FEDERAL COURT OF AUSTRALIA

State of New South Wales v Betfair Pty Ltd [2009] FCAFC 160

 PRIVILEGE – Legal professional privilege – Legal advice – Whether provision of draft legislation by Parliamentary Counsel to State constitutes legal advice – Whether privilege covers communications by State to third parties for dominant purpose of seeking legal advice – Draft legislation implicitly provides privileged legal advice – Considering nature of consultative process involved in drafting instructions for draft legislation, privilege applied to draft instructions and related communications between State and third parties

 PRIVILEGE – Legal professional privilege – Legal advice – Waiver of privilege – Whether State waived privilege by failing to place “use restraint” on privileged communications – Whether State waived privilege by putting privileged communications in issue – State did not act inconsistently with maintenance of confidentiality and therefore did not waive privilege

 PRACTICE AND PROCEDURE – Leave to appeal interlocutory decision – Whether decision attended by sufficient doubt – Whether substantial injustice would result if leave denied – Leave granted

Betfair Pty Limited v Racing New South Wales (No 7) [2009] FCA 1140

Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397

Waterford v Commonwealth (1987) 163 CLR 54

Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610

Workcover Authority (NSW) v Law Society of New South Wales (2006) 65 NSWLR 502

Hall v Meyrick [1957] 2 QB 455

Tickell v Trifleska (1990) 24 NSWLR 548 followed

Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 136 FCR 357

Mann v Carnell (1999) 201 CLR 1

STATE OF NEW SOUTH WALES v BETFAIR PTY LTD ACN 110 084 985, RACING NEW SOUTH WALES (ABN 86 281 604 417) and HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373)

NSD 1163 of 2009

KENNY, STONE AND MIDDLETON JJ

12 NOVEMBER 2009

MELBOURNE (HEARD IN SYDNEY)

REASONS FOR JUDGMENT

INTRODUCTION

1                          On 23 October 2009, having heard the parties, the Court made the following orders:

1.         The applicant is granted leave to appeal.

2.         The appeal is allowed.

3.         Order 1 of the Orders made by Jagot J on 8 October 2009 is varied by:

(a)        adding to the list subscribed to that order the items listed in the Schedule to these orders; and

(b)        replacing the entry in the list subscribed to that order in respect of Document 3 of Exhibit CM-1 with the following entry:

“Document 3: the parts highlighted pink and blue in Exhibit CM3, except for the paragraph on the page marked ‘50’ commencing “Taken to its full extent’.”

4.         The first respondent shall pay the appellant’s costs of the application for leave to appeal and the appeal.

5.         There be no order as to costs in relation to the Second and Third Respondents.

2                          When making these orders, the Court stated that it would deliver its reasons as soon as practicable thereafter.  The matter was dealt with in this way because a trial of the principal proceeding had been fixed for 16 November to 4 December 2009. 

3                          What follows are the reasons for judgment that were foreshadowed that day. 

4                          These orders were made following an application by the State of New South Wales for leave to appeal, and to appeal, from a judgment of a single judge holding that public interest immunity and legal professional privilege did not attach to certain documentary communications.  The documents in question are in the possession of Racing New South Wales (‘Racing NSW’) and Harness Racing New South Wales (‘Harness Racing NSW’).  By consent, the parties provided us with copies of the documents in the form inspected and considered by the primary judge: see Betfair Pty Limited v Racing New South Wales (No 7) [2009] FCA 1140 at [2]. 

5                          Racing NSW is a body corporate established by s 4(1) of the Thoroughbred Racing Act 1996 (NSW) and has various functions in connection with horse racing, including the control, supervision and regulation of horse racing in the State, and policy implementation and development: see s 13(1)(b) and (c).  Harness Racing NSW, a body corporate constituted by s 4(1) of  the Harness Racing Act 2009 (NSW), has similar functions to Racing NSW, though with respect to harness racing: see s 9(2)(a) and (c).

6                          In the principal proceeding, Betfair Pty Ltd (‘Betfair’) challenges the conditions imposed on certain approvals granted to it by Racing NSW and Harness Racing NSW pursuant to amendments to the Racing Administration Act 1998 (NSW) and the Racing Administration Amendment (Publication of Race Fields) Regulation 2008 (NSW).  The amendments authorised Racing NSW and Harness Racing NSW to grant approval, subject to conditions, to the use of field information.  Betfair alleges that conditions imposed on the approvals granted to it by these two bodies, which require it to pay 1.5% of turnover, are unlawfully protectionist and discriminatory in breach of the guarantee of free trade in s 92 of the Commonwealth Constitution.  According to Betfair, the turnover conditions are discriminatory against an inter-State trader (Betfair) and protectionist in favour of an intra-State trader (TAB Limited).  Betfair does not challenge the amendments to the legislative scheme enabling the conditions to be imposed.  Instead, it challenges the lawfulness of the conditions actually imposed.

PRIMARY JUDGE’S DECISION

7                          The primary judge outlined the circumstances relating to the creation of the documents in question, stating (at [6]-[11]) that:

1.   Racing NSW and Harness Racing NSW have possession, custody or control of all of the documents, which they have discovered in the principal proceeding.

2.   Racing NSW and Harness Racing NSW are regularly consulted by the NSW Office of Liquor, Gaming and Racing (‘OLGR’). OLGR is an office within the NSW Department of Communities, which advises the NSW Government on racing and wagering policy and policy implementation.  These two racing bodies also regularly make unsolicited submissions to OLGR about the legislative regime governing horse racing in the State.

3.   OLGR consulted racing bodies in NSW with respect to the amendments to the Racing Administration Act 1998 (NSW) and the Racing Administration Amendment (Publication of Race Fields) Regulation 2008 (NSW).  These were the amendments leading to the grant of the approvals subject to the conditions challenged in the principal proceeding.  The relevant consultative process involved the establishment of a working group.  The working group included representatives of the OLGR and racing bodies, including Racing NSW and Harness Racing NSW.  The purpose of the working group was to assist OLGR in developing legislative drafting instructions for Parliamentary Counsel.  The Office of Parliamentary Counsel is a separate office within the NSW Department of Premier and Cabinet and is responsible for drafting NSW legislation.

4.   The initial email communication that established the working group (which the OLGR forwarded to the relevant agencies but not to all attendees at the working group) said that “[t]he meeting is confidential in accordance with the protocol that applies to developing legislation generally”.  The working group met on at least six occasions.  Whenever a new participant joined, the Manager, Racing Policy, within the OLGR would reiterate that the meeting was confidential and that the discussions were to “to stay within the room”, and participants indicated their agreement.  Attendance varied but included officers of the OLGR and representatives of Racing NSW and Harness Racing NSW.   

8                          The State of New South Wales intervened in the proceeding before the primary judge, claiming public interest immunity and legal professional privilege over documents that Racing NSW and Harness Racing NSW had discovered.  After giving the matter careful consideration, the primary judge rejected the claim for public interest immunity, and there has been no attempt to challenge this aspect of her Honour’s judgment: see Betfair Pty Limited v Racing New South Wales (No 7) [2009] FCA 1140 at [44].  Her Honour also rejected a claim for “without prejudice” (or settlement) privilege made by Racing NSW: see [74].  There has also been no attempt to challenge this aspect of her Honour’s judgment. 

9                          The learned primary judge did not accept, however, that the drafting of legislation pursuant to an instruction to do so, in and of itself, involved a retainer, the dominant purpose of which was the giving of legal advice.  Her Honour said (at [50]-[51]):

More is required to attract legal advice privilege than a mere instruction to Parliamentary Counsel to draft legislation and the provision by Parliamentary Counsel of draft legislation (even if clarification is thereafter sought as to the intent of the instructions).  In short, there must be some express or implied request for legal advice.  In common with the cases referred to by Betfair where questions arose as to whether wills and the legal transaction documents were subject to legal professional privilege, an instruction to draft legislation does not necessarily carry with it an implied request for legal advice.  The provision by Parliamentary Counsel of draft legislation is also not necessarily the provision of legal advice.  Whether or not legal advice is involved largely depends on the nature and terms of the retainer (in this case, the drafting instructions).

I have read the drafting instructions to Parliamentary Counsel.  They are pure drafting instructions.  They seek the preparation of an exposure draft of legislation for the purpose of consultation with the industry.  They do not contain any request for legal advice.  I have also considered the draft legislation discovered.  Other than in one case, it is simply draft legislation with certain drafting notes and does not contain anything that purports to be legal advice.  I am satisfied that, other than in one case explained below, the discovered documents comprising draft instructions to Parliamentary Counsel (both draft and final) and draft legislation were not brought into existence for the dominant purpose of obtaining legal advice.  Accordingly, those documents cannot attract legal professional privilege.

(Emphasis added)

10                        The State of New South Wales sought to challenge the primary judge’s determination that instructions by the executive government of New South Wales to Parliamentary Counsel for the State were not instructions to provide legal advice, and that the provision of draft legislation to the executive government by Parliamentary Counsel pursuant to instructions of the executive government did not constitute the provision of legal advice. 

SUBMISSIONS

11                        In relation to its argument regarding legal professional privilege, New South Wales identified five categories of documents in dispute (noting that some documents fell into more than one category).  These categories were:

1.   Drafting instructions by OLGR to Parliamentary Counsel (and drafts of such drafting instructions);

2.   Draft regulations and draft Bills;

3.   Emailed communications made for the purpose of formulating instructions to Parliamentary Counsel;

4.   Part of a report prepared by the Chief Executive of Racing NSW for the Board of Racing NSW summarizing information in category 2; and

5.   Advice from the Crown Solicitor’s Office.

Plainly, the last category attracts legal professional privilege, and does not raise the issues with which this application and appeal are concerned.  An apparent slip by the primary judge in making orders has been corrected by reason of the orders made by the Full Court, and this needs no further elaboration.

12                        Briefly stated, the argument for the State of New South Wales was that the relationship between the State and Parliamentary Counsel was one of client and lawyer, and that the communications in question were confidential. Further, so it was submitted, the dominant purpose of these communications was the obtaining or giving of draft legislation by Parliamentary Counsel to the executive government, which ordinarily involved the seeking and giving of legal advice.  New South Wales drew attention to the role and work of Parliamentary Counsel. The State contended that “[t]he distinguishing work of Parliamentary Counsel is the application of legal skill and knowledge to the question of what the client might or might not be able (prudently) to do to achieve the policy objective” as previously determined by the Minister’s department.  According to the State, this required Parliamentary Counsel to advise: (1) how a policy might be achieved by legislation; (2) whether the drafted instrument conforms to the policy objective, or does so subject to variations or exceptions; and (3) whether the drafted instrument can legally and validly be made. Each of these tasks was, so it submitted, interrelated. The State submitted that legislative drafting depended on “a knowledge and understanding of relevant principles of construction, of the form and structure of primary and secondary legislation, of the ultra vires doctrine and other potential grounds for impugning the validity of delegated legislation, of legal skills in achieving plain English drafting, and of the relevance and operation of the Interpretation Act 1987 (NSW)”. 

13                        If leave to appeal were to be granted, then Betfair sought to rely on a notice of contention to the effect that, if legal professional privilege attached to the documentary communications as New South Wales submitted, then, in the circumstances as outlined by Betfair, any such privilege had been waived by the State.

LEAVE TO APPEAL

14                        The Court has granted leave to appeal to New South Wales.  This was necessary because the judgment of the primary judge was an interlocutory judgment requiring leave to appeal pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth).  At the hearing, we were persuaded that this was a case in which the test in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (at 398-399) was satisfied.  That is, we were satisfied that, for the reasons set out below, the impugned decision was attended by sufficient doubt to warrant it being reconsidered by an appellate court and, plainly enough, substantial injustice would have resulted if leave had been refused, supposing the decision to be wrong. 

ROLE OF PARLIAMENTARY COUNSEL

15                        The relationship between the State and Parliamentary Counsel may be one of client and lawyer: see Waterford v Commonwealth (1987) 163 CLR 54, 60-2 per Mason and Wilson JJ.  If advice were sought of and given by Parliamentary Counsel in relation to the drafting and preparation of draft legislation, this would qualify for legal advice privilege: see Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610at 652 [41]; and Workcover Authority (NSW) v Law Society of New South Wales (2006) 65 NSWLR 502 at 521 [74].  This seems to be accepted by the parties.

16                        The question then arises as to the scope of the retainer between the State and Parliamentary Counsel in circumstances where Parliamentary Counsel is asked to prepare draft legislation.  The scope of a retainer may not be confined to the client’s express instructions.  Matters which would reasonably arise in the course of carrying out express instructions should be regarded as coming within the scope of the retainer.

17                        For instance, in the case of drafting wills, a solicitor would be obliged to give advice to ensure that the client understands and agrees to the provisions of the will: see Morrell v Morrell (1882) 7 P.D. 68 at 72-4 per Hannen P.  In some circumstances, the solicitor will need to give advice on matters not requested to advise upon.  Thus, if a solicitor knows that his client is about to marry, he may need to advise the client of the law where the law provides that the will is revoked on marriage unless expressly made in contemplation of marriage: see eg Hall v Meyrick [1957] 2 QB 455, 2 All ER 722.  Therefore, a retainer simply to draw a will involves necessarily the providing of advice, at least as to its validity and effect.  In providing the finally drafted will to the client, the solicitor is effectively saying the will complies with the law and gives effect to the client’s instructions.

18                        A contrary position has been adopted.  In Tickell v Trifleska (1990) 24 NSWLR 548, Rogers CJ in an ex tempore ruling, without the citation of authority, concluded that a letter giving instructions for the preparation of a will was not privileged.

19                        His Honour said (at 549):

Mr Emmett submits that the letter from the second defendant to Mr Wagland constitutes communication to a solicitor with a view to obtaining legal assistance. This is by reason of the fact that, on his argument, when instructions are given to a solicitor for the preparation of a will, there is implicit in those instructions a request, ‘for advice on what is the proper form of the will’.

For myself, I am not prepared to draw that implication. While there may be circumstances in which there is a request for advice of that nature, further factual material, which is not available in the present case, would be required before a court would be prepared to draw the implication sought by Mr Emmett.

20                        In our view, Rogers CJ did not approach the matter correctly.  One would normally draw the implication that the solicitor will provide legal advice as to the effectiveness of the will, either expressly, or implicitly by the mere production of the will to the client.

21                        Similarly with preparing draft legislation, either in the form of an Act of Parliament or a regulation.  Parliamentary Counsel do not merely type or format the legislation.  Parliamentary Counsel apply legal skill and knowledge to give written expression to the policy underlying the proposed legislation.  Parliamentary Counsel would be expected, and perhaps under a duty, to advise upon the legality or effectiveness of the legislation being sought by the instructors.  In the case of subordinate legislation, if regarded as beyond power, Parliamentary Counsel would presumably advise of this view.  Similarly, if an Act of Parliament was considered unconstitutional, or inconsistent with another Act of Parliament, this is a matter Parliamentary Counsel would be expected to advise upon, even if the only express instruction was to draft the legislation.

22                        Where no problem of this kind arises, Parliamentary Counsel, in drafting the legislation and presenting the draft to the government agency, is in effect advising that the draft legislation is in accordance with the instructions given and gives legal effect to those instructions.  The draft itself is not the legal advice, but the communication in providing the draft legislation contains implicitly the advice of Parliamentary Counsel endorsing the draft legislation as being effective and valid.

23                        It is impossible to disentangle the creation of the draft legislation and the giving of advice in these circumstances.  It is not a matter of there being multiple concurrent purposes.  Undoubtedly if there were purposes of equal weight, then neither would be dominant, and a claim for privilege would fail.  However, there is only one purpose here – to obtain the advice of Parliamentary Counsel, and the communicating of that advice is given in the form of draft legislation. 

24                        Therefore, the purpose of the government agency providing instructions to Parliamentary Counsel is to obtain effective and valid draft legislation that is in accord with the instructions.  The provision of draft legislation without more necessarily involves Parliamentary Counsel implicitly advising that the draft legislation provided is effective and valid. 

25                        This conclusion does not, however, necessarily determine the outcome of the appeal.  There are two further issues to be considered.  The first is what counsel called “the Pratt point”, which arises in the following way.

PRATT HOLDINGS PTY LTD V COMMISSIONER OF TAXATION

26                        In Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 136 FCR 357, a Full Court of this Court held that legal professional privilege extended to a confidential communication prepared by a third party (regardless of the third party’s relationship with the client) and provided to the client, so long as the communication was prepared and made with the dominant purpose of its being used by the client to make the necessary communication with the client’s legal adviser to obtain legal advice.  The communication in that case was an accountant’s report prepared at the client’s direction, and it was held to be privileged if prepared with the dominant purpose of its being, or being part of, the client’s communication to its lawyers to obtain legal advice.

27                        In the present case, there were a number of communications made by the State (via the OLGR) to members of the Working Group prior to the communication of any drafting instructions to Parliamentary Counsel concerning the instructions to be given to Parliamentary Counsel, including drafts of drafting instructions.  Betfair submitted that the ruling in Pratt Holdings did not extend to the communications from OLGR to members of the Working Group prior to the involvement of Parliamentary Counsel because “the Pratt Holdings extension does not cover communications to third parties authored by the client (the State), but only communications authored by the third party”.  Further, so Betfair submitted, the evidence indicated that drafts of drafting instructions were given to the Working Group “to obtain input … from the members of the Working Group”, rather than to obtain legal advice.  Moreover, Betfair contended that the State had failed to establish that the various responsive communications by members of the Working Group to OLGR were made with the dominant purpose of providing legal advice, as opposed to providing their views on the matters in issue or “lobbying” the OLGR. 

28                        In essence, Betfair further challenged the State’s privilege claim with regard to these communications on the basis that: (1) the privilege did not extend to communications made by the client to a third party; and (2) the dominant purpose requirement was not satisfied.  In response, New South Wales submitted that the confidential communications made in the course of formulating drafting instructions in consultation with the Working Group were not materially different from the communications that were the subject of the ruling in Pratt Holdings.

29                        In order to evaluate the parties’ submissions, it is necessary first to examine Pratt Holdings a little further.  In holding as the Court did in Pratt Holdings, the Court reasoned that the relationship between the client and a third party responsible for the creation of a confidential documentary communication is immaterial to the question whether legal professional privilege attaches to the communication.  For the privilege to attach to a confidential communication, it is both necessary and sufficient that the communication came into existence for the dominant purpose of the client seeking and obtaining legal advice from the client’s lawyer.  In Pratt Holdings 136 FCR at 367-8 [41]  Finn J (with whom Merkel J agreed) stated:

The important consideration in my view is not the nature of the third party’s legal relationship with the party that engaged it but, rather, the nature of the function it performed for that party.  If that function was to enable the principal to make the communication necessary to obtain legal advice it required, I can see no reason for withholding the privilege from the documentary communication authored by the third party.  That party has been so implicated in the communication made by the client to its legal adviser as to bring its work product within the rationale of legal advice privilege. 

30                        Further, in Pratt Holdings 136 FCR at 386 [105], Stone J (with whom Merkel J also agreed) said:

The coherent rationale for legal professional privilege developed by the High Court does not lend itself to artificial distinction between situations where that expert assistance is provided by an agent or alter ego of the client and where it is provided by a third party.  Nor, in my view, should the availability of privilege depend on whether the expert opinion is delivered to the lawyer directly by the expert or by the client.  Provided that the dominant purpose requirement is met I see no reason why privilege should not extend to the communication by the expert to the client.  This approach is consistent with the High Court’s ruling in Daniels [Corp International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543] that legal professional privilege protects communications and therefore prevents the disclosure of information or documents that would reveal communications protected by the doctrine.

31                        Stone J explained that, in recognizing that the privilege covered a confidential communication brought into existence by third parties provided the dominant purpose requirement was met, the Court was protecting the policy at the heart of the privilege.  Her Honour said at 381 [86]:

If, however, the policy implicit in the rationale for legal professional privilege is not to be subverted, the dominant purpose criterion must be applied recognising that the situations in which people need legal advice are increasingly complex and that the client may need the assistance of third party experts if he or she is to be able to instruct the legal adviser appropriately.

32                        These observations are no less apposite in the present context.  The formulation of appropriate instructions to Parliamentary Counsel is virtually indispensable if the State is to obtain effective legal advice from that quarter.  The public interest that it does so is self-evidently high.  Given the complexity of many matters attracting legislative action, it can reasonably be expected that the difficulty of drafting such instructions in many situations is likely to be greatly increased without the assistance of informed third parties. 

33                        Naturally enough, in deciding whether the function of the third party was the relevant function of enabling the client to obtain legal advice, a court will consider not only the client’s stated purpose in having the communication created, but also the client’s conduct.  As Finn J said (at 369 [47]), the client’s own conduct may show that the intended use of the communication was “not its communication to the legal adviser … but rather it was to advise and inform” the client in determining how the communication should be used in making a communication of its own.  Stone J made a similar observation, also noting (at 386-7 [106]) that “[t]he difficulties in proving the relevant purpose should not be underestimated”. 

34                        Assuming (as the primary judge found) that the communications were confidential, the first question is, therefore, what is the intended use (or uses) for which the communications in question were brought into existence?  According to an affidavit affirmed by Carol Mills, Director-General of Communities NSW, on 4 September 2009, “the Minister authorised the formation of a Working Group to assist in the development of what was eventually promulgated as the Race Fields Regulations”.   In an email dated 24 January 2007, Mr Marzic, Manager, Racing Policy, OLGR, advised Racing NSW and Harness Racing NSW and other racing bodies that were to participate in the Working Group that a meeting was to be held “to workshop the drafting instructions for the race fields regulations”.  The email added:

 That is, to assist OLGR in developing drafting instructions to be provided to Parliamentary Counsel.  Draft regulations will then be submitted to the Minister for consideration.

The meeting is confidential in accordance with the protocol that applies to developing legislation generally.

According to Ms Mills’ affidavit, the subsequent discussions of the Working Group focussed on successive drafts of the drafting instructions that were to be given to Parliamentary Counsel. 

35                        Referring to a passage from Finn J’s reasons for judgment in Pratt Holdings (see [32] above), Betfair argued that OLGR was more than a post box in this process, and that the OLGR’s Mr Marzic exercised such a degree of independent judgment over the use of the Working Group’s communications that it could not be said that their intended use was as a communication to Parliamentary Counsel, but was merely to advise and inform OLGR in formulating its own communication.  Betfair placed particular reliance on a passage in Ms Mills’ cross-examination (transcript, 1 October 2009, p 61) in which Ms Mills acknowledged that Mr Marzic would form his own judgment about the instructions that were to be provided to Parliamentary Counsel.

36                        Having considered this passage and the other evidence to which we were referred, as well as the documents in dispute, we rejected Betfair’s characterization of the consultative process in this case.  This was not a case of merely seeking and receiving input from third parties with a view to OLGR independently formulating the drafting instructions to Parliamentary Counsel; nor, indeed, was this a case of third parties lobbying the Government, as Betfair at one stage maintained. Examination of the documents the subject of this appeal showed that the preparation and formulation of the drafting instructions to be provided to Parliamentary Counsel was essentially an iterative process involving both the OLGR and members of the Working Group.  Each successive draft of the drafting instructions provided to the Working Group was a step along the way towards finalising the drafting instructions that were ultimately given to Parliamentary Counsel and upon which Parliamentary Counsel was to act in drafting the new regulations.  Successive drafts were the product of the responses from members of the Working Group and OLGR designed to move closer towards agreement on a final version of the drafting instructions.  This process gave the OLGR and the Working Group members a more or less equal opportunity to contribute to working out consensually the final instructions to be given to Parliamentary Counsel and upon which Parliamentary Counsel was to act.  In this circumstance, Mr Marzic of OLGR not only represented the views of OLGR but was the conduit for the drafting instructions to the Parliamentary Counsel that were ultimately agreed by him and members of the Working Group.  We do not consider that the passage relied on by Betfair from Ms Mills’ cross-examination requires a different conclusion.

37                        The consultative process adopted by the State on this occasion was very different from the situation in which the State publishes an exposure draft of proposed legislation, and invites public comment.  In the process at issue in this case, OLGR and members of the Working Group were essentially working together consensually, under a regime of confidentiality, to formulate and finalise the drafting instructions that OLGR was to provide to Parliamentary Counsel in order for it to obtain appropriate regulations. 

38                        Examination of the documents the subject of appeal confirms that these documentary communications, whether from OLGR to members of the Working Group or from members of the Working Group to OLGR, were made in order consensually to formulate drafting instructions that OLGR would provide to Parliamentary Counsel. Having regard to the documents and the evidence to which we have been referred, we conclude that the communications were made for the dominant purpose of the State, as represented by OLGR, seeking and obtaining legal advice from Parliamentary Counsel.  We therefore reject Betfair’s submission that the dominant purpose test was not satisfied.

39                        As noted above, Betfair also sought to distinguish Pratt Holdings from the present case on the basis that Pratt Holdings concerned only communications prepared by third parties that were provided to the client for what was said to be the dominant purpose of seeking and obtaining legal advice.  Thus, said Betfair, the ruling in Pratt Holdings did not apply to the situation here where communications were being made by the client to members of the Working Group.  The communications went the wrong way. 

40                        The distinction that Betfair urged us to make is an entirely artificial one.  In our view, the case for privilege attaching to the communications at issue is at least as strong as, perhaps stronger than, in Pratt Holdings.  Supposing OLGR and the Working Group were seated at a table in the same room for the purpose of working out together the drafting instructions that OLGR was to provide to Parliamentary Counsel.  The entire record of that meeting would be privileged.   It could not sensibly be suggested that the communications from members of the Working Group were protected, but the communications from OLGR were not.  In the present case, emailed communications created a virtual meeting room in which OLGR and the Working Group were present.  For the purposes of legal professional privilege, there can be no sensible distinction between emailed communications emanating from OLGR and sent to the members of the Working Group and emailed communications from Working Group members to OLGR.  The rationale for legal professional privilege as outlined in Pratt Holdings would not support such an artificial distinction.  Provided a communication is made with the dominant purpose of the client seeking or obtaining legal advice, we see no reason why privilege should not protect communications between the client and third parties whose knowledge is desirable or necessary for the client to obtain the legal advice the client desires, as in this case.  Accordingly, we rejected Betfair’s submissions as to the inapplicability of Pratt Holdings.

41                        For these reasons, we substantially accepted the submissions of the State of New South Wales in support of the appeal.  In this event, however, it became necessary for us to consider the argument as to waiver raised by Betfair since Betfair also sought, by its notice of contention, to support her Honour’s judgment on this alternative ground. 

NOTICE OF CONTENTION: DID THE STATE WAIVE PRIVILEGE?

42                        As we have seen, in consulting with the Working Group, the State (via OLGR) disclosed to Racing NSW, Harness Racing NSW and other Working Group members the contents of various versions of drafting instructions for Parliamentary Counsel, draft regulations, and other associated communications.  Before us (and the primary judge) Betfair argued that, if the privilege were found to attach to the communications in issue, then the State should be found to have waived the privilege.

43                        Similar submissions on waiver were rejected by the primary judge, although we accept that, as Betfair pointed out, the primary judge’s ruling in this regard related to different documentary communications from those that concern us.  (For this latter point, see Betfair (No 7) [2009] FCA 1140 at [60].)    Her Honour’s reasons for judgment relate that:

Betfair’s submissions appear to identify two (probably related) bases for waiver.  First, that the documents were dealt with in a manner that destroyed the State’s capacity to control further dissemination of the document.  Second, that the documents were dealt with in a manner inconsistent with the maintenance of the privilege by reason of unfairness to Betfair.

44                        To the extent that the second proposition invoked “fairness at large” as a relevant criterion in deciding whether there had been waiver, her Honour rejected it, noting, correctly in our view, that “[t]he High Court rejected that basis of waiver in favour of the inconsistency test, ‘where necessary informed by considerations of fairness’”: see Betfair (No 7) [2009] FCA 1140 at [58].  Betfair did not contest this.

45                        Whilst the primary judge accepted that the first proposition disclosed “a proper basis for finding waiver”, her Honour found that, in the circumstances of the case, this basis was not made out, saying (at [60]):

There was express reference to confidentiality at the beginning of the meetings of the working group.  Betfair’s attempt to characterise that as relating to the meeting as opposed to the discussions or the advice disclosed is artificial.  The OLGR was attempting to communicate that everything connected with the process of legislative amendment, including any legal advice disclosed, was confidential, in the sense that it could not be communicated, I infer, other than to the boards of the organisations in question and on the basis that those board members themselves would understand the requirement of confidentiality.    (Emphasis added)

46                        On appeal, the question for determination was not whether the State had waived privilege over the documents in dispute by disclosing them to the Working Group.  As stated above, communications between OLGR and the Working Group were themselves privileged communications.  Rather, Betfair’s case on waiver focussed on: (1) an alleged failure on the part of the State to impose a use restraint on the communications that the State made to the Working Group; and (2) the use to which one member of the Working Group – Racing NSW – allegedly put these communications, or part of them.

47                        Betfair submitted that the State placed no use restraint on the Working Group’s use of the communications flowing between it and the Working Group.  This meant, so Betfair argued, that the State had dealt with the documents in a manner that destroyed its capacity to control further dissemination of them; and had thereby acted in a manner inconsistent with the continued existence of the privilege.  To quote Betfair’s written submissions “[t]here [was] no evidence that … the State placed upon Racing NSW any contractual or other restriction to prevent Racing NSW from using those documents otherwise than for the purpose for which it was provided” (emphasis original).  Betfair submitted that “the State must have visited upon it any unfairness to Betfair which arises out of the State’s failure” to impose a use restraint. 

48                        Betfair’s waiver case depended on the proposition that the failure of the State to impose a use restraint resulted in unfairness to Betfair.  In order to understand Betfair’s submissions on unfairness, it is necessary briefly to refer to the legislative context affecting the principal proceeding.  The Racing Administration Act 1998 (NSW) made provision in s 33A for approvals to use NSW race field information, including provision for approvals to which was attached a condition as to a fee “being a fee or fees imposed in accordance with any requirements prescribed by regulations”.  The OLGR and the Working Group were concerned with what subsequently became regulation 16(2)(a) of the Racing Administration Amendment (Publication of Race Fields) Regulation 2008 (NSW), which provides that a relevant racing control body “may impose a condition on approval that the holder of the approval must pay ... in relation to a publication  in Australia of a NSW race field … a fee that does not exceed 1.5% of the holder’s wagering turnover that relates to the race … covered by the approval”. 

49                        Betfair’s submissions on waiver relied on a part of the minutes of a meeting of the Board of Racing NSW on 18 June 2008 (in evidence before her Honour).  In particular, Betfair relied on the following passage from these minutes:

2.3       Race Fields Legislation

It was resolved that the report and the draft regulations be noted.

It was also resolved that the Board approve of a fee of 1.5% of turnover in excess of $5 million per annum being imposed on all wagering operators who were given approval to publish NSW thoroughbred race fields.

The Chairman opposed this latter resolution and requested that his dissenting vote be so recorded.

Betfair also referred to the Racing NSW Chief Executive’s Report, which the primary judge also accepted was before the Board.  This report included the comment that “[i]t is understood that the Government’s intention is to commence the provisions of the legislation and promulgate the regulation with effect from 1 July 2008”. 

50                        Betfair contended that Racing NSW must have ascertained from communications made by OLGR to the Working Group that the proposed new regulation would permit it to impose a fee condition.  This was borne out, so Betfair said, by the non-privileged communications that had been disclosed to it.  Betfair submitted that these documents showed that the Racing NSW representative on the Working Group had been provided with a draft regulation sometime in the first half of June 2008.  Betfair further submitted that “as a result, on 18 June 2008, Racing NSW purported to make a decision to impose a particular fee condition, prior to the Regulation’s coming into force on 1 July 2008”.  Betfair affirmed that “the whole issue at the heart of the [principal proceeding] is whether turnover is a discriminatory criterion” operating so as to offend s 92 of the Constitution.    

51                        Betfair contended that the documents “which Racing NSW used to make that decision are, forensically, extremely important”, and that “had the State properly controlled Racing NSW’s use of the material for which it claims privilege, Racing NSW could, consistently with that control, only have made the relevant decision in relation to the fee condition after the Regulation came into force”.  In this event, so Betfair argued, it would not have met with a claim that legal professional privilege attached to the documents.

52                        The State of New South Wales argued that Betfair’s waiver case was ill-founded.  For the following reasons, we agree.

53                        A person who would be otherwise entitled to the protection of legal professional privilege in respect of a communication may, at common law, lose that protection by virtue of some act of waiver.  The issue for determination is whether the State has done an act of waiver, with the result that it lost the protection that it would otherwise have enjoyed.  The test for waiver, formulated by the High Court in Mann v Carnell (1999) 201 CLR 1, is one of inconsistency test, “where necessary informed by considerations of fairness”.  According to the majority in Mann 201 CLR at 13 [29]:

Waiver may be express or implied.  Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect  …  What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large. (Emphasis added)

54                        Betfair has not shown that the State, as the privilege holder, did or failed to do anything inconsistent with the maintenance of the privilege: see Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 at 354 [45].   First, it should be borne in mind that Betfair carried the onus with regard to waiver.  In this regard, there is scant evidence as to the extent to which the Board of Racing NSW “used” otherwise privileged communications passing between OLGR and the Working Group; and there is even less evidence concerning the decision apparently made by Racing NSW to grant Betfair approval subject to the condition under challenge in the principal proceeding. 

55                        Secondly, as at 18 June 2008, when the minutes record the making of a resolution as to the 1.5% of turnover fee, the resolution could not take effect.  At that stage, there was no Racing Administration Amendment (Publication of Race Fields) Regulation containing subclause 16(2), or any equivalent regulation.  There might never have been any such regulation.  There was, therefore, no basis at that stage upon which the resolution could be given effect.  The resolution was no more than indicative of the Board’s thinking at that point if there were to be such a regulation and if an application were made for an approval to use NSW race field information.  Befair’s characterization of the resolution as “a decision to impose a particular fee condition” lacked legal (and indeed evidential) foundation.  We doubt whether the Board’s alleged use of privileged communications was indeed a “use” in any real sense.  To the extent that it was, however, it was, in our view, an internal use, which at the relevant time was not disclosed to, and had no effect on, persons outside Racing NSW. 

56                        Thirdly, the State ensured that communications passing between OLGR and the Working Group were made within a clear regime of confidentiality.  The primary judge found that the need for confidentiality was impressed upon the Working Group, and that the confidentiality regime extended to the communications in dispute.  On the appeal, no challenge was made to her Honour’s finding that “everything connected with the process of legislative amendment … was confidential, in the sense that it could not be communicated … other than to the boards of the organisations in question and on the basis that those board members themselves would understand the requirement of confidentiality”: see [45] above.  In the present context, the purpose of the privilege held by the State was to protect the confidentiality of the drafts of the drafting instructions, draft regulations, and associated communications passing between OLGR and the Working Group, in order that the State, through OLGR, might seek and obtain legal advice from Parliamentary Counsel.  By ensuring that the Working Group understood and respected the need for confidentiality, the State acted entirely consistently with the maintenance of the confidentiality the privilege is designed to protect.  The resolution of 18 June 2008 involved no breach of this confidentiality regime, because there was no occasion to disclose the conditions that Racing NSW might determine to impose on an approval to use NSW race field information unless and until the anticipated regulation was proclaimed, and an application for approval made to it.

57                        We consider that, in circumstances like the present case, there is no good reason to require the State to stipulate a use restraint as the condition of maintaining legal professional privilege.  It is unclear how such a requirement would be formulated. Betfair did not formulate what it said the use requirement should have been in the present case.  In the circumstances of a case like this, it could be difficult for the State to formulate a requirement, of the kind for which Betfair contends, in advance of setting up a consultative body such as the Working Group in this case.  In any event, we consider that the confidentiality regime imposed by the State implicitly contained relevant use restraints for the protection of the confidentiality at the heart of the privilege.  We reject as artificial the distinction that Betfair sought to draw between the imposition of an effective confidentiality regime and the failure to make a relevant use restraint.  

58                        At times Betfair’s argument came close to a claim for issue waiver.  In this regard, we note Betfair’s insistence as to the alleged forensic importance of the documents in suit.   There can, however, be no issue waiver as against the State.  This proposition may be variously explained, but it suffices to observe that, in the principal proceeding, the section 92 challenge made by Betfair relates to the conduct of Racing NSW and Harness Racing NSW in imposing a condition that is said to operate in a discriminatory and protectionist way against an inter-State trader (Betfair) and in favour of an intra-State trader (TAB Limited).    Save for the fact that the State is the holder of legal professional privilege in documentary communications discovered by these parties, the State is a stranger to the proceeding.  The State cannot be said to have put the contents of its privileged communications at issue in mounting a case or substantiating a defence, a requirement to be met in raising a claim of issue waiver: contrast Rio Tinto 151 FCR at 356 [52], 359 [61], 362-3 [72]-[74].  On examination it becomes apparent that the so-called “unfairness” cited by Betfair in not having access to the documents in question is no more than the legal effect of a properly-based claim for legal professional privilege.

59                        It was for these reasons that we concluded that, in the circumstances of the case, the State did not act inconsistently with the maintenance of the confidentiality that the privilege is designed to protect by not imposing a use restraint beyond that implicit in the confidentiality regime imposed by it. We, therefore, rejected Betfair’s submission that the State had by its acts or omissions waived the legal professional privilege that it otherwise held in the documents the subject of the appeal. 

60                        Accordingly, we granted leave to appeal to the State of New South Wales and allowed the appeal. The reasons for the remainder of our orders sufficiently appear above and from the course of argument. 

Associate:

Dated:         12 November 2009