Westpac Banking Corporation v 789Ten Pty Ltd

[2005] HCATrans 1044

[2005] HCATrans 1044

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S507 of 2005

B e t w e e n -

WESTPAC BANKING CORPORATION

Applicant

and

789TEN PTY LIMITED

Respondent

Application for special leave to appeal

HAYNE J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 16 DECEMBER 2005, AT 10.50 AM

Copyright in the High Court of Australia

MR F.M. DOUGLAS, QC:   May it please the Court, I appear for the applicant, Westpac Banking Corporation.  (instructed by Henry Davis York)

MR B.M. RAYMENT, QC:   May it please your Honours, I appear with MS E. RAPER for the respondent.  (instructed by Laurence and Laurence)

HAYNE J:   Yes, Mr Douglas.

MR DOUGLAS:   Your Honours, this is a matter which arises from a decision of the Court of Appeal of New South Wales on the question of privilege which arises in the context of section 119 of the Evidence Act.  The relevant correspondence which is sought to be protected is set out in the judgment of the Court of Appeal commencing at page 63 of the application book.  I draw the attention of the Court to the terms of the Bank’s letter which was:

“In connection with the audit of Westpac Banking Corporation and its controlled entities listed in Appendix A for the year ended 30 September 2004, we request that you provide our auditors, PricewaterhouseCoopers, with the following information.

Then there was a request for certain information in relation to various cases of which this was one, and at point 30 on the next page, which is page 64, it is said:

Your reply is sought solely for information in connection with the audit of the financial report.  The information will not be quoted or otherwise referred to in any financial report or related documents of the company and its controlled entities.

The argument which we wish to address in this Court is set out in the application book at page 94 and following.  It concerns the construction of section 119.  Although that section has been looked at in certain context before this Court in…..and Mann v Carnell, this specific issue has not arisen.

HAYNE J:   What do you say is the specific issue that would arise, other than an issue about what was the dominant purpose?

MR DOUGLAS:   The issue which arises in this case is what happens between corporations who are subject to statutory audit under the Corporations Law.

HAYNE J:   Yes.  The events may occur, and commonly will occur, very often.  I understand that.

MR DOUGLAS:   As Justice Tobias said in the Court of Appeal, he did not really see any way round doing what was done in this situation.  You have a situation in which the corporation is involved in litigation.  It has a certain opinion as to what its likely prospects in that litigation are.  That is to be included in its statutory accounts.  Its auditors, in order to seek appropriate confirmation as to whether the directors’ opinion is correct, wish to have confirmation from the lawyers acting for the corporation.  The corporation request the lawyers to provide, effectively, an opinion to the auditors of the corporation as to whether the directors’ assessment of the liabilities is an appropriate one.

HAYNE J:   Who is the client in that transaction?

MR DOUGLAS:   The Bank is, your Honour, as appears from the letter, because the Bank is asking its solicitors to provide, effectively, confirmation of the Bank’s assessment of its likely exposure in the litigation.

HAYNE J:   What is the dominant purpose that then ought to be identified?

MR DOUGLAS:   The dominant purpose is that of a client, that is the Bank, being provided with professional legal services relating to an Australian proceeding.  The professional legal service is that of the solicitors providing confirmation of the Bank’s opinion to the auditor.  It can be done in that way.  There may be other ways of doing it but, as Justice Tobias says in his judgment, he does not see that many of the ways suggested by Justice Bergin in her decision as to how to do it otherwise would be successful, so at least in the situation in which corporations which are subject to audits under the Corporations Law and which are required by prudent auditors to effectively get their solicitors to confirm their view of their likely exposure in litigation for the purposes of their annual audit, they are going to be ‑ ‑ ‑

HAYNE J:   If you go to page 81 of the application book and paragraph 53, going over to page 82, what is the challenge that you would make to what is said there – paragraph 53, straddling the two pages?

MR DOUGLAS:   Your Honour, the dominant purpose of providing professional legal services to the Bank includes that of providing information to the auditors to enable it to perform its auditing obligations.  In other words, a professional legal service goes beyond, if ones goes, for example, to paragraph 83 and following where the crux of his Honour Justice Tobias’ reasoning appears, it goes beyond merely providing an opinion.  A professional legal service, in our respectful submission, as we have said in our submissions, includes more than just giving legal advice. 

So when your sole purpose – let us assume it is the sole or the dominant purpose – is as set in paragraph 53, that of providing information to the auditors to enable them to perform their auditing obligations, the client, in requesting their solicitors to provide that, by way of third party confirmation, to the auditors, is in fact requesting that the solicitors provide them with a professional legal service for the benefit of their auditors.  That is why it falls within that definition. 

The expression “professional legal services”, as we pointed out in our submissions, goes beyond that of providing legal advice.  Legal advice is referred to in section 118, but professional legal services are referred to separately in section 119.  The way in which we seek to dispute the correctness of what Justice Tobias has said appears really from paragraph 3.4 of our written submissions at page 97, where we seek to put in more detail the point which I just sought to make to your Honour Justice Hayne, where we say that the reason the Court of Appeal rejected the Bank’s claim for privilege under section 119 was that it took the view that the service constituted by the solicitor’s representation letter was a service provided to PWC, and not to the Bank, within the meaning of section 119.  

Then there was a reference to what Justice Branson said in Sparnon v Apand and then it goes on to say the applicant does not dispute the correctness of that passage.  However, Justice Tobias erred in failing to give due attention to the emphasised parts of it when his Honour attempted to apply it in the paragraphs of his reasons that followed, and that is then set out.  In view of the time restrictions, I will not read the quotes from what the judge says, but what we say in 3.7 is this.  The emphasised parts of the above passages point to the error in the Court of Appeal’s approach.  The court construes too narrowly the phrase “professional legal service” in section 119.  It appears to proceed on the assumption that to be provided with a “professional legal service” within the meaning of the Act, one has to be provided with information, advice or a “legal opinion”.  That assumption is incorrect. 

The provision of “professional legal services” to a client in section 119 is to be contrasted with the subject of privilege in section 118, the provision of “legal advice” to a client.  Neither phrase is defined but, as a matter of ordinary language, “professional legal services” encompasses a wider sphere of activity than does “legal advice”.  The former phrase, on its ordinary meaning, refers to all work done, or business transacted, in the ordinary course of legal practice.  The latter phrase refers only to the provision by one person to another of legal commentary upon a present or anticipated factual situation, and we suggest that the legislature plainly intended to pick up different concepts.

The drafting and sending of the solicitor’s letter fell squarely within the concept of providing a “professional legal service” to the Bank.  The Bank request the service from Henry Davis York in their capacity as the Bank’s solicitors and Henry Davis York performed the service in that capacity.

Your Honour, I do not think I can state the question more plainly than that and the reasons why special leave should be granted are set out in paragraph 4.  The matter is one of public importance and the decision has the result, in our respectful submission, that any litigant the subject of an audit can be required to produce doctrines which may disclose both the company’s own view of its prospects in the litigation and the view of its solicitors. 

The Court of Appeal itself has acknowledged in its decision that that result is undesirable because, from a practical point of view, and also from the point of view of the requirements of the Corporations Law, solicitors’ representations letters are a necessary consequence of litigation for every public company.  A prudent auditor would be unlikely to be satisfied that a company’s financial statements represent a true and fair view for the purposes of the Corporations Act unless the company’s solicitors provided confirmation of directors’ estimates of contingent liabilities in any litigation.  Also, it is free from authority and arises also on the terms of the Evidence Acts in force in other jurisdictions. 

The Court of Appeal itself has said that the result is undesirable and that of itself should suggest that the matter is an appropriate matter for special leave.  But just indicating in terms of timing, your Honour, the trial is not to take place until 24 June now and that is ‑ ‑ ‑

HAYNE J:   I understand (a) that it is urgent and (b) that there would be time to deal with the matter between now and the time fixed for trial, or at least very soon thereafter.  I understand that.

MR DOUGLAS:   Yes, and the other matter is we would say, whilst it is interlocutory, it is a substantive issue in this respect, because it is our privilege – that is a substantive right – and if in fact the decision of the Court of Appeal is wrong, then we would be deprived of our privilege in respect of our communication in the very circumstances in which it ought to be preserved.  If it please the Court.

HAYNE J:   Thank you, Mr Douglas.  We will not trouble you, Mr Rayment.

What was the dominant purpose for obtaining the letters for which legal professional privilege was claimed in this matter is essentially a question of fact.  No point of general principle would conveniently fall for decision in the matter were special leave to be granted and there are in any event insufficient prospects of success to warrant a grant of special leave.  It follows that special leave to appeal is refused and refused with costs.

AT 11.01 AM THE MATTER WAS CONCLUDED