Commissioner of Taxation v Pratt Holdings Pty Ltd [2003] FCA 6 | Case summary

REASONS FOR JUDGMENT introduction 1 By an application dated 3 August 2001, the applicant, who is the Commissioner of Taxation of the Commonwealth of Australia ("the Commissioner"), seeks declarations that: (1) legal professional privilege does not attach to the communications constituted by or disclosed in certain documents ("the documents in dispute") held by the second respondent, PricewaterhouseCoopers ("PW"), on files relating to its former client, Pratt Holdings Pty Ltd; and (2) the Commissioner is entitled to have "full and free access" to the documents in dispute pursuant to s 263 of the Income Tax Assessment Act 1936 (Cth) ("the ITAA"). (The Commissioner previously indicated that he no longer seeks an order for the delivery up of the documents in dispute to the Court Registry.) 2 Section 263 of the ITAA provides as follows: (1) The Commissioner, or any officer authorised by him in that behalf, shall at all times have full and free access to all buildings, places, books, documents and other papers for any of the purposes of this Act, and for that purpose may make extracts from or copies of any such books, documents or papers. (2) An officer is not entitled to enter or remain on or in any building or place under this section if, on being requested by the occupier of the building or place for proof of authority, the officer does not produce an authority in writing signed by the Commissioner stating that the officer is authorised to exercise powers under this section. (3) The occupier of a building or place entered or proposed to be entered by the Commissioner, or an officer, under sub-section (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section. 3 By his statement of claim, as amended on 29 April 2002, the Commissioner has alleged that the first respondent, Pratt Holdings Pty Ltd ("Pratt Holdings") or PW, on behalf of Pratt Holdings, is not entitled to deny the Commissioner access to the documents in dispute on the ground of legal professional privilege (as it has done), and that the Commissioner is entitled to the access that he has sought pursuant to s 263 of the ITAA. In the alternative, the Commissioner has alleged that, if any of the communications were privileged, then Pratt Holdings has waived the privilege by disclosing the communications to PW. By their amended defences, the respondents have joined issue with the Commissioner on the question whether legal professional privilege has been properly claimed. (The respondents did not ultimately pursue the issues of authority that they raised at an earlier stage in the proceedings.) circumstances in which the documents in dispute were created 4 The documents in dispute were mostly created between January 1993 and August 1994 by officers of PW and Pratt Holdings. They came into existence in the circumstances outlined below. (The following account is derived from affidavits filed in this proceeding by the respondents, including affidavits sworn or affirmed by Mr Vincent O'Halloran on 2 November 2001 and 22 May 2002, Mr Christopher Reardon on 2 November 2001 and 3 May 2002, Mr Peter Le Huray on 2 November 2001 and 6 May 2002, Mr Roger Leopold on 18 April 2002, Mr Joey Borensztajn on 2 November 2001 and 17 April 2002, Mr Mark Leibler on 17 April 2002 and by Ms Pauline Grodski on 17 April 2002.) The account is also derived from the evidence in cross-examination of Mr O'Halloran and Mr Reardon. 5 Pratt Holdings is the ultimate holding company of the companies in the Pratt Group. Between 1990 and 1995, the Pratt Group underwent a major balance sheet reconstruction and refinancing program ("the reconstruction program"). Mr O'Halloran, who was at that time the Group's taxation and insurance manager, advised management in the administration and implementation of the reconstruction program. From time to time, he sought legal advice on taxation and other issues raised by the reconstruction program from the Group's legal advisers, the firm of Arnold Bloch Leibler ("ABL"). 6 In the course of the reconstruction program, an issue arose concerning the taxation consequences of significant losses incurred by an entity in the Pratt Group. In this connection, in early 1992, Mr O'Halloran sought ABL's advice on the application of the ITAA, and ABL commenced to give this taxation advice. 7 As part of this advising, Mr Leibler, a partner in ABL, suggested that Pratt Holdings obtain a valuation of assets from an independent accounting firm to assist in determining the exact quantum of the losses. In cross-examination, Messrs O'Halloran and Reardon gave evidence that the major or sole valuation ("the Yoni loan valuation") suggested by Mr Leibler concerned a loan receivable by Pratt Finance Pty Ltd from Yoni Pty Ltd ("Yoni"). (Pratt Holdings provided the Commissioner with a copy of this valuation (and its earlier drafts) at some time prior to the hearing of this matter.) Mr O'Halloran deposed that he formed the view that, if Pratt Holdings were to receive specific advice from ABL, then Pratt Holdings needed to give ABL "a detailed summary about the background and historical perspective in relation to the specific transactions giving rise to the losses and how they had been treated from an accounting prospective". In cross-examination, he said that this included "any transaction which may have taken place over a period of time, which may have had any impact on [Mr Leibler's] final advice", as well as accounting records and income tax returns. Mr O'Halloran also formed the view that the proposed work should not be prepared in-house, because the matters were complex, time consuming, involved areas where accounting expertise was required and because Mr Leibler had told [him] the valuations should be independent. 8 In early 1993, Mr O'Halloran telephoned Mr Reardon, then a partner of Price Waterhouse (subsequently PricewaterhouseCoopers) to foreshadow the assistance that Pratt Holdings was likely to seek. Mr O'Halloran and another representative of Pratt Holdings met with Messrs Reardon and Le Huray in February 1993. Mr Reardon deposed: I informed [Mr O'Halloran] that it was my view that there were additional issues to be considered as to the tax consequences of the transactions in addition to those which Mr Leibler had identified, as communicated to me by Mr O'Halloran during our first discussion. In conformity with this, Mr O'Halloran stated: I requested Mr Chris Reardon prepare a briefing paper ('the PW paper') to enable me to provide instructions to Arnold Bloch Leibler to obtain their legal advice. We discussed what additional work to the valuations PW would be required to provide in order to complete a comprehensive review. 9 At or shortly after this meeting, Mr O'Halloran informed Mr Reardon that he intended to use the paper that Price Waterhouse (also referred to as "PW" in these reasons) was to prepare ("the PW paper") for the purpose of obtaining legal advice from ABL, and that it might be necessary for Mr Reardon to attend conferences "or otherwise assist [ABL] on behalf of the Pratt Group". Mr Reardon was to be assisted in this work by Mr Peter Le Huray, who was then a senior consultant at PW. Mr O'Halloran also informed Mr Le Huray that he intended to submit the PW paper to ABL for review and advice. As things turned out, neither Mr Reardon, Mr Le Huray nor any other person from PW attended any conference with ABL, or had any other direct dealings with the firm. In cross-examination, Mr Reardon said: We weren't required at those meetings and we directed all correspondence to Mr O'Halloran and he came back to us with any queries or further information that Arnold Bloch Leibler required. 10 Mr O'Halloran subsequently provided Mr Reardon with a memorandum of instructions dated 5 February 1993. Mr Reardon understood that the PW paper was to be "used as a medium to explain the tax implications concerning the losses incurred and as a record of the facts and documents surrounding those losses from an income tax perspective". 11 In cross-examination, Messrs O'Halloran and Reardon gave evidence that the PW paper was also taken into account in preparing the Yoni loan valuation. This was consistent with the terms of the valuation, which stated (at p 3) that: In completing this valuation we have relied upon or taken into account, amongst other things: · Income tax position paper prepared for Pratt Industries (this term is used in reference to Pratt Holdings Pty Ltd and its subsidiaries), in relation to the deductibility to Pratt Finance of losses incurred on the assignment of the loan receivable from Yoni. … . Their evidence was that, in this passage, the authors of the valuation were referring to the fact that they had had regard to the PW paper in making the valuation of the Yoni loan. Indeed, Mr Reardon's evidence in cross-examination was that a reason for the preparation of the PW paper was "to [in]form that analysis to assist in the valuation process". 12 Although Mr Reardon was aware that Mr O'Halloran intended to provide the Yoni loan valuation and the PW paper to ABL, Mr O'Halloran did not provide Mr Reardon with the details of his instructions to ABL. On the contrary, O'Halloran said that: Although I informed Mr Reardon that the PW paper he was preparing was to enable me to brief Arnold Bloch Leibler, I did not provide him with details of my specific instructions to Arnold Bloch Leibler, nor did I specifically inform him about the matters that I had conferred with Arnold Bloch Leibler about, other than to the extent I considered it to be necessary. I did this because I considered it to be sufficient to instruct Mr Reardon on a 'need to know' basis. I also considered my discussions with Arnold Bloch Leibler on behalf of the Pratt Group to be confidential. However, from time to time my instructions to Mr Reardon were expanded if either he or Arnold Bloch Leibler raised additional issues for consideration. I did not instruct Mr Reardon to hold back on the work he was doing. If he considered matters to be material, or raised further matters, then I asked that he include them. I also considered any opinions he expressed as the matter progressed. (Emphasis added) 13 Between February 1993 and August 1994, there were numerous meetings and telephone conversations between Mr O'Halloran and others from the Pratt Group, and Messrs Reardon, Le Huray and others from PW. Mr Le Huray and his staff prepared a series of drafts of the PW paper, whilst others prepared drafts of the valuation. Mr Le Huray discussed the drafts with Messrs Reardon and O'Halloran. Mr Reardon or one of his team sent the relevant draft to Mr O'Halloran, who sent it to ABL. Mr O'Halloran deposed: Mr Reardon completed a series of drafts of the PW paper and both Arnold Bloch Leibler and myself reviewed copies of the drafts. I sent the drafts to Arnold Bloch Leibler after receiving them from Mr Reardon. I did not instruct Mr Reardon to send the documents directly to Arnold Bloch Leibler, as I wanted to control the process. (Emphasis added) 14 In cross-examination, Mr O'Halloran said that he wanted to control the flow of information to PW and to ABL. His evidence was that he wanted to determine what and when information prepared by PW was provided to ABL, and what and when the opinions of ABL's lawyers were provided as such to PW. He conceded that, from time to time, he chose to disclose to PW the advice, as legal advice, that Pratt Holdings received from ABL, even though it may not have been necessary for him to do so. 15 From time to time, Mr O'Halloran conferred with ABL's lawyers about the issues raised in the draft PW papers and, as already noted, when he considered it appropriate, he informed Mr Reardon of the opinions expressed by the lawyers. 16 PW sent Pratt Holdings what it referred to as a "final copy" of the PW paper on 15 October 1993, although the PW paper was in fact subject to subsequent amendments. The Yoni loan valuation, which was addressed to the directors of Pratt Finance Pty Ltd, also bore the date 15 October 1993. Under cross-examination Mr O'Halloran could not say whether he received the valuation and the PW paper simultaneously. PW sent Pratt Holdings a further version of the PW paper under cover of a letter dated 31 August 1994. Mr O'Halloran gave a copy of the August 1994 version to ABL and asked for ABL's advice on the issues raised by it. 17 Mr O'Halloran received a memorandum of advice from Mr Borensztajn of ABL in conference on 23 February 1995. Mr O'Halloran understood the memorandum to have been prepared by Ms Grodski and settled by Mr Leibler. Mr Borensztajn informed him that he too had reviewed the PW paper and the ABL advice. 18 Broadly speaking, the documents in dispute fell into seven categories. These categories were: (1) documents created by PW personnel (e.g., Messrs Reardon and Le Huray) that were not disclosed to Pratt Holdings; (2) documents created by PW personnel (e.g., Messrs Reardon and Le Huray) that were provided to Pratt Holdings; (3) documents created by Pratt Holdings personnel (e.g., Mr O'Halloran) that were provided to PW; (4) documents containing legal advice that were created by ABL and disclosed by Pratt Holdings to PW; (5) documents created by other firms of accountants that were disclosed by Pratt Holdings to PW; (6) documents created by PW that were disclosed to other firms of accountants by PW; (7) documents that fell within the descriptions in (1)-(6) above but have been disclosed to the Commissioner. 19 The documents in (1) included: (a) internal working notes (e.g., emails between PW personnel, notes on calculations and records of research); and (b) memoranda and other notes of discussions between PW personnel (e.g., Messrs Reardon and Le Huray) and Pratt Holdings personnel (e.g., Mr O'Halloran). 20 The documents in (2) included: (a) memoranda and other notes of discussions between PW personnel and Pratt Holdings personnel; (b) final and draft versions of the PW paper; (c) the Yoni loan valuation; (d) the discussion paper concerning a matter raised by the accounting firm of Arthur Andersen; (e) letters, fax cover sheets and emails (if any) constituting communications by PW to Pratt Holdings (excluding (b)-(d)). 21 The documents in (3) included letters, memoranda, fax cover sheets and emails (if any) constituting communications by Pratt Holdings to PW. The documents in (4) included: (a) letters and memoranda of advice prepared by ABL for Pratt Holdings; and (b) a letter of advice dated 18 December 1992 prepared by ABL and addressed to Mr Deane Howell of Frank Jones & Associates, forwarded by him to Pratt Holdings (Mr O'Halloran) and by Pratt Holdings to PW. 22 The documents in (5) included a letter dated 27 May 1994 from the accounting firm of Ernst & Young, with a draft letter to the State Revenue Office. The documents in (6) included correspondence with Arthur Andersen. The documents in (7) included the Yoni loan valuation, drafts of the valuation and associated papers, as well as "source documents" (as defined in "Access to Professional Accounting Advisors' Papers: Guidelines for the Exercise of Access Powers" ("the Guidelines")). 23 Mr Reardon gave evidence that there may have been memoranda or notes of discussions between representatives of Pratt Holdings and PW that PW created and forwarded to Pratt Holdings for some reason, although PW did not forward such documents as a matter of course. Mr O'Halloran's evidence was that there may have been some such memoranda or notes prepared by PW that he provided to ABL. He did not, however, instance any such case. His evidence was that: The major correspondence I passed on to Arnold Blochs was the briefing paper itself. To the extent there were other notes of meetings that had been conveyed to me by Price Waterhouse in a form of a memo or a minute of the meeting, I can't confirm whether I actually then passed that on to Arnold Bloch Leibler. 24 Mr Reardon said in cross-examination that there was no identified author in respect of a number of PW's internal working documents, and that he could not say what was in the mind of the author of these documents when he (Mr Reardon) was not the author. Mr Reardon also said that he made notes or memoranda of discussions with Mr O'Halloran and others not only as an aide memoire but also "to convey information to the team who were assisting" him. 25 In his second affidavit, Mr Reardon deposed that, as far as he was concerned, every communication of information by [a] client to PW was confidential and PW was not able to distribute that information to others without the client's consent. I considered PW was not at liberty to disclose to other personsinformation provided by Pratt Group to PW during PW's retainer, and to the best of my knowledge, PW did not do so. In each of their second affidavits, Messrs Le Huray and O'Halloran corroborated Mr Reardon's evidence in this regard. The files in which PW maintained documents relating to Pratt Group's retainer were all marked "Confidential". 26 Mr Reardon deposed, in his second affidavit, to the fact that PW assumed an obligation of confidentiality in respect of its client's affairs. He referred to the fact that, between 1989 and 1994, in offering professional staff employment, PricewaterhouseCoopers (or Price Waterhouse) had emphasised that staff members were under an obligation to maintain the confidentiality of clients' affairs. He referred to the fact that this obligation was reiterated in graduate induction programs, and emphasised in the Australasian partners' manual that was in force in 1992-1993. Mr Reardon also referred to the official publications of professional accounting bodies in which the importance of confidentiality was emphasised. circumstances in which the present dispute arises 27 This account is derived from an affidavit affirmed by Mr Kevin Dinsdale on 2 August 2001 and from the evidence (in the form mentioned above) of Messrs O'Halloran, Le Huray and Leopold. 28 In October 1999, an officer of the Australian Taxation Office ("the ATO") wrote to Mr Le Huray (who was by now a partner of PW) concerning certain documents held by PW in relation to the Pratt Group. The ATO officer was the audit case manager, Mr Kevin Dinsdale, then leading a team of ATO officers in an audit of the Pratt Group ("the audit"). In this letter, which was dated 22 October 1999, Mr Dinsdale proposed a meeting "to identify what correspondence, records and documentation is held in the custody of [PW] and discuss how our access to this information will be facilitated". 29 In a subsequent letter, dated 10 December 1999, addressed to Mr Umberto Torresi of PW Legal, Mr Dinsdale stated that: The scope of my enquiry involves access by auditors on my team to all those files, including electronic files, held by [PW], containing information, including financial statements, accounts and correspondence, which relates to entities which are either controlled foreign entities or attributable taxpayers of the Pratt Group, as those terms are defined in Part X of the Income Tax Assessment Act 1936. In a schedule to this letter, Mr Dinsdale listed the specific entities that were the subject of the ATO's enquiry. 30 Mr Torresi replied to Mr Dinsdale by a letter dated 17 December 1999, seeking further particulars of the transactions that were the subject of enquiry. Mr Dinsdale supplied some further information by a letter dated 21 December 1999, in which he stated: The scope of our particular enquiry relates to a narrow aspect of the income tax provisions concerning transactions affecting controlled foreign entities and also Australian taxpayers within the Pratt Group which may be attributable taxpayers. It is my understanding that [PW] has assisted the Pratt Group in its compliance with Part X of the Income Tax Assessment Act 1936 and that it is access to source documents on files dealing with this matter that is required. … The Pratt Group has been advised that the basis for making our enquiry concerns the need to establish the nature and extent of business transactions and in particular the relationship of such dealings to intra group activities of controlled foreign entities. The scope of this request was apparently widened in the following year. 31 By a facsimile transmission of 23 December 1999, PW, through PW Legal, indicated that it would provide copies of source documents (as defined in the Commissioner's Guidelines) by the end of the year. These copy documents were received by the ATO on 30 December 1999. 32 A member of Mr Dinsdale's audit team discussed the claims advanced by PW for legal professional privilege (as well as claims under the Guidelines) with Mr Torresi in January 2000. In March 2000, Mr Torresi supplied Mr Dinsdale with lists of documents that were the subject of legal professional privilege and other claims. Mr Torresi identified six documents as the subject of a claim for privilege. 33 Amended lists of documents were supplied to Mr Dinsdale in late January 2001. By a letter dated 26 March 2001, Mr Torresi supplied Mr Dinsdale with further information concerning the documents the subject of the legal professional privilege claim. The letter enclosed a list entitled "The Pratt Group - Catalogue of Documents with Legal Professional Privilege". The list consisted of nine documents, including the six previously mentioned. The Commissioner subsequently conceded that the claims made for privilege with respect to these documents were properly made. The status of these documents is not in dispute in this proceeding. 34 In May 2001, Mr Dinsdale informed Mr Torresi, by a letter dated 1 May 2001, that he intended to seek the approval of Mr Gordon McKimmie, Acting Assistant Commissioner, Compliance Assurance, for access to "restricted source" and "non-source" documents (as defined in the Guidelines) held by PW in relation to the Pratt Group. By a letter dated 12 July 2001, Mr Dinsdale informed Mr Torresi that Mr McKimmie had granted this approval, and that Mr Dinsdale proposed that he and members of his audit team visit PW and, pursuant to s 263 of the ITAA "take access to the documents". 35 Mr Dinsdale and members of the audit team attended the offices of PW on 26 July 2001. Mr Dinsdale informed Mr Torresi that he proposed to take access to the restricted source and non-source documents as previously advised. After some discussion, Mr Torresi told Mr Dinsdale that some documents had been removed from the files on the basis that they were the subject of legal professional privilege. Generally speaking, these documents are the documents in dispute. 36 Mr O'Halloran explained, in his first affidavit, that this claim for privilege was not made until 26 July 2001 because, until he commenced to examine the relevant documents on 24 July 2001, the documents had not been reviewed by any representative of Pratt Holdings who was aware of the circumstances surrounding their creation. In his affidavit, Mr Leopold, who is currently the Group's Tax Manager, stated that, although he reviewed the documents in dispute in late 1999, he had no knowledge of the context in which they came into existence. Although Mr Le Huray of PW had considered them prior to 24 July 2001, Mr Le Huray disclaimed any knowledge of the manner in which legal professional privilege could be claimed. the principles governing legal professional privilege 37 In Australia, as in some other jurisdictions, legal professional privilege (or client-solicitor privilege as it is sometimes called elsewhere) is regarded as a rule of substantive law: see The Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission [2002] HCA 49 ("Daniels"), at [9] per Gleeson CJ, Gaudron, Gummow and Hayne JJ (setting aside the decision of a Full Court of this Court, (2001) 108 FCR 123); Esso Australia Resources Ltd v Commissioner of Taxation (Cth) (1999) 201 CLR 49 ("Esso"), at 55 per Gleeson CJ, Gaudron and Gummow JJ; and Baker v Campbell (1983) 153 CLR 52 ("Baker v Campbell"), at 88 per Murphy J, 116-117 per Deane J and 127-8 per Dawson J; and cf R v Special Commissioner, Ex parte Morgan Grenfell & Co Ltd [2002] 3 All ER 1, at [7] per Lord Hoffmann. Accordingly, as Deane J said in Baker v Campbell,at 117: It is to be presumed that if the Parliament intended to authorize the impairment or destruction of that confidentiality by administrative action it would frame the relevant statutory mandate in express and unambiguous terms. 38 Adopting this approach, a Full Court of this Court held, in Commissioner of Taxation (Cth) v Citibank Ltd (1989) 20 FCR 403, that s 263 of the ITAA is subject to legal professional privilege: cf Daniels, at [10]. A person is, therefore, entitled to resist giving the Commissioner access to documents pursuant to a s 263 notice where the documents would disclose confidential communications between a client and his legal adviser, made for the dominant purpose of giving or obtaining legal advice, or what the majority in Daniels called "the provision of legal services": see Daniels, at [9]. The High Court first adopted "the dominant purpose" test, in place of the "sole purpose" test, for legal professional privilege in Esso (at 73 per Gleeson CJ, Gaudron and Gummow JJ). In this respect, the Court overruled its earlier decision in Grant v Downs (1976) 135 CLR 674 ("Grant v Downs") and approved the decision of the House of Lords in Waugh v British Railways Board [1980] AC 521 ("Waugh"). 39 The common law in Australia is, therefore, that legal professional privilege attaches to: (1) confidential communications passing between a client and the client's legal adviser, for the dominant purpose of obtaining or giving legal advice ("legal advice privilege"); and (2) confidential communications passing between a client, the client's legal adviser and third parties, for the dominant purpose of use in or in relation to litigation, which is either pending or in contemplation ("litigation privilege"). See Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332 ("Mitsubishi"), at [8] per Batt JA, with whom Charles and Callaway JJA agreed, and Grant v Downs, at 677 per Barwick CJ. As the majority observed in Esso, at 64: The privilege exists to serve the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers. 40 Plainly enough, different principles govern the availability of legal advice privilege and litigation privilege: cf Waugh,at 541-2 per Lord Edmund-Davies. One difference, which is relevant in this case, is that, unlike litigation privilege, advice privilege is not available "where one of the parties to the communication is a third party who is not the agent of the client for the purpose of the communication": see Mitsubishi,at [9] per Batt JA. Where, as in this case, litigation is neither pending nor contemplated, communications between a person or his legal adviser and a third party (who is not the agent of either of them) are not privileged, even though the communications were made for the purpose of giving or obtaining legal advice. The law in England and New Zealand would appear to be the same as that in Australia in this regard: see e.g., Great Atlantic Insurance Co v Home Insurance Co [1981] 2 All ER 485, at 487-9 per Templeman LJ (Dunn LJ agreeing); Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart [1985] 1 NZLR 596 ("Guardian Royal Exchange"), at 602 per Richardson J; and Waugh, at 541-2. (a) Advice privilege in Australia 41 In Australian courts, as in England, New Zealand and Canada, examination of the principles relevant to this aspect of the law of privilege usually commences with the decision of the English Court of Appeal in Wheeler v Le Marchant (1881) 17 ChD 675 ("Wheeler v Le Marchant"). In Wheeler v Le Marchant, the Court rejected an attempt to extend advice privilege to communications between the client's solicitors and a third party, who was not making the communication as an agent of the client seeking legal advice. Jessell, MR said, at 682, as follows: The actual communication to the solicitor by the client is of course protected, and it is equally protected whether it is made by the client in person or is made by an agent on behalf of the client, and whether it is made to the solicitor in person or to a clerk or subordinate of the solicitor who acts in his place and under his direction. … But what we are asked to protect here is this. The solicitor, being consulted in a matter as to which no dispute has arisen, thinks he would like to know some further facts before giving his advice, and applies to a surveyor to tell him what the state of a given property is, and it is said that the information given ought to be protected because it is desired or required by the solicitor in order to enable him the better to give legal advice. It appears to me that to give such protection would not only extend the rule beyond what has been previously laid down, but beyond what necessity warrants. … It seems to me we ought not to carry the rule any further than it has been carried. (Emphasis added) The principle was expressed by Cotton LJ in the same case, at 684, as follows: It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word 'representatives'. If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of the principal with the solicitor. But these persons were not representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients … to do certain work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor. (Emphasis added) 42 The House of Lords confirmed that advice privilege extended beyond the immediate communications between a client and his lawyer to communications through their agents for the purposes of making the communication in the subsequent case of Jones v Great Central Railway Company [1910] AC 4, at 6 per Lord Loreburn LC. 43 The principle stated in Wheeler v Le Marchant continues to be applied in Australian courts and elsewhere. For example, Wheeler v Le Marchant was cited with approval by Lockhart J in Trade Practices Commission v Sterling (1979) 36 FLR 244 ("Sterling"), at 245-246. The case was also discussed by Foster J in Morlea Professional Services Pty Ltd v South British Insurance Co Ltd (27 September 1984, Federal Court of Australia, unreported) ("Morlea") and by Wood J in Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44 ("Nickmar"), at 52-54. 44 In Morlea, Foster J held that certain experts' reports obtained by the defendant's solicitor or sent direct to the solicitor by the defendant's agents for the purpose of advising the defendant on his claim were privileged. As Wood J said in Nickmar,at 55: [In Morlea] his Honour was concerned with documents requested by the client from third parties, which were delivered to the legal adviser. In other words it was proper to consider the documents as having been brought into existence and communicated to the plaintiff by agents of the insurer. As was shown in Wheeler v Le Marchant such a form of communication may be considered to be that of the client itself. I do not read his Honour as having decided that Wheeler v Le Marchant was wrongly decided and that privilege should be extended to documents provided by a third party, not acting as agent of the client, to a legal adviser for the sole purpose of assisting him to advise that client in the absence of litigation actual or contemplated. (Emphasis added) 45 In discussing Wheeler v Le Marchant, Wood J in Nickmar noted, at 53-54, that: Each of Jessell MR and Cotton LJ recognized that there was a distinction between communications from third parties acting as agents of a client seeking advice, and from third parties not acting as agents. Communications by the former could perhaps be regarded as communications of the client itself, and on that account attract privilege, where made for the purpose of obtaining advice. Communications by the latter however stand in a different position. Although they may become employed on behalf of the client to do certain work, that work is not the communicating with the solicitor to obtain legal advice … . It is only when their communications are in contemplation of litigation, or for the purpose of giving advice or obtaining evidence with reference to it, that privilege attaches. Accepting that this remained the law in New South Wales, Wood J, at 57, upheld a claim for legal professional privilege upon the basis that the documents in question were "brought into existence for the sole purpose of recording information for the use of the solicitors either in advising or in connection with the defence of litigation". 46 Referring to Wheeler v Le Marchant as the "main authority on this topic", Gobbo J of the Supreme Court of Victoria held, in Leader Westernport Printing Pty Ltd v IPD Instant & Duplicating Pty Ltd (1988) 5 ANZ Ins Cas 60-856 ("Leader Westernport"), at 75,368, that only one report of a number of reports prepared by loss assessors was privileged "as being a communication to the solicitor for the purpose of securing advice as to possible litigation". (The other reports were not privileged because they were prepared for the insurer's use.) 47 White J of the South Australian Supreme Court rejected a claim for advice privilege in relation to documents produced by third parties in Macedonia Pty Ltd v Federal Commissioner of Taxation (1987) 87 ATC 4,565. His Honour applied Wheeler v Le Marchant in determining that the claim failed. White J held that, since the plaintiff's accountant was the agent of the plaintiff, a request by the accountant for information from a third party might be regarded as the plaintiff's own request for the purpose of obtaining advice from the plaintiff's solicitors. The information, when forthcoming, was, however, that of a third party and, in the absence of litigation, it could not be the subject of a successful claim for privilege. His Honour observed, at 4,568: The mere fact that these documents might ultimately have been deposited in the hands of the company's solicitors did not create some kind of ex post facto privilege. 48 The Supreme Court of Queensland purported to apply the principles of Wheeler v Le Marchant in Galway v Constable [2002] 2 Qd R 146 ("Galway v Constable"). After referring to Morlea, Nickmar, Leader Westernport and Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253 (discussed below), Holmes J upheld a claim for privilege by SimsMetal Ltd (a non-party). The plaintiff in the action claimed relief with respect to the alleged conversion of scrap metal belonging to it by its former employees and by an employee of SimsMetal. SimsMetal objected to the production of a report which had been prepared for it by PricewaterhouseCoopers concerning the matter, in an application made against it for non-party discovery on the ground of legal professional privilege. Her Honour related at [3]-[5] that: Mr Francis Moratti, who describes himself as holding the position 'legal counsel' with SimsMetal Limited, has sworn an affidavit as to the course of events. In it he says that around 13 April 1999 the plaintiff alleged that two of its staff had been selling scrap metal to SimsMetal without authorisation, and that a SimsMetal transport contractor and SimsMetal management were also involved. At about that time Queensland Police interviewed some of SimsMetal's staff. As a result, senior SimsMetal management in Sydney decided to have an investigation carried out 'to determine the nature and extent of the alleged criminal activities and the extent of the potential exposure of SimsMetal and/or its officers and employees to legal proceedings (including criminal prosecutions) arising from such activities'. For that purpose, PricewaterhouseCoopers was retained in April 1999 to investigate what criminal activity, if any, had been carried out, and the extent of any involvement of SimsMetal staff. … According to Mr Moratti, it was his intention and that of other senior SimsMetal management, depending on the outcome of the report, to obtain legal advice. 49 The completed report was first given to Mr Moratti, who supplied it to SimsMetal's solicitors. Holmes J doubted that Mr Moratti was "acting in a legal capacity when he requested and received the report, as opposed to acting as a member of SimsMetal management"; and held, at [22], that, on the evidence before her, PricewaterhouseCoopers was "properly to be regarded as the agent of SimsMetal for the purpose of collecting and communicating the information contained in the report". Her Honour also held, at [36]: In this case, the report itself was produced at a time when SimsMetal had formed the firm purpose, which can fairly be described as dominant, to use it to seek legal advice. I conclude, therefore, that the report as it was provided to SimsMetal attracted legal professional privilege. 50 Notwithstanding the language used by her Honour, Galway v Constable was a case of litigation privilege, and not advice privilege. Her Honour's observations on agency are, therefore, of little assistance in the present case. Holmes J apparently accepted Mr Moratti's evidence, which was to the effect that PricewaterhouseCoopers, as agent for SimsMetal, prepared the report for the purpose of SimsMetal obtaining advice from its solicitors about, amongst other things, legal proceedings that might be brought against it. Her Honour's finding, at [44], that "the evidence went no further than establishing that 'the document was at the time of its production conceived as possibly useful if litigation which ... might not be unlikely, did in fact ensue'" does not, it seems to me, necessarily militate against this view. As I understand her Honour's reasons for judgment, she upheld SimsMetal's claim for what was, in effect, litigation privilege, on the basis that the report constituted a communication for the purpose of legal advice in relation to litigation which SimsMetal considered "not unlikely". Considered in this way, the decision in Galway v Constable is consistent with the authorities to which her Honour referred. This was a case of litigation privilege, and not advice privilege. Her Honour was not seeking to depart from the well-established principles and to widen the scope of advice privilege. 51 The authorities make it clear that, where litigation is not in prospect, a claim for advice privilege in respect of a communication by an agent of the client is sustainable if (and only if) the agent is an agent for the purpose of making (or receiving) a communication to (or from) the client's legal adviser. Accordingly, in the absence of a finding in Galway v Constable that PricewaterhouseCoopers was the agent of SimsMetal for this purpose, the finding of agency for the purpose of doing certain other work (i.e., the gathering of information) would not have provided a sufficient basis for upholding SimsMetal's claim for advice privilege, even though (as her Honour found) SimsMetal's dominant purpose in employing PricewaterhouseCoopers was to prepare a report in order to obtain legal advice. It was only because the advice was sought with respect to legal proceedings that might be brought that a finding of litigation privilege could be sustained. 52 In this Court, Sackville J applied the principles of Wheeler v Le Marchant in Australian Rugby Union Ltd v Hospitality Group Pty Ltd (1999) 165 ALR 253 ("ARU"). After referring to Lockhart J's judgment in Sterling, at 245-6, his Honour said, at 259: [C]ommunications between a party's solicitor and a third party are ordinarily privileged only if they are made or prepared when litigation is anticipated or commenced. This limitation, which has its origins in the decision of the Court of Appeal in Wheeler v Le Marchant … was held by Wood J in [Nickmar] to represent the current law. (Nickmar was disapproved in one respect by the majority of the High Court in Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 …, but the disapproval was not expressed to affect Wood J's view that Wheeler v Le Marchant remains good law. … .) The limitation on the scope of legal professional privilege does not mean that a communication between a party's solicitor and a third party (a non-client), made before proceedings are instituted or contemplated, cannot be protected by legal professional privilege. The communication will be privileged if the third party is an agent of the client and if the communication is both confidential and made to the solicitor in his or her professional capacity with a view to providing legal advice to the client. … . (Emphasis original) 53 Appling these principles, his Honour upheld a claim of privilege in respect of the minutes of a meeting attended by the applicant's solicitor, the applicant and representatives of two other companies ("the non-clients"), on the basis that (at 259): the non-clients at the meeting … provided information to [the applicant's solicitors] at the express request of either the solicitors or the [applicant], or both. … . In these circumstances, … the communications by the non-clients to the solicitors were made by the non-clients as agents for the [applicant]. 54 As ARU indicates, advice privilege will not attach to a confidential communication made by a person who, though an agent of the client for some purpose, is not an agent of the client for the purpose of communicating with the solicitor to obtain or receive the advice. This proposition is not only supported by decisions in Australian courts, but also by decisions in England and New Zealand. (b) Advice privilege in England 55 In Re Highgrade Traders Ltd [1984] BCLC 151 ("Highgrade Traders"), a liquidator, acting under s 268 of the Companies Act 1948 (UK), requested the production of reports made to insurers by loss adjusters, accountants and forensic experts following the destruction of the company's stock by fire in suspicious circumstances. The liquidator sought to determine whether the insurance claim was valid in order to recover money for the creditors of the company. The insurers refused to produce the reports on the ground that either they were subject to advice privilege or they were subject to litigation privilege. Whilst upholding the litigation privilege claim, Oliver LJ (with whom Goff LJ agreed) rejected the submission that the reports were subject to advice privilege, observing, in connection with advice privilege, at 164: The proposition is that it is sufficient to support a claim to privilege merely to show that the documents were prepared at the behest of the insurers for the purpose of obtaining legal advice to be given to them by their solicitors, and it is a proposition which, it is said, is supported by a statement on p 452 of the Supreme Court Practice 1982 in the notes to RSC Ord 24, r 5. What is said there is this: 'Third party as medium of communications. - So confidential letters or communications between a party and his solicitor, in his professional capacity, made through a clerk or agent employed by the solicitor (Wheeler v Le Marchant (1881) 17 Ch D 675 at 682, CA), or, and by the client in order to convey information to or from the solicitor' - and a number of cases are cited - 'are privileged.' In my judgment, this passage is referring merely to the situation where the client, in communicating with his solicitor, uses as the medium of communication either the solicitor's agent or his own agent. It is not directed - and the authorities referred to (in particular Wheeler v Le Marchant (1881) 17 Ch D 675) show this - to the situation where, there being no litigation in progress or contemplation, the client or the solicitor procures a third party to provide information collected by the third party to the solicitor. It does not, in my judgment, support at all the proposition advanced by the appellant and, if it does, then it seems to me clearly to be wrong and to be irreconcilable with the … passage from the speech of Lord Edmund-Davies in [Waugh at 541, 542] … . 56 In Price Waterhouse (a firm) v BCCI Holdings (Luxembourg) SA [1992] BCLC 583 ("BCCI"), an issue of legal professional privilege arose in circumstances not dissimilar from the present case. Millett J adopted the same broach approach as Oliver LJ had done in Highgrade Traders. From October 1990, Price Waterhouse acted as a member of a committee of investigation set up by BCCI's controlling shareholders which, from February 1991, was constituted as an internal committee of BCCI to investigate problem loans made by BCCI and related companies. Under the committee's terms of reference, Price Waterhouse was required to report to BCCI's solicitors to enable them to give legal advice to BCCI. BCCI subsequently collapsed, and the Serious Fraud Office, the Bank of England, and the Treasury sought to obtain disclosure of documents prepared by Price Waterhouse in the course of investigating the problem loans. Amongst other things, BCCI claimed legal professional privilege in respect of these documents, on the basis that Price Waterhouse was merely BCCI's agent for the purposes of communicating with its legal advisers. Millett J held that the claim was untenable. After referring to the decision in Highgrade Traders, Millett J said, at 589 Price Waterhouse (or the investigating committee) was not merely the appointed channel of communication. It was not merely an agent for communicating material from BCCI to [its solicitors]; it was charged with the duty of bringing the material into existence. In so far as it reported to [BCCI's solicitors] (if indeed it did), it was not passing on a communication from BCCI; it was producing material for BCCI and, at BCCI's direction, forwarding it to [BCCI's solicitors] direct instead of to BCCI with a view of its being sent on to [BCCI's solicitors]. In my judgment, its position was not essentially different from that of the surveyors in Wheeler v Le Marchant [1881] 17 Ch D 675 or the loss-adjusters and other experts in Re Highgrade Traders Ltd. I should add that the investigating committee did not become an internal organ of BCCI, though in my view it would not matter if it did. 57 English law would not accord advice privilege where a third party prepares or brings into existence (adopting the words of Millett J in BCCI) a report for a client, and does not simply act as a medium of communication between the client and the legal adviser, even though the report was sought by the client for the dominant purpose of obtaining legal advice (assuming no litigation is contemplated). (c) Advice privilege in New Zealand 58 In Guardian Royal Exchange, Cooke J of the Court of Appeal of New Zealand stated, by way of obiter dictum, at 602: When litigation is not in prospect the traditional view is that communications between a party or his solicitor and a third party are not privileged, even although they may have been for the purpose of the giving or obtaining of legal advice: see, in addition to Waugh's case, Great Atlantic Insurance Co v Home Insurance Co [1981] 2 All ER 485. In this context an employee or agent is treated as a third party. At one stage of his argument, [counsel for the appellant] seemed to be inviting us to depart from this rule. In the light of the current trends already mentioned, we would not be justified in doing so. Guardian Royal Exchange was followed by Chilwell J in Mudgway v New Zealand Insurance Co Ltd [1988] 2 NZLR 283 ("Mudgway"). This was, however, a clear case of litigation privilege. Following a fire that had partially destroyed the plaintiff's house, the plaintiff's insurer appointed a firm of insurance assessors to investigate and to report to the insurer's solicitors. In accordance with the legal advice given to it, the insurer subsequently declined the plaintiff's insurance claim. The plaintiff commenced proceedings to recover the insurance moneys and, in the proceeding, sought discovery of, amongst other things, the assessor's fire investigation reports. Chilwell J held that, since litigation was reasonably anticipated when the relevant documents came into existence, the claim for privilege should be upheld. 59 In C-C Bottlers Ltd v Lion Nathan Ltd [1993] 2 NZLR 445, Henry J was required to determine whether legal professional privilege attached to documents recording or constituting communications between the plaintiff's solicitors and a financial adviser retained by the plaintiff in relation to a share purchase. The plaintiff submitted that privilege attached to the documents on the basis that they were communications between the plaintiff's solicitors and its financial adviser acting in its capacity as financial adviser and agent, for the purpose of enabling the plaintiff's solicitors to give ongoing legal advice to the plaintiff. After referring to Guardian Royal Exchange, Wheeler v Le Marchant, Mudgway and Nickmar, Henry J observed, at 448: Each case must of course depend upon its own particular circumstances. The communication here cannot in my view be seen as being in effect one on behalf of the plaintiff client to its solicitor created for the purpose of the client obtaining legal advice. It is a communication by [the financial adviser] in its capacity as a non-legal adviser to the client making certain recommendations to the solicitor as to the client's future course of conduct. It is therefore not protected, even though its purpose may have been the provision of consequential legal advice to the client. … . Accordingly, I am of the view that the claim of legal professional privilege for these documents cannot be upheld. … . 60 In New Zealand, it seems that the law will accord advice privilege to communications passing between a party or his agent and a solicitor where the agent acts merely as a medium of communication, but it will not accord privilege to non-legal advice prepared for a client by professional persons retained by him, even though that non-legal advice is conveyed to the client's solicitor directly in order that the solicitor may provide consequential legal advice. (d) Advice privilege in Canada and the United States 61 In Solicitor-Client Privilege in Canadian Law (Butterworths Canada Ltd, 1993) Ronald D Manes and Michael P Silver comment, at p 76, that: The changing complexities of a modern law practice have been recognized in the United States to give rise to a wider ambit of privileged communications in the context of agents or employees. 62 Analysis of the law in the United States usually commences with United States v Kovel 296 F 2d 918 (1961) ("Kovel"), a case concerning a claim for privilege by an accountant because of his employment by attorneys. A firm of attorneys specialising in tax law employed Kovel. Kovel was called before a grand jury to testify against a client of the attorneys for whom he had done tax work. He refused to testify, claiming legal professional privilege, and was found guilty of, and sentenced for, criminal contempt of court. Kovel contended that the communications between the client and him were privileged because of his status as an employee of the legal firm. Friendly J of the United States Court of Appeals (Second Circuit) noted, at 921-2: Nothing in the policy of privilege suggests that attorneys, simply by placing accountants, scientists or investigators on their payrolls and maintaining them in their offices, should be able to invest all communications by clients to such persons with a privilege the law has not seen fit to extend when the latter are operating under their own steam. On the other hand, in contrast to the Tudor times when the privilege was first recognised, … the complexities of modern existence prevent attorneys from effectively handling clients' affairs without the help of others; few lawyers could now practice without the assistance of secretaries, file clerks, telephone operators, messengers, clerks not yet admitted to the bar, and aides of other sorts. … … Accounting concepts are a foreign language to some lawyers in almost all cases, and to almost all lawyers in some cases. Hence the presence of an accountant, whether hired by the lawyer or by the client, while the client is relating a complicated tax story to the lawyer, ought not destroy the privilege …; the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit. … . What is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. If what is sought is not legal advice but only accounting service …, or if the advice sought is the accountant's rather than the lawyer's, no privilege exists. (Emphasis original) 63 The Court of Appeals ultimately decided to remand the case for further hearing to determine whether the communications to Kovel, as a member of the attorney's staff, were made in confidence for the purpose of obtaining legal advice, or if what was sought by the client was merely an accounting service or accounting advice: see also United States v Schwimmer 892 F 2d 237 (2nd Cir. 1989) and Grand Jury Proceedings (under seal) v United States 947 F 2d 1188 (4th Cir. 1991). 64 As in Australia, the law in Canada commences with the decision in Wheeler v Le Marchant, although Canadian law has apparently been affected by the development of the law in the United States. In Susan Hosiery Limited v Minister of National Revenue [1969] 2 Ex C.R. 27 ("Susan Hosiery"), Jackett P, Exchequer Court of Canada, had to determine whether letters between a consultant solicitor for the appellant and the accountant who acted as its auditor (and a memorandum of meeting between them) were privileged. The appellant claimed that the documents were privileged since they were drawn up in the course of seeking legal advice from the consultant solicitor and the memorandum was a record of a meeting between the solicitor and the accountant for the same purpose. The appellant submitted that the communications between the accountant and the solicitor were privileged since the accountant was acting as its representative in the matter. After referring to the principles governing legal professional privilege set down in Wheeler v Le Marchant and Lyell v Kennedy (No 2) (1883) 9 AC 81, Jackett P observed, at 35-36: (a) that no communication, statement or other material made or prepared by an accountant as such for a business man falls within the privilege unless it was prepared by the accountant as a result of a request by the business man's lawyers to be used in connection with litigation, existing or apprehended; and (b) that, where an accountant is used as a representative, or one of a group of representatives, for the purpose of placing a factual situation or a problem before a lawyer to obtain legal advice or legal assistance, the fact that he is an accountant, or that he uses his knowledge and skill as an accountant in carrying out such task, does not make the communications that he makes, or participates in making, as such a representative, any the less communications from the principal, who is the client, to the lawyer; and similarly communications received by such a representative from a lawyer whose advice has been so sought are none the less communications from the lawyer to the client. Jackett P added, also at 36: I think the Court may take judicial knowledge of the fact that corporations of all kinds are continuously faced with problems as to what arrangements are advisable or expedient having regard to the intricacies of the tax laws and that, while huge corporations have staffs of lawyers and accountants of their own through whom they seek advice of counsel learned in such special areas of practice, smaller corporations employ lawyers and accountants in general practice to act for them in obtaining special advice in connection with such matters. 65 It is implicit in these observations that Jackett P considered that it would be illogical to allow the distinction between agents and third parties to result in large corporations benefiting from the privilege whilst smaller corporations could not, simply because the latter had to retain external financial advisers in order to obtain legal advice from their lawyers. At the same time, however, Jackett P highlighted the distinction between an accountant acting as an accountant in giving accounting advice and an accountant using his financial skill and knowledge to put the client's position before the lawyers. Only in the latter case might the communication be privileged: cf earlier Re Sokolov (1968) 70 D.L.R. (2d) 324, at 331 per Matas J (Manitoba Queen's Bench), holding memoranda prepared by the client's auditors and submitted to the client's solicitors for the purpose of obtaining legal advice to be privileged. 66 In Belgravia Investments Ltd v Canada [2002] FCJ No 870; 2002 FCT 649 ("Belgravia Investments"), Heneghan J applied Susan Hosiery, noting, at [44], that the Exchequer Court in Susan Hosiery "distinguished between documents and the facts contained in those documents, for the purpose of recognising privilege". His Honour concluded, at [45]: This [distinction] means that although certain documents may be protected against disclosure, facts contained in those documents, which otherwise may be discoverable, are not protected. In relation to accountants, his Honour observed, at [49]-[50]: The limits on solicitor-client privilege, in relation to non-legal professionals, has been considered. The general rule is that communications, statements or other materials prepared by third parties for and on behalf of a solicitor are subject to the privilege only where those documents are prepared in contemplation of litigation; see Long Tractor Inc v Canada, supra. Accounting documents will be subject to the privilege if the accountant is used as a representative of a client to obtain legal advice; see Gregory v Canada (Minister of National Revenue), 92 DTC 6518. Where a communication is made to an agent, such as an accountant who must consider it and provide an individual opinion, no privilege attaches. Where a document is created by a lawyer who has been consulted by the client's own lawyer in relation to the client's business, the general rule is that such documents will be privileged; see Re Klasson-Bronze Ltd et al (1970), 70 DTC 6361. consideration of the claim for advice privilege 67 It is for the respondents to establish that the communications contained in the documents in dispute attract legal professional privilege: see, e.g., Waugh, at 541 per Lord Edmund-Davies. On the facts of this case, privilege does not attach to the communications between PW and Pratt Holdings. These communications are contained in, or constituted by, the documents in categories (2) and (3), referred to in [18] above. 68 Pratt Holdings employed PW to prepare a paper and a valuation. The paper was to summarise the historical background to the transactions giving rise to the losses that were to be the subject of ABL's advice. In preparing the paper, PW needed to exercise the professional skill of an appropriately qualified accountant. Pratt Holdings employed PW to prepare the paper, chiefly because Pratt Holdings believed that the paper would assist it in obtaining legal advice from ABL. Pratt Holdings intended to convey the information in the paper (or the paper itself) to ABL. As it happened, PW used the paper in preparing the Yoni valuation, also sought by Pratt Holdings for submission to its solicitors. 69 PW undertook the analysis required for the paper and presented the results (in draft and final form) to Pratt Holdings. In the course of the analysis, PW discussed its work with Pratt Holdings, but PW had no direct communications with ABL. In particular, PW did not forward the PW paper (in draft or final form) or any other document to ABL; and none of PW's members or employees discussed any aspect of their work for Pratt Holdings with anyone from ABL. PW only communicated with Pratt Holdings. PW gave the paper (in draft and final form) to Mr O'Halloran at Pratt Holdings. He determined whether or not the paper (in draft or final form, in whole or in part) was to be forwarded to ABL. That is, Mr O'Halloran decided what information prepared by PW was to be given to ABL, and when the information was to be given. He also decided when, whether, and to what extent the advice given by ABL was to be given to PW. For the purposes of the privilege now claimed, it was he, as an employee of the client, who communicated with ABL. 70 In these circumstances, PW was Pratt Holdings' representative only in the sense that PW was employed by Pratt Holdings to do certain work (i.e., the preparation of the report and the valuation). PW was not the agent of Pratt Holdings for the purpose of making (or receiving) communications to (or from) ABL. Let it be assumed that the communications between Pratt Holdings and PW were confidential. Let it also be assumed that, so far as Pratt Holdings was concerned, these communications were made for the dominant purpose of obtaining legal advice from ABL. Yet the communications were not privileged because PW was not the agent of Pratt Holdings for the purpose of communicating with ABL. PW was simply engaged to produce a paper and valuation for Pratt Holdings. It discharged its task by conveying the report and the valuation to Pratt Holdings (along with other documents) with a view to Pratt Holdings conveying the information to ABL (or with a view to Pratt Holdings conveying so much of this information as Pratt Holdings considered appropriate to convey to ABL). This situation is not materially different from the surveyors in Wheeler v Le Marchant, the loss adjusters in Hightraders or the accountants in BCCI. PW could not, adopting the words of Heneghan J in Belgravia Investments, be considered a representative of Pratt Holdings to obtain legal advice. 71 The claim made by Pratt Holdings for privilege in respect of the documents in categories (1), (5) and (6) (at [18] above) relies entirely upon the claim for privilege over the documents in (2) and (3). This claim over categories (1), (5) and (6) therefore fails as well. The applicants have not contended that the documents in categories (1), (5) and (6) are privileged on any independent basis. 72 It may be that the requirement in Australia and England that, for the purpose of advice privilege, an agent of a client must be a person who is an agent for the purpose of communicating with the client's solicitor is too narrow. For example, this approach apparently requires that the relevant communication pass directly between the non-client and the solicitor. A communication between a non-party and a solicitor, which passes via the client, it not apparently privileged. Upon this approach, too much may turn on whether a written communication is prepared by a corporation internally, or externally by a third party, notwithstanding that the communication in either case is for the dominant purpose of obtaining legal advice and may contain the same information. It may be that the more functional approach adopted in the United States and in Canada (and to a lesser extent in New Zealand) may produce a more rational, or less artificial, result. In the United States and Canada, a finding that a party is an agent for advice privilege purposes is resolved by finding that a communication was made by the agent for the dominant purpose of obtaining legal advice where the communicator was not acting entirely independently and "under his own steam". On the other hand, this more flexible approach puts some strain on the orthodox understanding of privilege, by extending its scope to a wider range of "agency situations" than that presently accepted in English and Australian law. Further, it diminishes the difference between advice privilege and litigation privilege (for which the rationales differ in some respects) and broadens the protection against enquiry, whether pursuant to statute (as in this case) or otherwise. Where, however, a question of privilege arises in a statutory context (as in this case) it would be open to the Parliament to modify or qualify the scope of the privilege for statutory purposes (subject, of course, to any relevant constitutional considerations). consideration of the parties' submissions on waiver 73 The Commissioner also submits that the privilege which attached or may have attached to some documents (including written advices given by ABL to Pratt Holdings (referred to in category (4) at [18] above)) was waived by Pratt Holdings when it disclosed the communications to PW. This submission relates to documents 35, 41, 43, 44, 45, 48, 53, 54, 57, 65, 69, 73, 75, 77, 83, 84, 85, 88 and 98 in "CMR 1" to Mr Reardon's first affidavit, as described in par 12 of the Commissioner's amended statement of claim filed on 29 April 2002. Mr O'Halloran's evidence was that Pratt Holdings gave PW a copy of a letter of advice received by it from ABL because it concerned issues relating to the preparation of the PW paper. This was document 35. (Whilst the Commissioner did not at first seek access to this document, the Commissioner pressed for access at trial.) 74 The Commissioner made separate submissions concerning document 37, which Pratt Holdings also provided to PW to assist it in the preparation of the PW paper. This was a letter of advice from ABL, dated 18 December 1992. The addressee of the advice is unstated. The advice was forwarded by Mr Deane Howell, of Frank Jones & Associates, to Pratt Holdings, and then to PW. In relation to document 37, the Commissioner submits that "two further problems exist". They are: (1) The identity of the recipient of the advice is not identified and a general letter of advice cannot be privileged. The privilege is the client's privilege and not the lawyer's; (2) The document is in the possession of Price Waterhouse. Accordingly, if the document was privileged (which it is not), Pratt Group has waived legal privilege. 75 Mr O'Halloran also gave evidence that, from time to time after PW's retainer by Pratt Holdings, Pratt Holdings obtained advice from ABL concerning drafts of documents prepared by PW. It follows from this that a question of waiver may arise in relation to legal advice from ABL communicated by Pratt Holdings to PW in the course of instructing PW and discussing the work being done by PW for Pratt Holdings. The Commissioner apparently submits that, whilst this advice was initially privileged, privilege over these communications was also waived when Pratt Holdings disclosed their contents to PW. 76 In response to the Commissioner's submissions on waiver, Pratt Holdings conceded that Mr O'Halloran's disclosures to PW were voluntary. Counsel for Pratt Holdings submitted, however, that this voluntary disclosure did not constitute waiver. In written submissions, Pratt Holdings submitted: 27. The evidence, particularly the new evidence from Reardon and Le Huray, demonstrates that disclosure to Price Waterhouse is not inconsistent with Pratt Group maintaining confidentiality in documents provided. In particular: 27.1 Price Waterhouse was agent of the Pratt Group and in that capacity waiver does not arise at all; 27.2 Price Waterhouse was not at liberty to disclose documents it received, or their contents, to strangers; 27.3 the documents were provided, and intended to be provided, confidentially; 27.4 Price Waterhouse needed the documents to perform its retainer; 27.5 the documents were received by Price Waterhouse and retained by it (and intended to be retained by it) confidentially. 77 As Gleeson CJ, Gaudron, Gummow and Callinan JJ observed in Mann v Carnell (1999) 201 CLR 1 ("Mann v Carnell"), at 13: At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege. … . 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. … 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. When an affirmative answer is given to such a question, it is sometimes said that waiver is 'imputed by operation of law'. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. … 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. 78 In the first place, the legal advice given by ABL to Pratt Holdings attracted advice privilege. Pratt Holdings did not necessarily waive the privilege when it disclosed that advice voluntarily to PW: see Mann v Carnell, at 14. Whether Pratt Holdings has, in fact, waived the privilege by such disclosure depends upon whether the disclosure to PW was inconsistent with the maintenance of confidentiality. In the circumstances of the case, I do not think it was. First, the purpose of the privilege is to protect the confidentiality of the legal advice received by Pratt Holdings from its solicitors. There is nothing inconsistent with that purpose in Pratt Holdings conveying the contents of the advice to PW, in order that PW provide an accounting analysis that would enable Pratt Holdings' solicitors to advise Pratt Holdings further on the matters of concern, upon the basis that PW would maintain the confidentiality of the legal advice: cf Mann v Carnell, at 35 per McHugh J dissenting. It follows that I would uphold Pratt Holdings' claim of advice privilege in respect of document 35. 79 I accept the Commissioner's submission in relation to document 37, which I have inspected, that no privilege attaches to the communication constituted by it. Document 37 is a letter dated 18 December 1992 from ABL to Mr Deane Howell, Frank Jones & Associates. The letter, which consists of some four pages, is of general import and does not identify any client for whom the advice was sought by Mr Howell, nor any particular factual circumstance. It is not said that the advice was sought by Mr Howell for Pratt Holdings, and no other person has come forward to claim privilege in respect of it. The respondents' claim for privilege in respect of this document is not sustainable. 80 As already noted, the Commissioner claimed that privilege had been waived in connection with a number of other documents. I have inspected each of these documents and, save for documents 35 (referred to above), 44, 69, 73, 77 and 98, there is no basis for attributing privilege to any of them. Save for these documents, none of the other documents refer to legal advice conveyed by ABL (or other lawyers) to Pratt Holdings and this, as I have found, is the only basis upon which a claim for privilege may be sustainable in the circumstances of this case. 81 Document 44 is a memorandum dated 7 October 1993 written by Mr Le Huray to Mr O'Halloran, which apparently sets out certain comments of Mr Mark Leibler, of ABL, concerning the work being undertaken by PW. Document 69 is Mr Reardon's file note of a telephone conversation with Mr O'Halloran dated 8 April 1993, recording, in two paragraphs, Mr Leibler's advice (given to Mr O'Halloran) concerning aspects of the work being undertaken by PW. (I note that document 76 is a copy of document 44.) Document 73 is a letter dated 4 November 1993, marked confidential, from Mr Reardon of PW to Mr O'Halloran, detailing Mr Leibler's observations on PW's draft paper (as conveyed to PW by Pratt Holdings) and setting out PW's response to each of Mr Leibler's observations. (I note that document 74 is the same as document 73.) Document 77 is Mr Reardon's draft file note dated 28 September 1993 of a conversation between him and Mr O'Halloran, recording a discussion between Mr O'Halloran and Mr Leibler (as conveyed to Mr Reardon by Mr O'Halloran). It records the advice given by Mr Leibler to Mr O'Halloran in relation to the draft PW paper, as relayed by Mr O'Halloran to Mr Reardon. Document 98 is the same as document 77. 82 If privilege attaches to advice given by ABL to Pratt Holdings and Pratt Holdings has not (as I have found) waived privilege in disclosing the advice to PW, then Pratt Holdings ought not be required to disclose the advice to the Commissioner. It does not seem to me that the documents numbered 73 (and 74) and 77 (and 98) are capable of being disclosed without disclosing the advice given by ABL that is recorded in them. This is not, however, the case with the documents numbered 44 (and 76) and 69. Parts of them may be disclosed to the Commissioner without compromising the privilege that attaches to the hitherto confidential communications from ABL to Pratt Holdings that are also mentioned in them. 83 After consideration, I inspected the remainder of the documents in dispute. This course was supported by the Commissioner and not opposed by Pratt Holdings. Upon inspection it was apparent that a number of documents contained expressions of opinion about the operation of the law. They are documents numbered 50, 42, 71, 32, 49, 70, 103, 1, 96, 109, 58, 92, 97, 105 and 107 in the list of documents that is "CMR 1". (I note that document 71 is a copy of document 42, and that documents 49 and 70 are copies of document 32.) Documents 103, 96, 92, 97, 105, 107 and 109 are drafts and copies of drafts of the same document. Save for documents 32, 49 and 70 (which are the same document), neither the evidence nor the contents of the documents themselves show that the opinions expressed were necessarily those of a lawyer, and there is insufficient evidence to support a claim for advice privilege in respect of them. Save, perhaps, in respect of documents 35 and 37, Pratt Holdings has not, moreover, made any claim for advice privilege on any basis other than that discussed at [73]-[76] above. 84 As for documents 32, 49 and 70, the evidence to which I have already referred and the contents of the documents themselves lead me to conclude that, in each case, privilege attaches to the first page of what is a seven page communication, and to the first two lines on page 2. summary

Commissioner of Taxation v Pratt Holdings Pty Ltd

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