FEDERAL COURT OF AUSTRALIA

Eric Preston Pty Ltd v Euroz Securities Limited [2009] FCA 240

EVIDENCE – legal professional privilege – whether ss 118 or 119 of Evidence Act 1995 (Cth) applicable – copy of privileged e‑mail from client to solicitor forwarded under a separate e‑mail to client’s accountant – whether privilege under s 118 protects copy of privileged communication – whether privilege lost because re-communication of privileged communication to accountant was not in the course of making a confidential communication – s 122(5)(a)(i).  

Held: Copy of privileged communication in subsequent e‑mail privileged and privilege not lost.  

Evidence Act 1995 (Cth), ss 118, 119, 122(2), 122(5)(a)(i) 

Carnell v Mann (1998) 89 FCR 247 applied

Hardie Finance Corporation Pty Ltd v CCD Australia Pty Ltd (1995) 67 FCR 594 cited

Mann v Carnell (1999) 201 CLR 1 applied

Spotless Group Ltd v Premier Building and Consulting GroupPty Ltd (2006) 16 VR 1 referred to  

ERIC PRESTON PTY LTD v EUROZ SECURITIES LIMITED

VID356 of 2008

GILMOUR J

17 MARCH 2009

PERTH

REASONS FOR JUDGMENT

1                     The applicant, Eric Preston Pty Ltd, (“EP”) asserts a claim of legal professional privilege in respect of an e‑mail dated 17 April 2008 sent by Mr Bruce Drummond, one of EP’s directors, to Mr Graham Anderson, its accountant (the second e‑mail).  The second email came into the possession of the respondent, Euroz Securities Limited or its legal advisers upon the return of a subpoena directed to Mr Anderson to produce, relevantly, all communications whether by letter, facsimile, e-mail or handwritten notes between him and Mr Drummond during the period 1 January 2006 to 30 June 2008.

2                     Euroz submits that the second e‑mail is not the subject of such privilege, or if it is, that it has been waived.  The second e‑mail is, for the present, to be regarded as notionally attached to these reasons but in fact maintained in a sealed envelope on the Court file to be accessed only by the parties or their legal advisers until further order.

3                     EP instituted proceedings against Euroz on 20 May 2008.  The trial of these proceedings was listed to commence before Siopis J yesterday but by reason of this application did not commence until this morning.  The privilege issue was referred to me, on an urgent basis, by Siopis J to be dealt with separately.  It would have been preferable if an objection to the production of the second e‑mail on the ground of privilege had been taken on the return of the subpoena: Hardie Finance Corporation Pty Ltd v CCD Australia Pty Ltd (1995) 67 FCR 594.

4                     At the time that the second e‑mail was sent proceedings had not been instituted although legal proceedings against Euroz were in contemplation by EP. 

5                     There were in fact two e‑mails relevant to this matter which were sent on 17 April 2008.  The first e‑mail was from Mr Drummond, and was sent on EP’s behalf to Ms Carita Kazakoff, a solicitor with Slater & Gordon Solicitors who were acting for EP.  It was copied by e‑mail to one M. Walter, also a solicitor with Slater & Gordon and P G Willis a barrister then retained on behalf of EP.  The “Subject” of the first e‑mail was expressed to be “Addition to witness statement”.

6                     It is evident, having regard to EP’s pleaded case, that the first e‑mail is, in part, directly concerned with EP’s then contemplated case.  It describes Mr Drummond’s business history in a summary way and makes very clear statements concerning his business practices, particularly in relation to his decision-making on behalf of the company in relation to its financial affairs.  It mentions his relationship with the company’s accountant, Mr Graham Anderson.  It also deals with important aspects of EP’s account with Opes Prime Stockbroking Ltd (“OP”) in May of 2007. 

7                     The second e-mail merely forwarded, in effect, a copy of the first e‑mail, to Mr Anderson.  There was no message contained in the second e‑mail but only the abbreviation “FYI” meaning “For Your Information”.

8                     It was agreed between the parties, for the purposes of this present application only, that the relevant relationship between Mr Drummond on behalf of EP and Mr Graham Anderson is as set out below which has been taken from para 8 of the Defence.

(i)         If, which is denied, the respondent is liable for the breach of retainer pleaded Mr Anderson is responsible for such loss or alternatively responsible for a proportion of such loss by reason of the following matters:

            (i)         at material times since 1995 Mr Anderson provided to Mr Drummond business, consulting and financial advice and was the primary source of such advice for Mr Drummond,

            (ii)        Mr Drummond consulted Mr Anderson for opinions before entering into any agreements or financial contracts;

            (iii)       Mr Anderson certified that Mr Drummond was a sophisticated investor by certificates dated 5 January 2002 and 27 August 2003;

            (iv)       Mr Anderson certified that the applicant was a sophisticated investor by certificates dated 18 December 2003, 6 July 2004, 22 February 2005, 28 September 2005 and 8 May 2006;

            (v)        in or about October/November 2003, Mr Anderson provided advice to Mr Drummond to conduct his share trading activities through the applicant;

            (vi)       in or about 2004, Mr Anderson provided advice to the applicant to enter into a margin lending facility with Leveraged Equities, which facility was entered into on terms that the applicant provide a registered charge over its assets in favour of Leveraged Equities;

            (vii)      Mr Anderson witnessed the signatures of Mr Drummond and Mrs Drummond to the Guarantee and Indemnity comprising part of the Application form submitted by the applicant to OP;

            (viii)      at 3.31 pm on Thursday 24 May 2007, Mr Drummond sent to Mr Anderson an e-mail requesting a meeting with Mr Anderson that afternoon;

            (ix)       at 4.31 pm on Thursday 24 May 2007, Mr Drummond sent to Mr Anderson by e-mail the OP FSG and other documents required by OP for the applicant to establish an account with OP, which documents did not include any security to be provided by the applicant to OP;

            (x)        at 5.22 pm on Thursday 24 May 2007, Mr Drummond sent to Mr Anderson the e-mail from Mr Rice to Caldow of 17 May 2007 advising of the OP leverage ratios for shares;

            (xi)       Mr Anderson's accounting firm GDA Corporate rendered to Mr Drummond at Goldeast Corporation an invoice for business consulting and financial advice for the period 11 April 2007 to 30 June 2007 and Mr Anderson provided such services to Mr Drummond;

            (xii)      by reason of the matters at (i) to (xi) the applicant reasonably expected Mr Anderson to advise it of any material risks associated with the termination of its facility with Leveraged Equities and the establishment of a new facility with OP and Mr Anderson owed to the applicant a duty to provide such advice;

            (xiii)      in or about October 2007, the applicant sought advice from Mr Anderson as to whether the applicant was required to lodge a substantial shareholder notice in respect of its shareholding in Sundance Energy Australia Limited (“Sundance”);

            (xiv)     in or about October 2007, Mr Anderson advised Mr Drummond that ANZ Nominees had lodged a substantial shareholder notice for all shares in Sundance registered in the applicant’s name;

            (xv)      by reason of the matters at (i) to (xi), (xiii) and (xiv) the applicant reasonably expected Mr Anderson to advise it of any consequences of ANZ Nominees lodging a substantial shareholder notice in respect of the applicant’s shares in Sundance, namely that ANZ Nominees was contending it held the beneficial ownership in the applicant’s shares in Sundance and Mr Anderson owed to the applicant a duty to provide such advice;

            (xvi)     at material times prior to 1 February 2008, Mr Anderson did not advise the applicant of the risks associated with the OP facility as alleged at paragraph 11 particulars (i) to (vi) of the Statement of Claim;

            (xvii)     further to paragraphs (i) to (xv), on or about 6 February 2008, the applicant sought advice from Mr Anderson as to what steps it should take in relation to the OP Facility by reason of the matters referred to in the e-mail of 1 February 2008 from Mr Caldow to the applicant and informed Mr Anderson of the matters disclosed by Mr Rice to Mr Caldow referred to at paragraph 7(1) of the Defence;

            (xviii)    Mr Anderson advised the applicant that if what Mr Rice had told Mr Caldow in relation to the financial standing of OP was correct, it was important but not urgent that the applicant terminate its OP facility by refinancing it.

9                     This is a somewhat artificial arrangement as many of these allegations are denied by EP in its reply.  It is sufficient, for present purposes, that I proceed on the basis that prior to his receipt of the second e‑mail, Mr Anderson was and had, for a significant period, been EP’s accountant and in certain respects its business adviser.

10                  Euroz accepts that the first e‑mail is subject to legal professional privilege.  It contends however that the second e‑mail is not because it fails to meet the requirements of s 119 of the Evidence Act 1995 (Cth) (“the Act”).  Section 119 is in these terms: 

Litigation

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:

(a)        a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or

(b)        the contents of a confidential document (whether delivered or not) that was prepared;

for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.

11                  Euroz submits that the second e‑mail was not a “confidential communication” as defined in s 117 for the purposes of s 119 in that it contains no express or implied obligation upon Mr Anderson not to disclose its contents.  

12                  Euroz further submits that even if the second e‑mail was a confidential communication the further requirement under s 119 was not satisfied in that the communication was not made for the dominant purpose of EP being provided with professional legal services relating to an Australian proceeding or an anticipated or pending Australian proceeding in which EP may be a party. 

13                  In my opinion, s 119 has no application to this application.  EP relies, correctly in my view, upon the provisions of s 118(a) of the Act, which provides relevantly as follows:

Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:

(a)        a confidential communication made between the client and a lawyer;

(b)        …

(c)        …

for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.

14                  A Full Court of this Court in Carnell v Mann (1998) 89 FCR 247 at 254 held that pursuant to ss 118 and 119, originals and copies are equally protected subject to the privilege being lost for one of the reasons set out in the succeeding sections of the Act. 

15                  The second e‑mail was merely an electronic means of delivering a copy of the first e‑mail to Mr Anderson.  Alternative means could have been employed by EP.  A photocopy of the first e‑mail could have been sent by mail or hand delivered or sent by facsimile transmission.  Each method is to the same effect: a copy of the original privileged communication would have been delivered to Mr Anderson.  The language of s 118(a) is directed to prohibiting evidence being adduced that would result in disclosure of a confidential communication made between a client and a lawyer.  To allow, for example, cross-examination of Mr Drummond, by senior counsel for Euroz, utilising the second e‑mail, would inevitably result in evidence being adduced which would result in the disclosure, in whole or part, of the privileged communication in the first e‑mail. 

16                  This reflects the position at common law as noted by the Full Court in Carnell v Mann at 254 when their Honours observed:

In principle, whether copies of original documents are privileged at common law should be determined by asking what was the purpose underlying the creation of those original documents, and not what was the purpose underlying the creation of the copies – see Carlton Cranes Ltd v Consolidated Hotels Ltd [1988] 2 NZLR 555 at 557 per Tompkins J.  …  

The better view, we think, is that, at common law, the mere act of copying a privileged document does not lead to loss of privilege in the copy simply because it was not created for a privileged purpose.  In an era where so many documents are routinely copied, it would be peculiar to think that the existence of legal professional privilege in any given copy might depend upon the purpose underlying the making of that specific copy.   (Emphasis added)

17                  As the majority of the High Court said to like effect in Mann v Carnell (1999) 201 CLR 1 at [16] the outcome on the question of privilege did not turn upon the manner in which the content of the privileged communications was disclosed.  The privilege attaches to the communications, not to the pieces of paper on which they were written.  What was shown were copies of privileged communications.  The question is whether the disclosure of the communications resulted in the loss of privilege.

18                  The second e‑mail was no more than a re-communication of the privileged communication contained in the first e‑mail.  There is no need, in those circumstances, to ask whether the re-communication was made for a privileged purpose.  That is the position at common law: Spotless Group Ltd v Premier Building and Consulting Group Pty Ltd (2006) 16 VR 1 at [20]-[24] per Chernov JA with whom Warren CJ agreed.  It also reflects that the proper approach in this case in under s 118 and not s 119.

19                  The principal question in this application is, in my opinion, the same question identified by the High Court in Mann v Carnell at [1] namely whether the legal professional privilege was lost by a subsequent disclosure of those communications.

Was the privilege lost?

20                  There is no suggestion here of any express waiver, nor would the evidence justify such a finding. 

21                  Section 122(2) of the Act provides: 

(2)  Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.

22                  Section 122(5)(a)(i) of the Act provides relevantly:  

(5)        A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because:

            (a)        the substance of the evidence has been disclosed:

                        (i)         in the course of making a confidential communication …

23                  Euroz submits that the evidence does not justify an inference that the second e‑mail was sent by EP to Mr Anderson in the course of making a confidential communication.   

24                  The expressions confidential communication is defined in s 117 to mean:

“confidential communication” means a communication made in such circumstances that, when it was made:

(a)        the person who made it; or

(b)        the person to whom it was made;

was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law.

25                  It cannot be said that there was an express obligation.  However, the circumstances, in my opinion, give rise to an implied obligation upon Mr Anderson, viewed objectively, not to disclose the contents of the first e­‑mail contained in the second e‑mail.  It may be seen that such an obligation need not be one which “arises under law” by virtue of s 117(1).  As the Court said in Carnell v Mann at 259 the Parliament must have had in mind relationships broader than those of (for example) solicitor/client when it enacted the definitions of “confidential communication”, and “confidential document” in s 117(1).

26                  The very content of the first e-mail which was copied in the second e‑mail disclosed on its face, so far as Mr Drummond, objectively, might have considered, that it related to legal proceedings, actual or anticipated involving EP, Mr Bruce Drummond as one of its directors and inferentially Mr Graham Anderson as a potential witness or at least someone who might be in a position to assist in various ways with that litigation.  Again, self-evidently, the first e‑mail was addressed to at least one person at Slater & Gordon, a well-known Australian legal firm.  It included information concerning the private financial affairs of EP.  Furthermore, the second e‑mail in the section directed to Mr Anderson shows the subject as “FW: Addition to witness statement”.  Accordingly, it was being sent and must be taken to have been received in the context of, at least, anticipated litigation.  In my opinion, it is inconceivable that EP and Mr Anderson would have considered the communication of the second e‑mail to be other than on a strictly confidential basis.  Furthermore, I am satisfied that the relationship between EP and Mr Anderson was of a confidential nature.  In addition to the other matters which I have mentioned such is the case generally as between a client and the client’s accountant. 

27                  I do not mention these matters with a view to attributing any particular purpose but rather to characterise the confidential nature of the communication.  This is not to say that the purpose of the communication may not be relevant to the question whether it was a confidential communication but merely that it is neither necessary to nor determinative of the resolution of the question.

28                  It was put by senior counsel for Euroz, but not with great conviction it appeared, that the production of the second e‑mail in answer to the subpoena resulted in the privilege, if any, attaching to it, being lost.  I do not accept this submission.  It is only the client who can waive the privilege.  That waiver can be express or implied but it must be a waiver by the client.  The disclosure of a privileged communication by a third party does not inevitably constitute either waiver by the client or a waiver on behalf of the client.  It was not suggested that Mr Anderson had any authority on behalf of EP to disclose it.   

29                  In any event, even if disclosure in answer to the subpoena had been made with the authority of EP this would not, by reason of the provision of s 122(5)(a)(iii) of the Act, have resulted in loss of the privilege. 

30                  It follows, for these reasons, that I find that the privileged communication contained in the first e‑mail was not waived or otherwise lost by reason of its disclosure to Mr Anderson in the second e‑mail.  The second email is also protected by the privilege. 

Associate:

Dated:         17 March 2009