Court finds sufficient evidence to support privilege claims in Crown class action

‘Associated material’ waiver application in Crown class action for production of documents over which privilege is claimed is granted in part but otherwise dismissed

This is a shareholder class action arising from allegedly criminal activities undertaken by the respondent (Crown) and its employees in the People’s Republic of China.

This judgement concerned an application filed by the applicant (Zantran) for production and inspection of certain documents over which Crown had claimed legal professional privilege.

At the heart of the dispute were witness statements filed on behalf of Crown by three of its employees who were involved, in one way or another, in the management or oversight of Crown’s operations in China during the relevant period. In their witness statements, the witnesses referred to legal advice Crown obtained from an American law firm based in China, WilmerHale, in relation to the legality of Crown’s operations in China during the relevant period. In essence, the witnesses said that, based on this advice, they believed that Crown’s activities in China did not contravene Chinese law and therefore did not give rise to a material risk that Crown’s operations would be shut down.

Although Crown produced copies of the documents recording the legal advice to which express reference was made in the witness statements, it resisted the production of a number of otherwise discoverable documents on the ground of legal professional privilege. The documents the subject of dispute between the parties fell into four categories:

  • communications during the relevant period regarding the enforcement of gambling debts in China, in respect of which Zantran submitted Crown had waived privilege pursuant to “associated material waiver” or the inconsistency principle in Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 (‘Mann v Carnell’);
  • communications with WilmerHale after the relevant period, in respect of which Zantran submitted Crown had waived privilege for the same reasons as the documents in category (1) above;
  • communications during the relevant period in respect of which Zantran submitted it was not possible to tell from the evidence adduced by Crown whether or not they were privileged; and
  • communications in respect of which Zantran submitted Crown’s claims of privilege had not been supported by proper evidence.

As a threshold matter, his Honour considered the question of whether or not there is a recognised species of waiver called “associated material waiver”. Zantran relied on the judgment of Young J in AWB Ltd v Cole (No 5) (2006) 155 FCR 30; [2006] FCA 1234 (and the authorities cited therein) for the proposition that the voluntary provision of one privileged communication gives rise to a waiver of legal professional privilege over all other privileged communications relevant to the same issue or subject matter as the communication voluntarily provided. After reviewing the relevant authorities, O’Callaghan J held that there is no separate species of “associated material waiver” in the sense propounded by Zantran. His Honour said (at [42]):

When waiver is express, as it is here, and an issue arises about whether and to what extent privilege has also been waived with respect to “related” non-disclosed documents, the documents in the latter category may, consistently with Mann v Carnell, be described as “associated material”. However, I do not read anything that Young J said in AWB Ltd v Cole as suggesting, as Zantran contends, that there is some species of waiver involving so-called “associated material” that involves an expansion of the principles in Mann v Carnell.

Consistent with the High Court’s decision in Mann v Carnell, when determining whether or not privilege has been waived over “associated material” the fundamental question is whether the party claiming privilege has acted in a matter that is inconsistent with the maintenance of the confidentiality of the associated material, which the privilege is intended to protect. At [41], O’Callaghan J observed:

It may be that the difference between the submissions advanced by the parties … with respect to so-called “associated material waiver” is more apparent than real. Zantran’s submission that the test to be applied is “whether the material that the party has chosen to release from privilege represents the whole of the material relevant to the same issue or subject-matter” may be said, on one view, not to invite a different question to the inconsistency test in Mann v Carnell. In either case, the critical anterior question is to identify the relevant issue or subject matter.

Turning to the categories of disputed documents, his Honour held that:

  1. Crown had not waived privilege over advice obtained during the relevant period regarding the enforcement of gambling debts in China. His Honour found that, contrary to Zantran’s submissions, Zantran did not plead a case founded on the proposition that Crown knew it was enforcing gambling debts in China contrary to Chinese law. Because “the relevant enquiry is confined by the terms of [Zantran’s] pleaded case” (at [55]), his Honour held that there was no inconsistency involved in the witnesses stating that based on the legal advice Crown obtained, they believed China was operating lawfully under Chinese law, and Crown withholding legal advice regarding the enforcement of gambling debts in China.
  2. Crown had not waived privilege over communications with WilmerHale after the relevant period. Zantran submitted that if a document, such as a covering email dated after the relevant period, includes as part of its email “thread” legal advice given during or prior to the relevant period that reveals Crown’s state of mind during the relevant period, privilege over such documents may be waived if withholding them would be relevantly inconsistent with the express waiver. In rejecting Zantran’s submission, his Honour said (at [60]):

Once earlier advices are purposefully incorporated into a post-Relevant Period privileged communication, those communications are privileged and necessarily can have nothing to do with the formation of Crown’s relevant state of mind during the Relevant Period. No issue of waiver therefore arises.

  1. Crown had supported its privilege claims with sufficient evidence “by identifying the capacity or role in which relevant people asked for, gave or passed on legal advice, together with hearsay evidence of the legal practitioners about the communications’ dominant purpose” (at [26]).

After inspecting the disputed documents, his Honour held that certain email exchanges contained in two of the disputed documents were not privileged and thus ordered that Crown produce them for inspection. His Honour otherwise dismissed Zantran’s application, on the basis that the remainder of the disputed documents were either privileged or irrelevant to the proceeding.

Zantran Pty Ltd v Crown Resorts Ltd (No 2) [2020] FCA 1024

Federal Court of Australia, O’Callaghan J,

21 July 2020

Applicant’s Solicitors: Maurice Blackburn;          

Respondent’s Solicitors: Minter Ellison;

Applicant’s Funder: ILFP

Austlii link: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2020/1024.html?context=1;query=zantran%20pty%20ltd%20%20;mask_path

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