MEMORANDUM OF ADVICE To: From: Re: Date: Matthew Owen Junior Solicitors Team Tankard v Oz Farm Supplies Pty

Ltd 25 February 2013

1. Summary of Advice In Victoria, the doctrine of Legal Professional Privilege has been codified in the Evidence Act 2008 (Vic) (hereafter The Act) at Part 3.10, Division 1 as client legal privilege. This Act mirrors the Evidence Act 1995 (Cth). The Act relates to adducing evidence at trial and not pre-trial matters where common law applies unless abrogated by statute. There has been some controversy over this division as it essentially means that two sets of law operate in the area of privilege. When discussing pre-trial issues, we will review the matter at common law as litigation privilege, which covers certain communications passing between a client and the clients lawyer or a third party, or the clients lawyer and a third party.1 We will also review options under the act if we were to proceed to trial. The judgment of Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 (Ensham) would support a challenge brought by us against the adequacy of OFSs privilege claim on the basis that, prima facie, their claim amounts to an excessive claim for client legal privilege since what is being withheld is not communication produced for the dominant purpose of obtaining legal advice, but rather produced for an additional purpose and being withheld in order to benefit OFSs position in the legal action by lessening liability. 2. Summary of facts Ensham involved an application for leave to appeal from an interlocutory order made which dismissed the applicants application to inspect documents for which the respondents had claimed legal professional privilege. The proceeding related to an insurance claim and loss suffered following the flood of a mine site. Of particular concern was an insurance report and emails discussing the contents of that report, which detailed the impact of the flood on the mine site. Ensham provides strong authority against OFSs claim of privilege, not only due to the strong parallel between factual situations, but also because it explores the issue of the indulgence factor resulting from maximising the prospects of establishing a claim for privilege.2 3. Key issues arising According to Ensham, when the communication is contained in a document and the document is brought into existence for the dominant purpose of anticipated legal
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Esso Australia Resources Limited v Commission of Taxation (1999) 201 CLR 49 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 12

proceedings, the document will be subject to legal professional privilege.3 The whole of that report will be privileged since the document amounts to communication. Only communication which is prepared for the dominant purpose of providing assistance in relation to those anticipated proceedings, however, will satisfy this purpose (Esso Australia Reources Limited v Commission of Taxation of the Commonwealth of Australia (1999) 201 CLR 49.4 4. Relevant law Litigation is reasonably anticipated Whether or not litigation is reasonably contemplated is a question of fact to be determined objectively. 5 In determining whether litigation was reasonably anticipated, the subjective views of the parties may well be relevant, but they are not determinative. The question is to be assessed by reference to all of the surrounding circumstances. 6 There has been no decision of the High Court as to what reasonably anticipated or reasonably contemplated means in the context of a claim for legal professional privilege. However, in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1998) 81 FCR 526 at 559, Goldberg J stated that:
reasonably anticipated meant that such proceedings will more probably than not be 7 commenced. Furthermore, in Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 CR 332 is was said that the test was that there must be a real prospect of 8 litigation, as distinct from a mere possibility, but it does not have to be more likely than not. It must be noted that the position of Mitsubishi has been followed by a number of judges in the Full Federal Court and it has also been followed by a judge of the Supreme Court of new South Wales in Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380.

It was accepted in Ensham that this was the case, but interestingly the purpose of litigation was set-out alongside commentary that the solicitors were indulging in self -serving statements referring to a potential claim for privilege contained in the email from Mr Stockdale to Mr Kodaira9 which would support our position as it highlights a disregard for excessive indulgence in privilege in order to strength a claim or avoid liability. Dominant Purpose If the document was created for the purpose of reasonably anticipated litigation, the question then becomes whether this purpose is its dominant purpose. Ensham provides authority that a document will not be privileged if it was not created for the dominant purpose of providing advice in respect of reasonably anticipated litigation.10 That is, purposes other than for the purpose of obtaining legal advice. Ensham also provides that regard should be made to the partys purpose in the creation of the document. In addressing this issue in Ensham, Buchanan J looked to Hartogen Energy Ltd (in liq) v The Australian Gaslight Company (1992) 36 FCR 357, whereby Gummow J stated the purpose
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Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 35 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 40 5 Grant v Downs (1976) 135 CLR 674 at 692 6 Visy Industries Holdings Pty Ltd v Australian Competition and Consumer Commission (2007) 161 FCR 122 7 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 54 8 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 55 9 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 62 10 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 63

for which a document is brought into existence is a question of fact. The purpose will ordinarily be that of the maker of the document, but this will not always be the case.11 In this respect Buchanan J held it is a matter of fact. His Honour concluded that the reports in question were prepared for purposes other than for the purpose of obtaining legal advice. His Honour highlighted that the applicant contended regard should have been made to the respondents purpose in the creation of the reports, as well as the solicitors purpose. In that respect it was argued that the insurers commissioning of the reports was for the purpose of the insurers setting an estimate on potential liability under the contract of insurance and for conducting their business.12 It was therefore held that in such circumstances it could not be said that the documents were created for the dominant purpose of the respondents obtaining legal advice. Power of the court to inspect Section 133 of The Evidence Act13 reads as follows: If a question arises under this Part relating to a document, the court may order that the document be produced to it an may inspect the document for the purpose of determining the question In the matter of Bailey v Department of Land and Water Conservation14 it was made clear that the court may inspect documents under this section in order to confirm a claim for privilege. Further to this, it was observed in Esso15 that the court should not be hesitant in exercising its power to examine documents. This section has been relevant in matters where the independence of a practitioner is a factor needing consideration. This is because the documents may not have been produced when the practitioner was acting in professional legal capacity and the nature of the documents may be administrative or managerial. This issue was raised in the matter of Australian Hospital Care Pty Ltd v Duggin 16 where the General Counsel of Australian Hospital Care was also the company secretary. In this matter, Gillard J held that the plaintiffs failed to exclude the doubt that General Counsel was acting independently in a professional capacity in the communications which were internal memorandums. In Seven Network v News Limited17, the court was again not convinced that the in-house lawyer was acting in a legal context or role in relation to the documents over which LPP was claimed, because Chief General Counsel also acted in a variety of roles within the News Group. 5. Application to OFS Ensham provides strong authority to the matter at hand, not only because of its consideration of dominant purpose, but also because it considers the issue of an indulgence factor resulting from maximising the prospects of estabdlishing a claim for privilege, 18 and the possibility of burying reports produced by third-parties for an additional purpose which may strengthen a partys claim.
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Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 76 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 64 13 1995 (Cth) 14 [2009] NSWCA 100 15 Gleeson CJ, Gaudron and Gummow JJ at 50 [52] 16 (No.2 ) [1999] VSC 131 (28 April 1999) 17 [2005] FCA 142 18 Ensham Resources Pty Limited v Aioi Insurance Company Limited [2012] FCAFC 191 at 12

The facts provide a strong parallel to our matter in that what is attempting to be discovered is a report which lends itself toward providing factual background to the question before the courts, which would ultimately impact upon the outcome of the matter. Considering Robin Jones reputation, it is likely that OFS is making an excessive claim for privilege, which includes illegitimate inclusions, in order to bury evidence that would suggest that OFS had prior knowledge of damage to the fence. In this respect, we should raise the following objections: i) The Existence of an Expert Report Existence of the engineers report is a factual matter to be established. It will be necessary to lead evidence adducing existence. On the information provided, there is a reasonable likelihood that this report is in existence. If it is shown to exist, it will be necessary to establish that the engineers report was not created for the dominant purpose of litigation.19 On the facts, the report is unlikely to be considered to be created for the dominant purpose of litigation as it was commissioned 3 months after the flooding (which occurred 2 years ago), presumably due to suspected structural damage in the fence. At that stage, there would have been no contemplation of litigation. 20 Even if future legal concerns had been a factor contributing to the commissioning of the engineers survey and report, it is unlikely that OFS will be able to demonstrate that the dominant purpose for the creation of the report was for the provision of legal advice or for use in anticipated or contemplated litigation. Rather, the report was prepared for a number of other key purposes, in particular so that OFS could obtain an understanding of its premises and any maintenance work required, as a matter of its ordinary business operations.21 Further, there was no litigation on foot when the report was made and the report was likely primarily developed in order to engage the extent of repair work necessary, including the type of repair work required, likely duration and those costs associated. Therefore, the basis of concealing it could only be for the purpose of concealing OFSs negligence in the matter. In order to prove the existence of the report and convince the court to compel its production, we could have Matt Rankin swear an affidavit setting out evidence of what he saw, heard or otherwise perceived on the day the engineer visited the premises. However, if Matt were to swear that he believes a report was produced, this is likely to be excluded as opinion evidence.22 According to our instructions, Matt says that he observed two people from head office, one of which was an engineer. We would need to determine who the other person was. If it was not OFSs in house lawyer, the evidence would support our argument that the engineers expert advice was not given for the dominant purpose of legal advice or in contemplation of litigation.

Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49. Esso Australian Resources Ltd v Federal Commissioner of Taxation 2000 168 ALR 123 (ch7 p6). 21 Powercor Australia Ltd v Perry [2011] VSCA 239. 22 Evidence Act 2008 (VIC), s76.
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ii) Minutes of board meetings and Peter Gardiners involvement As the party asserting privilege, OFS must show that the Minutes were communicated to inhouse counsel for the dominant purpose of legal advice.23 This is not clear cut, because Gardiner has a dual role as Company Secretary and Inhouse Counsel.24 As Company Secretary, Gardiner would be expected to attend broad meetings and have access to the minutes. Furthermore, the minutes were for general broad meetings, rather than specific meetings organized to discuss particular matters.. It would therefore be arguable that the Minutes have been obtained in the capacity as Secretary, rather than in-house Counsel. Here consideration should be paid to: The fact that legal professional privilege will only protect communications between a lawyer and client in the course of a professional relationship. The nature of the relationship collectively. Seven Network Ltd v News Ltd [2005] FCA 142 provides authority that legal professional privilege will only protect communications that are made in the course of a professional relationship between a lawyer and client, and that individuals may act multiple roles within the course of employment. Whether the Minutes were created for the purpose of anticipated litigation.

iii) Possibility that Peter Gardiner does not hold a practising certificate If it is established that Peter does not hold a practicing certificate, this may be indicative of a lack of independence from the Board, therefore not affording professional privilege on the basis of legal relationship. In Vance v Air Marshall McCormack (as Chief of Air Force) [2005] ACTA 35 (ch 8 p9) the ACT Court of Appeal held that failure to hold a practicing certificate is not fatal to a claim for legal privilege but that it is a very relevant fact to take into account in establishing whether an in-house legal advice such that would attract a claim under the Evidence Act. Please note, however, this decision is not binding at common law. This notion of independence was also discussed in W aterford25 whereby it was stated a legal advisor must be independent of the client in order that the personal loyalties, duties or interests of the adviser should not influence the legal advice which he gives or the fairness of his conduct of litigation on behalf of his client. If it is in fact true that Peter Gardener does not hold a relevant practicing certificate then it will only be considered an issue in the context of his independence and professionalism. If Matthew raise sufficient doubt in the minds of the court about this professionalism it may prompt them to inspect the documents as per Section 133 of The Act and the relevant cases mentioned above. Working as in house counsel and company secretary means that the independence of Gardener in his legal role is compromised. Therefore it is suggested that not all the documents to which privilege has been claimed were based on independent and impartial legal advice and nor do they satisfy the dominant purpose test. The report was made prior to the accident, and so irrespective of litigation. The minutes from Board meetings were not made in anticipation of litigation as they too were made before the meeting.

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Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49. Standard Chartered Bank of Australia Ltd v Antico (1993) 36 NSWLR 87, 91-93 Waterford v Commonwealth (1987) 163 CLR 54, 70

6. Conclusion Based on Ensham and associated case law, I believe we are in a strong position to challenge the adequacy of OFSs privilege claim, as the facts suggest that the communication was not created for the dominant purpose of obtaining legal advice, but rather communication was created for additional purposes and not in anticipation of litigation. Furthermore, OFSs conduct amounts to an excessive claim for privilege, and includes a claim for illegitimate documents, in an attempt to benefit their legal position by not disclosing all relevant materials, and lessen liability by burying reference to other facts. If such a claim were to be coupled with a statement from Matt, detailing his understanding of an existing engineers report, and considering the flood is public knowledge, our challenge would almost certainly be made out. Signed by: Sarah Poole, Alice Bradshaw, Vanessa Hubel & Winnifred So Mok