Crestel Pty Ltd v Australian National University

[1995] FCA 511

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
AUSTRALIAN CAPITAL TERRITORY      )       VG 382 of 1993
  )
DISTRICT REGISTRY                 )
  )

GENERAL DIVISION                  )

BETWEEN:CRESTEL PTY LTD

(ACN 053 180 895)

Applicant

AND:AUSTRALIAN NATIONAL UNIVERSITY

First respondent

ANUTECH PTY LTD

(ACN 008 548 650)

Second respondent

SUSAN ELIZABETH KESSON and

KRISTINA RINGWOOD (who are sued in their capacities as Executrices of the Will of ALFRED EDWARD RINGWOOD (Deceased)

Third respondent

AG 27 of 1995

BETWEEN:ANUTECH PTY LTD

(ACN 008 548 650)

First applicant

AND:HAROLD KANOST

First respondent

DARYL McCLURE

Second respondent

KEN McCLURE

Third respondent

CRESTEL PTY LTD

Fourth respondent

CORAM:    RYAN J

PLACE:    CANBERRA

DATE:     1 JUNE 1995

REASONS FOR JUDGMENT

RYAN J:   By a motion on notice dated 17 March 1995, the applicant ("Crestel"), seeks declarations that the second and third respondents have waived any privilege against the production of certain documents for which privilege has been claimed in supplementary lists of documents filed on 27 February 1995.  As well, certain consequential orders are sought to which it is unnecessary to refer further. 

By paragraph 7 of its amended statement of claim, Crestel alleges:

"During the course of the negotiations and in order to induce Crestel to enter into an exclusive licence agreement with ANU, ANU in trade or commerce made representations to Crestel that:

(a)the intellectual property was "stand alone" technology which to its knowledge was not covered by any patent in favour of another person; ..."

Paragraph 9 alleges:

"ANU represented and warranted to Crestel by the terms of the ANU licence agreement that it had no knowledge of any valid patent belonging to another person relating to the intellectual property."

The falsity of the relevant representation is alleged in

paragraph 12 in these terms:

"Crestel has since discovered that each of the representations were false, that each of the terms and conditions of the ANU licence agreement were breached in that:

(a)to the knowledge of ANU, the intellectual property was not "stand alone" technology which was not covered by any patent in favour of another person; ..."

It is unnecessary to read further from paragraph 12, but the
particulars sub-joined to that paragraph assert as follows:

"(i) At the time of making the representations referred to in paragraph 7 (a) hereof, Ringwood knew that:

A.the General Electric Company (USA) was patentee of US patent number 4 151 686 ("the GE patent");

B.the GE patent arguably prevented total or partial exploitation of the intellectual property by Crestel pursuant to the ANU licence agreement;

C.he had previously had discussions with the US Examiner of Patents as to the scope of the GE patent in relation to the intellectual property;

D.he had previously sought advice from Griffith Hack & Co., Patent Attorneys, on behalf of ANU and/or Anutech as to the scope of the GE patent in relation to the intellectual property."

The answering paragraph of the respondent's defence is

paragraph 7, which reads:

"The respondents deny the allegations in paragraph 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 and 24 of the amended statement of claim."

The second respondent ("Anutech") on 31 August 1994 filed a list of documents enumerating in Part 1 of Schedule 1 a large number of documents including correspondence between Anutech and its local and United States patent attorneys. In ignorance of the provisions of s 200 of the Patents Act 1990 (Cth), solicitors for Crestel were allowed to inspect all of those documents. Subsequently, on 27 February 1995, Anutech filed a supplementary list of documents. In that supplementary list, Anutech still discovered in Part 1 of Schedule 1 certain items of correspondence which were enclosed in what were called patent attorney files, and other correspondence of the same type. Some documents in those files were identified and included in Part 2 of Schedule 1, thus being made subject to a claim of privilege.

The process by which that supplementary list of documents was compiled has been described as follows, in an affidavit sworn on 26 May 1995 by Mr O'Donovan of the respondents' solicitors, Mallesons Stephen Jaques. 

"13.It became clear after the respondent's verified lists were filed, that there were considerably more documents that were discoverable than were disclosed in the original verified lists.

1. Between October 1994 and January 1995, I compiled three supplementary lists of documents for the respondents.  In these supplementary lists of documents privilege was claimed over: 

- documents that were confidential correspondence between the respondents and their patent attorney,

- documents prepared for the purpose of being used in confidential communications between the respondents and their patent attorney but not so used and

- confidential communications between the respondents' patent attorney and its US agents.

The bulk of the privileged documents were drawn from the files of Griffith Hack & Co, the patent attorney retained by the respondents.  The documents relate to numerous issues regarding a variety of patent applications over several years. 

1. These supplementary lists, originally unverified, were made available along with all non-privileged material for inspection by the applicant's representatives at Mallesons Stephen Jaques' Melbourne office. 

1. The supplementary lists were subsequently verified, filed and served and the claim of privilege was maintained. 

1. No claim of privilege is sought to be maintained over any document a copy of which has been inspected by the applicant." 

The same process had earlier been described in a letter of 3 March 1995 from Mr O'Donovan to Crestel's solicitors which included these paragraphs:

"Supplementary lists of documents have been filed by all three respondents in this matter and served upon your Canberra agent.  The last of the respondents' documents are available for inspection at Mallesons' Melbourne office..."

Privilege:

"You will note that the claims of privilege in relation to certain documents have been maintained. The claim of privilege is based upon a combination of the general law of legal professional privilege and section 200 of the Patents Act 1990."

There was then reference to the Patents Act and to a judgment of this court in Trades Practices Commission v Sterling (1979) 36 FLR 244, after which it was said:

"The documents over which legal professional privilege is claimed fall into the above classes.  We have also considered the proposition presented in your letter of 10 February 1995 that because privilege was waived in relation to some correspondence with patent attorneys, that a claim for privilege cannot be made in relation to other communications with patent attorneys.  With respect, it is clear that waiver of privilege in relation to one document does not amount to waiver of privilege in relation to all other documents in the same class."

By its motion, Crestel seeks, in effect to compel disclosure to it of the whole of the correspondence between Anutech and its local and United States patent attorneys.  It has been asserted that Anutech should be regarded as having impliedly waived privilege in respect of that whole collection of documents because it would be unfair if disclosure were not now required of the whole collection.  Counsel on both sides agree that the relevant principles have been stated by the High Court in Attorney General for the Northern Territory v Maurice (1986) 161 CLR 475, where Gibbs CJ said at page 481:

"The decisions in which this question has been considered seem to me to be particular applications of the rule that in a case where there is no intentional waiver, the question of whether a waiver should be implied depends on whether it would be unfair or misleading to allow a party to refer to or use material and yet assert that that material, or material associated with it, is privileged from production.  Thus it has been held that the privilege in respect of a document is not waived by the mere reference to that document in pleadings  (Roberts v Oppenheim (1884) 26 ChD 724; Buttes Oil Company v Hammer (No 3) [1981] QB 223 at 252) or in an affidavit (Lyle v Kennedy (1884) 27 ChD 1 at 24; Infields, Ltd v P Rosen & Son [1938] 3 All ER 591 at 597; (1983) 3 AER 591 at 597, Tate & Lyle "International Co Ltd v Government Trading Corporation", The Times, 24 October 1984), although the position will be different if the document is reproduced in full in the pleading or affidavit: Buttes Oil Company v Hammer [1981] (No 3) QB 223 at 252.  These cases may be explained by saying that it is not unfair or misleading to refer to a document in a pleading or affidavit which is not put into evidence but if the document is set out in full the privilege is waived.  A
fortiori, of course, privilege in respect of materials used in drawing a pleading or an affidavit and not referred to therein, would not lose their privilege because they have been  used in that way.

It is not difficult to see that where a document deals with a single subject matter, it would be unfair to allow a party to use part of a document and claim privilege as to the remainder.  So it has been held that where cross-examining counsel asked a witness whether he had said certain things in a written statement, examining counsel was entitled to require the whole of the statement to be put in evidence:  Burnell v British Transport Commission [1956] 1 QB 187. Similarly, where a party disclosed a document which contained part only of a memorandum which dealt with a single subject matter, and then read the document to the judge in the course of opening the case, it was held that privilege was waived as to the whole memorandum: Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 at pages 538 to 539. In that case, Templeman LJ said:

"the rule that privilege relating to a document which deals with one subject matter cannot be waived as to part and asserted as to the remainder is based on the possibility that any use of part of a document may be unfair or misleading, that the party who possesses the document is clearly not the person who can decide whether a partial disclosure is misleading or not, nor can the judge decide without hearing argument, nor can he hear argument unless the document is disclosed as a whole to the other side.  Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased".

The same test must be applied in deciding whether the use in legal proceedings of one document impliedly waives privilege in associated material.  In Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corporation [No 2] [1981] Com LR 138, 139, Mustill J. dealt with this question and suggested the following test:

..."where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question.  To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood."

In General Accident Corporation v Tanter [1984] 1 WLR 100 at 113, Hobhouse J. considered that in this passage Mustill J. used the words "deploying in court" in a strict sense, as referring to what is in evidence. After carefully reviewing the authorities, Hobhouse J. held that it was only where privileged material was adduced in evidence by the party to whom privilege attached that the waiver extended to related material. He said at 114 that "the underlying principle is one of fairness in the conduct of the trial and does not go further than that."

In the United States it appears that so strict a view has not been taken.  In United States v Cote (1972) 456 F.(2d) 18 at p 24 it was held that a taxpayer by filing income tax returns waived privilege in the working papers used in preparing the returns.  In the United States, also, the principle that there is a waiver if fairness requires it appears to be well accepted ..."

His Honour then cited the authorities for that proposition and 
concluded:

"If Hobhouse J. was correct in saying that there is no waiver of associated material until that material is adduced in evidence it follows in the present case that privilege in the source material has not been waived.  In my opinion however the rule is not so inflexible;  the question is whether the disclosure or use of material that has been made renders it unfair to uphold the privilege in the associated material, and although the question whether the material that has been disclosed has been used in evidence is relevant, it is not decisive."

The learned Chief Justice then turned to the claim book which was at issue in Maurice's case and concluded at page 483:

"The 1982 claim book was a document of a kind that would not be admissible in ordinary proceedings, but if it had been admissible in the proceedings before the Aboriginal Land Commissioner, and if it had in fact been admitted as evidence, the appellant would have been entitled to test its accuracy and weight, and since that could hardly be done unless it was known on what sources it was based, considerations of fairness might have required those sources to have been produced.  However it was not unfair or misleading for the claimants to make some reference to the book during the opening of the case before Kearney J. and to put some questions in the course of the examination of two of the witnesses, without making the source materials available."

Counsel for Crestel has pointed to internal indications in correspondence which it has been allowed to inspect which point as a matter of necessary inference to the existence of other documents presumably covered by the claim of privilege recently asserted by Anutech.  However, I do not regard that partial discovery as using part of a document or deploying or disclosing it in court within the principle enunciated by Gibbs CJ, which would render unfair the non-production of the rest of the material in the same category.

All that has happened so far is that Crestel has been allowed to see some material to which, if the privilege had been observed strictly, it would not have been entitled.  No unfairness has thereby been caused to it.  Of course, the position may change if, as I indicated in the course of argument, Anutech were to amend paragraph 7 of its defence.  As presently advised, I consider that defence to be evasive and not in compliance with O 11 rr 13 and 18 of the Rules of this court.  If any amendment were to include an assertion that Anutech, through Professor Ringwood or otherwise, had been advised that the General Electric patent registered in the United States of America had no impact on Anutech's capacity to license the use of the subject invention, that would amount to a use in court of material embodying that advice, and would release from privilege the whole of the material relevant to that question.

In that sense it would attract the operation of the principle applied by Smith J in Hongkong Bank of Australia Limited v Murphy (1993) 2 VR 419, where his Honour said at 438:

"On the present pleadings, the communications between Hongkong Bank and its lawyers are and will be an issue in the case.  It is true that there is an element of potential uncertainty in that Hongkong Bank could change its pleadings before trial, or could abandon issues which relate to these matters.  But the reality is that the issues of which the alleged privileged communications form a part, are central to Hongkong Bank's claim and defence to counterclaim.  I am satisfied that it will maintain the allegations to which the documents relate and will have to do so if it wishes to proceed with its attempt to enforce the rights it claims.  It plainly intends to proceed on that basis.  The question then to be answered is whether it would be unfair to allow the matter to proceed to trial while denying discovery of such documents."

See also the unreported judgment of Heerey J in Data Access Corporation v Powerflex Services Pty Limited (unreported, Heerey J, 11 October 1994). 

For these reasons I consider that Crestel's motion should be refused.  However, because the argument and clarification of the issues which have been raised by that motion may be capable of useful application if the respondents amend their defence in a certain way, I consider that I should not now award the costs of the motion against Crestel.  The costs of all parties of the motion will be reserved.

I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment of his Honour Justice Ryan

Associate:

Date:

Counsel for the applicants       

in VG 382/93 (and respondents in

AG 27/95):Mr I Sutherland QC

Solicitor for the applicants
in VG 382/93 (and respondents in

AG 27/95):Clayton Utz, as agents for Purves Clark Richards

Counsel for the respondents
in VG 382/93 (and applicants

in AG 27/95:  Mr A Robertson

Solicitors for the respondents
in VG 382/93 (applicants

in AG 27/95:  Mallesons Stephen Jaques

Hearing date:  1 June 1995