick Smith Electronics Pty Limited v Westpac Banking Corporation [2002] FCA 1040 at [28]. Similarly, the Wheeler proposition appears to have been accepted without discussion in Health & Life Care Ltd v Price Waterhouse [1997] SASC 6306; (1997) 69 SASR 362 at 369-70 by Lander J (with whom Doyle CJ and Bleby J were in general agreement). The critical issue in the case was confidentiality rather than the status of communications with third parties.
98 In the majority of cases where the Wheeler proposition has been applied the claim for privilege has been successful because the claimants have been able to establish either or both:
(a) the communications were made by agents of the client; Leader Westernport Printing Pty Ltd v IPD Instant & Duplicating Pty Ltd (1988) 5 ANZ Insurance Cases |P60-856 (‘Leader’); GSA Industries; Australian Rugby; Nickmar ;
or
(b) that they were made in the context of litigation which was actual, anticipated or in contemplation; Bartram & Son v E.A. Clark & Son Proprietary Ltd [1905] VLR 442; Leader; Nickmar; Mitsubishi (litigation).
99 Ignoring for the moment the decision that is the subject of these appeals, there is only one Australian case of which I am aware where the claim for privilege has been unsuccessful on the application of Wheeler; Macedonia Pty Ltd v Federal Commissioner of Taxation (1987) 87 ATC 4565 (Supreme Court of South Australia) (‘Macedonia’). More interestingly, there is no instance of which I am aware, where the purpose criterion has been met but the claim for privilege in respect of third party communications has nonetheless failed because of the application of the Wheeler proposition.
100 In Macedonia, White J considered the status of communications between the appellant company (through its agent Mr Balnaves) and Mr Richards who, although he had at one time been an agent for the company, was not the company’s agent at the relevant time. There were three documents: a request from the company to Mr Richards seeking certain information; Mr Richard’s response; and the company’s request for further and better particulars about a payment that had been made to Mr Shepherd, an accountant and director of the company. White J held that because Mr Richards was not an agent of the company the document would be protected only if it was created with the requisite purpose for use in anticipated litigation; his Honour held at 4568 that,
‘The purpose of obtaining advice would not be enough. The documents in this group suffer two disadvantages – they were not requested by or delivered to a solicitor and they were not shown to relate to anticipated litigation’
101 His Honour did not make any finding as to the purpose for which the documents were created and there is nothing in his account of the facts to suggest that they were created for the purpose of obtaining legal advice. This may be explained not only by the view his Honour had formed as to the principles regarding third party communications but also because, at the time, Grant v Downs required that the purpose of obtaining legal advice must be the sole purpose for privilege to be available. His Honour took a similar view of correspondence between the company’s solicitors and Mr Shepherd concerning the payment to Mr Shepherd.
102 Finally, this brings me to Morlea Professional Services Pty Ltd v South British Insurance Company Ltd (unreported) Supreme Court of New South Wales, 27 September 1984. The privilege issue arose in the context of a fire insurance claim. The documents in dispute fell into various categories, including those containing third party communications such as reports of inspectors and experts together with associated material, statements of various persons and draft memoranda. Foster J found that it was necessary for him to consider each document individually. Although his Honour did not give reasons in respect of each document he did outline the legal principles that he regarded as relevant to his decision and, relevantly, made the following comments:
‘The submission was put in the present case, based upon the old authority of Wheeler v Le Marchant ... that documents from third parties which come into existence at the request of a legal advisor for the purpose of his giving or preparing to give advice (apart from circumstances of anticipated or actual litigation) can never be privileged. Under this submission it was sought that I exclude, in particular, experts’ reports obtained by the defendant’s solicitor himself or sent direct to the solicitor at the defendant’s request for the purpose of the solicitor advising the defendant in relation to the claim in those proceedings.
I do not consider that Wheeler’s case is authority for so wide a principle ... I am satisfied that if it is established that the documents came into existence for the sole purpose of the solicitor rendering advice to the client it does not matter whether the document was forwarded to the solicitor by the client or by the maker of the document at the client’s request, nor does it matter that the document was obtained direct by the solicitor from the maker at the client’s request. The essential requirement is that it came into existence for the sole purpose of the solicitor rendering advice to the client.’ [emphasis added]
103 I am satisfied from this survey of the Australian decisions that have considered the Wheeler principle that this Court is not bound either by authority of considerations of comity to dismiss the present appeals because PW was not the agent of Pratt when it created the documents in question. In my view the present issue must be decided by the application of principle, eschewing formalistic approaches and concentrating on substance.
104 The history of legal professional privilege shows that the courts have been willing and able to adapt the doctrine to ensure that the policy supporting the doctrine is not sabotaged by rigid adherence to form that does not reflect the practical realities surrounding the application of privilege. The complexity of present day commerce means that it is increasingly necessary for a client to have the assistance of experts, including financial experts such as accountants, in formulating a request for legal advice and in providing legal advisers with sufficient understanding of the facts to enable that advice to be given. This much was recognised by Taylor LJ in Balabel.
105 The complexity of commercial arrangements is matched by increasing volume, complexity and technicality in the law: taxation legislation now runs to many volumes, encompassing nearly two thousand provisions; corporations and securities legislation is similarly mammoth. A company that wishes to obtain legal advice as to its obligations under such legislation may well need to rely on experts to assist it in instructing its legal advisers. This is not only true of commercial arrangements but may also extend to scientific and technological complexities. To take a purely hypothetical example, suppose the manufacturer of lip salve requests its lawyer to advise as to the health and manufacturing standards with which it must comply. The lawyer is aware that among the legal requirements that may be relevant are regulations applicable to skin care products. In such a case scientific advice may be required as to whether lips are skin. These are issues that did not arise in simpler times.
106 The coherent rationale for legal professional privilege developed by the High Court does not lend itself to artificial distinction between situations where that expert assistance is provided by an agent or alter ego of the client and where it is provided by a third party. Nor, in my view, should the availability of privilege depend on whether the expert opinion is delivered to the lawyer directly by the expert or by the client. Provided that the dominant purpose requirement is met I see no reason why privilege should not extend to the communication by the expert to the client. This approach is consistent with the High Court’s ruling in Daniels (see [84] above) that legal professional privilege protects communications and therefore prevents the disclosure of information or documents that would reveal communications protected by the doctrine.
107 I do not accept that this approach would lead to uncontrollable extension of the privilege. The difficulties in proving the relevant purpose should not be underestimated. Advice as to commercially advantageous ways to structure a transaction are extremely unlikely to attract privilege because the purpose in putting the advice together will, in most cases, be quite independent of the need for legal advice. Even if the parties have in mind that the advice will be submitted to a lawyer for comment, the purpose is unlikely to be the dominant purpose. Determining the dominant purpose underlying a communication may be difficult but no more so than many questions that come before courts. Courts would need to take into account exactly what function was served by the expert advice and whether it was really required in order to instruct the legal advisers fully. Obviously if the third party is an agent of the client and the client has the requisite purpose the determination is comparatively simple. Similarly if the material sought by the lawyer is required for litigation it is not difficult to determine the chain of authority and to find the requisite purpose; see, however, [90] above. Ultimately the question is one of fact and the onus is on the person seeking privilege protection to establish the case.
108 As mentioned earlier (see [61]-[62] above) the learned primary judge did not make a finding as to Pratt’s purpose; given her view that privilege could only apply if PW were the agent of Pratt it was not required. Since I am of the opinion that, in the circumstances, agency is not a necessary condition of privilege I would set aside the declarations that reflect her Honour’s contrary conclusion in relation to the documents in categories (1), (2), (3), (5) and (6). In relation to the documents in category 4, I agree with Finn J that the documents in category 4 should be reconsidered and that the declarations in relation to these documents should be set aside and the matter remitted to the primary judge. I agree with the orders proposed by Finn J.
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I certify that the preceding fifty-five (55) numbered paragraphs are a true
copy of the Reasons for Judgment herein of the Honourable
Justice Stone.
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Associate:
Dated: 10 May 2004
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Counsel for the Appellants:
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N J Young QC with
R Peters |
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Solicitor for the Appellants:
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Arnold Bloch Leibler
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Counsel for the Respondent:
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WB Zichy-Woinarski QC with
MM Gordon |
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Solicitor for the Respondent:
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Australian Government Solicitor
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Date of Hearing:
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4, 5 and 7 August 2003
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Date of Judgment:
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12 May 2004
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URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2004/122.html