BETWEEN : STRZELECKI HOLDINGS PTY LTD (ACN 051 222 253)

Practice and procedure - Discovery - Privilege - Application for inspection - Whether documents are the subject of legal professional privilege - Advice privilege - Turns on own facts

Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405

AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30

Balabel v Air India [1988] 1 Ch 317

Bond v West Australian Newspapers Ltd (No 3) [2009] WASC 129

Brambles Holdings Ltd v WMC Engineering Services Pty Ltd (1995) 14 WAR 239

CTC Resources NL v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48

Curtis v Curtis [2001] EWCA Civ 469; [2002] Fam 42

Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325

Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission [2002] HCA 49; (2002) 213 CLR 543

DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191; (2003) 135 FCR 151

DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499

Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia [1999] HCA 67; (1999) 201 CLR 49

Grant v Downs [1976] HCA 63; (1976) 135 CLR 674

Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185

Packer v Deputy Commissioner of Taxation [1985] 1 Qd R 275

Seven Network Ltd v News Ltd [2005] FCA 142

Southern Equities Corporation Ltd v Western Australian Government Holdings Ltd (1993) 10 WAR 1

Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2009] WASC 2

1 The plaintiff applies for an order for inspection of documents discovered by the defendant pursuant to my order of 15 January 2009. The defendant has claimed privilege in relation to these documents. The plaintiff challenges the claim to privilege. For the reasons that follow, the challenge to the claim for privilege fails.

2 On 15 January 2009 I ordered that the defendant give discovery of, relevantly, documents in the following categories:

(1) Corrs Chambers Westgarth's file in relation to the preparation of, and negotiations relating to, the special conditions, including but not limited to all drafts of special conditions, file notes and correspondence and emails passing between Corrs Chambers Westgarth and the defendant or passing between those parties and any third party; and

(2) all correspondence, emails, advice and other documents received by or on behalf of the defendant from Corrs Chambers Westgarth and any other consultants in relation to the indemnity and bank guarantee being 'key provisions'.

3 By affidavit of Ms Karen Hauff, sworn 19 January 2009, the defendant gave further discovery pursuant to that order. In her affidavit Ms Hauff said that she is general counsel and company secretary of Bemax Resources Limited (Bemax), and that the defendant is a wholly owned subsidiary of Bemax.

4 Paragraph 2 of the supplementary list of documents attached to that affidavit states that 'the defendant objects to producing the documents enumerated in Part II of the First Schedule on the ground that they are privileged from production'.

4. Documents in the schedule below, falling within the following categories, are listed in accordance with [orders (1) and (2) above] made by the Honourable Justice Beech on 15 January 2009:

(a) Corrs Chambers Westgarth's file in relation to the preparation of, and negotiations relating to, the special conditions, including but not limited to all drafts of special conditions, file notes and correspondence and emails passing between Corrs Chambers Westgarth and the Defendant or passing between those parties and any third party; and

(b) All correspondence, emails, advice and other documents received by or on behalf of the Defendant from Corrs Chambers Westgarth and any other consultants in relation to the indemnity and bank guarantee being 'key provisions'.

6 The First Schedule lists 24 documents bearing dates between 22 February 2006 and 21 March 2006. All of the documents are described as emails between Ms Lynette Jones of Bemax Resources NL and Mr Philip Wilson of Corrs Chambers Westgarth, or handwritten file notes made by Mr Wilson. Some of the emails from Mr Wilson to Ms Jones are described as attaching draft special conditions.

7 By chamber summons dated 31 March 2009 the plaintiff applies for inspection of the documents referred to in that part of Ms Hauff's affidavit.

8 In its written submissions dated 31 March 2009 in support of the application, the plaintiff contended that the defendant carried an onus of establishing that there was, at the time the documents were created, a real prospect of litigation. The submissions also contended that the defendant had led no such evidence.

9 In its submissions in opposition dated 8 April 2009, the defendant contended that the documents in question were protected by legal advice privilege, not litigation privilege. That position had been put by the defendant's solicitors in correspondence prior to the application being made (see the defendant's solicitors' letter dated 13 March 2009.

10 The plaintiff's submissions in reply dated 28 April 2009 contended that the defendant had failed to establish that the documents were protected by advice privilege. That question had not been dealt with in the plaintiff's primary submissions dated 31 March 2009, notwithstanding that the defendant's solicitors had identified their reliance on advice privilege. In the circumstances, the defendant was given an opportunity by the court, which it took up, to file further evidence and submissions in opposition to the plaintiff's application for inspection.

11 The affidavit of Ms Hauff sworn 7 May 2009 provides greater specificity in relation to the relationship between Bemax and the defendant. The shares in the defendant are owned equally by two companies, each of which is a wholly owned subsidiary of Bemax.

12 The defendant filed an affidavit of Mr Wilson sworn 7 May 2009. This affidavit includes the following:

(a) Mr Wilson received instructions from Ms Jones on behalf of the defendant in about February 2006 to prepare and provide legal advice in regard to special conditions to be incorporated in the proposed contract for the sale of land;

(b) Mr Wilson prepared draft special conditions and provided that advice on a file which had already been opened for the defendant;

(c) Ms Jones was the company secretary and general counsel for Bemax as at February 2006, and Mr Wilson understood that she was authorised to provide instructions on behalf of the defendant;

(d) the documents listed in the First Schedule of Ms Hauff's affidavit sworn 19 January 2009 fall within one of the following categories (in each case the category into which each individual document falls is identified):

(i) communications received from Ms Jones in which she either requested legal advice or provided instructions to enable Mr Wilson to draft the special conditions or provide advice in relation to them;

(ii) communications from Mr Wilson to Ms Jones in which he either provided drafts of the special conditions, sought further instructions, or provided legal advice to the defendant in regard to the proposed special conditions;

(iii) handwritten notes which Mr Wilson prepared in the course of either receiving instructions or in providing advice to the defendant in regard to the special conditions; and

(iv) communications between Ms Jones and Mr Wilson relating generally to the preparation of the special conditions and the provision of legal advice in relation to them.

13 I turn to the legal principles relevant to legal professional privilege, in particular advice privilege.

14 Legal professional privilege protects the confidentiality of certain communications made in connection with the giving or obtaining of legal advice or the provision of legal services, including representation in proceedings in court: Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia [1999] HCA 67; [1999] HCA 67; (1999) 201 CLR 49 [35].

15 Privilege attaches to communications, not to documents as such. However, if a document is created for the dominant purpose of giving or seeking legal advice, it will be privileged: Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission [2002] HCA 49; [2002] HCA 49; (2002) 213 CLR 543 [9]; AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006) 155 FCR 30 [41]; Bond v West Australian Newspapers Ltd (No 3) [2009] WASC 129 [14].

16 There is authority that the party claiming privilege bears the onus of establishing that the communication occurred, or the document was brought into existence, for the dominant purpose of giving or obtaining legal advice: AWB v Cole [44(1)]; Seven Network Ltd v News Ltd [2005] FCA 142 [7]. The defendant accepts that it bears this onus.

17 However, the position as regards onus may not be so clear. There is authority that in an application under O 26 r 12 of the Rules of the Supreme Court 1971 (WA), the applicant bears at least an evidentiary onus to displace the claim to privilege: see CTC Resources NL v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48 [33] - [35]; Brambles Holdings Ltd v WMC Engineering Services Pty Ltd (1995) 14 WAR 239, 246 - 247 (Owen J), cf 240 - 241 (Kennedy J) and 243 (Rowland J); Southern Equities Corporation Ltd v Western Australian Government Holdings Ltd (1993) 10 WAR 1, 5, 16, 22.

18 In any event, I do not rest my decision on any question of onus. Assuming, favourably to the plaintiff, that the onus rests entirely on the defendant, for the reasons to be given I am satisfied that the claim to privilege is sustained.

19 Any such onus on the defendant may be discharged by evidence as to the circumstances and context in which the communications occurred or the documents were brought into existence, or by evidence as to the purposes of the person who made the communication, authored the document or procured its creation. The onus might also be discharged by reference to the nature of the documents, supported by argument or submissions: Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 689; AWB v Cole [44(1)].

20 A claim of privilege will not be established by a mere assertion, in general terms, that communications were undertaken for the purpose of obtaining or giving legal advice, without any statement as to the subject matter of the advice said to have been sought: see AWB v Cole [44(3)] and authorities there cited.

21 Where communications take place between a client and its independent legal advisers it may be appropriate to assume that legitimate legal advice was being sought, absent any contrary indication: Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185 [23] - [27]; AWB v Cole [44(4)].

22 A narrow view is not to be taken of whether communications between lawyer and client relate to seeking or giving legal advice. In Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325, Anderson J said as follows:

...whenever a client gives instructions to his solicitor there is assumed to be a request for advice. In my opinion, discourse between solicitor and client with reference to the transactions covered by those instructions, that is, professional discourse in a professional capacity, should be regarded as prima facie for the purpose of giving and receiving advice. This would apply to any communication that is on its face a communication of a professional nature from the solicitor to the client or his agent touching the subject matter of the solicitor's engagement and any communication from the client to the solicitor in connection with that engagement. Only if the rule is applied in that way can the policy of it be carried out and its object practically fulfilled (333).

23 A communication may be privileged even though it is not intended for use in a litigation and not strictly speaking made for the purpose of legal advice, but for the purpose of providing legal assistance; for example, draft conveyances: Packer v Deputy Commissioner of Taxation [1985] 1 Qd R 275, 284 - 285; Dalleagles (332).

24 In Balabel v Air India [1988] 1 Ch 317, 332 the English Court of Appeal applied the following test in determining the scope of communications between solicitor and client that attract legal professional privilege:

Once solicitors are embarked on a conveyancing transaction they are employed to ensure that client steers clear of legal difficulties, and communications passing in the handling of that transaction are privileged (if their aim is the obtaining of appropriate legal advice) since the whole handling is experience and legal skill in action and a document uttered during the transaction does not have to incorporate a specific piece of legal advice to obtain that privilege.

25 In DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191; (2003) 135 FCR 151 Allsop J applied these statements of principle from Dalleagles and Balabel. His Honour observed that:

What underlies the expression of opinion in both cases is the recognition that the obligation of the lawyer to advise, once retained, is pervasive. It would be rare that one could, with any degree of confidence, say that a communication between client (or agent) and lawyer, in the circumstances of a retainer requiring legal advice and the directing of the client by a legal adviser, was not connected with the provision or requesting of legal advice... too literal a requirement of identifying legal advice as express advice about the law would place undue emphasis on formalism and undermine the privilege [52].

26 It is necessary that the aim of the communication is the obtaining of legal advice: Curtis v Curtis [2001] EWCA Civ 469; [2002] Fam 42 [10] - [11], [17] - [23].

27 Most of the submissions made by the plaintiff in its outlines dated 31 March 2009 and 28 April 2009 have been overtaken by the evidence subsequently filed. Consequently, I give primary attention to the plaintiff's responsive submissions dated 14 May 2009.

28 The plaintiff submits that while the affidavit of Mr Wilson sworn 7 May 2009 overcomes 'some' (without specifying which) of the objections it had made on its earlier submissions, the defendant 'still has not done enough to satisfy the court' that the claim to privilege should be upheld. For the reasons that follow, I do not accept that submission.

29 First, the plaintiff submits that the inconsistencies in and timing of the affidavits filed on behalf of the defendant ought to excite the court's attention to the view that the process of determining the challenge to the immunity claim will be aided by the court inspecting the documents in question. I do not accept that submission. It would have been preferable had an affidavit to the effect of Mr Wilson's affidavit sworn 7 May 2009 been provided in support of the claim for privilege at an earlier stage. However, until the plaintiff's reply submissions of 28 April 2009, the plaintiff's challenge to the claim for privilege proceeded on the erroneous basis that litigation privilege had been claimed. That seems to me to provide an adequate explanation for the timing of Mr Wilson's affidavit of 7 May 2009. Whether the timing of the affidavit may affect the question of costs is a different question. At this stage I say nothing as to that.

30 Further, I do not accept that there are inconsistencies of substance and significance in relation to the defendant's affidavits.

31 More generally, I am not persuaded that the material before me makes it appropriate that I inspect the documents in order to determine the challenge to the claim of privilege. The evidence satisfies me that the documents are privileged.

32 Secondly, the plaintiff invites attention to Ms Jones' status as company secretary and general counsel for Bemax, not as an officer of the defendant. As the plaintiff submits, while Mr Wilson states that he 'understood [Ms Jones] was authorised to provide those instructions on behalf of [the defendant]' he does not state the basis for his understanding. I accept that there is no direct evidence of Ms Jones' authority on behalf of the defendant to seek and obtain legal advice from Corrs Chambers Westgarth. Nonetheless, in the circumstances and given the relationship between Bemax and the defendant, I am prepared to infer that Ms Jones was authorised in that respect to act on behalf of defendant.

33 Thirdly, the plaintiff's submissions appear to call into question whether there was a legitimate purpose of seeking legal advice in the communications the subject of these documents. In my opinion, the evidence of Mr Wilson is amply sufficient to establish that the purpose of the communications and the creation of Mr Wilson's notes was the seeking and giving of legal advice and legal assistance in relation to the special conditions.

34 Fourthly, the plaintiff submits that the defendant's state of mind, and in particular whether it acted in good faith in relation to the special conditions, is relevant to the action. It is not clear to me what is said to follow from a contention to that effect. The relevance of the documents is not in question, but relevance does not afford a ground to displace legal professional privilege.

35 The plaintiff submits that Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405, 411 is authority for the proposition that where a party's state of mind is an element of a cause of action or defence, the party cannot withhold from their opponent the legal advice which is likely to have contributed to their state of mind. The substance of the plaintiff's submissions, at least apart from that proposition, is that privilege has not been established by the defendant; not that any privilege has been waived. In any event, if the plaintiff is contending that privilege is waived, I reject that contention for the reasons I gave in relation to the plaintiff's application for further and better discovery: see Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2009] WASC 2 [57]. Denial of a state of mind asserted by the other party in its pleadings does not amount to conduct waiving privilege: DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 384; (2003) 127 FCR 499.

36 Finally, the plaintiff invokes the objectives of the CMC list in support of its application, referring to pars 7, 8 and 9 of Practice Direction 4.1.2. I do not consider that the objectives of the CMC list generally, or the paragraphs of the practice direction referred to by the plaintiff, affect the question for decision in this application. That question is whether, on the material before the court, the documents in question are the subject of legal professional privilege.

37 For these reasons, I would dismiss the application. I propose that if the parties do not agree as to the costs of the application, they file written submissions and the question of costs be determined on the papers.

1. the plaintiff's application for inspection by chamber summons dated 31 March 2009 be dismissed;
2. failing agreement between the parties as to the costs of the application, the parties file written submissions in relation to costs in accordance with the following timetable:

(a) any party who seeks the costs of the application file submissions with seven days of the date of these orders; and

(b) submissions in opposition to any such application be filed within seven days thereafter.

1. the question of costs be determined on the papers.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : STRZELECKI HOLDINGS PTY LTD -v- CABLE SANDS PTY LTD [No 2] [2009] WASC 150 (S)

BETWEEN : STRZELECKI HOLDINGS PTY LTD (ACN 051 222 253)

Practice and procedure - Discovery - Application for inspection - Costs - Application unsuccessful - Whether costs should follow the event

Plaintiff to pay defendant's costs of the application

1 BEECH J: The plaintiff applied for an order to inspect documents discovered by the defendant. The plaintiff's application was unsuccessful. The defendant seeks its costs of the application. The plaintiff contends that it should have its costs up to 7 May 2009.

2 For the reasons that follow, I consider that the plaintiff should pay the defendant's costs of the application.

3 Pursuant to my order of 15 January 2009, by affidavit of Ms Karen Hauff, sworn 19 January 2009, the defendant gave further discovery. The relevant parts of the affidavit are summarised or set out in [4] - [6] of my reasons on the application.

4 In correspondence prior to the commencement of the application, the defendant's solicitors had stated that the documents were protected by legal advice privilege. Notwithstanding that, the plaintiff's written submissions of 31 March 2009 contended that the defendant carried an onus of establishing that there was, at the time the documents were created, a real prospect of litigation.

5 The defendant's submissions in opposition dated 8 April 2009 contended that the documents were protected by legal advice privilege. It is true, as the plaintiff emphasises, that those submissions also referred (at par 6) to the existence of a real prospect of litigation, thereby apparently not abandoning the alternative claim to litigation privilege. Nonetheless, read as a whole, the central contention in the submissions was that the documents were protected by advice privilege. That is what the defendant's solicitors had stated prior to the commencement of the application.

6 The plaintiff's submissions in reply dated 28 April 2009 contended that the defendant had failed to establish that the documents were protected by advice privilege. The plaintiff did not adduce any evidence to displace the claim to privilege.

7 On 7 May 2009, pursuant to the leave referred to in [10] of my reasons on the application, the defendant filed further evidence.

8 The plaintiff seeks its costs up to the filing of this further evidence.

9 The filing of the further evidence by the defendant did not lead to the plaintiff abandoning the application. To the contrary, the plaintiff put on further submissions in support of its application.

10 The plaintiff points to par 6 of the defendant's submissions dated 8 April 2009 and submits that the defendant's claim to privilege had proceeded at all times on the basis of both litigation privilege and advice privilege. Consequently, the submission continues, it was necessary for the plaintiff to undertake all the work it did between the filing of the application and receipt of Mr Wilson's affidavit of 7 May 2009.

The proper order as to the costs of the application

11 The discretion of the court in relation to costs is broad. Nevertheless, the success of the defendant in opposing the application will, absent other factors, generally lead to an order for costs in its favour.

12 I am not persuaded that the matters relied upon by the plaintiff are sufficient to call for a departure from the general rule that costs follow the event. That is so, I find, taking into account the following:

(a) the plaintiff's initial submissions focused solely on attacking a claim to litigation privilege, notwithstanding that, prior to the application, the defendant had stated that it relied on advice privilege;

(b) the plaintiff did not put on any evidence to displace the claim to privilege, notwithstanding that there are authorities (referred to in the defendant's submissions of 8 April 2009) to the effect that an objection to produce documents due to privilege will be upheld unless displaced by evidence, see [17] of my reasons on the application; and

(c) following receipt of Mr Wilson's affidavit of 7 May 2009 the plaintiff maintained its application and filed further submissions, and was unsuccessful on the application.

13 Taking into account the amount allowed in the practice direction, the exchanges of submissions in the application, and the absence of an oral hearing, I fix the costs in the sum of $2,000.

14 For these reasons, I order that the plaintiff pay the defendant's costs of the application fixed in the sum of $2,000, payable within seven days.