FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Quest South Perth Pty Ltd [2012] FCA 608

THE COURT ORDERS THAT:

1.    The interlocutory application be dismissed.

2.    Unless submissions to the contrary are filed within 10 days, there will be no order as to costs in which event costs will be determined on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    This proceeding is set down for trial later this year. The applicant seeks a variety of remedies in relation to alleged contraventions of the Fair Work Act 2009 (Cth) (FW Act) principally in connection with alleged ‘sham arrangements’ concerning conversion of various of the first respondent’s (Quest) employees to be employed by the second respondent (Contracting Solutions) as independent contractors. The third and fourth respondents have been joined as officers of Quest and Contracting Solutions respectively. They allegedly aided, abetted, counselled or procured or induced the contraventions or were knowingly concerned in them. It is unnecessary to say more about the principal proceedings for present purposes.

2    These reasons relate to disputes about documents which have been discovered by Contracting Solutions but in respect of which it claims privilege.

3    The applicant has pursued this interlocutory relief against both Quest and Contracting Solutions but due to service difficulties in connection with Quest, pursuit of relief against Quest has been adjourned. The outstanding dispute is whether the applicant should succeed on a motion to require Contracting Solutions to produce to the Court certain documents for the Court to determine the validity of Contracting Solutions’ objection to their production.

THE BASIS OF THE CLAIM

4    Contracting Solutions has claimed privilege over the following documents described in its list of discovery dated 3 October 2011:

(a)    Document number 1 in Pt 2 of its list of documents dated 3 October 2011 described as ‘Email from Raymond Crake to Judy Maynard regarding Quest Etc Fwd: Frank Letter – FWO Followup’ dated 10 September 2010;

(b)    Document number 4 in Pt 2 of the list of documents described as ‘Email from Steven Harris to Glenn Hutchinson regarding Odco Contracting Systems Australia Pty Ltd’ dated 20 August 2010;

(c)    Document number 5 in Pt 2 of the list of documents described as ‘Letter from Harris Legal to [Contracting Solutions] regarding FWO Investigation’ dated 29 September 2010; and

(d)    Document number 6 in Pt 2 of the list of documents as ‘Notes and correspondence prepared by Graham McCorry for the dominant purpose of the provision of legal services to the [Contracting Solutions] by Counsel and Norton Rose Australia in respect of actual or anticipated legal proceedings’ dated 1 March 2010 to present. (No longer in dispute).

5    The basis of the claims are for litigation privilege in respect of the first mentioned email in subpara (a) above (Document 1) and the fourth mentioned document (subpara (d) above) (Document 6); for the remaining two documents, being the ‘Email from Steven Harris to Glenn Hutchinson regarding Odco Contracting Systems Australia Pty Ltd’ (Document 4) and ‘Letter from Harris Legal to [Contracting Solutions] regarding FWO Investigation (Document 5), a claim is based on legal professional privilege

Relevant principles

6    Insofar as discovery and inspection of documents is concerned, the appropriate test is the common law test rather than the statutory test. As the High Court (Gleeson CJ, Gaudron and Gummow JJ) observed in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 (at [17]):

The claim in contention in the present case was not a claim that certain evidence could, or could not, be adduced. It was a claim that the appellant was not obliged to make certain written communications available for inspection by the respondent. Sections 118 and 119 are expressed in language which does not address that claim. The refusal of the majority in the Full Court to apply the statutory provisions otherwise than in accordance with their terms was right in principle, and was consistent with the decision of this Court in Northern Territory v GPAO.

7    The relationship of the two forms of privilege was helpfully discussed by Gordon J in Cadbury Schweppes Pty Ltd v Amcor Ltd (2008) 246 ALR 137 (at [7]-[16]). As her Honour noted (at [7]) in order to maintain a claim of legal professional privilege, a proponent must demonstrate that the communication is protected by ‘advice privilege’ or ‘litigation privilege’. Her Honour also noted ‘the relationship between the two types of privilege are just one of the matters that is unclear in Australian privilege law’. Her Honour listed a number of cases which support a proposition that litigation privilege is a separate category of legal professional privilege and others which questioned whether this is so.

8    In any event, with respect to legal professional privilege, while it had been regarded prior to Pratt Holdings Pty Ltd v Federal Commissioner of Taxation (2004) 136 FCR 357 that it was necessary to establish three elements, (1) a confidential communication; (2) between a lawyer and a client; and (3) made for the dominant purpose of giving or receiving legal advice, the Full Court dispensed with the second requirement. It held that third party communications may come within the ambit of legal professional privilege in Pratt Holdings (at [49] and [105]) (see Gordon J in Cadbury Schweppes (at [8])).

9    In Cadbury Schweppes there was no suggestion of confidentiality. It followed that no legal professional privilege inherently attached to the documents (witness statements) which, as her Honour observed, was not to say the privilege could never attach to copies or summaries of the communications depending on the purpose for which the copies or summaries were created.

10    In relation to litigation privilege, her Honour noted in Cadbury Schweppes (at [10]) that the analysis is not so simple. The privilege applies only to documents or communications if they are made or prepared:

1.    in anticipation of litigation (or during pending litigation); and

2.    for the purpose of the litigation (for example, with a view to obtaining legal advice or evidence for use in litigation).

11    A lawyer/client privilege is not required and the authorities are divided as to whether litigation privilege may attach to communications or documents summarising communications between a third party, an independent witness and a client even when they are not confidential. Both McLure JA in Public Transport Authority of Western Australia v Leighton Contractors Pty Ltd (2007) 242 ALR 181 (at [22]) and Gordon J in Cadbury Schweppes (at [11]) noted that general statements made by the High Court as to the need for confidentiality appear to be capable of applying to all categories of legal professional privilege.

12    I will approach the question on the basis that there is a need for confidentiality in communication for litigation privilege to apply but depending on the circumstances that confidentiality would not necessarily be broken in communications between client and a third party. It is to be determined as a question of fact by reference to objective criteria as well as statements of personal belief by participants who are involved in gathering information. However such personal beliefs will not be determinative. Ultimately it must be resolved by reference to an objective analysis.

Should I examine the documents?

13    There is a preliminary question. The applicant considers that it is necessary to examine the documents in order to determine whether they are privileged. Contracting Solutions suggests that I should first decide whether it is possible to determine the question without looking at the documents and to examine them only if I am otherwise unable to resolve the issue. I agree that the latter suggestion is the appropriate course in this instance.

THE EVIDENCE AS TO THE DOCUMENTS

Contracting Solutions engages an industrial advocate

14    Contacting Solutions relies upon an affidavit of Mr Graham McCorry, a registered industrial agent in Western Australia.

15    Mr McCorry deposes to the fact that in about early March 2009 he was appointed as a senior industrial advocate of the Raykon Group by Mr Glenn Hutchinson, the chief officer of that group. He became aware that the applicant was investigating in relation to the matters the subject of this proceeding on or about mid to late February 2010 when Mr Hutchinson contacted Mr McCorry and asked him to assist Contracting Solutions in relation to dealings with the applicant. In or about March 2010, Mr Derek Haayema, the director of Quest, engaged Mr McCorry to act for Quest in relation to the facts the subject of the now proceedings. He was acting for both Contracting Solutions from late February 2010 until June 2011 and for Quest from March 2010 to June 2011. He was made aware by Mr Haayema at about this time that on 22 January 2010, Mr Haayema received a notice to produce records or documents from the applicant made pursuant to s 712 of the FW Act. The notice was issued by Ms Georgina Rosendorff, a Fair Work inspector for the applicant. On 5 February 2010, Mr Haayema sent an email to Ms Rosendorff, requesting, amongst other things, an extension of time to comply with the notice to produce and stating that Quest ‘may even need to seek legal assistance’. Ms Rosendorff responded on the same day indicating that she did not have power to grant an extension of time.

16    On 16 February 2010, Mr Haayema received a letter from the applicant stating that the applicant was conducting an investigation in relation to allegations that Quest had breached a provision of the FW Act, specifically relating to sham contracting. That correspondence also foreshadowed the need for a formal recorded interview and notified Mr Haayema that he could seek independent legal advice and have legal representation at the interview. The interview was proposed for the week commencing 2 March 2010.

17    Mr McCorry says that in his experience as a registered industrial agent, once the applicant begins officially investigating a matter, a request that a formal recorded interview take place very often leads to proceedings being commenced in relation to the facts the subject of that matter. He considered, as at late February 2010, that it was likely that the matters, the subject of the proceedings, would be the subject of litigation in relation to both Quest and Contracting Solutions given the express reference to sham contracting in the letter from the applicant. He goes on to note that in that regard, ‘I was instructed by Contracting Solutions to collect any information relevant to the anticipated litigation in order to keep a detailed record of the events to be provided to legal representatives once engaged in Western Australia’.

18    On or about 18 March 2010, Contracting Solutions received a notice to produce records or documents from the applicant for the same purposes. Quest received a notice on 18 March 2010 in similar form. From that date, Mr McCorry considered that it was very likely that the matters the subject of the proceedings would be the subject of litigation in relation to both Quest and Contracting Solutions.

19    Proceedings were actually commenced on 27 May 2011. Contracting Solutions engaged solicitors and counsel in June 2011.

20    Mr McCorry says that on 22 June 2011 he received an email from Norton Rose solicitors requesting that he assist in preparing a defence to the application and, in particular, to ‘under (sic) an investigation’. He was requested to interview and take witness statements from a number of prospective witnesses and to attend at the premises of Contracting Solutions to gather relevant documents. He deposed to the fact that his understanding was that he was acting as an agent for Norton Rose and assisting them to prepare the proceeding for trial.

Solicitors are appointed

21    Mr Hutchinson has been CEO of the Raykon Group since 13 October 2008. Contracting Solutions, which is part of the Raykon Group entered into a licence with Odco Contracting Systems Australia Pty Ltd (OCSA) on 15 March 2007 for Contracting Solutions to use the Odco system. The Odco System is a system of deploying independent contractors to businesses.

22    In mid to late February 2010, Mr Hutchinson became aware that the applicant was investigating Quest and believed the investigation was in relation to unpaid entitlements.

23    Mr Hutchinson deposes that he had, in March 2009, authorised the appointment of Mr McCorry as a senior industrial advocate with the Raykon Group and in late February 2010 authorised Contracting Solutions to engage Mr McCorry, given his extensive experience as an industrial advocate, specifically to assist with the applicant’s investigation of the matters the subject of the proceeding. His engagement required him to collect any information relevant to the anticipated litigation when the applicant began investigating the events the subject of the proceeding in order to keep a detailed record of the events to be provided to legal representatives once engaged.

24    In the meantime OCSA engaged Harris Legal, a Victorian firm of solicitors to review the investigation by Quest in relation to the complaint. On about 10 May 2010, Mr Frank Konstek, a director of Contracting Solutions, received a letter from Harris Legal acting on behalf of OCSA. Harris Legal also sent Contracting Solutions an email of 20 August 2010 concerning the investigation and a letter of 29 September 2010 concerning the investigation. In the last of those documents, Harris Legal advised that it was withdrawing from acting for Contracting Solutions suggesting that until that point it had been acting for Contracting Solutions.

The provenance of the four documents

25    Dealing with the documents in respect of which privilege is claimed, Mr Hutchinson deposes to the fact that Document 1 is an email of 10 September 2010 from Mr Raymond Crake, a director of Contracting Solutions, to Ms Judy Maynard, managing director of OCSA, regarding Quest. The correct date of the document is 10 September 2010 rather than 11 November 2011. By 10 September 2010, the applicant had been investigating the facts the subject of the proceeding for several months. On his review of Document 1, Mr Hutchinson says that it is a communication between Mr Crake and Ms Maynard seeking Ms Maynard’s thoughts on the investigation by Quest and setting out the approach of Contracting Solutions to the investigation and asking for Ms Maynard to get the views of Mr Steven Harris from Harris Legal as to the matters raised in the email. As to Document 4 in which he is, again, not the author, he confirms that it is a communication between Contracting Solutions and Harris Legal, as is Document 5. As to Document 6, again, he is not the author but Contracting Solutions did instruct Mr McCorry to assist in the lead up to the anticipated litigation to ensure that Contracting Solutions had detailed records of what happened in order to represent the notes and correspondence prepared by Mr McCorry to Contracting Solutions’ legal advisor once engaged in Western Australia.

RULINGS

Document 1

26    As the affidavit of Mr Hutchinson explains, Document 1 is an email from Mr Crake, a director of Contracting Solutions to Ms Maynard, managing director of OCSA, about the applicant’s investigation, the approach of Contracting Solutions to the investigation and requesting Ms Maynard to obtain the views of Mr Harris of Harris Legal as to the matters raised in the email.

27    I am of the view that it is established objectively that litigation was reasonably contemplated by Contracting Solutions, and by its agent Mr McCorry, who says at para 17 of his affidavit that as at February 2010, he was instructed by Contracting Solutions to collect any information relevant to the anticipated litigation (being this proceeding pursued by the applicant) in order to keep a detailed record of the events to be provided to legal representatives once engaged in Western Australia.

28    The applicant argues that Document 1 which is a communication between Contracting Solutions and a third party is not protected by litigation privilege. It is said that it does not fall within the class of documents described in para (f) in Trade Practices Commission v Sterling (1979) 36 FLR 244 (at 246). It is said that to fall within this category it must have been created for the purpose of being put before Contracting Solutions’ solicitor for advice. On the evidence, Harris Legal was not at February 2010 acting for Contracting Solutions.

29    I am not persuaded that the ambit of this privilege is so confined. On the subjective evidence and, more importantly, the objective indicators from contemporaneous documents, Contracting Solutions clearly contemplated as at the date of Document 1 (10 September 2010) that it was likely to be defending a proceeding instituted from the applicant. The preparation that was conducted at that stage was clearly directed to marshalling materials for the purpose of obtaining legal advice in relation to that proposed proceeding. It is clear on the evidence that, at this stage, the applicant had been investigating the facts the subject of the proceeding for about seven or eight months. In fact, up until 29 September 2010, Harris Legal were still acting for Contracting Solutions. (See Mr Hutchinson affidavit (at para 21). There is the evidence of Mr McCorry that in his experience formal investigations conducted by the applicant, including requests for formal interviews very often lead to litigation (see para 15 of Mr McCorry’s affidavit). Whether that statement is right or not, it is clear, in my view, that Contracting Solutions were then anticipating a very real prospect of litigation. Objectively, the communication was made in the context of that prospect.

30    It is true that the email was to a third party (OCSA), but a third party with whom Contracting Solutions had entered into a licence agreement to use the Odco system owned by that third party.

31    It may reasonably be inferred (and I do) that the considerable interest in the investigation at this stage by OCSA was driven by a concern that it might also be the subject of litigation concerning the Odco system or, at least, that its reputation was at stake in any event by reason of the investigation into Contracting Solutions’ use of its system. Its interests were interests common with Contracting Solutions in relation to the prospects of this litigation ensuing. I also infer from the circumstances that this communication was intended to be confidential.

32    A further complaint raised for the applicant is that there is no evidence that Document 1 is confidential. As discussed above (at [11] – [12]) the authorities are not clear on the question of whether confidentiality is a condition of litigation privilege at common law: State of New South Wales v Jackson [2007] NSWCA 279 (at [37]). The competing positions are discussed in Public Transport Authority (at [21]-[30]) and Cadbury Schweppes (at [10] and [11]).

33    Given the timing of the document, the surrounding circumstances, the fact that solicitors had been engaged by OCSA and the fact that Contracting Solutions objectively viewed would reasonably anticipate a real or reasonable prospect of litigation, it is highly improbable that the communication was intended to be public. The issue was a serious one in respect of which a serious investigation was ensuing. It was being treated seriously by Contracting Solutions in anticipation of litigation. In my view, the communication was intended to be confidential and privilege applies.

Document 4

34    Document 4 is an email from Mr Harris, a partner at Harris Legal, to Mr Hutchinson, CEO of the Raykon Group of which Contracting Solutions is part, dated 20 August 2010 about the applicant’s investigation of Quest and Contracting Solutions, discussing issues of liability and the appropriate legal response by Contracting Solutions to the allegations of civil penalty breaches as anticipated being brought against Contracting Solutions.

35    The document was copied to Ms Maynard and Mr Peter Bosa, managing director of OCSA respectively. There is a question as to whether this constituted a waiver of privilege. As with Document 1, I consider that at this stage it is clear that litigation was anticipated and that the document came into existence for the dominant purpose of seeking advice in relation to that litigation.

36    I also consider that the argument for Contracting Solutions that there was a common interest is satisfied. While it may be accepted that a mere common interest in the outcome of litigation will be insufficient to enable a party with that interest to rely upon it for the purposes of resisting a waiver conclusion, it is not necessary for ‘common interest’ privilege that there be identical interests nor does it require that the interest be held only by those who are parties to the action: see the discussion in Farrow Mortgage Services Pty Ltd (In liq) v Webb (1996) 39 NSWLR 601 (at 608-609) where Sheller JA, with whom Waddell AJA agreed (thereafter Meagher JA dissented), noted that separately from circumstances giving rise to joint privilege are those where parties have a shared or similar interest in the subject of communications between one or more of them and a legal adviser. His Honour noted that the shared or similar interest may be the product of the particular situation in which a group of people find themselves. Neighbours may wish to oppose a proposed development in a residential area. An insured and insurer may have a shared or similar interest in defeating a claim against the insured. As his Honour observed, in such circumstances one or more of the parties, as an individual or a group, may obtain legal advice about the subject of that interest and then disclose the contents of communications with the legal adviser and any advice the result of them to others with a shared or similar interest in the matter. His Honour said (at 608):

This disclosure amongst persons with a common interest, as it has been described, need not result in a waiver of privilege by the party making it. The distinction between common interest privilege and joint privilege may be important when considering whether disclosure by one of the parties interested in the matter of the contents of the communications to a third party should be treated as a waiver by all the parties interested.

37    Lord Denning MR in Buttes Gas and Oil Co v Hammer (No 3) [1981] QB 223 (at 243) described ‘common interest’ privilege as a privilege saying:

It often happens in litigation that a plaintiff or defendant has other persons standing alongside him — who have the self-same interest as he — and who have consulted lawyers on the self-same points as he — but these others have not been made parties to the action. Maybe for economy or for simplicity or what you will. All exchange counsel's opinions. All for simplicity or what you will collect information for the purpose of litigation. All make copies. All await the outcome with the same anxious anticipation — because it affects each as much as it does the others. Instances come readily to mind. Owners of adjoining houses complain of a nuisance which affects them both equally. Both take legal advice. Both exchange relevant documents. But only one is a plaintiff. An author writes a book and gets it published. It is said to contain a libel or to be an infringement of copyright. Both author and publisher take legal advice. Both exchange documents. But only one is made a defendant.

In all such cases I think the courts should — for the purposes of discovery — treat all the persons interested as if they were partners in a single firm or departments in a single company. Each can avail himself of the privilege in aid of litigation. Each can collect information for the use of his or the other's legal adviser. Each can hold originals and each make copies. And so forth. All are the subject of the privilege in aid of anticipated litigation, even though it should transpire that, when the litigation is afterwards commenced, only one of them is made a party to it. No matter that one has the originals and the other has the copies. All are privileged.

38    The communication of legal advice in Document 4 was to Contracting Solutions not to OCSA. It is not surprising and accords with the common interest doctrine that the legal advisor would copy OCSA in the email in the anticipation that there was a common interest in the litigation in the sense discussed in Farrow and Buttes Gas and Oil Co. I consider the document is protected by litigation privilege.

Document 5

39    Document 5 is letter from Mr Harris of Harris Legal to Mr Hutchinson, CEO of the Raykon Group of which Contracting Solutions is part, dated 29 September 2010 about the applicant’s investigation of Quest and Contracting Solutions, discussing issues of liability and the appropriate legal response by Contracting Solutions to the allegations of civil penalty breaches as anticipated being brought against Contracting Solutions. Document 5 was also copied to Ms Maynard and Mr Bosa, managing director and director respectively of OCSA.

40    In my view and for the same reasons as discussed in relation to Document 4, the same considerations apply and privilege attaches to Document 5.

Document 6

41    Privilege is no longer disputed in relation to Document 6. That is appropriate.

CONCLUSION

42    For those reasons, I consider that privilege is established. It follows that the applicant is not entitled to the relief it seeks. Accordingly, the application will be dismissed. Having regard to s 43 of the Federal Court of Australia Act 1976 (Cth) and s 570 FW Act, unless submissions to the contrary are filed within 10 days, there will be no order as to costs in which event costs will be determined on the papers.

Associate:

Dated:    12 June 2012