FEDERAL COURT OF AUSTRALIA

EVIDENCE - application for production of documents during trial - whether client legal privilege waived - whether disclosure of substance of legal advice - whether parties consented to disclosure for purposes of s122(1) of the Evidence Act 1995 (Cth) - whether party put in contest, by reason of pleaded cause of action, an issue incapable of fair resolution without reference to the relevant legal advice, if any, received by that party - whether documents used to revive memory of witness.

Evidence Act 1995 (Cth) s34(1), s34(2), s122(1), 122(3), 122(4), 122(6)

Federal Court Rules O15 r15

Hong Kong Bank of Australia Limited v Murphy (1993) 2 VR 419

Telstra Corporation Limited v BT Australasia Pty Ltd (Full Court of the Federal Court, unreported, 24 July 1998)

Adelaide Steamship Co Limited v Spalvins (1998) 152 ALR 418

Akins v Abigroup Ltd (Court of Appeal NSW, 1 June 1998)

Ampolex Limited v Perpetual Trustee Co Canberra Limited (1996) 137 ALR 28

ARTHUR HENRY GRUNDY AND RITA NELL GRUNDY v JOHN BERTRAM LEWIS, HEADSHIP PTY LTD, CHAMBERG PTY LTD, GRAEME ARTHUR SCHMIDT AND PETER THOMAS MAKER

QG 168 of 1993

COOPER J

BRISBANE

14 SEPTEMBER 1998

THE COURT ORDERS THAT:

1.         The application for production of documents is refused.

2.         Mr Arthur Grundy may not be cross-examined as to the contents of the barrister’s opinion.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

The first, second and third respondents seek orders that the applicants produce for inspection certain documents in respect of which client legal privilege is claimed.  There is no question that client legal privilege attaches to the documents, the issue is whether it remains.  The claim arose in the context of the first applicant being cross-examined about legal advice he received in relation to a mortgagee’s duties in the exercise of power of sale upon default of the mortgagor.  By their defence the first, second and third respondents allege that the applicants did not obtain legal advice before selling the property, the subject of the mortgage assigned to them by the first respondent in part consideration for the purchase of the applicants’ piggery.

In the pleadings and in the particulars and answers to a notice to admit facts, the applicants plead oral advice from Mr Flehr, their solicitor, as to their duties and the fact that they acted in accordance with that oral advice.  The assertion is sworn to in the witness statement of Mr Arthur Grundy (Exhibit 2).  Additionally, there is reference in the statement to an advice having been sought and obtained from counsel.  The first, second and third respondents submit that having referred to the advice and having raised the matter as an issue in the proceedings, the privilege attaching to the contents of the documents was waived at common law and that it would be unfair not to order production:  see Hong Kong Bank of Australia Limited v Murphy (1993) 2 VR 419.

Further, they submit that production is necessary in terms of O15, r15 of the Federal Court Rules.  Further, if Part 3.10 of Division 1 of the Evidence Act 1995 (Cth) (“the Act”) has any relevant application, which the first, second and third respondents submit it does not, then the privilege is lost, so the respondents submit, because of the provisions of s122(1), s122(2) and s122(4) of the Act. 

There was an additional submission that the barrister’s advice lost any privilege which attached to it because Mr Grundy admitted referring to it to revive his memory when preparing his witness statement.  This, it was submitted, fell within s122(6) of the Act.

The provisions of Part 3.10 apply derivatively to ancillary processes.  Thus they apply in respect of discovery and inspection of documents, notices to produce and subpoenas.  The circumstances when client professional privilege is lost are those contained in Part 3.10 and in particular in s122 and any common law rules inconsistent with the statutory provisions are to that extent abrogated:  see Telstra Corporation Limited v BT Australasia Pty Ltd (Full Court of the Federal Court, unreported 24 July 1998, NG280 and 299 of 1988);  Adelaide Steamship Co Limited v Spalvins (1998) 152 ALR 418;  Akins v Abbey Group Limited (Court of Appeal New South Wales, 1 June 1998, CA40694/97).  These applications therefore fall to be decided by the application of Part 3.10 and not otherwise. 

I deal firstly with the notes, memorandum and other documents of the applicants’ solicitor, Mr Flehr, containing or evidencing the advice and communication of the advice pleaded in the amended reply and a defence filed 4 June 1998, the answers to the notice to admit sworn to in paragraph 131 of Exhibit 2 and paragraph 13 of the affidavit of Goldsworthy filed 23 June 1998. 

Has there been a disclosure of the substance of the advice?  Mere reference to legal advice will not amount to disclosure:  see Ampolex Limited v Perpetual Trustee Co Canberra Limited (1996) 137 ALR 28;  Adelaide Steamship at 431.

Whether the substance of the advice has been disclosed depends upon the degree to which disclosure has occurred.  Paragraphs 14(b), 14(d) and 14(e) of the amended defence filed on 4 June 1998, the answers to the notice to admit and paragraph 131 of Exhibit 2 purport to set out the advice given on each of the occasions referred to.  The substance of the advice has been sufficiently disclosed, in my view, for the purposes of s122(2) and s122(4)of the Act.  The applicants submit that notwithstanding such disclosure, it occurred under compulsion of law for the purpose of s122(2)(c) with the consequence that s122 did not apply, and that because of the compulsion, there was no express or implied consent for the purposes of s122(4).

Although the decision in Akins was concerned only with the delivery of witness statements pre-trial in accordance with a practice direction, the concluding observations of Mason P (agreed in by Rolf AJA and Priestly JA), give a broad definition to compulsion of law.  In my opinion, where in the present case the applicants have been directed by order of the Court to provide particulars of the advice given, where they sought merely to traverse an allegation that they had failed to obtain legal advice relating to their duties as mortgagees exercising power of sale, provision of the substance of the advice, in accordance with the direction, is in the relevant sense compulsion of law.  In these circumstances the privilege is not lost.

That leaves the question of whether the applicants have consented for the purpose of s122(1) of the Act.  That is answered by the question:  have the applicants put in contest, by reason of their pleaded cause of action, an issue incapable of fair resolution without reference to the relevant legal advice, if any, received by them?

This test is based upon the formulation of Branson and Lehane JJ in Telstra, at p11-12.  The answer to the question is, in my view, no.  The obtaining of and acting in accordance with legal advice as to their duties as mortgagees exercising power of sale is not a necessary ingredient of the applicants’ cause of action.

The first, second and third respondents in paragraph 13(n) of their defence, allege that the applicants contributed to their own loss by failing to take reasonable steps to avoid or reduce that loss, including “they took no advice from solicitors as to their duties as mortgagees exercising power of sale”.  The only basis upon which it can be contended that the applicants contributed to their own loss, in the manner and circumstances of the mortgagee sale, is that they sold at an undervalue and thereby failed to achieve market value for the security, with a consequent increase in the loss equal to the extent of the undervalue.  This appears from paragraph 13(aa) of the first, second and third respondents’ pleading.

The applicants do not plead that the legal advice they receive entitled them to sell at an undervalue.  In my view, the applicants have not put the question of the receipt of legal advice and the substance of it in issue as part of their cause of action, so as to, by implication, consent to the evidence being led with the loss of client privilege which attaches to the solicitor’s documents.  Section 122(1) does not assist the respondents in seeking production of those documents.  

I turn now to the barrister’s advice.  For the same reasons given above in respect of Mr Flehr’s documents, s122(1) does not cause the privilege to be lost in respect of the barrister’s opinion.  The mere reference to the advice in paragraph 131 of Exhibit 2 does not mean that the privilege is lost.  Nor has there been any disclosure of the substance of the advice.  Therefore s122(2) and s122(4) have no relevant operation. 

The only basis remaining is s122(6).  In my opinion, s122(6) enables evidence to be adduced of a document although the contents are subject to client legal privilege, where for the purposes of giving evidence of the fact, the witness has referred to the document prior to giving the evidence to try to revive the witness’s memory of the fact.  The sub-section does not apply generally to all documents to which recourse is had for the purpose of the litigation or for the framing of the case advanced. 

Section 122(6) is to be read in conjunction with s34(1) which deals with attempts to revive memory out of court.  As appears from s34(2), the focus is on the specific fact as to which the witness tried to revive his or her memory by reference to the document. 

The evidence of Mr Arthur Grundy relevant to the reference to the barrister’s opinion is contained, firstly, at p292 of the transcript.  There, after describing the instructions to obtain counsel’s advice, the witness says (line 13) :-

 “Please be careful in answering this question, in light of what his Honour said to you, but you were conscious when you drew your statement up, this document we're looking at now - you were conscious when you drew that statement up of the barrister's opinion; right?  You were thinking about the barrister's opinion in May '98, when you were drawing this statement up.  Is that right?---May '98.  Yes.

Yes.  You go on to talk about it?---Yes.

You go on, the next sentence, to say, ‘We subsequently received a barrister's opinion.’   Well, it's obvious ‑ ‑ ‑?---That's correct.

‑ ‑ ‑ that you had it in your mind at this time?---Yes.”

The questioner returns to the question of the advice, at the top of p293 :-

“That's what you say there.  So when you are making up this statement you must have had the barrister's opinion in front of you or you must have looked at it?   Correct?---Yes.

Yes.  You did that to help you remember what the barrister set out - be careful, I don't want to know what he said but you looked at it to help you remember what was in the opinion to help ‑ ‑ ‑ ?---I, I ‑ ‑ ‑ .”

Then Mr Logan objected.  After legal argument the matter was raised again at p296 of the transcript; commencing at line 3 :-

“So as you were either writing out your instructions or talking to Mr Flehr or whoever it was you were talking to when you were getting this statement done, you were remembering I suggest to you what was in your barrister's opinion.  Right?---I hadn't looked at it for some time, no.

So you got it out again to refresh your memory?  To help you with this statement I mean?---I made a comment about this yesterday.

Yes.  But Mr Sweeney was a barrister and he has given you a written opinion back in - he has given you a written opinion subsequently after Mr Flehr had his first meeting with you; right?  Correct?---Yes.

And that must have been within a week or two or a few weeks or a couple of months at the most after your meeting with Mr Flehr; right?  In other words in 1992 sometime?---Yes.

Right.  Now, you could not remember what was in the barrister's opinion six years later, none of us can; correct?---No.

So, you looked at the barrister's opinion to help you make up this statement; correct?---Yes.

That was a ‘yes’?---Yes.

All right, thank you.  And did it, in fact, refresh your memory as to what was in it for the purpose of helping you make this statement?  Do not tell me what was in it, but it did bring things back to you; right?---Yes.”

That is the end of the relevant evidence. 

At its highest, the only relevant fact to which it can relate is the receipt of advice from the barrister as to the duties of mortgagees exercising power of sale, and as to the applicants’ cause of action for any shortfall on sale.  The applicants do not seek to give evidence of the advice under either head.  To the extent that Mr Grundy seeks to give evidence of legal advice, it is only the oral advice of Mr Flehr.  That a barrister's opinion was sought and obtained is irrelevant to the pleaded case. 

At its lowest, the evidence is that the barrister’s advice was one of the documents before Mr Grundy as an aide-memoir or for the purposes of ensuring accuracy generally in the preparation of the statement as a whole and was not used specifically to attempt to revive his memory of any particular fact.  In the circumstances I am not satisfied that the conditions of s122(6) have been sufficiently made out in the present case.

For the above reasons, the application for production of documents will not be ordered, and Mr Arthur Grundy may not be cross-examined as to the contents of the barrister’s opinion.

Associate:

Dated:              30/11/98