SYDNEY HARBOUR CASINO PTY LTD v WALTER VIGNOLI

MASON P: This is an application for leave to appeal in which the Court heard full argument that would enable it to address the appeal should leave be granted.

The first opponent (whom I shall refer to as the plaintiff) has commenced proceedings in the Common Law Division for damages for wrongful arrest, false imprisonment and defamation.

Briefly, his allegation is that he was a patron at the Sydney Harbour Casino (operated by the claimant) on 20 June 1996 when he was detained by employees of the claimant investigating a suspected overpayment made when he cashed in his gambling chips that evening. The plaintiff alleges that he was held for approximately four and a half hours in circumstances which constitute wrongful imprisonment. The defamation claim arises out of an article which was published in the Sydney Morning Herald on 22 June 1996 which, it is alleged, was the result of a telephone call made to a journalist at the newspaper by the second opponent. The plaintiff claims that the telephone conversation and the article which ensued bore the imputation that the plaintiff was a thief. He asserts that the claimant and the second opponent are liable for the publication of that imputation.

Defences have been filed by both defendants and the matter has progressed as far as discovery and interrogatories.

The claimant has discovered as item 32 in its List of Documents (without claim of privilege) a memorandum from Garry Wills to Bill Brown dated 22 July 1996. Mr Wills is referred to as a chief investigator at the casino. Mr Brown is the solicitor and Vice-President, Legal and Compliance, of the claimant. So far as immediately relevant, the memorandum states: Bill In response to Levitt’s complaints perhaps the following points may assist. 1. … 3. Levitt was denied entry into the casino. He had every opportunity to enter. (Sifner and Richardson statements). Detectives arrived about one hour after being called. Detectives made the statement to Sifner, “We know Levitt, he can wait”.

The plaintiff has interrogated the claimant in relation to the memorandum and has confirmed that “Sifner” and “Richardson” were security employees of the claimant on 20 June 1996 and that the statements referred to are still in the possession of the claimant.

In response to a question (§8(d)(iii)) about where and when the statements can be inspected, the claimant answered that they are included in Part 2 item 3 of the claimant’s List of Documents. In other words, the witness statements are discovered by the claimant but subject to a claim of client legal privilege.

On this material, the plaintiff sought and obtained an order for a proper answer to the lastmentioned interrogatory. In effect he was requiring production for inspection of the two witness statements. The relevant formal order is that the claimant deliver verified answers to interrogatory 8 by Friday 5 February 1999. It has not been contended by either party that anything turns upon the way in which the issue of production has been litigated and determined. It is, however, material to remind oneself that the dispute over production arises at the interlocutory stages of the proceedings and well before the setting down of the trial for hearing.

I assume that the operation of the order under challenge has been suspended pending the determination of this application to the Court of Appeal. Presumably the many other issues addressed in the judgment and orders made on 31 December 1998 have been addressed according to the tenor of his Honour’s directions.

The primary judge’s reasons for deciding that the two witness statements ought to be produced for inspection may be summarised as follows: (a) Inclusion of the witness statements in the List of Documents was a tacit acceptance of their relevance. (b) The witness statements were properly the subject of a claim for privilege by the claimant, having been prepared in contemplation of litigation. (c) The Wills memorandum was discovered (without claim of privilege). On the basis of certain evidence, the judge was satisfied that its disclosure was knowing and voluntary in the terms of s122(2) of the Evidence Act 1995 . (d) Section 126 of that Act applied to the witness statements because it was “reasonably necessary to enable a proper understanding of” par 3 of the Wills memorandum. (e) Although the law in New South Wales in relation to the “derivative” application of the Evidence Act to pre-trial procedures is in a state of flux, the approach to be taken is founded in the operation of the Evidence Act 1995 (cf Akins v Abigroup Ltd (1998) 43 NSWLR 539).

I have stated his Honour’s reasoning in skeletal form. It will be necessary to return to the detail later.

In support of its application for leave and (subject to the grant of leave) its appeal, the claimant submits that his Honour erred on the following grounds: 1. If s126 applies to the pre-trial application in question, the primary judge nevertheless erred because (i) there was no ambiguity in par 3 of the Wills memorandum, and accordingly production of the witness statements was not reasonably necessary to enable a proper understanding of that paragraph of the memorandum; (ii) even if the parenthetical reference to the statements is to be read as confined to the second sentence in par 3 of the Wills memorandum, production of the witness statements was not reasonably necessary because it was pure speculation that the statements would cast light upon the meaning of that sentence; (iii) his Honour should not have ordered that the statements be produced in their entirety without first inspecting them to see whether the parts relevant to par 3 of the Wills memorandum could be segregated. 2. Section 126 did not apply because nothing in the application of ss121, 122, 123, 124 or 125 of the Evidence Act permitted the adducing of evidence of the memorandum itself. The essential point advanced is that it had not been established that the memorandum would have been privileged were it not for loss of that privilege because of its disclosure “ knowingly and voluntarily” (cf s122(2)) through inclusion in Part 1 of the claimant’s List of Documents. 3. Akins does not apply in relation to s126 in the circumstances of this case. But, if it does, Akins should be reopened and overruled in the light of Esso Australia Resources Ltd v Commissioner of Taxation (1998) 83 FCR 511.

It is convenient to address these arguments in reverse order.

I do not think that the prospect of distinguishing Akins in the context of s126 of the Act has a sufficient likelihood of success to merit the grant of leave. There is no reason why the principle expounded and applied in Akins should not apply with equal force to s126 in its application to an issue concerning discovery or interrogatories.

I am not disposed to revisit Akins at this stage, notwithstanding that the Full Federal Court (whose decision in Adelaide Steamship Co Ltd v Spalvins (1998) 152 ALR 418 was followed by this Court with a presently immaterial qualification) has subsequently overruled Adelaide Steamship in Esso Australia . This was the position adopted by a differently constituted Court of Appeal (Mason P, Handley JA and Giles JA) in Amalgamated Television Services Pty Ltd v Marsden [1999] NSW CA 97 at 13. My reason for applying stare decisis in relation to this Court’s recent decision in Akins is not based upon any fixed view as to the correctness of that decision, because I have not thought it necessary to address that matter in the present context. Rather it is based upon the fact that the High Court has granted special leave to appeal in Esso Australia for reasons which, according to the transcript of the special leave application heard on 14 May 1999, are intended to lay the issue to rest. It would be a foolhardy waste of judicial resources for this Court to revisit the issue of the derivative application of the Evidence Act in these circumstances.

There appears to be another reason for declining to embark upon this argument, although it was not debated in the hearing before us. Part 24 r6(3)(c) of the Supreme Court Rules provides that a party may object to answer an interrogatory on the ground that evidence in answer to the question could not be adduced in proceedings over the objection of any person, by virtue of Part 3.10 (other than ss128 and 130) of the Evidence Act 1995 . Akins concerned proceedings unaffected by a provision such as Pt 24 r6(3)(c) (see at 545E). Although objection to the interrogatory was not taken in this form, the right to do so indicates that the debate about the correctness of Akins in this context would be ultimately an arid one.

As to the second matter advanced by the claimant, I consider that his Honour was correct in holding (p6) that the Wills memorandum would have attracted client legal privilege had it not been discovered without a claim of privilege in the claimant’s List of Documents. The Wills memorandum bears many hallmarks of having come into existence at a time when litigation was clearly in contemplation and for the purpose of addressing the issues in that litigation. Its addressee is an officer of the claimant who is involved in legal matters. It cites the two witness statements which themselves are the subject of a claim for client legal privilege. And the nature of that memorandum as a response to Mr Levitt’s letter of demand (see below) suggests that it would have satisfied even the sole purpose requirement of Grant v Downs (1976) 135 CLR 674 had privilege not been lost through the application of s122.

To understand the issues raised by the first ground in its several manifestations, it is necessary to recall the context in which the Wills memorandum came into existence. The matters complained of in the litigation occurred between 20 and 22 June 1996. On 28 June 1996 Mr Levitt of Stewart Levitt & Co solicitors wrote to the General Manager of the claimant. He indicated that he acted for Mr Vignoli (the plaintiff). Reference was made to a meeting with the General Manager of the claimant on 27 June 1996. Mr Levitt asked for certain video tape to be preserved as material evidence in prospective litigation. The letter then set out in the form of a letter of demand the allegations and complaints made by the plaintiff in relation to the events of 20 to 22 June 1996. The claims of wrongful arrest, false imprisonment and defamation are foreshadowed in forceful and specific terms. The plaintiff’s case is presented at its highest and in detail. The letter concluded with an overture for settlement coupled with a threat of litigation in the absence of an acceptable response by the 3 July 1996.

It is clear that the Wills memorandum of 22 July 1996 was, as it stated, in response to Mr Levitt’s complaints. It does not matter for present purposes whether that response was being given after litigation was inevitable or at a time when the parties were still exploring whether settlement was possible. What is in my view clear is that the memorandum must be read as responsive to Mr Levitt’s letter.

Levine J noted that there was an apparent contradiction between the first two sentences of par 3. He cited Sackville J in Towney v Minister for Land and Water Conservation for the State of New South Wales (1997) 147 ALR 402 at 413, where the analogy of Attorney-General (NT) v Maurice (1986) 161 CLR 475 was invoked, with its concern about the misleading effect of a party using certain privileged material selectively. The nub of his Honour’s reasoning on the critical issue was as follows: It does appear to me, upon consideration, to be reasonably necessary for a proper understanding of the sentences “Levitt was denied entry into the casino. He had every opportunity to enter” to look at the Statements referred to. Both of these sentences, it could be argued, stand on their own: if the allegations are supported by the statements of Sifner and Richardson (which is the inference to be drawn from the inclusion of the reference in parentheses) then does that mean that they are not required to “enable a proper understanding” of this section of the memorandum? If the statements bear out these two apparently contradictory statements, then does that enable their understanding, if it merely confirms the apparent contradiction? If the statements contradict the two sentences, will inspection of them not “enable” a proper understanding of the statements, or gainsay them? These competing hypotheses compel rather than derogate from the conclusion that an “understanding” is “reasonably necessary”. That “reasonably necessary understanding” cannot be reached without the fundamental contradiction being explained. That can only occur upon discovery and inspection. The first defendant will be ordered to provide proper answers to interrogatory 8.

I respectfully disagree.

I do not construe the opening sentences of par 3 of the Wills memorandum as containing a “fundamental contradiction” requiring explanation. In my view, the first sentence of par 3 states the substance of a particular allegation by Mr Levitt; and the second sentence states Mr Wills’ response based upon the witness statements of its two employees.

One of the paragraphs of Mr Levitt’s letter had stated that Mr Vignoli: …was falsely imprisoned in a room designated as an “Investigations Room”, which incorporated listening devices and surveillance cameras…. Mr Vignoli was denied legal representation for a protracted period and efforts were made by your doormen to prevent me, as Mr Vignoli’s lawyer, from entering the Casino, even as a patron, for close on 40 minutes. For convenience, I repeat par 3 in its entirety: 3. Levitt was denied entry into the casino. He had every opportunity to enter. (Sifner and Richardson statements). Detectives arrived about one hour after being called. Detectives made the statement to Sifner, “We know Levitt, he can wait”.

The Wills memorandum is an unpolished communication from one officer to another within the corporate hierarchy of the claimant. In addition to the opening words of the memorandum, there are numerous cross-references to the letter. For example, in par 9 of his memorandum Mr Wills states: At no time did casino staff attempt to “dress up” allegations. (Statements prove this to be true). This is obviously an answer to the reference on page 3 of the letter to an attempt by Casino management to “dress-up the allegation that Mr Vignoli was attempting to asport the Casino’s funds” . See also pars 4, 5, 6, 12. The opening two sentences of par 3 of the memorandum must be read in similar vein.

All of these factors explain and resolve the apparent contrariety on the face of the first two sentences of par 3 of the Wills memorandum. Accordingly, access to Mr Wills’ source material for the second sentence was not reasonably necessary to enable a proper understanding of that sentence.

The plaintiff seeks to meet this conclusion by two alternative arguments.

Conceding for the purpose of argument, that the first two sentences of par 3 should be read in the way that I favour, counsel for the plaintiff argued that the power to order inspection of the witness statements was properly exercised because the statements were cited by the author of the memorandum as elucidating the second sentence. It was submitted that this was sufficient to enliven the power conferred by s126. Examples were given of hypothetical ambiguities in the meaning of the second sentence which would dissipate if the statements were produced for inspection. We were referred to the following passage in the judgment of Sackville J in Towney at 414: In applying the standard specified by s126 of the Evidence Act, it is to be borne in mind that the expression “proper understanding” is by no means narrow. The dictionary definition of “proper” includes “complete or thorough”; the definition of “understand” includes “to apprehend clearly the character or nature of” and “to grasp the significance, implications or importance of”: Macquarie Dictionary . It may or may not be correct to say that the test stated in s126 of the Evidence Act is, or appears to be, narrower than the principles governing implied waiver under the general law: cf Cross on Evidence , Aust ed, para 25300. Any precise assessment of the scope of s126 must await further decisions. However, I think it fair to say that, if a privileged document is voluntarily disclosed for forensic purposes, and a thorough apprehension or appreciation of the character, significance or implications of that document requires disclosure of source documents, otherwise protected by client legal privilege, ordinarily the test laid down by s126 of the Evidence Act will be satisfied.

Towney was a case quite removed from the present. An expert anthropological report had been filed in native title proceedings. It was intended to be used in evidence in support of the applicant’s claim. The respondent Minister subpoenaed various documents which were the subject of client legal privilege (“the claimed documents”). The claimed documents related to advice and comments relating to the native title claim which were taken into account in the preparation of the final expert report. Sackville J proceeded on the basis that the Evidence Act 1995 (Cth) applied derivatively to the Minister’s application for inspection. Applying s126, his Honour ruled that client legal privilege had been lost in the claimed documents because production of them was reasonably necessary to enable a proper understanding of the anthropological report.

The present case is distinguishable from Towney . First, it is clear that the final anthropological report in Towney was intended to be used in evidence in support of the applicant’s native title claim. Sackville J had pointed out (correctly in my respectful view) that a court applying s126 will take into account the forensic purpose for which it is proposed to use documents voluntarily disclosed (at 412). By contrast, there is nothing to indicate any real likelihood that the claimant intends to make any forensic use of the Wills memorandum. The contrary has not been suggested. (This position may change depending upon the conduct of the litigation, but that is another question.)

The second point of distinction lies in the analysis to be found in Towney (at 414-417), of the claimed documents and their relationship to the anthropological report. In a number of places the final report cited or referred to the claimed documents in circumstances that showed that the privileged communications were adopted as building blocks in the formulation of the principles expounded and data summarised in the final report. The document analogically closest to the witness statements referred to in the Wills memorandum was the document described as “No 1. Sutton 1996a”. This was a report by an anthropologist, Dr Sutton, which provided expert anthropological advice in relation to the applicant’s claim. The Sutton document was included in the list of references recorded at the end of the report. More importantly, the report made it clear that concepts formulated by Dr Sutton had been adapted and applied in that report (see at 415).

I do not think that these principles can be applied to the witness statements referred to in par 3 of the Wills memorandum as I have construed that paragraph. I cannot see any real prospect that the claimant would put the memorandum into evidence. But in any event, I cannot see any need for a “complete or thorough” understanding of the second sentence of par 3 that extends beyond the plaintiff’s wish to have prior access to the evidence of the two security personnel. In my view it is pure speculation that the statements would elucidate the second sentence in any way that would make it just to use s126 to override privilege.

Secondly, it is said that merely because this Court construes the memorandum differently to Levine J does not answer the fact that par 3 of the Wills memorandum is at least ambiguous. The portion of the judgment which is set out at par 20 above indicates that Levine J reasoned, in part, along the lines that production of the witness statements would assist in resolving the apparent ambiguity of the first two sentences. It is pointed out that the power in s126 is enlivened by the conclusion that production is “ reasonably necessary” to enable a proper understanding of the document that has already been disclosed.

I think that there is force in this submission, although (if leave were granted) it might be incumbent upon this Court to exercise the discretion afresh in the light of its finding that the judgment below turns (at least in part) upon a misconstruction of par 3 of the Wills memorandum. What this submission does indicate very clearly is that this application relates to a discretionary decision on a matter of procedure. In that situation appellate restraint is mandated for the reasons discussed in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177.

The consideration persuades me that leave to appeal should be refused.

The Wills memorandum was discovered by the claimant when it might have been the subject of a claim of privilege. The dispute concerns the manner in which a busy trial judge exercised a discretionary power (effectively to require production) in aid of another procedural power (the power to order the fuller answer to an interrogatory). The “prejudice” suffered by the claimant is the early disclosure of statements of witnesses who are likely to be called at the trial.

The claimant submitted that production of the whole of the witness statements should not have been required without the judge first inspecting the documents to separate immaterial parts. I have no difficulty accepting the claimant’s argument that the mere reference to a privileged source document, of itself, does not necessarily result in loss of the privilege attaching the whole of that source document (see Towney at 414, 416). But in circumstances where the matter was fought below on an “all or nothing” basis, I would not find appealable error in a trial judge applying s126 in similar manner. This was not a case where the trial judge was invited to examine the statements.

Jordan CJ’s oft-repeated obiter dicta in In the Will of F B Gilbert (deceased) (1946) 46 SR(NSW) 318 at 323 bears repeating: …there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.

I would refuse leave to appeal and dismiss the Summons with costs.

STEIN JA: I agree with Mason P.

FITZGERALD JA: The circumstances giving rise to this application for leave to appeal are set out in the comprehensive reasons for judgment of Mason P.

Despite the reservations which I expressed in Sevic v Roarty , (1998) 44 NSWLR 287. I agree with the President that this Court should continue to follow Akins v Abigroup Ltd (1998) 43 NSWLR 539. until the High Court decides the appeal from the decision of the Full Federal Court in Esso Australia Resources Ltd v Commissioner of taxation . (1998) 83 FCR 511.

The President decides most, at least, of the points argued in favour of the applicant, leaving one, or at most two, matters not finally resolved. I am prepared to proceed on that basis.

Nonetheless, for the reasons given by the President, I am of opinion that leave to appeal should be refused.

I agree with the orders which the President proposes.