FEDERAL COURT OF AUSTRALIA Seven Network Limited v News Limited [2005] FCA 915 PRACTICE AND PROCEDURE – discovery; conclusive nature of affidavit verifying; proper means of disputing privilege claims; circumstances in which a further affidavit verifying should be ordered; when severe costs orders would be appropriate. Federal Court Rules: O15 R6, 7A, 11 and 14 Spyer v Cuddles 'N' Mum (Franchise) Pty Limited (No 3) [2002] FCA 1563, 20 December 2002 Brookfield v Yevad Products Pty Limited [2002] FCA 1376, 6 November 2002 Fruehauf Finance Corporation Pty Limited v Zurich Australian Insurance Limited (1990) 20 NSWLR 359 Jones v The Monte Video Gas Company [1880] 5 QBD 556 Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49 National Crime Authority v S (1991) 29 FCR 203 Hartogen Energy Limited (in liq) v Australian Gas Light Company (1992) 36 FCR 557 Re Compass Airlines Pty Limited (1992) 35 FCR 447 Mulley v Manifold (1959) 103 CLR 341 Auspine Limited v H. S. Lawrence & Sons Pty Limited [1999] FCA 1749 Finance Sector Union of Australia v Commonwealth Bank of Australia [2000] FCA 1389 SEVEN NETWORK LIMITED (ACN 052 816 789) & ANOR v NEWS LIMITED (ACN 007 871 178) & ORS NSD 1223 OF 2002 GRAHAM J 7 JULY 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD1223 OF 2002 BETWEEN: SEVEN NETWORK LTD ACN 052 816 789 & ANOR APPLICANTS AND: NEWS LTD ACN 007 871 178 & ORS RESPONDENTS JUDGE: GRAHAM J DATE OF ORDER: 7 JULY 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Amended Notice of Motion filed by the Applicants on 22 June 2005 be dismissed. 2. The Applicants pay the Sixteenth and Twenty-Second Respondents' costs of the Motion filed 17 June 2005 and of the Amended Notice of Motion filed 22 June 2005. 3. Exhibits may be returned. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD1223 OF 2002 BETWEEN: SEVEN NETWORK LTD ACN 052 816 789 & ANOR APPLICANTS AND: NEWS LTD ACN 007 871 178 & ORS RESPONDENTS JUDGE: GRAHAM J DATE: 7 JULY 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Proceedings NSD 1223 of 2002, known as Seven Network Limited & Anor v News Limited & Ors arise out of bids for television broadcast rights in respect of two codes of football, one administered by the Australian Football League and the other by the National Rugby League. There are numerous parties to the proceedings and needless to say, the litigation is complex. 2 On 11 February 2005 the main proceedings were fixed for hearing before Justice Sackville commencing on Monday 18 July 2005. 3 By a Notice of Motion filed 2 May 2005 the Applicants sought relief in respect of the production of documents by the Sixteenth and Twenty-Second Respondents, namely Optus Vision Pty Limited and Singtel Optus Pty Limited ("the Optus Respondents") for which privilege had been claimed. 4 The annexure to that Notice of Motion was 48 pages in length and identified what appeared to be some 415 documents the production of which was sought. 5 To date, the Optus Respondents have provided eight lists of documents. The first list was filed on 18 June 2004. That list of documents stated:- "Pursuant to Order 4 of the orders made by Justice Sackville on 28 October 2003 as amended by Order 5(c) made by Justice Sackville on 11 June 2004: 1. The Sixteenth Respondent … has, in its possession, custody or power, the documents enumerated in Schedule 1. 2. The documents enumerated in Part 2 of Schedule 1 are privileged from production on the grounds stated in Schedule 1. …" 6 Schedule 1 was expressed as follows: " SCHEDULE 1 PART 1 See Annexure A to this List of Documents PART 2 1. Documents and copies of documents comprising: (a) confidential communications made between Optus Vision and its in-house legal counsel and legal advisers or made between any of Optus Vision's legal advisers and any other persons; or (b) the contents of confidential communications (whether delivered or not) that were prepared, made, created or otherwise brought into existence, for the dominant purpose of obtaining or giving legal advice to Optus Vision and/or for the dominant purpose of obtaining or giving to Optus Vision professional legal services relating to proceedings or anticipated proceedings or pending proceedings in which Optus Vision is or may be or was or might have been a party." 7 The accompanying list of documents did not enumerate all of the documents covered by Schedule 1 but only those covered by Schedule 1 Part 1. 8 The Schedule 1 Part 1 list being "Annexure A" was itself 166 pages in length and identified approximately eight documents on each page. 9 It would appear that the Applicants filed a Notice of Motion complaining about certain aspects of the Optus Respondents' discovery which resulted in Orders being made by Sackville J on 2 August 2004 including:-. "3. The Sixteenth Respondent provide further and better discovery by filing and serving a supplementary Verified List of Documents by 30 August 2004. … 7. The … Sixteenth … Respondents comply with Order 15 Rule 6(2) in respect of the documents falling within Part 2 of Schedule 1 of …verified discovery lists by 27 August 2004." 10 Order 15 Rule 6(2) provided:- "6(2) A list of documents shall enumerate the documents which are or have been in the possession, custody or power of the party making the list." 11 On 1 September 2004 the Optus Respondents proceeded to provide, inter partes, an enumerated schedule of documents within Schedule 1 Part 2 of the original discovery. The list of privileged documents so provided was 16 pages in length and detailed approximately 35 documents on each page. 12 Thereafter the Optus Respondents filed a Supplementary List of Documents on 5 October 2004, a Further Supplementary List of Documents on 22 October 2004 and a Second Further Supplementary List of Documents on 19 April 2005. 13 On each occasion when lists of documents were filed, the practice established in respect of the first list was followed, with a detailed list enumerating the documents for which privilege was claimed being provided, inter partes, at a later date. In respect of the Second Further Supplementary List, the list enumerating the privileged documents was not provided until 27 May 2005. The covering letter from the solicitors for the Optus Respondents, Atanaskovic Hartnell, to the solicitors for the Applicants, Freehills dated 27 May 2005 provided as follows: "We refer to your facsimile of 3 May 2005 and now enclose a list of the documents referred to in Part 2 Schedule 1 of our client's Second Further Verified List, as well as various other wholly privileged documents that have not been included in any of our client's Lists of Privileged Documents previously." 14 The covering letter was not felicitously expressed. At first blush it appeared to be suggesting that the List which was then being provided discovered for the first time documents which had not previously been discovered in the somewhat irregular manner which had been followed in respect of each of the Verified Lists that had been filed. Upon a more careful examination of the earlier Schedule 1 Part 1 Lists it became clear that they had included a small number of documents where claims for privilege had been noted. What appears to have occurred on 27 May 2005 is that those documents were expressly added to the list of privileged documents so as to avoid any doubt as to their status. 15 The Applicants' Notice of Motion filed 2 May 2005 came before me on 9 June 2005. As indicated above, it sought the production, in the conventional manner provided for in Order 15 Rule 11 of the Rules, of some 415 documents which had been identified in one or other of the Optus Respondents' lists of privileged documents. 16 As it transpires, in the period 6 May – 6 June 2005 the Optus Respondents abandoned their claims for privilege in respect of approximately 230 of the documents, the production of which had been sought under the Notice of Motion filed 2 May 2005. 17 The Applicants did not press their motion for inspection in respect of the remaining documents covered by it. In the result, the motion came before me simply to deal with the question of costs. I proceeded to order the Optus Respondents to pay the Applicants' costs of the motion, emphasising the importance of timely and proper discovery and making some disparaging remarks about some of the claims for privilege that had been made in respect of certain documents to which I was taken, where the claims were patently unsustainable. 18 What has now occurred is that the Applicants want more from the Optus Respondents. In effect they are seeking what could be described as "further and better discovery". They have elected not to seek production of further documents for which privilege has been claimed in the conventional manner for which Order 15 Rule 11 makes provision. 19 On 17 June 2005 the Applicants filed a Notice of Motion returnable on 20 June 2005 in which they sought substantive orders as follows:- "1. On or before 7 July 2005, the Sixteenth and Twenty-second Respondents review the privilege claims made in relation to their discovered documents, other than claims in respect of: (a) the documents listed in the schedules to the Applicants' notice of motion filed on 2 May 2005; and (b) the documents listed in schedule 8 provided with the facsimile from Freehills to Atanaskovic Hartnell dated 30 May 2005; and (c) communications to or from the Sixteenth and Twenty-second Respondents' external legal advisers where no other person external to the Sixteenth and Twenty-Second Respondents is an author, addressee or "cc". 2. On or before 7 July 2005, the Sixteenth and Twenty-second Respondents notify the Applicants of the documents over which a claim for privilege is maintained. 3. On or before 7 July 2005, the Sixteenth and Twenty-second Respondents produce to the Applicants for inspection in weekly tranches, the documents over which a claim for privilege is no longer maintained." 20 It will be appreciated that the Notice of Motion does not seek further relief in respect of any of the documents which were the subject of the Notice of Motion filed 2 May 2005, but sought a "review" of the privilege claims made in respect of other documents covered by the several privileged lists to which I have referred. 21 On the return date for the Notice of Motion, namely 20 June 2005, I was informed that the Optus Respondents still maintained claims for privilege in respect of over one thousand documents and that the Applicants had, inter partes, questioned the propriety of the claims in respect of some 230 of those documents. 22 Being unfamiliar with the concept of a "review" of privilege claims I urged counsel for the Applicants to consider whether the proper way to challenge the claims for privilege which had been made might be to seek orders for production in accordance with Order 15 Rule 11, either in respect of all of the documents for which privilege had been claimed or at least a sample of them, as had occurred with the 2 May 2005 Notice of Motion. 23 Thereupon the Applicants chose to file an Amended Notice of Motion on 22 June 2005 in which the substantive orders sought were as follows:- "1. On or before 7 July 2005, the Sixteenth and Twenty-second Respondents make an affidavit that complies with Order 15 of the Federal Court Rules verifying any documents in their custody, possession of (sic) power, over which they claim legal professional privilege, including any documents in Schedule 1 of Part 2 (sic) of any of their previous lists of documents. 2. For any document where a privilege claim in (sic) no longer pressed the Sixteenth and Twenty-second respondents are, on or before 7 July 2005, to provide images and data in accordance with the Protocols for Electronic Exchange of Documents in these proceedings." 24 On the hearing of the Amended Motion on Friday 1 July 2005 Mr T E F Hughes QC appeared with Mr T D F Hughes for the Applicants and Mr A J L Bannon SC appeared with Mr J C Hewitt for the Optus Respondents. 25 In addressing the Applicants' entitlement to an order for, in effect, "further and better discovery" it is important to note that, ordinarily, an affidavit verifying discovery will be accepted as conclusive as to the adequacy of the discovery (per Lindgren J in Spyer v Cuddles 'N' Mum (Franchise) Pty Limited (No 3) [2002] FCA 1563, 20 December 2003 at [37]; per Mansfield J in Brookfield v Yevad Products Pty Limited [2002] FCA 1376, 6 November 2002 at [21] and per Giles J in Fruehauf Finance Corporation Pty Limited v Zurich Australian Insurance Limited (1990) 20 NSWLR 359 at 361. See also the judgment of Menzies J in Mulley v Manifold (1959) 103 CLR 341 at 343; the judgment of O'Loughlin J in Auspine Limited v H. S. Lawrence & Sons Pty Limited [1999] FCA 1749, 21 December 1999 at [97-98] and [108] and the judgment of Moore J in Finance Sector Union of Australia v Commonwealth Bank of Australia [2000] FCA 1389, 4 October 2000 at [31].) 26 In Fruehauf Finance Corporation Pty Limited Giles J said at p 361:- "A limitation upon contesting the sufficiency of discovery in the sense of its amplitude does not necessarily carry with it a similar limitation on contesting any claim for protection from inspection of a discovered document. But many decisions have held that the affidavit of discovery is generally conclusive in that respect also." 27 In relation to the amplitude of discovery it is important to note that Order 15 Rule 7A places a continuing obligation on parties to provide proper discovery. The requirement of Order 15 Rule 2(3) is to disclose documents "of which the party giving discovery is, after a reasonable search, aware at the time discovery is given". 28 Order 15 Rule 7A provides:- "7A Where a party has been required, or ordered to give discovery, that party shall be under a continuing obligation to discover any document not previously discovered and which would otherwise be necessary to comply with the requirement or order." 29 If discovery proves to be inadequate, the salutary observation of Thesiger LJ in Jones v The Monte Video Gas Company [1880] 5 QBD 556 at 559 is worthy of note:- "A judge ought to be severe in awarding costs when he finds that expenses have been incurred through a wrongful suppression of material documents." 30 It seems to me that the observations of Gleeson CJ, Gaudron and Gummow JJ in Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49 at p 70 [52] are entirely apposite in the circumstances of this case, where they said:- "Although it has no direct bearing upon the issue now under consideration, reference should be made to a point emphasised both in the joint judgment in Grant v Downs and by Cooke J in Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart. A claim for privilege is not conclusively established by the use of a verbal formula. A court has power to examine documents in cases where there is a disputed claim, and it should not be hesitant to exercise such a power. In appropriate cases, there is also power to allow cross-examination of a deponent of an affidavit claiming privilege." 31 As the passage quoted indicates, the occasion for challenging a claim for privilege is where there has been "a disputed claim". I would understand such a situation to arise where an order for production is sought in respect of a document for which there has been a claim of privilege. 32 Now that the statutory test and the common law test for client legal privilege is "dominant purpose" rather than "sole purpose" there may well be, as Mr Hughes QC submitted, many more cases where, upon the hearing of a disputed claim, there will be occasion for a deponent, who has verified a list of documents claiming privilege, to be cross-examined. Indeed, it would seem from a procedural point of view that if production of a document within Part 2 of Schedule 1 of a list of documents is sought under Order 15 Rule 11 it would be incumbent upon the party giving the relevant discovery and claiming the privilege to, at the least, read the affidavit verifying the list and thereby expose the deponent to cross-examination (see National Crime Authority v S (1991) 29 FCR 203 at 211; Hartogen Energy Limited (In liq) v Australian Gas Light Company (1992) 36 FCR 557 at 561 and Re Compass Airlines Pty Limited (1992) 35 FCR 447 at 462). 33 In relation to the inspection of documents by the Court for the purpose of deciding the validity of claims for privilege it will be appreciated that there is an express power in Order 15 Rule 14 of the Federal Court Rules empowering the Court to do so. 34 In support of the present application for "further and better discovery" the Applicants relied upon the terms of a facsimile apparently sent at 10.16 pm on 30 June 2005 by the solicitors for the Optus Respondents to the Applicants' solicitors under cover of which the Optus Respondents provided a schedule with more information in respect of 120 of the 230 odd documents within the Optus Respondents' Lists of Privileged Documents, in relation to which greater detail of the privilege claims had been sought by the Applicants. The letter included an indication that in respect of the other documents where more detail had been sought, it was expected that the information requested would be provided no later than early in the week commencing 4 July 2005. 35 I was taken to three documents in particular within the accompanying 21 page schedule providing greater particularity in respect of the privilege claims, where the claims for privilege were either modified or no longer pressed. In respect of document 82 being document OPV.001.021.0058 the additional response provided was:- "This document is identical to OPV.001.013.0197. The masking will be amended to reflect the document is only partly privileged." 36 In relation to document 88 in the schedule being document OPV.001.021.0679 the response provided was:- "Consistent with our clients' approach to OPV.001.021.0702 which is another draft of this Agreement, our clients do not press their claim for privilege in this document." 37 An identical response was provided in respect of document number 90 in the schedule being document OPV.001.021.0690. 38 It does not seem to me that the relief which the Applicants have elected to seek in the amended motion is appropriate. 39 The abandonment of privilege referred to in respect of part or the whole of the three last mentioned documents does not seem to me to found a proper case for an order that the Optus Respondents start all over again in the discovery process in respect of documents for which privilege has been claimed. 40 Mr Hughes QC also took me to six documents for which privilege had originally been claimed which fell into the same category as the three documents which I dealt with in my reasons for judgment of 10 June 2005 (see [2005] FCA 778 at [23 – 26]). Accepting that these six documents were also ones for which claims for privilege should never have been made it is, nevertheless, significant to note that they were within the same group of documents to which the Notice of Motion filed 2 May 2005 related and for which claims for privilege had been abandoned in the face of that motion. 41 I appreciate that the Amended Notice of Motion does not include the qualification contained within the original Notice of Motion filed 17 June 2005, which only sought a "review" of the privilege claims made in respect of discovered documents other than, in broad terms, those to which the motion of 2 May 2005 related or which were classic privilege cases. Nevertheless, it seems to me that the generally conclusive nature of the Verified Lists of Documents, provided as they have been, should stand, especially given the continuing obligation which falls upon the Optus Respondents in respect of discovery under Order 15 Rule 7A. 42 The present case is not one warranting a fresh affidavit within the reach of Brett LJ's observation in Jones v The Monte Video Gas Company at p 558 namely:- "when the affidavit has been sworn [referring to an affidavit of discovery],if from the affidavit itself, or from the documents therein referred to, or from an admission in the pleadings of the party from whom discovery is sought, the … judge is of opinion that the affidavit is insufficient, he ought to make an order for a further affidavit; but except in cases of this description no right to a further affidavit exists in favour of the party seeking production." See also Mulley v Manifold at p 343. 43 The circumstances where a further affidavit should be ordered are where it is self-evident that the amplitude of the discovery provided has been inadequate. 44 Whilst counsel for the applicants hinted that under the prayer for "Such further or other order as the Court sees fit" an order for inspection of documents could be made in the present case, no precise order has been sought and in my opinion it would be inappropriate for me to seek to formulate one in the present circumstances, especially given the history of the Motion itself. 45 No doubt the observations of Thesiger LJ on costs, referred to above, would have a parallel application were inspection to be sought of documents where, on the description already provided, there could be little doubt as to the legitimacy of the claims for client legal privilege and a later consideration of the documents supported the validity of such claims. 46 In my opinion the Amended Notice of Motion filed 22 June 2005 should be dismissed with costs. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate: Dated: 7 July 2005 Counsel for the Applicants: Mr T E F Hughes QC with Mr T D F Hughes Solicitor for the Applicants: Freehills Counsel for the Sixteenth and Twenty-Second Respondents: Mr A J L Bannon SC with Mr J C Hewitt Solicitor for the Sixteenth and Twenty-Second Respondents: Atanaskovic Hartnell Date of Hearing: 1 July 2005 Date of Judgment: 7 July 2005