ESSO AUSTRALIA RESOURCES LTD v FC of T
Judges: Gleeson CJGaudron J
McHugh J
Gummow J
Kirby J
Callinan J
Court:
High Court
MEDIA NEUTRAL CITATION:
[1999] HCA 67
Callinan J
115. In this case the appellant asks the Court to re-open
Grant v Downs
[161]
Facts
116. This is an appeal from interlocutory orders. The substantive proceedings, yet to be heard, involve six related applications to the Federal Court, challenging assessments made by the respondent under the Income Tax Assessment Act 1936 (Cth) in respect of a transaction between the appellant, the Colonial Sugar Refining Company Limited (CSR) and other parties. By the agreement giving effect to the transaction, the appellant acquired all of the issued units in a trust, Delhi Australia Fund from CSR. Interest was payable to both CSR and to the Exxon Overseas Investment Corporation on the unpaid balance of the purchase price. The appellant claims that the interest paid to those two corporations is allowable as a tax deduction.
117. General orders for discovery were made in each of the six related applications on 18 October 1996. The appellant, by affidavit, claimed client legal privilege for a number of documents on the basis that they had been prepared for the dominant purpose of giving or receiving legal advice. By notices of motion dated 22 October 1997 the respondent sought orders that the appellant produce for inspection, all relevant documents except those prepared for the sole purpose of giving or receiving legal advice.
118. The Notices of Motion came on for hearing before Foster J who framed questions of law as follows:
[162]
``(a) Whether the correct test for claiming legal professional privilege in relation to the production of discovered documents is the `sole purpose' test as formulated by the High Court in Grant v Downs [163]
(1976) 135 CLR 674. or the `dominant purpose' test as set out in s 118 and s 119 of the Evidence Act 1995 (Cth).(b) Whether the court has power pursuant to O 15, r 15 of the Federal Court Rules to make an order excluding from production
ATC 4065
discovered documents on the basis that such documents meet the `dominant purpose' test as set out in s 118 and s 119 of the Evidence Act 1995 (Cth).''
119. Section 118 provides as follows:
``Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
- (a) a confidential communication made between the client and a lawyer; or
- (b) a confidential communication made between 2 or more lawyers acting for the client; or
- (c) the contents of a confidential document (whether delivered or not) prepared by the client or a lawyer;
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.''
120. Section 119 is in these terms:
``Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
- (a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or
- (b) the contents of a confidential document (whether delivered or not) that was prepared;
for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.''
The decision at first instance
121. Foster J referred to the reasoning of the majority (Stephen, Mason and Murphy JJ) in
Grant v Downs
who said:
[164]
``that unless the law confines legal professional privilege to those documents which are brought into existence for the sole purpose of submission to legal advisers for advice or for use in legal proceedings the privilege will travel beyond the underlying rationale to which it is intended to give expression and will confer an advantage and immunity on a corporation which is not enjoyed by the ordinary individual.''
122. His Honour also referred to the judgment of Barwick CJ who held that a test of dominant purpose was the appropriate test.
123. Since
Grant v Downs
, and after an extensive period of research and consultation, and a report by the Australian Law Reform Commission,
[165]
124. Foster J gave consideration to a number of cases in which it was held that ss 118 and 119 of the Act have a derivative, indirect, or ``flow-on'' effect on the common law, that in some way the former exert a gravitational influence on the latter so as to make the common law conform to the statute.
125. In
Telstra Corporation v Australis Media Holdings
[
No 1]
[167]
``an indirect or flow-on effect, in the application of equivalent principles to all ancillary processes.''
126. McLelland CJ in Eq was impressed by the reasoning in
Trade Practices Commission v Port Adelaide Wool Co Pty Ltd
,
[168]
127. In
Towney v Minister for Land and Water Conservation (NSW)
,
[169]
128. But there is a category of cases in which a different conclusion has been reached.
Akins v Abigroup Ltd
[170]
129. In the present case, Foster J decided not to follow Telstra and Towney . His Honour's view was that in terms, the Act applied only in respect of the adducing of evidence, and that the common law, as settled by this Court in Grant v Downs applied in other circumstances, including the present.
130. There is a third category of cases in which consideration has been given to an argument that O 15 r 15 of the Federal Court
ATC 4066
Rules authorises a Court, in effect, to circumvent Grant v Downs by refusing to make orders for discovery on the basis of a sole purpose test.131. The rule provides:
``The Court shall not make an order under this Order for the filing or service of any list of documents or affidavit or other document or for the production of any document unless satisfied that the order is necessary at the time when the order is made.''
132. In
BT Australasia Pty Ltd v New South Wales
,
[172]
133. Branson J thought it anomalous that a party might have access to a wider class of documents at an early stage of the proceedings than would be admissible at trial. Foster J pointed out however that the scope of discovery is not limited to documents which would be admissible in evidence.
[175]
134. Foster J, in disposing of the premise upon which the expansive view of the Federal Court Rules was said to be justified, held that the taking of a procedural step to widen privilege would be to accord a privilege expressly denied by the High Court in
Grant v Downs
.
[176]
135. The questions of law were answered by Foster J in this way:
[177]
``In respect of question (a), that the correct test for claiming legal professional privilege in relation to the production of discovered documents is the `sole purpose' test as formulated by the High Court in Grant v Downs .
In respect of question (b), that the question be answered in the negative.''
136. The appellants appealed to the Full Court of the Federal Court, comprised of a bench of five judges (Black CJ, Beaumont, Sundberg, Merkel and Finkelstein JJ).
[178]
``Yes, but to exclude from production discovered documents for the sole reason that they meet the `dominant purpose' test in ss 118 and 119 would not be a proper exercise of the power.''
Construction of the Act
137. Black CJ and Sundberg J were of the view that the Act did not apply either directly or indirectly to the production of documents in pre-trial settings. Their Honours rejected the argument that the Act had a derivative effect on the common law; that the common law must adapt itself to include the Act as part of its fabric; or that the common law was indirectly modified by the Act. They held that
Adelaide Steamship Co Ltd v Spalvins
[180]
138. In answer to the first proposition, Finkelstein J concluded that a literal reading of the sections (118 and 119) was appropriate, and that they have no application to pre-trial processes. In relation to the second, his Honour rejected the view that prevailed in many of the cases: that apparent asymmetry or inconsistency in the tests applicable at pre-trial and trial stages was sufficient to justify a reading of the sections contrary to their express and literal meaning. Then his Honour made two observations:
[182]
``Only one object of discovery, and in many cases not the principal object, is to obtain evidence. Often the principal object is to obtain information that will throw light on
ATC 4067
the case... including information that would, directly or by train of enquiry, advance a party's own case or disadvantage that of his or her adversary.''
139. And he concluded the point by saying:
[183]
``Further, in the preparation of a case for trial it is commonplace, and it has been for over 150 years, for a party to obtain possession of a large quantity of documents many of which are not capable of being tendered in evidence for one reason or another... Thus, rather than creating confusion and disorder, the ascertainment of facts and information from documents not themselves admissible is often likely to lead to a just determination of a cause.''
140. The minority (Merkel J, with whom Beaumont J, in brief reasons, agreed) held that there had been no modification of the common law other than that part of the common law directly altered by the Act. Merkel J also referred to what was said by Gaudron, McHugh, Gummow and Hayne JJ in
Garcia v National Australia Bank Ltd
: that it is for the High Court and not other courts in this country to depart from, or overrule its own decisions.
[184]
141. Their Honours differed from the majority on the construction of ss 118 and 119 of the Act: they thought that on its proper construction it did apply to ancillary processes. Otherwise, they said, the Act would frustrate and defeat the object attributed to the Statute: to protect client legal privilege in proceedings in the federal courts.
142. On the other point, that of the use to which O 15 r 15 of the Federal Court Rules could be put, there was unanimity. Their Honours concluded that to use the rule as a basis to accord privilege to a party when, on the authority of Grant v Downs , none existed, would not be a proper exercise of power.
The appeal to this Court
143. On some of the matters raised I can state my conclusions shortly.
144. I would reject the theory that the Act operates to alter the common law, so as in some way to make its provisions applicable to circumstances other than the adducing of evidence. The United States ``modification'' theory has not received any acceptance so far in this Court.
[185]
145. I would also reject the argument that it may, and ordinarily would not be ``necessary'' within the meaning of O 15 r 15 to order discovery of documents before a hearing if they, or their contents could not be adduced in evidence, over an objection on the ground of client legal privilege during a hearing. The purpose of the rule is to control oppressive and unnecessary obligations of discovery, and more particularly perhaps, to prevent obfuscation by excessive discovery. Its purpose is not to permit modification of the law of privilege.
146. A third argument of the appellant was that on its proper construction the Act did not confine the dominant purpose test to the adducing of evidence: indeed, that as a matter of statutory construction, ss 118 and 119 apply to ancillary processes. The appellant submits that a proper, purposive construction of the Act compels that conclusion.
[186]
``The Terms of Reference limit the Commission to considering the application of the privilege in the courtroom where evidence is sought to be given. Situations may arise where a party obtains access to documents outside the courtroom which are protected in the courtroom by the proposed privilege. Under the proposal, the privilege will still apply in the courtroom unless the client voluntarily disclosed the document. Having wider access on discovery or under a search warrant is usual. Access is not determined by the rules of admissibility such as relevance and hearsay. It is not unreasonable to have wider access in the investigative stage.''
(footnotes omitted)
147. The Evidence Bill 1993 in its original form contained cll 118 and 119 which did not adopt the Law Reform Commission Proposal and were in quite different terms from the Commission's draft Bill. It provided for a ``sole purpose'' test. The Bill was referred to the Senate Standing Committee on Legal and
ATC 4068
Constitutional Affairs on 9 February 1994. It was the Report of the Committee, which, it may be inferred, the appellant argues, influenced the Senate initially and ultimately the Parliament to adopt the dominant purpose test.148. The recommendation of the Committee was as follows:
[188]
``The Committee recommends that clients should be able to claim legal privilege for confidential communications made and confidential documents prepared by or for a lawyer acting for the client, for the dominant purpose of providing legal advice to the client, or where the dominant purpose is to provide the client with professional legal services in connection with litigation, or anticipated litigation involving, or possibly involving, the client. A dominant purpose test should also apply to confidential communications between, or confidential documents prepared by or for, unrepresented parties and their advisers.''
149. I do not propose to deal any further with this argument. Recourse to the extraneous material is not warranted. The language of ss 118 and 119 is clear. The Act is silent as to any situation other than the adducing of evidence. There is no reason to suppose that that silence on the part of the Parliament was other than deliberate. The intention of the Parliament must be taken to have been that the common law would govern the discovery, production and inspection of documents in situations other than the adducing of evidence.
150. There was a related, fourth argument which may also be shortly disposed of. It was that the discovery, production and inspection of documents were in truth a way of adducing evidence. It was pointed out that historically discovery was not available at common law. Access to documents could only be ordered by Courts of Equity in suits in equity, seeking, as final relief, a Bill of Discovery, which, if granted would enable a party to gain access to documents (and information in the possession of another party), for use in common law proceedings.
[189]
151. The appellant's major argument is that the decision in Grant v Downs should be re- opened, and a test of dominant purpose substituted by this Court.
152. It has been held that this Court does have ``power to review and depart from its previous decisions''. This must, with respect, be so. Although ``such a course is not
[
to be] lightly undertaken''
[190]
153. In
John v FC of T
[194]
154. The appellant first submits that the decision in
Grant v Downs
did not rest upon a principle carefully worked out in a significant succession of cases. As Barwick CJ said:
[196]
``There is no such statement of authority binding the courts in Australia. The matter has been discussed in cases decided in England and in articles in legal journals. But no authoritatively accepted statement of principle has emerged.''
155. The submission is correct. That this is so appears also from the reasons for decision of the majority in
Grant v Downs
who dwelt at length upon policy considerations (particularly in relation to corporations)
[197]
156. In
Grant v Downs
Jacobs J did not adopt the sole purpose test. His Honour preferred a test which looked to the reason for the existence of the material and posed the question in the following, perhaps, deceptively simple terms:
[198]
``does the purpose of supplying the material to the legal adviser account for the existence of the material?''
157. Later, in
Waterford v The Commonwealth
[199]
ATC 4069
in stating the test his Honour then thought appropriate:``For the document to be protected, the cause of its existence, in the sense of both causans and sine qua non, must be the seeking or provision of professional legal advice.''
158. The second matter upon which the appellant relies in seeking a review of Grant v Downs is that the stating of a sole purpose test by the majority was not necessary for the decision. All Justices allowed the appeal and ordered production and inspection: although the joint judgment considered in general terms documents brought into existence for several purposes they did not weigh up and consider the competing advantages and disadvantages of a dominant purpose test, as opposed to a sole purpose test. As the distinction between the two tests had no relevance to the outcome of the case it is likely, it was put, that there was little by way of submission which would have assisted the Court in striking the correct balance. In substance this submission also is correct.
159. The third matter to which the appellant points is the inconvenience which, it contends, has flowed from the application of a sole purpose test. Although it may have been no understatement for Dennis Pearce in an article ``Legal Professional Privilege
-
Sole or Dominant Purpose''
[200]
160. The authors of
Cross on Evidence
in 1979
[201]
``It is apparent that the majority decision will expose to production a great number of documents which have been traditionally supposed to be immune, such as routine reports following accidents or even loss assessors' reports to insurance companies which have among their purposes that of informing the underwriters of the justice of a claim by the insured. It is submitted that a too rigid application of the principle in Grant v Downs will lead to an undesirable reluctance on the part of such persons to express opinions which might subsequently be used against their principals. Moreover, in practice, it is likely to lead to unnecessary refinements in the concept of `purpose', as it is used in the rule, with a consequent loss of certainty among litigants as to the precise status of documents in their possession.''
161. I agree with those observations.
162. Just as it is important to be alive to, and to avoid, so far as can be, the placing of corporations in favoured positions, there is no reason why they should be placed in a disadvantageous position by comparison with natural persons. The application of a ``sole purpose'' test may in practice discriminate unfairly against corporations. The employees of natural persons, partners, officials in bureaucracies and employees and directors of corporations may, and often must, out of practical necessity communicate internally by written report. A corporation ``cannot... think or write or act except by certain machinery, which is, so to speak, extraneous of itself''.
[202]
163. The fourth matter referred to by Gibbs CJ in
Hospital Contribution Fund
was whether the earlier decision had been independently acted on ``in a manner which militated against reconsideration''.
[203]
164. The presence of any one or more of the matters to which Gibbs CJ referred does not mean that this Court must review an earlier decision even if the Court is persuaded that the earlier decision is one with which the later Court does not agree. Nor should it be assumed that the category of criteria identified by Gibbs CJ should be regarded as necessarily closed. Should this Court take the view, for example, that a decision reached by a majority of three to two should command the same weight and respect as a decision reached by a majority of all the Justices of the Court? Another question
ATC 4070
which may arise is whether the decision of a bench which itself may have overturned what had for a long time been regarded as settled legal orthodoxy should have a monopoly on the thinking on the topic in question for all time? If the answer to this last question is an affirmative one it would mean that those who support change of this kind would be able to entrench their changes by capitalizing on the caution of those who favour an incrementalist approach. These questions do not need to be answered in this case because there is other, good reason to overrule Grant v Downs . In Astley v Austrust Ltd , I referred to the disadvantage to people, particularly litigants, who have acted on a perceived, settled state of the law, when the law is restated in a quite different way. [205]165. A change in the present circumstances is unlikely to cause any serious inconvenience to anyone. A change in the rules relating to discovery is quite different from the creation of a new or different cause of action, the creation of a new defence, or the abolition of a pre- existing one. Those who satisfy a test of sole purpose should certainly be able to satisfy any lesser test. People are unlikely to have arranged their affairs on the basis that they or others may have brought into existence documents with an eye to a sole purpose test. The only likely inconvenience is in the case of pending actions in which discovery and inspection have already been given. In relation to those situations I think that there may be a great deal to be said for the view that Lord Browne-Wilkinson took in Kleinwort, effectively that the decision (in this case the decision of this Court) should in all respects be taken to operate prospectively only.
[207]
166. I do not think that I would have decided Grant v Downs in the way in which the majority did. I do not, with respect, regard it as stating a convenient test, or a wholly fair one in accordance with the underlying rationale for legal professional privilege, of candour by clients in communications with legal advisers, or one which necessarily emerged as a result of full and considered argument by the parties. I think that it may have a tendency to discriminate against corporations and other large organisations. It was based to some extent on policy considerations upon which minds have much differed.
167. In my opinion therefore
Grant v Downs
should be overruled. When it was decided it did represent a departure from the generally prevailing, if not universal view of the obligation of discovery as expressed by Buckley LJ in
Birmingham and Midland Motor Omnibus Co Ltd v London and North Western Railway Co
:
[208]
``It is not I think necessary that the affidavit should state that the information was obtained solely or merely or primarily for the solicitor, if it was obtained for the solicitor, in the sense of being procured as materials upon which professional advice should be taken in proceedings pending, or threatened, or anticipated. If it was obtained for the solicitor, as above stated, it is none
ATC 4071
the less protected because the party who has obtained it intended if he could to settle the matter without resort to a solicitor at all.''
168. The policy considerations which weighed with the majority in
Grant v Downs
are capable of pulling two ways. The sole purpose test has not proved more convenient, less productive of controversy or productive of some higher order of justice. It is also of some relevance that other common law countries have not adopted a sole purpose test.
[209]
169. I did give consideration to the possibility that a different test from either dominant or sole purpose might be formulated. For example, a test of ``a substantial purpose'' has its attractions. Dominant purpose is, however, by now a well understood test by reason of its adoption elsewhere. And in any event, as the parties presented their arguments, there were effectively only two contenders, ``sole'' or ``dominant''.
170. In
Waugh v British Railways Board
[210]
``The issue exemplifies a situation which frequently causes difficulties - where the forensic situation is covered by two valid legal principles which point each to a different forensic conclusion. Here, indeed, both principles subserve the same legal end - the administration of justice. The first principle is that the relevant rules of law should be applied to the whole body of relevant evidence - in other words, in principle all relevant evidence should be adduced to the court. The report in question in this appeal undoubtedly contains information relevant to the matters in issue in the litigation here. The first principle thus indicates that it should be disclosed, so that the appellant may make use of it if she wishes.
The second general principle arises out of the adversary (in contradiction to the inquisitorial) system of administration of justice. Society provides an objective code of law and courts where civil contentions can be decided. But it contents itself with so providing a forum and a code (and nowadays some finance for those who could not otherwise get justice). Having done so much, society considers that it can safely leave each party to bring forward the evidence and argument to establish his/her case, detaching the judge from the hurly- burly of contestation and so enabling him to view the rival contentions dispassionately.''
171. Later his Lordship stated his conclusion in terms with which I respectfully agree:
[212]
``Your Lordships will therefore, I apprehend, be seeking some intermediate line which will allow each of the two general principles scope in its proper sphere. Various intermediate formulae as a basis for the privilege have been canvassed in argument before your Lordships, most based on some authority - the obtaining of legal advice was `an appreciable purpose'; `a substantial purpose'; ` the substantial purpose'; it was `wholly or mainly' for that purpose; that was its `dominant' purpose; that was its `primary' purpose.
Some of these are in my view too vague. Some give little or no scope to the principle of open litigation with the minimum exclusion of relevant evidence. The one that appeals to me is `dominant' purpose, as it did to Barwick CJ in Grant v Downs [213]
(1976) 135 CLR 674. . It allows scope to each of the governing principles. It seems to me less quantitative than `mainly'; and I think it would be easier to apply - the law is already cognisant of the concept of a dominant purpose - in the law of conspiracy, for example (see Crofter Hand Woven Harris Tweed Co Ltd v Veitch ) [214][ 1942] AC 435 esp at 445 per Viscount Simon LC, 452 per Viscount Maugham. and in the law as to fraudulent preference in bankruptcy [215]See .''Halsbury's Laws of England , 4th ed, vol 3, at 496, 499, pars 908, 913.
172. Whether a purpose is a dominant purpose, is, in my view, a matter to be objectively determined
[216]
173. I would answer the first stated question as follows:
ATC 4072
``The appropriate test is the dominant purpose test at common law.''
174. The second question perhaps should have incorporated a reference to O 15 r 15 of the Federal Court Rules as the matter originally arose on a directions hearing pursuant to it. But because of the conclusion I have reached on the first question there is no need to consider the implications, if any, of this. It is therefore unnecessary to answer the second stated question.
175. The matter should be remitted to the Federal Court to deal with the applications in accordance with the judgments of this Court. The Solicitor-General offers no serious resistance to an order that costs should follow the event in this Court. Accordingly the appeal is allowed with costs. The respondent should pay the appellant's costs of the proceedings before Foster J and of the appeal to the Full Court of the Federal Court.
ORDER
1. Appeal allowed with costs.
2. Set aside the orders of the Full Court of the Federal Court of Australia made on 22 December 1998, and in place thereof, order that:
- (i) the appeal to that Court be allowed with costs; and
- (ii) the respondents pay the costs of the proceedings before Foster J.
3. Questions of law raised for decision for Foster J answered:
- (a) The correct test is the dominant purpose test, which is the common law test for claiming legal professional privilege.
- (b) Does not arise.
Footnotes
[161][162]
[163]
[164]
[165]
[166]
[167]
[168]
[169]
[170]
[171]
[172]
[173]
[174]
[175]
[176]
[177]
[178]
[179]
[180]
[181]
[182]
[183]
[184]
[185]
[186]
[187]
[188]
[189]
[190]
[191]
[192]
[193]
[194]
[195]
[196]
[197]
[198]
[199]
[200]
[201]
[202]
[203]
[204]
[205]
[206]
[207]
[208]
[209]
[210]
[211]
[212]
[213]
[214]
[215]
[216]
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