Australian Hospital Care Pty Ltd v Duggan

Supreme Court of Victoria|1999-04-28|Before: Gillard J

Australian Hospital Care Pty Ltd & Anor v. Duggan & Ors (No. 2)

Discovery of documents - Objection to production - Legal professional privilege - Salaried employee lawyer - Privilege available - Independence of lawyer - Whether necessary - Onus - Proof - Acting independently

This is an application by summons in the proceeding, brought by the twenty third and twenty fourth defendants seeking an order that the plaintiff produce for inspection by the said defendants, the documents numbered 132, 137, 147 and 178 in the affidavit of documents sworn by John Kenneth Nelson on the 16 March 1999 and filed on behalf of the plaintiffs.

The proceeding concerns a claim by the plaintiffs to enforce a contract of purchase of a radiology practice against the first to twenty first defendants. The twenty third and twenty fourth defendants assert that they purchased the practice and accordingly they are joined as defendants. The main issue in the proceeding is to determine who is entitled to purchase the radiology practice.

The plaintiffs through their solicitors filed an affidavit of documents sworn by Mr Nelson on 16 March 1999. He is a director of one of the plaintiffs and company secretary of both plaintiffs.

The documents referred to above are described in the affidavit and the plaintiffs object to their production on the ground of legal professional privilege.

The twenty third and twenty fourth defendants require the production of the said documents for inspection. They assert they are not the subject of legal professional privilege on the ground that the person responsible for the communications made in the documents did not make the communications to the plaintiffs in his capacity as an independent member of the legal profession.

The author of the said documents is Rodney John McNeil a qualified lawyer who is employed by a company called Australian Hospital Care Ltd. The plaintiffs are subsidiary companies of Australian Hospital Care Ltd.

He is employed as General Counsel and Company Secretary of that company.

Paragraph 3 of the affidavit of documents sworn by Mr Nelson provides -

"The documents enumerated in Part 2 of Schedule 1 are privileged and I object to produce them. The documents are privileged on the grounds that they have been brought into existence for the sole purpose of providing legal advice to the Plaintiffs and/or in contemplation of the Plaintiffs instituting this Proceeding or enabling the Plaintiffs to prosecute this Proceeding."

The documents in question are set out in Part 2 of Schedule 1. Each of the documents in question is described in a similar way.

The affidavit sets out the details concerning the documents in columns, namely, item, date, whether original or copy and a brief description.

Internal memorandum of Australian Hospital Care Limited from Rod McNeil to Group Leadership Team.

Internal memorandum of Australian Hospital Care Limited from Rod McNeil to Peter Selar and David Carruthers.

Internal memorandum of Australian Hospital Care Limited from Rod McNeil to Mark Bryce and Richard Royle.

Internal memorandum of Australian Hospital Care Limited from Rod McNeil to Mark Bryce.

Part 2 of the affidavit provides, inter alia, that the documents which are numbered and which include the above "are privileged on the grounds set out in paragraph 3."

In summary, the company secretary of the two plaintiffs has claimed privilege in respect of documents in their possession on the ground of legal professional privilege. The legal practitioner is employed by the plaintiffs' holding company.

In support of the twenty third to twenty fourth defendants' summons are two affidavits affirmed by Peter John Holloway on the 15 April 1999. He is a partner of the firm of solicitors acting for the twenty third to twenty fourth defendants. He deposes to the fact that on the 16 March 1999 he wrote a letter to the plaintiffs' solicitors seeking to ascertain whether Mr McNeil was legally qualified. He received no response to the letter and on the 23 and 24 March 1999 he sent further letters seeking the information and drawing attention to the fact that no response had been received. On the 9 April 1999 he had a telephone conversation with Mr Fagenblat of Feingold Partners the solicitors acting for the plaintiffs and during that conversation Mr Fagenblat said that an affidavit describing Mr McNeil's role was being prepared and was in the process of being finalised.

Later in a telephone conversation on 13 April 1999 he agreed to provide an unsworn copy of the affidavit to Mr Holloway and this occurred. Having reviewed the affidavit Mr Holloway sent another letter on 14 April 1999 seeking to ascertain when Mr McNeil was admitted to practice in Victoria and whether he had a current practising certificate. He drew attention to the High Court decision of Waterford v. The Commonwealth [1987] HCA 25; (1987) 163 CLR 54 and raised the question whether Mr McNeil was acting independently when giving advice to his employer and its subsidiary companies. He observed there was nothing in Mr McNeil's proposed affidavit which addressed this issue. He requested a response to the matters which were raised. He received no response.

Mr McNeil swore his affidavit on 15 April 1999 in the same form as the draft sent to Mr Holloway on the afternoon of 13 April 1999. The affidavit did not provide any information in response to the issues raised by Mr Holloway in his letter of 14 April 1999.

Mr Holloway exhibited to his affidavit a confidential exhibit which contained a number of documents which had in fact been discovered by the plaintiffs in the proceeding. He asserts in his affidavit that the documents show that Mr McNeil was involved "in commercial decision making processes and which appear to involve him in acting beyond the role of 'legal adviser' to the plaintiffs". He asserted that the plaintiffs had not supported their claim for legal professional privilege in relation to the specified documents.

Upon the return of the summons, Mr Peter Jopling QC who appeared with Mrs M. Kennedy for the twenty third to twenty fourth defendants submitted that although legal professional privilege could attach to documents prepared by a salaried employee solicitor for his employer, the privilege could be lost if it was established that at the time when the communication was made he was not acting with the necessary degree of independence required of a legal adviser when giving legal advice. Mr Jopling QC relied upon the High Court decision of Waterford v The Commonwealth of Australia supra.

At the outset it is necessary to determine the law in this State concerning communications and legal professional privilege where the legal adviser is a salaried employee of the client. For present purposes I will treat Mr McNeil as an employee of the plaintiffs. In fact he is not, but is an employee of their parent company but the distinction is of no consequence. See Ritz Hotel v. Charles of the Ritz Ltd (1987) 14 NSWLR 100 at 101.

The starting point for determination of law in this area is to the judgment of Lord Denning MR in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No. 2) (1972) 2 QB 102 at p.129.

"The law relating to discovery was developed by the Chancery Courts in the first half of the 19th century. At that time nearly all legal advisers were in independent practice on their own account. Nowadays it is very different. Many barristers and solicitors are employed as legal advisers, whole time, by a single employer. Sometimes the employer is a great commercial concern. At other times it is a government department or a local authority. It may even be the government itself, like the Treasury Solicitor and his staff. In every case these legal advisers do legal work for their employer and for no one else. They are paid, not by fees for each piece of work, but by fixed annual salary. They are no doubt servants or agents of the employer ... They are regarded by the law as in every respect in the same position as those who practise on their own account. The only difference is that they act for one client only, and not for several clients. They must uphold the same standards of honour and of etiquette. They are subject to the same duties to their client and to the court. They must respect the same confidences. They and their clients have the same privileges."

His Lordship after accepting that on occasions the salaried legal officer may not perform work of a legal nature and on those occasions the communications would not be privileged went on to say -

"Being a servant or agent too, he may be under pressure from his client. So he must be careful to resist it. He must be as independent in the doing of right as any other legal adviser. It is true, as the Law Reform Committee said in their report in 1967 on Privilege in Civil Procedure that the 'system is susceptible to abuse' but I have never known it abused. ... There is a safe guard against abuse ... If there is any doubt as to the propriety or the validity of a claim for privilege, the Master or Judge should without hesitation inspect the documents himself so to see if the claim is well founded or not."

The decision went on appeal to the House of Lords (1974) AC 405 but there was no challenge to the statement of principle by Lord Denning MR which has been followed throughout the common law world - see Waterford v. The Commonwealth supra at p.61.

The principles stated by Lord Denning MR have been considered by the High Court on two occasions in Attorney-General (N.T.) v. Kearney [1985] HCA 60; (1985) 158 CLR 500 and Waterford v. The Commonwealth, supra.

These cases were not concerned with salaried employees of a client in the private sector. Kearney's case was concerned with the Northern Territory Government and communications with its legal officers and in the other case the court was concerned with communications between the Attorney-General for the Commonwealth and the Treasurer and communications between the Crown Solicitor's Office and the Officers of the Treasury. Alfred Crompton's case was concerned with a communication between a government department and its internal legal advisers.

Accordingly, what was said with respect to salaried employees in the private sector was obiter but both the quantity and quality of the obiter leads to the conclusion that what was said represented the common law in Australia.

"I do not doubt the correctness of the decision of the Court of Appeal in Alfred Crompton Amusement Machines Ltd v. Customs and Excise Commissioners (No. 2) that the privilege extends to legal advice given by such employees provided that in giving the advice they are acting in their capacity as legal advisers."

Wilson J at pp.521-2 cited the authority with apparent approval and Dawson J at pp.530-31 said with respect to salaried employees in the Northern Territory Law Department -

"This is, however, no reason for denying privilege to communications passing between them and their client provided that they are consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client."

His Honour referred to the Alfred Crompton case.

In Waterford's case, Mason and Wilson JJ after referring to Lord Denning MR's statement and the fact that it had been followed in other jurisdictions and by some members of the High Court went on to say at p.62 -

"In our opinion, given the safeguards to which reference is made in the various citations, there is no reason to place legal officers in government employment outside the bounds of legal professional privilege. The proper functioning of the legal system is facilitated by freedom of consultation between the client and the legal adviser."

In my opinion, on a fair reading of what their Honours said at pp.60-62, the same principle applies to salaried employees in the private sector.

This view of the law is supported by the judgment of Deane J in Waterford at pp.78-82 although his Honour did reserve the question whether any and if so what qualification should be placed upon the acceptance of the privilege applying to salaried employees "to avoid potential abuse". Dawson J at p.95 also approved of the principle when he said -

" ... There is authority in this court and elsewhere for the proposition that legal professional privilege may attach to communications passing between a salaried legal adviser and his employer, provided that the legal adviser is consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client. For this reason the legal adviser must be qualified to practise law and it seems, subject to the duty to observe professional standards and the liability to professional discipline."

The substantial body of dicta leads me to the conclusion that it is the common law in Australia that legal professional privilege can exist in respect of communications made between an employer in the private sector and his employee legal adviser.

That view of the law was accepted in Ritz Hotel v. Charles of The Ritz (No. 4) supra and Deputy Federal Commissioner of Taxation v. Citibank Limited (1988) 88 ATC 4941.

See Cross on Evidence, 5th Australian Ed. paragraph 25245 and Laws of Australia, Vol. 16 at pp.26 and 27. In addition, the legal privilege enacted by the Commonwealth Evidence Act 1995 extends to confidential communications between private sector lawyer and his employer - see definition of "client" in s.117(a) of the Act.

In my opinion, legal professional privilege applies in respect of a confidential communication between a private sector employer and its employee legal practitioner if it is established that the communication -

(i) arises as a result of the employer consulting the employee in a professional capacity;

(ii) is in relation to a professional matter;

(iii) is made in confidence;

(iv) arises from the relationship lawyer and client,

see Dawson J in Kearney's case, supra at pp.530-1 quoted by Mason and Wilson JJ in Waterford's case, supra at p.61.

and

(v) satisfies one of the tests laid down in Grant v. Downes.

But in addition to these five elements there appears to be a sixth requirement and that is the element of independence. It is likely this is an aspect of the first element, namely, professional capacity but it is convenient to consider it as a separate element.

In a passage in the Alfred Crompton case, supra which I set out above, Lord Denning MR, after referring to the pressure that an employer can bring on an employee said -

"So he must be careful to resist it. He must be as independent in the doing of right as any other legal adviser."

The importance of independence to the professional relationship was discussed by the European Court of Justice in A.M. and S. Europe v. Commission (1983) QB 878 at p.150 where the Advocate General stated -

" ... It should be stated that the requirement as to the position and status as an independent lawyer, which must be fulfilled by the legal adviser from whom the written communications which may be protected emanate, is based on a conception of the lawyer's role as collaborating in the administration of justice by the courts and as being required to provide, in full independence, and in the overriding interest of that cause, such legal assistance as the client needs. The counterpart of that protection lies in the rules of professional ethics and discipline which are laid down and enforced in the general interest by institutions endowed with the requisite powers for that purpose. Such a conception reflects the legal traditions common to the member States ... "

However, the court went on to hold that communications between a salaried employee lawyer and his employer were not protected saying -

"Provided the communications in question are exchanged between an independent lawyer, that is to say one who is not bound to his client by a relationship of employment, and his client."

The decision does not represent the common law in this country and has not been followed. However, the concept of independence as stated in the first passage I have quoted has been considered in the two High Court cases.

In Kearney's case, Gibbs CJ at p.510 after referring to the decision of the European Court and noting that it did not represent the common law went on to say this -

"The advice will not be privileged if the legal adviser gives it in some other capacity (e.g. as an officer of a non-legal department) and will be privileged only if the lawyer who gives it has been admitted to practice and (I incline to think) remains subject to the duty to observe professional standards and the liability to professional discipline. However, these matters were not explored in argument before us."

Mason and Brennan JJ held that it was unnecessary to consider whether communications with a legal adviser who is not independent of the client are capable of attracting the privilege.

The question was again taken up in Waterford.

"To our minds it is clearly in the public interest that those in government who bear the responsibility of making decisions should have a free and ready confidential access to their legal advisers. Whether in any particular case relationship is such as to give rise to the privilege will be a question of fact. It must be a professional relationship which secures to the advice an independent character notwithstanding the employment."

Brennan J at pp.70-71 discussed the importance of independence. He said -

"If the purpose of the privilege is to be fulfilled, the legal adviser must be competent and independent. ... Independent, in order that the personal loyalties, duties or interests of the adviser should not influence the legal advice which he gives or the fairness of his conduct of litigation on behalf of his client. If a legal adviser is incompetent to advise or to conduct litigation or if he is unable to be professionally detached in giving advice or in conducting litigation, there is an unacceptable risk that the purpose for which privilege is granted will be subverted."

His Honour then went on to consider the question of judicial policy and the effect of a contract of employment on a legal adviser's independence.

Having recognised that it was not strictly necessary to express a general view as to legal professional privilege when an employee is of a non-government client, he went on to refer to what the European Court said and stated which "seems to me to identify the relevant considerations." His Honour set out what I have stated above concerning the attributes of independence and the need for it. His Honour then went on to say -

"I am therefore unable to accept the notion that salaried lawyers are generally to be assimilated to the position of the independent legal profession for the purpose of determining the availability of legal professional privilege. Although this view may seem to give insufficient acknowledgement to the personal integrity, as well as the competence, of many salaried lawyers, we are concerned with the general legal rule which is framed not with regard to the characteristics of individuals but with regard to the influences that naturally attend the relationship of employer and employee."

His Honour then went on to consider the position of legal advisers in the employment of the Crown.

Sir William Deane at pp.78-82, after quoting the views expressed by the European Court of Justice which I set out above and which his Honour said "there is plainly force in the views expressed by the court" and after referring to what Lord Denning MR had said made a number of criticisms of what the Master of the Rolls said and one of them was -

"Another, and more significant, criticism is that Lord Denning appears to me to unduly discount the importance, from the point of view of both the need for and the prevention of abuse of the privilege, of the matters mentioned in the above extract from the opinion of the European Court in the A.M. and S. case, particularly the importance of the 'full independence' of the independent lawyer."

His Honour then went on to accept that legal professional privilege could apply in relation to salaried legal employees but reserved the question of what if any qualification should be placed upon the rule to avoid potential abuse.

Dawson J at p.95 did not accept that the legal adviser must be wholly independent of his client for the privilege to apply and said that such a submission was contrary to the common law. However, his Honour went on to say at p.96 -

"For this reason the legal adviser must be qualified to practise law and it seems, subject to the duty to observe professional standards and the liability to professional discipline."

The learned judges of the High Court have not spoken with one voice. Mr Jopling QC made reference to the various statements made by the High Court judges and submitted that it was an essential element of the privilege that the legal adviser is acting independently when he gave the advice.

It is not possible to say with any degree of confidence that independence is an essential element of legal professional privilege with respect to communications between the private sector employer and employee legal adviser but in my opinion there is sufficient dicta to support the proposition that the employee legal adviser when performing his role in a communication concerning a legal matter must act independently of any pressure from his employer and if it is established that he was not acting independently at the particular time then the privilege would not apply or if there was any doubt the court should in those circumstances look at the documents.

The question of doubt was raised by Lord Denning MR and referred to by Mason and Wilson JJ in the Waterford case at p.61.

"If there is any doubt as to the propriety or validity of a claim for privilege the Master or the Judge should without hesitation inspect the documents himself so as to see if the claim is well founded, or not.

He has ample power under R.S.C.Ord. 24r12. The affidavit should not be treated as conclusive nor anything like it. A party cannot use the affidavit as a taboo or spell to prevent anyone looking at the documents. When the Master or Judge sees the documents, he will see if the privilege is rightly claimed - or not - and make an order accordingly."

Gone are the days when the court would refuse to go behind an affidavit of documents. Further, it is the party claiming privilege that has the burden of showing that the claim is a proper one. This is clear from what Stephen, Mason and Murphy JJ said in Grant v. Downes, supra at p.689 when they said -

"It is for the party claiming privilege to show that the documents for which the claim is made are privileged. He may succeed in achieving this objective by pointing to the nature of the documents or by evidence describing the circumstances under which they were brought into existence. But it should not be thought that the privilege is necessarily or conclusively established by resort to any verbal formula or ritual. The court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege."

I refer to Rule 29.13 of the Rules of Court which empowers the court to inspect the document for the purpose of deciding the validity of any claim of privilege.

Whether or not the claim is well founded is a question of fact - see Waterford's case, supra at p.62 per Mason and Wilson JJ.

What the authorities did not address are the issues for consideration and determination in the event that the independence of the lawyer is brought into question.

The starting point is the burden of proof. The ultimate burden rests upon the client party claiming the privilege.

In my opinion, in the first place it satisfies that burden by the client party swearing the affidavit of documents in the usual form claiming legal professional privilege in respect to the documentary communications. In so doing the party establishes the conditions of the privilege including the fact of independence from any pressures or constraints imposed by the client. In other words, the affidavit establishes the necessary facts.

Whilst the affidavit of documents no longer has the sanctity as it did in the past, nevertheless it is the starting point and due weight should be given to the testimony of the deponent.

This point is well made by Jenkins LJ in Westminster Airways Ltd v. Kuwait Oil Co Ltd (1951) 1 KB 134 at 146 where his Lordship after referring to the English rule which empowered the court to inspect documents said this -

"But there is nothing in the Rule, or in the authorities, to constrain the court to hold that, in every case where a claim to privilege is made and disputed, the party seeking production is entitled to come to the court and (as it were) demand as a right that the court should go behind the oath of the opposite party and itself inspect the documents. The question whether the court should inspect the documents is one which is a matter for the discretion of the court, and primarily for the judge at first instance. Each case must depend on its own circumstances; but if, looking at the affidavit, the court finds that the claimed privilege is formally correct, and that the documents in respect of which it is made are sufficiently identified and are such that, prima facie, the claim to privilege would appear to be properly made in respect of them, then in my judgment, the court should, generally speaking accept the evidence as sufficiently justifying the claim without going further and inspecting the documents."

The form of affidavit of documents in the Rules of Court do not and have not ever required a deponent to swear that at the relevant time the legal adviser was acting independently. See by example Form 29B to the General Rules of Procedure in Civil Proceedings 1996. Also see Chitty's Kings' Bench Forms 16th Ed. (1931) at pp.324-333.

A legally qualified legal practitioner knows his ethical obligations and his duty to the court and is duty bound to approach the task of providing advice in a professional, ethical, honest and independent way. The affidavit is that of the client, not the solicitor and the client is entitled to assume that the legal adviser has fully and properly performed his function.

In my opinion once the client swears the affidavit of documents claiming legal professional privilege in a way which leads the court to the conclusion that the claim is properly made, then the prima facie position is that the legal adviser was acting independently at the relevant time.

It follows that if any other party to the litigation disputes the claim for legal professional privilege then it has the evidentiary burden of establishing facts which prima facie rebut the presumption.

It is a contention of the twenty third and twenty fourth defendants that they have raised sufficient facts to put the matter in issue.

If the party opposing the claim for privilege does establish facts which rebut the prima facie presumption then in the end result the party claiming the privilege must establish the propriety and validity of the claim.

The court may, after considering the issues, reach the conclusion that the lawyer was acting independently and accordingly the privilege is upheld, or that the lawyer was not acting independently and according there is no privilege, or the court may reach a position where it is in doubt. If the latter stage is reached then the court should inspect the documents to determine the propriety and validity of the claim.

The production and inspection may create a problem for the court especially in a trial situation. The contents of the document may compromise the judge. This problem can be overcome by a direction that the documents be inspected by another judge. This has been done in the past. See Tickell v. Trifleska (1990) 23 NSWLR 548.

Mr Jopling QC referred to a number of facts which he submitted founded a basis for the court doubting that the communications made by Mr McNeil as a legal adviser to the plaintiffs were made by him acting independently of the pressures inherent in his position as an employee of the plaintiffs' holding company.

In this regard he relied upon the following categories of evidence -

(i) that the evidence in confidential Exhibit PJH5 to the affidavit of Peter John Holloway demonstrated that Mr McNeil was directly involved in acquisition of businesses by the plaintiffs including the one the subject of the proceeding;

(ii) the difficulty in obtaining information from the plaintiffs' solicitor Mr Fagenblat, the reluctance to provide information and in particular the failure to respond to the questions of independence and of Mr McNeil's right to practise law in this State;

(iii) that Mr McNeil although admitted to practice in Victoria in July 1998 did not hold any practising certificate nor was he registered with the Victorian Bar Council and accordingly was not permitted to practise law in this State.

It is convenient to consider each category of evidence but in the final analysis it is necessary for the court to consider all the evidence and determine whether Mr McNeil was acting as an independent professional lawyer at the relevant time.

At the outset it is important to emphasise that it is the plaintiffs' privilege which is claimed and their company secretary has sworn an affidavit in the usual form stating the bases for the claim for legal professional privilege. In addition, in the affidavit sworn by Mr McNeil he has said -

"As general counsel at AHC (Australian Hospital Care Ltd) I provide legal advice, in the first instance, both to AHC and to its subsidiaries including the plaintiffs in this proceeding. Where it is determined appropriate, external lawyers may be consulted by AHC and/or its subsidiaries. On these occasions I generally continue working with the external lawyers to provide legal advice to AHC and its subsidiaries. In respect of the documents which have been discovered by the plaintiffs in this proceeding each of the documents numbered 132, 137, 178 and 194 in the plaintiffs' affidavit of documents and supplementary affidavit of documents was created by me in my capacity as general counsel of the AHC solely for the purpose of providing legal advice and in contemplation and for the purpose of progressing this litigation."

The evidence reveals that Mr McNeil has the following qualifications, BA and LLB University of Sydney, B.Med.(Hons) from the University of Newcastle, an Asian Studies Diploma from Japan and a Oberstufe Diploma from the Goethe Institute in Germany. He deposes to his right to practise as a lawyer as follows -

"I am presently admitted as a solicitor of the Supreme Court of New South Wales, a solicitor admitted to the High Court of England and Wales, solicitor admitted to the Supreme Court of Hong Kong and a solicitor admitted to the Supreme Court of Victoria. I was admitted in the Supreme Court of Victoria in 1998."

It is common ground between the parties that he was admitted to practise in this State in July 1998, does not hold a practising certificate issued by the Solicitors' body and I am prepared to infer from the circumstances surrounding the preparation of his affidavit and the contents of same that he does not hold a practising certificate issued by the Victorian Bar Council. I also infer that he does not hold a practising certificate issued by the Legal Practice Board.

So far as his practice as a solicitor is concerned, he was an associate of Baker and McKenzie Solicitors between 1988 and 1990 in the Sydney and Hong Kong offices, between 1990 and 1994 an associate in its Hong Kong office and between 1994 and 1997 he was a partner in the Hong Kong office. Hong Kong law is based on English law and there was no objection taken to the court taking judicial notice of that fact.

Neither Mr McNeil nor Mr Nelson were cross-examined on their affidavits.

In relation to the first category of evidence the mere fact that the legal adviser is an employee of the client or that his duties may involve performing non-legal work do not establish that at the relevant time he was not acting independently. It is recognised that employees will perform non-legal work and it is an essential element to the establishment of the privilege that at the relevant time the employee was performing legal work.

The fact of employment is relevant but the weight to be attached to that fact in considering independence will depend on the circumstances.

Turning to the confidential exhibit, it reveals documents prepared during the period from 18 February 1998 to 5 June 1998 which on their face establish that Mr McNeil was involved in the business activities of the parent company and that clearly his duties involved activities which were not of a legal nature.

The documents show that Mr McNeil was substantially involved in Australian Hospital Care Limited's plan to set up its own radiology practice and possibly acquire other radiology practices. The documents also reveal that he had discussions with representatives of the first to twenty first defendants and that he discussed the question of merger or acquisition of their practice.

However, it is noted that the last document came into existence on 5 June 1998.

The present proceeding was instituted on 4 February 1999 and concerns events in the latter part of 1998 and early 1999. The four documents in respect of which the privilege is claimed came into existence shortly prior to and shortly after the issue of the proceedings. The timing of the four documents in question tend towards the conclusion that they constitute communications concerning the litigation about to commence and shortly after it was commenced. Further, the gap in time between the last document produced in the confidential exhibit and the date of the documents in question weaken the inference that Mr McNeil was involved in the events the subject of the proceeding, but the apparent degree of participation in the first half of 1998 provides a solid foundation for the conclusion that he was still involved in the latter half of the year leading into and including 1999.

In order to determine the issue it is necessary to trace the history of the issue being raised.

Mr Holloway, acting on behalf of the twenty third and twenty fourth defendants wrote a letter to the plaintiffs' solicitors on 16 March 1999 in which he raised the question of Mr McNeil's qualifications and sought information as to his title, the name of his employer, whether he held a practising certificate and whether his functions included commercial and non-legal functions. He received no response and seven days later wrote another letter in which he noted there had been no response and requested an urgent response. In a letter the following day he wrote -

"In that regard (ie. Mr McNeil) it is apparent to us from the documents that we have seen that Mr McNeil occupied a non-legal function within your clients and there is a real issue as to whether the documents created by Mr McNeil or sent to him which are said to be amenable to a claim to legal professional privilege, are in fact privileged."

The next thing that happened was that on 9 April 1999, in a telephone conversation, Mr Fagenblat informed Mr Holloway that an affidavit describing Mr McNeil's role has been prepared. On 13 April 1999, after a further conversation, Mr Fagenblat forwarded a draft copy of the affidavit.

On 14 April 1999, Mr Holloway, shortly prior to 1.00 p.m., forwarded a letter to Mr Fagenblat in which he raised a number of matters concerning Mr McNeil. He sought the date of Mr McNeil's admission in this State, whether he had a current practising certificate, referred to the High Court decision in Waterford, and in particular raised the question of independence.

"There is nothing in Mr McNeil's affidavit which addresses this issue."

The reference to "this issue" is the question of lack of independence involved where the lawyer is an employee of the client.

Despite those matters being raised the affidavit of Mr McNeil sworn the following day did not address any of these questions.

In his affidavit of 15 April Mr Holloway exhibited the confidential documents but copies of these were not made available to the plaintiffs' advisers.

In those circumstances it is not surprising that the affidavit of Mr McNeil did not refer to the documents.

However, the legal advisers for the plaintiffs were well aware prior to 15 April that there was an issue concerning Mr McNeil's position and they were made aware on the Wednesday prior to the hearing before me on the Friday that Mr McNeil's independence was in question. Despite this, no effort was made in the affidavit of Mr McNeil to address these issues, nor did he address the issue of a practising certificate. If the documents were prepared by Mr McNeil and the communications made when he was acting in an independent professional capacity, then it would have been easy to say so in the affidavit.

A consideration of these facts leads me to the conclusion that there is doubt about whether Mr McNeil was acting independently at the relevant time and accordingly it would be appropriate for a judge to inspect the documents to determine whether or not the propriety and validity of the claim for privilege is established.

The second category of evidence relied on concerning delay to supply information and failure to respond to matters reinforces my view that there is real doubt about the independence of Mr McNeil at the relevant time. Whilst I appreciate that the parties have been spending most of their time on preparation for the trial which is to commence this week, the fact is that the issues raised by Mr Holloway were ignored and ignored over a substantial period of time. No explanation has been given to me as to the delay in failing to respond to the issues which were raised in a general way weeks before the application and in a more specific way two days before the application.

Turning to the final category of evidence, dicta in the Waterford's case show that the facts of qualification and entitlement to practice are safeguards against a legal practitioner failing to act independently. The question of Mr McNeil's right to practice in this State was not fully explored before me. It was asserted from the Bar table and without reference to the Legal Practice Act 1996 that Mr McNeil was committing an offence in this State by practising here without having the necessary practising certificate. In some circumstances the failure to have a practising certificate would carry substantial weight on the question of lack of independence but each case must depend on its own particular circumstances and no doubt a court would be more concerned with the qualifications and experience of the lawyer in question, more so than the question of registration. I say this in an Australian context where there are reciprocal arrangements between the States concerning lawyers practising in other States and the qualifications necessary to do so.

That brings me to the question whether or not Mr McNeil, even though admitted in this State as a barrister and solicitor of the Supreme Court, could not practice in this State until he held a practising certificate and whether or not he was committing an offence.

Part 2A of the Act is concerned with interstate practice. It is noted in s.53 that the main purposes of the part are, inter alia, to allow interstate practitioners to engage in legal practice in this State without having to be admitted in this State or obtain "Victorian Practising Certificates".

Section 55 gives the right to an interstate practitioner to engage in legal practice in Victoria "subject to this Act" once he engages in practice, he becomes an officer of the Supreme Court, is subject to the Court's jurisdiction and has the same privileges and duties as an officer of the Supreme Court. He is bound to comply with the Act, the regulations and any other Act relating to legal practice - see ss.54 and 55.

Under s.56 an interstate practitioner must give written notice to the Legal Practice Board within 28 days after first engaging in practice in this State. It is an offence to fail to do so.

The section does not address the question of what effect, if any, the failure to give notice has upon the right of the interstate practitioner to practice in this State.

The answer is given in s.314 of the Act in relation to the prohibition on unqualified legal practice and which in my opinion supports the view that the failure to give written notification to the Board does not exclude an interstate practitioner practising in this State under s.55(1).

Section 314 makes it an offence for a person to engage in legal practice unless the person -

"(c) is an interstate practitioner (other than an interstate practitioner who is suspended or prohibited from engaging in legal practice in Victoria)."

Section 3 defines "interstate practitioner", and that is "a person who has been admitted to legal practice in another State, holds a practising certificate or is entitled to engage in legal practice in that State and who is not a current practitioner."

The phrase "current practitioner" means a legal practitioner holding a practising certificate in this State.

On the evidence I have, Mr McNeil is an interstate practitioner who has the right to practice in this State and even assuming that he has not given the necessary written notice to the Legal Practice Board, in my opinion that does not preclude him from practising in this State.

It follows therefore that he is a person entitled to practice in this State, and when he does so is subject to the rules and regulations concerning the practice of law in this State by a legal practitioner.

It follows that the fact that he does not hold a practising certificate in this State does not impinge upon the question whether Mr McNeil in giving the legal advice was acting independently at the relevant time.

Taking into account the first two categories of evidence, the plaintiffs have failed to exclude the doubt that I have as to Mr McNeil acting independently in a professional capacity when he made the communications which are evidenced in the four documents referred to in the affidavit of documents.

I propose therefore to order that the documents in question be produced for inspection by a judge who is not the trial judge and request a report in writing be provided to the trial judge and the parties on the propriety and validity of the claim for privilege in respect to the four documents.

Subject to submissions of counsel I propose to make the following orders -

(i) that the plaintiffs produce for inspection by a Judge of this court the documents numbered 132, 137, 147 and 178 in the affidavit of documents sworn by John Kenneth Nelson on 16 March 1999 and filed in this proceeding on behalf of the plaintiff;

(ii) that the plaintiffs pay the twenty third and twenty fourth defendants' costs of the twenty third and twenty fourth defendants' summons filed 14 April 1999.

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Legal Practice Act 1996

At a glance

Court

Decision date

Before

Source

Judgment (143 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (4)