FEDERAL COURT OF AUSTRALIA

Novartis Pharmaceuticals Australia Pty Ltd v Bayer Australia Limited (No 2) [2013] FCA 1201 

Citation:	Novartis Pharmaceuticals Australia Pty Ltd v Bayer Australia Limited (No 2) [2013] FCA 1201	
		
Parties:	NOVARTIS PHARMACEUTICALS AUSTRALIA PTY LTD (ACN 004 244 160) v BAYER AUSTRALIA LIMITED (ACN 000 138 714)	
		
File number:	NSD 314 of 2013	
		
Judge:	ROBERTSON J	
		
Date of judgment:	18 November 2013	
		
Catchwords:	EVIDENCE - legal professional privilege - whether implied waiver

EVIDENCE - whether paragraph of affidavit admissible -whether probative value of evidence substantially outweighed by danger that it might be unfairly prejudicial to a party 	
		
Legislation:	Evidence Act 1995 (Cth) s 135  	
		
Cases cited:	Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160
Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371 
Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341
DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 49
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46 
Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68
Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501  	
		
Date of hearing:	13 November 2013	
		
Place:	Sydney	
		
Division:	GENERAL DIVISION	
		
Category:	Catchwords	
		
Number of paragraphs:	31	
		
Counsel for the Applicant:	Dr AS Bell SC with Ms E Holmes	
		
Solicitor for the Applicant:	Clayton Utz	
		
Counsel for the Respondent:	Mr R Lancaster SC with Ms K Richardson and Ms J Wright	
		
Solicitor for the Respondent:	Resolve Litigation Lawyers Pty Limited	

IN THE FEDERAL COURT OF AUSTRALIA		
NEW SOUTH WALES DISTRICT REGISTRY		
GENERAL DIVISION	NSD 314 of 2013	
 
BETWEEN:	NOVARTIS PHARMACEUTICALS AUSTRALIA PTY LTD (ACN 004 244 160)
Applicant
	
AND:	BAYER AUSTRALIA LIMITED (ACN 000 138 714)
Respondent

JUDGE:	ROBERTSON J	
DATE OF ORDER:	18 NOVEMBER 2013	
WHERE MADE:	SYDNEY	

THE COURT ORDERS THAT:

1.	The notice to produce dated 6 November 2013 is set aside insofar as it seeks the production of communications the subject of legal professional privilege.
2.	The applicant pay the respondent’s costs of the interlocutory application filed in court on 13 November 2013.
3.	Paragraph 22(a) of the affidavit of John Ian Fairbairn sworn on 31 October 2013 is admitted into evidence.
4.	Paragraph 22(b) of the affidavit of John Ian Fairbairn sworn on 31 October 2013 is rejected.

THE COURT DIRECTS THAT:

1.	The respondent’s interlocutory application filed 31 October 2013 is stood over to 10.15am on 25 November 2013. 

Note:	Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA		
NEW SOUTH WALES DISTRICT REGISTRY		
GENERAL DIVISION	NSD 314 of 2013	
 
BETWEEN:	NOVARTIS PHARMACEUTICALS AUSTRALIA PTY LTD (ACN 004 244 160)
Applicant
	
AND:	BAYER AUSTRALIA LIMITED (ACN 000 138 714)
Respondent

JUDGE:	ROBERTSON J	
DATE:	18 NOVEMBER 2013	
PLACE:	SYDNEY	

REASONS FOR JUDGMENT
1		When the respondent’s interlocutory application filed on 31 October 2013 for leave to withdraw certain admissions in its pleading was called on for hearing, the parties indicated that a further dispute had arisen between them which it was necessary to hear first. This further dispute concerned legal professional privilege and whether there had been implied waiver of it by the respondent. I therefore granted leave to file in court a further interlocutory application seeking to set aside a notice to produce. Further, there were objections to paragraph 22 of the affidavit of John Ian Fairbairn, lawyer, sworn on 31 October 2013 (the Fairbairn affidavit) to be read on behalf of the respondent in relation to the first mentioned interlocutory application brought by the respondent to withdraw certain admissions. Those objections centred on s 135 of the Evidence Act 1995 (Cth).
2		These reasons deal only with the interlocutory application to set aside the notice to produce and the objections to paragraph 22 of the Fairbairn affidavit. They do not deal with the interlocutory application for leave to withdraw certain admissions: that matter is part heard.
3		Paragraph 22 of the Fairbairn affidavit was as follows:
22. 	I am informed by Emma Press the General Counsel of Bayer and verily believe that the admissions referred to at paragraphs 6 and 8 above:
(a)	were made:
(i)	in the context of the narrow scope of the Publications referred to in paragraph 21 above as then pleaded;
(ii)	the (then) likelihood of an early hearing on all issues other than the quantification of damages as described in paragraph 9 above; and
(iii)	in order to avoid a factual dispute as to the actual treatment frequency and efficacy of Lucentis and thereby avoid certain interlocutory disputes that had arisen in relation to that issue including in relation to document categories and subpoenas;
(b)	are inaccurate if they are taken to involve an admission that the Representations, if conveyed, in fact were misleading or deceptive, or likely to mislead or deceive, when the Publications are considered in context or in relation to predispositions of what is understood to be the relevant section of the public, namely, ophthalmologists and optometrists.
4		Paragraph 6 of the affidavit refers to the defence to the amended statement of claim filed by Bayer on 16 April 2013 admitting that, if found to be conveyed, which was denied, each of the First, Third and Fourth Representations were misleading or deceptive under s 18 of the Australian Consumer Law or a false or misleading representation under certain subsections of s 29 of the Australian Consumer Law. Paragraph 8 of the affidavit refers to a defence to the further amended statement of claim filed by Bayer on 17 April 2013 in which, in summary, Bayer admitted that, if found to be conveyed (which was denied), the Second Representation was also misleading or deceptive under s 18 or a false or misleading representation under certain subsections of s 29. The Publications referred to in paragraph 21 of the affidavit were posters displayed in a trade display booth at three meetings and advertisements in three editions of a certain magazine.
5		The notice to produce dated 6 November 2013, as amended in the course of correspondence, was as follows:
The applicant requires you to produce the following documents or things at the hearing of these proceedings on 13 November 2013 at 10:15 AM:
1.	All documents, including correspondence, file notes and memoranda, in relation to the making of the admissions made in paragraphs 14A, 14C, 14E(a) – (b) and 14F(a) – (b) of the Defence to the Further Amended Statement of Claim dated 17 April 2013 (the Admissions).
2.	All documents, including correspondence, file notes and memoranda, recording or evidencing:
(a)	advice provided to the Respondent by legal practitioners retained to act for the Respondent, including Senior Counsel, Junior Counsel and solicitors (the Respondent’s Legal Advisers) in relation to the making of the Admissions;
(b)	instructions provided to the Respondent’s Legal Advisers by the Respondent in relation to the making of the Admissions;
(c)	consideration by the Respondent and/or the Respondent’s Legal Advisers of whether the Admissions should be made.
6		The interlocutory application which I granted leave to file in court was in substance an application for an order that the notice to produce be wholly set aside so far as it concerned communications the subject of legal professional privilege.
7		When senior counsel for the applicant called on the notice to produce, senior counsel for the respondent said there were no documents that fell within paragraph 1 other than documents in respect of which legal professional privilege was claimed.
8		In submissions directed to the interlocutory application to set aside the notice to produce, the respondent Bayer asserted privilege in the documents sought by the applicant Novartis: it contended that there had not been any express or deliberate waiver of legal professional privilege and accordingly the production of the documents turned on the question of whether the contents of the Fairbairn affidavit at paragraph 22 constituted an implied waiver of privilege. The respondent referred to the principles recently summarised by Wigney J in Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160 at [7]-[26].
9		The central question, it was submitted, was whether the conduct on the part of the holder of the privilege was inconsistent with the maintenance of confidentiality which the privilege was intended to protect. The respondent referred to Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 at [52] for the proposition that implied waiver may be made out if the privilege holder has impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality. The Full Court approved a description of the principle in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at [58] per Allsop J:
the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.
10		The respondent relied in particular on Wigney J’s observations or qualifications at [15] and [20] of some statements in the New South Wales Supreme Court and at [24] with reference to Ferella v Official Trustee in Bankruptcy (2010) 188 FCR 68 at [65] per Yates J:
In Federal Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341 a Full Court of this Court held (at [45]) that where implied waiver is alleged, a court is bound to analyse the acts or omissions of the privilege holder that are said to be inconsistent with the maintenance of the privilege. The Full Court later observed (at [52]) that the waiver will be established where the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Thus where the contents of the otherwise privileged communication is put in issue that act will be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication. However the question is not simply whether the holder of the privilege has put that person’s state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue: see at [65]. Indeed, even the fact that the holder of the privilege makes clear that the advice was relevant or contributed to a particular course of conduct would not be sufficient to waive the privilege unless, possibly, the contents of the legal advice (and not merely the fact of the advice) are specifically put in issue by relying on the contents of the advice to vindicate a claimed state of mind: at [67].
11		The respondent submitted that there was reason to doubt that in the Federal Court there was a recognised general principle that a party making allegations raising the issue of its state of mind to which legal advice is likely to have contributed could not continue to claim the privilege. It was submitted that Wigney J in Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v Sage Group plc (No 3) [2013] FCA 1160 arrived at a contrary set of conclusions at [13]-[15].
12		The respondent submitted that paragraph 22 of the Fairbairn affidavit did not impliedly waive privilege in any communications because:
(a)	the paragraph did not refer, expressly or impliedly, to any communication between Bayer and its lawyers;
(b)	the paragraph did not refer, expressly or impliedly, to any such communication containing legal advice;
(c)	the paragraph did not refer, expressly or impliedly, to the fact of advice having been given in relevant respects, let alone to the contents of the legal advice, let alone to having relied on such legal advice in a particular respect;
(d)	the statements made by the General Counsel of Bayer, repeated on information and belief by Mr Fairbairn, indicated her understanding of the factual circumstances in which the admissions were made, and also her understanding that the admissions were inaccurate if they were taken to have a particular meaning;
(e)	even if there was an inference available that legal advice was sought and received on the general issue of the making of admissions (that being an inference that did not find a foothold in the Fairbairn affidavit), such an inference was not sufficient to waive the privilege, as set out in the principles stated in the authorities identified above.
13		The applicant submitted that the respondent had waived privilege. The relevant territory was indirect waiver, albeit the contents of what it may readily be inferred was the legal advice was communicated by the General Counsel. It was known that the original defence was drawn and settled by counsel and the same legal practitioners drew and settled the admissions. When one added to that the answer to paragraph 1 of the notice to produce that there were no documents other than documents which were passed between the lawyers and Bayer, one had plainly a factual situation where there had been, it should be inferred, deployment of the legal advice and the reasons asserted to be contained in it for the radical change of position. One then got to the issues of inconsistency and unfairness. Reliance was placed on Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371 and the reference at [30] to Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 at [11]. Similarly, Ms Press was raising a positive case to assist her client’s or employer’s application for relief, putting into play Bayer’s state of mind. That, in the words of Hely J in Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 at [11]:
opened up for examination and testing the source of, and the basis for, that state of mind. Where a party makes allegations raising the issue of its state of mind, to which legal advice is likely to have contributed, the party cannot continue to claim legal professional privilege for that advice: Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405.
14		The applicant submitted that the legal advice was highly likely to have contributed to the state of mind which the respondent positively relied on. The state of mind was why the admissions were made at the time they were made. Ms Press was saying the admissions were made because the litigation was in a particular context which included the likelihood of an early hearing on particular issues and in order to avoid a factual dispute. The applicant submitted it ought to be entitled to test that by reference to underlying documents otherwise there was the relevant unfairness of the kind which informed the s 135 application. A party cannot maintain the confidentiality of communication when it is positively deploying the state of mind likely to be, and in this case in fact, affected by legal advice. The line of authority the applicant referred to was where the communications with lawyers were likely to or in fact had direct bearing on the state of mind. And it was obvious the lawyers were involved in the decision to make the admissions: reference was made to 10 lines of transcript at an interlocutory hearing on 15 May 2013, page 19.
15		In reply the respondent submitted that there was no basis in paragraph 22 of the Fairbairn affidavit for identification of a communication being legal advice of a certain sort being given and accepted and put into the pleading.
16		In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46 at [31] the High Court has recently stated that in Mann v Carnell (1999) 201 CLR 1 at 13 [29] it was said that it is considerations of fairness which inform the court’s view about an inconsistency which may be seen between the conduct of a party and the maintenance of confidentiality, though “not some overriding principle of fairness operating at large.”
17		The next issue is that the applicant objected to paragraph 22 of the affidavit of Mr Fairbairn.
18		The objection to paragraph 22(a) was on s 135 grounds if the documents the subject of the notice to produce were not produced.  It was submitted on behalf of the applicant that the admission of paragraph 22(a) would work a relevant unfairness and prejudice to the applicant without the documents the subject of the notice to produce being produced. The material was on information and belief from the General Counsel of the respondent so it was already remote in that it was not able to be directly tested and it contained sweeping factual assertions which were not able to be fairly tested or examined without the underlying material one would expect would exist.
19		Moving to paragraph 22(b), it had the vice, the applicant submitted, of being a completely vague but rolled up conclusion seeking to establish an evidentiary basis for the withdrawal of the admission, not explaining how the information might be inaccurate and it was submitted that that evidence should not be admitted by reference to s 135 particularly given that the source of that information evidently was not prepared to expose herself to cross-examination. The objection to paragraph 22(b) was not affected by the notice to produce.
20		In respect of paragraph 22(a), the respondent submitted that the paragraph was a statement of the fact of Ms Press’ understanding at the time the admission was made, reported on information and belief by Mr Fairbairn. The applicant could make submissions about weight in that context. The applicant could make submissions about any relevant contrary or other information in the comprehensive documentary record of the interlocutory progress of the case and invite the court to draw some conclusion about the weight of it. That was not a circumstance that created any relevant or material unfairness or prejudice to Novartis. That applied to both the paragraph 22(a) and 22(b) objection. In relation to the separate objection as to the allegedly vague and rolled up nature of paragraph 22(b), what was identified in paragraph 22(b) was a description of what was a mixed conclusion of fact and law. What Ms Press did was to identify in a specific way that if the admission was taken to involve an admission in the terms set out in paragraph 22(b), that was inaccurate in her understanding. That was neither vague nor rolled up but was specific and was equivalently specific to the pleading the admission related to. If the applicant’s proposition that there was no extensive explanation of the sources of the material relied upon for the inaccuracy was a good one, it was only good as to weight and not as to admissibility.
Consideration
21		In relation to waiver I am not persuaded that paragraph 22 of the affidavit of Mr Fairbairn effects a waiver of legal professional privilege in the communications the subject of the notice to produce.
22		In my opinion, Bayer, the privilege holder, has not put in issue the character or contents of those communications. I do not accept in the circumstances of this case that it is sufficient to constitute waiver that the statements made in paragraph 22 of the Fairbairn affidavit may have been affected by those communications.
23		I take into account that paragraph 22 does not refer expressly to any communication between Bayer and its lawyers or to any such communication containing legal advice or to the fact of advice having been given in relevant respects. Neither does the paragraph refer to the contents of legal advice, nor to having relied on legal advice in a particular respect. Further in my opinion paragraph 22 does not refer impliedly to any such communication or to its contents. Thus, in my opinion, Bayer has not directly or indirectly put the contents of the otherwise privileged communications in issue in the litigation, the litigation for present purposes being the interlocutory application to withdraw certain admissions. Bayer has not made an assertion as part of its case in that litigation that lays open the privileged documents to scrutiny with the consequence that an inconsistency arises between the statements and the maintenance of the privilege.
24		I do not accept however, contrary to the submissions of the respondent, that the statements made by the General Counsel of Bayer, repeated on information and belief by Mr Fairbairn, indicated only her understanding of the factual circumstances in which the admissions were made. In my opinion paragraph 22(a)(iii) states a reason or reasons for making the admissions rather than merely factual circumstances. 
25		This does not however alter my conclusion that in the circumstances of this case there has been no waiver effected by paragraph 22 of the Fairbairn affidavit.
26		I should add that the facts in Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 were quite different to the present case and I would be reluctant to follow therefore the width of the principle there stated. But in any event I am bound to follow the Full Court in Commissioner of Taxation v Rio Tinto Ltd (2006) 151 FCR 341.
27		The appropriate order therefore is to set aside the notice to produce insofar as it seeks the production of communications the subject of legal professional privilege. The applicant should pay the respondent’s costs of the interlocutory application.
28		In relation to the objections to paragraph 22 of the Fairbairn affidavit it follows that the objection to paragraph 22(a) falls away in light of my conclusion as to legal professional privilege and the notice to produce. I shall assume however that in relation to both subparagraphs of paragraph 22 the question remains whether I should refuse to admit the evidence “if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to” the applicant.
29		Considering first paragraph 22(a), in my opinion any remaining contention on the part of the applicant that the probative value of this material is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the applicant Novartis is not made out. I admit paragraph 22(a).
30		Turning to paragraph 22(b), in my opinion it states a conclusion only without reference to primary facts and, further, the conclusion is expressed in a conditional way which gives the two words “are inaccurate” the character of a submission. In my opinion the subparagraph has negligible probative value. I reject the subparagraph.
31		It seems to me that the costs of the objection should follow the outcome of the interlocutory application to withdraw the admissions but I will hear the parties if they wish to contend for some other course.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.	

Associate:

Dated:	18 November 2013