Supreme Court New South Wales Medium Neutral Citation: Public Transport Ticketing Corporation v Integrated Transit Solutions Limited & Anor [2011] NSWSC 453 Hearing dates: 16 May 2011 Decision date: 19 May 2011 Jurisdiction: Equity Division - Commercial List Before: Einstein J Decision: Defendant's application dismissed Catchwords: Legal professional privilege-Principles-Onus of an assertion of legal professional privilege-Scope of legal advice extends to what prudently and sensibly should be done in the relevant legal context Legislation Cited: Evidence Act 1995 State Records Act 1998 Supreme Court Rules 1970 Transport Administration Act 1988 Uniform Civil Procedure Rules 2005 Cases Cited: Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360 Akins v Abigroup Ltd (1998) 43 NSWLR 539 Bailey v Department of Land and Water Conservation [2009] NSWCA 100 Balabel v Adi India [1988] Ch 317 Bauhaus Pyrmont Pty Ltd (in liq), Re [2006] NSWSC 543 Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 DSE (Holdings] v Intertan Inc [2003] FCA 1191 Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1998) 83 FCR 511 Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1999) 74 ALJR 339 Grant v Downs (1976) 135 CLR 674 Harris Scarfe Ltd (Receivers and Managers Appointed) (in liq) v Ernst & Young (No 10) (2006) 204 FLR 165 Mann v Carnell (1999) 74 ALJR 378 Michael Wilson and Partners Limited v Nicholls [2009] NSWSC 763 Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332 ML Ubase Holdings v Trigem, [2007] 69 NSWLR 577 [ National Crime Authority v S (1991) 100 ALR 151 New Cap Reinsurance Corporation (in liq) v Renaissance Reinsurance [2007] NSWSC 258 Northern Territory of Australia v GPAO (1999) 196 CLR 553 Sugden v Sugden [2007] NSWCA 312 Telstra Corporation v Australis Media Holdings (1997) 41 NSWLR 277 Towney v Minister for Land and Water Conservation for the State of New South Wales (1997) 76 FCR 401 Trade Practices Commission v Port Adelaide Wool Company Pty Ltd & Sinclair (1995) 60 FCR 366 Category: Procedural and other rulings Parties: Public Transport Ticketing Corporation Limited (Plaintiff) Integrated Transit Solutions Limited (First Defendant) ERG Limited (Second Defendant) Representation: Mr R Foreman (Plaintiff) Mr J Arnott (Defendants) Allens Arthur Robinson (Plaintiff) Norton Rose (Defendant) File Number(s): 2008/00290313 Judgment The application before the Court 1The application before the Court has some history and represents only a small part of the proceedings proper. In short the application brought by the defendant seeks to establish that it is entitled to inspection of draft board minutes over which the plaintiff has claimed client legal privilege. Background 2It is convenient in setting the scene for the legal privilege debate to simply outline the position taken by the defendant in its overview submissions, notwithstanding that the plaintiff naturally pursues its own case. 3The proceedings concern whether the PTTC was entitled to terminate a contract between the Transport Administration Corporation ( TAC ) and the first defendant, Integrated Transit Solutions Limited ( ITSL ), dated 20 February 2003 (the Contract ) under which ITSL was engaged to design, build and install an integrated smart card-based ticketing and fare payment system for public transport in the greater Sydney metropolitan region (the Tcard Project ). 4On 14 April 2011, the defendants filed an Amended Commercial List Response (the ACLR ) pursuant to consent orders, which sets out the defence to the PTTC's claim contained in its Further Amended Commercial List Statement filed 19 January 2010. 5The juridical basis of the defence is that it was not open to the PTTC to terminate the Contract because in purporting so to do it was taking advantage of its own wrongs, seeking to undermine the defendants' opportunity to perform the Contract and that the decisions made in the termination process were not made in good faith. 6In paragraphs 4 to 12 of the ACLR it is contended that the PTTC was in fact controlled by the relevant Ministers for Transport, being Minister Watkins and, at an earlier point of time, Minister Costa. Through the Minister in Cabinet, that is to say the Minister with the approval and authority of Cabinet (to be specific in this case, the Budget Cabinet Committee comprising the Premier, the Treasurer and the Minister) the NSW Government controlled the PTTC and that it was Cabinet which made the relevant decisions in the termination process. 7The Contract contained a process by which it might be terminated. The first notice was in fact issued on 24 September 2007 (the September Notice ). The trigger alleged by the PTTC for the issue of that notice was the non-achievement of certain milestone events under the Contract. The defendants maintain that they were not required to achieve those milestone events by the dates asserted by PTTC because their performance of the contractual obligations had been prevented and delayed by the conduct of PTTC itself and by conduct of the operators (essentially RailCorp and the State Transit Authority (the STA )) who were the intended users of the ticketing system. 8The conduct relied upon by the defendants is extensive. First there are the defined Relevant Circumstances which includes contributions to delay and difficulties on the project by PTTC, RailCorp and STA. The Relevant Circumstances also include pleadings of affirmation of the contract by PTTC after breach and a conventional estoppel. In addition, the defendants rely upon a series of pleaded breaches of the Contract by PTTC itself in paragraphs 187 to 204 of the ALCR. The defendants also contend that the issue of the September Notice was not valid because the PTTC itself was not ready, willing and able to complete its obligations under the Contract within the time specified in the notice and further, because the PTTC did not act reasonably and in good faith in issuing the notice. 9As the notice was not complied with, PTTC issued a second notice on 5 November 2007 (the November Notice ). The defendants maintain that the November Notice was also invalid for the same reasons. The Contract provided, in essence, that (assuming a valid second notice), if that notice was complied with or a satisfactory remedial programme submitted to PTTC within 20 business days, then PTTC had no right to terminate the Contract. The PTTC maintains that it issued a notice on 23 January 2008 pursuant to that right (the January Notice ). The defendants contend that the January Notice was also invalid for the same reasons. Pursuant to its contractual rights, ITSL submitted a remedial programme in response to the September Notices. At the time and in these proceedings, the defendants contend that the Remedial Programme was satisfactory and that the Contract ought not to have been terminated, had the question been considered in good faith. 10Before each of the September Notice, the November Notice and the January Notice were issued, the board of the PTTC and, subsequently, the Cabinet met to consider what action to take. Relevantly to the present dispute, on 11 January 2008, the board of the PTTC met and resolved to deem the Remedial Programme to be unsatisfactory and, subject to obtaining the prior approval of Cabinet, to terminate the Contract. The reasons for that resolution, and what was discussed at the meeting leading up to the resolution, are critical issues in the proceedings. The particular dispute 11The particular dispute that has arisen is with respect to a claim for client legal privilege asserted by the plaintiff, Public Transport Ticketing Corporation ( PTTC ), over eight documents it has discovered. The documents are drafts of the minutes of a meeting of the board of the PTTC held on 11 January 2008. What took place at that meeting is said to be a critical issue in the proceedings. 12The defendants submit that the eight drafts cannot be privileged. This is because on the defendant's case : (1)the PTTC has failed to provide sufficient evidence in support of its claim; and (2)in any event, it is said to be clear that the dominant purpose of producing the draft minutes was to record accurately what took place at the meeting on 11 January 2008. The approach taken by the plaintiff to the defendant's application 13The documents that are the subject of challenge are behind tabs A to G of the confidential exhibit ( "Confidential Exhibit" ) to the affidavit of Matthew Gerard McLennan dated 16 May 2011 ( "McLennan Affidavit" ). 14The documents consist of: (1)emails from a partner at a law firm acting for PTTC to PTTC's CEO (which emails attach draft board minutes) (see tabs A, B, C, and E of the Confidential Exhibit); (2)an email from PTTC's CEO to PTTC's chairperson forwarding one of the emails just referred to (tab D of the Confidential Exhibit); and (3)emails from a lawyer engaged by PTTC as an in-house counsel to PTTC to a different law firm acting for PTTC (tabs F and G of the Confidential Exhibit). 15The documents have been tendered to permit the Court to exercise its power pursuant to UCPR 1.8 and/or section 133 of the Evidence Act 1995 (NSW) to inspect the documents: see Michael Wilson and Partners Limited v Nicholls [2009] NSWSC 763 at [14]-[19] ( "MWP v Nicholls" ) and the cases there cited. 16Redacted versions of the emails in the Confidential Exhibit are annexures AA to GG of the McLennan Affidavit. An interlocutory hearing 17It is important to recall that the hearing is interlocutory. 18In that regard the plaintiff contended that the evidence before the Court establishes the following : (1)In January 2008: (a)Elizabeth Zealand ("Ms Zealand") was PTTC's CEO (McLennan Affidavit at [25]); (b)Steven Klimt ("Mr Klimt") was a partner in law firm Clayton Utz (McLennan Affidavit at [26]); (c)Clayton Utz were retained by the plaintiff to advise PTTC in respect of the contract between it and the first defendant ("the Contract") (including in relation to the termination of the Contract) (McLennan Affidavit at [26]); (d)Elizabeth Crouch ("Ms Crouch") was PTTC's chairperson (McLennan Affidavit at [10]); (e)Joanne Rees ("Ms Rees") was a lawyer engaged by PTTC as an in-house counsel to PTTC (annexure FF to the McLennan Affidavit; McLennan Affidavit at [15])). (2)At a board meeting on 11 January 2008, PTTC decided to terminate the Contract (see Vol 1 Tab B1 of the defendants' Court Book). By 11 January 2008, Ms Zealand believed that there was a real risk that, if PTTC terminated the contract, PTTC would become involved in litigation with the defendants (McLennan Affidavit at [28]). (3)Mr Klimt did not attend the 11 January 2008 board meeting (see Vol 1 Tab B1 of the defendants' Court Book). He was in Thailand at the time (McLennan Affidavit at [29]). (4)Shortly after the 11 January 2008 board meeting, Ms Zealand spoke by telephone to Mr Klimt. (McLennan Affidavit at [29], [30]). Ms Zealand asked Mr Klimt to review draft board minutes for the purpose of obtaining Mr Klimt's legal advice about the minutes and the decision of the board (McLennan Affidavit at [29], [30]). Ms Zealand drafted the board minutes (McLennan Affidavit at [29]). (5)Mr Klimt returned from Australia to Thailand on 13 January 2008 and reviewed the draft minutes (McLennan Affidavit at [30]). Mr Klimt created and sent the emails and attachments at tabs A, B, C, and E of the Confidential Exhibit for the purpose of giving PTTC legal advice in relation to the board minutes and the decision of the board (McLennan Affidavit at [30]). (6)The document at tab D of the Confidential Exhibit is an email from Ms Zealand to Ms Crouch forwarding earlier legal advice from Mr Klimt. (7)The documents at tabs F and G of the Confidential Exhibit are emails sent by Ms Rees to Allens Arthur Robinson ("Allens"), solicitors, for the purpose of briefing Allens to act in litigation against the defendants and to obtain Allens' advice about the documents attached to the emails (McLennan Affidavit at [31]). The authorities 19Both parties took the Court to sundry principles concerning legal professional privilege and waiver of privilege. 20In Michael Wilson & Partners Limited v Robert Coin Nicholls & Ors [2009] NSWSC 763 a number of parameters concerning the application of the Evidence Act 1995 to matters ancillary to proceedings before the Court were set out. At paragraphs 8-21 the following propositions were set out : i. A question which vexed various first instance judges and intermediate appellate Courts was the precise reach of the provisions of the Act. In terms, the Act applies only to proceedings in Court: s4(1). However, the notion - which may be traced back to the decisions of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings (1997) 41 NSWLR 277 and Branson J in Trade Practices Commission v Port Adelaide Wool Co Pty Ltd & Sinclair (1995) 60 FCR 366 - that the Act had an indirect or flow on effect to pre-trial proceedings, such as the issuing of a subpoena, or notice to produce, the answering of interrogatories, or the discovery of documents, obtained the approval of the NSW Court of Appeal in Akins v Abigroup Ltd (1998) 43 NSWLR 539, and of the Full Court of the Federal Court in Adelaide Steamship Co Ltd v Spalvins (1998) 81 FCR 360. The latter decision was, however, overruled by a majority of a five member Full Court of the Federal Court in Esso Australia Resources Ltd v Commissioner of Taxation (1998) 83 FCR 511. ii. The question whether the Act has an application by analogy to matters ancillary to proceedings in Court was resolved in the negative by the High Court in three decisions. Northern Territory v GPAO (1999) 196 CLR 553, Mann v Carnell (1999) 74 ALJR 378 and Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 74 ALJR 339. iii. The effect in New South Wales of changes to the rules [originally the Supreme Court Rules (Part 23, Rule 1 (c), and later as transported into the Uniform Civil Procedure Rules 2005 ] extend to the pre-trial inspection of documents including notices to produce. The effect of the rules is that notwithstanding the decisions of the High Court of Australia referred to above, when it comes to the application of legal professional privilege in most instances in connection of litigation - both in Court and in matters ancillary to it - it is to the Act that one must now look. [cf New Cap Reinsurance Corporation [in liq] v Renaissance Reinsurance [2007] NSWSC 258 at 15] [cf Section 131A of the Evidence Act 1995 ] [See also Part 34 UCPR]. 9. Nor do I see that there is any substantive difference between the relevant provisions of the Act and their Common Law analogues. Legal professional privilege as a substantive right 10. Legal professional privilege is a rule of substantive law and not merely a rule of evidence: Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 per Gleeson CJ, Gummow, Gaudron and Hayne JJ at 552 [9]-[10]. It is not merely a rule of substantive law, "it is an important common law right or, perhaps more accurately, an important common law immunity": at 553[11]. 11. McHugh J described legal professional privilege in the same case at 563 [44] as " a fundamental right or immunity ". Kirby J at 575-576 [85] referred to it as " a basic doctrine of the law " and a " practical guarantee of fundamental rights ". 12. Accordingly, as a substantive common law right or immunity, legal professional privilege is not something the Court can simply abrogate as a matter of judicial discretion... Legal professional privilege may be determined following inspection of documents by the Tribunal without a waiver of privilege 14. Rule 1.8 of the UCPR provides: " The Court may determine any question arising under these rules (including any question of privilege) and, for that purpose: (a) may inspect any document in relation to which such a question arises, and (b) if the document is not before the Court, may order that the document be produced to the Court for inspection. " 15. The exercise of a Court's power to determine claims for privilege was condoned, even encouraged, in Grant v Downs (1976) 135 CLR 674 at 689, per Stephen, Mason and Murphy JJ. 16. It is a common practice for Courts throughout Australia to exercise this power. A discussion of the rule, its history and practice is set out in the judgment of Debelle J in Harris Scarfe Ltd (Receivers and Managers Appointed) (in liq) v Ernst & Young (No 10) (2006) 204 FLR 165 at 173-179 [25]-[42]. The discussion of the authorities in that judgment makes it clear that inspection should only take place where it is necessary to the determination of the question of privilege. 17. Section 133 of the Evidence Act 1995 contains an equivalent rule. It reads: "If a question arises under this Part relating to a document, the Court may order that the document be produced to it and may inspect the document for the purpose of determining the question." 18. In Bailey v Department of Land and Water Conservation [2009] NSWCA 100 the Court of Appeal clearly stated that s. 133 permitted judicial inspection of the documents to determine a claim for privilege: see per Tobias JA at [57]-[61]; also per Allsop P at [2]; and per Hodgson JA at [6]. 19. In Esso Gleeson CJ, Gaudron and Gummow JJ observed at 70 [52] that a Court should not be hesitant to exercise its power to examine documents. Onus for assertion of legal professional privilege 20. It is accepted that the party claiming privilege bears the onus of establishing the basis of the claim: Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority (2002) 4 VR 332 at 337; In the matter of Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 543 at [24]), and that the party claiming privilege must establish the facts from which the Court can determine that the privilege is capable of being asserted: National Crime Authority v S (1991) 100 ALR 151 at 159. 21Counsel appearing for the defendant took the Court through sundry sections of the Transport Administration Act 1988 (NSW) as it applied in January 2008 which required that the board of the plaintiff was to ensure that the activities of the plaintiff were carried out properly and efficiently, contending that this was to ensure that the deliberations of the board were properly recorded. He further took the Court to the New South Wales State Records Act 1998 (NSW) which placed an obligation on the chief executive of each public office to ensure that the public office complied with the requirements of the Act and the Regulations. 22Ultimately his proposition was that the combination of the Transport Administration Act , the State Records Act and its regulations [including the standard issue by the State Records Authority] imposed a significant obligation on the plaintiff to document its activities and in particular to ensure that any deliberations of the board of the plaintiff were accurately recorded and any draft which were prepared of the minutes of such meetings were to be kept and maintained by that organisation 23In his submissions the defendant's counsel made crystal clear that the dominant purpose of the preparation of the draft minutes was to ensure that an accurate and complete record was created of what took place on 11 January 2008. His proposition was that it is not a privileged purpose and that to the extent that there are draft minutes over which privilege is claimed, that privilege cannot be sustained because the dominant purpose of preparing and bringing into existence each of those drafts was part of that the overarching purpose of creating full and accurate records. 24Having read the unredacted materials I reject the proposition that the privilege cannot be sustained. 25Furthermore and as Mr Foreman appearing for the plaintiff submitted, there was at least one fundamental distinction between the position advanced by his opponent and that advanced by the plaintiff. That distinction concerned whether it was possible for legal advice to be given in relation to board minutes. The defendant had contended that unless one was providing a written advice or unless one was explaining the law to one's client, then what the lawyer is doing in those contexts is not properly characterised as legal advice, therefore no relevant privilege could attach. 26As the plaintiff has contended legal advice is not limited to passing on or explaining the law to a client, it includes advice as to what prudently and sensibly should be done in a relevant legal context. The relevant legal context for present purposes concerns a termination of a contract and the litigation likely to result from that termination. I accept that it is entirely within the orthodox realm of legal advice for advice to be provided in relation to board minutes. 27In DSE (Holdings] v Intertan Inc [2003] FCA 1191 Allsop J cited Balabel v Adi India [1988] Ch 317 at 330, where it Taylor LJ observed : ... legal advice is not confined to telling the client the law; it must include advice as to what prudently and sensibly should be done in the relevant legal context. 28Allsop J [at 30] observed that the cases have sometimes appear to reflect a tension between a wide and narrow conception as to what is comprehended in the practical application of the notion of the dominant purpose of giving or receiving advice. As his Honour indicated, a helpful discussion of this tension and the relevant authorities is found in the judgment of Taylor LJ in Balabel . Allsop J made the point that it is prudent to recall that the privilege is a fundamental common law right making the point that the status of it as a fundamental right and its role in one of the underpinnings of the administration of justice remain related. 29Finally [at paragraph 72 and following] Allsop J dealt with the scope of advice privilege in relation to third parties in a fashion which is unexceptional. The unredact materials 30Returning to the materials made available only to the Court in a confidential capacity, that is to say the unredact materials, I have had the opportunity to carefully scrutinise the unredacted materials and have formed the very clear view that the plaintiff has succeeded in showing that the documents for which the claim is made privileged were indeed privileged. 31Nor is there any substance in the defendant's contention that legal professional privilege was waived. 32The operation of section 126 is to be assessed according to its terms, and not on the basis that in some way it incorporates the pre-existing common law so that the test made out in section 126 is an objective one. 33Indeed in so far as the defendant sought to rely upon s126 of the Evidence Act ; Sackville J in Towney v Minister for Land and Water Conservation for the State of New South Wales (1997) 76 FCR 401 observed that a Court considering whether client legal profit privilege has been lost under S126 must determine for itself whether the statutory standard has been satisfied in the particular circumstances of the case. His Honour concluded that any reference to a privileged source document, of itself, does not necessarily result in loss of the privilege attaching to the whole or even part of that source document. Rather the circumstances of the particular case must be examined. 34In Sugden v Sugden [2007] NSWCA 312, the South Wales Court of Appeal essentially adopted the above analysis of Sackville J. 35Brereton J in ML Ubase Holdings v Trigem [2007] 69 NSWLR 577 [at 45] put the matter as follows: Proper understanding of a document or communication will sometimes, but not always require that documents to which it responds or refers be available. It may very likely be so when the primary document contains a summary of all excerpts from an earlier communication, or responds to questions which not themselves restated in it. But I do not accept that a proper understanding of the communication or the document involves an appreciation of the manner in which the opinions contained in the document have been formed over time. Decision 36For those reasons the defendant's application is dismissed. 37The parties will be given an opportunity to address on costs ********** 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. Decision last updated: 19 May 2011