Margaret Lesley Marshall and Kim Neil Marshall v Michael Prescott

THE FACTS 8Although the facts are set out in my previous judgment, the issue I am left to determine requires me to set them out again, and to expand upon some aspects of them.

9The late Neil Marshall ("the deceased") was the husband and father of the first and second named plaintiffs respectively. In or about June 1995, the deceased separated from the first named plaintiff and commenced to reside in a de-facto relationship with Linda Carruthers ("Carruthers"). In 1996 a property settlement was reached between the deceased and the first named plaintiff. However, no proceedings were brought seeking dissolution of the marriage. 10On 31 May 2000 an aircraft in which the deceased was a passenger crashed near South Australia. The deceased, along with some twenty other passengers and the pilot, died as a result of that crash. 11Following the deceased's death, Carruthers brought proceedings pursuant to the Family Provision Act seeking an order that provision be made to her from the deceased's will. At about the same time, she also commenced proceedings in the Compensation Court of NSW, seeking a death benefit on the basis that she was the de-facto spouse of the deceased. 12On 26 July 2001, in the proceedings brought in the Compensation Court, Carruthers received a death benefit of approximately $200,000.00 which was paid by the GIO, who was the Workers Compensation Insurer of the deceased's employer, the Australian Manufacturing Workers Union. Although Carruthers was successful at first instance in the proceedings brought pursuant to the Family Provision Act, the Court of Appeal ultimately concluded that she was not entitled to any provision from the deceased's will (see Marshall v Carruthers [2002] NSWCA 47), and that the deceased's estate was held by the first named plaintiff on trust for the second named plaintiff (who at that stage had not attained the age of 18 years). The finding which had been made at first instance that Carruthers and the deceased were in a de-facto relationship at the time of the deceased's death was not the subject of any challenge. 13On or about 22 May 2002 a series of separate sets of proceedings were commenced in the United States District Court for the District of Pennsylvania ("the United States proceedings"). Those proceedings were brought by the surviving family members of each person who had died in the air crash, against Textron Lycoming Inc. ("Textron"), the manufacturer of the engines that were attached to the aircraft. The first and second named plaintiffs were plaintiffs in one of those actions, all of which were ordered to be tried together. All of the plaintiffs in the United States proceedings were represented by a firm of lawyers in New York, Messrs Kriendler and Kriendler ("Kriendlers"). The United States proceedings were required to be commenced, for jurisdictional reasons, in the District of Pennsylvania. That necessitated Kriendlers engaging another lawyer in Pennsylvania to act as their agent. 14The defendant in the current proceedings before this court is a South Australian lawyer who was instructed by some (but not all) of the plaintiffs in the United States proceedings. To the extent that he was not instructed by the remainder of those plaintiffs (including the first and second named plaintiffs in the current proceedings before this court) he appears to have acted as, for want of a better term, the "Australian representative" of Kriendlers. In particular, it appears to have been part of his role to liaise with the Australian legal representatives of those plaintiffs in the United States proceedings for whom he did not act, and to appraise them of aspects of the progress of such proceedings. 15On 21 February 2003 the United States proceedings were settled. As might be expected, it was necessary for various Deeds to be executed to give effect to the settlement which had been reached. Following the settlement being reached, but whilst the necessary Deeds were being prepared, Carruthers made a claim for the payment, to her, of that part of the settlement money from the United States proceedings which was due to the first and second named plaintiffs in these proceedings. She did so notwithstanding the fact that she was not, and never had been, a party to the United States proceedings. 16The notification of Carruthers' claim caused Kriendlers to advise that no part of the settlement money from the United States proceedings would be distributed to the first and second named plaintiffs in the present proceedings unless and until Kriendlers received some form of acceptable confirmation that Carruthers had no entitlement to it. In view of the advice of Kriendlers, the first and second named plaintiffs brought proceedings in this court against Carruthers seeking (inter alia) declaratory relief as to their entitlement to a share of the settlement monies from the United States proceedings ("the Carruthers proceedings"). Carruthers filed a cross claim in those proceedings seeking declaratory relief as to her entitlement. 17Initially, Carruthers was represented in those proceedings by the present defendant. When this became apparent, the first named plaintiff sought and obtained (in separate proceedings) an injunction against the defendant restraining him from, in effect, acting against her. From that point onwards, Carruthers was represented in the Carruthers proceedings by Teece Hodgson and Ward ("THW"), a firm of solicitors in Sydney. 18Ultimately, the first named plaintiff succeeded in obtaining relief against Carruthers in the Carruthers proceedings, the effect of which was to declare that Carruthers had no entitlement to any part of the settlement monies from the United States proceedings. In addition, the first and second named plaintiffs received the benefit of an order for costs in their favour. However, almost the entirety of the settlement monies from the United States proceedings to which the first and second named plaintiffs were adjudged to be entitled had, by that time, been expended in costs. 19Accordingly, the first and second named plaintiffs commenced the present proceedings against the defendant seeking, by way of damages, the costs which were expended. It is in these proceedings that the current notices of motion have been brought. 20There are a number of aspects of the Carruthers proceedings which are relevant in determining the present privilege claims, and to which I should make specific reference. 21As I have noted, upon the present defendant being restrained from acting for Carruthers in the Carruthers proceedings, Carruthers was thereafter represented by THW. 22Turks Legal were the solicitors for the GIO. They retained Mr Jenkins of counsel to advise the GIO. The GIO was never itself a party to the Carruthers proceedings although it had, in the circumstances which are more fully set out below, an interest in the outcome of those proceedings. 23Mr Jenkins acted for Carruthers in the Carruthers' proceedings. He did so originally on the instructions of the defendant, and later on the instructions of THW. 24Mr Hick's affidavit of 26 June 2012 establishes that the following funding arrangements were in place: (i)Turks Legal, as solicitors for the GIO, submitted its tax invoices to the GIO for payment; (ii)THW, initially as the defendant's agent and later as the solicitors for Carruthers, submitted tax invoices for work undertaken by them in the Carruthers proceedings, to the GIO for payment; (iii)Mr Jenkins, as counsel for Carruthers in the Carruthers proceedings, provided his tax invoices to Turks Legal who, in turn, forwarded them to the GIO parties for payment.

THE DOCUMENTS THE SUBJECT OF THE CLAIM 25Access is sought by the plaintiffs to a total of five (5) documents produced to the court by the GIO. Those documents have been provided by the GIO to the plaintiffs in a redacted form, such that the claims for privilege are made in respect of certain parts of them. The documents may be generally described as follows: (i)a letter dated 24 October 2003 from Prescotts Barristers and Solicitors ("Prescotts") (the defendant's law practice) to Turks Legal in relation to the Carruthers proceedings, discussing legal strategies and funding ("document 13"); (ii)a letter dated 4 August 2004 from Prescotts to Turks Legal in relation to the Carruthers proceedings, discussing legal strategies and funding ("document 14"); (iii)a letter dated 4 August 2004 from Prescotts to THW in relation to the Carruthers proceedings, discussing legal strategies ("document 15"); (iv)a letter dated 19 May 2005 from Prescotts to Turks Legal in relation to the Carruthers proceedings, discussing legal strategies ("document 17"); and (v)a funding agreement dated 9 June 2005 between the GIO and Carruthers in respect of the Carruthers proceedings ("document 20"). 26For the purposes of determining the claims for privilege I have inspected each of these documents in an unredacted form pursuant to the power contained in r. 1.8(a) of the Rules. It was expressly acknowledged by counsel for the GIO that it would be necessary for me to undertake that inspection for the purposes of determining the matter.

THE CLAIMS FOR PRIVILEGE 27In respect of each of documents 13, 14, 15 and 17, a claim is made by the GIO on the basis of: (1)legal professional privilege; or alternatively (2)common interest privilege. 28Although the first of these bases was not abandoned by the GIO, the submissions of the parties concentrated largely upon the second. 29The privilege claimed in respect of document 20 is said to arise from an "extension" of both legal professional and common interest privilege. Because the claim in respect of document 20 is made on a slightly different basis than that in respect of the other four documents, I have considered it separately. 30I have considered the matter on the basis of the written submissions provided by each party.

The relevant principles 31The affidavit of Mr Hick sworn on 26 June 2012 asserted that the GIO made "a claim for legal professional privilege pursuant to s. 119 of the Evidence Act 1995" ("the EA"). The affidavit then proceeded to cite lengthy passages from a number of authorities, before reproducing, in their entirety, the provisions of ss 117, 118, 119 and 122 of the EA. 32Leaving aside whether it is appropriate to include, in an affidavit of that nature, lengthy extracts from authorities and legislation, the submissions which were filed on behalf of the GIO were (but for one matter to which I have referred further below) bereft of any reference to the EA. The approach which was adopted in those submissions appeared to recognise the fact that in Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia [1999] HCA 67; (1999) 201 CLR 49, Gleeson CJ, along with Gaudron and Gummow JJ observed (at [16] - [17]) that ss. 118 and 119 of the EA were concerned with the adducing of evidence, and that they did not apply to a request for the production of documents for inspection. 33In these circumstances, the submissions on behalf of the GIO advanced the claim for legal professional privilege, not by reference to the provisions of the EA, but rather on the basis of the principles set out in The Daniels Corporation International Pty Limited and Anor v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 at [9]: "[9] It is now settled that legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings. It may here be noted that the "dominant purpose" test for legal professional privilege was recently adopted by this court in Esso Australia Resources v Federal Commissioner of Taxation in place of the "sole purpose" test which had been applied following the decision in Grant v Downs."

The submissions of the parties 34The GIO firstly submitted that the relevant onus of proof was upon the plaintiffs as the party "seeking to persuade the court that the privilege had been lost." The authority cited for this proposition was Odgers, Uniform Evidence Law (6th Edition) at [1.3.11420]. The GIO submitted that the plaintiffs had ignored this "important question of onus". 35In terms of the documents, the GIO addressed documents 13, 14 and 17 together and articulated the claim for legal professional privilege in the following way: (i)Carruthers was a party to the Carruthers proceedings and was the principal witness in her case and in the interests of the GIO; (ii)the GIO was the client and Turks Legal were the lawyers acting for the GIO; (iii)the letters recorded confidential communications by Carruthers, through the agency of Prescotts, to Turks Legal, as the lawyers for the GIO, regarding evidence or legal strategy in relation to the Carruthers proceedings; (iv)the communications were for the dominant purpose in each case of providing advice or providing legal services in relation to evidence or legal strategies; and (v)production of the documents in each case would reveal the communication. 36The claim for legal professional privilege in respect of document 15 was articulated as follows: (i)Carruthers retained Prescotts to act as her lawyers; (ii)Carruthers retained THW as her lawyers in Sydney and the GIO retained THW as its lawyers also; (iii)the contents of the document describe a confidential communication between the lawyers jointly acting for Carruthers and the GIO in relation to legal strategy in respect of the Carruthers proceedings (as to the first return date of the statement of claim); (iv)the letter was prepared for the dominant purpose of the lawyers for Carruthers and the GIO discussing legal strategy or being informed of legal strategy in respect of the Carruthers proceedings; (v)by the payment by the GIO for the legal services rendered by THW, and by the retainer between GIO and THW for the purposes of sharing information and documents going to the prosecution of the Carruthers proceedings, the GIO had a claim to privilege in respect of document 15; and (vi) production of the document would result in the communication being revealed. 37Shortly put, it was the submission of the plaintiffs that the claim for legal professional privilege in relation to each of these four documents was fundamentally misconceived. The misconception was said to arise from the fact that any privilege attaching to these documents was that of Carruthers, and not the GIO.

Determination of the claim 38It is firstly necessary for me to deal with the issue raised by the GIO in relation to the question of onus. 39As I have noted, the GIO relied upon a passage contained the 6th Edition of Uniform Evidence Law by Odgers to support the proposition that the plaintiffs bore an onus to establish "that the privilege had been lost". In the latest (10th ) Edition of that publication the equivalent notation (which is in the same terms as that cited by the GIO) appears at paragraph [1.3.11400] as follows: Burden and standard of proof "The burden of proof is on the party seeking to persuade the court that the privilege has been lost. In accordance with s. 142(1) the court is to find that the facts necessary for deciding the factual questions under s. 123 have been proved if it is satisfied that they have been proved on the balance of probabilities." 40That notation forms part of the notes to s. 123 of the EA and it is plainly referable to that section. Leaving aside the fact that the submissions of the GIO tend to disavow any reliance upon the provisions of the EA, s. 123 applies to criminal, not civil, proceedings. In circumstances where the notation, properly read, is confined to commenting upon the provisions of s. 123, it has no application at all to the circumstances of the present case and provides no support for the GIO's submission as to the issue of onus. 41Moreover, in my view, the submission advanced by the GIO as to onus in circumstances such as the present is generally contrary to authority. In Re Southland Coal Pty Limited (rec and mgr apptd) (in liq) [2006] NSWSC 899 Austin J observed at 14: "The party claiming privilege bears the onus of establishing the basis of the claim, and the party seeking production does not bear the onus of excluding privilege (Mitsubishi Electric Australia Pty Limited v Victorian WorkCover Authority (2002) 4 VR 332 at 337; ASIC v Rich [2004] NSWSC 1089 at [2]; in the matter of Bauhaus Pyrmont Pty Limited (in liq) [2006] NSWSC 543 at [24]). The party claiming the privilege must establish the facts from which the court can determine that the privilege is capable of being asserted (National Crime Authority v S (1991) 100 ALR 151 at 159)." 42His Honour's judgment has been referred to, and applied, on a number of subsequent occasions (see for example Priest v State of New South Wales [2006] NSWSC 1281 at [21]; Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] NSWLEC 247 at [12]; Kirby v Centro Properties Limited (No 2) [2012] FCA 70 at [11]. 43For these reasons, I do not accept the GIO's submission that the plaintiffs bear the onus of establishing that the privilege has been lost. Rather, the onus is on the GIO to establish the basis of the claim that it advances in each case. 44Further, I am not satisfied that legal professional privilege attaches to documents 13, 14, 15 and 17 on the basis advanced by the GIO. The reasons for that conclusion may be shortly stated. 45The privilege which is asserted is privilege claimed on behalf of the GIO. The GIO has been identified in the submissions advanced on its behalf as "the client". However, none of documents 13, 14, 15 and 17 constitute communications between the GIO (as the client) and any of its lawyers. They are all communications on behalf of Carruthers, albeit in some instances sent to lawyers acting for the GIO. 46Viewed in this way none of the documents reveal communications between the GIO (as the client) and its lawyers. Accordingly, no legal professional privilege of the GIO attaches to any of them. I therefore accept the plaintiffs' submissions that the claim for legal professional privilege is not made out.

The relevant principles 47In Bulk Materials (Coal Handling) Services Pty Limited v Coal and Allied Operations Pty Limited (1988) 13 NSWLR 689 Giles J (as his Honour then was) made reference (at 692) to the judgment of Lord Denning MR in Buttes Gas and Oil Company v Hammer (No 3) [1981] QB 223 at 242 - 243 in which the following observations were made: "There is a privilege which may be called "common interest privilege". That is a privilege in aid of anticipated litigation in which several persons have a common interest. It often happens in litigation that a plaintiff or defendant had other persons standing along side him - who have the self-same interest as he - and who have consulted lawyers on the self-same points as he - but these others have not been made parties to the action. Maybe for economy or for simplicity or what you will. All exchange counsels' opinions. All collect information for the purpose of litigation. All make copies. All await the outcome with the same anxious anticipation - because it affects each as much as it does the others. Instances come readily to mind... ...... In all such cases I think the courts should - for the purposes of discovery - treat all the persons interested as if they were partners in a single firm or departments in a single company. Each can avail himself of the privilege in aid of litigation. Each can collect information for the use of his or the other's legal adviser. Each can hold originals and each can make copies. And so forth. All are the subject of the privilege in aid of anticipated litigation, even though it should transpire that, when the litigation is afterwards commenced, only one of them is made a party to it. No matter that one has the originals and the other has the copies. All are privileged". 48In the same case Brightman LJ observed at (267): "If two parties with a common interest and a common solicitor exchange information for the dominant purpose of informing each other of the facts, or the issues, or the advice received, or of obtaining legal advice in respect of contemplated or pending litigation, the documents or copies containing that information are privileged from production in the hands of each". 49In Bulk Material (Coal Handling) Services (supra) Giles J also cited (at 695) a passage from Phipson on Evidence (13th Ed): "A joint interest for these purposes is not a rigidly defined concept. It is apparent that those categories described above, such as partners and the like, come within these principles. But a mere common interest in the outcome of litigation will be sufficient to enable any party with that interest to rely on it." 50His Honour then went on to observe (at 695): "While the retention of a common solicitor may be a factor, and in circumstances a significant factor, in the existence of the common interest, I can not see any reason why it should be essential if the common interest be found elsewhere".

The submissions of the parties 51The GIO submitted that there was a common interest between it and Carruthers in respect of the Carruthers proceedings which gave rise to the relevant privilege and which had its genesis in the provisions of s. 151Z(1)(b) of the Workers Compensation Act ("WCA") which is in the following terms: "If the injury for which compensation is payable under this Act was caused in circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury, the following provisions have effect: (a)... (b) if the worker recovers firstly compensation and secondly those damages, the worker is liable to repay out of those damages the amount of compensation which a person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation." 52There is no dispute that a principal issue in the Carruthers proceedings concerned whether Textron was liable to pay damages to one of the present plaintiffs (namely Mrs Marshall) on the one hand, or Carruthers on the other. The GIO took the view that in the event that a determination was made that Carruthers was entitled to those damages, it would be able, pursuant to s. 151Z of the WCA to recover, from those damages, the amount which had been paid to Carruthers in the Compensation Court proceedings (to which I referred at paragraph (12) above when recounting the facts). 53The GIO developed its argument by submitting that in the circumstances and context of the present case, there were three separate steps which were required to be completed in order to enable it to proceed with a recovery action pursuant to s. 151Z. 54The first of those steps was for the GIO to establish that the putative tortfeasor, in this case Textron, was a person who was liable to pay damages to Carruthers in respect of the deceased's death. The second step was to identify the amount of the compensation which had been paid to Carruthers. The third step was to identify the amount of damages. 55With emphasis on the first of those steps (the second and third not presenting any relevant difficulty) the GIO submitted that it shared a common interest in the outcome of the Carruthers proceedings with Carruthers, namely a common interest in establishing that Carruthers had an entitlement to a part of the settlement monies payable by Textron in the United States proceedings. It was submitted that this was so because if it were established that Textron was a person liable to pay damages in respect of the deceased's death, the first step towards recovery, by the GIO, of the compensation which had been paid to Carruthers could be met. 56With these matters in mind, and in respect of documents 13, 14 and 17, the claim for common interest privilege was articulated by the GIO in the following way: (i)Carruthers and the GIO had the self same interest in establishing the claim to part of the settlement monies in the US proceedings in respect of the death of the deceased; (ii)Prescotts were the lawyers acting for Carruthers and Turks Legal were the lawyers acting for the GIO; (iii)the letter, in each case, was a confidential communication in respect of evidence or legal strategy; (iv)the letter, in each case, was prepared for the dominant purpose of providing advice or legal services in respect of evidence or legal strategy concerning the Carruthers proceedings; (v)the letters were a sharing of confidential information between entities having a self same interest; and (vi)production of the letters would result in disclosure of the relevant confidentiality. 57In respect of document 15 the claim was articulated by the GIO in the following way: (i)Carruthers retained Prescotts as her lawyers; (ii)the GIO retained Teece Hodgson and Ward as one of its lawyers, along with Turks Legal; (iii)Carruthers and the GIO had the self same interest in establishing, in the Carruthers proceedings, a claim to part of the settlement monies in the United States proceedings in respect of the death of the deceased; (iv)the content of the letter was a confidential communication; (v)the letter was prepared for the dominant purpose of sharing information in relation to legal strategy in respect of the Carruthers proceedings; (vi)the letter, produced by the GIO, was shared with the GIO; and (vii)production of the letter would result in disclosure of the confidentiality. 58The plaintiffs challenged the correctness of what they described as "the s. 151Z thesis" although they did not take issue with the majority of the propositions which were advanced by the GIO in support of it. The plaintiffs' challenge concentrated upon the fundamental proposition that Carruthers and the GIO shared a common interest in establishing that Textron, as the putative tortfeasor, was liable to pay damages to Carruthers. The plaintiffs submitted that such proposition was founded upon a misinterpretation of the provisions of s. 151Z, such misinterpretation being said to arise from two factors, namely: (1)the fact that the statutory right of recovery of the GIO was conditional upon damages already having been recovered by Carruthers from Textron; and (2)that the GIO parties had no statutory right to sue the plaintiffs for any part of the settlement fund. 59In addition, the plaintiffs submitted that the GIO had an obligation to demonstrate that its interest in the Carruthers proceedings was a legitimate one. They submitted that such interest as the GIO had was not legitimate because s. 151Z "did not authorise the privilege claim to be made", and further because it was ultimately determined by the Court that Carruthers had no entitlement to any part of the settlement funds from the United States proceedings.

Determination of the claim 60In my view, the fact that the statutory right of recovery of the GIO pursuant to s. 151Z was conditional upon damages being recovered from the relevant tortfeasor (i.e. Textron) does not lead to the conclusion that the GIO and Carruthers did not share a common interest in the Carruthers proceedings. It is correct that the right of the GIO to recover, pursuant to s. 151Z, the compensation which had been paid to Carruthers could only have arisen in the event that Carruthers established an entitlement to part of the settlement funds from the United States proceedings. However, it does not follow that Carruthers and the GIO did not have a common interest in ensuring that such an entitlement was established. 61The submissions of the plaintiffs in this respect ignore the fact that a common interest is not a concept which can be rigidly defined. As I have already noted, mere common interest in the outcome of litigation will be sufficient to enable any party with that interest to rely upon it. It is evident that the GIO and Carruthers had a common interest in the outcome of the Carruthers proceedings. They were commonly interested in establishing that Carruthers was entitled to a share of the settlement monies paid by Textron in the United States proceedings. 62Further, in my view, the fact that the GIO had no statutory right to sue the plaintiffs for any part of monies received as a result of the settlement of the United States proceedings is not to the point. It has no bearing whatsoever on the existence of a common interest between the GIO and Carruthers. The more relevant fact is that the GIO had, in certain circumstances, a statutory right of recovery pursuant to s. 151Z. Directly relevant to the exercise of that statutory right was the principal issue in the Carruthers proceedings. 63In addition, I do not accept that the interest of the GIO which it shared with Carruthers was other than legitimate in any of the senses asserted by the plaintiffs. The submission that any interest of the GIO "was not a legitimate interest which can found a privilege claim, or indeed found any other claim at law or in Equity, because s. 151Z ...... did not authorise that claim to be made" overlooks the principles, to which I have referred, which govern the circumstances in which common interest privilege can arise, and in particular, overlooks the fact that the touchstone of the existence of the privilege can be a mere interest in the outcome of litigation. 64For the same reason, the fact that the principal issue in the Carruthers proceedings was ultimately resolved against Carruthers does not mean that the interest of the GIO in the outcome of those proceedings was somehow not justifiable. 65Accepting that this relevant common interest existed I am required to determine whether it is sufficient to support the claim for privilege which is made by the GIO

66Documents 13, 14 and 17 are each communications from Prescotts (acting for Carruthers) to Turks Legal (acting for the GIO). Accordingly, they were communications between the parties who had a common interest in the outcome of the Carruthers proceedings. 67It is evident from an examination of these documents that they were confidential, and were prepared for the dominant purpose of providing advice for legal services in relation to the Carruthers proceedings. In my view, they amount to the sharing of confidential information between entities who had a self same interest, the production of which would result in disclosure of confidentiality. 68In these circumstances it is my view that common interest privilege attaches to each of the documents. 69Document 15 is a communication from Prescotts to THW in relation to the Carruthers proceedings. At that time, Prescotts acted for Carruthers as did THW. THW were also retained by the GIO. Accordingly, the communication was between the parties, namely Carruthers and the GIO, who shared a self same interest in the outcome of the Carruthers proceedings. 70I am satisfied having looked at the document that it constitutes a confidential communication prepared for the dominant purpose of sharing information in relation to the Carruthers proceedings. The letter has been produced by the GIO, from which I infer that it was shared by THW with the GIO consistent with the arrangements which were in place. 71In these circumstances it is my view that common interest privilege attaches to the document.

The relevant principles 72The GIO's claim for privilege attaching to document 20, namely the litigation funding agreement, was based upon what was described as "an extension" of the claim for both legal professional privilege and common interest privilege. The nature of the extension which was relied upon was that described by Santow J (as his Honour then was) in Re Global Medical Imaging Management Limited (in liquidation) [2001] NSWSC 476 at [7]: "To deny legal privilege to a funding agreement of this sort would fail to give proper weight to its inextricable connection with the very subject matter of the legal advice that might be given and the nature of the professional legal services to be rendered. It has the potential to reveal the litigant's likely legal strategy. The funding agreement in a literal and substantive sense fulfils the purpose of providing legal services in terms not only of the overall capacity to have them at all, but also their availability at the critical junctures in the case. Whilst it may not reveal the content of legal advice it reveals the confidential circumstances of its availability and throws oblique light on the confidential circumstances to which the advice is directed." 73The applicants also relied on the decision of Bergin J (as her Honour then was) in Rickard Constructions Pty Limited v Rickard Hailes Moretti Pty Limited [2006] NSWSC 234. Although not referred to by the GIO in submissions, other observations on this issue have been made in subsequent decisions including Apple Computer Australia Pty Limited v Wily [2002] NSWSC 855 at [19], and Weston (as special purpose liquidator of One Tel Limited) v Publishing and Broadcasting Limited [2011] NSWSC 14 at [23].

The submissions of the parties 74The GIO submitted that privilege attached to the funding agreement because, on the evidence, the agreement fulfilled the purpose of providing legal services, not only in terms of the overall capacity to have those proceedings, but also their availability at critical junctures in the case. The GIO submitted that the document fell squarely within the principles articulated by Santow J in Re Global Medical Imaging Management Limited (in liquidation) (supra). It should be noted that his Honour's decision in that case was given in the context of provisions of the EA although, as I have noted below, subsequent authority favours the proposition that the purpose of the statutory provision is the same purpose as that of the general law. 75Further, the GIO relied upon correspondence annexed to the affidavit of Mr Hick which, it submitted, established that Carruthers required the GIO to fund her defence and cross claim in the Carruthers proceedings in order to obtain her cooperation. The GIO submitted that the only reasonable conclusion which was available was that the dominant purpose of the funding agreement was to ensure the overall capacity of Carruthers to have that funding, and to ensure that such funding would be forthcoming for securing legal advice relevant to prosecution of the Carruthers proceedings. 76The plaintiffs submitted that the claim for common interest privilege in respect of the funding agreement was not made out. Primarily, this was said to be because documents which implement transactions or agreements between parties are, by definition, unable to qualify as privileged communications between lawyer and client. The authority cited for that proposition was the judgment of Murphy J in Baker v Campbell (1983) 153 CLR 52 at 86 where his Honour said: "The privilege does not attach to documents which constitute or evidence transactions (such as contracts, conveyances, declarations of trust, offers or receipts) even if they are delivered to a solicitor or counsel for advice or for use in litigation." 77In the case of document 20 of course, neither party was a lawyer. Further, the plaintiffs' submissions made no reference no reference at all to the decision of Santow J in Re Global Medical Imaging Management Limited (in liquidation) (supra) or any of the other subsequent decisions to which I have referred.

Determination of the claim 78The resolution of whether privilege attaches to document 20 is not as straightforward as the submissions of the GIO would tend to suggest. This is for a number of reasons. 79Prior to the decision of Santow J, Lindgren J in Cook and Ors v Pasminco Limited and Ors (No 2) (2000) 179 ALR 462 had considered whether or not a costs agreement between a lawyer and a client was subject to legal professional privilege under the general law. His Honour concluded (at 47): "In my opinion, generally, an agreement between solicitors and their prospective client as to the terms of retainer of the solicitors does not attract either kind of legal professional privilege mentioned. The agreement is not created for the dominant purpose of the giving or receiving of legal advice, or of being used in existing or anticipated legal proceedings. A costs agreement is a bundle of mutual and reciprocal commitments between intending solicitor and the client. It is entered into by parties whose interest are, at the time, generally opposed. Generally speaking, the solicitors are entitled to negotiate the terms of the agreement in their own interests. Once it is appreciate that a costs agreement is an agreement between persons who are about to enter into the relationship of solicitor and client, there is no obvious reason why such an agreement, as a class of document, should be the subject of legal professional privilege". 80Santow J observed in Re Global Medical Imaging (supra) (at [2]) that it was not clear what the costs agreement considered by Lindgren J would have revealed, or what the legal strategy might have been. In any event, Santow J did not consider that his decision was (to use his words) "preordained" by the judgment of Lindgren J. 81The decision of Santow J is not authority for the proposition that privilege will attach to a funding agreement of the present kind in each and every case. So much is clear from the observations of Bergin J in Rickard Constructions Pty Limited v Rickard Hailes Moretti Pty Limited (supra) at [36] where, in reference to the decision of Santow J, her Honour observed: "This decision is not authority for the proposition that the relationship between a funder of litigation and the funded party is a confidential relationship. Rather it may be authority for the more limited proposition that a funding agreement may satisfy the requirements of s. 119 of the Act, depending on the particular terms of that agreement. It will depend on the facts of each case". 82All of the decisions to which I have referred were cited by Basten JA in CSR Limited v Eddy (2008) 70 NSWLR 735 where his Honour observed: "There is no doubt that a funding arrangement, whether with a third party or with a lawyer, may be characterised as a confidential document and may indeed be prepared for the dominant purpose of obtaining legal services. However, the nature of the connection must be assessed according to the purpose of the statutory provision. That purpose is the same as the purpose of the general law protection and, for reasons already noted, does not extend to a document the purpose of which is to create the relationship. Different issues may arise in relation to documents prepared for or provided to a litigation funder. Further, because the operation of s. 119 of the Evidence Act does not arise, it is sufficient for present purposes to say that the general law principle in relation to lawyer client costs agreement was correctly stated by Lindgren J in Cook. Accordingly, the costs agreements were not protected by client legal privilege". 83In the same case, Hodgson JA said (at [7]): "I agree with Basten JA that costs agreements that do no more than specify rates for work to be done by specified classes of persons, and / or give a global figure for carrying out a specified task, and / or give estimates for carrying out a specified task, are not the subject of client legal privilege at general law. However, if an agreement contains material which expressly or impliedly conveys legal advice or views about tactics or strategy then that material may be privileged. I agree also that there was no such material in this case." 84What emerges from an examination of the authorities is that whilst a document in the nature of document 20 may be characterised as confidential, and may be prepared for the dominant purpose of obtaining legal services, each case must be determined on its own facts. In particular, the nature of the connection between the preparation of the document, and the dominant purpose of obtaining legal services, must be assessed. If the document is merely one which does nothing more than create a relationship, then it is likely that no privilege will attach to it. I have examined document 20 carefully with these principles in mind. As a result, a number of matters emerge. 85Firstly, there is a clearly stated intention on the part of Carruthers and the GIO that the terms of the document will remain confidential, absent compulsion by law. That, of course, is not conclusive but is a relevant matter to be taken into account. 86Secondly, the document has the potential to reveal, at least in general terms, the legal strategy which was to be adopted in relation to the Carruthers proceedings. The fact that it does so by implication, rather than expressly, does not mean that privilege should not attach to it (see CSR v Eddy (supra) per Hodgson JA at [7]. 87Thirdly, the document by its very nature fulfils the purpose of providing legal services, at least in terms of the overall capacity to have them at all. 88Fourthly, the document has an obvious, and inextricable, connection with the advice tendered by GIO's lawyers to Carruthers in relation to the Carruthers proceedings. On any view, its content goes well beyond simply specifying rates for work which is to be carried out. 89In these circumstances I am satisfied that privilege attaches to document 20.

The relevant principles 90Section 98 of the Uniform Civil Procedure Act provides (inter alia) that costs are at the discretion of the court. Further, r. 42.1 of the rules provides that if the court makes an order as to costs, the court is to order that costs follow the event unless it appears that some other order should be made as to the whole or part of any costs. The effect of the GIO's submissions is that this is a case in which "some other order" ought be made. 91The plaintiffs referred me to the decision in James and Ors v Surf Road Nominees Pty Limited and Ors (No 2) [2005] NSWCA 296 where the court (at [31] to [36]) set out a number of general principles in relation to the power to award costs. Those general principles were adopted by Campbell JA in Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]. 92In the course of the judgment in James and Ors v Surf Road Nominees Pty Limited and Ors (No 2) (supra) the court (at [32]) made reference to the observations of Mahoney JA in Waters v PC Henderson (Aust) Pty Limited (CA)(NSW) 6 July 1994 unreported: "Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly this is so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, unless a particular issue or group of issues is clearly dominant of separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it fails." 93The court at [36] also made reference to the fact that where a discretion to apportion costs is exercised, the apportionment itself involves the exercise of a discretion. In that respect, the court referred to the decision of the Federal Court of Australia in Dodds Family Investments Pty Limited v Lane Industries Pty Limited (1993) 26 IPR 261: "Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is elusory and the exercise of the discretion will often depend upon matters of impression and valuation."

The submissions of the parties 94The plaintiffs have correctly pointed out that the "first limbs" of the notices of motion, namely the applications to set aside the subpoenas, were dismissed by virtue of my judgment of 8 June 2012. On the assumption that the privilege claims were similarly dismissed, the plaintiffs submitted that they would be entitled to an order for costs, encompassing both the hearing of the motions and the subsequent argument in relation to privilege. The plaintiffs submitted that there was no conduct on their part which would operate to disentitle them to such an order. However, the plaintiffs' submissions did not deal with the question of the appropriate order in the event that some, or all, of the privilege issues were determined against them. 95The GIO submitted that although the motions had ultimately been determined in favour of the plaintiffs, there was conduct on their part which operated to disentitle them to an order for costs in their favour. In that regard the GIO relied upon the fact that there were some issues litigated on the hearing of the motions which, despite the ultimate result, were determined adversely to the plaintiffs. On this basis, the GIO submitted that the appropriate order, reflecting what was described as the "mixed result", was that each party pay their own costs. Alternatively, the GIO submitted that in the event that it was determined that a costs order in favour of the plaintiffs in respect of the hearing of the motions was appropriate, the costs should be reduced by fifty percent to reflect the fact that time and resources had been devoted to litigating issues which were ultimately determined adversely to the plaintiffs. The GIO further submitted that the costs of the separate debate regarding issues of privilege should abide the result.

Determination of the issue 96At the hearing of the notices of motion to set aside the subpoenas, the plaintiffs advanced three principal assertions, namely: (i)that the applicants had no standing to set aside the subpoenas; (ii)that they (the plaintiffs) did not have to establish a legitimate forensic purpose; and (iii)that the subpoenas ought not be set aside. 97The first of those issues was resolved against the plaintiffs. In reaching that conclusion I observed (at paragraph [43] of my judgment) that the principal submissions advanced for the plaintiffs in support of their position on this issue were contrary to authority. In respect of the present argument as to costs, the GIO relied on the fact that in the submissions of 27 April 2012 which were filed on behalf of the applicants in support of their applications to set aside the subpoenas, the authorities upon which they relied in support of the proposition that they had standing were expressly cited and were directly on point. It followed, the GIO submitted, that the plaintiff's representatives must have been aware, some considerable time prior to the hearing of the motions, that there was authority directly against one of the propositions they wished to advance. The effect of the GIO's submission was that the appropriate course in these circumstances would have been for the plaintiffs to abandon their position on that issue. 98The second issue, namely the necessity to establish a legitimate forensic purpose, was also determined against the plaintiffs. Once again, I concluded (at paragraphs [45] and following of my judgment) that the submissions advanced on behalf of the plaintiffs in relation to this issue were contrary to authority. The GIO repeated its submission which I have summarised in [97] above in this regard. 99It must be recognised that the motions were ultimately determined in the plaintiffs' favour, and the applications which were made by the GIO (and by Turks Legal) to have them set aside failed. However, a considerable amount of valuable court time was taken up in dealing with the first two issues, in respect of each of which the plaintiffs advanced submissions which, in my view, were clearly contrary to authority and thus largely untenable. 100The entirety of the privilege claims have been resolved in favour of the GIO, and against the plaintiffs. The issues arising from those claims were dealt with quite separately from the hearing of the original motions, and indeed on the basis of written submissions without any further appearance on behalf of the parties. 101In my view, the issues which were litigated on the hearing of the motions to set aside the subpoenas were clearly separable. As I have pointed out, the GIO, although ultimately unsuccessful, succeeded on the two issues which together occupied the bulk of the time which was taken at the hearing. The plaintiffs representatives were on notice of the GIO's position, and the authorities upon which it proposed to rely, in respect of those issues. Those authorities were clearly contrary to the propositions the plaintiff sought to advance and there was no real attempt in the course of the hearing to distinguish them, or to advance some other reason why they ought not be followed. In view of the fact that the plaintiffs were ultimately successful on the motions, I do not accept the GIO's submission that this is a case in which I should order that each party pay their own costs. However, In my view, the circumstances support a conclusion that in the exercise of my discretion, the plaintiffs should not have the entirety of their costs of the motions. 102In relation to the privilege issues, the entirety of those issues have been resolved in favour of the GIO. There is no reason in the circumstances why costs ought not follow the event in respect of that aspect of the matter. 103The final issue in relation to costs arises out of the plaintiffs' submission that any costs awarded in their favour as against the GIO should be ordered to be paid forthwith. In essence, the basis of this submission is that the GIO is not a party to the principal proceedings. In my view there is merit in that submission, although it is a submission which applies equally to those costs I have ordered in favour of the GIO against the plaintiffs.

ORDERS 104For the foregoing reasons I make the following orders: (1)I uphold the claims for privilege made by the GIO in relation to documents 13, 14, 15, 17 and 20. (2)I otherwise dismiss the notices of motion seeking that the subpoenas issued by the plaintiffs to Turks Legal, GIO Workers Compensation (NSW) Pty Limited and GIO General Limited be set aside. (3)I order that the applicants pay 50 percent of the plaintiffs' costs of the plaintiffs of the notices of motion. (4)I order that the plaintiffs pay the costs of the GIO in respect of the claims for privilege. (5)I order that the costs in (3) and (4) above be paid forthwith.

Amendments 27 September 2012 - Correction to reference to Uniform Civil Procedure Act Amended paragraphs: 90 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 September 2012