Australian Competition and Consumer Commission v Cathay Pacific Airways Limited

REASONS FOR JUDGMENT 1 These proceedings were commenced in 2009. In part, they concern allegations by the applicant ("the ACCC") that the respondent ("Cathay Pacific") and other airlines providing air freight services to and from Australia engaged in "price-fixing", contrary to s 45 and s 45A of the Trade Practices Act 1974 (Cth), then applying. The allegations concern, amongst other things, the imposition of a fuel surcharge on the supply of air freight services from Hong Kong in the period between 2002 and 2006. Cathay Pacific's defence to that aspect of the case is that, under Hong Kong law, all airlines were required to obtain the approval of the Hong Kong Civil Aviation Department ("CAD") for all tariffs, including fuel surcharges, on air freight services originating in Hong Kong. According to Cathay Pacific, CAD required, as a matter of practice and legal directive, that applications for approval of proposed surcharges be made on a collective basis through a sub-committee of a Board of Airline Representatives. The sub-committee ("HK BAR-CSC") was chaired by a representative of Cathay Pacific. Cathay Pacific also alleged in its defence that CAD, at all relevant times, required airlines to agree on the amount of surcharge for which approval was sought and required airlines to levy fuel surcharges in that amount. The ACCC's reply did not admit that Cathay Pacific was required to obtain CAD's approval for fuel surcharges, pleaded that it was not a requirement of CAD that applications for surcharges be made on a collective basis, and alleged that airlines were not obliged to impose, or seek approval for, fuel surcharges. 2 The interlocutory application with which this judgment deals seeks to maintain a common law claim for legal professional privilege over communications in documents, the contents of which were inadvertently disclosed during the discovery process before trial. The claim arises at common law because the trial processes to which the Evidence Act 1995 (Cth) applies, have not yet commenced. Although the interlocutory application was framed by reference to actual documents which contain the communications, it is accepted that legal professional privilege protects communications, rather than documents as such. 3 Documents containing the communications were discovered by the solicitors for Cathay Pacific. Cathay Pacific, in written submissions, identified the way in which the present issue arose in the following manner: 1. In February 2011, in the course of discovery, four copies of an email chain dated 22 September 2006 containing privileged communications (22 September Privileged Communications) and two copies of a partially redacted email dated 20 September 2006 containing privileged communications (20 September Privileged Communications) (together, the Documents) were inadvertently produced to the Applicant by the solicitors for the Respondent, DLA Piper. The production was inadvertent and DLA Piper had no instructions to waive privilege over the Documents. 2. By letter dated 27 June 2012 the Applicant asked the Respondent's solicitors to confirm whether the Respondent claimed privilege in respect of the 22 September Privileged Communications. The Respondent confirmed that it did. By letter dated 30 August 2012, the Applicant advised that it had received copies of the 20 September Privileged Communications. The Respondent also advised that it claimed privilege in the 20 September Communications. The Applicant subsequently refused to return the Documents and has asserted that privilege does not exist in the Documents or that the privilege has been waived. … 39. … [the] evidence establishes that the Documents were disclosed as a result of inadvertence … As at the date of these submission[s] DLA Piper Australia has not be [sic] able to determine precisely how the Documents were produced to the AGS … However, DLA Piper Australia has been able to determine the following: (a) In relation to the 22 September Privileged Communication: a) four near identical copies of that exact communication were identified by DLA Piper Australia as containing privileged communication and marked in the databases as privileged in full … b) those four near identical copies were advised to the AGS as being privileged in full and were not produced to the AGS … c) It is probable that the 22 September Privileged Communication was produced to the AGS as a result of a document categorisation and production error … (b) The 20 September Privileged Communication contains a copy of an email from DLA Piper to Ms Christine Liu of Cathay Pacific marked "Privileged & Confidential". This email contains privileged communications between Cathay Pacific and DLA Piper. a) Four copies of this exact email as a standalone original email are contained in the Databases … (Original Email) b) The four copies of the Original Email are marked as privileged in full in the Databases … c) Each of the four copies of the Original Email were advised to the AGS as being privileged in full and were not produced to the AGS … 4 ACCC representatives have inspected the documents that were discovered inadvertently and seen the (normally) privileged communications they contain. The ACCC accepts, after considering the evidence filed by Cathay Pacific, that disclosure of the communications was inadvertent, and was not based on any instructions or actual authority from Cathay Pacific. The ACCC accepts that, unless privilege in the communications was waived by their disclosure or otherwise, the communications are privileged. It accepts that, on the evidence, a claim for privilege has been made and maintained for the same communications recorded in other documents. 5 Ms Christine Liu So Yu ("Ms Liu") was from July 2005 to June 2007 Cathay Pacific's representative on HK BAR-CSC and its chairperson. The inadvertently discovered documents consist of two "email chains" each of which contains communications passing between Ms Liu and Mr Martin Dajani, a lawyer from DLA Piper US. The email chains represent a single document in the hands of the last recipient, but they may not represent an uninterrupted, complete or accurate sequence of communications before that point. That certainly appears to be the case for one of the documents to be considered. The "chain" may include a number of individual documents (including other emails) which may be part of some other sequence of communications. 6 The email chain of 20 September 2006 had three parts, which I shall call pages 1, 2 and 3. Page 1 is an email from Ms Liu to an employee of Cathay Pacific (copied to another employee of Cathay Pacific). No claim to privilege is made for it. It refers to the existence of legal advice but does not summarise it, otherwise set out its terms, or say what its significance is. Page 2 contains email communications between Ms Liu and an employee of Lufthansa. They are referred to on page 1. No claim for privilege is made over page 2. Page 3 is an email to Ms Liu from Mr Dajani and Mr Edward Schwartz from DLA Piper US. It contains legal advice. That advice would normally be privileged. It has not been established that the contents of page 3 were divulged to the Lufthansa employee. An initial suggestion to that effect was not pressed. It seems clear that all three pages were sent to the final recipients of the email chain, but there is no evidence that, before the inadvertent disclosure by way of discovery, the advice on page 3 from Mr Dajani and Mr Schwartz was disclosed to any third party outside Cathay Pacific. 7 The email chain of 22 September 2006 consists of communications between Ms Liu and Mr Dajani (copied to other employees of Cathay Pacific and to DLA Piper US) between 20 and 22 September 2006. The communications clearly relate to the provision and receipt of legal advice. Those communications would normally be privileged. There is no evidence that, before the inadvertent disclosure by way of discovery, they were disclosed to any third party outside Cathay Pacific. 8 Cathay Pacific's defence to the allegations referred to earlier does not refer to or rely upon, legal advice directly or indirectly. That is one important matter to be taken into account. 9 Cathay Pacific's evidentiary case, to this point, includes affidavit evidence from Ms Liu. Cathay Pacific has also filed expert evidence from Mr Adrian Huggins SC, a legal practitioner with 35 years continuous practice at the Hong Kong bar. Ms Liu has deposed that, during the period she was the chairperson of HK BAR-CSC, CAD required that it approve any mechanism to calculate proposed fuel surcharges, that it approve the list of airlines which could impose a fuel surcharge calculated under any such mechanism, and that it required airlines to apply on a collective basis for approval of fuel surcharges. She referred to specific items of correspondence, and to statements allegedly made by representatives of CAD in conversations and meetings, in support of her conclusions. Mr Huggins SC provided an expert opinion to the effect that Cathay Pacific and other airlines were obliged to seek approval from CAD for all tariffs (including the fuel surcharge), that only a tariff at an approved level might be imposed, and that the requirements of CAD were "legal requirements" under Hong Kong law. In his assessment of whether airlines were required to apply collectively for approval of fuel surcharges Mr Huggins SC referred to Ms Liu's understanding and assertions, and to her evidence about statements made by representatives of CAD in a meeting on or about 29 September 2006. 10 The content of a foreign law is a question of fact. It may be the subject of expert opinion, but under Australian law assessment of that factual question remains a matter for the Court. Obvious questions arise about the extent to which Ms Liu's lay opinion (as opposed to evidence from her about factual matters) will be admissible at the trial, but they are not matters with which I need deal. I will assume for present purposes that all her evidence is pressed and may be admitted at trial. On that assumption, there is clearly scope for the ACCC to test the basis of Ms Liu's asserted understanding about the requirements of CAD, especially around September 2006, and whether her true understanding was adequately stated or disclosed in her affidavit. 11 The communications over which privilege is claimed are said (as I understand the ACCC's argument) to betray some belief or understanding by Mr Dajani or Ms Liu (or both) that CAD's position was not as Ms Liu stated it to be in her affidavit. It is sufficient for me to say that the proposition does not, in my view, emerge with any clarity or force from the communications themselves. At best, there might be a foundation in those communications (if the claim to privilege was overruled) upon which to base a line of cross-examination directed to such a proposition. In the end that might, if it occurred, yield nothing but a submission about credit, or it might yield nothing at all. Ultimately, the answer to any question about the content of Hong Kong law, or about the practice of CAD, does not rest on Ms Liu's subjective understanding but on objective evidence from which the content of Hong Kong law may be discerned. 12 However, the ACCC argues that, by Ms Liu making the statements in her affidavits and as a result of Cathay Pacific relying on Mr Huggins' opinions, Cathay Pacific has "exposed for scrutiny" the content of the communications between Ms Liu and Mr Dajani. The point may be made at once that nothing in Ms Liu's evidence, or Mr Huggins' own opinions, refers to legal advice from Mr Dajani or elsewhere. What has raised the present question for decision is not the contention that the ACCC should be able to see the communications between Ms Liu and Mr Dajani; they have been seen. What has raised the present question for decision is the ACCC's desire, having seen the communications, to turn them to advantage against Cathay Pacific by attacking Ms Liu's evidence and Mr Huggins' opinions with material now in its possession through inadvertence. 13 I intend no criticism by the foregoing observation. It is not the fault of the ACCC that the communications were disclosed. It acted properly in drawing the matter to the attention of Cathay Pacific. Its argument for the right to deploy the communications in its own case has been a substantial one. Nevertheless, the distinction made in the previous paragraph is an important one against which to assess the significance of the cases to which I will refer. 14 In Mann v Carnell (1999) 201 CLR 1 the majority judgment in the High Court stated the following propositions (at [28] and [29]): 28 At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. It has been observed that "waiver" is a vague term, used in many senses, and that it often requires further definition according to the context. Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege … 29 Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect … 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. 15 Shortly thereafter the majority judgment referred to the earlier High Court judgment in Goldberg v Ng (1995) 185 CLR 83 and went on (at [30]): 30 … the reasoning of all members of the Court was inconsistent with the proposition that any voluntary disclosure to a third party necessarily waives privilege. and (at [34]): 34 … Disclosure by a client of confidential legal advice received by the client, which may be for the purpose of explaining or justifying the client's actions, or for some other purpose, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect. Depending upon the circumstances of the case, considerations of fairness may be relevant to a determination of whether there is such inconsistency. The reasoning of the majority in Goldberg illustrates this. 16 Although the actions of Cathay Pacific's solicitors are to be treated as the conduct of Cathay Pacific for present purposes, it is accepted by the ACCC that disclosure by the solicitors for Cathay Pacific was inadvertent, that it did not reflect any intention or instruction of Cathay Pacific that the communications be disclosed or that privilege in them be waived, and that privilege had been claimed over other versions or copies of the same communications which are the subject of the present claim for privilege. In my view, disclosure of the privileged communications should not be seen as the result of deliberate conduct by Cathay Pacific or its solicitors. That immediately takes the present case out of the usual class of such cases where the conduct in question is deliberate, even if there was no intention to waive privilege. 17 In a case where disclosure of a privileged communication was the result of a deliberate act, even if that act was not intended to waive privilege, little difficulty may arise in deciding that privilege has been lost (see, by way of guidance, the examples given in Mann v Carnell at [28] and [29], which are not included in the passages set out earlier). Individual examples of that sort fall readily enough into a class of case identified by a Full Court of this Court in Commissioner of Taxation v Rio Tinto Limited (2006) 151 FCR 341 ("Rio Tinto"). The Full Court said (at [61]): 61 Both before and after Mann, the governing principle required a fact-based inquiry as to whether, in effect, the privilege holder had directly or indirectly put the contents of an otherwise privileged communication in issue in litigation, either in making a claim or by way of defence. In DSE [(2002) 127 FCR 499] at [58], Allsop J put the matter somewhat more descriptively, saying waiver arises when: the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication. (Emphasis in original.) 18 At [65] the Full Court said: 65 … As the previous examination of the authorities shows, the question is not whether the Commissioner has put his state of mind in issue but whether he has directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, either in making a claim or by way of defence. Put another way, to adapt Allsop J's language in DSE, has the Commissioner (being the privilege holder) made an assertion as part of his or her case in the litigation that lays open the privileged documents to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege? 19 On this analysis, the conduct which will waive privilege is either bringing a case which is in some way about (my emphasis) the contents of a confidential communication (that is not what has happened here) or bringing a case which lays open the confidential communication to scrutiny (my emphasis). The latter question is the one which requires attention in the present case on the argument advanced by the ACCC. 20 However, it is not enough that a party which has, by chance, been provided with a confidential communication sees a way to turn it to some forensic advantage, or sees inconsistencies with some aspect of the case of its opponent, whether in the pleadings or the evidence. Such circumstances do not expose otherwise privileged communications to scrutiny (see also Boensch v Pascoe [2007] FCA 532 at [34]-[38] and the cases there cited). Moreover, the material for which privilege is claimed cannot normally be used to set up the inconsistency relied on. That would pre-empt the answer to the question for resolution. Nothing in the pleadings, or in the evidence, to which I was referred in argument exposes for scrutiny the content of confidential communications between Cathay Pacific and its lawyers. What has exposed those confidential communications to scrutiny is the inadvertent disclosure of them by solicitors for Cathay Pacific. That is not conduct of the necessarily quality. It does not meet the usual tests for implied waiver of privilege. 21 The only possible exception to this approach might lie in the reservation by the High Court in Mann v Carnell of the possibility that some consideration of fairness might influence a conclusion about inconsistency between the conduct of a party claiming privilege and the maintenance of the privilege. I can see only two matters which might possibly deserve attention of this kind in the present case, although on analysis neither appears to me to fall within the limited reservation referred to in Mann v Carnell. 22 The first arises from the fact that the ACCC cannot, in my view, be criticised (at least not on the evidence before me) for examining the communications disclosed in the discovery process. In at least the case of the email chain of 20 September 2006 it might have appeared on the face of the document that the advice from Mr Dajani and Mr Schwartz had been communicated to an employee of Lufthansa. In the case of the other email chain of 22 September 2006 it was apparent that Mr Dajani's advice had been communicated to others within Cathay Pacific. There may have been, at that stage, nothing to deny the possibility that Mr Dajani's advice had been communicated outside Cathay Pacific, except perhaps the fact that privilege had been claimed over other documents revealing the same communications. Even that may not have been readily, or immediately, apparent. In the past, destruction of confidentiality by mistaken discovery has sometimes led to a loss of privilege. Should that be the conclusion in the present case? 23 In CMA Corporation Limited v Rowe (2010) 277 ALR 163; [2010] FCA 1042 ("Rowe") I discussed a number of cases in this Court and elsewhere which have considered various circumstances of inadvertent disclosure, including some where documents had been discovered and inspected. Rowe was not a case of that kind, and in the course of the judgment I distinguished a judgment of Goldberg J in Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 75 FCR 511 ("Meltend"). The circumstances of the present case do not permit that approach to be taken. I said in Rowe (at [21]-[22]): 21 In Meltend, documents which were later claimed to be privileged were included in a discovery list of non-privileged documents and then provided for inspection. After a request for copies was made it was asserted that the documents had been included in the list of non-privileged documents by mistake. Goldberg J, after referring to the observations of Clarke JA in Goldberg v Ng [(1994) 33 NSWLR 639], concluded in Meltend that "there was a sufficient deliberate and intentional disclosure". His Honour took the view that the solicitors had acted within ostensible authority to waive privilege and also that it would be unfair, disclosure having occurred, that the party receiving the information not be able to use it in the proceedings. His Honour said (at 526-7): In the absence of an obvious mistake apparent to an inspecting party and fraud I consider that the appropriate principle to apply is that once inspection has been allowed of a document listed in that part of an affidavit or list in which privilege from inspection is not claimed, any privilege attaching to that document is to be regarded as waived by being included in that part of the affidavit or list and by being made available for inspection. 22 I would not read Goldberg J's statements in Meltend as laying down a general principle applying to a case such as the present. In Meltend the failure to identify the asserted error continued for some months. It was a case of very different dimensions from the present one. In any event, the discovery process raises quite different issues from a case such as the present. When discovery is given there is usually, as there was in Meltend, a series of separate steps including identification of documents, service of a list (at which time privilege should be claimed) and subsequent inspection. Parties are entitled to rely upon the regularity of the process if questions of privilege are not identified and asserted in a timely manner. 24 The present case raises squarely for consideration whether the approach taken by Goldberg J in Meltend should be applied, with the result, notwithstanding the matters to which I earlier referred, that an inconsistency of the kind referred to in Mann v Carnell or Rio Tinto may appear to have been demonstrated. 25 I accept that my own observations in Rowe (at [22]) appear to accept the correctness of the approach taken by Goldberg J in a case where discovery and inspection have been given and the position has remained undisturbed for some time. However, now that the matter has arisen directly for decision it seems to me that the approach applied by Goldberg J should not be followed for two reasons. The first is that, with respect, that strict approach is hard to reconcile with other cases concerning documents inadvertently discovered, to which I referred in Rowe. The second reason is that it must be re-assessed in the light of the decisions in Mann v Carnell and Rio Tinto, to which I am bound to give effect. I do not regard the test for waiver (as I must apply it) as being met by the mere availability for inspection, or the acquisition of knowledge of, a privileged communication. If that was sufficient, any inadvertent disclosure would suffice. Appropriate regard must be paid to the quality of the conduct of the party entitled to claim privilege as well as to the practical significance of the disclosure. No doubt there will remain cases where even inadvertent disclosure will destroy a claim for privilege but, in my view, the present is not such a case. 26 I have also been concerned about the consequences which might flow from upholding the claim for privilege. In its interlocutory application, Cathay Pacific initially sought an order that the ACCC be required to identify everybody to whom the communications had been disclosed. I was told that Cathay Pacific has attempted, unsuccessfully, to interrogate the ACCC about that matter. Consideration is also being given by Cathay Pacific to whether, if the claim for privilege is upheld, the Court should be asked to direct that certain counsel and solicitors currently acting for the ACCC be no longer permitted to do so. These various steps are apparently thought to flow from a right of Cathay Pacific to take further steps to protect its privilege, if it is upheld. Disclosure of the material to the ACCC was not its doing. There may well be very real questions about the merit of any attempt to restrain it or subject it to a disadvantage in the conduct of the litigation, beyond the usual implied undertakings which will arise on its part and on the part of its representatives. However, not without some hesitation, I accept the submission by Cathay Pacific that these are issues for another time, if they are raised by Cathay Pacific. For the moment, attention must be focussed on whether Cathay Pacific's inadvertent disclosure was inconsistent with maintenance of the privilege. I will not, therefore, reduce the significance of the inadvertent nature of the disclosure by reference to the possibility that Cathay Pacific may attempt some future restraint of the ACCC or its representatives, arising from the oversight of its own representatives. There may be matters, apart from all else, which may be relevant to consider of which I am at present unaware. 27 I may return to the central question of principle with which this judgment is concerned. The communications in question were privileged. Disclosure of them was inadvertent. Cathay Pacific did not otherwise by its conduct, directly or indirectly, reveal the nature or contents of those communications. Nor did Cathay Pacific, by its conduct in pleading its case or otherwise, rely directly or indirectly on the communications so as to expose them to scrutiny. I do not accept that the position can be tested by comparing the communications with the evidence filed by Cathay Pacific to see whether the ACCC could make use of the communications to the possible advantage of its case. Such an approach is destructive, in advance, of the claimed privilege and pre-empts the question for examination and decision. Accordingly, the claim for privilege will be upheld. A declaration to that effect will be made. Apart from dealing with questions of ongoing confidentiality, further orders need not be considered at this stage. I will consider any application for further, or consequential, orders arising from the declaration if such an application is made. 28 The evidence and debate about the question of privilege must remain confidential. To that end permanent orders for confidentiality will be made. This judgment is not confidential. I will hear the parties on costs if necessary. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.