FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE – Discovery – Client legal privilege – Statutory protection for communications prepared for dominant purpose of providing legal advice or services in connection with litigation – Evidence not to be adduced – Whether extends to ancillary processes such as discovery and inspection – Construction – Whether in area not covered by statute common law sole purpose test modified by analogy with statute – Rules of Court – Court not to make order for production unless satisfied that order necessary – Whether proper exercise of power to exclude documents from production solely because they meet dominant purpose test.

Evidence Act 1995, ss 118, 119

Federal Court Rules O 15 r 15

 

Grant v Downs (1976) 135 CLR 674 applied

Telstra Corporation v Australis Media Holdings [No 1] (1997) 41 NSWLR 277 not followed

Saraswati v The Queen (1991) 172 CLR 1 considered

Commonwealth of Australia v Northern Land Council (1991) 30 FCR 1 cited

Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 60 disapproved

Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 considered

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1998) 153 ALR 393 considered

Sparnon v Apand Pty Ltd (1996) 138 ALR 735 cited

Towney v Minister for Land and Water Conservation (NSW) (1997) 147 ALR 402 cited

Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 not followed

Carnell v Mann (unreported, 4 December 1998) cited

Attorney‑General (NT) v Maurice (1986) 161 CLR 475 cited

Goldberg v Ng (1995) 185 CLR 83 cited

Telstra Corporation Ltd v B T Australasia Pty Ltd (unreported, 24 July 1998) not followed

Akins v Abigroup Ltd (unreported, 1 June 1998) considered

Nelson v Nelson (1995) 184 CLR 538 cited

Warnink v J Townend & Son (Hull) Ltd [1979] AC 731 cited

Osmond v Public Service Board (NSW) [1984] 3 NSWLR 447 cited

Ralevski v Dimovski (1987) 7 NSWLR 487 cited

Cotogno v Lamb [No 3] (1986) 5 NSWLR 559 considered

Lamb v Cotogno (1987) 164 CLR 1 considered

Agar v Orda (1934) 264 NY 248 considered

Moragne v States Marine Lines (1970) 398 US 375 considered

Mobil Oil Corporation v Higginbotham (1978) 436 US 618 considered

Nguyen v Nguyen (1990) 169 CLR 249 cited

National Australia Bank v Garcia (1998) 155 ALR 614 considered

B T Australasia Pty Ltd v New South Wales (1996) 140 ALR 268 disapproved

Taylor v Serious Fraud Office [1998] 3 WLR 1040 cited

Klin Co, Inc v New York Rapid Transit Corporation (1936) 271 NY 376 cited

South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 cited

R v Swaffield (1998) 72 ALJR 339 cited

Baker v Campbell (1983) 153 CLR 52 cited

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 cited

MacAlister v The Queen (1990) 169 CLR 324 cited

United States v Nixon (1974) 418 US 683 considered

Johnson v United States (1908) 163 F 30 considered

Ravenor Overseas Inc v Readhead (1998) 72 ALJR 671 cited

ESSO AUSTRALIA RESOURCES LIMITED v THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

VG 706 OF 1997

 

 

 

BLACK CJ, BEAUMONT, SUNDBERG, MERKEL AND FINKELSTEIN JJ

22 DECEMBER 1998

MELBOURNE

 

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 706 of 1997

 

 

BETWEEN:	esso australia resources limited AppELLant
AND:	the commissioner of taxation of the commonwealth of australia Respondent

JUDGES:	BLACK CJ, BEAUMONT, SUNDBERG, MERKEL AND FINKELSTEIN JJ
DATE OF ORDER:	22 DECEMBER 1998
WHERE MADE:	MELBOURNE

 

 

THE COURT ORDERS THAT:

 

1.                  The appeal be allowed in part.

2.                  In lieu of the answer given by the primary judge to question 1(b), that question be answered: “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”.

3.                  The appellant pay the respondent’s costs of the appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 706 of 1997

 

BETWEEN:	esso australia resources limited Appellant
AND:	the commissioner of taxation of the commonwealth of australia Respondent

JUDGES:	BLACK CJ, BEAUMONT, SUNDBERG, MERKEL AND FINKELSTEIN JJ
DATE OF ORDER:	22 DECEMBER 1998
WHERE MADE:	MELBOURNE

 

 

REASONS FOR JUDGMENT

 

BLACK CJ and SUNDBERG J:

BACKGROUND

In six related applications the appellant has challenged assessments made by the respondent under the Income Tax Assessment Act 1936.  Pursuant to orders for discovery the appellant filed an affidavit of documents in each proceeding in which it claimed client legal privilege in respect of a number of documents on the ground that they had been prepared for the dominant purpose of giving or receiving legal advice.  By notices of motion the respondent sought orders under O 19 r 2 of the Federal Court Rules that the appellant produce for inspection the listed documents other than those for which privilege was claimed and which had been prepared for the sole purpose of giving or receiving legal advice.  On the hearing of the motions Foster J ordered that there be decided separately the following questions of law:

 

1(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 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).

 

His Honour answered the first question by saying that the correct test is the “sole purpose” test formulated in Grant v Downs (1976) 135 CLR 674.  He answered the second question by saying that the Court did not have power to make such an order.  The appeal, pursuant to leave granted by the primary judge, is from those answers.

 

THE ISSUES

This appeal raises questions concerning the meaning and effect of ss 118 and 119 of the Evidence Act 1995 (Cth) (“the Act”) which deal with client legal privilege.  Section 118 provides that:

 

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; and

(b)               a confidential communication 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.

 

Section 119 provides:

 

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.

 

Section 118 thus deals with communications made or prepared for the purpose of providing legal advice to the client, and s 119 with communications made or prepared for the purpose of being used in actual or anticipated legal proceedings involving the client.  In each case the purpose referred to must have been the dominant purpose for which the communication was made or prepared.  In the areas in which they operate the sections alter the common law embodiment of the privilege stated in Grant v Downs in which the High Court held that in order for a communication to be privileged it had to have been made for the sole purpose of providing legal advice to the client or being used in actual or anticipated proceedings involving the client.

 

There are three questions raised by the appeal.  The first is whether on their true construction ss 118 and 119 apply only to the adducing of evidence in court or whether they extend to pre‑trial discovery.  The other questions do not arise unless the sections apply only to the adducing of evidence in court.  The second question is whether the sections can be used as the foundation for the modification of the common law stated in Grant v Downs.  The third is whether it is a proper exercise of the power in O 15 r 15 of the Federal Court Rules for the Court to exclude from production a discovered document for the reason that it meets the dominant purpose test in ss 118 and 119.

 

THE CONSTRUCTION ISSUE

The Act applies in relation to all proceedings in a “federal court” or an “ACT court”, including interlocutory proceedings or “proceedings of a similar kind”: s 4(1)(b).  The Act does not apply in relation to an appeal from a court of a State, including an appeal from such a court exercising federal jurisdiction: s 4(5)(a).  The expression “federal court” means the High Court, any other court created by the Parliament (other than the Supreme Court of a Territory), and includes “a person or body (other than a court or magistrate of a State or Territory) that, in performing a function or exercising a power under a law of the Commonwealth, is required to apply the laws of evidence”.  The expression “ACT court” means the Supreme Court of the Australian Capital Territory or any other court of the Territory, and includes “a person or body that, in performing a function or exercising a power under a law of the Territory, is required to apply the laws of evidence”.

 

Sections 118 and 119 both prohibit the adducing of evidence of communications.  To produce a document in a discovery context is not to adduce evidence.  The plain meaning of the sections is that they prohibit the putting forward of a communication as evidence in court.  This meaning is confirmed by the contents of Chapter 2 of the Act – “Adducing Evidence”.  Part 2.1 deals with the evidence of witnesses, Part 2.2 with proof of the contents of documents, and Part 2.3 with the adducing of evidence “in a way other than by witnesses giving evidence or documents being tendered in evidence”.  But the appellant contends that to limit the operation of the sections in this way produces an absurd result.  A document will not be immune from production if it satisfies only the dominant purpose test, and its confidentiality will be lost at the production stage even though the document will not be able to be used in evidence at trial.  Reliance was placed on the following observation of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings [No 1] (1997) 41 NSWLR 277 (“Telstra [No 1]”) at 279‑280:

 

If principles of client legal privilege … applicable to the adducing of evidence were to differ from those applicable to ancillary processes, the consequences would be anomalous, conducive to confusion and disorder in the preparations for and conduct of proceedings, and verging on the absurd.  The adducing of evidence at a hearing and ancillary processes are functionally linked.  … If different principles of client legal privilege were applied to the question of the production of the document on the one hand, and the adducing of evidence in the application on the other, in situations of this kind, quite impractical consequences would ensue.

 

The result of giving words their ordinary meaning does not need to be “anomalous” or “absurd” in order for a literal approach to be discarded.  Once a court concludes that the operation of a statute on a literal reading does not conform to the legislative purpose, as ascertained from the provisions of the statute, including the policy which may be discerned from its provisions, it is entitled to give effect to that purpose by additions to, omission from, or clarification of, the particular provisions.  See, for example, Saraswati v The Queen (1991) 172 CLR 1 at 22 and the cases there referred to.  Section 15AA of the Acts Interpretation Act 1901 deals with the same topic by providing that a construction which promotes the purpose or object underlying a statute is to be preferred to one that does not.  Section 15AB provides that in determining the meaning of a provision reference may be made to extrinsic material, including reports of a Law Reform Commission.

 

In 1979 the Law Reform Commission was charged with the task of reviewing “the laws of evidence applicable in proceedings in Federal Courts and the Courts of the Territories”.  In its Interim Report No 26 the Commission recommended that the “dominant purpose” test replace the “sole purpose” test in the context of client legal privilege.  Its recommendations were accompanied by a draft bill containing provisions in materially the same terms as ss 118 and 119.  Its interim recommendation was confirmed in its Final Report No 38.  The Commission treated the words “the law of evidence applicable in proceedings in Federal Courts …” in its terms of reference as excluding ancillary processes which do not involve the adducing of evidence (such as discovery and inspection).  In par 199 of the Final Report, having set out its understanding of the limits of its terms of reference, the Commission pointed out that in pre‑trial discovery a party might obtain documents which satisfy the “dominant purpose” test but not the “sole purpose” test, and which will thus be protected at the discovery stage but not in the courtroom.  The Commission observed that

 

Having wider access on discovery … 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.

 

While “access” is not the concept involved in “discovery” in its strict sense, it is true that the class of documents that are discoverable and liable to production is not limited to those that are admissible in evidence.  See Commonwealth of Australia v Northern Land Council (1991) 30 FCR 1 at 23.  It is plain that the Commission was using the word “discovery” in a broad sense as including production.

 

The Commission acknowledged that it was not dealing with pre‑trial discovery, and that if its recommendation were implemented, different rules would apply to the same document at the pre‑trial and trial stages.  Its draft ss 118 and 119 reflected this.  The Act is modelled on the Commission’s draft bill.  In particular, Parliament accepted the change in the test for client legal privilege recommended by the Commission, and enacted ss 118 and 119 without alteration.  In those circumstances it can be seen that the purpose or object underlying the sections was to adopt a new dominant purpose test for use at trial and to leave the old sole purpose test to apply pre‑trial.  It does not seem to us to matter that the Commission did not positively recommend different tests, and that its acceptance of a dual test may have been influenced by its understanding of the limits of the reference.  What is important is that it highlighted the effect of its recommendation (namely that there would be two tests which would in a given case produce different results), and it advanced a reason for its acceptance of these different results.  It was open to the Commission to hold the view that it is “not unreasonable to have wider access in the investigative stage”.  Although from the historical viewpoint of a common law privilege applying consistently to all stages of litigation it might perhaps be thought curious that a party should obtain on discovery a document which cannot be adduced in evidence because it is protected by client legal privilege (Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 60 366 (“Port Adelaide Wool”) at 370), we are unable to agree that in the circumstances prevailing after the Act came into force, and now, it is anomalous, conducive to confusion and disorder, verging on the absurd or productive of impractical consequences (Telstra [No 1]).  For one thing, the test of discoverability is not admissibility, but whether it is reasonable to suppose that the document contains information which may either directly or indirectly enable the party requiring the discovery to advance its own case or damage the case of its adversary.  A document will answer that description if it may fairly lead to a train of inquiry which might have either of those consequences.  See The Commonwealth v Northern Land Council (1991) 30 FCR 1 at 23.  Many documents which may assist the case of the party seeking discovery will thus come into that party’s hands even though, for one reason or another (including privilege), they cannot be adduced in evidence.  See Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 (“Meltend”) at 405 and Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1998) 153 ALR 393 (“Safeway”) at 418.

 

The appellant argues, however, that the very foundation for the client legal privilege that the Parliament intended to create would be destroyed if, through the process of discovery in litigation, privileged communications were to lose the confidentiality which it is the object of the privilege to protect.  The force of this argument is, however, greatly diminished by the fact that the Parliament did not set out to enact a rule of universal application throughout Australia.  Subject to the answer to the second question to be considered in this appeal, the core client legal privilege in Australia rests inevitably on the common law, with its ambit determined by the sole purpose test in Grant v Downs.  Given the limited legislative powers of the Parliament with respect to the laws of evidence, and its consequent inability to create an Australia‑wide statutory privilege, the Parliament could never have provided a foundation stronger or more extensive than that provided by the common law of Australia.  This is because a confidential communication between the client and a lawyer contained in a document prepared for the dominant, but not the sole, purpose of receiving legal advice could become discoverable or even admissible in evidence in any of the Australian jurisdictions to which the Act does not apply or which do not have client legal privilege provisions to the same effect as those in the Act.  Only New South Wales has such provisions.  Unless there were uniformity such as is provided by the common law, or such as might be achieved by uniform legislation, there could be no assurance that a communication made otherwise than for the sole purpose of giving or receiving legal advice would be protected and would remain confidential.  Given the nature of litigation in Australia today, instances can easily be imagined in which a confidential communication between a client and a lawyer on any one of a large range of topics might become of relevance in litigation later conducted in a federal, Territory or State (other than New South Wales) court, of which it would be impossible to say, at the time it came into existence, whether any rule beyond the Grant v Downs common law sole purpose rule would be applicable to protect it.  The situation becomes more complicated, and just as unpredictable outside the boundaries of the common law rule, when the compulsive powers of Federal, Territory and State regulatory and investigative authorities are taken into account.

 

But even if it could be said that it is curious or anomalous that a party should obtain on discovery a document which cannot be adduced in evidence because it is protected by client legal privilege, for the reasons we have given, it must be concluded that Parliament intended it.

 

In our opinion the plain language of the sections is confirmed by the only directly relevant extrinsic material, which shows that Parliament intended the consequence that is said by the appellant to be anomalous.  Especially when different views can be held about whether the consequence is anomalous on the one hand or acceptable or understandable on the other, the Court should be particularly careful that arguments based on anomaly or incongruity are not allowed to obscure the real intention, and choice, of the Parliament.  For the above reasons we are unable to conclude that the operation of ss 118 and 119 on a literal reading does not conform to the legislative purpose.  Our view accords with authority.  Whether ss 118 and 119 extend to ancillary processes has been considered in a number of cases, and the answer consistently given is that they do not: Sparnon v Apand Pty Ltd (1996) 138 ALR 735 at 737; Towney v Minister for Land and Water Conservation (NSW) (1997) 147 ALR 402; Telstra [No 1] at 278; Safeway at 416, 419; Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 (“Adelaide Steamship”) at 419, 427, a decision of the Full Court, and Carnell v Mann (unreported, 4 December 1998), another decision of the Full Court.

 

ANALOGICAL USE OF THE SECTIONS

Given that ss 118 and 119 cannot be construed so as to apply to pre‑trial discovery, the second issue is whether they can be used as the foundation for the modification of the common law sole purpose test in proceedings governed by the Act.  This question was considered by a Full Court in Adelaide Steamship.  The issue in that case was whether in ancillary proceedings concerning subpoenas the loss of client legal privilege was to be determined by common law principles or by the waiver provisions in the Act. The common law position is that where there is no intentional waiver of privilege, the question whether waiver should be imputed depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that the material, or material associated with it, is privileged from production: Attorney‑General (NT) v Maurice (1986) 161 CLR 475; Goldberg v Ng (1995) 185 CLR 83.  Sub‑sections (2) and (4) of s 122 posit a different test.  Sub‑section (2) provides that ss 118 and 119 do not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the “substance of the evidence”.  Sub‑section (4) provides that those sections do not prevent the adducing of evidence if the “substance of the evidence” has been disclosed to another person with the express or implied consent of the client or party.  In each case the test is a quantitative one ‑ whether there has been sufficient disclosure to warrant loss of the privilege.  The sub‑sections are not directly concerned with any principle of fairness.  Adelaide Steamship held that loss of privilege was to be determined in ancillary processes in accordance with s 122 and not in accordance with the common law, even though the sub‑sections speak of “the adducing of evidence”.

 

Adelaide Steamship was not a case such as the present where the question is whether the privilege exists.  Nevertheless the Court considered ss 118 and 119 as well as s 122.  The Court noted that ss 118 and 119 apply only to proceedings where evidence is adduced and not to ancillary processes such as discovery, and referred to par 199 of the Law Reform Commission’s Report in this connection.  At 428 the Court considered the “modification” issue:

 

We accept, necessarily, that in ancillary processes it is the common law that determines the availability of a client legal privilege claim.  In our view the issue that needs to be faced is what are the common law principles that are to be so applied.  … we do not consider that those well known decisions of the High Court dealing generally with the common law to which we have earlier referred conclude the matter.  In those decisions the High Court considered the common law in settings unencumbered by the Act.  In our view such is the significance of the Act’s provisions in this that their advent has created an entirely new setting to which the common law must now adapt itself, and adapt itself in such a way as to “include [the Act] as a fundamental part of its fabric” ….

 

Their Honours gave three reasons for concluding that adaptation was necessary.  The first was that the privilege had evolved as an exception to testimonial compulsion at trial and was then applied derivatively to ancillary processes as they emerged and developed.  The principles applicable at the trial provide the paradigm, and any changes to the paradigm should be reflected in the derivatives.  The second was that there was no principled reason for ascribing different policies and purposes, and hence different attributes, to the privilege depending on whether or not the privilege is claimed when evidence is being adduced at trial.  The third was that impractical consequences could ensue if differing principles applied at the pre‑trial and trial stages.  Their Honours’ conclusion was that “the ‘sole purpose’ test of Grant v Downs ought not to be applied as part of the common law in Evidence Act jurisdictions” (at 428‑429).  Adelaide Steamship was followed by Branson and Lehane JJ in Telstra Corporation Ltd v B T Australasia Pty Ltd (24 July 1998, unreported) and by another Full Court in Carnell v Mann (unreported, 4 December 1998).

 

The Evidence Act 1995 (NSW) contains client legal privilege provisions in the same form as those in the Act.  In Telstra [No 1] at 279‑280 McLelland CJ in Eq held that while the Act has no direct application to ancillary processes, it has had “an indirect or flow‑on effect, in the application of equivalent principles to all ancillary processes”, and “should be treated as applying, not directly but derivatively”, to ancillary processes.  In Akins v Abigroup Ltd (1 June 1998, unreported) (“Akins”) the Court of Appeal of New South Wales adopted the Telstra [No 1] and Adelaide Steamship approach.  Like Adelaide Steamship, Akins was a loss of privilege case.  Mason P, with whom Priestley JA and Rolfe AJA agreed, referred to the fact that appellate courts should follow decisions of other appellate courts in relation to indistinguishable statutory provisions unless convinced that they are plainly wrong.  At the end of his discussion of the derivative operation of the privilege provisions the President added what his Honour called a “caveat”:

 

A nice question would arise were the matter in issue whether a document prepared for the dominant but not sole purpose of providing legal advice was privileged from disclosure in some ancillary process involving the pre‑trial gathering of evidence.  Grant v Downs still represents the common law in this State.  I recognise that most of the cases which arrived at the view which I have adopted saw it as an inevitable consequence that Grant v Downs no longer applies in jurisdictions where the Evidence Act principles apply … I am far from convinced that any court other than the High Court has the right to depart from Grant v Downs merely because of the indirect flow‑on effect of the Evidence Act.  Notwithstanding the gravitational pull of s 118 it may be that only the High Court could administer the coup de grace to Grant v Downs if that is to be its fate in the Federal Court and courts in New South Wales in the light of the Evidence Act.

 

The “nice question” is of course the one that arises in the present case.

 

The analogical use of statutes in developing the common law is not a recent invention.  Courts of equity applied statutes of limitations to causes of action not expressly covered by the statutes.  They did this in “imitation” of the statutes: Pearson v Pulley (1668) 1 Chan Cas 102; 22 ER 714.  In Knox v Gye (1872) LR 5 HL 656 at 674 Lord Westbury said:

 

where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations, a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation.

 

Another example is the avoidance of preferences in bankruptcy, which was devised by Lord Mansfield without any positive enactment as a protection or furtherance of the policy disclosed by the existing statute law.  See Nelson v Nelson (1995) 184 CLR 538 at 554.

 

In Warnink v J Townend & Sons (Hull) Ltd [1979] AC 731 (“Warnink”) at 742‑743 Lord Diplock, with whom Viscount Dilhorne, Lord Salmon and Lord Scarman agreed, said:

 

Parliament, however, beginning in the 19^th century has progressively intervened in the interests of consumers to impose on traders a higher standard of commercial candour than the legal maxim caveat emptor calls for, by prohibiting under penal sanctions misleading descriptions of the character or quality of goods; but since the class of persons for whose protection the Merchandise Marks Acts 1887 to 1953 and even more rigorous later statutes are designed, are not competing traders but those consumers who are likely to be deceived, the Acts do not themselves give rise to any civil action for breach of statutory duty on the part of a competing trader even though he sustains actual damage as a result ….  Nevertheless the increasing recognition by Parliament of the need for more rigorous standards of commercial honesty is a factor which should not be overlooked by a judge confronted by the choice whether or not to extend by analogy to circumstances in which it has not previously been applied a principle which has been applied in previous cases where the circumstances although different had some features in common with those of the case which he has to decide.  Where over a period of years there can be discerned a steady trend in legislation which 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.

 

In Osmond v Public Service Board (NSW) [1984] 3 NSWLR 447 Kirby P held that the common law required decision‑making tribunals to give reasons for their decisions.  In support of this view his Honour referred to legislation in other jurisdictions which required the giving of reasons.  He quoted the concluding part of the passage from Lord Diplock’s speech in Warnink, and said (at 465):

 

By parity of reasoning, where a number of relevant Parliaments have enacted laws elaborating modern conceptions of administrative justice and fairness, it is appropriate for the judiciary in development of the common law in those fields left to it, to take reflection from the legislative changes and to proceed upon a parallel course.

 

On appeal the High Court was critical of the notion that because there has been a trend of legislation in one jurisdiction, the courts of another should develop the common law of their own jurisdiction on a parallel course: (1986) 159 CLR 656 at 669 per Gibbs CJ, with whom Brennan and Dawson JJ agreed.  However, Gibbs CJ did not rule out the use of analogical reasoning in an appropriate case.  Rather his Honour cavilled at its use except in relation to legislation of the forum.  See Kelly, “The Osmond Case: Common Law and Statute Law” in Australian Law Journal vol 60 (1986) 513, Ralevski v Dimovski (1987) 7 NSWLR 487 at 493 and Cotogno v Lamb [No 3] (1986) 5 NSWLR 559 at 571‑572, 582.  On appeal in the last‑mentioned case the High Court referred to analogical reasoning, saying it had never really gained general acceptance in the simple form advocated by Pound, but quoted with apparent approval Lord Diplock’s dictum in Warnink: Lamb v Cotogno (1987) 164 CLR 1 at 11‑12.

 

The analogical use of statutes in developing the common law has long been accepted in the United States, prompted by Roscoe Pound’s seminal article “Common Law and Legislation” in Harvard Law Review vol 21 (1908) 383.  Pound’s central thesis was that there is no reason why statutes cannot be viewed as providing general principles from which courts can reason by analogy in much the same way as they do from cases.  Agar v Orda (1934) 264 NY 248; 190 NE 479, a decision of the New York Court of Appeals, is a useful example.  It concerned an executory contract for the purchase of stock.  When the buyer refused to accept delivery, the seller brought an action to recover the purchase price.  Prior to the enactment of the Sales Act, New York courts granted this form of relief in the case of contracts for the sale of all types of personal property.  The Sales Act changed the law in relation to the sale of goods, and allowed the seller to recover damages only and not the full purchase price.  The stock was not “goods” as defined by the Act, and so the Act did not directly apply to the contract.  Nevertheless, because stock, like goods, was freely bought and sold in the market place, the Court determined to modify the common law so that a rule to the same effect as the Sales Act rule applied to all contracts for the sale of personal property.  The Court considered whether it was at liberty to take the course it had when the legislature may well have intended that the Act not apply to the sale of stock.  However it considered that the relevant question was not whether the legislature intended its statute to apply directly to a controversy, but whether it intended that the courts should not adopt a similar solution on their own.  The former intent did not necessarily contain the latter, which alone would prevent a court from employing statutory analogy.

 

The leading American case is probably the Supreme Court’s decision in Moragne v States Marine Lines (1970) 398 US 375; 26 L Ed 2d 339 (“Moragne”).  A longshoreman was killed while aboard a vessel in waters within the State of Florida.  His widow brought an action against the shipowner in a Florida State court alleging unseaworthiness.  Florida’s wrongful death statute did not allow recovery for unseaworthiness.  Federal legislation dealing with death on the high seas did not apply to waters within the territorial limits of a State.  In The Harrisburg (1886) 119 US 199; 30 L Ed 358 the Supreme Court had held the common law did not afford a cause of action for wrongful death.  The question for decision was whether that was still good law.  In the light of developments since 1886 the Court thought it unnecessary to decide whether The Harrisburg was correct when it was decided.  One development was the judicial rejection of the old rule that death was not a compensable injury.  Another was its legislative rejection, both in England and America.  Every American State had enacted a wrongful death statute.  Congress had created actions for wrongful deaths of railway employees, merchant seamen and persons on the high seas, and had made the United States subject to liability in certain circumstances for negligently caused death to the same extent as a private person.  The Court observed at US 390; L Ed 351:

 

These numerous and broadly applicable statutes, taken as a whole, make it clear that there is no present public policy against allowing recovery for wrongful death ….  This legislative establishment of policy carries significance beyond the particular scope of each of the statutes involved.  The policy thus established has become itself a part of our law, to be given its appropriate weight not only in matters of statutory construction but also in those of decisional law.

 

And at US 392‑393; L Ed 352 the Court said:

 

The legislature does not, of course, merely enact general policies.  By the terms of a statute, it also indicates its conception of the sphere within which the policy is to have effect.  In many cases the scope of a statute may reflect nothing more than the dimensions of the particular problem that came to the attention of the legislature, inviting the conclusion that the legislative policy is equally applicable to other situations in which the mischief is identical.  This conclusion is reinforced where there exists not one enactment but a course of legislation dealing with a series of situations, and where the generality of the underlying principle is attested by the legislation of other jurisdictions ….  On the other hand, the legislature may, in order to promote other, conflicting interests, prescribe with particularity the compass of the legislative aim, erecting a strong inference that territories beyond the boundaries so drawn are not to feel the impact of the new legislative dispensation.  We must, therefore, analyze with care the congressional enactments that have abrogated the common‑law rule in the maritime field, to determine the impact of the fact that none applies in terms to the situation in this case.

 

The Court went on to hold that Congress had given no affirmative indication of an intent to preclude the judicial allowance of a remedy under the general law for wrongful death in situations not covered by the Act, and that the common law should be modified so that an action under general maritime law was available for death caused by violation of maritime duties.  The Harrisburg  was overruled.

 

Mobil Oil Corporation v Higginbotham (1978) 436 US 618; 56 L Ed 581 (“Mobil”) provides a contrast.  The occupants of a helicopter died when it crashed outside Louisiana’s territorial waters.  The Death on the High Seas Act enabled the widows of the dead men to recover compensation for pecuniary loss.  But they wanted as well damages for loss of society, for which the Act did not provide.  They pressed the Supreme Court with Moragne, citing a clear majority of States in which statute permitted the recovery of damages for loss of society.  The Court refused to allow damages for loss of society.  At US 625; L Ed 587, in distinguishing Moragne, the Court said:

 

There is a basic difference between filling a gap left by Congress’ silence and rewriting rules that Congress has affirmatively and specifically enacted.  In the area covered by the statute, it would be no more appropriate to prescribe a different measure of damages than to prescribe a different statute of limitations, or a different class of beneficiaries.  … we have no authority to substitute our views for those expressed by Congress in a duly enacted statute.

 

In “Statutes as Sources of Law Beyond their Terms in Common Law Cases” in George Washington Law Review vol 50 (1982) 554 at 566‑567, after examining several cases including Moragne, Robert F Williams says:

 

These cases illustrate that courts should not limit their inquiry to whether a statute’s terms reach a given situation; judges should also examine whether a statute forbids or negatives a contemplated common‑law decision.  The relevant question then becomes whether the legislature was “excluding by implication, or simply omitting without prejudice”.  Legislative silence, without more, should push a court in neither direction.  Analysis should focus on whether any discernible legislative intent underlies legislative inaction.  Courts that fully appreciate their own powers and obligations with respect to decisional law will not be deterred from a desirable result by inference from legislative silence, but only by some indication of legislative intent to preclude the proposed result.  This is not to say that in the absence of such negative intent, courts should automatically accept the proposed result, for argumentum a pari is as unjustified as argumentum a contrario.  Rather, courts should exercise their freedom to evaluate the persuasiveness of statutes and then accept or reject arguments based on them.  Incomplete statutory treatment does not put “off limits” the issues a legislature has failed to resolve.

 

The two features of Moragne that were important in the result were the existence of “numerous and broadly applicable” wrongful death statutes, and the absence of any indication in the Congressional legislation of an intention to preclude the judicial allowance of a remedy for wrongful death outside the area of the maritime domain in which recovery was expressly permitted.  Comparable features do not exist in the present case.  Only the Commonwealth and one State, New South Wales, have adopted the Law Reform Commission’s Report and have displaced the sole purpose test in relation to client legal privilege.  This limited coverage of the relevant jurisdictions does not enable it to be said that there exists a public policy that privilege should exist in respect of communications made or prepared for the dominant purpose of seeking legal advice or for use in litigation.

 

Further, we do consider that it can be said that Parliament has remained silent on the question whether the dominant purpose test is to apply to ancillary processes such as discovery and inspection.  The extrinsic material to which we have referred discloses a legislative awareness of the limited ambit of the corrective legislation proposed by the Commission, and of the Commission’s view that it is not unreasonable to have different tests apply at the two stages of a proceeding.  In enacting, without expanding, the sections drafted by the Commission, Parliament has evinced an intention that ss 118 and 119 are not to apply to ancillary processes such as discovery.  In our opinion that course is inconsistent with judicial freedom to apply the test in those sections to ancillary processes.  The present case is one in which the legislature has prescribed with particularity the area of operation of its provisions, thus demonstrating that territory beyond those boundaries is not to be judicially affected by the new regime.  Cf Moragne at US 392; L Ed 352 and Mobil at US 625; L Ed 587.  We stress that what is involved is not the conventional inquiry as to Parliament’s intention.  We have given our reasons for concluding that on their true construction ss 118 and 119 do not apply to ancillary processes.  The question is whether, to use Professor Williams’ language, the legislature has precluded by inference or omitted without prejudice.  For the reasons we have given, we think the former is the proper characterisation, as it was in Mobil.

 

For the foregoing reasons we would not have come to the same conclusion as did the Full Court in Adelaide Steamship.  However, it is well established that while this Court can depart from its earlier decisions, it should do so cautiously and only when compelled to the conclusion that the earlier decision is wrong.  See, for example, Nguyen v Nguyen (1990) 169 CLR 249 at 269.  In Adelaide Steamship the Court said that “the sole purpose test of Grant v Downs ought not to be applied as part of the common law in Evidence Act jurisdictions”.  Over and above what we have said about the availability of an analogical approach in the present case, there are, in our view, two particular difficulties with this statement.  The first is that it contemplates a common law which is applicable only in “Evidence Act jurisdictions”, namely those covered by the Act and the New South Wales Act.  However, unlike the position in the United States, there is but one common law in Australia: Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 562‑563, and it seems to us to be impossible to have a common law dominant purpose test applicable to discovery in New South Wales and in other parts of Australia when the issue arises in a federal court (as defined), and a common law sole purpose test at all other times and in all other places.  Although of course a common law rule may operate only when certain conditions are present, it would seem quite inconsistent with the notion of one common law of Australia if, to take a practical example than can easily be envisaged, the same documents in the same place were subject to two different common law rules depending upon whether they were the subject of discovery in, say, the Supreme Court of Victoria on the one hand or in this Court, the Supreme Court of New South Wales or the Supreme Court of the Australian Capital Territory on the other.

 

The second related difficulty results from the fact that ultimately it is the High Court which declares the common law of Australia.  In National Australia Bank v Garcia (1996) 39 NSWLR 577 the Court of Appeal of New South Wales took the view that what had been said to be the principle in Yerkey v Jones (1939) 63 CLR 649 was a principle to which only Dixon J adhered, and at its heart was based upon general assumptions about the capacity of married women rather than upon evidence of the circumstances of the particular case.  The Court identified in some recent cases an expression of doubt about a principle founded on the assumption that a married woman is ipso facto under a special disadvantage in any transaction involving her husband and that the husband is in this context the stronger party.  Accordingly the Court concluded that “the so‑called principle in Yerkey v Jones should no longer be applied in New South Wales”.  On appeal the High Court thought the better view to be that Dixon J’s reasons were not significantly different from those of the other members of the Court, and emphasised that it was for the High Court alone to determine whether one of its previous decisions is to be departed from or overruled: Garcia v National Australia Bank Ltd (1998) 155 ALR 614 at 619.  Accordingly we consider that the Full Court in Adelaide Steamship was not free to hold that Grant v Downs ought not to be applied in Evidence Act jurisdictions.  It was this concern that lay behind Mason P’s caveat in Akins, a caveat which, we respectfully suggest, is inconsistent with an acceptance of the reasoning in Adelaide Steamship.

 

For the foregoing reasons we are compelled to the conclusion that Adelaide Steamship was wrongly decided.  We are conscious of the need for caution in departing from an earlier decision, but we consider that we should now do so.  The issue decided in that case concerns an important area of law of great practical significance and with daily application.  It is accordingly more important that the law should be correctly stated than that the status quo constituted by Adelaide Steamship should be preserved in the interests of precedent.  It would seem most unlikely that anyone would, in reliance upon Adelaide Steamship, have made a communication that would not otherwise have been made, for as we have pointed out, the only safe basis upon which to proceed in the absence of uniformity is that communications will be protected everywhere in Australia only if they satisfy the sole purpose test of the common law of Australia.

 

ORDER 15 r 15

Order 15 r 15 provides that

 

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.

 

It was contended for the appellant that if the uniform application of the dominant purpose test could not be achieved by a process of construction or by the analogical use of ss 118 and 119, it could be achieved under r 15.  The Court could refuse to make an order for production of a document which satisfied the dominant purpose test but not the sole purpose test.  Reliance was placed on the following passage from the judgment of Branson J in Port Adelaide Wool at 370:

 

The documents required to be discovered by O 15 of the Federal Court Rules are not limited to documents which would be admissible in evidence ….  However, the fact that evidence will not be able to be adduced, over objection, if it would result in disclosure of the contents of a confidential document will, in my view, ordinarily be telling as to whether the production of that document can be said to be necessary for the fair disposal of the proceedings.

 

Her Honour went on to say that it would be curious if a party could be required to produce on discovery a confidential document prepared for the dominant and not the sole purpose of a lawyer providing legal advice, if at the trial that party could object to evidence being adduced which would result in the disclosure of the contents of the document.  Her Honour concluded by saying:

 

the Court will not, in my view, ordinarily be satisfied that an order for production of a document is necessary if evidence of the contents of such document could not be adduced at trial over the objection of the party discovering the document on the ground of client legal privilege.

 

Her Honour’s reasoning was adopted by Sackville J in B T Australasia Pty Ltd v New South Wales (1996) 140 ALR 268.

 

It follows from what we have said about the limited scope of ss 118 and 119, and about Parliament’s awareness of its consequences, that we consider that it would be wrong to use O 15 r 15 as a means of in effect extending the operation of the sections.  Furthermore, we do not think it necessarily curious that a party could be required to produce a confidential document notwithstanding that at trial the party could object to it being adduced in evidence.  We agree with Goldberg J in Meltend at 404‑405 that there will be cases where a document might not be able to be adduced in evidence but which nevertheless puts a party on a train of inquiry which will assist it when it presents its case or cross‑examines the other party’s witnesses.  See also Adelaide Steamship at 428 and Safeway at 418.  The same point can be put in a different way.  Given that Grant v Downs states the law applicable to discovery and production, it would be an improper exercise of power to use O 15 r 15 as a means of sidestepping the test laid down in that case in favour of the test it rejected but which is applied in different circumstances by ss 118 and 119.

 

In answering the second question of law the primary judge said that the Court has no power under r 15 to exclude from production a document which satisfies the dominant purpose test.  While we are of the view that r 15 should not be used so as to exclude such a document, we do not think it is a question of power.  Rather it is whether it is a proper exercise of the power to exclude the document on the sole ground that it satisfies the dominant purpose test.

 

CONCLUSION

We would answer the questions of law as follows:

 

(a)                Whether the correct test for claiming legal professional privilege in relation to the production of discovered documents the ‘sole purpose’ test as formulated by the High Court in Grant v Downs (1976) 135 CLR 674 or the ‘dominant purpose’ test as set out in s 118 and s 119 of the Evidence Act 1995 (Cth).

 

The correct test is the ‘sole purpose’ test.

 

(b)               Whether the court has power pursuant to O 15 r 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.

 

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.

 

The appeal should be allowed to the extent required by the answer we have given to the second question.

 

I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black and Justice Sundberg

Associate:

Dated:              22 December 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	VG 706 of 1997

 

BETWEEN:	ESSO AUSTRALIA RESOURCES LTD APPELLANT
AND:	COMMISSIONER OF TAXATION RESPONDENT

 

JUDGES:	BLACK CJ, BEAUMONT, SUNDBERG, MERKEL AND FINKELSTEIN JJ
DATE:	22 DECEMBER 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

BEAUMONT J.

I have had the benefit of reading the reasons of Merkel J.  I agree with his Honour, for the reasons he gives, that the present question falls to be resolved by the application of the established principles of statutory construction where, as McLelland CJ in Eq. held in Telstra, the literal application of the Evidence Act would produce consequences that are “anomalous, conducive to confusion and disorder in the preparations for and conduct of proceedings, and verging on the absurd”.  It follows that I, also, would construe the legal professional privilege provisions of the Evidence Act as, in truth, intended to pick up all aspects of the litigious process concerned with the gathering of evidence, including discovery.  In my view, this step is as legitimate and necessary, if a capricious result is to be avoided, as the extensive interpretation in Cooper Brookes  which attributed a supplementary aspect to the scheme of that taxation legislation.  This attribution, it will be recalled, was achieved by applying settled principles of construction.

I would only add that, at the policy level, it may be noted that whilst the “dominant purpose” criterion may have been a minority view in Grant v Downs, it has become established in English case law (see Sec. of State for Trade v Baker [1998] Ch 356 per Scott V.-C. at 367).

 

In these circumstances, I need not consider whether the same result might have been reached here by the analogical use of the statute.

I concur in the orders proposed by Merkel J.

Since writing the above, the House of Lords has decided Taylor v Serious Fraud Office (1998) 3 WLR 1040 in which it was held that the absolute (common law) immunity from suit which applied to judges, advocates and witnesses in respect of statements made in court, extended also to out of court statements which could fairly be said to be part of the process of investigating a crime or a possible crime with a view to a prosecution.

Lord Hoffmann said (at 1052):

“… I find it impossible to identify any rational principle which would confine the immunity for out of court statements to persons who are subsequently called as witnesses.  The policy of the immunity is to enable people to speak freely without fear of being sued, whether successfully or not.  If this object is to be achieved, the person in question must know at the time he speaks whether or not the immunity will attach.  If it depends upon the contingencies of whether he will be called as a witness, the value of the immunity is destroyed.  At the time of the investigation it is often unclear whether any crime has been committed at all.  Persons assisting the police with their inquiries may not be able to give any admissible evidence;  for example, their information may be hearsay, but none the less valuable for the purposes of the investigation.  But the proper administration of justice requires that such people should have the same inducement to speak freely as those whose information subsequently forms the basis of evidence at a trial.”

Turning to the position of investigators, he said (at 1053):

“… it seems to me that the same degree of necessity applies.  It would be an incoherent rule which gave a potential witness immunity in respect of the statements which he made to an investigator but offered no similar immunity to the investigator if he passed that information to a colleague engaged in the investigation or put it to another potential witness.”

In my view, it would be equally irrational and incoherent (and thus an unlikely Parliamentary intention) to introduce a double standard in the present context – one at the stage of tender of evidence at the trial proper, and another at the pre-trial stage of compulsory disclosure of potential evidence.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont

Acting Associate:

Dated:              22 December 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 706 of 1998

 

BETWEEN:	ESSO AUSTRALIA RESOURCES LTD (arn 000 444 860) Applicant
AND:	commissioner of taxation
JUDGEs:	black cj, beaumont, sundberg,  merkel and finkelstein JJ
DATE:	22 december 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

MERKEL J:

Introduction

Since Grant v Downs (1976) 135 CLR 674 it has generally been accepted that legal professional privilege, which may now be more aptly described as client legal privilege, may be claimed in respect of documents which record confidential communications of a professional nature between a person and that person’s lawyer and are brought into existence for the sole purpose of obtaining or giving legal advice or for use in legal proceedings.

Sections 118 and 119 of the Evidence Act 1995 (Cth) (“the Act”) widened the criterion for client legal privilege.  These sections provide that evidence is not to be adduced in federal courts as defined in the Act if, on objection by a client, the evidence would result in disclosure of a confidential communication of a professional nature between a person and his or her lawyer made for the dominant purpose of obtaining or giving legal advice or for use in legal proceedings.

The question arising on the present appeal is whether the common law “sole purpose” test or the statutory “dominant purpose” test is to be applied to certain ancillary processes of the Court such as discovery or the inspection of subpoenaed documents, which relate to, but do not involve, the adducing of evidence in a proceeding in a federal court.

The question has arisen in six related applications to the Court in which the appellant (“Esso”) is challenging certain assessments of the respondent (“the Commissioner”) made under the Income Tax Assessment Act 1936 (Cth) as amended.  General orders for discovery were made on 18 October 1996.  Esso, in its affidavit of documents in each of the applications, claimed client legal privilege in respect of a significant number of documents on the ground that the documents were prepared for the dominant purpose of giving or receiving legal advice.

By notices of motion issued under O 19 r 2 of the Federal Court Rules,the Commissioner sought an order that Esso produce for inspection each of the documents so listed, excepting those documents for which client legal privilege was claimed and which were prepared for thesole purpose of giving or receiving legal advice.  The motions came on for hearing before the learned primary Judge who, with the agreement of the parties, ordered pursuant to O 29 r 2 that there be decided separately the following questions of law ((1997) 150 ALR 117 at 126):

“1  (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 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)?”

 

His Honour answered the questions of law as follows:

 

“2.       In respect of question (a), 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.

3.         In respect of question (b), that the question be answered in the negative.”

The primary Judge granted leave to appeal from his judgment and also ordered that Esso pay the Commissioner’s costs of the application.

On the hearing of the appeal Esso contended that, as the “dominant purpose” test was the legislatively prescribed test where evidence was to be adduced in Evidence Act jurisdictions, it would be anomalous for a different test to apply in the ancillary processes in those jurisdictions.  Accordingly, so it was said, the “sole purpose” test in Grant v Downs should not be applied as part of the common law for those jurisdictions.  Esso submitted that ss 118 and 119 of the Act are to be interpreted to have that operation or effect or, alternatively, to result in a derivative modification of the common law, albeit that the modification may be beyond that which is provided for under the Act.  Esso relied on the decision of the Full Court in Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 at 428-429 per Olney, Kiefel and Finn JJ in support of its alternative submission.  Esso also submitted that even if the Court did not accede to its primary submissions, it nevertheless had a general discretion under O 15 r 15 to refuse inspection on the ground that the “dominant purpose” test prescribed by ss 118 and 119 had been met.

The Commissioner disputed those contentions.  He contended that the common law test for legal professional privilege was laid down in unambiguous terms by the High Court in Grant v Downs, and that only the High Court could modify that common law test. Until that occurred, so it was argued, it was the duty of every other court in the Australian judicial hierarchy faithfully to apply that decision.  The Commissioner accepted that the common law “sole purpose” test was abrogated by ss 118 and 119 of the Act, but maintained that the abrogation was only as provided by those sections, that is, in respect of the adducing of evidence in certain proceedings in federal courts.  The Commissioner drew support for his submission from the reports of the Australian Law Reform Commission (“the Commission”) upon which the Act was based.  It was contended that it was plain from the reports that the distinction between the Act’s application to adducing of evidence and its non application to ancillary processes such as discovery, was recognised by the Commission and accepted by the legislature.  Accordingly, so it was said, the primary judge was clearly correct in determining that the Act’s operation was confined to the adducing of evidence with the consequence that the common law “sole purpose” test was to be applied to discovery.  The Commissioner also disputed Esso’s contention that the power conferred by O 15 r 15 can properly be utilised to overcome the sole purpose test.  His simple contention was that, if the document in question was relevant to a matter in issue and was not privileged from production, production of the document could, and should, be ordered.

The Evidence Act 1995 (Cth)

The starting point for the competing contentions is the Act.  Sections 118 and 119 provide as follows:

“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.”

Section 117 contains a number of definitions (which include expanded definitions for the purpose of, inter alia, ss 118 and 119) of “client”, “lawyer” and “party”.  “Confidential communication” and “confidential document” are defined in s 117 as follows:

“‘confidential communication’ means a communication made in such circumstances that, when it was made:

(a)       the person who made it; or

(b)       the person to whom it was made;

was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law;

‘confidential document’ means a document prepared in such circumstances that, when it was prepared:

(a)       the person who prepared it; or

(b)       the person for whom it was prepared;

was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law.”

Sections 121-126 provide for the circumstances in which client legal privilege is lost in relation to evidence adduced in a proceeding to which the Act applies.

Plainly, the statutory provisions to which I have referred have, as their fundamental objective, the protection from disclosure of confidential privileged communications other than where the privilege is lost.  The legislature has broadened the criterion for that protection by adopting the “dominant”, rather than the “sole”, purpose test for determining client legal privilege.

The application of the Act is provided for in Part 1.2.  Section 4(1) provides for the Act to apply to “all proceedings in a federal court or an ACT Court”.  Proceedings to which the Act applies include “interlocutory proceedings or proceedings of a similar kind”: see s 4(1)(b).  Section 3 provides for certain definitions set out in the Dictionary at the end of the Act to apply.  The Dictionary defines a “federal court” to mean the High Court, or any other court created by the Parliament other than the Supreme Court of a Territory and includes:

“a person or body (other than a court or magistrate of a State or Territory) that, in performing a function or exercising a power under a law of the Commonwealth, is required to apply the laws of evidence.”

Section 4(5) provides that the provisions of the Act do not apply in relation to certain proceedings, including an appeal from a court of a State and an appeal from a court of a State exercising federal jurisdiction: see s 5(a).  Section 5 provides for certain provisions of the Act (not including ss 118 and 119) to apply to all proceedings in “an Australian court”.  It is unnecessary for present purposes to outline those provisions other than to say that, in general, they relate to formal, rather than substantive, evidentiary matters.  Section 8 provides, subject to certain limited exceptions, that the Act does not affect the operation of the provisions of any other Act.  Finally, s 11(1) provides that the power of a court to control the conduct of a proceeding is not affected by the Act, except in so far as the Act provides.

The legislature has stipulated with precision the circumstances in which the Act is to apply and those in which it is not to apply.  Sections 118 and 119 expressly relate only to the adducing of evidence in a proceeding in a federal court or a court of the Australian Capital Territory as provided in s 4(1), including an interlocutory proceeding or a proceeding of a similar kind.  The Act is silent in relation to ancillary processes such as discovery or the power to subpoena documents.

The anomaly created by the apparently confined operation of the Act is that it protects the confidentiality of communications the subject of client legal privilege at the evidentiary stage  by the statutory “dominant purpose” test, but fails to protect that confidentiality in the ancillary processes if the narrower “sole purpose” test prescribed by the common law is to be applied.  Put simply, the confidentiality protected by the wider test in the evidentiary process may have already been lost by the narrower test applied in the ancillary process, notwithstanding that the function of that process is to serve the evidentiary process by enabling the parties to identify the evidence to be adduced.

An identical problem has arisen in respect of the loss of client legal privilege.  As with ss 118 and 119, ss 121-126 altered the common law by stipulating a carefully defined statutory test for the loss of privilege which differed from the common law test enunciated by the High Court in Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475.

The disparity, in relation to the existence and loss of privilege if the statutory tests are to be applied in the evidentiary process and the common law tests are to be applied in the ancillary processes, has given rise to significant differences of judicial opinion.

 

The Current State of the Authorities

 

The views of judges sitting at first instance have differed widely as to the manner in which the anomaly to which I have referred is to be resolved.  The issue was first considered by an appellate court in Adelaide Steamship v Spalvins (1998) 152 ALR 418.  The Full Court of the Federal Court (Olney, Kiefel and Finn JJ) outlined the problem at 419:

 

“The central issue on this appeal is whether questions relating to loss of legal professional privilege ought to be determined by applying principles derived from the common law as it has developed to date, or from provisions of the Evidence Act 1995 (Cth) (“the Act”).

The provisions of Pt 3.10 Div 1 (client legal privilege) of the Act are concerned with proceedings where evidence is adduced and are not expressed to apply to ancillary processes such as discovery or the inspection of subpoenaed documents.  Difficulties may arise in practice because the Act approaches the question of the privilege, and its loss, in significantly different ways from the common law.  For example the common law might require documents to be produced in an ancillary process because privilege did not attach to them, notwithstanding that they could not later be tendered in evidence because of the different scope the Act gives to client legal privilege:  see Esso Australia Resources Ltd v FCT (1997) 150 ALR 117.  Similarly, a document may be able to be adduced in a proceeding because it has lost privilege for the Act’s purposes yet it may not be required to be produced in an ancillary process because it remains privileged at common law:  see Abigroup Ltd v Akins (SC (NSW) Bainton J, 2 October 1997, unreported).  The responses to those inconsistencies in approach have, however, diverged, and three quite distinct positions have been taken.  The first has been to apply the principles of the Act ‘derivatively’ to ancillary processes, modifying the common law so as to accord with the Act:  see Telstra Corp v Australis Media Holdings (No 1) (1997) 41 NSWLR 277;  Towney v Minister for Land and Water Conservation for New South Wales (1997) 147 ALR 402;  KC v Shiley Inc, (Federal Court of Australia, Tamberlin J, 11 July, 1997 unreported);  Director of Public Prosecutions v Kane, (SC (NSW) Hunt CJ (CL), 10 September 1997, unreported) and see also Newcastle Wallsend Coal Co Pty Ltd v Court of Coal Mines Regulations,(New South Wales Court of Appeal, 12 September 1997, unreported).

The second, while not purporting to modify the common law as such, accepts that it is appropriate to have regard to the principles of the Act when exercising relevant discretions under rules of court regulating ancillary processes, for example O 15, r 15 of the Federal Court Rules:  see Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 132 ALR 645;  B T Australasia Pty Ltd v New South Wales (1996) 140 ALR 268;  Sparnon v Apand Pty Ltd (1996) 68 FCR 322;  Relationships Australia v Pasternak (1996) 20 Fam LR 604 (and see also British-American Tobacco Co Ltd v Philip Morris Ltd (1996) 36 IPR 36 at 44).

The third position taken is to hold that as the Act does not apply to ancillary processes, the common law to that extent is preserved unmodified and is to be applied:  Abigroup Ltd v Akins, above;  Esso Australia Resources Ltd v FCT above; and see also Re Z (1996) 20 Fam LR 651.

In this appeal it is necessary to determine which, if any, of the above positions ought to be adopted.”

 

The Court outlined the divergence between the principles to be applied by the Act and the common law (at 427):

 

“As we have already noted, the provisions of the Act are not expressed to, and in our view do not, apply to processes that are ancillary to a proceeding in which evidence is sought to be given or determined.  They were not proposed to apply to those proceedings by the Australian Law Reform Commission (the ALRC) in its reports concerning the Act:  see ss 118-126 and the reference to ‘adducing evidence’ and Report No 38, ALRC, para 199 and cll 106-108 of the draft bill annexed to that report.  Similar conclusions were drawn in Towney v Minister for Land and Water Conservation for the State of New South Wales; Telstra Corp v Australis Media Holdings (No 1); and Trade Practices Commission v Port Adelaide Wool Co Pty Ltd.  The question whether the provisions should nevertheless be applied in substance to such processes, notwithstanding that they do not do so of their own force, is an important one.  There are, as we have said, significant differences between the provisions of the Act and the principles of the common law.  In the scope given to client legal privilege, s 118 adopts a “dominant purpose” test (as proposed by Barwick CJ, in dissent, in Grant v Downs (1976) 135 CLR 674, at 678) and not the common law’s ‘sole purpose’ test, for protecting communications made in documents prepared for the purpose of the lawyer giving legal advice to a client.  And as we have earlier explained, s 122 contains its own test to determine when the privilege is lost, one which differs from and is inconsistent with that applied by the common law in allowing for loss by partial disclosure:  see also Telstra Corporation (No 2) at 349.  These are not the only differences:  see for example the discussion in G R Roberts, ‘Client Legal Privilege’, (1996) 70 Law Inst Jo 54.”

 

Reference was made by the Court to the observations of McLelland CJ in Telstra Corporation v Australis Media Holdings [No 1] (1997) NSWLR 277 at 279-280 where his Honour said:

 

“If principles of client legal privilege...applicable to the adducing of evidence were to differ from those applicable to ancillary processes, the consequences would be anomalous, conducive to confusion and disorder in the preparations for and conduct of proceedings, and verging on the absurd.  The adducing of evidence of a hearing and ancillary processes are functionally linked.  Moreover, both may occur at the same time and place…  If different principles of client legal privilege were applied to the operation of  the production of the document on the one hand, and the adducing of evidence in the application on the other, in situations of this kind, quite impractical consequences could ensue.”

 

The Full Court, in dealing with the issue as one of principle rather than one of discretion under the Rules of Court, concluded that there had been a derivative modification of the common law as a consequence of ss 121-126 of the Evidence Act.  The underlying principle was explained by the Court at 428-429 in the following terms:

 

“We accept, necessarily, that in ancillary processes it is the common law that determines the availability of a client legal privilege claim.  In our view the issue that needs to be faced is what are the common law principles that are to be so applied.  With the greatest respect to those who have expressed the contrary view (see for example Esso Australia Resources Ltd v FCT) we do not consider that those well known decisions of the High Court dealing generally with the common law to which we have earlier referred conclude the matter.  In those decisions the High Court considered the common law in settings unencumbered by the Act.  In our view such is the significance of the Act’s provisions in this that their advent has created an entirely new setting to which the common law must now adapt itself, and adapt itself in such a way as to “include [the Act] as a fundamental part of its fabric”:  see G Calabresi, A Common Law for the Age of Statutes, Harvard UP, Cambridge, 1982, p 86;  R v Swaffield 151 ALR 98;  on the analogical use of statutes in developing common law principles, see “Statutory Modelling of Torts”, by French J in Mullany, Torts in the Nineties and the references therein;  Bennion, Statutory Interpretation, 2nd ed pp 369-370.

Our reasons for concluding that this adaptation is necessary are as follows.  First, while it is the case today that claims to legal professional privilege are most commonly made in civil litigation in ancillary processes particularly on discovery, the privilege itself evolved as an exception to testimonial compulsion at trial and was then applied derivatively to ancillary processes as these emerged and developed:  see Baker v Campbell (1983) 153 CLR 52 at 126;  Telstra Corp v Australis Media Holdings Ltd (No 1) at 279.  In this sense, as McLelland CJ (at 279) noted in the Telstra case, the principles applicable at the trial provide the paradigm and any change to the paradigm ‘should rationally be reflected in the derivatives’.  For this reason alone we would consider it to be ‘undesirable to have two streams as it were, one legislative and the other judicial’ (R v Swaffield at 127) capable of producing differing results depending upon the adventitious circumstance of when in the trial process the privilege claim is made.

Secondly, even if there is not uniform agreement as to the policies informing, and the purposes of, the privilege (see the discussion in the ALRC’s Report No 26 paras 877-878, 881;  and also McNicol, Law of Privilege, 46ff) we can see no principled reason for ascribing differing policies and purposes, and hence differing attributes, to the privilege depending upon whether or not the privilege is claimed when evidence is being adduced at trial.  In the absence of such reason, the legislatively prescribed attributes of the privilege ought be reflected in those of the common law in jurisdictions where the two operate in tandem.

We acknowledge that a consequence of this view is that the ‘sole purpose’ test of Grant v Downs ought not to be applied as part of the common law in Evidence Act jurisdictions.  Given that the ‘dominant purpose’ test is the legislatively prescribed one where evidence is to be adduced, we can see no reason for a different test in ancillary processes.  We would add that the reasoning in Grant v Downs provides no justification for the maintenance of a difference in approach.  Rather its premise is to the contrary.

Thirdly, impractical consequences could ensue if differing principles were to be applied by the Act and by the common law as McLelland CJ in Eq indicated in the Telstra (No 1) case.  This of itself provides some reason for assimilating the Act’s principles into the common law.

There is one further matter we should note.  The effect of our decision is that Pt 3.10 Div 1 of the Act should, through the common law, be applied derivatively to ancillary proceedings.  We do not need to express a concluded view on the questions (a) whether that Division in fact codifies the law on client legal privilege and (b) whether the common law in Act jurisdictions ought in consequence be regarded as limited in its content to the principles in Div 1.  We need, however, to emphasise that, insofar as previously established principles of the common law are now inconsistent with the Act and its purposes, they are to be taken as being modified correspondingly so as to avoid such inconsistency.  Disclosure waiver falls into this category.”

 

The decision of the Full Court was considered by the Court of Appeal of New South Wales in Akins v Abigroup Limited (Mason P, Priestley JA, Rolfe AJA, 1 June 1998, unreported) in relation to the Evidence Act 1995 (NSW), which contains substantially the same provisions in relation to privilege as those contained in the Act.  Akins v Abigroup was also concerned with loss of privilege.  In his judgment Mason P, after considering the conflict between the authorities, adopted and followed the reasoning in Adelaide Steamship.  Mason P then concluded that the principles of the Evidence Act (NSW) touching client legal privilege applied derivatively to ancillary processes involving the pre-trial gathering of evidence.  His Honour’s reasons for that conclusion may be summarised as follows:

1.      The doctrine of legal professional privilege is a fundamental common law doctrine that furthers the rule of law and, as such, has continued to respond to changes in the law of procedure and evidence.

2.      If the law relating to pre-trial gathering of evidence was not responsive to relevant and applicable changes in the Evidence Act, it would be departing from its history of appropriate response to changes in the law.  This would create anomalies and lead to a waste of expenditure as a result of different principles applying to the same document or piece of information, depending upon whether access was sought prior to or even at the trial or whether it was actually put into evidence.  Although some of the anomalies could be overcome by the exercise of judicial discretion, there remained force in criticism of a state of affairs brought about by the common law’s refusal to adapt itself to the changed statutory setting.

3.      Although the Commission did not extend its proposed reforms to ancillary processes and did not regard such a state of affairs as “unreasonable”, neither the caution of the Commission or the legislature should stultify “the capacity of the common law to develop incrementally” to reflect the “gravitational pull” of statutes.

4.      Provisions in the Act which stipulated that it did not affect the operation of certain principles or rules of common law or equity in relation to evidence did not touch the situation before the Court as it was not, at that stage, dealing with evidence.

5.      The provisions relating to client legal privilege do not abrogate the privilege or undercut its high function.  Consequently, the principles of statutory interpretation touching the construction of legislation abrogating fundamental common law rights have little or no impact in the present context.

6.      Doctrines of precedent require that appellate courts follow the decisions of other appellate courts in relation to the reach of indistinguishable statutory provisions, unless convinced that the decisions of other courts are plainly wrong.  In that regard it was also relevant that in Re Z (1996) 134 FLR 40 at 66-69 a majority of the Full Court of the Family Court took the same approach as in Adelaide Steamship.

 

Mason P stipulated one qualification which he stated in the following terms:

 

“I mention one caveat.  A nice question would arise were the matter in issue whether a document prepared for the dominant but not sole purpose of providing legal advice was privileged from disclosure in some ancillary process involving the pre-trial gathering of evidence.  Grant v Downs still represents the common law in this State.  I recognise that most of the cases which arrived at the view which I have adopted saw it as an inevitable consequence that Grant v Downs no longer applies in jurisdictions where the Evidence Act principles apply: see, eg Adelaide Steamship at 428-9.  According to Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (at p35), Telstra (No 1) turned on the dominant purpose issue; but this is not apparent on the face of the report of that case.  I am far from convinced that any court other than the High Court has the right to depart from Grant v Downs merely because of the indirect or flow-on effect of the Evidence Act.  Notwithstanding the gravitational pull of s118 it may be that only the High Court could administer the coup de grace to Grant v Downs if that is to be its fate in the Federal Court and courts in New South Wales in the light of the Evidence Act.  In Ravenor Overseas Inc v Roadhead (1998) 72 ALJR 671 at 672 Brennan CJ said that:

            ‘Nothing is more important to the due administration of justice than that the Courts of Australia should faithfully follow decisions of this Court.  This Court has the responsibility of determining the law applicable throughout the Commonwealth.  Nor should it be thought that, because some new argument can be devised contrary to a holding of this Court, the authority of its decisions become problematic.  Although the decisions of this Court will, when this Court deems it necessary, be revisited, there should be no qualification about the duty of other Courts faithfully to apply the decisions of this Court as they stand.’”

 

Priestley JA agreed with the conclusion of Mason Pthat the principles of the Evidence Act (NSW) regarding legal privilege apply derivatively to ancillary processes involving the pre-trial gathering of evidence.  Rolfe AJA also agreed with Mason P.

 

As I later point out, there is some justification for the caveat of Mason P in Akins v Abigroup Limited.  However, his Honour’s use of the caveat as a qualification to his decision in that case is not easy to follow.  Sections 118-119 and 121-126 modify the common law as laid down by the High Court in Grant v Downs and Attorney-General v Maurice respectively.  If the caveat is to apply, it must apply equally to any derivative modification in respect of all of those sections.  Further, it was central to the decision in Adelaide Steamship that the Act resulted in a derivative modification of the common law in relation to the loss of privilege by waiver.  The Full Court in Adelaide Steamship then stated (at 428-429) that a necessary consequence of the decision was a similar modification in respect of the sole purpose test of Grant v Downs.  Senior counsel for the Commissioner contended that whilst Adelaide Steamship and Akins v Abigroup were authorities on loss of privilege, it did not follow that the same reasoning applied in relation to the existence of privilege.  I do not accept that contention.  Assuming for the moment that the principles applied in Adelaide Steamship are correct, those principles must, both as a matter of logic and principle, apply in the same way to the applicability of common law principles relating to the existence of privilege as they do to the loss of privilege in relation to proceedings governed by the Act.  In each situation, the issue is whether there has been a derivative modification of the common law beyond that which is provided for under the Act.

 

The same issue again came before a Full Court of the Federal Court (Beaumont, Branson and Lehane JJ) in Telstra Corporation Ltd v BT Australasia Pty Ltd (24 July 1998, unreported).  Branson and Lehane JJ (at 4 of their reasons) decided not to depart from the approach of the Full Court in Adelaide Steamship, saying:

 

“In the Adelaide Steamship case the Full Court held that, because the Evidence Act 1995 (Cth) (the ‘Act’) is, in terms, operative only in respect of the adducing of evidence, legal professional privilege, for the purposes of ancillary processes such as the production of discovered documents and access to documents produced on subpoena, continues to arise, and is waived, in accordance with common law principles.  Those principles, however – and this is for present purposes the ratio decidendi of the Adelaide Steamship case – so far as they are inconsistent with the Act, have been modified (as they are applied in courts in which the Act is in operation) so as to avoid such inconsistency.  That is so because of the entirely new setting, resulting from the advent of the Act, in which the common law must now operate.”

 

Beaumont J dissented in the result, but in so doing assumed, without deciding, that Adelaide Steamship was correctly decided.

 

 

Is Adelaide Steamship v Spalvin to be followed?

 

The primary submission made on behalf of the Commissioner was that this Court ought not to follow Adelaide Steamship v Spalvin.  The Commissioner submitted that the decision of the Full Court in Adelaide Steamship was clearly wrong, and further, in so far as it was relied upon to reject the application of the Grant v Downs “sole purpose” test in Evidence Act jurisdictions, the Court transgressed the fundamental principle that it was for the High Court alone to determine whether one of its previous decisions is to be departed from.

 

It is well recognised that this Court is not bound by its previous decisions but will normally follow an earlier decision unless convinced it is wrong: see Chamberlain v The Queen (1983) 72 FLR 1 at 8-9 per Bowen CJ and Forster J; Perrett v Commissioner for Superannuation (1991) 29 FCR 581 at 592; Byrne v Australian Airlines Limited (1994) 47 FCR 300 at 304, 315, 333; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 111 and Qantas Airways Limited v Bruce Cornwall (Federal Court of Australia, Burchett, Cooper and Finn JJ, unreported, 24 July 1998).  The principle was stated in Nguyen v Nguyen (1990) 169 CLR 245 at 269 per Dawson, Toohey and McHugh JJ:

 

“Where a court of appeal holds itself free to depart from an earlier decision it should do so cautiously and only when compelled to the conclusion that the earlier decision is wrong.  The occasions upon which the departure from previous authority is warranted are infrequent and exceptional and pose no real threat to the doctrine of precedent and the predicability of the law: see Queensland v. The Commonwealth, [(1977) 139 CLR 585, at pp 620 et seq], per Aickin J.”  (Footnote incorporated)

 

The principles acted upon by the Full Court in Adelaide Steamship may be summarised as follows:

·        the relevant statutory provisions concerning client legal privilege are confined in their operation to the adducing of evidence in proceedings in federal courts;

·        in ancillary processes, the common law is to determine the availability of a claim for client legal privilege;

·        such is the significance of the provisions of the Act concerning client legal privilege that its advent has created an entirely new setting to which the common law must now adapt itself, so as to “include [the Act] as a fundamental part of its fabric”;

·        due to the entirely new setting in which the common law must now operate, in so far as the common law is inconsistent with the Act, it is to be taken to have been modified in Evidence Act jurisdictions so as to avoid such inconsistency; and

·        accordingly, the “sole purpose” test of Grant v Downs ought not to be applied as part of the common law in Evidence Act jurisdictions.

 

I have already set out the reasons given in Adelaide Steamship and Abigroup Ltd v Akins for the conclusion that modification of the common law is necessary.  I have also adverted to the anomalous situation which has been created by the disparity between the two tests operating in respect of the same confidential communications in a proceeding in a federal court.  However, even accepting for the moment that the resulting situation was accurately described by McLellan CJ in Telstra Corporation (No 1) as “verging on the absurd”, that merely raises, but does not answer, the question of whether it is for the courts, rather than for the legislature, to resolve the problem.  In Adelaide Steamship, the Full Court opted for judicial intervention to resolve the problem.  Through the analogical use of statutes in developing common law principles the Court concluded that there has been a derivative modification of the common law as a result of the advent of the Evidence Act.  It is necessary to consider the correctness of that approach.

 

 

The Analogical Use of Statutes in Developing Common Law Principles

 

The relationship between statutes and the common law, and the extent to which statutory developments may affect the common law has received academic and judicial consideration in a number of jurisdictions.  The idea that statutes could be used in developing the common law by way of analogy appears to have evolved from the writing of Roscoe Pound early this century: see “Common Law and Legislation” (1908) 21 Harvard Law Review 383.  Pound identified four ways in which courts could approach a legislative innovation.  The first approach was to “receive it fully into the body of the law as affording not only a rule to be applied but a principle from which to reason” and, taking statutes as a more democratic and hence superior source of principle, to reason from them by analogy in preference to common law rules on the same subject.  Under the second approach, legislation was used to reason from by analogy, with equal authority to any common law rule.  The third approach did not allow reasoning from legislation by analogy, but interpreted it liberally to ensure that it covered the entire ground that it was intended to cover.  The fourth and most limited use of legislation was to apply it directly only, with a strict interpretation to ensure that it covered only the cases expressly referred to.  Pound considered that whilst the fourth approach constituted the “orthodox common law attitude”, the third approach represented the attitude towards which American courts were tending, and that:

“the course of legal development upon which we have entered already must lead us to adopt the method of the second and eventually the method of the first hypothesis.” (at 386)

 

See also “The Common Law in the United States” (H F Stone (1936) 50 Harvard Law Review 4).

As predicted by Pound, analogical use of statutes now appears to be widely accepted as a mode of legal reasoning in the United States.  Following a number of examples of application of the doctrine in State courts (see for example Klin Co, Inc  v New York Rapid Transit Corporation (1936) 271 NY 376; 3 NE 2d 516, where the New York Court of Appeals modified the common law in relation to a prescriptive easement in respect of light and air above property, by reference to an equivalent change in the legislation relating to prescription by adverse possession) the United States Supreme Court accepted the doctrine.  In  Moragne v States Marine Lines Inc (1970) 398 US 375; 26 L Ed 2d 339, the Supreme Court was required to consider whether an action for wrongful death caused by violation of maritime duties existed in maritime law.  An earlier decision of the Supreme Court had held that “in the absence of a statute there is no action for wrongful death”.  The Supreme Court noted that the earlier decision was based on principles which, even at the time, were discarded in England and “had never existed in this country at all”.  However, the Court did not consider it necessary to determine whether the earlier case was correctly decided at the time, as:

“A development of major significance has intervened, making clear that the rule against recovery for wrongful death is sharply out of keeping with the policies of modern American maritime law.” (at 398 US 388; 26 L Ed 350)

This development was, in part, the rejection of the rule by English judges.  However, the primary development was the disapproval by English and United States legislatures of the rule against recovery for wrongful death:

“In the United States, every State today has enacted a wrongful-death statute….These numerous and broadly applicable statutes, taken as a whole, make it clear that there is no present public policy against allowing recovery for wrongful death.  The statutes evidence a wide rejection by the legislatures of whatever justifications may once have existed for a general refusal to allow such recovery.  This legislative establishment of policy carries significance beyond the particular scope of each of the statutes involved.  The policy thus established has become itself a part of our law, to be given its appropriate weight not only in matters of statutory construction but also in those of decisional law.”  (at 398 US 390-391; 26 L Ed 351)

 

The Court referred to academic and judicial observations in support of this use of statutes, and concluded (at 398 US 392; 26 L Ed 352):

 

“It has always been the duty of the common-law court to perceive the impact of major legislative innovations and to interweave the new legislative policies with the inherited body of common-law principles – many of them deriving from earlier legislative exertions.”

 

The Court found that the Congress had not indicated any intention to preclude a wrongful death remedy and overruled the earlier decision.  However, the Court in observing that the statutory policy it had identified arose from “numerous and broadly applicable statutes” and that caution would need to be exercised in identifying policies from statutes, said:

“The legislature does not, of course, merely enact general policies.  By the terms of a statute, it also indicates its conception of the sphere within which the policy is to have effect.  In many cases the scope of a statute may reflect nothing more than the dimensions of the particular problem that came to the attention of the legislature, inviting the conclusion that the legislative policy is equally applicable to other situations in which the mischief is identical.  This conclusion is reinforced where there exists not one enactment but a course of legislation dealing with a series of situations, and where the generality of the underlying principle is attested by the legislation of other jurisdictions.  On the other hand, the legislature may, in order to promote other, conflicting interests, prescribe with particularity the compass of the legislative aim, erecting a strong inference that territories beyond the boundaries so drawn are not to feel the impact of the new legislative dispensation.” (at 398 US 392 26 L Ed 352)

 

See also the discussion of this case and other United States authority by D St L Kelly in “The Osmond Case: Common Law and Statute Law” (1986) 60 Australian Law Journal 513.

 

The analogical use of statutes does not, however, appear to be as clearly accepted in other jurisdictions.  In England Sir Rupert Cross, in Precedent in English Law (3^rd ed, 1977) claimed that it was arguable that the English legal system had accepted “for a considerable time” Pound’s hypothesis that legislation could be received as a source of principles from which to reason, with equal or even superior force, to those of the common law.  He cited a limited number of authorities for his conclusion that:

 

“…in England, a legislative innovation is received fully into the body of law to be reasoned from by analogy in the same way as any other rule of law.” (at 170)

There has been some academic questioning of this view by commentators who consider that in practice, courts have regarded legislation as being an inferior analogical source to the common law, if a source at all:  see F A R Bennion, Statutory Interpretation (3^rd ed, 1997) at 390; P S Atiyah, “Common Law and Statute Law” (1985) 48 Modern Law Review 1; cf Cross on Statutory Interpretation (3^rd ed by J Bell and G Engel, 1995).  Atiyah accepts, however, that there is “some scope for a cautious development” of the theory.  For example, where a common law principle is based on out-dated values, legislative amendment to that principle may be “eminently suitable for extension by the courts” (supra at 28).  Bennion observes that a legislative innovation based on a legal principle has the effect that the principle is thereafter embodied in legal policy (supra, at 390).

The analogical use of statutes has found judicial expression in the House of Lords in Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd [1979] AC 731, a passing off case.  Lord Diplock said at 743:

“…the increasing recognition by Parliament of the need for more rigorous standards of commercial honesty is a factor which should not be overlooked by a judge confronted by the choice whether or not to extend by analogy to circumstances in which it has not previously been applied a principle which has been applied in previous cases where the circumstances although different had some features in common with those of the case which he has to decide.   Where over a period of years there can be discerned a steady trend in legislation which 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.”

See also the comments of Lord Scarman in R v Lemon [1979] AC 617 at 665, and Gillick v West Norfolk and Wisbech Area Health Authority [1986] AC 112 at 185-188.

There has also been support in Australia for the analogical use of statutes as a method of judicial reasoning.  Sir Anthony Mason referred to Pound’s writing on the subject in expressing the view that legislative inroads on the common law make the erosion of the formal separation between the common and statute law “inevitable” (“Future Directions in Common Law”, supra at 160-161).  He observed:

“…the failure of the courts to adapt the common law in the light of statutory policy is both a reflection of judicial reluctance to make use of policy arguments and a ground for the accusation that the law is excessively legalistic.  There are strong arguments for treating statute law as well as existing judicial decisions as a platform for future elaboration of the common law…”.

R S French (now Justice French), in considering the interaction between legislation and the common law in the area of torts referred to the analogical use of statutes and the academic writings on the subject (“Statutory Modelling of Torts” in N J Mullany, Torts in the Nineties, 1997).  He observed that:

“Statutory rules are capable of contributing to the content of generally expressed common law rules of liability.  There is some indication that analogical reasoning from statute law to the common law may be open.” (at 211)

However, it was acknowledged that the influence of the common law on statute remained greater than that of statutes on the common law and that an integrated approach to the two sources of law was not yet available.

Professor P D Finn (now Justice Finn) has also considered the relationship between statutes and the common law.  In “Statutes and the Common Law” (1992) 22 Western Australian Law Review 7 he concluded that the law appropriately accommodates different views of the relationship between the common law and statutes, including the use of statutory analogues where the relevant statute builds on a fundamental theme in the common law.  Two examples of the analogical use of statutes that were referred to were the High Court decision of R v L (1991) 174 CLR 379 and the decision of the NSW Court of Appeal in Osmond v Public Service Board of New South Wales [1984] 3 NSWLR 447.

In R v L, Mason CJ and Deane and Toohey JJ (at 390) acknowledged the early common law authority that there could be no rape within marriage as marriage gave rise to an irrevocable consent to sexual intercourse and referred to later authority which did not appear to accept that proposition.  They concluded that:

“…even if the respondent could, by reference to compelling early authority, support the proposition…that by reason of marriage there is an irrevocable consent to sexual intercourse, this Court would be justified in refusing to accept a notion that is so out of keeping with the view society now takes of the relationship between the parties to a marriage.  The notion is out of keeping also 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.”  (Footnote omitted)

See also Dawson J at 405.  R v L is an example of the courts referring to changes in social and community values in formulating the common law and interpreting legislation.

In Osmond v Public Service Board,Kirby P held that the common law required decision-making tribunals to provide reasons for its decisions.  In reaching that conclusion, his Honour referred to the development of legislation in administrative law and specifically to legislative provisions requiring the giving of reasons.  His Honour then referred to the observations of Lord Diplock in Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd referred to above.  Kirby P (at 465) considered that the legislative changes in the field of administrative law could:

“simply reflect the same social changes and expectations that may also be evidenced in the common law….  [W]here a number of relevant Parliaments have enacted laws elaborating modern conceptions of administrative justice and fairness, it is appropriate for the judiciary in development of the common law in those fields left to it, to take reflection from the legislative changes and to proceed upon a parallel course.”

In Ralevski v Dimovski (1986) 7 NSWLR 487 at 493, Kirby P reiterated these views and while acknowledging that “[t]here may be doubt that Lord Diplock’s suggestion is applicable where the legislation, from which analogies are sought to be drawn, is enacted by different legislatures in the one Federal polity”, noted that the enactment of existence of anti-discrimination legislation by the Commonwealth and NSW legislatures, indicated changing community attitudes which should be reflected in the common law.

 

There are examples of the analogical use of statutes in other Commonwealth jurisdictions.  In  South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 at 298, Cooke P observed that “[t]he analogy of a statute may properly influence the development of the common law” and referred to a number of English and New Zealand judgments to that effect.  His Honour also referred approvingly to Professor J F Burrows’ view (expressed in Statute Law in New Zealand, 1^st ed, 1992) that this type of reasoning is “so sensible that it is surprising that it did not occur earlier”.  See also Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 at 422 and “Common Law and Statute Law” J F Burrows, (1980) New Zealand Law Journal 98.  Use of the doctrine in Canada (albeit unacknowledged) is found in the Supreme Court decision R v B (KG) [1993] 1 SCR 740 where Lamer CJ, with whom Sopinka, Gonthier, McLachlin and Iacobucci JJ agreed, referred extensively to abandonment by statute of the rule as to inadmissibility of prior inconsistent statements (and by the judiciary in other jurisdictions) as a factor supporting an equivalent change in the common law.

The High Court of Australia has neither accepted nor rejected the doctrine.  In Public Service Board of New South Wales v Osmond  (1986) 159 CLR 656, Gibbs CJ (with whom Brennan and Dawson JJ agreed) rejected the Court of Appeal’s view that the common law of natural justice required the giving of reasons for decisions.  His Honour referred to Kirby P’s reference to the Erven Warnink decision and said (at 669):

“…Lord Diplock did not intend to say that because there has been a trend of legislation in  one jurisdiction, the courts of a different and independent jurisdiction should develop the common law of that jurisdiction on a parallel course.  Such a proposition would be as impossible to sustain as it would be to put into practice when different States had taken different legislative courses.”

 

His Honour, added by way of example, that:

 

“The common law of New South Wales cannot be judicially modified to make it accord with the statute law of, say, Victoria.”

 

Although His Honour’s view as to the common law of a State rather than the common law of Australia would not, as I later explain, now be accepted, clearly his Honour was cautioning against analogical use of statutes of other jurisdictions; cf Moragne at 398 US 392; 26 L Ed 352.

Gibbs CJ rejected the proposition apparently espoused by Kirby P that a trend of legislation in one jurisdiction can lead the courts of another jurisdiction to develop the common law on a corresponding course.  However, as noted by D St L Kelly in “The Osmond Case: Common Law and Statute Law”, (supra) Gibbs CJ did not reject the possibility of analogical reasoning; rather his Honour limited its potential use to legislation of the legislature in the relevant common law jurisdiction.

More recently, in R v Swaffield (1998) 72 ALJR 339 Toohey, Gaudron and Gummow JJ (at 361) commented on the undesirability of having two streams:

“…one legislative and the other judicial, the latter simply echoing the former or perhaps deviating from it.”

The concept of the analogical use of statutes may be compared with the sixteenth century method of statutory construction known as giving effect to “the equity of the statute”.  This doctrine, advocated by Sir Edward Coke, involved judges interpreting statutes to cover cases clearly not covered by the statute’s terms but which fell within the statute’s policy, or interpreting cases which were within the statute’s terms but outside the range of its “mischief” as being outside the statute’s operation.  This doctrine, which was subjected to criticism in the eighteenth and nineteenth centuries, fell into disuse.  However, in Nelson v Nelson (1995) 184 CLR 538 at 553-554, Deane and Gummow JJ acknowledged that despite criticism of the doctrine:

“the doctrines developed in equity survived.  In the legal system as a whole there remained, and indeed entered the statute law itself, particular applications, developed by the eighteenth century judges, of the broader concept of the equity of the statute.  One such instance in the modern law of bankruptcy is the avoidance of preferences.  This was first devised by Lord Mansfield, as it was said, ‘without any positive enactment’ and as a protection or furtherance of the policy disclosed by the existing statute law.”  (Footnote omitted)

 

The “equity of the statute” doctrine built on and extended the operation of a statute into areas not covered by its terms.  By contrast, the analogical use of statutes in the evolution of the common law does not give the statute any operation beyond its terms; rather, it is a method of ensuring that developments in the common law are not out of step or inconsistent with social change reflected in significant legislative change.

The theme running through the analogical use of statute cases is that in seeking to identify change in social or legal policy it is appropriate to look to widely enacted legislation which evidences a legislative acceptance of such change in contemporary values.  An important premise for analogical use of statutory policy appears to be that the extent of its enactment warrants it being regarded as a policy to be thereafter applied uniformly as part of the overall body of the common law.

Justice McHugh speaking extra-judicially, in a paper entitled “Democracy and the Law” (5 July 1998) which discussed the impact of social change on the law, observed that:

“Extrinsic values and practical experience derived from democracy, economics, science, social and political forces, public morality and contemporary conceptions of justice are often relevant factors in shaping the development of the law.”

Plainly, legal policy in relation to the factors discussed by his Honour, evidenced in widely enacted legislation, would offer significant guidance in shaping any requisite consequential developments in the common law.

In that context there are sound reasons for referring to legal policy, clearly expressed in legislation, as a premise for legal reasoning in developing the common law.  However, it is not sufficient that a statute adopts or even some statutes adopt, a changed social or legal policy.  The doctrine is premised on the relevant statutory policy evolving as an integral part of a clear and coherent change in social or legal policy in the jurisdiction within which the common law is to adapt.  In Moragne the United States Supreme Court justified its analogical use of statute on the basis that the applicable statutes evidenced “a wide rejection by the legislatures of whatever justifications may once have existed” for the relevant common law rule.

As was observed by Kirby P in Ralevski at 493 and by Toohey, Gaudron and Gummow JJ in R v Swaffield at 361, there are greater difficulties in the analogical use of statutes in an Australian federal setting where some, but not other, legislatures enact legislation with the consequence that any consequential legal policy change only occurs in some States or jurisdictions.

 

Further, unlike the situation in the United States, there is only one common law in Australia; the common law of Australia.  The High Court considered the interaction of the Constitution, statute law and the common law in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520.  In the unanimous joint judgment at 562-563 the Court said:

 

“With the establishment of the Commonwealth of Australia, as with that of the United States of America, it became necessary to accommodate basic common law concepts and techniques to a federal system of government embodied in a written and rigid constitution.  The outcome in Australia differs from that in the United States.  There is but one common law in Australia which is declared by this Court as the final court of appeal.  In contrast to the position in the United States, the common law as it exists throughout the Australian States and Territories is not fragmented into different systems of jurisprudence, possessing different content and subject to different authoritative interpretations: [cf Black & White Taxi Co v Brown & Yellow Taxi Co (1928) 276 US 518 at 533-534; Erie Railroad Co v Tompkins (1938) 304 US 64 at 78-79].”  (Footnote incorporated)

 

And at 564:

 

“The Constitution, the federal, State and territorial laws, and the common law in Australia together constitute the law of this country and form ‘one system of jurisprudence’ [McArthur v Williams (1936) 55 CLR 324 at 347; cf Thompson v The Queen (1989) 169 CLR 1 at 34-35].”  (Footnote incorporated)

 

The enactment of a federal statute will, by reason of the limitations on Commonwealth legislative power under the Constitution, usually have only a confined operation within Australia.  The statute may abrogate the common law, in so far as it is inconsistent with the operation of the statute, but only within the area covered by the statute.

 

In Western Australia v The Commonwealth (1995) 183 CLR 373 at 487 in the joint judgment (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ) their Honours explained the limited effect of a law of the Commonwealth on the common law.  Their Honours said:

 

“A ‘law of the Commonwealth’, as that term is used in the Constitution, cannot be the unwritten law.  It is necessarily statute law, for the only power to make Commonwealth law is vested in the Parliament.  But the laws of the Commonwealth operate in the milieu of the common law.  As Sir Owen Dixon observed:

            ‘We act every day on the unexpressed assumption that the one common law surrounds us and applies where it has not been superseded by statute.’

A law of the Commonwealth may exclude, wholly or partially, the operation of the common law on a subject within its legislative power or it may confirm the operation of the common law on such a subject or it may simply assume that the common law applies to the subject, as in truth it does unless excluded.”  (Footnotes omitted)

 

Although I accept the role of the analogical use of statutes in developing the common law of Australia, the statutory limitations on the exercise of Commonwealth legislative power under the Constitution and, subject to the Constitution, the extensive legislative power conferred on State and Territory Parliaments, would usually require extensive legislative action before the doctrine is capable of being attracted.  Such a requirement was explicitly recognised in Moragne and appears to have been implicitly recognised by Gibbs CJ in Osmond at 568 and Kirby P in Ralevski at 493.

 

In R v Swaffield (1998) 72 ALJR 339 consideration was given to the effect of the enactment of s 90 of the Commonwealth and NSW Evidence Acts on the unfairness discretion as a basis for excluding confessional statements in a criminal proceeding.  In considering an argument that the principles on that subject in the Evidence Act should be adopted as part of the common law, Toohey, Gaudron and Gummow JJ said at 361:

 

“It is relevant to bear in mind the provisions of the Evidence Acts.  Although, in general, the Commonwealth Act applies only in the external Territories and in proceedings in federal courts and courts of the Australian Capital Territory, [ss 4, 5 and 6], it has been substantially re-enacted in New South Wales.  It may well be re-enacted in other States. It may be thought undesirable to have two streams, as it were, one legislative and the other judicial, the latter simply echoing the former or perhaps deviating from it.  On the other hand there is no comparable legislative provisions in Queensland and Victoria, the two States with which the Court is presently concerned.  It is therefore appropriate to develop the common law in Australia in terms of a broad principle based on the right to choose whether or not to speak.”  (Emphasis added, footnote incorporated)

 

Thus, on the basis of the absence of uniform legislation and, in that case, of legislation applicable in the relevant jurisdictions from which a generally applicable statutory principle could be drawn, their Honours found that it was appropriate to develop the common law by reference to broad policy principles rather than statutory policy principles.

 

The same difficulty arises in the present case.  The client legal privilege provisions in the Act are of limited operation.  The provisions do not affect the operation of the common law, even in relation to offences against Commonwealth law, except in proceedings in federal courts as defined.  Other than in New South Wales “no comparable legislative provision” has been enacted in any other State or Territory.  Although the Second Reading speech anticipated that counterpart legislation might be enacted in the States, that has yet to occur.  It seems to me that, as in Swaffield, the enactment of the Evidence Act with its confined operation is insufficient to justify the analogical use of the Act in the development of the common law of Australia.

 

Whilst it is true that the Full Court in Adelaide Steamship confined its decision to modification of the common law only “in Evidence Act jurisdictions”, for the reasons set out above such an approach is impermissible.  It is in the nature of the common law that it is “subject to affection by the exercise of legislative power” (Western Australia v The Commonwealth at 487) by excluding, confirming or assuming the continued operation of the common law.  However, in Australia legislative power cannot fragment the common law so that its content differs within the Commonwealth.  Thus, to the extent the common law is inconsistent with the operation of a statute the statute might abrogate or supersede the common law but only to the extent of the inconsistency.  To the extent the common law is not abrogated or superseded by the statute it remains part of the common law of Australia.  Thus there is not, and cannot be, a different common law “in Evidence Act jurisdictions” even if that phrase was intended to be confined to proceedings governed by the Evidence Act.

 

There is a further difficulty with the decision of the Full Court.  The difficulty is that raised by the caveat of Mason P in Akins v Abigroup.  The principles governing client legal privilege were authoritatively laid down in Grant v Downs andarenot to be departed from other than by the High Court.  Whilst it can be accepted that it is open to the courts to adapt the common law to a new policy setting, including that which is derived from the analogical use of statutes, that is not the case where the common law has already been authoritatively determined by the High Court albeit, in the view of the lower court, in a different policy setting.  In that situation, it is for the High Court alone to determine that its decisions are to be departed from or overruled by reason of the new setting: see Garcia v National Australia Bank Ltd [1998] HCA 48 at para 17 per Gaudron, McHugh, Gummow and Hayne JJ.

 

For the above reasons I am of the view that the reasoning employed by the Full Court in Adelaide Steamship in arriving at its conclusion that the common law in respect of privilege had been modified derivatively by reason of the enactment of the Evidence Act is wrong.  However, that does not lead to the conclusion that the result arrived at by the Full Court was also wrong.  The same result might be reached by a process of construction of the relevant statutory provisions.

 

 

The Construction of ss 118 and 119

 

The ordinary meaning conveyed by the text of ss 118 and 119 is that the prohibition against disclosure contained in the sections only arises when evidence is to be adduced in a proceeding in a federal court.  Surprisingly little, if any, consideration has been given to whether the sections may be construed as applying to ancillary processes in a manner which avoids the anomalous or unreasonable outcomes suggested in many of the cases.

 

Plainly, ss 118 and 119 apply to ancillary processes insofar as those processes involve the adducing of evidence in “interlocutory proceedings or proceedings of a similar kind” (s 4(1)(b)) and proceedings that “are heard in chambers” (s 4(1)(c)).  I cannot discern any principle or reason why the prohibition on disclosure should operate in some ancillary processes (for example, interlocutory hearings) but not in respect of other ancillary processes (for example, discovery), in respect of the same communications in the same proceeding, simply because the other processes do not involve the adducing of evidence.  If the primary Judge’s conclusions in the present case are correct, production of the disputed documents is to be determined on the basis of “sole purpose” test but any objection to evidence (including cross examination) based on whether the documents satisfy that test on the motion for production, is to be determined on the basis of the “dominant purpose” test.

 

In Baker v Campbell (1983) 153 CLR 52 the High Court determined that the doctrine of legal professional privilege was not confined to judicial and quasi judicial proceedings.  In explaining his reasons for arriving at that conclusion Deane J observed at 115-117:

 

“Once one recognizes that the principle underlying legal professional privilege is that a person should be entitled to seek and obtain legal advice without the apprehension of being prejudiced by subsequent disclosure of confidential communications and that the privilege is not confined to such communications as are made in the course of or in anticipation of litigation but extends generally to confidential communications of a professional nature between a person and his lawyer made for the purpose of obtaining or giving legal advice, common sense points to a conclusion that the principle should not be seen as restricted to compulsory disclosure in the course of such proceedings.  Indeed, the doctrine of legal professional privilege would represent an aberration of the common law if it withheld from the courts information or documents which were material in the search for truth in circumstances where the disclosure thereof could be compelled as a matter of course by any administrative officer with a relevant and general statutory mandate to require the provision of information or the production of documents.

…

Both logic and authority support the present-day acceptance of the preservation of that confidentiality as a fundamental and general principle of the common law.”

 

The observations of Deane J are particularly pertinent to the present case if different privilege tests are applied in the ancillary processes than those which apply to evidentiary processes.  It would be anomalous, or as his Honour puts it an “aberration”, if disclosure of communications could be compelled in the discovery process but the same communications could be withheld from the federal courts, notwithstanding that they are material in the court’s search for truth.  It seems to me to be no answer to the issue raised in the present matter to contend that the Court ought to be cautious about interpreting legislation in a manner that might extend the operation of client legal privilege and thereby hinder the court’s search for truth.  That hindrance has already occurred by the enactment of ss 118 and 119 which prohibit the privileged communications from being adduced in evidence in order to protect the confidentiality of those communications.  The primary issue is whether that purpose would be defeated or frustrated if the Court does not interpret ss 118 and 119 on the basis that it is implicit in the express prohibition that is contained in those sections that the same test is to apply in the ancillary processes of federal courts which are directed at determining the evidence to be adduced in proceedings in those courts.

 

If the construction of ss 4(1), 118 and 119 based on the ordinary meaning of the words used in those sections would defeat or frustrate the object or purpose of their enactment, that can afford a basis for determining the meaning of the provisions to be something different from the ordinary meaning.  A substantial body of authority supports that approach.

 

In Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 311 Stephen J declined to adopt a literal application when to do so:

“will, in the words of Fry L.J., be to construe ‘the Act in order to defeat its object rather than with a view to carry its object into effect’, Curtis v. Stovin.”  (Footnote omitted)

In a much cited passage in that case (at 320-321) Mason and Wilson JJ said that departure from the ordinary grammatical sense is not restricted to cases of absurdity or inconsistency. Their Honours said at 321 that:

“…when the judge labels the operation of the statute as ‘absurd’, ‘extraordinary’, ‘capricious’, ‘irrational’ or ‘obscure’ he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.

 

Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.”

These principles have been applied more recently. In MacAlister v The Queen (1990) 169 CLR 324 Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ said at 330:

 

“To give the words ‘an offence’ in s.77 their literal meaning would defeat the purpose of the legislation and produce the unreasonable result that there was no right of appeal from the County Court against a s.70(b) order. Such a result was certainly not intended. On the other hand, if the words ‘an offence’ are read as ‘his or her offence’, as we think their context and the apparent intention of the section suggest they should be read, the provision has a sensible meaning which gives effect to its evident purpose. In Luke v. Inland Revenue Commissioners, Lord Reid, when confronted with a similar problem, said:

‘The general principle is well settled. It is only where the words are absolutely incapable of a construction which will accord with the apparent intention of the provision and will avoid a wholly unreasonable result, that the words of the enactment must prevail.’”

In Saraswati v The Queen (1991) 172 CLR 1, after referring to the passages from the judgment of Mason and Wilson JJ in Cooper Brookes set out above, McHugh J said at 22:

 

“Moreover, once a court concludes that the literal or grammatical meaning of a provision does not conform to the legislative purpose as ascertained from the statute as a whole including the policy which may be discerned from its provisions, it is entitled to give effect to that purpose by addition to, omission from, or clarification of, the particular provision: see Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd.; Jones v. Wrotham Park Settled Estates; Cooper Brookes; In re Lockwood.”  (Footnotes omitted)

See also Hospital Benefit Fund of Western Australia Inc v Minister for Health, Housing and Community Services (1992) 111 ALR 1 at 6 per Wilcox, Burchett and French JJ, Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 421-4 per McHugh JA and Agfa-Gevaert (1996) 186 CLR 389 at 400-401.

There are numerous cases in which courts in the United Kingdom have applied similar principles to give effect to, rather than defeat or frustrate, the manifest intention or purpose of the legislature: see F A R Bennion Statutory Interpretation: A Code (3^rd ed, 1997) at 356-360; 785 and 801-803.  See also Ministry of Housing and Local Government v Sharp [1970] 2 QB 223 at 264 per Lord Denning and R v Sheffield Crown Court, ex parte Brownlow [1980] QB 530 at 538-539 per Lord Denning.

A court does not disregard or override the statute; rather it gives effect to the legislative intention by interpreting the statute “in accordance with the judicially presumed parliamentary concern for common sense and justice” per Ungoed-Thomas J in Re: Maryon-Wilson's Will Trusts [1968] Ch 268 at 282.  The role of “logic and common sense in matters of statutory construction" was reiterated recently by the High Court in Agfa-Gevaert Ltd at 400-401 per Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ.  As Lord Diplock observed in “The Courts As Legislators” in The Lawyer and Justice (Sweet & Maxwell, 1978) at 274:

 

“‘if...the Courts can identify the target of Parliamentary legislation their proper function is see that it is hit; not merely to record that it has been missed.’”

Such considerations recently led Lord Templeman to comment in In re M. (A Minor) [1994] 2 AC 424 at 438:

 

“My Lords, this appeal is an illustration of the tyranny of language and the importance of ascertaining and giving effect to the intentions of Parliament by construing a statute in accordance with the spirit rather than the letter of the Act.”

See also Bennion at 614-616.

Section 15AA of the Acts Interpretation Act 1901 (Cth) reinforces the common law position, by providing that a construction which promotes the purpose or object underlying the act shall be preferred to a construction that would not promote that purpose or object.  Section 15AAA provides that in determining the purpose or object of an Act for the purpose of s 15AA, reference may be made to extrinsic material.  Section 15AB permits the use of extrinsic material in the interpretation of an Act, inter alia, to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purposes or object underlying the Act (s 15AB(1)(a)) or to determine the meaning of the provision when the ordinary meaning conveyed by the text of the provision, taking into account its context in the Act and the purpose or object underlying the Act, leads to a result that is “manifestly absurd or is unreasonable” (s 15AB(1)(b)(ii)).

 

However, as was pointed out in the joint judgment of Brennan CJ, Dawson, Toohey and Gummow J in CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408:

 

“It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure.  [Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg Aktiengesellschaft [1975] AC 591 at 614, 629, 638; Wacando v The Commonwealth (1981) 148 CLR 1 at 25-26; Pepper v Hart [1993] AC 593 at 630].  Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. [Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436 at 461, cited in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 312, 315].  Instances of general words in a statute being so constrained by their context are numerous.  In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd [(1986) 6 NSWLR 363 at 388], if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance.  Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent [Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320-321].”  (Footnotes inserted)

 

See also Newcastle City Council v GIO General Limited (1997) 149 ALR 623 at 631 and Project Blue Sky Inc v Australian Broadcasting Authority (1998) 72 ALJR 841 at 855.  In the latter case, reference was made to Commission for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 where Dixon CJ pointed out that:

 

“the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed.”

 

Any consideration of the object or purpose of ss 118 and 119 must commence with Grant v Downs.  In that case the High Court adopted the “sole purpose” test (with only Barwick CJ preferring the “dominant purpose” test) as the suitable criterion for determining whether documents in respect of which legal client privilege is claimed are protected by the privilege.  The rationale of this head of privilege, as identified in Grant v Downs, is that it promotes the public interest by assisting and enhancing the administration of justice through facilitating the representation of clients by legal advisers by:

 

“…keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor”.  Grant v Downs per Stephen, Mason and Murphy JJ at 685

 

The Australian Law Reform Commission considered the issue of client legal privilege under the following terms of reference:

 

“TO REVIEW the laws of evidence applicable in proceedings in federal courts and the courts of the territories with a view to producing a wholly comprehensive law of evidence based on concepts appropriate to current conditions and anticipated requirements AND TO REPORT:

(a)       whether there should be uniformity, and if so to what extent, in the laws of evidence used in those courts; and

(b)       the appropriate legislative means of reforming the laws of evidence and of allowing for future change in individual jurisdictions should this be necessary.”

 

In its Interim Report No. 26, the Commission recommended that the “dominant purpose” test be substituted for the “sole purpose” test in respect of a claim of client legal privilege in relation to evidence which is sought to be given in federal and territory courts.

At para 878 of the Interim Report, the Commission identified the rationale for legal professional privilege to be the public interest in the provision of legal advice and assistance and in the functioning of the adversarial trial system.  The Commission stated that it is not desirable to abolish the privilege nor to extend it further than is necessary.  The Commission concluded:

“The proposals, therefore, do not set out to extend the privilege but rather are directed to addressing deficiencies in the law.”

One of the deficiencies identified by the Commission was said to be the “sole purpose” test.  After considering the reasons put forward in favour of the “dominant purpose” test in the context of the Commission’s identification of the rationale for the privilege the Commission concluded that:

“The ‘dominant’ purpose test strikes the correct balance and should be adopted.”

The Commission then set forth its interim recommendations and proposals, including a draft bill containing provisions which were not relevantly distinguishable from ss 118 and 119.

In its Final Report No 38, after having received further submissions, the Commission recommended that, subject to minor changes which are not presently relevant, its interim recommendations and proposals should be implemented.  The Commission interpreted its terms of reference as excluding any consideration by it of ancillary processes which did not involve the adducing of evidence.  At para 199 of the Final Report, the Commission explained its failure to make recommendations in respect of the ancillary processes in the following terms:

“The limits of the Terms of Reference.  The Terms of Reference limit the Commission to considering the application of the privilege in the courtroom where evidence is sought to be given.  Situations may arise where a party obtains access to documents [eg in pre-trial discovery, on search warrant], outside the courtroom which are protected in the courtroom by the proposed privilege [eg third party communications that do not satisfy the ‘sole purpose’ test but satisfy the ‘dominant purpose’ test].  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.”  (The passages in parentheses were in the footnotes to para 199.)

Paragraph 199 was relied upon by the Commissioner in support of his contention that the Act’s failure to deal with ancillary processes, such as discovery, was deliberate and, more importantly, was a consequence that was determined by the Commission to be not inappropriate on the basis that it was “not unreasonable to have wider access in the investigative stage”.  There is considerable force in the Commissioner’s submission.  It plainly accords with what is stated in para 199.  It also accords with the well established rule that discoverable documents which relate to any matter in question between the parties are not limited to documents which would be evidence to prove or disprove any matter in question in the action.  As was stated by the Full Court in Commonwealth of Australia v Northern Land Council (1991) 30 FCR 1 at 23:

“A document relates to a matter in question between the parties if it is ‘reasonable to suppose’ that the document ‘contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary’.  A document will answer that description if it may fairly lead to a train of inquiry which might have either of those consequences: see The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55, per Brett LJ (at 62-63) and per Baggallay LJ (at 60).  This extended meaning was described by Lord Scarman in Burmah Oil Co Ltd v Bank of England [1980] AC 1090 at 1141 as ‘a vital part of the law of discovery, enabling justice to be done where one party knows the facts and possesses the documents and the other does not’.  The class of documents thus discoverable is not limited to those which would be evidence to prove or disprove any matter in question in the action.”

Accordingly, the Commission’s observation that wider access is given on discovery for a broader investigative purpose is plainly correct.  However any implicit suggestion that there is nothing “unreasonable” about different tests applying in relation to privilege at each stage is more difficult to accept.  As has been pointed out above:

·        the rationale for the existence of client legal privilege is to keep the privileged communications secret;

·        it was central to the recommendation of the Commission that maintenance of the secrecy of the privileged communications was based on the public interest in the provision of legal advice and assistance and in the functioning of the adversarial trial system;

·        adoption of the “dominant purpose” test was said by the Commission to strike the correct balance in achieving those public interest objectives;

·        although the Commission’s proposals were not intended to extend the area in which privilege was to operate, they were directed to addressing deficiencies in the law, one of which it identified to be the “sole purpose” test.

In order to give effect to its conclusions the Commission proposed the enactment of provisions not relevantly distinguishable from ss 118-119 and 121-126 of the Act in order to protect the secrecy of the privileged communications.

In para 199 the Commission explained why it did not deal with the ancillary processes, such as discovery, in its proposals.  It did not assert, nor in my view could it assert, that it was desirable for a different test to apply to those processes.  However, any statement of the Commission that it is “not unreasonable” to protect the confidence at the evidentiary and discovery stages by different tests is based on false reasoning.  The different functions of discovery and evidence are irrelevant to the rationale identified by the Commission for the maintenance of the confidentiality of communications in respect of which client legal privilege is claimed.  As a consequence, the explanation given by the Commission in para 199 is, in my view, fundamentally inconsistent with the policy considerations which led the Commission to adopt the “dominant”, rather than the “sole”, purpose test in proceedings in federal courts.  If public policy considerations dictate that there be non disclosure of privileged documents or information material in the search for truth at the evidentiary stage then surely the same considerations, with the same criterion, must apply in the same court in a proceeding at the investigative stage to prevent non-disclosure of the documents or information.  That is particularly so as:

·        the primary purpose of the investigative stage is to determine the evidence to be adduced at the evidentiary stage;

·        disclosure at the investigative stage will commonly be to the party’s adversary in respect of whom the party would most wish to maintain the confidentiality of the documents and information.

The Act was based substantially on the recommendations and proposals of the Law Reform Commission, as was the Evidence Act 1995 (NSW).

 

Not surprisingly the Second Reading speech in respect of the Act (Hansard, Wednesday 15 December 1993 at 4,087-4,090) is silent on this particular issue.  However, the Second Reading speech does make a number of points which relevantly were:

·        one of the main objectives of the bill is “to provide an evidence law to apply in proceedings in federal courts”;

·        another and, perhaps the most important, object of the bill was that it was hoped to “form the basis of substantially uniform evidence law throughout Australia”;

·        the bill was stated to be based “largely” on the Commission’s recommendations;

·        existing common law was to have effect “subject to inconsistency with the bill”.

 

In my view, it was the intention of the legislature, when enacting the bill proposed by the Commission, to change the common law in relation to privilege in proceedings in the federal courts as defined.  In particular, in adopting the “dominant purpose” test in ss 118 and 119 the legislature was accepting the Commission’s recommendation that that test would better and more appropriately protect the confidentiality of privileged communications in proceedings in federal courts.  The legislature, in adopting the “dominant purpose” test, adopted the test that has now been accepted in the United Kingdom (Waugh v British Railways Board [1980] AC 521) New Zealand; (Guardian Royal Exchange Assurance of New Zealand v Stuart (1985) 1 NZLR 596) and in Canada save for Ontaria (Sopinka Lederman and Bryant “evidence” (1992) at 656-658).  On this particular aspect the legislature was dealing with what was perceived by it to be a particular defect in one of the criteria necessary to establish the existence of client legal privilege rather than extending the operation of the privilege.

The Commissioner submits that the purpose of ss 118 and 119 is clearly expressed in the terms of the sections.  That purpose, so it is said, is to prohibit communications protected by client legal privilege from being adduced in evidence in a proceeding in a federal court.  In my view the Commissioner’s approach to the issue of purpose is too narrow.  It focuses upon the terms of the provisions rather than the reason for their enactment.  It also suffers from the vice of interpreting the provisions in order to ascertain the purpose or object of their enactment rather than ascertaining the purpose or object of the enactment of the provisions in order to interpret them by ascertaining whether the ordinary meaning of the words used is to be departed from.  As pointed out above ascertaining the legislative purpose or object is an important step in determining whether the ordinary meaning is to be displaced.

The Commissioner also relied upon the extrinsic material to support his submission.  However, the extrinsic material does not suggest a legislative intention that different tests would apply to the same communication in the ancillary and the evidentiary processes in a proceeding in the federal courts.  Rather, the legislative intention was that existing common law was to have effect “subject to inconsistency with the bill”.

 

But for the Commission’s explanation in para 199 I would have little doubt that the legislative intent was for the “dominant purpose” test to apply to ancillary evidence gathering processes of the federal courts.  The generality of the observations in the Second Reading speech do nothing to dispel that conclusion.  In particular there is no reason to suspect that the legislature was cognisant, let alone approved, of the Commission’s explanation for not providing for the ancillary processes in its proposed reforms of the laws of evidence.  In these circumstances I am not prepared to elevate the false reasoning of the Commission to a legislative intention.  To do so would be contrary to both logic and common sense.

 

For the reasons I have set out, to confine the prohibition in ss 118 and 119 to the adducing of evidence, whether at an interlocutory or final hearing, and not extend it to the ancillary evidence gathering processes is inconsistent with the Act, is unreasonable and would tend to frustrate and defeat an important object and purpose of the amendments, namely the adoption of the “dominant purpose” test to protect legal client privilege in proceedings in the federal courts.  Put another way, it is implicit in the express prohibition in ss 118 and 119 against evidence being adduced in respect of confidential communications that satisfy the “dominant purpose” test that the same test would apply in the court’s ancillary processes for the purpose of determining the evidence to be adduced.  That result will avoid:

·        inconsistency;

·        removing one of the significant benefits sought to be conferred by ss 118 and 119;

·        unreasonable and anomalous outcomes.

 

For the above reasons the prohibition in ss 118 and 119 is to be construed as applying explicitly to evidence adduced in proceedings in the federal courts as defined and implicitly to any of the ancillary processes of the federal courts, including discovery, which serve the purpose of determining the evidence to be adduced in a proceeding.  That construction gives effect to, rather than frustrates or defeats, a significant object and purpose of the Act, recognises the role of “logic and common sense in matters of statutory construction” (Agfa-Gevaert at 400-401) and ensures that the legal meaning of ss 4(1), 118 and 119 includes what is necessarily or properly implied so as to give effect to the legislative intention gleaned from the language used: see Chorlton v Lings (1868) LR 4 CP 374 at 387 per Willes J and Bennion on Statutory Interpretation at 361-368.

 

It must follow that the statutory, rather than the common law, test would also apply to loss of privilege in the ancillary evidence gathering processes of the federal courts.

 

Thus, using the language of the joint judgment in Western Australia v The Commonwealth at 487, the common law of client legal privilege has been “subject[ed] to affection by the exercise of legislative power”.  The Act has excluded the operation of the common law relating to legal client privilege in relation to evidence adduced in a proceeding in a federal court and in the court’s ancillary processes, such as discovery, for the purpose of determining the evidence to be adduced.

 

I have arrived at the same conclusion, albeit by different reasoning, as was reached by the Full Court in Adelaide Steamship.  Notwithstanding that conclusion there will remain a disparity between the tests applicable to client legal privilege depending on whether the issue arises in an evidence related process in a proceeding in a federal court.  Obviously, that is an unsatisfactory state of affairs.  However that outcome was anticipated by the legislature which regarded the Act as the forerunner of uniform evidence legislation throughout the Commonwealth.  If, and when, such uniformity occurs then there may well be occasion for the analogical use of such legislation in the development of the common law.

 

In conclusion the result in Adelaide Steamship, although not the path by which it has been reached, is correct.  The judgment the subject of appeal in the present case was handed down prior to the decision of the Full Court in Adelaide Steamship.  The primary Judge approached the issue before him as one of construction.  On that basis his Honour, construing ss 118 and 119 by reference to the ordinary meaning of the words used, concluded that the relevant statutory provisions only operate in respect of the adducing of evidence and that the common law test in Grant v Downs was to be applied in the ancillary process of discovery.  For the reasons set out above I have arrived at a different conclusion.

 

The answer to the question of law in para 1(a) is that the correct test for claiming legal privilege in relation to the production of discovered documents is the “dominant purpose” test set out in ss 118 and 119 of the Evidence Act 1995 (Cth).

 

 

Order 15 rule 15

 

Order 15 r 15 of the Federal Court Rules provides as follows:

 

“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 made.”

 

The question the Court was asked to determine was whether it has power pursuant to O 15 r 15 to make an order excluding from production discovered documents on the basis that such documents meet the “dominant purpose” test as set out in ss 118 and 119 of the Evidence Act.  The primary Judge answered the question in the negative on the basis that the Court had no power to exclude from production documents that were discoverable and were not privileged.  In view of the answer to question 1(a) it is unnecessary to answer question 1(b).  However, as the present matter may proceed further it is desirable that I briefly set out my views on the rule.

 

In Commonwealth v Northern Land Council at 24-25 the Full Court considered the operation of O 15 r 15:

 

“As appears later in these reasons dealing with the leading English cases upon the inspection and production of documents for which public interest immunity is claimed, the Federal Court Rules relevant to those topics are more liberal than the equivalent provisions of the Rules of the Supreme Court in England.  The same criterion of ‘necessity’ governs orders for the filing or service of lists of documents as governs orders for their production.  It is a reflection of the policy of judicial case management that underlies the Federal Court Rules generally.  It is a broad criterion which requires consideration of the interests of justice in the particular case as well as its economic and efficient disposition.”

 

The criterion in O 15 r 15 is broad and requires the exercise of the power conferred under the rule after consideration of the interests of justice in the particular case.  Plainly, there might be circumstances in a particular case where the Court will exercise the power conferred under the rule to refrain from ordering documents to be produced for inspection notwithstanding that they were discoverable and not privileged from production under common law principles.  Unless the criterion set out in the rule is satisfied the Court is to refuse to make an order for production under the rule.  That is a matter which depends on the facts of the particular case.  Further, O 15 r 15, like all other rules of Court, is subject to O 1 r 8 which empowers the Court to dispense with compliance with the rules, including O 15 r 15.  That only serves to emphasise the inappropriateness of a question which assumes that O 15 r 15 relates to power.  Ultimately the rule is not concerned with power.  Rather, it is concerned with whether production might be ordered in a particular case.

 

The issue sought to be raised by the parties was whether, in the event that the common law test in Grant v Downs was to apply to discovery, it would be an improper exercise of the power conferred under the rule to refuse production solely on the basis that the document met the “dominant purpose” test as set out in ss 118 and 119 and therefore could not be adduced in evidence.  Plainly the fact that documents are not able to be adduced in evidence is not a valid objection to their discovery or to their production.  Further, in general it would not be a proper exercise of the Court’s discretion to refuse production of documents under O 15 r 15 in order to remove any disparity between the statutory and common law tests for privilege.  The refusal would deny a right one party usually has to production and to give the other party a right to refuse production, which that party usually does not have, without regard to whether the order for production is “necessary” or in the interests of justice in the particular case.

 

It is unnecessary to pursue this aspect further as, having regard to the answer to question 1(a), it is unnecessary to answer question 1(b).

 

 

Conclusion

 

For the above reasons it is my view that the appeal should be allowed with costs and the questions of law answered as set out above.  The order of the primary Judge that Esso pay the Commissioner’s costs of the application should be set aside and in lieu thereof it should be ordered that the Commissioner pay Esso’s costs of the application to the primary Judge.

 

 

 

I certify that this and the preceding forty (40) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:              22 December 1998

IN THE FEDERAL COURT OF AUSTRALIA
victoria DISTRICT REGISTRY	vg 706 of 1997

            On Appeal from a single Justice of the Federal Court

 

BETWEEN:	esso australia resources limited  Appellant
AND:	the commissioner of taxation of the                           commonwealth of australia Respondent

JUDGES:	BLACK CJ, BEAUMONT, SUNDBERG, MERKEL and FINKELSTEIN JJ
DATE:	22 DECEMBER 1998
PLACE:	MELBOURNE

 

 

REASONS FOR JUDGMENT

 

FINKELSTEIN J: This case raises an important issue concerning the extent to which a party is required to produce for inspection documents which it has discovered in its list of documents.  The documents record confidential communications between that party and its solicitors and counsel and information collected by that party in order to obtain legal advice or for use in pending or anticipated litigation.  The question is whether these documents are privileged from production.  The appellant, who has discovered the documents, says that they are: the privilege relied upon being legal professional privilege or client legal privilege as it has now come to be known.

Legal professional privilege, the oldest of the privileges for confidential communications known to the common law, dates back to the sixteenth century.  In its original formulation it was restricted in its operation to an exemption from testimonial compulsion.  Its objective was to protect the “oath and honour” of the lawyer who was bound to keep confidential the instructions of his client: see Holdsworth, “A History of English Law” vol 9 at 201-202;
8 Wigmore, “Evidence” (McNaughton Revision) (1961) para 2290; Baker v Campbell (1983) 153 CLR 52 at 126-127.

By the nineteenth century it was accepted that all communications by a client to his lawyer for the purpose of obtaining legal advice were protected from compulsory disclosure, whether by testimony or by the production of documents, at least in the case where that advice had been sought in relation to existing or anticipated litigation.

The classic statement of the policy that lies behind the privilege is that of Lord Brougham LC in Greenough v Gaskell (1833) 39 ER 618 at 620-621:

“The foundation for the rule is not difficult to discover.  It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.

“But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice which cannot go on, without the aid of me skilled in jurisprudence, in the practice of the courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings.  If the privilege did not exist at all, every one would be thrown upon his own legal resources.  Deprived of all professional assistance, a man would not venture to consult any skilful persons or would only tell his counsellor half his case.”

See also Anderson v Bank of British Columbia (1876) 2 ChD 644 at 649; Southwark & Vauxhall Water Co v Quick (1878) 3 QBD 315; Wheeler v Le Marchant (1881) 17 ChD 675 at 681-682.

In the United Kingdom there has been some uncertainty whether the privilege is limited to communications made in relation to actual or expected litigation.  The early cases held that it was not so limited but extended to the seeking of any legal advice whether for the purpose of litigation or not: see e.g. Lawrence v Campbell (1859) 62 ER 186 at 188, Minet v Morgan (1873) 8 ChApp. 361; Minter v Priest [1929] 1 KB 655.  On the other hand in Parry-Jones v Law Society [1969] 1 Ch 1 the Court of Appeal, comprising Lord Denning MR and Diplock and Salmon LJJ, held that the privilege was irrelevant if not concerned with judicial or quasi judicial proceedings.  Diplock LJ explained (at 9):

“[S]trictly speaking, [the] privilege refers to a right to withhold from a court, or a tribunal exercising judicial functions, material which would otherwise be admissible in evidence.”

This restricted view of legal professional privilege was rejected by the High Court in Baker v Campbell where it was held, by majority, Gibbs CJ, Mason and Brennan JJ dissenting, that the privilege extends to all communications made for the purpose of receiving legal advice.  The same principle applies in New Zealand (see e.g. Commissioner of Inland Revenue v West-Walker [1954] NZLR 191), in Canada (see e.g. Solosky v The Queen (1979)105 DLR (3d) 745 at 756) and in the United States of America (see e.g. Upjohn Company v United States (1981) 449 US 383; 8 Wigmore on Evidence, para 2294).

In most common law jurisdictions it has also been accepted that the communication of legal advice by a lawyer to his client is within the privilege: in the United Kingdom see Bunbury v Bunbury (1839) 48 ER 1146; Reece v Trye (1846) 50 ER 365; Phipson on Evidence (14th ed) (1990) para 20-20; in Australia see Baker v Campbell, supra, at 60, 90; Waterford v Commonwealth (1987) 163 CLR 54 at 67;in Canada see Solosky, supra, at 752.

The basis for this branch of the rule has not been stated and the foundation for it is not altogether clear.  Where the advice records the substance of a confidential communication from the client then the advice should be treated in the same way as the communication.  But what if the advice does not record a confidential communication by the client?  If the advice is in relation to litigation the privilege may be justified on the basis that production of the advice would undermine the adversarial system of justice dispensed by our courts.  In Waugh v British Railways Board [1980] AC 521 the House of Lords considered whether a report that had been prepared for a number of purposes, only one of which was for the purpose of obtaining legal advice, was privileged.  Lord Simon said that the reason for holding the document to be privileged was to further the adversarial system.  His Lordship said (at 536):

“This system of adversary forensic procedure with legal professional advice and representation demands that communications between lawyer and client should be confidential, since the lawyer is for the purpose of litigation merely the client’s alter ego.  So to material which is to go into the lawyer’s (i.e. the client’s) brief or file for litigation.”

See also Brennan J in Baker v Campbell, supra, at 108 where his Honour said that the justification for legal professional privilege is the “maintenance of the curial procedure for the determination of justiciable controversies – the procedure of adversary litigation”.  But this rationale cannot explain why the privilege should exist in the case of advice given in relation to out of court matters. 

Perhaps the true reason for protection being given to all communications between a lawyer and his or her client is that stated by the High Court in Grant v Downs (1976) 135 CLR 674 where, in a joint judgment, Stephen, Mason and Murphy JJ said (at 685):

“The rationale of this head of privilege, according to traditional doctrine, is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline.  This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor.”

To a similar effect is the statement of Deane J in Baker v Cambell, supra, (at 118):

“[T]he general and substantive principle underlying legal professional privilege is of fundamental importance to the protection and preservation of the rights, dignity and equality of the ordinary citizen under the law in that it is a pre-condition of full and unreserved communication with his lawyer.”

Dawson J in the same case said (at 130):

[I]f a client cannot seek advice from his legal adviser confident that he is not acting to his disadvantage in doing so, then his lack of confidence is likely to be reflected in the instructions he gives, the advice he is given and ultimately in the legal process of which the advice forms part.”

In these passages there is to be found the idea that it is not only the need to encourage a client to make a full and free disclosure to his or her lawyer of all relevant facts that gives rise to the privilege but that the privilege is required to protect the administration of justice in a more general way. 

However, this is not a universally accepted view.  Professor Wigmore has argued that there is no occasion for protecting communications from a lawyer unless the disclosure would hamper freedom of communication by exposing the client’s communications or by leading to inferences as to the terms of those communications: 8 Wigmore on Evidence, supra, para 2320; see also McCormack on Evidence (4th) (1992) vol 1 at 326-327.  There are cases that have accepted this approach and have denied the protection of legal professional privilege to legal advice that does not disclose the client’s communications: see United States v United Shoe Manufacturing Corp (1950) 89 F.Sup.357; Ohio-Sealy Mattress Manufacturing Co v Kaplan (1980) 90 FRD 21; American Standard Inc v Pfizer (1987) 828 F (2d) 734. On the other hand cases have held that this approach is too narrow and that all legal advice should be the subject of the privilege.  For example, in Re Spectrum Systems International Corp v Chemical Bank (1991) 78 NY (2d) 371 the Court of Appeals of the State of New York said (at 379):

“As we made clear in Rossi, the privilege is not narrowly confined to the repetition of confidences that was supplied to the lawyer by the client … That cramped view of the attorney-client privilege is at odds with the underlying policy of encouraging opening communication: it poses inordinate practical difficulties in making surgical separations so as not to risk revealing client confidences; and it denies that an attorney can have any role in fact-gathering incident to the rendition of legal advice and services …”.

See also Great American Insurance Co v Smith (1978) 574 SW (2d) at 379; Rossi v Blue Cross and Blue Shield of Greater New York (1989) 73 NY (2d) 588. 

Thus far the discussion has concerned communications between a client and his lawyer.  What is the position where the communication is between a third party and a lawyer made for the purpose of the lawyer providing legal advice to his or her client? 

Where the third party is the agent of the client it is clear that the privilege is co-extensive with that which exists if the communication was by the client: Wheeler v Le Marchant, supra, at 682, 684; Anderson v Bank of British Columbia, supra, at 657; Bray, “Law of Discovery” (1885) at 398-401.  The rationale is that the act of the agent is to be treated as the act of his or her principal.

However, where the third party is not the agent of the client the generally accepted position is that the communications will be protected provided they are in relation to pending or apprehended litigation.  In Wheeler v Le Marchant, supra, Jessel MR said (at 682):

“[T]he evidence obtained by the solicitor, or by his direction, or at his instance, even if obtained by the client, is protected if obtained after litigation has been commenced or threatened, or with a view to the defence or prosecution of such litigation.  So, again, a communication with a solicitor for the purpose of obtaining legal advice is protected though it relates to a dealing which is not the subject of litigation, provided it be a communication made to the solicitor in that character and for that purpose.  But what we are asked to protect here is this.  The solicitor, being consulted in a matter as to which no dispute has arisen, thinks he would like to know some further facts before giving his advice, and applies to a surveyor to tell him what the state of a given property is, and it is said that the information given ought to be protected because it is desired or required by the solicitor in order to enable him the better to give legal advice.  It appears to me that to give such protection would not only extend the rule beyond what has been previously laid down, but beyond what necessity warrants.”

See also Brett LJ at 683 and Cotton LJ at 684-685.

This view was accepted by the Full Court of the Supreme Court of Victoria in O’Sullivan v Morton [1911] VR 70, the Supreme Court of New South Wales in Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44, the Supreme Court of Queensland in Nagan v Holloway [1996] 1 Qd R 607 and by the Federal Court in Trade Practices Commission v Sterling (1978) 36 FLR 244.  It was recently affirmed by the House of Lords in Waugh.  The position in Canada is the same: see Blackstone v Mutual Life Insurance Co [1944] OR 329; Re Goodman & Carr v Minister of National Resources [1968] 2 OR 814.

Mr Ligertwood in the first edition of his text, “Australian Evidence”, (1988) argued that as a consequence of Grant v Downs there was no longer any justification for privilege to cover communications between third parties and a client’s lawyer.  In Grant v Downs the High Court was required to consider “the relevant principle of law governing the privilege which attaches to communications and materials submitted by a client to his solicitor for the purpose of advice and for the purpose of the use in existing litigation.”  Stephen, Mason and Murphy JJ said (at 688):

“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 true 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.”

Mr Ligertwood contended that the High Court did not deal with third party communications in its general formulation of the principle and thus concluded that these communications must be outside the privilege.  This is not an approach that has been accepted by the courts (see e.g. TPC v Sterling, supra, at 246; Nickmar, supra, at 53-54; Dingle v Commonwealth Development Bank (1989) 23 FCR 63 at 66) and it appears that Mr Ligertwood has abandoned his argument in the most recent edition of his text published a few months ago.

Finally, it is necessary to consider in what circumstances the privilege will attach to documents, such as reports, briefing notes, statements and the like, that contain confidential material.  In Grant v Downs the High Court held that a document prepared by a client or his agent would only be privileged if the document was brought into existence for the sole purpose of submission to his lawyer for advice or for use in legal proceedings.  The majority, Stephen, Mason and Murphy JJ, said (at 688):

“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.  It is true that the requirement that documents be brought into existence in anticipation of litigation diminishes to some extent the risk that documents brought into existence for non privileged purposes will attract the privilege but it certainly does not eliminate that risk.  For this and for the reasons which we have expressed earlier we consider that the sole purpose test should now be adopted as the criterion of legal professional privilege.”

In Waugh the House of Lords held that it would be going too far to follow the “sole purpose” test adopted in Grant v Downs principally for the reason that it would deny privilege to material whose principal purpose was for use in litigation simply because another and very minor purpose was also present.  Accordingly, the House decided that the “dominant purpose” for the coming into existence of the document should be the test.  The “dominant purpose” test was that suggested by Barwick CJ in his dissent in Grant v Downs.  It is the test that has been adopted in Canada, except in Ontario; see Sopinka Lederman & Bryant, “Evidence” (1992) at 656-658; Manes & Silver, “Solicitor-Client Privilege in Canadian Law” (1993) at 96-99.  New Zealand initially adopted the less satisfactory and more difficult to apply “appreciable purpose test” (see Konia v Morley [1976] 1 NZLR 455) but has now followed Waugh: see Guardian Royal Exchange Assurance of New Zealand v Stuart [1985] 1 NZLR 596.

Grant v Downs did not expressly deal with documents that had been prepared by a third party.  In the case of these documents they must have been brought into existence for the purpose of pending or threatened litigation before the privilege can be claimed: Waugh, supra, at 542 per Lord Edmund-Davies.

This discussion of the applicable principles of the common law is not sufficient to dispose of the appeal.  The appellant says that these principles have been modified by the Evidence Act 1996 (Cth) and in particular by ss 118 and 119 which provide:

“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.”

These provisions significantly alter the common law in the areas in which they operate particularly with regard to the contents of confidential documents.  Here they have replaced the “sole purpose” test adopted by the High Court in Grant v Downs in favour of the “dominant purpose” test favoured by other jurisdictions.  In the case of communications between a lawyer and his client for the purpose of giving or receiving legal advice and communication between a lawyer and a third party in relation to anticipated or pending proceedings the change is not so significant.  It is true that under the common law for these communications to be privileged the communications must be for the “sole purpose” of giving or receiving of advice and in the case of communications with a third party the communications must be for the “sole purpose” of anticipated or pending proceedings: see Waterford, supra, at 67 per Mason and Wilson JJ.  However, it is doubtful whether the adjectives “sole” or “dominant” add much by way of definition.  In order to attract the privilege the lawyer must be acting in his professional capacity: Minter v Priest [1929] 1 KB 655 at 675.  Ordinarily when a lawyer is acting in a professional capacity communications between the lawyer and his client will only be for the purpose of obtaining or giving legal advice.  The same is true with respect to communications with third parties undertaken in connection with the provision of advice to the client.  It must be remembered that if in the course of a professional communication statements unrelated to the obtaining of legal advice are made they are not privileged: Balabel v Air India [1988] Ch 317 at 331-332; The Sarah C Getty Trust [1985] QB 956 at 964-965.

There are three bases upon which it is said that ss 118 and 119 have altered the category of documents that must be produced for inspection.  First it is said that on a proper construction of ss 118 and 119, a construction that adopts a purposive and not a literal approach, these sections should be read as governing pre-trial procedures including the production of discovered documents.  The second way the case is put is that the court should make an order under O 15 r 15 of the Federal Court Rules to exempt from production documents which could not be tendered in evidence by reason of ss 118 and 119.  The final and by far the most far reaching submission is that the common law must adapt to take account of ss 118 and 119 and arrive at a new set of rules that would see the common law operate in harmony with ss 118 and 119.  The appellant relies upon Adelaide Steamship Co Ltd v Spalvins (1994) 152 ALR 418 which has adopted this approach.

The argument that ss 118 and 119 should be given a construction (presumably by way of implication or by the addition of appropriate words) that would have them operate in relation to the production for inspection of discovered documents relies on two independent but nevertheless related propositions.  The first is that such a construction would promote the purpose and object underlying the Evidence Act.  The second is that a failure to adopt that construction would lead to unfair or absurd consequences.  In Telstra Corporation v Australis Media Holdings (No 1) (1997) 41 NSWLR 277 at 279-280 McClelland CJ in Eq. said:

“If principles of client legal privilege … applicable to the adducing of evidence were to differ from those applicable to ancillary processes, the consequence would be anomalous, conducive to confusion and disorder in the preparations for and conduct of proceedings, and verging on the absurd. …

If different principles of client legal privilege were applied to the operation of the production of the documents on the one hand, and the adducing of evidence in the application on the other, in situations of this kind, quite impractical consequences could ensue.” 

The object of statutory construction is to determine what parliament intended so that the legal consequences of what was intended can be put into effect.  If the meaning of the words used in an enactment are clear there will usually be no difficulty: the enactment will be taken to have meant what the legislation literally provides.  However, there are circumstances in which it is both appropriate and proper to depart from the literal meaning of an enactment.  Those circumstances will only arise where it is apparent that to give effect to the literal meaning of an enactment would be to frustrate the intention of parliament.  That is, a departure from the literal meaning of a statute is permitted solely for the purpose of giving effect to the parliament’s intention.  But it is going too far to say, as Lord Denning did in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1977] 1 All ER 518 at 523 that the court should “adopt a more liberal attitude [to] construction as will ‘promote the general legislative purpose’ underlying the provision” if his Lordship meant by that that the court can “fill in the gaps” (Ministry of Housing v Sharpe [1970] 2 QB 223 at 264 per Lord Denning MR) in accordance with what the court thinks is good sense (R v Barnett[1982] QB 688 at 720-721 per Lord Denning MR).

There are many cases where the court has held that the literal operation of a statute was not its intended operation.  The facts upon which a statute operates may demonstrate that its literal meaning will give rise to absurd or unjust consequences.  That is often a good indication that the parliament did not intend the literal meaning to prevail: Mills v Meeking (1990) 169 CLR 214 at 242; Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304.

But that is not the only circumstance in which a departure from the literal meaning of a statute is permissible.  In Cooper Brookes Mason and Wilson JJ said (at 321):

“[W]hen the judge labels the operation of the Statute as ‘absurd’, ‘extraordinary’, ‘capricious’, ‘irrational’ or ‘obscure’ he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred.  But the propriety of departing from the literal interpretation is not confined to situations described by these labels.  It extends to any situation in which for good reason the operation of a statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.”

If, on a proper analysis, it appears that the intention of parliament will be thwarted by the application of the literal meaning of an enactment then the court is entitled to remedy the situation by a strained construction of the words used, or by the addition of words, or by the omission of words: Saraswati v R (1991) 172 CLR 1 at 22. 

It is not in dispute that if ss 118 and 119 are given their literal meaning they will only operate to prevent evidence being adduced in proceedings if objection to that evidence is taken.  Read literally they do not affect the obligation of a party in a proceeding in a federal court to make over for inspection documents that have been discovered by that party.  Does this contradict the object and policy of the Evidence Act?  Does this create a situation that is “unfair” or “absurd”?  Can it be said that if the literal meaning is applied parliament has unintentionally missed its mark?

In arriving at an answer to these questions there is one matter that should steadfastly be borne in mind.  Any extension to the privilege and any extension to the area in which the privilege will operate may act as a fetter on the discovery of truth.  In United States v Nixon(1974) 418 US 683 at 710, in relation to a claim of privilege made by the President of the United States concerning the production of certain well known tape recordings, Burger CJ said “whatever their origins, these exceptions to the demand for every man’s evidence are not lightly created nor expansively construed, for they are in derogation of the search for truth.”

The argument that to limit ss 118 and 119 to testimonial compulsion is to defeat the purpose and object of the Evidence Act has no attraction.  In the first place it is an argument that is contradicted by the Act itself.  Chapter 3 of the Act (the relevant sections are to be found in Part 3.10 of Chapter 3) contains provisions that are solely concerned with the exclusion of evidence.  The effect of Chapter 3 is explained in the introductory notes.  In relation to Part 3.10 the notes say that it “is about the various categories of privilege that may prevent evidence being adduced.”  An examination of the provisions found in Part 3.10 bears out this description. 

In the second place the general scheme of Part 3.10 suggests that it is not concerned with discovery or other methods of gathering information that may assist a party in the prosecution of his or her case.  The Part provides for a variety of circumstances in which evidence is not to be adduced in a federal court: some but not all of the common law privileges are dealt with.  Most of the provisions are concerned with the protection of a witness whether or not a party to the proceeding.  In some cases the testimonial prohibition is not absolute.  For example, in the case of client legal privilege, the privilege may be waived: see s 122.  In the case of privilege against self incrimination, where a witness does give criminating evidence he or she is to be provided with protection against the future use of that evidence: see s 128.  In the case of settlement negotiations the right to withhold evidence may be lost in a variety of identified circumstances: see s 131.  Section 130 is concerned with evidence relating to matters of state.  The court is given power to determine whether such evidence should be adduced.  That determination will usually take place at the trial.  In all of these cases, leaving aside client legal privilege, it would be inappropriate to construe the legislation as imposing additional limitations on the obligation to give discovery.  To single out client legal privilege as the exception appears to be the creation of a policy rather than its ascertainment from the text of the legislation. 

In the third place the enacting history of the Evidence Act tells against the submission.  In 1979 the then Attorney-General, upon the recommendation of the Senate Standing Committee on Constitutional and Legal Affairs, referred to the Law Reform Commission the recommendation that the laws of evidence in federal courts be reviewed.  In 1987 the Law Reform Commission delivered its report.  The report included a draft bill that had been prepared by the Commission.  That draft was the basis of the bill that was tabled in parliament and that was subsequently enacted as the Evidence Act.  Sections 118 and 119 were modelled on cl 106 of the draft bill.  The Commission had prepared the draft bill on the basis that it would not affect the obligations upon a party to make documents available for inspection.  The Commission explained (at para 199):

“The Terms of Reference limit the Commission to considering the application of the privilege in the court room where evidence is sought to be given.  Situations may arise where a party obtains access to documents [e.g. in pre-trial discovery, on search warrant] outside the court room which are protected in the court room by the proposed privilege.  Under the proposal, the privilege will still apply in the court room 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.”

In the fourth place, to give effect to the suggested construction is to impute to parliament an intention to impose even greater fetters than those created by ss 118 and 119 on the ability of a party to properly and adequately conduct litigation.  It is true that the parliament has decided that the public interest will best be served by an extension of client legal privilege in the manner provided by ss 118 and 119.  But there must be a very clear indication that the parliament intended to impose even greater restrictions before a court would be justified in departing from the grammatical meaning of ss 118 and 119 in the way that has been suggested.

Next, there is the argument that seems to be the true foundation for the contention that the purpose of the legislation will be defeated unless the appellant’s construction of ss 118 and 119 is adopted, namely that these provisions have as their fundamental objective the protection from disclosure of confidential privileged communications.  However, I do not accept that this is a proper characterisation of the purpose of the legislation.

In my view the fundamental objective of ss 118 and 119 is not to protect from disclosure certain confidential communications.  Nor is protection from disclosure the fundamental objective of s 127 in relation to religious confessions, of s 128 in relation to self incrimination, of s 129 in relation to reasons for decision by a judge or an arbitrator, of s 130 in relation to matters of state or of s 131 in relation to settlement negotiations.  The purpose of each of these provisions, including ss 118 and 119, is to ensure that evidence in respect of the topics dealt with is not to be adduced or given in a proceeding.  That purpose finds its expression in s 134 which provides: “Evidence that, because of this part [i.e. part 3.10] must not be adduced in a proceeding is not admissible in the proceeding.”

Finally, it is necessary to turn to the contention that the consequence of applying different principles to discovery and to the adducing of evidence is unjust or absurd.  There is a good deal of support for the view that the absence of symmetry and consistency in relation to the adducing of evidence and discovery is both anomalous and irrational: see e.g Telstra Corporation Limited,supra, at 279-80 in the passage cited above; see also Kizon v Palmer (unreported, Federal Court 13 June 1997) where Beaumont J said (at 10) that symmetry and consistency required ss 118 and 119 to apply derivatively to the subpoena processes; see also Trade Practices Commission v Port Adelaide Wool Co Pty Ltd (1995) 60 FCR 366 at 370 where Branson J said “it would be a curious result” if the sections did not apply to prevent “dominant purpose” documents being produced for inspection.

 

However, with the greatest respect to those who have taken this view, I regret to say that I am not persuaded by it.  First, the absence of symmetry and consistency, without more, is not a proper basis upon which to depart from the grammatical language of an enactment.  If it was there would be very few statutes in respect of which it could be said: “The words mean what they say”.  Second, it is not by any means apparent how confusion or disorder would result from the fact that a party has obtained inspection of documents that are not admissible in evidence.  Only one object of discovery, and in many cases not the principal object, is to obtain evidence.  Often the principal object is to obtain information that will throw light on the case (Hutchinson v Glover [1876] 1 QBD 138) including information that would, directly or by a train of enquiry, advance a party’s own case or disadvantage that of his or her adversary: (Mulley v Manifold (1989) 103 CLR 341 at 345).  It must be remembered that the fact that a document was not admissible in evidence was never a ground either at law or in equity for not granting inspection of that document: Bustros v White (1876) 1 QBD 425; Bray on Discovery at 184-185.  Even so, discovery was still regarded as “indispensable to the due administration of justice”: The Commissioners appointed to inquire into the Process, Practice and System of Pleading in the Court of Chancery, First Report (1852) at 23.

Further, in the preparation of a case for trial it is commonplace, and it has been for over 150 years, for a party to obtain possession of a large quantity of documents many of which are not capable of being tendered in evidence for one reason or another.  The documents may have been obtained by discovery, on subpoena or, nowadays, by non-party discovery.  In a world where transactions are becoming increasingly complex there are many cases where a party, whether plaintiff or defendant, is not in a position to adequately advance or defend his or her case based on his or her own first hand knowledge of the facts.  Thus, rather than creating confusion and disorder, the ascertainment of facts and information from documents not themselves admissible is often likely to lead to a just determination of a cause. 

It is convenient now to turn to the argument that “dominant purpose” documents should be excluded from the documents to be produced for inspection by an order made under O 15

r 15.  That rule 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.”

Prior to the passage of the Law of Evidence Amendment Act 1851 (UK) discovery was only available in a bill in equity.  Every bill for relief in equity was, in reality, a bill for discovery: Smith’s Weekly Publishing Co Ltd v Sunday Times Newspaper Co Ltd (1923) 31 CLR 552; Naismith v McGovern (1953) 90 CLR 336; Halsbury’s, Laws of England (4th ed) vol 13
para 5. 

The Law of Evidence Amendment Act enabled common law courts to give discovery in an action.  It was soon the established belief that a party to an action was entitled to discovery as of right subject to certain established exceptions: Bray on Discovery at 11.  However, this was only so after the Judicature Act 1873 (UK) because the rules of court provided for automatic discovery in actions commenced by writ (Burmah Oil Co v Bank of England [1980] AC 1090 at 1141) whereas in proceedings commenced by originating summons, a procedure designed for the quick and simple determination of a number of matters, the “right” to discovery was discretionary and the discretion was not often exercised: see e.g. In re Borthwith [1948] Ch 645; National Mutual Life Nominees Ltd v Co-operative Farmers and Graziers Direct Meat Supply Ltd [1976] VR 634.

Discovery in the Federal Court is regulated by O 15.  Order 15 r 1 provides that a party may require another party to give discovery unless the court otherwise orders.  An order may be made to limit the class of documents to be discovered or provide that discovery is to be made only in relation to particular matters: see O 15 r 3.  The object of this rule is to prevent unnecessary discovery. It is clear that in proceedings in the Federal Court discovery is discretionary: see Trade Practices Commission v Rank Commercial Ltd (1994) 53 FLR 303 at 322.  Indeed Burchett J has said that the court has a very wide discretion to make appropriate orders in respect of discovery including an order dispensing with discovery altogether: Murex Diagnostics Australia Pty Ltd v Chiron Corporation Ortho Diagnostic Systems Inc (1995) 55 FCR 194 at 199. 

Nevertheless, it should not be thought that in an ordinary case limitations will be imposed upon a party’s ability to obtain discovery.  As a general rule every document that is in the possession or power of a party which is material or relevant to the case must be discovered and thereafter produced for inspection unless covered by some established privilege.  In contemporary litigation there is often a real need for very broad discovery.  This is not only for the reason that courts should insist on a party disclosing the truth, the whole truth and nothing but the truth to adopt the language of Lord Hailsham in D v National Society for Prevention of Cruelty to Children [1978] AC 171 at 225.  Nor is it because, as will often be the case, discovered documents will add materially to the ability of the court to fairly determine controversial issues of fact.  Broad discovery is often necessary for the fair disposal of a case because there is a substantial risk that limited discovery, that is discovery limited by class or subject matter, will result in important documents being kept from the court and will substantially inhibit a party’s ability to present his or her case in the best possible light.

The same is true in relation to the production of documents for inspection.  It is my view that a court should be reluctant to refuse to allow inspection in the case of admittedly relevant documents.  As regards “dominant purpose” documents the position is no different from any other category of document.  These documents are not amongst the category of documents  that are exempt from production and, prima facie, inspection of them should be allowed.  The fact that the contents of these documents may not be led in evidence is beside the point.  Without more, that is not a sufficient reason for denying inspection: see also the observations of Goldberg J in Meltend Pty Ltd v Restoration Clinics of Australia Pty Ltd (1997) 145 ALR 391 at 404-405.

This is not to suggest that in an appropriate case the court is not able to make an order that “dominant purpose” documents should not be inspected.  However, it would be a rare case where such an order would be made without the court first inspecting the documents to ascertain whether there is some good reason, over and above the fact that they may not be led in evidence, why they should not be inspected: compare Science Research Council v Nasse [1980] AC 1028. 

The issue whether the Evidence Act has modified the common law as it applies to the pre-trial gathering of evidence in a federal court, or indeed in all courts if the logic of Adelaide Steamship is to be given its full application, must be considered in the following context.  Upon federation there was created throughout Australia a uniform body of unwritten law (the common law) described as “a single legal system” by Sir Owen Dixon in “Sources of Legal Authority”, Jesting Pilate (1965) at 198-200; see also Breavington v Godleman (1988) 169 CLR 41 at 121-128 per Deane J.  In so far as legislative powers are concerned, while the parliament of the Commonwealth has certain exclusive powers, (see e.g. ss 52, 90, 114 and 115 of the Constitution), most are shared with the States although in the case of inconsistency the laws of the Commonwealth will prevail (see s 109 of the Constitution).  In the case of common law privileges such as legal professional privilege the Commonwealth parliament does not have exclusive jurisdiction to enact, circumscribe or abrogate the privilege.   It can affect the privilege in its own area of legislative competence, namely where that privilege operates in federal courts, in federal tribunals, in relation to information gathering under federal statutes and in State courts exercising federal jurisdiction.  With regard to the Evidence Act its area of operation is relevantly confined to federal courts (as defined) and ACT courts (as defined): see s 4(1) of the Evidence Act.

 

The orthodox view of judges has been that legislation “generally changes the law for the worse, and that the business of the judge is to keep the mischief of its interference within the narrowest possible bounds”: F. Pollock, “Essays in Jurisprudence and Ethics” (1882) at 85.  This no doubt followed the attitude of judges that the common law “is the perfection of reason”: Blackstone, “Commentaries on the Laws of England” Bk 1 at 70. 

 

Accordingly, courts were disposed, so far as was possible, to confine the operation of a statute according to its precise terms.  This has not always been so.  In early times statutes were badly drafted and it was necessary for the courts to give them a beneficial construction to ensure that they had a sensible field of operation.  This led to the theory of the equity of the statute described by W. Page in “Statutes as Common Law Principles” [1944] Wisconsin Law Review 137 at 185 as being “somewhere between a genuine, though very free, construction, and a disguised use of analogy in the creation of common law principles, rules and standards, taken from the provisions of statutes which, by their terms, applied to like cases but not to the particular case in question.”

 

In Adelaide Steamship the Full Court applied the principle that a statute (the Evidence Act) could be regarded as a source from which the common law should be developed by extending legal professional privilege in a manner that had expressly been rejected by the High Court in its declaration of the common law in Grant v Downs.

The use of statutes as a source from which common law or equitable principles could be developed is not novel.  For example, courts of equity have long applied the statute of limitations by analogy: see Meagher, Gummow & Lehane, “Equity, Doctrines and Remedies” (3rd) para 3415.  The avoidance of preferences in bankruptcy was a common law development that was based on the policy of statute law: Nelson v Nelson (1995) 184 CLR 538 at 553-4.

In 1908 Roscoe Pound surveyed the attitude of courts to legislation and reached the firm conclusion that if, as the courts often stated, they apply old principles to new situations, it was also obligatory for courts to apply new principles to both old and new situations: the new principles being legislation and the old principles being the common law: see R. Pound, “Common Law and Legislation” (1908) 21 Harvard Law Review 363.  It was Pound’s view that in legislation there was to be reflected the general will of society and that general will should also be reflected in the common law.

Pound was not alone in espousing the view that courts should take account of statutes in addition to other sources when determining whether the common law should be developed in new directions.  The same idea was taken up, among others, by Professor Landis, the Dean of Harvard Law School, in “Statutes and the Source of Law”, Harvard Legal Essays (1934), by the Hon Justice Stone, then an associate Justice of the Supreme Court of the United States, in “The Common Law in the United States” (1936) 50 Harvard Law Review 4 and by the Hon R.G. Traynor, Chief Justice of the Supreme Court of California, in an article entitled “Statutes Revolving in Common Law Orbits” (1968) 17 Catholic University Law Review 401.  The view that was put forward was that there was nothing in the history or principles of the common law that prevented a court from treating a statute as a source of law and as a premise for legal reasoning and that the courts should do so.

There are two important decisions in the United States where this idea was taken up.  The first is Johnson v United States (1908) 163 F 30 where Justice Holmes urged that courts should recognise and obey the legislative policy underlying a statute.  He said (at 32):

“A statute may indicate or require as its justification a change in the policy of the law, although it expresses that change only in specific cases most likely to occur to the mind … The major premise of the conclusion expressed in the statute … may not be set out in terms, but it is not an adequate discharge of duty for courts to say: we see what you are driving at, but you have not said it, and therefore we shall go on as before.”

In 1970 the Supreme Court of the United States handed down its decision in Moragne v States Marine Lines Inc (1970) 398 US 375.  In Moragne the petitioner’s husband, a longshoreman, had been killed while working on a vessel in navigable waters within the State of Florida.  She claimed that his death resulted from the unseaworthiness of the vessel.  The respondent argued that maritime law permitted no recovery for a wrongful death in territorial waters and that the only applicable statute did not encompass unseaworthiness as a basis of liability.  If the accident had occurred outside the territorial waters of Florida the petitioner would have had a claim under applicable legislation.  She also would have had a claim had the death occurred within the waters of adjoining States by reason of the legislation of those States.  Finally, if the death had resulted from breach of duty to use reasonable care a cause of action would have existed by reason of other legislation. 

Justice Harlan, who delivered the opinion of the court, made reference to the fact that every State in the United States had enacted a wrongful death statute.  He continued (at 390):

“These numerous and broadly applicable statutes, taken as a whole, make it clear that there is no present public policy against allowing recovery for wrongful death.  The statutes evidence a wide rejection by the legislatures of whatever justifications may once have existed for a general refusal to allow such recovery.  This legislative establishment of policy carries significance beyond the particular scope of each of the statutes involved.  The policy thus established has become itself a part of our law, to be given its appropriate weight not only in matters of statutory construction but also in those of decisional law. “

His Honour cited as authority the articles by Professors Pound and Landis and the dissent of Justice Holmes in Panama Railway Co v Rock (1924) 266 US 209 at 216 where his Honour had referred to his previous decision in Johnson. 

Justice Harlan recognised that the legislature did not always enact general policies.  His Honour accepted that in many cases the operation of a statute reflects nothing more than the fact that the legislature had a particular problem with which to deal.  But if a particular mischief was dealt with then his Honour said it might be possible to conclude that the legislative policy may be applicable to other situations in which the mischief is identical.  He said (at 392) “this conclusion is reinforced where there exists not one enactment but a course of legislation dealing with a series of situations, and where the generality of the underlying principle is attested by the legislation of other jurisdictions”.

In New Zealand Sir Robin Cooke commented on the use of analogical reasoning in South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd [1992] 2 NZLR 282 a case that was concerned with the existence of a duty of care on the part of private investigators.  His Honour said (at 298):

“(xiii)  The analogy of a statute may properly influence the development of the common law.

            …

(xiv)         The acceptance by the New Zealand Parliament in 1974 that third parties affected by the activities of licensed private investigators should have the right to file a disciplinary complaint based on negligence is, in my opinion, one of the strongest points in favour of recognising in this country a corresponding common law duty of care.  The statute is hardly a controversial or party political one.  Rather it aims at regulating in the public interest the activities of a type of business closely affecting members of the public.  To be investigated is an intrusion into ones life in return for submitting to which it is not unreasonable to ask for reasonable care.”

In the result the court found that for other reasons of policy no duty of care did exist and hence the statutory analogy did not prevail.

In the United Kingdom, in Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731, at 743 Lord Diplock, with whom Viscount Dilhorne and Lord Salmon agreed, said in relation to an argument that the definition of the tort of passing off should take account of the more rigorous standards of commercial honesty as evidenced by legislation:

“Where over a period of years there can be discerned a steady trend in legislation which 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.”

The common law is judge made law.  It is a series of common sense principles created to ensure an ordered society by adopting rules that regulate and control the acts, rights and liabilities of the state and its citizens.  In many respects it is a reflection of the values and customs of the society that it regulates.  The common law can and does change to deal with new circumstances and it does adapt to changed circumstances.  In this connection there is much to be said for the view that where a statute or a series or statutes can be seen to be an expression of some new and lasting policy that policy should be taken into account in the development of the common law in those areas in which the statute does not operate.

However, it appears to me that there are at least four reasons that, either alone or in combination, negate the possibility that the common law should adapt to ss 118 and 119.  First, in 1976 the High Court in Grant v Downs laid down the relevant principles of the common law.  In doing so it struck a balance between competing policies: the policy of ensuring a fair trial based on all admissible evidence and the policy of protecting the interests of justice by facilitating legal representation.  The Evidence Act has encroached upon the common law by extending the privilege.  But it has done so in a limited fashion.  It confined the extension to the adducing of evidence in a federal court.  The Commonwealth parliament had the power to, but did not, extend the privilege in other areas within its legislative competence.  For example, it did not extend the privilege to the discovery process in a federal court.  Nor did it extend the privilege to the production of documents on subpoena.  Further, there are provisions in many Commonwealth enactments pursuant to which a citizen may be required to produce documents or provide information.  Some are concerned with the investigation of criminal activity, some are concerned with the protection of the revenue and some exist for the purpose of ensuring compliance with the laws of the Commonwealth.  The parliament has chosen not to extend the privilege to any of these areas.  This suggests that the parliament did not necessarily regard the balance between competing policies struck by the High Court to be inappropriate except to the extent that ss 118 and 119 have provided to the contrary. 

Second, it is by no means apparent how one piece of legislation (or two if the Evidence Act 1994 (NSW) is taken into account), being legislation that operates in one confined area, not confined because of the absence of legislative power but by legislative intent, can be said to bespeak a new policy that is sufficiently broad so as to inform the common law.  In my view, neither the Evidence Act standing alone, nor the Evidence Act and the Evidence Act 1995 (NSW) taken together, constitute a sufficiently broad expression of a policy from which analogies can be drawn for the common law. 

Third, in Baker v Campbell the High Court decided that for the common law to be consistent the same body of common law rules should be applied not only in relation to curial proceedings and quasi judicial proceedings but to other processes by which the law can compel the production of documents or the provision of information.  To turn the clock back and once more accept the existence of a different set of rules as applicable in one area, namely pre-trial information gathering in federal courts, is to create a situation that undermines the common law as “the perfection of reason”.  Parliament is of course free to take that step.  The Commonwealth parliament has done so by the Evidence Act.  But the common law does not ordinarily develop in such a fashion and it should not in this case. 

Finally, if the foregoing is not sufficient to dispose of this part of the case, there is the insuperable difficulty that the suggested development of the common law requires Grant v Downs to be overruled.  That is a matter that must be resolved by the High Court: Ravenor Overseas Inc v Readhead (1998) 72 ALJR 671 at 672.

Accordingly, in my view, Adelaide Steamship was wrongly decided and it should be overruled. 

Question 1(a) of the questions reserved pursuant to O 29 r 2 of the Federal Court Rules reads:

“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 CLR 674 or the ‘dominant purpose’ test as set out in ss 118 and 119 of the Evidence Act 1996 (Cth)?”

It should be answered:  “The correct test is the ‘sole purpose’ test”.

Question 1(b) reads:

“Whether the Court has power pursuant to O 15 r 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
ss 118 and 119 of the Evidence Act 1966 (Cth)?”

It should be answered: “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”. 

Although my answer to the second question requires the appeal to be allowed in part in substance the respondent has been successful and he should have his costs of the appeal.

I certify that this and the preceding twenty-one (21) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein

Associate:

Dated:              22 December 1998

Counsel for the Appellant:	B Shaw QC and J De Wijn QC
Solicitors for the Appellant:	Clayton Utz
Counsel for the Respondent:	G A A Nettle QC, C M Maxwell and M M Gordon
Solicitor for the Respondent:	Australian Government Solicitor
Dates of Hearing:	21 July and 13 August 1998