FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 45

THE COURT ORDERS THAT:

1.    The application by the Australian Competition and Consumer Commission for leave to inspect the documents which have been produced under paragraph 4 of the Schedule to the subpoena dated 2 December 2013 and issued to Frozen Bakery Solutions Pty Ltd is refused.

2.    The application by the Australian Competition and Consumer Commission for leave to inspect the documents which have been produced under paragraph 4 of the Schedule to the subpoena dated 2 December 2013 and issued to Speedibake (a division of George Weston Foods Ltd) is refused.

3.    The application by the Australian Competition and Consumer Commission for leave to inspect the documents which have been produced under paragraph 4 of the Schedule to the subpoena dated 2 December 2013 and issued to Laurent Bakery Pty Ltd is refused.

4.    The applicant is to pay the respondent’s costs of the application for leave to inspect, including reserved costs.

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 listed for a trial commencing on 19 February 2014. On 15 January 2014, at the return of subpoenas issued by the applicant, the Australian Competition and Consumer Commission (ACCC), the respondent, Coles Supermarkets Australia Pty Ltd (Coles), made a claim of legal professional privilege over one of the four categories of documents produced by a number of third parties in answer to the subpoenas. A Registrar of the Court referred the claim for hearing, including submissions on whether, if any privilege exists, it has been waived. The matter came on for hearing before me on 6 February 2014.

2    By the time of the hearing before me, the ACCC accepted the documents were subject to legal professional privilege, as Coles claimed. However, it submitted the privilege had been waived by Coles’ conduct in correspondence with the ACCC in November 2013, in the process of the parties seeking to finalise an Agreed Statement of Facts in the proceeding.

3    For the reasons I set out below, in my opinion there has been no waiver of legal professional privilege by Coles. Leave will not be granted to the ACCC to inspect the fourth category of documents produced in answer to the three subpoenas.

BACKGROUND

4     From 4 July 2012 the respondent has offered for sale at its Coles Supermarket Stores a variety of bakery products in packaging displaying the marketing phrases “Freshly Baked In-Store”, “Baked Today, Sold Today” and “Coles Bakery”. In submissions filed in the substantive proceeding, the ACCC explains that these bakery products are prepared using the method of “par baking”. “Par baking” is where a supplier makes, shapes and proves the dough, places the dough in an oven and applies heat, and then snap-freezes the product where it is stored for a period of time. The product is then transported, frozen, to the retailer where it may be stored frozen for a further period and the retailer subsequently places the product in an oven and applies heat and offers the product for sale.

5    On 12 June 2013, the ACCC commenced proceedings in this Court alleging contraventions of ss 18, 29(1)(a) and 33 of the Australian Consumer Law, as set out in Sch 2 of the Competition and Consumer Act 2010 (Cth). The ACCC claims that the use of the marketing phrases “Freshly Baked In-Store”, “Baked Today, Sold Today” and “Coles Bakery”, in relation to par-baked products, constitutes misleading or deceptive conduct, and/or the making of false or misleading representations. It seeks injunctive and declaratory relief, probation and publication orders, and pecuniary penalties against Coles.

6    Orders were made in the proceeding to the effect that the trial proceed by way of an Agreed Statement of Facts, to be filed together with identification of any additional lay evidence the parties propose to adduce that will not be the subject of agreement, and which is to be filed and served at a later date. The evidence on this application for leave to inspect discloses a constructive but firm process of negotiation in which — as is usually the case in an adversarial setting — not all facts, or categories of facts, each party proposed for agreement were ultimately accepted by the other party.

7    One category of facts related to the baking processes undertaken by Coles’ suppliers of the par-baked bread. After some negotiation and exchange of correspondence, Coles did not agree to all of the facts proposed by the ACCC. Considering those facts to be critical to the prosecution of its case, the ACCC sought that subpoenas be issued to three of Coles’ suppliers. Those suppliers are Laurent Bakery Pty Ltd, Speedibake (a division of George Weston Foods Limited) and Frozen Bakery Solutions Pty Ltd (together, the suppliers). The subpoenas were issued on 2 December 2013. Each subpoena listed four categories of documents in its schedule, and were relevantly identical, save for changes necessary to identify each supplier and its products. For example, the categories listed in the schedule to the subpoena to Frozen Bakery Solutions were as follows:

1.    Documents which describe the process of production undertaken by Frozen Bakery Solutions Pty Ltd, trading as Breadsolutions (Breadsolutions) for each of the following par baked products supplied by Breadsolutions to Coles Supermarkets Australia Pty Ltd (Coles):

a.    Rustic baguette (300 grams);

b.    Stone baked Turkish bread (400 grams);

c.    Sunflower triangles;

d.    Stone baked light rye & currant sourdough Vienna (500 grams);

2.    Documents which describe the physical changes to the products (including any changes in chemical composition) identified in paragraph 1(a) to (d), above, as a result of the process of production set out in paragraph 1;

3.    Documents which describe the percentage or portion of total baking undertaken by Breadsolutions for each of the products identified in paragraph 1(a) to (d), above, in the course of the process identified in paragraph 1 above, and the basis for such calculation; and

4.    Any communications to Coles or to its solicitors King & Wood Mallesons by Breadsolutions relating to the matters set out in paragraphs 1 to 3, above.

8    On 5 December 2013 the parties filed an Agreed Statement of Facts. The evidence discloses they agreed that, if appropriate, a supplementary Agreed Statement of Facts could be filed to deal with any outstanding factual issues which could ultimately be agreed between them, including facts relating to the baking processes undertaken by Coles’ suppliers of par-baked bread.

9    On 15 January 2014, documents were produced by each of the suppliers in answer to the subpoena. The ACCC was granted leave to inspect documents produced under the first three categories. Coles opposed the grant of leave to the ACCC to inspect the fourth category of documents (Category 4 documents), on the basis that the documents are subject to its legal professional privilege. The ACCC contends that the legal professional privilege which it now accepts attaches to the disputed documents has been waived by Coles.

10    In support of its claim for legal professional privilege, and its resistance of the ACCC’s waiver argument, Coles relied on an affidavit sworn by Mr James Russell, a solicitor at King & Wood Mallesons. The ACCC adduced no evidence and did not challenge any of the contents of Mr Russell’s affidavit. The contents of that affidavit, and its annexures, can be accepted as providing the necessary factual basis for the findings I make.

11    Both parties agreed to my inspection of the documents in contention, for two specific purposes. First, it was submitted to me by the ACCC that, if some of the documents contained something other than factual material underlying the communications in which the ACCC says privilege has been waived (for example, information relevant to the respondent’s litigation strategy), then the ACCC would not press for production of those documents, or would be content for those parts to be redacted. The parties agreed it would be necessary for me to inspect the documents to determine whether this circumstance applied. Second, Coles submitted that it might be necessary for me to look at the documents to determine whether Coles in fact had, through the communications in question, made a disclosure of the information in the communication. Accordingly, I have inspected the documents for those purposes.

THE CIRCUMSTANCES SAID TO SUPPORT A FINDING OF WAIVER

12    In early September 2013, and as part of the process of negotiating an Agreed Statement of Facts for the Court, the ACCC wrote to Coles suggesting the parties’ Agreed Statement of Facts should include the following:

Bread Production:

•    More detail is required in relation to each of the three production methods.

•    In relation to par-baking, the SoAf ought to include facts regarding:

o    the suppliers of par baked bread to Coles;

o    the exact process involved in the initial heating of the dough;

o    the process involved in snap freezing the products;

o    storage and defrosting; and

o    transportation of the frozen products to Coles stores and the time and distance involved.

If the above information varies from product to product, Coles should provide the precise information by reference to each particularised example. Naturally, if there is a process manual or plan that identifies and describes the steps in this process, could you please provide it to us.

13    At this stage, Coles was itself seeking to have a section in the Agreed Statement of Facts concerning industry marketing practices of other retailers such as Aldi and Bakers Delight. In the same correspondence the ACCC rejected the inclusion of that information, stating:

… the information is not verified and it is not Coles or the ACCC’s information. Pursuant to the Court Orders, either party may adduce relevant evidence regarding the practices of other industry participants by affidavit if they so wish.

14    As negotiations progressed, the ACCC proposed facts which went into detail about the baking processes undertaken by Coles’ suppliers, and then the baking processes undertaken by Coles. Coles rejected these proposals, contending that there was “no utility” in the detail the ACCC was seeking. It also contended it did not know the detail, because those matters were within the knowledge of its suppliers.

15    In response, the ACCC made it clear it considered the factual detail to be critical to the proceeding. It stated in correspondence:

The central issue in this case is whether Coles’ promotion of par-baked products by reference to terms such as ”Baked Today, Sold Today” and “Freshly Baked in Store” is misleading and deceptive or likely to mislead or deceive. The Court can only make that determination with full knowledge of the process that is in fact employed by Coles and/or its par bake suppliers, to produce the products in question. The detailed circumstances of the creation of the products (including temporal, storage and re-heating details) in relation to which representations are made are indisputably critical.

…

The proposition that “there is no utility in the further detail sought” is misconceived. It is also untenable for Coles to assert that it does not know this information or, as it appears to suggest, that it is not in a position to provide it. Coles has marketed the products as “Baked Today” and/or “Freshly Baked in Store”. We do not understand how Coles could make these representations without a clear idea of the method adopted in the production of these products.

To be clear, the utility of the information is to inform the Court of the process of manufacture of the products in order for the Court to determine whether consumers are misled by the marketing phrases “Baked Today” and/or “Freshly Baked in Store”. These marketing phrases make implicit representations about the production processes employed by Coles. In testing whether the phrases are misleading, it is necessary for the Court to understand the production processes.

16    Coles continued to say that it did not have the details the ACCC sought, and that the factual details of the suppliers’ baking processes were of “no utility” to the determination of the issues in the proceeding. It added that processes between suppliers differed. However it informed the ACCC that, notwithstanding those views, it was making inquiries of its suppliers “to see if it can obtain further details of the kind you are seeking”. The ACCC maintained its position that these details were important. Various iterations of the Agreed Statement of Facts continued to be exchanged. At least one version was filed on 30 September 2013, but there were further iterations thereafter. In all iterations and correspondence the issue of the details of the baking processes undertaken by Coles’ suppliers remained unresolved, with versions of proposed facts about that issue (and others) continuing to be exchanged.

17    Two key pieces of correspondence were sent from King & Wood Mallesons in mid and late November 2013. By a letter dated 19 November 2013, Coles informed the ACCC that it had obtained further information in relation to the par-baking process. I will refer to this as “the November letter”, as Mr Russell did in his affidavit. There were three categories of information the ACCC had sought:

1    identification of all suppliers to Coles, their locations and the geographical area which they supply;

2    details of the:

a.    average time in the supplier’s oven;

b.    average time stored frozen by supplier;

c.    average time stored frozen by Coles; and

d.    average time in Coles’ oven; and

3    the changes that each product underwent when heat was initially applied to the dough by the supplier in an oven as set out in paragraph 75(a) of the Draft ASOF.

18    Coles informed the ACCC it had obtained the information in the first two categories, with some qualifications which are not presently relevant. It then made the following statements, which are said by the ACCC to constitute the conduct which gives rise to an inconsistency in the maintenance of legal professional privilege which should lead the Court to find the privilege has been impliedly waived.

In relation to question 3, the suppliers of the Particularised Products and Particularised Signage Products have provided our client with different information regarding the changes that occur to their par baked bread products when they undergo their initial or first bake. We understand this is because different techniques, ingredients and technology are employed by different suppliers in order to make their par baked products, and techniques, ingredients and technology differ between products.

Our client’s suppliers have provided the following information:

(a)    Bread Solutions

Bread Solutions’ Rustic Baguette, Sunflower Triangles and Stone Baked Turkish Bread products underwent the following changes when heat was applied to the dough by Bread Solutions in an oven:

•    some water in the dough boiled and evaporated;

•    the starches gelatinised and the proteins coagulated, meaning that the dough set and formed the structure of bread; and

•    caramelisation of sugars started to occur.

These products then underwent the following changes when heat was applied to them by Coles:

•    moisture in the dough was further evaporated and caramelisation of sugars continued;

•    enzymes were activated, creating natural reducing sugars (glucose and maltose) from starch; and

•    a chemical reaction between these reducing sugars and amino acids took place (known as the ‘Maillard Reaction’) which browned and hardened the exterior of the product, generating a finished “crust” and creating a range of odours and flavours.

(b)    Laurent

Laurent’s bread products are baked until the structure of the bread is formed, and caramelisation of the sugars has started to form the crust.

(c)    Cuisine Royale

Cuisine Royal regards information relating to its manufacturing processes as confidential and so has not explained to Coles what changes its bread underwent during the initial bake.

(d)    Speedibake

The initial bake produces a product that is between 80% and 90% baked.

Please let us know how you propose that the information set out above in relation to the par baking processes might be incorporated in a supplementary Agreed Statement of Facts.

19    After further negotiations, and a directions hearing, a further iteration of the Agreed Statement of Facts was provided to Coles by the ACCC, presumably to replace the one filed on 30 September 2013. This draft contained the following proposed paragraphs in relation to the suppliers’ baking processes:

78    The Particularised Products and the Particularised Signage Products supplied to Coles by Bread Solutions and Laurent underwent the following changes when the products were placed in an oven by the supplier:

(a)    some water in the dough boiled and evaporated;

(b)    the starches gelatinised and the proteins coagulated, meaning that the dough set and formed the structure of bread;

(c)    caramelisation of sugars started to occur and the bread started to form a crust.

79    In respect of the Particularised Products supplied to Coles by Cuisine Royale, the cooking process was 90% completed in the Cuisine Royale factory before the products were snap frozen and supplied to Coles (Tab 7, pg. COL.001.001.1232).

80    In respect of the Particularised Products and Particularised Signage Products supplied to Coles by Speedibake, the cooking process was 80-90% completed by Speedibake before the products were snap frozen and supplied to Coles.

20    By a letter dated 28 November 2013, Coles responded to these proposed paragraphs by agreeing to a modified version of proposed paragraph [78], and not agreeing to proposed paragraphs [79] and [80]. It stated:

Our client does not agree to include your proposed new paragraphs 79 and 80 in an amended ASOF.

Neither proposed paragraph accurately reproduces the assertions of the two suppliers concerned, and in any event concern untested assertions which are unclear as to their meaning.

If your client wishes to adduce further evidence in relation to suppliers beyond that already included in the ASOF, and which our client is prepared to have included in an amended ASOF as set out in this letter, it is at liberty to seek to adduce that evidence by other means.

21    Despite some faint submissions to the contrary on Coles’ behalf, I find that Coles’ references to “assertions” must be understood to be a reference to either the information provided in the November letter, or other information received from its suppliers which it had not disclosed.

22    Following receipt by the ACCC of the 28 November letter, there were further communications between the ACCC’s and Coles’ solicitors regarding inclusion of the material in the Agreed Statement of Facts, on which no agreement was reached. On 2 December 2013, the ACCC made a request to the Court to issue the subpoenas with which this application is concerned.

23    A final Agreed Statement of Facts was filed with the Court on 5 December 2013. The equivalent of proposed paragraph [78] referred to at [19] above appears in the following form as a now agreed fact:

78    The Particularised Products and the Particularised Signage Products underwent the following changes when the product was placed in an oven with heat being applied in the Coles In-store Baking Area in order to make the product saleable:

(a)    the products became hot;

(b)    the exterior of the products became darker in colour, harder and a crust was generated;

(c)    moisture in the products evaporated;

(d)    the interior of the products became softer, lighter and less dense in texture; and

(e)    the products developed a strong “bread” aroma.

24    Counsel for the ACCC informed the Court that if the Court were to find privilege had been waived, the ACCC would examine the documents with a view to seeing if further facts could be agreed with Coles and a supplementary Agreed Statement of Facts filed. She conceded that if that were not the case, the ACCC would consider whether it should adduce evidence of those facts.

HAS COLES IMPLIEDLY WAIVED ITS PRIVILEGE?

25    The parties accepted that the approach to be taken to the question whether legal professional privilege in a communication has been waived is set out in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66, in the following passage from the joint judgment at [28]- [29]:

Legal professional privilege exists to protect the confidentiality of communications between lawyer and client. It is the client who is entitled to the benefit of such confidentiality, and who may relinquish that entitlement. It is inconsistency between the conduct of the client and maintenance of the confidentiality which effects a waiver of the privilege. Examples include disclosure by a client of the client’s version of a communication with a lawyer, which entitles the lawyer to give his or her account of the communication, or the institution of proceedings for professional negligence against a lawyer, in which the lawyer’s evidence as to advice given to the client will be received.

Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is “imputed by operation of law”. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege … 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.

26    The parties accepted that, because this is a pre-trial application, the common law applies: Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67. The ACCC accepted it bore the onus of establishing the circumstances in which waiver should be found: New South Wales v Betfair Pty Ltd (2009) 180 FCR 543; [2009] FCAFC 160 at [54]. Finally, there was no dispute between the parties that the question of waiver is one of fact and degree: Nine Films and Television Pty Ltd v Ninox Television Ltd (2005) 65 IPR 442; [2005] FCA 356 at [26] per Tamberlin J; Osland v Secretary, Department of Justice (2008) 234 CLR 275; [2008] HCA 37 at [49] per Gleeson CJ, Gummow, Heydon and Kiefel JJ.

27    The ACCC submits that Coles’ conduct in disclosing the information contained in the November letter is inconsistent with the maintenance of a claim of legal professional privilege over the communications containing the information. It advanced the following reasons to support that submission.

28    First, since the subject matter of the Category 4 documents in the subpoena is the same as that in the November letter, the ACCC submitted that Coles has through the November letter disclosed the gist or substance of the information in the Category 4 documents: AWB Ltd v Cole (No 5) (2006) 155 FCR 30; [2006] FCA 1234 at [163] per Young J. Second, by sending the November letter, Coles is said to have made an assertion in the proceeding about the information it had obtained from its suppliers for the purpose of substantiating its defence. It thereby is said to have put the contents of the November letter in issue and opened those contents to scrutiny. The ACCC relied on Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341; [2006] FCAFC 86 at [52] and DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499; [2003] FCA 384 at [58] per Allsop J to support those submissions. Third, if the information in the November letter represents only part of what is contained in the Category 4 documents about the suppliers’ baking processes, then the ACCC submits there has been a partial disclosure by Coles of a privileged communication and fairness requires a full disclosure: Australian Securities and Investments Commission v Rich [2004] NSWSC 923. Flowing from this, the ACCC submitted there was significant unfairness to it because it may be in possession of only part of the information on an aspect of the proceeding it has always maintained is critical. It submitted there will be strategic disadvantages for it: it is difficult to make a decision about whether to subpoena suppliers as witnesses when it is unsure whether what is in the November letter is verifiable, or all the relevant information. It cannot assist the Court by agreeing further facts about the baking process of Coles’ suppliers because it cannot verify the source documents underlying the information given in the November letter. Coles volunteered the information and in that sense deployed it in the proceeding, and the ACCC contended it is entitled to an “opportunity of satisfying [itself] that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question”: Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 482 per Gibbs CJ, quoting Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 at 538-539 per Mustill J.

29    Although the November letter occurred in the context of an open negotiation between the parties about the form of an Agreed Statement of Facts, the ACCC submits there is no material difference between that and a disclosure by Coles in a pleading, or in evidence. The inconsistency is of the same nature, the ACCC submits: there was an invitation from Coles to the ACCC to rely on the material and agree to its incorporation into the Agreed Statement of Facts. Having made that invitation, and asserted that was the information from its suppliers, it would be inconsistent and unfair to allow Coles to maintain privilege so the ACCC cannot verify that information, nor assure itself it is all of the information. Therefore, the information cannot reliably be put in an Agreed Statement of Facts, and the ACCC’s strategic choices about dealing with the evidence outside an Agreed Statement of Facts in the proceeding are put at a disadvantage. It matters not that the issue of the suppliers’ baking process has been put in issue in the proceedings by the ACCC and not Coles: what matters is that those facts are in issue.

30    As to the ACCC’s first argument, having inspected the documents, it could be said that the information in the November letter does present the gist or substance of at least some of the communications over which privilege is claimed. However, I accept Coles’ submission that disclosure of gist or substance of privileged information will not necessarily waive privilege: see Osland 234 CLR 275; [2008] HCA 37 at [49]. No doubt it will be important for the Court to consider the content of the disclosure (including in comparison with the privileged communication) as part of the context, but the key issue is whether, the disclosure having occurred, there is an inconsistency in the maintenance of the privilege. That will be fact and context dependent in every case. In particular, the inconsistency is to be ascertained by reference to the matters in issue, and the processes adopted, in a proceeding. That is because, ultimately, waiver is implied to ensure the fairness of a trial process.

31    As to the second argument of the ACCC, a consideration of the evidence makes it clear, as Coles submitted, that it has consistently disavowed any reliance on the baking processes of its suppliers, and indeed disputes the relevance of that kind of evidence. In that sense, there is no parallel with the pleading of a matter in defence: see, eg, DSE (Holdings) Pty Ltd 127 FCR 499; [2003] FCA 384. Acceptance of there being no parallel with a pleading does not necessitate acceptance of Coles’ further submission which sought to narrow the circumstances in which waiver might occur.

32    Coles sought to rely on observations by Gibbs CJ in Maurice 161 CLR 475 at 482, where his Honour uses the phrase “where a party is deploying in court”, to submit that the process of agreeing facts for trial was outside the kind of circumstances in which waiver might occur. In my opinion, the use of that phrase by Gibbs CJ is not to be seen as narrowing the circumstances in which an inconsistency could arise sufficient to constitute a waiver. Indeed, that is precisely what Gibbs CJ held, after the passage relied on by Coles. His Honour was considering the different approaches to waiver in the United Kingdom and the United States, and in particular observations by Hobhouse J in General Accident Corporation v Tanter [1984] 1 WLR 100 at 113. Gibbs CJ reached the following conclusion (at 483):

If Hobhouse J. was correct in saying that there is no waiver of associated material until that material is adduced in evidence it follows in the present case that privilege in the source material has not been waived. In my opinion however the rule is not so inflexible; the question is whether the disclosure or use of material that has been made renders it unfair to uphold the privilege in the associated material, and although the question whether the material that has been disclosed has been used in evidence is relevant, it is not decisive.

33    In my opinion there is no basis to suggest that the “deployment” must be in the course of trial itself, in pleadings or in evidence sought to be tendered or in fact tendered. Along the way to trial parties make many forensic decisions based on the information available to them: that is the purpose of pre-trial procedures such as discovery and subpoenas. In current court procedures, processes such as the agreement of facts between the parties are rightly encouraged and seen as a critical part of modern case management. The Court relies on parties to negotiate those documents in a manner which ensures they are complete and accurate and therefore entirely reliable for the Court to proceed upon. Agreed facts are given particular status under the uniform evidence legislation: see s 191 of the Evidence Act 1995 (Cth). In proceedings such as the current one, which is conducted through this Court’s Fast Track processes, agreement of facts has particular importance for the achievement of the aims of the Fast Track process and the broader aims set out in s 37M of the Federal Court of Australia Act 1976 (Cth). In principle, there is no reason why a waiver of privilege might not occur through the conduct of a party negotiating an agreed statement of facts, although if the waiver is not express, it may be a rare circumstance that the necessary inconsistency will arise, for reasons I outline more fully below.

34    In my opinion, the matter of the baking processes undertaken by Coles’ suppliers was clearly put in issue in the proceeding by the ACCC, as central to the Court’s determination of whether Coles’ marketing phrases such as “Baked Today, Sold Today” and “Freshly Baked” in relation to par-baked goods from those suppliers was misleading or deceptive conduct, or involved the making of misleading or false representations. In the process of agreeing a statement of facts, which the parties had been ordered to do, the facts to be included will necessarily cover facts that one party sees as material, facts that another party sees as material and facts that both see as material. Coles did, I find, voluntarily engage with the ACCC as part of the preparation of the Agreed Statement of Facts on the factual issue of its suppliers’ baking processes, which the ACCC saw as material. It did so by choosing to disclose information provided by its suppliers. It did so, on the evidence, by providing a paraphrase of the information provided by the suppliers: there is nothing in the November letter which suggests Coles represented to the ACCC that it was quoting the source information to the ACCC. I reject Coles’ argument that, because the November letter dealt with preparation of a draft Agreed Statement of Facts on matters Coles itself did not see as material to the proceeding, it must necessarily be concluded that privilege has not been waived. Those circumstances are still capable of giving rise to an inconsistency in the maintenance of the privilege. Whether they do or not depends on other factors.

35    As to the ACCC’s third argument, which rests on considerations of fairness, Coles submitted that the ACCC was incorrect to characterise what occurred in the November letter as a disclosure by Coles of privileged communications. It submitted that, while not a complete analogy, the authorities concerning solicitors’ disclosure of instructions provided appropriate comparison. Coles submitted that the information in the November letter was a synthesis of what was in the privileged communications, without reference to any particular communication or information that was identifiable as directly from Coles’ suppliers. It relied on the decisions of Forrest J in French v Triple M Melbourne Pty Ltd [2008] VSC 547 and Digby J in QUBE Logistics (Vic) Pty Ltd v Wimmera Container Line Pty Ltd [2013] VSC 695, to contend that an exchange of information formulated by solicitors on instructions (whether from a client or a third party) did not, without more, provide the necessary inconsistency to imply waiver in the underlying communications conveying the instructions.

36    In QUBE [2013] VSC 695, Digby J said at [131]-[132]:

I also observe that most, if not all, letters of demand are necessarily expressly or impliedly, communicating what the lawyer acting for that party has been instructed. It is such instructions that provide the basis for the demand. Professional conduct and other requirements necessitate such letters being based on a client’s instruction.

If a solicitor advising a client could not assert the sort of matters asserted in the subject email for the fear of waiving privilege and its client being exposed to disclosure of the otherwise privileged communications, there would be an unjustified restriction imposed on the legal representative’s ability to communicate his or her client’s position and demands.

37    With respect, I agree with his Honour’s emphasis on both the process by which instructions are conveyed between parties as a regular part of litigation, and on the need to identify the inconsistency said to arise if privilege is maintained over a communication containing instructions. To the contrary of the submissions put by the ACCC, I agree with Coles that these cases provide an analogy to the current circumstances. That is because the process of exchanging instructions in the course of litigation — often for the purpose of clarifying or narrowing issues in dispute, or identifying sources of evidence — is similar to the process undertaken in the preparation of an Agreed Statement of Facts. In each case, solicitors are putting forward summaries, paraphrases, or their formulations of what they understand to be their clients’ position or instructions, perhaps including evidence or information supporting that position. I accept Coles’ submission that it is irrelevant whether what is put forward originates from the client, or from a third party, when legal professional privilege is recognised to subsist in both. Without more, this conduct gives rise to no necessary inconsistency in the maintenance of legal professional privilege.

38    However I do not read these authorities, in particular QUBE, as suggesting there is no “disclosure” of a privileged communication, as Coles’ submissions seemed to suggest. Rather, these authorities are dealing with the question of an inconsistency in the maintenance of privilege over the communication: indeed, the authorities accept there is some disclosure and in the passage in QUBE from which I have quoted, Digby J is assessing the consequences — in terms of waiver — of that disclosure.

39    In particular, when dealing with the possibility of partial disclosure, the ACCC relied substantially on questions of fairness, sometimes putting that factor as separate from inconsistency. I do not read the joint judgment in Mann 201 CLR 1; [1999] HCA 66 as separating out those two concepts at all. Rather, the joint judgment emphasises (at [29]) that the inconsistency in the maintenance of the privilege which must be identified is what constitutes the unfairness. There is to be no assessment of fairness at large, which is what the ACCC’s submissions tended to suggest. The ACCC’s submissions amounted to a contention that non-disclosure of the underlying communications which informed the paragraphs in the November letter would make the ACCC’s forensic task in the litigation (of proving the critical facts about Coles’ suppliers’ baking processes) harder than it might have been. In my opinion that does not amount to an inconsistency and therefore to any unfairness in the requisite sense.

40    The ACCC is at liberty to adduce by way of evidence the material facts it contends are necessary to make out its allegations. If necessary, it can issue subpoenas to the relevant suppliers to give evidence. It has some information about those processes, albeit not supported by the kind of definitive documentary material it considers must exist. Whether or not there is such source material, ultimately the evidence will revolve around the things people do to products during that process, and the changes in the bread during production, all of which are observable. These are matters which can be the subject of evidence. However, the ACCC is in a better position to make a decision on adducing such evidence than it would have been had the exchanges between the parties for the purpose of trying to agree facts not occurred. It knows something about the suppliers’ baking processes: perhaps not enough for its own forensic purposes, but more than it otherwise would. The ACCC is at no disadvantage in the proceeding because of Coles’ conduct in providing information in the November letter: if anything, it has an advantage because of it.

41    There is no doubt but that the provision of information in the November letter was a voluntary disclosure by Coles of at least some information its suppliers had provided to it. However, the voluntariness of the disclosure, of itself, is not enough: Mann 201 CLR 1; [1999] HCA 66 at [30]. To characterise the November letter as an “invitation” for the ACCC to rely on what was said for the purposes of agreeing facts in my opinion again mischaracterises what is involved in the process of agreeing facts to put before the Court. Obviously, before a party formally agrees a fact, the party must be satisfied it is true and correct, because that is what the parties’ agreement represents to the Court. However, before that formal agreement takes place, there may be many circumstances where a party will consider facts proffered by another party, and consider them unreliable, unverified or unsuited to the characterisation a party wishes to present to the Court, or irrelevant or unsuited to found a legal argument the party wishes to make. Such forensic decision-making is an inherent part of agreeing facts in a trial setting. Failing an agreement, the parties revert to the usual position in contested adversarial litigation: the bearing of either an evidentiary or legal burden of proof.

42    Competing submissions were made by both parties about the “chilling effect” on parties’ willingness to agree facts if waiver were implied, or not implied, in the current circumstances. The ACCC submitted without an implication of waiver, allowing a party to put forward only the information it chose to put forward in proposing agreed facts would make other parties less likely to agree. Coles submitted implying waiver would lead to reluctance in parties to engage in frank disclosures during negotiation processes about agreeing facts. Both contentions may have some substance to them. However, I find the more likely “chilling effect” would arise from too ready an implication of waiver in these circumstances. An Agreed Statement of Facts will be drawn and agreed by parties with a view to the respective cases they wish to advance in the proceeding. That will be done in the knowledge, as is the case in this proceeding, that in the absence of an agreement as to a material fact, the parties are at liberty to adduce evidence in the usual way to prove that fact. The level of frankness and candour in open negotiations of this nature might well be affected by too ready an implication of waiver of legal professional privilege.

43    Where that consideration really leads, in my opinion, is to a recognition of the different environment in which the conduct said to constitute the waiver in this case occurred. While, as I have said, I reject Coles’ submission that waiver is confined to a narrow concept of “deploying in court” and could extend to conduct occurring during a negotiation to agree facts, whether an inconsistency of the necessary kind exists in those circumstances is the central question. The very nature of the process of negotiating to agree facts may make it unlikely that maintenance of a claim of legal professional privilege is inconsistent with a disclosure made in the course of such negotiations. However, that will be a matter for determination in each given case.

44    It is important to appreciate that the stage at which the disclosure was made in the November letter was one where, although one version of the Agreed Statement of Facts had been filed with the Court on 30 September 2013, the parties were obviously contemplating replacing that version with another version. There were more factual issues outstanding than the ones dealing with the suppliers’ baking processes. There was, for example, an ongoing debate between Coles and the ACCC about an entire section in the Agreed Statement of Facts dealing with the marketing practices of other retailers: Coles wanted an entire section of agreed facts on this issue; the ACCC resisted on the grounds of relevance. Ultimately that section was not agreed and the Court was informed that Coles now seeks to adduce evidence on that subject matter by way of affidavit.

45    In those circumstances, there is no inconsistency in my opinion in Coles maintaining its privilege over the communications which provide the source material for the disclosures made in the November letter. Failing agreement as to a fact, the parties revert to their usual position of adducing admissible evidence.

46    Although it is true, as counsel for the ACCC submitted, that agreed statements of fact are of considerable assistance to the Court, and provide a highly efficient and effective use of the Court’s and the parties’ resources in the conduct of a trial, considerations of their efficiency and effectiveness (and therefore the desirability, in principle, that they be comprehensive) cannot affect a determination of waiver of privilege. In a trial where each party retains the ability to call evidence in the usual way, a claim of legal professional privilege which results in communications used during a negotiation to attempt to agree facts not being available for another party has no necessary effect on the availability of the underlying information contained in those communications to that other party. It is that consideration which, to my mind in the circumstances of this case, means there is no inconsistency in Coles maintaining legal professional privilege over communications which contained information it had volunteered during those negotiations, which ultimately was not included in the Agreed Statement of Facts.

Associate:

Dated:    11 February 2014