Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3 (8 February 2005)

Last Updated: 6 April 2005

FEDERAL COURT OF AUSTRALIA

Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3

PRACTICE AND PROCEDURE – affidavit sworn, filed and served in first proceeding – leave to use the affidavit in later proceedings – affidavit not privileged – leave to use granted

Evidence Act 1995 (Cth) s 122(1)(c)



Akins v Abigroup Ltd (1998) 43 NSWLR 539 referred to
Austress v Marlin [2002] NSWSC 958 referred to

Complete Technology v Toshiba [1994] FCA 1314; (1994) 53 FCR 125 referred to

Harman v Secretary of State for the Home Department [1983] 1 AC 280 referred to
Ingot Capital Investments v Pty Ltd v Macquarie Equity Capital Markets Limited [2004] NSWSC 40 referred to
Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 referred to
Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337 referred to
Sevic v Roarty [1998] NSWSC 462; (1998) 44 NSWLR 287 referred to

Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 referred to

State Bank of South Australia v Smoothdale (No 2) Ltd [1995] SASC 5070; (1995) 64 SASR 224 referred to

The Bell Group Ltd (In Liquidation) v Westpac Banking Corporation [1998] FCA 849; (1998) 86 FCR 215 referred to















LIBERTY FUNDING AND ANOR v PHOENIX CAPITAL LTD
VID 38/2005

BRANSON, SUNDBERG & ALLSOP JJ
8 FEBRUARY 2005
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 38 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	LIBERTY FUNDING PTY LTD FIRST APPELLANT LIBERTY FINANCIAL PTY LTD SECOND APPELLANT
AND:	PHOENIX CAPITAL LTD RESPONDENT
JUDGE:	BRANSON, SUNDBERG & ALLSOP JJ
DATE OF ORDER:	24 JANUARY 2005
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. Leave be granted to appeal from the decision of the primary judge.
2. The appeal be allowed.
3. The appellants have leave to use in the Victorian Supreme Court proceedings numbered 9140 of 2003 between Liberty Financial Pty Ltd and Another v Scott and Another the affidavit of Alistair James Jeffery sworn in this proceeding on 29 May 2001.
4. The respondent pay the appellants’ costs of the appeal and the notice of motion dated 22 December 2004 and the costs of the argument before the primary judge.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 38 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	LIBERTY FUNDING PTY LTD FIRST APPELLANT LIBERTY FINANCIAL PTY LTD SECOND APPELLANT
AND:	PHOENIX CAPITAL LTD RESPONDENT

JUDGE:	BRANSON, SUNDBERG & ALLSOP JJ
DATE:	8 FEBRUARY 2005
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

THE COURT:

Introduction

1 On 24 January 2005, after hearing argument, the Court made orders granting the appellants leave to appeal and allowing the appeal from orders made by the primary judge on 15 December 2004. The Court also granted leave to use the affidavit the subject of debate in proceedings on foot in the Supreme Court of Victoria. These are the reasons of the Court for those orders made on 24 January 2005.

2 The matter initially came before the primary judge as an application by the appellants, as applicants in a proceeding commenced in this Court in 2001 (the "First Proceeding"), for leave to use, in current proceedings in the Supreme Court of Victoria, an affidavit sworn by a Mr Jeffery, the Chief Executive Officer of the respondent (the "Jeffery affidavit") which had been served on the appellants as applicants in the First Proceeding. The argument developed before the primary judge as to whether the Jeffery affidavit was in fact the subject of legal professional privilege. The primary judge found that the Jeffery affidavit was privileged and on that basis it could not be used in the Supreme Court proceedings. On this basis, his Honour did not find it necessary to deal with the question of leave to use the affidavit by reference to the principles in cases such as Harman v Secretary of State for the Home Department [1983] 1 AC 280.

Factual background

3 On 22 March 2001, the First Proceeding was commenced in this Court by the appellants against the respondent which traded under the name Bluestone Mortgages (Bluestone). The essence of the claims in the First Proceeding was that Bluestone had disseminated an erroneous and misleading document which misdescribed various financial products supplied to the public by the appellants. We will refer to this document the subject of complaint in the First Proceeding as the Document. In the resolution of the First Proceeding, one issue relevant to liability and damage was the extent of dissemination by Bluestone of the Document.

4 The First Proceeding came into the docket of North J. Early in its procedural life, at a directions hearing, the issue of mediation was raised. Prior to the directions hearing that took place on 30 April 2001, the representatives of the parties had exchanged correspondence about the extent of the dissemination of the Document. This factual question was not resolved before the directions hearing. At the directions hearing, the parties accepted the utility of a Court annexed mediation. From the transcript of the directions hearing it can be seen that North J was keen to see the parties crystallise the issues in dispute between them before the mediation took place. One of those issues was the extent of the dissemination of the Document. The applicants sought an order for specific discovery of documents concerning that issue. Bluestone resisted that course, and embraced, and then urged, a course which was suggested by North J of Bluestone filing and serving an affidavit describing the scope of the dissemination of the Document. By the time of the directions hearing, dissemination of the Document had been halted by the giving of undertakings by Bluestone. The transcript of the directions hearing recorded the following (Mr Maryniak being counsel for Bluestone):

His Honour: What do you say about the question of the extent of dissemination? [T3.45]
Maryniak: Your Honour, on my instructions, it’s very limited and in fact we have attempted to advise the applicants of the extent of the dissemination. [T3.45-T4.02]

His Honour: Would it be for instance possible for an officer of the respondent to swear an affidavit of the subject matter instead of discovery as a preliminary to mediation? [T4.05]
Maryniak: On my instructions, your Honour we have informed them of what we know. [T4.15]

His Honour: Unless there is some good reason, I am inclined, having regard to the state that the case is in, to make an order requiring a responsible officer of the respondent to depose... to the extent of dissemination. [T4.45 et seq]

At T5.30-T5.45 Counsel for Liberty pressed for discovery in relation to dissemination.

Counsel for Bluestone resisted the application for limited discovery. [T5.45]

[At T7.01]

His Honour: Yes. The only real difference between you is this question of discovery as against affidavit. What is in truth the difference between the two courses for your side? I mean the obligation of the deponent will be if the affidavit course is adopted to make full inquiries and that would be specified in the form of order. I’m interested to know why you resist discovery if you are prepared to have...

[At T7.15]

His Honour: It really amounts to the same thing though, doesn’t it? I mean in order to be in the position to swear the affidavit, you will have to do exactly the same work as would be necessary to make discovery and it’s more a conventional course. I don’t really follow why you see a distinction. There wasn’t intended really to be one. It just seems that swearing an affidavit in the sense fixes the issue more precisely than discovery.
Maryniak: Exactly your Honour, and that’s why we embrace it. It’s a clearer form of sending the message across about dissemination. ... We will investigate it and we will say on affidavit how the document has been disseminated.

[At T 7.35]

His Honour: I mean indeed my concept is that the affidavit would be more informative than discovery. It would perhaps explain what steps you have taken to investigate, while with discovery all you do is say "here are the documents".
Maryniak: Your Honour, it will be an affidavit put forward in good faith to elaborate on and explain the extent of the dissemination.

His Honour: I think with that indication, Mr Harrison, you actually ought to be better with an affidavit than with discovery and that’s what I intend and if that’s not the way it eventuates then the matter should be brought back before the directions day by exercising liberty to apply.

5 North J ordered that an affidavit be filed by Bluestone dealing with dissemination of the Document.

6 A number of relevant things can be said about the above exchanges at the directions hearing. First, the affidavit was to take the place, and fulfil the function, of an affidavit of discovery and of inspection of discovered documents. Secondly, the affidavit was intended to be informative in a way that an affidavit of discovery would not be. In particular, it was a procedure which enabled Bluestone to identify, on oath, the boundaries of the dissemination that had occurred. This was important for Bluestone, because it could then participate in the mediation with the possible loss and damage flowing from dissemination of the Document fixed by reference to what was in the affidavit. Thirdly, the ordering of the affidavit suggested by North J was embraced, and then urged, as a procedural course by Bluestone. That is, it was not in reality a course which Bluestone followed only by reason of legal compulsion. Fourthly, it was intended that the appellants rely on the affidavit’s contents, in particular, but not limited to, in approaching and conducting the mediation. Fifthly, whilst the proposed affidavit concerned issues that would be canvassed at any trial, it was not specifically intended to be an affidavit that would form part of the evidence should there be a hearing. The affidavit was intended to be informative about an issue in the proceeding that was central to the proposed mediation. It was intended to be used and relied upon by the appellants for the purposes of the mediation.

7 Thereafter, the affidavit was sworn by Mr Jeffery. Service of the Jeffery affidavit was preceded by the sending of a draft of the affidavit to the appellants’ solicitors under cover of a letter from Bluestone’s solicitor which stated:

We attach the unsworn affidavit of Alistair James Jeffery.

Mr Jeffery is interstate at present and is unable to swear the affidavit. We will file and serve the sworn affidavit in the form attached on Mr Jeffery’s return to Sydney next Tuesday.

No reservation on the use that could be made of the draft was stated in the letter.

8 The Jeffery affidavit was filed and served upon the appellants.

9 The Jeffery affidavit dealt, amongst other things, with the dissemination of the Document, the email system of Bluestone and the back-up and retention of documents and emails in Bluestone.

10 A mediation was held. The First Proceeding settled in May 2001.

11 In December 2001, a new proceeding was instituted in this Court by the second applicant in the First Proceeding and another against the respondent in the First Proceeding (now called Bluestone Group Pty Limited) and a Mr Trevor Scott. Mr Scott was a former employee of the second applicant in the First Proceeding. In the new proceeding allegations were made, amongst other things, that Mr Scott had wrongfully used the applicants’ confidential information and breached copyright and that the respondent (Bluestone) had knowingly taken advantage of these breaches. On 20 December 2001, Weinberg J made Anton Piller orders against Mr Scott.

12 Pleadings were filed in 2002. On 13 November 2003, Weinberg J transferred the proceeding to the Supreme Court of Victoria.

13 The appellants wish to use the Jeffery affidavit and the information contained therein in the conduct of the Supreme Court proceedings. The Jeffery affidavit is said to be relevant in a pending application for better and more specific discovery which is listed for hearing in February 2005 before Harper J. Dealing as the Jeffery affidavit does with the holding of, and dealing with, electronic communications in Bluestone, the relevance of the affidavit to this end can be readily understood. Also, the appellants wish to deploy the information in the Jeffery affidavit in the preparation of the Supreme Court proceedings, including the formulation of the evidence and likely material for cross-examination.

The approach of the primary judge

14 Application was made in the First Proceeding for leave to use the Jeffery affidavit and the information contained therein in the Supreme Court proceedings. The primary judge dismissed this application on the basis that the affidavit remained protected by legal professional privilege. Leave to appeal was sought in respect of these orders made in the First Proceeding. That application for leave came before us on 24 January 2005. We granted leave on 24 January 2005.

15 The primary judge came to the conclusion he did by applying what his Honour saw to be the preponderance of authority to the effect that statements or affidavits filed and served in proceedings, but not read in open court, remained subject to legal professional privilege. The primary judge referred to the reasons of Olney J in Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337, of the Full Court of the Supreme Court of South Australia in State Bank of South Australia v Smoothdale (No 2) Ltd [1995] SASC 5070; (1995) 64 SASR 224 and of the Court of Appeal of New South Wales in Akins v Abigroup Ltd (1998) 43 NSWLR 539 and Sevic v Roarty [1998] NSWSC 462; (1998) 44 NSWLR 287, and to other cases. With one exception, all these cases dealt with the status of statements of prospective witnesses filed and served pursuant to court order in advance of the trial, not with the status of affidavits in like position.

The reasons for leave being granted

16 In our view, the issues raised by the proposed appeal were important. Further, we were of the view that the reasons of the primary judge were attended by sufficient doubt to warrant the grant of leave.

The arguments on appeal

17 Counsel for the appellants emphasised that all the cases referred to by the primary judge concerned statements and not affidavits. This is not accurate. Bergin J in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Limited [2004] NSWSC 40, (see especially [45] of her Honour’s reasons), dealt with a call on a subpoena for documents which included affidavits in other proceedings.

18 A significant number of issues were argued on appeal on the privilege issue. These included:

(a)	Whether the affidavit was privileged at all prior to filing, but after being sworn, being a sworn body of evidence the purpose of which was to assist the Court determine where the truth lies: Ahearn v Freeman [1974] VR 121, 124. If the affidavit remained privileged, it would be impossible, outside the First Proceeding, to test the truthfulness or expose the falsity of the oath sworn by Mr Jeffery in making the affidavit.
(b)	Alternatively, whether privilege simply had not been made out on the facts, in the light especially of the expressed desire of Bluestone to adopt this course before North J, of the sending of a draft of the affidavit to the solicitors before the sworn version was served and of the description in open court before North J of the anticipated contents.
(c)	If the Jeffery affidavit were privileged, whether privilege had been waived by its being filed and served or by permitting Harper J in the Supreme Court to read it in the Supreme Court proceedings.
(d)	Whether this Court should decline to follow Smoothdale, Akins and Sevic and apply the contrary analysis of Hill J in Complete Technology v Toshiba [1994] FCA 1314; (1994) 53 FCR 125.

Our approach to the resolution of the appeal

19 We are of the view that this case can be disposed of without the necessity for expressing a concluded view on the correctness or otherwise of the approach of the Full Court in Smoothdale or of the Court of Appeal in Akins or Sevic.

20 The Jeffery affidavit was intended to fulfil the role (albeit somewhat extended) of an affidavit of discovery. It was intended to be read and relied upon by the other side in the litigation. Without dispensation of the Court, it could not be used otherwise than for the purposes of the First Proceeding. That could be seen to give a measure of practical confidentiality to Bluestone, but it was not a limitation based on confidence. The applicants in the First Proceeding were at liberty to use the Jeffery affidavit and its contents as they saw fit for the proper purposes of that litigation. Such purposes might well involve disclosing all or part of the contents of the Jeffery affidavit to third parties without obtaining confidentiality undertakings. The restraint on use after service is derived from an implied undertaking to the Court (in its terms contemplating discharge in some circumstances) the purpose of which is to prevent any abuse of the Court’s procedures. It is not a limitation based on the existence of confidentiality or privilege. The role intended to be fulfilled by the Jeffery affidavit was inconsistent with the maintenance of the confidentiality of the communications recorded in, and any advice apparent from, the contents of the Jeffery affidavit.

21 The affidavit was not brought into existence as part of the anticipated evidence for a hearing, whether final or interlocutory. It was intended to be a convenient procedural device in the nature of, but in lieu of, a usual affidavit of discovery. That is sufficient, we think, to distinguish Smoothdale, Akins and Sevic. Those cases dealt with the status of proposed evidence served in advance of the trial. Also, the fact that the subject of debate here is an affidavit sworn under relevant legislation attending the making of an oath further distinguishes the position from those cases.

22 We are prepared to assume for the purposes of these reasons (without deciding) that the Jeffery affidavit was privileged after it had been sworn, but before it was filed and served. However, in the circumstances outlined in [6] and [7] above, once it was filed and served, a step was taken entirely antithetical to the confidentiality that might be said to have previously existed in the content of the document, the communications stated therein and any advice which might be inferred therefrom. Such confidentiality is at the heart of legal professional privilege: Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [29] and [34]. The essence of waiver is not general fairness – it is the inconsistency of the posited act with the confidentiality protected by the privilege (in which analysis fairness may play a part): Mann v Carnell at [29] and [34]. Here, whatever confidentiality had existed was destroyed by the service of the Jeffery affidavit. The Jeffery affidavit was given to the applicants so that they would place immediate reliance upon it, including for the purpose of the mediation. Nonetheless, the implied undertaking restricted the use of the affidavit and the information therein, subject to a judicial discretion to release the applicants from the implied undertaking wholly or in part. The Jeffery affidavit was not the subject of any other restriction based on its contents, on any asserted confidentiality or upon any asserted privilege.

23 On this basis, privilege in the communications recorded in, or in any advice which could be inferred from the contents of, the Jeffery affidavit was waived upon its service.

24 Whilst on the approach that we have taken it is unnecessary to analyse Smoothdale, Akin and Sevic in detail, it appears to us that there is a real issue as to the correctness of those decisions, at least insofar as they deal with the question of waiver at common law by service of statements (or affidavits) of witnesses in advance of the trial.

25 The difficulty with the approach in Smoothdale is highlighted by the approach of Barrett J in Austress v Marlin [2002] NSWSC 958 in which his Honour distinguished cases such as Smoothdale on the basis that they were concerned with use in one proceedings of a statement or an affidavit filed and served in another. Barrett J, on the other hand, was dealing with the question whether a party could tender, as an admission, parts of an affidavit sworn by the opposing party in the same proceeding. Barrett J said, buttressed by ample authority, that this could be done, because it was within the range of permitted use – the purpose of the proceedings. Barrett J was undoubtedly correct. Thus, it is necessary to posit a limited waiver, within a broad framework of the conduct of proceedings, which may bring about the result (as in Austress) that it is in the other side’s power to destroy the privilege entirely by putting the statement or affidavit into evidence or examining or cross-examining on its contents.

26 This so-called "limited waiver" by service such that the privilege is waived only for the purpose of the legal proceedings in question might be seen to be no more than the operation of the implied undertaking dealt with in Harman.

27 However, as we have said, it is unnecessary to deal any further with these issues or with the issue of whether statements or affidavits filed in advance of the hearing under procedural directions or orders are provided "under compulsion of law" for the purposes of s 122(1)(c) of the Evidence Act 1995 (Cth).

28 Nothing we have said is contrary to the decision of the Full Court of this Court in The Bell Group Ltd (In Liquidation) v Westpac Banking Corporation [1998] FCA 849; (1998) 86 FCR 215. There, the argument proceeded on the basis of concessions by the relevant party that the witness statements were privileged after being served: see 86 FCR at 223-4.

29 The Jeffery affidavit is not privileged.

30 It is necessary now to turn to whether leave should be given for the use of the Jeffery affidavit in the Supreme Court proceedings.

31 In order to be released from the implied undertaking it has been said that a party in the position of the appellants must show "special circumstances": see, for example, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217. It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. The notion of "special circumstances" does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. In Springfield Nominees, Wilcox J identified a number of considerations which may, depending upon the circumstances, be relevant to the exercise of the discretion. These were:

•	the nature of the document;
•	the circumstances under which the document came into existence;
•	the attitude of the author of the document and any prejudice the author may sustain;
•	whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain;
•	the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information):
•	the circumstances in which the document came in to the hands of the applicant; and
•	most importantly of all, the likely contribution of the document to achieving justice in the other proceeding.

32 Taking those matters as a helpful guide, they being particular matters addressed by both parties, it seems to us that there are compelling considerations in favour of leave being given.

33 The Jeffery affidavit was created for the purpose of the appellants relying on it. It may or may not have contained material that was confidential from other parties outside the litigation, but the applicants in the earlier proceedings were intended to rely upon it and act upon it. The Jeffery affidavit came into existence in circumstances where Bluestone was urging its creation and service. Bluestone resisted an order for discovery based on its willingness fully and frankly to disclose material in the Jeffery affidavit. There appears to be no prejudice in the Jeffery affidavit being used in the Supreme Court proceedings. It should be recognised, of course, that any use in the Supreme Court proceedings will be under the restriction of a similar implied undertaking as to the use for the purposes of the proceedings in the Supreme Court. Whilst the Jeffery affidavit might not have been intended to reach the public domain, given the width of the permitted purpose, information within the Jeffery affidavit was likely to reach the public domain if the matter was litigated. It is not said that the Jeffery affidavit contains personal data or commercially sensitive information. If it does, its use will be able to be protected both by the implied undertaking in the Supreme Court or by any necessary confidentiality orders. Whilst it cannot be said categorically that any particular end of justice will be furthered by the use of the Jeffery affidavit in the Supreme Court proceedings, it seems to us appropriate that, to the extent that it deals with issues relevant to the resolution of the controversy in the Supreme Court, the Supreme Court should have available to it relevant material, including such an affidavit, sworn in an earlier proceeding, which may illuminate matters in the Supreme Court.

34 There is no undermining of the confidentiality or efficacy of the mediation that was earlier undertaken by granting leave to use the Jeffery affidavit in the Supreme Court. The Jeffery affidavit was not part of the mediation, nor does it disclose any aspect of the mediation. North J was keen to have a crystallisation of issues prior to mediation commencing. The affidavit was intended to bring about that result in a more cost effective and focussed way than could be achieved by the process of discovery.

35 Looking at all the circumstances and the arguments placed before the Court by counsel, we think that it is not only appropriate, but it is also in the interests of justice, that leave be granted to the appellants to use the Jeffery affidavit in the Supreme Court proceedings. In our view special circumstances have been made out.

36 The Court is grateful for the assistance provided in submissions and argument by counsel and solicitors.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Branson, Sundberg and Allsop.

Associate:

Dated: 8 February 2005

Counsel for the Appellant:	R Kendall QC and A P P Rodbard-Bean
Solicitor for the Appellant:	Abbott Stillman & Wilson
Counsel for the Respondent:	A T Broadfoot
Solicitor for the Respondent:	Freehills
Date of Hearing:	24 January 2005
Date of Orders:	24 January 2005
Date of Reasons:	8 February 2005