Archer Capital 4A Pty Ltd (as trustee for the Archer Capital Trust 4A) v Sage Group plc

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[2013] FCA 1098 AWB Ltd v Cole (No 5) (2006) 155 FCR 30[1997] HCA 3 Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341[2006] FCAFC 86 Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236[2008] NSWCA 164 Domain Paper (Australia) Pty Ltd v Galloway [2014] FCA 936 DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499[2003] FCA 384 Grant v Downs (1976) 135 CLR 674 Hastie Group Ltd (In Liq) v Moore (t/as Deloitte Touche Tohmatsu) (2016) 339 ALR 635[2016] NSWCA 305 Kennedy v Wallace (2004) 208 ALR 242[2004] FCA 332 Mitsubishi Electric Australia Pty Ltd v Victoria WorkCover Authority (2002) 4 VR 332

Inspection of documents

A question arose as to whether the evidence relied upon by Metallurg was such that the Court should reject the claims for privilege without proceeding to inspect the documents in question. Global Advanced Metals submitted, and it was not disputed, that Metallurg bears the onus of establishing its claim for privilege and this is not achieved simply by resort to a verbal formula or ritual: Grant v Downs (1976) 135 CLR 674 at 689 per Stephen, Mason and Murphy JJ; Mitsubishi Electric Australia Pty Ltd v Victoria WorkCover Authority (2002) 4 VR 332; [2002] VSCA 59 at [11] per Batt JA, with whom Charles and Callaway JJA agreed. As Young J explained in AWB Ltd v Cole (No 5) (2006) 155 FCR 30; [2006] FCA 1234 at [30]: (citations omitted) … The onus might 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, or authored the document, or procured its creation. It might also be discharged by reference to the nature of the documents, supported by argument or submissions … The purpose for which a document is brought into existence is a question of fact that must be determined objectively. See also Domain Paper (Australia) Pty Ltd v Galloway [2014] FCA 936; Archer Capital 4A Pty Ltd (as trustee for the Archer Capital Trust 4A) v Sage Group plc (No 2) (2013) 306 ALR 384; [2013] FCA 1098 per Wigney J at [13]-[14].
Global Advanced Metals relied on Brereton J's decision in Hancock v Rinehart (Privilege) [2016] NSWSC 12. In support of her claim for privilege, Gina Rinehart read an affidavit of her then solicitor who explained how the schedule containing details about the privileged documents had been compiled. At [9]-[10]: [9] … However, it contains no evidence of the circumstances in which and purpose for which the Schedule 1 documents were created. Nor does it even contain an assertion that the Schedule 1 documents were privileged - which, in any event, would be no more than an inadmissible opinion on the deponent's part, founded on facts not within his knowledge. [10] …, the affidavit does not say anything about the column [in the schedule headed] "circumstances under which privilege is claimed", which purports to state the basis of the privilege claim. The facts asserted in that column are unverified assertions of no evidentiary value. Although Mr McClintock SC offered to call the solicitor who made the affidavit to verify the facts asserted in that column, he could not have done so: the solicitor in question had no contemporaneous involvement in the creation and receipt of the disputed documents, had no personal knowledge of the matters asserted, and could not have given evidence of those matters, other than inadmissible hearsay or opinion. His Honour's description is also an apt description of the first affidavit of Metallurg's solicitors.
The plaintiffs, John Hancock and Bianca Rinehart, objected that there was no affidavit of Mrs Rinehart personally making or proving the claim for privilege. At [16]: If there were evidence from another source which proved the facts that established a claim for privilege, the absence of an affidavit from Mrs Rinehart personally would not be fatal: the question must be whether the requisite facts are proved, not by whose evidence they are proved. In a large enterprise, it may well be someone other than Mrs Rinehart personally who would have the best knowledge of the relevant facts. … Nonetheless, no-one involved has deposed to the purpose for which the disputed documents were created, which leaves Mrs Rinehart devoid of testimonial evidence on the essential fact she must prove to establish her claim of privilege. In those circumstances, not only will the court not readily infer a dominant privileged purpose in the absence of evidence from those who might have illuminated it, but it may infer from the failure to call the witnesses who could have done so that their evidence would not have assisted the claim.
His Honour considered the evolution of the procedure for making and testing claims for privilege, and the circumstances in which the Court may inspect documents over which a claim is made. At [31]-[34]: (citations omitted) [31] The preferable explanation of the court's power to inspect the documents is that it exists not to facilitate proof by a claimant of the facts required to sustain the claim, but to provide a means of enabling a claim to be scrutinised and tested. … [32] A further consideration telling in favour of that view is that the essential issue on a claim for privilege is the purpose for which the document or communication in question was made. As that involves ascertaining the purpose of a person, the best direct evidence will be that given by the person whose purpose is in question. While purpose may be inferred from the document, direct evidence of it can be given by the person who purpose it is. While the documents themselves may well illuminate the purpose for which they were created, to allow them to be used as evidence - let alone the sole evidence - in support of a claim for privilege, would be contrary to well-established practice. It would also be grossly unfair to the other party: if the only evidence of purpose is to be inferred from the document itself, the party seeking access is deprived of any opportunity to test the asserted purpose, which would defeat rather than promote the intent of enabling claims to be tested and scrutinised. … [34] Better informed now by the above analysis, in my view, such an approach is not merely unsatisfactory, but impermissible in principle. Whether the creature of judicial decision or, as I think more properly, rules of court, the court's power to inspect documents - and to require their production for that limited purpose - was a response to the potential injustice in treating the claimant's oath as conclusive. The power was not intended to detract from the requirement that a person claiming privilege prove, by admissible evidence, the grounds of the claim, that is quite a different notion from permitting a person claiming privilege to sustain the claim by adducing no testimonial evidence but asking the court to inspect the documents. … To voluntarily proffer the documents for inspection … is inconsistent with maintaining the claim.
His Honour concluded at [35(2)]: A claim for privilege must be made on sworn direct evidence - not inadmissible hearsay or opinion - proving the facts on which the claim is founded. This is unaffected by the court's discretionary power to require production in order to enable inspection for the purpose of adjudicating the claim, which exists to enable a claim for privilege to be scrutinised, not to enable it to be proved. No party - least of all the party claiming privilege - may insist that the court inspect the documents. As Mrs Rinehart had not tendered "admissible sworn evidence amenable to being tested by cross-examination probative of the facts on which the claim for privilege is founded - in particular, her purpose in making the relevant communications - it would be contrary to justice to uphold her claim solely on the basis of an inspection of the documents": at [36]. The Court refused to inspect the documents and held that the privilege claims failed.
Application for leave to appeal was refused in Rinehart v Rinehart [2016] NSWCA 58 where the Court (comprising Beazley P, Leeming and Simpson JJA) found no appellable error in the primary judge's finding of fact that there was no evidence in support of Mrs Rinehart's claim of privilege. Even if error were shown, the Court of Appeal was not prepared to remit the matter to the Equity Division nor itself exercise the discretion to view the documents in question. At [26]-[27]: [26] First, this is a case where there is no shortage of resources available to either side. … There was and is no explanation for the conspicuous deficiency in the evidence. This is not a case where it was impossible to adduce evidence from Gina, or from the lawyers (including Mr Sceales) who were involved at the time the documents were prepared. Nor is it a case in which it was impossible for the current lawyers to adduce evidence on information and belief in respect of those matters (although in the particular circumstances of this litigation, we should not be taken to be expressing a view as to the appropriateness of this latter course). [27] In short, this is not a case where a contestable claim of privilege has been advanced by evidence which is disputed by the party seeking access. This is a case where a well-resourced litigant has advanced no evidentiary basis at all to support a claim for privilege, in circumstances where it may readily be inferred that evidence was available.
The Court of Appeal concluded that a deliberate forensic choice had been taken to adduce no evidence in support of the claim for privilege and thus the Court should not itself review the documents over the opposition of the plaintiffs. The Court considered it was a very unusual case where the person making the claim for privilege adduced "no evidence at all" (emphasis that of the Court at [41]) and relied wholly upon the documents to support the claim.
Unlike Rinehart, I do not think it can be said that Metallurg has made a deliberate forensic decision to adduce no evidence but simply to rely on the documents. Rather, it seems to me that an effort was made to adduce evidence, but that effort failed for want of compliance with section 75, I infer from the urgent circumstances in which this issue was been brought before the Court for determination whilst the substantive hearing was underway. I am not sure that much is to be gained by rejecting a party's claim for privilege out of hand in those circumstances, particularly as it may have the result of abrogating an important privilege held by Metallurg due to their solicitor's drafting infelicity. For this reason, I granted leave to Metallurg to serve a further affidavit in accordance with the requirements of section 75.
Global Advanced Metals relied, in particular, on Brereton J's remarks at [7]: (citations omitted) (emphasis added) To sustain a claim of privilege, the claimant must not merely assert it; but must prove the facts that establish that it is properly made. Thus a mere sworn assertion that the documents are privileged does not suffice, because it is an inadmissible assertion of law; the claimant must set out the facts from which the court can see that the assertion is rightly made, or in other words "expose ... facts from which the [court] would have been able to make an informed decision as to whether the claim was supportable". The evidence must reveal the relevant characteristics of each document in respect of which privilege is claimed, and must do so by admissible direct evidence, not hearsay.
As to the proposition that evidence in support of a claim for privilege must be "admissible direct evidence, not hearsay", Brereton J referred to Commissioner of Australian Federal Police v Propend Finance Pty Limited (1997) 188 CLR 501 at 503-4; [1997] HCA 3 where Brennan CJ made such a statement. I note that the Chief Justice's judgment in Propend is one of five majority judgments; the other majority judgments do not make a statement to like effect nor refer to the Chief Justice's reasons. Nor, of course, is there a strict dichotomy between admissible evidence, on the one hand, and hearsay, on the other: there is admissible hearsay evidence, such as business records. This is consistent with Brereton J's statement, at [35(2)] of Reinhart, that a claim must be made on "sworn direct evidence - not inadmissible hearsay or opinion" (emphasis added).
I do not think the Chief Justice had in mind in Propend to revise the application of the Evidence Act including in respect of interlocutory hearings. Although Propend was handed down in 1997, the judgment at first instance was decided before the enactment of the Evidence Act 1995 (Cth), and so was not argued with the present legislation in mind. In any case, the privilege claimed was in relation to search warrants and the source of the privilege was the common law. The question was whether allegations of improper purpose such as to displace a claim for privilege could be founded upon hearsay evidence rather than whether a claim for privilege can rest upon hearsay. The decision was final, not interlocutory, and section 75 of the Evidence Act would not have applied in any case. The matter at hand, by contrast, is interlocutory for the purposes of section 75, as it arises in the course of proceedings: see, for example, Kennedy v Wallace (2004) 208 ALR 242; [2004] FCA 332 at [110] ff. Consistently with this, the Court of Appeal in Rinehart v Rinehart envisaged the evidence on such an application might be given on information and belief: at [26]; see also Hastie Group Ltd (In Liq) v Moore (t/as Deloitte Touche Tohmatsu) (2016) 339 ALR 635; [2016] NSWCA 305 at [32]-[34].
Global Advanced Metals submitted that the solicitor's third affidavit did not fill the evidentiary lacuna having regard to Hancock v Rinehart and Propend, and had other deficiencies. Bearing in mind that the onus may be discharged "by reference to the nature of the documents supported by argument or submissions" (AWB v Cole), I consider that the evidence relied upon by Metallurg in toto is sufficient to establish a claim for privilege - albeit without the finesse and overwhelming force one may be accustomed to seeing in large, commercial litigation. The circumstances in which the affidavits were prepared may account for this: urgency, an overseas witness and a parallel substantive hearing. Global Advanced Metals agreed that I should inspect the documents in those circumstances, which I have done, so as to determine whether Metallurg's claim should be upheld under sections 118 and 119 of the Evidence Act.

Issue waiver

Loss of privilege by waiver is dealt with by section 122(2) of the Evidence Act. Global Advanced Metals submitted that privilege had been lost by "issue waiver". Whether this is so requires "a fact-based inquiry" depending "very much on the particular character of the case": Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; [2006] FCAFC 86 at [56]-[61], or "matters of fact and degree": Cooper v Hobbs [2013] NSWCA 70 at [70] McColl JA (with whom Bergin CJ in Eq agreed). As Hodgson CJ in Eq explained in Wayne Lawrence Pty Ltd v Hunt [1999] NSWSC 1044 at [12]: …the question of whether the advancing of a person's state of mind is to be taken…as waiving privilege, is a matter of degree in each case. It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver. See also Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66; Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297 at [38], [41]; DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499; [2003] FCA 384 at [102]-[104]; SA EMed Pty Ltd v Calvary Health Care Adelaide Ltd (No 2) [2011] FCA 835 at [23]-[25].
Global Advanced Metals submitted that this would encompass a case in which the client has made crucial assertions about its own state of mind, in circumstances where confidential communications are likely to have affected that state of mind. Depending on the character of the case, there may well be an inconsistency between such an assertion, and a claim that the communications which affected the asserted state of mind (and could perhaps disprove the assertion) should be withheld from the opponent. As Hodgson JA (with whom Campbell JA and Handley AJA agreed) explained in Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236; [2008] NSWCA 164 at [48]: … What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential documents likely to have affected that state of mind"
None of the decisions to which I have been taken particularly resemble the facts at hand. Several relate to the state of mind of a plaintiff at the time they allege they relied upon misleading and deceptive conduct. DSE Holdings also deals with misleading and deceptive conduct, specifically whether a defendant, in denying by its pleading the existence of a certain state of mind, is taken to have waived privilege. The decision of SA EMed related to the circumstances at the time a contract was formed. Wayne was a case where a party sought to set aside a summary dismissal for its failure to provide security for costs, because, inter alia, it did not understand that dismissal, and not a stay, would be the consequence of that failure.
Rio Tinto has some similarity to the present case, as it does concern a statutory requirement that a particular state of mind exist. The requirement, however, was that the Commissioner in reaching its taxation decision be satisfied of certain matters, which it did in part by relying on advice, a matter in issue in the proceedings . It is not necessary for present purposes to recite how the Full Court concluded that the relevant statute and rules put the matter in issue (see [64]). But its analysis as to the operation of issue waiver where state of mind is required to be put in issue does bear repeating: [66] In the ordinary case, the Commissioner's compliance with his procedural obligations in a taxation appeal, including the provision of a SFIC [a statement outlining succinctly the Commissioner's contentions and the facts and issues in the appeal as the Commissioner perceives them], would not result in a waiver of privilege. In taxation appeals, the requirement to provide a SFIC, which is properly particularised, means that the Commissioner "must expose to the taxpayer … both his state of mind at the relevant time and its basis" … [67] Further, in exposing his states of mind and the basis for it, the Commissioner would not ordinarily act in a manner inconsistent with the maintenance of privilege over legal advice relevant to his attaining a state of satisfaction or exercising his discretion in a particular way. … Even though such communications may contribute to the decision-making, the mere reference to this fact by a decision-maker in the course of defending a judicial review application or on a taxation appeal is not inconsistent with the maintenance of privilege… This is because the decision-maker (here the Commissioner) would not put such legal advice in issue merely by saying that the advice was relevant or contributed to his decision. There would be no issue waiver because the decision-maker would not have done anything inconsistent with the maintenance of privilege. The situation might be otherwise if the decision-maker puts the contents of the legal advice in issue by specifically relying on the contents of the advice (and not merely the fact of the advice) to vindicate his claimed state of satisfaction or exercise of discretion. [68] In this case, everything turns on the particulars given by the Commissioner in response to Rio's request. …
Section 237(2)(b) of the Corporations Act provides that the Court must grant an application for leave to bring a derivative action if satisfied inter alia that "the applicant is acting in good faith". Global Advanced Metals pointed to two portions of Mr Dunckel's evidence relied on in support of its application as amounting to "issue waiver" in respect of Metallurg's state of mind. In Mr Dunckel's affidavit of May 2019, he deposed at [107]: Metallurg does not seek to obtain any benefit from the claim it wishes to bring in GAM's name with respect to those other proceedings. Metallurg wishes to bring the proceedings on behalf of GAM against the proposed defendants for the purpose of recovering GAM's losses, and recovering a judgment for the benefit of GAM and its shareholders as a whole.
In a further affidavit sworn on 17 October 2019, Mr Dunckel deposed at [21]: The reason Metallurg has commenced these proceedings is because it considers that the board of GAM did not follow proper process in connection with its decision to sell Wodgina and its ultimate sale.
The fact that an applicant for leave under section 237 must establish that it is acting in good faith cannot, without more, and I think much more, amount to a waiver of client legal privilege in respect of confidential communications with its lawyers in relation to the proposed proceedings. It might be different if Mr Dunckel, in seeking to establish that Metallurg was acting in good faith, referred to the fact that the decision to bring the application was based on legal advice that the proposed proceedings were meritorious. It might be unfair in those circumstances for Metallurg to maintain privilege over the legal advice. If the legal advice was, in fact, that the proposed claim was utterly hopeless but Metallurg persisting in seeking leave nonetheless then perhaps it could be said that Metallurg was acting in bad faith but Mr Dunckel's evidence does not say anything about legal advice being a reason, motive or endorsement for seeking leave or somehow supporting Metallurg's good faith. I do not think "issue waiver", or any waiver, arises.
For these reasons, I uphold the plaintiff's claim for privilege over the documents.

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