Tirango Nominees Pty Ltd & Ors v Dairy Vale Foods Ltd [1998] FCA 724

federal court of australia

EVIDENCE - client legal privilege - copy of privileged document sent to third party - whether that copy privileged - whether document sent in the course of a confidential communication - consideration of interaction of ss 122(2) and (4) of Evidence Act 1995 (Cth).

Evidence Act 1995 (Cth) ss 117, 118, 122(2) and 122(4)

Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418, considered

Telstra Corporation v Australia Media holdings (No 2) (1997) 41 NSWLR 346, considered

TIRANGO NOMINEES PTY LTD (ACN 006 777 537) and

ALLEN JAMES WILLIAMS and PAULINE ANNE STOCKMAN

v DAIRY VALE FOODS LIMITED (ACN 065 923 597)

VG 123 of 1997

MANSFIELD J

28 MAY 1998

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY VG 123 of 1997

BETWEEN: tirango nominees pty ltd

acn 006 777 537 and

allen james williams and

pauline anne stockman

ApplicantS

AND: dairy vale foods limited

acn 065 923 597

Respondent

dairy vale foods limited

cross-claimant

tirango nominees pty ltd

acn 006 777 537 and

allen james williams and

pauline anne stockman

cross-respondents

JUDGE: MANSFIELD J

DATE: 28 may 1998

PLACE: ADELAIDE

REASONS FOR DECISION This ruling addresses the question of whether the provision of a copy of a document to a third party, the original of which is protected from being adduced in evidence as it is subject to client legal privilege, deprives that document or the copy of that document from the protection of Pt 3.10 of the Evidence Act 1995 (Cth) ("the Act"). In this matter, the issue arose in the course of the cross-examination of the applicant Pauline Stockman ("Mrs Stockman") as to whether a document presently part of a document marked for identification as exhibit R19 may be cross-examined upon. That document is a facsimile from Mrs Stockman to Mr Colin Bishop ("Mr Bishop") the accountant for the applicant Tirango Nominees Pty Ltd ("Tirango") apparently sent on 9 April 1996. Mrs Stockman, as a director of Tirango, sent that document to Mr Bishop for his comment and advice. It is a facsimile of one page, with which was enclosed a copy of a three page handwritten letter from Mrs Stockman to her then solicitor, dated 8 April 1994. There is no dispute that the letter to the solicitor itself is a privileged document. Nor is there any claim that the front page or the first page of that facsimile is properly the subject of client legal privilege. The claim to client legal privilege is made only with respect to the enclosure with that front page, namely the copy of the letter from Mrs Stockman to her solicitor. I shall hereafter call that copy of the letter "the document in issue". For the purposes of this ruling, Pt 3.10 of the Act comprises the body of principles applicable to its determination: Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418. The starting point is therefore s 118 of the Act. In my view that section operates with respect to cross-examination on the document in issue. That is because the evidence apparently proposed to be adduced by cross-examination on the document in issue would result in disclosure of a confidential communication made between Mrs Stockman, as a director of Tirango, and her solicitor which was for the dominant purpose of the solicitor providing legal advice to Mrs Stockman and Tirango. The real matter debated between the parties is whether that protection has been lost by the publication to Mr Bishop of the document in issue. Section 122 of the Act contains the provisions dealing with that question. As Sackville J has pointed out in BT Australasia Pty Ltd v State of New South Wales (No 7) (1998) 153 ALR 722 at 729-730, that section contains its own test to determine when the privilege is lost. It is a test which is different from that applied by the common law. In Adsteam (above at 426) the Full Court said: "The test is a quantitative one, which asks whether there has been sufficient disclosure to warrant loss of the privilege. If what is disclosed falls short of the test posed by the section, there is no waiver. Importantly, the subsections are not concerned with any principle of "fairness" such as that developed by the common law and by which waiver may be imputed. It should, additionally, be said of the subsections' quantitative test that its application may result in privilege being lost in respect of a discrete part of aspect of a confidential communication or confidential document where the matter disclosed only relates to, or else relates sufficiently to, that part or aspect." Section 122 relevantly provides: "(1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made: (a) in the course of making a confidential communication or preparing a confidential document; or (b) as a result of duress or deception; or (c) under compulsion of law; or (d) if the client or party is a body established by, or a person holding office under, an Australian law - to the Minister, or the Minister of the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held. (3) Subsection (2) does not apply to a disclosure by a person who was, at the time, an employee or agent of a client or party or of a lawyer unless the employee or agent was authorised to make the disclosure. (4) Subject to subsection (5), this Division does not prevent the adducing of evidence if the substance of the evidence has been disclosed with the express or implied consent of the client or party to another person other than: (a) a lawyer acting for the client or party; or (b) if the client or party is a body established by, or a person holding an office under, an Australian law - the Minister, or the Minister of the State or Territory, administering the law, or the part of the law, under which the body is established or the office is held." It is not necessary for present purposes to refer to subss (5) and (6). As the submissions revealed, the real matter of contention concerns the interaction of subss (2) and (4). Mr Anderson QC for the respondent urged that subs (4) applies so that client legal privilege had been waived, because the substance of the proposed evidence to be adduced through cross-examination has been disclosed with the consent of Mrs Stockman and Tirango to a person other than her solicitor, namely the accountant Mr Bishop. Mr Bick for the applicants contended that subs (4) does not apply. He submitted that on the proper construction of s 122, if subs (2) operates in favour of preserving client legal privilege in the document in issue, subs (4) cannot destroy that privilege. I accept that submission for the applicants. It is clear that subs (2)(a) has a wider potential operation than that of subs (4)(a). Consequently, if subs (4)(a) was to have the scope of operation contended for by the respondent, then the protection which subs (2)(a) is designed to offer would have no practical area of operation. The protection which s 122(2)(a) preserves is in respect of communications between the person or entity in whom the client legal privilege reposes and another person which are themselves confidential communications or in the course of preparing confidential documents. Those two terms are each defined in s 117 of the Act, and relate to circumstances where the recipient of the communication "was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law". The dictionary definition of "document" in the Act encompasses a copy of another document. The obligation of confidentiality is not necessarily confined to the relationship of solicitor and client. The fact that there is, or may be, confidentiality obligations beyond that relationship was discussed by Mason J in Baker v Campbell (1983) 153 CLR 52 at 75. Unless s 122(2)(a) is to have no practical area of operation, the scope of s 122(4)(a) must be restricted in some way, as it provides for the loss of client legal privilege by communication to a person other than the solicitor for the client or party. That restriction in my view emerges from the differing expressions in subss (2) and (4): the former concerns the active disclosure by the client or party in whom the privilege resides, whereas the latter concerns the disclosure, apparently by some other person, with the consent of that client or party. In my view, that difference reflects the intention that subs (4) is intended to apply only to disclosure of confidential material other than by the client or party in whom the client legal privilege resides. I note that a similar conclusion was reached by McLelland CJ in Eq. in Telstra Corporation v Australia Media Holdings (No 2) (1997) 41 NSWLR 346 at 350-351. In my judgment, therefore, it is in the circumstances appropriate to address the claim that client legal privilege has been waived by reference to s 122(2) of the Act. Before doing so, I note that it has not been contended that the circumstances in which Mr Bishop, by answering a subpoena issued at the direction of the Court to produce his files to the Court, and including the document in issue, can be taken either personally or on behalf of Mrs Stockman or Tirango to have expressly or impliedly to have consented to the disclosure of the document in issue to the respondent, or to use the expression sometimes used in cases under the common law to have accidentally waived the privilege that otherwise existed in the document in issue in circumstances where now it would not be fair to allow the claimed privilege to subsist. Furthermore, the document in issue was in a file of accounting documents relating to Tirango. That file, upon its production pursuant to the subpoena, was ordered to be made available for the inspection of the respondent. At that time, the prospect of the file containing documents the subject of client legal privilege was not expressly adverted to. In those circumstances, Mr Anderson QC fairly did not contend that the permitted inspection of itself carried with it any consent of Mrs Stockman or Tirango under subs (4), although it was by that process that the respondent came to see the documents in issue. I turn then to consider whether s 122(2) operates in respect of the document in issue, so as to enable the proposed cross-examination to proceed. It provides that client legal privilege will be lost firstly if the client or party knowingly and voluntarily discloses to another person the substance of the proposed evidence, and secondly that that disclosure was not made, relevantly for present purposes in terms of subclause (a), in the course of making a confidential communication. The first of those conditions has clearly been met by the disclosure of the document in issue by Mrs Stockman to Mr Bishop. As noted earlier, 'confidential communication' is defined in s 117 to include a communication made in circumstances where the person making the communication and the recipient of that communication was under an express or implied obligation not to disclose its contents, whether or not that obligation arises under law. It has been put, and as I have understood the submissions not contested, that the communication by Mrs Stockman to Mr Bishop was in circumstances giving rise to an implied obligation upon his part not to disclose its contents, except as required by law. I have not been referred to authority on that point but it seems to me, in the limited time available, that it is in the nature of the relationship between a client and an accountant that it is implied into that relationship that the accountant will not air the affairs of that client to the public, and will recognise that those affairs are subject to an obligation of confidentiality. I do not intend to conclude that necessarily every communication between an accountant and a client will be impliedly subject to an obligation of confidentiality, or that the relationship per se of accountant and client necessarily implies such an obligation. It is not necessary to decide those matters. But there will clearly be communications from a client to an accountant to which an implied obligation of confidentiality attaches. A clear example is the communication of private and sensitive commercial information. I think the topics dealt with in the document in issue fall into the category of matters which clearly involve an implied obligation on the part of Mr Bishop not to disclose that communication. Accordingly, I rule that the document in issue, being the copy letter from Mrs Stockman and Tirango to her solicitor dated 8 April 1996 enclosed with her one-page facsimile to their accountant apparently sent on 9 April 1996, is a document about which evidence may not be adduced by way of cross-examination about the document in issue. In my view such cross-examination would result in disclosure of the confidential communication between the client and the solicitor, for the purpose contemplated by s 118, and s 122 does not operate in the circumstances so as otherwise to permit the giving of such evidence. It is a consequence of that conclusion that Pt 3.10 of the Act may operate so as to prevent evidence being led in some circumstances of a copy of a document where the original of the document is subject to client legal privilege. I certify that this and the preceding six (6) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.