New South Wales Supreme Court CITATION : Natuna Pty Ltd v Cook [2006] NSWSC 1367 HEARING DATE(S) : 5 December 200 JUDGMENT OF : Biscoe AJ EX TEMPORE JUDGMENT DATE : 12/05/2006 DECISION : Claim for privilege upheld. CATCHWORDS : Evidence - client legal privilege - whether draft expert report privileged LEGISLATION CITED : Evidence Act 1995 (NSW) ss 117, 119 Australian Securities and Investments Commission v Southcorp Ltd (2003) 46 ACSR 438 Brookfield v Yevad Products Pty Ltd [2006] FCA 1180 Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 Filipowski v Island Maritime Ltd [2002] NSWLEC 177 CASES CITED : Interchase Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141 Linter Group Ltd v Price Waterhouse (a firm) [1999] VSC 245 Mann v Carnell (1999) 201 CLR 1 Re Southland Coal Pty Ltd (rec & mgrs apptd) (in liq) (2006) 59 ACSR 87 Ryder v Frohlich [2005] NSWSC 1342 PARTIES : Natuna Pty Ltd (Plaintiff) Donald Thomas Cook (Defendant) FILE NUMBER(S) : SC 2877/05 COUNSEL : Mr A Ogborne with Mr S Ipp (Plaintiff) Mr J Robson SC with Mr J Lazarus (Defendant) SOLICITORS : Bruce Stewart Dimarco (Plaintiff) Colin Biggers & Paisley (Defendant) - 11 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BISCOE AJ 5 December 2006 2877/05 NATUNA PTY LTD v DONALD THOMAS COOK EX TEMPORE JUDGMENT 1 HIS HONOUR: The defendant issued a notice to the plaintiff to produce at the trial, among other things, valuation reports or drafts prepared by or received by the plaintiff or its representatives in connection with certain lands which are at issue in these proceedings. Among the documents produced at the trial in response to the notice to produce are documents said to be, and which appear to be, draft valuation reports by two valuers. The first valuer is Mr Allsopp, whose valuation reports have been served in the proceedings. The second valuer is Mr Hoolihan, whose valuation report has not been served in the proceedings. 2 Client legal privilege is claimed by the plaintiff for those draft reports. Because of rule 1.9 of the Uniform Civil Procedure Rules 2005, read in the light of the definitions of "privileged documents" and "privileged information" in those rules, the test for privilege is as laid down in Part 3.10 Division 1 of the Evidence Act 1995 (NSW), which includes s 119. That is common ground. Section 119 provides: 119 Litigation 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 between the client and another person, or between a lawyer acting for the client and another person, that was made, or (b) the contents of a confidential document (whether delivered or not) that was prepared, for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party. 3 The plaintiff contends that a draft expert report is a "confidential communication" or a "confidential document" within the meaning of s 119(a) and (b). The expressions "confidential communication" and "confidential document" are defined in s 117: confidential communication means a communication made in such circumstances that, when it was made: (a) the person who made it, or (b) the person to whom it was made, was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law. confidential document means a document prepared in such circumstances that, when it was prepared: (a) the person who prepared it, or (b) the person for whom it was prepared, was under an express or implied obligation not to disclose its contents, whether or not the obligation arises under law. 4 A threshold point raised by the defendant is whether the plaintiff has discharged its onus of proving that these drafts were prepared for the dominant purpose of the client being provided with professional legal services relating to a proceeding or an anticipated or pending proceeding in which it is a party. So far as Mr Allsopp's draft reports are concerned, I am satisfied from the correspondence between Mr Allsopp and his instructing solicitors produced in response to the notice to produce, that that onus has been discharged. So far as Mr Hoolihan's draft report is concerned, I am satisfied from the following inscription thereon that that onus has been discharged: "In this matter I am instructed by Mr Robert Gorczyca, Bruce Stewart Dimarco Lawyers, to assess the market value of two parcels described herein for litigation purposes as at 24 August 2005". 5 I turn then to whether these draft reports fall within s 119(a) or (b). 6 There is divergence in the authorities as to whether draft expert reports, or the communications therein, are privileged. A negative answer was given, at least in the context of common law legal professional privilege, in Australian Securities and Investments Commission v Southcorp Ltd (2003) 46 ACSR 438 at 441 – 442 at [21] and cases that have followed it. An affirmative answer to the question has been given in Re Southland Coal Pty Ltd (rec and mgrs apptd) (in liq) (2006) 59 ACSR 87 at [16] – [20], Linter Group Ltd (in liq) v Price Waterhouse (a firm) [1999] VSC 245 at [16] and Filipowski v Island Maritime Ltd [2002] NSWLEC 177 at [22]. In ASIC v Southcorp Ltd Lindgren J at [21] propounded the following principles which, however, were not contested before him: [21] I will apply the following principles which I did not understand to be in dispute: (1) Ordinarily the confidential briefing or instructing by a prospective litigant's lawyers of an expert to provide a report of his or her opinion to be used in the anticipated litigation attracts client legal privilege: cf Wheeler v Le Marchant (1881) 17 Ch D 675; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246; Interchase Corp Ltd (in liq) v Grosvenor Hill (Qld) Pty Ltd (No 1) [1999] 1 Qd R 141 (Interchase) at 151 per Pincus JA, at 160 per Thomas J. (2) Copies of documents, whether the originals are privileged or not, where the copies were made for the purpose of forming part of confidential communications between the client's lawyers and the expert witness, ordinarily attract the privilege: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; 141 ALR 545; 91 A Crim R 451 (Propend); Interchase, per Pincus JA; Spassked Pty Ltd v Cmr of Taxation (No 4) (2002) 50 ATR 70 at [17]. (3) Documents generated unilaterally by the expert witness, such as working notes, field notes, and the witness's own drafts of his or her report, do not attract privilege because they are not in the nature of, and would not expose, communications: cf Interchase at 161 – 2 per Thomas J. (4) Ordinarily disclosure of the expert's report for the purpose of reliance on it in the litigation will result in an implied waiver of the privilege in respect of the brief or instructions or documents referred to in (1) and (2) above, at least if the appropriate inference to be drawn is that they were used in a way that could be said to influence the content of the report, because, in these circumstances, it would be unfair for the client to rely on the report without disclosure of the brief, instructions or documents; cf Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 481; 69 ALR 31 at 34 per Gibbs CJ, CLR 487-8; ALR 38-9 per Mason and Brennan JJ, CLR 492-3; ALR 42-3 per Deane J, CLR 497-8; ALR 46-7 per Dawson J; Goldberg v Ng (1995) 185 CLR 83 at 98; 132 ALR 57 at 66 per Deane, Dawson and Gaudron JJ, CLR 109; ALR 75 per Toohey J; Instant Colour Pty Ltd v Canon Australia Pty Ltd [1995] FCA 870; BC9506842; Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89; BC 200300344 (ACCC v Lux) at [46]. (5) Similarly, privilege cannot be maintained in respect of documents used by an expert to form an opinion or write a report, regardless of how the expert came by the documents; Interchase at 148-50 per Pincus JA, at 161 per Thomas J. (6) It may be difficult to establish at an early stage whether documents which were before an expert witness influenced the content of his or her report, in the absence of any reference to them in the report: cf Dingwall v Commonwealth of Australia (1992) 39 FCR 521; Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 83 FCR 397 at 400; 156 ALR 364 at 366; ACCC v Lux at [46]. 7 ASIC v Southcorp was approved by Ryan J in Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 948, Einstein J in Gate Gourmet Australia Pty Ltd v Gate Gourmet Holding AG [2004] NSWSC 768 and Barrett J in Ryder v Frohlich [2005] NSWSC 1342. In the latter case, Barrett J concluded that a draft expert report did not attract the common law privilege and said at [11] – [12]: 11 Lindgren J's item (3) refers to the judgment of Thomas J in Interchase Corporation Ltd v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141. It is pertinent to quote from his Honour's judgment (at p.162): We are concerned in this case with discovery and production of documents. A necessary basis for privilege to attach to anything - document or otherwise - is that it records a communication. The material in categories B, C, D and E has remained in Richard Ellis's [sic] possession, and has not been the subject of any communication with the solicitors, or for that matter anyone else. The basis upon which privilege was claimed for these documents is confined to the claim that they were 'brought into existence by Richard Ellis solely for use in this litigation since its commencement and have been kept confidential.' (my italics). The italicised words draw attention to what is missing, and expose a deficiency in the claim. The documents consist mainly of working papers and valuations of other properties, and lack the quality of confidentiality. There is no reason to think that the documents were made for any confidential purpose. The other deficiency is that they were not communicated or intended to be communicated to anyone. In Commissioner of Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 552, McHugh J underlined the fundamental point that the subject matter of privilege is communications . This point, however trite it may seem, is fundamental to the determination of the present appeal. Much of the confusion present in the case law arises from a failure to apply it. Legal professional privilege is concerned with communications, either oral, written or recorded, and not with documents per se. In the present matter, shortly put, the documents in no way make or record communications, let alone confidential communications. I would hold that in general, when an expert is engaged by a solicitor for the purpose of giving evidence in a case, documents generated by the expert and information recorded in one form or another by the expert in the course of forming an opinion are not a proper subject for a claim of legal professional privilege. Privilege may however be claimed in relation to communications between the expert and the solicitor (both ways) when such communication is made for the purpose of confidential use in the litigation. Beyond this there is no sufficient reason why any material relevant to the formation of the expert's opinion should be subject to a claim of legal professional privilege. It is as well to add that an expert or solicitor may not artificially manufacture privilege by, for example, the expert sending in his or her file to the solicitor. Documents of this kind simply are not confidential. 12. The point made here is that privilege can only attach to documents which embody communication between the expert and the litigant by whom the expert is retained (or the litigant's lawyer). A draft report prepared by the expert is not, of its nature, such a communication. It may be that the draft report is, in fact, given or sent by the expert to the litigant or the litigant's lawyer, but that does not change its character as something prepared by the expert which is not intended to be a means of communication with the litigant or lawyer. ( emphasis added ) 8 The Southcorp and Interchase cases from which Barrett J quoted appear to have been concerned with legal professional privilege at common law, rather than under the uniform Evidence Acts. In Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49 at 79 [80] McHugh J emphasised that legal professional privilege at common law is concerned with communications and not with documents per se. This emphasis on communications in the common law privilege context led Barrett J to conclude in Ryder that legal professional privilege can only attach to documents which embody communications between the expert and the litigant by whom the expert is retained, or the litigant's lawyer, and thus that it does not attach to a draft expert report. 9 However, it has been accepted that if a draft expert report is brought into existence for the purpose of communication to the litigant or the litigant's lawyer then it is privileged. In Brookfield v Yevad Products Pty Ltd [2006] FCA 1180 at [15] Mansfield J said "I do not think that Lindgren J's principle (3) in Southcorp should be read as suggesting that a draft report provided by an expert to solicitors for the purpose of litigation is not itself privileged. It operates precisely as a communication for the purposes for which privilege exists… Provided that document was brought into existence for such a purpose, that is to record information to be submitted to a solicitor for the purpose of litigation, it may be privileged even in the hands of the expert." His Honour held that a draft expert report was privileged from production at an interlocutory stage. In the present case it appears from the terms of the notices to produce that the draft expert reports were in fact received by the plaintiff or its legal representatives for the purposes of litigation. Therefore, in my opinion, they were confidential "communications" under s 119(a) of the Evidence Act as well as for the purposes of common law legal professional privilege. 10 Whether or not that is correct, in my opinion a draft expert report is a confidential "document" which is privileged from production by operation of s 119(b). Section 119(b) goes outside the area of communications with which both s 119(a) and common law concepts of privilege are concerned. It applies to "documents". This was recognised in Re Southland Coal Pty Ltd (rec & mgrs apptd) (in liq) (2006) 59 ACSR 87 at [16] – [20] by Austin J who held that a draft witness statement prepared for the requisite dominant purpose is privileged under the Evidence Act 1995, as well as at common law: 16 The QBE Parties submitted that legal professional privilege protects communications, not documents as such. They cited the observation of Dawson J in Commissioner Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 515, that to say that a document is privileged is merely a shorthand way of saying that the communication constituted by the document is privileged (see also Toohey J at 525, Gaudron J at 543, McHugh J at 552 and Gummow J at 569; and see AWB Ltd v Cole , at [102] per Young J). Propend was a case arising under the search warrant provisions of s 10 of the Crimes Act 1914 (Cth), rather than in circumstances governed by the Uniform Evidence Act. AWB Ltd v Cole arose under the Royal Commissions Act 1902 (Cth) (see at [25] to [59]), again a situation not governed by the Uniform Evidence Act. 17 The legal propositions in these decisions must be received with circumspection in cases where the Evidence Act applies. Both s 118 and s 119 literally protect not only certain confidential communications, but also the contents of certain confidential documents (whether delivered or not). If, therefore, a document satisfies the requirements of either section - if, that is, it is a confidential document that was prepared by the requisite person for the requisite dominant purpose - the contents of the document are not to be disclosed, regardless of whether those contents have been or are to be communicated. To say that the statutory provisions protect the " communication constituted by the document ", rather than the document as such, is correct only in the sense that the privilege attaches to the information contained in the document (whether communicated or not) rather than to the piece of paper upon which that information is recorded. 18 This difference in content or emphasis, between the Evidence Act provisions and the observations in Propend and AWB Ltd v Cole , may have no significant practical consequences. Take two examples. First, a confidential draft pleading or draft witness statement prepared for the requisite dominant purpose is protected from disclosure under both the Evidence Act and the general law, whether or not the draft reflects some communication that has occurred or is a wholly uncommunicated draft . Under the Evidence Act the result flows from the simple application of the statute, which applies to the contents of the confidential document whether delivered or not . Under the general law, as propounded in Propend and AWB Ltd v Cole , the contents of the document are protected if their disclosure would reveal (or allow the reader to infer) the content or substance of a privileged communication that has been incorporated into the draft ( AWB Ltd v Cole at [132]). Arguably the contents are also protected if the confidential draft, having been prepared for the purpose of legal advice or proceedings, is intended to be communicated in pursuit of that purpose. 19 The second example relates to copies of documents. Under the general law, legal professional privilege can attach to copies of non-privileged documents, if the copy is brought into existence for the dominant purpose of providing legal advice or providing professional legal services relating to proceedings or anticipated proceedings ( Propend , at 507 per Brennan CJ, 544 per Gaudron J, 553-4 per McHugh J, 571 per Gummow J, and 587 per Kirby J; AWB Ltd v Cole at [103] per Young J). Under the Evidence Act, if the copy is made by the client or the lawyer for the requisite dominant purpose, its contents are protected from disclosure provided the document is confidential , a requirement probably satisfied where the copy is made for the purpose of obtaining confidential legal advice. 20 In the present case, the principal significance of the distinction between communications and documents is that some of the disputed documents are e-mails exchanged between officers of QBE or between an officer of QBE and a third party. The issue to be addressed is not whether those e-mails, per se, are privileged, but whether the grant of access to them would result in disclosure or privileged communications such as the provision of legal advice by Wotton & Kearney to their client QBE. ( emphasis added ) 11 It was submitted for the defendant that the reference in Southland to a "draft witness statement" should be understood to refer only to a draft lay witness report and not to a draft expert witness statement. In aid of the submission, attention was directed to the modern requirements of the expert witness code of conduct found in Schedule 7 to the Uniform Civil Procedure Rules. Paragraph 2 of the code provides that an expert witness has an overriding duty to assist the Court impartially on matters relevant to the expert's area of expertise. Paragraph 3 is prescriptive as to matters which must be specified in a report by an expert witness; including the facts, matters and assumptions on which an opinion is based, instructions and any materials utilised in support of an opinion. Therefore, it was submitted, in modern times an expert witness' draft report should not be regarded as "confidential" within the meaning of s 119. Such a submission may have some force in the case of a Court appointed expert in the sense in which that title is used in the Uniform Civil Procedure Rules (which is not necessarily the sense in which it is currently used in certain other jurisdictions where those rules do not yet apply). Be that as it may, in my view a draft report by an expert retained by a party or parties is not stripped of its character of confidentiality by the expert witness code of conduct. I do not think that Austin J in Southland intended to distinguish between a draft expert witness statement and a draft lay witness statement. 12 A related submission for the defendant was that the overriding duty of an expert to assist the Court impartially, as stated in the expert witness code of conduct, means that it can no longer be said that an expert report is prepared for the dominant purpose of the client being provided with professional legal services relating to proceedings. I do not accept that submission. In my view the overriding duty to the Court imposed by the Code does not change the dominant purpose for which an expert report is prepared. 13 Cogent policy reasons support the conclusion that draft expert reports are privileged from production. In Linter Group Ltd v Price Waterhouse (a firm) [1999] VSC 245 Harper J held prior to commencement of a trial that a draft expert report was privileged from production. His Honour said at [16]: ... an expert is surely permitted, indeed to be encouraged, to change his or her mind, if a change of mind is warranted. Just as a judge ought never to allow publication of a draft of a judgment, in part because it is necessary to preserve the freedom to change his or her mind on further reflection about the case, so experts should not be inhibited by fear of exposure of a draft from changing their minds when such change is warranted by the material then before the expert. 14 This decision was followed by Lloyd J in Filipowski v Island Maritime Ltd [2002] NSWLEC 177, where his Honour held, in criminal proceedings, that a draft expert report was privileged from production. His Honour said at [22]: The comparison by Harper J of a draft expert's report with a draft judgment is, in my opinion, valid. In my experience, it is not unusual for a judge to walk off the bench at the end of a case and prepare a draft judgment leading to a particular conclusion. However, as one's reading and thinking about the case develops over the ensuing weeks, it is not unusual for successive drafts to be completely re-written, leading to the opposite conclusion. I agree with Harper J that this is to be encouraged. So too, with experts. They may be discouraged from reformulating their opinions and conclusions, or changing their minds after further reading or examination if their drafts were not the subject to privilege. 15 I respectfully agree with the reasoning in Southland, Linter and Filipowski and propose to follow them. I hold that the draft expert witness statements are privileged under s 119(b) of the Evidence Act 1995. 16 However, in relation to the Allsopp draft reports the defendant submitted that there has been a waiver of the privilege arising from the fact that the final Allsopp report has been served. The waiver submission was not advanced in relation to the Hoolihan draft report because no Hoolihan report has been served. This aspect of the argument was brief. Mann v Carnell (1999) 201 CLR 1 was cited and reference was made to Odgers, Uniform Evidence Law (7th ed) at p532. No authority directly in point was cited. The submission seems to me to be inconsistent with the decisions in Brookfield, Linter and Southland. It is contrary to Filipowski at [25] where Lloyd J held: In Maurice [ Attorney-General for the Northern Territory v Maurice & Ors (1986) 161 CLR 475] the High Court held that disclosure of the final claim book did not amount to waiver of the privilege attaching to the draft document and that there was no unfairness in maintaining the privilege. In my opinion the same reasoning leads to the conclusion that fairness does not require an implied waiver of the privilege attaching to draft experts' reports in this case. In my opinion service of an expert report does not waive privilege in relation to a draft. 17 For these reasons, I propose to uphold the claim for privilege in respect of the draft expert reports. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.