FEDERAL COURT OF AUSTRALIA

Seven Network Limited v News Limited (No 12)

[2006] FCA 348

PRACTICE AND PROCEDURE – whether discovery of a document recording conclusion stated in legal advice waives privilege in the advice

Evidence Act 1995 (Cth), s122

Mann v Carnell (1999) 201 CLR 1 cited

Bennett v Chief Executive Officer of the Australian Customs Service (2004) 140 FCR 101 followed

Rio Tinto Ltd v Commissioner of Taxation (2005) 224 ALR 299 cited

SEVEN NETWORK LIMITED and ANOR v NEWS LIMITED and ORS

NSD 1223 of 2002

SACKVILLE J

SYDNEY

3 APRIL 2006

THE COURT ORDERS:

1.      Optus’ motion seeking an order setting aside the applicants’ notice to produce dated 10 March 2006 be dismissed.

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

REASONS FOR JUDGMENT

1                     The sixteenth and twenty-second respondents (together ‘Optus’) have filed a motion seeking an order setting aside an amended notice to produce, dated 10 March 2006, served by the applicants.  The notice requires Optus to produce ‘[a]ny documents containing or recording the legal advice referred to in [the Project Alchemy Board Paper]’.  The notice to produce was issued in the course of the trial, which has thus far consumed some seventy-three hearing days.

2                     The Project Alchemy Board Paper (‘Alchemy Paper’) was placed before the board of the twenty-second respondent (‘SingTel Optus’) at its meeting on 21 February 2002.  Prior to that meeting, Optus and the applicants had agreed, on two separate occasions, to vary the terms of the Optus Channel Supply Agreement (‘OCSA’), which the parties had entered into on 30 June 1998.  Under the OCSA, the applicants had agreed to supply the sixteenth respondent (‘Optus Vision’), a retail pay television provider, with sports programming.  The OCSA was expressed to be for a term expiring on 31 December 2008, subject to early termination in certain circumstances.

3                     The variations to the OCSA agreed to between the parties included the insertion of cl 8A.  This clause, as further amended, provided for an ‘exclusivity period’ from 27 September 2001 to 28 February 2002, during which Optus was not to participate in discussions or negotiations on certain matters with any party other than the applicants.

4                     The Alchemy Paper includes a section headed ‘Legal Risks’.  Within this section, the following appears:

‘By negotiating with Foxtel, C7 [one of the applicants] may allege that Optus has breached certain exclusivity provisions contained in the C7 variation agreements. C7 might immediately terminate those arrangements (therefore leaving Optus without sport content for up to 6 weeks) and/or seek damages.

In the interim a Fox sports deal has been agreed that will provide sports programming until such time as the larger deal is finalised.

Optus has also offered C7 to take its content as a buy through.  Optus will defend vigorously any claims brought by C7.  Our legal advice is that the risk of damages being awarded against Optus is low.’ (Emphasis added.)

The applicants’ notice to produce seeks production of any documents recording the legal advice referred to in the last sentence of this extract.

5                     The applicants identify the following allegations in the Statement of Claim as relevant to the present motion:

(a)    Optus breached cl 8A of the OCSA by negotiating with Foxtel during the exclusivity period, among other things, for the supply to Optus Vision of certain sports channels;

(b)   SingTel Optus induced Optus Vision to breach cl 8A; and

(c)    Optus Vision engaged in misleading and deceptive conduct, in contravention of s 52 of the Trade Practices Act 1974 (Cth), by making false representations to the applicants concerning their dealings with Foxtel.

6                     Optus discovered the Alchemy Paper to all parties in the proceedings on 19 March 2004.  Unmasked copies of the document in electronic form were provided to the other parties, including the applicants.  The motion has been addressed on the basis that Optus made no claim for privilege in respect of any part of the Alchemy Paper. 

7                     Optus subsequently discovered a document which apparently contains the legal advice referred to in the Alchemy Paper.  However, this document is subject to a claim for privilege.

8                     At the time the Alchemy Paper was provided to the applicants, the Statement of Claim filed in the proceedings did not include any claim based on cl 8A of the OCSA or on any related misleading or deceptive conduct.  The applicants added these causes of action to the pleadings by amendments made in the second half of 2004.

9                     The applicants contend that Optus has waived privilege in relation to the legal advice referred to in the Alchemy Paper, including any advice as to:

(a)    whether cl 8A was binding on Optus or otherwise enforceable;

(b)   whether any conduct would constitute a breach of cl 8A;

(c)    the prospects of success of any proceedings brought by the applicants for breach of cl 8A; and

(d)   the quantum of any damages which the applicants might recover from Optus in respect of a breach of cl 8A.

10                  Optus accepts that its disclosure of the Alchemy Paper in unmasked form to the applicants waived any client legal privilege that otherwise would have existed in respect of the communication contained in the Alchemy Paper itself.  However, Optus says that:

·        the waiver is limited to that particular communication and does not extend to the legal advice referred to in the Alchemy Paper, in respect of which privilege has been specifically claimed;

·        the test to apply in determining whether privilege in the legal advice has been waived is that stated in Mann v Carnell (1999) 201 CLR 1, at [29], as follows:

‘What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large’;

·        the fact that the ‘gist’ of the legal advice was disclosed to the applicants (as Mr Bannon SC, on behalf of Optus, concedes) is not determinative of the question of waiver, because considerations of fairness need to be taken into account; and

·        since Optus has not sought to rely upon the legal advice in the proceedings in any way, there is no unfairness in seeking to maintain privilege in that advice.

11                  Mr Bannon argued energetically that the common law test of waiver applies in the circumstances of this case, notwithstanding the provisions of s 122 of the Evidence Act 1995 (Cth).  I am content to deal with the application to set aside the notice to produce on the basis that, as Optus contends, common law principles apply.

12                  On that basis, however, it seems to me that Optus has waived privilege in the legal advice referred to in the Alchemy Paper.  The waiver has come about because Optus has voluntarily disclosed the gist or conclusion of the legal advice recorded in the document identified in the Alchemy Paper.

13                  In Bennett v Chief Executive Officer of the Australian Customs Service (2004) 140 FCR 101, legal representatives of the Australian Customs Service (‘Customs’) stated that they had given advice to Customs that a particular regulation did not prohibit all public comment by an officer on matters of public administration.  Gyles J, with whom Tamberlin J agreed, considered that the primary Judge had erred in drawing a distinction between the conclusion expressed in legal advice, on the one hand, and the reasons for that conclusion, on the other.  This distinction had led the primary judge to the incorrect holding that disclosure of the conclusion did not involve disclosure of the reasons (at [62]).

14                  Gyles J referred to a number of authorities supporting the proposition that a party who expresses a particular legal conclusion and asserts that it has received legal advice endorsing that view, will be taken to have waived privilege in the legal advice.  Gyles J expressed agreement with this reasoning (at [65]):

‘The voluntary disclosure of the gist or conclusion of the legal advice amounts to waiver in respect of the whole of the advice to which reference is made including the reasons for the conclusion.  The primary judge was in error in drawing a distinction between conclusion and reasoning in the context of such a disclosure.’

15                  Gyles J noted that the primary Judge in Bennett v CEO had correctly identified the decision in Mann v Carnell as providing guidance as to the law to be applied.  However, Gyles J considered that the test had been misunderstood, at least in part.  His Honour said this (at [68]):

‘The test looks to inconsistency between the disclosure that has been made by the client on the one hand and the purpose of confidentiality that underpins legal professional privilege on the other.  It is not a matter simply of applying general notions of fairness as assessed by the individual judge.  The authorities to which I have referred show that it is well established that for a client to deploy the substance or effect of legal advice for forensic or commercial purposes is inconsistent with the maintenance of the confidentiality that attracts legal professional privilege.’

16                  In agreeing with the analysis of Gyles J, Tamberlin J observed (at [6]) that the position in the case before the Full Court may have been different if the legal advisors to Customs had simply asserted that the client had taken legal advice and had adopted a particular position having considered that advice.  Tamberlin J pointed out that in these circumstances, the substance of the advice is not disclosed, but only the fact that some advice had been given and had been considered.  His Honour went on:

‘However, once the conclusion in the advice is stated, together with the effect of it, then in my view, there is imputed waiver of the privilege. The whole point of an advice is the final conclusion.’

Later in the judgment, his Honour observed (at [14]):

‘Disclosure of one conclusion but not others in an advice does not necessarily amount to waiver in respect of the non-disclosed conclusions. However, if the conclusions and reasoning are so interconnected that they cannot be separated or isolated, then it may be that the whole of the advice on which all those conclusions are based, must be considered to have been waived.’

17                  Mr Bannon submitted that the comments made by Gyles J in the last sentence of the passage extracted in par 15, above, should be regarded as qualifying the scope of the principle applied by his Honour.  However, Gyles J specifically stated that Mann v Carnell had not implicitly overruled the line of authority upon which he relied in reaching the conclusion expressed in [65] of his judgment (see par 14, above).  His Honour pointed out that the question in Mann v Carnell was whether a particular kind of limited disclosure had waived client legal privilege.  He considered that the reasoning in that case cast no doubt on the principles to be applied where disclosure is made by one party to a dispute to the other party, in the absence of any special arrangements as to confidence (at [66]).

18                  The principle stated in Bennett v CEO, was applied by Sundberg J in Rio Tinto Ltd v Commissioner of Taxation (2005) 224 ALR 299.  In that case, the Commissioner produced, in response to an application under the Freedom of Information Act 1982 (Cth), an audit report.  The audit report stated that the Commissioner would be relying upon certain specific grounds ‘supported by … opinions obtained from counsel.’  Sundberg J held (at [49]) that:

‘The conduct of the [Commissioner] in twice providing to the applicant an Audit Report that discloses the “gist” or “substance” of the privileged Audit Report documents is inconsistent with the maintenance of legal professional privilege over those documents and thus effects a waiver of the privilege.’

19                  I should add that I have not been invited to examine the legal advice in order to determine whether it deals with discrete issues, other than those in respect of which the Alchemy Paper records the conclusion reached.  Mr Sheahan SC, on behalf of the applicants, accepted that if Optus claims that privilege in parts of the legal advice has not been waived because those parts relate to discrete issues, it may be appropriate for Optus to have an opportunity to test that claim.  However, in that event, given my role in the substantive proceedings, it will be necessary for another Judge to inspect the legal advice in order to rule on Optus’ claims. 

20                  For the reasons I have given , subject to what is said in the previous paragraph, I consider that any privilege in the legal advice referred to in the Alchemy Paper has been waived by Optus.  The waiver, in my view, extends to legal advice on any of the issues identified in par 5, above.  Accordingly, Optus’ motion must be dismissed.

Associate:

Dated:              3 April 2006