Lanton Productions Pty Ltd v Edward Rushton Pty Ltd
[1996] FCA 323
•3 May 1996
CATCHWORDS
DISCOVERY - third party discovery - without prejudice privilege - basis for privilege - common interest privilege - extension of existing privilege - legal professional privilege - inconsistent claims in general terms - role of Court - examination of documents required
Federal Court Rules O 15 r 11, O 15A r 10
Evidence Act 1995 s 131
Cutts v Head [1984] Ch 290 Refd
Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 Cons
Field v Commissioner for Railways for NSW (1957) 99 CLR 285 Cons
Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 69 Refd
Alfred Compton Amusement Machines Ltd v Commissioners of Customs and Excise [1971] 2 All ER 843 Refd
Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd (1988) 13 NSWLR 689 Refd
Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 Refd
Thiess Contractors Pty Ltd v Terokell Pty Ltd [1993] 2 Qd R 341 Refd
Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223 Cons
Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd [1992] 2 Lloyd's Rep 540 Refd
Grant v Downs (1976) 135 CLR 674 Refd
Lanton Productions Pty Ltd v Edward Rushton Pty Ltd; Electronic Learning Systems International Pty Ltd; Graeme Charles Pitts, Moorgate Finance Pty Ltd and Frank Edge
No QG 160 of 1992
Kiefel J Brisbane 3 May 1996
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG 160 of 1992
BETWEEN:LANTON PRODUCTIONS PTY LTD
Applicant
AND:EDWARD RUSHTON PTY LTD
First Respondent
AND:ELECTRONIC LEARNING SYSTEMS INTERNATIONAL PTY LTD
Second Respondent
AND:GRAEME CHARLES PITTS
Third Respondent
AND:MOORGATE FINANCE PTY LTD
Fourth Respondents
AND:FRANK EDGE
Fifth Respondent
AND:FRANK EDGE
First Cross-Claimant
AND:MOORGATE FINANCE PTY LTD
Second Respondent to the First Cross-Claim
AND:EDWARD RUSHTON PTY LTD
Second Cross-Claimant
AND:MOORGATE FINANCE PTY LTD
First Respondent to the Second Cross-Claim
AND:FRANK EDGE
Second Respondent to the Second Cross-Claim
AND:EDWARD RUSHTON PTY LTD
Third Cross-Claimant
AND:ELECTRONIC LEANING SYSTEMS INTERNATIONAL PTY LTD
First Respondent to the Third Cross-Claim
AND:GRAEME CHARLES PITTS
Second Respondent to the Third Cross-Claim
AND:ELECTRONIC LEARNING SYSTEMS INTERNATIONAL PTY LTD
Fourth Cross-Claimant
AND:EDWARD RUSHTON PTY LTD
First Respondent to the Fourth Cross-Claim
AND:GRAEME CHARLES PITTS
Fifth Cross-Claimant
AND:EDWARD RUSHTON PTY LTD
First Respondent to the Fifth Cross-Claim
AND:ELECTRONIC LEARNING SYSTEMS INTERNATIONAL PTY LTD
Sixth Cross-Claimant
AND:LANTON PRODUCTIONS PTY LTD
First Respondent to the Sixth Cross-Claim
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 3 May 1996
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT DIRECTS THAT:
The respondents to the motion forthwith produce to the Court the documents listed as 1 to 21 in its List of Documents.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG 160 of 1992
BETWEEN:LANTON PRODUCTIONS PTY LTD
Applicant
AND:EDWARD RUSHTON PTY LTD
First Respondent
AND:ELECTRONIC LEARNING SYSTEMS INTERNATIONAL PTY LTD
Second Respondent
AND:GRAEME CHARLES PITTS
Third Respondent
AND:MOORGATE FINANCE PTY LTD
Fourth Respondents
AND:FRANK EDGE
Fifth Respondent
AND:FRANK EDGE
First Cross-Claimant
AND:MOORGATE FINANCE PTY LTD
Second Respondent to the First Cross-Claim
AND:EDWARD RUSHTON PTY LTD
Second Cross-Claimant
AND:MOORGATE FINANCE PTY LTD
First Respondent to the Second Cross-Claim
AND:FRANK EDGE
Second Respondent to the Second Cross-Claim
AND:EDWARD RUSHTON PTY LTD
Third Cross-Claimant
AND:ELECTRONIC LEANING SYSTEMS INTERNATIONAL PTY LTD
First Respondent to the Third Cross-Claim
AND:GRAEME CHARLES PITTS
Second Respondent to the Third Cross-Claim
AND:ELECTRONIC LEARNING SYSTEMS INTERNATIONAL PTY LTD
Fourth Cross-Claimant
AND:EDWARD RUSHTON PTY LTD
First Respondent to the Fourth Cross-Claim
AND:GRAEME CHARLES PITTS
Fifth Cross-Claimant
AND:EDWARD RUSHTON PTY LTD
First Respondent to the Fifth Cross-Claim
AND:ELECTRONIC LEARNING SYSTEMS INTERNATIONAL PTY LTD
Sixth Cross-Claimant
AND:LANTON PRODUCTIONS PTY LTD
First Respondent to the Sixth Cross-Claim
CORAM:Kiefel J.
DATE:3 May 1996
PLACE:Brisbane
REASONS FOR JUDGMENT
This matter involves claims for privilege from production of documents by Australian Guarantee Corporation Limited and AGC (Advances) Limited to the first respondent, Edward Rushton Pty Ltd ("Rushtons"). I shall refer to both of the former companies as "AGC". AGC is not a party to the proceedings but has been the subject of an order to list documents and to state the claims to privilege. This application for production is brought under O 15 r 11, which applies also to non-party discovery (see O 15A r 10).
On 1 November 1989 the applicant ("Lanton") entered into a number of contracts with the third respondent Pitts to purchase land and premises, a business and some intellectual property rights and into an agreement with the second respondent "Electronic Learning Systems" to produce video tapes, for a total consideration of $2.35M. In May 1989 Rushtons produced a valuation of plant and equipment under instructions from Electronic Learning Systems and Pitts, but which valuation was said to be made for AGC. I take it AGC was involved in the advance of monies to the applicant to facilitate the purchase. AGC holds a charge over all of the assets and undertaking of the Lanton pursuant to a mortgage debenture dated 7 November 1989.
The documents in question number 21 in all and the claims for privilege fall under three heads: "without prejudice" privilege; "common interest" privilege and "legal professional privilege".
"Without Prejudice" Privilege
This is said to affect all of the documents. The documents listed are principally letters passing between Mr Birt or a company with which he is associated, QH & M Birt Pty Ltd, and Westpac Banking Corporation, with whom AGC is associated, and file notes of AGC. Mr Birt is also the principal executive officer of Lanton. The documents are dated between August 1993 and August 1994, that is to say during the currency of these proceedings. The letters are said to have come into existence "in the course of without prejudice discussions", I take it as between Lanton and AGC, and the file notes are said to record without prejudice communications.
Two questions arise. Firstly, assuming that the documents do concern negotiations between those parties in an endeavour to resolve some dispute between them, whether they are protected from production to a third party. The second question concerns whether or not the claim made concerning the documents brings them within the head of privilege. As to the first question, one might observe that if the privilege was confined to production in litigation as between the parties to the negotiations it would serve little purpose and that the true operation of it with respect to the documents, copies of which the parties already have, is to prevent them being tendered one against the other. Section 131 of the Evidence Act 1995 now addresses this. A distinction must however be drawn for the purposes of this application between documents which may not be admissible in evidence and documents which nevertheless may be required to be produced. As to the second, the point made by Rushtons is that it is not suggested by AGC that the documents contained any admissions.
Privilege from production of records of negotiations has been said to rest partly upon a basis of some implied agreement between the parties to it, that neither would use what was said as against the other (see for example Cutts v Head[1984] Ch 290, 313-4) and partly on the ground of public policy (Rush & Tompkins Ltd v Greater London Council[1989] AC 1280, 1299). If it were the former, AGC would be on stronger ground in arguing that a third party was not caught by such an agreement. I agree however with the author S McNicol Law of Privilege" (1992) at 439 that it does not provide a compelling justification for the privilege. The better view is that it is derived from public policy considerations (although I note in this respect that that author argues that it may
arise from other rights). The public policy justification rests upon the desirability that parties should be encouraged, so far as possible, to settle their dispute without resort to litigation and should not be discouraged by the knowledge that what they have said in the course of them may be used. To that end the Court will prevent use of the statements: see Rush & Tompkins(1299), and also Field v Commissioner for Railways for NSW(1957) 99 CLR 285, 291-2. One would think that the policy is likely to be pursued with even more vigour today. If that be the basis for the policy, there seems no reason to limit it as operating only as between the parties to the dispute. That was the view of the House of Lords in Rush & Tompkins(1301) where Lord Griffiths said:"Suppose the main contractor in an attempt to settle a dispute with one subcontractor made certain admissions it is clear law that those admissions cannot be sued against him if there is no settlement. The reason they are not to be used is because it would discourage settlement if he believed that the admissions might be held against him. But it would surely be equally discouraging if the main contractor knew that if he achieved a settlement those admissions could then be used against him by any other subcontractor with whom he might also be in dispute. The main contractor might well be prepared to make certain concessions to settle some modest claim which he would never make in the face of another far larger claim. It seems to me that if those admissions made to achieve settlement of a piece of minor litigation could be held against him in a subsequent litigation and run counter to the whole underlying purpose of the "without prejudice" rule. I would therefore hold that as a general rule the "without prejudice" rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement. It of course goes without saying that admissions made to reach settlement with a different party within the same litigation are also inadmissible whether or not settlement was reached with that party."
That does not however conclude the matter. The first respondent submitted that the claim did not assert, as it says it must, that the documents themselves contained admissions. In Field (293) the High Court considered whether admissions as to the circumstances of an accident were sufficiently incidental to negotiations that they should be protected by the privilege. It would seem to follow from this and the statement as to the policy underlying the privilege that, so long as the document had a "proper connection with any purpose connected with the settlement of the action" it would be exempt from production. However that is not to condition the privilege or narrow its operation to require something approaching an admission. Some cases have required something firm and by way of concession to have been stated before the privilege is attracted. These cases and those which argue to the contrary, that such an approach is too restrictive, were considered by Beaumont J in Trade Practices Commission v Arnotts Ltd(1989) 88 ALR 69, 70-73. The narrower approach does not seem to me to be consonant with the policy underlying the privilege.
That is not to say there are no difficulties arising from the general terms in which the plea is stated and the other claims to privilege later made and which may be contrasted with this ground. It is asserted that the documents, generally described, came into existence in the course of without prejudice communications or that they record those communications. The first description perhaps leaves open the possibility that they may not have formed part of the actual negotiations but dealt with other matters, but I take the claims to mean that they formed part of the communications themselves. However, absent some explanation as to the facts relating to the dispute in question, I am unable to conclude that the documents had anything to do with negotiations. Here AGC has not been joined by Lanton to these proceedings and it is nowhere suggested that it was ever contemplated. There are possibilities of course. AGC played a part in the purchase the
subject of the litigation even if only as financier. However it is not readily apparent to me that that was a cause for complaint or involved actionable conduct. Some dispute could have arisen out of the relationship between AGC and Lanton of lender and borrower. The further affidavit dealing with the "common interest" ground of privilege states that Lanton is indebted to AGC and that the latter has forborne from claiming those monies and instead is looking for payment from the successful prosecution of this action. This does not establish a prior dispute. The matter is then only capable of resolution by an examination of the documents. In this respect, whilst I consider the Court should not be unreasonably burdened by the need to do so where sufficient explanation could otherwise have been given (see the discussion by B Cairns, The Law of Discovery ( 1984) at 38-9 and Alfred Compton Amusement Machines Ltd v Commissioners of Customs and Excise[1971] 2 All ER 843, 848) it may be, as the author Cairns notes, that this is a case where the provision of further information might identify the very matter that the claim for privilege seeks to protect.
Another aspect of this issue, which may be more relevant to the question of costs, is that Rushtons, the applicant for production, may not be shown to have had any real basis for challenge to the claims made. I should add, at this point, that if upon examination it appears that the documents record negotiations between AGC and Lanton relating to disputes arising under the terms of the charge, I would not be inclined to make an order for production since the documents would not meet even the extended definition, that they "relate" to any issue in the proceedings. The other difficulty which, as I have said, here arises is brought about by the following claims for privilege made. A large
number of the documents are also said to have been produced for the sole purpose of Birt informing AGC of matters arising in these proceedings and of advices received with respect to them, the "common interest" ground. In each case, however it is also said to form part of negotiations between them. What is not apparent is how a document can be for the "sole purpose" of one, but also relevant to another. This is compounded in the case of file notes, which are said to fall under either or both of these two grounds and also are said to have been made for the "sole purpose" of submission to legal advisors for advice or for use in contemplated legal proceedings.
Common Interest Privilege
Two main points were made in the written submissions for Rushtons and which, it is said, are fatal to the claim. I shall attempt also to deal with other matters raised in the course of argument.
Firstly, the existence of the dispute upon which the claim relating to the without prejudice communications is based is, it is submitted, wholly inconsistent with the notion of there being a common interest held by the same parties. I have referred to the problem of combining this ground with others because this is said to be the only purpose in the communication on record. I do not however infer that the fact that the parties may have a dispute, for example as to monies owing would render it impossible that they might also share a common interest in the outcome of the litigation as is here claimed. It may well reinforce the interest. Here AGC is a security holder and its charge extends to all of the assets of Lanton including any chose in action. It has a real interest in the application
being pursued in the best possible way to ensure success and is in a position similar to that discussed by Giles J in Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd(1988) 13 NSWLR 689, 695. It has been held that an interest in the outcome of litigation held, for example, by underwriters (Bulk Materials) and insurers (Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 and Thiess Contractors Pty Ltd v Terokell Pty Ltd [1993] 2 Qd R 341) may come within the principles of mutual interest referred to in Buttes Gas & Oil Co v Hammer (No 3)[1981] QB 223, which stands as the modern exposition of this ground of confidentiality. Whilst the facts in Buttes case have later been relied upon as narrowing its field of operation, for example, because there the same solicitor acted for both parties, what was held required was that there be a true "common interest" in the same litigation. If that were so, each could avail the other of the privilege in aid of litigation. The perceived need that was being addressed was to the extension of the privilege otherwise available to one party, such as legal professional privilege, to another having a mutual interest in the outcome of the litigation for otherwise the privilege would be eroded or lost. The result of a common interest, if it were to arise here, would be that either AGC or Lanton could avail themselves of the legal professional privilege enjoyed by the other (see Buttes case (243) and Bulk Material (695). The privilege dependent upon negotiations does not require resort to this principle.
However, it needs be borne in mind that Buttes' case was concerned to extend an existing privilege, not create a new category of confidentiality having as its basis only that a document be a communication passing between two parties having an interest in the litigation. This was the effect of AGC's submission. I add, however, that if comments by them as to the litigation were all that were contained in the document production for inspection might be refused on other bases. In Buttes the document (or copies) which were made available to the plaintiffs were those of the Ruler of Sharjah who was entitled to claim legal professional privilege with respect to them. Similarly, in Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd ["the Good Luck"] [1992] 2 Lloyd's Rep 540 the owners of the Good Luck passed on to the plaintiffs in the proceedings their lawyer's advice concerning their (the owners') claim against the defendants. In Bulk Materials, the copies of the loss assessor's report provided to the plaintiff were held to be privileged in the hands of the underwriters, for whom it was written and then to be privileged in the hands of the plaintiff. However here it is not shown that the documents are the subject of any privilege of Lanton's.
Legal Professional Privilege
This ground is confined to the file notes which, absent further description, I take to have been prepared by AGC. It does not add extra to the communications between Birt and Westpac (documents 1,2,3,6,14,16,17 and 19).
With respect to the file notes it was submitted for Rushtons that a purpose must have been to record the meeting and therefore it could not pass the "sole purpose" test referred to in Grant v Downs(1976) 135 CLR 674. A purpose in making such a note may however been for referral to legal advisors. A greater difficulty is however created by
the other uses which the other claims for privilege say the document was put to or was the reason for its preparation.
Preliminary Conclusion
There is uncertainty as to the claim based upon negotiations between Lanton and AGC which arises by the number of objections in differing grounds of privilege taken, and which may be resolved only upon examination of the documents. If the privilege was held to be made out this would cover all documents. Further, if a perusal of them showed that they concerned dealings only as between Lanton and AGC connected with monies owing to AGC I would not in any event be inclined to make an order for production. The only other potential ground, in the way in which the claims have been made, is for legal professional privilege but this is limited to the file notes and does not extend to the written communications between AGC and Lanton. Further a valid claim to it seems unlikely given the other purposes for which it is said these documents were created.
I am mindful of the submission made on behalf of AGC that, were I to conclude that some of the claims were inadequately made, they ought to be given an opportunity to swear a better affidavit. One cannot state a hard and fast rule, and the Court's view in a particular case is likely to be influenced by the nature of the document in question. However I would not regard the discovery process as properly undertaken by the making of patently inconsistent claims and in very general terms. If this be seen to be the approach taken I do not think it is then for the Court, when it examines the documents, to pronounce that there is some other valid ground for privilege. I would be inclined to
view the circumstances in which leave to file a further amended list ought be granted as limited and generally to arise where the claims already made are explicable.
I direct that the respondents to the motion forthwith produce to the Court the documents listed as 1 to 21 in its List of Documents.
I certify that this and the preceding 11 pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date:3 May 1996
Counsel for the First Respondent: Mr L Bowden
Solicitors for the First Respondent: Bowdens
Counsel for Australian Guarantee
Corporation Limited and AGC (Advances)
Limited:Mr A Ryan
Solicitors for the respondents: Clayton Utz
Date of Hearing: 29 February 1996
Place of Hearing: Brisbane
Date of Judgment: 3 May 1996
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