Truckbug Pty Limited & Anor v Rethmann Australia Environmental Services Pty Limited & Ors

Second Respondent: Andrew Hopkins

Third Respondent: ADH Transport Pty Limited

CATCHWORDS: Unfair contract - s 106 of the Industrial Relations Act 1996 - application brought by first respondent by way of notice of motion seeking access to a letter of advice prepared by the applicants' counsel and sent to the applicants' solicitor on 6/09/01 - letter of advice sent under cover of letter of 13/03/03 by the applicants' solicitor to an expert - application of s 122(2) and s 122(4) Evidence Act 1995 - whether client legal privilege waived - application of Rule 160 IRC Rules to s 122 Evidence Act - Held: privilege not waived under s 122(2) - Held: privilege not waived under s 122(4) - application dismissed - orders

Evidence Act 1995 NSW LEGISLATION CITED: Industrial Relations Act 1996 Uniform Civil Procedure Rules NSW

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited & Ors (1998) 81 FCR 526 Cahill v State of New South Wales (Department of Community Services) (2007) 161 IR 124 CASES CITED: Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49 ML Ubase Holdings Co Ltd v Trigem Computer Inc. [2007] NSWSC 859 New Cap Reinsurance Corporation Ltd (In Liq.) + 1 Or v Renaissance Reinsurance Ltd [2007] NSWSC 258 Tirango Nominees Pty Ltd & Ors v Dairy Vale Foods Limited 156 ALR 364

First Applicant: Mr D Smallbone, of counsel Anderson Lawyers Bartholomew Rando LEGAL REPRESENTATIVES: First Respondent: Mr S Prince, of counsel TressCox Lawyers Philip Mitchell

Truckbug Pty Limited & Anor v Rethmann Australia Environmental Services Pty Limited & Ors

Application under s 106 of the Industrial Relations Act 1996

1 This is an application brought by the first respondent by way of notice of motion seeking orders that it be granted access to a letter of advice dated 6 September 2001 from David Smallbone to Anderson Lawyers. The advice was produced by MacBride Hinton and Co. in answer to a summons to produce issued by the first respondent. Mr Smallbone is counsel for the applicant in proceedings under s 106 of the Industrial Relations Act 1996. Those proceedings have been set down for hearing in the near future. Anderson Lawyers are the applicants' solicitors, and MacBride Hinton is a firm of chartered accountants which received instructions from the applicants, via their solicitor, to prepare an expert report for use in the pending proceedings under s 106 of the Act. The applicants object to production of the letter of advice on the ground that it is the subject of client legal privilege which has not been waived. 2 Anderson Lawyers, under cover of letter dated 13 March 2003, sent the advice to Paul Mansfield, a qualified lawyer, then a practising accountant employed by MacBride Hinton. The advice was one of a number of documents sent to Mr Mansfield to assist him in compiling the report on behalf of the applicants. The advice when sent was not expressed to be the subject of confidentiality. During cross-examination of Mr Mansfield on the notice of motion he said he did not read the advice or otherwise rely on it when he prepared his report. 3 Mr Prince of counsel appearing for the first respondent on the notice of motion, informed the Court that the argument upon which the application is based, comprises two limbs. The first limb relies on the application of s 122(2) of the Evidence Act 1995 NSW. The second limb relies on s 122(4) of that Act. The argument in brief, is that the sending of the letter of 6 September 2001 to Mr Mansfield in March 2003, constituted a disclosure of the advice by the applicants to an expert not in confidential circumstances, and resulted in a waiver of client legal privilege which otherwise attaches to the advice. The second limb relies, in the alternative, on an imputed waiver of the advice by reason of the provision of Mr Mansfield's report to the first respondent in circumstances where Mr Mansfield had received the advice prior to the preparation of the report. 4 Both limbs of the first respondent's argument proceed on the basis that the legal advice is the subject of privilege. The first respondent's reliance on s 122 of the Evidence Act is said to arise because the section applies derivatively to the advice to which access is sought under the notice to produce. 5 As a preliminary observation, s 122 in its terms is concerned with the adducing of evidence. The present application, in contrast, is concerned with the pre-trial stage of litigation, namely the production of documents following a summons to produce. Sections 122(2) and (4) are extracted below:

122. Loss of client legal privilege: consent and related matters

(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made: (a) in the course of making a confidential communication or preparing a confidential document, or (b) as a result of duress or deception, or (c) under compulsion of law, or (d) if the client or party is a body established by, or a person holding an office under, an Australian law--to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held.

(4) Subject to subsection (5), this Division does not prevent the adducing of evidence if the substance of the evidence has been disclosed with the express or implied consent of the client or party to another person other than: (a) a lawyer acting for the client or party, or (b) if the client or party is a body established by, or a person holding an office under, an Australian law--the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held.

(I note for completeness that neither party places any reliance on s 122(5).) 6 The section falls within Part 3.10 of the Evidence Act which deals with privileges, including client legal privilege in Division 1. The provisions of Part 3.10 relate only to the adducing of evidence. The first respondent's notice of motion seeks access at the pre-trial stage. Whether s 122 does in fact apply by analogy or derivation to a document to which access is sought at the pre-trial stage has been the subject of judicial comment. In Mann v Carnell (1999) 201 CLR 1 Gleeson CJ, Gaudron, Gummow, and Callinan JJ held that claims for privilege under the Evidence Act made in relation to the discovery and inspection of documents should be considered by reference to the more extensive common law doctrine of legal professional privilege, not the provisions of the Evidence Act which deal with client legal privilege. Any resort to the latter approach the High Court said was an error: at [25] -[27]. In Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49 the High Court again held that any attempt to apply derivatively the provisions of the Evidence Act dealing with client legal privilege to claims for privilege made at a pre-trial stage should be rejected: at [13] - [17]. 7 In Uniform Evidence Law by Stephen Odgers SC, 7th Edition, Lawbook Co. 2006, the commentary to s 118 of the Evidence Act (which deals with disclosure of confidential communications when adducing evidence) notes (at p507) that the Dictionary definition of "privileged information" in the Uniform Civil Procedure Rules NSW (UCPR) imports the application of almost all of the provisions of Part 3.10 of the Evidence Act into civil pre-trial proceedings. A reading of Rule 1.9 of the UCPR would appear to confirm this. That rule deals with objections to the production of documents at the pre-trial stage on the ground that the documents are privileged; and, to answering questions on the ground that the answers would disclose privileged information. Rule 160 of the Industrial Relations Commission's Rules (IRC Rules) expressly imports the provisions of Part 3.10 of the Evidence Act into the pre-trial stage of discovery and inspection of documents. Rule 160(c)(i) provides that:

"Privileged document" means in relation to proceedings:

a document of which evidence could not be adduced in the proceedings over the objection of any person, by virtue of the operation of Part 3.10 of the Evidence Act 1995.

8 Boland J, in Cahill v State of New South Wales (Department of Community Services) (2007) 161 IR 124, utilised Rule 160 to apply Part 3.10 to a number of documents to which access was sought at the pre-trial stage of the proceedings. The proceedings before his Honour concerned a prosecution under the Occupational Health & Safety Act 2000. The defendant served on the prosecutor a notice to produce seeking documents in respect of which the prosecutor claimed legal professional privilege. The defendant contended that the privilege had been waived. The first document was a memorandum from an industrial officer employed by the prosecutor who had assumed responsibility for the preparation of the prosecution case. The memorandum recommended the prosecution of the defendant and sought approval to proceed. The memorandum had attached to it a legal advice from counsel acting for the prosecutor. The defendant also sought access to this document. Boland J held that mere reference to the advice in the memorandum did not amount to waiver under s 122(1) of the Evidence Act, but that the situation may be different where the effect of the legal advice could be inferred. His Honour found that the substance of the legal advice could be inferred from the recommendations contained in the memorandum, namely that the advice had recommended that the industrial officer approve the prosecution and that the prosecution would succeed or had reasonable prospects of success. According to his Honour (at [52], [53]), the substance of the advice was voluntarily disclosed because its effect could be inferred. This finding followed the reasoning in Adelaide Steamship Company Ltd v Spalvins (1998) 81 FCR 360. The privilege which ordinarily attached to the advice had therefore been waived and the prosecutor was ordered to produce it to the defendant for inspection. 9 In the present proceedings, the submissions of both parties have been advanced on the basis that s 122 of the Evidence Act applies to Mr Smallbone's advice. I therefore intend to adopt the approach of Boland J and utilise Rule 160 to apply the relevant provisions of the Evidence Act to the first respondent's application.

Section 122(2) 10 Returning to the first limb of the first respondent's argument, I have no doubt that under s 122(2) the sending of the letter of advice to Mr Mansfield under cover of letter of 13 March 2003 constituted a knowing and voluntary disclosure of the substance (indeed the whole) of the advice. In my opinion, however, the privilege which attaches to the advice has not been waived. This is because the second pre-requisite or condition set out in s 122(2) has not been satisfied, namely, that the disclosure, "was not made in the course of making a confidential communication ...". On the contrary, I find that the advice was disclosed in the course of making a confidential communication to Mr Mansfield. The reasons for this conclusion follow. 11 Under s 117 of the Evidence Act a "confidential communication" means a communication made in such circumstances that when it was made, "... the person to whom it was made; was under an express or implied obligation not to disclose its contents whether or not the obligation arises under the law". 12 I have already observed that when the advice was forwarded to Mr Mansfield it was not expressly or explicitly said to be a confidential document. The issue is therefore whether, in the circumstances, the obligation not to disclose the contents of the advice to third parties was implied. 13 In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited & Ors (1998) 81 FCR 526, Goldberg J considered whether draft witness statements were confidential documents. His Honour examined the context in which the documents came into existence and their proposed use, and found that they were confidential documents. In that regard, his Honour said (at 563F-564B): "It is hardly to be expected that at the stage the draft witness statements came into existence the Commission would be prepared for any person to see the statements. I consider that confidentiality should be inferred from the nature of the activities being undertaken by Mr Eva. Unlike the situation in Trade Practices Commission v AMPOL Petroleum (Vic) Pty Ltd , the information for the witness statements was not obtained under a coercive power in which situation the information is not given in confidence. As Davies J said in Trade Practices Commission v AMPOL Petroleum (Vic) Pty Limited (at 323): "The person who is examined is not in the position of a witness or a potential witness who, by voluntarily making a statement for use in legal proceedings, may, perhaps if the circumstances are appropriate, impliedly accept a duty of confidentiality with respect to the statement given. ... The privilege when it exists is that of the client and not that of the lawyer or of the witness who may have given a statement."" 14 As an expert retained by the applicants it could be expected that Mr Mansfield's interest in the litigation would be neutral and that the applicants would have no reason to apprehend any prejudice that might arise through fear of subsequent disclosure by Mr Mansfield of the advice to persons independent of or adverse to the litigation. Mr Mansfield was retained by Anderson Lawyers on behalf of the applicants to prepare a report for the use in the applicants' pending litigation. The purpose of retaining Mr Mansfield to prepare the report was no doubt to secure his assistance in order to advance the applicants' claim under s 106. This purpose is not inconsistent with the purpose of legal professional privilege or client legal privilege, which is to protect the applicants from subsequent disclosure of the advice. In Mann v Carnell, Ms Carnell, the Chief Minister and head of the executive of the Australian Capital Territory (the Territory), sent to a member of the Territory's legislative assembly, copies of legal advices which were a response to a complaint made by Dr Mann (the appellant) concerning litigation in which he had been involved. The issue before the Court was whether the legal advices were the subject of privilege which had been lost by reason of the disclosure to a third party (the member of the legislative assembly). In finding that the privilege had not been lost, the High Court made observations on the purpose of the privilege (at [34] [35]): [34] ... Disclosure by a client of confidential legal advice received by the client which may be for the purpose of explaining or justifying the client's actions, or for some other purpose, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect. ... [35] The purpose of the privilege being to protect the Territory from subsequent disclosure of the legal advice it received concerning the litigation instituted by the appellants, there was nothing inconsistent with that purpose in the Chief Minister conveying the terms of that advice on a confidential basis to a member of the Legislative Assembly who is to consider the reasonableness of the conduct of the Territory in relation to the litigation. 15 It is implicit for the reasons outlined above that when the advice was sent to Mr Mansfield he was under an obligation not to disclose its contents. It follows therefore that the advice retains its character of confidentiality and accordingly the privilege which attaches to the advice has not been waived. Section 122(4)

16 Nor can it be inferred from the contents of the report that the substance of the advice was disclosed with the express or implied consent of the clients (the applicants) to another person. In Tirango Nominees Pty Ltd & Ors v Dairy Vale Foods Ltd 156 ALR 364, Mansfield J considered whether the privilege which attached to letters of instruction to an expert, was lost by reason of s 122(4) in circumstances where the letters were produced during the cross-examination of the expert. His Honour approached the issue by considering whether under s 122(4) the substance of the evidence had been disclosed with the express or implied consent of the clients (the applicants in the proceedings). His Honour looked at the expert report in order to see whether the letters of instruction had provided any foundation for the opinions expressed by the report or whether production of the letters of instruction was necessary as associated material to the report, in order to avoid an incomplete or misleading picture of the evidence. His Honour noted that the only material pointed to within the expert's evidence, which may have amounted to disclosure of the instructions given to him, appeared in paragraph six of the report, and in two brief passages of oral evidence during cross-examination. Paragraph six of the report read, "I have been requested by the solicitors ... to quantify the economic loss suffered by the applicants as a result of actions taken or not taken by Dairy Vale Foods". There was no detailed reference in the evidence to the nature of the letters of instruction or identification of any material contained in the instruction documents. Based on the extent of the material disclosed, his Honour found that it was not a "sufficient substantial disclosure" of any information so as to constitute a waiver of privilege. Accordingly, the claim for privilege was held to be properly maintained. 17 A similar approach has been taken in two other authorities to which the Court's attention was directed by the applicants on the present notice of motion. The first of these is ML Ubase Holdings Co Ltd v Trigem Computer Inc. [2007] NSWSC 859 where Brereton J said at [45]: [45] In my opinion, service and tender of an expert witness's report in proceedings does not constitute a waiver of the privilege which attaches to communications between the expert and the solicitor who instructed him or her save to the extent that those communications are associated documents reasonably necessary to an understanding of the report. "Proper understanding" of a document or communication will sometimes, but not always, require that documents to which it responds or refers be available. It may very likely be so when the primary document becomes a summary or excerpt from an earlier communication, or responds to questions which are not themselves restated in it. But I do not accept that "a proper understanding of the communication or document" involves an appreciation of the manner in which the opinions contained in the document have been formed over time, or the iterations and evolutions through which they have passed. The test is concerned with the comprehensibility of the primary communication or document: if it can be completely or thoroughly understood without more, then access to the related communications or documents is not reasonably necessary." 18 In the second authority, New Cap Reinsurance Corporation Ltd (In Liq) & 1 Or v Renaissance Reinsurance Ltd [2007] NSWSC 258, White J said at [53] [54]: 53 The question is not merely whether it could be said that the privileged materials were used in such a way that they could be said to influence the content of the report, but whether it could be said that they influenced the content of the report in such a way that the use or service of the report would be inconsistent with maintaining the privilege in those materials, such as, where it would be unfair for the party to rely on the report without disclosure of those materials. Where an expert's report is submitted to a party's legal advisers so as to be put into a form which will ensure that it is admissible, it can be said that the privileged communications between the expert and the lawyers have influenced the content of the report, in the sense of its form, although not in the sense of the formulation of the substantive opinions expressed by the expert. Likewise, privileged communications between an expert and the party's lawyers whereby material information is provided to the expert in the form of assumptions or documents may well influence the content of the report. However, an expert's report is required to state what material and assumptions are relied on. Use of a final report, which refers to such materials and assumptions, is not inconsistent with maintaining confidentiality in the communications which produced the final product. 54 Having considered the documents in respect of which privilege is claimed, I do not consider that it could be said that they have influenced the content of the final report in such a way that the service or use of the report would be inconsistent with maintaining confidentiality in the privileged materials. 19 Returning to the present proceedings, Mr Mansfield's report makes no reference at all to Mr Smallbone's advice. In cross-examination, Mr Mansfield said that he neither relied upon, nor read, the advice when preparing and completing his report. The Court has no basis for disbelieving Mr Mansfield's evidence on this point or in any way finding that his evidence was unreliable. In cross-examination, Mr Mansfield explained that he has a detailed familiarity with the industry in which the applicants operated and was capable of providing valuations of the machinery (in this case, a truck) and the business which was what he was instructed to do when preparing the report, without recourse to extraneous material. In the report he states that he reached his conclusions as a result of, "a familiarity with the cartage business and accounting principles concerning profit determination". Based on these matters I therefore accept Mr Mansfield's evidence in its entirety. It was not suggested by the first respondent that the letter of advice was reasonably necessary to an understanding of the report, (as to which, see s 126 of the Evidence Act). Moreover, in contrast to the circumstances before Boland J in Cahill v New South Wales (DCS), no inference is capable of being drawn from the contents of the report as to the substance of the advice. Even if a comparison of the two documents yielded a similarity or similarities, a competing rational inference is available that the two documents relied independently on a common source, for example, the statement of the second applicant which was one of a number of documents sent by Anderson Lawyers on behalf of the applicants to Mr Mansfield under cover of the letter of 13 March 2003. (I note however that that statement is undated.) 20 I therefore find that there has been no imputed waiver of the privilege attaching to the letter of advice by reason of the provision of Mr Mansfield's report to the first respondent. 21 The Court makes the following Orders:

1. The notice of motion filed by the first respondent, Rethmann Australia Environmental Services Pty Limited, on 27 April 2007 is dismissed.

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