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Excerpts from: Smoking Gun

By John Malpas Legal Week [05/02/02]

As smoking guns go, the hand-written note made by Clayton Utz partner John Oxland during a conference with his colleague Brian Wilson and two British American Tobacco (BAT) in-house lawyers takes some beating.

“Keep all research docs that became part of public domain and discover them,” he wrote.

“As to other documents, get rid of them and let other side rely on verbal evidence of people who used to handle such documents.”

A second note is even more blunt: “To shred all docs in Australia more than five years old (docs will still be available off-shore, though).”

At the time Oxland made these notes, on 2 April 1990, he would, presumably, have been mortified if someone had told him that 12 years later they would be produced before Victoria Supreme Court in a sensational product liability action.

But that is exactly what happened, thanks to the decision of Judge Geoffrey Eames to waive legal professional privilege and order their discovery, in the now notorious case of Rolah Ann McCabe vs BAT.

The case — the first of its kind outside the US — saw McCabe, a grandmother dying of cancer who said she became addicted to cigarettes as a child, awarded damages of a$710,000 (£259,000).

Meanwhile, BAT and its Australian legal adviser Clayton Utz were left facing the consequences of the judge’s conclusion that they had “subverted the discovery process” by orchestrating the destruction of thousands of documents with the deliberate intention of denying the plaintiff a fair trial.

“It is not a strategy which the court should countenance,” the judge said witheringly before striking out BAT’s defence.

The case against BAT hinged on its systematic destruction of a vast database of thousands of documents in 1998 (see timeline).

It had been compiled in preparation for discovery in a law suit being levelled at BAT. The process saw individual documents rated on a scale of one to five depending on how damaging they were perceived to be to BAT’s cause.

When the law suit was discontinued, said Eames, BAT took advantage of a “window of opportunity” before the commencement of the next case against it to destroy the database.

If that was not bad enough, Eames went on to rule that both he and the plaintiff — who had months to live — were misled during the discovery process.

He said the defendant had deployed a variety of tactics to delay the production of documents and conceal the fact that most of them had been destroyed.

Although it was the physical destruction of so many documents in 1998 that derailed BAT’s defence in the McCabe case, the judge devoted much of his judgment to the events leading up to this.

‘How could it happen?’ he appears to be asking. The culprit is the euphemistically entitled document retention policy (DRP) that operated at Wills, BAT’s Australian subsidiary, from 1985 onwards.

Originally drawn up in 1985, the DRP was modified in 1990 after Wills was taken over by BAT. The person assigned with this task was Clayton Utz partner Brian Wilson.

According to the judge, Wilson received his instructions from Wills’ in-house counsel, F Gulson, on 23 March 1990.

To help Wilson revise the policy, Gulson sent him a memo written by Andrew Foyle, a partner at Lovell White Durrant, now Lovells, who had been “engaged by BATCO [BAT’s head office] for purposes of addressing policy on document handling”.

The memo was drawn up in the form of a series of questions that Wilson was asked to address.

According to Eames: “Foyle expressed the concern of BATCO that because Wills had had access to sensitive BATCO research documents, through a computer link to England, that might lead to the discovery of the BATCO documents in any Australian proceedings and also documents of other group companies.”

The memo went on to identify another problem. The judgment quotes the following extract from the memo.

“The retention of a set of the BATCO research reports means that a plaintiff will have access to much sensitive BATCO research. The information in the reports is enough to prompt searching questions about the underlying research policy and also questions about what follow up action was taken by BATCO in the light of the research results.”

Later still, Foyle asks: “Is there any reason why Wills should not now destroy its copies of most of the reports, if the motive for doing so were that the information in the reports is not relevant to Wills’ current ‘research mission’?”

On 29 March Wilson wrote to Gulson with his response. His letter made it clear that documents had already been destroyed by Wills.

But it added: “Wills’ destruction of documents has not occurred during litigation in relation to which those documents might be relevant.

“If it had, that would be extremely strong evidence of an intention ‘to do something likely to interfere with the course of justice’.

“The destruction has occurred, instead, in a situation where litigation has been, and still is, contemplated. But it can be said that it has not occurred only because of that fact and in order adversely to affect the litigation.”

He then quotes from Wills’ 1985 DRP, summarising the motivations for the destruction of documents as “cost efficiency, litigation support and sabotage prevention”.

He adds: “In our view, they are clear evidence of an intention which is the complete opposite of an intention ‘to do something likely to interfere with the course of justice’. This positive intention cancels out the negative impression created by destruction per se. We feel, therefore, that there is little, if any, risk of contempt of court.”

Later on in his letter Wilson responds to Foyle’s question as to whether copies of BATCO’s research documents being held by Wills can be destroyed if the information were “not relevant to Wills’ current ‘research mission’”.

His answer was: “On balance, no — although it would be better if the motivation included litigation support in the sense discussed earlier.”

Eames describes the letter as “couched in terms which suggest that Wilson was very conscious of the fact that he could not guarantee that the Clayton Utz letter might not subsequently be disclosed”.

That does not stop the judge offering his own interpretation of what the letter was really saying — that the dire consequences of destroying documents “could be avoided if they [Wills] asserted innocent intention and employed statements of such innocent intention that he was now feeding to them”.

Eames reiterates the point with reference to Foyle’s question about the BATCO research documents.

The judge says Wilson’s advice “was, in effect, get rid of the documents but claim an innocent intention. Foyle had suggested that the motive might be said to be that the documents were no longer required for the current ‘research mission’.

He highlighted those words, but Wilson suggested a better answer. [Glenn] Eggleton, the only Clayton Utz partner who gave evidence to me, said he did not understand what Foyle could have meant by ‘research mission’, and I do not think it was a phrase which had any genuine meaning, in this context.”

Any doubts about Wilson’s real message, said the judge, were dispelled on 2 April 1990 when Wilson and Oxland met up with Gulson and BATCO legal counsel Nick Cannar, who was visiting Australia to help oversee the DRP review.

Oxland’s notes of that meeting appear in the judgment. They record Wilson as having said: “Keep all research docs which became part of public domain and discover them. As to other documents, get rid of them, and let other side rely on verbal evidence of people who used to handle such documents.

” The judge adds another handwritten note by Oxland, apparently made at the same meeting, records the apparent decision “to shred all docs in Aust more than 5 yrs old (docs will still be available offshore, though)”.

The judge notes that Wilson did not give evidence in the hearing to strike out the defence, his absence being “unexplained”.

But Eames did ask Clayton Utz partner Eggleton about the note. “He agreed that if the note accurately reflected the oral advice which Wilson had given, then it was not proper advice for a solicitor to give a client,” he says in his judgment.

Eames goes on to maintain that following Wilson’s review of Wills’ DRT, it was amended so that it more firmly asserted the “innocent intention” of the destruction of documents, and “denied the true intention, which was to prejudice the prospects of success of any plaintiff in later proceedings”.

From then on, says the judge, a broader strategy was developed to ensure that, where possible, relevant documents “would not be held under the possession, custody or power of the defendant, but would be held by Clayton Utz or by other bodies or organisations, so that such documents would not be discovered in any proceedings.”

The impact of the judge’s findings — especially in the current ‘post-Enron’ climate — is unlikely to be confined to Australia.

Like Enron, the fallout from the case has already started to spread worldwide. In the US, for example, the Department of Justice has written to McCabe’s lawyers, Slater & Gordon, asking for evidence.

In the UK, Lovells has responded to an article in Legal Week that referred to the part played by Andrew Foyle in the affair by stating that it and its litigation partner had acted “entirely properly — legally, professionally and ethically”.

The judge appears acutely conscious of the similarities between his case and Enron, going out of his way to highlight the fact that BAT’s document destruction programme was orchestrated “by an army of litigation lawyers, from several countries and being both retained private practitioners and in-house lawyers”.

Which begs the ethical question of whether it is fair for Clayton Utz and, more specifically, Brian Wilson to take the rap — or whether the entire legal system is at fault.