FEDERAL COURT OF AUSTRALIA

Seven Network Limited v News Limited (No 7) [2005] FCA 1092

1.                  The motion be dismissed.

2.                  Unless written submissions are filed in accordance with Order 3, the costs of the motion be costs in the cause.

3.                  The parties have liberty to file written submissions within 7 days seeking a different costs order to that in Order 2.

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

REASONS FOR JUDGMENT

thE motion

1                     The Sixteenth and Twenty-Second Respondents (‘Optus’) have filed a cross claim against the applicants (‘Seven Network’) in these proceedings seeking relief based, inter alia, on alleged misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act  1974 (Cth) (‘TP Act’).  Optus has now applied by motion for leave to issue a notice to produce to Seven Network.  The notice to produce seeks production of the following documents:

‘All documents recording or evidencing any legal advice given to [Seven Network] relating to the matters the subject of the statements contained in the letter from [C7 Pty Ltd] to [Optus Vision Pty Ltd] dated 1 May 2001 referred to in paragraph 9 of the Amended Cross Claim of [Optus]’.

2                     In the letter of 1 May 2001 (‘the Letter’), C7 Pty Ltd made certain assertions as to when Seven Network Ltd had lost the rights to televise Australian Football League (‘AFL’) games.  The Letter contained the following paragraph:

‘Under its present arrangements with the AFL, Seven has the right to broadcast on Pay and FTA [free-to-air] the AFL Spectacles until at least the commencement of the 2002 Season (being approximately February 2002).  For this reason until the first day of the 2002 AFL Season Seven will still have, and will not have lost, the AFL rights, and accordingly Optus’ right of termination under clause 16.2(a) [of the Optus Channel Supply Agreement] will only arise on the first day of the 2002 AFL Season’.

As will become clear, the date on which Seven Network Ltd lost the AFL pay television rights (‘AFL television rights’) is material to the issues arising on the cross claim.

3                     There is no dispute that the advices contained in the documents referred to in the proposed notice to produce are protected by legal professional privilege, unless Seven Network has waived or otherwise lost that privilege.  Optus says, however, that the material in the documents is relevant to the issues raised by Seven Network’s defence to cross claim and that Seven Network has therefore waived or lost any legal professional privilege that otherwise would have attached to that material.

4                     Optus argues that Seven Network, by its defence to cross claim, has put in issue its state of mind, or that of its officers, concerning the date on which Seven Network Ltd lost the AFL rights.  Optus accordingly contends that Seven Network must be taken to have waived privilege attaching to any legal advice it received on the question.  Alternatively Optus argues, on the authority of Telstra Corporation v BT Australasia Pty Ltd (1998) 85 FCR 152, that the touchstone to apply when determining whether legal professional privilege has been waived is essentially that of fairness.  Optus contends that a party affirmatively asserting that it had a reasonable basis for making a particular representation cannot, as a matter of fairness, maintain privilege in respect of legal advice received as to whether the basis for making the representation in truth existed.

5                     For its part, Seven Network says that the documents sought in the proposed notice to produce are not relevant to any issue in the proceedings.  Seven Network further says, even if the material in the documents is relevant, it has never waived legal professional privilege.  Seven Network’s argument on relevance is based on the precise form of the defence to cross claim, in particular the absence of any pleading referring to the state of mind of Seven Network or of anyone acting on its behalf.  The privilege argument rests on much the same point: that is, Seven Network has not pleaded any state of mind to which the legal advice might be relevant, nor has it pleaded the terms of any advice that may have been received.  Seven Network accordingly contends that there is no basis for holding that it has waived or lost legal professional privilege in respect of the legal advice received by it.

6                     There is no dispute, at least for the purposes of the motion, that Seven Network  received legal advice as to when it had lost the AFL television rights.

THE PLEADINGS

The cross claim

7                     The cross claim pleads that during December 2000 corporations other than Seven Network obtained the AFL television rights to games to be played during the seasons 2002 to 2006 inclusive (par 1).  It is said (par 2) that in consequence of the loss by Seven Network of the AFL television rights, Optus acquired a right to terminate an agreement known as the Optus Channel Supply Agreement, since cl 16.2(a) of that Agreement gave Optus a right to terminate if Seven Network:

‘does not have, or loses, the pay television rights to AFL games for any reason’.

8                     Optus further alleges that a determination of the exact date upon which its termination rights under cl 16.2(a) of the Agreement arose depended upon contractual arrangements then in force between Seven Network and the AFL relating to the AFL television rights (par 3).  It says that Seven Network had access to those contractual arrangements, while Optus did not (pars 4, 5).

9                     Paragraph 9 of the cross claim pleads the relevant terms of the Letter.  Paragraph 19 alleges that the Letter constituted a representation to Optus that:

‘(a)      the Optus Channel Supply Agreement could not be terminated by Optus until the beginning of the 2002 AFL Season;

(b)               under its contractual arrangements with the AFL, [Seven Network] retained the AFL rights until the first day of the 2002 AFL Season with the consequence that Optus’ right to terminate the Optus Channel Supply Agreement would only arise at that time;

(c)               under its contractual arrangements with the AFL, [Seven Network] had the right to broadcast on pay television the ‘AFL Spectacles’ until the commencement of the AFL Season …’.

10                  The representations pleaded in par 19 of the cross claim are said to have contravened s 52 of the TP Act for two reasons.  First, the representations were false or misleading in that Optus acquired the right to terminate the Optus Channel Supply Agreement at the end of the 2001 AFL Season, since Seven Network had lost the AFL television rights by that time (par 20).  (It is apparently common ground that the 2001 AFL season ended in late September or early October 2001.)  Secondly, each of the representations referred to in par 19 was a representation with respect to or about a future matter (par 24).  The particulars to par 24 state that Optus relies on s 51A of the TP Act.  The cross claim therefore makes it clear that Optus intends to seek the benefit of s 51A(1) of the TP Act which is reproduced at [14] below: cf O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455, at [16], per curiam.

the defence

11                  The defence to cross claim filed by Seven Network admits the terms of the Letter, but otherwise does not admit par 9.  The defence to cross claim also, in substance, denies pars 19, 20 and 24.

12                  Paragraph 28A of Seven Network’s defence pleads the following:

‘(a)      An expression by C7 of a view or opinion as to the operation or construction of the Optus Channel Supply Agreement or any agreement pursuant to which C7 obtained AFL rights is not capable of amounting to misleading and deceptive conduct within the meaning of section 52 of the TPA.

(b)       Further or in the alternative, the view expressed by C7 in its letter of 1 May 2001 was an objectively reasonable view, or alternatively the correct view, as:

(1)               Optus’ right to terminate pursuant to clause 16.2(a) of the Optus Channel Supply Agreement arises where C7 “or a related body corporate does not have, or loses, the pay television rights to AFL games for any reason”.

(2)               The term “pay television rights to AFL games” is not defined in the Optus Channel Supply Agreement, and must take its meaning from the agreement as a whole.

(3)               Clause 4.4 of the Optus Channel Supply Agreement specifies what must be included in the C7 channels by way of “AFL games”.  The requirements are:

(i)                 a certain quantity of live games (clause 4.4(d));

(ii)               a replay of all AFL games in each round of the AFL season (clause 4.4(a));

(iii)             replays of the lead-up competition, selected highlights of replays of the Brownlow Medal presentation complete with interviews and summaries, and talk panel shows which comprise a number of talk or panel programs produced exclusively for the C7 channels (clause. 4.4(b)); and

(iv)             one “classic” or popular library game per week in regular time slot (clause 4.4(e)).

(4)               Pursuant to clause 3 of the AFL Licence Extension Agreement, the AFL conferred upon the Seven Network’s broadcast licensees, inter alia, the exclusive right to exhibit or broadcast live and delayed coverage by way of pay television of all AFL matches and events conducted under the auspices of the AFL, including the pre-season competition and the presentation of the Brownlow Medal.

(5)               Pursuant to clause 4 of the AFL Copyright Agreement dated 20 August 1996, the AFL conferred upon the Seven Network’s broadcast licensees a non-exclusive right in perpetuity to transmit on free-to-air or pay television any recording of AFL Spectacles.

(6)               Following the last AFL match for 2001, the only programming which C7 would be obliged to supply pursuant to the Optus Channel Supply Agreement (being replays, talk panel shows, and the weekly classic or library match) is programming which C7 continued to be able to supply.  C7 was therefore in a position to meet its obligations to supply AFL games under the Optus Channel Supply Agreement until the commencement of the 2002 AFL season.  At that point, but not earlier, C7 would be unable to supply the live games which C7 was obliged to supply, and C7 would properly be regarded as having “lost” its pay television rights to AFL games within the meaning of clause 16.2(a) of the Optus Channel Supply Agreement’.

13                  It is clear enough that par 28A(b) of the defence is intended to answer Optus’ plea that it is entitled to take advantage of s 51A(1) of the TP Act.

reasoning

14                  Section 51A of the TP Actprovides as follows:

‘(1)      For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2)       For the purpose of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. 

(3)       …’ (Emphasis added.)

15                  It will be noted that s 51A(1) of the TP Act provides that a representation by a corporation as to a future matter is taken to be misleading if the corporation ‘does not have reasonable grounds for making the representation’.  The section does not say that a corporation escapes the effect of s 51A(1) if a representation made on its behalf was ‘an objectively reasonable view’. 

16                  In Sykes v Reserve Bank of Australia (1998) 88 FCR 511, Heerey J (with whom Sundberg J agreed on this issue) noted (at 513) that if a party has made a representation as to a ‘future matter’, s 51A requires the representor to show (or at least to adduce evidence of):

‘●         some facts or circumstances

●          existing at the time of the representation

●          on which the representor relied

●          which are objectively reasonable and

●          which support the representation made’.  (Emphasis added.)

17                  Paragraph 28A of the defence pleads that the view expressed by Seven Network in the Letter was ‘an objectively reasonable view’.  Six reasons are given why this was so at the relevant time.  Conspicuous by its absence is any pleading that Seven Network, or anyone on its behalf, relied on any or all of these matters in making the representation in the Letter.

18                  I infer that the defence has been carefully drafted so as to avoid pleading anything that could be taken to allege that Seven Network, or persons acting on its behalf, had a particular state of mind or a particular set of beliefs at the relevant time as to the date on which Seven Network would lose the AFL rights.  No application has been made to strike out par 28A(b) of the defence.  Nonetheless, it is difficult to see how the matters pleaded in par 28A(b) in its present form are capable of establishing that Seven Network had ‘reasonable grounds for making the representation’ within the meaning of s 51A(1) of the TP Act. Heerey J’s observations in Sykes v Reserve Bank simply reflect the language of s 51A(1).  There must not only be ‘objectively reasonable’ grounds that could have been used to support the representation as to a future matter.  The corporation must adduce evidence that it had reasonable grounds for making the representation.

19                  The authorities on waiver of legal professional privilege do not speak with one voice.  In Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152, the majority (Branson and Lehane JJ) analysed the operation of s 122 of the Evidence Act 1995 (Cth), which provides that what the Act calls client legal privilege does not prevent the adducing of evidence ‘with the consent of the client’.  At the time Telstra v BT was decided, s 122 was thought, in effect, to govern loss of legal professional privilege in ancillary processes, such as the production of discovered documents or the grant of access to subpoenaed documents (see now Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49).  What is significant for present purposes is that their Honours approached the construction of s 122 by reference to the common law principles of waiver which, in their view, s 122 was intended to incorporate.

20                  Branson and Lehane JJ held (at 168) that where:

‘a party relies on a cause of action, an element of which is the party’s state of mind (including the quality of the party’s assent to a transaction) the party is taken to have waived privilege in respect of legal advice which the party had, before or at the time of the relevant events, material to the formation of that state of mind.

Accordingly, their Honours considered (at 166-167) that where:

‘a party pleads that he or she undertook certain action “in reliance on” a particular representation made by another, he or she opens up as a element of his or her cause of action, the issue of his or her state of mind at the time that he or she undertook such action.  The court will be required to determine what was the factor, or what were factors, which influenced the mind of the party so as to induce him or her to act in that way.  That is, the party puts in issue in the proceeding a matter which can not fairly be assessed without examination of relevant legal advice, if any, received by that party.  In such circumstances, the party, by putting in contest the issue of his or her reliance, is to be taken … to have waived reliance on the privilege which such material would otherwise attract’. (Emphasis added.)

21                  This analysis of common law principles (which now govern claims made in ancillary processes that privilege has been waived or lost) has been followed in some cases and doubted in others.  In a comprehensive review of the authorities, Allsop J in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499, expressed the view that, if it were open to him to do so, he would hold that the reasoning of the High Court in Mann v Carnell (1999) 201 CLR 1, had undercut the approach taken in Telstra v BT.  In particular, Allsop J pointed to the emphasis placed by the majority in Mann v Carnell, at [29], on conduct inconsistent with the maintenance of confidentiality when determining whether a party has waived legal professional privilege, rather than on general considerations of fairness.  Allsop J thought that in the light of these observations, the better view was that a mere pleading by an applicant that he or she relied on a representation does not amount to an assertion that the applicant did or did not rely on privileged information.

22                  Allsop J noted, however, that a Full Court in Perpetual Trustees (WA) Ltd v Equuscorp Pty Ltd [1999] FCA 925, had endorsed the reasoning in BT v Telstra, albeit before Mann v Carnell had been decided.  Several single judge decisions had also followed BT v Telstra after Mann v Carnell had been decided: see, for example, Fort Dodge Australia v Nature Vet Pty Ltd [2002] FCA 501 (Hely J); BT Australian Pty Ltd v Nyran Pty Ltd [2002] FCA 1302 (RD Nicholson J).  Allsop J concluded [at 112] that:

‘the law on implied waiver may be seen as expressed by the majority of the Full Court in Telstra.  So to conclude flows from an obligation to apply the Full Court’s decision in Perpetual Trustee (albeit decided before Mann v Carnell) and from comity with Hely and Nicholson JJ.  My own view is that Mann v Carnell and the earlier seminal decisions point to a more restricted principle, which, though not easy to apply in any given circumstance, is not sufficiently expressed by the views of the majority in Telstra …’

23                  Consistently with the reasoning in BT v Telstra, Allsop J considered that where a party makes allegations raising the issue of its state of mind to which legal advice is likely to have contributed, that party cannot continue to claim legal professional privilege for the advice.  However, his Honour added (at [113]) a qualification that the principle should be applied:

‘with the necessary recognition from Mann v Carnell that inconsistency is the key to understanding the application of the principle’.

In the result, Allsop J held (at [115]) that the mere denial by respondents of an allegation as to their state of mind does not waive privilege in respect of any advice that may have materially contributed to the alleged state of mind.

24                  I think that there is much force in the view that the reasoning in Mann v Carnell requires Telstra v BT to be reconsidered.  As the Full Court observed recently (Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3, at [22]), the effect of Mann v Carnell is that:

‘the essence of waiver is not general fairness – it is the inconsistency of the posited act with the confidentiality protected by the privilege (in which analysis fairness may play a part)’.

25                  It is not, however, necessary in the present case to explore the question further.  Even if the reasoning in Telstra v BT applies (with or without the qualification relating to inconsistency suggested by Allsop J), I do not think that Seven Network can be taken to have waived privilege in respect of the legal advice it apparently received concerning the date on which it was to lose the AFL rights. 

26                  Seven Network has gone to considerable lengths to avoid an affirmative plea that it or its officers had a specific state of mind, or relied on particular matters, in making the statements in the Letter concerning the date on which it would lose the AFL television rights.  The ratio of Telstra v BT does not support Optus’ claim that legal professional privilege has been waived.  This is not a case where the party claiming privilege has pleaded that he or she had a particular state of mind or relied on particular representations.  In my view, there is no unfairness in allowing Seven Network to maintain its claim to legal professional privilege, having regard to the limited scope of the plea in par 28A of its defence.

27                  The rub in this conclusion is that, if what I have said is correct, par 28A(b) of the defence may not advance Seven Network’s case very far at all.  For the reasons I have given, par 28A(b) does not seem to plead matters sufficient to enable Seven Network to avoid the effect of s 51A(1) of the TP Act.  If Seven Network seeks to amend its pleading, or to adduce evidence that goes beyond the narrowly circumscribed scope of its present pleading, other issues doubtless will arise.

conclusion

28                  The motion should be dismissed.  My present view is that the costs of the motion should be costs in the cause.  Unless either party makes written submissions on costs within seven days, that is the costs order I propose to make.

Associate:

Dated:              11 August 2005