ESSO AUSTRALIA RESOURCES LTD v FC of T

Members: Gleeson CJ
Gaudron J

McHugh J
Gummow J
Kirby J
Callinan J

Tribunal:
High Court

MEDIA NEUTRAL CITATION: [1999] HCA 67

Decision date: 21 December 1999

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McHugh J

64. In my opinion this appeal should be dismissed. The facts and issues are set out in the joint judgment of Gleeson CJ, Gaudron and Gummow JJ. I agree with their Honours that the Full Court of the Federal Court was correct in holding that the Evidence Act 1995 (Cth) does not apply to the discovery of confidential written communications made between lawyer and client, either directly or by a derivative modification of the common law. I also agree with their Honours that the discretionary power in O 15 r 15 of the Federal Court Rules should not be exercised for the purpose of subverting or circumventing the rules ``which determine the existence of privilege''. ^[66] Esso Australia Resources Ltd v FC of T 2000 ATC 4042 at 4048 [ 32]; [ 1999] HCA 67 at [ 32] .

65. However, I am unable to accept the proposition that the Court should now overrule the ratio decidendi of Grant v Downs ^[67] (1976) 135 CLR 674. and substitute a dominant purpose test of privilege for the sole purpose test laid down in that case. Two reasons lead me to that conclusion. First, it would extend the area of privilege with the result that a party to litigation, and the court, would have less access to relevant material. Second, it would impose a test that is not easy of application and which seems inconsistent with the rationale of legal professional privilege. Furthermore, a dominant purpose test is one that must lead to extensive interlocutory litigation because there seems to be a growing acceptance, contrary to earlier authority and former practice, that the person claiming privilege can be cross-examined on the affidavit claiming privilege. ^[68] For the earlier reluctance to allow cross-examination, see Brambles Holdings Ltd v Trade Practices Commission (No 3) (1981) 58 FLR 452 at 454 per Franki J; Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 at 366 per Giles J; and cf Morgan v Shaw (1819) 4 Madd 54 [ 56 ER 629] (a solicitor's statement on oath that he cannot answer a question without breaching privilege is conclusive unless it appears from the question that no issue of privilege could arise). The more permissive approach is seen in National Crime Authority v S (1991) 29 FCR 203 at 211 per Lockhart J; Hartogen Energy Ltd & Ors v Australian Gas Light Company & Ors (1992) 10 ACLC 1,324 at 1,326; (1992) 36 FCR 557 at 561 per Gummow J; and Re Compass Airlines Pty Ltd (1992) 10 ACLC 1,380 at 1,392; (1992) 35 FCR 447 at 462 per Beaumont and Gummow JJ. In New South Wales, Pt 36 r 13(3) of the Supreme Court Rules confers power on the Court to permit, if it thinks fit, cross-examination on any affidavit used in support of a claim of privilege.

66. The decision of this Court in Grant v Downs ^[69] (1976) 135 CLR 674. in 1976 came as a surprise to me, as I am sure it did to most practising lawyers of those days. ^[70] See the article by Professor Pearce ``Legal Professional Privilege — Sole or Dominant Purpose'' in [ 1979] Australian Current Law DT 281 where he states that the decision in Grant was ``greeted with disbelief by some practitioners.'' Even the minority view of Barwick CJ - who would have applied the dominant purpose test - had little, if any, support in dicta. ^[71] The very experienced senior counsel for the appellant agreed with a suggestion that I put to him in argument that ``most members of the profession would have thought at the time that both the majority and the minority [ in Grant ] got it wrong'': transcript of proceedings, 28 September 1999 at 6. Before Grant , the accepted view was that legal professional privilege

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ATC 4055

applied if one purpose of a confidential communication was to obtain legal advice or assistance or for use in litigation. Although there was no decision that established this proposition, my view, and I think the view of many practising lawyers, was that the judgment of Buckley LJ, concurred in by Vaughan Williams LJ, in Birmingham and Midland Motor Omnibus Co Ltd v London and North Western Railway ^[72] [ 1913] 3 KB 850 at 856. correctly stated the law. In that case, Buckley LJ referred to what was required in an affidavit claiming legal professional privilege for a communication between lawyer and client. His Lordship said:

``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.''

67. On this view, legal professional privilege protected a communication if it could be said that it was a communication made for the purpose of obtaining or giving legal advice or for use in litigation which was on foot or might reasonably be expected or anticipated. If the communication was made for that purpose, it was immaterial that it was also made for some other purpose or purposes. But that view of the scope of legal professional privilege changed with Grant v Downs . ^[73] (1976) 135 CLR 674. After the decision in Grant , it was no longer sufficient that one of the purposes of the communication was obtaining legal advice or assistance. It had to be the sole purpose of the communication.

68. The decision in Grant brought about such a change in practice that it was not surprising that it would come under criticism. The criticism was not long in coming. In the next Australian edition of Cross on Evidence , which was published in 1979, the learned authors wrote: ^[74] 2nd Aust ed, par 11.27.

``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.''

69. The criticism has continued. ^[75] Australia, Senate Legal and Constitutional Legislation Committee, Evidence Bill 1993 Final Report , December 1994, par 1.36. Furthermore, no other final appellate court in the English-speaking world has adopted the sole purpose test, and the federal and New South Wales parliaments have adopted the dominant purpose test for the adduction of evidence. ^[76] Evidence Act 1995 (Cth) and Evidence Act 1995 (NSW), ss 118, 119.

70. These seem powerful reasons for reviewing a decision which established a principle which had no support in the previous case law or professional practice and which, as the majority judgment in this case points out, ^[77] Esso Australia Resources Ltd v FC of T 2000 ATC 4042 at 4050 [ 42]; [ 1999] HCA 67 at [ 42]. was not even the subject of argument in this Court or at first instance or on appeal in the courts of New South Wales. But that said, I am not convinced that we should now substitute the dominant purpose test for the sole purpose test.

71. First, the dominant purpose test will inevitably restrict the amount of information that a person can be required to disclose on discovery or in answer to subpoenas. Courts will have less information before them. How much less is impossible to tell. But applying a dominant purpose test must often mean that a party to litigation will not have access to documents containing information that is relevant to the litigation. It is not merely that the party will be deprived of material that can be tendered in evidence. Discovery and subpoenas often bring to light material that points the way to obtaining relevant and admissible information not in the possession of the party issuing a subpoena or seeking discovery. A document is discoverable if it ``may fairly lead... to a train of inquiry'' which might either advance the case of the party seeking discovery or damage the case of the party resisting it. ^[78] Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 at 63 . If dominant purpose becomes the test of legal professional privilege, a party will have less access to information than he or she would if Grant v Downs stated the relevant law. Because that is so, courts may sometimes have to make decisions contrary to what they would have made if the sole purpose test was the governing criterion.

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ATC 4056

72. ``Legal professional privilege is itself the product of a balancing exercise between competing public interests'', ^[79] Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 583 . those competing interests being the common law's pursuit of truth and the need to give effect to the rationales underlying legal professional privilege. ^[80] For discussion of these rationales, see my comments in Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 160-161 . In the age of the Internet and freedom of information legislation, the line which strikes the balance should not be changed to restrict the volume of information available to decision makers. It seems contrary to the spirit of the times for a common law court in 1999 to change a point of balance struck in 1976 when the change will result in judges and juries and other decision makers having less information available to them than they would have had under the rule in Grant v Downs .

73. Second, a dominant purpose test is much harder to apply than the sole purpose test and its use must increase the volume of interlocutory litigation. ^[81] See my comments in Perre & Ors v Apand Pty Ltd (1999) Aust Torts Reports ¶ 81-516 at 66,059; (1999) 73 ALJR 1190 at 1205; 164 ALR 606 at 628-629, in relation to the costs of litigation and the need for certainty. When ``sole'' purpose or ``a'' purpose is the criterion for existence of the privilege, seldom can it be necessary to go beyond the contents of the document and the identity of its recipient to determine whether privilege protects the document. But if ``dominant'' purpose becomes the test, it will often be necessary to examine the state of mind of the person creating the document. Cross- examination of the deponent to the affidavit claiming privilege will be inevitable in many cases, particularly in relation to what the second Australian edition of Cross on Evidence called ``routine reports following accidents or even loss assessors' reports to insurance companies... of a claim by the insured.'' ^[82] (1979), par 11.27. If deponents can be cross-examined, the cross-examiner's side must be able to adduce evidence to prove that legal advice or assistance or use in litigation was not the dominant purpose of the communication.

74. It needs to be kept in mind that the application of the different tests for legal professional privilege - ``a purpose'', ``sole purpose'' or ``dominant purpose'' - brings about a different result only when a communication is made to the same person for more than one purpose. If a loss assessor sends his or her report to the solicitor for a party and a copy to the insurer of a party ``for information'', the latter communication is not privileged unless it also was sent for a purpose connected with the legal aspects of the litigation. Without that purpose, the copy is not privileged whatever test is applied - ``sole'', ``dominant'' or ``a'' purpose.

75. But if dominant purpose becomes the test of legal professional privilege, production will often depend on whether one or two communications are made. If the loss assessor sends the report to the insurer for a purpose such as settling a claim and also for the purpose of being used in litigation if it ensues, how will any court realistically determine whether one or other purpose was dominant? Will the issue turn on an investigation of the likelihood of litigation being commenced or legal advice being sought? Claims of privilege for loss assessors' reports are likely to be a fertile field of dispute. But such disputes can arise whenever a communication is sent or received with a legal purpose and a non- legal purpose in mind.

76. To take another example, if a company secretary writes a letter, explaining the company's version of an event, to a director who is also the company's solicitor and does so for the purpose of keeping the director informed of company affairs and also for the purpose of seeking legal advice, privilege will depend on what was the dominant purpose of the secretary. It seems odd that privilege should exist if, on balance, the dominant purpose of the communication was to obtain or receive legal advice but is lost if neither purpose dominated. If the secretary had sent two separate letters, one addressed to the recipient in her capacity as a solicitor and the other in her capacity as a director, no privilege could be claimed for the latter letter. On no basis could it be claimed that the latter communication was privileged. The dominant purpose test, therefore, produces a result that depends on form. That cannot happen with the ``a purpose'' or ``sole purpose'' tests. Under those tests, claims of legal professional privilege do not depend on whether there are two communications or one communication with two purposes.

77. There are also practical difficulties with the dominant purpose test. Sometimes, the contents of the document may indicate that one or other purpose was dominant. But often it may not. Moreover, frequently the issue of dominant purpose will turn on the surrounding facts and circumstances, particularly previous dealings ^[83] Ankin v London and North Eastern Railway Co [ 1930] 1 KB 527 ; Abbott v Brisbane City Council [ 1941] QWN 44 . between the parties. A test that requires the party claiming privilege to examine surrounding facts and circumstances seems ill

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ATC 4057

suited to the discovery and subpoena processes. A person who resists the production of a document on the ground of privilege should not be required to examine collateral circumstances to make a decision concerning the existence of privilege. In commercial litigation, discovery often requires the examination of hundreds of thousands of documents and takes months to complete. It is often a very expensive process and it should not be made more expensive by a party or its employees and their lawyers being forced to investigate the circumstances surrounding the making of a communication to ascertain what was the dominant purpose of the communication.

78. Furthermore, legal professional privilege exists so that persons can obtain legal advice and assistance without fear of their confidences being disclosed. It does not exist to protect communications for non-legal purposes. It is contrary to the rationale of the privilege that communications made for non-legal purposes should be able to free-ride on the protected purpose and obtain protection. If a person would disclose information for a non-legal purpose in any event, why should he or she get the benefit of a privilege that exists only because it is thought necessary to have it so that people will communicate freely with their lawyers? No doubt in many cases, the same facts will be directed to all purposes of a communication. In others, they will not. In some cases, it may be possible to uphold privilege for some facts and not others. But it will not always be possible to sever facts and matters directed to a non-legal purpose from the facts and matters going to the relevant legal purpose. Because that is so, information not directed to the privileged purpose will obtain protection from disclosure, although it would not be protected if communicated separately. In any event, issues of severance can only make the process of discovery or the answering of subpoenas more complex than it has ever been in this country. Whether or not the facts of a communication can be categorised into those relating to legal and those relating to non-legal purposes, the rationale of the privilege provides no ground for extending it to facts, matters or information that are disclosed for non-legal purposes.

79. I am afraid that I do not understand the contention that in practice the sole purpose test is never applied and that a dominant purpose test is effectively applied. This contention and much of the criticism of the sole purpose test seem to spring from two errors: first, failing to keep in mind that the privilege attaches to communications and not to documents; second, failing to keep in mind that the privilege belongs to the client, not the legal adviser. ^[84] R v Davies (1921) 21 SR (NSW) 311 . In some circumstances, the legal adviser may waive the privilege because of ostensible authority even when he or she has been expressly told not to waive the privilege. ^[85] Great Atlantic Insurance Co v Home Insurance Co [ 1981] 1 WLR 529 at 539-540 per Templeman LJ; [ 1981] 2 All ER 485 at 492-494 . But subject to instructions to the contrary, the legal adviser has no actual authority to waive privilege or to act in a way that is inconsistent with the privilege.

80. Where the communication is constituted by or recorded in a document, the document is merely evidence of the communication. Thus, notes of a solicitor's interview with a client are privileged because they record the communication. ^[86] Ainsworth v Wilding [ 1900] 2 Ch 315 . As I pointed out in Commissioner of Australian Federal Police v Propend Finance Pty Ltd , ^[87] (1997) 188 CLR 501 at 552. `` [ l]egal professional privilege is concerned with communications, either oral, written or recorded, and not with documents per se.'' When privilege is claimed for a document, it is because it records or constitutes a communication prepared, given or received for the purpose of obtaining legal advice or assistance. Any document brought into existence for the purpose of recording information that is to be submitted to a solicitor is privileged. ^[88] The Theodor K ö rner (1878) 3 PD 162 ; Southwark Water Co v Quick (1878) 3 QBD 315 ; Ankin v London and North Eastern Railway Co [ 1930] 1 KB 527 ; Seabrook v British Transport Commission [ 1959] 1 WLR 509 ; [ 1959] 2 All ER 15 . The communication need not come from the client; it may be a communication from a third party to a solicitor providing information at the request of the solicitor or the client. ^[89] Tooheys Ltd v Housing Commission of New South Wales (1953) 53 SR (NSW) 407 . In some cases, privilege may exist for the communication even where the third party does not anticipate litigation, provided that the client does. ^[90] Di Pietrantonio v Austin Hospital [ 1958] VR 325 .

81. If the sole purpose of the communication is to obtain or give legal advice or assistance, privilege exists under Grant v Downs . If there was some other purpose for the communication , privilege does not exist. But it is the purpose of the communication that is decisive, not the purpose in making the document (for example, to have a record) or any copies of the document. If six copies of a communication are made because they may later be useful, they are all privileged if the communication was privileged. That is because they evidence a privileged communication. Thus, even an entry in a bill of

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ATC 4058

costs may be privileged because it records a communication. ^[91] Ainsworth v Wilding [ 1900] 2 Ch 315.

82. If a copy of a document recording a privileged communication is subsequently used as the basis of a new communication, whether that new communication is privileged will depend on the purpose for which it is made. The copy may not be privileged because the purpose for which it is used is not within the protection of the privilege. The result may be that the privilege attaching to the original com- munication is lost. But the privilege in the original communication is not lost because the legal adviser made more copies of it than were necessary or because he or she wanted to keep a record of the communication for his or her own purposes. Those states of mind of the legal adviser do not bear upon the purpose of the communication that attracts the privilege.

83. In my opinion, we should not substitute a dominant purpose test for a sole purpose test. No doubt in the courts of New South Wales and in courts exercising federal jurisdiction, some practitioners and judges may feel uncomfortable about using a dominant purpose test for the adduction of evidence and a sole purpose test for the production of documents. But even in those jurisdictions the worst that can be said is that the different tests may lead to the production of documents that cannot be tendered in evidence. That is nothing new - often documents which must be produced on discovery cannot be tendered in evidence because they merely record inadmissible hearsay, opinion material or other inadmissible matter which ``may fairly lead... to a train of inquiry'' which will advance the case of the party seeking discovery or which will damage the case of the party resisting it. ^[92] Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 at 63. But whatever the disadvantages of using the sole purpose test it has one great advantage over the dominant purpose test: it has a greater potential to lead to the production of documents that lead to other forms of evidence that will be admissible. Add to that advantage, the inevitable cost and expense of applying a dominant purpose test, and the case for overruling Grant v Downs is not persuasive.

84. The appeal should be dismissed.