X Corporation Pty Ltd and Jess & Anor
[2016] FamCAFC 43
•24 March 2016
FAMILY COURT OF AUSTRALIA
| X CORPORATION PTY LTD & JESS AND ANOR | [2016] FamCAFC 43 |
| FAMILY LAW – APPEAL – Interlocutory orders – Where the appellant seeks leave to appeal – Where the trial judge found that legal professional privilege did not apply to certain documents – Where the trial judge made orders for the production of the documents – Evidence Act 1995 (Cth) – Whether the trial judge erred in finding that, to the extent there was a joint privilege held by the husband and the appellant, the husband alone could waive it – Where the trial judge was invited to inspect the documents – Whether the trial judge erred by failing to give reasons for not inspecting the documents – Where the trial judge erred in drawing a Jones v Dunkel inference –Whether the appellant was materially distinguishable from the husband – Whether the errors asserted affected the outcome of the proceedings – Appeal dismissed. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) r 15.26(2) |
| A v J (1995) FLC 92-619 |
| APPELLANT: | X Corporation Pty Ltd |
| FIRST RESPONDENT: | Ms Jess |
| SECOND RESPONDENT: | Mr N Jess |
| FILE NUMBER: | MLF | 3444 | of | 2006 |
| APPEAL NUMBER: | SOA | 60 | of | 2015 |
| DATE DELIVERED: | 24 March 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Strickland, Aldridge & Cronin JJ |
| HEARING DATE: | 14 October 2015 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 24 September 2015 |
| LOWER COURT MNC: | [2015] FamCA 822 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Waller QC with Mr Mereine |
| SOLICITOR FOR THE APPELLANT: | HWL Ebsworth Lawyers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Glick QC & Mr O’Shannessy |
SOLICITOR FOR THE FIRST RESPONDENT: | Kenna Teasdale Lawyers |
| SOLICITOR FOR THE SECOND RESPONDENT: | Condello Lawyers |
Orders
The Application in an Appeal filed on 3 September 2015 be dismissed.
The application for leave to appeal Order 1 of the orders made on
24 August 2015 by the Honourable Justice Bennett be allowed.
The Appeal be dismissed.
The appellant X Corporation Pty Ltd pay the costs of the appeal of the first respondent, Ms Jess, as agreed, or in default of agreement, as assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym X Corporation Pty Ltd & Jess and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SOA 60 of 2015
File Number: MLF 3444 of 2006
| X Corporation Pty Ltd |
Appellant
And
| Ms Jess And Mr N Jess |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 24 August 2015 Bennett J ordered X Corporation Pty Ltd (“XC”) to produce to Mr N Jess (“the husband”) the hand written file notes which were taken by a firm of solicitors, Clayton Utz, at a meeting on 20 June 2003, and the agenda for that meeting. The meeting took place at the offices of Clayton Utz and the file notes were kept by it. In making the order the trial judge rejected the contention of XC that the documents were privileged from production because they recorded legal advice given to it.
XC now seeks leave to appeal from the order and, if leave is granted, to appeal. The application for leave to appeal and the appeal itself were opposed by Ms Jess (“the wife”). The husband filed written submissions declaring support for the wife’s submissions, but indicated that he did not wish to be heard further and would abide any decision of the court.
After the Court had reserved its decision the legal representatives of the wife referred the Court to the decision of Hancock v Rinehart (Privilege) [2016] NSWSC 12.
The application before the trial judge
The proceedings before the trial judge were proceedings between the wife, the husband and 25 other parties, which were referred to by the trial judge as “the represented third parties”. The represented third parties included Mr Jess (Jnr) (“Mr JJ”) (“the husband’s son”), XC and Mr B, a former employee of the husband. Mr B was present at the meeting on 20 June 2003.
The trial judge described the nature of the proceedings as follows:
2.By her application the wife seeks, amongst other things, to set aside a number of instruments and transactions which effected a final alteration of property interests between herself and the husband pursuant to the Family Law Act 1975 and consequent upon the breakdown of their marriage as well compromising proceedings commenced by the husband’s son, [Mr JJ], in the Supreme Court of Victoria in 2007 against the wife which were settled and, for all intents and purposes, concluded contemporaneously with the family law proceedings, in late September 2009.
…
4.Mr [N Jess] is the first respondent to the wife’s application. His interest in the outcome of the proceedings is consistent with that of the wife but with different consequences. I am satisfied that the husband is now entirely aligned with the wife and that, together, the wife and Mr [N Jess], are wholly aligned against the other respondents.
The proceedings are being conducted in a slightly unusual way. Due to the health of the husband, his evidence is being taken prior to the commencement of the hearing.
On 22 September 2014, at the request of the husband’s solicitors, a subpoena was issued and served upon Clayton Utz seeking production of, relevantly, the following documents:
1.All documents (hard or electronic) that include all instructions received from [Mr N Jess], instructions received on behalf of [Mr N Jess] or formulated as a consequence of the instructions in respect to:
(a) The ownership both legal and beneficial in the [Y Trust]; and
(b) The proceeding in which you acted for Mr Jess in the Supreme Court between [Mrs XX] (as executrix of the Estate of [Mr XX] deceased), [Mr N Jess] and [XC] (as trustee of the [Y Trust]) No. [2/2007] (“the [XX] Proceeding”).
…
3. All instructions, correspondence, file notes and other documents (hard or electronic) in respect to the declaration of trust said to be dated 28 February 2002 between [Mr N Jess] and [Mr JJ] (a copy is attached for the avoidance of doubt).
…
5. All files, correspondence, file notes and other documents (hard or electronic) for any matter in which you acted for [Mr N Jess] between February 2002 and the date of this document.
On 3 October 2014 Clayton Utz filed a Notice of Objection to the production, asserting that the subpoena was oppressive and that some or all of the documents would be the subject of a claim for legal professional privilege.
The Notice of Objection was supported by an affidavit sworn by a partner of Clayton Utz, Mr HR. He said that until October 2010, the firm had acted for the husband and a number of companies controlled by or associated with him, including XC. At that time it ceased to act for the husband but continued to act for XC.
A review of the files undertaken at Mr HR’s direction revealed some 307 lever arch files and 7736 electronic documents (excluding attachments) which would need to be examined to see if they fell within the terms of the subpoena. This was the basis of the claim for oppression.
Notwithstanding that, the search uncovered two files which were entitled “General Affairs” and “Structuring Advice 2004”. The latter was opened in the name of X Group Pty Ltd. No such company has existed and Mr HR opined that the name had been used as a short hand reference to the 26 (at least) corporate entities associated with the husband. He said at [24] of his affidavit sworn on 7 October 2014:
…As a result, Clayton Utz was acting for [XC] in this matter and this file therefore contains information which is likely to be the subject of a claim for privilege by a party other than the issuing party of the subpoena. Those documents are produced to the Court on a USB marked “SUBJECT TO LPP” and saved in a folder titled “Item 3(a)”.
A similar claim was made in relation to the “General Affairs” file.
Documents not covered by the objections were produced.
On 29 July 2015 the matter was before the court for directions. Counsel for the husband referred the Court to an entry in the husband’s diary for 20 June 2003 and a note written by the husband dated 19 June 2003 (it was not disputed that the date should have been 20 June 2003).
The diary entry contained a reference to a meeting with Mr Z of Clayton Utz at 11:00 am on 20 June 2003. The note written by the husband said:
[Mr N Jess]
Meeting with Clayton Utz
Friday, 19 June 2003
Matters for clarification
1. Ownership of new corporate structure
a. Personal ([Y Trust])
b. Personal (direct)
c. New Family Trust
2. Ongoing suitability of [Y Trust]:
a. To own Brandnames (with licence to Corporate structure)
b. To own new Corporate structure
c. Changes required to [Y Trust] – ensuring no resettlement
3. Maintaining pre-CGT ownership of Brandnames (held in [Y Trust])
4. Asset protection
a. Operating businesses
b. [Sporting] business (including [D])
c. Properties
d. Other trademarks
e. Non-core businesses
Acceptable under common Holding company?
5. Any ongoing use for [FG]/[GH] (if [XC] moved)?
6. Mechanism to deal with minority interests
7. Other estate planning issues
The husband said that these were notes he prepared for the meeting. Counsel for the husband then called for the production of the notes of the meeting taken by Clayton Utz. After some discussion, the trial judge noted that the agreed course to deal with that call was that Clayton Utz would take steps to identify any such documents and particularise any claim for privilege.
On 6 August 2015 the matter was again before the court. At that stage of the proceedings the husband was in the course of being cross-examined by counsel for XC, although still in advance of the hearing. Counsel for XC informed the court that a file note of the meeting on 20 June 2003 had been located by Clayton Utz as well as an agenda for the meeting. XC claimed privilege over both documents. The call for the documents was adjourned so that an affidavit seeking to establish that claim of privilege could be prepared.
On 20 August 2015 the issue returned to court. The husband was still being cross-examined. Counsel for XC relied on a further affidavit of Mr HR sworn on 10 August 2015 in which he referred to a file note and agenda that had been identified earlier. He said:
11. Although the agenda and file note were physically located on the “Structuring Advice 2004” file, I am informed by [Mr EF], who is the Credit Management Officer at Clayton Utz and has access to the time and billing records of Clayton Utz, that:
(a) the “Structuring Advice 2004” file was opened on 19 October 2004;
(b) time for attendance at the meeting was recorded on a Clayton Utz file titled “Realignment” (Clayton Utz matter no. […]) (Realignment file);
(c) the Realignment file was opened in the name of [Y Pty Ltd] (which I understand to be a former name of [XC]) on 18 December 2002;
(d) time for attendance at the meeting was billed to [Y Pty Ltd] on 30 September 2003 (invoice number […]); and
(e) invoice number […] was paid by [Y Pty Ltd] by cheque on 7 November 2003.
XC then sought to resist the husband’s claim for production of the file note and agenda asserting that it was entitled to claim legal professional privilege over the documents. In doing so it relied on the two affidavits of Mr HR and called no other evidence.
The reasons for judgment of the trial judge
Her Honour commenced her reasons by referring to s 118 of the Evidence Act1995 (Cth) (“the Evidence Act”) which provides as follows:
Legal advice
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 a lawyer; or
(b) a confidential communication made between 2 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.
We pause to observe that, in the absence of any equivalent of s 131A of the Evidence Act 1995 (NSW) and the Evidence Act 2008 (Vic), claims for production of documents are dealt with under common law (Esso Australia Resources Limited v Commissioner of Taxation of the Commonwealth of Australia (1999) 201 CLR 49 at [59] - [63], Dupont & Chief Commissioner of Police and Anor (2015) FLC 93-648 at [32]).
In any event, the common law position is essentially the same as that provided for under the Evidence Act (National Employers’ Mutual General Insurance Association Limited v Waind and Anor (1979) 141 CLR 648 at 654, Esso at [65] - [66]). Counsel and the trial judge approached the application on that basis.
Her Honour stated that the first step in determining the claim for privilege was to ascertain the identity of the client at the meeting on 20 June 2003. After referring to Mr HR’s evidence her Honour said:
32.There is force in the submissions of Senior Counsel for the wife, Mr Dickson QC, that in the context of asserting privilege, [XC] has first to establish the nature of the communications that took place at the meeting on Friday 20 June 2003. Furthermore, the mere fact that a file is opened in the name of a particular person or entity is not conclusive of anything. He referred to earlier evidence of Mr [HR], at paragraph 24 of the affidavit sworn 7 October 2014 to the effect that Clayton Utz had opened a file titled “[X] Group Pty Ltd”. In October 2014, Mr [HR] deposed:
I have conducted a search of the online records of the Australian Securities and Investments Commission and, based on the results of that search, it appears that there is no such legal entity. However, as this matter related to a corporate restructuring of the entities involved in the running of the [Y Pty Ltd] business, it appears to me that “[X] Group Pty Ltd” was used as a shorthand reference to those entities.
33.Mr [HR] has no personal experience of Clayton Utz having acted for the husband. At paragraph 10 of his first affidavit, sworn 7 October 2014, he deposed:
Neither I, nor any Clayton Utz lawyers involved in the review of documents for the purpose of compliance with the [husband’s] subpoena, had any involvement in the matters in which Clayton Utz acted for [Mr N Jess].
34.Mr Dickson QC further submitted that, the fact that a document was created in the course of giving advice to a particular client(s) is an essential element for the establishment of client legal privilege. He submits that there is no evidence conclusively identifying the client nor any evidence about the nature of the communications during the meeting on 20 June 2003.
35.Mr Dickson QC submits, correctly in my view, that “W6”, the relevant part of which is extracted at paragraph 17 above, merely informs the court of the topics which were intended to be discussed by [Mr N Jess].
36.On the basis of Mr [HR]’s evidence, I cannot be satisfied that the communications during the meeting were for the purpose of providing advice to [XC]. Absent a concession by the represented third parties that the husband’s list titled “Matters to be considered” is the “agenda” to which Mr [HR] refers and that the discussion followed the agenda, I cannot conclude what was discussed at the meeting.
(Emphasis added)
Thus her Honour, in those passages, did not determine the identity of the client at the June 2003 meeting. There was, however, a finding that the trial judge was not satisfied that the communications were for the purpose of giving advice to XC.
Her Honour went on to consider and reject a submission from XC that her Honour could infer from the circumstances that the purpose of the meeting was to provide legal advice. Her Honour said:
40.Having already heard much evidence in the case, I can comfortably conclude that, as at mid-2003, [Mr N Jess] was not materially distinguishable from the corporate entity [XC] and that he, for all intents and purposes, had control of it and other parts of the business empire although his reliance on [Mr JJ] was increasing. In these circumstances, I have not been able to place significant weight on the title of the file from which the documents were extracted and produced to the court or the fact that [XC] paid an invoice for time billed to that file.
The trial judge returned to the note written by the husband in planning for the meeting and discussed whether it could be inferred that it was the same document as the agenda over which privilege was claimed. Her Honour was inclined to infer that it was.
The trial judge then said:
44.Having regard to the evidence adduced by [XC] I reject the contention that [XC] was the only client at the conference on 20 June 2003. The contention of [XC] and the represented third parties, that the documents are subject to client legal privilege, must fail.
45.In point of fact, such evidence as there is leads me to be primarily satisfied that [Mr N Jess] was the client at the conference on 20 June 2003. By this I mean that there is more evidence tending to prove that [Mr N Jess] was the client seeking advice than there is evidence tending to prove the [XC] was the client seeking advice at this particular conference. I am supported in this view by the “Matters for clarification” document. I am satisfied that [Mr N Jess] went to the meeting intending to discuss issues which appear to have a personal estate planning perspective about them. Sure enough, there is mention of corporations and the implications and consequences for corporations and certain structures, but the direction of the matters which [Mr N Jess] wanted clarified appear to me to relate to whether the structures will satisfactorily meet his needs or whether he wants alternative structures.
46.It is not necessary for the ambit of this dispute for me to find that [Mr N Jess] was the client who sought and obtained advice at the meeting on 20 June 2003. I have set out my reasoning in this regard to demonstrate the basis upon which I have concluded that [XC] has failed to discharge the onus it bears to establish that client legal privilege attached to the documents.
47.If [Mr N Jess] was the client at the meeting on 20 June 2003, it follows that any client legal privilege which attached to the documents is his alone to waive. As [XC] was the only person asserting client legal privilege over the documents and [XC] has failed to establish that such privilege exists, the opposition of [XC] is no impediment to the document being produced. As [Mr N Jess] and his advisers have not yet seen the documents, however, it is appropriate that the documents be released to them.
In these passages the trial judge sets out the basis for leaning towards a finding that Mr N Jess was the client at the meeting to whom advice was given. Importantly, however, her Honour goes on to state that such a finding is unnecessary because XC had failed to prove client legal privilege attached to the documents. That is to say, XC failed to prove that the communication was privileged.
Her Honour moved to the application, if any, of s 124 of the Evidence Act, which provides as follows:
124 Loss of client legal privilege: joint clients
(1) This section only applies to a civil proceeding in connection with which 2 or more parties have, before the commencement of the proceeding, jointly retained a lawyer in relation to the same matter.
(2)This Division does not prevent one of those parties from adducing evidence of:
(a) a communication made by any one of them to the lawyer, or
(b) the contents of a confidential document prepared by or at the direction or request of any one of them,
in connection with that matter.
Her Honour was satisfied that this section applied and that, to the extent there was a joint privilege held by the husband and XC, the husband alone could waive it.
This led the trial judge to make the following conclusions:
61.My primary decision is that [XC] has failed to establish that client legal privilege attaches to the documents. This is because there is no evidence of the nature of the communications during the conference on 20 June 2003 which led to the creation of the documents. My impression is that there is more evidence to support the proposition that [Mr N Jess] was the sole client than there is to support the proposition advanced by [XC] that [XC] was the client to the exclusion of [Mr N Jess]. However, it is not necessary for me to decide that point in order to determine this dispute. It is sufficient for me to find (as I have) that [XC] cannot use client legal privilege, within the meaning of s118 of the Evidence Act 1996, to refuse to produce the documents.
62.As to the alternative case countenanced by counsel for [XC], that the documents are subject to joint client legal privilege:-
a)I could have accepted that Clayton Utz was jointly retained by [XC] and [Mr N Jess];
b)I am satisfied that pursuant to s 124 of the Evidence Act 1995, [Mr N Jess] alone can waive the joint client legal privilege without the concurrence of [XC];
c)I am satisfied that the fact that [Ms E Jess] and her advisors may gain access to the documents is immaterial to the entitlement of [Mr N Jess] to adduce evidence of the contents of the documents if he wishes to do so.
Leave to appeal
Leave to appeal may be granted where an error of principle or a substantial injustice can be established.
This application raised significant issues as to confidential client communications. We would therefore grant leave, particularly as the issue of privilege is an important one.
The appeal
Before dealing with the grounds we shall set out the approach to be taken to applications of this kind.
There is no doubt that a person seeking to resist the production of a document to a court on the ground that it records a confidential communication must prove its nature by sufficient and persuasive evidence.
In Barnes and Anor v Commissioner of Taxation (Cth) (2007) 242 ALR 601 the Full Court of the Federal Court said at 605:
18. The authorities emphasise the need for focused and specific evidence in order to ground a claim for legal professional privilege. In Kennedy v Wallace (2004) 142 FCR 185; 213 ALR 108; [2004] FCAFC 337 (Kennedy), Black CJ and Emmett J reiterated the principles that verbal formulae and bare conclusory assertions of purpose are not sufficient to make out a claim for privilege: see also National Crime Authority v S (1991) 29 FCR 203 at 211; 100 ALR 151 at 158–60 (per Lockhart J); Grant at CLR 689; ALR 589 (per Stephen, Mason and Murphy JJ). Where possible the court should be assisted by evidence of the thought processes behind, or the nature and purpose of advice being sought in respect of, each particular document. The fact that generalised evidence is not challenged in cross-examination does not mean that such evidence must be accepted, particularly when it is as manifestly inadequate as it is in this case. As in Kennedy, mere general assertions of the purpose of creation of the documents are insufficient to discharge this onus. Even though in that case some evidence as to the purpose of particular records was adduced, Allsop J at [168] considered that the onus had not been discharged because the evidence did not permit a conclusion to be drawn as to the dominant purpose of the creation of any particular document or entry in a document. Simply to show that one purpose for creation of the document was to obtain legal advice or assistance is not good enough.
In Bailey and Anor v Director-General, Department of Land and Water Conservation and Ors (2009) 74 NSWLR 333, after referring to the above passage from Barnes, Tobias JA said at 344, “…failure to file and serve adequate evidence to support a claim for privilege may well have similar consequences…” and that parties should not assume that any deficiencies in the evidence will be covered by the judge inspecting the document in question.
This point was re-iterated by Murphy J, with the agreement of May and Thackray JJ, in Strahan & Strahan & Commissioner of Taxation (2013) FLC 93-570 at 87,664 – 87,665. At 87,665 and 87,667 his Honour said:
29. … For present purposes, the important point is that a party cannot rely on the potential examination of documents by the court to cure deficiencies in the description of documents alleged to be subject to privilege. That point is underscored by the summary of the current state of the authorities as to what is required when describing documents said to be covered by privilege in Heydon, D, Cross on Evidence, 9th ed, LexisNexis, Chatswood, 2012 as follows (at 25240):
Given the personal nature of this privilege it must be claimed by the person entitled to it. Where the claim is made with respect to subpoena[ed] documents the witness may assert a claim to privilege when attending the court in response to the subpoena or when application is made for inspection of the documents produced. No particular form of words is necessary provided language is used which is capable of being reasonably understood to invoke the privilege. It is for the party claiming privilege to justify the claim, either by pointing to the nature of the documents or (in the absence of agreement) by evidence describing the circumstances in which they were brought into existence. Resort to verbal formulae or ritual is inadequate. Focused and specific evidence demonstrating the dominant purpose is needed. But in most cases the factual basis for the claim to privilege must be placed before the court by admissible evidence or by agreement. This requirement is not satisfied by the traditional, but reprehensible, practice of parties making an affidavit of documents baldly asserting that the privileged purpose was the dominant purpose for which the document was brought into existence. The assessment of the disputed claim to privilege will then be undertaken upon the facts deposed to, including the circumstances attending the creation of the document including such statutory provisions as are relevant.
…
32.Further, whilst subsequently deemed to be incorrect in respect of the nature of the “test” to be applied, the following statement of Stephen, Mason and Murphy JJ in Grant (at 689) remains applicable:
He may succeed in achieving this objective [of successfully claiming legal professional privilege] by pointing to the nature of the documents or by evidence describing the circumstances in which they were brought into existence. But is [sic] should not be thought that the privilege is necessarily or conclusively established by resort to any verbal formula or ritual…
Ground 1 - The trial judge failed to give adequate reasons
Ground 3 – The trial judge failed to inspect the file note and agenda
XC submits that the trial judge failed to give reasons for two significant decisions. The first was that no reasons were given for the finding that “…as at mid-2003 [Mr N Jess] was not materially distinguishable from [XC]…”. The second was that the trial judge failed to give reasons for her decision not to inspect the file note and agenda produced by Clayton Utz. It was further submitted that her Honour erred in not inspecting the documents.
The obligation of a court to give adequate reasons for its decision is well known.
In Bennett and Bennett (1991) FLC 92-191 the Full Court said at 78,266:
In Sun Alliance Insurance Limited v Massoud (1989) VR 8, the Full Court of the Supreme Court of Victoria, consisting of Fullagar, Gray and Tadgell JJ followed the principles established by the New South Wales Court of Appeal. Gray J, who delivered the principal judgment, said, at 18:
“The adequacy of the reasons will depend upon the circumstances of the case. But the reasons will, in my opinion, be inadequate if: -
(a)the appeal court is unable to ascertain the reasoning upon which the decision is based; or
(b)justice is not seen to have been done.
The two above stated criteria of inadequacy will frequently overlap. If the primary Judge does not sufficiently disclose his or her reasoning, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected.”
We think that the test propounded by Gray J is a particularly useful one, and one which also applies to discretionary judgments…
Importantly though, in Whisprun Pty Ltd (formerly Northwest Exports Pty Ltd) v Dixon (2003) 200 ALR 447 Gleeson CJ, McHugh and Gummow JJ said at 464:
62. …A judge’s reasons are not required to mention every fact or argument relied on by the losing party as relevant to an issue. Judgments of trial judges would soon become longer than they already are if a judge’s failure to mention such facts and arguments would be evidence that he or she had not properly considered the losing party’s case.
Further, in A v J (1995) FLC 92-619 the Full Court said at 82,232:
It is important to guard against too zealous an application of the requirement to give reasons, particularly in circumstances where it is argued that inadequacy in the reasons lies in the failure to make findings of fact leading to a finding of a material or an ultimate fact: see Soulemezis per Mahoney JA.
The trial judge did not set out the evidence that she had already heard in the case that led her to the view that “…as at mid-2003, [Mr N Jess] was not materially distinguishable from the corporate entity [XC] and that he, for all intents and purposes, had control of it…”. To that extent, it can be said that reasons for that finding were not given.
However, it is necessary to understand the basis for the trial judge’s decision, which took place mid-hearing. In doing so it must be borne in mind that counsel for the husband had submitted to her Honour that XC had to establish its claim by proving the nature of communication, i.e. that it was a confidential communication and by proving that the client was XC. It was the position of the husband that XC had failed to establish either aspect. Thus, we are not satisfied that the impugned finding was relevant, and accordingly that the lack of reasons therefor was fatal, because the trial judge’s primary finding was that XC had failed to prove the confidential nature of the communication for the following reasons.
In the first sentence of [32] of the trial judge’s reasons, the trial judge identified the need for XC to prove the confidential nature of the communication. At [34] her Honour noted the submissions that there was no evidence identifying the client or the nature of the communications.
Her Honour then made the finding at [36] that she could not be satisfied that the communications were for the purpose of providing advice to XC and that she could not conclude what was discussed at the meeting.
At [39] her Honour rejected the submission that the purpose of the communications could be inferred from the circumstances. One of the reasons for this was the dearth of evidence about the communications themselves.
At the end of the judgment, at [61], her Honour said that her primary decision was that XC had failed to establish that client legal privilege attached to the document “…because there is no evidence of the nature of the communications during the conference on 20 June 2003…”. Her Honour did go on to say that it was her impression that there was more evidence to support the proposition that the husband was the sole client as opposed to XC but that “…it is not necessary for me to decide that point…”.
Taking her Honour’s reasons as a whole, as we must, it is sufficiently clear that her decision was based on the lack of evidence as to the nature of the communications. The trial judge’s reasoning process is clear. It follows that the finding that the husband was indistinguishable from XC was not a central part of those reasons. Ultimately, it seems, despite the wording of the earlier paragraphs, her Honour did not finally determine this issue of who was the client. Given that the failure to prove the nature of the communication was fatal to the claim of privilege by XC, such a finding did not need to be made.
As we have said therefore, any lack of reasons for this finding as contended for by XC was not relevant to the critical part of the trial judge’s decision.
The second aspect of this challenge is that the trial judge did not inspect the documents the subject of the claim for privilege and gave no reasons for taking that course. Her Honour was invited to inspect the documents by XC and that course was not opposed by the husband. Her Honour did not give reasons for not inspecting the documents herself.
In Bailey at 348 - 349, Tobias JA referred to recent authority as to the judge inspecting the relevant documents as follows:
60.A common law claim for legal professional privilege was recently discussed by Giles JA, with whom Mason P and Beazley JA agreed, in State of New South Wales v Jackson [2007] NSWCA 279. His Honour said (at [24]):
“In ruling on a claim to legal professional privilege or client legal privilege the court may inspect the relevant documents (Grant v Downs (1976) 135 CLR 674 at 677 and 688–689; Trade Practices Commission v Sterling (1979) 36 FLR 244 at 246–247; Woollahra Municipal Council v Westpac Banking Corporation (1994) 33 NSWLR 529 at 541–542; Esso Australia Resources Ltd v Commissioner of Taxation at [52]; AWB Ltd v Cole (2006) 152 FCR 382 at 391; see also s 133 of the Evidence Act 1995). Inspection is discretionary (Grant v Downs (at 688–689); District Council of Mallalla v Livestock Markets Ltd (2006) 94 SASR 258 at [30]), for such assistance as it may provide in arriving at the documents’ status. In Esso Australia Resources Ltd v Commissioner of Taxation (at [52]) Gleeson CJ and Gaudron J and Gummow J said, after observing that a claim for privilege is not conclusively established by use of a verbal formula, that a court ‘should not be hesitant to exercise’ its power to examine documents. Where the parties have put evidence before the court, however, beyond the use of a verbal formula, I respectfully remain of the view expressed in Woollahra Municipal Council v Westpac Banking Corporation (at 542), that the court should not unnecessarily pay regard to material which can not be known to the party challenging the claim to privilege.”
61.In Woollahra Municipal Council v Westpac Banking Corporation (1994) 33 NSWLR 529, Giles J (as he then was) at 542 (being the page reference referred to by him in State of New South Wales v Jackson) when considering whether he should inspect the documents in dispute for the purpose of reaching a conclusion as to whether they were privileged, observed:
“In Grant v Downs (1976) 135 CLR 674 at 689, the power to do so [that is, to inspect] was recognised and it was said that ‘in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence’. Inspection should not be undertaken unless there is good reason to do so. The Court should be able to proceed upon evidence describing the documents and the circumstances of their creation, and should not unnecessarily pay regard to material which cannot be known to the party challenging the claim to privilege.”
62.His Honour was there dealing with the power to inspect at common law. The critical word in the passage referred to is “unnecessarily”. If the court is unable to proceed upon the evidence, as in the present case, then in my view there is no impediment to the court exercising its undoubted discretion under s 133 to order that the document or documents be produced and inspected for the purpose of determining the question of whether privilege attaches. How the court utilises the power to inspect under s 133 will obviously depend on the circumstances of each case. I do not consider that merely because the party resisting the claim for privilege objects to the judge exercising the power under s 133 is of itself a legitimate reason to refuse to exercise the discretion: compare Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380 at [66] per McDougall J. As was noted by Giles JA in State of New South Wales v Jackson in the passage which I have recorded at 348 [60] supra, in Esso Australia Resources Ltd v Commissioner of Taxation(Cth) (1999) 201 CLR 49 at 70 [52], Gleeson CJ, Gaudron J and Gummow J observed that a court “should not be hesitant” to exercise its power to examine documents.
In Bailey the complaint was that the trial judge had inspected the documents.
It is true that the High Court has encouraged judges to inspect the documents themselves. In Grant v Downs (1976) 135 CLR 674 Stephen, Mason and Murphy JJ said at 689:
…The court has power to examine the documents for itself, a power which has perhaps been exercised too sparingly in the past, springing possibly from a misplaced reluctance to go behind the formal claim of privilege. It should not be forgotten that in many instances the character of the documents the subject of the claim will illuminate the purpose for which they were brought into existence.
In Trade Practices Commission v Sterling (1979) 36 FLR 244, Lockhart J said at 246 - 247:
It is not open to doubt that the court has power, in a proper case, to inspect documents where a claim of privilege is made to resist an application for inspection of documents by the opposite party. See Grant v. Downs, and Westminster Airways Limited v. Kuwait Oil Co. Limited. However, it is as well to bear in mind what was said by Jenkins L.J. in Westminster Airways Limited v. Kuwait Oil Co. Limited: “But there is nothing in the rule, or in the authorities, to constrain the court to hold that, in every case where a claim to privilege is made and disputed, the party seeking production is entitled to come to the court and (as it were) demand as of right that the court should go behind the oath of the opposite party and itself inspect the documents. The question whether the court should inspect the documents is one which is a matter for the discretion of the court, and primarily for the judge of first instance…”
(Footnotes omitted)
Finally, there are the comments of Brereton J to the same effect in Hancock, where his Honour said:
31. ...Moreover, it has often been observed that a party is not entitled to insist on the court inspecting the documents, it being a matter for the discretion of the judge, who will only do so if there is good reason. While those comments have been made in response to requests by applicants for production asking the court to go behind the affidavit evidence in support of the claim and inspect the documents, they apply a fortiori where the claimant, having adduced insufficient evidence otherwise to sustain the claim, requests the court to inspect the documents (to the exclusion of the applicant).
…
35....No party – least of all the party claiming privilege – may insist that the court inspect the documents.
These authorities establish that any inspection of documents is essentially an issue for the trial judge. They support a trial judge’s reticence to do so in order to overcome a lack of evidence adduced by the person seeking to maintain the privilege. This is so even though r 15.26(2) of the Family Law Rules 2004 (Cth) permits the court to compel the production of documents to it for the purpose of ruling on an objection to production.
In this case the trial judge was well engaged in the hearing. At the time her Honour heard the application, the husband’s cross-examination had continued for some days. One can well understand that the trial judge would be cautious about taking a step that might prejudice the hearing continuing before her. It is possible that a judge, having inspected a document and found that it was privileged, might consider that the information of which they were now aware, but could not be before them by way of evidence, was of such a nature that they should not properly continue to hear the case.
Importantly, XC had been given two opportunities to adduce evidence to establish its claim for privilege and the matter had been adjourned for almost two months to allow for that evidence to be given.
The obligation was upon XC to adduce sufficient evidence to establish the claim, which the trial judge found it had failed to do. As inspection of documents is very much a matter for the trial judge, and as such inspection should not be a substitute for proper evidence, her Honour was not obliged to inspect the documents herself. Thus we are not satisfied that her Honour was in error in not inspecting the documents.
However, we do consider that her Honour was in error in failing to provide any reasons for not inspecting the documents. As the authorities clearly identify, that decision is a discretionary one for the trial judge, but that does not absolve the trial judge from providing reasons for that decision, and particularly where the trial judge is requested to inspect the documents. Further, depending on the circumstances, those reasons could be quite brief. Nevertheless, we do not consider this error to be fatal. As is also apparent from the authorities, it is not open to a party to insist that a trial judge inspect the documents, and the decision to inspect or not is one entirely for the trial judge. Significantly, and to repeat, in this case the trial judge found that XC had not adduced sufficient evidence to establish the claim for privilege, and it is well established that an inspection of the documents by the trial judge should not be a substitute for the presentation of proper evidence. Her Honour clearly recognised this, and although no reasons were provided, it is readily apparent that that is why her Honour did not inspect the documents.
Ground 2 - The trial judge erred in failing to recognise [XC] as a distinct legal entity
XC complains that the trial judge erred “…both in fact and in law by failing to distinguish between [Mr N Jess], the individual, and [XC], the corporation.”
As the trial judge spent considerable time in her reasons trying to determine whether the client was the husband or XC, it is clear that her Honour was well aware that they were separate legal entities. That is so, even if, at a certain time, the husband, by virtue of his control of XC, was said to have been indistinguishable from it.
The complaint, as articulated in oral argument, became a complaint that the finding that the husband was the sole client could not be sustained. As we have already explained no such finding was made.
There can be no error here.
Ground 4 - The trial judge erred in drawing a Jones v Dunkel inference from the failure of [XC] to call [Mr B]
Mr B had been employed by the husband in 1997 to assist with his commercial and personal affairs, which he did until 2010. He was employed by one of the entities controlled by or associated with the husband. As we have said, he is one of the “represented third parties” involved in these proceedings.
The trial judge said:
38.Mr [B] has sat in Court for the cross examination of Mr [N Jess]. Mr [B] attended the meeting with Mr [Z] at Clayton Utz on 20 June 2003. As one of the represented third parties and a director of [XC], Mr [B] has had an opportunity to inspect the documents. Mr Waller QC, for [XC], asserted that “[Mr [B] was] there because he was a director of [XC] having been appointed to that position on 28 September 2001”. Notably, Mr [B] was not called to give evidence in support of [XC]’s claim for privilege, on the issue of what was discussed at the meeting on 20 June 2003, or otherwise. Consistently with the rule in Jones v Dunkel (1959) 101 CLR 298, I infer that Mr [B]’s evidence in relation to the identity of the client and/or some indication of topics discussed at the meeting on Friday 20 June 2003 would not have assisted the case of [XC].
A person cannot be compelled to waive his or her privilege. Thus no adverse inference can be drawn from their failure to give evidence as to the nature of the communication. In Standard Chartered Bank of Australia Ltd and Anor v Antico and Ors (1993) 36 NSWLR 87 Hodgson J said at 94:
…However, it seems to me clear that if there is other evidence from which the court may draw an inference as to the content of legal advice (or as to the commission of an offence in the case of the privilege against self-incrimination), the court may be able to draw that inference on the balance of probabilities in the absence of contrary evidence from the person claiming the privilege. What the court cannot do is to gain extra assistance in drawing that inference from the Armory v Delamirie or Jones v Dunkel principle. A fortiori, the court cannot draw an adverse conclusion if there is no other evidence supporting the conclusion. Most particularly, the court must not draw any adverse inference sub silentio without referring to it.
In Bailey v Director General, Department of Natural Resources (formerly known as Department of Land and Water Conservation) [2014] NSWSC 1012 Fullerton J said at [331]:
331. Mr Williams submitted that the differing iterations of the prosecution memorandum do nothing to displace the settled principle in Antico that subject only to waiver, or where an issue is raised as to person's state of mind to which it is said that legal advice is likely to have contributed, no adverse inference can be drawn against a party from a claim of legal professional privilege. He submitted that it is contrary to authority that a Jones v Dunkel inference can arise from the failure of the person claiming the privilege to give evidence as to the contents of the material the subject of the privilege or the circumstances in which the advice was sought or given (or in this case the privileged communication was made). I accept that submission.
Of course, it is obvious that a person is entitled to adduce evidence as to the nature of the communication without disclosing the actual communication in respect of which privilege is claimed. If it were otherwise it would make nonsense of the privilege. However, it is common, as the above authorities make plain, for there to be evidence from which conclusions may be drawn that the communications were for the predominant purpose of giving legal advice. That evidence can be given without revealing the privileged advice.
Mr B was present at the meeting. He was not the party claiming privilege although he may have been a director of XC, which was claiming privilege. If so, of course, he could not be compelled to waive the privilege of XC.
Neither of the documents the subject of the claim for privilege was prepared by Mr B. The evidence does not disclose whether he was even aware of them at any relevant time. That being so, it is difficult to see what evidence Mr B could give as to what occurred at the meeting that was relevant to the documents.
Further, it is important to understand that an inference drawn from a failure of a relevant witness to give evidence merely enables the trial judge to more readily accept the evidence of the opposing party. Here, where the trial judge found there was insufficient evidence, a finding that Mr B could have given evidence did not alter that basic finding. There was no evidence of the opposing party that could be accepted more readily because of the inference. There was simply insufficient evidence all round.
In these circumstances, there was no basis for drawing a Jones v Dunkel inference from the failure to call Mr B and the trial judge erred in doing so.
However, the error of making an adverse inference was of no weight or relevance, and did not affect the outcome of the proceedings. Thus it cannot result in the appeal being successful.
Grounds 5 – 8 - The trial judge erred in finding that the husband was the client to whom advice was provided
As we have already pointed out, despite some infelicity in wording of earlier paragraphs in the reasons, the trial judge, ultimately, did not find the husband to be the client.
In submissions before us, XC relied upon the agenda and file note itself, which it urged us to inspect together with two documents tendered by the husband and accepted into evidence shortly after the trial judge had given her ruling requiring production of the agenda and file note. Inspection of the agenda and the file note was not opposed by the husband, but inspection of the other documents was opposed.
As we have said, a court may inspect the documents themselves to assist in determination of the claim for privilege. That, of course, involves the court having regard to material that is unknown to the claimant’s opponents. We have referred in some detail to the authorities that discuss this issue. To that discussion we would add that in Barnes, referred to above, the Full Court decided to inspect the documents on the appeal. We decided to take the same course. It is important to note that we did so in reliance on the common law power of courts to do so and not in reliance on s 133 of the Evidence Act which only applies where a party is seeking to adduce the evidence.
Having inspected the file note (including a typed copy of the handwritten notes) and the agenda, it is sufficient to say that these documents do not point to a clear conclusion that XC was a client.
As to the other two documents, they were the subject of an Application in an Appeal filed by XC on 3 September 2015. They were two further documents obtained by Clayton Utz. The client name is “[N Jess]”. The second is an “Engagement Letter and Costs Agreement” dated 4 September 2002 and addressed to “Mr [N Jess]”.
It is submitted that these documents indicate that a discrete file was opened by Clayton Utz in 2002 with the husband as the client. Thus, the submission continued, Clayton Utz distinguished between the husband and his affairs on the one hand and XC and its affairs on the other hand and that it is more likely than not, XC was the client at the meeting on 20 June 2003 as it paid for it. This, it is submitted, undermines the finding of the trial judge that the “Realignment File” which had been opened in the name of Y Pty Ltd was the relevant file.
This submission has some force but it does not grapple with the essential point that the real basis of the trial judge’s conclusion was not the identity of the client but rather the lack of evidence as to the nature of the communications. We entirely agree with the trial judge that XCG did not prove that the communications at the meeting were for the dominant purpose of providing legal advice. As the claim failed at that hurdle it is irrelevant who the client may have been.
The application to adduce further evidence will be dismissed because, in the light of that finding, it is irrelevant.
Grounds 9 - 11 - The trial judge erred in applying s 124 of the Evidence Act
Her Honour found that:
62. As to the alternative case countenanced by counsel for [XC], that the documents are subject to joint client legal privilege:-
(a)I could have accepted that Clayton Utz was jointly retained by [XC] and [Mr N Jess];
(b)I am satisfied that pursuant to s 124 of the Evidence Act 1995, [Mr N Jess] alone can waive the joint client legal privilege without the concurrence of [XC];
(c)I am satisfied that the fact that [Ms E Jess] and her advisors may gain access to the documents is immaterial to the entitlement of [Mr N Jess] to adduce evidence of the contents of the documents if he wishes to do so.
Counsel for the husband correctly submitted that s 124 is only engaged when a party seeks to adduce the privileged evidence. No party has yet done that and the point is premature, as the section has not been engaged. The above finding by the trial judge had no impact on the conclusion reached.
Conclusion
We have found no merit in any of the grounds of appeal save and except in relation to one aspect of Ground 1, and in relation to Ground 4 where we do find merit. However, as explained, although we consider that her Honour has erred, those errors do not call for appellate interference with her Honour’s orders. Accordingly, we propose to dismiss the appeal.
Costs
Senior counsel for XC accepted that in the event that the appeal was unsuccessful it should pay the wife’s costs. That is an appropriate order in the circumstances. We will make that order.
The husband filed short submissions declaring support for the submissions of the wife and indicating that he did not wish to be heard on the appeal but would abide the decision of the court. The appropriate course is that as between XC and the husband there should be no order as to costs.
I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Aldridge & Cronin JJ) delivered on 24 March 2016.
Associate:
Date: 24 March 2016
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