Esso Australia Resources Ltd v Federal Commissioner of Taxation

In 1996 Esso commenced proceedings in the Federal Court, appealing against amended income tax assessments. Orders for discovery were made, and privilege was claimed in respect of 577 documents. After discussion between the parties, it was agreed that some of the documents qualified for protection under the sole purpose test; whereas others would only be protected by the dominant purpose test.201 CLR 49 at [7]

At first instance, Foster J held that the correct test that applied to the discovered documents was the 'sole purpose' test in Grant v Downs; rather than the 'dominant purpose' test as set out in ss118 and 119 of the Evidence Act 1999 (Cth).201 CLR 49 at [8]

Foster J's finding was upheld by the Full Federal Court by Black CJ, Sundberg and Finkelstein JJ. Beaumont and Merkel JJ dissented.83 FCR 511

Esso then appealed to the High Court. One of their arguments was that the court should declare that at common law, the dominant purpose test applies to legal professional privilege.

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The plurality judgement discussed at length the history of common law development sometimes having origins 'in statute, or as glosses on statute, or as responses to statute'.201 CLR 49 at [19] - [27] Nevertheless, they declined to develop the common law test in this way.201 CLR 49 at [28] Instead, they decided to accept the appellant's invitation to reconsider Grant v Downs.201 CLR 49 at [34]

The plurality rationalized the majority judgement in Grant v Downs as compatible with the dominant purpose test.201 CLR 49; at [44] quoting Grant v Downs (1976) 135 CLR 674 at 687-688. Barwick CJ's view in that case, previously referred to as a dissent, was recharacterised by the court in Esso as a concurrence. The court noted a passage from Barwick in that case which had 'proven influential in other jurisdictions'.

Barwick had written:201 CLR 49 at para [46], quoting Grant v Downs (1976) 135 CLR 674 at 677

'The Court should state the relevant principle as follows: a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.'

The court then characterised the sole purpose test enunciated by Stephen, Mason and Murphy JJ in Grant as unprincipled. The plurality then claimed that their reasons did not require a preference for the sole purpose test over the dominant purpose test.201 CLR 49 at para 56

It described the primary issue facing the court with regard to the two tests as follows:201 CLR 49 at [57]

'The search is for a test which strikes an appropriate balance between two competing considerations: the public policy reflected in the privilege itself, and the public policy that, in the administration of justice and investigative procedures, there should be unfettered access to relevant information. Additionally, whatever test is adopted must be capable of being applied in practice with reasonable certainty and without undue delay and expense in resolving disputed claims.'

Concurring with the plurality, Callinan J discussed the sole purpose test at length, alongside critical commentary of the Grant decision. He regarded the Grant v Downs test as an inconvenient test, and not 'wholly fair' in accordance with the 'underlying rationale for legal professional privilege, of candour by clients in communications with legal advisers'. Neither did the test emerge, in his view, from 'full and considered argument by the parties' in Grant v Downs. Additionally, Callinan J was concerned that the test 'may have a tendency to discriminate against corporations and other large organisations'.201 CLR 49 at [166]

For those reasons he decided that Grant v Downs ought be overruled.201 CLR 49 at [167] He endorsed comments by the House of Lords which themselves endorsed the 'dominant purpose' test as expressed by Barwick in Grant v Downs.Waugh [1980] AC 521 at 537 He added that 'whether a purpose is a dominant purpose, is, in my view, a matter to be objectively determined but the subjective purpose will always be relevant and often decisive'.201 CLR 49 at [172]

In his honours opinion, the ratio of Grant v Downs ought not have been overruled. McHugh gave two reasons for this. His first reason was that the dominant purpose test would 'extend the area of privilege with the result that a party to litigation, and the court, would have less access to relevant material'. His second reason was that it would impose a test that is 'not easy of application and which seems inconsistent with the rationale of legal professional privilege'.201 CLR 49 at [65]

He added that the dominant purpose test was one that would 'lead to extensive interlocutory litigation because ... the person claiming privilege can be cross-examined on the affidavit claiming privilege'.

Kirby referred to comments he had made in an [https://jade.io/article/67996 earlier case] in which he had suggested that:

'a brake on the application of legal professional privilege is needed to prevent its operation bringing the law into "disrepute", principally because it frustrates access to communications which would otherwise help courts to determine, with accuracy and efficiency, where the truth lies in disputed matters'.201 CLR 49 para 86, quoting 188 CLR 501 at 581

Esso is a decision of high importance to the Australian legal system. According to LawCite, it is the 112th most cited High Court decision in Australia.Note: LawCite citation statistics track the written judgements of courts, journal articles, and tribunals. (both in Australia and overseas) https://www.austlii.edu.au/cgi-bin/LawCite?cit=&party1=&party2=&court=High%2BCourt%2Bof%2BAustralia&juris=&article=&author=&year1=&year2=&synonyms=on&filter=on&cases-cited=&legis-cited=§ion=&large-search-ok=1&sort-order=citedNote: list is as of September 2020

Professor [https://www.sydney.edu.au/law/about/our-people/academic-staff/chester-brown.html Chester Brown] of the University of Sydney, commented in 2000 of the decision, writing:{{Cite journal|last=Brown|first=Chester|date=2000|title=Case note: Esso Australia Resources Ltd v Commissioner of Taxation|url=http://www.unswlawjournal.unsw.edu.au/wp-content/uploads/2017/09/23-1-16.pdf|journal=UNSW Law Journal|volume=23|issue=1|pages=190|via=UNSW}}

"The decision in Esso significantly broadens the scope of legal professional privilege, and its practical effect is to alleviate the problem of protecting privileged information in large corporations and public authorities.

While the decision is sound from a practical point of view, the dissenting judges raise legitimate concerns over the extension of the privilege. These concerns include a possible increase in the amount of pre-trial applications challenging privilege claims, and an enhancement of the ability of large litigants to claim privilege over non-legal communications and, accordingly, frustrate the ability of judicial decision-makers to have access to relevant information."

• Legal professional privilege in Australia
• Legal professional privilege in England and Wales
• List of High Court of Australia cases

Category:High Court of Australia cases