Legal professional privilege: dominant versus secondary purpose September 14, 2019

DOUGLAS v MORGAN

[2019] SASCFC 76

Legal professional privilege

41 Legal professional privilege “is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings”.  

42 The rationale for the existence of the privilege “is that it promotes the public interest because it assists and enhances the administration of justice by facilitating the representation of clients by legal advisers, the law being a complex and complicated discipline. This it does by keeping secret their communications, thereby inducing the client to retain the solicitor and seek his advice, and encouraging the client to make a full and frank disclosure of the relevant circumstances to the solicitor.”

43 The formulation of the rule and identification of its rationale emphasise the centrality of the confidential relationship between client and lawyer to the existence of the privilege. Several aspects of the criteria for the existence of the privilege follow from this centrality.

44 First the privilege protects communications between client and lawyer rather than information or documents per se. Information that is obtained and/or recorded, and documents created that record such information, for the purpose of communication between client and lawyer are capable of being protected provided that they are obtained, recorded or created for the dominant requisite purpose of legal representation.

45 Secondly the privilege only protects confidential communications. It is not necessary in the present case to explore the meaning of this requirement.

46 Thirdly the communication must be made or the information must be obtained or recorded or the document must be created for the dominant purpose of the provision of legal services by the lawyer to the client. The legal services will typically comprise advice or representation in legal proceedings but, as the formulation above suggests, is not necessarily confined to these two types of legal services. In addition, while advice can be given in an entirely non-litigious context, advice can also be given in a litigious context in which case there will often be an overlap between purposes of advice and representation. In a litigious context, litigation need not necessarily be on foot: a communication might be made between client and lawyer or information obtained or recorded or document created for the purpose of provision to a lawyer in connection with threatened or anticipated litigation.

47 In formulations of the rule, on occasions reference is merely made to actual, threatened or anticipated litigation. On other occasions reference is made to actual, threatened or reasonably anticipated litigation. The meaning of the adverb “reasonably” in this context is unclear. It may merely serve to emphasise that the communication must genuinely be made between lawyer and client or the information genuinely obtained or recorded or document genuinely created for the purpose of provision to a lawyer for use in connection with anticipated litigation: if litigation is not reasonably anticipated this may (not must) give reason to doubt the existence of the requisite purpose. On the other hand, it may mean that, even though the client and lawyer genuinely anticipate litigation and the information is genuinely obtained or recorded or document created for provision to the lawyer for use in connection with anticipated litigation, the test will not be satisfied unless a reasonable person would have anticipated litigation. If the latter, the rationale for the requirement is obscure. For reasons that will appear, it is not necessary to resolve this question in this case.

48 In formulations of the rule, it is accepted that information provided or documents created by third parties for the dominant purpose of use by a lawyer in litigation is protected. However, different opinions have been expressed whether information provided or documents created by third parties for the dominant purpose of use by a lawyer in providing advice, or at least non-litigious advice, is protected. One line of authority decides that such information and documents are protected; another line of authority decides that they are not. It is difficult to identify a rationale for applying a different approach when the purpose of the provision of the document to lawyers is to provide advice, or non-litigious advice, as opposed to legal representation in proceedings. In formulations of the rule, albeit at a general level, by the High Court, such as the formulation quoted at [41] above, there is no suggestion of such a distinction. However, this question does not arise on the present appeal because Ms Douglas does not contend on appeal that the purpose of obtaining the Investigation Report was for provision to solicitors for advice.

49 Fourthly the purpose of the communication, information or document being for the provision of legal services by the lawyer to the client must be the dominant purpose. “Dominant” in this context is to be contrasted with “primary” or “substantial”. The purpose must have “clear paramountcy”.

50 Fifthly it follows that the first step in determining whether privilege exists in respect of a communication or information obtained and/or recorded or document created is to make a finding as to the purpose or purposes thereof. If there is a single purpose, it is necessary to identify that purpose and determine whether it was for the provision of legal services by a lawyer to a client (a protected purpose). If there are two purposes, it is necessary to identify each purpose, determine whether each was a protected purpose or some other purpose (a non-protected purpose) and if one purpose was a protected purpose and another purpose was not, whether the protected purpose was the dominant purpose.

51 Sixthly the time at which the relevant purpose or purposes are to be ascertained is at the time of the communication or the obtaining or recording of the information or creation of the document in question. In the case of a request for a report, ordinarily (unless circumstances materially change between the time of the request and receipt of the report) the relevant time will be when the report is requested because the purpose may be expected to be a continuing one. The mere fact that the information obtained and recorded or document created is not ultimately used to give advice or represent a party in litigation or otherwise for the provision of legal services does not in itself negate the existence of privilege. On the other hand, the subsequent use of the information may throw light on the purpose for which it was obtained and hence be of evidentiary value in ascertaining that purpose.

52 Seventhly the ascertainment of the relevant purpose or purposes in this context principally involves applying a subjective test. In the case of a document, the inquiry is directed to the purpose of the person who created it or, where applicable, the person under whose direction it was created. The purpose of the creator or commissioner of a document is largely equated to the use intended to be made of the document. Intention is classically ascertained using a subjective test. The concept of purpose in this context is similar to the concept of purpose in the context of the phrase “the purpose of substantially lessening competition” in section 46 of the Competition and Consumer Act (Cth) which involves a subjective test (acknowledging that the meaning of a word in one context is not necessarily the same in another context). Evidence from the person who created or commissioned the creation of the document is admissible as direct evidence of intended use or the purpose of creation. However, intention – and purpose – can be and often are inferred from the objective circumstances. Direct evidence from the person concerned might be rejected based on the objective circumstances. In addition, if for example a document was objectively incapable of serving the intended use or performing the propounded purpose, it might not be regarded as having been created for the propounded purpose. Although the test is sometimes described as “objective”, that language is probably used to denote these last three aspects of the concept of purpose. Bearing those aspects in mind, the test is perhaps best described as a subjective test with objective overtones.

53 Finally the onus of proof lies on the party propounding privilege.

Cases involving investigation

54 In Cataldi v Commissioner for Government Transport witness statements were taken, pursuant to working orders, from the bus driver and a witness in relation to a collision between a bus and the plaintiff. The New South Wales Court of Appeal proceeded on the basis (which was common ground) that the test for the existence of privilege did not require that the requisite purpose be the sole or dominant purpose but it was sufficient that it was merely one of several purposes. This test was later overruled by the High Court in Grant v Downs (in favour of the sole purpose test) and in Esso Australia Resources v Commissioner of Taxation (in favour of the dominant purpose test). The Court of Appeal held that it could be inferred that one of the purposes of taking the witness statements was for obtaining advice as to the defendant’s legal liability and conducting litigation arising out of the accident. 

55 In Grant v Downs several reports were provided to the Department of Public Health within days of the death of a patient at a Psychiatric Centre operated by the Department. An officer of the Department deposed that one of the purposes of the preparation of the reports was for submission to legal advisers to advise in relation to potential liability and represent the Department in any proceedings for damages. He said that other purposes were to determine whether there had been any breaches of discipline or faults in the security of the institution. Barwick CJ (who in dissent applied a dominant purpose test) held that the evidence fell far short of establishing that the dominant purpose was to obtain advice or aid the conduct of litigation.

56 In National Employers’ Mutual General Insurance Association Limited v Waind the employer’s workers compensation insurer obtained reports from loss assessors  and medical  reports  in relation to injuries suffered by an employee at his place of employment.  An officer of the insurer, Mr Tritton, gave evidence that the purpose of obtaining the reports was to deny liability and defend the matter in the Workers Compensation Commission.  The Judge at first instance  found that  there were two purposes of obtaining the reports; first to decide whether  the insurer’s insured was liable for claims made upon it; and secondly for use if litigation came about to form the basis for the insurer’s brief in opposing the application. The High Court held that the reports were not privileged. Mason J (with whom Barwick CJ, Stephen, Jacobs and Aickin JJ agreed) said:

Ninety per cent of the claims do not result in litigation and the documents are brought into existence so that the appellant can decide in the first instance whether it will pay compensation or dispute liability. In these circumstances the purpose of submitting the documents to solicitors is very much of a secondary consideration because a small proportion of the cases only proceed that far.

The evidence given by Mr. Tritton in response to the plaintiff’s counsel related to documents brought into existence with a view to providing a basis for discontinuing payments of compensation in cases in which an initial liability had been conceded or established. In this instance again, documents are brought into existence to enable the appellant to decide what it will do. In this situation, if the appellant decides to discontinue payments, litigation is likely to ensue. Although there is a greater likelihood that documents of this class will be submitted to solicitors for use in litigation, the primary function for which they are called into existence is, as the trial judge said, to enable the appellant to make a decision in the ordinary course of its business. Only when the appellant has made a decision to discontinue payments will the documents be submitted to solicitors for use in the subsequent litigation.

These facts do not sustain the existence of an overriding purpose of the kind which the appellant seeks to set up. If it had been the practice of the appellant to refer every claim and every case with the relevant reports to its solicitor for advice or information, the appellant might have been in a position to establish the existence of an overriding purpose which would found a claim to legal professional privilege. But the facts fall far short of this. 

57 The Court also rejected a contention by the insurer that the reports were created for a single overriding purpose which included deciding on liability and use in anticipated litigation.

58 In Nickmar Pty Ltd v Preservatrice Skandia Insurance Limited Nickmar claimed indemnity under its fire insurance policy. The insurer instructed solicitors to advise in relation to the fire claim and they in turn instructed loss adjusters to provide reports to them for the purpose of giving legal advice. There was no other purpose in obtaining the reports. Wood J held that the reports were privileged.

59 In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd an officer of the Commission, Mr Eva, investigated possible breaches of the Trade Practices Act with a view to the institution of proceedings. Goldberg J found that until a decision was made to institute proceedings, the purpose of creating the witness statements was a dual purpose of investigation and, if proceedings were issued, submission to lawyers for use in those proceedings, the latter not being the dominant purpose. Goldberg J said:

I am satisfied on this analysis of the evidence that up until at least 4 April 1996 Mr Eva brought the draft witness statements and such witness statements as were signed into existence for two purposes.  One purpose was as part of the Commission’s investigatory process to gather evidence together for submission to the Commission for consideration as to whether proceedings should be instituted.  The other purpose was as part of his preparation for the legal proceedings which he believed were prospective or reasonably anticipated…

When I consider the evidence overall, I am satisfied that a significant purpose for which the draft witness statements of Messrs Morrell, Dobson and Mrs Wiles and the George Weston employees came into existence up to 3 April 1996 was as part of the investigatory process and not for the sole or dominant purpose of prospective or reasonably anticipated legal proceedings.  The process of investigation is logically anterior to, and a precursor to, the point at which it may be said that proceedings are prospective or reasonably anticipated.

60 In Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority the employer’s insurer’s solicitors commissioned reports by a loss adjuster and engineers in relation to an injury suffered by a worker when a machine exploded for the purpose of giving legal advice in relation to anticipated litigation. There was no other purpose in obtaining reports. The Victorian Court of Appeal concluded that the reports were privileged.

61 In Perazzoli v BankSA, a division of Westpac Banking Corporation Limited a firm of solicitors was approached by investors in what was alleged to be a failed Ponzi scheme with a view to bringing proceedings to recover their losses. The solicitors created documents recording their communications with the investors and documents relating to work undertaken by them for the purpose of seeking advice from counsel. The Full Court of the Federal Court concluded that there was a relationship of solicitor and client between the solicitors and investors and the documents were created for the purpose of advice by the solicitors about, and use by the solicitors in, anticipated litigation.

Allianz’s purpose or purposes in commissioning the Investigation Report

62 The privilege was claimed by Ms Douglas because she is the party to the litigation.  However, the matter was argued at first instance and on appeal on the basis that legal professional privilege, if it existed in respect of the Investigation Report, belonged to Allianz rather than Ms Douglas.  It is convenient therefore to refer to the contentions made by the appellant on appeal as contentions by Allianz. Neither party suggests that anything turns on the question whether technically the privilege (if it exists) vests in Allianz or Ms Douglas. 

63 Although the initial claim for privilege articulated in Ms Douglas’ list of documents referred to a purpose of obtaining legal advice as well as use in proceedings and the Master in his conclusion referred to both advice and anticipated litigation, Allianz does not advance any contention on appeal that the Investigation Report was sought for the purpose of obtaining legal advice. Nor was there any suggestion in any of the contemporaneous documents or the affidavits that the Investigation Report was sought for the purpose of obtaining legal advice. This purpose therefore need not be further considered.

64 Starting with the Investigation Request, the reason for investigation was described as follows:

We wish to obtain a detailed account of the accident from the insured, witnesses and claimant, if possible in order to confirm the accident circumstances and ascertain the insured and claimant’s awareness prior to the accident. We ask that you also please comment on the credibility of those interviewed.

We would like a full description of the circumstances leading up to the event, during and after including exactly where the accident occurred (distances from kerb, lanes, objects etc), the speed that the vehicle was travelling at prior to the accident, whether the insured attempted to break [sic] or avoid the collision, where the damage was located. Further with regards to the claimant we wish to confirm which direction he [sic] came from, when he was noticed on the road, what other vehicles were around and what clothes he was wearing.

65 Considering the Investigation Request initially in isolation, the reason articulated by Ms Dunham for seeking a detailed account of the accident from the witnesses was to confirm the accident circumstances. The request on its face suggests that it was Allianz who wished to confirm the accident circumstances rather than anyone else. There is no mention of any intention to provide the information obtained to lawyers or that lawyers wanted the information. Contrary to the conclusion reached by the Master, there is nothing in the Investigation Request which indicates that the purpose of the request was to provide the information obtained to lawyers for advice or use in any litigation.

66 Considering the Investigation Request in context, it followed the Initial Claim from Mellor Olsson. The Mellor Olsson letter proceeded on the assumption that the response to the claim would come from Allianz (as opposed to lawyers). 

67 Critically, at the same time as she made the Investigation Request, Ms Dunham sent the Initial Response to the Mellor Olsson Initial Claim in the terms set out at [10] above. The Initial Response commenced by saying:

We refer to the above matter and confirm that we are attempting to obtain details of the accident from the participants and will communicate further with you as soon as possible following receipt of these details.68 In the context in which Ms Dunham was requesting the report from Verifact Investigations to obtain “a detailed account of the accident from the insured, witnesses and claimant”, her reference in her letter to Mellor Olsson to “attempting to obtain details of the accident from the participants” was unequivocally a reference to her request to Verifact Investigations for a report. 

69 In the first paragraph of the Initial Response, Ms Dunham said that “we” are attempting to obtain the details, by which she was referring to Allianz. She then said that Allianz would communicate further with Mellor Olsson as soon as possible following receipt of the requested details. She thereby conveyed an intention to provide a substantive response to the claim following and having had regard to the result of Allianz’ obtaining details of the accident from the participants (via Verifact Investigations).

70 Ms Dunham went on in the second paragraph to request blood alcohol results, which would be relevant to liability and in particular contributory negligence, and information which would be relevant to quantum. This information was explicitly requested “so that we can give consideration to your client’s claim”. The letter unequivocally conveyed that Allianz intended to consider and make a determination concerning liability and in due course quantum in respect of the claim. There was no suggestion that the information was to be provided to solicitors to advise on the claim or for use in litigation.

71 Ms Dunham in the third paragraph said that Allianz would adopt a position whether it would reimburse medico-legal disbursements progressively if Mellor Olsson made such a request prior to those disbursements being incurred. Again, the letter conveyed that Allianz would make this decision.

72 Ms Dunham in the fourth paragraph said that Allianz would consider reimbursement of other disbursements at finalisation of the matter. She said that it would only consider interim reimbursement if it entered into a prior agreement as part of the ‘Agreed Resolution Plan’ process. This paragraph further conveyed that Allianz would make the decisions concerning reimbursement of disbursements and finalisation of the matter. It also indicated that Allianz had in place a formal ‘Agreed Resolution Plan’ process for making decisions for interim reimbursement.

73 The fact that Allianz intended to make a determination in relation to liability is further corroborated by the standard Allianz Notification of Motor Vehicle Injury stating that Allianz would endeavour to advise the doctor and patient within five business days whether the cost of any further treatment would be paid by the Compulsory Third Party scheme on a without prejudice basis.

74 The context in which the Investigation Request and Initial Response were sent by Ms Dunham on 27 December 2012 included that, objectively assessed, Ms Dunham did not at that stage have sufficient information to make a decision whether or not to accept liability. The mere fact that a car hit a pedestrian did not necessarily entail that the car driver was negligent: it was necessary to ascertain the location and movements of the pedestrian immediately before the collision to determine whether Ms Douglas failed to keep a proper lookout or was otherwise negligent. The mere fact that a pedestrian was hit by a car did not necessarily entail that the pedestrian was not negligent: again it was necessary to ascertain location and movements of the pedestrian immediately before the collision. It is clear from the Investigation Request and Initial Response that Ms Dunham expected to obtain this information from the investigation through witness interviews, sketches and photographs and, once she received that information, would be in a position to make a determination as to Allianz’ attitude to liability.

75 The conduct by Ms Dunham on and up to 27 December 2012 unequivocally demonstrates that her immediate or primary purpose in requesting the Investigation Report was so that Allianz could make a determination in relation to liability, which she was not in a position to do in the absence of the information expected to be obtained and recorded in the Investigation Report, and then attempt to resolve the claim. Depending on the content of that information, prospectively Allianz would either admit liability, negotiate with a view to agreeing on an apportionment of liability or deny liability.

76 The subsequent conduct of Ms Dunham confirms this immediate or primary purpose of requesting the Investigation Report. On 25 February 2013 she telephoned Mellor Olsson, saying that Allianz’ liability investigations had not yet been completed and Ms Morgan’s blood alcohol certificate was required before any determination of liability could be made. On 8 May she formulated a position on liability based on the Investigation Report and her Technical Specialist subsequently approved her liability determination. On 12 June she wrote to Mellor Olsson in regards to liability and adopted the position that Ms Morgan’s injuries were caused by her negligence in crossing the Road and made or referred to some proposal for resolution of the claim. Ms Dunham in fact used the Investigation Report to determine Allianz’ response to the claim. Throughout the period from December 2012 to June 2013 there was no apparent contemplation of engaging lawyers to assist in Allianz’ response to the claim. Ms Dunham’s conduct after she received and read the Investigation Report on 5 March 2013 is evidence of her purpose because Mr Scholz in his affidavit said that her conduct of the claim was in accordance with general practice and all of the evidence points to her conduct after receiving the Investigation Report having been in accordance with her purposes before she received it. 

77 On the hearing of the appeal Allianz does not contend that it was not and is not open to find that a purpose of obtaining the Investigation Report was for Allianz to make a determination in relation to liability, although it stops short of admitting that this was a purpose of the Investigation Report. Allianz accepts that such a purpose is a non-protected purpose. 

78 Given Allianz’ role as claims agent for the Compulsory Third Party insurer in respect of motor vehicles in South Australia, and Ms Dunham’s role as a claims consultant responsible for the management of claims on behalf of Allianz, she must have anticipated from the outset that, if the claim was not admitted and if a negotiated outcome of the claim could not be achieved, there was a significant prospect that Ms Morgan would sue Ms Douglas for damages and Allianz would be obliged to engage solicitors defend the action. She must also have anticipated that, in that event, Allianz would provide the Investigation Report to its solicitors for the purpose of legal representation in the action. It may be accepted therefore that a secondary purpose of obtaining the Investigation Report was to provide it to solicitors in the event that the claim was not determined and resolved by Allianz itself. This was however only a contingent purpose in the sense that the Investigation Report would only be used for this purpose if the claim could not be resolved by Allianz.

79 Ms Dunham’s affidavit is not inconsistent with the above analysis, to a significant extent confirms it and it is incapable of displacing it.

85 Given that the protected purpose was only contingent on the primary use of the Investigation Report to determine liability and attempt to resolve the claim not being successful, it is not easy to envisage what evidence would be capable of proving that the protected purpose was nevertheless the dominant purpose. For example, even if Allianz had adduced evidence that statistically there was a 90 per cent probability that Ms Morgan’s claim would proceed to litigation given its circumstances as known to Allianz, this would not necessarily establish that use for the purpose of litigation was the dominant purpose when Allianz still intended to use Investigation Report to determine liability and attempt to resolve the claim. However, Allianz did not adduce any such evidence and hence failed to prove for example that statistically there was not say a 90 per cent probability that the claim would be resolved by Allianz and not proceed to litigation. Likewise, even if Allianz had adduced evidence that it would not have obtained the Investigation Report in any event for the purpose of determining liability and attempting to resolve the claim regardless of providing it to solicitors if the claim could not be resolved, this would not necessarily establish that provision to solicitors was the dominant purpose but again Allianz did not adduce any such evidence.

86 Allianz complains on appeal that Ms Morgan was not entitled to challenge Ms Dunham’s evidence in the absence of cross-examination. However, for the reasons given above, Ms Dunham’s affidavit, with or without the other evidence adduced before the Master, was incapable of proving that the dominant purpose of obtaining the investigation report was for provision to solicitors for use in anticipated litigation. In those circumstances, it was not incumbent on Ms Morgan to cross-examine Ms Dunham. Having said that, if Ms Dunham had been called (by either party) to give oral evidence, it is likely that the position would have been made plain and there would have been no need for appellate intervention. 

87 On the evidence adduced before the Master, Allianz manifestly failed to prove that the dominant purpose of obtaining the Investigation Report was for submission to solicitors for use in any litigation that might be instituted by Ms Morgan. On the evidence adduced, the purpose of obtaining the Investigation Report for submissions to solicitors for use in potential litigation could not be said to be either the primary or substantial purpose even if that were the threshold. Regardless of the threshold applied, Allianz failed to prove that the Investigation Report was obtained for the purpose of providing legal services. The Master erred in finding otherwise. The Judge was correct to allow the appeal.

Reasonable apprehension of litigation

88 The Master held, and Allianz accepts on appeal, that it is an additional independent element of legal professional privilege not only that a communication was made or information was obtained or recorded or a document created for the purpose of use in actual, threatened or anticipated litigation (if it was not made for the purpose of legal advice or provision of other legal services), but also that objectively assessed there was a reasonable anticipation of litigation eventuating. Allianz refers in this respect amongst others to the decisions in Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority and Perazzoli v BankSA, a division of Westpac Banking Corporation Limited.

89 For the reasons given above, it is not clear what would be the rationale or doctrinal basis for this additional element of legal professional privilege. However, it is unnecessary to further consider this question because Allianz failed to establish that the Investigation Report was obtained for the requisite dominant purpose. For the sake of completeness, if there were an independent element that there be a reasonable anticipation of litigation eventuating, I consider that this element would have been satisfied.

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