FEDERAL COURT OF AUSTRALIA

AWB Limited v Honourable Terence Rhoderic Hudson Cole (No 6)

[2006] FCA 1274

REMEDIES – declarations – that documents protected by legal professional privilege – form of declarations – whether appropriate to grant declaration that certain documents are privileged and others not – whether necessary to distinguish between waived documents and documents to which privilege never attached

COSTS – discretion to award – where each party achieved substantial measure of success on certain issues – no orders as to costs

Federal Court of Australia Act 1976 (Cth) s 43

AWB Limited v Honourable Terence Rhoderic Hudson Cole (No 5) [2006] FCA 1234 referred to

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 followed

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 followed

Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 applied

Cretazzo v Lombardi (1975) 13 SASR 4 considered

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 cited

Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 cited

Cummings v Lewis (1993) 41 FCR 559 cited

Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400 cited

Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 cited

Forster v Farquhar (1893) 1 QB 564 cited

Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (No 2) (1991) 28 FCR 172 cited

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 cited

AWB LIMITED v THE HONOURABLE TERENCE RHODERIC HUDSON COLE AO RFD QC AND COMMONWEALTH OF AUSTRALIA

VID 594 OF 2006

YOUNG J

26 SEPTEMBER 2006

MELBOURNE

REASONS FOR DECISION

1                     On 18 September 2006, I delivered reasons for judgment in this proceeding and adjourned the matter to Monday 25 September 2006 for any argument as to the orders that should be made to give effect to my reasons: AWB Limited v Honourable Terence Rhoderic Hudson Cole (No 5) [2006] FCA 1234 at [251].

2                     These reasons for decision are directed to the final orders that I have determined to make, having heard submissions from the applicant and the respondents yesterday. The issues that separated the parties narrowed considerably during the course of yesterday’s hearing. The remaining differences relate to the form of declaratory relief that is appropriate and the costs orders that should be made.

Declaratory Relief

3                     AWB submitted that, where I have determined that documents attract privilege, wholly or partly, the Court should make a declaration to that effect. On the other hand, AWB submitted that, where I have determined that documents over which AWB claimed privilege do not attract privilege or that any privilege has been waived, I should not make a declaration to that effect. It submitted that any such declaration was unnecessary and would lack utility. Senior Counsel for AWB said, from the bar table, that the documents in question were being produced to the Commission. The relevance of this is dubious, as it follows the delivery of my reasons for judgment and, presumably, anticipates that final orders will be made that give effect to those reasons. AWB also pointed out that the Commonwealth had not mounted any cross-claim for declaratory relief in its favour.

4                     Not surprisingly, the Commonwealth pressed for a declaration that reflected both aspects of my findings, namely that privilege attached to some contested documents and not to others.

5                     The making of a declaration and the terms in which it should be framed are in the Court’s discretion: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-439 per Gibbs J; and Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 (‘Ainsworth’) at 581-582 and 596-597. As a matter of substance, the dispute that AWB submitted to the Court for its adjudication was whether legal professional privilege did, or did not, attach to the documents in AWB’s further revised list of privileged documents dated 7 August 2006 (as supplemented by letters from AWB’s solicitors to the Court dated 25 August 2006 and 5 September 2006). In my opinion, any declarations made by the Court should reflect the final outcome of this case with certainty and precision. Moreover, it is desirable that there should be an authoritative resolution of the dispute presented to the Court.

6                     I have concluded that the Court should make a declaration, reflecting my reasons for judgment, that legal professional privilege attaches to specified documents, and does not attach to other specified documents. Declaratory relief in this form is appropriate because it determines the legal controversy that was before the Court: see Ainsworth at 582 and 596-597; and Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 355-356. As AWB’s application makes clear, the controversy includes the question whether the documents at issue are protected from production to the Commission by legal professional privilege. This controversy is only likely to be quelled, completely and finally, by making a declaration in the form I propose.

7                     I do not regard the fact that the Commonwealth did not cross-claim for declaratory relief as an obstacle to the declaratory relief I propose to grant. The declaration I propose to make contains positive and negative limbs: in effect, the declaration that AWB seeks will be conditioned by a second limb that gives effect to my decision that other documents are not privileged.

8                     AWB also submitted that any declaration that privilege does not subsist in specified documents should distinguish between documents over which privilege was waived and documents where no privilege ever attached. My judgment addresses this distinction, but I do not see why the declaration needs to be expressed in this way. In either case, the result is that no privilege attaches to the documents that would protect them from production to the Commission.

Costs

9                     In relation to costs, AWB and the Commonwealth took up positions at opposite ends of the spectrum.

10                  AWB sought an order that the respondents pay its costs of the proceedings, including any reserved costs. It argued that the applicant was the successful litigant in material respects. It submitted that, subject to the Court’s findings concerning waiver and the fraud exception, it had successfully proven that privilege prima facie attached to all but 25 of the documents over which it pressed its claim. It said that the costly and time-consuming part of the case was proof of the prima facie status of each document as one brought into existence for the dominant purpose of obtaining, or giving, legal advice. AWB also criticised the reasonableness of the Commonwealth’s conduct in requiring that AWB prove its claim in respect of each and every document; it asserted that the soundness of many of the claims ought to have been apparent from the description of the documents in AWB’s list of privileged documents.

11                  These submissions take an exceedingly optimistic view of AWB’s level of success in the proceedings. In fact, because of the Court’s findings concerning waiver and the fraud exception, AWB’s privilege claims wholly failed in relation to approximately 321 of the documents that were in contest. In addition, on the first day of the hearing, AWB withdrew its claim for a declaration that privilege attached to about 24 documents relating to the Tigris transaction. Roughly one-half of the hearing time was devoted to the issues concerning waiver and the fraud exception.

12                  AWB submitted that the circumstances do not warrant any departure from the usual approach that an applicant who achieves substantial success should have the costs of the proceedings. AWB relied in particular on the following passage from Cretazzo v Lombardi (1975) 13 SASR 4 (‘Cretazzo’) where Jacobs J said at 16:

‘But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.’

In short, AWB submitted that it achieved substantial success and that it should have the costs of the proceeding, notwithstanding its failure on the issues of waiver and the fraud exception.

13                  The Commonwealth submitted that AWB should pay its costs of the proceedings. It argued that success in this case cannot be measured purely in numerical terms; rather a judgement ought to be made as to which party has had substantial success in the case, having regard to the significance of the issues decided by the Court in favour of one or other party. It added that a finding that privilege subsists in a large number of technical or peripheral documents cannot be weighed in the same scale.

14                  The Court’s discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is unfettered, except that it must be exercised judicially. The usual order as to costs is that a successful party will have its costs paid on a party and party basis by the unsuccessful party: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234. As the passage from Cretazzo indicates, the mere fact that a substantially successful applicant fails on particular issues of fact or law along the way may not afford an adequate ground for depriving that applicant of some or all of its costs. On the other hand, it lies within the Court’s discretion to make a costs order that reflects the degree of success attained: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234-235 [11] and 236 [15]. Depending on the circumstances, it may be an appropriate exercise of the Court’s discretion to deprive a party of its costs in respect of an issue which it lost at trial: Cummings v Lewis (1993) 41 FCR 559 at 599-604; and Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400 at [3]. Alternatively, the Court can order a successful party to pay some costs in respect of unsuccessful aspects of the case: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136; Forster v Farquhar (1893) 1 QB 564; and Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (No 2) (1991) 28 FCR 172.

15                  In many cases, these principles can only be applied sensibly by taking a broad view of the results of the case and the issues that were litigated. An allocation of costs in a case of mixed results can rarely if ever be done with mathematical precision: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272 per Gummow, French and Hill JJ.

16                  Taking a broad and overall view of the outcome of this case, I consider that both AWB and the Commonwealth achieved a substantial measure of success. I cannot agree with AWB’s submission that, in material respects, it was the successful litigant. The Commonwealth succeeded on a number of very important issues. It established that privilege did not attach to numerous documents that are likely to be material to the issues being investigated by the Commission. AWB did not merely fail ‘along the way’ to prove particular issues of fact and law which, in the end, did not prevent it achieving substantial success; rather, AWB lost some of the most substantial issues that were litigated. Those issues involved more than half of the hearing time occupied by this case.

17                  In all the circumstances, I consider that the just and appropriate order is that there be no order as to the costs of the proceeding. The result will be that AWB and the Commonwealth must each bear its own costs.

18                  I do not consider that there is any substance in the criticisms that AWB directed towards the Commonwealth. The Commonwealth was entitled to put AWB to the proof of its privilege claims. Nor do I agree with AWB’s assertion that the description of the documents in AWB’s lists was generally sufficient to enable the Commonwealth to form a view about the provenance of each document and the grounds upon which privilege was claimed.

19                  AWB also sought the costs of its notice of motion dated 19 June 2006 and the first respondent’s notice of motion dated 24 July 2006. I have concluded that there should be no order as to the costs of these notices of motion.

20                  By its notice of motion dated 19 June 2006, the applicant sought an interlocutory injunction against the first respondent. Interim injunctive relief was granted by Kenny J on 20 June 2006. I extended that order by consent until the hearing and determination of the proceedings. I accept that AWB was compelled to seek injunctive relief because the first respondent declined to give an acceptable undertaking that he would not exercise his powers under s 6AA of the Royal Commission Act 1902 (Cth) pending the hearing and determination of these proceedings. Ordinarily, this would suggest that the successful applicant should have its costs of the motion for interim injunctive relief. But this is a very special case. The basis upon which AWB sought injunctive relief was an apprehended contempt of Court by the first respondent and/or alleged constitutional invalidity of s 6AA. Had the motion for an interlocutory injunction been contested, these issues would have been considered by the Court. In the result, however, the Court did not need to make any determination concerning the questions of contempt of Court and the constitutionality of s 6AA, either on a final or interlocutory basis. In these circumstances, I consider that the appropriate order is simply one that leaves the costs of the motion where they fall. There will, accordingly, be no order as to the costs of the notice of motion dated 19 June 2006.

21                  By notice of motion dated 24 July 2006, the first respondent sought an order vacating a direction I had made that the first respondent should provide certain particulars that would assist in defining the issues in this case. I made this direction at the request of AWB and the Commonwealth. By the time the first respondent’s notice of motion came on for hearing, both AWB and the Commonwealth had changed their position. Neither sought to maintain the direction. As a result, I vacated the direction and reserved the costs of the notice of motion. In these circumstances, I consider that there should be no order for costs in relation to this notice of motion. The first respondent did not seek an order for costs in his favour.

Other Matters

22                  There are two other matters that it is appropriate to record in these reasons. First, AWB informed the Court that it did not persist with its application for injunctive orders against the first respondent. Secondly, AWB submitted that four additional documents should be included in any declaration that specified documents were the subject of legal professional privilege. Three of these documents (documents 307, 383 and 1031) are not referred to in my reasons for judgment because they were withdrawn by AWB by mistake. Senior Counsel for AWB informed me that they are, respectively, exact copies of documents 306, 381 and 418 which are considered in my reasons for judgment. I am satisfied that this is the case. In addition, AWB submitted that the declaration should include document 704II which is referred to in paragraph [241] (i) of my reasons for judgment. The Commonwealth accepted that any declaration of privilege in favour of AWB should extend to these four documents.

Final Orders

23                  The Court will make the declarations and other orders as follows:

1.                  The Court declares that in relation to the documents listed and described in the applicant’s further revised list of privileged documents dated 7 August 2006 as supplemented by the letters from the applicant’s solicitors to the Court dated 25 August 2006 and 5 September 2006:

(a)                legal professional privilege attaches to the documents listed in Schedule 1 to this Order to the extent claimed by the applicant;

(b)               legal professional privilege attaches to the documents listed in Schedule 2 to this Order only to the extent identified in paragraph 241 of the reasons for judgment in this proceeding; and

(c)                legal professional privilege does not attach to the documents listed in Schedule 3 to this Order.

2.                  The Court declares that in relation to the documents listed and described in the applicant’s revised list of duplicate privileged documents dated 28 July 2006, legal professional privilege attaches to duplicates of:

(a)                the documents listed in Schedule 1 to this Order; and

(b)               the parts of the documents referred to in Schedule 2 to which privilege attaches under paragraph 1(b) above.

3.                  In relation to the applicant’s notice of motion dated 19 June 2006:

(a)                the injunctions against the first respondent made by order of the Honourable Justice Kenny on 20 June 2006 and extended by the orders of the Honourable Justice Young made on 18 July 2006 are dissolved; and

(b)               there be no order as to the costs of the notice of motion.

4.                  In relation to the first respondent’s notice of motion dated 24 July 2006:

(a)                save for the orders of the Court made 26 July 2006 the notice of motion is otherwise dismissed;

(b)               there be no order as to the costs of the notice of motion.

5.                  There be no order as to the costs of the proceeding.

6.                  The application otherwise be dismissed.

 

Associate:

Dated: 26 September 2006

SCHEDULE 1

1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 16, 17, 18, 19, 20, 21, 23, 24, 25, 34, 35, 36, 40, 42, 44, 45, 46, 47, 48, 49, 50, 51, 52, 55, 57, 58, 59, 60, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 80, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 107, 108, 119, 128, 133, 135, 143, 144, 145, 146, 150, 151, 152, 154, 155, 156, 157, 158, 159, 160, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173, 174, 175, 176, 176A, 177, 178, 179, 180, 181, 182, 182A, 183, 184, 185, 186, 187, 188, 189, 190, 194, 196, 197, 199, 200, 201, 204, 205, 206, 207, 208, 208A, 209, 210, 211, 211A, 215, 217, 218, 219, 220, 221, 222, 224, 225, 226, 227, 228, 230, 231, 232, 233, 234, 237, 238, 239, 254, 255, 256, 260, 261, 262, 264, 269, 270, 273, 274, 275, 276, 277, 278, 281, 282, 285, 286, 288, 293, 302, 303, 304, 305, 306, 307, 311, 315, 316, 317, 318, 319, 319A, 320, 321, 322, 323, 324, 334, 343, 345, 346, 347, 349, 350, 351, 352, 353, 354, 358, 362, 368, 374, 381, 382, 383, 384, 387, 388, 389, 390, 391, 392, 393, 395, 398, 399, 400, 401, 402, 403, 404, 405, 406, 407, 408, 410, 412, 413, 414, 416, 417, 418, 419, 420, 421, 423A, 426, 427, 428, 430, 431, 433, 434, 435, 436, 437, 438, 439, 440, 441, 442, 444, 450, 451, 452, 453, 454, 456, 457, 459, 460, 462, 464, 465A, 467, 468, 470, 471, 472, 473, 475, 476, 477, 478, 479, 480, 481, 482, 483, 484, 485, 488, 490, 491, 492, 493, 494, 496, 497, 498, 499, 500, 501, 502, 504, 505, 506, 509, 510, 511, 514, 515, 517, 518, 519, 521, 525, 529, 530, 536, 537, 538, 539, 540, 549, 550, 551, 552, 556, 558, 559, 559A, 560, 561, 562, 564, 566, 567, 581, 591, 593, 600, 605, 671, 672, 673A, 679, 694, 696A, 704E, 704F, 704G, 704H, 704I, 704Q, 704R, 704U, 704V, 704W, 704Y, 704Z, 704BB, 704CC, 704DD, 704EE, 704GG, 704HH, 704II, 704JJ, 706, 707, 708, 709, 710, 724, 727, 740, 741, 742, 743, 744, 745, 747, 748, 751, 752, 754, 758, 759, 760, 761, 763, 764, 765, 766, 768, 769, 770, 772, 773, 775, 777, 779, 780, 781, 785, 787, 790, 792, 797, 799, 800, 801, 802, 802A, 804, 806, 807, 808, 809, 810, 811 812, 813, 814, 816, 818, 819, 821, 822, 826, 827, 828, 829, 830, 831, 835, 849, 850, 851, 852, 856, 857, 860, 861, 863, 865, 866, 868, 869, 870, 873, 876, 877, 879, 881, 882, 883, 885, 887, 888, 889, 890AB, 890AC, 890AG, 890AIA, 890AL, 890AR, 890AS, 890AT, 890AU, 890AV, 890AW, 890AX, 890AY, 890AZ, 890BA, 890BB, 890BC, 890BD, 890BE, 890BF, 890BG, 891, 892, 893, 894, 895, 898, 899, 900, 901, 902, 903, 904, 905, 906, 907, 908, 909, 910, 911, 912, 913, 914, 915, 918, 919, 921, 923, 924, 925, 928, 929, 930, 931, 932, 933, 934, 935, 936, 937AA, 937AB, 937AC, 937AD, 937AE, 937AF, 937AG, 937AH, 937AI, 937AJ, 937AK, 937AL, 937AM, 937AO, 937AP, 942, 947, 948, 950, 951, 952, 953, 956, 957, 958, 959, 960, 961, 962, 963, 964, 966, 970, 971, 972, 973, 974, 975, 976, 977, 978, 979, 980, 981, 981A, 982, 983, 984, 985, 986, 987, 988, 989, 990, 991, 992, 994, 995, 997, 998, 1000, 1001, 1002, 1003, 1004, 1031, 1071, 1073, 1074, 1075, 1076, 1077, 1078, 1078A, 1079, 1080, 1081, 1082A, 1083, 1086, 1087, 1100, 1101, 1112, 1113, 1113A, 1114, 1115, 1116, 1117, 1118A, 1152A, 1155, 1158, 1159, 1160, 1190, 1191, 1192, 1193, 1194, 1195, 1196, 1197, 1198, 1199, 1200, 1201, 1202, 1204, 1206, 1207, 1209, 1212, 1213, 1214, 1215, 1216, 1217, 1218, 1219, 1225, 1226, 1227, 1228, 1229, 1230, 1231, 1232, 1233, 1234, 1235, 1236, 1237, 1238, 1239, 1240, 1243, 1244, 1245, 1246, 1247, 1248, 1249, 1250, 1251, 1252, 1253, 1254, 1255, 1256, 1257, 1258, 1259, 1260, 1261, 1293, 1296, 1299, 1300, 1301, 1302, 1303 and 1304.

SCHEDULE 2

138, 251, 376, 503, 516, 520, 522, 526, 527, 691, 696, 704S, 965 and 1097.

SCHEDULE 3 

12, 30, 31, 32, 32A, 33, 41, 56, 77, 78, 79, 81, 82, 83, 84, 85, 100, 101, 102, 103, 104, 105, 106, 110, 111, 112, 113, 114, 115, 116, 117, 120, 121, 122, 123, 124, 126, 127, 129, 130, 131, 132, 136, 137, 139, 140, 161, 213, 229, 235, 240, 241, 245, 246, 247, 250, 252, 253, 257, 258, 259, 263, 265, 266, 267, 268, 271, 279, 280, 283, 284, 290, 292, 294, 295, 296, 297, 298, 299, 300, 301, 308, 309, 310, 313, 326, 327, 330, 331, 332, 333, 335A, 336, 337, 338, 339, 340, 341, 342, 344, 348, 353A, 355, 356, 357, 359, 361, 362A, 362B, 365, 375, 377, 378, 379, 380, 385, 386, 394, 422, 423, 424, 425, 432, 443, 445, 446, 447, 448, 449, 455, 461, 463, 465, 469A, 486, 487, 495, 507, 508, 513, 523, 524, 533, 534, 541, 542, 543, 544, 547, 548, 553, 554, 554A, 555, 557, 563, 565, 568, 569, 570, 571, 572, 573, 574, 575, 576, 577, 578, 579, 582, 583, 584, 585, 586, 587, 588, 589, 590, 592, 594, 595, 595A, 595B, 595C, 596, 599, 601, 602, 603, 675, 681, 68lA, 689A, 689B, 699, 700, 701, 702, 703, 703A, 704, 704A, 704B, 704C, 704D, 704J, 704K, 704L, 704M, 704N, 704O, 704P, 704T, 704X, 704AA, 704FF, 704KK, 711, 712, 713, 714, 715, 721, 722, 725, 729, 730, 731, 732, 733, 736, 737, 738, 739, 749, 753, 755, 756, 757, 762, 771, 784, 788, 794, 798, 815, 817, 820, 823, 824, 837, 840, 847, 867, 872, 890AA, 890AD, 890AE, 890AH, 890AI, 89OAJ, 890AK, 89OAM, 890AN, 890AP, 890AQ, 1005, 1006, 1009, 1011, 1012, 1013, 1025, 1026, 1028, 1029, 1030, 1032, 1033, 1051, 1056, 1059, 1070, 1088, 1089, 1090, 1091, 1092, 1093, 1094, 1095, 1096, 1098, 1099, 1118, 1119, 1120, 1121, 1123, 1124, 1144, 1145, 1146, 1147, 1148, 1149, 1150, 1151, 1152, 1161, 1162, 1163, 1183, 1184, 1185, 1186, 1187, 1221, 1222, 1262 and 1297.