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[2006] VSC 429
Supreme Court of Victoria
2006-10-30
KAYE J
Original judgment source is linked above.
PRACTICE - Discovery - Inspection - Claim for legal professional privilege - Whether cross-examination of deponent of affidavits in support of claim permitted - Action for wrongful dismissal - Whether privilege attached to draft report to directors prior to dismissal, sent to solicitors for advice.
1 This is an application by the plaintiff for inspection of a document discovered by the defendant entitled "Confidential draft report to non-executive directors on the managing director" and dated 19 October 2004.
2 The defendant has objected to producing the documents on the grounds of legal professional privilege. The defendant is a large building and construction company. In April 2003 the plaintiff was employed as the defendant's managing director for a period of three years commencing in May.
3 The plaintiff was dismissed by a resolution of the board of directors of the defendant on 26 October 2004. In these proceedings he claims damages and amounts owing to him under the employment agreement. In essence the defendant by its defence and counter claim asserts that it was entitled to dismiss the plaintiff for gross negligence and/or serious misconduct.
4 In the affidavit of documents sworn by the managing director of the defendant, Mr Marshall Dennis, of 25 August 2006, the defendant discovered the document in dispute in sub-paragraph (e) of schedule 1 part 2, in effect claiming that the document was prepared for the dominant purpose of enabling the defendant to be provided with legal advice in relation to these matters.
5 The plaintiff now contests that privilege claim. In support of the claim for privilege the defendant has filed two affidavits on which it relies. The first is an affidavit of Mr Dennis sworn 25 August 2006. The relevant paragraphs of that affidavit are paragraphs 7 and 8 which I quote:
"7. On or about 19 October 2004, I decided to draft a report which I titled, 'Confidential draft report to non-executive directors on the managing director'. The report was created for John Cooper to read and advise on. I incorporated in that report some elements of the legal advice which John Cooper provided to me prior to that date. After I drafted the document, I immediately had it emailed to John Cooper with a request that he provide legal advice. The report was not circulated to any other person and no other person, save for my secretary, was involved in its preparation.
8. I was advised by John Cooper not to use this draft report and that his firm would provide a report and legal advice to the board on the plaintiff's conduct. I accepted that advice and my draft report was only sent to Freehills and was not forwarded to anyone else."
6 Mr Cooper, a solicitor employed by Freehills, has sworn the other affidavit dated 25 August 2006. He states that on 19 October 2004 he received the document and a request for legal advice from Mr Dennis. He said that the draft report incorporated and made reference to legal work which Freehills had carried out for the defendant and provided to Mr Dennis prior to that date.
7 Mr Dennis sought from Mr Cooper legal advice in relation to the draft document. Mr Cooper states that he advised Mr Dennis not to use the document and told him that he, Cooper, would prepare a report and legal advice to the board of the defendant regarding the plaintiff's conduct. Mr Cooper adds in his affidavit that the draft document has not been used and it remains on the Freehill file.
8 The principles relating to the doctrine of legal professional privilege are not in dispute and can be simply summarised as follows. First, the purpose of legal professional privilege is to protect disclosure of confidential communications between a client and the client's legal adviser, see Esso Australia Resources Ltd v Commissioner of Taxation.[1]
9 Secondly, in respect of documents which are communicated to a legal adviser, the relevant enquiry is the purpose for which the document came into existence, not the purpose for which it was communicated to the legal adviser, see National Employers Mutual General Insurance Association Ltd v Waind,[2] Ventouris v Mountain,[3] Grant v Downs.[4]
10 Thirdly, the onus lies on the party asserting the privilege to establish the appropriate basis for that claim, see Grant v Downs,[5] and N.C.S. v S.[6]
11 Fourthly, the test is whether the dominant purpose for the creation of the document was for the purposes of obtaining legal advice, see Esso Australia Resources Ltd v Commissioner of Taxation.[7]
12 And, fifthly, the dominant purpose is defined as the prevailing or most influential purpose. In that respect I respectfully adopt, without setting out in its entirety, the useful exposition of the meaning of dominant purpose by Her Honour Kenny J in Commissioner of Taxation Commonwealth v Pratt Holdings Pty Ltd.[8]
13 The question then in this case is what does the material tell me about the purpose for which the report in question was prepared. In that context the primary source of that information must be the affidavit of Mr Dennis. Mr Dennis has said that the report was created for Mr Cooper to read and advise on. Mr Dennis's affidavit is carefully drafted and does not even indicate for what purpose Mr Cooper was to advise on the document. However, I think both parties accept that the correct meaning of Mr Dennis' affidavit is that Mr Cooper was to read and advise on whether the draft report in that form, or at all, ought to be distributed to non-executive directors. In my view that is the correct construction of the affidavit which has been filed in this case.
14 Mr Gunst of Queen's Counsel who appears for the plaintiff with Mr Champion, raised at one stage the issue as to whether I would permit cross-examination of the deponent, Mr Dennis, on his affidavit as to his assertion as to his purpose for which the document was prepared. However he did not press that application and understandably so. The authorities make it clear the courts are most reluctant to permit cross-examination on interlocutory applications such as these, see Olympic Airways SA v Alysandratos & Consolidated Travel (Vic) Pty Ltd[9] and Fruehauf Finance Corp Pty Ltd v Zurich Australian Insurance Ltd & Ors.[10] In this case no exceptional circumstances have been relied on justifying departure from the normal rule. I would be particularly loath to permit cross-examination at this interlocutory stage because it seems to me ultimately the enquiry as to what really was Mr Dennis's intention would very much depend on an understanding, and perhaps some exposition, of the background circumstances pertinent to the substantive claim in this case which were at large at the time that the report was prepared and then sent to the solicitors. In those circumstances I indicated in argument to Mr Gunst that I would not be prepared to allow cross-examination.
15 Mr North, Senior Counsel, who appears with Mr Forbes for the defendant, submitted that in analysing the intention of Mr Cooper, resort should be also had to the background context of the case. It seems clear from the facts which have been set out in the affidavits, and are usefully summarised in the outline, that at the time at which the report was sent to Mr Cooper, both parties had engaged solicitors and there was at least a potential for the impending termination of the plaintiff to become litigious.
16 Mr North submitted that in those circumstances it is clear that the dominant purpose of Mr Dennis in preparing the report was that attested to, namely to seek for the purposes of obtaining legal advice from Mr Cooper.
17 In response Mr Gunst submitted that the true purpose of the document should be gathered from its title, namely that it was intended to be a report to non-executive directors and the managing director. He submitted that the very title to the document operated to undermine the assertion of privilege made by Mr Cooper in his affidavit. It was submitted that the obtaining of legal advice was at best secondary to the preparation of the document for the purpose of tendering it to the non-executive directors.
18 As I already stated, at this interlocutory stage, it seems to me I am bound by what Mr Dennis has said on his affidavit, notwithstanding the submissions which were forcefully put to me by Mr Gunst. Mr Dennis has said that the document was created for the solicitor, Mr Cooper, to read and advise on.
19 It is a fair inference, as I have already said, that the purpose was that Mr Cooper was to read and advise on whether that document in that form, or indeed any other form, ought to be sent to the non-executive directors. Bearing that in mind, it seems clear that on the affidavit material before me, that the dominant purpose for the preparation of the document was that attested to by Mr Dennis, namely for the obtaining of legal advice as to whether or not the document should then be sent to non-executive directors.
20 That being the case, it follows in my view that at this stage the claim for legal professional privilege on the ground asserted in the affidavit of documents and supported in the affidavits of Mr Dennis and Mr Cooper is made out. In stating that I emphasise and make specific that this is simply an interlocutory application by the plaintiff for production of the document at this stage. The conclusions which I have come to and the views which I have expressed are made for the purposes of that interlocutory application and not otherwise and are made on materials which have not been subjected to cross-examination.
21 It is fair to observe, as Mr Gunst correctly did so, that the affidavits have been carefully drafted, and indeed are more conspicuous by what they do not say rather than by what they say. Thus nothing that I have said in this ruling should reflect on any later application at trial in relation to production of the document.
22 Bearing that in mind, and bearing in mind the conclusions which I have reached in these submissions, I would therefore rule that the application by the plaintiff by amended summons to me for production for inspection of the documents referred to should be dismissed.
[1] [1999] HCA 67; (1999) 201 CLR 49 at p.64.
[2] [1979] HCA 11; (1978) 141 CLR 648 at p.654 (per Mason J).
[3] [1991] 1 WLR 607 at pp.611-612 and 621.
[4] [1976] HCA 63; (1976) 135 CLR 674 at p.677 (per Barwick CJ) and p.688 (per Stephen, Mason and Murphy JJ).
[5] [1976] HCA 63; (1976) 135 CLR 674 at p.689.
[6] (1991) 100 ALR 151 at p.159.
[7] above at p.73.
[8] [2005] FCA 1247; (2004) 225 ALR 266 at pp.279-280.
[9] (1997) BC 9702121 at pp.9-10.
[10] [1990] 20 NSWLR 359 at p.366.
Carter
Dennis Family Corporation [2006] VSC 429
(1999) 201 CLR 49
(1978) 141 CLR 648
(1976) 135 CLR 674
(1991) 100 ALR 151
(2004) 225 ALR 266