Seven Network Limited v News Limited

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NEW SOUTH WALES DISTRICT REGISTRY NSD 1223 OF 2002

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is an application by the applicants in the substantive proceedings which are currently part heard before Sackville J for access to the parts of a letter dated 18 February 2002 from Baker & McKenzie to the sixteenth respondent, Optus Vision Pty Limited, which has been produced in redacted form as answering the legal advice the subject of the waiver found by his Honour (Seven Network Limited v News Limited (No 12) [2006] FCA 348 at [20]). The sixteenth respondent is Optus Vision Pty Limited ('Optus') and the twenty second respondent is Singtel Optus Pty Limited ('Singtel'). 2 The issues to which the waiver was found by his Honour to relate were identified by reference to the summary in par 5 of his Honour's judgment. I have been taken to sections of the current statement of claim between paragraphs 600 and 657, which set out some of the material facts the subject of the summary in par 5 of Sackville J's judgment that material supplemented, inter alia, the issues identified by his Honour by identifying a claim in deceit to which his Honour had not expressly referred. 3 The letter of 18 February 2002 was written in the context that, as I understand it, two earlier variation agreements had been entered into between the applicants on the one part and Optus on the other to take account of the fact that there was some uncertainty as to when Optus would be able to, if it wished, terminate its agreements for taking a sports channel programming feed from the applicants in consequence of the applicants' loss of the AFL rights. One agreement was negotiated on about 27 September 2001 and another extension of that agreement on 18 December 2001. 4 The unredacted parts of the letter of 18 February indicate that cl 8A was assumed to have been breached by Optus at that time through its then negotiations with the Foxtel parties to the proceedings. On 20 February 2002 there was a public announcement of the conclusion of an agreement between the Foxtel parties and Optus. Mr Bannon SC and Mr Hewitt appeared for Optus and Singtel. They argued that the redacted portions of the letter referred to issues discrete from those the subject of the waiver applying the tests set out in Sackville J's judgment.

PARAGRAPH 5 and the introductory words of paragraph 6 5 The first pair of redactions were those of par 5 and the introductory words of par 6. Optus and Singtel argued that the introductory words of paragraph 6 might disclose what was in 5, which was a discrete issue, and it was for that reason they ought be redacted. One of the issues pleaded, in particular in par 656 and par 657 as well as in par 625 to par 628 inclusive, is that Singtel knew at all relevant times of the relevant contractual arrangements between Optus and the applicants, and that it induced Optus to act in breach of the two exclusivity clauses which, as I understand it, are cl 8A. 6 The contravention of cl 8A alleged is not a singular contravention. Rather it is a contravention that involves taking into account the fact that negotiations were conducted over a period in which cl 8A said they ought not to be conducted between Foxtel and Optus which culminated in the ultimate breach alleged, being the entry into the arrangement or agreements announced on 20 February 2002. 7 The 'Alchemy Paper' described by Sackville J at par 4 of his judgment in the passage there extracted records critically: 'Our legal advice is that the risk of damages being awarded against Optus is low -' 8 That was in the context of describing the fact that Optus had been negotiating with Foxtel in apparent breach of, inter alia, cl 8A. Optus and Singtel argue that the 'Alchemy Paper' does not describe any consideration of a breach of s 52 of the Trade Practices Act 1974 (Cth), and that therefore that is a discrete issue. I do not think that that argument has any substance. The 'Alchemy Paper' is seeking to address Optus' likely commercial position, and focuses on the facts dealing with the negotiation of or the conclusion of the exclusivity arrangements. 9 But the reference to their legal advice enabled the authors of the paper to put it forward to Optus' board and, as I understand it, for Optus' board to put that forward to Singtel's board, as encapsulating the likely legal outcome in relation to a risk as to damages if the negotiations with Foxtel were to be pursued and concluded in breach of cl 8A. 10 In my view, the contents of par 5 of the letter of 18 February indicate a view as to the legal position that is relevant to the expression of the opinion that the risk of damages is low because it deals with a subject matter that can have a direct bearing on Optus' and Singtel's knowledge of the applicant's legal rights and the consequence of their being breached such as might be relevant to an issue of exemplary damages pleaded in par 656 and par 657 of the current statement of claim. 11 In my opinion, par 5, although it does deal with advice about matters that in one sense are different from those summarised in par 5 of Sackville J's judgment, are really so interconnected with consideration of Optus' and Singtel's understanding of the legal rights of the applicants that it would not give a complete picture of the basis on which Optus assessed its risk of damages being low and in which Optus proceeded to act in the way it did. And likewise this applies to Singtel, to the extent that it may have seen or relied on or be taken to have knowledge of this material, acted. 12 In my opinion, the matters go at least to the issue of damages the subject of par 656 and par 657 of the current statement of claim. For those reasons, in my view, the legal professional privilege in par 5 has been waived in accordance with the ruling Sackville J gave, and I order it be disclosed. For the same reasons, the introductory words of par 6 must likewise be disclosed.

PARAGRAPH 6(C) 13 The claim is made that par 6(c) is still capable of being the subject of a claim for legal professional privilege because it is argued that it deals with a discrete subject matter that arises after cl 8A was entered into or the two variation agreements were made, and deals with a discrete subject matter as to consequences that might flow if Optus entered into an agreement with Foxtel after 18 February 2002. 14 In par 6(c) there is an examination of the possible consequences were the applicants to learn of a potential breach of cl 8A. The entry into and announcement of the arrangements between Optus and Foxtel parties on 20 February 2002 is alleged to have been a breach of cl 8A and to have been induced by Singtel, causing Optus to breach cl 8A. 15 The 'Alchemy Paper' refers to the legal advice about the risk of damages being awarded against Optus being low in the context of considering the entry into the agreement of 20 February, or what became or might become an agreement on 20 February. One issue which is relevant in the assessment of exemplary damages is whether the tortfeasor may have made or be taken to have made a calculation that the result of a payment of damages or other legal consequence of his or her or its behaviour vis-a-vis the plaintiff would be that the amount payable by the tortfeasor would be less than the gain which the conduct of the tortfeasor impugned may realise to it. That consideration is pleaded in par 656 and par 657. 16 It seems to me that the subject matter in par 6(c) does relate to that question and has been the subject of a waiver in accordance with Sackville J's ruling.

PARAGRAPH 6(d) 17 Paragraph 6(d) is, in my opinion, in a different category. That paragraph deals with a discrete subject matter which is not the subject, as I understand it, of any pleaded allegation and does not seem to me to be relevant to any pleaded allegation. In my opinion, the redaction of that paragraph should remain.

PARAGRAPH 6(H) 18 Paragraph 6(h) is also redacted. It is, in one sense, a summary of or an elaboration of what would follow from the preceding matters. I have upheld the claim for privilege in respect of par 6(d). I think that it is possible to produce a version of par (h) which, if there is something that it currently reveals as to the content of par 6(d), can be revealed with appropriate redactions. I am not sure that the whole of it cannot be revealed, but I would prefer to allow Optus and Singtel to consider how much of it could be revealed and I will, if agreement cannot be reached or if what is produced is not satisfactory to the applicants, rule on whatever is produced at a later time. I think that is the most convenient way of dealing with the difficulty that there are parts redacted and unredacted in what had preceded it.

PARAGRAPH 7 19 Paragraph 7 of the letter is said to relate to what might happen in the future as opposed to dealing with the claims the subject of Sackville J's summary in par 5 of his judgment and more extensively set out in the paragraphs of the current version of the statement of claim to which I was taken. 20 In my opinion, par 7 is relevant to the issues pleaded by the applicants, particularly in relation to the issue of exemplary damages and the way in which Optus and, to the extent that it was relevantly dealing with the applicants, Singtel, were conducting themselves in those dealings up to the time of 20 February 2002. 21 In my opinion, there is an assessment as to the exposure for damages that is the subject of the 'Alchemy Paper' revelation, and I am of the opinion that the waiver found by Sackville J extends to the content of par 7.

PARAGRAPHS 8 AND 9 22 Paragraphs 8 and 9 appear under a heading which indicates that they raise discrete issues. Optus and Singtel argue that indeed the issues were discrete. The subject matter of paragraph 8 deals with what Mr Bannon SC described as a mechanical consequence once the 28 February expiry date passed. In my opinion, that submission should be accepted and the claim for privilege should be upheld. 23 Paragraph 9 deals with an entirely different matter. It is not, as I understand it, relevant to any allegation which the applicants have made in the proceedings, and I am of the opinion that the claim for privilege for that paragraph should be upheld. 24 The orders that I make are that the claim for privilege in respect of paragraphs 5 and the introductory words to pars 6, 6(c) and par 7 have not been established. I will declare that. 25 I direct the Optus and Singtel parties to prepare a redacted form of par 6(h) if they wish to maintain any claim to privilege in respect of that paragraph consistent with my reasons. 26 I uphold the claim for privilege in respect of pars 6(d), 8 and par 9. 27 I order that the costs of this motion be the applicant's costs in the proceedings.

I certify that the preceding twenty seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Counsel for the Applicants: J Sheahan SC with S Moran

Solicitors for the Applicants: Freehills

Counsel for the Sixteenth and Twenty-second Respondents: A Bannon SC with J Hewitt

Solicitors for the Sixteenth and Twenty-second Respondents: Atanaskovic Hartnell

Date of Hearing: 4 April 2006

Date of Judgment: 4 April 2006