Resolution of the privilege issue
15To qualify as the dominant purpose, the relevant purpose must be the ruling, prevailing or most influential purpose: Mitsubishi Electric Australia Pty Ltd v. Victorian WorkCover Authority (2002) 4 VR 332 at 336 [10]; Federal Commissioner of Taxation v. Spotless Services Limited (1996) 186 CLR 404 at 416. It is not sufficient that the purpose is the primary purpose or even a substantial purpose: Grant v. Downs at 678 per Barwick CJ. The test is one of "clear paramountcy": Waugh v. British Railways Board [1980] AC 521 at 543; Sydney Airports Corporation Limited v. Singapore Airlines Limited [2005] NSWCA 47 at [7].
16Before it can be said that litigation is reasonably apprehended, there must be a real prospect of that litigation, as distinct from a mere possibility, but it does not have to be more likely than not: Mitsubishi Electric at 341 [19]; State of New South Wales v. Jackson [2007] NSWCA 279 at [67].
17These questions of dominance, and whether litigation can be reasonably anticipated, must be determined objectively: Grant v. Downs at 682 per Stephen, Mason and Murphy JJ. [O]ne does not look solely at the evidence or intention of the maker of a document to determine what was the dominant purpose or indeed any purpose, for which the document came into existence: Australian Competition and Consumer Commission v. Australian Safeway Stores Pty Ltd (1998) 81 FCR 526 at 545F per Goldberg J.
18It follows from Goldberg J's observation cited in the immediately preceding paragraph that in an insurance context, the intention of the insurer who commissioned the report, rather than the intention of its author, may better inform the inquiry; this indeed follows from Barwick CJ's reference to the person or authority under whose direction the document was produced or brought into existence: Grant v. Downs at 677; Guinness Peat Properties Ltd & Ors. v. Fitzroy Robinson Partnership [1987] 2 All ER 716 at 722 - 724 per Slade LJ.
19As I have said, it is common ground that Ms. Olsen, who was the person under whose direction the documents were produced or brought into existence, at least initially had more than one purpose. To assist me in determining whether the relevant purpose enjoyed that quality of clear paramountcy, the parties referred me to statements in the cases reflecting what I would regard as an expression of the judiciary's collective experience of "how things work" in practice. These general observations are, of course, factual considerations that may inform the probabilities, rather than statements of principle, but they do help to contextualise the inquiry (see [21]-[24] below.)
20Ms. Olsen's statement as to her intentions in her second affidavit is relevant and admissible, but cannot be determinative. More weight should be accorded to the inferences that can be naturally drawn from what was said by each party to the conversations to which she deposes. From that material I infer that from the outset, that is from the time the claim was first made orally to her by Melrose Cranes, she was aware that the insured attributed responsibility for the damage to Manitowoc. I further infer that she acted with celerity to initiate inquiries from a number of investigators and experts having different roles, for two purposes. First, to inform herself as to the facts for the purpose of equipping herself to make a decision whether or not to admit the claim. And secondly, to preserve and document the relevant evidence for submission to solicitors by her for their advice about whether a recovery action was available. In this latter regard, I understood Manitowoc to accept that this was a purpose apt to attract "litigation privilege" if that purpose was the dominant purpose.
21In Australian Safeway Stores Goldberg J pointed out page 545 - 6:
The process of investigation as logically anterior to, and a precursor to, the point at which it may be said the proceedings are prospective or reasonably anticipated. If evidence is required for proceedings it can be expected that until that evidence gathering process is well advanced, a view will not be able to be formed that proceedings are prospective or reasonably anticipated. That is a reason why it is difficult to ascribe a dominant purpose to the preparation of the anticipated proceedings before the evidence gathering process is well advanced and the evidence has been evaluated.
On the other hand, in Tooheys Ltd v. Housing Commission of New South Wales (1952) 20 LGR (NSW) 236 at 245 - 6 it was said that:
[i]n common experience, happenings of some kinds very often lead to litigation, and the occurrence of such an event would found a sufficient anticipation of litigation.
22In Cataldi v. Commissioner for Government Transport (1970) 1 NSWR 65, the Court of Appeal at [68] picked up the statement from Tooheys Ltd and pointed out that in some cases:
The circumstances in which documents came into being are such as to compel the inference that it was a purpose of their coming into existence that they would serve as materials upon which professional advice would be sought or that they would be used for the conduct of litigation arising out of the accident.
And in Mitsubishi Electric Batt JA at 342 [23], having referred to the dictum of Goldberg J in Australian Safeway Stores, said:
There must be many cases where it can be said that litigation is likely before the evidence gathering process has even begun
In that case, the factual conclusion was although an inquiry as to the facts was being commissioned, the results of it were to be given directly to lawyers for their advice.
23In Mitsubishi Electric however, the party on whose behalf the report was commissioned was a defendant who had already received notice of an occurrence of a type likely to give rise to a claim. And one can well accept that in circumstances such as those the force of circumstance strongly suggests that the relevant purpose is dominant.
24On the other hand, in a case like the present, even where the insurer has in mind the prospect of a recovery action from the outset, the logically anterior question must remain whether to admit the claim. And a decision about that cannot be made until more is known about the facts. This case is different from Nikmar where an experienced investigator was suspicious of arson at the conclusion of his preliminary investigation. Notwithstanding the assertions made by Ms. Olsen in her second affidavit, which I accept are honestly made, taking an objective view, I am not satisfied that UAA has demonstrated on the balance of probabilities that from the 30thJune 2009 the purpose of bringing a recovery action enjoyed clear paramountcy over it's need to know the essential facts to enable it to decide whether to admit the claim.
25However by the time that Mr. Grasso spoke to Mr. Hendriks on 27th July 2009 that initial phase had passed, a decision had been made to admit the claim, and the focus was on the prospective recovery action. Given that it was known that this was likely to be a large claim exceeding as much as $2 million in value, and the insured (Melrose Cranes) had a strong view about the responsibility of Manitowoc, in my judgment the matter, by then, had been identified as one of that kind which [i]n common experience ... very often lead[s] to litigation. Mr. Hendriks, immediately upon receipt of his oral instructions, re-instructed the persons from whom reports had been commissioned and another. From that point the purpose of advising on recovery proceedings had attained the requisite clear paramountcy.
26Moreover, to adapt the language of Batt JA from Mitsubishi Electric at [19], from 27 July 2009 there was a real prospect of recovery proceedings being instituted, as distinct from a mere possibility, although I could not say that the institution of such an action was then more likely than not.
27It follows from this that the documents listed in MFI 1, each of which post-date Mr. Hendriks' involvement in the case, are protected from disclosure by "litigation privilege".
28Accordingly, it is unnecessary for me to decide whether the documents are likewise covered by "advice privilege". In this regard I note that there is an apparent tension between the decision of the Court of Appeal of Victoria in Mitsubishi Electric and the Full Court of the Federal Court in Pratt Holdings. In the former case, Batt JA held that "advice privilege" is not available where one of the parties to the communication is a third party who is not the agent of the client for the purpose of the communication. This might be called the traditional view of Wheeler v. Le Marchant. See also Nickmar and DSE (Holdings) referred to above. In Pratt Holdings neither Finn J nor Stone J found it necessary to reconcile the apparent differences between "litigation privilege" and "advice privilege" as expressed in Wheeler v Le Marchant, but neither applied it: 361 [10] and 381 [85].
29I interpolate that the continued applicability of Wheeler v Le Marchant had been questioned at first instance, and in written submissions on appeal, in Mitsubishi Electric, but the point was abandoned on the hearing of the appeal: 335[8]-336[9]. Batt JA's dictum quoted above was said in approbation of said counsel's sagacity rather than to quell any remaining controversy. With respect this affects the precedential value of his Honour's remarks.
30To my mind it is clear that both Finn J and Stone J were seeking to develop "advice privilege" in a way which would modernise the rule in Wheeler v. Le Marchant. At page 367 [41] it is clear that Finn J thought the question of agency was not a principled reason for denying privilege. At 386[105] Stone J arrived at a similar conclusion. In her Honour's view the agency question did not provide a coherent rationale for "advice privilege". Her Honour would have given precedence to the dominance of the purpose. And Finn J would focus on the nature of the function the third party performed.
31To my mind there was a clear divergence between the Victorian Court of Appeal and the Full Court of the Federal Court relating to common law "advice privilege" and the present status of the rule stated in Wheeler v. Le Marchant. In the absence of a directly binding decision of the New South Wales Court of Appeal I would be bound to follow a decision of another Australian intermediate court of appeal unless convinced it is plainly wrong: Farah Constructions Pty Ltd v. Say-Dee Pty Ltd (2007) 230 CLR 89 at 151 - 152 [135]; CAL No. 14 Pty Ltd v. Motor Accidents Insurance Board (2009) 239 CLR 390 at 411 [49] - 413 [51].
32Naturally, particular difficulties arise where a first instance judge is required to choose between competing lines of thought in Australian intermediate Courts of Appeal not forming part of the judicial hierarchy in which the judge is placed. However, Pratt Holdings was considered, obiter dictum, in the New South Wales Court of Appeal in Meteyard v. Love (2005) 65 NSWLR 36 by Basten JA, with whom Beazley and Santow JJA agreed. That, however, was an Evidence Act 1995 case, not a common law case, concerning s.118 of that Act in the form that provision took before its amendment by the Evidence Amendment Act 2007 commencing on 1st January 2009. In its present form the language of par. (c) of s.118 would clearly abrogate the rule in Wheeler v. Le Marchant.
33Meteyard was an Evidence Act case because s.118 of the Act was picked up and applied to interlocutory applications by Part 36 Rule 13 of the then Supreme Court Rules (Meteyard at 63 [102]). The Court held that the rule in Wheeler v. Le Marchant did not apply to s.118 by a process of interpretation, the result of which was to give the concept of "agent" where it appears in the definitional s.117 a wider operation ... than that identified in Wheeler: 68 [121]. With respect it seems tolerably clear that, had the common law been in play, the Court may not have followed Pratt Holdings. No conclusion about this was expressed because it was unnecessary for the Court to do so: 62[97]; 64[107]; 64[109]; 68[123].
34Basten JA's analysis of Wheeler v. Le Marchant is at 60[90] and 64[109]. At 68[121] his Honour said:
As noted above, it is clearly arguable that the relevant principle identified in Wheeler v. Le Marchant was more restrictive of the immunity than recent Australian cases would allow.
35The phrase clearly arguable is, of course, a long way short of saying Pratt Holding was plainly wrong, assuming the former phrase refers to it. Basten JA's language is restrained, but with respect, his analysis demonstrates that the full Federal Court's decision extends "advice privilege" in a manner inconsistent with the traditional view of Wheeler v. Le Marchant. See also Westpac Banking Corp. v. 789TEN Pty Ltd (2005) 55 ACSR 519 [24] - [29]; [38] - [40] per Tobias JA with whom Beazley JA and Campbell AJA agreed. 789TEN, however, was another Evidence Act case.
36The traditional view is adhered to in New Zealand: Guardian Royal Exchange Assurance of New Zealand v. Stuart [1985] 1 NZLR 596; C-C Bottlers Limited v. Lion Nathan Limited [1993] 2 NZLR 445. It continues to be applied in Victoria: Orica Australia Pty Ltd v. Limit (No. 2) Limited [2008] VSC 247 (cf Samenic Limited v. APM Group (Aust.) Pty Ltd [2011] VSC 194, an Evidence Act case in the current form. A more expansive view was taken in Queensland by Holmes J in GSA Industries (Aust.) Pty Ltd v. Constable [2002] 2 Qd R 146 [19] - [22]; and also in South Australia. The view is that there is no difference between "litigation privilege" and "advice privilege" when it comes to communicating with third parties: Health and Life Care Limited v. Price Waterhouse (1997) 69 SASR 362 per Doyle CJ. In Western Australia different incidents of "litigation privilege" and "advice privilege" are recognised: Public Transport Authority of Western Australia v. Leighton Contractors Pty Ltd (2007) 34 WAR 279 at [13]; [18] and [20].
37I point out that in DSE (Holdings) Allsop J decided that "advice privilege" was not co-extensive with "litigation privilege" (his Honour was the successful counsel in Nickmar), but his Honour, with respect, seemed to take no narrow view about the scope of an agency to communicate for the purpose of the rule in Wheeler v Le Marchant: 177[89] - 178[92]; at 178[92] his Honour said:
...the appointment of someone to liaise with a lawyer and to include in that person's retainer (as here) a standing brief to communicate such matters about the client's affairs and its views on the client's affairs as is thought appropriate, can, it seems to me, be seen as the appointment of an agent to communicate. Though such a role goes beyond being a messenger to communicate, it involves, nevertheless, the retention of an agent to communicate.
However, unlike Finn J and Stone J (his Honour's decision predated Pratt Holdings), his Honour regarded it as necessary ... that the third party be the client's deputed agent to communicate with the lawyer in connection with the provision of legal advice: DSE (Holdings) at 179 [96].
38It seems to me that it can be said that the Australian common law in relation to "advice privilege" is in something of a state of flux, assuming the bifurcation forms part of the common law here. There is much to be said, as many learned Judges have, for the view that as there is a single rationale underpinning legal professional privilege in both its branches, and that the traditional view of Wheeler v. Le Marchant does not represent the current state of the common law in Australia.
39The idea that there is a single rationale underlying legal professional privilege in the common law in Australia is well illustrated by the analysis of Stone J in Pratt Holdings from 379[78] - 381[84]. As is well known, since Baker v. Campbell (1983) 153 CLR 52, it has been recognised in Australia that legal professional privilege is no mere exclusionary rule of evidence, but is a rule of substantive law supporting an important civil liberty: R. v. P. (2001) 53 NSWLR 664 at 679[43]; Waterford v. Commonwealth (1987) 163 CLR 54 at [64] - [65]; Esso at [64] - [65]; Commissioner of Australian Federal Police v. Propend Finance Pty Ltd (1997) 188 CLR 501; The Daniels Corporation International Pty Ltd v. Australian Competition and Consumer Commission (2002) 213 CLR 543. These cases all concerned extra-curial statutory compulsion by manifestations of the executive. In Daniels at 552 [10], Gleeson CJ, Gaudron, Gummow and Hayne JJ said:
Being a rule of substantive law and not merely a rule of evidence, legal professional privilege is not confined to the processes of discovery and inspection and the giving of evidence in judicial proceedings. Rather and in the absence of provision to the contrary, legal professional privilege may be availed of to resist the giving of information or the production of documents in accordance with investigatory procedures ... (footnotes omitted).
There is a difference, of course, between public investigatory procedures supported by legal compulsion, and the private law contractual interactions of an insured and its insurer. In my view nonetheless, these signal decisions make it inapt to speak of "advice privilege" and "litigation privilege". A passage cited by Stone J (Daniels Corp. at 552[9]) makes it abundantly clear that there is a rule of substantive law (emphasis added) which covers obtaining legal advice or the provision of legal services, including representation in legal proceedings. Were I free to make my own decision about the matter I would accept UAA's submission that the traditional view of Wheeler v. Le Marchant no longer represented the common law in Australia.
40In these circumstances I would not say, with great respect, that Pratt Holdings is plainly wrong, far from it. But in view of the conflict in authority at the level of Australian intermediate courts of appeal, nor can I follow it where it appears to conflict with considered dicta in the New South Wales Court of Appeal in Meteyard and Westpac Banking Corp, both of which treat Wheeler v Le Marchant as forming part of Australian common law.
41Accordingly, I would apply the traditional view of the rule in Wheeler v. Le Marchant and decide, to adapt the language of Allsop J from DSE (Holdings) at 178[92], that the retention of a loss adjustor, investigator or expert to prepare a report about the cause and origin of the fire which damaged the crane, which it is contemplated will be submitted to lawyers for advice, is not the retaining of a third party to act as an agent to communicate with the lawyer on behalf of the client. On this basis I would have held that the documents enumerated in MFI 1 were not protected from disclosure by "advice privilege".