Kelly v Penzes [2023] VSC 74 (23 February 2023)

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

BENJAMIN KELLY	Plaintiff

v

MARIA PENZES	Defendant

JUDGE:	Gorton J
WHERE HELD:	Melbourne
DATE OF HEARING:	9 February 2023
DATE OF JUDGMENT:	23 February 2023
CASE MAY BE CITED AS:	Kelly v Penzes
MEDIUM NEUTRAL CITATION:	[2023] VSC 74

PRACTICE AND PROCEDURE – Appeal from judicial registrar – Legal professional privilege – Dominant purpose test – Where document created for the purpose of obtaining legal advice if needed but otherwise retained on file – Whether any privilege waived by reason of Transport Accident Act 1986 (Vic) s 126A(2) – Evidence Act 2008 (Vic) ss 118 and 119 – Transport Accident Act 1986 (Vic) s 126A.

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A D B Ingram KC and Mr Y C Chen of counsel	Maurice Blackburn Lawyers

For the Defendant	Mr C Blanden KC and Ms A Bannon of counsel	Transport Accident Commission

1 This case concerns whether two investigation reports obtained by the Transport Accident Commission (‘the TAC’) are privileged.

2 Benjamin Kelly, the plaintiff, sustained injuries in a transport accident on 4 July 1997 when he was 14 years old. On 8 July 1997, his father completed a claim on his behalf for compensation under the Transport Accident Act 1986 (‘the Act’). The claim form indicated that Mr Kelly had suffered injury when his bicycle was hit by a car after he had ridden from the footpath onto a road, and that he had received injuries including a head injury. He was in hospital when the claim form was completed. On 28 July 1997, the TAC accepted his claim and commenced to pay no-fault benefits under the Act.
3 Shortly afterwards, on 11 August 1997, an employee of the TAC, Ms Angelie Marshall, engaged external investigators to prepare a report. Ms Marshall, who was not then legally qualified, was employed as a ‘Common Law Officer’. Her request to the investigators was in the following terms:

4 The investigators provided their report. Then, on 3 October 1997, Ms Marshall provided to the investigators the contact details of a police officer, and asked them to prepare a second report. This request was in the following terms:

5 Not long after this, the second report was provided.
6 More than twenty years then passed. There is no evidence of what, if anything, was done with the reports over that time. Then, in 2019, Mr Kelly commenced a proceeding under s 93(4)(d) of the Act in which he sought leave to commence a proceeding for the recovery of damages on the grounds that he had suffered a ‘serious injury’, as that term is defined in the Act.^[1] On 16 July 2020, the TAC, being satisfied that Mr Kelly had sustained a ‘serious injury’, issued to Mr Kelly a certificate in writing consenting to the bringing of a proceeding for the recovery of damages. Any proceeding for the recovery of damages was statute barred and so Mr Kelly applied for an extension of time under s 23A of the Limitation of Actions Act 1958. After a contested hearing, on 18 December 2020, the County Court of Victoria granted an extension of time.^[2] On 13 May 2021, Mr Kelly commenced this proceeding. He claims damages on the grounds that the driver of the car, the named defendant, was negligent. The TAC is obliged to indemnify a driver against any liability arising out of the use of a motor vehicle^[3] and is entitled to take over the defence of the proceeding on the driver’s behalf.^[4] I infer that the TAC, in accordance with its usual practice, has exercised its rights to do so and has taken over the defence of this proceeding.
7 The TAC has discovered the two 1997 investigation reports but has claimed privilege over them. Mr Kelly disputes that they are privileged. A judicial registrar of this Court determined that the reports are not privileged. The TAC has now appealed to the trial division of this Court under r 84.05(3) of the Supreme Court (General Civil Procedure) Rules 2015. The appeal is a hearing de novo.^[5] With leave, important evidence was put before me that was not before the Judicial Registrar. That evidence consisted of an affidavit sworn by Ms Marshall and oral evidence from her adduced in cross-examination and re-examination.^[6] As noted above, she was the employee of the TAC who in 1997 engaged the investigators to prepare the reports.

10 These sections deal with the adducing of evidence rather than discovery obligations. However, by reason of s 131A of the Evidence Act 2008, if these criteria are met then the TAC is not obliged to produce the documents for inspection.
11 It was, sensibly, common ground that:

12 The issue in dispute was, therefore, whether the reports are privileged on the grounds that they were prepared for the ‘dominant purpose’ of a lawyer providing legal advice to the TAC (s 118) or the TAC being provided with professional legal services relating to an anticipated proceeding (s 119). I was not invited to read the reports and I have not done so.

13 It was also common ground that it was the intention of the TAC when it engaged the investigators to prepare the reports that mattered, and not the intention of the investigators.^[9] For this reason, and because confidentiality is conceded, I place no weight on the evidence that the reports themselves contained assertions on their front pages that they were privileged.
14 As noted above, Ms Marshall swore an affidavit and was cross-examined.^[10] In her affidavit, she deposed that her role with the TAC in 1997 was to assess claims ‘for common law damages potential’, and, if a claim did have ‘common law damages potential’, to engage investigators to prepare reports that were directed at uncovering and recording the facts that would be relevant to assessing negligence and which could be used by the TAC in defending a common law action. She deposed that she obtained the reports ‘to obtain information in order to determine fault in negligence for the accident to provide to the TAC’s solicitors’, and ‘to provide an assessment of the police evidence to the TAC’s solicitors’. This was not unambiguous as to whether she obtained the reports so that she (or someone else within the TAC) could make decisions internally in relation to the management of the claim including in relation to assessing negligence, or whether she obtained the reports for the purpose of obtaining external legal advice, or for a combination of both purposes. However, she clarified these matters in her oral evidence. Although she had no recollection of this particular file, she explained, and I accept, that:

15 Counsel for Mr Kelly put to Ms Marshall that she obtained the reports for the purpose of determining whether the claimed injuries were consistent with the accident circumstances. She denied that she had that purpose. I accept her denial. In this respect, I note that these reports were obtained by the TAC’s common law team, not its no-fault team, and they were obtained after the no-fault team had already accepted Mr Kelly’s claim form and were paying him no-fault benefits.
16 Counsel for Mr Kelly put to Ms Marshall that she and the investigators were involved in ‘an investigatory process’. He then later made the following suggestions, which received the following responses:

17 It was clarified that the ‘recommendations’ she was referring to consisted of highlighting or summarising parts of the reports that she thought significant and relevant to assessing fault and explaining why, and that the recommendations were made to the TAC’s solicitors when she forwarded the reports to them.
18 I accept this evidence. I conclude that Ms Marshall, on behalf of the TAC, obtained the reports so that they could be sent to the TAC’s solicitors so that the TAC could be provided with legal advice in relation to liability issues that might arise in a damages claim. It is significant that she herself did not use the reports to assess the questions of liability ‘in house’, as it were, but used them instead to obtain advice from external lawyers. Indeed, as the above extract indicates, that was not what Mr Kelly’s counsel suggested to her. The fact that Ms Marshall summarised the reports, or emphasised parts of them in her communications with those solicitors, does not alter this purpose.
19 The question then becomes whether that was the ‘dominant purpose’. I consider that it was. On the basis of Ms Marshall’s evidence and the surrounding circumstances, I conclude that the ‘ruling, prevailing or most influential purpose’ for which the documents were brought into existence was for the purpose of them being provided to lawyers to obtain legal advice in the event that a claim in negligence for damages were made,^[11] and that but for that purpose the documents would not have been brought into existence.^[12] Ms Marshall’s evidence as to her own purpose as the person within the TAC who decided to engage the experts is obviously of critical importance in this assessment.^[13] However, her evidence that she obtained the reports so that she could obtain legal advice if damages were sought is supported by the terms of the letters of engagement set out in paragraphs 3 and 4 above and the facts that:

20 Mr Kelly’s principal submission became that the reports were obtained instead for the dominant purpose of uncovering the ‘precise circumstances’ of the accident as a ‘fact finding’ exercise. So much may be accepted when it is an investigative report that is being sought. But this submission leads to the enquiry as to why the precise circumstances of the accident were sought to be uncovered. The answer to that query is, on the evidence in this case, so that legal advice could be obtained; the ‘precise circumstances’ were to be obtained so that they could be passed on to external lawyers so that those lawyers could provide legal advice. The purposes of ascertaining the precise circumstances and of obtaining legal advice were complementary or overlapping, rather than competing.
21 Mr Kelly sought to separate the two purposes conceptually by contending that there were occasions when reports were not sent to solicitors for advice. This was consistent with the tenor of Ms Marshall’s evidence that the reports were obtained promptly in case a damages claim was made, not only after one had been made, and that she believes that the reports were retained on file in the meantime. Clearly enough, the sooner an investigation is performed after an accident takes place, the more likely the investigation will obtain accurate information; it makes sense to obtain a report shortly after an accident in case a damages claim is later made, rather than to wait until after one is made. As this case shows, there may be a significant delay.
22 Ms Marshall was asked how many of her reports ‘were relevant to litigated cases’, which question she was unable to answer. I took this question and answer to be directed at how often reports were in fact provided to solicitors. In these circumstances, and bearing in mind that the TAC has the onus of establishing the privilege, I am prepared to accept that the TAC common law team’s practice was to send the reports to its solicitors only after a claim for damages was made. I am also prepared to accept that if no claim for damages were made, the reports may never have been sent to the solicitors. More specifically, I am prepared to accept that on this occasion the reports were obtained so that they could be provided to the TAC’s lawyers for advice if need be, but were not sent to the TAC’s lawyers until Mr Kelly’s claim for damages emerged in 2019 which was more than twenty years later. In the absence of evidence, I am prepared to infer that the reports simply remained on file during this period. I am not prepared to infer, however, in the absence of evidence, that they were used in some other manner. As pointed out above, the only competing purpose put to Ms Marshall was so that the TAC could assess whether the claimed injuries were consistent with the accident circumstances, and I have accepted Ms Marshall’s denial that the reports were obtained for that purpose.
23 The extended period of delay and the prospect that the investigations might never in fact be sent to solicitors gives some weight to Mr Kelly’s submission that the dominant purpose for obtaining the reports is better characterised as being for the ascertainment of facts for later use, rather than for the purpose of solicitors providing legal advice. But, in my view, the period of delay, or the possibility that the reports may never be used at all, are not sufficient reasons in the circumstances of this case so to characterise the dominant purpose. There is no additional requirement that a document in fact be sent to legal advisers if it is to be privileged.^[14] In my view, if a report is obtained with the intention that it be retained on file until such time as a claim for damages is made and then be sent to solicitors so that they can provide advice on that claim, then it is proper to characterise the purpose of its creation as being for the obtaining of legal advice. The effluxion of time does not alter the relevant purpose, nor does the fact that sometimes the document simply remains on the file. If the document were used in the meantime for some other purpose, then inferences might be able to be drawn about the dominant purpose for which it was created, but that is not this case.
24 Having regard to my conclusions expressed above, the reports meet the criteria in s 118 of the Evidence Act 2008 and the TAC is entitled to maintain privilege in them. There is no further requirement, under s 118 of the Evidence Act 2008, that the advice be in relation to anticipated litigation.^[15]

25 Mr Kelly submitted that, by reason of s 126A(2) of the Act, the TAC should be treated as having waived that privilege. As at the date of the accident, s 126A of the Act provided as follows:^[16]

26 Following amendments that took effect from 1 January 2010, the words ‘and client legal privilege’ were added to the end of the heading and the words ‘or client legal privilege’ were added after the words ‘legal professional privilege’ in each of ss 126A(1) and 126A(2).^[17] However, the parties agreed that it was the version in place prior to these amendments, as set out above, that applies.
27 I note that s 126A(1) is expressed in surprisingly wide language and, on its face, would seem to have the effect of elevating any purpose of use in anticipated legal proceedings into a sole purpose and thus a dominant purpose. That result would extend beyond the reason given for the introduction of that section by the Minister when it was introduced.^[18]
28 Section 126A(2) applies only to a privilege that arises ‘by the application of subsection (1)’. The privilege I have found established arises under s 118 of the Evidence Act 2008. As noted above, s 118 does not require there to be an ‘anticipated legal proceeding’, only that the documents be prepared for the dominant purpose of a lawyer providing legal advice. It is s 119 of the Evidence Act 2008 that has a requirement that there be an anticipated legal proceeding. My finding that the investigation reports were prepared for the purpose of a lawyer providing legal advice in the event that a claim for damages were made does not compel a conclusion that the reports were prepared for the dominant purpose of the provision of legal services in relation to an anticipated legal proceeding. It is necessary to distinguish between a claim for damages and the commencement of a legal proceeding. Not every claim for damages results in legal proceedings; many will be settled before proceedings are initiated. An investigation report that is obtained for the purpose of obtaining advice from external solicitors on liability so that a party may, for example, negotiate a settlement and thereby avoid the issuing of legal proceedings may be privileged under s 118 of the Evidence Act 2008 but may well not be privileged under s 119 of that Act.
29 In my view, s 126A(1) of the Act, at least in the form that applied prior to the amendments, applies only where the privilege under consideration is a privilege under s 119 of the Evidence Act 2008, as s 126A is directed at the criteria that apply under s 119 of the Evidence Act 2008. It would be perverse were s 126A(1) to require, for the purpose of assessing privilege under s 118 of the Evidence Act 2008, that the relevant criteria, being the purpose of obtaining legal advice, had to be disregarded.
30 It is not necessary for me to determine whether the reports are also privileged under s 119 of the Evidence Act 2008, or whether, if so, s 126A(2) of the Act would operate on a privilege that arises under both ss 118 and 119 of the Evidence Act 2008. That is because I am satisfied that s 126A(2) would not apply in the circumstances of this case in any event. As noted above, the time within which Mr Kelly had to bring his legal proceeding expired but was subsequently extended. The clear purpose, it seems to me, of s 126A(2) is to compel a waiver of privilege once the legal proceeding is either concluded or can no longer be brought. If the words are given their strict literal meaning, the use of the word ‘or’ would mean that a plaintiff could assert an obligation on the TAC to waive a privilege six years after an accident because the time within which to bring proceedings had expired, even if proceedings had already been commenced within the six year period. That would be an absurd result. Similarly, it would be an odd result if a person in Mr Kelly’s position could require the TAC to waive privilege in a document on the grounds that the limitations period had expired, in circumstances where that time had been extended and there was an ongoing proceeding. The ‘or’ in the s 126A(2) must be read conjunctively, and the phrase ‘time within which to bring any relevant legal proceeding has expired’ must be read as not applying where the time period has expired but has since been extended (and so has not ‘been concluded’). The purpose would be frustrated if the forced waiver were to apply while a relevant proceeding was ongoing.

31 The decision of the Judicial Registrar the subject of this appeal proceeded on the basis that the provisions of the Evidence Act 2008 applied. There was no submission made to me that this was an error, and the oral argument before me also proceeded on the assumption that the provisions of the Evidence Act 2008 applied. I have given my reasons accordingly.
32 The reports the subject of this appeal were created in 1997, but the claim to privilege was asserted in 2022. The Evidence Act 2008 did not exist in 1997. It may be that the common law principles, rather than the Evidence Act 2008, would apply to documents created prior to its commencement. This issue was not argued. Nonetheless, the test in s 118 of the Evidence Act 2008 reflects the common law position. I am satisfied that the investigation reports would also be privileged under the common law for the same reason: that they were brought into existence for the dominant purpose of obtaining legal advice.^[19]
33 I note that the second request to the investigators included a request that the investigators interview the cyclist, that is, Mr Kelly. It is difficult to see how the TAC could maintain privilege over any statement obtained from Mr Kelly because it would be difficult to establish that such a statement was confidential in the relevant sense as against him. That was not, however, argued and so I make no final conclusions in this regard.
34 I will hear the parties on the form of order and on the question of costs.

^[6] The TAC filed an affidavit that explained that Ms Marshall no longer worked for the TAC and that she had not been located at the time that the application was heard by the Judicial Registrar.

^[7] The term ‘client’ is defined in s 117 of the Evidence Act 2008 (Vic) to include a person or body who engages a lawyer to provide legal services.

^[9] This is because the relevant purpose is the purpose ‘that led to the creation or the document’: Carnell v Mann [1998] FCA 1566; (1998) 89 FCR 247, 253F (Higgins, Lehane and Weinberg JJ). See also Hartogen Energy Ltd (in liq) v Australian Gas Light Company [1992] FCA 322; (1992) 36 FCR 557, 569 (Gummow J).

^[11] Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404, 416 (Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ); IOOF Holdings Ltd v Maurice Blackburn Pty Ltd [2016] VSC 311, [47(3)] (Elliott J).

^[12] Carter Holt Harvey Wood Products Australia Pty Ltd v Auspine Ltd [2008] VSCA 59, [7] (Maxwell P and Redlich JA), quoting Sparnon v Apand Pty Ltd (1996) 68 FCR 322, 328 (Branson J); Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49, 72 [58] (Gleeson CJ, Gaudron and Gummow JJ).

^[13] Carter Holt Harvey Wood Products Australia Pty Ltd v Auspine Ltd [2008] VSCA 59, [2]-[3] (Maxwell P and Redlich JA).

^[14] In this respect, too, the legislation picks up the common law position – see Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357, 362-363 [19].

^[15] In this respect, the legislation picks up the common law position as described in Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122; (2004) 136 FCR 357, 362 [15], 366 [34], 367-368 [41]-[43] (Finn J), 386 [105] (Stone J). See also Saunders v Commissioner of Australian Federal Police [1998] FCA 1652; (1998) 160 ALR 469, 472(French J): ‘The principle ... extends with equal facility to materials brought into existence by the client for the purpose of communication to the solicitor whether or not they are themselves provided to the solicitor’.

^[16] The version quoted is the version in place prior to amendments made on 1 January 2010.

^[17] The words were added by the Statute Law Amendment (Evidence Consequential Provisions) Act 2009 (Vic), s 54 (Schedule, Pt 1, Item 59.2).

^[18] Victoria, Parliamentary Debates, Legislative Council, 15 November 1994, 811 (Roger Hallam, Minister for Regional Development).

Supreme Court of Victoria

Kelly v Penzes [2023] VSC 74 (23 February 2023)