Hodgson v Amcor Ltd; Amcor Ltd v Barnes & Ors

AJ Macken and Co (a non-party to the proceeding (8181 of 2007)

1 In proceeding 8181 of 2007 (the "Barnes proceeding") the firm of solicitors A J Macken & Co was served with a summons dated 9 December 2010, and the affidavit of Janet Whiting dated 9 December 2010 filed by the plaintiffs in that proceeding (the "Amcor parties") seeking non-party discovery of seven categories of documents.

2 The Amcor summons sought the following documents from A J Macken & Co:

1. Within 14 days of the date of these orders, AJ Macken & Co make non-party discovery to the Plaintiffs on the following documents, or copies of such documents, in its possession, custody or power:

(a) All documents relation to the ownership of the Service Packaging Business (as that term is defined in the Third Further Amended Statement of Claim) from 1 February 2002 to 30 March 2007, including but not limited to ownership of interests in G5 Investments Pty Ltd and in Service Packaging Pty Ltd;

(b) All documents relating to any proposed sale of the Service Packaging Business by Mr Ian Hottes, Mrs Marlene Hottes and/or the beneficial shareholders of the 4 shares in G5 Investments Pty Ltd held legally by Mr Ian Hottes and subsequently by Mrs Marlene Hottes;

(c) All documents relating to any proposed transfer of the Service Packaging Business by Mr Ian Hottes, Mrs Marlene Hottes and/or the beneficial shareholders of the 4 shares in G5 Investments Pty Ltd held legally by Mr Ian Hottes and subsequently by Mrs Marlene Hottes;

(d) All documents evidencing any communications with the beneficial owners G5 Investments Pty Ltd or their advisers;

(e) All documents which relate to or record the identity of the beneficial shareholders in G5 Investments Pty Ltd (excluding Mr Ian Hottes and Mrs Marlene Hottes) since 1 February 2001 to date.

(f) All documents that constitute, refer or relate to the sale and/or transfer of the assets of the Service Packaging Business pursuant to the First Sale Agreement (As that term is defined in the Third Further Amended Statement of Claim), whether before or after such a sale.

3 A J Macken & Co resisted that application and submitted that the summons of the Amcor parties directed to it for non-party discovery should be dismissed.

4 On 22-23 February 2011 I heard argument on the application. On 4 March 2011 I delivered a ruling on the matter.[1]

5 On 7 March 2011 I ordered that non-party discovery by the provision of an affidavit of documents by A J Macken & Co in the terms of paragraph [1] of the Amcor summons dated 9 December 2011, and that the costs of the firm in providing the affidavit of discovery in the first instance should be paid by the Amcor parties, on a solicitor client basis, subject to any further order subsequently being made by the Court as to such costs and that the costs of A J Macken & Co in responding to the summons dated 9 December 2010 (including the costs of the appearance on 21 and 22 February 2011) be paid by the Amcor parties on a solicitor client basis.

6 Subsequently, A J Macken & Co served and filed its affidavit of documents dated 14 April 2011 in accordance with the order. It was sworn by Antony John McDermott Macken ("Mr Macken"), who is the principal of A J Macken & Co, solicitors for Mr Hodgson (the plaintiff and defendant to counterclaim) and Bankson (a defendant to counterclaim) in the Hodgson v Amcor Ltd and Ors proceeding (No. 9420 of 2004). In the affidavit of documents, it was claimed that a number of documents discovered were the subject of legal professional privilege because they comprised confidential communications made either for the dominant purpose of obtaining or giving legal advice or were brought into existence for the dominant purpose of use in existing or anticipated litigation. Such documents were listed and described in Part 2 of Schedule 1 of the affidavit. Objection was taken to their production "on the grounds apparent from their description". Part 2 of Schedule 1 of the affidavit listed 108 documents. Each document was numbered and briefly described; stated to be either an original or a copy; the basis of the claim to privilege in each case was set out in brief terms; and the date of the document was provided.

7 On 4 May 2011, a further affidavit sworn of 3 May 2011 was served by A J Macken & Co on the Amcor parties relating to discovery (the "further affidavit"). This was provided in response to a letter dated 18 April 2011 written by the solicitors for the Amcor parties to A J Macken & Co (the "Corrs' letter").

8 On 6 May 2011 I heard argument from the Amcor parties, who were represented by Mr WT Houghton QC with Dr SB McNicol and Mr G Fitzgerald of counsel, and A J Macken & Co, which was represented by Ms R Doyle SC with Dr O Bigos of counsel, as to whether the claims to privilege maintained by the firm could be sustained.

9 In relation to documents numbered 17, 46 and 54, 68 and 69, and 149, I directed that they be produced to the Court for inspection pursuant to s.133 Evidence Act 2008.

10 In relation to the balance of the documents in contention, I ruled that the claim to privilege was sustained.

11 Having examined the documents produced to the Court, on 11 May 2011 I made the following orders:

In relation to the claim to privilege maintained in relation to the AJ Macken & Co documents:

1. The documents referred to in Schedule 1 Part 2 of the affidavit of documents dated 14 April 2011 sworn by Antony John McDermott Macken and enclosed in the envelope marked "A Privileged" are privileged from production.
2. The documents referred to in Schedule 1 Part 2 of the said affidavit and enclosed in the envelope marked "B Not Privileged" are not privileged from production.
3. Copies of the non-privileged documents are directed to be made available to any party seeking them.

12 These are my reasons for making the orders and arriving at the findings on the privilege claims.

13 The regime established under the Supreme Court (General Civil Procedure) Rules 2005 (the "Supreme Court Rules") in relation to discovery on its face appears simple enough. Rules 29.02 and 29.04 require a party to a proceeding, upon service of notice on it by any other party to the proceeding, to discover any document which is or has been in that party's possession "relating to any question raised by the pleadings". Under r.29.09, the party making discovery is required to produce the documents, so discovered, for inspection to the other party upon request. Rule 29.04(d) requires a party making an affidavit of documents, where the party claims that a document is privileged from production, to state sufficiently in that affidavit, the grounds of privilege which the party maintains in respect of a document discovered. This provision is most commonly applied in relation to claims founded upon legal professional privilege.

14 Legal professional privilege in its present form has its foundation in public policy.[2] It was developed by the courts to promote the administration of justice. The rationale is that the privilege encourages clients to be frank with their lawyers about their legal affairs. This in turn assists lawyers to give accurate advice based on a complete knowledge of the facts.[3] It also assists lawyers prepare for and conduct litigation on behalf of the client so that a court hearing the matter is in a position to hear the best case a party is properly able to advance, and dispense justice accordingly. The privilege also assists parties to litigation to make realistic assessments of their position upon legal advice founded upon a full appreciation of the relevant facts. This in turn has a part to play in achieving an appropriate compromise of proceedings, where this outcome is the best course. This too has an important part to play in case management and the administration of justice.

15 Dawson J in Baker v Campbell[4] expressed the rationale in the following terms:

[I]ts justification is to be found in the fact that the proper functioning of our legal system depends upon a freedom of communication between legal advisers and their clients which would not exist if either could be compelled to disclose what passed between them for the purpose of giving or receiving advice. This is why the privilege does not extend to communications arising out of other confidential relationships such as those of doctor and patient, priest and penitent or accountant and client.

The restriction of the privilege to the legal profession serves to emphasize that the relationship between a client and his legal adviser has a special significance because it is part of the functioning of the law itself. Communications which establish and arise out of that relationship are of their very nature of legal significance, something which would be coincidental in the case of other confidential relationships. It has been found necessary that professional guidance in the complex processes of the law should be uninhibited by the possibility that what is said to enable advice to be sought or given might later be used against the person seeking the advice.

16 Legal professional privilege is thus a very powerful privilege.[5] It enables lawyers and their clients to make frank assessments about their legal position and their prospects in legal proceedings. This can only be properly undertaken if the confidence of the communications is able to be protected.

17 The common law developed to recognise two forms of legal professional privilege - the advice privilege and the litigation privilege. These are now enacted in ss.118 and 119 Evidence Act 2008, as follows:

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of-

(a) a confidential communication made between the client and a lawyer; or

(b) a confidential communication made between 2 or more lawyers acting for the client; or

(c) the contents of a confidential document (whether delivered or not prepared by the client, lawyer or another person-

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of-

(a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or

(b) the contents of a confidential document (whether delivered or not) that was prepared-

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

18 As to the general principles to be applied in determining a contested claim to legal professional privilege, [6] reference is made to the analysis provided by Young J in AWB Ltd v Cole (No 5), where his Honour conveniently described the approach in the following terms:

(1) The party claiming privilege carries the onus of proving that the communication was undertaken, or the document was brought into existence, for the dominant purpose of giving or obtaining legal advice. The onus might be discharged by evidence as to the circumstances and context in which the communications occurred or the documents were brought into existence, or by evidence as to the purposes of the person who made the communication, or authored the document, or procured its creation. It might also be discharged by reference to the nature of the documents, supported by argument or submissions: see Grant v Downs [1976] HCA 63; (1976) 135 CLR 674 ('Grant v Downs') at 689; Commissioner of Taxation v Pratt Holdings Pty Ltd [2005] FCA 1247; (2005) 225 ALR 266 at 278 [30] ('FCT v Pratt Holdings'); and AWB v Cole at [63].

(2) The purpose for which a document is brought into existence is a question of fact that must be determined objectively. Evidence of the intention of the document's maker, or of the person who authorised or procured it, is not necessarily conclusive. It may be necessary to examine the evidence concerning the purpose of other persons involved in the hierarchy of decision-making or consultation that led to the creation of the document and its subsequent communication: see AWB v Cole at [110].

(3) The existence of legal professional privilege is not established merely by the use of verbal formula: Grant v Downs at 689 per Stephen, Mason and Murphy JJ. Nor is a claim of privilege established by mere assertion that privilege applies to particular communications or that communications are undertaken for the purpose of obtaining or giving 'legal advice': National Crime Authority v S (1991) 29 FCR 203 at 211-212 per Lockhart J; Candacal Pty Ltd v Industry Research & Development Board [2005] FCA 649; (2005) 223 ALR 284 ('Candacal') at 298 [70]; Seven Network Limited v News Limited [2005] FCA 142 at [6]-[8]. If assertions of that kind are received in evidence in support of the privilege claim, their conclusionary nature can leave unclear what advice was really being sought. There will be cases in which a claim of privilege will not be sustainable in the absence of evidence identifying the circumstances in which the relevant communication took place and the topics to which the instructions or advice were directed: Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185 ('Kennedy v Wallace') at 189-190 [12]-[17] per Black CJ and Emmett J and at 211-212 [144]-[145] and at 215-216 [166]-[171] per Allsop J; see also Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 6) [2001] SASC 398.

(4) Where communications take place between a client and his or her independent legal advisers, or between a client's in-house lawyers and those legal advisers, it may be appropriate to assume that legitimate legal advice was being sought, absent any contrary indications: Kennedy v Wallace [2004] FCA 332; (2004) 208 ALR 424 at 442 [65] per Gyles J; affirmed on appeal, Kennedy v Wallace at 191-192 [23]-[27] per Black CJ and Emmett J. In Kennedy v Wallace, Black CJ and Emmett J inclined to the view that in the ordinary case of a client consulting a lawyer about a legal problem in uncontroversial circumstances, proof of those facts alone will provide a sufficient basis for a conclusion that legitimate legal advice is being sought or given.

(5) A 'dominant purpose' is one that predominates over other purposes; it is the prevailing or paramount purpose: AWB v Cole at [105]-[106]; FCT v Pratt Holdings at 279-280 [30] per Kenny J.

(6) An appropriate starting point when applying the dominant purpose test is to ask what was the intended use or uses of the document which accounted for it being brought into existence: Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357 at 366 [35] per Finn J.

(7) The concept of legal advice is fairly wide. It extends to professional advice as to what a party should prudently or sensibly do in the relevant legal context; but it does not extend to advice that is purely commercial or of a public relations character: Balabel v Air India [1988] 1 Ch 317 ('Balabel') at 323 and 330; Nederlandse Reassurantie Groep Holding NV v Bacon and Woodrow [1995] 1 All ER 976 ('Nederlandse') at 983; Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2004] UKHL 48; [2005] 1 AC 610 ('Three Rivers') at 652-653 [43]-[44], 657-658 [59]-[60], 681 [114] and 683 [120]; Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325 ('Dalleagles') at 332-333; DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191; (2003) 135 FCR 151 ('DSE') at 161-173 [25]-[71]; and AWB v Cole at [100]-[101].

(8) Legal professional privilege protects the disclosure of documents that record legal work carried out by the lawyer for the benefit of the client, such as research memoranda, collations and summaries of documents, chronologies and the like, whether or not they are actually provided to the client: Daniels at 563 [44] per McHugh J; Commissioner of Australian Federal Police v Propend Finance Pty Ltd [1997] HCA 3_;_ (1997) 188 CLR 501 ('Propend') at 550 per McHugh J; Dalleagles at 333-334 per Anderson J; Trade Practices Commission v Sterling [1979] FCA 33; (1979) 36 FLR 244 ('Stirling') at 245-246 per Lockhart J; and Kennedy v Lyell (1883) 23 Ch D 387 at 407; Lyell v Kennedy (1884) 27 Ch D 1 at 31 per Bowen LJ; Propend Finance Pty Ltd v Commissioner of Australian Federal Police (1995) 58 FCR 224 at 266 per Lindgren J.

(9) Subject to meeting the dominant purpose test, legal professional privilege extends to notes, memoranda or other documents made by officers or employees of the client that relate to information sought by the client's legal adviser to enable him or her to advise: Stirling at 246. The privilege extends to drafts, notes and other material brought into existence by the client for the purpose of communication to the lawyer, whether or not they are themselves actually communicated to the lawyer: Saunders v Commissioner of Australian Federal Police (1998) 160 ALR 469 at 472.

(10) Legal professional privilege is capable of attaching to communications between a salaried legal adviser and his or her employer, provided that the legal adviser is consulted in a professional capacity in relation to a professional matter and the communications are made in confidence and arise from the relationship of lawyer and client: Waterford v Commonwealth [1987] HCA 25; (1987) 163 CLR 54 at 96 per Dawson J; see also Deane J at 79-82. Some cases have added a requirement that the lawyer who provided the advice must be admitted to practice: see Dawson J in Waterford at 96; GSA Industries (Aust) Pty Ltd v Constable [2001] QSC 180; (2002) 2 Qd R 146 at 150; Glengallan Investments Pty Ltd v Arthur Andersen [2001] QCA 115; (2002) 1 Qd R 233 at 245. However, in Commonwealth v Vance [2005] ACTCA 35; (2005) 158 ACTR 47, the Full Court (Gray, Connolly and Tamberlin JJ) did not regard the possession of a current practising certificate as an essential precondition to the availability of legal professional privilege: at [23]-[35]. The same view was taken by Lee J in Candacal at 303 [99], by Gillard J in Australian Hospital Care (Pindara) Pty Ltd v Duggan [1999] VSC 131 at [111], and by Downes J in Re McKinnon and Secretary, Department of Foreign Affairs and Trade [2004] AATA 1365; (2004) 86 ALD 780 at 785 [51].

(11) Legal professional privilege protects communications rather than documents, as the test for privilege is anchored to the purpose for which the document was brought into existence. Consequently, legal professional privilege can attach to copies of non-privileged documents if the purpose of bringing the copy into existence satisfies the dominant purpose test: Propend at 507 per Brennan CJ, 544 per Gaudron J, 553-554 per McHugh J, 571-572 per Gummow J, and 587 per Kirby J. In Propend at 512, Brennan CJ added a qualification to this principle: if an original unprivileged document is not in existence or its location is not disclosed or is not accessible to the persons seeking to execute the warrant, and if no unprivileged copy or other admissible evidence is made available to prove the contents of the original, the otherwise privileged copy loses its protection.

(12) The Court has power to examine documents over which legal professional privilege is claimed. Where there is a disputed claim, the High Court has said that the court should not be hesitant to exercise such a power: Esso; see also Grant v Downs at 689. If the power is exercised, the court will need to recognise that it does not have the benefit of submissions or evidence that might place the document in its proper context. The essential purpose of such an inspection is to determine whether, on its face, the nature and content of the document supports the claim for legal professional privilege.

19 The common law provided as a general rule, that an affidavit of documents was conclusive as to the ground on which privilege was claimed. In order to ameliorate the strictures of the common law in the proper case, r.29.13 of the Supreme Court Rules was introduced, following its predecessor.[7] Rule 29.13 empowers the Court, in the event of a contested claim to privilege in relation to the production of documents, to inspect the relevant documents in order to determine the issue. The purpose of the inspection is to permit the Court to test the accuracy of the claim that the relevant party is entitled to object to its production and to enable a court to properly rule upon the objection to production.

20 The power for a court to inspect documents is also now enacted in s.133 Evidence Act 2008, which provides:

133. Court may inspect etc. documents

If a question arises under this Part relating to a document, the court may order that the document be produced to it and may inspect the document for the purpose of determining the question.

21 Given that the privilege claim has been put in issue by the Amcor parties, I have power to order that the documents in question be produced to the Court to enable it to inspect them for the purpose of determining the question. Although an affidavit of documents is generally treated as conclusive, in some cases it is appropriate to take this course. Cross-examination of the deponent who swears an affidavit of documents may also in some cases be permitted, where this is appropriate and in the interests of justice.[8]

22 In Gunns Limited & Ors v Marr & Ors,[9] Kaye J touched upon the principles to be applied in determining whether to inspect a document to determine whether it should be redacted to remove irrelevant or confidential components of the document. The principles discussed have some elements in common with the issue of inspection for the purposes of determining legal professional privilege.

23 Reference should also be made to observation (12) of Young J in AWB Ltd v Cole (No 5), referred to above.[10]

24 I apply the following principles to the exercise of the discretion to inspect the documents in question in this case:

(a) the nature and description of the document may be sufficient to entitle a Court to be guided solely by the oath of the party making discovery, that the whole of the document or the nominated redacted parts of it are privileged;

(b) on the other hand, there may be other cases where either the nature of the document, or other material, may be sufficient to put in doubt the claim by the deponent that the whole of the document or redacted parts of it have the protected status. Alternatively, some uncertainty may arise as to the purpose for which documents the subject of the claim for legal professional privilege were prepared, or the precise basis of the claim sought to be established;

(c) the court should not be hesitant to exercise such a power;

(d) ultimately however, it is for the court to determine whether the circumstances warrant inspection of some or all of the documents in question, either in their original form, in a proposed redacted form, or both, in order to determine the questions before it.

25 In the present case, I accept the characterisation of the documents sworn to by the solicitor on the record, Mr Macken, save in a relatively small number of cases. For the most part, there was no good reason to go behind the grounds for privilege described in Mr Macken's affidavit of documents or in his further affidavit in support.

26 The Amcor parties challenged the claims to privilege maintained by A J Macken & Co on a number of grounds. Each will be dealt with in turn.

27 The Amcor parties submitted that the claim to legal professional privilege was deficient because in relation to a number of documents, the identities of persons spoken to or communicated with by the clients of A J Macken & Co, by the firm on behalf of its clients, or by counsel engaged by the firm's clients, were not disclosed.

28 The Amcor parties submitted that the further affidavit does not provide the identity of the third parties referred to in the following documents numbered: 89, 92-94, 96, 100-104, 109-110, 120, 122, 134, 143-146, 148-149, 152-156, 158 and 174.

29 Mr Macken's further affidavit at paragraph 7 says:

As to documents referred to in paragraph 2 of the Corrs letter, in respect of which Corrs seeks information relating to third parties, I object to disclosing the identity of persons spoken to or communicated with by my clients, by A J Macken & Co or by counsel engaged on my clients' behalf.

Such communications have come into existence for the dominant purpose of use in anticipated or existing legal proceedings, and to reveal the identity of those third parties would disclose the nature of the privileged communications in question.

[Emphasis Added]

30 The Amcor parties challenged this position. They submitted that the onus is on the privilege claimant to establish in what way the disclosure of the identity of third parties "would disclose the nature of the privileged communications in question". Just as the identity of the client must be disclosed in order to establish the privilege,[11] it was submitted that where either the lawyer or the client (or both) has communicated with a third party, the identity of the third party must be disclosed in order to establish the privilege.

31 The Amcor parties further submitted that the facts and circumstances surrounding the communication of legally privileged material to a third party (or to third parties), including the terms on which it occurred and the fact that the communication was confidential, should also be disclosed in order to establish that there has been no waiver.[12] Whether disclosure of legal advice is inconsistent with the maintenance of confidentiality in the advice will depend on the circumstances of each case.[13]

32 I do not accept the submissions of the Amcor parties on this issue.

33 Rule 29.04(1)(d) Supreme Court Rules requires the party making the affidavit of documents to state sufficiently the grounds of the privilege. It is in the following form:

29.04. Affidavit of documents

(1) An affidavit of documents for the purpose of making discovery of documents shall be in Form 29B and shall-

...

(d) where the party making the affidavit claims that any document in that party's possession is privileged from production, state sufficiently the grounds of the privilege.

34 It is important to note what is required by r.29.04(1)(d). It is a sufficient statement of the grounds of the privilege. It is not a statement as to the particulars of the evidence relied upon to support the privilege by, for example, describing the evidence upon which the claim may be founded. Nor is it necessary to give such description as would enable the other party to test the truth of the claim for privilege.

35 The exercise involved in stating sufficiently the grounds of the privilege necessarily involves balancing competing considerations.

36 On the one hand the grounds of the privilege claimed must be sworn in terms which identify the legal basis upon which the claim is made and provide a sufficient description of the elements of the document relied upon to support the claim made on that basis.

37 On the other hand, a claiming party cannot be compelled to provide such particularity as would compromise the very privilege that is claimed. It would defeat to object of the protection, and hence the public purpose which it seeks to advance, if the description required was such as to enable the other party to discover the contents or effect of the document, and thereby compromise its confidential status. Thus in Halliday v ACN 003 075 394 Pty Ltd,[14] Ormiston J noted that while some listing of documents is required, it is not necessary that, "the documents be listed in a manner which would result in the loss of the benefit of the privilege."

38 There are numbers of situations which may arise, where disclosure of a third party in a document description made in a claim to privilege, would result in loss of the benefit of the privilege. Take for example, circumstances where a third party is a potential witness in a proceeding. Any obligation to identify such a third party in an affidavit of documents would permit an opposing party to identify the potential witnesses approached by or on behalf of the claiming party. This would not only defeat the privilege, it could prejudice the claiming party and give the opposing party an advantage at trial, by effectively inviting the opposing party to make a Jones v Dunkel[15] submission in the event that a decision is made not to call the potential witness.

39 An example of the balance being appropriately struck is to be found in Farrow Mortgage Services Pty Ltd (in liq) v Bailey.[16] In this case Hayne J considered an objection of the plaintiffs to the production of documents enumerated in a schedule to the affidavit of documents on the ground that they contained or recorded confidential communications between the plaintiffs, their solicitors and counsel, being instructions provided to the plaintiffs' solicitors and/or counsel for the purpose of obtaining legal advice. In the list of documents in the schedule, a number was assigned to each document, and each was described as "file memo", "file note", "a letter to" or "draft letter" to a named recipient, or other similar expression. In almost all cases, a date was given to the document but in some cases, for example, draft letters, the documents were said to be undated. It was held that the documents had been described sufficiently to enable the court to determine whether privilege for the documents had been properly claimed, and the defendant's objection to the affidavit was dismissed.

40 The description of the grounds for the claim to privilege is not a formulaic exercise. The notion of clarity as to the basis of the claim is the touchstone, and for this purpose, no particular form of words is either prescribed or called for.

41 In Cape Wools SA v KPMG Corporate Finance[17] Habersberger J noted that the form of description of documents is not important, "so long as it is clear in respect of each document the basis or bases on which the privilege is claimed".

42 Thus, if the identification and description of the document is adequate to support the claim to privilege and to enable production to be enforced if ordered, "sufficiency" for the purposes of r.29.04(1)(d) is established.

43 The schedule to Mr Macken's affidavit of documents contained a description of the basis of the claim to privilege in each case in a manner which provided a similar degree of particularity. For example, in relation to document 89: it was described as "Email between Solicitors to third parties and D. Macken and attachment". The claim to privilege was particularised as follows: "Record of confidential communication between Mr Hodgson's legal advisor and third parties created for the dominant purpose of use in existing or anticipated legal proceedings". In this way the basis for the claim to privilege is set out (litigation privilege, as opposed to the advice privilege) and the essential elements of the communication giving rise to the claim to privilege on that basis are described.

44 Indeed, the approach taken by Mr Macken was similar in form to that taken by the Amcor parties in their discovery, as exemplified by the affidavit of discovery sworn on their behalf dated 19 October 2010 (Schedule 1 Part 2).

45 All of the other documents in this category, numbered 92-94, 96, 100-104, 109-110, 120, 122, 134, 143-146, 148-149, 152-156, 158 and 174, were similarly described in Mr Macken's affidavit of documents. In relation to document 149, however, in addition to the descriptor "created for the dominant purpose of use in anticipated or existing litigation", the descriptor "created for the dominant purpose of obtaining legal advice" is also used.

46 In these circumstances, there was no necessity to identify the so-called "third parties" in order to sufficiently particularise the claims to privilege. Certainly, it is not a requirement of r.29.04(1)(d) that this be done.

47 In his further affidavit, Mr Macken objects to disclosing the identity of persons spoken to or communicated with by his clients, the firm or counsel where such communications have come into existence for the dominant purpose of use in anticipated or existing legal proceedings, and says that to reveal the identity of those third parties would disclose the nature of the privileged communications in question.

48 The approach taken by Mr Macken accords with the principles I have described.

49 The Amcor parties placed reliance on the decision in Commissioner of Taxation v Coombs.[18] This case is distinguishable from the present. The decision concerns the question whether the identity of a client is privileged, and says nothing about the position of third parties.

50 Accordingly, I find that the description provided by Mr Macken in his affidavit of documents in relation to third parties is sufficient to support the claim for privilege and that the Court need not move to inspect any of the documents in this class, save for document 149 which ought to be inspected.

51 I determined that it was necessary to inspect document 149. This is because a claim to privilege was made in relation to this document on the basis of the advice privilege as well as the litigation privilege and because of the general nature of the document described ("Email from the third party to Jim Hodgson and from J Hodgson to D Macken"). In order to determine the precise purpose behind preparation of the document, and whether either or both bases had been made out, it was necessary to inspect the document.

52 Having examined document 149, I determined that it fell within the advice privilege, but not the litigation privilege as claimed.

53 Mr Macken's memorandum of costs and his time ledger were documents 68 and 69 in the affidavit of documents. They were claimed to be privileged on both the legal advice ground and the litigation ground.

54 Document 68 in the affidavit of documents was described as "Memorandum of Professional Costs and Disbursements re General Advices - Various Matters for the period 20/04/05 - 20/06/05".

56 It is accepted that legal professional privilege attaches to a communication undertaken, or to a document brought into existence, for the dominant purpose of giving or obtaining legal advice. At first glance, a memorandum of professional costs or a time ledger prepared by a solicitor does not have this dominant purpose. It is prepared for the purpose of accounting to the client for work done, and rendering a bill of costs in respect of it.

57 However, and subject to meeting the dominant purpose test, legal professional privilege also protects the disclosure of documents that record legal work carried out by the lawyer for the benefit of the client. In these cases, the protection extends to notes, memoranda or other documents made by a lawyer that relate to information sought by the client to enable him or her to advise.

58 The Amcor parties submitted that documents of the type in question are not ordinarily privileged. Reliance was placed on the observations of Tamberlin J in Lake Cumbeline Pty Ltd & Ors v Effem Foods Pty Ltd.[19] The documents which were the subject of the contested claim of privilege in that case included accounts for professional costs from a firm of solicitors. There were also memoranda and accounts from other solicitors relating to Victorian Supreme Court proceedings concerning the applicants and another party and accounts and memoranda of costs relating to another piece of litigation.

59 However, as illustrated by Lake Cumbeline, careful consideration needs to be undertaken of the form of the particular memorandum of costs in question.

60 In the usual case, a memorandum of fees is brought into existence, not for the dominant purpose of obtaining legal advice, or for use in legal proceedings, but principally for the purpose of recording and raising charges in respect of work which had been already completed. In such a case, where for example the memorandum of fees merely set out the dates and refers to the action taken in respect of which a charge is made, no privilege will attach. This was the case in Lake Cumbeline.

61 The same approach is taken in respect of other accounting records maintained by a solicitor. Thus in Packer v Deputy Commissioner of Taxation[20] the Full Court of the Supreme Court of Queensland held that legal professional privilege does not attach to entries in a solicitor's trust account ledger, except to the extent that such entries record communications referable to the relation of solicitor and client in a professional sense. The Court pointed out that the general nature of trust account ledgers is to record movement of money and to indicate matters in respect of which the movement occurs.[21] The dominant purpose of trust account ledgers, in the usual case, is to record movement of money and to indicate matters in respect of which the movement occurs.

62 However, cases where memoranda or bills of costs rendered by a solicitor are in detailed form and disclose, either directly or indirectly, communications concerning matters that are protected by the privilege, including instructions given by a client to his solicitors, the advice given, approaches to potential witnesses and other such things, stand in an altogether different class. Such memoranda and bills of costs are likewise privileged.

63 Were the position to be otherwise, it would work to undermine the privilege and the public policy it seeks to advance. It would have the consequence that a party, while initially at least being able to seek legal advice and initiate the creation of documents for use in legal proceedings fully protected by legal professional privilege, would risk losing the benefits of the privilege when it comes time to pay for the legal services provided. If this was to occur, in my opinion, the outcome would "substantially impede freedom of communication between client and legal advisers, which is at the very heart of the privilege. This would discourage free and uninhibited discussion of the issues and questions for fear that these communications could later be disclosed to the severe disadvantage of the client".[22]

64 In the present case, I have perused the relevant memorandum of costs and the time ledger. I consider that they disclose the nature or content of privileged material.

65 For this reason, the relevant memorandum of costs and the time ledger are themselves privileged.

66 The Amcor parties submitted that five documents (namely documents 17, 46, 54, 68 and 69) are not protected by legal professional privilege because there are reasonable grounds to believe that the documents evidence communications in furtherance of improper conduct based on the "crime/fraud exception" to privilege.

67 At common law, legal professional privilege does not protect communications between a lawyer and client made for the purpose of guiding or assisting in the commission of a fraud or a criminal offence. See: Cox v Railton.[23]

68 I agree with the observations of Hollingworth J in P & V Industries Pty Ltd v Anthony Porto & Ors (No 3)[24] that communications in furtherance of a crime or fraud are not protected by legal professional privilege because the privilege never attaches to them in the first place. As stated by her Honour:

While such communications are often described as 'exceptions' to legal professional privilege, they are not exceptions at all. Their illegal object prevents them becoming the subject of the privilege. It is nevertheless convenient to refer to the 'crime or fraud exception', as that term is commonly used in the cases.[25]

I take a similar approach in considering the common law, although with the enactment of s.125 Evidence Act 2008, the law has moved beyond the "faux" exception attributed to it. Section 125 now provides for a true exception.

69 The approach the crime/fraud exception may be seen as a further expression of public policy. Just as there are sound reasons for the establishment and maintenance of legal professional privilege which are rooted in public policy, so must the principle yield to countervailing public policy considerations where warranted. The "crime/fraud exception" is a clear example of this influence.

70 The High Court expressed the common law as to the crime/fraud exception in Commissioner of AFP v Propend Finance.[26] It held variously that the privilege does not attach to a lawyer/client communication:

(a) "made for some illegal or improper purpose ... contrary to public interest ... [or] ulterior purpose";[27]

(b) "brought into existence in furtherance of a crime or fraud";[28]

(c) "for the purpose of furthering some illegal object";[29]

(d) "in furtherance of fraud or crime";[30] and

(e) "[for] an illegal or improper purpose or the furtherance of an illegal object".[31]

71 These statements find symmetry in the common theme of public policy. Breaches of the criminal law, fraud, and other such conduct contrary to the public interest, are not to be protected under the mantle of legal professional privilege. Or as Young J put it in AWB Limited v Cole (No. 5), "[t]he privilege takes flight if the relationship between lawyer and client is abused".[32]

72 It was submitted Ms Doyle SC (who appeared with Dr Bigos of counsel on behalf of A J Macken & Co) that P & V Industries Pty Ltd v Anthony Porto & Ors (No 3)[33] and ASIC v Mercorella (No 3)[34] reflect current Australian law in drawing a distinction between documents created in furtherance of the commission of a fraud (to which the crime/fraud exception may attach) and documents which come into existence subsequent to the commission of a fraud (which remain protected by the privilege).

73 In P & V Industries Pty Ltd v Anthony Porto & Ors (No 3) Hollingworth J held that in order for the "crime/fraud" exception to operate where fraud is alleged, it needs to be established, on a prima facie evidentiary basis, that the communication which is the subject of the claim of privilege was made in furtherance of or as a step preparatory to the commission of the fraud. Hollingworth J heard an appeal from a Master who had held that the exception captures documents which "conceal a fraud". The Master had adopted the view that to "conceal a fraud" is "to act in furtherance of it". Hollingworth J reviewed the authorities in her reasons[35] and concluded that the Master had misapplied the law. Having found that the civil fraud alleged in P & V Industries (if committed) must have, "occurred no later than 1998", Hollingworth J found[36] that the plaintiff's equitable and statutory causes of action accrued, "at the time when he is alleged to have wrongfully taken [the impugned step]. Damages may have continued to accrue since that time ... But the civil fraud, if any, committed by Anthony Porto occurred no later than early 1998". Accordingly, her Honour was not satisfied that the subject document had been made "in furtherance of" the alleged breaches of fiduciary duty or statutory duties.[37]

74 Further, in ASIC v Mercorella (No 3)[38] Mansfield J considered the position where the client engaged solicitors for the purpose of preparing documents which had the effect of concealing the true nature of a transaction and which enabled the client to present, through the documents, a picture that was not true. The Judge held that communications made for the purpose of creating sham documents were a "fraud on justice" and were not privileged. However, the client later sought advice from the solicitors as to how to protect its assets and interests and as to the enforceability of some of the sham security documents. Mansfield J held that these communications were not made in furtherance of the fraud and were therefore protected by privilege.

75 On this basis it was contended on behalf of A J Macken & Co that the "crime/fraud exception" had no application. It was put that the persons alleged to have been involved in the fraud in contention are Messrs Hodgson, Barnes, Bayley and Sangster. The first time that Mr Macken was retained by any of those individuals was when Mr Hodgson engaged Mr Macken on 12 October 2004. The fraud, if any, committed by those persons occurred in 2002. While, as Hollingworth J noted, damages may have continued to run since that time, that is not a relevant touchstone for production of privileged documents in reliance on the exception.

76 The observations of Hollingworth J in P & V Industries and Mansfield J in Mercorella are undoubtedly correct in a context where the operation of the exception is confined, as it was in those cases, to an allegation of fraud. However, in the light of the breadth of the approach taken by the High Court in Propend, and the flavour of the public policy sought to be advanced by the "exception", it has application beyond fraud in the strict sense. Depending on the precise circumstances revealed by the facts, some illegal or improper purpose which is contrary to public interest may suffice to enliven its operation.

77 In the present case, Mr Houghton QC (who appeared with Dr McNicol and Mr Fitzgerald of counsel for the Amcor parties) submitted that there was evidence of conduct which amounted to a continuation and concealment of an illegal or improper purpose, namely the fraud committed by them and others on the Amcor parties, arising from and concerning the sale of a business, in circumstances alleged to have occurred as described below. It was also put that the sale of the business (or attempts to do so) in 2005, was improper because it involved the realisation of the subject matter of the fraud, namely the business. Such conduct, although not strictly amounting to fraud, may well fall within the descriptions provided by the High Court in Propend, and I approach my analysis on this basis.

78 The "crime/fraud exception" has now been enacted in s.125 Evidence Act 2008 (Vic) provides for the exception in the following terms:

1. Loss of client legal privilege-misconduct
2. This Division does not prevent the adducing of evidence of-

(a) communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or

(b) a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.

1. For the purposes of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that-

(a) the fraud, offence or act, or the abuse of power, was committed; and

(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power-

the court may find that the communication was so made or the document so prepared.

1. In this section, power means a power conferred by or under an Australian law.

79 In considering s.125 Evidence Act 2008, given that the relevant commission of the alleged fraud or offence is a fact in issue, in order for the exception to have application, I must be satisfied that there are reasonable grounds for finding that, first the fraud, offence or act, or the abuse of power, was committed; and second a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power, before the exception may apply to otherwise privileged material.

80 In this context, the concept of "fraud" is one of some breadth. As Doyle CJ put it in Southern Equities Corp v Arthur Anderson[39] "[Fraud] ... embraces a range of legal wrongs that have deception, deliberate abuse of or misuse of legal powers, or deliberate breach of a legal duty at their heart". In Barclays Bank PLC v Eustice,[40] the English Court of Appeal held that documents passing between a lawyer and his client relating to transactions undertaken by the client which had the effect of prejudicing a bank chargee, would be "sufficiently iniquitous for public policy" to require those communications to be discovered.[41]

81 Consistently, with its public policy origins, the reference to a communication being in "furtherance" of a fraud ought not be read too narrowly, or be too confined in a temporal sense.[42] The fraud exception will not protect legal professional privilege if:

(a) a solicitor is consulted "to cover up or stifle a fraud";[43]

(b) steps are taken to "conceal" profits, or to "defeat or delay" recovery by victims of an initial fraud;[44]

(c) to "conceal an abuse of delegated powers to enact legislation".[45]

82 Proof of the fraud to the civil standard, taking into account the Briginshaw test,[46] or to the criminal standard, is not required. In Propend, the position was variously expressed as follows: "to show reasonable ground for believing the communication ... [was made] for some illegal or improper purpose";[47] "there must be something to give colour to the charge" and "[it] is enough that circumstances are made to appear which sufficiently point to the bona fides and credibility of the allegation";[48] or "some prima facie evidence that it has some foundation in fact".[49] In Southern Equities, Doyle CJ referred to the need for "material raising an arguable case that the relevant communications were made for the purpose of furthering or assisting a ... fraud".[50] Under s.125(2) Evidence Act 2008, there must be "reasonable grounds" for finding the fraud, crime or abuse was committed.[51]

83 Part of Amcor's case proposed to be presented at trial is that its former senior managers, including Mr Hodgson, acted in breach of the various contractual, equitable and statutory duties they owed to the Amcor parties by wrongfully and secretly obtaining interests in a business known as the Service Packaging Business (the "Business") at an undervalue.

84 The Amcor parties seek to rely upon documents which they say show that a Mr Hottes was the beneficial owner of one-fifth (20%) of the Business through a company called G5 Investments Pty Ltd ("G5"), and that Mr Hodgson, together with Mr Barnes, Mr Bayley and Mr Sangster (or their companies) (together referred to as the "former mangers), were the beneficial owners of the remaining four-fifths (80%) (with Mr Hottes and G5 as the legal owners).

85 The Amcor parties rely on the fact that each of the former managers has admitted on the pleadings or sworn in their interrogatories that they executed two agreements with G5 (the "G5 agreements") giving them, on the face of the agreements, interests in the Service Packaging Business, while they were employed by the Amcor parties. In summary, the former managers defend this by saying the G5 agreements were not proceeded with or did not take effect.

86 The Amcor parties also allege that Mr Hodgson, Mr Barnes and Mr Sangster ostensibly acted for the Amcor parties in relation to an agreement pursuant to which the Amcor Business was sold to Mr Hottes (or to G5) (the "First Sale Agreement"). It is alleged that they all signed or witnessed it.

87 The Amcor parties have alleged in their pleadings, and in filed witness statements, that they did not give informed consent to the obtaining of interests by the former managers in this business and that the extent of the deal-making by those managers was concealed from them.

88 Arising from Mr Macken's affidavit and further affidavit, the Amcor parties rely upon what they say is evidence that Mr Macken's firm performed work for a number of clients being Australian Management Consulting Group Pty Ltd and its directors, Messrs Barnes, Sangster, Bayley and Mihelic at least from 20 April to 20 June 2005 concerning the ownership, sale or transfer of the Business or its assets. During that period Mr Walmsley (Mr Hottes' solicitor) sent a fax on 3 May 2005 with attachments to Mr Macken's firm, regarding a sale of Mr Hottes interest (through his estate) in the Business and G5 Investments Pty Ltd. This fax has a subject line "Hottes - Sangster - Amcor". [A copy of the document was provided to the Court.] On the back of the document is a phone number, which was at the time Barnes' mobile phone. The fax relevantly states: "as we understand it, our respective clients wish to proceed with the sale or purchase of the subject business or company ..." According to the Amcor parties, the documents in Part 1 (minus the redacted parts of the three documents) produced for inspection also show:

(a) document 17 (redacted in part for privilege) is a file note dated 12 August 2005. It records a telephone conference with "JH & Others" apparently by Dominic Macken regarding the interest in "ACP" and discussions with "Walmsley & Co" concerning this;

(b) document 4 is a copy of handwritten "Dear Ian" letter (also document 54), which shows it was faxed to someone in Melbourne on 12 August 2005;

(c) the "Dear Ian" letter is addressed to Ian Hottes and states "legal opinion to establish the doability of joining you as partners and opinion has suggested that there is enough grey area to warrant withdrawing from the deed. I act on all signatories behalf";

(d) Sangster in his answers to interrogatories sworn 18 April 2011 has confirmed he wrote this letter, after both the G5 Deeds;

(e) document 54 includes another copy of "Dear Ian" letter, with a handwritten annotation in the top right corner "Only copy in our possession".

89 On this basis the Amcor parties claim that the five documents in question are subject to the crime/fraud exception, and therefore have lost their privilege, (if privilege ever attached in the first place) and should be produced. They claim the privileged redactions to documents 17 (file note 12 August 2005), 46 (file note discussion Walmsley and Hodgson) and 54 (undated "Ian" letter and attachments), as well as privileged documents 68 (Memorandum of costs for period 20 April 2005-20 June 2005) and 69 (Time ledger for 3 May to 13 May 2005), because, as was submitted by the Amcor parties, the "must or are likely to relate to Hottes sale issues".

90 The Amcor parties submit that it is now clear from Mr Macken's further affidavit that at least from about April-June 2005, Mr Macken's firm was acting at least for Mr Hodgson, Mr Barnes and Mr Sangster concerning a proposed sale of Mr Hottes' interests - both legal and beneficial - in the Business and G5 Investments Pty Ltd. They submit that there are reasonable grounds for believing that this was done in continuation and concealment of an illegal or improper purpose, namely, the fraud committed by those parties and others on the Amcor parties, arising from and concerning the sale of the Business. This was put in a number of ways, including a continuation of the concealment of the original fraud and a realisation of the product of the original fraud by the sale of the acquired assets, namely the Business.

91 Because of the nature of the controversy as to the effect of documents 17, 46, 54, 68 and 69, I exercised the power of the Court to inspect the documents in issue, both in their redacted and unredacted forms.

92 As a result, I am satisfied that none of the documents examined evidenced any communication made or document prepared in furtherance of the commission of any fraud or for any other illegal or improper purpose such as to enliven the operation of the exception.

93 For these reasons, the crime/fraud exception has no application.

[1] Hodgson v Amcor Ltd; Amcor Ltd v Barnes [2011] VSC 63.

[2] For an encapsulated history since the sixteenth century, see Dawson J in Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 128 [18-19].

[3] See: Emilios Kyrou (as he then was) paper delivered in Melbourne, 15 December 2003.

[4] [1983] HCA 39; (1983) 153 CLR 52 at 128 [21].

[6] This does not include considerations of other matters relating to legal professional privilege such as waiver of the privilege or the enforceability of the privilege by a personal representative or successor in title to the original possessor of the privilege, which rare not relevant to the present issues.

[8] Bill Acceptance Corp. Ltd. v Colliers Jardine (Vic) Pty Ltd. unreported, Supreme Court of Victoria, No. F3793, 7 April 1993, Hedigan J at p 14.

[9] [2008] VSC 464 at [31]- [33].

[10] (2006) FCR 30 at 47 [44](12).

[11] See: FCT v Coombs [1999] FCA 842; (1999) 92 FCR 240, per Full Court (Sundberg, Merkel & Kenny JJ) at [31].

[12] See, for example Spotless Group Ltd v Premier Building and Consulting Group Pty Ltd (2006)16 VR 1 per Chernov JA at [26] and generally [20]-[30].

[13] See: Osland v Secretary to the Department of Justice 234 CLR 275 [49], Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at 14 [30] and [32].

[14] Unreported, Supreme Court of Victoria, Appeal Division, 11 April 1994, Ormiston J at p 7.

[15] [1959] HCA 8; [1959] 101 CLR 298.

[16] VSC, Hayne J. No. 8563/92, 9 August 1994, unreported. Noted in Williams, Supreme Court Practice, note 29.01.315.

[17] (2002) VSC 571 at [24].

[18] [1999] FCA 842; (1999) 92 FCR 240 at [31].

[19] (1994) 13 ACLC 55 (extract); 126 ALR 58 at 68.

[21] Lake Cumbeline Pty Ltd & Ors v Effem Foods Pty Ltd, ibid at [55]-[57].

[22] Supra at [62] (where Tamberlin J used the phrase in a slightly different context).

[23] (1884) 14 QBD 153.

[24] [2007] VSC 113.

[26] ( 1996) 188 CLR 501.

[33] [2007] VSC 113.

[34] [2006] FCA 772.

[38] Op cit_,_ cited in P & V Industries Pty Ltd v Anthony Porto & Ors (No 3) ibid at [32].

[39] [1997] SASC 6712; (1997) 70 SASR 166, at 174.

[40] [1995] EWCA Civ 29; [1995] 4 All ER 511; [1995] 1 WLR 1238.

[42] Derby & Co v Weldon (No. 7) [1990] 3 All ER 161; [1990] 1 WLR 1156, per Vinelott J at 1174 (English Chancery Division); cf. P & V Industries v Porto [2007] VSC 113 (Hollingworth J).

[45] A-G for Northern Territory v Kearney.

[46] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 per Dixon J at 361.

[51] See: Kang v Kwan [2001] NSWSC 698 at [40]- [42] and on appeal, Kwan v Kang [2003] NSWCA 336 at [25]- [52].