FEDERAL COURT OF AUSTRALIA

Seven Network Limited and anor v News Limited and Others [2005] FCA 778

COSTS – Motion for production of discovered documents for which client legal privilege had been claimed – numerous documents produced – Motion discontinued – whether Motion premature – importance of timely and proper discovery in major commercial litigation – reasonableness of action taken.

Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 cited

Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia;

Ex parte Lai Qin (1997) 186 CLR 622 referred to

One.Tel Ltd & Ors v Commissioner of Taxation (2000) 101 FCR 548 referred to

Commonwealth of Australia v Lyon [2004] FCAFC 92, 29 April 2004 referred to

Seven Network Limited & Anor v News Limited & Ors [2005] FCA 142 cited

Waterford v The Commonwealth of Australia (1987) 163 CLR 54 referred to

SEVEN NETWORK LIMITED & ANOR v NEWS LIMITED & ORS

N1223 OF 2002

GRAHAM J

10 JUNE 2005

SYDNEY

THE COURT ORDERS THAT:

1                     I note that no further substantive relief is sought on the Notice of Motion filed 2 May 2005. 

2                     I order the Sixteenth and Twenty-Second Respondents to pay the Applicants’ costs of the Motion. 

3                     I grant leave to the Applicants to have a bill of costs taxed forthwith. 

4                     I order that payment of the costs be effected forthwith notwithstanding that the substantive proceedings have not concluded.

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

REASONS FOR JUDGMENT

5                     Proceedings NSD1223 of 2202, known as Seven Network Limited & Anor v News Limited & Ors arise out of bids for television broadcast rights in respect of two codes of football one administered by the Australian Football League and the other by the National Rugby League.  There are numerous parties to the proceedings and needless to say, the litigation is complex.

6                     On 11 February 2005 the main proceedings were fixed for hearing before Justice Sackville commencing on Monday 18 July 2005.

7                     By a Notice of Motion filed 2 May 2005 the Applicants seek relief in respect of the production of documents by the Sixteenth and Twenty-Second Respondents, namely Optus Vision Pty Limited and Singtel Optus Pty Limited.  The precise relief sought in the Motion was:-

“1.       The sixteenth and twenty-second respondents produce to the applicants for inspection the documents set out in the annexure to this motion.

2.         The sixteenth and twenty-second respondents pay the applicants’ costs of and incidental to this motion;

3.         Such further or other order as the Court sees fit.”

8                     The annexure to the Motion was 47 pages in length and identified what would appear to be some 410 documents the production of which was sought.

9                     On 11 May 2005 Justice Sackville made a number of directions including a direction that the Notice of Motion be listed for hearing before me on 9 June 2005 that is to say yesterday.

10                  On the hearing of the Motion Mr. T. E. F. Hughes QC appeared with Mr. T. D. F. Hughes for the Applicants and Mr. Leeming of Counsel appeared for the Respondents to the Motion (“the Optus Respondents”).

11                  Had it been necessary to determine the substantive prayers for relief in the Motion it would have been necessary to determine the validity of the claims made by the Optus Respondents for client legal privilege in respect of the 410 documents.

12                  However, the matter has not been static and other issues have arisen.

13                  In the result, during the course of the hearing before me, the Optus Respondents produced five documents in respect of which a claim for privilege is no longer pressed (see the facsimile transmission from the Optus Respondents’ Solicitors, Messrs Atanaskovic Hartnell, to the Applicants’ Solicitors, Messrs. Freehills, of 6 June 2005).

14                  On 30 May 2005 the Optus Respondents had earlier abandoned their claim for privilege in respect of some 71 documents.  This followed an earlier abandonment of claims for privilege in respect of 160 documents on 6 and 9 May 2005.

15                  On 13 May 2004 inspection was given in respect of the 160 documents and it is anticipated that inspection of the 71 documents, in respect of which privilege has not been maintained since 30 May, will occur some time today when electronic copies of the documents are placed upon the computer system which has been established for the conduct of this litigation.

16                  In the foregoing circumstances the Applicants no longer wish to seek any relief by way of orders for inspection under the Motion.

17                  However the Applicants have pressed their claim for an order for costs.

18                  The Optus Respondents have argued that the Court should not engage in a mini trial to determine what might have been the outcome of the motion had it proceeded to a hearing.  However, that is not what the Applicants have done nor are they asking me to do so.  They have simply put before the Court evidence as to what has occurred and what concessions have been made by the Optus Respondents in the face of the Motion. 

19                  After reviewing a number of authorities Hill J in Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201 stated the following propositions where substantive proceedings have been resolved without the necessity for a hearing:-

“(1)     Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order:  Stratford and the SEQEB case.

(2)       It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial:  Stratford.  This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.

(3)       In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB).

(4)       In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation:  cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371.

(5)       Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted:  cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration.”

(see also Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; One.Tel Ltd & Ors v Commissioner of Taxation (2000) 101 FCR 548 at 553 and Commonwealth of Australia v Lyon [2004] FCAFC 92, 29 April 2004 at paragraph 9)

20                  No authority was cited before me which specifically dealt with the exercise of the Court’s discretion in respect of an interlocutory motion such as that presently before the Court where, because of changed circumstances that have arisen since the Motion was filed, no further relief was sought.

21                  Costs in respect of interlocutory proceedings are covered by Order 61 Rule 3 of the Federal Court Rules.  The Rules lay down no criteria to determine how costs should be awarded.  It is sufficient that such costs lie in the discretion of the Court, which discretion must, of course, be exercised judicially.

22                  In litigation of the complexity of the current proceedings where numerous parties are involved, the likely hearing time will be considerable and the attendant costs enormous, it is essential that the parties are not constrained to prepare their cases and to evaluate the strengths and weaknesses of their cases with one hand tied behind their backs.

23                  Whilst the demands on the parties to prepare their own cases may be considerable and may call for the application of considerable resources to enable time limits set by the Court to be met, it is entirely inappropriate to put to one side their obligations to the other parties who are under like pressure to prepare their cases.

24                  The above propositions are, in my view, consistent with what Tamberlin J said in Seven Network Limited & Anor v News Limited & Ors [2005] FCA 142, an earlier interlocutory judgement in proceedings N1223 of 2002.  In paragraph 22 of his Reasons for Judgment Tamberlin said:-

“The importance of the availability of documentation to parties in litigation, particularly in litigation on the scale of the present case, and the public interest in the courts making fully informed decisions by reference to documentary records, requires scrupulous compliance with the requirements of the FCR and the accepted principles for discovery and the assertion of privilege.  An affidavit verifying the authenticity of the claim for privilege in respect of a list of documents should not be sworn in a hasty or cursory manner.  The deponent should ensure that proper instructions are obtained and followed before swearing the affidavit.  The Court must be able to rely on diligent compliance with its orders and this is reflected in the requirement that the solicitor must give a certificate.  Documentation will clearly play a central role in resolution of the complex issues which arise on the pleadings in the present case.  The present litigation involves a number of disputes in respect of which documentation may prove to be critical.”

25                  In his submissions, counsel for the Optus Respondents acknowledged that his clients had been guilty of some “slippage”.  By using this word I understood him to be conceding that the Optus Respondents’ obligations to deal with the issues which the Applicants had raised covering the legitimacy of the Optus Respondents’ claims for privilege had been put to one side whilst the Optus Respondents attended to other things.

26                  Ultimately, claims for privilege in respect of numerous documents were not pressed.  Counsel for the Applicants took me to some of these to support his submission that they should never have been the subject of claims for privilege in the first place, that it wasn’t simply a case of waiver of privilege and that an attempt had been made to colour documents as privileged when on the face of them, they were not privileged.

27                  One such document to which I was taken was a copy email from Paul Fletcher to Paul O’Sullivan with copies to Chris Anderson and Max Suich.  (see Exhibit MA3 at page 196).  The subject of the email is described as “Foxtel and ACCC – a couple of issues – legally privileged”.  The email was sent by Mr. Fletcher in his capacity as “Director, Corporate and Regulatory Affairs” of “Optus”.

28                  It is clear that from a reading of the email that it is not a privileged communication.  Indeed, it is somewhat curious that the words “legally privileged” should have been added to the subject of the email as if, by so doing, privilege could be attracted.

29                  Another similar document is a copy email dated 17 May 2002 from Paul O’Sullivan who is described in the email as “Chief Operating Officer” of “Optus” to Paul Fletcher with the subject heading “ACCC Alchemy”.  Prior to the commencement of the message this email has emblazoned upon it:-

“PRIVILEGED COMMUNICATION: CLIENT LAWYER PRIVILEGED”

 (see page 230 of Exhibit MA3)

30                  Another document said to illustrate that it had quite erroneously been the subject of a claim for privilege was a copy email from Scott Lorson to Paul Fletcher and Martin Dalgleish dated 27 May 2002 to which an earlier email from Paul Fletcher to Martin Dalgleish and Scott Lorson of 27 May 2002 is attached (see page 245 of Exhibit MA3).  Once again there would not appear on the face of the document to be any basis on which either of these emails could be said to attract a proper claim for client legal privilege.  It may be noted that no evidence was given by the Optus Respondents on the hearing before me explaining why client legal privilege had been claimed for any of the documents in relation to which the claim was no longer pressed.

31                  Much of the Applicants’ concern in respect of the Optus Respondents’ privilege claims related to communications directed to or emanating from Mr. Fletcher.

32                  It would appear that Mr. Fletcher was from time to time involved in the provision of legal advice to the Optus Respondents.  However he also appears to have had a role in the negotiation of the Foxtel/Optus content sharing arrangements, a role in corporate strategy an involvement in the consideration by Optus of the problems that had been experienced in establishing a viable and profitable Pay TV business and of the proposals which had been considered for addressing those problems and also a role in media and communications strategy.

33                  The evidence is that Mr. Fletcher had been appointed a director of Optus Vision on 5 June 2002.  He was also a director of Corporate and Regulatory Affairs at Singtel Optus having held that position since December 2001 and having previously been Director, Regulatory and Public Affairs and Director, Regulatory Affairs and Interconnect.  He was apparently responsible for Optus’ internal legal function, regulatory issues, government relations, media relations, internal communications, corporate affairs and the commercial interconnect relationship with Telstra.

34                  In this regard it is appropriate to note that on 28 February 2005 Tamberlin J handed down his Reasons for Judgment, referred to above, on a not dissimilar motion from that presently before the Court in which His Honour dealt with certain privilege claims by the News Respondents.  His Honour said in respect of client legal privilege:-

“4.       The dominant purpose test has particular importance in relation to the position of in-house counsel because they may be in a closer relationship to the management than outside counsel and therefore more exposed to participation in commercial aspects of an enterprise.  The courts recognise that being a lawyer employed by an enterprise does not of itself entail a level of independence.  Each employment will depend on the way in which the position is structured and executed.  For example, some enterprises may treat the in-house adviser as concerned solely in advising and dealing with legal problems.  As a matter of commercial reality, however, both internal and external legal advisers will often be involved in expressing views and acting on commercial issues.

5.         The authorities recognise that in order to attract privilege the legal adviser should have an appropriate degree of independence so as to ensure that the protection of legal professional privilege is not conferred too widely.  …”

(See also Waterford v The Commonwealth of Australia (1987) 163 CLR 54 at 62, 70-1 and 81-2)

35                  In respect of the application before him His Honour continued:-

“14.     The evidence discloses that privilege was originally claimed for some 283 documents in an affidavit sworn on 28 May 2004 by Mr. Philip, Chief General Counsel for News, and certified by the solicitor for News.  Mr. Philip is also the nineteenth respondent in the proceedings.  He holds a number of other positions and offices in the News Group of companies.  These include directorships and alternate directorships of six associated companies.  He is also a member of the NRL Partnership Executive Committee.  The evidence demonstrates that Mr. Philip has been actively involved in a commercial role in a number of business activities which are set out in an affidavit of 24 November 2004 made by Mr Graeme Johnson on behalf of Seven.  These activities include negotiations of numerous important commercial arrangements, including the grant of options, the making available of television channels to other parties and the conduct of negotiations concerning a content sharing agreement and the broadcast of football matches.  This evidence as to his extensive involvement in commercial matters is not contradicted or qualified by any evidence on behalf of News or Mr Philip.

…

17.       The present Notice of Motion by Seven, which was filed on 24 November 2004, seeks the production by News and Mr Philip of 26 documents the subject of the disputed claim for legal professional privilege.  The Motion was set down for hearing before me on 17 December 2004.

…

38.       … I am cognisant of the fact that there is no bright line separating the role of an employed legal counsel as a lawyer advising in-house and his participation in commercial decisions.  In other words, it is often practically impossible to segregate commercial activities from purely ‘legal’ functions.  The two will often be intertwined and privilege should not be denied simply on the basis of some commercial involvement.  In the present case, however, I am persuaded that Mr Philip was actively engaged in the commercial decisions to such an extent that significant weight must be given to this participation.  In many circumstances where in-house counsel are employed there will be considerable overlap between commercial participation and legal functions and opinions.  As can be seen from the specific rulings below, I am not persuaded that in this proceeding Mr Philip was acting in a legal context or role in relation to a number of the documents in respect of which privilege was claimed.  Nor am I persuaded that the privilege claims were based on an independent and impartial legal appraisal.”

36                  In relation to the Optus Respondents’ claims for privilege, similar considerations apply to the role of Mr. Fletcher as applied to Mr. Philip in the case of News.  However, no substantive issues fall to be determined by me, given the concessions that have been made by the Optus Respondents and the satisfaction of the Applicants with the outcome that has been achieved.

37                  One key submission of Counsel for the Optus Respondents has been that the Applicants acted precipitately in applying for the relief set out above.  He draws attention to the fact that the motion was dated 29 April 2005 and filed on 2 May 2005 in circumstances where the Optus Respondents had promised, before that time, to deal with the challenge to the privilege claims that had been made, by 9 May 2005 and, as it transpires, responses to the then challenges to the Optus Respondents’ claims for privilege were provided in part on 6 May 2005, with the remainder being provided on 9 May 2005 as promised.  As an aside it is acknowledged that a decision was not taken to no longer press privilege in respect of one document where exception had, been taken to the privilege claim until 30 May 2005.

38                  The Applicants meet this submission by drawing attention to the then well-established unreliability of the Optus Respondents’ expressions of intention in respect of future action.  The Applicants urge that they acted in a totally reasonable way by filing the Notice of Motion and urge that but for the threat of the Court’s intervention, they would not have achieved the outcome which they have achieved.  They further urge that even in respect of the documents for which privilege is still claimed, their ability to accept the claims which were made has been facilitated by additional information that had not previously been provided and, they say, would not have been provided but for the filing of their Motion.

39                  A short history of the privilege claims is as follows:-

(a)        On 1 March 2005 Freehills sent a facsimile to Atanaskovic Hartnell in which they said:-

“We refer to your client’s revised lists of privileged documents, provided with your letter of 17 February 2005.

Mr Fletcher is a director of Optus. …

Our clients are concerned that Mr Fletcher was concerned in a commercial, rather than a legal capacity in respect of the events that formed the subject matter of these proceedings.

Please advise whether there are any documents in your clients’ list that are said to be privileged by virtue of Mr Fletcher acting as the relevant legal adviser.  If there are, please identify them.

…”

(b)        On 15 March 2005 Freehills again wrote to Atanaskovic Hartnell.  In this facsimile (six pages and accompanying schedules taking up 32 pages) Freehills said:-

“We raised our clients’ concerns about whether Mr. Fletcher was capable of giving privileged legal advice in respect of matters the subject of these proceedings in our facsimiles of 1 and 11 March 2005.  We now raise a number of other concerns that our clients have with your clients’ privilege claims.  We have endeavoured to provide comprehensive comments but, given the extent of your clients’ claims for privilege and the general poor state of Schedule 1 Part 2 of your clients’ lists of documents, our clients reserve the right to make further complaints and to raise further questions.

…”

(c)        Freehills’ facsimile of 15 March would appear to have crossed with one from Atanaskovic Hartnell to Freehillls also dated 15 March 2005, but probably sent on 16 March (two pages together with schedules spanning 10 pages).  The covering letter contained the following:-

“Attached to this letter is a schedule setting out those documents in our client’s Lists of Privileged Documents that are said to be privileged in part at least by virtue of Mr Fletcher acting as the relevant legal adviser. …

(d)        By facsimile dated 4 April 2005 to Atanaskovic Hartnell, Freehills said:-

“Our clients are most concerned about the absence of a reply given the history of your clients’ discovery, the seriousness of the matters raised, that this matter is listed for a hearing commencing on 18 July 2005, and where orders have been made for parties to provide tender lists.

Unless your clients satisfactorily answer our clients’ queries by 12 April 2005 (which allows your clients a month to answer the queries) we are instructed to file a notice of motion seeking appropriate orders resulting in production of the documents identified in our facsimile.

On 16 March 2005, in your response to our facsimile of 1 March 2005 regarding privilege claims over communications for the purpose of Mr Fletcher giving legal advice, you identified documents that your clients say are privileged on that basis.  A large number of the documents you identified were created while Mr Fletcher was a director of Optus Vision.  In our facsimile of 1 March 2005 we notified you of our client’s view that Mr Fletcher was involved in a commercial, rather than legal, capacity in respect of the events that formed the subject matter of these proceedings.

By 12 April 2005 also please articulate the basis on which your clients contend that Mr Fletcher was capable of giving privileged legal advice, having regard to Mr. Fletcher’s commercial role for your clients.  If our clients are not satisfied by your clients’ response we are instructed to also seek appropriate orders resulting in production of documents said to be privileged where the relevant legal adviser was Mr. Fletcher.”

(e)        By a facsimile dated 7 April 2005 Atanaskovic Hartnell responded to Freehills’ facsimile of 4 April 2005 saying:-

“Your facsimile of 15 March 2005 attached 32 pages of schedules of queries relating to our client’s claims for legal professional privilege.  We have been working through these queries and expect to be in a position to finalise our client’s instructions and respond to you by next Friday, 15 April 2005.

…

Further … our team has been attending to various other tasks that require completion by specified Court deadlines, including the progressing of further lay evidence and expert evidence, discovery of Project Emu/County documents to facilitate the finalisation filing of our clients’ Verified Second Further Supplementary Discovery List. 

Insofar as your facsimile seeks further articulation of the basis on which Optus contends that Mr Fletcher was capable of giving legal advice having regard to his commercial role and position as a director, we will endeavour to provide this response by 15 April 2005.”

(f)         In a facsimile dated 19 April 2005 Atanaskovic Hartnell wrote to Freehills stating:-

“As stated in our facsimile of 7 April 2005, your facsimile of 15 March attached 32 pages of schedules of queries relating to our client’s claims for legal professional privilege over 379 documents.  We have been working through these queries and obtaining instructions on a progressive basis.  However, this review has taken longer than we anticipated and unknown to us on 7 April, Mr Fletcher was scheduled to go on leave from 8 to 15 April 2005 inclusive, making it difficult for us to obtain instructions during this period.

…

Realistically, our client requires more time in order to complete its response.  …the hearing date is not sufficiently close to necessitate a formal motion being filed.

… we will respond in tranches upon receipt of instructions and Optus will complete its responses by no later than Monday 9 May 2005 …”

(g)        When the proceedings were before Sackville J for directions on 20 April 2005 Senior Counsel for the Applicants made reference to an intended motion “regarding Optus privilege claims”.  He said (transcript page 19):-

“The Optus parties have said to us in correspondence that we are jumping in a little early because they will respond to us in detail by 9 May.  We would rather get on with it.  It is unlikely the motion would be heard before 9 May in any event.  We would rather have some slight risk of costs being wasted on this …”

In response Senior Counsel for the Optus Respondents said (transcript page 20):-

“The position is this, that on 13 March, in the light of Tamberlin J’s judgment relating to in-house privilege Freehills sent to my instructing solicitor a lengthy letter attaching a number of schedules, seeking responses in respect to queries in respect of 379 documents related to the role of Mr. Fletcher, the in-house counsel for Optus.  Despite our best efforts we haven’t been able to provide a detailed response to that but have been, in the course of dealing with that, accounting for the time when it was raised and things which had been organised within the client independently of this request.  We can do that and provide that response by 9 May.  We can’t do it before then. …”

(h)        An interchange then took place between Sackville J and Senior Counsel for the Applicants as follows (transcript page 21):-

“HIS HONOUR:            Mr Sheahan if you’re going to get a response by the 9^th, that may, presumably will narrow the issues.  Is there some virtue in your withholding any motion until immediately after 9 May?

MR SHEAHAN:          We don’t’ think so, your Honour.  There is going to be – we think it’s almost inevitable there will be a dispute with the Optus parties about this.  We’re not trying to jump our learned friends.  We started correspondence with them about the adequacy of their lists so far as privileged documents were concerned on 5 January.  One of the reasons why we’ve got a more compressed timetable with them, why we’re running out of time with them, is that their list wasn’t in as good a form as some of the other parties, and now we’re getting, because of the trial date approaching, on the one hand, we’re getting jammed.  We need to get it underway.”

40                  In my opinion it was entirely reasonable for the Applicants to file the Notice of Motion when they did.  It is clear that numerous documents were not privileged in relation to which client legal privilege had been claimed and in respect of which the claims for privilege were later withdrawn.  The Optus Respondents’ “slippage” needed to be brought to an end and in my opinion it is unlikely that this would have occurred had it not been for the filing of the Motion.

41                  In my opinion an Order should be made that the Sixteenth and Twenty-Second Respondents pay the costs of the Applicants of the Motion filed 2 May 2005.

42                  Accordingly, I note that no further substantive relief is sought on the Notice of Motion filed 2 May 2005.  I order the Sixteenth and Twenty-Second Respondents to pay the Applicants’ costs of the Motion.  I grant leave to the Applicants to have a bill of costs taxed forthwith.  I order that payment of the costs be effected forthwith notwithstanding that the substantive proceedings have not concluded.

Associate:

Dated:              10 June 2005