FEDERAL COURT OF AUSTRALIA Liberty Funding v Phoenix Capital Ltd [2004] FCA 1640 EVIDENCE – legal professional privilege – leave to use affidavit in other proceedings – affidavit prepared by order of Court and in contemplation of mediation – whether service of affidavit on party amounted to waiver of privilege Harman v Secretary of State for the Home Department [1983] 1 AC 280, referred to The Bell Group Ltd (in liquidation) v Westpac Banking Corporation (1998) 86 FCR 215, referred to Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337, followed Complete Technology Pty Limited v Toshiba (Australia) Pty Ltd (1994) 53 FCR 125, followed (in part) and not followed (in part) Cheers v El Davo Pty Ltd (In Liquidation) [2000] FCA 361, referred to Australian Competition and Consumer Commission v Telstra Corporation Ltd [2000] FCA 28, (2000) 96 FCR 317, followed Austress v Marlin [2002] NSWSC 958, followed Microsoft Corporation v Ezy Loans Pty Ltd [2003] FCA 37, cited Ingot Capital Investments Ltd v Macquarie Equity Capital Markets Limited [2004] NSWSC 40, cited State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 64 SASR 224, followed Sevic v Roarty (1998) 44 NSWLR 287, followed Goldberg v Ng (1995) 185 CLR 83, applied Attorney General (NT) v Maurice (1986) 161 CLR 475, applied Mann v Carnell (1999) 201 CLR 1, applied LIBERTY FUNDING PTY LTD, LIBERTY FINANCIAL PTY LTD v PHOENIX CAPITAL LTD trading as BLUESTONE MORTGAGES V213 OF 2001 MARSHALL J 15 DECEMBER 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V213 OF 2001 BETWEEN: LIBERTY FUNDING PTY LTD (ACN 081 982 872) FIRST APPLICANT LIBERTY FINANCIAL PTY LTD (ACN 077 248 983) SECOND APPLICANT AND: PHOENIX CAPITAL LTD trading as BLUESTONE MORTGAGES (ACN 091 201 357) RESPONDENT JUDGE: MARSHALL J DATE OF ORDER: 15 DECEMBER 2004 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The notice of motion of the applicants filed on 23 November 2004, as amended on 29 November 2004, be dismissed. 2. The applicants pay the respondent's costs of and incidental to the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V213 OF 2001 BETWEEN: LIBERTY FUNDING PTY LTD (ACN 081 982 872) FIRST APPLICANT LIBERTY FINANCIAL PTY LTD (ACN 077 248 983) SECOND APPLICANT AND: PHOENIX CAPITAL LTD trading as BLUESTONE MORTGAGES (ACN 091 201 357) RESPONDENT JUDGE: MARSHALL J DATE: 15 DECEMBER 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The matter before the Court is a notice of motion filed by the applicants in which they seek leave to use an affidavit (which was filed in this proceeding) in "the Victorian Supreme Court proceeding No 9140 of 2003 between Liberty Financial and Anor v Scott and Anor". The affidavit concerned is one sworn by Alistair James Jeffrey on 29 May 2001 ("the Jeffrey affidavit"). 2 The applicants are subject to an implied undertaking to this Court not to use the Jeffrey affidavit in the Supreme Court of Victoria without first obtaining the leave of this Court: see Harman v Secretary of State for the Home Department [1983] 1 AC 280 and The Bell Group Ltd (in liquidation) v Westpac Banking Corporation (1998) 86 FCR 215 at 220 to 221. 3 The preliminary question for determination, on the motion, which precedes, and may obviate the need for, any consideration of the Harman principle, is whether the Jeffrey affidavit is subject to legal professional privilege. A further question arises as to whether, if the affidavit is subject to legal professional privilege, that privilege has been waived in the circumstances. The instant proceedings 4 On 22 March 2001 the applicants filed an application in this Court seeking, among other relief, a permanent injunction restraining the respondent from publishing a document which made a comparison between an aspect of the business of the applicants with that of the respondents ("the document"). The proceeding was settled at a mediation conducted by Registrar Connard on 31 May 2001. Prior to the settlement, the application was in the docket of North J. On 9 July 2001 Merkel J, by consent, dismissed the application with no order as to costs. 5 North J conducted a directions hearing in the proceeding on 30 April 2001. His Honour was informed by counsel that: · the respondent had given permanent undertakings with respect to the document, and · the only remaining issues in the case were - the extent of dissemination of the document, and - damages 6 Counsel for the applicants informed his Honour that his clients required discovery to assist in ascertaining the extent of dissemination, prior to a mediation being conducted. At p 4 of the transcript North J said: "Would it be for instance possible for an officer of the respondent to swear an affidavit of the subject matter instead of discovery as a preliminary to mediation?" At pp 4-5, his Honour said: "…I am inclined, having regard to the state that the case is in, to make an order requiring a responsible officer of the respondent to depose and we will have to find some formula that describes the extent of the dissemination and then refer the matter to mediation with a report back to the court and a directions hearing." 7 Counsel for the parties ultimately agreed with the course which his Honour proposed. 8 At p 7 North J said: "I mean indeed my concept is that the affidavit would be more informative than discovery. It would perhaps explain what steps you have taken to investigate, whilst with discovery all you do is say 'here are the documents'." 9 Counsel for the respondent then said: "Your Honour, it will be an affidavit put forward in good faith to elaborate on and explain the extent of the dissemination." 10 What is plain from a perusal of the transcript before North J is that the affidavit was ordered to assist the settlement of the proceeding at mediation. 11 The Jeffrey affidavit was filed in the Victoria District Registry of the Court on 30 May 2001. One paragraph, in particular, in the Jeffrey affidavit has excited the interest of the second applicant who is the first plaintiff in matter No 9140 of 2003 in the Supreme Court of Victoria ("the Supreme Court proceeding"). The Supreme Court Proceeding 12 In the Supreme Court proceeding, the second applicant has alleged that the respondent and a Mr Trevor Scott have misused the confidential information of the second applicant. In that proceeding the second applicant has sought an order for further discovery directed to the respondent, including in respect of items which are related to what is contained in the Jeffrey affidavit. The application for further discovery is currently part-heard before Harper J. The second applicant has sought to rely on the Jeffrey affidavit in support of its application for further discovery. Legal professional privilege 13 The Jeffrey affidavit is a document which was prepared as a consequence of the order of North J. It is a statement brought into existence for the purpose of the litigation in this proceeding, at least with a view to assisting its resolution. The Jeffrey affidavit is subject to legal professional privilege until it becomes part of the evidence in the proceeding; see Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337 at 341, per Olney J; see also Complete Technology Pty Limited v Toshiba (Australia) Pty Ltd (1994) 53 FCR 125 at 128, per Hill J. 14 In Cheers v El Davo Pty Ltd (In Liquidation) [2000] FCA 361 at [5], a Full Court of this Court acknowledged that legal professional privilege attaches to witness statements saying that: "There has been disagreement in the decided cases as to whether and to what extent exchange of witness statements results in the waiver of the legal professional privilege which would otherwise attach to them. Many of the cases on this issue were referred to in the decision of Lindgren J in Australian Competition and Consumer Commission v Telstra Corp Ltd [2000] FCA 28." (emphasis supplied). 15 In Australian Competition and Consumer Commission v Telstra Corporation Ltd [2000] FCA 28, (2000) 96 FCR 317, the respondent, Telstra, sought permission as Lindgren J described it at [1] to: "…use the pleadings and the affidavits (in fact they are in the form of statements) filed on behalf of the applicant (the Commission) in the proceedings, in another proceeding…" 16 At [28] to [31] in Telstra, Lindgren J said: "In Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation (1994) 48 FCR 337, decided on 22 February 1994, Olney J held that statements of witnesses filed in legal proceedings and exchanged continued to attract legal professional privilege unless and until they were put into evidence. In Complete Technology Pty Ltd v Toshiba (Australia) Pty Ltd (1994) 53 FCR 125, decided on 7 September 1994, Hill J thought otherwise. His Honour accepted that unless waived, legal professional privilege subsisted in a witness statement or affidavit prepared for the purpose of litigation, but thought that the privilege was waived once the statement or affidavit was served on the other party. The matter did not rest with this difference between two first instance decisions of this Court. A Full Court of the Supreme Court of South Australia was called upon to consider the issue in State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 64 SASR 224. The Full Court gave its judgment on 2 June 1995. The Court applied Nilsen and did not follow Complete Technology. Finally, in Abigroup Ltd v Akins (1997) 42 NSWLR 623, decided on 2 October 1997, Bainton J in the Supreme Court of New South Wales also followed Smoothdale rather than Hill J in Complete Technology. On the hearing yesterday senior counsel for the Commission submitted, in substance, simply that I should follow the preponderance of authority. Counsel for Telstra submitted, in substance, simply that I should follow the more recent decision of a single judge of this Court. In the circumstances in which I am placed of having to decide now and without the opportunity to explore fully the reasoning in the cases mentioned and others mentioned in them, I think I should follow the preponderance of authority. It was not suggested that the circumstances in which the statements were filed in these consolidated proceedings differ from those in which the affidavits or statements were filed in the cases to which I have referred. Nor was it suggested that there are any special circumstances in this case which were not present in those. Nor was it suggested that those cases are distinguishable or that for any reason they are plainly wrong. The submissions that were put were put on the simple basis of authority versus authority. On that limited basis I would follow Nilsen, Smoothdale and Abigroup rather than Complete Technology." 17 Contrary to the submission of counsel for the applicants, Telstra shows that the privilege attaches equally to witness statements and affidavits. Indeed, in submitting that the privilege only applied to witness statements and not to affidavits, counsel was unable to point to any logical rationale to support such a distinction. 18 It is noteworthy that in Austress v Marlin [2002] NSWSC 958, Barnett J of the Supreme Court of New South Wales dealt with a claim for legal professional privilege with respect to certain affidavits. In dealing with the issue and referring to relevant authorities, Barnett J treated affidavits and witness statements equally as being subject to the privilege. See also Microsoft Corporation v Ezy Loans Pty Ltd [2003] FCA 37, per Spender J. I note also that the privilege was held to apply to affidavits by Bergin J in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Limited [2004] NSWSC 40. 19 Hill J in Complete Technology accepted the existence of the privilege and considered that it applied whether the documents were called witness statements or affidavits. The point of departure from other authorities in Complete Technology is on the question whether the privilege is waived once an affidavit or witness statement is served on the other party, although not read into evidence. The real question for determination in the present circumstances is whether the respondent waived its legal professional privilege in respect of the Jeffrey affidavit. Has waiver occurred by service? 20 The preponderance of authority, that is all relevant authorities other than Complete Technology, supports the view that legal professional privilege is not lost when an affidavit or witness statement filed pursuant to a Court order is served on the opposing party. I consider that I should follow the preponderance of authority unless convinced that it is clearly wrong. I am not convinced that the following main authorities are clearly wrong: · Nilsen Industries · Telstra (which was recently applied by Heerey J in AMP Financial Planning Pty Ltd v CGU Insurance Limited [2004] FCA 1196 at [8]) · State Bank of South Australia v Smoothdale (No 2) Ltd (1995) 64 SASR 224, a judgment of a Full Court of the Supreme Court of South Australia · Akins v Abigroup Ltd (1998) 43 NSWLR 539, a judgment of the Court of Appeal of New South Wales Has waiver otherwise occurred? 21 In Sevic v Roarty (1998) 44 NSWLR 287 at 301, Powell JA said: "…waiver is not to be implied or imputed where the document the delivery of which is relied upon to found the implication, or to support the imputation, of waiver was delivered – whether to the other party to the litigation or to a third party – pursuant to an order of a court or otherwise under compulsion of law unless the documents be later tendered in evidence on the hearing of the proceedings in which the parties are involved, or otherwise used in such a way on the hearing of those proceedings as would make it unfair to the other party not to treat the privilege as having been waived." 22 The approach of Powell JA in Sevic is consistent with that of the High Court in Goldberg v Ng (1995) 185 CLR 83 at 98 where the majority (Deane, Dawson and Gaudron JJ) considered that the critical question was whether "ordinary notions of fairness" meant that the disclosure of privileged documents resulted in a waiver of the privilege. 23 In Attorney General (NT) v Maurice (1986) 161 CLR 475 at 487, Mason and Brennan JJ made it plain that the unfairness which might arise to a party which would lead to waiver must occur whereby: "…by reason of some conduct on the privilege holder's part, it becomes unfair to maintain the privilege." See also Mann v Carnell (1999) 201 CLR 1 at [28] where Gleeson CJ, Gaudron, Gummow and Callinan JJ referred to waiver being effected by "inconsistency between the conduct of the client and maintenance of the confidentiality." 24 Counsel for the applicants submitted that privilege in the Jeffrey affidavit was lost once "an unsworn copy" of the affidavit was served on the solicitors for the applicants. That submission is untenable. The service of what in effect is a draft affidavit in unsworn form, as a courtesy in advance of the deponent being able to swear the affidavit, is not conduct disentitling the deponent to maintain privilege in the affidavit. The privilege which subsists in the affidavit cannot be lost upon its filing simply because an earlier draft of the document was previously disclosed to the applicants on the basis that that document could be expected to be the final form of the document. No unfairness on any aspect of the matter is visited upon the applicants such that any consideration of waiver truly arises. Harman not reached 25 Having regard to the view of the Court that the Jeffrey affidavit is subject to the respondent's subsisting legal professional privilege, no occasion arises for the consideration of whether the affidavit should otherwise be made available for use in the Supreme Court proceeding. Order 26 The Court will order as follows: 1. The notice of motion of the applicants filed on 23 November 2004, as amended on 29 November 2004, be dismissed. 2. The applicants pay the respondent's costs of and incidental to the motion. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 15 December 2004 Counsel for the Applicants: Mr A Rodbard-Bean Solicitor for the Applicants: Abbott Stillman and Wilson Counsel for the Respondent: Mr A Broadfoot Solicitor for the Respondent: Freehills Date of Hearing: 24 and 29 November 2004 Date of Judgment: 15 December 2004