FEDERAL COURT OF AUSTRALIA

IO Group Inc v Prestige Club Australasia Pty Ltd (No 2) [2008] FCA 1237

PRACTICE AND PROCEDURE – privilege – onus - communications with expert – draft report of expert – adequacy of description of documents

ASIC v Southcorp Ltd [2003] FCA 804, 46 ACSR 438 followed

Grant v Downs (1976) 135 CLR 674 followed

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

New Cap Reinsurance Corp Ltd (in liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258 followed

Trade Practices Commission v Sterling (1979) 36 FLR 244 cited

IO GROUP INC T/AS TITAN MEDIA AND ORS v PRESTIGE CLUB AUSTRALASIA PTY LTD (ACN 088 953 566) AND ORS

Nsd 1940 of 2006

FLICK J

11 AUGUST 2008

SYDNEY

THE ORDERS OF THE COURT ARE:

1.             The parties are to bring in short minutes of orders at 9.30am on 21 August 2008 that give effect to the ex tempore judgment delivered today.

2.             The proceeding be adjourned to 9.30am on 21 August 2008 with a view to making orders to give effect to the ex tempore judgment delivered today.

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

REASONS FOR JUDGMENT

(Revised from transcript)

1                     There were a number of matters argued before the Court during the course of today. Two of those matters, in respect to which reasons for decision can now be given, are:

1.                  a claim for legal professional privilege by the Fifth Respondent in respect to seven documents caught by a Notice to Produce, dated 28 March 2008; and

2.                  two documents which fall within that Notice to Produce and a Subpoena previously served upon Simpsons Solicitors.

2                     In respect to both of these two matters, it is common ground that:

(a)           the onus of establishing privilege lies with the party asserting it; and

(b)          once a claim for privilege has been established, the onus of showing that privilege has been lost shifts to the party who asserts that there has been a waiver.

3                     In Grant v Downs (1976) 135 CLR 674 at 688–9, it will be recalled that Stephen, Mason and Murphy JJ summarised the position as follows:

It is well accepted that the court in allowing production and inspection of documents exercises a judicial discretion. In so doing it needs to scrutinize with care claims of privilege made on the ground now under consideration. It is for the party claiming privilege to show that the documents for which the claim is made are privileged. He may succeed in achieving this objective by pointing to the nature of the documents or by evidence describing the circumstances in which they were brought into existence. But it should not be thought that the privilege is necessarily or conclusively established by resort to any verbal formula or ritual. The court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence.

This passage was cited with approval by Lockhart J in Trade Practices Commission v Sterling (1979) 36 FLR 244 at 247.

The Seven Documents

4                     On 31 March 2008 a Notice to Produce was served by the Applicants upon the Fifth Respondent. Privilege was claimed in respect to a number of documents falling within the terms of that Notice.

5                     Presently in issue is a claim of privilege in respect to seven documents. Those documents have been described in the Affidavit of Ms Chylek sworn on 25 July 2008 as follows:

6                     Ms Conoulty is the expert retained by the Fifth Respondent. The Expert Report of Ms Conoulty has been filed and served upon the parties, including the Applicants. 

7                     The description of the documents for which privilege has been claimed has been brief. But there was no cross-examination of Ms Chylek on her Affidavit, as there could have been: National Crime Authority v S (1991) 29 FCR 203 at 211 per Lockhart J.

8                     In ASIC v Southcorp Ltd [2003] FCA 804 at [21], 46 ACSR 438 at 441–2 Lindgren J helpfully formulated the principles to be applied in a case such as the present. In particular, His Honour there formulated two of those principles as being:

(3)  Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications: cf Interchase [Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141] at 161–2 per Thomas J.

(4)  Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents…

9                     For the purposes of resolving the present claims for privilege, an inference may be drawn that the “handwritten annotations” of Ms Chylek most probably contain observations in respect to the email or the draft expert report then before her. The onus upon the Fifth Respondent of establishing privilege, albeit on minimal material, has been made out. Those handwritten annotations it is thus considered are privileged, as is Document 2, the email from Ms Chylek to the expert.

10                  The documents, it may generally be accepted, were confidential.

11                  And it may be accepted that Documents 3 and 5 caused Ms Chylek to give legal advice. Such is the evidence given in her Affidavit sworn on 25 July 2008. But there is no evidence that the disclosure of those two documents would themselves disclose any legal advice given.

12                  Documents 9 and 11 are draft expert reports. The draft expert reports, however, are not considered to be privileged and the onus imposed upon the Fifth Respondent to establish the claim has not been discharged. A draft report from an expert, together with a communication from an expert to a solicitor, “do not attract privilege because they are not in the nature of, and would not expose, communications” per Lindgren J. Nor, if it be relevant, is there any evidence that the draft reports were given for the purpose of obtaining the input of the solicitors: New Cap Reinsurance Corp Ltd (in liq) v Renaissance Reinsurance Ltd [2007] NSWSC 258. That was a case arising under s 119 of the Evidence Act 1995 (Cth) and not the common law. All that is known of the draft reports in the present proceeding is simply that, namely they are “draft reports”. Nothing is known as to the reasons why such drafts were prepared and nothing is known as to whether the disclosure of a draft report prepared by the independent expert would disclose anything other than the contents of a draft of a report which was subsequently filed and served. Indeed, Senior Counsel for the Fifth Respondent accepted that privilege would not attach to a document if all that was known was that it was a “Draft Report” which was forwarded in confidence.

13                  The inadequacy in the description of the documents is exposed by the description of Document 12, being correspondence to and from the expert and Ms Chylek. To the extent that the correspondence is from Ms Chylek, the claim for privilege is upheld; to the extent that the communication is from the expert to Ms Chylek, the claim is rejected.

14                  It should be noted that the potential inadequacy in the description of the documents for which privilege was to be claimed had previously been raised with Counsel appearing for the Fifth Respondent. No further affidavit was filed. To the extent that the Affidavit of Ms Chylek falls short in its description of the documents over which privilege is claimed, that presumably was a forensic choice deliberately made by those advising the Fifth Respondent.

15                  The Fifth Respondent urged a course upon the Court that it should inspect the documents itself for the purpose of resolving the claim. That course has not been considered necessary and no such inspection has thus taken place.

16                  The claim for privilege is thus upheld with respect to:

·      Document 2, being the email from Ms Chylek to the expert;

·      Document 5, but only to the extent of the handwritten annotations of Ms Chylek;

·      Document 9, but only to the extent of the handwritten annotations of Ms Chylek;

·      Document 10, being the email from Ms Chylek to Ms Conoulty;

·      Document 11, to the extent of the handwritten annotations by Mr Simpson and Ms Chylek; and

·      Document 12, to the extent of the email correspondence from Ms Chylek.

17                  The claim for privilege in respect to the balance of those documents is rejected.

18                  All parties seek a quick resolution of the issues to be decided and more considered and comprehensive reasons are not sought.

19                  It should be noted that one revision to the ex tempore reasons as delivered has been to extend the claim for privilege to Document 10. It is not understood that the parties dispute the ability to make that revision.

The Two Overlapping Documents

20                  A separate claim for privilege has been advanced in respect to parts of the two documents identified in the Affidavit of Ms Chylek sworn on 11 August 2008 and described as follows:

21                  These documents have been variously described as the “overlap documents”, being those documents which fall within both the terms of a Subpoena served upon Simpsons Solicitors and the Notice to Produce served upon the Fifth Respondent and dated 28 March 2008. Access to other documents described in that Affidavit has not been pressed.

22                  These two documents were claimed to be privileged by the Fifth Respondent by reason of both the privilege attaching to communications with legal advisers for the purposes of obtaining evidence and by reason of what has been described as a common interest privilege. That common interest has been described as including a common interest in maintaining a defence as to illegality which may be involved in either the sale or distribution of the films in issue in the principal proceeding. 

23                  The Applicants maintain that such privilege as otherwise may have attached to these two documents has been lost. The two documents, it is accepted by all parties, fall within the Notice to Produce. That Notice sought documents in respect to the Expert’s Report filed and served by the Fifth Respondent, being:

Documents recording, referring to or evidencing the following items which are identified as expenses of PCA at subparagraphs 13b(iii)-(iv) of the Conoulty Report.

There then follows a series of expenses identified in that Report. The documents in respect to which access was sought by the Applicants were those documents described as “email correspondence” or an “email”; access was not sought to the “draft affidavit” or the “draft unsworn Affidavit” of Mr Kiriakidis.

24                  To the description of the documents provided by Ms Chylek, and described by her as “email correspondence” or an “email”, the Applicants contend that there is a further description, namely the description set forth in the Notice to Produce.

25                  The communication of information as between legal advisers and an expert may or may not be privileged. The mere fact that the two documents in issue may have that additional description, it is considered, does not resolve the claim for privilege. However else they may be described, the two documents record communications on matters of evidence. That, it is considered, is sufficient to attract the claim for privilege. The fact that the email communications may also be described as being in respect to “expenses” identified in an expert’s report does not deny to those documents the privilege claimed.

26                  The further claim for a common interest privilege need not therefore be resolved.

27                  The claim for privilege in respect to the two documents now in issue is thus upheld.

28                  Again, all parties seek a quick resolution of the issues to be decided and more considered and comprehensive reasons are not sought.

Orders

29                  The orders of the Court are:

1.             The parties are to bring in short minutes of orders at 9.30am on 21 August 2008 that give effect to the ex tempore judgment delivered today.

2.             The proceeding be adjourned to 9.30am on 21 August 2008 with a view to making orders to give effect to the ex tempore judgment delivered today.

Associate:

Dated:         15 August 2008