Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 6) [2001] NSWIRComm 135 (8 June 2001)

Last Updated: 12 June 2001

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 6) [2001] NSWIRComm 135

FILE NUMBER(S): IRC 5227

HEARING DATE(S): 06/06/2001

DECISION DATE: 08/06/2001

PARTIES:

FIRST APPLICANT

Gough & Gilmour Holdings Pty Ltd

SECOND APPLICANT

Harcourt David Gough

THIRD APPLICANT

Anthony Lansley Gilmour

FIRST RESPONDENT

Caterpillar of Australia Ltd

SECOND RESPONDENT

Caterpillar Inc.

JUDGMENT OF: Boland J

LEGAL REPRESENTATIVES

APPLICANTS

Mr M J Kimber S.C. with Mr I Taylor and Mr A B Gotting of counsel

Solicitor:

Mr J Robinson

Harmers Workplace Lawyers

RESPONDENTS

Mr P M Hall Q.C. with Mr W.T. Houghton Q.C. and Mr M Connock of counsel

Solicitor:

Mr A Gooch

Mallesons Stephen Jaques

CASES CITED: Ainsworth v Wilding [1900] 2 Ch 315

Baker v Campbell (1983) 49 ALR 385

Chant v Brown (1852) 9 Hare 791; 68 ER 735

"Daily Express" (1908) Ltd v Mountain (1916) 32 TLR 592

Gough & Gilmour Holdings Pty Ltd & ors v Caterpillar of Australia Ltd [2001] NSWIRComm 73

Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) (1994) 126 ALR 58

Packer v Deputy Commissioner of Taxation (QLD) (1984) 55 ALR 242

Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152

Turton v Barber (1874) LR 17 Eq 329

LEGISLATION CITED: Evidence Act 1995

Industrial Relations Act 1996

JUDGMENT:

- 14 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: BOLAND J

8 June, 2001

Matter No IRC 5227 of 2000

Gough & Gilmour Holdings Pty Limited & ors v Caterpillar of Australia Limited & Anor

Application under s 106 of the Industrial Relations Act 1996

Interlocutory Judgment No. 6

- Legal Professional Privilege -

1 Further to my interlocutory judgment of 9 April 2001 regarding legal professional privilege ([2001] NSWIRComm 73), a number of additional privilege issues have emerged during the course of these proceedings.

2 Firstly, the respondents have sought access to certain additional documents relating to the issue of goodwill and its impact on the applicants' state of mind concerning the 90 day termination provisions in the dealership agreements. The respondents contend that the documents fall within the class of documents made available to them by the judgment of 9 April and the consequent orders of 23 May 2001. The applicants say that the material sought by the respondents does not fall within the class of documents referred to in the orders of 23 May.

3 Secondly, the respondents have sought access to bills of costs provided to the applicants by various legal advisers but in respect of which the applicants either claim privilege or, in the case of a bill of costs provided by the law firm Gilbert & Tobin to the applicants in respect of which privilege has been waived, the applicants claim that it can only be used for limited purposes in cross-examination.

4 Thirdly, the respondents claim that it would be unfair against them for the applicants to be able to contend that they were given an assurance by the first respondent regarding the sale of shares (referred to in the proposed third further amended summons as the "fourth assurance") thereby creating a particular state of mind within the applicants and then for the applicants to rely on privilege to prevent the respondents from testing the basis for that state of mind, including any relevant communications with legal advisers that may have influenced the applicants' state of mind. Accordingly, it was submitted by the respondents that privilege had been imputedly waived.

Privilege - Goodwill

5 I deal with the first issue and that arises in the following way: it appears that there were communications between the applicants and their legal representatives regarding the issue of goodwill. In the judgment of 9 April I said that although the circumstances in which imputed waiver of privilege may arise are not closed, as matters stood and in the absence of more specific information I was not disposed to accept that it may be imputed that the applicants had waived privilege in respect of their position on goodwill.

6 The respondents now contend that while communications involving the issue of goodwill in the context of its relevance, for example, in valuing the applicant's business or shares may remain subject to legal professional privilege and fall outside the orders made by the Commission in Court Session on 23 May, there may be communications referring to goodwill in another context causing those communications to fall within the scope of the orders. That context being where communications referring to goodwill may bear on the applicant's state of mind influencing their understanding or belief:

(i) that the respondent's right to terminate the dealership under the with or without cause 90 day termination provision of the dealership agreements only operated in "with cause" situations, namely, wilful misconduct or sustained and significant poor performance;

(ii) of the nature referred to in sub paragraph (i) above prior to or preparatory to the outlay of extraordinary capital investment and the reinvestment of dividends at various times since 1989 and/or;

(iii) that their investments in the Caterpillar dealership were secure and of a long-term nature, notwithstanding the termination provisions in the dealership agreements referred to in sub-paragraph (i) above.

7 So, as I understand the respondent's contention, the applicants' claim it was their understanding or belief based on assurances given that the first respondent's right to terminate the dealership under the "with or without cause" 90 day termination provision would only operate in "with cause situations". The respondents contend that any communications as defined by the orders of 23 May 2001 that may have had the effect of negativing that state of mind by, for example, advising that there was no goodwill attaching to the business because of the first respondent's right to terminate the dealership at will, carried with it an imputed waiver of privilege. This is because the applicants have put in issue in the proceeding a matter which can not fairly be assessed without examination of relevant legal advice, if any, received by the applicant.

8 I accept Mr Hall's contentions.

9 In determining this issue, I was provided with a bundle of documents and the parties requested that in respect of each of the documents in the bundle I make a determination as to whether it fell within the scope of the orders made on 23 May 2001.

10 In doing so Mr Kimber reminded me of the high status of professional privilege and the careful protection the law affords it. He also contended that in determining whether any of the contested documents fell within the class of documents covered by the orders of 23 May 2001 the test was this "What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large."

11 Before going to these documents in question, I should comment that there was some debate about the timing of any communications between the applicants and their legal advisers that may have influenced the applicants' state of mind. It was Mr Kimber's contention that in examining what legal advice may have influenced the applicants' state of mind it was only that legal advice that may have influenced the formation of the state of mind. So that once the state of mind had been formed any subsequent legal advice could not be said to have influenced the "basis" for that state of mind - the reference to the word "basis" being drawn from par 49 of my earlier interlocutory judgment on privilege. In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152, a case referred to by me in my earlier interlocutory judgment, the majority said at 166-167:

The quality of any particular legal advice, and the extent, if any, to which it was causative of loss and damage, can only properly be assessed once it is placed in the context of the totality of legal advice received by the client. The client, by bringing the proceeding, is taken to have consented to the use of the privileged material, or to have waived reliance on the privilege which would otherwise attach to such material. Reliance on the privileged nature of the material would, in the circumstances, be unjust and would inhibit the proper functioning of the legal process.

Where, as in this case, a party pleads that he or she undertook certain action "in reliance on" a particular representation made by another, he or she opens up as an element of his or her cause of action, the issue of his or her state of mind at the time that he or she undertook such action. The court will be required to determine what was the factor, or what were factors, which influenced the mind of the party so as to induce him or her to act in that way. That is, the party puts in issue in the proceeding a matter which can not fairly be assessed without examination of relevant legal advice, if any, received by that party. In such circumstances, the party, by putting in contest the issue of his or her reliance, is to be taken as having consented to the use of relevant privileged material, or to put it another way, to have waived reliance on the privilege which such material would otherwise attract.

12 In these proceedings, where the applicants plead that they, or any one of them, undertook certain action in reliance on a particular representation or assurance, the applicants open up as an element of their cause of action, the issue of their state of mind at the time that they undertook such action. The court will be required to determine what was the factor, or what were factors, which influenced the mind of the applicants so as to induce them to act in that way, including any relevant legal advice.

13 In relation to the "goodwill" issue then, if at the time of entering into the dealership agreement, or at the time the applicants allege they received assurances that their investments were secure and of a long-term nature, or prior to or preparatory to the outlay of extraordinary capital investment and the reinvestment of dividends at various times since 1989 the applicants had been advised, for example, that there was no goodwill because the first respondent could terminate the dealership at will, then it would seem to me that there is an inconsistency in the applicants' position; on the one hand the applicants say they relied on representations by the respondent that its right to terminate the dealership would only operate if there were sustained and significant poor performance on the part of the applicants, but on the other hand the applicants have at their disposal advice that the dealership has no goodwill because the first respondent has the right to cancel the dealership for any reason at any time, only subject to notice.

14 Where the applicants have sought advice on goodwill other than in the circumstances described in the preceding paragraph and where the advice could not be said to be inconsistent with actions undertaken by the applicants in reliance on representations by the respondents, then privilege in respect of the communications containing that advice could not be said to be waived. For example, if the applicants sought advice on the value of their business in the ordinary course of business in, say 1997 and that advice dealt with goodwill, I cannot see that it bears on the state of mind of the applicants in making the dealership in 1989, or outlaying extraordinary expenditure in 1994 to expand the business.

15 Having regard to the foregoing, I have examined all of the documents in the two folders provided to me. Apart from the document under tab 1, which is already in the respondents' possession, in my opinion privilege applies to all of the documents and waiver cannot be imputed. I should say that within the bundle of documents there were two handwritten documents that were practically illegible but given their context I am satisfied they do not fall within the class of documents covered by the order of 23 May.

Privilege - Bill of Costs

16 The second substantive issue relating to privilege concerns bills of cost. Before me was an account for professional fees for services provided to the applicants by the law firm Gilbert & Tobin for the period 21 June 1999 to 11 August 2000. The account listed the dates upon which particular services were rendered and a short description of the service. Mr Hall has sought access to this account and I understand will be seeking production of a number of other bills of cost that I have not yet seen. Mr Kimber's position was that as the account had already been provided to the respondent's he accepted that privilege had been waived. However, he submitted that it was clear from correspondence between the parties' solicitors that the account was only provided to the respondent's for a limited purpose, namely in relation to statements in an affidavit of Mr Harcourt Gough concerning payments made by him.

17 While conceding that the Gilbert & Tobin bill had been waived, Mr Kimber nevertheless, put argument generally on whether bills of cost were subject to privilege on the basis that the respondent would be seeking access to other bills in respect of which the applicants had not waived privilege. Mr Kimber's reference point was the Gilbert & Tobin bill.

18 It was Mr Hall's primary contention that a bill of costs of the type represented by the Gilbert & Tobin bill was not subject to legal professional privilege. Mr Hall took me in detail to a decision of the Full Court of the Supreme Court of Queensland in Packer v Deputy Commissioner of Taxation (QLD) (1984) 55 ALR 242. That case was essentially about whether privilege attached to entries in a solicitor's trust account ledger. However, there was considerable discussion in the judgments of Andrews SPJ and McPherson J on whether privilege attached to bills of costs on the basis that it was argued that the trust account ledger was analogous to a bill of costs. In this respect, the judgments referred to a number of English authorities on the issue, namely "Daily Express" (1908) Ltd v Mountain (1916) 32 TLR 592, Chant v Brown (1852) 9 Hare 791; 68 ER 735, Turton v Barber (1874) LR 17 Eq 329, Ainsworth v Wilding [1900] 2 Ch 315.

19 Both Andrews SPJ and McPherson J made a number of observations about whether bills of costs are subject to privilege but these could only be regarded as obiter. One thing that is clear from their Honours' judgments, however, is that whether a bill of costs contains privileged information is a matter for judgment in particular cases. Moreover, Andrews SPJ said (at 248) "In my view there is nothing in particular to set aside a bill of costs as forming some special category of record of privileged information".

20 As to the English authorities, I do not consider that they establish any authoritative precedent to the effect that a bill of costs per se is privileged. According to the analysis of the cases by McPherson J at 251-252 the decisions in those cases depended on their own peculiar facts.

21 I was also referred to a judgment of Tamberlin J of the Federal Court in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) (1994) 126 ALR 58. One of the questions to be decided in that case was whether in providing memoranda of legal fees, backsheets to counsel and counsel's fees amounted to an implied waiver of legal professional privilege in the underlying documents which included briefs to counsel, advice from counsel, instructions to solicitors and communications to other parties for the purpose of legal advice or legal proceedings.

22 Tamberlin J held at 67-68:

In the present circumstances I do not consider that disclosure of the memoranda of fees, backsheets and similar documents amount to such a use of privileged material in a way which is unfair to UBA. Disclosure of the memoranda of fees and other documents does not in any way disclose the nature or contents of the advice or communications between the applicants and their legal advisers. The memoranda of fees simply set out the dates and refer to the action taken in respect of which a charge is made. The memoranda of fees were brought into existence, on their face, not solely for the purpose of obtaining legal advice or for use in legal proceedings but for the purpose of recording and raising charges in respect of work which had been already completed. It is evident that the documents were made or brought into existence for a purpose different from, or beyond, the obtaining of legal advice or use in the proceedings.

23 Prima facie, a bill of costs is not a confidential communication or confidential document made for the dominant purpose of providing legal advice or for the dominant purpose of providing or receiving legal services in connection with pending or anticipated litigation within the meaning of ss 118 or 119 of the Evidence Act 1995 (NSW) and, consequently, no privilege attaches to a bill of costs. That is not to say that every bill of costs is not privileged. There may be circumstances where the bill does fall within ss 118 or 119 of the Evidence Act but where it merely sets out the dates and refers to the action taken in respect of which a charge is made, I cannot see that it is subject to legal professional privilege. It is to be noted that what is protected from disclosure is not the document itself but its contents "in the form of communications made for the (dominant) purpose of giving or receiving advice or for use in existing or anticipated litigation": Baker v Campbell (1983) 49 ALR 385 at 439 per Dawson J. Thus the existence of a document is not protected from disclosure but its contents are. So if a bill of costs indicates that a legal adviser gave advice on a particular subject matter, that is not privileged information but the contents of that advice would be so privileged.

24 I would not consider that the Gilbert & Tobin bill of costs is subject to legal professional privilege. In saying that, however, I am not giving the respondents a licence to pursue the contents of any communication or document that might underlie the actions described in the bill taken by the legal adviser in respect of which a charge was made, unless it could be said that privilege has been waived in relation to that communication or document.

25 Mr Kimber submitted that the use by the respondent of the Gilbert & Tobin bill of costs should be limited to issues arising out of par 126 of Mr Gough's affidavit of 31 January 2001. In a letter to the applicants' solicitors on 26 April 2001, the respondents' solicitors sought documents relating to payments made by Mr Gough and referred to in his affidavit of 31 January 2001. The letter said: "We have no objection to your masking any privileged part of those documents". The applicants' solicitors replied on 4 May 2001 enclosing copies of the Gilbert & Tobin invoice adding that "our clients are only providing you with these invoices on the basis that by so doing they are not waiving privilege in relation to any document created to which the work invoice relates." In my opinion, if the applicants' intention was to provide the invoice only for the limited purposes that they now contend they should have taken steps to make this abundantly clear. Having not done so, I do not consider that it would be unfairly prejudicial to the applicants to allow the respondents to use the material, in a proper way, as it sees fit.

Privilege - Sale of Shares

26 The third issue goes to whether privilege has been waived by the applicants in relation to their alleged reliance on what is described in the proposed third further amended summons as the "fourth assurance". That assurance is described as follows:

In mid-1999, the Overall Arrangement was varied by the addition of the assurance by the first respondent to the second and third applicants that if they agreed to sell their shares in the first applicant, that process would be conducted on an amicable and reasonable basis without duress and would provide an opportunity for the second and third applicants to receive a fair value for their shares; that the first respondent would assist the applicants to achieve such an outcome; and, by implication, that if no agreement for a sale at a fair value could be reached the applicants would retain the dealership (the "Fourth Assurance").

27 In reliance on this alleged assurance it is said that the second and third applicants embarked on a course of conduct to sell their shares. The respondents submit, as I understand them, that it would be unfair against them for the second and third applicants to contend that it was their understanding or belief, based on assurances given by the first respondent that, in effect, the first respondent would look after the interests of the second and third applicants if they would sell their shares and then for the applicants to rely on privilege to prevent the first respondent testing the basis for that state of mind, including any legal advice that may have influenced that state of mind. In other words, as I understand what the respondents are putting is that as the second and third applicants are claiming that they relied on the alleged fourth assurance by the first respondent as the basis for embarking on a course of action aimed at selling their shares, they have opened up the issue of their state of mind in pursuing that course. By doing so, the second and third applicants have, by imputation, waived reliance on privilege in respect of any legal advice they may have received that influenced that state of mind.

28 Given my reasoning and the basis for it as expressed in the earlier judgment on legal professional privilege, the principles enunciated in that judgment apply equally to the issue of the sale of shares as I have described it.

29 The difficulty, however, lies in constructing an order to reflect the principles as they apply to the sale of shares issue without encroaching on the exceptionally valuable right of privilege. Clearly, what the respondents are mainly interested in is whether the second and third applicants acted inconsistently with what they say they were induced to do by the respondents' alleged representations regarding the sale of shares. In particular, whether the applicants acted inconsistently with their pleadings and evidence that their state of mind was such that if there was no sale of shares at fair value there would be no termination of the dealership by the first respondent and that they proceeded to attempt to sell their shares on that basis. That inconsistency might be found in communications between the second and third applicants and their legal advisers. For example, if the applicants indicated in communications with legal advisers that, despite assurances by the first respondent, their true expectation was that the first respondent would terminate the dealership agreements, that could then be said to be inconsistent with the pleaded state of mind that based on the respondents' representations there was no expectation of termination. Alternatively, if the advice of the applicants' legal advisers was that the applicants should put no store in the respondents' assurances, that might also indicate an inconsistency in the applicants' position.

30 The problem arises in where to draw the line between those communications in respect of which it might be said that privilege has been waived and those communications that must remain privileged. For example, as an incident to advice sought from legal advisers about the sale of shares the applicants may have asked for advice about their options on termination but in a manner and under circumstances that reflects no inconsistency on the part of the applicants. Alternatively, the legal advisers may have offered advice on termination options even though that advice was not sought by the applicants.

31 I must say that unless I am satisfied a clear line can be drawn between material in respect of which it could said that privilege has been waived and material that must remain the subject of privilege, I would be inclined not to impute or imply waiver.

32 The parties are directed to confer on this issue and attempt to reach agreement on the terms of a draft order that reflects what I have said. If there is no agreement, the respondents are directed to provide a draft as soon as possible that I will then consider. Any draft is to be directed to the period between 8 June 1999, when it was alleged that the representations regarding sale of shares was made and 7 February 2000, when it was alleged that it became clear to the applicants that they faced cancellation of the dealership agreements.

LAST UPDATED: 08/06/2001