Media Ocean Limited v Optus Mobile Pty Limited

REASONS FOR JUDGMENT 1 Two motions were filed in the proceedings, one by the applicants, the other by the respondent. Both seek orders that the opponents make available for inspection certain documents in respect of which legal professional privilege is claimed. The orders are sought pursuant to O 15 r 11 of the Federal Court Rules (Rules). The documents the subject of the applicants' motion are a representative sample of a much larger group of documents totalling about 1400. Both motions were set down for hearing before me on 12 May or thereabouts, after orders were made by Cowdroy J on 29 April 2010. The substance of those orders was that with respect to the applicants' notice of motion each party was to nominate, and notify the other party of, ten representative documents in relation to one group of named Optus personnel and five representative documents in relation to a second group of named Optus personnel "to be used as the basis for a preliminary determination of the claims for privilege made by [the respondent]". 2 His Honour went on to set out a timetable for the serving of evidence, which included that the respondent was to serve any evidence in relation to the applicants' notice of motion on or before 27 May 2010. No such evidence was served by that date but, by consent, the period was extended until 15 June. 3 This morning the parties explained the nature of the principal proceeding and the factual background to it, which was necessary to understand the relevance of the documents and to put the proceeding in context. Suffice it to say at this point that the factual matrix is complex and Mr McHugh, who appeared for the respondent, explained it in some detail and took some time to do so. 4 Mr Kunc, who appeared for the applicants, did not rely on any evidence in relation to his own client's motion. Mr McHugh read an affidavit by Mr Lindsay Powers, a solicitor with the carriage of this matter at Minter Ellison, which acts for the respondent. That affidavit was sworn on 15 June 2010. Mr McHugh also tendered two volumes of documents, foreshadowing an intention to seek an order pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) to make certain of those documents the subject of a confidentiality order. 5 Mr Kunc explained the basis for his client's position with respect to the respondent's evidence in this way. First of all, he argued that the affidavit made numerous formulaic statements to the effect that documents came into existence for the dominant purpose of giving or receiving legal advice, or in connection with legal services with respect to existing or anticipated legal proceedings, and the courts have frequently stated that such formulaic statements may not be sufficient to discharge the onus that rests on the party claiming the privilege to prove that the documents are subject to it. 6 Secondly, he argued that this proceeding was not in the nature of an interlocutory proceeding, thereby permitting a party to rely on hearsay evidence where its source is identified pursuant to s 75 of the Evidence Act 1995 (Cth) (Evidence Act). The reason, he submitted, was that what was at the heart of the motion was a fundamental right which, once determined, would conclusively decide the issue. Hence, his argument exposed what he considered was a serious deficiency in the evidence adduced by the respondent in support of its claim of privilege. 7 His third contention was that, in the alternative, the evidence in Mr Powers's affidavit was so weak, that whatever probative value it had would be substantially outweighed by its prejudicial effect and it should therefore be excluded under s 135 of the Evidence Act. He relied on two aspects of s 135. One was paragraph (a) - that is, unfair prejudice, the unfair prejudice being his inability to cross-examine the person who was the author of the document or the relevant communication. The second was paragraph (b) - that the evidence relied upon was so ambiguous as to make it misleading or confusing. 8 After the luncheon adjournment Mr McHugh requested that the hearing of the motion, or more particularly, the application for rulings with respect to the representative documents, be adjourned for a period of approximately six to eight weeks to enable his client to put on further evidence which would hopefully meet the deficiencies to which Mr Kunc had pointed. Mr McHugh frankly conceded that the true basis of his request for an adjournment was that he wished to improve the evidence upon which his client had earlier proposed to rely. Mr McHugh argued that he and his client were concerned that a judgment that dealt with Mr Kunc's submissions and resulted in a finding based on those submissions to the effect that the evidence was inadequate to discharge the respondent's onus of proof may not be sufficient to resolve the wider question of the privilege attaching to the larger group of documents, which was the purpose of having a preliminary determination in accordance with Cowdroy J's orders. 9 The applicants opposed the adjournment. 10 First, Mr Kunc argued, the regime set up by the Court always left open the question about what would happen after the preliminary determination. 11 Secondly, he submitted, the respondent made a fully informed forensic decision when it determined to adduce the evidence from Mr Powers in the form in which it was adduced. 12 Thirdly, he argued, the question of the independence of in-house lawyers was always in play. I pause to say that the communications said to be privileged in this matter are communications to or from in-house lawyers of the respondent company. As early as 19 March 2010 the respondent's solicitors were on notice that the challenge to the claims for privilege would include a challenge based on the proposition that the relevant in-house lawyers for the respondent company were not sufficiently independent so as to be able to provide legal advice capable of being subject to a valid claim for legal professional privilege. 13 And fourthly, Mr Kunc explained, the procedural history of this matter shows that the respondent had ample time to consider its position and to decide what evidence it would call. 14 The long and the short of the applicants' opposition to the respondent's application for adjournment is that the respondent made a forensic election to adduce the kind of evidence it did and having made that election, it should be held to it. 15 The application is to be determined having regard to the overarching purpose of the civil practice and procedure provisions of the FCA Act and Rules, namely, the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. Section 37M of the FCA Act, which enshrines that overarching purpose, goes on to explain in subs (2) that the purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. 16 There is no doubt that the parties on both sides are represented by very experienced lawyers and skilful advocates. Equally, there is no doubt that the respondent made a forensic election to adduce evidence in the manner in which it did. There were always going to be risks inherent in taking such a course. In Kennedy v Wallace [2004] FCAFC 337; (2004) 142 FCR 185 at [13], Black CJ and Emmett J said of an approach where formulaic statements are made in an affidavit seeking to maintain privilege over documents: The appellant's decision to base his claim for privilege in this way was attended with considerable risk, since, as Lockhart J observed in National Crime Authority v S (1991) 29 FCR 203 at 211, it is not sufficient for a party merely to assert a claim for privilege nor will an affidavit asserting the purpose for which a document was brought into existence followed by a statement about the category of legal professional privilege to which the document is said to belong necessarily be sufficient. Moreover, in the leading case of Grant v Downs (1976) 135 CRL 674, Stephen, Mason and Murphy JJ warned against the erroneous view that the privilege is "necessary or conclusively established by resort to any verbal formula or ritual" (at 689). In the same case, their Honours also observed that whatever the facts may be, it is always for the party claiming privilege to show that the documents for which the claim is made are in fact privilege. 17 Later, in their Honours' judgment at [17], they remarked that it was open to Mr Kennedy, the person asserting the privilege in that case: to seek orders that would have allowed the evidence to be given in confidence under such conditions as to preserve the privilege. 18 The respondent also made a forensic decision not to call the authors of the sample documents and so expose them to cross-examination, despite remarks made by (amongst others) Tamberlin J in Seven Network Limited v News Limited [2005] FCA 142 at [3] concerning the propriety of such a course and the need for the Court to be satisfied in the case of in-house lawyers of their independence, that is to say, that their personal loyalties, duties and interests do not influence the professional legal advice they give and that the advice in question is of a legal, rather than a commercial nature: cf. Rich v Harrington (2007) FCA 1987; (2007) 245 ALR 106, Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No 2) (2007) FCA 1445 at [35] per Graham J. 19 There is a very strong case, therefore, against the application. Ordinarily, I would not be disposed to grant it because I do not think that the overarching purpose would be served by allowing the application. But in the present case, I am persuaded that I should make an exception and the reason for the exception is the desirability that the object behind the orders made by Cowdroy J be fulfilled. If there is any real chance that a determination of the privilege question with respect to the sample documents could not readily dispose of the wider issue of the privilege attaching to the 1400 odd documents, then that would not further the overarching purpose of the civil practice and procedure provisions of the FCA Act and Rules. 20 It would not be an efficient use of the judicial and administrative resources of the court for the court to be bogged down in making rulings about so many documents, if it is possible, as the parties appear to think it is, to resolve that issue by reference to a small representative sample. At the end of the day, taking into account the objectives set out in subsection (2) of s 37M, I am of the opinion that the best way to serve the overarching purpose is to grant the application and I do so. With respect to the question of costs, I order that the respondent pay the applicants' costs thrown away by the adjournment. 21 I therefore order that: 1. The applicants' notice of motion filed on 14 October 2009 be listed for hearing on 19 and 20 August 2010. 2. Any further evidence in support of the respondent's claim for privilege be provided to my associate and served by 19 July 2010. 3. Any further submissions be filed and served by Thursday 5 August 2010. 4. The respondent pay the applicants' costs thrown away by the adjournment of their motion. 5. This proceeding is listed for further directions at 9.30 am on Friday 6 August 2010. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.