Attachment 16.1 McCabe v British American Tobacco and its aftermath

The best known tobacco litigation case in Australia is the McCabe v British American Tobacco case, which has generated significant national and international interest. The McCabe case has led to various investigations into the behaviour of BAT and its lawyers in Victoria and New South Wales and to important legislative change in Victoria, and its revelations have been important in litigation in the US. The various developments are summarised below.

Brief summary of the McCabe case

In late 2001, Rolah McCabe commenced a case against British American Tobacco Australia in the Supreme Court of Victoria. McCabe was a 51-year-old woman dying of lung cancer. She had started smoking in the early 1960s at the age of 12.[1] McCabe sued BAT arguing that it had been negligent in its manufacturing and marketing of cigarettes, and that its negligence had caused her lung cancer. She sought damages. McCabe argued that BAT knew that cigarettes were addictive and dangerous to health, took no reasonable steps to reduce the risk of addiction or the health risks, targeted children in its advertising, and ignored or publicly disparaged research results which indicated the health risks of smoking.[2]

In April 2002, McCabe became the first person outside of the US to obtain a verdict against the tobacco industry in a personal injury claim, though the verdict was overturned on appeal later that year. McCabe obtained the verdict in her favour after the trial judge, Justice Geoffrey Eames, struck out BAT's defence to the proceeding and ordered judgement for McCabe, after finding that 'the process of discovery in this case was subverted by the defendant and its solicitor … with the deliberate intention of denying a fair trial to the plaintiff, and the strategy to achieve that outcome was successful.'[3] Justice Eames found that this outcome could not 'now be cured so as to permit the trial to proceed on the question of liability.'[4] The subversion of the process of discovery had, according to Justice Eames, involved the deliberate destruction of thousands of relevant documents to keep them from prospective plaintiffs such as McCabe; misleading the court about what had become of the missing documents; and the ongoing 'warehousing'[5] of documents to keep them from the court. Justice Eames sent the case to trial before a jury solely on the issue of quantum of damages. The jury awarded McCabe $687 560 plus interest and costs.[6]

BAT appealed against Justice Eames' decision, and the Court of Appeal (Justices Phillips, Batt and Buchanan) unanimously allowed the appeal.[7] In its decision, the Court of Appeal overturned a number of Justice Eames' major findings of fact and conclusions relating to the purpose and propriety of BAT's so-called 'document retention policy', preferring an 'innocent' explanation of the policy and the destruction of documents under the policy. The Court of Appeal also disagreed with Justice Eames about the appropriate means of intervention by courts in cases affected by the unavailability of relevant documents.

The Court of Appeal overturned the judgement that had been made in McCabe's favour, and sent the case back to trial. McCabe died before the Court of Appeal's decision was handed down. Her daughter sought special leave to appeal against the Court of Appeal's decision, but the High Court refused the application.[8] The effect of the High Court's refusal was that the Court of Appeal's decision sending the case for trial stood.

The McCabe case is still before the Courts. In 2006, proceedings were again commenced in New South Wales and are now continuing in the Victorian Supreme Court. The proceedings currently before the court concern BAT seeking to stop the McCabe estate from using particular documents that were "leaked" to re-open the case which BAT claim are confidential. In defence, the McCabe estate stated that the information was in the public domain, it was not privileged or confidential, its use is in the public interest and that the former Clayton Utz lawyer, who leaked the information, was under no duty to keep it confidential. The Court, rather than outright disallowing the defence as a whole, ordered that the defendant (the McCabe estate) amend a number of defects in the defence pleadings.[9] Leave was granted to allow the McCabe estate to file and serve an amended defence. At the time of writing, the matter had not been listed for trial.

The decisions can be viewed at:
Justice Eames:
Court of Appeal:
High Court:
Supreme Court 2009:

Findings in the McCabe case about BAT's document retention policies and practices

While the trial judge and the Court of Appeal in the McCabe case took very different views of the evidence presented, a number of facts were not in dispute. At all times between November 1990 and March 1998, litigation against BAT concerning smoking-related disease was underway in at least one Australian jurisdiction. While such litigation was underway, BAT imposed what it called 'hold orders', preventing the destruction of documents under its internal document policies.[10] In March 1998, the final hold order was revoked, when the last case then underway in Australia was discontinued.[11] It was not in dispute before the Court of Appeal that, at this time, 'litigation could still be anticipated of the sort now brought by the plaintiff in this instance, litigation, that is, by a smoker complaining that her ill health was a direct result of misconduct on the part of one tobacco company or another'.[12] Justice Eames had held that BAT considered that 'further proceedings were not merely likely, but a near certainty'.[13]

When the hold order was lifted in 1998, BAT destroyed thousands of documents. The Court of Appeal explained[14] :

Perhaps the best example of what happened in March-April 1998 was the destruction of documents which had been discovered in the Cremona litigation [a previous case] … In that litigation, general discovery had been required and, as already described by reference to Mr Maher's [a former in-house counsel at BAT] affidavit, the task of discovery for the defendant was enormous, very costly and in the end not very productive for the plaintiff … [A] n image of some 30 000 documents was placed on computer discs and, in addition, documents were indexed and in most instances summarised for easier retrieval … [T] he documents had also been rated on the scale of 1 to 5, according to how damaging each was likely to be to the defendant in any litigation, or how beneficial. All records of the summaries and rating of the documents had, however, been destroyed before the commencement of the present litigation … Not only were the documents discovered in the Cremona litigation destroyed, at least in the main, so too was the database, denying the defendant the ability to describe the documents in question.

Thus, there was no dispute that in March and April of 1998:

(a) BAT destroyed thousands of documents which were, or may have been, relevant to McCabe's proceeding, as well as records of such documents; and

(b) BAT destroyed such documents at a time when it anticipated that proceedings such as those ultimately commenced by McCabe would be brought against it.

As noted above, the primary difference between the trial judge and the Court of Appeal on factual matters related to the purpose and propriety of the document destruction.

Evidence about the purpose of document destruction that has emerged since the McCabe hearing

Since the hearing took place, evidence has emerged that supports Justice Eames' version of events, namely that the purpose of BAT's document retention policy was to keep incriminating documents out of court. Most prominently in Australia, Fred Gulson, a former company secretary and legal counsel of WD & HO Wills (predecessor to BAT), has come forward to tell his story about his experiences at the company in 1989–90. Gulson's sworn allegations were first reported in The Age on 19 July 2003. The article by William Birnbauer, who had received a copy of Gulson's sworn affidavit, stated:

'A tobacco company insider has detailed for the first time how his company destroyed sensitive internal documents to cleanse files of damaging smoking and health information.'

'Frederick Gulson, secretary and legal counsel of W.D. & H.O. Wills Ltd [predecessor to BAT] in 1989-90, was responsible for preparing the company for an expected wave of litigation.'

'In an affidavit, which was issued to The Age newspaper, Mr Gulson says: 'It was obvious to everyone 'in the know' what the strategy was. That is, its purpose was to get rid of all the sensitive documents but do so under the guise of an innocent housekeeping arrangement and to ensure that all relevant documents that were not destroyed or removed from the jurisdiction were properly (legally) privileged.'

'It involved getting "rid of everything that was damaging in a way that would not rebound on the company or the BAT group as a whole'.'

'Mr Gulson said the company had many documents that were considered sensitive and could be damaging if produced in smoking and health litigation, or if they became public. They included what W.D. & H.O. Wills and the BAT group knew about addiction and the relationship between smoking and disease.'

'The documents included reports on the companies' use of "nicotine technology to make cigarettes more addictive and their marketing strategies, including marketing strategies directed at all age groups'.'

'Mr Gulson agreed with the findings in April last year of the former Victorian Supreme Court judge Geoffrey Eames in the case involving Rolah McCabe, a lung cancer sufferer who sued BAT for damages.'

'Justice Eames concluded that BAT had deliberately destroyed documents so they would not have to be produced in health-related court cases, and struck out its defence.'

Gulson's evidence became important in the large racketeering case brought by the United States Department of Justice against the US tobacco industry. He gave evidence in that case, reiterating the version of events that had been recounted in The Age newspaper. Extracts of the transcript of Gulson's evidence are reproduced below[15] :

Q: What was the Document Retention Policy?

A: It was the official title for what was more commonly known as the 'Document Destruction Policy'. The Policy was a program to ensure that all sensitive documents, all documents that if made public or discovered in litigation could potentially damage Wills, or Wills' affiliate companies in the BAT group, were sanitised.

Q: What do you mean by sanitised?

A: Destroyed or otherwise made undiscoverable.

Q: What was the purpose of the Document Retention Policy?

A: The purpose of the Document Retention Policy was twofold, to protect the litigation position of Wills, and to protect the litigation positions of other BAT Group companies, especially our US affiliate Brown and Williamson, by ensuring that potentially damaging documents would not be discovered from Australia.

Q: What did the written Document Retention Policy say?

A: I don't recall the specific language of the Policy. The written document's primary purpose was to provide cover for the actual document destruction enterprise, to ascribe an innocent housekeeping justification for the widespread destruction of sensitive documents. The Document Retention Policy wasn't simply the written policy itself, but the corporate knowledge of how the Policy was to be applied apart from the written language. My recollection of the Document Retention Policy comes not from the written document, but how it was explained to me by Nick Cannar [then senior counsel for BATCo, the parent company] , Andrew Foyle [a UK lawyer for the BAT group] , Brian Wilson, a partner at Clayton Utz, and others, rather than from the document itself, since the written document was incomplete in terms of describing the actual workings and purpose of the Document Retention Policy.

Q: What do you mean by incomplete?

A: The Document Retention Policy, as written, required widespread destruction of documents, including the elimination of all scientific reports after a certain time period, but only at certain specified time periods and without regard to whether a document was helpful or harmful. The Document Retention Policy itself - and by that I mean the actual BATCo, BAT Industries, Wills Document Retention Policy, not the piece of paper - was specifically designed to destroy potentially dangerous documents - documents that could be used against the BAT Group in litigation. Because of the possibility that the written Document Retention Policy itself could be discovered, it wasn't written that way.

Q: Other than the destruction of documents, are you aware of any other aspect of the Document Retention Policy?

A: Yes. Another important component of the Policy was routing of documents through lawyers for the purpose of 'privileging' the documents, that some documents should include a notation to the effect of 'for the purpose of legal advice' and be routed through a lawyer, so that a document which would not otherwise attract privilege would now attract privilege.

The Document Retention Policy was a contrivance designed to eliminate potentially damaging documents while claiming an innocent 'housekeeping' intent. While I was uncertain about whether the ruse was legal or not, I knew that it was a ruse and that made me uncomfortable. The policy didn't pass the smell test. The whole purpose was to keep evidence out of the courts.

Q: At the time you started working at Wills did you discuss the implementation of the Document Retention Policy with anyone?

A: Yes. It was part of the initial discussion about the Document Retention Policy that I had with Nick Cannar and Andrew Foyle. When I first started, I was told by Nick Cannar that the Document Retention Policy had been implemented by the law firm of Clayton Utz, and that all documents at Wills that were potentially damaging to the BAT Group had been destroyed or otherwise put beyond the reach of discovery.

Q: Why did you come to question the effectiveness of the implementation of the Document Retention Policy when you visited Wills Scientific Research Group?

A: During the course of this visit, I examined some of the documents in the [scientific] library. What I saw alarmed me, because it was immediately apparent that the Document Retention Policy had not been fully implemented despite assurances to the contrary.

Q: How was it apparent?

A: The research facility at Pagewood was where many of the scientific research reports prepared by our overseas affiliates, including BATCo and Brown and Williamson, as well as our own reports, were kept. Just taking a quick look at the documents, I became fairly certain that these documents included the kind of sensitive smoking and health documents that were supposed to have been destroyed under the policy, so it was clear to me that the policy had not been completely adhered to.

Q: What do you mean by sensitive?

A: That the documents would be damaging to the BAT Group if they ever had to be produced by Wills in smoking and health litigation, or if they became public.

Q: How did you know that they were sensitive?

A: I recall that even just reading the titles and skimming the documents, that the subject matter related to the sorts of topics that Nick had said had been taken care of. While I'm not a scientist, it seemed pretty clear that these documents shouldn't have survived the implementation of the Document Retention Policy.

Q: Do you recall what subjects these documents addressed?

A: I don't remember the specific documents, but they covered a broad range of smoking and health topics including addictiveness of smoking, the relationship between smoking and disease, the use of nicotine technology, among others.

Findings in the US Department of Justice case

Mr Gulson's evidence was accepted by Judge Gladys Kessler of the US District Court in the Department of Justice's racketeering case. Judge Kessler found that '[u] pon observation at trial, the Court found Mr Gulson's demeanour and testimony credible. His testimony was clear, internally consistent, and not impeached. Mr Gulson had no reason to lie and demonstrated no affirmative bias against the defendants … the Court fully credits Mr Gulson's testimony.'[16]

On the question of document destruction by companies within the BAT Group, Judge Kessler concluded, after hearing Mr Gulson's evidence and reviewing a large number of documents:

'Finally, members of the BAT Group, in furtherance of the Policy's purposes, destroyed documents, routed them from one country or BAT facility to another, erased a useful litigation database as well as the fact that the documents it contained had ever existed as soon as the pre-existing judicial hold was lifted, and constantly exhorted their many employees to avoid putting anything in writing. All these activities were taken for one overriding purpose – to prevent disclosure of evidence in litigation.'

Judge Kessler's judgement can be viewed at The relevant portions are in paragraphs 3930–3997.

Findings in (Re Mowbray) Brambles Australia Ltd v British American Tobacco Australia Services Ltd

BAT’s document destruction policies and practices were also considered by the New South Wales Dust Diseases Tribunal in (Re Mowbray) Brambles Australia Ltd v British American Tobacco Australia Services Ltd. Brambles Australia was being sued by the widow of Mr Mowbray, who claimed that her husband’s lung cancer was caused by exposure to asbestos. Brambles argued that Mr Mowbray’s cancer was also caused by cigarettes manufactured by British American Tobacco, and cross-claimed against it for contributory negligence.
Brambles alleged that BAT had, pursuant to its Document Retention Policies, intentionally destroyed prejudicial documents, both scientific and internal, relevant to its knowledge of issues relevant in the proceedings with the purpose of placing them beyond the reach of litigants and to avoid having to give discovery or inspection of them; and falsely asserted an innocent housekeeping explanation for destruction of prejudicial documents so as to prevent adverse inferences from arising in relation to that destruction.

On 30 May 2006, Judge Curtis found:

‘I am persuaded on the present state of the evidence that BATAS in 1985 drafted or adopted the Document Retention Policy for the purpose of a fraud within the meaning of s125 of the Evidence Act. … The terms of the policy would appear to be so contrived that BATAS may secure legal sanction for the stated policy, while nevertheless selectively destroying prejudicial documents. Those terms permitted BATAS to determine that which was a “valuable business document” entirely without scrutiny or chance that it may be later held accountable to some objective measure contained within the policy. A claimant in subsequent litigation could not compare the identity or content of documents destroyed against the text of the Document Retention Policy to prove that the documents were not destroyed pursuant to the dictates of that policy. Such proof could raise an inference that the destruction of documents was selective and in aid of a forensic advantage, rather than an orderly administration of a policy instituted for the legitimate purpose of records management.

In the absence of evidence to the contrary, I infer that legal advice to the effect that destruction of documents pursuant to the terms of the policy was not contrary to law, was integral to the decision by BATAS to persist with its policy of selective destruction. That advice gave BATAS the confidence that, in the event that the terms of policy were revealed, those terms would give a potential litigant no cause for legal complaint, nor clue as to the manner in which the policy had been implemented. I find that the communications made for the purpose of obtaining that advice were communications in furtherance of the commission of a fraud within the meaning of s125.’

Disclosure of an internal Clayton Utz report into the conduct of the McCabe case

In October 2006, The Sunday Age published contents of a leaked internal inquiry by the law firm, Clayton Utz, BAT's lawyers in the McCabe case, into the handling of the case. The Sunday Age reported that Clayton Utz had launched internal inquiries after Justice Eames' decision had been handed down. According to the paper, the internal inquiries found that two of the firm's partners involved in the case, Glenn Eggleton and Richard Travers, had engaged in serious professional misconduct and that Eggleton had given evidence that was 'potentially perjurious'. Travers had, according to the internal report, written correspondence that was designed to frustrate the discovery process. The report found: 'This occurred against the backdrop of uncontradicted evidence that Mrs McCabe had only months to live. It seems clear that it was the intention of Travers to misuse the litigation process to take advantage of that fact.' The contents of the Clayton Utz report had never been put before a court.

The Sunday Age published only some of the contents of the Clayton Utz report. Both The Sunday Age and Australian Financial Review wished to publish further of the contents. BAT brought an action against the Fairfax media company, of which the two newspapers are part, seeking injunctions preventing further publication of the material on the ground that the documents contained confidential material in the form of legally privileged communications. Ultimately, the claim was settled, with Fairfax agreeing not to publish certain parts of the material. A similar claim for injunctions to prevent use of the documents was also brought against Slater & Gordon, law firm for the McCabe family. Slater & Gordon contested the application. The firm wanted to be able to use the documents to re-open the McCabe case on the ground that the judgement in BAT's favour had essentially been procured by fraud. As at the time of writing, these proceedings were still ongoing. BAT also threatened both the McCabe family and employees of The Cancer Council Victoria with legal proceedings in relation to the documents.

On 21 December 2006, the Victorian Attorney-General, Rob Hulls, announced that, after receiving advice from the Victorian Government Solicitor about the contents of the Clayton Utz documents, he had decided to refer the documents to the Victorian Director of Public Prosecutions 'so he may investigate the allegation of criminal conduct'.[17] Hulls also announced that he had referred the documents to the Legal Services Commissioners in Victoria and NSW 'as they are the appropriate bodies to investigate possible misconduct by legal practitioners' and brought the allegations to the attention of the Federal Attorney-General and state and territory Attorneys-General in jurisdictions where Clayton Utz has offices.

The seriousness of the destruction of documents

The destruction of evidence can be a criminal offence, if done with the intention of preventing their use in court, either under the general common law offence of attempting to pervert the course of justice or under specific statutory provisions dealing with the destruction of evidence. Complaints were made to police by the VicHealth Centre for Tobacco Control during 2005.

On 24 December 2006, The Sunday Age reported that both Victorian and New South Wales police had been investigating allegations of criminal behaviour in relation to the matters that had emerged through the McCabe case.

Legislation in the aftermath of the McCabe case

In 2006, the Victorian Government enacted two pieces of legislation responding to matters that had arisen in the McCabe case. The Crimes (Document Destruction) Act introduced new provisions into the Crimes Act relating to the destruction of evidence that 'is, or is reasonably likely to be, required in evidence in a legal proceeding'.[18] While the destruction of evidence had already been capable of amounting to the criminal offence of attempting to pervert the course of justice, the new provisions made the law clearer and clarified its operation to corporate entities. In his Second Reading speech, Hulls explained: 'It is essential to the rule of law that individuals and corporations cannot intentionally destroy documents to prevent their use in judicial proceedings with impunity.'[19]

The Evidence (Document Unavailability) Act introduced new provisions into the Evidence Act giving courts wide powers to do justice in civil proceedings affected by the unavailability of relevant documents. Powers under the new provisions extend to: drawing adverse inferences against a party from the unavailability of documents; presuming facts in issue between the parties to be true in the absence of evidence to the contrary; ordering that certain evidence not be adduced; striking out all or part of a defence or statement of claim; and reversing the evidential burden of proof be in relation to a fact in issue. The new provisions overturn the Court of Appeal's ruling on the powers of courts to make orders to ameliorate injustice caused in civil proceedings by the destruction of documents. In his Second Reading Speech, Hulls explained that the purpose of the new law was to 'enable the courts and the Victorian Civil and Administrative Tribunal to intervene in civil proceedings where relevant documents are unavailable to ensure a fair outcome between parties in civil proceedings.' The importance of the changes lay in 'the very basic feature of our civil justice system … that material relevant to civil justice proceedings be available to the court for the proper and fair resolution of those proceedings.'[20]

[1] McCabe v British American Tobacco Australia Services Limited [2002] VSC 73 (Unreported, Eames J, 22 March 2002) at [7] . Available from:URL:

[2] Ibid.

[3] Ibid at [385] .

[4] Ibid.

[5] Ibid [324] . Eames J described 'warehousing' as the tactic of having third parties hold documents relevant to issues in the trial so that those documents would be available to be called on to rebut the plaintiff's witnesses or to be used by the defendant's witnesses, whilst not being required to be discovered by the defendant because they would be said to be not under its possession, custody or power.

[6] British American Tobacco Australia Services Limited v Cowell [2002] VSCA 197 (Unreported, Phillips, Batt and Buchanan JJA, 6 December 2002) at [1] . Available from:URL:

[7] Ibid at [192] .

[8] Cowell v British American Tobacco Services Ltd [2003] HCATrans 384 (3 October 2003). Available from:URL:

[9] For a detailed summary of the required amendments and reasons see British American Tobacco Australia Limited v Gordon & Ors (No 3) [2009] VSC 619 (24 December 2009) at 174.

[10] McCabe v British American Tobacco Australia Services Limited [2002] VSC 73 (Unreported, Eames J, 22 March 2002) at [61] ; British American Tobacco Australia Services Limited v Cowell [2002] VSCA 197 (Unreported, Phillips, Batt and Buchanan JJA, 6 December 2002) at [26] .

[11] McCabe v British American Tobacco Australia Services Limited [2002] VSC 73 (Unreported, Eames J, 22 March 2002) at [127–8] ; British American Tobacco Australia Services Limited v Cowell [2002] VSCA 197 (Unreported, Phillips, Batt and Buchanan JJA, 6 December 2002) at [137] .

[12] British American Tobacco Australia Services Limited v Cowell [2002] VSCA 197 (Unreported, Phillips, Batt and Buchanan JJA, 6 December 2002) at [137]

[13] McCabe v British American Tobacco Australia Services Limited [2002] VSC 73 (Unreported, Eames J, 22 March 2002) at [289] .

[14] British American Tobacco Australia Services Limited v Cowell [2002] VSCA 197 (Unreported, Phillips, Batt and Buchanan JJA, 6 December 2002) at [140] .

[15] Reproduced in (Re Mowbray) Brambles Australia Ltd v British American Tobacco Australia Services Ltd [2006] NSWDDT 15. Available from:URL:

[16] United States of America v Philip Morris USA Inc et al available at at [3949] .

[17] Office of the Victorian Attorney-General. Statement from Attorney General Rob Hulls. Media release. 2006 Dec 21. Available from:URL:!OpenDocument.

[18] Crimes (Document Destruction) Act 2006 (Vic), s.254.

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