FEDERAL COURT OF AUSTRALIA

Kennedy v Wallace [2004] FCA 332

LEGAL PROFESSIONAL PRIVILEGE – communications prepared for purpose of consultation with foreign lawyer – proof that such communications were for the dominant purpose of obtaining legal advice – burden of proof not discharged

LEGAL PROFESSIONAL PRIVILEGE – scope of privilege – communications for purpose of seeking or receiving foreign legal advice – communications for purpose of obtaining foreign assistance to evade scrutiny of assets and transactions by Australian authorities – whether communications entitled to legal professional privilege

CRIMINAL LAW – investigations and inquiries – search and seizure – warrant authorising seizure of documents of specified class– whether warrant authorised seizure of documents reasonably suspected of falling within specified class

EVIDENCE – proceedings seeking declaration that document is privileged from production – disputed document sought in the course of ongoing investigation conducted under statutory authority – whether hearsay evidence of purpose of creation of document admissible – whether proceedings final or interlocutory for purposes of Evidence Act

EVIDENCE – statutory discretion to exclude prejudicial evidence – whether discretion restricted to cases of potential misuse of evidence by tribunal of fact – whether discretion restricted to cases of potential forensic prejudice in instant case

Crimes Act 1914 (Cth) ss 3, 3C, 3F

Evidence Act 1995 (Cth) ss 75, 117, 135

Adler v Gardiner (2002) 43 ACSR 24; [2002] FCA 1141 distinguished

Attorney-General (NT) v Kearney (1985) 158 CLR 500 applied

Attorney-General (NT) v Maurice (1986) 161 CLR 475 applied

Baker v Campbell (1983) 153 CLR 52 applied

Brouwer v Titan Corporation Ltd (1997) 73 FCR 241, 149 ALR 50 distinguished

Bunbury v Bunbury 1 Beavan 318 (48 ER 963) considered

Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501applied

Commonwealth v Lyon (2003) 203 ALR 553 cited

Commonwealth v Northern Land Council (1991) 30 FCR 1, 103 ALR 267 distinguished

Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325 cited

Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 77 ALJR 40; 192 ALR 561 applied

DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 203 ALR 348 referred to

Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 applied

Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 considered

Grofam Pty Ltd v ANZ Banking Group (1993) 45 FCR 445 considered

Hart v Commissioner of Australian Federal Police (2002) 124 FCR 384 cited

Hooper v Kirella Pty Ltd (1999) 96 FCR 1 considered

In Re Duncan (Deceased) [1968] P 306 considered

International Business Machines Corp v Phoenix International (Computers) Ltd [1995] 1 All ER 413 considered

Lawrence v Campbell (1859) 4 Drewry 485, 62 ER 186 considered

London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932 distinguished

Macfarlan v Rolt (1872) L.R. 14 Eq 580 considered

Malouf v Malouf (1999) 86 FCR 134 cited

National Crime Authority v S (1991) 29 FCR 203 applied

Papakosmas v The Queen (1999) 196 CLR 297 considered

Re Bufalo Corporation Pty Ltd (No 2) (2002) 43 ACSR 241 distinguished

Re Doran Constructions Pty Ltd (In Liq) (2002) 194 ALR 101 distinguished

Ritz Hotel Ltd v Charles of the Ritz Ltd (No 4) (1987) 14 NSWLR 100 considered

The Larrakia People v Northern Territory [2003] FCA 1175 cited

Three Rivers District Council v The Governor & Company of the Bank of England [2004] EWCA Civ 218 referred to

Three Rivers District Council v The Governor & Company of The Bank of England [2003] EWCA Civ 474 referred to

Daiske Yoshida, The Applicability of the Attorney-client Privilege to Communications with

Foreign Legal Professionals, 66 Fordham L Rev 209, 1997

Nygh and Davies, Conflict of Laws in Australia, 7^th Edn, 2002

Paul F Rothstein and Susan W Crump, Federal Testimonial Privileges (2004) § 2:40

TREVOR JOHN KENNEDY v ANDREW CHARLES VERSCHUER WALLACE, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION AND COMMISSIONER OF POLICE, AUSTRALIAN FEDERAL POLICE

N 3065 OF 2003

GYLES J

25 MARCH 2004

SYDNEY

THE COURT ORDERS THAT:

The application stand over to a date to be fixed.

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

REASONS FOR JUDGMENT

1                     This case involves some difficult questions as to the operation of legal professional privilege, some of which are novel.  On 13 November 2003 officers of the Australian Federal Police accompanied by officers of the Australian Securities and Investments Commission (ASIC) executed a search warrant at the residence of the applicant Trevor John Kennedy (Kennedy) between approximately 8.35 am and 12.20 pm.  Kennedy was present throughout, as was a solicitor from the firm of Atanaskovic Hartnell.  Amongst otherthings, three documents were located and seized.  One was notepaper of the Ritz Hotel London with handwriting, another was a Ritz Hotel notepad with no visible handwriting and the third was notepaper of the Florhof Hotel Zurich with handwriting.

2                     It is claimed by the applicant that the two notes with handwriting are protected from valid seizure by the existence of legal professional privilege.  That claim of legal professional privilege was first made by Atanaskovic Hartnell on behalf of Kennedy by letter of 18 November 2003.  It is claimed that the Ritz notepad without handwriting is not properly within the description of documents in the warrant.  Orders are sought for the return of the pieces of notepaper and the notepad.  ASIC denies the existence of legal professional privilege in the contents of either of the pieces of notepaper with writing on various bases and says that any such privilege which might otherwise exist was waived or cannot be enforced.  Kennedy denies any waiver of privilege.  ASIC contends that the seizure of the blank Ritz notepad was authorised by the warrant. 

Facts and Circumstances

3                     The immediate events commenced on 30 October 2003 when The Australian Financial Review newspaper (AFR) published a series of articles over a number of pages (commencing with page 1) concerning what was described as a special investigation.  The articles published included headlines such as:

‘Share-trading secrets:  A special investigation

Rivkin’s Swiss bank scandal’

‘Inside the Offset Alpine maze’

‘I keep no Swiss records, says Trevor Kennedy’

4                     The most significant allegation concerning Kennedy was that one René Rivkin (Rivkin) had given evidence to Swiss authorities that Kennedy had been the beneficial owner of approximately 12 per cent of a parcel of shares in the Australian listed public company Offset Alpine Printing Group Limited (Offset Alpine).  It will be necessary to look more closely at events surrounding that parcel of shares but for present purposes it suffices to know that, when Kennedy had been interviewed by officers of the predecessor of ASIC in 1995, he had denied holding any beneficial interest in that parcel of shares.  The AFR articles also contained a good deal of information alleged to relate to dealings between Kennedy and various Swiss banks.  The implication of the articles was that the proceeds from the Offset Alpine shares and other monies had been hidden from the Australian authorities by means of such dealings.  The articles purported to quote from the transcript of the interview between Rivkin and the Swiss authorities which was, so they said, conducted in the presence of his Swiss lawyer – a lawyer also said to be retained by Kennedy.  The articles also purported to quote from at least two letters written by Kennedy to that lawyer in 2002.

5                     By about 10.30 am on 30 October Kennedy had retained Tony Hartnell (Hartnell) of Atanaskovic Hartnell to act for him in matters arising out of the publication of the AFR articles.  During the course of the afternoon, he visited Rivkin at his house by prior arrangement.  Graham Richardson (Richardson), who was also implicated by the AFR articles in relation to beneficial ownership of part of the Offset Alpine shareholding and dealings with Swiss banks, was also present.

6                     On Friday 31 October Kennedy flew to London arriving early on Saturday morning, 1 November, and checked into the Ritz Hotel.  Before leaving Sydney, Kennedy had arranged to meet one Benno Hafner, a Swiss attorney based in Zurich on Monday 3 November 2003.  The date of the meeting was subsequently changed to Tuesday 4 November.  Kennedy’s ultimate evidence was that the writing on the Ritz Hotel notepaper, made whilst in London or on his way to Zurich, was notes for the purpose of obtaining legal advice from Hafner.  The notes on the notepaper of the Florhof Hotel Zurich were prepared in Zurich and were also, on Kennedy’s evidence, for the purpose of obtaining legal advice from Hafner.  His evidence is that he took both notes with him when he met Hafner on Tuesday 4 November.  That part of Kennedy’s evidence in which he claimed that he discussed the points recorded on both notes with Hafner was rejected as inadmissible in form with leave to lead further evidence.  That leave was not taken up.

7                     It has been admitted for the purposes of this proceeding that Hafner was a qualified Swiss lawyer.  No evidence has been led from Hafner or anybody else as to the nature of his practice, as to the work that he actually does or as to how lawyers in Switzerland are organised, controlled or disciplined.  No evidence has been led as to whether legal professional privilege is a concept known to Swiss law or, if so, as to how and in what circumstances it operates under the law of that jurisdiction.

8                     It is submitted for ASIC that, even assuming that the notes were prepared for the purpose of meeting with Hafner and that they were actually used for that purpose, Kennedy’s assertion that he saw Hafner, a qualified lawyer, for legal advice does not of itself establish legal professional privilege which would be recognised by an Australian court.  It was submitted that even if legal professional privilege may exist in relation to some communications with some foreign lawyers (which was not accepted), the lack of evidence as to the role of Swiss lawyers in general and Hafner in particular was fatal to the claim.  Furthermore, it was submitted that Kennedy’s evidence that the purpose of meeting Hafner was to obtain legal advice in the required sense is mere assertion which does not prove the conclusion asserted and which, in any event, would be rejected.  It was also submitted that the lack of evidence as to communication of the notes to Hafner is fatal to the claim of privilege.  It was further submitted that the notes are not entitled to privilege because they were made for illegal or improper purposes.

9                     In order to place the issues in context it is necessary to say something more about the underlying facts as they appear from the evidence in this case. 

10                  On or shortly after 21 April 1995, the Australian Securities Commission (ASC) (the predecessor of ASIC) received a referral from Australian Stock Exchange Ltd which drew the attention of ASC to trading in the shares of Offset Alpine between 1 September 1994 and 28 February 1995.  It was suggested to ASC, amongst other matters, that there may have been breaches of the substantial shareholder provisions of the then Corporations Law by EBC Zurich AG (EBC) and Bank Leumi Le-Israel (Bank Leumi).  On 26 April 1995 ASC commenced an investigation pursuant to s 13(1) of the Australian Securities Commission Act 1989 in relation to possible contraventions of s 709 and ongoing contraventions of s 615 and s 710 of the Corporations Law in relation to Offset Alpine.

11                  On 3 May 1995 ASC commenced a proceeding in this Court against (amongst others) Bank Leumi and EBC.  The primary relief sought was that a number of parcels of shares in the capital of Offset Alpine, of which EBC and Bank Leumi were variously registered as owners, should be vested in the ASC.  Alternatively, orders were sought that the relevant respondents divest themselves of those parcels of shares. 

12                  On 18 May 1995 Kennedy attended an examination pursuant to s 19 of the ASC Law:

‘In relation to an investigation of suspected contraventions of 615, 709 and 710 of the Corporations Law by shareholders of Offset Alpine Printing Group Ltd ACN 003 394 876 commencing on 29 January 1992 and ongoing’. 

The transcript of that interview is not in evidence but Kennedy accepts that in it he denied having any beneficial interest in the Offset Alpine shares held by either EBC or Bank Leumi, claiming that his only interest was held through a company related to him which was actually registered as a shareholder.

13                  The ASC proceeding was heard by Sackville J.  Judgment was delivered on 14 December 1995 (Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101).  It was ordered that each of Bank Leumi and EBC dispose of its shares by instructing its nominees to sell them to the highest bidder under a takeover offer current at the date of the orders or made or announced before midnight on 27 December 1995 such that all of the shares were to be sold not later than the last day for acceptance of any of those offers.  However, his Honour declined to make orders requiring either Bank Leumi or EBC specifically to comply with its obligations under the Corporations Law to identify the principals for whom the shares were held or orders ‘freezing’ the shares or their proceeds of sale by vesting them in the Commission conditionally ie pending compliance by Bank Leumi and EBC with their obligations under the Corporations Law.  An appeal came on for hearing on 21 May 1996 and judgment was delivered on 18 September 1996 (Australian Securities Commission v Bank Leumi Le-Israel (1996) 69 FCR 531, 139 ALR 527).  Both the appeal and cross-appeals were dismissed.  It was noted that the shareholdings had been sold prior to the appeal coming on for hearing.  Atanaskovic Hartnell had acted for Bank Leumi during this proceeding.  In part the reason for not ordering disclosure or framing an order to encourage disclosure was Article 47 of the Swiss Banking Law which prohibits a bank or its officers from divulging secrets entrusted to them.  The upshot was that the identity of the beneficial owner or owners of the parcels of shares was not disclosed. 

14                  Presumably, some time after 18 September 1996 the amount obtained for the shares was distributed.  It is claimed in the AFR articles that the Australian Taxation Office moved to freeze the money prior to transfer to Zurich and that the proceeds were not released until mid 1997.  That is not evidence of the fact and there is no other evidence to the same effect.

15                  On 1 and 2 December 2003 Kennedy was examined pursuant to s 19 of the Australian Securities and Investments Commission Act 1989.  He was represented by Hartnell.

16                  The following questions and answers appear from the transcript of that examination:

Q.                Right.  So that if we may perhaps move on from the form of the question, I’ll ask you more generally:  did you have any interest at all in the shares that were the subject of the ASC action?

A.                 Privilege.  I don’t believe so.

Q.                And when I asked that question in terms of any interest that you have, would the question be any different – would the answer be any different if instead of referring to you personally, we referred to some family company or trust or other entity associated with you?

A.                 Privilege.  Yes, it could well be.

Q.                Mmm-hmm.  And are you able to explain that for us?

A.                 Privilege.  Well, in the late 80s, to the best of my recollection, I caused an entity to be established that was off shore.

Q.                What was the name of that entity?

A.                 It was, I believe, called Brampton.’

17                  Kennedy described the initiation of the first Brampton entity as follows:

‘Q.       … And you say that you gave instructions to somebody with regard to its formation?

A.                 Privilege.  I don’t recall.  I – I – privilege.  It was suggested to me that – that – that – that it might be useful to have something over there.  I – the – to the extent which I gave instructions, I – I simply don’t recall.

Q.                Who – who made the suggestion that it might be useful?

A.                 I don’t remember.

Q.                And when you used the expression “over there”, what did you mean by that expression?

A.                 As I recall, it was suggested that it might be a useful exercise, but I can’t recall the details of why and –

Q.                But –

A.                 – or –

Q.                – the – the expression “over there”, is that a – a reference to some particular country or jurisdiction, or what?

A.        When it was originally suggested, I can’t recall whether the – the – the jurisdiction was going to be the Netherlands BV – when I worked at the Consolidated Press, there was a lot of companies that were established in the Turks and Caicos and Netherlands BVs, Liechtenstein, Switzerland, et cetera.  What specifically, I don’t recall.’

18                  Later, Kennedy said:

‘Q.       …So first of all, what was the structure before the change?

A.        As I have said before – privilege – the structure before the change was created by some supposedly smart accountants and lawyers in London on the basis that what I was doing was strictly legal and that I had no ownership or – or authority over it...’

19                  Kennedy claimed that the Brampton entity was established on the advice of London lawyers and accountants on the basis that it would be strictly legal and have nothing to do with him.  It later went through different iterations.  He claimed that he took no interest in the affairs of the entity, that he did not know who the beneficiaries were and indeed that he had no association with it at all.  He said that there was a change in the structure following a fraud at EBC where money was stolen or misused or defrauded from the entity, and that he had Swiss lawyers examine how he might get them to try and ensure that this did not happen again.  Hafner was obviously one of those Swiss lawyers.

20                  The following evidence was given by Kennedy:

‘A.       Privilege.  An entity over which I have some influence has assets in Switzerland.

Q.                Righto.  So that we establish a benchmark, what is that entity?

A.                 Privilege.  I can’t tell you exactly.  It’s another construction of smart lawyers and accountants in Switzerland.

Q.                Well, can you give us any – anything in terms of a name or other form of identification that enables us to identify it?

A.                 Privilege.  No.

Q.                Can you give us any indication of who might be the subject of inquiry in order to identify it?

A.                 Privilege.  My Swiss attorney has all the details.

Q.                Right.  So that we can put that into perspective, to whom do you refer when you use the expression “my Swiss attorney”?

A.        Privilege.  Mr Benno Hafner.’

21                  Kennedy said he had first met Hafner in 1996 or 1997.  He said that there was another iteration of Brampton over which he had more influence in matters such as the choice of investment managers but he was uncertain as to the nature of his interest.  By that time Hafner was the person with whom he dealt in relation to the entity or entities.

22                  He gave the following evidence:

 ‘Q.      After the change you say you had a degree of influence on the identity of the fund manager? 

A.                 Privilege.  Yes.

Q.                And was there anybody else other than you who also had some input on the identity of the fund manager after the change?

A.                 Privilege.  There – there was a – there were other advisers.

Q.                And who were they?

A.        Privilege.  The – the directors that were – it’s my – I don’t remember.  Privilege.   There is – there were directors, as I understand it, who were arranged by my lawyers who had rights and they also had an influence.’

23                  When pressed as to the identity of a person to whom enquiries might be made with a view to ascertaining what the structure was, Kennedy said:

‘The only person that I am aware who understands the thing is Mr Hafner.’

24                  In denying that Rivkin had any association with the structure of Brampton, Kennedy said that he did not believe that Rivkin would even have known about it:

‘Because it was a very private piece of my own affairs’.

25                  Kennedy gave the following evidence:

‘Q.       Well, let’s just ask the question afresh.  As at the 30^th of October 2003 did you have available to you any records relating to your assets or transactions in Switzerland?

A.                 Privilege.  As of the date that you mentioned I would have been able to access information from Mr Hafner.

Q.                Mmm-hmm.  Well, did you have any records in Australia relating to your assets or transactions in Switzerland?  This is as at the 30^th of October 2003?

A.                 Privilege.  The question assumes I have assets and I’m not – I’m not clear about the actual ownership and control, et cetera, of assets in Switzerland or elsewhere that might be controlled by the existing entity.  If you’re asking me did I have any records here of what that entity has or does, my answer is no, I don’t believe so.

Q.                And did you have any records anywhere other than in Australia?

A.                 Privilege.  I believe Mr Hafner has records relating to this entity.

Q.                And what would be the nature of the records that he has?

A.                 Privilege.  I assume he’s got everything relating to them.

Q.                Well, when you say “everything”, what do you mean by that?

A.        Well, I presume, given that he has – he has been responsible for the custody of everything relating to them, that everything that arises in relation to that entity he would – he would have or have access to.’

26                  Kennedy confirmed that he had been involved in proceedings in the Commercial Court of the Canton of Zurich involving Bank Leumi and Brampton in the last couple of years.

27                  The following evidence was given by Kennedy:

‘Q.       …Where can I find the records of this structure up to – or structures up to that date?

A.        Privilege.  The only place that I believe you can find those records is at the offices of Mr Benno Hafner in Zurich.

Q.                Do those records still exist, to your knowledge?

A.                 Privilege. I do not know.

Q.                Have you given any instructions in relation to the provenance of those records?

A.                 Privilege.  No, I don’t believe I have.

Q.                Is there any doubt in your mind?

A.                 Privilege.  Sorry, could you ask the question again?  The provenance of – you mentioned –

Q.                Have you given any instructions to Mr Hafner regarding the safe keeping of those documents or, at the other end of the spectrum, the destruction of those documents?

A.        Privilege.  To the best of my recollection, I’ve given him no instructions on either – in either case.   He conducts his law practice, I presume, like everybody else does.  I have no – but I have certainly – well, I have absolutely no recollection – I’ve certainly never asked him to do anything that you would – I’ve always found that lawyers are pretty unreceptive to – to – well, I shouldn’t say that because I haven’t asked him to do anything, but it’s always been my understanding that they’re unreceptive to – to – to being told what they should do in the administration of records.’

28                  Kennedy confirmed that the new Brampton entity had an association with Bank Maerki Baumann.  He also confirmed the existence of a dispute involving a fraud perpetrated on Bank Leumi which was the subject of one of the AFR articles.  Kennedy confirmed that he kept no records in Australia of any Swiss dealings and that he visited Switzerland about once a year.

29                  Kennedy accepted in his s 19 examination that he realised fairly quickly that he was likely to be the subject of another examination by ASIC as a result of the publication of the AFR articles.  His evidence as to his reaction to the publication included:

‘No.  I mean, I’m not looking for sympathy, but this was probably the worst day of my life and the notion of sort of sitting there and thinking about what people said or didn’t say, or whatever, was not – not what I had on my mind.  I wasn’t thinking of anything about – except about what my world was crashing down around me, frankly.’

…

‘Mr Riordan, I understand, but, again, I would ask you to also understand that this was – this was an absolutely chaotic day and the – from the moment that I first learnt about this thing to the next two or three days are just a blur in my mind.  There is recollections of weeping wives, of dozens of people ringing up, of all of that sort of stuff, and I think it’s totally unreasonable to expect me to remember the details of conversations that occurred on that day.’

30                  A reading of the s 19 transcript as a whole reveals many unsatisfactory answers to relatively straightforward questions about Kennedy’s affairs which a business person with the experience of Kennedy would be expected to know, particularly as he had been on notice of the issue since 30 October and had consulted Australian and Swiss lawyers in the meantime.  It is certainly far from a full and frank account of the dealings which he had in Switzerland and his participation in them.  It is also far from a full and frank account of his dealings with Hafner.  It is not credible that any person, let alone an experienced business person, would set up a series of entities to manage investments overseas without having any idea as to the ultimate fate of the investments or their proceeds which is the picture that Kennedy sought to convey in the answers to the questions asked of him during the examination.  For the purposes of this case, it is necessary only to note the deficiencies in the evidence rather than to ascribe any cause for those deficiencies.

31                  It is perfectly clear that Hafner was a good deal more than an arm’s length independent source of strict legal advice in relation to Kennedy’s financial affairs.  It is pointed out for ASIC that Kennedy did not produce or give evidence of any records of his retainer of Hafner, either on 4 November or otherwise.  Indeed, there was a nil return to a notice to produce such documents.  It is also pointed out that Kennedy had already engaged Atanaskovic Hartnell to act for him.  If specialised Swiss legal advice were required, then it would be conventional for the Sydney lawyers to liaise with the Swiss lawyer.  After the meeting Kennedy did not bring back to Australia any documents with him, including, for example, any written advice or any note of any written advice received from Hafner.  There is no evidence from Kennedy’s Australian lawyers that they received a copy of any advice from Hafner following the meeting or that they received any oral advice from Hafner following the meeting.

32                  Hafner’s role included being custodian of all records and he was effectively the only source of information about the entities.   He provided directors for the entity.  He certainly appears to have occupied the role of a true attorney.  Hafner was also alleged to have been a participant in the events which the AFR reported.  There would be very good reason for Kennedy to wish to confront Hafner as to those disclosures, both as to his attendance while Rivkin made the incriminatory statements and as to the possession by the AFR of correspondence from Kennedy to Hafner which was embarrassing, if not worse, for Kennedy.

Handwritten Notes

Arguments

33                  It is submitted for ASIC that the failure by Kennedy to disclose adequately the nature of his relationship with Hafner both generally and in particular as to what occurred on 4 November and the failure to call Hafner on the basis that he be cross-examined gave rise to Jones v Dunkel inferences.  It is submitted that there is nothing to displace the natural inference to draw from the circumstances that the visit to Hafner was in order both to obtain information and to take whatever steps could be taken to hinder or defeat any further attempt by ASIC or other Australian authorities to ascertain the facts in relation to the Offset Alpine affair and, no doubt, other aspects of the dealings of Kennedy in Switzerland since the late 1980s.

34                  Counsel for Kennedy submitted that there is no proper basis on which to reject the evidence of Kennedy as to the subjective purpose that he had when the notes were written and indeed submits that Kennedy was not squarely cross-examined to suggest that the purpose was information gathering rather than the obtaining of legal advice.  It is suggested that the answers of Kennedy at the s 19 examination are consistent with Hafner acting as a lawyer would in relation to transactions and no evidence that he was going beyond that role.  Counsel submitted that so far as the role of a Swiss lawyer is concerned, the assumption should be made that the law of Switzerland governing lawyers is the same as that of Australian jurisdictions unless the contrary were proved.  It was suggested that the drawing of any Jones v Dunkel inference was misconceived.  Kennedy gave evidence of his purpose and that was all that was required.  Hafner is not a party under the control of Kennedy in any substantive sense and there is no practical way in which he could be called to give evidence against his will.  Furthermore, calling of evidence from Kennedy or Hafner as to their relationship would inevitably involve breach of any privilege which existed.  It was also submitted that in any event a Jones v Dunkel inference does not supply evidence.

35                  There is an issue of principle concerning the operation of legal professional privilege in relation to the seeking or obtaining of legal advice from a foreign lawyer. 

36                  Counsel for ASIC makes an attractive case for reviewing the law in relation to foreign legal advice and for denying privilege in the present case.  It is submitted for ASIC that the rationale of according privilege is for the purpose of assisting and enhancing the administration of justice in Australia.  It is further submitted for ASIC that there is a risk of the purpose of privilege being subverted by claims in respect of communications with foreign lawyers not bound to facilitate the administration of justice in Australia.  It is pointed out that legal practitioners in Australia are:

(a)        officers of the Court;

(b)        subject to disciplinary procedures administered and supervised by the Courts;

(c)        subject to standards of competency;

(d)        independent; and

(d)        in providing legal services, expected to act in a professional capacity, exercising the skill of a lawyer as a professional.

37                  It was submitted that in relation to this case:

(a)        Hafner is not a legal practitioner in Australia.

(b)        He is not subject to the jurisdiction of any Australian court and/or any disciplinary procedures.

(c)        He is therefore under no obligation, express or implied, to recognise, or assist or enhance, or facilitate the administration of Australian law.

(d)        No evidence has been adduced by the applicant to demonstrate that Hafner is subject to any disciplinary regime comparable, or compatible with, the Australian system.

(e)        Although ASIC has admitted that Hafner was qualified as a (Swiss) lawyer, it has not admitted that Hafner did, in fact, practise as a lawyer (and that he was called upon to provide, and did provide, legal advice).  Hafner’s competence or level of skill is not demonstrated.  The Court should not assume that levels of competence or training – as to substantive law or ethical duties – are comparable to or compatible with Australian regulation of legal practitioners. 

38                  In the present case the legal advice was not sought or obtained through the client’s Australian legal practitioner, as would have ensured that there were at least an officer of an Australian Court susceptible to Australian disciplinary jurisdiction to take responsibility for the propriety of communications the subject of the claim for privilege.  It is also pointed out in passing that the effect of the definition of ‘lawyer’ in Part I of the Dictionary in the Evidence Act 1995 (Cth) read with the inclusive definition of ‘lawyer’ in s 117 of that Act, suggests that the client legal privilege for which the Act provides does not protect communications with a foreign lawyer unless they are with a foreign lawyer who is retained as an agent of an Australian practitioner.

Authorities as to Privilege in relation to Foreign Legal Advice

39                  Because of the importance of legal professional privilege in relation to advice from foreign lawyers in an increasingly multinational world, I need to examine authorities on that topic with some care. 

40                  In Bunbury v Bunbury 1 Beavan 318 (48 ER 963) an antisuit injunction was granted in relation to proceedings in the then colony of Demerara, formerly a Dutch colony in relation to which Dutch law governed certain topics including the devolution of real estate.  It was held that the dispute should be heard in England.  In the course of that proceeding (2 Beavan 173, 48 ER 1146) a question arose as to discovery of documents claimed to be the subject of legal professional privilege.  The decision is of importance in relation to litigation privilege where a medium of communication is not a solicitor.  Additionally, the following is said (at 177):

‘A case “which, since the institution of this suit, had been stated on behalf of the Defendants for the opinion of counsel in Holland, as to the rights and interests of the Defendants, and stated with reference to the defence in this suit, and the opinion of counsel upon such case,” were held by the Master of the Rolls to be privileged, and their production was refused.’

That would appear to me to be an unexceptionable case of the application of litigation privilege.  There was a formal brief to an independent lawyer as to foreign law directly relevant to the issues in the local case.

41                  Macfarlan v Rolt (1872) L.R. 14 Eq 580 concerned enforcement in the English High Court of a convention for the purpose of establishing a line of steam vessels between Antwerp and New York.  The defendants claimed privilege for:

‘… a communication between the solicitors acting for us in the matters in question in this suit and the agent of such solicitors, such agent being also in the capacity of our solicitor or avoué in Brussels with reference to the said matters in question.’ (at 581)

This was fleshed out in relation to particular documents identified by number (at 582):

‘…we say that the same are confidential communications between our said solicitors and M. F. Mahieu, as avoué (solicitor) of Brussels; and that such communications were made to or by the said M. Mahieu as the agent of our said solicitors with reference to matters which are now in question in the cause.’

It appears that the affidavit was held to be sufficient.  Where the litigation arose from an agreement in relation to a line of steam vessels operating between Belgium and the United States, it is hardly surprising that the advice was taken from a lawyer in Brussels and was obtained by the English lawyer.

42                  Lawrence v Campbell (1859) 4 Drewry 485, 62 ER 186 concerned communications between a Scotsman living in Scotland and solicitors admitted in Scotland and who had practised as such but who were now resident and practising in London as Scotch solicitors and law agents. Their affidavit stated that they acted in such professional capacity in relation to those communications.  The Vice Chancellor said (at 490–491):

‘In the present case, here is a gentleman (Mr. Campbell) residing in Scotland, who has undertaken certain matters relating to the debts of the Defendant, Meiklam, who resided in England when and where the debts were contracted.  He has undertaken a certain amount of duty and responsibility and employs these gentlemen, practising as Scotch lawyers and agents in London.   Suppose a Scotch solicitor or writer to the signet at Edinburgh comes across the border, and being found in England is required to produce communications made to him professionally in Scotland.  No one would contend that he could be obliged to do so.  If a Scotchman consults a Scotch solicitor in Scotland the privilege is allowed.  What difference does it make in principle that the Scotch solicitor, instead of being resident in Scotland, resides in this country for the purpose of conducting the business of Scotch clients?  Is it not right that they should have the same facilities for consulting their solicitors in this country as in Scotland?  It might be that an English solicitor would not answer the purpose so well. 

The question really comes to this.  If a Scotchman has occasion to communicate with a professional adviser in this country must he consult an English solicitor or may he not employ a Scotch solicitor?  It appears to me that the same principle that would justify an Englishman consulting his English solicitor would justify a Scotchman consulting a Scotch solicitor.

A question has been raised as to whether the privilege in the present case is an English or a Scotch privilege; but sitting in an English Court, I can only apply the English rule as to privilege, and I think that the English rule as to privilege applies to a Scotch solicitor and law agent practising in London, and therefore the letters in question are privileged from production.’

43                  It will be seen that the decision was the recognition by an English court of privilege attaching to communications between a client and solicitors resident and practising in England.  The step that was taken was to extend the privilege to communications to and from foreign lawyers practising the law of a foreign place in England at the behest of a foreigner living in the relevant foreign place.  That is not the issue which arises here.  It is somewhat puzzling that the submission (at 487) that privilege would not have been accorded under Scotch law was not properly addressed.  It does seem anomalous that a Scotch client consulting a Scotch lawyer who only practised Scotch law might be entitled to a privilege in an English court but not in a Scottish court.  If the Scotch client had consulted a Scottish lawyer in Edinburgh, would the English court have recognised privilege in those communications in those circumstances?  Would the same apply to all communications between any client and any lawyer in a foreign country?  These complications were not considered.

44                  Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 concerned a dispute arising out of a marine insurance agency and reinsurance relating to marine insurance sought by clients of, and negotiated by, one Elger and his companies.  The manner in which the issue emerged appears from the judgment of Templeman LJ at 532–533 as follows:

‘In 1980 the plaintiffs became worried about the results of insurance business negotiated by Elger, accepted by the plaintiffs and re-insured by Home.  The plaintiffs sent out an insurance expert, a Mr. Alexander, to investigate Elger’s business and he made a written report commenting very adversely on the conduct and results of Elger’s business.  This report is not a document for which privilege against disclosure in legal proceedings can be claimed by the plaintiffs or has been claimed by the plaintiffs.

About the same time as he made his report, Mr. Alexander orally reported the results of his investigation and discussed the results of his visit to Elger’s offices with a representative of the firm of American attorneys who were acting for the plaintiffs as their lawyers.  No privilege can be claimed for what Mr. Alexander said to the American representative because litigation was not at the time in prospect in the present proceedings:  see Wheeler v. Le Marchant (1881) 17 Ch.D. 675.  Heath could for example subpoena Mr. Alexander and the American representative to give evidence of what was said between them.

By a memorandum dated May 2, 1980, the American attorneys wrote to the plaintiffs setting out in the first two paragraphs of that memorandum an account of the discussions between Mr. Alexander and the representative of the American attorneys.  The memorandum then continued with additional matter which, according to the sworn affidavit of a partner in the plaintiffs’ English firm of solicitors, dealt with “questions of strategy affecting both the Elger and Marlow matters.”  For present purposes the “Marlow matters” need no explanation; they are connected with the difficulties which had arisen over the Elger matters.

In this appeal the plaintiffs argue that the first two paragraphs of the memorandum are not privileged because they are merely an account of a discussion which was itself not privileged.  They argue that the additional matter was privileged.  Heath claim that the whole of the memorandum was privileged and that the privilege has been waived in the circumstances which I shall shortly narrate and that Heath are entitled to see the whole of the memorandum including the additional matter for which privilege is asserted.  The judge agreed with Heath.’

45                  It will be seen that the plaintiffs did not argue that the advice part of the memorandum was not privileged.  They claimed that it was producible because the whole memorandum should be producible on various bases.  At 535–536, Templeman LJ added the following dicta:

‘In the present case the relationship of solicitor and client between the American attorneys and the plaintiffs is undoubted.  The plaintiffs were seeking and the American attorneys were proffering advice in connection with a business transaction.  The fact that litigation was not then contemplated is irrelevant.  This appeal may serve a useful purpose if it reminds the profession that all communications between solicitor and client where the solicitor is acting as a solicitor are privileged subject to exceptions to prevent fraud and crime and to protect the client and that the privilege should only be waived with great caution.  This principle applies equally to communications between a client and his foreign lawyers or attorneys:  Macfarlan v. Rolt (1872) L.R. 14 Eq. 580.

With respect to Templeman LJ (as he then was), Macfarlan v Rolt hardly justified such a sweeping and unqualified statement.

46                  In In Re Duncan (Deceased) [1968] P 306, Ormrod J said (at 311):

‘The basis of the privilege is just as apt to cover foreign legal advisers as English lawyers, provided only that the relationship of lawyer and client subsists between them.  Any other conclusion would lead to an impossible position for if this Court were required to investigate the position of such communications in foreign law it must first determine the foreign law, but what law governs the relationship of English client and foreign lawyer, at any rate, where no proceedings are in contemplation?  There is no forum and therefore no lex fori.  The nationality of the foreign lawyer is as irrelevant as his address for this purpose.’

It had been argued that communication between a client and foreign lawyers was not privileged if such communications were not privileged by the municipal law of the jurisdiction within which the foreign lawyer  was practising.  Ormrod J was influenced by the decision in Lawrence v Campbell which I regard as amounting to a bald conclusion without adequate reasoning.  I do not find the reasoning of Ormrod J to be persuasive or to accord with the rationale for legal professional privilege (which I shall presently discuss).  In fact, the reasoning of Ormrod J illustrates the problems which arise with foreign advice.

47                  In International Business Machines Corp v Phoenix International (Computers) Ltd [1995] 1 All ER 413, Phoenix International (Computers) Ltd (Phoenix) had received a letter before action from International Business Machines Corp (IBM) claiming infringement of trademark and passing off.  The letter also required an associated German company of Phoenix to give the requested undertakings.  Further, a sister company of Phoenix in the United States contemplated that it might become involved in litigation in that country with IBM.  The disputed document (called the road map) was written by a US attorney with an Oxford law degree who was a partner in a United States firm and working in that firm’s London office.  It was entitled ‘Preliminary Legal Analysis of Re-Worked Memory Issues’.  It was conceded that the document would be privileged if it had been written by an English solicitor.  After referring to Duncan v Duncan and Great Atlantic Insurance Co, Aldous J at 429 said:

‘The road map contains advice that was given by American attorneys who were acting as solicitors to Phoenix and its sister companies in the sense that Templeman LJ used the word “solicitors” in the extract from his judgment that I have quoted.  They were proffering advice in circumstances where litigation was contemplated which would affect the business of those companies.  The fact that the advice given related predominantly to English law is irrelevant.  It was advice of foreign lawyers acting as lawyers, to be used by Phoenix to decide what strategy to adopt in carrying on business.  Further, that advice was given in the context of a business that was being carried on in at least the US, UK and Germany.  Not only was it a business carried on by Phoenix and its sister companies internationally, but also the intellectual property rights relied on by IBM were for practical purposes international rights.  The approach adopted by IBM sinks into formalism.  The correct approach is to look at the substance and reality of the document, the circumstance in which it came into existence and also its purpose.  It was advice given by lawyers in circumstances where litigation was contemplated to enable the recipient to decide what strategy to adopt, both from a legal and business standpoint.  Such a document is privileged.’

48                  McLelland J considered a related question in Ritz Hotel Ltd v Charles of the Ritz Ltd (No 4) (1987) 14 NSWLR 100 at 101–102 where His Honour said:

‘The author of the document, Mr Morrazzo, is a qualified lawyer and member of the Bar of the State of New York and the Federal District Court for the Southern and Eastern Districts of New York.  He is an expert on trade mark law.  He is employed by Revlon Inc, the parent company of the second defendant, in what is called its Law Department, which consists of a group of attorneys and their support staff, whose function is to provide legal advice and counsel to the management of Revlon Inc and its subsidiaries.  The lawyers in that department are directly responsible to a Mr McNabb, an attorney, who is the Senior Vice-President (Law) of Revlon Inc.

Apart from Mr McNabb and, no doubt, the board of directors of Revlon Inc, no one within the management of Revlon Inc or its subsidiaries has any supervisory authority or control over any attorney in the Law Department.

The memorandum was produced by Mr Morrazzo for transmission to Mr Nicholls, who is an attorney in the Law Department of Revlon Inc and who is also vice-president and secretary of that company, in contemplation of the acquisition by Revlon Inc of assets of the Charles of the Ritz Group Ltd, which assets included numerous trade marks and which acquisition involved Revlon in the assumption of responsibility for litigation concerning many trade marks in a large number of countries round the world.  The memorandum was prepared in response to a request to Mr Morrazzo to check the status of trade marks involved in the proposed acquisition, examine the status of the various pieces of litigation, evaluate their likely outcome and report thereon to Mr Nicholls.

I am satisfied that the sole purpose of the bringing into existence of this memorandum was to provide legal advice on these matters to Revlon Inc in connection with the proposed acquisition, that in so doing Mr Morrazzo was acting in his capacity as a professional legal adviser to that company, and that the memorandum was of a confidential nature.

It was submitted that because many of the trade marks were registered in foreign countries and the litigation (or much of it) was in foreign courts, Mr Morrazzo was not competent to give legal advice in relation to such matters, notwithstanding his legal qualifications in the United States.

I do not consider that legal professional privilege is as limited as this submission would suggest.  Leaving aside the circumstance that on the face of the document it appears that some of the material in it is based on communications with lawyers in foreign countries, it seems to me that legal professional privilege is not confined to legal advice concerning or based on the law of the particular jurisdiction in which the giver of the advice has his formal qualification.  For instance, I have no doubt that legal advice by a lawyer qualified in New South Wales on matters involving the law of, for example, Victoria or the United Kingdom, would, in appropriate circumstances, attract legal professional privilege.  Similarly, and particularly in a field with such international ramifications as trade mark law, I see no reason why legal advice from a lawyer qualified in New York, concerning trade marks and trade mark litigation in other countries, would not, in appropriate circumstances, attract legal professional privilege.’

49                  In considering whether the person consulted for advice must be a qualified practitioner, the Full Court in Grofam Pty Ltd v ANZ Banking Group (1993) 45 FCR 445 at 455 said:

‘An imperfect analogy can be found in the cases where legal advice has been given within a jurisdiction by a foreign legal adviser not qualified to act within that jurisdiction.  In Great Atlantic Insurance Co v Home Insurance Co (supra) Templeman LJ held that legal professional privilege applied to communications between a client and his foreign lawyers or attorneys.  We share his Lordship’s view.  It would be an anomalous and capricious result that legal advice, given by solicitors duly qualified and authorised to practise within a jurisdiction, especially in respect of a matter which involved a foreign element, although we do not consider that qualification to be decisive, was protected by the privilege, but legal advice given by properly retained foreign lawyers in respect of the same subject matter was not privileged.’

50                  It will be observed that none of these judgments has given reasoned consideration to the very real issues in relation to foreign legal advice which counsel for ASIC has put forward in the present case.  Further, in most of the cases there was a deal of evidence about the circumstances under which the advice was given and the general substance of it.  When that evidence is considered, there was nothing in any of the cases to suggest that the foreign lawyer was acting otherwise than as a professional lawyer giving professional legal advice appropriate to the resolution of the case or issue in hand.  Even the in-house lawyer in the Ritz Hotel case was acting only for the purpose of giving precise legal advice on an appropriate topic.  It is not necessary to consider in this case whether the extension of the principle to foreign in-house lawyers was appropriate.

51                  A particular respect in which the discussion of foreign legal advice in the authorities has been unsatisfactory is in relation to the choice of law implications.  It would be something of an affront to ordinary notions of justice if, for example, legal advice to an Australian as to how to take advantage of secrecy provisions of a tax haven were not privileged from production in the tax haven but were privileged from production in Australia.  On the other hand, it might be seen as not acceptable that privilege from production in Australia should be governed by, for example, a statutory right to silence equivalent to privilege in the tax haven.  The position taken in England without any real discussion seems to be that the matter is governed entirely by the law of the forum without any consideration of choice of law.  The position in the United States appears to be more sophisticated:

 ‘Where there is a substantial connection to both the United States and a foreign jurisdiction, such as the communication having been made abroad or having been made to a foreign professional, the attorney-client privilege law of the country with the predominant, most important, or most direct and compelling connection to or interest in the matter should be applied.’

Paul F Rothstein and Susan W Crump, Federal Testimonial Privileges (2004) § 2:40

It appears that there are differences between courts in the United States on the topic (Daiske Yoshida, The Applicability of the Attorney-client Privilege to Communications with Foreign Legal Professionals, 66 Fordham L. Rev. 209 (1997)).  The discussion by Deane J in Baker v Campbell (1983) 153 CLR 52 at 118–120 shows that the issue was not then approached uniformly in Europe as might be expected. 

52                  It was submitted on behalf of ASIC that a claim of privilege is governed by the law of the forum in which the claim is made in answer to, in this case, seizure of the document (Nygh and Davies, Conflict of Laws in Australia, 7^th Edn, 2002, pages 303 and 311) and that submission was not disputed.  Neither side sought to prove Swiss law relating to legal professional privilege.

Conclusions as to the Law

53                  In my opinion, the authorities consulted do not establish the proposition that all communications of a professional nature between an Australian client and a foreign lawyer concerning advice as to foreign law are privileged from seizure in Australia under a valid warrant issued pursuant to the Crimes Act 1914 (Cth).  Furthermore, such a proposition is inconsistent with the rationale for legal professional privilege.

54                  The High Court of Australia considered the rationale for legal professional privilege most recently in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49.  The majority, Gleeson CJ, Gaudron and Gummow JJ, said (at 64):

‘The privilege exists to serve the public interest in the administration of justice by encouraging full and frank disclosure by clients to their lawyers.’ (emphasis added)

In Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 511 the rationale ascribed by Gibbs CJ to the privilege was the ‘proper functioning of the legal system’, in Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 487 by Mason and Brennan JJ ‘the furtherance of the administration of justice’ and by the Earl of Halsbury LC in Bullivant v Attorney-General (Victoria) [1901] AC 196 at 200–201 ‘the perfect administration of justice’. 

55                  In Baker v Campbell (1983) 153 CLR 52 at 95, Wilson J sought to explain the extension of the privilege to advice as follows:

‘In fostering the confidential relationship in which legal advice is given and received the common law is serving the ends of justice because it is facilitating the orderly arrangement of the client’s affairs as a member of the community.  Furthermore in promoting the faithful discharge of his responsibilities and the enjoyment of his rights under the law the ends of justice are being served.  It is in the public interest to encourage the service of such ends.’

The multiplicity and complexity of the demands which the modern state makes upon its citizens underlines the continued relevance of the privilege to the public interest.  The adequate protection according to law of the privacy and liberty of the individual is an essential mark of a free society and unless abrogated or abridged by statute the common law privilege attaching to the relationship of solicitor and client is an important element in that protection.

It is not only a matter of protection of the client.  But freedom to consult one’s legal adviser in the knowledge that confidential communications will be safeguarded will often make its own contribution to the general level of respect for and observance of the law within the community …’ (emphasis added)

56                  In the same case Dawson J said of the privilege (at 128–129):

‘… it is now established that its justification is to be found in the fact that the proper functioning of our legal system depends upon a freedom of communication between legal advisers and their clients which would not exist if either could be compelled to disclose what passed between them for the purpose of giving or receiving advice. … The restriction of the privilege to the legal profession serves to emphasise that the relationship between a client and his legal adviser has a special significance because it is part of the functioning of the law itself.

…

The conflict between the principle that all relevant evidence should be disclosed and the principle that communications between lawyer and client should be confidential has been resolved in favour of the confidentiality of these communications.  It has been determined that in this way the public interest is better served because the operation of the adversary system, upon which we depend for the attainment of justice in our society, would otherwise be impaired. …

It is a doctrine which is based upon the view that confidentiality is necessary for proper functioning of the legal system and not merely the proper conduct of particular litigation.’ (emphasis added)

57                  It is far from axiomatic that the administration of justice and the proper functioning of the legal system in Australia is served by granting privilege from production to all (or perhaps any) foreign legal advice. 

58                  A wider issue is involved.  According legal professional privilege to communications relating to legal advice unconnected with litigation is well established but has never been satisfactorily explained.  As McHugh J noted in Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 161, the usual rationale:

‘hardly seems applicable to the non-litigious communications between legal adviser and client unless the concepts of “the legal system” and “the administration of justice” are given extended and artificial meanings.’

59                  The England and Wales Court of Appeal recently said in Three Rivers District Council v The Governor & Company of the Bank of England [2004] EWCA Civ 218 at [39]:

‘We have found this area of law not merely difficult but unsatisfactory.  The justification for litigation privilege is readily understood.  Where, however, litigation is not anticipated it is not easy to see why communications with a solicitor should be privileged.  Legal advice privilege attaches to matters such as the conveyance of real property or the drawing up of a will.  It is not clear why it should.  There would seem little reason to fear that, if privilege were not available in such circumstances, communications between solicitor and client would be inhibited.  Nearly fifty years have passed since the Law Reform Committee looked at this area.  It is perhaps time for it to receive a further review.’

60                  The facts of such a case as DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 203 ALR 348 exemplify some of the anomalies in the application of the principle.  In many transactions, whether of a business or a private character, a client may consult, in addition to a lawyer, one or more of an accountant, a financial planner, a merchant banker and a financier for advice concerning the preferred structure of the transaction and one or more of those other advisers may bring its own lawyer into the consultations.  Often some or all of the advisers and the lawyers will consult at the same time, each considering the same questions.  It is not possible to explain rationally why a client’s private explanation of its position and its objectives to a lawyer is privileged but precisely the same private explanation to the other advisers working on the same issue is not.

61                  It is easy to see how the privilege is necessary to encourage candour on the part of a client who confronts or anticipates litigation to vindicate or defend legal rights as the client may need to disclose facts which are incriminating, discreditable or embarrassing in order to obtain sound advice.  It is not so easy to see why a client who wishes to order its affairs to best advantage would need or require any encouragement for candour.  Nor is it easy to see what corresponding public interest is served by preserving the secrecy of a client’s reasons for a transaction (unless the client chooses to lift the veil) in cases where disclosure would serve the ends of justice or would enable a statutory inquiry to be properly conducted.

62                  Whether or not it is, as suggested by Dawson J in Baker v Campbell at 29, now too late to reconsider the advice privilege in its application to communications in Australia, it is questionable whether there is any need to extend the principle to overseas legal advice.  It is not obvious that such advice promotes the better administration of Australian justice particularly as, in relation to practitioners in foreign jurisdictions, Australian courts have none of the supervisory and disciplinary powers that provide, in their potential application to local practitioners, some assurance against misuse of the privilege.  There is no authority binding me to extend the privilege in this way but refusal to do so to any extent would be controversial.  I prefer therefore to assume for the purposes of this case that advice privilege may be accorded to some foreign communications and examine whether the applicant has established that what occurred here is entitled to the benefit of such privilege.

63                  It must be borne in mind that the question at issue in this case relates to the notes, and not to the meeting with Hafner as such, although there is an essential connection between the two.  It was submitted for ASIC that the only evidence was that the notes were made prior to the meeting and that they were therefore not proved to be part of any communication.  The privilege in this case being advice privilege and not litigation privilege, it was submitted that it is only a communication that is protected (Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 515, 525, 543; Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121, 166; Three Rivers District Council v The Governor & Company of The Bank of England [2003] EWCA Civ 474 at [21]).  It was submitted for Kennedy that the privilege is not so limited but attaches to information in documents created by a client for the purpose of obtaining legal advice whether or not the document is provided to the legal adviser (Grant v Downs (1976) 135 CLR 674, 677; Trade Practices Commission v Sterling (1979) 36 FLR 244, 245; Waterford v The Commonwealth (1987) 163 CLR 54, 85, 87) and further that it attaches not only to that which is ancillary to the communication but also to that which would tend to disclose a communication (Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325).  It is, on this submission, the purpose for which the notes were made that is important and the purpose remains unaltered by the fact that it may not be achieved (Grofam Pty Ltd v ANZ Banking Group Ltd (1993) 45 FCR 445, 456;  Global Funds Management (NSW) Ltd v Rooney (1994) 36 NSWLR 122, 128–129). 

First ground of decision as to handwritten notes

64                  I am satisfied that the notes in question were used by Kennedy during his meeting with Hafner in the sense that the topics listed were discussed.  His evidence was that they were prepared for that purpose.  The time at which they were made is consistent with that purpose.  It is sensible and usual that notes of that character would be made in preparation for such a meeting and used during it.  The risk of loss of any privilege which might exist is an explanation for the lack of direct evidence from Kennedy and Hafner.  I inspected the notes at the suggestion of both parties and there is nothing in them that I could detect which casts doubt on this finding.  To produce the notes would reveal the substance of at least part of a communication, and so would have the benefit of any privilege which would properly attach to that communication (Attorney-General (NT) v Maurice per Dawson J at 496; Dalleagles Pty Ltd v Australian Securities Commission at 333).  It is thus unnecessary to resolve all the other possible complications which were argued. 

65                  It is well established that the party claiming legal professional privilege bears the onus of proving the facts which give rise to the entitlement (National Crime Authority v S (1991) 29 FCR 203 at 211–212).  Where an Australian practising lawyer is communicated with on a professional basis it may be appropriate to assume that legitimate legal advice was sought absent any contrary indications.  Such an assumption rests upon judicial notice of, and judicial authority to enforce, the legal and ethical responsibilities of Australian legal practitioners and upon a common understanding as to the body of Australian law which must be complied with.  No corresponding assumption can be made in the case of foreign lawyers without satisfactory evidence.

66                  It is necessary to consider whether the applicant has established that the communication that the notes represent was for the dominant purpose of obtaining legal advice.  No direct evidence has been given of the communication or to explain the notes.  I am not prepared to draw a Jones v Dunkel inference against the applicant on that account because to have given such evidence might have destroyed any privilege which exists.  The issue must however be decided on the evidence, and without the benefit of some favourable assumptions which, on the bases I have described, would be made in relation to a meeting with an Australian lawyer.

67                  I am satisfied that Kennedy would have sought and received some advice as to the effect of Swiss law from Hafner during their meeting.  Kennedy was alarmed about the effect of the AFR articles.  There was the immediate problem of the apparent inconsistency between Rivkin’s statements and Kennedy’s evidence to ASIC as to beneficial ownership of the parcel of Offset Alpine shares.  It was also obvious that there was likely to be scrutiny by Australian authorities of Kennedy’s arrangements in Switzerland generally.  It is highly unlikely that these matters would have been discussed with the Swiss lawyer most familiar with Kennedy’s affairs without his seeking and obtaining legal advice.

68                  I am also satisfied that Kennedy would have sought information from Hafner which did not involve seeking or receiving legal advice.  Hafner was the repository of information as to the relevant Swiss entities set up on Kennedy’s instructions.  He was effectively the custodian of records and directly or indirectly was de facto trustee or manager of the entity.  He was also a repository of information about the structures which had existed before the 1996 or 1997 reorganisation.  Hafner was alleged to have been present at Rivkin’s interview.  He would be expected to have contacts with the banks and other institutions used by the relevant entities and with Swiss authorities from which he may have gleaned or may have been perceived as able to glean information as to the likely reaction to existing and further Australian inquiries.  It is likely that Kennedy would have sought to have Hafner utilise any contacts which he had in any way that would have assisted Kennedy’s position.  It is also likely that Kennedy would have given Hafner instructions of an administrative nature in relation to the relevant entity.

69                  It is possible that the legal questions could have been dealt with separately and severably from the other issues.  However, it is unlikely that there was or could easily have been, a neat compartmentalisation of communications made in the course of this meeting between legal advice and other communications.  Hafner had more than one role.  Kennedy’s concern was such that he would wish to pull all levers available to him without discrimination.  What is more, there is not always a bright line between legal advice and services and administrative or commercial advice and services.  This gives rise to the problem discussed in a local setting in DSE (Holdings) Pty Ltd v InterTAN Inc at [25]–[71] and dealt with in the landmark decision of the England and Wales Court of Appeal in Three Rivers Council v The Governor & Company of the Bank of England [2003] EWCA Civ 474.

70                  My inspection of the notes in issue indicates no clear separation between legal advice and other topics.  Each was a list of brief items.  Some are cryptic.  Some are difficult to read.  I can see the relevance of some, but not of others.  That is not surprising.  I do not have an intimate knowledge of the surrounding facts.  Some are consistent with a request for legal advice, but the precise context of that advice and, more importantly, the object of it is not always obvious on the face of the document.  Some are fairly clearly seeking information rather than legal advice as such.  Some appear to be giving instructions for action which may or may not be action as a lawyer.  Many are ambiguous. 

71                  There is also force in the argument advanced on behalf of ASIC that if the dominant purpose of meeting Hafner was to obtain legitimate legal advice for Australian purposes then it would be expected that the communication would be through or supervised by the Australian lawyers who had by then been instructed.

72                  There is also force in the point taken by ASIC that if the dominant purpose of making the notes was to obtain legitimate legal advice, it is surprising that Kennedy did not claim legal professional privilege in them at the time of execution of the warrant on 13 November.  He saw and recognised the notes which were seized.  Hartnell had been instructed since 30 October.  Kennedy was anticipating further ASIC inquiries.  A solicitor from Atanaskovic Hartnell was present throughout the search and seizure.  He must be taken to have been aware, at least, of the general principles as to legal professional privilege.  In any event, the warrant contained the following:

‘LEGAL PROFESSIONAL PRIVILEGE

NOTE:     This warrant is issued in recognition that a claim for legal professional privilege may be made in respect of documents covered by this warrant and on the understanding that, if that occurs, the executing officer will, as far as is reasonably practicable, follow the course of action set out in the document entitled “Claims for Legal Professional Privilege:  Premises other than those of a Lawyer, Law Society or Like Institution” a copy of which is attached to this warrant.’

…

‘Claims for Legal Professional Privilege:  Premises other than those of a Lawyer, Law Society or Like Institution.

If a claim is made for legal professional privilege in respect of any document covered by the warrant, and if the person claiming privilege is prepared to cooperate with the executing officer, the following procedure will be followed to the extent to which it is possible to do so:

1.         The executing officer or a constable assisting will prepare a list of the relevant documents in cooperation with the person claiming privilege.  The list will show the general nature of each document, the ground on which privilege is claimed, and the name of the person claiming privilege;

2.                  The documents will be placed in a envelope or other container which will be sealed;

3.                  The list and the container will be endorsed with a note to the effect that, having regard to the claim for privilege, the warrant has not been executed in respect of the documents set out in the list and that those documents have been sealed in the container pending resolution of the claim;

4.                  The list and the container will be signed by the executing officer or constable assisting and the person claiming privilege;

5.                  The sealed container and a copy of the list will be delivered to a third party agreed between the executing officer or constable assisting and the person claiming privilege;

6.                  The third party shall hold the container and the copy of the list pending resolution of the claim for privilege;

7.                  Subject to any agreement to the contrary, the person claiming privilege will have four working days after delivery to the third party in which to commence proceedings to establish the privilege claimed.  If proceedings are commenced within that time the sealed container and the copy of the list will be delivered to the registrar of the court in which the proceedings have been brought.  The documents will then be held by the registrar pending the order of the court;

8.                  Subject to paragraph 9, if proceedings are not commenced within four working days, or such other period as may be agreed, the third party will deliver the documents, or such of them as the executing officer still wishes to examine, to the executing officer;

9.                  Nothing in this document prevents the executing officer from discussing a claim for privilege with the person raising the claim.  If agreement can be reached on which documents are covered by legal professional privilege, and which are not, the third party will be asked to act in accordance with that agreement.

If the person claiming legal professional privilege is not prepared to cooperate with the executing officer, it will normally be necessary for the executing officer or a constable assisting to examine each relevant document to determine whether there is a proper basis for seizure.’

What is more, the substance of the warrant was read in the presence of Kennedy and his solicitor.  The most probable inference is that Kennedy did not tell his solicitor that the notes, which were clearly identified by him at the time of seizure, were prepared for the purpose of obtaining legal advice.

73                  Although I am satisfied that a significant purpose of Kennedy in meeting with Hafner was to obtain legal advice, I am not satisfied that that was his dominant purpose.  His assertion of that conclusion does not establish the fact.  The other purposes of the meeting to which I have referred were also significant, and I cannot attribute dominance to one purpose in this case (Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49).  The purpose for making the notes is inextricably bound up with the purpose of the meeting.

74                  I have found that Hafner’s role went far beyond that of an arm’s length professional legal adviser bound by the legal and ethical constraints upon an Australian lawyer retained in a legal advisory capacity.  Compartmentalisation of what was communicated at the meeting is not practical or realistic.  If the roles cannot be separated then it would go beyond any binding authority to accord legal professional privilege to communications with Hafner that have not been clearly and unequivocally identified as seeking or obtaining legal advice as such in the evidence before the Court.  No such identification has been undertaken here.  That is sufficient to deny legal professional privilege in all of the notes.

Second ground of decision as to handwritten notes

75                  In any event, a dissection would only be necessary if those parts of the notes which do or may relate to communications seeking legal advice were made for a purpose that attracts legal professional privilege.  In my opinion the applicant has not established the necessary connection between the notes and the administration of justice or the proper functioning of the legal system in Australia.  The overwhelming inference to be drawn in all of the circumstances is that Kennedy’s dominant underlying purpose in meeting with Hafner on 4 November was to take all available steps to preserve or enhance the secrecy from Australian authorities, including ASIC, of his dealings in or relating to Switzerland including all facts and circumstances in relation to the Brampton entities and any dealings he may have had in Switzerland directly or indirectly with Rivkin generally and in relation to proceeds of the Offset Alpine shares in particular.

76                  The s 19 transcript of the interview with Kennedy in 2003 and also the judgment of Sackville J in the Bank Leumi case refer or allude to various Swiss laws relating to secrecy of transactions which, particularly with the use of appropriate legal structures, can be utilised to enable Australians (amongst others) to secrete assets and information from the reach of Australian law enforcement and taxation authorities including ASIC.  Indeed, whilst the judgment of Sackville J is not evidence before me of the truth of the facts asserted, the result of the Bank Leumi case was that the identity of the beneficial owners of the Offset Alpine shares was not disclosed owing to the operation of those very laws.  The general nature and operation of the Swiss laws in this respect have been a matter of public notoriety for decades.

77                  It is obvious that the successive Swiss Brampton entities were established in order to take advantage of Swiss secrecy laws and thereby hide assets and transactions with which Kennedy had a connection from the Australian authorities including the Australian Taxation Office.  It is also obvious that the entities were structured by Hafner and administered by him in such a fashion as to minimise the risk of any disclosure of any association with Kennedy.  The fact that Kennedy has kept no records in Australia relating to any Swiss transactions with which he was directly or indirectly connected over nearly 15 years underlines the difficulty of any effective scrutiny of those transactions by Australian authorities.

78                  On his own account of it, the effect of the AFR articles upon Kennedy can only be described as dramatic.  Whether or not he had been involved directly or indirectly with Rivkin in dealings with Offset Alpine shares, the published allegation concerned him greatly and it was vital for him to control the supply of information about it to the Australian authorities if possible.  In any event, there would be serious implications for him if the hitherto undisclosed dealings of about 15 years involving the Brampton entities could be scrutinised by the Australian authorities.  After 30 October it was vital to Kennedy to know how effective the structure had been and would be to ensure secrecy, and what, if anything, could be done to improve its effectiveness.  I have no doubt he was prepared to take any step open to him to secure that end. 

79                  It is not necessary to find that Kennedy would have knowingly been party to breaching Swiss law to achieve his purpose, but he would have been quite prepared to leave matters in the hands of Hafner to do as he saw fit to achieve it.  None of the evidence before me enables me to assume that it would be unprofessional for a Swiss lawyer to assist an Australian citizen by advice or otherwise to best utilise Swiss laws to hide assets and transactions from the Australian law enforcement and taxation authorities.  That may not involve any breach of Swiss law.  Indeed, in his s 19 examination, Kennedy was at pains to say that at all times his instructions were to ensure that whatever was done was legal, presumably according to the law of Switzerland and any other tax haven which might have been employed. 

80                  It is not conducive to the public interest in the administration of Australian justice that the enforcement of Australian laws including laws with respect to taxation should be hindered or obstructed by the use of devices constructed by reference to rules of foreign jurisdictions with the advice and assistance of overseas lawyers who may be acting properly in accordance with the laws of the country in which they practise.  It may not be unlawful for an Australian to seek advice for such a purpose or to act upon it, but there is no reason in principle why communications made for that purpose should receive the benefit of the cloak of legal professional privilege so as to prevent their disclosure to Australian authorities.

81                  The purpose of the communications to Hafner that are in issue here, whether Hafner was acting in the capacity of legal adviser or not, is not such a purpose as would entitle those communications to legal professional privilege.  Assisting an Australian to take advantage of foreign secrecy laws to evade scrutiny of assets and transactions by Australian authorities including taxation authorities has no conceivable connection with the administration of justice or the proper functioning of the legal system in Australia which is the sole rationale for legal professional privilege.  Such communications may breach no Australian law or any other law, and the legal entities and structures which are designed in pursuance of them may be effective.  That is not the point.  Those seeking or taking legal advice for such purposes are not entitled to resist an otherwise lawful demand for disclosure of such communications on the grounds of legal professional privilege.

82                  It is not necessary to analyse the situation by referring to the so-called crime or fraud exception to legal professional privilege.  The principle that I have applied depends upon a lack of association between the purpose to be served by a communication and the public interest in the administration of justice or the functioning of the legal system in Australia.  The exception is applicable to cases where the purpose to be served by a communication is contrary either to law or the public interest in Australia.  The exception proceeds from the assumption that all confidential professional communications involving legal advice from an Australian legal practitioner are at least presumptively privileged.  It is now entrenched that the onus of proving the relevant improper purpose lies on the party seeking to impeach the privilege on that basis, although there is debate as to the evidence to be acted upon and the standard of proof to be applied (see generally, Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501).  This is explicable in a domestic setting where favourable assumptions about the confidential professional relationship are applicable even though there is some question as to whether in truth it is an exception or rather a situation in which the privilege never attaches (eg per McHugh J in Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 163).  A reading of the various judgments in Regina v Bell; Ex parte Lees (1980) 146 CLR 141, Attorney-General (NT) v Kearney (1985) 158 CLR 500, and Commissioner of Federal Police v Propend Finance Pty Ltd indicates support for the proposition that the conduct here would be caught by the exception as it would be contrary to the better administration of justice, the public interest in which the privilege is designed to secure, to allow the privilege to be used to protect communications made to frustrate the processes of the law itself by frustrating the enforcement of Australian statutes (eg, per Gibbs CJ in Kearney at 515, Brennan CJ at 514, Gaudron J at 545 and Gummow J at 564 in Propend).  On the view I have taken concerning the extension of legal professional privilege to communications with a foreign lawyer in the circumstances of this case, there is no need to come to a final view about that.

83                  It was submitted for Kennedy that the cross-examination of him did not permit some of the submissions on the part of ASIC as to purpose to be made.  I do not agree.  Kennedy has the onus of establishing his claim to privilege on the whole of the evidence.  Those parts of his s 19 examination which were admitted are in evidence for all purposes.  All inferences which are available on the whole of the evidence may be drawn provided that they relate to the issues to be determined in the case.

Waiver and Estoppel Issues

84                  ASIC argues that if privilege existed it was waived, and that Kennedy is also estopped from relying upon it.  It is unnecessary to make findings as to these issues.  In case a different view is taken in relation to the existence of privilege on appeal, I should resolve one significant dispute of fact which affects these issues, namely whether there was an express reservation of rights by Kennedy.

85                  The evidence of Lance Sacks, the solicitor present, was:

‘After we completed the process [of examining the documents to be seized], one of the AFP officers then turned on the tape recorder and read out what was written on the seizure record.  He may said [sic] other things when the tape was on but I do not now recall.  The officer then said to the Applicant words to the effect:

“Do you have any objection to the documents seized?”

The Applicant looked at me.  I then spoke to him quietly and he then said to the AFP officer words to the effect:

“I reserve my rights to make objections at a later time.”’

86                  Kennedy gave similar evidence.  That evidence is denied by all of the AFP and ASIC officers who were in a position to hear it.  It is not recorded on the tape.  Neither Kennedy nor Sacks made any contemporaneous note of the statement.  Sacks did not ensure that the reservation was taped, and he did not confirm it immediately he returned to his office or at all.  It was not relied upon in pre-litigation correspondence.  It was not recorded in any contemporaneous note by those executing the warrant.  Those circumstances weigh against the account given by Kennedy and Sacks.

87                  Counsel for Kennedy subjected each of the AFP and ASIC officers to a searching cross-examination, and the manner in which their affidavits were prepared gave him some ammunition.  Sacks and Kennedy were also well-tested on their evidence and discrepancies emerged. 

88                  Having heard the witnesses and considered the submissions, I am not satisfied that either side has deliberately manufactured evidence in concert, notwithstanding the apparently sharp conflict between their respective accounts.  I was left in doubt as to whether Kennedy had any real recollection of what occurred.  It is also clear that Sacks’ memory was faulty in some respects.  Taylor, who was the officer most closely involved in discussion with Sacks and Kennedy, did not have a perfect recollection but I am satisfied that he did not deliberately doctor or tailor his notes to omit any reservation of rights.  His evidence as to the meaning of some of the notes was not convincing.

89                  In my view counsel for Kennedy is probably correct when he suggests that the key to the issue lies in two entries in Taylor’s contemporaneous notes as follows:

 ‘(a)     Brief conv. with solicitor for Mr TJ Kennedy.  He asked re offence issue re specific doc – I advised that appreciated he did not know specifics of investigation and that a determination had been made that documents were relevant.  I also advised that he could contest in court if wished and he stated he was aware of that.

(b)       A further conv. re bank statements 1987 with solicitor – I advised @ this time determination made that docs relevant however if case subsequently determined docs not then will arrange immediate return.’

A formal reservation of rights in that context would be natural and may have seemed unremarkable.  The statements of Taylor (which he recorded) and a formal reservation in response by Kennedy would, in a sense, do little more than state the obvious.  At that stage nobody present had legal professional privilege in mind.  Any reservation was not specifically in relation to the documents that are the subject of these proceedings.  The statements on either side at that stage were related to the question of whether each and every document was properly caught by the description in the warrant.

90                  I find that some words generally reserving his rights were said by Kennedy in connection with the statements I have identified from Taylor’s notes, but that they were either regarded as routine or not heard by the officers present.

91                  I also infer that Kennedy did not tell Sacks that the disputed notes were written for the purpose of obtaining legal advice from Hafner.

Invalidity of Search

92                  It has been argued for Kennedy that the search was not in accordance with law as there was no proper opportunity to ascertain whether legal professional privilege applied in relation to the documents seized.  Even if there is such a ground of invalidity, and even if it could be established on the facts, it would have no relevant application here as there was no legal professional privilege attaching to the handwritten notes.

Ritz Hotel Notepad

93                  Kennedy claims that the blank Ritz Hotel notepad is not covered by the warrant at all.  The affidavit evidence of Andrew Wallace, the warrant holder, as to the circumstances of seizure was as follows:

 ‘At approximately 10.25 am whilst searching the desk located in the study, I located and seized from the notepad holder on the desk 1 white notepad sized notebook with “Ritz London” marked on it.  As far as I recall Mr Kennedy and Mr Sacks were in the study at this time.  I then took that notebook down to the second floor, placed it in a clear plastic bag and handed the bag to Federal Agent Heather.  I now understand that notebook was recorded as SBA142508.’

94                  He had earlier said:

‘During the ensuing search of the premises, at approximately 10 am, I was searching the top of a desk located in the study on the third floor of the premises.  At that time both Mr Kennedy and Mr Sacks were present in the study and I observed them observing me.  Mr Sacks and Mr Kennedy were in the vicinity of the desk, in front of me, and both had an unobstructed view of what I was doing.  On the desk I located 2 notepad sized pieces of white paper containing handwritten notes in black ink.  I picked up the pieces of paper, read the handwritten notes on both pieces of paper and contemplated for at least 2 to 3 minutes the relevance of the handwriting on the pieces of paper with the three conditions on the warrant.  At all times I noted Kennedy and Sacks to be observing me.  The two pieces of paper were in clear view of Mr Sacks and Mr Kennedy.  I did not speak to Mr Kennedy or Mr Sacks nor did Mr Kennedy or Mr Sacks say anything to me.  Those two pieces of paper were the only two pieces of paper seized at that time.  Apart from myself, Mr Kennedy and Mr Sacks there was only one other person in the study at this time.’

95                  Section 3F of the Crimes Act 1914 (Cth) relevantly provides:

‘(1)      A warrant that is in force in relation to premises authorises the executing officer or a constable assisting:

…

(c)         to search the premises for the kinds of evidential material specified in the warrant, and to seize things of that kind found at the premises;’

96                  ‘Evidential material’ is defined in s 3C of the Act as meaning:

‘a thing relevant to an indictable offence or a thing relevant to a summary offence, including such a thing in electronic form.’

97                  The phrase ‘thing relevant to an indictable offence’ is defined in s 3 to mean:

‘(a)      anything with respect to which an indictable offence against any law of the Commonwealth or of a Territory has been committed or is suspected, on reasonable grounds, to have been committed; or

(b)       anything as to which there are reasonable grounds for suspecting that it will afford evidence as to the commission of any such offence; or

(c)        anything as to which there are reasonable grounds for suspecting that it is intended to be used for the purpose of committing any such offence.’

There is a like definition of ‘thing relevant to a summary offence’.

98                  The warrant in question authorised seizure of evidential material which satisfied all of three conditions.  The first condition was:

‘1.        Things which are originals or copies or drafts of any of the following including any of them which are stored in electronic or magnetic form:

All things referred to in (a) to (p) below relating to the period 1 January 1991 to present, whether or not created during that period being:

(a)               accounting records including bank statements, bank documentation, deposit books, cheque books, cheque butts, cheque requisition forms, cash receipts books, cash payments books, general ledgers, general journals, invoices, memoranda of fees, work in progress ledgers, tax returns, records of transfer of monies;

(b)               statutory registers;

(c)                records of communication including correspondence, reports, announcements, media releases, files, file notes, memoranda, notes of conversations, transcripts of interviews or examinations, electronic mail and facsimile transmissions;

(d)               deeds, agreements, treaties and contracts including share sale agreements, trust deeds;

(e)                minutes of meetings, agendas, board papers and reports;

(f)                 diaries, appointment books and other notes;

(g)               unit certificates, share transfer forms and share certificates;

(h)               statutory declarations;

(i)                 powers of attorney;

(j)                 documents concerning any application for or the provision of any finance, including letters of offer and loan agreements;

(k)               notes, research material, memoranda, correspondence, diary notes and broker records including contract notes and statements of account relating to dealings in securities;

(l)                 telephone directories, paper and electronic diaries and/or personal planners containing any of the above information;

(m)             computer hard drives, floppy disks, computer disks or any other digital media containing any of the above information;

(n)               any transcript of the interview of Rivkin by Nathan Landshut, District Attorney, at the District Attorney’s Office in Zurich Canton, Business Division on or about 10 December 2002;

(o)               any transcript of the interview of Kennedy by Nathan Landshut, District Attorney, in 2002;

(p)               Richardson’s driver’s licence being the licence which expired on 18 January 2001.

together with any storage medium or storage device which contains any of the above things and any manual, instruction, password or other thing which is needed to gain access to or interpret or decode any of the above things.’ (emphasis added)

99                  Wallace gave the following oral evidence:

‘So far as you could tell at the time you found that document, you couldn't read anything written on it, could you? --- No.  Well, sorry, let me rephrase that.  There is a stationery letterhead on that document, but nothing handwritten.

And by that letterhead, you mean The Ritz London notation? --- Yes, that's correct.

But apart from that stationery part of it, you couldn't read anything on it? --- No.

Did you give consideration at the time you were in the study, when you came upon this document, to whether it satisfied condition 1 of the warrant? --- Yes.

Can you tell us which paragraph or subparagraph of condition 1 you thought it satisfied? --- I think the - where it says "notes".  Records of communication, paragraph 1(c).

What communication did you think was contained upon this piece of paper at the time you saw it in the study? --- I thought and think that this blank notepad related specifically to the preceding seizure, the handwritten pieces of paper.

When you say related to it, there's nothing on it you could read that would tell you that, was there? --- There's nothing I could read other than the stationery letterhead.

So it was based upon the stationery letterhead being the same between the two documents that you seized it, is that right? --- As far as I was concerned, the document was relevant for two reasons:  firstly, it was the first notepad in the notepad holder on the desk.  So it indicates a link between the – one of the handwritten notes had identical stationery letterhead on it.  It indicates a link between the handwritten note with that stationery letterhead and that desk.  It indicates that the document could have been written on that desk and the second reason I considered it was relevant is that if the document had been written on that notepad, which was the logical presumption, then the notepad would contain impressions of that written note and other impressions and that those impressions could be obtained by forensic procedure and they would indicate when approximately the handwritten note was written.

In terms of it containing any impression, you were simply speculating about that, weren't you? --- Yes.

Can we go back to 1(c), records of communication, I am a bit unclear as to the basis upon which you thought this particular document recorded a communication.  Can you tell us what it was please? --- I consider it to be - to start with, I consider it to have potentially recorded the same notes that were on the second last seizure, the handwritten notes.

Are you telling his Honour in the exercise of the power given to you by the Crimes Act in the execution of this search warrant you read the words "records of communications" as extending to potential communications? --- In this case, yes.

Do you think that's a legitimate basis upon which to exercise a warrant? --- I

do.

Are you agreeing with me that it's not? --- Say again.

Are you agreeing me [sic] that it's not a legitimate basis upon which to seize a document under this warrant? --- No, I don't.

Do you think it's completely legitimate to read “records of communications” as extending to or meaning in part records of potential communications? --- In this case, yes.

…

If I can take you over to condition 2.  Sorry, I think I might have distracted myself from where we were up to before.  Can you tell his Honour please why you read this warrant as including the word “potential” in 1(c) when it doesn't appear there? --- It's my view that in this case, file notes, it was appropriate that that document fell within the category of file notes, memoranda, notes of conversations.

But you did see that where it refers to file notes that that comes after the word “including” and that prior to the word “including” there is the description “records of communications”; you saw that, didn't you? --- Yes.’

100               Taylor gave some advice to Wallace generally as to compliance with condition 3 of the warrant relating to the connection of items to be seized with the various offences.  He said he also turned his mind to the other conditions.  There is no evidence that he passed on those thoughts to Wallace.  In relation to condition 1, he nominated sub-paragraphs (f) and (k) as being satisfied.

101               Counsel for Kennedy also attacked the link between the notepad and conditions 2 and 3 of the warrant.

102               In my opinion the blank Ritz Hotel notepad does not answer the description of any thing described in condition 1 of the warrant as there is no sensible meaning of sub paragraphs (c), (f) or (k) which could lead to that result.  Whilst it may be that there is no requirement that the task of construing the warrant should be prima facie hostile to the invasion of privacy which is involved (cf Hart v Commissioner of Australian Federal Police (2002) 124 FCR 384) neither should construction of it be strained to authorise a seizure which has taken place. 

103               Reliance was placed by counsel for ASIC upon some statements by Hely J in Adler v Gardiner (2002) 43 ACSR 24; [2002] FCA 1141.  The first was the following (at [21]):

‘The executing officer or constable assisting has to make a judgment as to whether seizure of a document is authorised by the warrant.  The executing officer or constable assisting has to consider whether “there are reasonable grounds for suspecting” that the document will afford evidence as to the commission of a warrant offence.  This is judgment which the executing officer must make in relation to every “thing” which is to be seized in reliance upon the warrant.  But where the relevant thing consists of a folder or file, there may well be justification for an executing officer, or constable assisting, to take the entirety of the folder or file in which he or she locates an individual document itself within the warrant, because the context in which the document is found may itself be of assistance in evaluating the true evidentiary significance of the document in question: Harts Australia Ltd v Commissioner, Australian Federal Police [2002] FCA 245 at [39].’

104               That passage does not relate to the issue to be decided here but rather to another topic – that is, whether ‘there are reasonable grounds for suspecting’ that the document will afford evidence as to the commission of a warrant offence.  It was a case in which the relevant thing was defined to consist of a folder or file which was seized.

105               Reliance is also placed upon the following passage (at [39]–[41]):

‘A court is not entitled to substitute its own opinion on that question for the opinion of the executing officer or constable assisting.  That does not mean that the executing officer, or constable assisting, has an unexaminable discretion; it does mean, however, that the officer’s decision is only impeachable if the decision was one which the officer could not lawfully reach on the materials before him or her: Minister for Immigration & Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 275-276.

In Propend Finance Pty Ltd v Commissioner, Australian Federal Police (1994) 29 ATR 87 at 100 Davies J rejected an invitation to examine a number of the documents seized under a search warrant to determine whether or not they were evidence of the offences stated in the warrant.  His Honour declined that invitation as that is not his Honour’s task.  His Honour said:

“The material before the court would not enable me to decide, by merely reading a particular document, whether it answered the description in the warrant.  A background knowledge of the nature of the offences charged and of how the particular documents fitted into the picture would be required.  Presumably, the officers authorised to execute the warrants had that knowledge.  The court has no jurisdiction to interfere with their seizure unless their actions are proved to have been excessive.  A mere examination of a particular document would be unlikely to establish that.”

The onus, then, is on the applicants to establish that the seizure decisions taken in relation to the disputed documents were infected by reviewable error.  In the light of my finding that it was open to Ms Balding to conclude that the disputed documents fell within the terms of the warrant, and that she in fact drew a conclusion to that effect, it follows that the applicants have not established that the seizure decision was not authorised by the Crimes Act, or that it was an improper exercise of the power conferred by the Crimes Act, or that it was otherwise contrary to law or amenable to judicial review.’

106               Again, that passage relates to a different question to that which arises here, namely, satisfaction that there are reasonable grounds for suspecting that things seized will afford evidence as to the commission of an offence. 

107               In my opinion there is nothing in the relevant provisions of the Crimes Act or in the terms of the warrant itself to permit seizure of a document which the officer reasonably suspects to be, for example, a note of a communication.  Actual compliance with condition 1 was necessary.  The thing to be seized must be accurately described in the warrant and whether it is or not is a question of objective fact which is not committed to the opinion of the officer or to the reasonable suspicion of the officer.

108               It follows that relief must be granted in relation to the notebook.

109               For the sake of completeness, I should say that the warrant holder did not purport to rely upon s 3F(1)(d) of the Crimes Act and gave no evidence which would have permitted reliance upon it. 

Rulings on Evidence

Final or interlocutory?

110               During the hearing I ruled that the proceeding was final and not interlocutory for the purposes of s 75 of the Evidence Act 1995 (Cth).  I did not then give reasons.  These are those reasons.

111               There is a plethora of cases dealing with the question whether proceedings are interlocutory or final for various purposes, including s 75 of the Evidence Act, some of which concern legal professional privilege.  An issue as to whether documents are privileged from production upon that basis in the course of a substantive proceeding in a court is interlocutory.  That does not decide the present question.

112               This is a proceeding pursuant to s 39B(1) and s 39B(1A)(c) of the Judiciary Act 1903 (Cth) to, inter alia, seek to enforce a common law right or immunity.  Legal professional privilege is not merely a rule of evidence.  It is a rule of substantive law.  (Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 77 ALJR 40; 192 ALR 561 at [9]–[11].)  That has been the position since the High Court redefined the effect of the privilege in Baker v Campbell in 1983.  There is a dispute or controversy between Kennedy and ASIC as to whether Kennedy is legally entitled to the benefit of that privilege in the present case.  Settlement of that controversy or dispute is a ‘matter’ within the meaning of s 39B.  (See the recent analysis by the Full Court in Commonwealth v Lyon (2003) 203 ALR 553 at [14]–[29].)  In my opinion, as submitted for Kennedy, a decision upon that matter will be a final resolution of the dispute or controversy between the parties.

113               ASIC submits that the potential seizure of the notes is a step in an ongoing investigation and that a proceeding to determine the legality of that seizure is not determinative of any legal right that could arise for final determination independently of the existence of that investigation.  It is submitted that a decision in this case would not govern the same issue arising later, particularly if (as in the case of waiver) there were different facts.  It needs to be borne in mind that, although argument in the case has been confined to the issue of legal professional privilege, the relief sought involves the execution of a search warrant which has no connection with any curial proceeding.  The description of that as part of an ongoing investigation is beside the point.

114               Reference is made on behalf of ASIC to a statement by Campbell J in Re Doran Constructions Pty Ltd (In Liq) (2002) 194 ALR 101 at [128] that a determination that a document is the subject of legal professional privilege is interlocutory.  This statement was referred to with apparent approval by Hansen J in Re Bufalo Corporation Pty Ltd (No 2) (2002) 43 ACSR 241 at [43]–[44].  The jurisdiction being exercised in Re Doran Constructions was supervision by the New South Wales Supreme Court of examinations conducted in that Court by a liquidator pursuant to Part 5.9 of the then Corporations Law.  In particular it was a review of a ruling by the Deputy Registrar who presided at the examinations.  The issue in Bufalo Corporation Pty Ltd was similar in substance.  That situation is clearly distinguishable from the present and it is unnecessary that I should examine the correctness or otherwise of the conclusions in those cases.

115               Counsel for ASIC also relies upon decisions in relation to determination of a claim for public interest immunity – in the case of Brouwer v Titan Corporation Ltd (1997) 73 FCR 241, 149 ALR 50 production pursuant to subpoena addressed to a third party and in Commonwealth v Northern Land Council (1991) 30 FCR 1, 103 ALR 267 the case of a party called upon to make discovery – being regarded as interlocutory.  Again, in my opinion, those situations are distinguishable from the present as clearly being ancillary to a proceeding in a court.

116               Reliance is also placed by ASIC upon the decision of Finkelstein J in London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932 at [17]–[22] in which it was held that a proceeding for preliminary discovery pursuant to O 15A of the Federal Court Rules is interlocutory for the purposes of s 75 of the Evidence Act.  The contrary had been held by Lindgren J in Levis v McDonald (1997) 75 FCR 36.  Finkelstein J does not seem to have been referred to the decision in Malouf v Malouf (1999) 86 FCR 134 where the Full Court considered the relevant line of authority and said (at [33]):

‘In both Allstate and Levis his Honour was concerned with the meaning of the term “interlocutory” for the purposes of the Evidence Act and not with the construction of the appellate provisions of the Federal Court Act.  It has long been accepted that the terms “final” and “interlocutory” may mean different things in different contexts:  see Salter Rex and Co v Ghosh [1971] 2 QB 597 at 600–601; Tampion v Anderson (1973) 48 ALJR 11 at 12–13; Wentworth v Wentworth (unreported, Supreme Court, NSW, Santow J, 17 April 1997) at p 4.  It is not difficult to find good reason for allowing relaxation of the hearsay rule in a narrower category of cases than that in which the right of appeal is truncated by a requirement for leave.  The latter requirement merely places the parties in the hands of the Court.  Relaxation of the hearsay rule may substantially affect the outcome of the proceedings or the way in which they are conducted.  We note that Lindgren J was a member of the Full Court in Brouwer which distinguished Allstate.’

That was a guarded statement as it was unnecessary to resolve the evidentiary question for the purposes of the point being considered. 

117               Of greater importance in this connection is the decision of the Full Court in Hooper v Kirella Pty Ltd (1999) 96 FCR 1 in which the constitutional validity of O 15A was considered.  That decision makes clear that the ‘matter’ which establishes jurisdiction is the underlying substantive claim, not the application for a preliminary discovery itself ([56]–[61]).  Thus, even if an application pursuant to O 15A is interlocutory for the purposes of s 75 of the Evidence Act, it would be because the application is ancillary to the underlying ‘matter’.

118               The decision of the High Court in Propend does not decide the precise point because the hearing at first instance took place before the Evidence Act 1995 had come into force.  Nonetheless, the nature of the proceeding was relevantly indistinguishable from the present and each of the Justices discussed the issue as to whether hearsay evidence was admissible.  A clear majority favoured the view that evidence as to the issue of privilege or no privilege was required to be in admissible form – see Brennan CJ at 513–514, Gaudron J at 547, McHugh J at 556 and Gummow J at 568, 575–576.  The underlying rationale was that the task of the Court was to decide the issue of privilege or no privilege rather than conduct judicial review of a decision concerning the existence of privilege arising in the course of execution of the warrant.  That is consistent with the submission put here on behalf of Kennedy.  The other member of the majority, Kirby J, appeared to take a different view upon the hearsay point although it is not quite clear why that is so (see 592–593).  Dawson J expressed (at 523–524) an opinion which is closest to that put forward here on behalf of ASIC.  However, there is some difficulty with the reasoning adopted by his Honour in support of that opinion.  His Honour commenced by pointing out that it would not be accurate to describe the proceedings at first instance as interlocutory proceedings for they resulted in a declaration which was not part of any proceedings otherwise on foot.  His Honour indicated that he favoured a view of the nature of the proceedings which was akin to judicial review of the conduct of the police officer.  He went on to say however:

‘On the other hand, if they were independent proceedings to determine whether legal professional privilege was displaced, then they were in substance, if not in form, interlocutory proceedings or at least the kind of proceedings in which it is established that hearsay evidence is not excluded.’

No authority is cited for that proposition.  Toohey J expressed the view that there was no reason why hearsay material should be excluded, although his Honour’s view was that much of the material before the primary Judge was not simply hearsay (see 533–534).  In my opinion, the reasoning of the majority of the Court is applicable to the present circumstances and should be applied.

Alleged Rivkin interview

119               On 4 March I ruled that the purported record of an interview of Rivkin (and others) (the record) by Swiss authorities, if otherwise admissible, would be rejected pursuant to s 135 of the Evidence Act.  I did not then give my reasons for that ruling.  The following are those reasons.

120               In my opinion the record in question has little, if any, relevance to the issues in this proceeding which (for present purposes) are limited to Kennedy’s purpose in making the notes claimed to be privileged.  There is no evidence that Kennedy saw or had access to the record prior to his making the notes in issue.  A claimed version of the Rivkin interview had been published in the AFR on 30 October 2003.  Kennedy had met Rivkin about that publication before leaving for Switzerland and before making the notes in issue.  It is clear that his proposed visit to Hafner was a direct result of his concern about the AFR publication of the alleged record by Rivkin.  The most that could relevantly be drawn from the record (if admitted) would be to support the conclusion that Rivkin had made the statements attributed to him in the AFR article.  This adds little, if anything, to the other known circumstances relating to Kennedy’s purpose in making the notes in issue. 

121               On the other hand, the provenance of the record is doubtful, as the source was the AFR rather than any official source notwithstanding the availability of official sources.  There are other serious questions raised as to authenticity.  For example, the document states that the interview was conducted in English, yet the English version sought to be tendered is a translation of a German version which is also sought to be tendered.  There are unexplained blanks in the record and in it other documents are referred to which are not part of the record.  Successive translations have rendered the meanings of some words doubtful.  The record has the capacity to be misleading and confusing within the meaning of s 135(b) of the Evidence Act.  This danger substantially outweighs any slight probative value it may have and the record accordingly should not be admitted. 

122               Further, admission of the record would occasion unfair forensic prejudice to Kennedy.  There is no opportunity to test any statement in it by cross-examination.  It is not apparent how he could meet the gist of the evidence without calling Rivkin or Hafner or both and otherwise becoming involved in the substantive issue of beneficial ownership of the Offset Alpine shares.  It is hardly likely that Kennedy would undertake either course if he were properly advised, since to do so would raise collateral issues, the examination of which would almost certainly be highly prejudicial to Kennedy.  The record contains much that is damaging but completely irrelevant to the case, and many of the statements in it are not in admissible form or are not based upon personal knowledge.  It is not possible to answer those matters as they are not relevant issues in this case.  In my opinion, the slight probative value of the evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial to Kennedy within the meaning of s 135(a) of the Evidence Act.

123               It was submitted for ASIC that the forensic prejudice which is claimed here goes beyond the intended scope of unfair prejudice in s 135(a) of the Evidence Act.  This submission was said to find support in the judgment of McHugh J in Papakosmas v The Queen (1999) 196 CLR 297 at [90]–[97], particularly at [91]–[93]. I disagree.  I do not think that McHugh J intended to limit unfair prejudice to misuse of the evidence by the jury in some unfair way.  Papakosmas and the decision in R v BD (1997) 94 A Crim R 131 (which it approved) were each concerned with the operation of the then new Evidence Act upon evidence of complaint in a criminal sexual assault case.  The only conceivable forensic prejudice at issue in those cases was misuse by the jury of the evidence of complaint.  The principal point settled by Papakosmas was that the Evidence Act made evidence of complaint admissible on the issues in the case, although there were some differences as to the extent to which this altered the pre-existing law (Gleeson CJ and Hayne J at 309, Gaudron and Kirby JJ at 315 and McHugh J at 321-324).  Another issue concerned an argument that use of the evidence of complaint should have been limited by a direction pursuant to s 136 of the Evidence Act.  The gist of the point being made by McHugh J was to disagree with a statement in R v BD that, in a particular situation, a s 136 direction should be given as a matter of course.  After citing from a passage from Hyman v Rose [1912] AC 623 at 631 which disapproved of fettering general statutory discretions, McHugh J said (at [97]):

‘Sections 135, 136 and 137 contain powers which are to be applied on a case by case basis because of considerations peculiar to the evidence in the particular case.  It may be proper for appellate courts to develop guidelines for exercising the powers conferred by these sections so that certain classes of evidence are usually excluded or limited (See Norbis v Norbis (1986) 161 CLR 513 at 517–520, per Mason and Deane JJ; cf at 536–538, per Brennan J).  But those sections confer no authority to emasculate provisions in the Act to make them conform with common law notions of relevance or admissibility.

124               Gleeson CJ and Hayne J to the same effect said (at [38]):

‘Counsel went so far as to argue that, as a general rule, a court which receives evidence of complaint in any criminal case should limit its use under s 136 so that it is not used for a hearsay purpose.

The submissions must be rejected.  They amount to an unacceptable attempt to constrain the legislative policy underlying the statute by reference to common law rules, and distinctions, which the legislature has discarded.

There may well arise circumstances in which a court, in the exercise of a discretion enlivened by the requirements of justice in the facts and circumstances of the particular case, will see fit to limit the use of complaint evidence, and, in some instances, it may be appropriate to effect that limitation in a manner which corresponds to the previous common law.  To assert a general principle of the kind for which the appellant contends, however, would be to subvert the policy of the legislation.’

125               It may also be taken from Papakosmas that making a case stronger is not prejudicial to the other party within the meaning of s 135 or s 136 (per Gleeson CJ and Hayne J at [29] in their approval of the decision in R v BD, and McHugh J at [98]).

126               The decision in Papakosmas confirms the width and importance of the discretion in s 135.  Gleeson CJ and Hayne J said (at [26]):

‘The fact that hearsay evidence falls within one of the exceptions to the exclusionary rule contained in s 59 does not necessarily mean that it will be received, or used for a hearsay purpose.  The Act confers on courts a general discretion to refuse to admit evidence in certain circumstances (s 135), and it obliges a court, in a criminal proceeding, to refuse to admit evidence adduced by the prosecutor if its probative value is outweighed by the danger of unfair prejudice to the defendant (s 137).  Neither of those provisions was invoked on behalf of the appellant in this case.’

127               McHugh J said (at [87]):

‘Whatever the dangers of admitting out-of-court statements into evidence may be, the scheme of the Act is to deal with them by the hearsay rule (s 59), by the discretions conferred by ss 135–137 and by the warning provision in s 165, not by reference to notions of relevance.  Notions of reliability and procedural fairness play no part in testing the relevance of evidence for the purpose of s 55 of the Act.’

128               The effect of liberalisation of the rules of evidence by the Evidence Act, in particular of the rules in relation to hearsay and the width of the notion of relevance, has led to much evidence being admissible which has a tenuous connection with the case, is untested and could never be tested because truth or otherwise of the statements are not of sufficient (if any) relevance to the case.  Section 135 is a control mechanism in relation to that result.  As this case illustrates, the admission of hearsay evidence has much potential for prejudice to a party apart from the tendency to inculpate.  The existence of ss 135, 136 and 137 provides the mechanism to control unfair prejudice.  Those sections should not be read down by unexpressed limitations.  If the unfair prejudice were limited to misuse at the point of decision by the tribunal of fact the sections would be rendered virtually nugatory in cases heard by a judge alone.

129               To approach the balancing exercise  required by s 135 in the way I favour is not to give undue weight to outdated notions of admissibility, but rather to recognise the breadth of the changes effected by the Evidence Act and the potential for prejudice inherent in those changes (see The Larrakia People v Northern Territory [2003] FCA 1175 at [11]).

130               In addition, the record contains much material which is prejudicial to the general personal interests of Kennedy and his reputation for which Kennedy is not the direct or indirect source, which cannot be tested in this case and which have nothing to do with this case.  In my opinion, that is unfair prejudice within the meaning of s 135(a) which should not be read down to refer to forensic prejudice in the instant case alone.  That would be a gloss on the statute and would unduly restrict the beneficial effect which it (and s 136) can have in such circumstances. 

Conclusion

131               Relief will be granted in relation to the Ritz Hotel notepad.  Relief will otherwise be refused.  I have been asked to refrain from immediately making orders. The proceeding will stand over for the making of orders and for argument as to costs.  It will be up to the parties to remind me of any issue which I have not resolved.

Associate:

Dated:              25 March 2004