Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd

[1995] FCA 1081

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA  )
NEW SOUTH WALES DISTRICT REGISTRY  )        No NG 381 of 1994
GENERAL DIVISION                 )

BETWEEN:

ALLSTATE LIFE INSURANCE CO and the parties listed as applicants in Annexure A to the third further amended statement of claim.
  Applicants

AND:

AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED and the parties listed as respondents in Annexure B to the third further amended statement of claim.
  Respondents

CORAM:Lindgren J

PLACE:Sydney

DATE:19 December 1995

REASONS FOR JUDGMENT (No 20)
     (Skadden Arps' motion for production for inspection)

There is before the Court a motion brought by the first cross-respondent ("Skadden Arps") by notice of motion filed on 30 November 1995, seeking an order that the 6th, 11th, 12th, 13th, 14th and 15th applicants, (the "Ariel Entities"), pursuant to O 15 r 11 (d) of the Federal Court Rules, produce for inspection "all daily activity reports, without redaction, a sample of which is annexed at pages 3-12 of annexure 'A' to the affidavit Jeffrey Noel Babington Lees sworn 30 November 1995 in support of [the] motion, contained in a draft list of
documents of the Ariel Entities".  The expression "without redaction" means "without editing".

The way in which the issue arises is that the Ariel Entities have given discovery of the daily activity reports referred to in the sense of having listed them in their list of documents but they have blackened out certain data relating to particular securities.  The particular item of information on which the argument has focused is the "market value" of the securities. 

It is not clear to me how some of the securities referred to in the daily activity reports in respect of which the blackening out has occurred are or may be relevant to any issue in these proceedings, but this does not matter for present purposes.  The fact is that they have been discovered, there has been no debate about their relevance, and some of them such as the senior subordinated debentures issued by Linter Textiles Corporation Limited itself, are clearly potentially relevant.

The claim for privilege is sought to be made in an affirmation of Jack N. Mayer, affirmed 7 December 1995.  He says that the information in question has been blackened out because in arriving at the market value figures, the Ariel Entities took into account legal advice.  He says that he sought legal advice concerning, amongst other things, the status of various legal proceedings, "because the value of such holdings was integrally connected to, and derived in part from, the status of litigation relating to those holdings".  The "holdings" to which he refers are, of course, the Ariel Entities' holdings referred to in the daily activity sheets.

Mr Mayer goes into further detail in his affirmation as to the attorneys with whom he had conversations.  He says that the conversations were conducted over the telephone and that the advice included an assessment by the respective attorneys of the risks, costs and attendant delays in litigation.  It was not disputed that legal professional privilege would attach to such advice communicated in those conversations.  It is the next step which has given rise to contention.  Mr Mayer says that in the course of the conversations, a specific value and/or range of values was ascribed to the bonds held by the Ariel Entities, and that he used the knowledge which he gained in the conversations in determining the values to be shown for the securities in question.  I quote from his affirmation as follows:

"Specifically, the value of the securities that are subject to litigation derive in large measure from the risks, recovery prospects, costs and attendant delays in litigation, matters concerning which, with respect to the litigated interests, I rely not upon myself or my co-workers, but upon advice of counsel, including values that were ascribed to Linter Textiles bonds in the course of meetings with counsel.  Accordingly, the value that I ascribed to such interests derived primarily from my conversations with counsel."

Mr Mayer continues by saying that the values assigned in the
daily activity reports reflect, among other things, the values of the securities and that the determinations of value were based primarily on the conversations with counsel to which he referred.  It is put for the Ariel Entities that in the light of that affidavit, I should conclude that a disclosure of the market value figures would reveal the substance of the advice which was given.

It is put for Skadden Arps that this is not so and that the affidavit does not satisfy the test of a successful claim of legal professional privilege.  In particular, Skadden Arps refer to the decision of Pincus J in Allen Allen & Hemsley v Deputy Commissioner of Taxation (1988) 81 ALR 617 at 628.

There has been some debate over whether the test to be applied is that under the general law or that under s 118 of the Evidence Act 1995 (Cth). In the view which I have formed, the same result will follow no matter which test is applied. I should record that s 118 provides that evidence is not to be "adduced" if, on objection by a client, the Court finds that adducing the evidence would result in disclosure of, relevantly, "a confidential communication made between the client and a lawyer" for the dominant purpose of the lawyer's providing legal advice to the client.

I have come to the conclusion that on the basis of the evidence found in the affirmation of Mr Mayer, the claim for legal professional privilege is not made out.  The reason is that the fact that the legal advice was the primary factor taken into account in arriving at the market value does not signify that revelation of the market value figure would necessarily or probably reveal the substance of that legal advice. 

It is conceivable that an amount assigned in a document to a security or for that matter to any other item of property as its "market value" by the owner of the security or other item of property, might, coupled with other background facts known to the reader of the document, reveal the substance of legal advice taken into account by the owner of the security of other property in arriving at that figure.  But the case would surely be an exceptional one, dependent upon evidence of special facts known to the reader.  The evidence before me is no more than what is contained in the affirmation of Mr Mayer.  Even that document does not suggest that the legal advice was the sole determinant of the figure assigned as the market value of the securities.  Moreover, there is not before me evidence of facts external to the daily activity reports of the kind to which I have referred.

On the evidence, I am not persuaded that a reader of the market value figures in the daily activity reports would probably be thereby informed that legal advice at all, or legal advice of any particular kind, had been given.

I make the following orders:

(1)I make an order in terms of paragraph 1 of Skadden Arps' notice of motion filed 30 November 1995, with the addition thereto of the words "by 22 January 1996". 

(2)I grant leave to the 6th, 11th, 12th, 14th and 15th applicants (the "Ariel Entities") to apply in relation to production, pursuant to order (1), by filing a notice of motion by this Friday 22 December 1995 to be made returnable before the Duty Judge during the vacation.

(3)I order the Ariel Entities to pay the costs of Skadden Arps' motion.

I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated:21 December 1995

Heard:        19 December 1995

Place:        Sydney

Decision:     19 December 1995

Appearances:   Mr A R Emmett QC of counsel instructed by Deacons Graham & James appeared for the 6th, 11th, 12th, 13th, 14th and 15th applicants (the "Ariel Entities") (respondents to the motion).

Mr A J Sullivan QC instructed by Dibbs Crowther & Osborne appeared for the 1st cross respondent ("Skadden Arps") (applicant on the motion).