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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Gleeson CJ, Gaudron and Gummow JJ

The central issue in this appeal concerns the test for determining whether what is usually called legal professional privilege, (an expression which might suggest erroneously that the privilege is that of the lawyer), or what is called in the Evidence Act 1995 (Cth) client legal privilege, ^[1] The Evidence Act also confers a similar privilege on unrepresented litigants: s 120. applies in relation to discovery and inspection of confidential written communi- cations between lawyer and client.

2. The test in the Evidence Act is whether the communication was made, or the document was prepared, for the dominant purpose of the lawyer providing legal advice or legal services. ^[2] Evidence Act , ss 118, 119. The dominant purpose test accords with the common law test now adopted in England, ^[3] Waugh v British Railways Board [ 1980] AC 521 . New Zealand, ^[4] Guardian Royal Exchange Assurance of NZ Ltd v Stuart (1985) 3 ANZ Insurance Cases ¶ 60-671 ; [ 1985] 1 NZLR 596 . Ireland, ^[5] Silver Hill Duckling Ltd v Minister for Agriculture [ 1987] IR 289 . and most Canadian Provinces. ^[6] Levin v Boyce [ 1985] 4 WWR 702 ; Milton Farms Ltd v Dow Chemical Canada Inc (1986) 13 CPC (2d) 174 ; Doiron v Embree (1987) 16 CPC (2d) 70 ; Ed Miller Sales & Rentals Ltd v Caterpillar Tractor Co (No 1) (1988) 22 CPR (3d) 290 . It was favoured by Barwick CJ in the leading Australian case on the subject, Grant v Downs . ^[7] (1976) 135 CLR 674. However, a majority in that case (Stephen, Mason and Murphy JJ) preferred a sole purpose test. Hence, since 1976, courts in Australia have applied the common law of legal professional privilege on the basis that privilege will only attach to a confidential com- munication, oral or in writing, made for the sole purpose of obtaining or giving legal advice or assistance or of use in legal proceedings.

3. The difference between the Evidence Act test and what has, since Grant v Downs , been accepted in Australia as the common law test, has given rise to a number of problems. The Evidence Act only applies in proceedings in a federal court or an Australian Capital Territory court. New South Wales has enacted legislation in the same terms for that State, but no other jurisdiction has done so. Moreover, even in a jurisdiction where the Evidence Act applies, the relevant provisions relate only to the adducing of evidence. The reason for this was explained in the report of the Australian Law Reform Commission which proposed the legislation, and which said: ^[8] Australian Law Reform Commission, Evidence , Report No 38, (1987), par 199. ``The Terms of Reference limit the Commission to considering the application of the privilege in the courtroom where evidence is sought to be given.''

4. As was pointed out in Mann v Carnell , ^[9] [ 1999] HCA 66. the circumstances in which legal professional privilege may apply are not limited to the adducing of evidence. As in the present case, the privilege may be invoked in other circumstances, such as discovery and inspection

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of documents. Documents may be discoverable, or the subject of a demand for inspection, even though they are not admissible in evidence. They may be significant, for example, because they open up a line of inquiry. Furthermore, in this country, the application of the privilege is not confined to judicial or quasi-judicial proceedings. ^[10] Baker v Campbell 83 ATC 4606 ; (1983) 153 CLR 52 . On any view, the ambit of the common law doctrine of legal professional privilege in Australia exceeds that of the relevant provisions of the Evidence Act . Given the specific and limited heads of legislative power in s 51 of the Constitution, there also may be questions as to the extent of the legislative power of the Parliament to deal with the privilege, apart from its operation in relation to judicial proceedings under Ch III.

5. The Australian Law Reform Commission was aware of the problem, and adverted to it in its report. After referring to the limitation in its terms of reference, the Commission said: ^[11] Australian Law Reform Commission, Evidence , Report No 38, (1987), par 199.

``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.''

6. Some judges have disagreed with the Commission's views as to what was not unreasonable. They have seen the co-existence of two different tests for privilege as anomalous. A deal of ingenuity has been devoted to developing arguments which could overcome the lack of congruence between the statute and the common law. In this Court, however, the appellant has relied principally upon an argument that was not available in any of the other courts that have so far considered the question. The appellant has invited the Court to reconsider Grant v Downs , and to declare that the dominant purpose test now represents the common law of Australia. In that event, the common law of this country would be in line with that of England, Canada, New Zealand and Ireland, and with the legislation which now applies in federal courts and in New South Wales and the Australian Capital Territory. The inconsistencies resulting from the limited reach of the statutory provisions would not be eliminated, because there are other respects in which the statute differs from the common law, but they would be reduced in one significant respect.

The present litigation

7. In 1996 the appellant commenced proceedings in the Federal Court of Australia, appealing against amended assessments of income tax for the years ended 31 December 1987 to 31 December 1992. General orders for discovery were made in October 1996. The rules and practice of the Federal Court as to discovery and inspection of documents, and as to the making of directions with respect to the conduct of the proceedings, were summarised by Burchett J in Murex Diagnostics Australia Pty Ltd v Chiron Corporation . ^[12] (1995) 55 FCR 194 at 198-199. The provisions of Orders 10 and 15 of the Federal Court Rules are of particular relevance. In June 1997, the appellant filed and served a list of documents verified by affidavit. Privilege was claimed in respect of 577 documents. Disagreement concerning the claims for privilege arose. After an exchange of correspondence, the area of disagreement narrowed. It was accepted that, in relation to some of the documents, which were said to have been brought into existence for the sole purpose of giving or receiving legal advice, there was no dispute. However, it appeared that, in relation to many of the documents in question, the appellant's contention was that ``their disclosure would result in disclosure of a confidential communication made between [ the appellant] and a lawyer for the dominant purpose of the lawyer... providing legal advice to [ the appellant]''. The descriptions of the purposes of the communications varied slightly, but in all cases where the claim was disputed it was based upon an assertion of dominant purpose. In October 1997 the respondent filed Notices of Motion seeking orders that the appellant produce for inspection the documents in respect of which the claim for privilege was disputed.

8. The applications came for hearing before Foster J. Pursuant to O 29 r 2, Foster J ordered that there be decided separately the following questions of law:

``(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 (1976) 135

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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 Order 15 rule 15 of the Federal Court Rules to make an order excluding from production 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)?''

9. Foster J answered the questions as follows:

``In respect of question (a), [ declare] 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), [ declare] that the question be answered in the negative.''

10. The appellant appealed to the Full Court of the Federal Court. Because judges of the Federal Court, and of other courts, had expressed differing opinions on the point, and because it appeared that there would be an invitation to reconsider the earlier decision of the Full Court of the Federal Court in Adelaide Steamship Co Ltd v Spalvins , ^[13] (1998) 81 FCR 360. which had been followed by the Court of Appeal of New South Wales in Akins v Abigroup Ltd , ^[14] (1998) 43 NSWLR 539. a specially constituted court of five members sat. By majority (Black CJ, Sundberg and Finkelstein JJ, Beaumont and Merkel JJ dissenting) the Full Court substantially upheld the decision of Foster J. ^[15] (1998) 83 FCR 511. The decisions in Adelaide Steamship Co Ltd v Spalvins and Akins v Abigroup Ltd were not followed. The Full Court agreed with the answer given by Foster J to the first question. The answer given by Foster J to the second question was varied to read:

``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.''

11. The appellant now appeals to this Court. As was noted, a submission is advanced which was not available in the Federal Court, where the arguments and reasons for judgment were constrained by the authority of Grant v Downs . The appellant argues that this Court should declare, contrary to what was said by three members of the Court in Grant v Downs , but in accordance with what was said by Barwick CJ in that case, that at common law in Australia the dominant purpose test applies. If that argument were accepted, the first of the questions asked by Foster J would be answered by declaring that the correct test is that of dominant purpose, and it would be unnecessary to answer the second question. Alternatively, the appellant repeats the arguments which it advanced in the courts below and which, if accepted, would lead to a similar result.

12. It is convenient first to consider the arguments dealt with in the courts below, and then to come to the appellant's new argument.

The arguments considered by the Full Court

13. In the Full Court, the appellant relied upon three alternative methods by which, it was contended, one could arrive at the conclusion that, notwithstanding Grant v Downs , in a case such as the present a claim for privilege in relation to discovery and inspection of documents was to be resolved by the application of the dominant purpose test. First, it was argued that, upon its true construction, notwithstanding the apparently restricted terms in which it was expressed, the Evidence Act establishes such a test as applicable to discovery and inspection. Secondly, the appellant invited the Full Court to follow a line of reasoning which had prevailed in some earlier cases, ^[16] eg Telstra Corporation v Australis Media Holdings [ No 1] (1997) 41 NSWLR 277 , Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360 and Akins v Abigroup Ltd (1998) 43 NSWLR 539 . to the effect that, even if the provisions of the Evidence Act did not directly apply to claims for privilege made in relation to discovery and inspection of documents (and in other circumstances not involving the adducing of evidence), the common law, by analogy or derivation, should be treated as modified to accord with the statutory test ``at least in the jurisdictions where the Act applies''. (As will appear, the qualification reflects a significant problem in the argument.) Thirdly, the appellant relied upon the discretionary power, in O 15 r 15, as to ordering, or refusing to order, production of discovered documents as a basis upon which courts could, and should, make the test on discovery and production conform to that to be applied in adducing evidence.

14. In the Full Court of the Federal Court, the majority rejected all three arguments. They were correct to do so.

15. The provisions of the Evidence Act which deal with the subject of client legal privilege are ss 118 and 119. They are in the following terms:

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``118 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.

119 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.''

16. Those sections appear in Ch 3 (ss 55-139) of the Act which, save for presently immaterial exceptions, is concerned with the admissibility of evidence. This limitation in the language of the statutory provisions was noted, and was essential to the decision of this Court, in Northern Territory of Australia v GPAO . ^[17] (1999) FLC ¶ 92-838; (1999) 73 ALJR 470; 161 ALR 318. The explanation of the wording of the Act is set out above. The statutory language is clear. It deals with the adducing of evidence. That would cover adducing evidence in interlocutory proceedings as well as at a final hearing, or on an appeal, but it does not cover all the circumstances in which a claim for privilege might arise. To take the most obvious example, it would not cover the circumstances considered in Baker v Campbell . ^[18] 83 ATC 4606; (1983) 153 CLR 52.

17. The claim in contention in the present case was not a claim that certain evidence could, or could not, be adduced. It was a claim that the appellant was not obliged to make certain written communications available for inspection by the respondent. Sections 118 and 119 are expressed in language which does not address that claim. The refusal of the majority in the Full Court to apply the statutory provisions otherwise than in accordance with their terms was right in principle, and was consistent with the decision of this Court in Northern Territory of Australia v GPAO .

18. The second argument was not at the forefront of the appellant's oral submissions in this Court and reliance is placed upon the written submissions. The interrelation and interaction between common law and statute may trigger varied and complex questions requiring full argument in cases where they arise.

19. Significant elements of what now is regarded as ``common law'' had their origin in statute or as glosses on statute or as responses to statute. For example, in Peters v R , <sup>[19]</sup> (1998) 192 CLR 493 at 513-515. McHugh J explained the derivation of the criminal law of conspiracy from statutes enacted in the thirteenth century. The doctrine of part performance is expressed in three centuries of case law which has the effect of allowing specific performance of a contract which on its face the Statute of Frauds renders unenforceable. The Statute of Limitations in its terms does not operate directly upon equitable remedies, but, as Dixon J put it in Cohen v Cohen , <sup>[20]</sup> (1929) 42 CLR 91 at 100. ``such remedies are barred in Courts of equity by analogy to the statute''. On the other hand, the courts did not refuse to enforce rights arising under a contract or trust merely because the trust or contract is associated with or in furtherance of a purpose rendered illegal by a statute which applied to the relevant parties. ^[21] Nelson v Nelson (1995) 184 CLR 538 ; Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 .

20. In the Chorley Lecture 1984, titled ``Common Law and Statute Law'', ^[22] (1985) 48 Modern Law Review 1. Professor Atiyah referred to such matters and continued: ^[23] (1985) 48 Modern Law Review 1 at 6.

``If, as I have suggested, statute law and common law do, at least in many areas, work together in some kind of legal partnership, creating sometimes amalgams of law of various kinds, [ is it] possible for the courts to take account of statute law, in the very development of the common law itself? Can the courts, for instance, use

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statutes as analogies for the purpose of developing the common law? Can they justify jettisoning obsolete cases, not because they have been actually reversed by some statutory provision, but because a statute suggests that they are based on outdated values? Could the courts legitimately draw some general principle from a limited statutory provision, and apply that principle as a matter of common law? It must be clear that using statutes in this way is fundamentally different from any process of construction, however benevolent or liberal that might be. Construction, as a matter of theory at least, requires the court to give effect to what it thinks the legislation actually enacts. Using statutes by way of analogy quite clearly involves using them to produce results which the legislation does not enact.''

21. It is in the area identified in this passage that the appellant's second argument lies. Its origin is to be found in the judgment of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings [ No 1] . ^[24] (1997) 41 NSWLR 277. That was a case concerning a claim to inspect documents produced on subpoena. The documents were said to be the subject of legal professional privilege, and a question arose as to the test to be applied to determine that contention. McLelland CJ in Eq noted the difference between the statutory test and the common law test. He also said that, as a matter of statutory construction, ss 118 and 119 of the Evidence Act did not apply to ancillary process, and that no question of adducing evidence arose. However, his Honour regarded it as anomalous and ``verging on the absurd'' ^[25] (1997) 41 NSWLR 277 at 279. that different tests should apply to a claim for privilege made in an ancillary process and a claim made at the stage of adducing evidence. Clearly, he did not agree with the Australian Law Reform Commission's view that this was not unreasonable. He pointed out that, historically, the doctrine of legal professional privilege was established in the context of testimonial compulsion, although, now, in Australia, it operated in a wider context. He said: ^[26] (1997) 41 NSWLR 277 at 279.

``In this sense the principles of legal professional privilege applicable to testimony at a trial provide the paradigm, and the extension of the same principles to ancillary processes was derivative in nature. Accordingly, any change to the paradigm should rationally be reflected in the derivatives.''

22. This approach was taken up by the Full Court of the Federal Court in Adelaide Steamship Co Ltd v Spalvins , ^[27] (1998) 81 FCR 360. which, in turn, was followed by the Court of Appeal of New South Wales in Akins v Abigroup Ltd . ^[28] (1998) 43 NSWLR 539. But not, however, by the Court of Criminal Appeal of New South Wales in R v Young [ 1999] NSWCCA 166 . The Full Court of the Federal Court, in Adelaide Steamship , approving what McLelland CJ in Eq had said, referred also ^[29] (1998) 81 FCR 360 at 373. to the principles concerning the analogical use of statutes in developing common law principles and concluded that the Evidence Act had ``created an entirely new setting to which the common law must now adapt itself''. ^[30] (1998) 81 FCR 360 at 373.

23. As was pointed out by the Full Court of the Federal Court in the present case, there is a fundamental difficulty with this line of reasoning. The legislation in question does not apply throughout Australia. At present, it applies only in federal courts, and in the courts of New South Wales and the Australian Capital Territory. In Lange v Australian Broadcasting Corporation ^[31] (1997) Aust Torts Reports ¶ 81-434 at 64,230; (1997) 189 CLR 520 at 563. this Court said that `` [ t]here is but one common law in Australia which is declared by this Court as the final court of appeal''. Certain legislatures in Australia have enacted legislation concerning privilege which differs in a number of respects from the common law principles. One respect concerns whether the test to be applied for determining privilege is the sole purpose or the dominant purpose test. There are other differences, which are not material to the present case, but which should not be overlooked. As was observed in Mann v Carnell , ^[32] [ 1999] HCA 66. for example, the rules relating to loss of privilege are also different in some respects. Other legislatures have not enacted similar legislation. Furthermore, the legislation, even in the jurisdictions where it applies, in its terms leaves untouched certain areas in which the privilege may operate. In such a setting, there is no consistent pattern of legislative policy to which the common law in Australia can adapt itself. The fragmentation of the common law implicit in the qualification that such adaptation should occur only in those jurisdictions in which the Evidence Act applies is inconsistent with what was said in Lange , and is unacceptable.

24. In Warnink v J Townend & Sons (Hull) Ltd ^[33] [ 1979] AC 731 at 743. Lord Diplock said:

``Where over a period of years there can be discerned a steady trend in legislation which

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reflects the view of successive Parliaments as to what the public interest demands in a particular field of law, development of the common law in that part of the same field which has been left to it ought to proceed upon a parallel rather than a diverging course.''

Subsequently, in Photo Production Ltd v Securicor Transport Ltd , ^[34] [ 1980] AC 827 at 843. Lord Wilberforce, in supporting the discarding by the House of Lords of the ``fundamental breach doctrine'', referred to the legislative intention manifested in the Unfair Contract Terms Act 1977 (UK) that, consumer contracts apart, the parties to commercial contracts be free to apportion the risks as they see fit.

25. Their Lordships were speaking in the context of a nation with a single Parliament. What has occurred in Australia in relation to the legislation here in question cannot be said to reflect a consistent legislative view of what the public interest demands in relation to the law of legal professional privilege. Most Australian legislatures have not adopted the Evidence Act , and those which have adopted it have limited its application to part only of the field in which the privilege operates. In Moorgate Tobacco Co Ltd v Philip Morris Ltd & Anor , ^[35] (1984) Aust Torts Reports ¶ 80-314; (1984) 156 CLR 414. See also Perre & Ors v Apand Pty Ltd (1999) Aust Torts Reports ¶ 81-516 at 66,076-66,077; (1999) 73 ALJR 1190 at 1223-1224; 164 ALR 606 at 654-655 . Deane J spoke against a background of federal law, namely the provisions of Pts IV and V of the Trade Practices Act 1974 (Cth), when rejecting the existence of a common law action for ``unfair competition'' or ``unfair trading''. His Honour, speaking for the Court, said: ^[36] (1984) Aust Torts Reports ¶ 80-314 at 68,193; (1984) 156 CLR 414 at 445.

``... Those limits, which define the boundary between the area of legal or equitable restraint and protection and the area of untrammelled competition, increasingly reflect what the responsible Parliament or Parliaments have determined to be the appropriate balance between competing claims and policies.''

Subsequently, in R v L , ^[37] (1991) FLC ¶ 92-266; (1991) 174 CLR 379. the Court rejected the proposition that it was part of the common law of Australia that, by marriage, a wife gave irrevocable consent to sexual intercourse with her husband. Mason CJ, Deane and Toohey JJ referred to the uniform pattern of legislation in five States and added that the notion of irrevocable consent was out of keeping ^[38] (1991) FLC ¶ 92-266 at 78,786; (1991) 174 CLR 379 at 390. ``with recent changes in the criminal law of this country made by statute, which draw no distinction between a wife and other women in defining the offence of rape''.

26. In Moragne v States Marine Lines Inc , ^[39] 398 US 375 (1970). the question before the United States Supreme Court was whether a decision of 1886, which held that the principles of maritime law which applied in the federal courts did not afford a cause of action for wrongful death, should no longer be regarded as acceptable in the light of what by 1970 was the enactment in every State of the Union of a wrongful-death statute. The Supreme Court decided that, although no State legislation applied to the case in hand, the federal rule should adapt by analogy to the position established in the various States.

27. The situation in these authorities, where the analogy is drawn from federal statute law, or from a consistent pattern of State legislation, markedly differs from the situation presented here.

28. In South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd , Cooke P, speaking in a unitary system, observed that `` [ t]he analogy of a statute may properly influence the development of the common law''. ^[40] [ 1992] 2 NZLR 282 at 298. However, whatever may be involved in this doctrine of analogy, as to which it is unnecessary now to venture any further opinion, the situation in the present litigation cannot provide an occasion for its application.

29. The members of the Full Court of the Federal Court were in substantial agreement upon the third argument relied upon by the appellant.

30. Order 15 r 15 of the Federal Court Rules 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.''

31. The necessity referred to is necessity for the fair disposition of the case. ^[41] Burmah Oil Co Ltd v Bank of England [ 1980] AC 1090 at 1141-1142 .

32. Discovery and inspection of documents may be onerous and oppressive, and unless kept within the bounds of necessity may add greatly to the expense and delay involved in litigation. The rule confers a salutary discretionary power, but its purpose is not to enable the court to subvert, or circumvent, the rules which determine the existence of privilege.

33. In a particular case, the circumstance that a document is one which could not be tendered

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in evidence because, for example, it was covered by client legal privilege under the Evidence Act , might possibly be a consideration relevant to a decision as to whether it was necessary that it be produced for inspection even though at the stage of discovery it was not covered by privilege. However, as Finkelstein J pointed out, ^[42] (1998) 83 FCR 511 at 568. in that respect a document produced for a dominant purpose related to legal advice or assistance may be in a position no different from any other document. What was held in the Full Court, correctly, was that the question is one of necessity, and that this is to be determined in the light of the facts and circumstances of the individual case.

34. The Full Court was right to reject the arguments advanced by the appellant in that court. It is necessary now to turn to the appellant's invitation to reconsider Grant v Downs .

The common law of legal professional privilege

35. Legal professional privilege (or client legal privilege) protects the confidentiality of certain communications made in connection with giving or obtaining legal advice or the provision of legal services, including representation in proceedings in a court. In the ordinary course of events, citizens engage in many confidential communications, including communications with professional advisers, which are not protected from compulsory disclosure. The rationale of the privilege has been explained in a number of cases, including Baker v Campbell , ^[43] 83 ATC 4606; (1983) 153 CLR 52. and Grant v Downs itself. The privilege exists to serve the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers. In Waterford v The Commonwealth , ^[44] (1987) 163 CLR 54 at 64-65. See also Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 128 per Brennan J, 134 per Deane J, 147 per Toohey J, 163 per McHugh J . Mason and Wilson JJ explained that legal professional privilege is itself the product of a balancing exercise between competing public interests and that, given the application of the privilege, no further balancing exercise is required. As Deane J expressed it in Baker v Campbell , ^[45] 83 ATC 4606 at 4641; (1983) 153 CLR 52 at 114. a person should be entitled to seek and obtain legal advice in the conduct of his or her affairs, and legal assistance in and for the purposes of the conduct of actual or anticipated litigation, without the apprehension of being prejudiced by subsequent disclosure of the communication. The obvious tension between this policy and the desirability, in the interests of justice, of obtaining the fullest possible access to the facts relevant to the issues in a case lies at the heart of the problem of the scope of the privilege. Where the privilege applies, it inhibits or prevents access to potentially relevant information. The party denied access might be an opposing litigant, a prosecutor, an accused in a criminal trial, or an investigating authority. For the law, in the interests of the administration of justice, to deny access to relevant information, involves a balancing of competing considerations. This Court is now asked to reconsider the balance that was struck in Grant v Downs .

36. Like the present case, and the leading English case of Waugh v British Railways Board , ^[46] [ 1980] AC 521. Grant v Downs was about discovery and inspection of documents in pending litigation. Although privilege, where it applies, attaches to communications, not to pieces of paper, discovery is concerned with documents, and privileged communications are frequently in writing. If a written communication is made for the sole purpose of seeking or giving legal advice, or obtaining or providing legal services, the problem of present concern does not arise. It arises where the documentary communication comes into existence for some purpose or purposes in addition to the legal purpose.

37. As the facts of the cases illustrate, this is not an unusual situation. In Grant v Downs , the inmate of a public psychiatric hospital died in circumstances which gave rise to an action by his widow against the New South Wales Government for damages under the Compensation to Relatives Act 1897 (NSW). In accordance with standard Departmental practice, reports had been made about the occurrence. Upon discovery it was claimed that the reports were privileged. They were said to have been prepared for a number of purposes: to assist in determining whether there had been a breach of staff discipline; to detect whether there were any faults in the hospital's systems and procedures; and to enable the Department to obtain legal advice as to its possible liability and to obtain legal representation in the case of any coronial or civil proceedings. Such a multiplicity of purposes is commonplace, especially in large corporations or bureaucracies, which will often have their own internal legal staff, who are amongst those to whom such reports will be directed. In Waugh , an employee of a railway board was killed in a collision between locomotives. His widow sued the board. There was an internal inquiry into the

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accident, resulting in a report. The report was prepared for two purposes: to assist the board to decide whether there was a need to revise safety and operational procedures; and to obtain legal advice in anticipation of litigation.

38. In both cases, the claims for privilege were disallowed. In neither case was the obtaining of legal advice or assistance the dominant, let alone the sole, purpose of bringing the documents into existence. It may be added that the conditions of s 118 and s 119 of the Evidence Act would not have been satisfied in either case.

39. At the time Grant v Downs was decided at first instance, the law, both in Australia and England, as to the test to be applied in such cases had not been determined by any court of ultimate authority, but the prevailing view was that it was sufficient to attract privilege to such reports if one purpose of their preparation was to obtain legal advice or assistance. In some cases it was said that the purpose had to be substantial, or appreciable, but the weight of authority was against the view that the existence of another purpose, or other purposes, in addition to obtaining legal advice or assistance, resulted in loss of the privilege. It was well settled that it was the purpose of the report, not the motive of the individual who made it, that mattered. In many cases the reports would result from established corporate or bureaucratic procedures, and the individual who made the report would simply be following instructions. It may be necessary to understand the internal procedures, or the objectives of some person of higher authority, in order to identify the purpose or purposes for which reports were prepared.

40. The generally accepted view, however, was that, if there were multiple purposes, it was sufficient to attract privilege that one, not insubstantial, purpose was that of obtaining legal advice or assistance. It was to the correctness of that view that the judgments in Grant v Downs were primarily directed. Rath J, in the Supreme Court of New South Wales, held that the reports were privileged. The Court of Appeal refused leave to appeal from his decision. ^[47] (1976) 135 CLR 674 at 675-676. Special leave to appeal to this Court was granted. The decision of Rath J was reversed. Similarly in Waugh , both Donaldson J and the Court of Appeal in England upheld the claim for privilege, ^[48] [ 1980] AC 521. but the House of Lords reversed their decisions. Thus, in both Grant v Downs and in Waugh , this Court and the House of Lords narrowed the scope of the privilege. It was in relation to the extent of the narrowing that the cases differed.

41. Although the judgment of Barwick CJ in Grant v Downs is sometimes referred to as a dissenting judgment, that is not strictly accurate. All five members of the Court agreed in the result. They were all of the opinion that the test applied by Rath J, (that a purpose of obtaining legal advice or assistance was sufficient, even though there were other purposes), should no longer represent the common law in Australia.

42. It is in the joint judgment of Stephen, Mason and Murphy JJ that the sole purpose test emerged. In the light of subsequent developments in England and other common law jurisdictions, it is to be noted that nowhere in their reasons did their Honours expressly consider a dominant purpose test as an alternative possibility, or give reasons for rejecting such a test. The reasons they gave were advanced as reasons for rejecting the prevailing test, which had been applied by Rath J. An examination of the transcript of the argument in the case shows that the question whether, if the prevailing test were rejected, the new test should be a sole purpose or a dominant purpose test, was not debated. Neither party to the appeal had an interest in that question. It was sufficient for the appellant's purposes that either a dominant purpose or a sole purpose test be adopted. The respondent, to succeed, had to contend for the test applied by Rath J. It did not matter to either party whether, if a test stricter than that applied by Rath J were adopted, it was a sole purpose or a dominant purpose test.

43. A reading of the joint judgment shows that a reason which influenced the decision was a concern that, in large corporations and public authorities, especially those with internal legal officers, routine reports and other documents prepared by subordinates for the information of their superiors would also, in the ordinary course, be provided to lawyers for the purpose of obtaining legal advice or assistance. It was regarded as unacceptable, and contrary to the interests of justice, that such documents should be privileged merely because one of their intended destinations was the desk of a lawyer.

44. Their Honours said: ^[49] (1976) 135 CLR 674 at 687-688.

``It is difficult to see why the principle which lies behind legal professional

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privilege should justify its extension to material obtained by a corporation from its agents with a double purpose. The second purpose, that of arming central management of the corporation with actual knowledge of what its agents have done, is quite unconnected with legal professional privilege; it is but a manifestation of the need of a corporation to acquire in actuality the knowledge that it is always deemed to possess and which lies initially in the minds of its agents. That cannot itself be privileged; quite the contrary. If the party were a natural person or, more accurately, an individual not acting through servants or agents, it would be precisely that knowledge which would be discoverable and the party cannot be better off by being a corporation. The fact that a second purpose may also be being served, a purpose to which the privilege would extend, does not cover with that privilege information which would otherwise be discoverable.

...

All that we have said so far indicates 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. It is not right that the privilege can attach to documents which, quite apart from the purpose of submission to a solicitor, would have been brought into existence for other purposes in any event, and then without attracting any attendant privilege.''

45. That reasoning, if accepted, explains why the prevailing test, applied by Rath J, should be rejected, but it does not necessarily demand rejection of a dominant purpose test. The premise that it is unsatisfactory that one purpose of obtaining legal advice or assistance is sufficient does not sustain a conclusion that it is necessary that such a purpose be the only purpose. The fact that a report which is prepared for a dominant purpose, which is a legal purpose, and for a subsidiary purpose as well, does not necessarily mean that, if the dominant purpose did not exist, the report would nevertheless still have come into existence. To use the language of Jacobs J, to which further reference will be made below, it might be the dominant purpose which alone accounts for the existence of the report.

46. Leaving to one side whatever room for evaluation or judgment might have resulted from qualifying adjectives such as ``substantial'' or ``appreciable'' under the previous test, the joint judgment appeared to substitute one bright-line test for another. Previously, in the case of a multiplicity of purposes, it sufficed if one purpose was submission to legal advisers or use in legal proceedings. Now the test was whether that was the sole purpose. The reasons for the joint judgment addressed those alternatives. The other two members of the Court also addressed intermediate possibilities. Jacobs J distinguished between communications to obtain advice or action in litigation which is pending or in fact expected, and communications where litigation is merely a contingent possibility. In the latter case, his Honour said, the test is whether the purpose of supplying the material to the legal adviser accounts for the existence of the material. ^[50] (1976) 135 CLR 674 at 690, 692. Barwick CJ, in a passage that proved influential in other jurisdictions, said: ^[51] (1976) 135 CLR 674 at 677.

``Having considered the decisions, the writings and the various aspects of the public interest which claim attention, I have come to the conclusion that the Court should state the relevant principle as follows: a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.''

47. The Chief Justice explained that he thought a sole purpose test too narrow, but was unable to accept a lesser requirement than dominant purpose.

48. As the judgment of Jacobs J illustrates, there are other possible ways of formulating a suitable test without reference to the concept of purpose, whatever qualifying adjective is employed. In many areas of the law, references

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to purpose bring their own potential for uncertainty and argument. However, as appears from the detailed examination of the earlier authorities on the subject made by Havers J in Seabrook v British Transport Commission , ^[52] [ 1959] 1 WLR 509; [ 1959] 2 All ER 15. for more than a century courts have expressed the principles relating to the privilege in terms of purpose, and it would not contribute to certainty to depart from that term at this stage.

49. In Waugh , the House of Lords, after an examination of the previous English authorities, agreed that the reports in that case were not privileged, and that the pre-existing rule, applied in the Court of Appeal, which was to the same effect as that applied by Rath J in Grant v Downs , should be changed. However, in considering Grant v Downs , their Lordships unanimously preferred the test expounded by Barwick CJ to that of the joint judgment. They acknowledged that a dominant purpose test was less clear than a sole purpose test, but they found the latter unduly restrictive. They pointed out that dominant purpose is a concept well known, and frequently applied, in other areas of legal discourse.

50. Upon one point, which was the point of decision in each case, all members of the High Court and the House of Lords were agreed: if the most that could be said of the reports in question was that the purposes for which they came into existence included a purpose of obtaining legal advice or assistance, then privilege would not apply.

51. In 1985, in Guardian Royal Exchange Assurance of NZ Ltd v Stuart ^[53] (1985) 3 ANZ Insurance Cases ¶ 60-671; [ 1985] 1 NZLR 596. the same question arose in the Court of Appeal of New Zealand. In that country, the prevailing authority supported a test which asked whether the legal purpose was an appreciable purpose of a report or communication. ^[54] Konia v Morley [ 1976] 1 NZLR 455 . The Court of Appeal preferred a narrower test, and adopted the dominant purpose test. Richardson J said: ^[55] (1985) 3 ANZ Insurance Cases ¶ 60-671 at 79,190; [ 1985] 1 NZLR 596 at 605.

``... I am satisfied that we should move to a dominant purpose test. First, a more restrictive test than appreciable purpose is called for in balancing the relevant public interest considerations.... Second, in terms of ease of application a dominant purpose test is both familiar to lawyers and more straightforward in its application. As [ has been] observed... the phrase `appreciable purpose' is not precise and in some instances an appreciable purpose test would be much more difficult to apply than a sole or dominant purpose test. And a dominant purpose test is a familiar concept in other branches of the law, notably insolvency and taxation. Finally, it holds the scales in even balance, whereas at the other extreme, unless read down by refusing to rank as a `purpose' any considerations other than submission to legal advisers which were in mind, a sole purpose test would provide extraordinarily narrow support for the privilege.''

52. Although it has no direct bearing upon the issue now under consideration, reference should be made to a point emphasised both in the joint judgment in Grant v Downs ^[56] (1976) 135 CLR 674 at 689. and by Cooke J in Guardian Royal Exchange Assurance of NZ Ltd v Stuart . ^[57] (1985) 3 ANZ Insurance Cases ¶ 60-671 at 79,185; [ 1985] 1 NZLR 596 at 599. A claim for privilege is not conclusively established by the use of a verbal formula. A court has power to examine documents in cases where there is a disputed claim, and it should not be hesitant to exercise such a power. ^[58] See also Trade Practices Commission v Sterling (1979) ATPR ¶ 40-121 ; (1979) 36 FLR 244 . In appropriate cases, there is also power to allow cross-examination of a deponent of an affidavit claiming privilege. ^[59] National Crime Authority v S (1991) 29 FCR 203 .

53. The dominant purpose test has been taken up in Ireland and in Canada. In Australia, when the Parliament enacted the Evidence Act , it adopted the dominant purpose test for the areas in which the Act was to apply, and in this respect it was followed by the Parliament of New South Wales.

54. The appellant does not invite this Court to refuse to follow the actual decision in Grant v Downs , which was unanimous. It established that the previously accepted test, by reference to whether the legal purpose was one purpose, was inappropriate. This Court is not invited to reconsider Grant v Downs with a view to deciding that the common law in Australia is now even further out of line with the common law in other countries, and with the Evidence Act , than was thought. Nor are we invited by the appellant to declare that what Jacobs J said in Grant v Downs states the test, although in practice it may not be very different from the dominant purpose test. Whatever its merits, it has not been adopted in other jurisdictions. The submission is that we should reconsider the point upon which the judgment of Barwick CJ differed from the joint judgment; a point which was not the subject of argument in the case and which was not critical to the decision.

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55. Although what is proposed does not involve an overruling of a previous decision of the Court, nevertheless the question whether to reconsider the reasoning of Stephen, Mason and Murphy JJ, and to refuse to follow it if we disagree with it, should be decided by reference to considerations of the kind discussed by Gibbs CJ in The Commonwealth v Hospital Contribution Fund . ^[60] (1982) 150 CLR 49 at 55-58. These considerations were applied in John v FC of T ^[61] 89 ATC 4101 at 4112, 4119-4120; (1988-1989) 166 CLR 417 at 438-439, 450-453. See also Northern Territory of Australia v Mengel & Ors (1995) Aust Torts Reports ¶ 81-355 at 62,318; (1994-1995) 185 CLR 307 at 338 . when overruling Curran v FC of T . ^[62] (1974) 131 CLR 409. Grant v Downs has, for more than 20 years, been accepted in Australia as authority for the sole purpose test of legal professional privilege, and it has been consistently followed in later decisions and has been applied in this Court in National Employers' Mutual General Insurance Association Ltd v Waind ^[63] (1979) 1 ANZ Insurance Cases ¶ 60-010; (1979) 141 CLR 648. and Waterford v The Commonwealth . ^[64] (1987) 163 CLR 54. The power to disturb settled authority is, as Gibbs CJ said, one to be exercised with restraint, and only after careful scrutiny of the earlier course of decisions and full consideration of the consequences.

56. The sole purpose test enunciated by Stephen, Mason and Murphy JJ did not rest upon a principle that had been worked out in a succession of cases. On the contrary, it overturned what was, until then, accepted principle. Insofar as the question was whether there should be a sole purpose or a dominant purpose test, that question was not important to the parties to the appeal, and was not the subject of argument save to the extent that what was said about the point in issue in the case, which was whether the pre-existing test should prevail, indirectly reflected on the matter. The reasons given in the joint judgment for rejecting the pre-existing test do not, as a matter of logic or of policy, require a preference for the sole purpose test over the dominant purpose test, and nowhere do those reasons address a possible choice between those two tests. The House of Lords in England, and the Court of Appeal in New Zealand, with the benefit of the reasoning in Grant v Downs available to them, subsequently preferred the dominant purpose test, and the law in Australia is now out of line with other common law jurisdictions. The parliaments of the Commonwealth and New South Wales have adopted the dominant purpose test for their Evidence Acts. All those circumstances, in combination, lead to the conclusion that this Court should now reconsider the matter.

57. The search is for a test which strikes an appropriate balance between two competing considerations: the public policy reflected in the privilege itself, and the public policy that, in the administration of justice and investigative procedures, there should be unfettered access to relevant information. Additionally, whatever test is adopted must be capable of being applied in practice with reasonable certainty and without undue delay and expense in resolving disputed claims.

58. At first sight, sole purpose appears to be a bright-line test, easily understood and capable of ready application. Many disputes as to its application could be resolved simply by examining the documents in question. However, there is reason to believe that the position is not quite as it appears. The main objection to the test is what was described in the Court of Appeal in New Zealand as its extraordinary narrowness. If it is to be taken literally, one other purpose in addition to the legal purpose, regardless of how relatively unimportant it may be, and even though, without the legal purpose, the document would never have come into existence, will defeat the privilege. This has led some judges to apply the Grant v Downs test in a manner which might suggest that it is not to be taken literally. For example, in Waterford v The Commonwealth , ^[65] (1987) 163 CLR 54 at 85. Deane J said the test of whether a document is to be protected is whether ``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''. That may be closer to dominant purpose than sole purpose. At the least, it seems to involve a reformulation aimed at avoiding the use of ``purpose'' and also at avoiding the conclusion that the existence of any purpose in addition to the legal purpose, albeit minor and subsidiary, will mean that no privilege attaches. In argument in the present case, counsel for the respondent endeavoured to explain the meaning of the sole purpose test in a manner that equated it with the test expounded by Jacobs J in Grant v Downs . Whilst seeking to uphold a sole purpose test, they submitted that ``if a document is created for the purpose of seeking legal advice, but the maker has in mind to use it also for a subsidiary purpose which would not, by itself, have been sufficient to give rise to the creation of the document, the existence of that subsidiary purpose will not result in the loss of privilege''. That appears

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close to a dominant purpose test. If the only way to avoid the apparently extreme consequences of the sole purpose test is to say that it should not be taken literally, then it loses its supposed virtue of clarity.

59. One of the considerations prompting rejection of the pre-existing test was that it was unduly protective of written communications within corporations and bureaucracies. The sole purpose test goes to the other extreme. Such organisations necessarily conduct a large proportion of their internal communications in writing. If the circumstance that a document primarily directed to lawyers is incidentally directed to someone else as well means that privilege does not attach, the result seems to alter the balance too far the other way. This may be the kind of result Deane J was intending to avoid in his reformulation of the privilege, but it seems to follow unless one puts a gloss upon the sole purpose test.

60. A dominant purpose test was sufficient to defeat the claims for privilege in Grant v Downs , and Waugh . The reason why Barwick CJ, the House of Lords, and the New Zealand Court of Appeal preferred that test was that they were unable to accept, as either necessary or desirable, the apparent absoluteness and rigidity of a sole purpose test. If the only way to avoid that absoluteness and rigidity is to water down the sole purpose test so that, in its practical application, it becomes more like the dominant purpose test, then it should be abandoned. Either the test is too strict, or it lacks the clarity which the respondent claims for it.

61. It would be possible to seek to formulate a new test, such as that adopted by Jacobs J in Grant v Downs , or Deane J in Waterford , in a further attempt to adjust the necessary balance of competing policies. To do so, however, would produce only confusion. As a practical matter, the choice presently confronting this Court is between sole purpose and dominant purpose. The dominant purpose test should be preferred. It strikes a just balance, it suffices to rule out claims of the kind considered in Grant v Downs and Waugh , and it brings the common law of Australia into conformity with other common law jurisdictions.

Conclusion

62. The appeal should be allowed with costs. The orders of the Full Court of the Federal Court of Australia should be set aside. In their place, the appeal to that court from Foster J should be allowed. The questions of law raised for decision by Foster J should be 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.

63. 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.