Esso Australia Resources Ltd v Commissioner of Taxation M53/1999 [1999] HCATrans 349 (29 September 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M53 of 1999

B e t w e e n -

ESSO AUSTRALIA RESOURCES LIMITED

Appellant

and

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Respondent

GLEESON CJ

GAUDRON J

McHUGH J

GUMMOW J

KIRBY J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 29 SEPTEMBER 1999, AT 10.19 AM

(Continued from 28/9/99)

Copyright in the High Court of Australia

GLEESON CJ: Yes, Mr Solicitor.

MR BENNETT: If the Court pleases. There are three questions I was asked yesterday I wish to just deal with a little bit more before resuming my submissions. Your Honour Justice Kirby asked me about the taxonomy, about the words - - -

KIRBY J: Mr Solicitor, what is a taxonomy? You have used that in this and other cases and I have never been - I have been too embarrassed to ask you what it means.

MR BENNETT: Nomenclature. I apologise, your Honour. It is another word for nomenclature but it is shorter than nomenclature.

KIRBY J: I see. I see.

MR BENNETT: It is the classification of concepts by the use of words. It is used frequently in botany and one gets it in marihuana cases with the difference between cannabis sativa and cannabis ruderalis and whether the one is prohibited and the other is not and how one classifies. It is called taxonomy. It is the science of how one names things and classifies them. It is - - -

KIRBY J: There must be a similar word that is something to do with skins.

MR BENNETT: With?

KIRBY J: Skin.

MR BENNETT: Yes.

KIRBY J: And I am just confusing the two, but thank you for making that clear.

MR BENNETT: Yes, I apologise, your Honour. But it concerns the words "sole purpose" and what your Honour put to me was, well, if the Court is defining "sole purpose" differently to the way the majority defined it in Grant v Downs, the Court is really, in effect, overruling Grant v Downs and laying down a new test and we answer that in two ways. First, I submitted from the passages I read from the majority judgment that, in fact, the test we have put is what was intended by "sole purpose" which was not otherwise expounded.

But may I just add this, it really is a sole purpose test, because if one accepts that in the context of the question, what was the purpose for which the document was brought into existence - - -

GUMMOW J: I think the purpose really is the purpose of the communication manifested by the document.

MR BENNETT: Yes, I am sorry, your Honour, I accept that modification to what I was saying.

GUMMOW J: Looked at that way, some of the problems with purpose are not so acute.

MR BENNETT: Yes. If one looks at the purpose for which the communication was made, one is looking to causation. Indeed one of the cases, which I will take you in a moment, says one is looking to the reason for the communication, what caused it to be made. Once one says that, if one has the situation where a purpose is sufficient in the sense that it alone would have caused the communication to be made and necessary in the sense that it would not have been made but for that purpose, then it is the sole purpose, because the so-called subsidiary purpose, the other matter which the maker had in mind, is simply not a purpose.

KIRBY J: That is by classification, that is by legal fiction. If you ask the person, "Did you have another purpose?", they would say, "Of course I did but it wasn't very important in my thinking".

MR BENNETT: The person may have had another purpose but it was not a causative purpose. It was not a purpose which gave rise to the making of the communication. The example of the communication in the form of legal advice which may also be passed on to the student's son is a very good one because, although there may well be an intention to use the communication in that way, there may be an intention to do something in the future, it is not in any sense of the word a reason for or causative in relation to the making of the communication. In that sense, "sole purpose" is an accurate description.

We accept of course what Justice Deane said in Waterford where the phrase used was that it was a convenient - what has conveniently, if somewhat loosely, been referred to as the sole purpose test. But we submit that what we have outlined is the sole purpose test and the traditional view of Grant v Downs may well have been mistaken. That means the principal criticism of Grant v Downs, the criticism which says, "Oh, isn't it dreadful if one loses the privilege merely because one had an additional subsidiary purpose", does not operate and that criticism is forestalled.

KIRBY J: At some stage would you tell me if it is an illegitimate way of reasoning in this case to work along this basis. Grant v Downs has recently been applied by the Court - Propend. It has been assumed to be, and to continue to be, the sole purpose test. On your own analysis, that is too simplistic and needs to be revisited. It must be revisited now in the context of a new federal statute of general application in federal jurisdiction throughout Australia and in the local territory court, the ACT court, and also in New South Wales. In that statute it refers to a dominant purpose test, therefore that is going to be applied throughout the country in those courts, and in such a context, in a re-examination of Grant v Downs, it is therefore now relevant to take into account that for a major part of litigation in the country a dominant purpose exists. True, it is a little difficult to give content to, but it will have to be given content to because it is in the statute and therefore the occasion is now presented in which, on re-examination of Grant v Downs, it is appropriate to take into account the existence of the statute as a new factor in the equation. It is not quite analogical reasoning, but it is looking at the reality in which the problem is now presented to the Court. Now, is that illicit or is it permissible?

MR BENNETT: We will be submitting it is not permissible, your Honour. That is the fourth of my four arguments. I am still on the first.

KIRBY J: I see. You deal with that in due course.

MR BENNETT: I will deal with that in some detail. I do ask your Honour's indulgence to defer answering that question, if I may?

KIRBY J: Of course.

MR BENNETT: The final aspect in answer to the present question is that the judgment of Justices Mason and Wilson in Waterford at page 66 - and this really answers what Justice McHugh put to me yesterday about the meaning of "purpose" and the distinction between "purpose" and "reason" -Their Honours said:

The appellant's submission fails to appreciate that the sole purpose test is a test that looks to the reason why the document was brought into existence.

Or, more accurately, the communication was made. Its purpose in this context, when one asks the purpose for the making of a communication, does involve causation and does ask the question about reason. It is a little different to mere intention or something one has in one's mind at the time.

McHUGH J: That means, does it, that the importance of the object, from an objective point of view, is totally irrelevant?

MR BENNETT: Yes, your Honour, except in so far as importance may, in many cases, coincide with whether one would or would not have brought it into existence for one or other of the purposes alone, but, except to that extent, yes.

McHUGH J: You could not have a bar of dominant reasoning, I take it, in your - - -

MR BENNETT: No, your Honour. I am arguing against that.

GAUDRON J: What do you say is the difference between your test and dominant reason?

MR BENNETT: There are two differences, your Honour, and they are illustrated in paragraphs 45(1) and (5) of our submissions. I was going to come to this in a few minutes but I will deal with it now. In paragraph 45 all we are doing, we are not saying what the test is. I have done that in much simpler terms. Paragraph 45 is simply showing how the test works out in a number of logically complete possible situations.

The first one is one which leads to a result where a document - this is the case where you have two purposes. Neither on its own would have been sufficient to cause the communication to be made so one would not have bothered writing the report just for the lawyer, one would not have bothered writing it just to the engineer but because they both wanted it, one wrote the report.

In that situation, on the test as we have propounded it, the document would not be privileged because the privilege purpose alone would not have caused the document to come into existence. But on the dominant test one would ask which was the more important or dominant of the two purposes and if that was the privileged one it would be privileged. So that is the first case which produces a different result.

The second case that produces a different result is - - -

GAUDRON J: Number (2), might (2), might it not?

MR BENNETT: Yes, (2) is the other one that might produce a different result. If there were two purposes and each on its own would have led to the creation of the document, again, one would ask, on the dominant purpose test, which was in some way more important than the other. That is really a metaphysical question because if there were two reasons each of which would have led to it, how does one weigh the importance? Does the witness answer by saying, "Well, the engineer was concerned with human life, the lawyer was concerned with money; I think human life is more important than money"? Does he answer it that way or is it a question of saying, "Well, (1) is something we always prepare documents for", or "(1) is something we do not", or "I thought (1) was uppermost in my mind"? When either would have caused it, to apply a dominant purpose test is very metaphysical and very subjective, but on our test it, again, has a clear and logical result for the reasons I gave yesterday and the reasons given by both the majority and Justice Jacobs in Grant v Downs that it would have come into existence anyway even if there was no question of going to a lawyer, so why should going to the lawyer add something to it?

GLEESON CJ: Is it possible to speak of dominant purpose unless there is more than one purpose?

MR BENNETT: No, your Honour.

MR BENNETT: No, your Honour.

GLEESON CJ: Then section 118 obviously does not mean what it says. How does section 118 operate where the sole purpose is one of the purposes there referred to?

MR BENNETT: Yes, I am sorry, I should perhaps qualify the answer again. There is no test to be applied. If it is the sole purpose, a fortiori it is the dominant purpose. The greater includes the lesser.

GLEESON CJ: Where does the Evidence Act deal with that?

MR BENNETT: It does not need to, your Honour. The test is dominant purpose, sole purpose satisfies it a fortiori in the traditional sense of sole purpose.

GLEESON CJ: That must mean that section 118 is to be read as though by implication it says "for the sole purpose or, if there is more than one purpose, for the dominant purpose". Otherwise there is nothing in the Act that deals with the case of the sole purpose.

MR BENNETT: Yes, that is so, your Honour, with the qualification that grammatically one might regard dominant as including sole in the same way as a majority of people might include the entire group. If one is asking was this motion passed by a majority when it was passed unanimously, one would say yes, although as a matter of strict English one does not really need to ask the question. It is a bit like that.

In relation to the question about Propend that your Honour Justice Kirby asked me a few moments ago, may I just say this? I gave reasons yesterday to Justice McHugh as to why the reasoning in that case is equally consistent with the two versions of the sole purpose test. So it was not necessary for the court to consider which one was the appropriate one.

GLEESON CJ: Mr Solicitor, now that so many communications are made electronically, if the plant operator prepared a communication to be sent by e-mail to the lawyer and to the plant engineer, how many communications are involved?

MR BENNETT: There may well be two and there might well be questions arising there as to distinctions, I suppose, as in the case of a normal document, the electronic communication may say "from plant operator to lawyer, copy to engineer".

GLEESON CJ: How do these rules work, if you have two identical communications, one to a lawyer for the sole purpose of getting legal advice from the lawyer and one to an engineer for the sole purpose of getting engineering advice from the engineer?

MR BENNETT: I suppose, your Honour, if it is merely the same document headed differently on the e-mail, it is clearly two communications. If it is simply a copy sent of the first, one then has to look at Propend and the effect of Propend might well be that the communication to the engineer stands on its own feet.

GLEESON CJ: Well, suppose there are two oral communications. Suppose the man goes into the office of the lawyer and gives an account of how the accident happened and then the man goes into the office of the engineer and gives an identical account of how the accident happened?

MR BENNETT: There is no question there.

GLEESON CJ: There, one is privileged and the other is not, is that the result?

MR BENNETT: Yes.

GLEESON CJ: Well then, why would it be different if the communication is by e-mail?

MR BENNETT: Only because it would bring in, presumably by analogy, the rules in Propend about copies of documents.

GLEESON CJ: Then why should it be different if, instead of having two oral communications, the man just makes a written report and sends the original to the board or, more likely, puts the original in his own file and sends one copy to the engineer and one copy to the lawyer?

MR BENNETT: Well the copy to the engineer would, almost certainly in that case, be a non-privileged, one would have thought. Again, that is not the issue which is - - -

GAUDRON J: It might result in loss of privilege under section 122(2).

MR BENNETT: That would occur, of course, under any of the three tests. The issues as to copies of documents and multiple communications are really in a different field of inquiry to what is involved in this case.

GLEESON CJ: Not all that different. It is the multiplicity of the purposes of bringing a report into existence that give rise to all this problem.

MR BENNETT: Except that, as Justice Gummow puts to me, one is concerned with the communication rather than the document.

GLEESON CJ: That was what prompted my line of questioning.

MR BENNETT: Yes. All that means is that in many areas the question of which test one applies may be of less significance where there are multiple documents produced, multiple e-mails produced or multiple copies produced.

McHUGH J: But the problem is that different principles apply to illustrations the Chief Justice gave you in the instant case. I would have thought it beyond argument if you send two different documents, one to the engineer and one to the lawyer, the one to the engineer is not privileged and that will then mean that you have waived your privilege to the lawyer because you have, in effect, disclosed its contents. It may depend upon the terms of it, exactly what you say to the engineer, but in the context we are dealing with you have a matter which goes to the solicitor but contains other material or is sent for other reasons.

MR BENNETT: The cases where it arises most in practice - - -

McHUGH J: So waiver is not the point.

MR BENNETT: No, it is not waiver. The cases where it arises most are really a third category, and that is where a person has two hats. Where one has a person who - the example is a bad one. It works better with some of the other examples - where the person is both the lawyer and the engineer. It is more likely of course in practice, the person both has an entrepreneurial role in the company and is the legal adviser and a document is sent to that person in both capacities. That is where one gets the sort of question that is involved in this case and one asks whether the purpose was to instruct that person as a director or otherwise.

That is referred to in Waterford in Justice Deane's judgment at the top of page 86 where he gives that very example. That is the situation, I suppose, where what your Honours will decide today is of most significance. His Honour says:

Ordinarily, a letter from a professional legal adviser will be written only in his character as such and only for the purpose of furnishing professional legal advice. The cases where such scrutiny will ordinarily be necessary are cases like the present where a letter is or may be written in one or both of two capacities: eg, a letter written to the secretary of a company by a person who is both a director of the company and the company's solicitor.

In a sense the engineer example obfuscates that except in Melbourne where there is now a law engineering degree.

The second matter I wanted to answer from yesterday is a question your Honour Justice Gummow asked me about cross-examination on affidavits. There is a line of authority in it which I will not take your Honours through.

There is a decision of Justice Giles in the Supreme Court of New South Wales that was mentioned to me in Fruehauf Finance v Zurich Insurance (1990) 20 NSWLR 359. I will not take your Honours to it. There, his Honour said, in effect, "I'm bound by a whole raft of common law authorities that one doesn't allow cross-examination on an affidavit of discovery but really that's very inappropriate today and the rule ought to be amended but I'm not going to do it".

Meanwhile, in the Federal Court there has been a more adventurous spirit afoot and there is a Full Court decision in National Crime Authority v S [1991] FCA 234; 29 FCR 203 which I will hand to your Honours in which Justice Lockhart, with whom Justice Keely agreed, dealt with this issue in some detail. In the course of that case Justice Lockhart said, in effect, that, bearing in mind the need to inquire into questions of legal professional privilege and the need to cross-examine where the affidavit is general and so on, one should not be slow to permit cross-examination on affidavits.

Your Honour Justice Gummow referred to that in Hartogen 36 FCR 55 to which I have taken your Honours a number of times. Your Honour there referred to Justice Giles and then said at page 561 at the top of the page:

Giles J was giving reasons for what he regarded as the unsatisfactory position in the Supreme Court of New South Wales that deponents of affidavits in support of discovery should not be cross-examined. His Honour in so concluding referred to what had been said in this Court by Franki J in Brambles Holdings Ltd v Trade Practices Commission (No 3) [1981] FCA 81; (1981) 58 FLR 452 at 454. But in this Court matters have since moved, as is indicated by National Crime Authority v S.....See also Zarro.....involving a public interest immunity claim. In the present case, after hearing submissions, I indicated that I proposed to follow what had been said by Lockhart J as to the existence of a discretion to permit cross-examination. I permitted cross-examination of the three deponents upon some but not all of the topics which counsel for the respondents sought to explore.

Justice Lockhart had used the phrase at 211:

Courts should not be slow to permit cross-examination of the deponent of such an affidavit -

Now, that is presumably done under Order 10 which is the order dealing with directions and Order 10 rule 1:

On a directions hearing the Court shall give such directions with respect to the conduct of the proceedings as it thinks proper.

Then there is a long checklist in subrule (2) which is: "Without prejudice to the generality of" that rule. So there is clearly power to do it and the approach the Federal Court has taken today seems to be that, where appropriate, it will be permitted and the court will not regard itself as bound by the old common law practice, in which there were a string of cases from Lyell v Kennedy onward in the end of the last century and the early part of this century.

There is a New South Wales Full Court case - the first time the Federal Court started to do it seems to be a Full Court decision in Young v Quin 4 FCR 483.

GUMMOW J: That is public interest immunity, is it not?

MR BENNETT: Yes, where the common law rule was referred to but it was said there are exceptions and maybe in exceptional cases we will do it and that seems to have been picked up in the later cases. So, for present purposes, the result of all that is that where necessary one can cross-examine. Of course, the beauty of the test which we posit is that the issue to be cross-examined on is not one which will take so long.

If one looks at cases like the ACCC Case referred to in our submissions - Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd and Others (1988) 81 FCR 526. Your Honours need not go to it. The importance of that case is that Justice Goldberg in a case where he discussed whether he would apply the sole purpose test or the dominant purpose test allowed cross-examination for the purpose of identifying the issues first and that seems to have gone for a considerable period of time and occupied a very large part of his Honour's judgment.

What we submit is that had his Honour been simply applying our interpretation of the sole purpose test there would really have been much more limited cross-examination, and much more precise and accurate cross-examination, because the way one would challenge an assertion, "I would have done something if something had been the fact" would simply involves seeing if it was done on some other occasion when that was the fact, whereas cross-examining on whether something was someone's dominant or lesser purpose is so subjective and difficult that it is hard to imagine it having much effect. It is untestable, in many ways.

Now, thirdly, your Honour Justice Gummow asked me about conveyancing transactions. The leading modern case seems to be Coombes v Federal Commission of Taxation 99 ATC 4634. It is a decision of a Full Federal Court , comprising Justices Sundberg, Merkel and Kenny and there it was simply said - - -

GUMMOW J: What is the name again, Mr Solicitor? Cruise?

MR BENNETT: Coombes (No 2), I am sorry. At page 4644, at the top of the first column, their Honours in the judgment of the court say:

Instructions to a lawyer to do a particular thing, for example to prepare a legal document such as a will, are generally not privileged, because instructions to do something do not necessarily amount to a request for advice.

There is an English case to the same effect called Reg v Inner London Crown Court Ex parte Baines (1988) QB 579 in relation to a typical conveyancing transaction. Your Honour considered it indirectly in a case called Pfizer v Warner Lambert [1989] FCA 402; (1989) 24 FCR 47. That involved the privilege of a patent attorney and much of your Honour's judgment turns on the distinctions between a patent attorney and a lawyer although there were some remarks your Honour makes about this rule.

As a practical matter therefore, where one is dealing with something as simple as that, "Please act on this conveyancing transaction. I am buying the house for $100,000", there is probably no privilege. In practice, of course, in complex transactions, a document is rarely going to not have the elements of legal advice which will raise some of the questions we are concerned about.

In paragraph 43 of our submissions, I put the baring-the-breast argument which I referred to yesterday. The only reason I wanted to return to it was to remind your Honours of what was said by the Supreme Court of the United States in Fisher v United States [1976] USSC 65; 425 US 391. Like all these cases, it is largely a Fifth Amendment case, but it is of greater value because it is one of the few cases where they go off in a Fifth Amendment case and discuss what the situation is in relation to legal professional privilege simpliciter. It is the only case we have found which precisely raises the present issue. In the United States, of course, privilege is a matter of State common law, so one would find, no doubt, as many common laws as there are States on the subject.

At page 402, they show how the matter arises. Halfway down the text their Honours say:

The difficulty is that the taxpayers have erroneously relied on the Fifth Amendment without urging the attorney-client privilege in so many words. They have nevertheless invoked the relevant body of law and policies that govern the attorney-client privilege. In this posture of the case, we feel obliged to inquire whether the attorney-client privilege applies to documents in the hands of an attorney which would have been privileged in the hands of the client by reason of the Fifth Amendment.

On the next page they go on to discuss legal professional privilege, and they say at the top:

Confidential disclosures by a client to an attorney made in order to obtain legal assistance are privileged.

They use the word "assistance" not advice, so they take the broader word there, but that does not affect this submission:

The purpose is to encourage clients to make full disclosure to their attorneys.

Then there is a further exposition of that reason. Then at about point 6 against the words "legal advice" this passage appears and this is what we rely on:

However, since the privilege has the effect of withholding relevant information from the factfinder, it applies only where necessary to achieve its purpose. Accordingly it protects only those disclosures - necessary to obtain informed legal advice - which might not have been made absent the privilege.

The two limbs of the test, and:

This Court and the lower courts have thus uniformly held that pre-existing documents which could have obtained by court process from the client when he was in possession may also be obtained from the attorney by similar process following transfer -

and then after some more cases, on page 404:

The purpose of the privilege requires no broader rule. Pre-existing documents obtainable from the client are not appreciably easier to obtain from the attorney after transfer to him. Thus, even absent the attorney-client privilege, clients will not be discouraged from disclosing the documents to the attorney, and their ability to obtain informed legal advice will remain unfettered.

And then they draw the conclusion, after reference to subpoenas:

"It follows, then, that when the client himself would be privileged from production of the document, either as a party at common law . . . or as exempt from self-incrimination, the attorney having possession of the document is not bound to produce."

And that is a quotation from Wigmore and, yes, that is as far as I need to take it.

So although there is not a detailed analysis of the dual purpose approach, they seem to be reaching the same conclusion as that for which we contend. It is a decision in 1976 which, interestingly, was decided about six months before this Court handed down judgment in Grant v Downs and as far as we can ascertain by a shepherdising process that aspect does not seem to have been departed from, although the cases that refer to it all seem to be Fifth Amendment cases, that being the context where it normally arises.

Now, paragraph 45 I will not take your Honours through in great detail. I have really put each of the submissions in a different form. The first two propositions are the general ones which arise where one does not give a positive or give the right answer to both questions and we stress there is no need in those cases to weigh the purposes at all.

Paragraph (4) is uncontroversial, that applies on all the tests. Paragraph (5) is the case where the document is privileged. Paragraph 6 is a gloss which is probably necessary in complex cases. That does not arise in this appeal. The ultimate point in paragraph (7) which I have made is that the sole purpose test does not mean that any secondary purpose, if it is properly described as one, not attracting privilege will disqualify the document.

Your Honour the Chief Justice yesterday asked me three questions, one about a hospital, one about a train and one about an explosion. The answers to each of those simply turns, in our submission, on the answers to the two questions. So, in the hospital case where there is a universal practice of having inquests into deaths in hospitals and the report is prepared which will inevitably be used at the inquest, one simply says, "Well, if there had not been that purpose in mind, would the communication have been made, and if that purpose had been the only purpose in mind, would it have been made?" One does the same thing in the train example, although there is an added subtlety there where the engine driver makes a report because there is a standing instruction to make reports. As Guinness Peat says, one may need to ask what was the purpose of that standing instruction, because the mind that determines the report will be made may not be the engine driver's mind. The engine driver's sole motive may be compliance with a direction, so one has to look at the direction. But otherwise, one asks the same two questions and the example of the explosion in the gasworks I answered your Honour about yesterday.

GLEESON CJ: Do we know anything about the documents in the present case? Do we know what it is that produces the consequence that they would be privileged on one test and not on the other?

MR BENNETT: My understanding, your Honour, and I say this subject to correction because I have not been in the case below, is that the problem arose on the wording of the affidavit of discovery. The affidavit was worded in accordance with the dominant purpose test and there was then a separate issue tried as to whether that was a sufficient affidavit of discovery.

GLEESON CJ: We just assume that if the test had been the sole purpose test the deponent would not have been able to swear that it was privileged.

MR BENNETT: Yes, your Honour, that is how the issue is not academic.

GLEESON CJ: But we do not know why. In other words, we do not know what the facts are that gave rise to the question in the present case.

MR BENNETT: Yes, I am told that is the case, your Honour. The whole problem with this case is we do not know the facts, your Honour, that is why we are here. We sought production of those which were dominant but not sole, yes, that is the effect of it.

In paragraphs 46 to 52, we have put submissions in relation to practical considerations and the adverse effect on law enforcement. Those are, of necessity, fairly general submissions but may I just remind your Honours of what the Law Reform Commission said in its interim report at page 499. This is a part of the report which was not included in my learned friend's book. I have given your Honours copies but it is a very short passage - I will perhaps read it. It is page 499, four lines from the bottom:

A `dominant' purpose test may be more difficult to apply than a `sole' purpose test. There is, perhaps, more room for argument and false claims of the appropriate purpose. An examination of the document will often be sufficient for the `sole' purpose test but not for the `dominant' purpose test. The issues raised for the court by such a test, however, overlap with those which the courts had to consider under the law that existed prior to Grant v Downs and a dominant purpose test should be workable.

So, they concede that it will involve greater inquiry. They rather dismiss a crude version of the test which we propound, the version of the sole purpose test we propound, higher on page 499 where they describe it as "Document Would have Come into Existence Anyway", and they refer to the passage in Grant v Downs in the majority judgment and say:

One commentator has pointed out that this argument while supporting the test advanced by Justice Jacobs does not support a `sole purpose' test.

The commentator, I think, was Mr Sweeney, of the Sydney Bar, in a short note in the ALJ. They do not express any view in relation to the point.

McHUGH J: Is there any evidence in the reported cases as to how the dominant purpose test is working in the other jurisdictions, because it appears to me almost impossible to reply without cross-examination of the deponent?

MR BENNETT: I am not aware of discussion of that issue, your Honour; the cases laying it down have been cited to the Court.

KIRBY J: Cross-examination would be one way, but just the sequence of events, the timing, the circumstances in which the document was produced, the inherent logic of the communication, would be another way.

MR BENNETT: Yes. Both versions of the sole purpose test are much simpler in that sense, because they can be established objectively in rather more cases than the dominant purpose test.

McHUGH J: But if a witness swears that his or her dominant purpose was this, is the Court to reject that sworn evidence simply by looking at this or that. You can do it with the sole purpose test, because, on its face - to see whether or not there is a sole purpose test, but I have difficulty about this idea of dominance, how you can work - - -

MR BENNETT: Well, that is the submission we put.

KIRBY J: But a witness could not simply, claiming a sole purpose, immure himself or herself from scrutiny of the true facts.

MR BENNETT: If one takes the hypothetical witness, who is not prepared to commit blatant perjury, but might be prepared to make a subjective statement that cannot be effectively challenged which is a little borderline, and one looks at that real situation in every day life, such a witness has no trouble saying, my dominant purpose was X, but might have real trouble answering the two "but for" questions or referring to a sole purpose, so, in that sense it is, in the interests of establishing the truth and establishing the situation, very desirable that one has one of the two versions of the sole purpose test.

We have made the general point of course that the costs of litigation in this area are important and we also repeat the point which is made in paragraph 49 that there are real problems, real practical problems, in weighing purposes. The most honest witness in the world who has two purposes and is asked, "Was one your dominant purpose?", is not going to find it an easy question.

McHUGH J: In Theophanous Justice Deane said that inquiring into persons' motives, states of mind, is the one area where the legal system is likely to fall down.

MR BENNETT: Yes, whereas the sole purpose test makes that a much simpler exercise on either version of it.

KIRBY J: It has to be done (a) in most criminal trials, and (b) under this statute where "dominant purpose" is there. We cannot wish it away. There is going to be a developed jurisprudence around the phrase.

MR BENNETT: But of course, the major area where this is going to arise - and this is the final submission under Grant v Downs, paragraphs 50 to 52 - is in investigatory processes. Certainly one is going to get it in discovery situations. In that situation, as history reveals, the government may be on either side of the debate but in investigative processes by bodies such as the Commissioner of Taxation, but it applies equally to the chief executive officer of customs, the Australian Consumer and Competition Commission, the Australian Securities Investments Commission, any government investigatory body, it is in normal circumstances investigating something where it does not know the primary facts as much as an opposing party frequently does in litigation.

The task of investigating can be very easily thwarted if people who are engaging in transactions of a type which are being investigated do what they can to clothe documents, which otherwise might be unprivileged, with legal professional privilege.

The dominant purpose test enables that to be done. Neither version of the sole purpose test enables that to be done. That has to be weighed, of course, against all the Baker v Campbell factors in favour of legal professional privilege which, as we now know, applies against investigating authorities, except where a statute specifically abrogates it.

When one is dealing with multi-purpose documents, one has to bear in mind the importance of enabling transactions to be investigated and preventing people from engaging in a very simple avoidance exercise - avoidance in the documentary sense, not the taxation sense - by applying to documents a specific characterisation. We would submit that the considerations we have listed which are referred to by Justice Dawson in his dissenting judgment in Baker v Campbell, as well as in a different way by the majority in Grant v Downs, are matters of great importance. It may well be that it is that sort of factor which the majority in Grant v Downs had in mind when it referred on a number of occasions to the position of corporations. Of course, it is - - -

GLEESON CJ: It may have had this sort of thing in mind. The worker who was injured in a railway accident might give an account of the events to his lawyer and then give an account of the events to his doctor, and no privilege attaches to the account of the events that he gives to his doctor. But when the corporate defendant brings into existence the defendant's version of events, it does so mechanically, bringing into existence a document, a copy of which will go to the lawyer and a copy of which will go to the engineer, or the medical adviser, or as the case may be.

MR BENNETT: Yes.

GLEESON CJ: It seems a fairly capricious operation of the rule about legal professional privilege that the worker's account to the doctor of the way the accident happened is not privileged, but the corporation's account to its doctor of the way the accident happened is privileged, provided the same account was intended to be conveyed to the lawyer.

MR BENNETT: That is very much what we put, your Honour, and that is clearly part of what the Full Court was saying when it referred to the advantage obtained by corporations. That is magnified today even on your Honour's example because of the many insurance companies which employ people in their claims departments who are both doctors and lawyers, who have a qualification in both or at least, even if not as much as that, certainly have skills in both areas, able to make decisions in both areas affecting compensation of injured workers. When one applies that in the tax area or tax investigation or corporate investigation where the transactions being investigated are inherently transactions in which lawyers are involved to some extent very often with two hats, it becomes enormously important to have a test which, while permitting the client to bear his breast to the lawyer, does not permit the client to conceal documents which would have been brought into existence anyway and would otherwise have come to the attention of the other side. That is the ultimate issue in this area.

The remaining three - I have dealt with one of the four questions but your Honours will be pleased to hear I am far more than a quarter of the way through my argument. The other three submissions can be dealt with much more briefly. The other three submissions, of course, assume that Grant v Downs is not interfered with.

On the sections 118 and 119 points, we submit that one only has to read the section to see the relevant aspect of the meaning and there is no way, with any amount of imagination, twisting or playing with the words or applying a Cooper Brookes approach to the words, that one could read them as saying what my friend needs to read them as. They just do not say it. It says "evidence is not to be adduced." That, in the context, means "evidence is not admissible". It does not mean the person trying to adduce it is committing some criminal offence. It means that the judge says, "Rejected" when the evidence is attempted to be adduced and, therefore, it does not get into evidence.

As was said in GPAO this part of the Evidence Act, Part 3, is dealing with the admissibility of evidence. One does not need to go to the note which is not part of the Act to reach that conclusion. That appears in GPAO [1999] HCA 8; 73 ALJR 470, 161 ALR 318 and it appears in the judgments of the Chief Justice and Justice Gummow at pages 16 and 17 and it is also in paragraphs 135, 145 Justice Gaudron, 198 by Justices McHugh and Callinan and 254 by Justice Hayne. That is a clear statement by this Court of what is quite obvious in reading the part that it is dealing with those matters.

It is also significant, if your Honours have the Act, that section 127 dealing with "Religious confessions" and section 187, dealing with self-incrimination and its abolition in relation to corporations, both use much wider language. In section 127, which I have to say is an exception to what your Honours said in GPAO, religious confessions, the wording is:

A person who is or was a member of the clergy of any church or religious denomination is entitled to refuse to divulge -

the result of the confessional, not "evidence shall not be adduced of" and, similarly, in relation to the privilege against self-incrimination, a:

body corporate is not entitled to refuse or fail to comply with the requirement -

again, it is a general provision, not confined to the adducing of evidence. That is not in Chapter 3.

Now, one has to contrast that with the language of section 118. I appreciate that expressio unius does not have the force it used to have, but it is a pretty clear expressio unius, we would respectfully submit.

Your Honours have been taken to paragraph 199. We do not repeat what is said in the submissions about that. My learned friend's answer to that is that the final report of the Senate sub-committee suggests that there was a more general purpose. But, if one goes to his volume - - -

KIRBY J: Which tab?

MR BENNETT: Might I take your Honours to tab 7 of my learned friend's volume, and to page 7 of tab 7, your Honours will see at the bottom of the page, paragraph 1.16 - this is the Senate report:

The sole remaining outstanding issue concerns the appropriate test for legal professional privilege, which is termed `client legal privilege' in the Bill. This issue is discussed in further detail below.

So, what it is discussing is client legal privilege in the Bill, and the Bill, of course, in that part is dealing with, as the report did, only with the topic of the adduction of evidence.

GLEESON CJ: That emerges clearly from paragraph 1.17 of the discussion.

MR BENNETT: Yes, that is so, your Honour. We rely on that as well.

KIRBY J: Could you help me on this: the Act applies to interlocutory proceedings?

MR BENNETT: Yes, your Honour.

KIRBY J: I think we were told that. The discovery procedures are interlocutory to, and often crucial to, the trial of the substantive issue, and we have learned today of the practice in the Federal Court and to some extent in the Supreme Court of New South Wales, two courts to which the Act will apply in permitting cross-examination on the affidavits objecting to the provision of the communication. Why is that not part of the adduction, if that is the noun, of evidence to the Court?

MR BENNETT: Because, your Honour, one does not ask the witness in the box what was the communication. One does not adduce evidence of the privileged communication. That is not the purpose of the cross-examination. The purpose of the cross-examination is to ascertain whether, under the laws of a discovery and inspection of documents, there is a privilege or not.

KIRBY J: I understand that, but the purpose of it, given another characterisation, is the production or non-production of the evidence to the court which will be used later in the trial.

MR BENNETT: No, your Honour.

GLEESON CJ: Which may be used later in the trial.

MR BENNETT: May or may not be and, indeed, probably will not be. The other purpose of discovery is to give one leads that one can follow to ascertain other pieces of evidence.

KIRBY J: It may not be, but it is the object to which the vessel is steering. The harbour to which it is approaching is getting material that will be relevant to the trial. I mean, otherwise it is all inadmissible because it is irrelevant. So, that is the purpose of it and only purpose. It just seems a little narrow or even perhaps artificial to say this is not adduction of evidence before a court.

MR BENNETT: Your Honour, the fact that one - well, first of all there is a clear distinction between material that may assist one to obtain evidence which will be adduced and material that one is going to adduce itself. The latter may be in the category your Honour describes, the former certainly is not. It has always been one of the bases of discovery that one may use it for the purpose of finding a line of inquiry which one will follow and which may lead one to the evidence. A very good example is the Propend situation where the production of a document, even a privileged document, may alert one to the existence of an original or a copy which would not be privileged and which one can then subpoena from its appropriate source.

Another example, I suppose, is the Propend exception, where the existence of the document may lead one to discover that the original was destroyed when that was created and thereby destroy the privilege in that document. So, there were all sorts of situations where although one may not know at the time one sees it that the document is privileged, one may still obtain an advantage, and a legitimate advantage, by seeing the document at the discovery stage.

GLEESON CJ: The simplest example of a document that would be discoverable, may or may not be privileged, but would not be admissible in evidence is a witness's account of what happened at an accident. It would not be admissible because it is hearsay but it would be discoverable because it is relevant to the issues in the case.

MR BENNETT: Yes. Perhaps an even simpler example than that is if the document the solicitor has says, "An accident was witnessed by Mrs Jones of 18 Smith Street". You may not want to prove that the client said that but you certainly want to go and speak to Mrs Jones and get her statement.

KIRBY J: The difficulty I am having, though, is that if you look at it as applicable to interlocutory proceedings and ask the question of adduction in the context of interlocutory proceedings, it may not ultimately go on to be useful in the trial but it is being adduced for the purpose of the interlocutory proceedings anterior to the trial. At least that is one construction of the statute that is available.

MR BENNETT: No, your Honour. If one in the course of cross-examination on the affidavit of discovery were to say to the deponent, "What was the legal advice you sought or obtained?", the question would be rejected, and properly rejected under section 118. That is not what one is doing. One is not adducing that evidence. One is simply ascertaining whether that evidence or that material is or is not liable to be produced on discovery. Indeed, part of the rationale of the old common law cases which said one could not cross-examine on the affidavit of documents was that that affidavit was not evidence in the case or even in an interlocutory proceeding. It was not evidence of anything. It was simply a compliance with an obligation which one complied with by producing an affidavit disclosing certain things.

One put one's oath to it so as to create a sanction in relation to it but it was not in any sense evidence either in the proceedings or even in the motion for further discovery unless someone chose to read it. It was an object rather than a piece of evidence. So the distinction between adducing evidence and not adducing evidence is not broken down by the sort of cross-examination that may take place in the interlocutory proceedings.

Now, in paragraph 10 we make the final point that there is neither anomaly nor absurdity in having a different test at the pre-trial and trial stages. That is referred to in a number of places and paragraph 199 itself seems to suggest that as well as the other passages we have referred to and that is part of the answer I just gave to Justice Kirby and, finally, in paragraph 12 we refer to the presumption that legislation is not presumed to have altered the common law unless it says so, although I probably do not need that presumption in this case.

The second of the other three matters is the analogical development of the common law. I am conscious of the disagreement in Cotogno v Lamb which I will come to in a moment and also a discussion by the New South Wales Supreme Court in Reg v Young this year.

KIRBY J: I see that the primary judgment in the Full Court here said on that matter the view taken by this Court in Cotogno v Lamb was not quite as unsympathetic to the notion as I had expressed it yesterday.

MR BENNETT: Yes, that is certainly so, your Honour. The main point we make is simply this, that let it be assumed against me - probably not against me, but let it be assumed for the moment that the Court may in appropriate circumstances look at legislation with a view to discerning a trend as one of the factors it might take into account in considering a case where there is to be some development of the common law. Let me make that assumption for the moment. This is not a case where one gets even close to an application of that principle. In Australia we have, not counting the external territories, nine jurisdictions which have evidence legislation, the Commonwealth, the six States and the two internal Territories, and one has legislation in two of those jurisdictions.

KIRBY J: Three really - the Australian Capital Territory. I gather the federal Evidence Act applies to the Territory; is that not correct?

MR BENNETT: I have not checked that, your Honour.

GLEESON CJ: It says so in the Evidence Act.

MR BENNETT: Yes, well, I am sorry. Three of the nine. Now, the common law of Australia is unitary. This Court has said on a number of occasions - and we have given your Honours the references - that unlike the United States one does not have a different common law in every State, let alone Territory.

How, one asks rhetorically, can an Act in Tasmania change the application of the common law in the Northern Territory? One simply cannot say that because one State, and perhaps the Commonwealth and a Territory, has passed legislation, that that shows some trend of the type which is necessary. If one looks at the language of Warnick v Townsend in England, the paragraph which was adopted in Cotogno, and I will show your Honours the passage in a moment, there must be a steady trend in legislation which reflects the views of successive Parliaments. That is the phrase used by Lord Diplock in Warnick v Townsend & Sons and the passage was quoted in full by this Court in the judgment of the whole Court in Cotogno v Lamb [1987] HCA 47; (1987) 164 CLR 1 at page 12, and at the very top of page 12 this is the passage cited, with approval:

"Where over a period of years there can be discerned a steady trend in legislation which reflects the view of successive Parliaments as to what the public interest demands in a particular field of law, development of the common law in that part of the same field which has been left to it ought to proceed upon a parallel rather than a diverging course."

Now, if one looks at the issue in that case, without in any way canvassing the decision of the Court, which of course we do not, one would have thought how much stronger a case for that principle that was, than this one, because - - -

KIRBY J: Lamb, you mean?

MR BENNETT: Yes, Lamb.

KIRBY J: I thought it was a very strong case.

MR BENNETT: Precisely, your Honour; one had legislation in every State and Territory that had been around since the 1930s, which made a particular application of a common law principle surprising, to say the least, and yet, even in that case, the Court said, "There is no principle or trend to be discerned in the Act or any other legislation about the measure of damages to be applied in these cases." One cannot simply take the principle of all those statutes and say, "Well, we have got to change the common law." Here one has so much less.

GLEESON CJ: Well, bearing in mind the controversy, reflected in articles in law journals and elsewhere, that surrounded the enactment of this legislation in the first place, there does not seem much reason to assume that the failure of the other jurisdictions to enact similar legislation is the result either of inadvertence or pressure of other business.

MR BENNETT: No, precisely, your Honour, and this legislation, as you have said, has specifically not chosen to take the extra step. Why should the courts take the step that the legislature refuses to take?

KIRBY J: I think that is a very powerful argument, and I take the force of it, but I asked the question earlier today in a slightly different way. It is not that one would draw out the common law and develop it analogically with the Evidence Act that applies only in three jurisdictions of nine, but it is, given the imperfections of the formulation in Grant v Downs, given the desirability of clarifying them if one is at the border of a decision, is it relevant to take into effect in answering in part the suggestion that dominant purpose is too vague or too time consuming, that it is there, it is in the law and it is going to have a widespread national application in Australia and a jurisprudence will develop around it, and secondly, that it is now a given fact that one takes into account? This is not quite analogical reasoning in developing the common law but it is developing the common law given the reality of what has now occurred.

MR BENNETT: Your Honour, we would rather put it this way. That by the fact, first, that the Federal Parliament has only dealt with one aspect, namely adduction of evidence, and secondly, the fact that six of the nine jurisdictions have not even done that, it has been left to the common law to continue. The common law was well known at the time, the stage it had reached, it was Grant v Downs and that was well known to parliaments and the drafts people of the report and so on. We would submit it is rather an indication by both the silent and the speaking parliaments that one would expect the courts to do whatever they were going to continue to do in the other areas independently of what had been done in section 118 and for that reason, we submit that the principle which your Honour referred to Cotogno v Lamb whether or not, whatever weight it may have in other cases, simply does not operate here.

The final matter concerns Order 15 rule 15.

GAUDRON J: Does it? Can you advance the debate further? Does not concern Order 15 rule 15?

MR BENNETT: Your Honour, that is my submission.

KIRBY J: Is that the correct rule or is it irrelevant to the debate as it appeared to emerge yesterday?

MR BENNETT: It is irrelevant to the debate, not quite for the reasons that emerged yesterday. It is a rule about a different subject matter. The one standard criticism that is frequently made by critics of the legal profession and the conduct of courts by its well known critics, including Lord Woolf, is the length of time and the extent of the process of discovery in big cases where you have teams of solicitors and their clerks working for a year on discovering millions of documents to the other side. That has been - - -

GLEESON CJ: Discovery has become a very useful mechanism of concealment.

MR BENNETT: And that is the other aspect - - -

GLEESON CJ: And oppression.

MR BENNETT: Yes, and we have said that in paragraph 20. The two problems that that creates are, first, the huge cost of extent of discovery and, secondly, the use of discovery to obfuscate. One puts the smoking gun document in amongst the receipts. That is an extreme example. It may not be as simple as that of course. But that type of obfuscation in discovery is something which critics of the profession have been very active in referring to. But, more importantly, they have referred to the huge amount of effort involved. Order 15 rule 15 is a rule designed to deal with that and it says that:

The Court shall not make an order under this Order for the filing of service of any list of documents or affidavit or other document or for the production of any document unless satisfied that the order is necessary at the time when the order is made.

In other words, the court should always, at the directions procedure, say to itself, "Is this a case where discovery will assist in the elicitation of the truth? Is it a case where it is necessary in that sense?"

GUMMOW J: Or some discovery.

MR BENNETT: Or some discovery. Should we have discovery just on a particular issue or just for a particular type of document?

GLEESON CJ: That term "necessary" comes originally, does it not, from the rules and practices relating to interrogatories?

MR BENNETT: Yes.

GLEESON CJ: You are only entitled to such interrogatories as are necessary.

MR BENNETT: Yes. Some of us remember the interrogatories of the sixties where one had multiple questions and interrogatories which meant many thousands of questions had to be answered by the other party.

GUMMOW J: The answer to that is you make them come up with a draft set. That is what the judge does.

MR BENNETT: That is right, and the judge looks at the set and says, "That is too many. You only really need to know one thing", or half a dozen things. That is what this rule is about. It is not about enabling the court to modify the doctrine of legal professional privilege and if it was it is no part of my role to submit that subordinate legislation is invalid. But there would be a serious question about its validity if it were to be given the other interpretation.

Might I remind your Honours of what was decided by the South Australian Full Court in Taylor v Guttilla (1992) 59 SASR 361. It is tab 7 in our volume of cases. In that case the District Court Rules in South Australia - the Local Court Rules, I am sorry, provided that if a party obtained a medical report but decided because it was adverse not to use it, one had to produce that medical report to the other side notwithstanding the privilege that would otherwise have attached to it.

The South Australia Supreme Court - they sat five justices for that case - held, by the whole court, that the rule was invalid because it was a rule that went beyond practice and procedure into interference with the substantive doctrine, that of legal and professional privilege. I will not take your Honours through the detail of the reasoning but there would certainly be a serious argument for invalidity of the rule if it were to have the effect that my learned friends refer to. Apart from anything else, there would be very few cases, one would have thought, where the discretion under that rule could be exercised to deny inspection once a document had been discovered.

In the normal case the extra inconvenience of permitting inspection would be comparatively small compared with the inconvenience and expense of locating and listing the relevant document. We have dealt with the arguments about necessity in a little more detail in paragraphs 22 to 25 and refer to Peruvian Guano and the various cases. There is also a reference by your Honour Justice Kirby in Harrington v Lowe 190 CLR 311 to the question of possible invalidity in such a case at 342 where your Honour said at the top of the page:

The mere fact that a procedural rule has effect upon substantive rights is not enough to strip it of its procedural character. But if the rule goes beyond the provision of the means by which substantive rights are to be enforced or protected, the decision-maker will be entitled to conclude that what has been done, under the guise of a procedural rule, is, in fact impermissibly to alter substantive rights. By law, that is forbidden to the rule-maker.

That would very much be so here if this rule were construed as allowing the Court to say, "Well, we really prefer a dominant purpose test at the discovery stage, notwithstanding that the law is otherwise to the contrary, so, we will enforce that by using this rule and saying you cannot inspect any document unless it satisfies a different test". I should mention before I leave the rules that the substantive power in relation to production appears to be Order 15 rule 11 and that seems to be the relevant Rules rather than Order 15 rule 10. Order 15 rule 11 says that:

Where -

(a) it appears from a list of documents -

the party has a document -

the Court may, subject to any question of privilege which may arise, order the party -

(d) to produce -

it. Then, Order 15 is an exception to that in cases where it might be onerous or more likely unnecessary to order the production, but, it is not unnecessary merely because one would not be able to tender the document at the trial, for all the reasons that I have given, and, principally, the Peruvian Guano reasons.

For those reasons, we submit that while we have come to explain the Grant v Downs, not to bury it, the explanation we have offered of it is consistent with the reasoning of the Court and avoids the criticisms which are otherwise made of the rule and provides a practical framework which most importantly accommodates the two principles which need to be balanced in considering legal professional privilege. Would your Honour just pardon me?

Your Honour the Chief Justice asked a question about the extent to which we knew about specific documents in the materials before the Court. Rather than attempt to read what has been written for me, might I ask my learned friend, Mr Maxwell to deal with your Honour's question because he was involved in that aspect of it.

GLEESON CJ: Yes, thank you, Mr Maxwell.

KIRBY J: Could I just ask you a question that I have left in my mind, and I ought to know the answer to this: assume that you would have succeeded, your client would have succeeded on every point in this appeal save the Grant v Downs application, and that the appellant succeeded in securing leave to reconsider that matter, or redefine what it said, and have a new principle stated, and that on that footing the Full Court of the Federal Court and the courts below were correct in applying the authority of this Court as then stated and understood, does that have any consequences for costs, or in these well-lawyered large parties, is this just part of the costs of the matter that should follow the outcome of the instigation right down the line? Or, when a court, as it were, clarifies and re-expounds a general principle, as Grant v Downs itself tried to do, is that a matter that ought to be taken into account in respect of costs?

MR BENNETT: We would submit, your Honour, that if the submissions I have put find favour, that ought to be regarded, from the point of view of costs, as a successful outcome for the respondent and should be determined accordingly. It certainly has not added to the costs of the proceedings in any sense.

KIRBY J: That is if they find favour, but if on the first point which has been argued in this appeal, they fail, do you accept that the consequence of that, and only on that point, that the consequence of that is that the costs just have to follow the event, and you have to pick up the costs. Or when the Court formulates a new principle, and the courts below were correct to apply the old principle until reformulated by this Court, does a different cost rule apply?

MR BENNETT: Your Honour, in relation to the costs below, had the appellant, on the hypothesis your Honour puts to me, said to the first court, to the trial judge, "Your Honour, we can only succeed if Grant v Downs is overruled and one applies a dominant purpose test. There is no point in arguing that to your Honour or the Full Court because you are both bound by Grant v Downs, so would your Honour merely, therefore, dismiss our application and wish us godspeed on our way to the High Court.", if that had been done at the lower level and, again, in the Court of Appeal, as is sometimes done where one brings a case up to this Court for the purpose of testing a previous decision, the costs involved in those courts would have been minimal, nothing like the costs which were incurred. For that reason we would submit that in that event there would be no reason to disturb the orders for costs made below.

So far as this Court is concerned, one might have to ask the question which I have not done the mathematics on of whether the other issues had the effect of causing it to be a two day case, not a one day case and so on, but otherwise the costs would follow the event in my friend's favour in that hypothesis in this Court.

CALLINAN J: You do not think there should be any special allowance for hardship, and I use the expression "hardship" perhaps loosely, arising out of the fact that this Court might adopt a quite different view from the view which had been adopted by this Court earlier?

MR BENNETT: No, your Honour, that has never been a factor in relation to costs as I understand it.

GLEESON CJ: It is certainly not hardship for your client.

MR BENNETT: Well, I do not think either client in this Court would complain of hardship in the other sense but in the sense in which your Honour puts it to me, I would not put that as a factor.

KIRBY J: I was asking a question really removed from the parties presently before the Court and looking at it as a matter of general principle of when a new principle is formulated does a different rule apply as to costs.

MR BENNETT: Yes.

CALLINAN J: You see Lord Brandon touched upon this recently in a case in England where - in relation to mistake of fact and mistake of law, not on the issue of costs but whether parties should be regarded as having acted under a mistake of law when the law was a certain way at the time when they so acted. You may know the case. I cannot remember the name of it. It is a similar sort of a situation, but in any event you do not want to say any more about that.

MR BENNETT: No. Obviously, I mean, it applies in a sense to a trial judge too who may be reversed for doing what he was bound to do and overruled and said to be wrong, although the trial judge was bound to do exactly what he or she did.

CALLINAN J: It would be very hard on a party.

KIRBY J: But just not on your particular part.

MR BENNETT: It is inevitable, your Honour, in any situation where the court overrules one of its previous decisions.

CALLINAN J: But it does not do that very often.

MR BENNETT: No, your Honour, it does not and it may not in this case or may not need to.

CALLINAN J: Anyway, you do not want to say any more about it, so I will not take up time.

GLEESON CJ: Yes, Mr Maxwell.

MR MAXWELL: If the Court pleases. Your Honours, it may assist if I briefly, very briefly, explain the chronology of events with respect to the list of documents when with assistance from us my learned leader informed the Court that there was no information about the basis of the claim of privilege we did not advert to the fact that late in the day there was an affidavit filed on behalf of Esso elaborating the claim and in order to put that into context if I could take the Court to the first volume of the appeal book at 107 and your Honours will see that is the list of documents filed by the applicant in traditional form.

The terms of paragraph 2 were uninformative but conventional. Your Honours will then find part 2 of schedule 1, being the list of privileged documents, starting at 207 and I need not trouble the Court with any of the detail, but your Honours will see turning the pages from 207 onwards, up to and including 238, that there was a very substantial number of documents in respect of which privilege was claimed. I think there is another Esso affidavit which numbers them at 577 in total in respect of which privilege was claimed. Your Honours will see the description of individual documents is minimal. They are described shortly as "letters, memorandums" and so on and there is a list of addressees where there is more than one, in some instances a number of addressees, and that will be relevant when I take your Honours to the affidavit.

On the basis of the information in the list, that is the descriptions given of the privileged documents and to whom they were sent, the Australian Government Solicitor, our instructor and acting for the Commissioner, identified those documents which the Commissioner was prepared to accept were privileged, and that appears in the second volume at page 249, and your Honours will see that is a letter to the solicitor for Esso, which says in the second and third lines:

on the basis of the information contained in the List, appear to be privileged.

In parenthesis, "on the sole purpose test", and then there is a list attached.

Before I take your Honours any further, if I might give your Honours the reference to page 245 in volume 1, where Ms Green, one of the solicitors for Esso, says in paragraph 4 of her affidavit that Esso's list contained:

(a) 1704 documents in Part 1 of Schedule 1 -

that is in respect of no claim was made of privilege, 1704, and -

(b) 577 documents in Part 2 of Schedule 1, in respect of which EARL claimed privilege.

KIRBY J: Is there a common thread running through the documents on page 250? Are they all documents received by a person who your client knew to be a lawyer? Is that basically it?

MR MAXWELL: As I recall, your Honour, and if it would assist the Court we can - - -

KIRBY J: No, we are not conducting the trial here.

MR MAXWELL: Your Honour is not, and it is only in the sense - - -

GUMMOW J: There has not been a trial. All there was there were some questions under Part 29, that is all.

MR MAXWELL: Exactly so, and that is why the matter was stopped in its tracks and why these matters were not investigated, but there is enough, in the descriptions of the documents, for example, advice from our learned friends, which indicated that they were classically privileged documents and there was going to be no issue about that and your Honours will see their names appearing in that long list.

Then, pursuant to the order that Justice Merkel made on 24 October, which is court book 49, Esso filed a further affidavit, elaborating the claim for privilege, and that is to be found at court book 253, just a page or two on from where the Court presently is, and your Honours will see, this is an affidavit of John McIntyre, Public Officer.

GLEESON CJ: It is at page 260, is that right?

MR MAXWELL: Page 253, your Honour.

GLEESON CJ: Page 260 is the answer to my question, is that right?

MR MAXWELL: Sorry, your Honour, yes, commencing at page 260 there is an identification of different bases of claim for different groups of documents and the only relevance of the earlier parts of the affidavit is that it describes the capacity in which the various officers were employed, by way of elaboration of their legal capacity as addressees.

GLEESON CJ: He repeats that formula on pages 263 and 264.

MR MAXWELL: But your Honour will see that the subparagraphs are slightly different in - - -

GLEESON CJ: Page 269.

MR MAXWELL: Yes, your Honour, and each category is slightly different in its definition, whether it is actually a communication between the lawyer and the client or between the lawyers for the purpose of one or other of them giving advice. The differences will not matter.

GLEESON CJ: Presumably we are entitled to infer that that was the highest he could put it?

MR MAXWELL: Yes, your Honour, with respect. The Court could infer that. In the ordinary course of this matter, had the preliminary questions not been identified by agreement, the Court can infer that there would have been cross-examination of the deponent about those matters and about the capacities in which the various authors and addressees were acting.

KIRBY J: I just do not quite understand why we are getting into this, given that our job is to identify the correct legal principle. Whether it is sole or dominant, there will remain a task for the judge managing this litigation.

MR MAXWELL: Just so, your Honour. It was only that I was concerned that the Court was left with the impression that there was nothing in the material to indicate what supported the claim for privilege. Your Honours may find that this is of no relevance to the judgments.

KIRBY J: I suppose you could make a forensic point of advocacy that to the extent that one diminishes the "sole" and adopts a broader test, we are looking at least in this litigation at a very, very large number of documents.

MR MAXWELL: Just so. Your Honours will have noted that the language used in paragraph 21 by the deponent is "dominant purpose" and that there are documents here which have gone to as many as five or six different people - - -

KIRBY J: As the United States Supreme Court said to the extent that one, as it were, adopts a softer test, you prevent the decision maker from getting material that may or may not be relevant.

MR MAXWELL: Just so, your Honour. The task the Commissioner faces at the investigatory level, as the learned Solicitor has submitted, becomes progressively more difficult. This was the Court circumstance but the pre-Court investigatory circumstance is the same. As one of the affidavits in the Court discloses, there was a substantial claim for privilege during the investigation for the audit before any proceedings were commenced. We do invite the Court to note that almost 600 documents were the subject of a claim for privilege and the proportion that bears to the 1,500 documents in respect of which no claim was made.

CALLINAN J: But all that means is that commerce is complicated. A great number of documents may come into existence. We get a lot of documents here.

MR MAXWELL: Just so, your Honour, but this is a case where, as this - - -

CALLINAN J: You cannot decide the case upon the basis - it is not relevant to the case, surely, that the transaction may have involved a great deal of paper. It is just modern commerce.

MR MAXWELL: The submission the Commissioner makes, your Honour, is that this is a case where in-house lawyers, that is salaried employees with legal qualifications - and the affidavit is perfectly frank about that - are the addressees of these documents, and questions of the kind adverted to by Justice Deane in Waterford about the multiple capacities in which one or more of those persons may have been acting are raised, much more acutely than if a brief is sent to counsel where no question arises.

CALLINAN J: Again, that is modern commerce. A lot of lawyers carry commercial roles in commerce too, and it just has to be decided which hat they were wearing and what the purpose was. The same question could arise with a sole purpose test.

MR MAXWELL: Our submission, as your Honours know, has been that the question is simpler and the investigation is shorter when the sole purpose test is applied. As soon as you allow a multiplicity of purposes, including the corporation's internal purpose as well as the legal advice purpose, then the entitlement to advance the claim becomes more debatable. The likelihood of speculative claims is greater and the length and cost of the investigation to get to the heart of the matter is likely, we submit, to be greater. If your Honours please.

GLEESON CJ: Thank you, Mr Maxwell. Yes, Mr Shaw.

MR SHAW: If the Court please, I have asked Mr de Wijn to make the reply.

GLEESON CJ: Mr de Wijn.

MR de WIJN: If the Court pleases, if I could just address first my learned friend Mr Maxwell's point. In the affidavit at page 263 volume 2 of the Court book, it is certainly not conceded that the claim for privilege on a dominant purpose test is put at the highest. Esso did not distinguish in its affidavits of documents between sole and dominant purpose test, so in respect of every document for which privilege was claimed, it claimed it on the basis of the dominant purpose test. So, incorporated in that may be documents that satisfy the dominant purpose test or satisfy the sole purpose test. So, there was no distinction made between sole purpose and dominant purpose documents.

GLEESON CJ: To say that a document was prepared for the dominant purpose of being shown to a lawyer assumes that it was prepared for a multiplicity of purposes, does it not?

MR de WIJN: Well, we took, with respect, my learned friend the Solicitor's view that the Evidence Act in sections 118 and 119, in using the word "dominant", incorporated "sole".

GLEESON CJ: It really means sole or dominant.

MR de WIJN: Sole or dominant, and we take your Honour's point that that is not what the Evidence Act says but it seems to be assumed in the Evidence Act that if you had a sole purpose then the dominant purpose test would be satisfied. That may not be strictly correct as a matter of grammar but that seems to be what the Evidence Act assumes - - -

McHUGH J: I am not sure that that is right because the report of the Legislative Committee seemed to think that there could never be a sole purpose. They reported it in an example of Justice Smith where he said that "The solicitor's file would not be privileged because it does not come into existence solely for the purpose of giving legal advice and assistance." If that is correctly reported, it does illustrate a fundamental misunderstanding of privilege. There is no privilege in respect of solicitor's files, it is only in respect of communications.

MR de WIJN: Precisely, your Honour.

McHUGH J: But that said the fact is that the legislature seemed to think that dominant purpose was applicable because all documents had more than one purpose.

KIRBY J: Justice Smith might have been referring to the fact, and I agree with Justice McHugh that it is imperfectly expressed, but he might have been referring to the fact that one purpose of having communications prepared is for costing and other such internal purposes of the solicitor's office.

MR de WIJN: With respect, I do not think it is a fair summary of either the Law Reform Commission Report or the Senate Committee Report to say that they thought there could never be a sole purpose. They certainly thought there could rarely be a sole purpose test satisfied.

GLEESON CJ: You would not say that an opinion of Mr Shaw was prepared for the dominant purpose of giving legal advice, presumably?

MR de WIJN: I would have thought that would have been prepared for the sole purpose, but there may be examples that one can even think about with legal advice where, perhaps not advice, perhaps not in respect of the brief to counsel, but in other legal advice where the dominant purpose is clearly to provide advice. A subsidiary purpose might be to provide a document to the board of directors, or - - -

KIRBY J: Or it could be to provide aide-memoire which may later become a basis for advice.

MR de WIJN: Yes, and that is, we would say, a perfect example of where the dominant purpose test achieves the policy objectives of the law in respect of privilege whereas the sole purpose test would not, and that is a classic case.

Can I now quickly turn to your Honour the Chief Justice's example of the company's communication to the lawyer which might also go to the doctor or the engineer and the workers' communication. Your Honour, that example is, we say, easily dealt with because it deals with two communications and you ask the question in respect of each communication. In respect of one communication you might get an answer that is privileged, in respect of another you might get a different answer. That has been the case all along and I do not think we contend for a different result. But that is a situation that deals with two communications. The documents that are in issue in this case are single communications or they record single communications but with multiple purposes.

GLEESON CJ: That is what seems to have been troubling the majority in Grant v Downs, that there would be a capricious operation of this rule which would make its practical effect depend upon the business practices of the communicator.

MR de WIJN: It may, but surely the question to ask is what is the purpose of the rule, the privilege, and it seems to be commonly accepted that it is to enable someone, be it a corporation or an individual, to bear their breast to their solicitors, to obtain legal advice, to facilitate settlement, to get proper advice, get proper instructions. Once one accepts that as a policy, and that seems to have been accepted as the policy throughout, then one needs to find a solution that promotes that policy and the sole purpose test simply does not.

What has been clear before Grant v Downs and after Grant v Downs and both in Australia and outside Australia is that what the courts look to in determining whether the particular communication will or will not attract the privilege is the purpose of either the person making the document or by whose authority the document was made or requested to be made, and the only issue is where you put the bar.

Before Grant v Downs the debate in England was whether a purpose was sufficient or whether it needed to be a substantial purpose, as Lord Diplock preferred. After Grant v Downs three more tests, in effect, entered the race, the sole purpose test, Justice Jacobs' test, and the dominant purpose test. So, it is really a question of determining purpose and which test to apply.

McHUGH J: Yes, but it does not seem to me that the dominant purpose gives sufficient protection to the privilege. Take the case of the solicitor/director of the company. He sends off legal advice to the secretary of the company intending to give legal advice but also in his memorandum, knowing that it is going to be given to the board of directors, because he is a director, and he wants to influence a decision. Now, it might be his dominant purpose to influence a decision to settle the case, for example, but at the same time he gives legal advice. Why, given the nature of the privilege, should it be lost and why is not the better test the older test, simply, was this communication made in the course of obtaining or giving legal advice or for use in litigation which was either on foot or could be reasonably anticipated?

MR de WIJN: Well, we have come here and plumped - I think as your Honour said - for the dominant purpose test. I think we would embrace your Honour's suggestion with open arms but it is a bit late in the day, perhaps, because we thought we were taking a balanced approach.

McHUGH J: I do not know why it is "late in the day". The dominant purpose test, in this country, has only ever had one supporter until this legislation. It has never been applied by any court. The question is, if you are going to abandon Grant v Downs, do you go back to what was the generally accepted view of the law or, for reasons of legal policy, do you develop some new test. The only reasons that appear to me is that we have got a statute that is on the books and whether you should just simply follow that statute, rather than look at what principle or what test would best serve legal professional privilege. I have a think at the moment that the old test is the test which best serves that privilege, particular now, having regard to the fact that it is regarded as a fundamental human right.

MR de WIJN: Your Honour, if in fact the Court plumped for the old test, either a purpose or a substantial purpose, that would automatically override any difficulties with the Evidence Act because, as a substantive issue of law, the Evidence Act would be irrelevant.

GLEESON CJ: You have a little problem here, have you not? You are inviting us to reconsider Grant v Downs which, on that question, is a unanimous decision of the Court.

MR de WIJN: Yes, I understand that, and we have come here advocating the dominant purpose test and that is our submission.

GUMMOW J: I am not sure how this would all be worked out. If you look at page 449 and compare it with page 346, what you seem to be asking at 449 is an answer to the question - firstly, one has to work out what the question was. The question is at 346. It is put as two possibilities. It says, "or the `dominant purpose' test as set out in s 118 and s 119". I am not sure that is right. There may be some differences in working out - - -

MR de WIJN: There are perhaps two ways of dealing with it. I think, as the learned Solicitor said yesterday, the answer to the question might not be (a) or (b) but it might be (c). We would propose that the answer to the question be something along these lines. The correct test for claiming legal professional privilege in relation to the production of discovered documents is the dominant purpose test as set out in the reasons for decision, so that is a way of getting round it. If one felt constrained by the reference to the Evidence Act, we would say that that effectively sets out in any event the dominant purpose test in Grant v Downs.

GLEESON CJ: Chief Justice Barwick's judgment was not a dissenting judgement.

MR de WIJN: No, and I was going to comment that the relief sought in paragraph (d) in any event ought to be changed because it was not a dissenting judgment. It is in error. So the question could be answered by saying that the correct test is the dominant purpose test as set out in reasons for decision and whether or not a declaration is made is probably not sufficient.

GUMMOW J: Well, it looked to be a very bare declaration.

MR de WIJN: Yes, it is not the sort of case in which you would expect a declaration.

GUMMOW J: No.

MR de WIJN: Just like in Grant v Downs, the reasoning sets out the reasoning of the court.

GUMMOW J: And it would be unnecessary then to answer the other question, would it?

MR de WIJN: And it would be unnecessary to answer question - - -

GUMMOW J: (b).

MR de WIJN: - - - (b). If it pleases, I just wanted to deal with the question of discretion and could I hand up to the Court copies of Order 15, copies of the order for discovery and copies of Order 10. Your Honour Justice Gummow was perfectly correct yesterday in saying that the application under Order 15 was misconceived and while we are prepared to take our share of the blame, the notice of motion that in fact originally sought inspection of the document, sought inspection under Order 15 but - - -

KIRBY J: Where is that? What page is that?

MR de WIJN: That is at page 2 of volume 1 the appeal book. It, in fact, sought inspection under Order 15 rule 10. That appears to have been a misdescription. I think it was intended to be rule 11. That is probably why everyone has gone off on the wrong track. The orders that I have handed up to the Court show quite clearly that the order for discovery, that is, the filing and serving of a list of documents, was made at a directions hearing under Order 10 and it is clear that no order for discovery was made under Order 15, because, as the Court will see, that requires a notice under subrule 1. Before an order for discovery can be made under Order 15, two preconditions need to be satisfied: first, it can only happen after a directions hearing and, of course, the directions hearing was adjourned, and the normal practice is that it just keeps getting adjourned; and secondly, there needs to be a notice filed and the remaining parts of Order 15 appear only to apply to discovery pursuant to Order 15.

Therefore your Honour Justice Gummow is entirely correct that the appropriate order was Order 10 and it was obviously that order under which the list was ordered to be prepared and any question for inspection - and, I suppose, assuming a valid notice of motion - would have to be made under Order 10 and perhaps we get to the same answer in any event, because the discretion in Order 10 rule 2 is clearly a very wide discretion: "the Court may make orders with respect to discovery and inspection of documents", and so perhaps we get to the same answer whether it is Order 15 or Order 10, but we think it is clearly Order 10.

We say, in respect of that, discretion is a broad one and that just as a judge has discretion not to order discovery, we submit that a judge has a discretion under Order 10 rule 2 not to order that documents be inspected on the footing that one could resist their being adduced into evidence under section 118 or section 119 of the Evidence Act, and on the footing that the discretion was being exercised to preserve the confidentiality of the document which the Evidence Act clearly intended it to have at trial or on an interlocutory application.

GLEESON CJ: Do you agree that this question is unnecessary to answer if you succeed on the first submission?

MR de WIJN: Yes, your Honour. Your Honour, the only remaining point we want to make is the point that we think the Commissioner has not adequately responded to, if at all, that is, the point we start at page 7 of our outline - that concerns the application of the Evidence Act - and it is not a point that relies on a change to the common law, it is simply a point that says until Baker v Campbell the law in respect of privilege was considered to be a rule of evidence. The rule in respect of discovery seems always to have been if you could resist producing the document at trial or by way of evidence on the grounds of privilege, then it followed that you did not have to produce that document for inspection in the discovery process or answer an interrogatory which disclosed the contents of the document.

So before Baker v Campbell, the law on privilege was a rule of evidence and that rule of evidence determined what documents needed to be produced on inspection. What we say is that the interpretation we contend for in part (i) of section B of our outline does not call for any change in the common law. We say the common law has always been that if you resist producing the document at trial on the grounds of privilege because of the rule of evidence, it followed that you could resist providing inspection of the document during the discovery process or answering a question in respect of it in the interrogatory process.

Over the years, no doubt - and I think Mr Justice Jacobs in Grant v Downs sets out a bit of a history of the change in the law of privilege over the centuries - and, no doubt, as that law changed, the documents that needed to be produced for inspection on discovery also changed to keep pace with the evidentiary rule. We say that it would be an impermissible change to the common law if the construction contended for by my learned friends were to be accepted because that would give rise to a situation where for the first time in our common law one was required to produce for inspection in the discovery process a document in respect of which you could make a proper claim for privilege at trial. On that basis, we say the construction we contend for, because of the Evidence Act, does not involve a change in common law but involves a consistent application of the common law, the common law applying differently, but the law being the same.

With respect, my learned friends simply have not dealt with that point. It is not an analogical use of the statute. It is a matter of asking what is the common law in the first place and we say the common law is that you could resist producing for inspection a document in respect of which you could make a valid claim for privilege at trial.

KIRBY J: Where is the case that says that most clearly? I do not ask you to read it but just put it on the record please.

MR de WIJN: I think the best place to find it is in the decision of Justice Dawson in Baker v Campbell where his Honour sets out the history of discovery and how it emerged as an exception and privilege as it emerged as an exception to a compulsory testimony.

KIRBY J: His Honour was dissenting in that case, was he not?

MR de WIJN: He may have been, but certainly the historical section that he deals with is not in issue. It is hard to find a case that specifically says that in those terms, but sometimes - - -

KIRBY J: That, itself, is remarkable given that there would have been a billion applications for inspection before this problem was presented to the Court in Grant v Downs.

MR de WIJN: With respect, we say it is not remarkable because it is an obvious proposition.

GUMMOW J: It is just assumed.

MR de WIJN: It is just assumed, but what is clear, we say from the cases, and we referred to them in our submissions, that up until Baker v Campbell, the law in respect of privilege was regarded as a law of evidence, not a law about discovery; a law of evidence. That seems to have been assumed in Australia and overseas right up until Baker v Campbell.

GUMMOW J: But the problem is that the foundation for the practice, or whatever you like to call it, changed when the nature of the privilege changed after Baker v Campbell.

MR de WIJN: With respect, we would disagree with that. Certainly the concept of privilege changed dramatically after the decision in Baker v Campbell, but the linking between what was required to be produced on inspection in the discovery process, and what you could refuse to produce at trial does not change. That link has always been there, and it was the evidentiary rule which drove the rule that said what had to be produced in respect of privilege.

On that basis we do not contend for any change in the common law on the construction argument and it is a point, with respect, that my learned friends have not dealt with and it does not require one to go to the analogical use of statute, it simply requires one to identify what the common law was and to apply it consistently. For those reasons we would say the appeal should be allowed. We would say that if we are successful on any ground, including the Grant v Downs ground, we should get our costs not only here but below. It happens frequently that a judge at first instance decides a case and he might be bound. It happened, for example, in the Spotless Case, which was a Part IVA case.

When Spotless came on before Mr Justice Lockhart, at first instance, he was bound by the decision of the Full Court in - I cannot remember whether it was Peabody or one of the other cases, and, ultimately, the High Court overturned or came to a different conclusion in Spotless, but, in that case costs were ordered all the way down the line. It happens commonly that a judge is bound, so, we would say we would get our costs all along. If your Honour pleases.

GLEESON CJ: Yes, thank you, Mr de Wijn. Yes, Mr; Solicitor?

MR BENNETT: Could I just have leave to say, your Honour, that the point my friend says we did not deal with was dealt with and is also dealt with in footnote 1 in paragraph 10 of our submissions. If the Court pleases.

GLEESON CJ: We will reserve our decision in this matter.

AT 12.20 PM THE MATTER WAS ADJOURNED