Cowell & Ors v British American Tobacco Australia Services Ltd & Ors [2007] VSCA 301

Court of Appeal (Vic)|2007-12-14|Before: WARREN CJ, CHERNOV and NETTLE JJA

PRACTICE AND PROCEDURE - Discovery - Confidential information - Restraining wrongful use of confidential information in litigation against owner - Whether objection by owner to use of confidential information in one proceeding is inconsistent with consent in related proceeding - Harman undertaking - Release from Harman undertaking - Legal professional privilege - Exceptions to legal professional privilege - Loss of privilege - Whether information privileged - Injunction to restrain use of privileged information - Whether prima facie case of privilege must be established - Whether doctrine of clean hands is applicable - Whether appropriate for court to look at document to determine question of privilege - Costs - Application for stay of costs.

**1 The Court has before it a number of applications for leave to appeal against interlocutory decisions of Byrne J made on 6 July 2007 and 13 September 2007 that relate to the proceeding brought by the late Rolah Anne McCabe ('Mrs McCabe') on 26 October 2001[1] against British American Tobacco Australia Services Ltd ('BATAS') ('the McCabe proceeding'). The Court also has before it an adjourned application for a stay of the execution of costs orders made by this Court on 9 December 2002 and 2 May 2003 in the McCabe proceedings. Before dealing with the applications it is necessary to describe the background to them. In her action, Mrs McCabe sought damages for personal injury said to have arisen as a consequence of her having been a smoker, since 1962, of cigarettes manufactured and distributed by BATAS and its predecessor. During the course of that proceeding, the trial judge ruled that BATAS had waived legal professional privilege in relation to certain documents that had been produced in response to subpoenas and, on 6 February 2002, ordered that access to them be given to the plaintiff. In the result, the documents ('the BATAS documents') were duly delivered. On 25 March 2002 his Honour ordered that the defence of BATAS be struck out, except in relation to the question of damages, because he considered that BATAS had subverted the process of discovery by deliberately destroying relevant documents.[2] After the jury awarded Mrs McCabe damages in the sum of $687,560, his Honour entered judgment in her favour for that sum, together with interest and costs. The appeal by BATAS against the decisions in the McCabe proceeding was successful[3] although by the time it was determined Mrs McCabe had died and, in the result, the Court ordered that Mrs McCabe's daughter, Roxanne Joy Cowell ('Ms Cowell'), represent the estate of her late mother for the purposes of the appeal and that she be made a respondent to the appeal in her place.[4] The Court concluded that his Honour's decision as to the waiver of privilege in relation to the BATAS documents was wrong and that the orders for production of them should be set aside.[5] The Court also considered that his Honour's decision to strike out the defence was wrong. Thus, by orders made on 9 December 2002 ('the first Court of Appeal decision'), the Court of Appeal set aside the judgment below and ordered a new trial. The Court further ordered that, subject to a qualification that is not presently relevant, the plaintiff deliver up to the solicitors for BATAS copies of the BATAS documents which were identified in the schedule to the Court's order. In the event, the scheduled documents were returned as ordered. The Court declared that, if and in so far as BATAS was entitled otherwise to claim legal professional privilege in relation to the documents identified in the schedule, such privilege was not waived as held by the trial judge. The plaintiff was also ordered to pay the costs of BATAS of the trial and of the appeal.

2 On 24 April 2002, being the day following the institution of the appeal by BATAS against the decision in the McCabe proceeding, Ms Cowell commenced a proceeding by way of originating motion[6] whereby she sought a declaration, inter alia, that she and her solicitors be entitled to distribute to the United States Department of Justice and the Australian Consumer and Competition Commission information acquired by them through or from documents to which reference was made during the hearing of the McCabe proceeding. Essentially, they sought a waiver of their Harman[7] undertakings referrable to that action. In May 2002, Byrne J effectively made the declarations sought. On 2 May 2003 this Court reversed his Honour's decision ('the second Court of Appeal decision') and ordered the applicant to pay the costs of BATAS of the hearings and of the appeal. Their Honours ordered that certain documents, including the BATAS documents, were and remained subject to an implied Harman undertaking (that prohibited the plaintiff and Slater & Gordon from using the documents for any 'collateral or ulterior purpose'). Moreover, said the Court, some of the documents aired during the trial were privileged and were thus protected from disclosure.

3 Notwithstanding that the Court had directed a new trial as already mentioned, the McCabe proceeding remained dormant. And as will be described BATAS took no steps to enforce the abovementioned cost orders until recently.

4 In about September 2006, a former partner of Clayton Utz, the solicitors who acted for BATAS at the McCabe trial and the appeals, supplied to the solicitors who acted for Mrs McCabe, Slater & Gordon Pty Ltd[8] ('Slater & Gordon'), documents ('the Clayton Utz documents') that came into existence in the course of an internal review conducted by Clayton Utz regarding the alleged misconduct of partners of the firm in the conduct of the defence in the McCabe proceeding. The Clayton Utz documents were said to include confidential information and privileged documents that were held by those solicitors in their capacity as solicitors for BATAS, and for an associated company, British American Tobacco Australia Ltd ('BATAL').

5 In the result, in November 2006, each of BATAL and BATAS commenced a proceeding in the Supreme Court of New South Wales ('the NSW proceedings') against, amongst others, Slater & Gordon and one of its partners, Peter Gordon ('Mr Gordon'), seeking orders restraining the defendants from publishing, disseminating or using the information contained in certain of the documents. Later, Ms Cowell was joined as a defendant in each of the NSW proceedings on the basis that she had come into possession of the Clayton Utz documents. The defendants to the NSW proceedings made it apparent that they intended to use the information arising from the Clayton Utz documents to set aside the first Court of Appeal decision on the basis that it was obtained by fraud, and thus reinstate the judgment of the trial judge.

6 On 16 March 2007 the NSW proceedings were transferred to the Supreme Court of Victoria pursuant to the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW).[9] Prior to this occurring, however, on 29 November 2006, the judge hearing the matters in New South Wales, Brereton J, granted in each case an interlocutory injunction restraining the defendants until further order from publishing, disseminating or using the information contained in the Clayton Utz documents, which his Honour identified by reference to, respectively, Annex A & B to the summons filed by BATAS and Schedule A to the summons filed by BATAL, other than for the purpose of defending the respective NSW proceedings.

7 In June 2007, Byrne J had before him summonses filed by Slater & Gordon and Ms Cowell seeking a variation of the orders of Brereton J so as to permit them to make reciprocal use of the information in the Clayton Utz documents to defend both of the NSW proceedings.[10] His Honour also had before him a summons in the McCabe proceeding dated 5 June 2007 pursuant to which the defendants in the NSW proceedings effectively sought modification of their respective Harman undertakings in the McCabe proceeding in relation to the BATAS documents that were returned to BATAS as earlier described, such that they could use the information derived from them for the purpose of defending the NSW proceedings and for the purpose of any application that may be made to this Court to set aside the first Court of Appeal decision.

8 In the result, on 6 July 2007 Byrne J ordered in the BATAS proceeding that the restraining orders of Brereton J be varied so as to permit BATAL to use the information derived from the Clayton Utz documents referrable to BATAS in its defence. And on the summons in the McCabe proceeding his Honour ordered that the applicants have leave 'to use' the documents, identified by him in a schedule to his order, that included the BATAS documents produced under compulsion in the McCabe proceeding, and any information derived from them, for the purpose of the NSW proceedings. In each case, his Honour made it plain that the orders made were without prejudice to any claim for privilege, confidentiality or relevance that may be made by the two companies in relation to the documents and the relevant information.

9 As has been mentioned, BATAS did not seek to take any overt step to the enforce the costs orders made earlier in its favour by the Court of Appeal until May 2007. Thus, shortly after the NSW proceedings were listed before Byrne J for directions, it instituted in May 2007 the process of taxing its costs which were said to be in the order of $2 million.

10 It was in that context that BATAS sought, by summonses filed on 12 July and 20 July 2007, leave to appeal against his Honour's above orders of 6 July 2007 in the BATAS and the McCabe proceedings. By summonses filed on 4 and 19 June 2007, the representatives of the estate of Mrs McCabe sought a stay of execution of the costs orders made by the Court of Appeal in favour of BATAS as earlier described. The summonses first came on for hearing before this Court on 15 August 2007. Relevantly, the Court ordered that the hearing of the applications for leave to appeal be adjourned to the Court which, if leave were granted, would hear the appeals. Consequential directions were made for the purpose of facilitating the hearing of the appeal. The stay application was disposed of by the two companies undertaking by their counsel that, until the hearing and determination of the applications for leave to appeal, and, if leave was granted, the appeals, they would not take any step to enforce the above costs orders.

11 On 22 August 2007, in the course of what seems to have been a directions hearing, Byrne J heard applications on behalf of Ms Cowell effectively seeking orders -**

(a) discharging the restraining orders of Brereton J, as varied;

(b) Ms Cowell be permitted to use the information described in the amended schedule to the Amended Statement of Claim in the BATAS proceeding only for the purpose of:

(ii) applying to the Court of Appeal to set aside the first Court of Appeal decision on iniquity grounds;

(iii) alternatively, making a cross-claim for damages in the NSW proceedings based on iniquity grounds;

(iv) prosecuting her application in the Court of Appeal for a stay of the costs orders made against her as described earlier.

On 13 September 2007 his Honour dismissed the applications. Ms Cowell now seeks leave to appeal against those decisions and, if leave be granted, seeks orders that the appeals be allowed.

(a) Applications for leave to appeal, and if leave is granted, the appeals, against the two impugned orders of Byrne J of 6 July 2007, namely, varying the restraining order of Brereton J so as to permit the applicants to 'cross-use' the BATAS information in Clayton Utz documents in the BATAL proceeding and modifying the Harman undertaking in the McCabe proceeding to the extent referred to.

(b) Application for leave to appeal, and if leave is granted, the appeals against the orders of Byrne J of 13 September 2007.

(c) An application for a stay of the execution of the costs orders of the Court of Appeal of 9 December 2002 and 2 May 2003 to which reference has been made.

**13 We turn first to consider the claim of BATAS that his Honour erred in varying the order of Brereton J on 29 November 2006 so as permit the respondents - Slater & Gordon and Ms Cowell - to use the Clayton Utz documents referrable to BATAS in the defence of the claim brought by BATAL. BATAS claims, as has been noted, that the Clayton Utz documents contain privileged and confidential information belonging to it and that his Honour's decision, which effectively gave the respondents permission to use such documents as a springboard for their BATAL defence, gives them an improper advantage to the prejudice of BATAS.

14 The claim of BATAS that his Honour so erred was based on reasoning, the principal aspects of which were these. First, it was said that, on established principle, if BATAS succeeds in its proceeding it will be entitled to relief that will preclude any unauthorised use by the respondents of the Clayton Utz documents that relate to it. Secondly, it was argued that the proposed use of the Clayton Utz documents would be as much a use of them as would physical use by publication or dissemination. Thirdly, it was said that BATAS has established a prima facie case for protection of its confidentiality and privilege in the Clayton Utz documents referrable to it and, thus, for the interlocutory relief which it has secured. Importantly, BATAS contended, if the respondents were to be permitted to use the documents as proposed, then even if it ultimately succeeds in its claim such use would cause BATAS irreparable prejudice. Consequently, it was said, the balance of convenience favoured interlocutory protection of its rights with respect to those documents pending trial and his Honour should have dismissed the application to vary the above order of Brereton J on 29 November 2006.

15 Clearly enough, equity may restrain use of confidential information, that was obtained improperly, as a springboard for a claim or defence in litigation against an associate of the owner. Thus, in Lord Ashburton v Pape[11] the court ordered that the defendants be restrained 'from publishing or making use of any of the copies of such letters or any information contained therein', thereby denying the wrongdoer use of the information in other pending proceedings. And in Terrapin Ltd v Builders Supply Company (Hayes) Ltd[12] Roxburgh J said:**

As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as a springboard for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.

This passage was cited with approval by Lord Denning MR in Seagar v Copydex Ltd.[13] Lord Denning added:

The law on this subject ... depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent. The principle is clear enough when the whole of the information is private. The difficulty arises when the information is in part public and in part private. [In those circumstances] ... the recipient must take special care to use only the material which is in the public domain ... He should not get a start over others by using the information which he received in confidence ... .

**16 The principle was put into effect in Sullivan v Sclanders & Goldwell International Pty Ltd[14] in which the Full Court of the Supreme Court of South Australia ordered that the plaintiffs' statement of claim be struck out given that it was based on the defendant's confidential information which they had obtained improperly. The plaintiffs were granted liberty to file a fresh statement of claim 'making no use either directly or indirectly of the confidential documents or their contents'.

17 It may also be accepted for present purposes, as seems to have been done by his Honour, that the Clayton Utz documents contained confidential information belonging to BATAS, just as his Honour accepted for the purposes of the argument before him that the BATAS information in those documents was relevant to the BATAL proceeding. Other things being equal, therefore, there may be something to be said for the claim of BATAS that the court would intervene to restrain the use of improperly obtained confidential information in the manner proposed by the respondents - being a use that would create a springboard for a defence to a claim against them by a company associated with the owner of the confidential information. But for the following reasons we consider that the circumstances here are such that equity would not grant such protection.

18 First, the dispute involves a limited category of the Clayton Utz documents that are referrable to BATAS. As his Honour noted, there is a degree of overlap in the information that was sought to be protected by BATAS:**

- some of the information in the Clayton Utz documents is common to both proceedings ('the overlap information')

- some is peculiar to the BATAS proceeding ('the BATAS information')

- some information is peculiar to the BATAL proceeding ('the BATAL information').

As has been mentioned, the objection by BATAS is limited to the use of the BATAS information in the BATAL proceeding.

**19 Secondly, the position adopted by BATAS in this regard is artificial and inimical to the proper administration of justice. It may be accepted that, as was submitted by BATAS, it is not inappropriate for it and BATAL to be represented by separate solicitors and to have commenced separate proceedings. Nevertheless, the two proceedings will be, or are very likely to be, heard at the same time so that the position in that regard will be no different in practical terms from one where the companies brought their respective claims in the one proceeding. Were such circumstances to prevail, it would have been artificial for BATAS to take no objection to the respondents using the BATAS information to defend the BATAS claim but object to it being used in the defence of the BATAL claim. We consider that his Honour was justified in taking the view that, in the circumstances, the objection by BATAS to its documents being used by the respondents in the BATAL proceeding would 'not serve the interests of justice'. To recognise this is not to subject the doctrine of legal professional privilege, or the law pertaining to confidential information, to a perceived, higher, public interest. Rather, it is the recognition that to permit in the present circumstances BATAS to pick and choose which documents could be used by the respondents in their defences would run counter to the proper administration of justice.

20 Thirdly, and importantly, we consider that BATAS would suffer no relevant prejudice if his Honour's order were to stand such that the respondents could use the BATAS information for the purpose of preparing their defence in the BATAL proceeding. His Honour did not determine the question whether any part of the BATAS information is privileged or otherwise confidential such as to give BATAS an entitlement to a protective order. His Honour said that this will be a matter for the trial judge to resolve when the matter is raised. Additionally, at least until trial, the BATAS information will not be disclosed by the respondents to any stranger to the NSW proceedings. It may be disclosed to BATAL during the interlocutory process, but that is unlikely to cause relevant prejudice to BATAS, having regard to its corporate structure with BATAL. And as his Honour noted in his reasons: 'No embarrassment or other adverse consequence to BATAS was identified or suggested in argument to arise from the disclosure of the BATAS information to BATAL'.

21 Fourthly, we consider that, in the circumstances, the objection by BATAS to the respondents using its documents in the BATAL proceeding is, as a matter of substance and effect, inconsistent with its acceptance that the BATAS information can be used by the respondents to defend the BATAS proceeding and that the overlap information can be used in both proceedings.

22 For these reasons, we consider that his Honour did not relevantly err, as is claimed by BATAS, in varying the order of Brereton J of 29 November 2006. Consequently, we would not grant leave to appeal against that aspect of his Honour's decision.**

**23 We turn next to Byrne J's order[15] that Ms Cowell, Mr Gordon and Slater & Gordon Ltd have leave to use the documents described in the schedule to the order, and any information derived from those documents, in and for the purposes of the BATAS and BATAL proceedings.

24 As has been noted, the documents referred to are documents in respect of which BATAS claims legal professional privilege but which it was required to produce in the trial of the McCabe proceeding.[16] Following BATAS' successful appeal against Eames J's judgment, the documents were returned to BATAS in accordance with the orders of this Court made on 9 December 2002. The information derived from the documents is information, such as Slater & Gordon's 'work product', derived from the documents while they were available to Mrs McCabe, Slater & Gordon and Mr Gordon. Byrne J made the order 'without prejudice to any privilege or confidentiality which may be claimed by British American Tobacco Services Ltd ('BATAS') or British American Tobacco Australia Ltd ('BATAL') to exist in relation to the documents or the information derived from them'.[17]

25 BATAS now seeks leave to appeal against the order, on two grounds:**

(a) BATAS contends that relief from the Harman undertaking is inconsistent with the judgment and order of this Court of 6 December 2002;[18] and

(b) BATAS contends that, in any event, the order will cause BATAS irreparable prejudice because it will result in BATAS' rights of privilege and confidentiality in the communications and information disclosed in the documents being 'irretrievably eroded'.

26 Eames J found that BATAS had waived its claim for legal professional privilege in respect of the documents and so ordered that they be produced. On appeal, this Court found that Eames J had erred and ordered that the documents be returned. As the Court then explained in British American Tobacco Australia Services Ltd v Cowell (No 2):

On 6 December last we delivered judgment in the earlier and associated appeal brought by the appellant against the judgment for damages in favour of Mrs McCabe and, as already mentioned, that appeal was allowed and a retrial ordered when orders were pronounced on 9 December. In the course of our reasons for judgment we held that the trial judge had fallen into error in ruling that legal professional privilege had been waived by the appellant over documents coming into existence over many years - 'from early 1990 until late 1998' - and as a result much of his Honour's reasoning for striking out the defence was significantly undermined and could not stand. Our opinion on privilege now has its bearing on the present appeal; for it means that of the 38 documents put in issue on this appeal 32 of them are still properly regarded as subject to legal professional privilege so that, being protected by privilege, they are not available to the respondent on any view; the appellant need establish no more to succeed on this appeal in relation to those 32 documents.[19]

27 BATAS submits that this Court thereby determined the issue of legal professional privilege and that, in order to give effect to that determination, Byrne J should have refused to relax the Harman undertaking. Instead, according to BATAS, by allowing Ms Cowell and Slater & Gordon to make use of the documents and the information, Byrne J acted in a fashion which is liable to subvert BATAS' privilege, and so contrary to the precept that:

when an erroneous judgment or order is overturned, whether by means of appeal or by any other procedure, the court will achieve a just result by requiring anything that has been taken from him by the other party by virtue of the wrong decision to be restored. [20]

**28 In our view, BATAS' submissions should not be accepted in the broad terms in which they are expressed. BATAS is right to the extent that the question of waiver of legal professional privilege was determined in favour of BATAS and, subject to exceptions which at present do not arise, BATAS is also correct that it would not be open to Byrne J to make orders inconsistent with that determination. But we do not think that his Honour's orders are inconsistent with the determination.

29 The respondents are not seeking to reopen the question of waiver. As appears from Byrne J's reasons for judgment, the respondents base their case for variation of the Harman undertaking on the fact that BATAS has made an issue of Slater & Gordon's and Mr Gordon's state of knowledge at the time of their receipt of the Clayton Utz documents. By its further amended statement of claim in the BATAS proceeding, BATAS alleges that Slater & Gordon and Mr Gordon received the Clayton Utz documents well knowing that the documents were confidential. Slater & Gordon and Mr Gordon deny that and, by their defence, Slater & Gordon contends that Slater & Gordon's and Mr Gordon's belief at the time of receipt was (and is now) that the documents evidence a course of conduct on the part of BATAS designed to pervert the course of justice - by destroying or hiding documents relevant to claims made or to be made by plaintiffs for damages for injuries suffered as a result of smoking BATAS' cigarettes. Further, Slater & Gordon and Mr Gordon say by their counsel that their belief was and is informed by their knowledge of the Harman documents and the information derived from the Harman documents and so they contend that they must be free to refer to the Harman documents and information in order to prove their belief. In their submission, BATAS should not be permitted to invoke court process in the form of a Harman undertaking to prevent them from following that course.[21]

30 Byrne J accepted that contention, for these reasons:**

36 The use of the [Harman] documents for the [BATAS and BATAL] proceedings raises a more difficult question. The authorities to which I have been referred show that the court will have a keen and jealous regard for the interests of persons who are obliged to yield up confidential material in the interests of justice.

37 The present application, however, has a number of significant and unusual characteristics. The documents are documents of BATAS which is a party to one of the [BATAS and BATAL] proceedings. The [BATAS and BATAL] proceedings are brought to prevent the use by the estate of the confidential information for the purposes of the McCabe proceeding. In this sense, the BATAS proceeding is brought by BATAS for the purpose of resisting the McCabe claim against it. Moreover, for the reasons which I have mentioned, the use of the documents in the BATAS proceeding, and probably the BATAL proceeding, will not breach any confidentiality which reposes in BATAS.

38 It was put, with some force, by counsel for BATAS that these documents, or at least those in paragraph 4 of the Schedule, had been found by the Court of Appeal to be privileged. Accordingly, they ought not to have been required by the Court to be produced. How, then, can this Court, consistent with the Court of Appeal ruling, permit their use? This argument produces a circle. Counsel for the estate say that they wish to use the documents which have been found to be privileged in order to mount a case in the [BATAS and BATAL] proceedings which, if successful, will release information for use in the application to set aside the Court of Appeal decision which itself established the privilege in question. This circle can only be broken, they say, by granting the present application.

39 I agree. The circumstances of this application are such that I am satisfied that special circumstances exist which are sufficient to warrant the modification of the undertaking so as to permit the documents to be used, if they might otherwise be used, for the purposes of resisting the claims of BATAS and its related company BATAL.

(ii) Preservation of legal professional privilege

**31 BATAS contends in the alternative that, even if it has made an issue of Slater & Gordon's and Mr Gordon's belief as to the confidentiality of the Clayton Utz documents, and even if the Harman documents and information are relevant to the issue, Byrne J was wrong to hold that BATAS's claims for privilege should yield to the requirements of relevant evidence. Counsel for BATAS relies on the fact that the High Court has repeatedly rejected the notion that rights of privilege may yield to some conception of higher interest.[22] He points out that in Carter[23] a majority of the High Court even went as far as rejecting the view, which is accepted in other common law jurisdictions, that legal professional privilege should yield to an accused's entitlement to defend himself or herself against criminal charges. He argues that, if legal professional privilege does not yield to an accused's interest in defending himself or herself against criminal charges, it cannot possibly yield to the needs of Slater & Gordon and Mr Gordon to defend themselves against BATAS' allegations in a civil proceeding.

32 Once again, however, it seems to us that BATAS' contentions cannot be accepted in the broad terms in which they are expressed. Admittedly, the High Court has taken a broad view of legal professional privilege. As the law stands, the only exceptions are communications in furtherance of crime or fraud[24] or abuse of power[25], communications which conceal the whereabouts of a ward of court[26] and communications which would frustrate the execution of an order of the court.[27] But as Byrne J observed below, in this case the subject matter of the Harman undertaking is not a document, but rather information obtained from the Harman documents and, although it is now accepted that legal professional privilege is more than just a rule of evidence or procedure,[28] it is clear that it is not to be characterised as a rule of law conferring individual rights sounding in damages or an injunction to restrain an apprehended or continued breach.[29] Consequently, once information in a privileged document has come into the hands of a party to litigation, even as a result of compulsive process which is later reversed, the fact that the document was and remains privileged does not of itself prevent that party from making use of the information.[30]

33 It is true that equity will intervene in an appropriate case to restrain use of the document and knowledge of its contents. It will do so on the basis that the document, or more accurately the communication recorded in the document, retains its confidentiality despite improper disclosure.[31] It has also been held that, once the equitable jurisdiction is engaged, there is no discretion to refuse relief according to the materiality of the communication or otherwise according to 'the justice of admitting or excluding it or the like'.[32] More generally, there is no room for balancing the preservation of the privilege against the public interest in the availability of relevant evidence at trial. The balance between privilege and truth is said to have been struck already in favour of the privilege.[33]

34 But since the jurisdiction to enjoin publication or use of privileged information[34] is limited to such equity as may inhere in the confidentiality of the communication,[35] ordinary principles dictate that injunction ought not go at the suit of an applicant who comes to equity with unclean hands or where the subject-matter of the communication 'is the existence or real likelihood of the existence of an iniquity in the sense of a crime, civil wrong or serious misdeed of public importance, and the confidence is relied upon to prevent disclosure to a third party with a real and direct interest in redressing such crime, wrong or misdeed'.[36]

35 So to say does not mean that the defences of 'unclean hands' and 'iniquity' should apply in exactly the same way to a legal professional privileged communication as to other kinds of confidential communications. Generally speaking, the rationale of both defences in this context is that there is a public interest in disclosure of iniquity which makes it unconscionable for the applicant to insist upon the maintenance of a confidence which would keep the iniquity secret.[37] But, as has been seen, with legal professional privileged communications the public interest favours maintenance of the confidence of the communication[38] unless the communication comes within one of the established exceptions to legal professional privilege. Logically, therefore, the remedy of injunction should not be withheld for want of clean hands or because of iniquity, unless it amounts to the furtherance of crime or fraud or abuse of power or the concealment of the whereabouts of a ward of court or the frustration of the execution of an order of the court.

36 But, as has been noted, the respondents say that they wish to use the Harman information (in conjunction with the Clayton Utz documents) to demonstrate that BATAS engaged in a course of conduct to pervert the course of justice. The other side of the coin, as they put it, is that the Harman documents were themselves created in furtherance of the crime or fraud and, therefore, never attracted privilege. If that were established, it would be a sufficient reason to refuse injunctive relief and, therefore, in our view, sufficient to warrant relaxation of the Harman undertaking for the purpose of the BATAS and BATAL proceedings.

37 The question then is simply one of proof, as to which Byrne J said:**

... counsel [for the respondents] said that the argument which is now to be put is that there is no privilege where the documents were brought into existence in the furtherance of a crime or fraud or in analogous circumstances. Counsel said that the matters asserted against BATAS in the BATAS proceeding, if established, will bring this doctrine into play.

51 This issue, if raised, will have to be determined. I do not determine it now. Indeed, I was told that its determination would involve a consideration of the matters which the defendants would raise in the [BATAS and BATAL] proceedings. I was referred to what was pleaded by Slater & Gordon in its defence to the BATAS proceeding. Counsel for BATAS said privilege has not yet been brought into question so that I should not make an order which the Court of Appeal said in the passage referred to was inappropriate.

52 But this case raises particular difficulties which render it by no means certain that the question will or even can be determined. This is because the subject matter of the modification to the Harman undertaking which I am asked to make concerns, not a document, but information obtained from a document. I do not know what this information is other than in the most general terms. Neither of the contending parties have identified it. Any order with respect to it will present difficulties of formulation and, perhaps, of enforcement. It seems to me that the appropriate course is for me to reserve to BATAS the right to raise questions of privilege if and when use is sought to be made of information which has as its source the privileged documents. The question as to the existence of privilege may then be debated against the circumstances as they then stand and in the light of the particular piece of information which is in question.

With respect, we are inclined to agree with his Honour.

**38 The appellants attack Byrne J's reasoning. They contend that the reservation of a right to raise questions of privilege when and if the respondents seek to use the Harman information does not provide them with any effective protection of BATAS' privilege or the confidentiality of the subject-matter of the Harman documents. Counsel for BATAS argues that the respondents may use the Harman information surreptitiously, in a fashion which is never discovered, and he offers as an example use of the Harman information in order to draft a defence or further and better particulars. Alternatively, counsel submits that, even if it were apparent from the face of the pleading or particulars how the Harman information had been used, in reality BATAS could not object until it was too late (in that by then the use would already have been made of the information in a manner which was inconsistent with BATAS's right to claim privilege and confidentiality) and, in that event, BATAS' 'fundamental common law right' to assert legal professional privilege in the Harman information would be 'irretrievably eroded'.[39]

39 There is some force in those submissions. A claim to legal professional privilege in respect of a communication is not displaced merely by making an allegation that the communication was made in furtherance of an illegal or improper purpose. Those who seek to exclude legal professional privilege must have some definite charge, either by way of allegation or affidavit, which must be made in clear and definite terms, and there must be some prima facie evidence that the allegation has a foundation in fact.[40] The court will then exercise its discretion not merely as to the terms in which the allegation is made but also as to the surrounding circumstances for the purpose of seeing whether the charge is made honestly and with sufficient probability of its truth to make it right to disallow the privilege of professional communications.[41] In this case that is yet to occur.

40 Additionally, although a court may choose to look at a document for the purposes of deciding whether it is legally professionally privileged,[42] as counsel for the BATAS submitted, a party who seeks to exclude the privilege is ordinarily not permitted to do so until he or she has established a prima facie case for exclusion. Hence, it may be that, because of Slater & Gordon's and Mr Gordon's knowledge of the Harman information, they could have an advantage in establishing a prima facie case for the exclusion of the privilege and, to that extent, BATAS 'fundamental common law right' to assert legal professional privilege in the Harman documents could be 'irretrievably eroded'.

41 On the other hand, where as here the question is whether the legal professional privilege claimed in respect of a document should be excluded because the document was brought into existence in furtherance of a crime or fraud; and where, as a result of an earlier disclosure of the document, the party seeking to exclude the privilege has knowledge of its contents, it would be impossible for that party to put his or her knowledge of the contents out of mind. And as a rule, an injunction will not go to require a party to do what is impossible.[43]

42 Moreover, if the application to have privilege excluded were to succeed, it would be because the document was found to have been created in furtherance of a crime or fraud (and thus in effect never to have been privileged); and in that event, BATAS would lose nothing in the way of legal professional privilege except an advantage to which it was not entitled. Contrastingly, if the application to have the privilege excluded were to fail, the respondents would be restrained by the Harman undertaking (and, if necessary, could be further restrained by injunction) from making any further or other use of the information. Admittedly, BATAS' task of defending the privilege might be made more difficult by Slater & Gordon's and Mr Gordon's knowledge of the Harman documents. But if BATAS were successful in defending the privilege, any additional burden would sound in costs. For all other purposes and in all other respects, the privilege and its benefits would be protected.

43 Where an applicant seeks an interlocutory injunction to restrain breach of confidence, ordinary principles dictate that the applicant must demonstrate not only a prima facie case of privilege but also that the balance of convenience favours interlocutory restraint.[44] In this case, a prima facie case of privilege, and thus of confidence, may be assumed. But so long as the respondents' use of the Harman information is restricted to their attack on BATAS' claim to legal professional privilege, the balance of convenience must surely favour the respondents. In our view, an injunction restraining their use of the Harman information for the purposes of attacking the privilege would inflict injury on the respondents out of all proportion to the relief which BATAS should obtain.[45]

44 It is true that, under Byrne J's order of 6 July 2007, the grant of leave to use the Harman information extends generally to the BATAS and BATAL proceedings and, in that sense, it is theoretically possible that the respondents could use the Harman information in order not only to demonstrate that the Harman information is within the crime/fraud exception but also or alternatively to show that BATAS was engaged in some greater or lesser crime or fraud to defeat the claims of plaintiff smokers. But in reality, we do not see that resulting in any difficulty.

45 Presumably, as Byrne J has said he would do, his Honour will hear all aspects of the BATAS and BATAL proceedings together, including the claim to have the Harman information excluded from the protection of legal professional privilege. If then his Honour finds that the privilege is not excluded, or not excluded in respect of all of the Harman information, it is to be assumed that he will rule to be inadmissible and otherwise exclude from his mind for the purposes of determining the balance of the BATAS and BATAL proceedings such part of the Harman information as is not excluded from legal professional privilege.

46 It is also true, as BATAS and BATAL contend, that even in those circumstance the respondents' knowledge and use of the Harman information might conceivably give them a 'spring board' enabling them better or more easily to defend the BATAS and BATAL proceedings. But despite having not seen either the Clayton Utz documents or the Haman documents, we are inclined to doubt the reality of that suggestion. In any event, we observe that, if the Clayton Utz documents had come to light immediately after the reversal of Eames J's judgment, and the respondents had moved the court forthwith to reconsider its decision in light of the Clayton Utz documents, it cannot be doubted that the respondents could have made use of their knowledge of the Harman documents for the purposes of the motion. Similarly, if such a motion had failed, it cannot be doubted that the respondents would have been free thereafter to resist a claim of confidence made in respect of the Clayton Utz documents. In effect, the position now is no different.**

47 In the end, a Harman undertaking rests on the principle that the interest that supports the use of the compulsory processes of the court to assist the conduct of legal proceedings is balanced by the need to ensure that the adverse effects of any intrusion should not extend any further than is absolutely necessary.[46] In our view, the order of Byrne J does just that.

McCabe proceeding and BATAS and BATAL proceedings cross-claim

**48 Counsel for Ms Cowell and Slater & Gordon submitted that, inasmuch as the application to have the Harman information excluded from legal professional privilege, and the application by BATAS' for injunctions to restrain use of the Clayton Utz documents, involves the same issues as Ms Cowell's claim to set aside the judgment of this Court in the McCabe proceeding, all three claims should be heard together and, therefore, that Byrne J erred in refusing to give directions designed to allow that to occur.

49 We do not accept that contention. For the reasons already given, we consider that his Honour was right to adopt the course of dealing first with the BATAS and BATAL proceedings and, in those proceedings, with the respondents' claim to have the Harman information excluded from legal professional privilege. As has been explained, that approach will serve to preserve such privilege as may inhere in the Harman information and, at the same time, avoid the practical impossibility of requiring the respondents not to make use of their knowledge of the Harman information for the purpose of seeking to establish that privilege is excluded. Contrastingly, if Byrne J had allowed all three proceedings to be heard together, it may be that BATAS and BATAL would have been prejudiced by the use of privileged information in the McCabe proceeding. Additionally, it makes good sense to deal first with the issues of privilege and confidentiality, for it will only be after those issues have been resolved that an informed decision can be made as to whether there is any substance in the claim to reopen the judgment of this Court in the McCabe proceeding.

50 We add for completeness that counsel for the respondents expressed some concern that the limitation period for the reopening of the McCabe judgment may expire before the BATAS and BATAL proceedings have been heard and determined. But in view of BATAS' response to that suggestion there should be no problem. Following the hearing of the application, BATAS has offered an undertaking as follows:

The plaintiff (BATAS) will give an undertaking to the Court as a condition of the continuance of the restraining orders of Brereton J of 22 March 2007 and any variation, or orders in substitution of, as may be made from time to time, that it will not by way of defence to a proceeding commenced[47] by Ms Cowell (as executrix of the estate of the late Rolah Ann McCabe) by which she makes a claim for damages or other appropriate relief on the grounds that the judgment of the Court of Appeal in British American Tobacco Australia Services Ltd v Cowell (No 1) [2002] VSCA 197; (2002) 7 VR 524 was procured by fraud, or iniquity, or professional misconduct, or perversion of the course of justice, rely on the Limitation of Actions Act 1958, or any corresponding legislation in other states or territories of Australia, in respect of any such proceeding commenced within the period expiring ninety (90) days from the date of the judgment in this proceeding 5618 of 2007, or of any orders made in any appeal or application for special leave to appeal in respect thereof.**

If there were any doubt about that, however, we think that the respondents could issue a generally indorsed writ for the institution of a fresh proceeding in order to preserve the position pro tem and, once it has been served, seek an order from Byrne J to stay that proceeding until the hearing and determination of the BATAS and BATAL proceedings.

**51 We finally turn to deal with the application on behalf of the McCabe estate for an order staying the execution of the costs orders made by this Court on 9 December 2002 and 2 May 2003 as earlier described. It is obvious enough that a principal reason for seeking the stay order is the apprehension by the representatives of the McCabe estate that the costs orders may be executed with the effect, so it is said, of inhibiting or terminating its defence in the New South Wales proceedings and its proposed re-opening of the Court of Appeal decisions on substantive issues. More specifically, it is said that if the costs orders are executed the estate may be rendered bankrupt and the trustee in bankruptcy might not defend the current proceedings or take any step to re-open the decisions of the Court of Appeal. On the other hand, it is pointed out, if the McCabe estate is successful in setting aside the Court of Appeal decisions, the costs orders against it will also fall. BATAS, on the other hand, contends that the taxation of its costs, which precipitated the application for the stay, involves only the quantification, and not the enforcement, of the costs orders in question and does not threaten any right or the exercise of any right of the applicant. Thus, it is said, there is no necessity for the orders sought. Moreover, says BATAS, the application for a stay was made without any attempt by the applicant to ascertain whether BATAS intended to enforce the costs orders, or seek an undertaking from it not to do so without adequate notice.

52 We have already referred to the undertaking of BATAS to the Court, made on 15 August 2007, not to take any step to enforce the costs orders pending the Court's hearing and determination of BATAS' application for leave to appeal against the impugned decisions of Byrne J of 6 July 2007. This undertaking will necessarily terminate with our disposition of these matters. Nevertheless, BATAS has informed the Court that it is prepared to undertake to it that it will not take any step to enforce the two costs orders without first giving the plaintiff in the McCabe proceeding 45 days' prior notice.

53 It is apparent enough that special or exceptional circumstances have to be shown before a stay of execution of judgment is granted.[48] It may be that a real threat of bankruptcy to the McCabe estate if the application is not granted may amount to special circumstances, or at least be relevant to the Court's exercise of its right to discretion in this matter.[49] Be that as it may, the preparedness by BATAS to give the undertaking referred to seems to remove at least the immediate apprehension that pursuit of the proposed re-opening proceeding will be affected by the anticipated bankruptcy of the McCabe estate.

54 In the circumstances, we consider that, upon BATAS providing to the Court the undertaking to the above effect, it would be inappropriate to grant the stay order sought. If such an undertaking is given, the Court will direct that it be noted in 'Other Matters' in the Court's order.**

**55 During the hearing of the matter before us, counsel for Ms Cowell and the McCabe estate applied, ore tenus, essentially for Ms Cowell (as the sole remaining executor of the will of the late Mrs McCabe) to be substituted for Mr McCabe as plaintiff in the McCabe proceeding and that he be removed as co-plaintiff in proceeding 5288 of 2002. This application was not opposed by BATAS.

56 Briefly, the background to the application is this. On 6 December 2002, this Court ordered that Ms Cowell be appointed to represent the McCabe estate for the purposes of the appeal in the McCabe proceeding and that she be made a respondent to it in substitution for Mrs McCabe. Orders were also made that the title to the appeal be amended accordingly. On 7 March 2003, probate of the will of Mrs McCabe was granted to Ms Cowell and Mr McCabe and, on 11 March 2003, Master Wheeler ordered that Mr McCabe, as executor of the will of the Mrs McCabe, be substituted as plaintiff in the McCabe proceeding. Then, on 22 August 2007, Smith J ordered that, pursuant to s 34 of the Administration and Probate Act 1958, Mr McCabe be removed as one of the executors of the will of the late Mrs McCabe and that the net assets of her estate vest in Ms Cowell as the sole continuing executor of the will. By affidavits sworn 28 November 2007 in each of the McCabe proceeding and proceeding 5288 of 2002 Mr McCabe consented to the proposed substitution. Given these developments, and since the application is not opposed, we will make orders such that Ms Cowell be the sole representative of the McCabe estate for the purposes of the New South Wales and the McCabe proceedings and proceeding 5288 of 2002.**

ROXANNE JOY COWELL and ANOR (representing the estate of ROLAH ANN McCABE, deceased, by order made on 2 May 2003)

JAMIE RYAN McCABE (as executor of the will of ROLAH ANN McCABE, deceased) and ORS

[2] McCabe v British American Tobacco Australia Services Ltd [2002] VSC 73.

[3] British American Tobacco Australia Services Ltd v Cowell (representing the Estate of McCabe (deceased)) [2002] VSCA 197; (2002) 7 VR 524.

[4] Later, Mrs McCabe's son, Jamie Ryan McCabe ('Mr McCabe'), in his capacity as executor of the will of his mother, was substituted as plaintiff. As will become apparent, we will order that Ms Cowell replace her brother as plaintiff in the McCabe proceeding.

[5] The plaintiff in the McCabe proceeding was unsuccessful in the application to the High Court for special leave to appeal and the documents in question were delivered up to BATAS in accordance with the order of the Court of Appeal.

[7] Harman v Secretary of State for the Home Department [1983] 1 AC 280.

[8] The company later became Slater & Gordon Ltd.

[9] They were numbered 5617 of 2007 - 'the BATAL proceeding'; and 5618 of 2007 - 'the BATAS proceeding'. For purposes of convenience, however, they will continue to be described in these reasons as 'the NSW proceedings'.

[10] A like summons filed on 30 May 2007 in respect of the BATAL proceeding was dismissed by his Honour on 28 June 2007.

[16] Pursuant to Eames J's determination that BATAS had waived privilege in respect of the documents.

[17] The conditional nature of the order is noted in the order under the heading 'Other Matters'.

[18] British American Tobacco Australia Services Ltd v Cowell (No 1) [2002] VSCA 197; (2002) 7 VR 524 (Cowell (No 1); and on 28 April 2003 in Cowell (No 2) [2003] VSCA 43; (2003) 8 VR 571.

[20] National Australia Bank Limited v Bond Brewing Holdings Limited [1991] VicRp 31; [1991] 1 VR 386, 597 (Brooking J).

[21] Cf. Thomason v The Council of the Municipality of Campbelltown (1939) 39 SR (NSW) 347, 358-9.

[22] Waterford v The Commonwealth of Australia [1987] HCA 25; (1987) 163 CLR 54, 64-5; Attorney General for the Northern Territory of Australia v Kearney [1985] HCA 60; (1985) 158 CLR 500, 532; Carter v The Managing Partner Northmore Hale Davy & Leake (1995) 183 CLR 121, 128, 133, 163.

[24] R v Cox and Railton (1884) LR 14 QBD 153, 165.

[25] Attorney-General (NT) v Kearney [1985] HCA 60; (1985) 158 CLR 500.

[26] R v Bell; Ex parte Lees [1980] HCA 26; (1980) 146 CLR 141, 146.

[27] Ibid 152; Carter v Northmore Hale Davy & Leake (1994) 183 CLR 121, 130 (Deane J).

[28] It has variously been described by judges of the High Court as 'a practical guarantee... of fundamental constitutional or human rights', a 'substantive rule of law' and 'or one of those traditional common law rights which is not to be abolished or cut down otherwise than by clear statutory provision': see Commissioner of Australian Federal Police & Ors v Propend Finance Pty Ltd & Ors (1997) 188 CLR 501, 564-5.

[29] Commissioner of Australian Federal Police & Ors v Propend Finance Pty Ltd & Ors (1997) 188 CLR 501, 565 (Gummow J).

[30] Calcraft v Guest [1898] 1 QB 759, 763-4; Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 (Gibbs CJ, in diss), 67, 80 (Mason J, in diss) 101, 109-110 (Brennan J in diss), 129 (Dawson J); Trevorrow v State of South Australia ( No 4) [2006] SASC 42; (2006) 94 SASR 64, 70 (Doyle CJ), 80 (Debelle J), 101 (White J); Heydon, Cross on Evidence, 7th Aust Ed (2004) [25025].

[31] Lord Ashburton v Pape [1913] 2 Ch 469, 475; Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 565 (Gummow J); ISTIL Group Inc v Zahoor [2003] EWHC 165; [2003] 2 ALL ER 252; ISTIL v Director of Public Prosecutions (C'th) v Kane (1997) 140 FLR 468, 476-7, (Hunt CJ at CL); Trevorrow v South Australia (No 4) [2006] SASC 42; (2006) 94 SASR 64, 71 (Doyle CJ); Heydon, Cross on Evidence, above n 29, [25025].

[32] Goddard & Ors v Nationwide Building Society [1987] 1 QB 670, 685 (Nourse LJ); Director of Public Prosecutions (C'th) v Kane (1997) 140 FLR 468, 479 (Hunt CJ at CL); ISTIL Group Inc v Zahoor [2003] EWHC 165; [2003] 2 All ER 252, 273 [93] (Lawrence Collins J).

[33] Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121,126 (Brennan J), 161 (McHugh J); ISTIL Group Inc v Zahoor, [2003] EWHC 165; [2003] 2 All ER 252, 273 [93] (Lawrence Collins J).

[34] Apart from injunction in aid of contractual, statutory and proprietary rights.

[35] Corrs Pavey Whiting & Byrne [1987] FCA 266; (1987) 14 FCR 434, 454 (Gummow J, in diss. but not in point of principle).

[36] Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, 456; Australian Football League v The Age Co Ltd [2006] VSC 308; (2006) 15 VR 419, 433 [57]-[68] (Kellam J); cf. ISTIL Group Inc v Zahoor [2003] EWHC 165; [2003] 2 All ER 252, 273 [94].

[37] Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, 457.

[38] Even if it might disclose the commission of a crime: Carter supra.

[39] Commissioner of Taxation v Rio Tinto Limited [2006] FCAFC 86; (2006) 151 FCR 341, 353.

[40] Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 592-3 (Kirby J).

[41] O'Rourke v Darbishire & Ors [1920] AC 581, 604; Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 522 (Dawson J).

[42] Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 689 (Stephen, Mason and Murphy JJ); Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49, 70 (Gleeson CJ, Gaudron and Gummow JJ).

[43] Evans v Manchester, Sheffield, and Lincolnshire Railway Co (1887) LR 36 Ch D 626, 639; Pride of Derbyshire Angling Association LD & Ors v British Celanese LD & Ors [1953] 1 Ch D 144,181; Spry, Equitable Remedies, 7th Ed, 405-6.

[44] Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199, 218[15]-[16] (Gleeson, CJ); Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 623; Meagher, Meagher, Gummow and Lehane's Equity Doctrines and Remedies, 4th Ed [21-375].

[45] Bowes v Law (1870) LR 9 Eq 636, 642; Sharp v Harrison [1922] 1 Ch 512, 515-6; Spry, Equitable Remedies, 7th ed, 591-2.

[46] Riddick v Thames Board Mills Ltd [1977] QB 881, 896 (Lord Denning MR); Home Office v Harman [1983] 1 AC 280, 299-300 (Lord Diplock).

[47] A reference to the commencement of a proceeding includes a reference to any cause of action introduced by way of counterclaim in proceeding 5618 of 2007 or by way of amendment to proceedings 8121 of 2001, or 5618 of 2007.

[48] Cellante v G Kallis Industries Pty Ltd [1991] VicRp 99; [1991] 2 VR 653, Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSCA 66; (2004) 9 VR 382.

[49] Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSCA 66; (2004) 9 VR 382, 387.

Courts (Cross-Vesting) Act 1987

At a glance

Court

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Before

Source

Judgment (135 paragraphs)

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Legislation Cited (6)

Cases Cited (20)