Matthews v SPI Electricity Pty Ltd
[2013] VSC 422
•15 August 2013
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
SCI 2009 04788
BETWEEN:
| CAROL ANN MATTHEWS | Plaintiff |
| v | |
| SPI ELECTRICITY PTY LTD (ACN 064 651 118) & ORS (according to the schedule of parties) | Defendants |
AND BETWEEN:
| SPI ELECTRICITY PTY LTD (ACN 064 651 118) | Plaintiff by Counterclaim |
| v | |
| ACN 060 674 580 & ORS (according to the schedule of parties) | Defendants by Counterclaim |
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JUDGE: | Derham AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 August 2013 | |
DATE OF JUDGMENT: | 15 August 2013 | |
CASE MAY BE CITED AS: | Matthews v SPI Electricity Pty Ltd & Ors (No 6) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 422 | |
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PRACTICE AND PROCEDURE – Call for production of documents in the course of cross‑examination at trial – Whether documents within the call – Whether documents produced the subject of client legal privilege – Dominant purpose test – Whether leave to cross‑examine deponent should be granted – Leave granted on limited basis – rule 40.04 of the Supreme Court (General Civil Procedure) Rules 2005 - Evidence Act 2008 (Vic) ss 45, 118, 119 and 131A.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr AJ Keogh SC with Ms M Szydzik | Maurice Blackburn Lawyers |
| For the First Defendant | Mr DJ Farrands | Herbert Smith Freehills |
HIS HONOUR:
Introduction
The trial of this proceeding is presently before J Forrest J and has been running now since March of this year.
By order made on 2 August 2013 J Forrest J referred to me for determination the following two questions:
(a) Whether the following documents:
(i) numbered 460 in the 29 July 2011 affidavit of Susan Elizabeth Taylor (“the Baillee email”)[1]; and
[1]SPN.730.002.0071.
(ii) numbered 2011-264 in the 30 March 2012 list of documents (“the Clark/Walley reports”),
are required to be produced by SPI [the first defendant] pursuant to the application of the plaintiff of 1 August 2013;
(b) if yes to any part of (a) then which (if any) of those documents are the subject of legal profession privilege.
The matter came before me on Monday 5 August 2013, at which time directions were made for the filing and service of affidavits to bring the matter before me on Friday, 9 August 2013. It also emerged that the document referred to in paragraph 2(a)(i) above was misdescribed. It is common ground that it should have been specified as document numbered 452.
Summary of Conclusions
For the reasons which follow, I have concluded that:
(a) the Baillie email and the Clark/Walley reports are required to be produced pursuant to the plaintiff’s application of 1 August 2013 (“the Call”); and
(b) all of those documents are subject to client legal privilege.
Background
I have now delivered five judgments in matters referred to me by J Forrest J in this proceeding,[2] and I will not repeat the background that explains the claims and defences and the subject matter of the proceedings, save to say that it is a group proceeding brought by the plaintiff under Part 4A of the Supreme Court Act1986 (Vic) on behalf of persons who have suffered loss and damage in the Kilmore East-Kinglake bushfire, the largest and most destructive of the Black Saturday bushfires that ravaged Victoria on 7 February 2009. The bushfire destroyed a number of towns, including Kinglake, destroying 1,242 properties and killing 119 people.
[2]Matthews v SPI Electricity Pty Ltd & Ors [2013] VSC 33; Matthews v SPI Electricity Pty Ltd & anor (No 2) [2013] VSC 86; Matthews v SPI Electricity Pty Ltd & anor (No 3) [2013] VSC 116; Matthews v SPI Electricity Pty Ltd & anor (No 4) [2013] VSC 237; and Matthews v SPI Electricity Pty Ltd & anor (No 5) [2013] VSC 285.
The immediate background to the referral by J Forrest J is that on 31 July 2013 Mr Tobin S.C., senior counsel for the plaintiff, was cross-examining Mr McCrohan, an employee of SPI, about reports prepared by SPI as a result of the investigation of faults as a part of the usual practise of SPI.[3] In the course of that cross-examination, Mr Tobin put questions and received answers from Mr McCrohan, as follows:[4]
The usual practise of SPI when there is an event that causes a major power outage and damage is to have that event investigated and reported for the purposes of understanding it and trying to restrict its recurrence. Is that correct?---That’s correct.
You understood that that occurred in early 2009 in relation to this event?‑‑‑Yes. I believe the asset lines group undertook that report.
They created the report of that nature?---I believe that’s the case. I haven’t seen it though.
Your Honour, could I expand my call to include any report beyond the IMS report[5] created for the purposes of investigation of this fire [on] or this event as part of the usual business of the defendant, including for the purposes of ensuring it doesn’t occur again? [Emphasis added]
[3]Transcript at p 5983–8.
[4]Transcript at p 5986–7.
[5]A report the subject of an earlier call at Transcript p 5985.
Later in the debate on this matter, Forrest J said:
What I am minded to do is this, though I think the call is specific enough to require SPI to provide a list of documents that respond to the call and indicate which – and it may be all – are the subject of the claim for privilege. It seems to me that’s how we should progress it. This should include the date the document was compiled and a proper description. … [6]
[6]Transcript at p 5983–8.
The next day (1 August 2013) there was further debate when Mr Beach QC, senior counsel for SPI, responded to the call by saying that no documents were produced. In the course of debate upon the subject Mr Beach identified that one document, item 452 in the affidavit of Susan Elizabeth Taylor sworn 29 July 2011 “is the only conceivable document in my documents that could possibly fall within the description” of the call.[7] Mr Beach indicated that he doubted that the particular document identified fell within the call and that, in any event, it was the subject of a claim for client legal privilege. Mr Tobin indicated that the claim for privilege was challenged and the call was persisted with in relation to that document.
[7]1 August 2013, transcript p 6015–6.
Then the debate (on 1 August 2013) turned to other evidence given by Mr McCrohan as to the existence of hundreds of reports.[8] This led to Forrest J requiring SPI to comply with the direction that he made on 31 July 2013 but with removal of the definite article of “the purpose” so as it encompassed documents prepared for “a purpose”, being a report created for a purpose of investigating the fire as a part of the usual business of SPI.[9]
[8]31 July 2013, transcript p 5984.
[9]1 August 2013, transcript p 6031.
On 2 August 2013, in response to the call as rephrased by his Honour, SPI referred to documents that may possibly fit the call, being documents 214-264 in the list of documents of SPI dated 30 March 2012, and subsequently verified by affidavit of Susan Elizabeth Taylor sworn 8 June 2012[10] (later expanded to documents 211-264). Once again, no document was actually produced pursuant to the call. Reference was made to these particular documents as arguably within the call and, in any event, the subject of a claim for client legal privilege. This then led to the Order of 2 August 2013.
[10]2 August 2013, transcript p 6117–8.
The context of the call
As is apparent from the extract from the transcript above, the call in question was made during Mr McCrohan’s evidence for SPI. Mr McCrohan is the Electricity Networks Asset Maintenance Manager of SP AusNet.[11] Mr McCrohan agreed in cross-examination that:
(a) it was the usual procedure (within SP AusNet) to investigate a major fault affecting the system;
(b) the investigation as part of the normal practice of the business was because of the need to report on that fault to a number of others, including Energy Safe Victoria (“ESV”), perhaps shareholders of SP AusNet, and other departments;
(c) a section within SP AusNet would be directed to investigate the fault as part of the normal practice of SP AusNet.[12]
[11]Although the party to the proceeding is SPI Electricity Pty Ltd, SP AusNet is the name of the listed ‘stapled’ entities of which SPI is a part, and at the Trial it is common to refer to SPI as SP AusNet.
[12]31 July 2013, Transcript p 5983.
Mr McCrohan gave evidence that he believed the asset lines group within SP AusNet investigated and reported on the event on 7 February 2009 that caused a major power outage and damage, for the purposes of understanding the event and trying to restrict its recurrence.[13]
[13]31 July 2013, Transcript p 5986–7.
The affidavit evidence
In accordance with the directions I made on 5 August 2013, SPI tendered the affidavits of Ruth Elizabeth Overington and Kyriacos Karafotias each sworn on 8 August 2013, together with confidential exhibits comprising the Baillie report and 4 versions of the Clark/Walley reports, including what is later in these reasons referred to as a Hardware Report.[14] Ms Overington is a solicitor at Herbert Smith Freehills, who act for SPI in this proceeding and have acted for SPI in relation to the subject matter of the proceeding since 9 February 2009.
[14]See paragraph 18 below.
Mr Karafotias is a qualified Australian lawyer and was, at the times (in 2009) relevant to the questions relating to the call and client legal privilege (“privilege”) an in house legal manager of SPI and in that capacity held a Victorian practicing certificate. In his capacity as a legal manager, Mr Karafotias regularly gave legal advice to SP AusNet.[15]
[15]Which, loosely described, is the stapled ‘entity’ listed on the ASX one part of which is SPI.
The affidavit of Ms Overington included the following matters:
(a) The relevant context was given by way of a chronology as follows:
(i) on 7 February 2009 the Kilmore East-Kinglake fire commenced;
(ii) on 8 February 2009 the fracture surfaces of the conductor which failed on 7 February near pole 39 on the Pentadeen Spur were seized by Victoria Police;
(iii) on 9 February 2009 Freehills was engaged by SP AusNet and the Premier announced that there would be a Royal Commission into the fires;
(iv) on 16 February 2009 the Royal Commission’s Terms of Reference were issued.
(b) In response to the call made by Mr Tobin during the cross‑examination of Mr McCrohan, she conducted the following inquiries:
(i) various searches of the documents discovered by SPI in the proceedings;
(ii) instructions from SP AusNet regarding the existence of documents responsive to the call;
(c) As a result of those inquiries, the Baillie email and the Clark/Walley reports were identified. She reviewed the Baillie email. It summarises preliminary factual information obtained by Mr Baillie regarding the location and suspected cause of fire ignition. It contains no analysis of the cause of the conductor failure. She reviewed four versions of the Clark/Walley reports. They were versions of a briefing paper comprising two parts which provided background briefing information regarding:
(i) the single wire earth return system of electricity distribution;
(ii) electricity distribution equipment – both generic and used on the Pentadeen Spur;
(iii) policies, procedures and standards relevant to the equipment in use on the Pentadeen Spur; and
(iv) photographs taken on site following the failure of the Pentadeen Spur conductor on 7 February 2009;
The briefing paper contained no analysis of the cause of the failure of the conductor.
The affidavit of Mr Karafotias included the following matters:
(a) He became aware of the major fires which broke out across Victoria on 7 February 2009 (paragraph 5);
(b) on about 16 February 2009 he became aware that a class action had been commenced against SP AusNet in relation to the Kilmore East fire alleging that SPI AusNet had been negligent in operating its network (paragraph 6);
(c) in early to mid February 2009 he established a specialised team of persons within SP AusNet to attend to various tasks anticipated to arise as a result of the fires which commenced in the SP AusNet distribution network on 7 February 2009. This team comprised Ross Clark, Yoshiko Yamaoka, and Mr Karafotias in his capacity as legal manager and was known as the Bushfire Response Team (“BRT”). He led the Team (paragraph 7);
(d) the work of the BRT was to–
(i) brief external legal advisers (Herbert Smith Freehills, then known as Freehills) to represent and provide advice to SP AusNet and act as its solicitors on the record in relation to a Coronial investigation of the fire which commenced on 8 February 2009, the current proceedings and the 2009 Victorian Bushfires Royal Commission, which was established by letters patent dated 16 February 2009 (“the Bushfires Litigation”);
(ii) to respond to various enquiries made of SP AusNet by Victoria Police and ESV in relation to their investigations of the Kilmore East fire; and
(iii) to prepare communications to be distributed within SP AusNet regarding the various investigations and enquiries referred to above; (paragraph 8)
(e) in or about February 2009, Mr Karafotias requested Mr Clive Baillie, the then Claims and Investigations Manager within SP AusNet, to provide preliminary information about the circumstances of some of the fires which had started on 7 February 2009 including the Kilmore East fire;
(f) his request to Mr Baillie was made for the sole purpose of assisting him to provide legal advice to SP AusNet in his capacity as Legal Manager and informing him of facts to be used to brief Herbert Smith Freehills to enable that law firm to represent and advise SP AusNet in relation to the Bushfires Litigation;
(g) on 20 February 2009 he received an email report from Mr Baillie containing preliminary information regarding the circumstances of certain fires including the Kilmore East fire;
(h) a copy of the email he received from Mr Baillie is the Baillie email;
In March or April 2009 Mr Karafotias asked Ross Clark and Anthony Walley to prepare a note for the sole purpose of being used to brief Herbert Smith Freehills, and counsel retained, with facts of relevance to their representation of SP AusNet in the Bushfires Litigation. For this purpose he asked them to include general background information regarding –
(a) the single wire earth return system of electricity distribution (the SWER system);
(b) equipment in use on the Pentadeen Spur SWER system; and
(c) policies and procedures of relevance to the construction and maintenance of the equipment in use on the Pentadeen Spur SWER system. (paragraph 16)
Mr Walley prepared a draft of the requested briefing note (Clark/Walley report) which comprised two parts, of which there were various versions. They were entitled–
(a) Part 1 – SWER overview;
(b) Part 2 – Pentadeen details;
(c) SWER report; and
(d) Hardware Report. (paragraph 17)
Various versions of the Herbert Smith Freehills briefing note are itemised in an exhibit marked “SET‑1” to the affidavit of Susan Elizabeth Taylor, General Counsel and Company Secretary for SP AusNet, sworn on 8 June 2012. These items include those documents referred to in paragraph 2(a)(ii) of the order of Forrest J made 2 August 2013 (referred to in paragraph 2 above) and also include some further discovered documents in respect of which privilege is claimed.
Application to cross-examine
At the hearing on 9 August 2013, Mr Keogh SC, Senior Counsel for the plaintiff, applied pursuant to Rule 40.04 of the Supreme Court (General Civil Procedure) Rules 2005 to cross-examine Mr Karafotias on some discrete aspects of his affidavit. This application was opposed by Mr Farrands, Counsel for SPI.
I allowed limited cross-examination of Mr Karafotias. I limited the cross-examination to two subject matters:
(a) the matters revealed in paragraphs 5-9 of his affidavit and, in particular, the question of the establishment of the BRT and whether or not that was his decision alone and, if not, what direction was given to him in relation to it, and if so, by whom;
(b) the matter in paragraph 16 of his affidavit and his authority to speak for the corporation and its purpose in the commissioning of the Clark/Walley reports in its various versions.
I indicated that I would give more complete reasons when I gave reasons for my answers to the two questions that have been referred to me by Forrest J. To those reasons I now turn.
Leave to cross-examine
Rule 40.04 provides:
(1) Where an affidavit is filed in any proceeding, the Court may –
(a) order that the deponent be examined before the Court; and
(b) order that the deponent attend for that purpose at such time and place as it directs.
(2) Unless the Court otherwise orders, a party to a proceeding commenced by originating motion on whose behalf an affidavit is filed in the proceeding shall cause the deponent to attend at the trial of the proceeding to be examined if notice that such attendance is required is served on the party by any other party a reasonable time before the commencement of the trial.
(3) Where the deponent in respect of whom an order is made under paragraph (1) or a notice is served under paragraph (2) does not attend for examination the Court may order that the affidavit be not received into evidence.
The distinction drawn by the Rule between affidavits referred to in paragraph (1) and affidavits referred to in paragraph (2) is the distinction between affidavits to be used for any purpose (paragraph (1)), including in an interlocutory application, and affidavits to be used at the trial of proceedings commenced by originating motion.[16]
[16]Dale v Clayton Utz [2012] VSC 577 per Hollingworth J at [23].
There is a tension between the authorities in the United Kingdom and Victoria as to the circumstances in which leave to cross‑examine a deponent on his affidavit will be allowed. In Comet Products UK v Hawkex Plastics Ltd[17] Megaw LJ observed that where there is a bona fide application to cross-examine a deponent on his affidavit in interlocutory proceedings, the application should normally be granted. In a number of decisions in Victoria the approach taken is to exercise the power to allow cross‑examination in interlocutory proceedings “somewhat sparingly”: Scanlon v American Cigarette Company (Overseas) Pty Ltd(No 1).[18] This observation was followed by Branson J in Friends of Hinchenbrook Society Inc v Minister for Environment (No 1),[19] and by Kenny J in Wu v Avin Operations Pty Ltd (No 3),[20] and by Habersberger J in Talacko v Talacko (No 2).[21]
[17][1971] 2 QB 67, 76 (“Comet”).
[18]Scanlon v American Cigarette Company (Overseas) Pty Ltd(No 1) (1987) VR 261 (“Scanlon”).
[19](1996) 69 FCR 1, 17.
[20][2006] FCA 1321.
[21](2009) 25 VR 613.
In Palmer Tube Mills (Aust) Pty Ltd v Semi[22] Brooking JA (with whom Tadgell and Buchanan JJA agreed) commented in relation to the observation of Megaw LJ in Comet that the observation of his Lordship “may go further than the practise in Victoria”.
[22][1998] 4 VR 439, 448.
In Yunghanns v Elfic Pty Ltd[23] Warren J (as she then was) refused to allow cross‑examination on an interlocutory application by the plaintiffs for an order allowing them to inspect certain discovered documents in respect of which the defendants had claimed legal professional privilege. The defendants had sought to cross‑examine Mr Yunghanns in relation to alleged inconsistencies in his evidence and as to his legal and commercial knowledge, acumen and experience. Warren J refused leave, essentially for the reasons that:
[23](2000) 1 VR 92, particularly at [18] (“Yunghanns”).
(a) in so far as there were inconsistencies in Mr Yunghanns’ evidence, they were appropriate for submission;
(b) in so far as there was an allegation of recent invention this also was appropriate for submissions;
(c) it is undesirable except in special compelling circumstances for a court to permit a party to have the opportunity at an interlocutory stage to cross-examine an opposing party upon the issue of fact that goes to the core of the proceeding. This would enable a dress rehearsal of a vital component of evidence to be ventilated at trial;
(d) that she would not be assisted by the cross‑examination.
An examination of the authorities[24] shows that the variety of circumstances in which it may be appropriate to allow cross‑examination varies according to the nature of the application and the facts of the case. The overriding principle is that of procedural fairness. There are, however, a number of factors that have been found relevant to granting leave to cross-examine, as follows:
[24]Palmer Tube Mills (Aust) Pty Ltd v Semi [1998] 4 VR 439; Scanlon v American Cigarette Company (Overseas) Pty Ltd(No 1) (1987) VR 261; Friends of Hinchenbrook Society Inc v Minister for Environment (No 1) (1996) 69 FCR 1; Wu v Avin Operations Pty Ltd (No 3) [2006] FCA 1321; Talacko v Talacko (No 2) (2009) 25 VR 613; Yunghanns v Elfic Pty Ltd (2000) 1 VR 92; Dale v Clayton Utz [2012] VSC 577.
(a) where the credit of the witness is important to resolving the interlocutory application;[25]
[25]Scanlon (1987) VR 261, 273; Palmer Tube Mills [1998] 4 VR 439, 448; Dale v Clayton Utz [2012] VSC 577, [88]–[89].
(b) the interlocutory application requires the establishment of material facts;[26]
(c) there is a relevant factual dispute which requires cross‑examination for its resolution;[27]
(d) the interlocutory application is unusual and it is difficult to know what issues will eventually be relevant.[28]
[26]Scanlon (1987) VR 261, 272–3; Palmer Tube Mills [1998] 4 VR 439, 448.
[27]Dale v Clayton Utz [2012] VSC 577, [79], [83] and [92].
[28]Talacko v Talacko (No 2) (2009) 25 VR 613, 617 [15].
There are, of course, factors that will exclude or limit cross‑examination, including:
(a) that the application is not made bona fide to test an issue of material fact on the interlocutory application, but rather to engage in a rehearsal of issues relevant to the trial;[29]
(b) the extent to which the pressure of the business of the Court permits cross-examination.[30]
(c) The factors referred above from the decision of Warren J in Yunghanns.
[29]Scanlon (1987) VR 261, 273.
[30]Talacko v Talacko(No 2) (2009) 25 VR 613, 617 [16].
Mr Keogh submitted, in support of his application to cross‑examine Mr Karafotias, that there was a clear distinction between the purpose that Mr Karafotias proposes that he had in paragraph 16 of his affidavit and the corporate purpose of SPI. Paragraph 16 of his affidavit is as follows:
To the best of my recollection, during March or April 2009, I asked Ross Clark and Anthony Walley to prepare a note for the sole purpose of being used to brief Herbert Smith Freehills and counsel retained by that firm with facts of relevance to their representation of SP AusNet in the Bushfire Litigation (the HSF Briefing Note). For this purpose, I asked them to include general background information regarding the:
(i) single wire earth return system of electricity distribution (the SWER system);
(j) equipment in use on the Pentadeen Spur SWER system; and
(k) policies and procedures of relevance to the construction and maintenance of the equipment in use on the Pentadeen Spur SWER system.
Mr Keogh tendered, without objection, a number of letters passing between ESV and SP AusNet relating to enquiries made by ESV for the purpose of its investigations into the Kilmore East-Kinglake fire, in particular regarding the Pentadeen Spur and the single earth SWER conductor, and its failure. This correspondence showed that the initial request by ESV was made to the managing director of SP AusNet, Mr Nino Ficca, that the first response was made by Mr Norm Drew, General Manager Network Development Division, and that he (Mr Drew) directed any further questions that ESV had to be made to Mr Karafotias, who then delegated to other officers of the company, including Mr Clark, the responses to be made.
Mr Keogh submitted that both the absence in the affidavit of Mr Karafotias of any indication that his establishment of the BRT was a team that he was directed to establish, and the evidence involving the managing director of SP AusNet in directing responses to ESV, showed that there was a likely lacuna in the affidavit of Mr Karafotias. That lacuna was whether or not he had acted on his own initiative to establish the BRT or whether he had been instructed to do so by someone higher up in the corporate hierarchy of SP AusNet. Given that Mr Karafotias’ position at the time, in February 2009, was that of Legal Manager, in contrast with the position, for example, of Ms Taylor, the deponent of the affidavits of discovery, who was the General Counsel and Company Secretary of SP AusNet, indicated that his position was not so high in the hierarchy that it was likely that he acted on his own initiative without any direction.
Mr Farrands, on behalf of SPI submitted that the leave should be refused because:
(a) the credit of Mr Karafotias was not in issue. Mr Keogh made it clear that he did not wish to challenge the credit of Mr Karafotias;
(b) the matters upon which cross‑examination was sought are more appropriately matters for submission because the affidavit of Mr Karafotias (when read together with the affidavit of Ms Overington) were fulsome and did not call for any further elaboration.
In my view, it was appropriate to give limited leave to cross-examine Mr Karafotias because of the matters raised by Mr Keogh relating to the distinction between the purpose of the individual solicitor, Mr Karafotias, and the purpose of the corporation. It was also relevant that the material he had tendered showed the involvement of the Managing Director of SP AusNet, and others within the corporate structure, who were involved in responding to requests to provide material to ESV, and the people who, in the course of the collection and delivery of that material, were involved, being, of course, some of the same people involved in the BRT.
I formed the view that the cross-examination may inform the Court as to whether or not the sole purpose to which Mr Karafotias deposes in paragraph 16 of his affidavit is in fact also the sole or dominant purpose of the corporation. The distinction is self evidently important, particularly having regard to the result in the case of Perry v Powercor Australia Ltd,[31] and on appeal, Powercor Australia Ltd v Perry.[32]
[31][2011] VSC 308; on appeal
[32](2011) 33 VR 548; [2011] VSCA 239.
The Cross-examination
After I delivered short reasons for the grant of leave to cross-examine Mr Karafotias, the transcript of proceedings was mistakenly terminated. In consequence there was no transcript of the cross‑examination of Mr Karafotias. From my notes and recollection, the following is the substance of the evidence given:
(a) At the time in February and March 2009 he reported to Susan Taylor, who in turn reported to Nino Ficca;
(b) He discussed the fires with Susan Taylor on the evening of 7 February 2009;
(c) the managing director, Mr Nino Ficca, contacted him on 10 February;
(d) he had a general discussion with Nino Ficca and Susan Taylor as to how SP AusNet should respond to the issues arising out of the fires at which time the establishment of a BRT was discussed. The purposes of the BRT were delineated by Nino Ficca and Susan Taylor;
(e) there was no written instruction given to him to establish that BRT. There was, however, a charter for the BRT prepared by Susan Taylor. A call was made for this charter and it was produced, subject to a claim for client legal privilege;
(f) he followed the direction of Nino Ficca and Susan Taylor in establishing the BRT;
(g) the three purposes identified in paragraph 8 of his affidavit were the only purposes of the BRT. It was not the intention of the BRT to respond or provide information to shareholders, insurers or ASIC;
(h) the charter gave him authority to lead the BRT. He reported to Susan Taylor regarding its work. He did not take direction from Susan Taylor or Nino Ficca in directing tasks to be undertaken on behalf of the BRT. Susan Taylor did make suggestions as did Mr Ken Adams of Freehills. He did not receive instructions from Susan Taylor or Nino Ficca after the charter was prepared. No-one instructed him to instruct Mr Ross Clark and Anthony Walley to prepare the Clark/Walley Reports. He did discuss with Susan Taylor the appointment of Mr Anthony Walley to prepare, with Mr Clark, the Clark/Walley reports;
(i) in relation to paragraph 16 of his affidavit, his reference to “to the best of my recollection” relates to the timing of when he asked Ross Clark and Anthony Walley to prepare the Clark/Walley reports referred to in that paragraph;
(j) Mr Clark was involved in responding to the ESV requests and Anthony Walley assisted him;
(k) he confirmed that it was both his purpose and, by virtue of his authority as leader of the BRT, SPI’s purpose that the Clark/Walley reports were prepared for the purpose of briefing Freehills and counsel retained.
Are the documents within the call?
The plaintiff submitted that there are two elements to the call. First, that the report is of an “investigation of this fire or event”. Secondly, that it was prepared “as part of the usual business of the defendant”.
The phrase “investigation of this fire or this event” is, the plaintiff submitted broad in its meaning. It clearly goes beyond any question of causation and captures investigations into any aspect of the event, for instance its occurrence, and its consequences.
The plaintiff submitted that the phrase “usual business of the defendant” should be given meaning in the context of the occurrence of the fire/event. In other words, what is anticipated within the usual business response to such an event? From the evidence that had been given by Mr McCrohan, this includes investigation of a major fault (T 5983.6), reporting on that fault to a number of others including ESV, the shareholders and other departments of SP AusNet (T 5983.10) and trying to understand the event and restrict its recurrence (T 5996.27).
The plaintiff submitted that other purposes of SPI might have included obtaining legal advice, informing insurers, preparing for and responding to processes and proceedings such as the Victorian Bushfires Royal Commission, Coronial investigations or litigation such as this proceeding. Even if the sole purpose of the Baillie email and the Clark/Walley reports was to obtain legal advice, they are clearly documents commissioned in the course of the usual business of the defendant and therefore come within the call.
By contrast, SPI submitted that having regard to the evidence given by Mr McCrohan, the reports to which he referred were not a part of the usual investigations and reports relating to fires or events, but were specific investigations and reports relating to the cause or causes of the outage and damage in relation to the Kilmore fire. In short, it was said, that this was not part of the usual business but a very special event.
In my view, the evidence of Mr McCrohan indicated that, even though this was a special event, it was a part of the usual business of SPI to investigate fires and events and the reports were capable of being classified as being created as a part of the usual business of the defendant. Accordingly, in my view the documents referred to in the order of 2 August 2013 do fall within the call.
Are the Reports Privileged?
SPI relies upon ss 118 and 119 of the Evidence Act 2008 (Vic) which relate to ‘legal advice privilege’ and ‘litigation privilege’, respectively.
Section 118 provides as follows:
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of –
(a)a confidential communication made between the client and the lawyer; or
(b)a confidential communication made between two or more lawyers acting for the client; or
(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person –
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
Section 119 is as follows:
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of –
(a)a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or
(b)the contents of a confidential document (whether delivered or not) that was prepared -
for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceedings (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is, or may be, or was or might have been, a party.
In this case, it is clear that at the time the particular documents identified and the subject of this dispute were sought, prepared and provided, either the Coronial inquest, the Royal Commission or these legal proceedings were anticipated or had been commenced.
Thus, the issue that I am required to address is whether or not these documents are confidential documents prepared for the dominant purpose of SPI’s lawyers providing legal advice to SPI, or for SPI being provided with professional legal services relating to an anticipated or pending Australian proceeding.
It is quite clear that SPI bears the onus of establishing that the documents were prepared for that dominant purpose. SPI asserts that it has done so. The plaintiff submits that where – as here- the reports are prepared for a corporation, the purpose of the corporation is clearly relevant and determinative. The purpose of any individual employee of the corporation who commissioned the reports, as in this case Mr Karafotias did, may inform an analysis of the purpose, but is secondary.
The plaintiff submitted that in the case of the Kilmore East fire or event, persons in the most senior positions would have had a keen interest in and, in all likelihood, an intimate involvement in the commissioning of the reports. Any such involvement would be critically relevant to any evaluation of the purpose or purposes of the corporation. The affidavit of Mr Karafotias shows that he established the BRT, but in it he does not say whether or not he did so at someone else’s behest, nor what directions were given to him or the BRT in relation to commissioning of the reports.
It was this lacuna in the affidavit of Mr Karafotias that was, in part, the occasion for, and subject of, his cross-examination. I have mentioned that in the course of the cross-examination a call was made for the so called “charter” pursuant to which the BRT was established. That call was responded to by the production of a document entitled “SP AusNet Response to Royal Commission and Class Action” dated 23 February 2009 and under the typed signature of Susan Taylor (“Charter”). Privilege was claimed in respect of the Charter. I have inspected the document and confirm that it is both headed with a claim for privilege and appears to contain material capable of attracting privilege. Accordingly, unless and until the plaintiff makes a challenge to the claim for privilege, and requires further proof of the privilege claimed, I will uphold the claim to privilege.
Mr Karafotias gave evidence in his cross-examination that under this Charter he was clothed with authority of SPI, as leader of the BRT, to commission the reports in question. My examination of the Charter confirms this, although the language is different.
The plaintiff contends that SPI has not discharged its onus of establishing that the dominant purpose of the corporation, as distinct from the purpose of Mr Karafotias, for the commissioning of the reports was a privileged purpose.
Ordinarily the purpose of preparing a document will be that of the maker of the document. However, that will not always be so where some other person, such as a solicitor, commissions the provision of a report and thus calls the document in question into existence. In such a case, the relevant purpose will not be that of the author but that of the person calling the document into existence: Carter Holt Harvey Wood Products Australia Pty Ltd v Auspine Ltd (“Carter Holt”).[33]
[33][2008] VSCA 59, [2]; see Perry v Powercor Australia Ltd [2011] VSC 308, [50] and the authorities at footnote 39 and Powercor Australia Ltd v Perry (2011) 33 VR 548, [20].
In the case of a document produced for a corporation it may be necessary to examine the purpose of the persons in the corporation hierarchy, which may be some person or persons other than the author or indeed the person directly commissioning the document, to determine the purpose for which the document was brought into existence.[34]
[34]Ibid.
In Esso Australia Resources Ltd v FCT,[35] Gleeson CJ, Gaudron and Gummow JJ said:
In many cases the reports would result from established corporate or bureaucratic procedures, and the individual who made the report would simply be following instructions. It may be necessary to understand the internal procedures, or the objectives of some person of higher authority, in order to identify the purpose or purposes for which the reports were prepared.
[35](1999) 201 CLR 49, 66 [39].
In AWB v Cole,[36] Young J said:
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.
[36]AWB Ltd v Cole (No 5) (2006) 155 FCR 30, 45, cited with approval by the Court of Appeal in Carter Holt Harvey Wood Products Australia Pty Ltd v Auspine Ltd [2008] VSCA 59.
In Carter Holt[37] the Court of Appeal confirmed that a two step approach must be adopted in determining dominant purpose. The two steps are:
(a) ascertaining the subjective purpose or purposes of the person or persons making or commissioning the communication in question;
(b) if the Court concludes that there was more than one purpose, at least one of which was a purpose capable of attracting legal professional privilege, to determine whether the party claiming the privilege has established that the privileged purpose was the dominant purpose, a determination that must be made objectively.
[37][2008] VSCA 59, [3].
The Court of Appeal in Carter Holt cited with approval the observations of Kenny J in Commissioner of Taxation v Pratt Holdings,[38] as follows:
The purpose for which a document is brought into existence is a question of fact. Where there are a number of purposes for the creation of a document, it can be difficult to identify the dominant purpose. The dominant purpose must be determined objectively, having regard to the evidence, the nature of the documents and the parties’ submissions. The purpose will ordinarily be that of the maker of the document, but this will not always be the case.
[38](2005) FCA 1247.
The Court of Appeal, and other courts, have interpreted the word “dominant” as meaning that there must be a “clear paramountcy” of purpose.[39]
[39]Perry v Powercor Australia Ltd [2011] VSC 308, [55] and the cases cited at footnote 47.
The plaintiff relied heavily on the decisions of Robson J and the Court of Appeal in the Powercor v Perry decisions.[40] The facts in that case were very different from the facts in this case. In the Court of Appeal, the critical findings of Robson J were extracted, as follows (at [17[-[18]):
[40]Perry v Powercor Australia Ltd [2011] VSC 308; Powercor Australia Ltd v Perry (2011) 33 VR 548.
Dealing first with the Rands reports, the judge found that there were many different purposes for which the applicant needed or was likely to need them, only some of which were privileged purposes, and that the applicant had failed to satisfy him on the balance of probabilities that the applicant's dominant purpose in obtaining the documents was a privileged purpose. His Honour said that:4
I infer as a fact that the disputed reports were and were intended to be the source of information that Powercor used and intended to use for its normal business purposes including: obtaining legal advice; providing information to the Royal Commission; providing information to the regulator under the Electricity Safety Act 1998; providing information to the Coroner, if need be; providing information to its insurer; providing information for its internal Powercor Asset Failure Reporting & Investigation procedure; and in reviewing its maintenance program and the continued use of the type of equipment that failed at Coleraine. As I have indicated, no evidence was led by Powercor to the contrary.
THE FAILURE TO CALL THE CHIEF EXECUTIVE OFFICER
The failure of the CEO to give evidence was not explained. I assume that the CEO at the time was Mr Shane Breheny who also prepared a witness statement for the Royal Commission. There was no suggestion that he was not available to give evidence by affidavit of otherwise. He instructed Ms Rands to carry out the investigation which was likely to involve her obtaining information from experts. I can only infer what his purposes were in obtaining the report. His failure to give evidence in circumstances where it is central to the establishment of the privilege does give rise to the inference that his evidence would not have assisted Powercor's claim to privilege. As has been discussed, the plaintiffs seek to draw the inferences from the evidence that Powercor needed the information for multiple purposes and that legal advice from Ms Rands was not the dominant purpose. As the CEO failed to give evidence to rebut those inferences, the court is entitled to more readily draw those inferences.5
I find that there were multiple purposes for which the information in the reports were to be used. I accept an important one was to give legal advice to Powercor and to use it in the anticipated legal proceedings in giving privileged advice about the Royal Commission. Nevertheless, Powercor bears the onus of establishing that the privileged purpose was the dominant purpose.
I find that Powercor has not done that. Powercor led no evidence on its internal procedures that would have required or made use of the information in the reports. The court can only imply that the requirement for the information would have been legally necessary and important to the operations of Powercor's business.
Powercor failed to produce evidence of the CEO or explain the requirements Powercor had for the information other than for legal advice. It failed to explain its legal obligations of reporting under the Electricity Safety Act 1998, WorkCover, the Coroners Act 1985 or the duty of its officers under the Corporations Act 2001 or otherwise at common law to have the information in the reports to carry out their duties whether legal or otherwise. Powercor failed to explain the variety of uses to which the information would be put and why it was needed.
Having regard merely to the duties placed on officers under the Corporations Act 2001 and in particular their duty to exercise their powers with care and diligence, the officers of Powercor were probably bound to find out what happened and the role Powercor's assets played in the Coleraine fire so that they could take proper steps to carry out their reporting obligations, make claims on their insurers, attend to maintenance issues, and attend to a myriad of other matters in the interests of Powercor. As I have said, Powercor has led no evidence on these matters to establish the privilege claim.
Accordingly, I am not satisfied that the dominant purpose Powercor had in obtaining the disputed reports was for privileged purposes. I find that the reports are not protected by legal professional privilege.
As to the W & K report, the judge said that:
The fourth report was the subject of little evidence. Ms Rands says that she is advised that in June 2009, Wotton & Kearney instructed Ken Woolhouse to prepare a report with respect to the tie wire the subject of the fire at Coleraine. There was no evidence as to the purpose for which the report was obtained. During argument it was not differentiated from the other three reports and Powercor submissions did not seek to support its claim to privilege of this report using any arguments other than those advanced for the other three reports. [Emphasis added.]
In the application for leave to appeal, Powercor had contended that the primary judge erred in treating the purpose of the applicant's CEO as a factor of central relevance. It was argued that, because the Rands reports were commissioned by the applicant's in-house lawyer, the relevant purpose was her purpose.
The Court of Appeal rejected this contention, saying that “…where, as here, the purpose in question is the purpose of a corporation, it is necessary to have regard not only to the subjective purpose of the legal officer in question but also to the objectives of the CEO who gave her instructions, citing and quoting from Carter Holt the propositions I have extracted above at paragraph 53. They observed “that it is the purpose of the report and not the motive of the individual who made it that matters”.[41]
[41]Powercor Australia Ltd v Perry [2011] VSC 308, [51], referring to Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 per Gleeson CJ, Gaudron and Gummow JJ
The Court of Appeal emphasised the significance of the burden of proof to the outcome of the application, saying (at [42]-[43]):
We should say for completeness that we have spoken several times throughout these reasons in terms of inferences which it was open to the judge to draw. It has been convenient to speak in those terms because it serves to focus attention on the evidence that was available. It is important to keep in mind, however, that the judge determined the application on the basis that it was incumbent on the applicant to persuade him to draw the inference that the applicant's dominant purpose in commissioning the reports was a privileged purpose, and that the applicant failed to do so. His Honour was correct to approach the matter in that fashion. It is also important to keep in mind the background circumstances against which the reports were commissioned.
We emphasise the point because, even if it were not open positively to infer that the applicant had a number of purposes in mind, of which the provision of legal advice was not dominant, it would by no means necessarily follow that the judge was in error in concluding that the applicant had failed to discharge the burden of establishing on the balance of probabilities that its dominant purpose was privileged.
The proofs of SPI in this case are very different from those in Powercor. Here there is evidence not only of the motivation of the person who commissioned of the Reports, but evidence that it was his purpose that was SPI’s purpose, by virtue of the authority he had under the Charter.
The affidavits of Ms Overington and Mr Karafotias seem to me to establish the purpose of the commissioning of the reports as being a privileged purpose, and the affidavit of Mr Karafotias and his cross-examination confirmed that his purpose was the purpose of SPI.
In addition, I was invited by SPI, with the concurrence of the plaintiff, to inspect the Baillie email and a selection of the Clark/Walley Reports, which were provided to me. My examination of these documents (looking at them with an objective eye, so to speak) serves only to confirm the evidence of Mr Karafotias as to the purpose for which they were brought into existence.
The Baillie Email
Having regard to his position as leader of the BRT, the authority given to him under the Charter and his evidence relating to the purpose of the Baillie email, together with my inspection of that email, I am positively persuaded that that document is privileged. There has been no suggestion of waiver of privilege. In the result, the answer to question in paragraph (b) of the Order of 2 August 2013 in relation to the Baillie email is that it is the subject of privilege.
The Clark/Walley Reports
I have inspected four versions of the Clark/Walley Reports.[42] I have also been provided with a disc containing a detailed analysis of the differences between the versions of all those Reports. For the same reasons I have given in relation to the Baillie email, I am satisfied that the Clark/Walley Reports are privileged.
[42]SPN.802.415.0368, SPN.802.416.0855, SPN.802.417.0517 and SPN.802.419.0317
I will therefore answer the questions in the Order of 2 August 2013 as follows:
(a) Yes, they are all required to be produced to the Court;
(b) Yes, they are all the subject of client legal privilege, and so may not be inspected by the plaintiff.
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