Esso Australia Resources Ltd v Commissioner of Taxation
High Court of Australia · 1999
Esso Australia Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49
Almost nothing an organisation writes has exactly one reason behind it. How much of the reason has to be legal before the document is privileged?
The anomaly Esso was decided to remove has since been closed from the other direction by statute in some jurisdictions, and the High Court has confirmed the effect. Section 131A of the Evidence Act 1995 (NSW) and s 131A of the Evidence Act 2008 (Vic) require a court to determine an objection to a "disclosure requirement" by applying Part 3.10 -- which contains client legal privilege -- and define that term to include pre-trial discovery, non-party discovery, interrogatories, a notice to produce and a subpoena. French CJ, Kiefel, Bell, Gageler and Keane JJ confirm the consequence at [32]: s 122(2) of the Evidence Act is "made applicable by s 131A of that Act to the determination of a question of waiver of client legal privilege arising in the context of pre-trial discovery". Their Honours also state the waiver principle at [30]: courts impute an intention to waive "where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect".
DO NOT GENERALISE FROM THE SECTION NUMBER. The Commonwealth Evidence Act 1995 also has a s 131A, and it extends journalist privilege rather than client legal privilege to disclosure requirements. What matters is whether the applicable Act extends the client legal privilege Division to discovery; check the provision, not its number.
What happened?
Esso was in litigation with the Commissioner of Taxation over amended assessments and claimed privilege over documents on discovery. Two different tests were in play at once. Under Grant v Downs the common law protected a confidential communication only where obtaining or giving legal advice or assistance, or use in legal proceedings, was its sole purpose. Sections 118 and 119 of the Evidence Act 1995 (Cth) used dominant purpose — but those provisions govern the adducing of evidence, not discovery, and apply only in federal and ACT courts (and New South Wales, which had enacted the same terms).
So the same document could be protected at trial and produced on discovery. Esso asked the High Court to remove the anomaly by declaring dominant purpose to be the common law test.
What did the Court decide?
The appeal was allowed, by four to two. Gleeson CJ, Gaudron and Gummow JJ delivered joint reasons and Callinan J agreed in the result; McHugh and Kirby JJ would have kept Grant v Downs.
The joint reasons did not treat the choice as obvious. "As a practical matter, the choice presently confronting this Court is between sole purpose and dominant purpose." What decided it was where each test put the balance. One reason for rejecting the pre-Grant position had been that it was "unduly protective of written communications within corporations and bureaucracies", but "[t]he sole purpose test goes to the other extreme": such organisations "necessarily conduct a large proportion of their internal communications in writing", and "[i]f the circumstance that a document primarily directed to lawyers is incidentally directed to someone else as well means that privilege does not attach, the result seems to alter the balance too far the other way". Their Honours added that if the only way to avoid the sole purpose test's "absoluteness and rigidity" was to water it down until it worked like a dominant purpose test, "then it should be abandoned".
McHugh J's dissent is worth a line, because it names the cost: the dominant purpose test "is much harder to apply than the sole purpose test and its use must increase the volume of interlocutory litigation".
Proposition
What is the principle?
Legal professional privilege protects a confidential communication made for the dominant purpose of obtaining or giving legal advice or assistance, or of use in legal proceedings, even where the communication also served another purpose. Confidentiality is a precondition, not an optional extra; dominant purpose replaced the sole purpose test laid down by the majority in Grant v Downs.
Why does this case matter?
Because of what it does not change. Widening the purpose limb left every other condition standing, and a great many claims fail on one of those rather than on purpose. Purpose is also the element most likely to be argued about after the event and least likely to be recorded at the time — which is why the practical work in a privilege dispute is usually evidentiary rather than doctrinal: whose idea the document was, what brief it answered, what would have been written without the legal reason.
It is also an unusually clear example of a court changing the common law with its eyes open. Nobody pretended Grant v Downs had been misunderstood. The majority held that the line had been drawn in the wrong place and moved it; two judges said the cost in interlocutory litigation was not worth paying. If you are asked whether a court should depart from its own decision, this is the case that shows the argument being had rather than assumed.
Exam and application relevance
Deal with confidentiality first, but do not treat it as a tripwire. Wide distribution is evidence that a communication was not confidential, and later disclosure may waive privilege — but neither follows automatically. As the Court held in Mann v Carnell, decided the same day, disclosure to a third party waives privilege only where it is inconsistent with maintaining the confidentiality the privilege protects, which is a question about the circumstances. Say what the circulation shows about confidentiality, rather than counting recipients.
Then say which limb you are in, and note that two things vary between them: the dominant purpose required, and how the provision is structured. Advice privilege in s 118 restricts participants for communications — between client and lawyer, or between lawyers acting for the client — though s 117 defines "client" and "lawyer" to take in employees and agents, so that restriction is less narrow than it reads. Separately, s 118(c) protects "the contents of a confidential document ... prepared by the client, lawyer or another person" for the dominant purpose of the lawyer providing legal advice, and a written communication is also a document, so a third party's material may still qualify through that paragraph. Litigation privilege in s 119 imposes no such restriction on communications: it covers "a confidential communication between the client and another person, or between a lawyer acting for the client and another person", for the dominant purpose of legal services relating to actual or anticipated proceedings. So ask what the dominant purpose was, who counts as client or lawyer, and whether what you have is a communication, a document, or both.
Then assess purpose at the time of creation, from the circumstances rather than from a label. A document copied to lawyers does not become privileged, and a heading saying "privileged and confidential" proves nothing. Ask who commissioned it, why, and whether it would have been created in that form without the legal reason.
Finally, say which regime you are in, and read the provision rather than trusting a section number. Sections 118 and 119 govern the adducing of evidence. In New South Wales and Victoria, s 131A of the local Act also applies Part 3.10 — the client legal privilege provisions — to a "disclosure requirement", defined to include pre-trial discovery, non-party discovery, interrogatories, a notice to produce and a subpoena, so there the statute decides a privilege objection on discovery. The Commonwealth Act's s 131A does something different: it extends journalist privilege, not client legal privilege. Where no such extension applies, the common law governs discovery — and it is Esso that makes the purpose test the same either way.
Check your understanding
A board paper analyses a commercial decision and includes a section of legal advice. What questions decide whether the whole document is privileged — and which of them comes before purpose?