Bartolo v Doutta Galla Aged Services Ltd
[2014] FCCA 1517
•15 July 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BARTOLO v DOUTTA GALLA AGED SERVICES LTD | [2014] FCCA 1517 |
| Catchwords: INDUSTRIAL LAW – Application alleging contraventions of s.340 of the Fair Work Act 2009 – Application in a Case seeking discovery of certain documents – claim for legal professional privilege – whether report to Respondent’s Board privileged – whether privilege waived by the Respondent. |
| Legislation: Evidence Act 1995 (Cth), Part 3.10, Division 1, ss.117, 118, 122 Fair Work Act 2009 (Cth), ss.340, 342, 361 |
| Attorney General (NT) v Maurice (1986) 161 CLR 475 Stephen Odgers, Uniform Evidence Law, (10th ed, 2012) |
| Applicant: | JOHN BARTOLO |
| Respondent: | DOUTTA GALLA AGED SERVICES LTD |
| File Number: | MLG 513 of 2013 |
| Judgment of: | Judge Whelan |
| Hearing date: | 8 July 2014 |
| Date of Last Submission: | 8 July 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 15 July 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Wilkinson |
| Solicitors for the Applicant: | Nowicki Carbone |
| Counsel for the Respondent: | Mr N Harrington |
| Solicitors for the Respondent: | Colin Biggers & Paisley |
ORDERS
THE COURT DECLARES THAT:
Pursuant to s.45(1) of the Federal Circuit Court of Australia
Act 1999 (Cth) that it is appropriate to allow for discovery in this case.
THE COURT ORDERS THAT:
Pursuant to Rule 14.02(2) of the Federal Circuit Court Rules 2001 (Cth) the Respondent produce to the Applicant the (Interim) Report presented to the Respondent Board by Aitken Partners on 24 September 2012.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 513 of 2013
| JOHN BARTOLO |
Applicant
And
| DOUTTA GALLA AGED SERVICES LTD |
Respondent
REASONS FOR JUDGMENT
This is an Application in a Case[1] in which the Applicant,
MR JOHN BARTOLO (“the Applicant”), seeks certain orders with respect to disclosure and discovery concerning the involvement of AITKEN PARTNERS (“Aitken Partners”) in an investigation of what is referred to as “the 16 August 2012 email”, [2] and/or in the termination of the Applicant’s employment with DOUTTA GALLA AGED SERVICES (“the Respondent”). The application further seeks that the Respondent produce any letter from Aitken Partners to the Respondent’s Board (“the Board”) and/or members of the Respondent’s Board dated 23 September 2012. The Respondent opposes the orders being made and claims legal professional privilege over the documents sought.
[1] Application in a Case filed 1 July 2014.
[2] Ibid at p.2.
The substantive proceedings in this matter are brought under the provisions of the Fair Work Act 2009 (“the Act”) and allege contraventions of s.340 of that Act with respect to a number of matters.[3] The Applicant contends that several adverse actions were taken against him by the Respondent, including his dismissal. The Applicant further contends that a reason for the termination was his exercising, or proposing to exercise, workplace rights within the meaning of the legislation. In particular, for the purposes of these proceedings, the Applicant contends that the investigation by
Aitken Partners amounted to adverse action for the purpose of s.342 of the Act.
[3] Application and Form 2 filed 18 April 2013.
Under the provisions of s.361 of the Act, the reasons for taking an action are presumed to be taken for the reason alleged unless the person taking the action proves otherwise. It is clear that the state of mind of the decision-maker is an issue in the proceedings.[4]
[4] Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500, at paras.44-45.
In its Response, the Respondent states:
At 10am on 20 August 2012 the Applicant participated in an executive meeting of managers of the Respondent comprising Anderson, Robinson, Koulis during which the Applicant was informed that the Respondent had engaged the law firm Aitken Partners to undertake an independent investigation for the Respondent’s Board into the sending of the 16 August 2012 email together with the allegations contained within it.[5]
[5] Response filed 26 March 2014, p.5 at para.26(b).
In paragraph 31 of the Response, the Respondent again states:
[O]n 20 August 2012 it engaged the law firm Aitken Partners to undertake an independent investigation for the Respondent’s Board into the sending of the 16 August 2012 email together with the allegations contained within it.[6]
[6] Ibid at p.7.
In paragraph 33 of the Response, the Respondent states:
The Respondent denies the allegations contained in paragraph 33, refers to and repeats paragraph 31 above and says further that it retained Aitken Partners for two reasons being:
(a) the unauthorised sending of the 16 August 2012 [sic]; and
(b) the serious allegations contained within it.[7]
[7] Ibid.
In paragraph 67 of the Response, the Respondent states as follows:
The Respondent admits that on around 24 September 2012 it received a confidential interim report from Aitken Partners arising from the investigation into the 16 August 2012 email (“interim report”).[8]
[8] Response filed 26 March 2014, at pp.11-12.
In paragraph 69 of the Response, the Respondent states as follows:
Save that the Respondent admits that:
(a)after it considered the interim report the Respondent Board elected to recommend to Anderson that he terminate the Applicant’s employment under the Termination with Notice clause (22.2) of the Applicant’s employment contract; and
(b)Anderson immediately accepted the recommendation but decided not to implement it until he had taken the necessary steps to limit the interruption of the Applicant’s departure. [sic]
it otherwise does not admit the allegations contained in paragraph 69 of the Statement of Claim. [9]
[9] Ibid at p.12.
In paragraph 70 of the Response, the Respondent states as follows:
The Respondent denies the allegations contained in paragraph 70 of the Statement of Claim and says further that the Respondent Board recommended that the Applicant’s employment be terminated for the following reasons:
(a)Contractual entitlement: the Applicant’s employment contract enabled the Respondent to terminate him without reason at any time on three months’ notice. The Respondent gave the Applicant 3 months’ notice and did not require him to work during the three month period;
(b)Lost confidence: the Applicant breached the Trust and Confidence term of his employment contract and lost the confidence of the Board and of Anderson due to his performance and general behaviour including:
(i) Failing to follow process and direction for recruitment and promotion;
(ii) Inappropriate appointment and management of cleaning contracts;
(iii) Failure to cooperate with the Aitken Partners investigation; and
(iv) Maintaining undisclosed personal relationships with staff members in breach of the Respondent’s policies
(c)Disharmony with management: the Applicant had demonstrated that he was unable to work within the existing executive management team and repeatedly failed to follow the directions of the Board and Anderson, including in connection with the investigation into the 16 August 2012 email;
(d)Bullying behaviour: the Applicant had repeatedly engaged in bullying, inappropriate, intimidating and threatening behaviour towards staff and fellow colleagues which was deemed unacceptable by the Respondent. [10] (Original emphasis).
[10] Response filed 26 March 2014 at p.12
The Chief Executive Officer of the Respondent at the time,
MR MARK ANDERSON (“Mr Anderson”), produced a sworn affidavit dated 4 July 2014, which also attached a statutory declaration dated 30 October 2012.[11] In his affidavit at paragraph 88, Mr Anderson states as follows:
Due to the nature of the allegations in the email, and the persistent rumours that had been circulating a recommendation was made to me by the Chairman of the Board in consultation with his directors that an independent, legally qualified, investigator be appointed to address the allegations in the email, investigate who constructed the email and distributed it illegally and importantly advise the Board on how to address the situation from a legal point of view, depending on the investigation.[12]
[11] Affidavit of Mark Anderson filed 7 July 2014 at Exhibit “MA-01”.
[12] Ibid at p.13.
At paragraph 91 of his affidavit, Mr Anderson states: “The law firm, Aitken Partners, were engaged to undertake the investigation and advise the Board directly”.[13]
[13] Ibid.
At paragraph 163 of his affidavit, Mr Anderson states:
Aitken Partners completed their investigation and provided a confidential interim report to the Board of Directors on the evening of Monday 24 September 2012 in a closed Directors only session.[14]
[14] Affidavit of Mark Anderson, filed 7 July 2014, p.21 at para.163.
He goes on to say at paragraph 164 of his affidavit:
The Board considered the report and issued four recommendations to me including that:
…
(b)That Mr Bartolo’s contract be terminated in accordance with his contract of employment. Termination would include three months notice as per the contract.[15]
[15] Ibid.
At paragraph 166 of his affidavit, Mr Anderson states: “Following receipt of the Board’s recommendations I made the decision to terminate Mr Bartolo”.[16]
[16] Ibid at p.22.
At paragraph 198 of his affidavit, under the heading “Reasons for terminating Mr Bartolo”, Mr Anderson gives, as one of his reasons: “The recommendations of the Board on 24 September 2012”.[17]
[17] Ibid, p.26 at para.198(g).
In his statutory declaration, Mr Anderson makes the following statements:
86.Due to the nature of the allegations in the email, and the persistent rumours that had been circulating a decision was made by the Chairman of the Board in consultation with his directors that an independent investigator be appointed to address the allegations in the email and investigate who constructed the email and distributed it illegally.
…
89.I subsequently engaged Aitken Partners to undertake the investigation for the Board. (Emphasis added).
…
153.The investigator completed their investigation and provided an interim report to the Board of Directors on the evening of Monday, 24 September 2012 in a closed Directors only session.
154.The Board considered the report and issued four recommendations to me, including that:
…
b)That John Bartolo’s contract be terminated in accordance with his contract of employment. Termination would include three months notice as per the contract.[18]
[18] Affidavit of Mark Anderson filed 7 July 2014, Exhibit “MA-01” at pp.9-10, 16.
On 7 July 2014, MR BRUCE ALLAN MILDENHALL
(“Mr Mildenhall”), the Chairman of the Board of Directors of the Respondent, swore an affidavit in the proceedings.[19] In that affidavit he stated, with respect to the 16 August 2012 email, the following:
I was concerned about the Board’s exposure to legal liability arising from the email having regard to the following:
a) the corporate governance of Doutta Galla;
b) compliance with the requirements of the Department of Health and Ageing;
c) Doutta Galla’s and the Board’s reputations in the aged care services industry generally.[20]
[19] Affidavit of Bruce Allan Mildenhall filed 8 July 2014.
[20] Ibid, p.2 at para.5.
Mr Mildenhall went on to state:
As a result of my concerns concerning possible legal liability attaching to the Board, I made the decision to approach
Mr Ric Birkett of Aitken Partners, Lawyers. I did this because I wanted the Board to have the matter independently assessed and to obtain legal advice regarding the allegations in the email. Shortly after 16 August 2012 I spoke with Ric Birkett regarding the Board retaining Aitken Partners directly to investigate and to provide confidential legal advice with respect to the Board.[21] (Emphasis added).
[21] Ibid at para.7.
In paragraph 9 of his affidavit, Mr Mildenhall states as follows:
The Board resolved in the directors only session of the Board meeting on 27 August 2012 to retain Aitken Partners on a confidential basis to investigate and provide legal advice to it regarding the allegations in the email and related matters affecting the Board. There was no intention to provide Aitken Partners’ advice to the executive team or anyone else at Doutta Galla that was not at Board level. So far as I am aware, the Aitken Partners report and advice was not communicated to any person other than the Board and its advisors.[22] (Emphasis added).
[22] Affidavit of Bruce Allan Mildenhall filed 8 July 2014 at pp.2-3.
In paragraph 10 of his affidavit, Mr Mildenhall goes on to say that the decision was made for the Board to “retain Aitken Partners directly on a confidential basis”.[23] He further states that the Board retained Aitken Partners to “investigate the allegations in the email and provide legal advice regarding workplace laws and the Board’s governance and compliance responsibilities”.[24] The minutes of the Board meeting[25] simply state that the Directors only session covered “Board initiated investigation” and stated that “The Board initiated investigations will remain confidential”.[26]
[23] Ibid at p.3.
[24] Ibid.
[25]Ibid at Exhibit “BM-01”.
[26] Ibid.
In paragraph 13 of his affidavit, Mr Mildenhall states that he received a written interim report from MR RIC BIRKETT (Mr Birkett”) on
24 September 2012. MR STEPHEN CURTAIN (“Mr Curtain”), a lawyer and partner of Aitken Partners, attended the Directors only session of a meeting that evening. Mr Mildenhall states that Mr Curtain distributed a copy of the written report to the Directors and spoke to the Directors regarding the content of the report: “Mr Curtain gave legal advice to the Board based on the written report and matters raised by the Board in the discussion that day”.[27] (Emphasis added).
[27] Ibid at p.3.
In paragraph 14 of his affidavit, Mr Mildenhall recalls that after
Mr Curtain left the meeting:
. . . Mr Anderson, entered the meeting. The Board informed
Mr Anderson that it had obtained independent legal advice. The Board made four recommendations to Mr Anderson, including that Mr Bartolo be terminated.[28] (Emphasis added).[28] Affidavit of Bruce Allan Mildenhall filed 8 July 2014, p.3 at para.14.
Mr Mildenhall then states:
The Board did not elaborate upon its reasons for recommending to terminate Mr Bartolo other than to say, in effect, that:
(a)there appeared to be serious issues with respect to the awarding of contracts to third parties by and with respect to the promotion of personnel within Doutta Galla and that Mr Bartolo was ignoring Doutta Galla’s policies in this regard.
(b)they were aware that Mr Bartolo was defiant of the CEO’s authority that this was not appropriate.[29] (Emphasis added).
[29] Ibid.
Mr Mildenhall stated that the Board did not provide Mr Anderson or anyone else, at that time, with a copy of Aitken Partner’s written report. The minutes of the meeting of 24 September 2012 stated:
The Directors only discussion covered the Board initiated investigation into the unauthorised email of 16 August 2012.
Following the provision of legal advice in relation to the outcomes of the investigation, the following recommendations were agreed to be referred to the CEO:
…
4. Termination of the contract of the Director of Residential Care.
The CEO joined the meeting and following discussion agreed to implement the four recommendations.
The Board initiated investigations and the legal advice received will remain confidential.[30]
[30] Ibid at Exhibit “BM-02”.
The Applicant’s contentions
The Applicant contends that there are two issues concerning the state of mind of the Board and of Mr Anderson. The Applicant states that, “[T]he state of mind of the board is at issue and that has been put into the pleadings by the respondent and, therefore, it’s enlivened as an issue in the proceeding …”.[31] The Board formed a view based on the advice of Aitken Partners. The Applicant contends that he is entitled to see the documents relevant to the state of mind of the Board and that includes documents provided to the Board by Aitken Partners:
[T]he other state of mind that’s in issue is Mr Anderson’s. He says he made decisions to do or not to do certain things and, therefore, he has directly put in issue his state of mind in the proceeding as well.[32]
[31] Transcript of proceedings, 8 July 2014, p.4 at lines 6-8.
[32] Ibid at lines 9-11.
The Applicant states that the investigation referred to in the Response involved:
·Retaining IT experts to find out how the Respondent’s email system was compromised;
·Interviews conducted by Mr Curtain, a principal solicitor of Aitken Partners, who interviewed the Applicant amongst others; and
·Provision of a confidential interim report to the Board.
It would appear from the evidence that no advice was given prior to
24 September 2012, because up until that stage, “it had simply been an investigation and the provision of a report”.[33]
[33] Ibid, p.5 at line 39.
Further, it is clear that Mr Anderson made his decision to terminate the Applicant following receipt of the Board’s recommendations. The state of mind of both Mr Anderson and the Board in the decision-making process to terminate the Applicant’s employment has therefore “been put squarely in issue”.[34]
[34] Ibid, p.6 at line 43.
The Applicant drew the attention of the Court to parts of the pleadings, in particular those which refer to the Respondent commencing an investigation and the Chairman of the Board informing Mr Anderson that an independent investigator had been appointed. There is nothing in the pleadings that refers to Aitken Partners being retained for the purpose of providing legal advice.
At paragraph 69(a) of the Response, the Respondent states: “after it considered the interim report the Respondent Board elected to recommend to Anderson that he terminate the Applicant’s employment ...”.[35] This brings into issue the question of how the Board made the decision to make a recommendation to Mr Anderson. It is clear that Mr Anderson acted on the advice of the Board. The Applicant contends that he is entitled to see any documents which go to the Respondent’s state of mind in making the decision to terminate his employment.
[35] Response filed 26 March 2014 at p.12.
The Applicant referred the Court to the decision of the New South Wales Supreme Court in Idoport Pty Ltd (in liq) (recs apptd),
Re; National Australia Bank Ltd v Sheahan [2012] NSWSC 58 and, in particular, to paragraph 78 of that decision, where Ward J said: “It is submitted (and I accept) that whether a party makes allegations about its state of mind is to be determined by reference to the pleadings”.The Applicant submits that, having put the state of mind of the decision-makers in issue, the Applicant is entitled to know what the state of mind of the decision-maker, in particular Mr Anderson, and the Board was.
The Applicant also took the Court to a decision of the Supreme Court of Victoria in Brunswick Hill Apartments Pty Ltd v CGU Insurance Ltd [2010] VSC 532. In particular, the Applicant referred the Court to the following passage:
The Victorian Court of Appeal’s decision in Mitsubishi Electric Pty Ltd v Victorian WorkCover Authority establishes or confirms that in its ordinary meaning “dominant” indicates the purpose which was the ruling, prevailing or most influential purpose. The Court also considered the variety of expressions used in the cases to describe the degree of apprehension – not that such a matter is capable of formulaic evaluation, or a matter of mere verbiage for a deponent. Two propositions emerged. First, a mere vague apprehension of litigation is insufficient. Secondly, litigation is reasonably anticipated or in contemplation if its initiation is likely or reasonably probable.[36]
[36] [2010] VSC 532 p.8 at para.28.
The Applicant went on to refer to other parts of the judgment in that matter, and in particular to the following:
Where the purpose of such a report is for the insurer to satisfy itself about the facts in order to understand its exposure or whether the event fell within the terms of the policy or fell within any exclusions, great care must be taken to ensure that the investigative purpose is not then ex post facto turned into an assertion that the dominant purpose was for use for confidential legal advice or in apprehended litigation.[37]
[37] [2010] VSC 532, p.9 at para.30.
The Applicant submitted that everything up to the provision of advice by Aitken Partners ought to fall within the principles of this being an investigation not prepared for the dominant purpose of legal advice. Everything after that point, where there is a recommendation or legal advice provided, the Applicant says has been issue waived by the Respondent’s pleadings and it’s affidavit material.
The Applicant sought to rely on the provisions of s.122(2) of the Evidence Act 1995 (Cth) (“the Evidence Act”). This section states:
Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.
The Applicant referred the Court to the decision of the High Court of Australia in Mann v Carnell (1999) 201 CLR 1 (“Mann”) and, in particular, to paragraph 29 of the decision of the majority, where the Court considers the issue of waiver of privilege:
What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.[38]
[38] [1999] 201 CLR 1, p.13 at para.29.
The Applicant submits that the conduct of Aitken Partners’ client has been to disclose:
·Communications,
·The investigation or the existence of an investigation,
·The receipt of an interim report,
·The receipt of recommendations from the Board, and
·The state of mind of its CEO, Mr Anderson,
which are crucial to the running of its defence. The Applicant says that:
[t]his is inconsistent with the maintenance of confidentiality or any prima facie protection by professional privilege which the privilege serves to protect. In other words, it’s unfair for them to say we’re going to rely on the recommendations, the investigation, the advice that was given, the state of mind of our board and our CEO and we’re going to use that to run our defence but we’re not going to hand over any of those documents and put them into evidence.[39]
[39] Transcript of proceedings of 8 July 2014 , p.14 at lines 20-26.
The Applicant submits that the Respondent has effectively undertaken an issue waiver. The Applicant referred the Court to a decision of the Federal Court of Australia in Perpetual Trustees (W.A.) Ltd v Equuscorp Pty Ltd [1999] FCA 925 (“Perpetual Trustees”) which the Applicant contends supports the proposition that it is not fair to rely upon a privileged communication which influenced one’s state of mind and withhold the privileged communication.
In Perpetual Trustees, the Judge at first instance had referred to the decision of the Full Court in Telstra Corp Ltd v BT Australasia Pty Ltd (1998) 156 ALR 634:
The majority of the Full Court in Telstra held that where a party pleads that he or she undertook certain action in reliance on a representation, the party thereby opens up, as an element of the cause of action, the issue of his or her state of mind at the time when such action was undertaken. The party therefore puts in issue a matter which could not fairly be assessed without examination of the relevant legal advice. In such cases, by putting in contest the issue of reliance, the party was to be taken to have consented to the use of relevant privileged material or to have waived reliance on the privilege which such material would otherwise attract.[40]
[40] [1999] FCA 925 at para.4.
The Applicant also referred the Court to a further decision of the Supreme Court of Victoria in Liquorland (Australia) Pty Ltd v Anghie [2003] 7 VR 27 (“Liquorland”), where Byrne J stated in paragraph 44 of his judgment:
In my opinion, it would be relevantly unfair for Liquorland to make these implied assertions and, at the same time, to assert privilege with respect to any legal communication which is likely to have had a bearing upon those very matters. In short, Liquorland cannot come to the court seeking a determination that it had a certain view of its legal rights and at the same time withhold from the court and its opponents privileged communications which are likely to have informed its corporate mind as to those matters. Discovery must be made by Liquorland of documents containing such communications.[41]
[41] [2003] 7 VR 27 p.23 at para.44.
His Honour considered the meaning of unfairness in this context and stated as follows at paragraph 32:
“Unfairness” in the sense that this word is used in this area of law, is typically characterised as an inconsistency between the position of the client seeking a finding as to an issue upon which the privilege communication had a bearing and, at the same time, withholding the content of the communication from the opponent and the court. This will usually involve consideration of what is the precise issue and how it is said that the communication impacts upon that issue.[42]
[42] Ibid at p.15.
In this case, the Applicant submits that the inconsistency of relevance to unfairness is between the prior conduct of the party (the Respondent putting in issue its state of mind) and the conduct of the party in objecting to material prima facie protected by legal privilege. After referring to the decision in Perpetual Trustees, Byrne J went on to refer to paragraph 17 of the decision in that matter:
In our view, the facts of the present matter reflect the requisite degree of unfairness. Equus complains that it relied on the specified representations when it executed the security document. It says that the words ‘letter of credit’, appearing in that document, do not faithfully record the common intention of the parties and that the words were used under a mutual mistake of fact. There is evidence, that at the relevant time or times,
ie shortly before executing the security document, Equus sought and obtained legal advice. In our opinion, in those circumstances, it would be relevantly unfair for Equus to be allowed to maintain legal professional privilege. Equus’ state of mind is central, at the very least, to its claim for rectification.[43]
[43] [2003] VSC 73, p.19 at para.36.
The Applicant submitted:
[W]here certain parts of advice have been disclosed through the pleadings - for example, the recommendations made by the board - then you can’t just disclose part of those but not disclose the rest.
. . .
Only parts of the advice received from Aitken Partners has been voluntarily disclosed to the applicant. Paragraph 69(a) of the response makes clear that after it considered the interim report, the respondent board elected to recommend to Anderson that he terminate the applicant’s employment.
. . .
The board considers the interim report . . . then, the respondent board makes an election to make a recommendation, apparently based on legal advice but not specifically stated to be so. And then that recommendation is that Anderson terminate the applicant’s employment[44]
and further submits that Mr Anderson acts on that recommendation.
[44] Transcript of proceedings, 8 July 2014, p.16 at lines 10-12, 14-22.
The Applicant submits “fairness demands that the balance of the communications over which privilege is claimed must be disclosed and the full list of the following documents should be provided”. [45]
[45] Ibid at lines 32-34.
The Applicant also referred the Court to Attorney General (NT) v Maurice (1986) 161 CLR 475, and in particular to the judgment of Gibbs CJ at paragraph 481:
There is always also the objective consideration that when his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder. He may elect to withhold or to disclose, but after a certain point his election must remain final.[46]
[46] (1986) 161 CLR 475 at 481.
The Applicant also referred the court to Esso Australia Resources Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2007] VSCA 224 at paras.16-18, where the Victorian Court of Appeal held:
It is self-evident, in our view, that it would be grossly unfair [to deny to BHP access to Esso’s privileged material by way of discovery to enable it to defend Esso’s claims]. As the High Court made clear in Carnell, the application of the inconsistency test should ‘where necessary [be] informed by considerations of fairness’ . . . Esso’s counterclaim puts in issue whether its expenditure on legal costs fell within the operating agreement and that, in turn, depends on the nature and purpose of the legal work which occasioned the payment. The documents in question are plainly relevant to these issues. By making its claim for reimbursement, Esso made an assertion about the contents of the documents. Esso thereby laid the documents open to scrutiny. It would be plainly inconsistent for it now to maintain a claim for confidentiality in respect of them, even if we accepted the possibility that Esso might choose not to rely on the documents in the proceedings.[47] (Underlining added by Applicant).
[47] Applicant’s Outline of Submissions, dated 8 July 2014 at para.22.
The Applicant’s position is that there has been sufficient disclosure of the legal advice that was given because the recommendations of the Board were a necessary consequence of that advice. Mr Anderson made his decision following the recommendation that were made. The minutes of the Board meeting state:
Following the provision of legal advice in relation to the outcomes of the investigation, the following recommendations were agreed to be referred to the CEO
…
The CEO joined the meeting and following discussion agreed to implement the four recommendations.[48]
[48] Affidavit of Bruce Mildenhall filed 8 July 2014 at Exhibit “BM-02”.
The Respondent’s Contentions
The Respondent contended that the evidence central to the issue of the purpose for which Aitken Partners was retained is set out in the affidavit of Mr Mildenhall. The Respondent submits “the retainer is clear from the Mildenhall affidavit and that the dominant purpose was the receipt of legal advice”.[49] This is not a matter in which legal advice was obtained in anticipation of litigation or with reasonable apprehension of litigation. It is the advice privilege that is claimed. Assuming that the purpose of the communications was legal advice the question which then arises is the operation of s.122(3) of the
Evidence Act, but also the common law concept as found in Mann.
[49] Transcript of proceedings dated 8 July 2014, p.17 at lines 42-43.
The Respondent submits that nowhere is the gist or the substance of the advice received by the Board disclosed in a manner that is “inconsistent with the maintenance of confidentiality of that advice”.[50] Thus, there is no waiver.
[50] Ibid, p.18 at lines 17-18.
The Respondent took the Court to the affidavit of Mr Mildenhall. At paragraph 5 of his affidavit, Mr Mildenhall sets out his concerns about the Board’s exposure to legal liability arising from the email. At paragraph 6 of his affidavit, he sets out that the allegations were of such a degree of inappropriateness that he was concerned that there could be breaches of legislation and that there could have been unlawful conduct. What Mr Mildenhall did, as Chairman of the Board, was to engage or create a retainer between the Board and competent lawyers “to investigate the factual substratum in order to provide appropriate legal advice to the board”.[51]
[51] Ibid, p.19 at lines 28-29.
There is a very specific assertion in Mr Mildenhall’s affidavit, unchallenged in the Court, that Aitken Partners were retained to investigate and provide legal advice. The commissioning of a report from Aitken Partners was not simply one step taken in an established process. On 24 September 2012, Mr Birkett provided a copy of the report to Mr Mildenhall. Before the Board meeting, only
Mr Mildenhall had a copy of the report. Mr Curtain gave legal advice to the Board based on the written report and matters raised by the Board in discussion that day. The Respondent submits that the report is an “aide-memoire to the provision of legal advice in a confined confidential setting . . . Mr Mildenhall does not waive privilege in that advice by simply saying that in his affidavit”.[52]
[52] Transcript of proceedings of 8 July 2014 at lines 33-34, 37-38.
The Respondent submits that the report was discussed with Mr Curtain and he answered matters raised by the Board in the discussion. All of that is covered by legal privilege because it is advice privilege. There is no waiver for a party to say that they have obtained independent legal advice.
The Respondent submits that the fact that the Board made recommendations to Mr Anderson, including that the Applicant be terminated, does not amount to waiver:
[T]here is no link between the fact of the advice obtained and the nature of the recommendations made, because the gist of the advice has not been communicated by the board, who received it, to Mr Anderson, who had a different job to do . . . He listened to the recommendations from the board and he made his decision. He is the decision-maker for the purposes of the Fair Work legislation.[53]
The Board has been very careful not to disclose the nature of the legal advice. That is the “critical consideration once dominant purpose is established, once advice privilege is established”.[54]
[53] Ibid, p.22 at lines 20-25.
[54] Ibid at lines 43-44.
The Respondent submits that it is what is in the mind of the
decision-maker that is relevant and it is the considerations or what is taken into account or not taken into account by the decision-maker. The evidence from Mr Anderson will clearly be that he received the recommendations but he ultimately made the decision himself: “[t]he case rises or falls, from the respondent’s point of view, on him as a decision maker and whether or not he took into account certain complaints and the like, in terms of . . . the adverse action of dismissal”.[55] In this case, the Respondent submits the Board is not the decision-maker. It had a part in the process, but it is Mr Anderson who is the decision-maker.
[55] Ibid, p.25 at lines 34-37.
The Respondent submits that the report is an element of the communication of the advice because, while Mr Mildenhall had it before the Board meeting, none of the other Board members did.
Mr Curtain turned up with a document and presented it as part of giving advice to the Board. The document has been created for a purpose which, in the Respondent’s submission is the dominant purpose of giving legal advice.
The Respondent referred the Court to the provisions of s.122(3) of the Evidence Act which deals with the question of loss of privilege:
(2)Without limiting subsection (2), a client or party is taken to have so acted if:
(a)the client or party knowingly and voluntarily disclosed the substance of the evidence to another person.
The Respondent took the Court to the commentary concerning s.122(3) of the Evidence Act in Odgers’ Uniform Evidence Law which states as follows:
The Federal Court has observed that the test is “a quantitative one, which asks whether there has been sufficient disclosure to warrant loss of the privilege”. It has been held that a mere reference to the existence of legal advice will not amount to disclosure, but that words “[the company] maintains that the correct ratio is 1:1 and has legal advice supporting this position” disclosed the “substance” of the legal advice . . .
. . .
A critical issue is whether privilege is lost where a party states not only that it has received legal advice, but that it has acted on that advice, thereby disclosing the “bottom line” of the advice. A narrow, but understandable, view of the concept was adopted by Einfeld J in the Federal Court, when he concluded that:
[W]hen the subsection is referring to the substance of advice, it is not talking about the, as it were, “bottom line” of the advice, but to what its content is and possibly even the reasoning which led to it.[56]
[56] Stephen Odgers, Uniform Evidence Law, (10th ed, 2012), at pp.677-678.
The Respondent submits that the content and reasoning which lead to the Board’s recommendations has not been disclosed by the Board at any time. The Board disclosed the fact of the advice and the fact of the recommendations but there is “no disclosure of the substance of the underlying rationale and reasoning”.[57]
[57] Transcript of proceedings 8 July 2014, p.29 a.t lines 44-45.
The Respondent submits that the lawyers were engaged as lawyers and were asked to provide legal advice to Mr Mildenhall. They did provide a written report but for the purpose of addressing the Board on legal issues; that is why they were engaged.
The Respondent submits that determining the dominant purpose for which a document is created is a question of fact. This is a two-stage process.
·The first is ascertaining the subjective purpose(s) of the person(s) making or commissioning the communication in question.
That will depend on the evidence led.
·The second step is to determine whether the party claiming the privilege has established that the privileged purpose was the dominant purpose.
In Powercor Australia Ltd v Perry (2011) 33 VR 548, the Judge at first instance was critical of the failure of Powercor for not calling the CEO on the question of why certain expert reports were commissioned. The Court of Appeal held that:
Where, as here, the purpose for the commissioning and provision of the reports was the purpose of the corporation it was necessary to have regard not only to the subjective purpose of the in-house corporate lawyer, but also to the objectives of the CEO of the corporation who gave the lawyer her instructions.[58]
[58] (2011) 33 VR 548
At page 553 of the report the Court goes on to say;
The High Court of Australia has held that it is the purpose of the report and not the motive of the individual who made it that matters.
The importance of establishing the ‘objectives of some person of higher authority’ such as the Chief Executive Officer of Powercor in this case, to identify the purpose or purposes for which the reports were prepared was repeated by Young J in AWB v Cole in a passage that has been cited with approval by our Court of Appeal:
The purpose for which a document is brought into existence is a question of fact that must be determined objectively. Evidence of the intention of the document’s maker, or of the person who authorised or procured it, is not necessarily conclusive. It may be necessary to examine the evidence concerning the purpose of other persons involved in the hierarchy of decision-making or consultation that led to the creation of the document and its subsequent communication.[59]
[59] (2011) 33 VR 548 at p.553.
The Court of Appeal in Carter Holt Harvey Wood Products Australia Pty Ltd v Auspine Ltd [2008] VCSA 59 confirmed that a two-step approach must be adopted in determining dominant purpose: “The first is the ascertainment of the subjective purpose(s) of the person(s) making or commissioning the communication in question”.[60] That will depend upon the evidence that is led about that purpose or those purposes:
If the Court concludes there was more than one purpose, at least one of which was a purpose capable of attracting legal professional privilege, the second step is to determine whether the party claiming the privilege has established that the privileged purpose was the dominant purpose.[61]
[60] [2008] VCSA 59 at para.2.
[61] Ibid.
It is evident from the affidavit of Mr Mildenhall that his purpose is clear. The dominant purpose was provision of the legal advice arising out of that investigation that he commissioned.
The Applicant raises an issue of waiver of the advice. The Respondent says that the advice was not put in issue because there was no gist or substance of it disclosed. The Respondent rejects the submission of the Applicant that the Board was the decision-maker and that if it says anything about why it made the decision it waives the privilege. The Respondent submits that the Board was not the decision-maker.
Mr Anderson was the decision-maker and he sets out in his affidavit the reasons why he made the decision: “The mere revealing of the existence of that report, or the fact that legal advice was received from Mr Curtain . . . does not meet the test in Mann v Carnell”.[62]
[62] Transcript of proceedings of 8July 2014, p.35 at lines 7-10.
Conclusions
The issue in this matter concerns whether certain documents and communications, in particular, a document referred to as the Aitken Partners’ Interim Report, should be disclosed to the Applicant in these proceedings or whether such documents and communications are confidential communications/documents made or prepared for the dominant purpose of the provision of legal advice. If the latter, has the Respondent acted in such a way as to waive the privilege?
The issue is of relevance in the proceedings because the Applicant claims that certain actions of the Respondent were adverse actions taken against him for reasons prohibited by the Act. The onus is on the Respondent in such circumstances to establish that the reasons for the actions were not prohibited reasons. It is apparent that the state of mind of the decision-maker is at issue in such proceedings. The state of mind of the decision-maker is something uniquely within the knowledge of and can only be established by the evidence given by the
decision-maker. The Applicant is entitled to dispute the reasons given by reference to contradictions in the decision-maker’s own evidence or other evidence which challenges the credibility of the evidence given.[63]
[63] Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500, p.517 at para.45.
While the Respondent in this matter has strongly contended that the decision-maker in this case was the CEO of the Respondent,
Mr Anderson, it is apparent that at least one of the reasons given by
Mr Anderson for his decision was that the Board, after receiving a report of an investigation, and receiving legal advice, recommended to him that the Applicant be dismissed. Mr Anderson, after discussion with the Board, agreed to implement that recommendation. Whether or not the Board can be said to be the decision-maker, and I do not accept that the case is as clear cut as contended by the Respondent, the state of mind of Mr Anderson was clearly influenced by his discussion with the Board. The Board, for its part, made its recommendations “[f]ollowing the provision of legal advice in relation to the outcomes of the investigation”[64] (Emphasis added). The outcome of the investigation is therefore clearly relevant to the decision to terminate the Applicant’s employment.
[64] Affidavit of Bruce Allan Mildenhall, filed 8 July 2014 at Exhibit “BM-02”.
Part 3.10, Division 1 of the Evidence Act deals with the issue of client legal privilege. Section 117 of the Evidence Act defines certain terms used in the Division. It defines ‘client’ as
(a)a person or body who engages a lawyer to provide legal services . . .
(b) an employee or agent of a client.[65]
While there are some contradictions in the affidavit evidence as to who engaged Aitken Partners, Mr Anderson or Mr Mildenhall, it is most likely that the ‘client’ for the purposes of this Division was the corporate entity, being the Respondent rather than Mr Anderson or the Board.
[65] Evidence Act 1995 (Cth) at s.117(1).
There are also some contradictions in the material concerning the purpose for which Aitken Partners were engaged. The Response filed by the Respondent states variously that Aitken Partners were engaged “to undertake an independent investigation . . . into the sending of the
16 August 2012 email together with the allegations contained within it”;[66] and[66] Response filed 26 March 2014, p.7 at para.31.
. . . for two reasons being:
(a) the unauthorised sending of the 16 August 2012 [email]; and
(b) the serious allegations contained within it”.[67]
[67] Ibid at para.33.
Further the Response states “after it [the Board] considered the interim report the Respondent Board elected to recommend to Anderson that he terminate the Applicant’s employment”.[68] There is no mention that a purpose of the engagement was to obtain legal advice, nor that the Board received legal advice before it elected to recommend the dismissal of the Applicant.
[68] Ibid, p.12 at para.69(a).
In his statutory declaration of 30 October 2012, Mr Anderson makes no mention of the Board appointing Aitken Partners to provide the Board with legal advice. If one compares paragraph 86 of the statutory declaration with paragraph 88 of his affidavit of 4 July 2014 it is apparent that they are almost identical with the exception that the latter included the words legally qualified when describing the investigator and the additional words and importantly advise the Board on how to address the situation from a legal point of view, depending on the investigation.
Paragraph 70 of the Response also opens up the issue of why the Board recommended to Mr Anderson that the Applicant’s employment be terminated. It details four reasons which include their loss of confidence in him for various reasons including:
(i)Failing to follow process and direction for recruitment and promotion;
(ii)Inappropriate appointment and management of cleaning contracts;
. . .
(iv)Maintaining undisclosed personal relationships with staff members in breach of the Respondent’s policies[69]
all of which were serious allegations raised in the 16 August 2012 email and about which Aitken Partners were engaged to conduct an investigation, and also included his repeated failure to follow directions of the Board and Mr Anderson and his bullying, inappropriate, intimidating and threatening behaviour towards staff and fellow colleagues .
[69] Response filed 26 March 2014 at p.12.
In contrast, Mr Mildenhall’s affidavit makes no mention of the detailed considerations contained in paragraph 70 of the Response and states:
The Board did not elaborate [to Mr Anderson] upon its reasons for recommending to terminate Mr Bartolo other than to say, in effect, that:
(a)there appeared to be serious issues with the respect to the awarding of contracts to third parties by and with respect to the promotion of personnel within Doutta Galla and that
Mr Bartolo was ignoring Doutta Galla’s policies in this regard.
(b)they were aware that Mr Bartollo was defiant of the CEO’s authority that this was not appropriate.[70]
[70] Affidavit of Bruce Allan Mildenhall, filed 8 July 2014, p.3 at para.14.
The Response begs the question of how the Board formed its views on why it should recommend the termination of the Applicant’s employment, if not from the report prepared by Aitken Partners, in relation to the outcome of its investigation.
The Respondent submits that the retainer of Aitken Partners, based on the affidavit of Mr Mildenhall, was to investigate the factual substratum in order to provide legal advice to the Board. It therefore attracts the privilege contained in s.118 of the Evidence Act. In this case the investigator was a lawyer. The work required in conducting the investigation could however hardly be described as work for which being qualified as ‘an Australian lawyer’ was a requirement. There is no privilege if a communication is with a lawyer acting in a non-legal capacity and providing something other than legal advice.[71]
[71] See Uniform Evidence Law, at p.647.
In Waterford v Commonwealth (1987) 163 CLR 54, Deane J opined:
Ordinarily a letter from a professional legal adviser will be written only in his character as such and only for the purpose of furnishing professional legal advice. The cases where such scrutiny [in determining the purpose for which the document was created] will ordinarily be necessary are cases like the present where a letter is or may be written in one or both of two capacities: e.g., a letter written to the secretary of a company by a person who is both a director of the company and the company’s solicitor.[72]
[72] (1987) 163 CLR 54 at p.86.
His Honour was of the view that, if privileged material was contained in one distinct part of a document and non-privileged in another, protection of the confidentiality of the privileged part would not ordinarily require that the part which was not covered by privilege should also be immune from production.
Dawson J, in the same matter, was concerned at the problem of separating privileged and non-privileged communication:
No doubt if the legal advice is accompanied by advice of another kind which can be separated from it, e.g., by blanking out parts in a document, then only the legal advice will be privileged. But if the legal advice contains extraneous matter which cannot be separated from it, the legal advice will not lose its privilege for that reason. There is only one purpose in legal advice and the privilege which it attracts cannot be lost by the application of the principle which applies when a document containing information of a factual nature is brought into existence for more than one purpose.[73]
[73] (1987) 163 CLR 54 at p.103.
Clearly, it was the intention of the Board that the investigation should be confidential. It also appears from the pleadings and the affidavit of Mr Mildenhall that the retaining of Aitken Partners was for more than one purpose. The recommendations made to Mr Anderson by the Board dealt with operational issues as well as those relating to termination of employment. Under the circumstances described by Mr Anderson in his affidavit, it would have been surprising if the Respondent had not conducted some type of investigation. I accept, however, that the evidence of Mr Mildenhall supports the contention that the engagement of Aitken Partners was so that the Board could have “the matter independently assessed and to obtain legal advice regarding the allegations in the email”.[74]
[74] Affidavit of Bruce Allan Mildenhall, filed 8 July 2014 at para.7.
Was the purpose of obtaining legal advice the dominant purpose?
As Young J said in Australian Wheat Board v Cole and Another (No. 5) (2006) 155 FCR 30:
The purpose for which a document is brought into existence is a question of fact that must be determined objectively. Evidence of the intention of the document’s maker, or of the person who authorised or procured it, is not necessarily conclusive.[75]
[75] (2006) 155 FCR 38, pp.44-45 at para.44.
The dominant purpose test is intended to reflect that proposed by Barwick CJ in Grant v Downs (1976) 135 CLR 674:
It seems to me to be preferable to test the status of each document according to the purpose of its production . . . For my part, I prefer the word “dominant” to describe the relevant purpose. Neither “primary” nor “substantial”, in my opinion, satisfies the true basis of the privilege.[76]
[76] (1976) 135 CLR 674 at p.678.
In Sydney Airports Corp Ltd v Singapore Airlines Ltd [2005] NSWCA 47, the Court discussed different formulations of the term dominant purpose, referring to expressions such as “clearly paramount” purpose; and “most influential” purpose. Spigelman CJ, with whom the other members of the Court of Appeal agreed, concluded at paragraph 55 of the judgment that it was open to find the dominant purpose test was not satisfied where the document was “always to be deployed for
non-privileged purposes, which purposes were of significance” even though the privilege purpose “may have been the most important single factor”.[77][77] [2005] NSWCA 47 at para.55.
In the absence of the document itself, it is difficult for the Court to ascertain the dominant purpose for which it was brought into existence. It would appear that it was used by Aitken Partners for the purpose of providing advice to the Board. The purpose for which a document is brought into existence is to be determined at the time at which it is commissioned and not by reference to purposes to which it may later be applied.[78] Nevertheless, the evidence of Mr Mildenhall is uncontested that he was concerned about the Board’s exposure to legal liability arising from the email and that the Board retained Aitken Partners to investigate the allegations in the email and provide legal advice regarding workplace laws and the Board’s governance and compliance responsibilities. I am satisfied that the dominant purpose of the confidential communications between the Board and Aitken Partners was for the purpose of obtaining such legal advice.
Can it be said that the communications lost privilege because the client has acted in a way that is inconsistent with the client objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in s.118 of the Evidence Act?
[78] (2011) 33 VR 548 at pp.555-556.
In Mann, the majority of the High Court held that what brings about a waiver of legal professional privilege is inconsistency between the conduct of the person entitled to the benefit of confidentiality of communication between lawyer and client and maintenance of confidentiality. At paragraph 29 of the majority decision, the Court said:
What brings about the waiver is the inconsistency, which the courts, where necessary informed by consideration of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.[79]
[79] [1999] 201 CLR 1 at para.29
At paragraph 34 of the majority decision, the Court went on to say:
Disclosure by a client of confidential legal advice received by the client, which may be for the purpose of explaining or justifying the client’s actions, or for some other purpose, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect. Depending upon the circumstances of the case, considerations of fairness may be relevant to a determination of whether there is such inconsistency.[80]
[80] Ibid at para.34.
In Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341, the Full Court of the Federal Court formulated the question, in the context of claimed issue waiver, as whether a party has:
[M]ade an assertion as part of his case that puts the contents of the privileged scheduled documents in issue, or necessarily lays them open to scrutiny, with the consequence that an inconsistency arises between the making of the assertion and the maintenance of the privilege.[81]
[81] (2006) 151 FCR 341 at para.68.
In DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 127 FCR 499 the test as to when an implied waiver arises was expressed as being when:
[T]he party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.[82]
[82] (2003) 127 FCR 499 at para.58.
It is clearly not sufficient that a mere reference to legal advice will amount to disclosure. Nor could a mere reference to a decision having been made after consultation with lawyers, amount to a disclosure of the contents of that advice. Where, however, the client has put in issue its state of mind and it appears that legal advice was given at the relevant time, the privilege was lost where it was shown that there is a likelihood that the legal advice contributed to that state of mind.[83]
[83] (2003) 7 VR 27.
In this matter, the evidence is that Aitken Partners produced some type of report for the Respondent’s Board which was provided to the Chairman of the Board prior to the Board meeting on
24 September 2012 (but on the same day) and distributed to the Board members at the Board meeting. Mr Curtain spoke to the Directors regarding the content of the report and gave legal advice to the Board based on the written report and matters raised by the Board in the discussion.
After Mr Curtain left the meeting, Mr Anderson was called in and the Board gave him four recommendations including that the Applicant be terminated. Paragraph 70 of the Response says that the Board recommended that the Applicant’s employment be terminated for a number of reasons which are detailed in the pleadings. The Respondent has raised specifically the Board’s reasons for recommending the termination of the Applicant’s employment.
On the basis of the evidence it appears that the communication in question had some bearing on the Board’s recommendation. It is difficult to see how the Board could have formed those views at the meeting on 24 September 2012 other than on the basis of the report and the advice given by Aitken Partners.
In Liquorland, Byrne J stated:
Where a party has in fact had access to privileged legal advice in forming its state of mind or belief, it will not always be apparent from the pleadings or other material that it has done so. Sometimes it may not be revealed until cross-examination of a witness at the trial. It could, of course, make a crucial difference to the outcome, and it is better that such matters be revealed at an early stage rather than at trial. Revelation at trial will cause surprise, and possibly substantial disruption to the trial in a variety of possible ways. In order to prevent that occurring it behoves a party claiming privilege to disclose or describe documents properly according to the exigencies of the issues raised on the pleadings or through other documents.[84]
[84] (2003) 7 VR 27 at para.28.
The involvement of the Board in the decision to terminate the Applicant’s employment is an issue in these proceedings. The reasons given for the Board’s recommendation to Mr Anderson to terminate the employment are set out in the pleadings. At the very least, this opens to scrutiny the basis for those recommendations which it is likely came from the report of Aitken Partners. That report appears to have dealt with a range of matters some of which may have attracted legal professional privilege and some of which in the normal course may not. I am satisfied that it would be unfair to the Applicant, in the sense used by the Court in Mann, to allow the Respondent to rely on those pleadings without disclosing to the Applicant the factual basis on which the Board formed the reasons which gave rise to the recommendation that the Applicant be dismissed.
I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of Judge Whelan
Associate:
Date: 15 July 2014
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