FEDERAL COURT OF AUSTRALIA

Australian Unity Health Ltd v Private Health Insurance Administration Council

[1999] FCA 1770

DISCOVERY AND INTERROGATORIES – legal professional privilege - actual or implied waiver – use of legal advice by respondent in making the decision the subject of the proceeding – respondent referred to contents of legal advice in decision - where legal advice was a factor relied on by respondent - where legal advice supported respondent’s policy – legal professional privilege not available when legal advice motivated decision‑maker.

Federal Court Rules:  O 15 r11

Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12 followed

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

Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 cited

Thomason v Council of the Municipality of Campbelltown (1939) 39 SR NSW 347 cited

AUSTRALIAN UNITY HEALTH LTD v PRIVATE HEALTH INSURANCE ADMINISTRATION COUNCIL

V 393 of 1999

GOLDBERG J

10 DECEMBER 1999

MELBOURNE

THE COURT ORDERS THAT:

1.         The respondent produce to the applicant within seven days of this date for inspection pursuant to O 15 r11 of the Federal Court Rules the letter of advice referred to as being attached in the recommendation being exhibit GEG 10 to the affidavit of Gayle Elizabeth Ginnane sworn 29 October 1999.

2.         The respondent pay the applicant’s costs of the motion filed 6 December 1999.

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

REASONS FOR JUDGMENT

HIS HONOUR:

1                     The applicant has filed a motion for an order pursuant to O 15 r11 of the Federal Court Rules that two letters of advice referred to in exhibits to an affidavit filed on behalf of the respondent to which I will shortly refer, be produced to the applicant for inspection. Order 15 r11(1) provides:

“Where –

(a)       it appears from a list of documents filed by a party under this Order that any document is in his possession, custody or power;

(b)       a pleading or affidavit filed by a party refers to any document; or

(c)        it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that any document relating to any matter in question in the proceeding is in the possession, custody or power of a party,

the Court may, subject to any question of privilege which may arise, order the party -

(d)       to produce the document for inspection by any other party at a time and place specified in the order; or

(e)        to file and serve on any other party a copy of the whole or any part of the document, with or without an affidavit verifying the copy made by a person who has examined the document and the copy.”

2                     In order to understand how the application for production arises under that rule, it is necessary to identify the nature of the present proceeding.  It is an application by the applicant to review the decision of the respondent Council made on 4 November 1998 under Private Health Insurance Administration Council Rules (No 4) enacted under s 82G(r) of the National Health Act 1953 (Cth) (“the Act”), whereby the Council decided not to exercise its power pursuant to cl 4 and cl 5 of Rule 4 to make a determination under s 73BC(12) of the Act that an amount be paid out of the Health Benefits Reinsurance Trust Fund (“the Fund”) to the applicant.  Similar applications have been brought by different applicants against the respondent in proceedings V 391 of 1999, V 392 of 1999 and V 498 of 1999 but the relief claimed mutatis mutandis, is the same.

3                     The applicant had sought to have the Council exercise its power pursuant to cl 4 of Rule 4 to make a determination under s 73BC(12) of the Act that an amount be paid out of the Fund to the applicant.  The grounds of the application relied upon for the purposes of the Administrative Decisions (Judicial Review) Act 1977 (Cth) are: 

“1.       The making of the decision was an improper exercise of the power conferred by the Act in that irrelevant considerations were taken into account. 

2.         The making of the decision was an improper exercise of the power conferred by the Act in that relevant considerations were not taken into account. 

3.         The making of the decision was an improper exercise of the power conferred by the Act in that it was an exercise of a discretionary power in accordance with a rule of policy without regard to the merits of the particular case. 

4.            The making of the decision was not authorised by the Act.”

These grounds are particularised.

4                     As a result of directions which were given for the filing of affidavits for the purposes of the hearing of the application, the Chief Executive Officer of the respondent, Ms Gayle Elizabeth Ginnane, swore an affidavit on 29 October 1999 setting out in some detail the manner in which the Fund, established under s 73BC of the Act, was administered.  It is not necessary for the purposes of this motion to analyse in any detail the structure of the scheme which incorporates the administration of that fund.

5                     In the course of that affidavit, Ms Ginnane made the following statements under the heading “Council consideration”:

“46.     In October 1998 PHIAC considered several submissions from registered organisations including Australian Unity seeking adjustments.  The submissions all claimed there were ‘exceptional circumstances’ under clause 5 of Rule No 4 for PHIAC to make reinsurance adjustments earlier than the most recent financial year for which they were required to provide an audit report (‘the timeframe’).

47.       In October 1998 I made a written recommendation to PHIAC in relation to all the submissions, including Australian Unity, for reinsurance adjustments.  Now produced and shown to me and marked ‘GEG‑10’ is a true copy of the recommendation.  That recommendation canvassed the issues regarding whether exceptional circumstances justifying a readjustment were made out under Rule No 4 in respect of each of the submissions, including the submission of Australian Unity.

48.       PHIAC decided to accept adjustments for the year ended 30 June 1998 as this was within the timeframe allowed by clause 5 of Rule No 4.  However PHIAC declined to make any adjustment for the year ending 30 June 1997, as this was outside the timeframe and exceptional circumstances were not made out.”

6                     Under the heading “Statements of Reason”, Ms Ginnane set out in para 50 that the applicant in a letter dated 24 May 1999 requested a statement of reasons why the respondent did not accept the request for adjustments for the financial year ending 30 June 1997.  The respondent provided the statement of reasons on 18 June 1999, and Ms Ginnane produced a copy of those reasons as exhibit “GEG‑12”.  In the recommendation (exhibit GEG‑10), Ms Ginnane set out details of her recommendation, including the background, relevant funds affected by the recommendation and action which had been taken to date.  Under the heading “Adjustment Policy” the following statement appears:

“PHIAC policy - approved by Council - has been to automatically allow adjustments for the most recent year for which an audit report is required.  These adjustments may be incorporated in the next quarterly return and must be accompanied by an audit certificate detailing the reasons for adjustments, certification that the adjustments have been correctly calculated, and the amounts involved on a State by State basis.  If adjustments are greater than 1% of the State pool to which they relate, then the adjustment must be spread over four or more quarters.  This policy is defined in Council Rule No 4.  Separate legal advice supporting PHIAC’s view of this rule has been received.  A copy of that advice is attached.”

A copy of the advice was not in fact attached to the recommendation which was exhibit GEG10. 

7                     Exhibit GEG12 was headed “Administrative Decisions (Judicial Review) Act 1977 (Cth) Section 13 Statement of Findings on Material Questions of Fact and Reasons for Decision”.  The first section was headed “Findings on Material Questions of Fact”.  The second section was headed “Evidence or Other Material on which Findings were Based” and comprised thirty‑three separate paragraphs.  Paragraph 2.23 was described as “Letter from Phillips Fox to PHIAC dated 10 August 1998”.

8                     As appears from an affidavit filed by Mr Brian O’Callaghan, the solicitor for the respondent, the document referred to in para 2.23 is the same document as the legal advice referred to in the section under Adjustment Policy referred to in Ms Ginnane’s recommendation.  Objection has been taken by the respondent to production for inspection of that legal advice on the ground that it is protected from production by legal professional privilege. 

9                     In his affidavit, Mr O’Callaghan said that the basis of the objection to production was that the document contains legal advice provided to the chief executive officer of the respondent on behalf of the respondent by its solicitor and that the document was prepared for the dominant purpose of the solicitors providing legal advice to the respondent.  In viva voce evidence, Mr O’Callaghan said that that part of his affidavit was drafted in the light of the provisions of the Evidence Act 1995 (Cth) which he thought applied to the claim for legal professional privilege “which ought to be made in respect of the document at this stage”.  He said further in viva voce evidence that the letter of advice had been sent as a result of a request for legal advice and that the letter was limited to legal advice.  In short, he said that the sole purpose of the letter was the provision of legal advice to the respondent.  I accept that the sole purpose for which the letter was brought into existence was the provision of legal advice to the respondent.

10                  Mr Caleo, who appeared for the applicant, submitted in substance that the letter of advice was shown to be relevant by the Statement of Reasons, having regard to the grounds of review set out in the application for review and that there had been a waiver of legal professional privilege by the reference in the recommendation that the statement in the legal advice supported the respondent’s view of the proper interpretation of Rule 4.

11                  As I understand the current state of authority, whether legal professional privilege applies to the document under consideration and whether that privilege has been waived, is not to be determined by reference to the provisions of the Evidence Act, but rather by reference to common law principles, having regard to the fact that the issue arises not in the course of seeking to tender or adduce evidence at a hearing, but at an anterior interlocutory stage.  This principle has been laid down by the Full Bench of the Court in Esso Australia Resources Ltd v Commissioner of Taxation (1998) 83 FCR 511. 

12                  Mr Ginnane, who appeared for the respondent, submitted that there had not been any waiver of legal professional privilege.  In particular, he submitted that the contents of the legal advice had not been disclosed and that in any event, even if I was of the view that there had been waiver, under O 15 r11 I had a discretion whether or not to allow production.  He submitted that I should not order production of the document having regard to the fact that there was a public interest element involved in the manner in which the legal advice had been referred to.  Mr Ginnane referred to the fact that under s 13 of the Administrative Decisions (Judicial Review) Act, upon an appropriate request being made, the respondent was bound to set out the matters which it had set out in its s 13 statement, that is, its findings on material questions of fact, the evidence or other material on which the findings were based and the reasons for the decision.

13                  He submitted in substance that the information had been supplied under compulsion of law and that in those circumstances, having regard to the public law element of the matter, I should exercise my discretion against allowing production of the document.  Compulsion of law is an exception to a requirement to produce a document under s 122(2) of the Evidence Act.  But that provision, in my view, does not apply to the circumstances before me.  Nevertheless, it is a matter which I should take into account in considering whether or not to exercise my discretion under O 15 r11. 

14                  Mr Caleo relied on public interest considerations in favour of the proposition that I should exercise my discretion in favour of allowing production of the document on the basis that if in fact the respondent had relied upon the advice for the purpose of reaching its decision and had not made that position known to the applicant, there may well be a basis for submitting that there was a denial of natural justice.  He referred as an example of such a situation arising, to what had arisen in Essendon Health Care Pty Ltd v Honourable Judi Moylan (1998) 50 ALD 421. 

15                  I commence with the proposition that the legal advice which is referred to in the two exhibits was, in its inception, the subject of legal professional privilege.  So much flows from the evidence of Mr O’Callaghan.  In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 40 NSWLR 12, Rolfe J had to consider whether there had been a waiver of legal professional privilege in the legal advice which had been given to Ampolex by counsel.  He drew a distinction between two statements which had been made in a Pt B statement issued by Ampolex on 8 May 1996. 

16                  In one part of the statement, it was stated:

“Ampolex’s views as to the likely outcome of the Convertible Note litigation.

The views set out below have regard to the pleadings, the evidence available to Ampolex and the advice of the barristers and the solicitors engaged by Ampolex for the purposes of the litigation, as at 1 May 1996.”

Ampolex’s views were then set out.  Later in the Pt B statement, there was reference to a report which was incorporated in the Pt B statement. That report stated:

“There is a dispute about the conversion ratio.  Ampolex maintains that the correct ratio is 1:1 and has legal advice supporting this position.”

Rolfe J concluded that the statement that Ampolex’s views had regard to the advice of the barristers and the solicitors was not a disclosure of the legal advice, whereas the statement that Ampolex has legal advice supporting the position of the ratio being 1:1 was a disclosure of the terms or the substance of that legal advice.

17                  That decision was the subject of appeal to the Court of Appeal of New South Wales which was dismissed.  An application was made to the High Court for a stay, pending the hearing of an application for special leave to appeal.  In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 137 ALR 28, Kirby J refused a stay.  At 34 his Honour said:

“Ampolex stated that it had ‘legal advice supporting its position’.  Rolfe J concluded this statement was, within s 122, disclosure of the ‘substance of the evidence’.  The disclosure suggested, to reasonable inference, that the legal advice supported Ampolex’s stated position.  Ampolex drew attention to the limits of ‘substance’ suggested by such decisions as Derby and Co Ltd v Weldon No. 10 (1991) 1 WLR 660 at 668.  I agree that a mere reference to the existence of legal advice would not amount to a waiver of its contents.  Rolfe J appears to have acknowledged this distinction by later rulings to which I was taken during the course of argument.  But at least in respect of the substance of the legal advice supporting Ampolex’s assertion about the correct ratio, which is in contest here, it is strongly arguable that the public reference to the supporting legal advice, waived the privilege as to the precise content of the legal advice, on that point.  I cannot say that the ruling is attended by such doubt as to promise a substantial prospect of a grant of special leave to appeal to this court.  On the contrary, on my present understanding of the facts and as a tentative view, the opinion expressed in the ruling seems arguably correct.”

That decision was given in the context of s 122 of the Evidence Act, which as I have indicated earlier is not relevant for present purposes.  Nevertheless, I consider that it is of assistance by way of analogy in determining whether there has been either a disclosure of the legal advice or a waiver of privilege in the circumstances of this case.

18                  I do not consider that the statement made in para 2.23 of the s 13 statement is a disclosure of the legal advice.  It simply says that it is part of the evidence and other material on which the finding was based.  Consistently with the reasoning of Rolfe J and Kirby J, I do not consider that is a disclosure of the contents of the advice or a waiver of legal professional privilege.  However, I form a different view in relation to the recommendation where it is explicitly stated that legal advice supporting the respondent’s view of Rule No 4 has been received.  Again, I reach the conclusion by analogy with the reasoning of Rolfe J and Kirby J in the Ampolex cases (supra) above.  It seems to me that by stating the respondents’ view of the rule, and that legal advice supports that view, the existence of legal advice is being disclosed, the contents of which say that it supports the respondent’s view of the rule.

19                  Consistently with the reasoning of the High Court in Attorney‑General Northern Territory v Maurice (1986) 161 CLR 475, and Goldberg v Ng (1995) 185 CLR 83, I am of the opinion that there is at the least an implied waiver of legal professional privilege, and at the most an actual waiver of the legal advice because the contents of the advice are referred to.  So far as an implied waiver is concerned, it seems to me that it can be said that there is an implied or an imputed waiver because the recommendation sets out a justification for the policy and an explanation of it which is supported by legal advice.  That recommendation is now before the Court and it seems to me that the fairness principle requires that that advice to be disclosed.

20                  I turn to an alternative ground upon which it might be said that privilege in respect of the contents of the legal advice has been waived or that legal professional privilege cannot be claimed for it.  I refer to Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405, a decision of Giles J, then Chief Justice of the Commercial Division of the Supreme Court of New South Wales where, at 411, his Honour referred to the proposition that where allegations are made which raise the issue of the state of mind of a party and legal advice is likely to have contributed to that state of mind, then the party who was the recipient of the legal advice cannot claim legal professional privilege in relation to it.  Giles J followed the reasoning in Thomason v Council of the Municipality of Campbelltown (1939) 39 SR NSW 347 where at 358‑359 Jordan CJ said:

“Hence, in effect, one of the issues in the case was what advice if any the plaintiff had received from her legal advisers as to her alternative legal rights.  In these circumstances, since the fact and nature of the advice is an issue in the case, I am of opinion that privilege cannot be raised to prevent the proof of the advice.  The position is analogous to that which arises in a suit in Equity to set aside a transaction on the ground of undue influence.  In such a suit, it has always been the practice for the defendant to cross‑examine the plaintiff with a view to proving that the plaintiff had competent legal advice when he entered into the transaction, and to call and examine the legal adviser if he is available; and I have never known it to be suggested that such evidence is inadmissible on the ground of the plaintiff's privilege.”

Giles J noted that that principle had recently been affirmed and applied in Benecke v National Australia Bank (1993) 35 NSWLR 110 and was ultimately founded on the fairness doctrine considered in Attorney‑General Northern Territory v Maurice (supra). 

21                  Although the circumstances in this case are not directly the same as those which arose in Thomason, Benecke or the Ampolex cases (supra), it seems to me that the grounds which have been raised as the grounds for review to which I have already referred, which include taking into account irrelevant considerations, failing to take relevant considerations into account and that the making of the decision was an exercise of a discretionary power in accordance with a rule of policy without regards to the merits, make an issue in the case what was the legal advice received.  It seems to me that when it is established that part of the evidence or other material on which the finding was based was the letter of advice and that the letter of advice supports the respondent’s view of the rule, it can be said with some force that it is an issue in the case as to what activated or motivated the decision‑maker, in the circumstances where part of the material relied on was legal advice.  For those reasons legal professional privilege cannot be claimed.

22                  I turn then to the exercise of my discretion under O 15 r11.  I am satisfied that the document is relevant; so much appears from the documentation to which I have referred earlier.  The statement of reasons establishes the relevance of the letter of advice and, as I have noted earlier, the recommendation constitutes or amounts to a disclosure of its contents and a waiver of privilege.  I am not satisfied that the public interest considerations to which Mr Ginnane referred ought to persuade me not to exercise my discretion in favour of production.  Although it is true that the statement of reasons required the disclosure of the legal advice in the circumstances of this case, it seems to me that if the legal advice was part of the material upon which the decision-maker relied, or, put more correctly, was part of the evidence or other material on which the findings were based, then it is not a consideration against disclosure that the decision‑maker was bound to make that fact known.  It seems to me that where the circumstances are that there are matters which are matters upon which a decision‑maker’s findings are based, it ought not to be a relevant consideration against disclosure that one of those matters is the giving or the receipt of legal advice.

23                  Mr Ginnane pointed out that because of the circumstances in which the advice had come into existence and had been tendered, there was an obligation on the respondent not to avoid the document going to the Board, that is to say the letter of advice had to go to the Board.  But in circumstances where there is an obligation to tell the applicant what was taken into account, it seems to me that any public policy consideration ought to be in favour of the disclosure of that advice.

24                  I therefore conclude that an order for production should be made on the motion.  Mr Ginnane submitted that because the recommendation had referred to the advice supporting the respondent’s view of Rule 4, any disclosure should be limited to only that part of the advice which deals with the rule.  The difficulty I have with that submission at the present time is that the statement of reasons makes it clear that it is the letter, and not any part of the letter, upon which the findings were based.  It may be that there is discrete material in the letter of advice that deals with matters wholly - and I emphasise the “wholly” - unrelated to the subject matter of the proceeding.  At this stage, I am not prepared to make an order that there only be production of part of the letter of advice.  If there is any particular or special reason that relates to some matter unconnected with the subject matter of the proceedings that might make such an application desirable, it may be that that application will have to be made to another judge.  It would be inappropriate for it to be made to me as the judge who will be hearing the trial of the proceeding. 

25                  The motion for production has only been filed in this proceeding and not in proceedings V 391 of 1999, V 392 of 1999 and V 498 of 1999.  Duplication of the motion was unnecessary as the same evidence of Ms Ginnane and the same exhibits appear in each of those proceedings.  The benefit of the order which I propose should, in my view, enure for the benefit of each of the applicants in those other three proceedings.  Unless it be thought necessary to make a formal order in those matters, I do not propose to do so.  It is a matter for the parties, but I would expect that the respondent will release the applicant in this proceeding and its solicitors who are acting for the other three applicants in the other three proceedings from their implied undertaking to the Court not to make the document to be produced under this order available to the applicants in the other proceedings.  I do not think I need to say any more about that.

26                  I therefore propose to order that the respondent produce to the applicant within seven days of this date pursuant to O 15 r11 of the Federal Court Rules the letter of advice referred to in the recommendation being exhibit GEG 10 to Ms Ginnane’s affidavit sworn 29 October 1999, as being attached to the recommendation.

27                  My understanding is that that is exactly the same document as is referred to in para 2.23 of exhibit GEG12.  So it is not necessary to make a separate order in relation to that document.

28                  So far as the question of costs is concerned, the relief which the applicant has sought and has obtained today was relief in respect of which it gave the respondent notice.  It is true that the respondent is a public body, having, in general terms, public interest obligations.  Nevertheless, the matter was argued substantively and the applicant has succeeded on its substantive argument.  It is not as if the respondent came along to Court today not knowing what the issues were or are.  In those circumstances, as an exercise of my discretion I consider it appropriate that the respondent pay the applicant's costs of the motion.

Associate:

Dated:              10 December 1999