IN THE FEDERAL COURT OF AUSTRALIA NG 1082 of 1997 NEW SOUTH WALES DISTRICT REGISTRY NG 1084 of 1997 BETWEEN: HI-FERT PTY LIMITED Plaintiff AND: UNITED SHIPPING ADRIATIC INC. First Defendant MARINE CARGO CARE PTY LIMITED Second Defendant HYUNDAI MERCHANT MARINE CO LIMITED Third Defendant JUDGE: EMMETT J DATE: 26 NOVEMBER 1998 PLACE: SYDNEY EX TEMPORE REASONS FOR JUDGMENT HIS HONOUR: When this matter was called on for hearing yesterday, the first defendant called on a notice to produce addressed to the plaintiff. The notice to produce called for production of "all written advice from the plaintiff's UK counsel, UK solicitors, Australian counsel and Australian solicitors concerning the matters considered and referred to in paragraph 10 the affidavit of Rodney Edward Withnell sworn on 16 November 1998 and filed in these proceedings". That affidavit was filed in order to answer a foreshadowed claim on behalf of the first defendant that there had been delay in the commencement and prosecution of these proceedings which was material to the exercise of any discretion which might arise concerning the grant of a stay sought by the first defendant. Paragraph 10 of the affidavit relevantly provided as follows: When the Plaintiff failed at first instance in the "Kuikiang Career" the Plaintiff then actively considered how best to resolve the undesirable situation thereby there existed both UK arbitration and Australian litigation arising out of the same facts. That consideration involved complex issues requiring advice from UK and Australian Counsel and Solicitors. Matters considered included whether there was any merit in USA's claims in the London arbitration and if not whether Hi-Fert should apply to the arbitrators for determination as a preliminary issue, of the question of whether USA's claim as pleaded in the arbitration, disclosed any proper cause of action. The matters considered also included the question of whether Hi-Fert might apply to the London arbitrators for a stay of the UK arbitration. The advice I received from UK lawyers was that neither a preliminary point nor an application for a stay, was likely to succeed. By April 1998 the Plaintiff had decided that the only way to resolve the duplication of UK arbitration and Australian litigation was to advance the Australian litigation in the expectation that the USA would then apply for a stay and that the Australian stay application would then effectively determine the jurisdiction in question. [emphasis added] While that affidavit has been read in the proceedings, the two sentences which are emphasised were not read. In the course of argument on the notice to produce, counsel for the first defendant acknowledged that the notice to produce went too far in so far as it called for all written advice concerning the matters considered and referred to in paragraph 10. Accordingly, the call on the notice was deferred until after the evidence closed, by which time it was apparent that the plaintiff was not going to rely on the two sentences in question. Nevertheless, counsel for the first defendant then made an oral call for production of any written advice or any writing recording any advice which is referred to in the sentences in question. Order 15 rules 13 and 15 of the Federal Court Rules provide: 13(1) The Court may, at any stage of any proceeding, order any party to produce to the Court any document in his possession, custody or power relating to any matter in question in the proceeding. 15 The Court shall not make an order under this Order … for the production of any document unless satisfied that the order is necessary at the time when the order is made. The plaintiff relied on rule 15 and on the provisions of the Evidence Act 1995 (Cth) to resist the production of the documents called for. I was informed in the course of argument by counsel for the plaintiff that there is in fact a document which would satisfy the call. Section 118 of the Evidence Act provides 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; …………………………………… for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client. The argument has proceeded on the basis that the document referred to by counsel for the plaintiff would fall within the terms of section 118. However, section 122(1) provides as follows: This division does not prevent the adducing of evidence given with the consent of the client or party concerned. Section 122(2) provides: …[Section 118] does not prevent the adducing of evidence if a client or a 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 of 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 … administering the law under which the body is established or the office is held. It is not being contended that any of paragraphs (a) (b) (c) or (d) is applicable. I am satisfied that, by the sentences in question, the plaintiff has knowingly and voluntarily disclosed the substance of the advice which would otherwise be protected by section 118. The question is whether section 122 applies in the circumstances of the present case. The case involves an application for a stay of the proceedings generally in favour of arbitration in London together with an application by the plaintiff for orders restraining the first defendant from prosecuting an arbitration in London. From one point of view, it is curious, and perhaps anomalous, that sections 122 and 118 refer only to the adducing of evidence. To some extent, the language of the sections leaves up in the air the question of whether or not the principles laid down by the Evidence Act are operative only in respect of the adducing of evidence or whether the principles are to be operative also for the purposes of ancillary processes, such as the production of discovered documents and access to documents produced on subpoena. I am satisfied that, apart from the operation of the Evidence Act, there would be no requirement for the plaintiff to produce for inspection the document in question. As I understand the general principle, apart from the operation of the Evidence Act, if it would be unfair to the other side for one party to rely on having received legal advice without disclosing either the substance or the precise terms of that legal advice, then the privilege which the common law otherwise affords would not be available. In circumstances where, notwithstanding the terms of the original affidavit, the plaintiff elected not to read the sentences in question, I do not consider that there would be any unfairness to the first defendant by reason of the plaintiff withholding access to the written advice or written memorandum in question. However, the Evidence Act, it seems to me, must be regarded as changing that position. In Telstra Corporation Pty Ltd v BT Australasia Pty Limited (1998) 156 ALR 634, the Full Court was concerned with the operation of section 122 in circumstances where there was no express disclosure but where the circumstances of the case involved a party relying on having received legal advice. The Court was concerned in that case with whether it could be said that the client in question had knowingly and voluntarily disclosed the substance of the evidence comprising legal advice. In that context the Court said (at 649): Once it is accepted that consent for the purposes of the section extends beyond express consent, it should be taken to extend to impute a consent. In particular, if that were not so, a defendant ordinarily would no longer be able, where the plaintiff alleges that a transaction was procured by the defendant's undue influence, to lead evidence to the effect that the plaintiff had comprehensive legal advice, immediately before entering into the transaction as to its effect. …It follows that, in such cases, the position has changed little, if at all, following the introduction of the Act, The Court considered that that could not be intended. However, it is significant that the issue in Telstra v BT arose in the context of pre-trial processes and, in particular, on an application for access to documents which would otherwise be privileged. The Court referred (at 643-4) to the decision of an earlier Full Court in Adelaide Steamship Co Limited v Spalvins (1998) 152 ALR 418. The majority said (at 643) as follows: In the Adelaide Steamship case the Full Court held that, because the Evidence Act 1995 … is, in terms, operative only in respect of the adducing of evidence, legal professional privilege, for the purposes of ancillary processes such as the production of discovered documents and access to documents produced on subpoena, continues to arise, and is waived, in accordance with common law principles. Those principles however - and this is for present purposes the ratio decidendiof the Adelaide Steamship case - so far as they are inconsistent with the Act, have been modified (as they are applied in courts in which the Act is in operation) so as to avoid such inconsistency. That is so because of the entirely new setting, resulting from the advent of the Act, in which the common law must now operate. The Court then concluded at 649: In our view, BT are taken, within the meaning of section 122(1) of the Act, to have consented to the disclosure of any legal advice received by them: (a) as to whether contractual provisions could exclude them from the benefit of representations made during the negotiations leading to the TDN Agreement; and (b) specifically concerning the legal effect of the acknowledgment position of the TDN agreement. Thus, in accordance with the reasoning of the Full Court in the Adelaide Steamship case, at common law, as derivatively altered by the Act, BT has lost its privilege in such legal advice. I understand from that passage that the terms of sections 118 and 122 do not strictly apply in the circumstances which I have before me but that the common law must be taken to have been modified so as to be consistent with the principles contained in those sections. It would be curious and anomalous if the regime established by sections 118 and 122 were limited to the adducing of evidence in the strict sense but a different regime, and possibly an inconsistent regime, applied in relation to access to documents on discovery and on subpoena prior to the commencement of trial. My understanding of what was intended by the majority in Telstra v BT accords with commonsense and leads to an overall scheme which is consistent. It follows, in my opinion, that the plaintiff in the present case, notwithstanding what would otherwise have been the general principle, is not entitled to rely on section 118 and is not entitled to rely on the general entitlement to privilege. It should, therefore, be required to produce the document in question. I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 26 November 1998 Counsel for the Plaintiff: PE King with MJ Watts Solicitor for the Plaintiff: Withnell Hetherington Counsel for the First Defendant: AS Bell Solicitor for the First Defendant: Ebsworth & Ebsworth Counsel for the Second Defendant: JE Marshall with GR Kennett Solicitor for the Second Defendant: Clayton Utz Solicitor for the Third Defendant: Mallesons Stephen Jaques Date of Hearing: 26 November 1998 Date of Judgment: 26 November 1998