Supreme Court of NSW|1998-06-01|Before: Mason P, Priestley JA, Rolfe JA, Bainton J

Akins and Ors v Abigroup Limited Matter No Ca 40694/97 [1998] NSWSC 254 (1 June 1998)

The Supreme Court of New South Wales Court of Appeal

NATURE OF JURISDICTION: COMMERCIAL DIVISION - BAINTON J

Evidence - client legal privilege - statements served before trial in compliance with orders of Commercial Division - whether served "under compulsion of law" - Evidence Act 1995 (NSW), s 122(2)(c) - Supreme Court Act 1970, s 76A; Practice Notes 39 and 89

Evidence - legal professional privilege - client legal privilege - statements served before trial in compliance with orders of Commercial Division - whether served "under compulsion of law" - Evidence Act 1995 (NSW), s 122(2)(c) - Supreme Court Act 1970, s 76A; Practice Notes 39 and 89

Practice and Procedure - principles governing access to statements served before trial - whether such principles displace client legal privilege - Supreme Court Act 1970, s 76A; Practice Note 97 - Supreme Court Rules 1970, Pt 65 r 7

In 1990 the respondent brought action against the directors/shareholders of Hughes Bros, for, amongst other claims, breach of warranties in a Share Sale Agreement. These proceedings were ultimately settled on 18 July 1994. However, prior to settlement, witness statements were exchanged between the parties ("the disclosed statements") in accordance with the directions of the Court and Practice Note 39 (now superseded by Practice Note 89). These statements were never admitted into evidence.

In 1991 the respondent instituted separate proceedings in the Commercial Division against the appellants who are the partners of the firm of chartered accountants Deloitte Haskins and Sells. The respondent gave discovery by filing a List of Documents. The List included reference to the disclosed statements, although subject to a claim of legal professional privilege.

The appellants applied by Notice of Motion for orders that the respondent make these statements available for inspection. Bainton J rejected the application on the basis that the filing and serving of the disclosed statements pursuant to directions of the Court did not waive the privilege attaching to those statements at common law. His Honour held that the Evidence Act 1995 (NSW) ("the Act") did not abrogate or modify the principles developed at common law in respect of maintaining the confidentiality of communication between solicitor and client, save in relation to the adducing of evidence.

(1) The principles of the Act touching client legal privilege apply derivatively to ancillary processes involving the pre-trial gathering of evidence, except within the field covered by Grant v Downs.

Telstra Corporation v Australia Media Holdings & Ors (No 1) (1997) 41 NSWLR 277; The Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; (1988) 152 ALR 418, followed. Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, considered.

(2) Restrictions are imposed upon access to documents in any proceedings in the Supreme Court of NSW by the Supreme Court Rules 1970, Pt 65 r 7, Practice Note 97 and the common law. These restrictions do not provide sufficient protection against a loss of confidentiality to displace the application of client legal privilege to the disclosed documents.

Home Office v Harman [1983] 1 AC 280; Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756; Carter v Managing Partner, Northmore Hale Davey & Leake (1995) 183 CLR 121, considered.

(3) The service of the disclosed statements in accordance with the directions of the Court represented a knowing and voluntarily disclosure of a privileged communication made under compulsion of law according to s 122(2)(c) of the Act.

Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756, not followed.

MASON P: The issue in this appeal is whether client legal privilege attaching to witness statements is lost when those statements are served before trial in compliance with orders made in the Commercial Division.

The respondent ("Abigroup") has sued the appellants who are the partners of the firm of chartered accountants Deloitte Haskins and Sells ("Deloittes"). The proceedings (which I shall refer to as "the current proceedings") were commenced in the Commercial Division in 1991.

Abigroup was considering the purchase of the issued capital in Hughes Bros Pty Ltd ("Hughes Bros"). Various representations were allegedly made by a partner of Deloittes to Abigroup concerning the value of the shares. These representations are pleaded to have involved conduct contravening s42 of the Fair Trading Act 1987 as well as negligence. Abigroup alleges that it was induced by the representations to purchase the shares and to invest money in Hughes Bros and its subsidiaries. The loss thereby suffered is claimed as damages pursuant to s68 of the Fair Trading Act, and alternatively as damages at common law.

The decision by Abigroup to purchase the shares in Hughes Bros is said to have been made on 28 October 1988 when Heads of Agreement were entered into between Abigroup and the directors/shareholders of Hughes Bros. This was followed by a formal Share Sale Agreement on 23 November 1988 and an amended Share Sale Agreement on 7 April 1989 between the same parties.

In their Defence, Deloittes have denied the allegations of conduct contravening s42, reliance by Abigroup and duty of care. Contributory negligence has been pleaded, and also failure to mitigate loss.

In 1990 Abigroup and two other plaintiffs sued the directors/shareholders of Hughes Bros in the Supreme Court. The miscellany of claims in these proceedings (No 50804/1990) included a claim by Abigroup for damages based on breach of warranties in the amended Share Sale Agreement. These proceedings have been referred to as the "directors' proceedings". They were ultimately settled on 18 July 1994. However, prior to settlement, witness statements had been exchanged between the parties in accordance with directions of the Court. It is convenient to refer to the statements filed in support of the plaintiffs' case in the directors' proceedings as the "disclosed statements".

In the current proceedings Abigroup has given discovery by filing a List of Documents. The List includes reference to the disclosed statements as well as witness statements in other proceedings, although all of the statements are the subject of a claim of legal professional privilege.

Deloittes applied by Notice of Motion for orders that Abigroup make these statements available for inspection. The particular statements sought by Deloittes were identified at some stage prior to the hearing of the application. They include lay and expert evidence filed and served by the plaintiffs in the directors' proceedings pursuant to Practice Note 39. Several statements are by persons whose statements have also been filed in the current proceedings. Little more was proved in relation to the disclosed statements or the circumstances in which they had been produced or handed over. Nevertheless, Deloittes accepted below that the statements attracted legal professional privilege prior to the time when they were served in the directors' proceedings. Apparently this concession was made upon the dual bases that (a) the statements were privileged at common law and (b) they fell within either ss118 or 119 of the Evidence Act as constituting "confidential communications" or being "confidential documents": see letter from Corrs Chambers Westgarth dated 5 March 1997 (BAB 39-40); Outline of Submissions of defendants/applicants on Motion para 2.4 (BAB 25); oral submission of Mr Ellicott (BAB 14). Bainton J observed:

"that the privilege attaching to each of those statements is not lost unless it has been served has, I think been conceded, but in any event it is plain."

Bainton J rejected the application for inspection: see (1997) 42 NSWLR 623. He first examined the law relating to legal professional privilege as it stood before the Evidence Act 1995. Citing a number of cases, especially State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 54 SASR 224, he held that the filing and serving of witness statements pursuant to directions in the directors' proceedings did not waive the privilege attaching to those statements.

His Honour then addressed the impact of the Evidence Act 1995 (NSW). He held that the Act did not abrogate or modify the principles developed at common law in respect of maintaining the confidentiality of communication between solicitor and client, save in relation to the adducing of evidence. In so doing his Honour declined to follow McLelland CJ in Eq in Telstra Corporation v Australia Media Holdings & Ors (No 1) (1997) 41 NSWLR 277 ("Telstra (No 1)"). His Honour indicated that if he were wrong in that conclusion, he would have held that the order in the directors' proceedings for the exchange of witness statements operated as "compulsion of law" within s122(2)(c) of the Evidence Act with the result that privilege arising under the Act was not lost.

COMPULSORY EXCHANGE OF WITNESS STATEMENTS IN THE COMMERCIAL DIVISION

At the time when the disclosed statements were served, Practice Note No 39 governed proceedings in the Commercial Division.

Clause 1 of the Practice Note stated that it had been made having regard to the power in s76A of the Supreme Court Act whereby the court may give such directions as the court thinks fit, whether or not inconsistent with the Rules, for the speedy determination of the real questions between the parties to proceedings in the Commercial Division.

Clause 13, which dealt with fixing a date of trial, stipulated inter alia that when a date for hearing was fixed, the court would direct which parts of the Usual Order for Hearing should be complied with. That Usual Order is set out in Annexure 3 of the Practice Note. Relevantly it provided, in clause 1:

1(a) Each party shall, at least seven days before the date fixed for hearing, serve on each other party a written statement by each proposed witness of the oral evidence which that party intends to lead on any issue of fact to be decided at the trial. Unless the Court otherwise orders, each statement shall be signed by the intended witness.

(b) If an intended witness to whose evidence a statement under subpara (a) relates does not give evidence, no party may put the statement in evidence at the trial without leave of the Court.

(c) Where the party serving the statement does call such witness at the trial:

(i) that party may not, without the leave of the Court, lead evidence from that witness the substance of which is not included in the statement served;

(ii) the Court may, on such terms as it thinks fit, direct that the statement served or part of it, shall stand as the evidence in chief of the witness or as part of such evidence;

(iii) Whether or not the statement or any part of it referred to during the evidence in chief of the witness, any party may put the statement or any part of it in cross-examination of the witness.

(d) Without the leave of the Court, a party shall not be entitled to adduce the evidence of any person, a statement of whose evidence has not been served in accordance with subpara (a).

(e) Nothing in this order shall deprive any party of its right to treat any communication as privileged or make admissible evidence otherwise inadmissible.

As regards experts' reports, clause 11 of the Practice Note itself provided:

(11) In the event that any party intends to rely upon the evidence of one or more expert witnesses then:

(a) that party shall serve a copy of the report of each such expert in accordance with the directions of the court and, in the absence of a specific direction, no later than 28 days before the date fixed for hearing. Any report which is purely responsive to material in a report served by another party shall be served no later than fourteen days before the date for hearing:

(b) in the event that the party serving the report does not call the expert in question, no other party may, without the leave of the court, put the report in evidence at the trial;

(c) where the party serving the reports does call the expert at the trial:

(i) that party may not, without the leave of the court, lead evidence from that witness the substance of which is not included in the report served;

(ii) the court may, on such terms as it thinks fit, direct that the statement served, or part of it, shall stand as the evidence, or part of the evidence, in chief of the witness;

(iii) whether or not the report is referred to during the evidence in chief of the witness, any party may put any part of it in cross-examination of the witness;

(d) where any party fails to comply with subpara (a) hereof, such party shall not, without the leave of the court, be entitled to adduce evidence from an expert witness whose report has not been served;

(e) the court may, upon such terms as it thinks fit, direct that experts, whose reports have been served in accordance with this provision, consult, at a "without prejudice" meeting, in order to narrow any points of difference between them and identify to the court the remaining points of difference and the reasons therefore.

The Usual Order did not require statements or reports to be delivered to the court in advance of the hearing date, but it was commonplace for this have to occurred.

Clause 9 of the Practice Note reminded practitioners that "the court will enforce compliance with its orders with all appropriate sanctions".

Practice Note No 39 has ceased to have effect and Practice Note No 89 now applies. Its requirements touching the service and use of statements and expert reports are materially identical.

IMPACT OF THE EVIDENCE ACT PRINCIPLES RELATING TO CLIENT LEGAL PRIVILEGE

As indicated, the privileged status of the disclosed statements was not in issue below. This concession implied that the documents were brought into existence for the sole purpose of use in legal proceedings (if the common law stated in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 applies) or that they were confidential documents prepared for the dominant purpose of the directors' proceedings (if the Evidence Act 1995 applies: see s119.) The fact that the statements were prepared with a view to compliance with the "usual order" does not detract from this. Indeed it reinforces it: see Smoothdale at 226. In the appeal Deloittes sought to resile from this concession, insofar as there was a submission that there was no evidence as to the contents of the disclosed statements or the circumstances in which they were prepared. However, Deloittes should be held to this position in the light of the way the matter was fought below, given that evidence might have been led on the subject had it been put in issue.

Questions whether client legal privilege touching discovered documents exists, or is lost, do not require a conclusion as to whether or not the Evidence Act 1995 is a code. Indeed, s9(1) of that Act (the New South Wales statute, not the Commonwealth statute) makes plain its intention not to affect the operation of principles or rules in relation to evidence in a proceeding except so far as the Act provides otherwise expressly or by necessary intendment.

The issues in this case should be addressed in the context of the current proceedings. The disclosed statements have been discovered in a List of Documents filed in accordance with Part 23 of the Rules (in the form it stood for proceedings commenced before 1 October 1996). That Part has always recognised that discovery may involve questions of privilege.

Claims of privilege may be made in connexion with processes ancillary to trials, notably discovery, interrogatories and the production of documents under subpoena or notice to produce. (I shall refer to these compendiously as the pre-trial gathering of evidence.) As regards discovery in proceedings commenced on or after 1 October 1996, or in respect of interrogatories pursuant to notice given or order made on or after that date, the Supreme Court Rules incorporate by reference the Evidence Act principles: see Pt 23 r1(c), Pt 24 r6(3)(c). However the corresponding rules as they stood in relation to proceedings such as the directors' proceedings simply acknowledge that the processes of discovery or interrogatories might involve questions of privilege. And there has never been a rule addressing the application of the Evidence Act in relation to subpoenas or notices to produce.

The Evidence Act 1995 (Cth) and the Evidence Act 1995 (NSW) make significant changes to the law of evidence in relation to client legal privilege. These include the adoption of the dissenting view of Barwick CJ in Grant v Downs (see s118) and other changes: see generally The Adelaide Steamship Co Ltd v Spalvins [1998] FCA 144; (1988) 152 ALR 418 at 427.

The impact of the Acts upon pre-trial gathering of evidence has been a matter of controversy in the cases. It is common ground that each Act is in terms relevantly confined to the adducing of evidence, and that this expression does not in its ordinary and natural meaning extend to ancillary processes involving the pre-trial gathering of evidence. In the decision under appeal, Bainton J held that the common law of client legal privilege (including the waiver thereof) was unaffected in relation to the pre-trial gathering of evidence, even for hearings commenced on or after 1 September 1995 when the Evidence Act generally commenced in New South Wales courts. Opposed to this view are Telstra (No 1) and the recent decision of the Full Court of the Federal Court of Australia in Adelaide Steamship . Bainton J was however in accord with the views expressed by Foster J in Esso Australia Resources Ltd v The Commissioner of Taxation of the Commonwealth of Australia (Federal Court of Australia, unreported, 21 November 1997); Hill J in Zemanek v Commonwealth Bank of Australia (Federal Court of Australia, unreported, 2 October 1997) and Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (Federal Court of Australia, unreported, 18 March 1998) (albeit that Goldberg J recognised that he was obliged to bow to the contrary view adopted recently by the Full Federal Court). There have also been a significant number of cases which have held or assumed one position or the other without detailed analysis.

The detailed consideration of the legal issues in Telstra (No 1) and Adelaide Steamship relieves me of the need to address the matter at length. With one presently immaterial qualification, I would respectfully adopt and follow the reasoning in those cases and hold that the principles of the Act touching client legal privilege apply derivatively to ancillary processes involving the pre-trial gathering of evidence. I acknowledge that this entails recognition that the common law is modified so as to accord with the Evidence Act in this area. Shortly stated, my reasons are:

1. The doctrine of legal professional privilege is more than a rule of evidence. It is a fundamental common law doctrine that furthers the rule of law: Baker v Campbell (1983) 153 CLR 52 at 88-9, 94-6, 116-7, 127-8, 131-2; Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 132-3, 145, 161. Nevertheless, "it emerged in the sixteenth century as a natural exception to the then novel right of testimonial compulsion" (Baker v Campbell (1983) 153 CLR 52 at 126 (Dawson J), cited in Telstra (No 1) at 279). The doctrine has continued to respond to changes in the law of procedure and evidence. (Thus, it was extended to the client's own testimony when a party ceased to have a privilege from testifying in the trial of civil cases at common law: 8 Wigmore, Evidence s2290 (McNaughton rev 1961).) And, in time the doctrine was extended to ancillary processes as they emerged and developed (Telstra (No 1) at 279). Accordingly, in the words of McLelland CJ in Eq (ibid):

"... the principles of legal professional privilege applicable to testimony at a trial provide the paradigm, and the extension of the same principles to ancillary processes was derivative in nature. Accordingly, any change to the paradigm should rationally be reflected in the derivatives."

Bainton J is correct to point out (42 NSWLR at 637-8) that this does not represent a deduction of strict logic. Nevertheless, Justice Holmes' aphorism that "the life of the law has not been logic: it has been experience" (O Holmes, The Common Law (1881) p1) indicates why the reasoning remains compelling.

2. If the law touching the pre-trial gathering of evidence were not responsive to relevant and applicable changes in the Evidence Act it would not only be departing from this history. It would also create anomalies and lead to waste of expenditure. Different principles would apply to the same document or piece of information depending on whether access to it is sought prior to or even at the trial, or whether it is actually put into evidence. It is true that rights of inspection are not to be elided with rights of adduction into evidence, if only because inspection of a document may prompt a train of inquiry or facilitate preparation of cross-examination (National Employers' Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 at 384-5; Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 at 404-5). But it does not follow that the common law should allow a yawning gap of unprincipled distinction in the application of the rules of client legal privilege to the same document at different stages of litigation. It is not in the interests of orderly litigation that a party should be forced into the position of tendering a document sight unseen, yet this is one consequence of refusing pre-trial inspection of a document made admissible by the Evidence Act. Some of the anomalies can be overcome by concessions made or the exercise of judicial discretions (cf Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 60 FCR 366). Nevertheless, there remains force in the criticism of a state of affairs brought about by the common law's refusal to adapt itself in this way.

3. It is true that the Australian Law Reform Commission deliberately refrained from extending its proposed reforms in this area to ancillary processes, not regarding such a state of affairs as "unreasonable" (see Adelaide Steamship at 427). However, the caution of the legislature does not stultify the capacity of the common law to develop incrementally. The common law is responsive to change, including change reflecting the "gravitational pull" of statutes: see generally the Hon Justice Robert S French, "Statutory Modelling of Torts" in Mullany ed, Torts in the Nineties (1997); Adelaide Steamship at 428. I accept that the matter is controversial: see Lamb v Cotogno [1987] HCA 47; (1987) 164 CLR 1 at 11-12. In R v Swaffield [1998] HCA 1; (1998) 72 ALJR 339 at 361 Toohey, Gaudron and Gummow JJ noted that it may well be thought undesirable to have two streams of evidence law, one legislative and the other judicial, the latter simply echoing the former or perhaps deviating from it. I do not read these remarks as a wholesale invitation to bring common law principles of evidence in line with statutory analogies found in the Evidence Act. Nevertheless, the comment has particular force in the present context in view of the matters referred to in s2 above.

4. Section 9(1), which appears only in the New South Wales version, states:

This Act does not affect the operation of a principle or rule of common law or equity in relation to evidence in a proceeding to which this Act applies, except so far as this Act provides otherwise expressly or by necessary intendment.

This provision does not in terms touch the present situation, because the Court is not yet dealing with evidence in the current proceedings.

5. Part 3.10 Division 1 ("client legal privilege") does not abrogate the privilege, or undercut its high function. Rather it fine tunes the law and states it in accessible legislative form. The principles of statutory interpretation touching the construction of legislation abrogating common law rights have little or no impact in this context: Adelaide Steamship at 429.

6. The doctrines of precedent strongly support this approach. Adelaide Steamship represents a recent, considered decision of the Full Federal Court in relation to the reach of indistinguishable provisions of the Evidence Act 1995 (Cth). See also Re Z (1996) 134 FLR 40 at 66-9, where a majority of the Full Court of the Family Court took the same approach. In those circumstances our duty is to follow the Full Federal Court unless convinced that its interpretation is plainly wrong: Australian Securities Commission v Marlborough Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 492; Fernando v Commissioner of Police (1995) 36 NSWLR 567 at 587-90, 593. Cf also Towney v The Minister for Land and Water Conservation of New South Wales (1997) 147 ALR 402 at 412 and Newcastle Wallsend Coal Co Pty Ltd v Court of Coal Mines Regulation (1997) 42 NSWLR 351 at 388, 392-3.

(I mention one caveat. A nice question would arise were the matter in issue whether a document prepared for the dominant but not sole purpose of providing legal advice was privileged from disclosure in some ancillary process involving the pre-trial gathering of evidence. Grant v Downs still represents the common law in this State. I recognise that most of the cases which arrived at the view which I have adopted saw it as an inevitable consequence that Grant v Downs no longer applies in jurisdictions where the Evidence Act principles apply: see, eg Adelaide Steamship at 428-9. According to Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (at p35), Telstra (No 1) turned on the dominant purpose issue; but this is not apparent on the face of the report of that case. I am far from convinced that any court other than the High Court has the right to depart from Grant v Downs merely because of the indirect or flow-on effect of the Evidence Act. Notwithstanding the gravitational pull of s118 it may be that only the High Court could administer the coup de grace to Grant v Downs if that is to be its fate in the Federal Court and courts in New South Wales in the light of the Evidence Act. In Ravenor Overseas Inc v Roadhead [1998] HCA 17; (1998) 72 ALJR 671 at 672 Brennan CJ said that:

"Nothing is more important to the due administration of justice than that the Courts of Australia should faithfully follow decisions of this Court. This Court has the responsibility of determining the law applicable throughout the Commonwealth. Nor should it be thought that, because some new argument can be devised contrary to a holding of this Court, the authority of its decisions become problematic. Although the decisions of this Court will, when this Court deems it necessary, be revisited, there should be no qualification about the duty of other Courts faithfully to apply the decisions of this Court as they stand.")

RELEVANCE OF HARMAN OBLIGATION PRECLUDING COLLATERAL USE OF STATEMENTS

Deloittes correctly accept that the principle in Home Office v Harman [1983] 1 AC 280 extends beyond discovered documents and applies to statements disclosed pursuant to pre-trial directions: see Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509; Springfield Nominees Pty Ltd v Bridgeland Securities Ltd [1992] FCA 472; (1992) 38 FCR 217; Smoothdale at 229. The Harman principle imposes restrictions upon the party who gains access to documents from an opponent pursuant to pre-trial processes. These are designed to ensure that the documents are used only for the purposes of the litigation for which they were handed over. In Australian law at least, it is probably the law that once the information in such documents is adduced into evidence it becomes part of the public domain, unless the court restrains publication of it: Esso Australian Resources Ltd v Plowman (1995) 183 CLR 10 at 32-33 (Mason CJ); Ainsworth v Hanrahan (1991) 25 NSWLR 155 at 164 (Kirby P, Samuels JA agreeing, Handley JA reserving the point at 170). But, until the contents of the document have been disclosed to the public at trial, the party receiving such documents is subject to an obligation which has been described as one of confidentiality. This restricts that party from disclosing information derived from the document for any "collateral or ulterior purpose": Esso at 33 (Mason CJ), 36 (Brennan J). The obligation is enforceable by injunctive and contempt remedies. Disclosure between parties pursuant to discovery or exchange of witness statements is not disclosure to the world at large: Law Institute of Victoria v Irving [1990] VicRp 37; [1990] VR 429 at 437.

Strangers to litigation who seek access to documents or things in any proceedings in the Supreme Court of New South Wales require the leave of the court: Supreme Court Rules, Part 65 r7. This extends expressly to witness statements: r7(3). The procedure for seeking access is now regulated by Practice Note 97 - Access to court files by non-parties. A stranger to proceedings would not be in a position superior to that of a party, and a party must show "special circumstances" before leave will be given permitting the collateral use of documents subject to a Harman undertaking (Complete Technology Pty Ltd v Toshiba (Australia) Pty Ltd [1994] FCA 1314; (1994) 53 FCR 125 at 132-3; Esso at 37),

Deloittes accept these principles. Indeed they embrace them as indicative of the adequacy of the protection afforded by law in relation to the disclosed statements. They urge that there is simply no need for the law of client legal privilege to stand as a backstop. However, the submission proves too much and too little.

At this stage no application has been made for access to any copy of the statements that may be in the custody of the court in the directors' proceedings. What Deloittes seek is access to the copies of the identified plaintiffs' statements retained by Abigroup as one of the co-plaintiffs in the directors' proceedings and discovered by it (subject to a claim of privilege) in the current proceedings. It is convenient to dispose of Deloittes' invocation of Harman before returning to issues of privilege. The Harman principle has been expressed as embodying a duty of confidentiality upon the party subject to the implied duty not to make collateral use of documents produced by one litigant party to another: supra. I have stated that Deloittes' submission involving Harman proves too much and too little. Deloittes' submission proves too much, because the Harman principle extends to all categories of disclosed documents or things, whether attracting client legal privilege or otherwise: Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 765. Conversely, the submission proves too little, because it fails to give due effect to the proposition that client legal privilege is a right vested in the client which cannot be overridden if it subsists. The fundamental and enduring nature of the privilege is illustrated in the High Court's recent decision in Carter v Managing Partner, Northmore Hale Davey & Leake (1995) 183 CLR 121, which held that it cannot be overridden even to establish innocence of an accused person. The protection afforded by Harman falls significantly short of this, because the court may give leave permitting the collateral use of documents subject to an implied Harman undertaking. Even though it is inconceivable that leave would be given in relation to a privileged document, the possibility that it might (according to Harman) shows that privilege and Harman are in different realms of discourse.

Accordingly, it is no answer to an otherwise subsisting client legal privilege to argue that Harman is available as a back up. Abigroup's invocation of privilege remains to be addressed on its own terms.

APPLICATION OF EVIDENCE ACT PRINCIPLES TO THE MATTER IN ISSUE

Deloittes contend that the occasion when the disclosed statements were handed over in the directors' proceedings was not a "privileged communication", because it did not have the requisite degree of confidentiality. On this basis, it is submitted that one does not get to issue loss of privilege pursuant to s122 of the Act (if Evidence Act principles apply).

This submission should be rejected. I have already recorded that it was common ground below that the disclosed statements attracted client legal privilege at least up to the time when they were handed over. The trial judge's decision to that effect cannot be challenged in the appeal. The attempt to treat the very act of disclosure as a non-confidential communication does not sidestep the other legal issues.

The notion of a privileged document may be a solecism at common law: cf Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 543-4. But the Parliament is not bound to conform to doctrinal purity. Section 119 deals in the alternative with a "confidential communication" and "the contents of a confidential document (whether delivered or not)". "Confidential document" is defined in s117 to mean:

"... a document prepared in such circumstances that, when it was prepared:

was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law."

The present application seeks access to documents which were created or adopted for use as witness statements in circumstances attracting a conceded privilege. The contents of those documents are themselves "the contents of a confidential document (whether delivered or not)".

Deloitte's submission also overlooks clause 1(e) of the "usual order" which stipulates that nothing in the order shall deprive any party of its right to treat any communication as privileged.

Next, Deloittes challenge the trial judge's conclusion that, if Evidence Act principles apply, s122(2)(c) would ensure that client legal privilege was not lost. Deloittes argue that privilege was lost when Abigroup knowingly and voluntarily disclosed the substance of the statements by serving them in the directors' proceedings (cf s122(2)). It is submitted that this disclosure was not made within any of the defined circumstances in s122(2)(a) - (d)) including, in particular, "under compulsion of law" (see s122(2)(c)).

So far as relevant, s122(2)(c) provides:

...this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made:

Senior counsel for Deloittes submits that the disclosure of the statements was not under compulsion of law because the usual order made pursuant to Practice Note 39 left it open to the parties in the directors' proceedings to choose whether or not they wished to disclose the information contained in the disclosed statements or the statements themselves. It was further submitted that the usual order merely brought forward the time at which the parties to the directors' proceedings would have waived any privilege touching the contents of the statements when they decided to tender those statements or called the makers of them as witnesses (cf Comfort Hotels Ltd v Wembley Stadium Ltd [1988] 1 WLR 872 at 877-8).

I would reject these submissions. In my view any disclosure by delivery of copies of the statements was "under compulsion of law" within s122(2)(c). My reasons follow.

The expression "shall serve" is used in the Practice Note in relation to witness statements and expert reports. A consequence of a party's failure to comply in each case is stated to be that the party shall not be entitled to adduce the relevant evidence without the leave of the court. But this is not the limit of the obligation, or of the court's power to enforce it. As regards each category of evidence, the Practice Note speaks in terms of an obligation crystallising prior to the hearing date. Thus, in the case of witness statements, clause 1 of the Usual Order requires service of "a written statement by each proposed witness of the oral evidence which that party intends to lead on any issue of fact to be decided at the trial" (emphasis added). And clause 11 of the Practice Note commences with: "In the event that any party intends to rely upon the evidence of one or more expert witnesses" (emphasis added). In each case there is the language of a present obligation, operative because of the intent of the party at the time when the exchange of statements or reports is to take place. That is sufficient to represent "compulsion of law".

To point out that waiver or loss of privilege attaching to a statement in the nature of a proof of evidence will or may occur when the witness is called to testify - and this may turn upon the use made of the statement by the witness: Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647 at 687 - does not change the character of what happens when the statement of the intended witness is exchanged. See Smoothdale.

There is no doubt that the nearly invariable sanction for breach is the deprivation of testimonial use of the witness concerned. But non sequitur that the obligation to exchange statements or reports pre-trial is merely a pious exhortation. Clause 9 of the Practice Note reminds that the court will enforce compliance with its orders "with all appropriate sanctions".

There are good reasons why the obligations are expressed as they are. One purpose of advance disclosure of intended evidence is the promotion of early settlement. Another is the early appraisal of the opposite party with information about the matters truly in issue, thereby ensuring the saving of time and money wasted in trial by ambush.

Commercial litigation is frequently multi-party litigation. Parties other than those directly opposed to the party in breach of the usual order may yet have a legitimate interest in obtaining access to the information intended to be disclosed in advance of trial, so as to be able to make decisions about settlement, calling witnesses or the subpoena of documents or witnesses. For example P, an owner, may sue D an architect, for negligence in the design of a faulty building. D may wish to seek contribution from E, an engineer who constructed the building. And D and its insurer I may be in dispute about professional indemnity cover. If the only sanction against D for not disclosing in advance the evidence it intends to rely upon to dispute D's retainer by P were the deprivation of D of testimonial use of that evidence, this would enure to the detriment of E and I. It would also be likely to prolong the litigation, because E and I might be forced to seek an adjournment if unexpectedly confronted with the collapse of D's defence in consequence of procedural default.

Senior counsel for Deloittes relied upon a passage in the judgment of Hobhouse J in Prudential at 765-6. His Lordship used the expression "compulsion principle" to refer to what I have termed the Harman principle. He said:

"It was argued before me that the compulsion principle is not simply confined to orders which require the disclosure of documents or information. In litigation a party may be subjected to orders or rules of procedure which require him to do various things or take various steps in the action. It was argued that whenever a party was in this position he was acting under a compulsion which brought the implied undertaking into force. This argument can be attractively developed. It is said that many things in actions are done because a party is ordered or otherwise required to do them. They are required to deliver pleadings, swear and lodge affidavits, call witnesses, or, in the present context, serve advance copies of the evidence upon which he proposes to rely at the trial. In all these situations the practical sanction is similar to that which arises from a failure to give discovery or respond to other orders. The primary sanction that the court imposes is to strike out the claim or the defence. If a party fails to deliver a pleading or to lodge or adduce evidence he will fail to protect his rights and the other party's claims or defences will prevail. The outcome for the litigant is in practical terms the same. However in legal terms this is not correct. There is distinction between orders, the breach of which is a contempt of court and those orders or rules which merely give rise to a default."

With respect, I disagree. A "procedural" direction is still an order of the court. There is no reason why a flagrant breach or a third party's inducement to breach could not be punished as a contempt. Clause 9 of the Practice Note reminds that "the court will enforce compliance with its orders with all appropriate sanctions". For the reasons given in the preceding paragraphs, the sanction of striking out a claim or defence may be inadequate in some cases. The efficiency of the procedures of the court is not the exclusive concern of the litigants in the instant litigation: cf Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 155, 168. At the end of the day:

"If a court lacked the means to enforce its orders, if its orders could be disobeyed with impunity, not only would individual litigants suffer, the whole administration of justice would be brought into disrepute"

(AMIEU v Mudginberri Station Pty Ltd [1986] HCA 46; (1986) 161 CLR 98 at 107)

In my view Bainton J was correct to hold that, if Evidence Act principles apply and if the compelled exchange of witness statements represents the knowing and voluntary disclosure of a privileged communication, then such disclosure was made under compulsion of law.

My reasoning makes it unnecessary to decide the case on common law principles. Were it necessary to do so, I would have held (as Bainton J did below) that no waiver of privilege occurred of such nature or extent as to preclude its invocation by Abigroup against Deloittes in the current proceedings: see Smoothdale; Prudential Assurance at 774; Goldberg v Ng [1995] HCA 39; (1994) 33 NSWLR 639, 185 CLR 83; Network Ten Ltd v Capital Television Holdings Ltd (1995) 36 NSWLR 275.

PRIESTLEY JA: I agree with the conclusion of Mason P, for the reasons he gives, that the principles of the Evidence Act 1995 touching legal privilege apply derivatively to ancillary processes involving the pre-trial gathering of evidence. This seems to me to be sufficiently clear to justify this court in saying so, notwithstanding the continuing authority of the High Court's decision in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 as to the common law position.

Again, for the reasons given by Mason P, I think this court must approach this appeal on the basis that the documents in question here were subject to client legal privilege until the time when they were served in the earlier proceedings, which never came to hearing.

Finally, in my opinion, the documents were served "under compulsion of law" within the meaning of s 122(2)(c) of the Act. That admittedly gives the words a broader meaning than a strictly technical approach might produce, but I think the broader meaning is fully justified by the context. The sanctions for non compliance with the practice requirements of the Commercial Division are not and cannot be inevitable; sometimes the abiding necessity for a fair trial will preclude the application of the direst sanctions, but the compulsion of the requirements seems to me to be very real, and properly described as one of law.

On the foregoing bases, and in the light of the circumstances of the present case, I agree with Mason P that the appeal should be dismissed with costs.

ROLFE AJA: I have had the advantage of reading the President's judgment in draft form. I agree with his Honour's reasons and the orders he proposed.

Akins and Ors v Abigroup Limited Matter No Ca 40694/97 [1998] NSWSC 254

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Judgment (107 paragraphs)

Akins and Ors v Abigroup Limited Matter No Ca 40694/97 [1998] NSWSC 254 (1 June 1998)

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Legislation Cited (6)

Cases Cited (27)