Time and again we’ve seen examples of the cover-up causing more problems than the crime and the decision by British America Tobacco and its legal adviser Clayton Utz to destroy 30,000 documents leaves then hugely exposed to an avalance of claims after a Victorian jury awarded Rolah McCabe $700,000 this week. Jonathon Liberman has followed the case from the start and provides this amazing summary. (Editor’s note: since this was published Clayton Utz did overturn several elements of the findings on appeal.)

Rolah Ann McCabe is a 51 year old woman “seriously ill with lung cancer”. She “has a life expectancy of, at best, months, possibly only weeks. She claims compensatory, general [ie pain and suffering] and exemplary [called “punitive” in the United States] damages for personal injuries.” [4] (Note: the claim for exemplary damages was abandoned on 4 April, in part because the plaintiff’s health was such that she may not last through a trial of the length that would be required to make the case for exemplary damages.)

The defendant

“The defendant [British American Tobacco Australia Services Limited] is the successor to W.D. & H.O. Wills (Australia) Limited (hereafter referred to as “Wills”), which was in existence between September 1958 and March 2000.” [8]

Consequences if the plaintiff were to die before verdict – damages available to estate restricted

“In the event that the plaintiff were to die before verdict then a successful verdict for damages for the benefit of her estate would not include general or exemplary damages and pecuniary loss damages would be significantly restricted.” [6]

The nature of the case

“The plaintiff’s statement of claim alleges that from her early teens (having commenced smoking at age 12) she became addicted to cigarettes [Capstan and Escort [173]] manufactured by the defendant, and that as a result of that addiction and the properties of the cigarettes, she contracted lung cancer. The plaintiff alleges that the defendant, itself or through its predecessor and affiliated companies, knew that cigarettes were addictive and dangerous to health, and by its advertising targeted children to become consumers. The plaintiff alleges that the defendant, knowing the dangers of addiction and to health of consumers, took no reasonable steps to reduce or eliminate the risk of addiction or the health risks, and ignored or publicly disparaged research results which indicated the dangers to health of smoking.” [7]

The importance of the defendant’s documents to the case

In cases such as this one, questions as to what the defendant knew, when it knew it, and what it did with its knowledge are critical.

“It is clear that the plaintiff’s case against the defendant will direct attention to the question of what was known to the defendant as to the risks of smoking, the addictive properties of cigarettes, the considerations and knowledge which bore upon the defendant’s decisions as to the manufacturing process, and advertising campaigns concerning its products, and, in particular, its knowledge as to the consumption of cigarettes by children. It is also clear that contemporaneous and historical documents held by the defendant relating to scientific research, not only that held in the public domain but also research conducted by scientists acting on its behalf, on behalf of other tobacco producers, and also research conducted by outside agencies on behalf of the defendant or the tobacco industry, would be of very great importance to the plaintiff’s case. Equally important might be any internal memoranda reflecting the defendant’s response to such research and its knowledge and actions as to relevant issues.” [12]

Plaintiff’s application that the defence be struck out

On 25 January 2002, counsel for the plaintiff applied for an order that the defendant’s defence be struck out. [1] [The application sought that the defence be struck out such that the defendant would be held liable for the plaintiff’s injury, with only the amount of damages to be awarded to be determined by the court.]

The grounds for this application included [2]:

* The destruction of potentially relevant documents by the defendant, at a time when litigation was apprehended, has rendered it impossible for the plaintiff to have a fair trial;

* The defendant, through counsel, solicitors and deponents to affidavits, has misled the court and the plaintiff as to the true situation concerning documents discoverable in the trial;

* The defendant’s conduct caused severe prejudice to the plaintiff.

Plaintiff’s application granted by Justice Eames – Defendant’s defence struck out, judgment entered for plaintiff, with amount of damages to be assessed.

The conduct of BAT and its solicitors, Clayton Utz, had denied the plaintiff a fair trial. This had been their “deliberate intention”. That outcome could not now be “cured”.

“At all times since 1985 when the modified Document Retention Policy was implemented, under the guidance of Clayton Utz [solicitors for the defendant], litigation was either on foot or the defendant considered that future litigation was inevitable.” [289]

“The defendant intended that by the destruction of documents any plaintiff in the position of the present plaintiff would be prejudiced in the conduct of their action, both generally and, in particular, in the ability to lead relevant evidence or to cross examine witnesses. It was intended by the defendant that any such plaintiff would be denied a fair trial.” [289]

“The civil litigation system is an adversarial process, but it is a process governed by rules which the judges must administer. The formal rules of procedure [ie including document discovery] complement and acknowledge the inherent powers of the Court which apply with the overriding objective of ensuring that parties to litigation receive a fair trial. Central to the conduct of a fair trial in civil litigation is the process of discovery of documents. That process is particularly important where documentary evidence is likely to be both voluminous and critical to the outcome of the case, and where access to documents is very much dependent on the approach adopted by one party and its advisers. For a fair trial to be assured in such circumstances the approach which that party must adopt may well conflict with its self-interest. The party which controls access to the documents must ensure that its opponent is not denied the opportunity to inspect and use relevant documents, and it must disclose fully and frankly what has become of documents which have been in its possession, custody or control.” [383]

“In my opinion, the process of discovery in this case was subverted by the defendant and its solicitor Clayton Utz, with the deliberate intention of denying a fair trial to the plaintiff, and the strategy to achieve that outcome was successful. It is not a strategy which the court should countenance, and it is not an outcome which, in the circumstances of this case, can now be cured so as to permit the trial to proceed on the question of liability. In my opinion, the only appropriate order is that the defence should be struck out and judgment be entered for the plaintiff, with damages to be assessed.”[384]

The suppression order

Given the seriousness of Justice Eames’ findings against BAT and its solicitors, and the inevitability of these findings being the subject of significant media coverage, Justice Eames has imposed a suppression order to prevent the publication of matter relevant to the striking out of BAT’s defence. The suppression order will be in place until the jury has delivered its damages verdict, to protect the jury against being influenced by matters not relevant to their task.

IMPLICATIONS OF JUSTICE EAMES’ DECISION IN McCABE v BAT

Rolah Ann McCabe, a 51 year old woman with terminal lung cancer, sued British American Tobacco Australia (“BAT”) in negligence in the Supreme Court of Victoria. On 22 March 2002, Justice Eames struck out BAT’s defence to Mrs McCabe’s claim because BAT and its solicitor, Clayton Utz, had “subverted” the process of discovery3 “with the deliberate intention of denying a fair trial to the plaintiff” and “the strategy to achieve that outcome was successful”, ie they had, by their actions, succeeded in denying the plaintiff a fair trial4. Justice Eames held that “it is not a strategy which the court should countenance” and that, “in the circumstances of this case”, the outcome (ie the denial of a fair trial) could not “now be cured so as to permit the trial to proceed on the question of liability”. Accordingly, he ordered that BAT’s defence as to liability should be struck out and that judgment be entered for the plaintiff with damages to be assessed.

Subversion of the discovery process by BAT and its solicitors consisted of three inter-related strategies:

* The deliberate destruction of thousands of documents and of records of the documents destroyed, beginning in 1985;

* Misleading the Court as to what had happened to missing documents;

* The ongoing “warehousing” of documents, ie having relevant documents held by third parties so as to keep them from discovery, but to have access to them should they be necessary to the defence of the claim.

Given the seriousness of Justice Eames’ findings against BAT and its solicitors, and the inevitability of these findings being the subject of significant media coverage, Justice Eames had imposed a suppression order to prevent the publication of matter relevant to the striking out of BAT’s defence. The suppression order was in place until the jury delivered its damages verdict, to protect the jury against being influenced by matters not relevant to their task.

Implications of Justice Eames’ decision for future litigation against BAT

Justice Eames reached his decision after considering the entirety of BAT and Clayton Utz’s conduct (and also that of BAT’s other firm of solicitors, Mallesons Stephen Jaques) which denied the plaintiff a fair trial. Though each of these strategies alone gave Justice Eames power to strike out BAT’s defence, he had a discretion as to whether to take that step, or to allow the trial on liability to proceed with orders designed to ameliorate the prejudice to the plaintiff. It was the entirety of the conduct of BAT, Clayton Utz and Mallesons which led Justice Eames to conclude that the trial could not “now be cured”.

A judge only ever decides the case before him or her. A judgment is not prescriptive in the way that legislation is. Future cases are assessed against the principles or guidelines set by earlier cases, but the facts are different in each case, different judges give different weight to different facts, and ultimately reach conclusions based on their view of the particular circumstances of the case before them. Thus, whether judges in future cases against BAT reach the same conclusion as Justice Eames (that BAT’s conduct has denied the plaintiff a fair trial, and that that outcome cannot be “cured”, and that BAT’s defence should be struck out and the case proceed immediately to an assessment of damages) remains to be seen – each future case will be decided on its merits. Presumably, in future cases, BAT will have learned that it ought to be frank with the Court about its destruction of documents and that it should re-consider its ongoing document warehousing arrangements. If it does learn these lessons and comes to the Court with a different approach from the approach it decided to take in Mrs McCabe’s case, the results may be different.

Nevertheless, that is not in any way to underestimate the significance of document destruction itself (putting aside, for the moment, misleading the Court and warehousing documents). Throughout his judgment, Justice Eames made findings about the intent behind BAT’s document destruction policy, and the effect on the plaintiff of that conduct. On question of the intent behind BAT’s document destruction, Justice Eames found:

“The defendant intended that by the destruction of documents any plaintiff in the position of the present plaintiff would be prejudiced in the conduct of their action, both generally and, in particular, in the ability to lead relevant evidence or to cross examine witnesses. It was intended by the defendant that any such plaintiff would be denied a fair trial.” [289]

(Further such findings have been reproduced in Appendix A to this information sheet.)

On the effects of BAT’s document and records destruction, Justice Eames noted a number of ways in which the plaintiff had been prejudiced. These included:

* It was impossible to precisely assess what documents may have been destroyed, and the extent to which BAT had failed to provide full and complete discovery, though it was clear that “significant numbers of important documents have been denied to the plaintiff by the strategy adopted by the defendant”.

* Even if the plaintiff could obtain copies of missing documents, it would still face “serious difficulty” in making use of the documents to prove BAT’s state of knowledge of relevant matters. It is one thing to have a defendant admit it possesses or has possessed a document. It is quite another for a plaintiff to have possession of a document and to seek to prove that the defendant possesses or once possessed it.

* A former legal counsel for BAT said that there were “internal documents, memos, and commentaries on research” (which would clearly have been important to the plaintiff’s case). “None has been produced in this case.”

* Prejudice to the plaintiff “might be immense by virtue of the deliberate destruction of just one document, which might have been decisive in her case”. The plaintiff may have been denied “at least one “knockout” document, if not many.”

* The “real difficulty” for the plaintiff is that she cannot know if internal research was conducted and reported upon by the defendant. She will be confronted with “difficulties of proof which may well not have arisen had the destruction not occurred”.

* In cross-examining witnesses in the defendant’s camp, especially those with a scientific or research background”, the plaintiff’s counsel would be “potentially handicapped by a lack of knowledge of research with which those witnesses are familiar but where documents relating to which have been destroyed”.

(Appendix B to this information sheet contains Justice Eames’ full statements on these and other matters of prejudice to the plaintiff.)

Accordingly, Justice Eames concluded that “the prejudice to the plaintiff by the destruction of documents is considerable”. He considered this conclusion in light of his further conclusions that this was always the intention of the defendant, and that “the belief held by the defendant in 1998 (as it was for the whole period from 1985) was that future proceedings were not merely likely, but were virtually certain, as indeed, proved to be the case.” [288]

Thus, the arguments made by the plaintiff about document and record destruction in this case will undoubtedly be made by plaintiffs in future cases against BAT. And of course, BAT’s intention in destroying documents and their records was not to deny Mrs McCabe in particular a fair trial, but to deny “any plaintiff in the position of the present plaintiff” a fair trial. Unless BAT does an about-face such as by discovering that it has not actually destroyed documents and their records, there is every reason to think that the matters that weighed heavily on Justice Eames in relation to document destruction will weigh similarly on future judges. Though, as stated above, this can only be observed in future on a case-by-case basis, BAT faces the serious possibility that the effects of its decisions and conduct in relation to the destruction of documents will include the repeated striking out of its defence in future cases, with countless plaintiffs able to proceed directly to an assessment of damages, just as Justice Eames has ordered for Mrs McCabe.

BAT’s destruction of documents – destroying records of its day-to-day business

Inevitably, BAT’s document destruction will be compared to the current Arthur Andersen/Enron document destruction scandal, and portrayed in a similar light. Though there is a superficial similarity, it is important that the fundamental differences between the two cases be understood.

In the Arthur Andersen/Enron case, the destroyed documents allegedly relate to such matters as fraud, and accounting and financial irregularities. They are documents that are alleged to show Enron defrauding its investors in particular ways at particular times, ie Enron acting outside the scope of its ordinary recognised business, doing things it should not have been doing. In contrast, BAT has been destroying documents about the very heart of what it has always done as a business. The fear of exposure and liability that document destruction evidences is, in Enron’s case, of defrauding investors; in BAT’s case it is of manufacturing and marketing cigarettes in the way that it always has.

Throughout Justice Eames’ judgment there are many references to “Hold Orders” imposed on document destruction while litigation against BAT was on foot. When litigation concluded, BAT saw windows of opportunity to destroy documents it thought it should not destroy while a case against it was in the courts. At one point in his judgment, Justice Eames listed categories of documents which were identified by the defendant as covered by a Hold Order issued in 1996, ie to be retained until completion of litigation against the defendant. These categories included:

* “Documents relating to the smoking and health issue or the continuing public debate, including any information relating to allegations that smoking was connected with ill health or disease, allegations that smoking is addictive or habit forming, components of tobacco or cigarette products including flavouring and additives, smoking testing and analysis of the combustion process, smoking behaviour including information as to why people smoke or choose to quit.

* Marketing, including documents relating to packaging, advertising and product launches, information relating to government health warnings, published cigarette advertisements and promotional material from 1955 to November 1987, documents directly concerned with the intention of effectiveness of any advertising or promotions.

* Documents relating to public and government attitudes to smoking and health issues and action aimed at influencing those attitudes …

* The records in connection with smoking and health and marketing that had to be retained were to include correspondence, internal memoranda and meeting minutes, discussion papers, reports, surveys and statistical data, scientific or pharmaceutical materials, both published and unpublished, and documents including references to such material, books magazines and journals obtained from all sources, audio and video tapes, films and photographs, electronic data and computer print-outs, including floppy discs, computer backup discs and tapes. …” [90]

Documents such as these are documents that relate to matters at the very heart of BAT’s business: components of cigarettes; “smoking behaviour including information as to why people smoke or choose to quit”; “marketing, including documents relating to packaging, advertising and product launches”; “records in connection with smoking and health and marketing” and so on. These documents are about the everyday business of BAT. And it is documents such as these which were, presumably, destroyed when Hold Orders were lifted (if not before).

Justice Eames noted the results of document destruction in the case before him. Not a single document was discovered in relation to “the pharmacological effect of nicotine” [124]. All “internal documents reflecting discussion within the company about research, advertising, addiction and other critical issues” were destroyed. Mr Maher, then in-house counsel for the defendant, “knew at the time how important such material would have been to the case of a future plaintiff” [146]. And “not a single internal note, memorandum or letter has been discovered in which any company representative discusses its response to any research paper or any other relevant matter” [314].

What needs to be underlined here is that the documents that are potentially damaging to BAT, and are therefore the subject of its document destruction policy, are documents about how it goes about manufacturing and marketing cigarettes. When BAT goes about its ordinary business – ie selling as much of an addictive, deadly product as it can, knowing how many people its product is killing, and how many people are addicted to that product, while controlling the ingredients of its product, and using marketing techniques to take its consumers’ minds away from what its product does – it fears the consequences if what it does is exposed.

Implications for more rational regulation of the tobacco industry

The reason that BAT understands how damaging its day-to-day documents are is the very reason that the current regulatory approach to the tobacco industry is untenable, if not absurd. BAT’s anxiety about the very heart of its business must be fully understood. It eloquently underlines why the tobacco industry should not be allowed to continue to operate as it presently does; why it must be regulated in a way that does not encourage it to continue to act in a way that it deems it must always cover up, lest this be seen by a court and judged accordingly; why it must be regulated in a way that protects the public’s health, corrects wholesale market failure, and ensures respect for the law.

If an appropriate regulatory approach to the tobacco industry is not adopted, we should expect the McCabe case, the stories it exposes (of document destruction), and, even more seriously, the stories it does not expose because of BAT’s destruction of documents, to be still being played out in ten, twenty or thirty years in State and Federal courts across the country, as today’s smokers, the lung cancer sufferers of the 2010s, 2020s and 2030s, look to hold tobacco companies accountable for their conduct. This is an inefficient approach to public policy, and will continue to cost the community in lives lost, massive economic costs, and burdens on its legal and judicial processes. We cannot change the past, or prevent our courts adjudicating on conduct of the past. But we can learn our lessons and prevent the conduct of today, and of the future, delivering the same difficulties as, we now see, has the conduct of the past. There are rational approaches to tobacco regulation, that would benefit the community rather than the tobacco industry. They must now be adopted.

Appendix A

Justice Eames’ findings in relation to the Defendant’s intention in destroying documents and their records

“The defendant intended that by the destruction of documents any plaintiff in the position of the present plaintiff would be prejudiced in the conduct of their action, both generally and, in particular, in the ability to lead relevant evidence or to cross examine witnesses. It was intended by the defendant that any such plaintiff would be denied a fair trial.” [289]

“I am, however, entirely satisfied that the primary purpose of the development of the new policy in 1985 and subsequently was to provide a means of destroying damaging documents under the cover of an apparently innocent house-keeping arrangement.” [19]

“In pursuit of the defence strategy, the wording of the Document Retention Policy was amended so that it more firmly asserted innocent intention and denied the true intention, which was to prejudice the prospects of success of any plaintiff in later proceedings.” [289]

“The predominant purpose of the document destruction was the denial to plaintiffs of information which was likely to be of importance in proving their case, in particular, proving the state of knowledge of the defendant of the health risks of smoking, the addictive qualities of cigarettes and the response of the defendant to such knowledge.” [274]

“In my view, [a paragraph in the Document Retention Policy Document] is a lawyer’s attempt to disguise the reality, which is that the primary purpose for the reduction of documents was to impede the prospects of success of any plaintiff who brought proceedings against the defendant. The paragraph […] demonstrates a recognition that the programme might be viewed adversely by courts, and in my view the paragraph really demonstrates that the view was taken that it was better to destroy a whole body of documents (apart from those which had to be retained for tax audit or other purposes not concerned with legal proceedings) so as to ensure that all documents which had the potential to be damaging would be removed. The paragraph constitutes a clumsy and self-serving attempt to declare innocence but at the same time, in my opinion, demonstrates the clear purpose behind the program.” [269]

Appendix B

Justice Eames’ findings in relation to prejudice to the plaintiff arising from the destruction of documents and their record

“It is impossible to precisely assess what documents may have been destroyed in 1998, and earlier, and to what extent there has been a failure to give full and complete discovery as to documents in the categories for which I ordered discovery. It may be that some of the documents which the plaintiff’s counsel identified as destroyed might eventually be located, either held by the defendant or in supposedly independent data bases, or else in the public domain. The tactics adopted by the defendant, including its deliberate obliteration of any records of what documents it had destroyed over the years, prevents there being certainty as to the current position. It is, however, very clear that significant numbers of important documents have been denied to the plaintiff by the strategy adopted by the defendant.” [290]

“The fact that the plaintiff has or could obtain copies of some missing documents does not eliminate all prejudice which flows from destruction of the defendant’s copies. … Even if the plaintiff can produce documents from other sources, unless admissions are made by the defendant the plaintiff faces serious difficulty in first proving the documents and then of making use of the documents in order prove the state of knowledge of the defendant.” [300]

“Mr Maher [former legal counsel for the defendant] said that there were internal documents, memos, and commentaries on research which would have been destroyed. None has been produced in this case.” [303]

“Furthermore, the prejudice to the plaintiff might be immense by virtue of the deliberate destruction of just one document, which might have been decisive in her case. It would be interesting to know, for example, how many of the Cremona [a previous case] documents had been rated 5 (a “knockout” blow for the plaintiff) and how many of those had been discovered in this case. The dilemma, stressed by counsel for the plaintiff, is that they can not now know, at least not by virtue of cross examination of any of the witnesses who were called on this application, whether they have been denied such documents. The people who would be likely to know whether such documents were destroyed might be thought to be people such as Wilson, Cannar, Schechter, Northrip, Travers and Kinross. Whilst their unexplained absence6 leads to the inference that their evidence would not have been helpful to the defendant, that does not relieve the plaintiff’s anxiety that she may have been denied at least one “knockout” document, if not many.” [309]

“For the plaintiff the real difficulty is that she can not now know if internal research was conducted and reported on to Wills but has been destroyed without any record of its existence. If that was the case then by virtue of that fact, and compounded by the fact that the defendant will not now make the admissions sought by the Notice to Admit (i.e. that relevant documents have been in its possession), the plaintiff is confronted at trial with difficulties of proof which may well not have arisen had the destruction not occurred.” [310]

“Thus, it is clear that the destruction of records and the failure to keep a record of what documents were held, and when and when they were destroyed, will cause significant difficulties to the plaintiff’s counsel in proof of those documents during the trial.” [313]

“The mere fact that many scientific reports were retained does not diminish the fact that of those retained few if any of the research documents which the plaintiff’s advisers identified and specifically sought in this case as being of critical importance are now to be found in the defendant’s possession, and yet many of those were documents which it unquestionably had in its possession (and, for the purpose of the application, admits to be so) at the conclusion of the Cremona case. Furthermore, not a single internal note, memorandum or letter has been discovered in which any company representative discusses its responses to any research paper or any other relevant matter. It seems likely that what was retained as scientific research was no more than material which was already on the public record or material which had already been vetted as to its capacity to harm the defendant’s cause.” [314]

“The destruction of documents has other disadvantages for the plaintiff, also, and these were contemplated by the defendant’s legal advisers as an advantage which it would gain by destruction of documents.” [315]

“Documents proved to have been held by the defendant could have been the subject of interrogatories designed to facilitate the tender of those documents. In order to prove documents which have not been discovered or admitted the plaintiff’s counsel may be obliged to call witnesses who are in the defendant’s camp. In calling such witnesses counsel will be bound by their answers. In cross examination of witnesses for the defendant, especially those with a scientific or research background, the plaintiff’s counsel will be potentially handicapped by a lack of knowledge of research with which those witnesses are familiar but where documents relating to which have been destroyed. Even if the witness acknowledged the past existence of such documents, counsel would be severely handicapped in cross-examining without the documents. Some of those problems may be reduced or be overcome by pre-trial directions or directions during the course of the trial as to the depth of information required to be contained in statements of proposed witnesses, or in other ways, but it is likely to delay the trial and to cause inconvenient interruptions, especially if the defendant seeks to then rely on “warehoused” documents in order to rebut matters raised in cross-examination of its witnesses.” [316]

“Advantages such as these, which would flow from the destruction of damaging documents, were fully understood within the camp of the defendant. I am satisfied that such motives were part of the explanation for document destruction.” [317]

“In assessing the prejudice which the plaintiff has suffered I have to keep in mind that it is very much in the interests of the plaintiff to emphasise prejudice and to understate the extent to which it might be overcome. Counsel for the defendant submit, too, that even if documents were discovered it did not follow that they would have been admissible at trial. That, of course, may be so, but by their destruction the plaintiff has been denied the opportunity to attempt to have them tendered. The mere fact that documents were held by the defendant might make them admissible for limited purposes, at least, even if the truth of the contents of the documents could only be established by other means.” [321]

“In my opinion, the prejudice to the plaintiff by the destruction of documents is considerable.” [322]

SMOKING, ADDICTION AND RESPONSIBILITY

Responses to tobacco industry denials of responsibility

The tobacco industry routinely argues that it should bear no responsibility at all for smoking-related disease and death. After all, the industry says, people choose to smoke with full awareness of the risks. They must, therefore, accept responsibility for any diseases they suffer.

There are many powerful responses to this line of argument. First, the approach taken by the tobacco industry over the last 40 or so years has been to publicly deny or downplay the risks of smoking, and, in so doing, to mislead the public about the genuine effects of smoking. Thus, the tobacco industry has found itself in the absurd position of arguing both that there is no conclusive evidence that smoking is harmful and that everyone knows that smoking is harmful.

Second, tobacco industry marketing has been, and still is, designed to portray smoking as anything other than the harmful addiction it is. Rather, carefully researched marketing devices are used to portray smoking as cool or sexy or rebellious and so on. The very aim of this marketing is that as many people as possible should use as many of the industry’s products as possible. It matters not to the industry if its aims are achieved through disingenuous marketing. Its only interest is in the bottom line.

Third, and perhaps most important, is the matter of addiction. The issue was explained very clearly by Paul Knopick, of the United States Tobacco Institute, writing to a colleague in 1980 that:

“Shook, Hardy and Bacon [lawyers for Philip Morris, based in Kansas City, US, who Justice Eames found had given advice to the defendant and its solicitors in Mrs McCabe’s case on issues of document destruction and document warehousing] reminds us, I’m told, that the entire matter of addiction is the most potent weapon a prosecuting attorney can have in a lung cancer/cigarette case. We can’t defend continued smoking as `free choice’ if the person was `addicted'”.

Given that the overwhelming majority of smokers commenced smoking before turning 18, and that addiction impairs the capacity to exercise genuine free choice, it is not hard to understand why the whole issue of addiction is so damaging to the tobacco industry. It is hardly surprising, therefore, that in Mrs McCabe’s case, in spite of the overwhelming evidence to the contrary, BAT has denied that smoking is addictive. As Justice Eames said:

“As to the plaintiff’s allegation that the defendants’ cigarettes were addictive, the defendant, whilst acknowledging that some persons may find it difficult to quit smoking, denies the allegation, and asserts that smoking is a behaviour of choice, and does not impair the ability of a smoker to assess the risks of smoking and to make an informed decision.” [10]

Justice Eames noted that “not a single document was in fact discovered” in the category of the “pharmacological effect of nicotine”. He said that “the implication seems overwhelming that discovery has been fundamentally thwarted under this category by virtue of the 1998 destruction program”. [124]

Evidence that nicotine is addictive

We know that, in Australia, around 75% of smokers have tried to quit. The evidence that smoking is addictive is beyond any serious dispute.

As with other drugs such as cocaine, heroin and alcohol, nicotine can produce psychoactive effects, mood alterations, strong reinforcing effects, physical dependence and tolerance. Based on these criteria for drug dependence developed by the World Health Organisation, the US Surgeon General has concluded that nicotine as delivered by tobacco smoking is addictive. The US Surgeon General has said that: ‘The pharmacological and behavioral processes that determine tobacco addiction are similar to those that determine addiction to drugs such as heroin and cocaine.’

The Royal College of Physicians of London recently published an extensive report on the addictive properties of nicotine. It cited a report by Henningfield et al rating nicotine as high or higher than heroin and cocaine on eight out of ten criteria for addiction.

Smokers develop a tolerance to nicotine. They develop extra receptor sites responsive to nicotine, and changes occur in the way their brains metabolise glucose and release catecholamines. (Note: catecholamines include adrenaline, noradrenaline and dopamine, with roles as hormones and neurotransmitters.) This is known as the “changed brain” syndrome. Such changes have been detected in former smokers even many years after they have quit. Recently it has been suggested16 that there are critical periods for the development of nicotine dependence, that young brains respond differently to older brains and that exposure during adolescence may produce profound, long-lasting changes.

Knowledge within the BAT group of companies about the addictiveness of nicotine

Documents released in the US over the last eight or so years demonstrate that the international BAT group has known of the addictiveness of nicotine for decades, and that it has understood the role of nicotine addiction in smoking. The quotes referred to below are extracted from just a small sample of those documents now publicly available. The sources from which they have been taken are set out.

13 February 1962

Nicotine “is a natural tranquilizer”. If the increase in production of tranquilizer drugs continues, and if “such drugs become more freely available they will compete with nicotine”.

“If the absorption of nicotine is made pleasant and attractive this enhances the benefits just as in the case of well prepared and well served food. However, the force of the habit or the strength of addiction is not such as to give any grounds for complacency in the face of alternative methods of stimulating the body to meet stress, and that is just where the danger lies since alternative methods are becoming available. In the last few years there has been a quite remarkable increase in the production of tranquilizer drugs, and while most of these need a doctor’s prescription there is already one on free sale in Switzerland. If such drugs become more freely available they will compete with nicotine, which was a — which is a natural tranquilizer, and will leave smoking primarily dependent on its psychological effects for the maintenance of the habit.”

30 May 1963

Body craves for renewed drug intake to restore physiological equilibrium “In a chronic smoker the normal equilibrium in the corticotropin releasing system can be maintained only by continuous nicotine intake. It means that those individuals are but slightly different in their aptitude to cope with stress in comparison with a non-smoker. If nicotine intake, however, is prohibited to chronic smokers, the corticotropin-releasing ability of the hypothalamus is greatly reduced, so that these individuals are left with an unbalanced endocrine system. A body left in this unbalanced status craves for renewed drug intake in order to restore the physiological equilibrium. This unconscious desire explains the addiction of the individual to nicotine.”18

17 July 1963

Large part of tobacco industry business is administration of nicotine “It may be useful, therefore, to look at the tobacco industry as if for a large part its business is the administration of nicotine (in the clinical sense)”.19

7 August 1964

The kick of a cigarette is “a product of the quantity of nicotine in the smoke and the speed of transfer of that nicotine from the smoke to the blood-stream.” A 1964 document from H. D. Anderson, vice president of research and development (R&D), to R. P. Dobson, president of BAT, discussed adding potassium carbonate to tobacco: “There seems no doubt that the ‘kick’ of a cigarette is due to the concentration of nicotine in the bloodstream which it achieves, and this is a product of the quantity of nicotine in the smoke and the speed of transfer of that nicotine from the smoke to the blood-stream.”20

24 -27 October 1967

“Smoking is an addictive habit attributable to nicotine …” BAT’s 1967 Research Conference is held in Montreal. Draft minutes list “Assumptions made by R&D scientists”: “Smoking is an addictive habit attributable to nicotine and the form of nicotine affects the rate of absorption by the smoker … It was likely, moreover, that tobacco would be involved in legislation of a food or drug administration nature in respect both of product and of manufacturer.” A hand-written not changes “addictive habit” to “habit”. The completed minutes state that “There is a minimum necessary level of nicotine. Smoking is a habit attributable to nicotine. The form of nicotine affects the rate of absorption by the smoker”.21

September 1969

“Nicotine has well documented pharmacological action.” D.J. Wood from R&D at BAT gives a presentation to company executives: “Nicotine has well documented pharmacological action. It is claimed to have a dual effect, acting both as a stimulant and a tranquilliser. It is believed to the responsible for the ‘satisfaction’ of smoking, using this term on the physiological rather than the psychological sense”.

29 March 1976

If nicotine delivery is reduced below a “threshold ‘satisfaction’ level”, smokers “will question more readily why they are indulging in an expensive habit”.

“If the nicotine delivery is reduced below a threshold ‘satisfaction’ level, then surely smokers will question more readily why they are indulging in an expensive habit,” Green, senior BAT scientist.

19 May 1977

“Unable to stop (by and large) and … would basically prefer to stop (if they could)”.

A memo from Dr. Jagger of BAT’s Brazilian subsidiary Souza Cruz: “If you ask people why they carry out a practice which they are unable to stop (by and large) and which they would basically prefer to stop (if they could) it is reasonable to expect them to take considerable refuge in justifications – i.e. enjoyment, pleasure, taste, satisfaction, tension relief. etc”.24

28 August 1979:

We “are searching explicitly for a socially acceptable addictive product”. Should consider “the hypothesis that the high profits additionally associated with the tobacco industry are directly related to the fact that the consumer is dependent upon the product”.

A BAT document outlines “Key Areas – Product Innovation over the Next 1- Years for Long-Term Development: “We have to satisfy the ‘individual’ who is either about to give up or has just done so, i.e., in other words, customers in danger of extinction …we are searching explicitly for a socially acceptable addictive product involving: – A pattern of repeated consumption -A product which is likely to involve repeated handling – the essential constituent is most likely to be nicotine or a ‘direct’ substitute for it”.

“…We also think that consideration should be given to the hypothesis that the high profits additionally associated with the tobacco industry are directly related to the fact that the consumer is dependent upon the product. Looked at another way, it does not follow that future alternative ‘Product X’ would sustain a profit level above most other product/ business activities, unless, like tobacco, it was associated with dependence.”

1 January 1980

Large numbers of people will continue to smoke “because they can’t give it up. … They can no longer be said to make an adult choice.”

Dr SJ Green writes: “It has been suggested that cigarette smoking is the most addictive drug. Certainly large numbers of people will continue to smoke because they can’t give it up. If they could they would do so. They can no longer be said to make an adult choice”.

11 April 1980

BAT should “look at itself as a drug company”

“…BAT should learn to look at itself as a drug company rather than as a tobacco company.

16 May 1980

Company’s “position on causation is simply not believed by the overwhelming majority of independent observers, scientists and doctors.” Opinion that we “now move to position B, namely, that we acknowledge ‘the probability that smoking is harmful to a small percentage of heavy smokers’.”

“The company’s position on causation is simply not believed by the overwhelming majority of independent observers, scientists and doctors….The industry is unable to argue satisfactorily for its own continued existence, because all arguments eventually lead back to the primary issue of causation, and on this point our position is unacceptable…. Our position on causation, which we have maintained for some twenty years in order to defend our industry is in danger of becoming the very factor which inhibits our long term viability….On balance, it is the opinion of this department that we now move to position B, namely, that we acknowledge ‘the probability that smoking is harmful to a small percentage of heavy smokers’…. … By giving a little we may gain a lot. By giving nothing we stand to lose everything.”28

1980

“Smoking is addictive” and “many smokers would like to give up the habit if they could”.

A 1980 BATCO document clearly acknowledges that “smoking is addictive” and that “many smokers would like to give up the habit if they could”.

7 April 1982

Offer the smoker a product with “comparatively high nicotine levels”. “If delivery levels are reduced too quickly or eventually to a level which is so low that the nicotine is below the threshold of pharmacological activity then it is possible that the smoking habit would be rejected by a large number of smokers….The simple answer would seem to be to offer the smoker a product with comparatively high nicotine deliveries so that with a minimum of effort he could take the dose of nicotine suitable to his immediate needs.”

12 November 1984

Nicotine “may be presented to the smoker in at least three forms”. “Free base forms” are “considerably more ‘active'”.

“Nicotine may be presented to the smoker in at least three forms: (i) salt form in the particulate phase, (ii) free base form in the particulate phase, (iii) free base form in the vapour phase. It has long been believed that nicotine presented as in (ii)/(iii) is considerably more ‘active’.”

8 August 1991

The “unique property of inhaled cigarette, the delivery of unchanged nicotine to the brain occurring a few seconds after taking a puff”. Linda Rudge, a BAT Information Scientist, writes about “Smoking Cessation Methods”, commenting that: “Overall, most methods have achieved, at best, only moderate success because they cannot imitate the unique property of inhaled cigarette, the delivery of unchanged nicotine to the brain occurring a few seconds after taking a puff”.

“Let us provide the exquisiteness and hope that they, our consumers, continue to remain unsatisfied. All we would want then is a larger bag to carry the money to the bank.”

A further BAT report recognises that if cigarette’s nicotine level: ” is so low that the nicotine is below the threshold of pharmacological activity then it is possible that the smoking habit would be rejected by a large number of smokers”.

“Certainly the nicotine level of B&W (Brown & Williamson, the US subsidiary of BAT) cigarettes…was not obtained by accident….[W]e can regulate, fairly precisely, the nicotine and sugar levels to almost any desired level management might require.”

Another BAT document stated, “When a cigarette is smoked, nicotine is released momentarily in the free-form. In this form, nicotine is more readily absorbed through the body tissue.”

Knowledge within the BAT group of companies of the dangers of smoking, and responses

1976

“[K]eep the scientific question open.”

— Ernest Pepples, Brown & Williamson’s Vice President and General Counsel, writes an internal memo entitled “Industry Response to the Cigarette/ Health Controversy” that the industry should “support scientific research to refute unfavourable findings or at a minimum to keep the scientific question open … The significant expenditures on the question of smoking and health have allowed the industry to take a respectable stand along the following lines – ‘After millions of dollars and over twenty years of research, the question about smoking and health is still open'”

6 April 1978

This has “long ceased to be an area for scientific controversy”.

— The Annual BAT research conference seemed to acknowledge the relationship between smoking and disease: “There has been no change in the scientific basis for the case against smoking. Additional evidence of smoke-dose incidence of some diseases associated with smoking has been published. But generally this has long ceased to an area for scientific controversy…”

1 January 1980

“A demand for scientific proof is always a formula for inaction and delay and usually the first reaction of the guilty.”

— A draft of Dr. Green’s paper “Cigarette Smoking and Causality” states: “A demand for scientific proof is always a formula for inaction and delay and usually the first reaction of the guilty …By repudiation of any causal role for cigarette smoking in general, lawyers hope to cut off any claim for liability without further consideration of the specific cause in this particular case”.

16 May 1980

Company’s “position on causation is simply not believed by the overwhelming majority of independent observers, scientists and doctors.” By not acknowledging “the probability that smoking is harmful to a small percentage of heavy smokers … we stand to lose everything.”

“The company’s position on causation is simply not believed by the overwhelming majority of independent observers, scientists and doctors….The industry is unable to argue satisfactorily for its own continued existence, because all arguments eventually lead back to the primary issue of causation, and at this point our position is unacceptable….[O]ur position on causation, which we have maintained for some twenty years in order to defend our industry is in danger of becoming the very factor which inhibits our long term viability….On balance, it is the opinion of this department that we should now move to position B, namely, that we acknowledge ‘the probability that smoking is harmful to a small percentage of heavy smokers’….By giving a little we may gain a lot. By giving nothing we stand to lose everything.”

February 1981

At the beginning of the 1960s, tobacco companies “realised there was serious evidence connecting smoking and ill health”. Their first reaction “was to spend money on research to see if this was true”. When this failed, research was directed to finding a safer cigarette, though development of substitutes. When this “flopped” in the mid-1970s there was “a sharp change in direction”. … [R]esearch was redirected to serve the interests of marketing.”

Dr Jim Green, head of research at BAT for 20 years, summarised the approach to research. “At the beginning of the sixties the tobacco companies realised there was serious evidence connecting smoking and ill health. Their first reaction was to spend money on research to see if this was true, in the hope that it wasn’t, so they could win the argument. When this failed, the research effort was directed to finding a safe cigarette, through the development of substitutes. When this flopped in the mid-seventies there was a sharp change of direction. New, corporate careerists were now in charge of the companies and they had fewer qualms about the business they were in; research was redirected to serve the interests of marketing. This development coalesced rather well with the attitude that the companies had taken towards the health risk and regulation policy. On the advice of their PR man, they pursued a ‘tight-rope’ policy on health … and entered into voluntary agreements because this bought them time”.

Note: The availability of overseas documents does not cure the prejudice suffered by Australian plaintiffs

It should be noted that the above excerpts of documents are drawn from documents of the BAT international group of companies, not from WD & HO Wills Pty Ltd (the Australian part of that group of companies until September 1999). It should not be thought that the availability of documents from the BAT international group of companies removes the prejudice suffered by Australian plaintiffs through the destruction of documents by Wills and BAT Australia. Australian plaintiffs cannot simply use these documents to prove the knowledge, at relevant times, of Wills and BAT Australia. Australian plaintiffs can seek to rely on inferences that Wills and BAT Australia probably had the same knowledge and information as their overseas counterparts, but this is an immeasurable way short of being in a position to prove a defendant’s knowledge through its possession of documents. Destruction of documents means that Australian plaintiffs cannot have access to, and make use of, documents of the nature of those extracted above, in the way that plaintiffs in the US, in particular, can and have. The final destruction of documents and their records creates a prejudice that can never be fully cured. (See the discussion in Information Sheet 2 about the prejudice that destruction of documents creates for plaintiffs.)

THE CRIMINAL OFFENCES OF CONTEMPT OF COURT AND ATTEMPTING TO PERVERT THE COURSE OF JUSTICE

Justice Eames held that the conduct of BAT and its solicitors had denied Mrs McCabe a fair trial, that this had been their deliberate intention, and that the outcome they had achieved could not be “cured”. Accordingly, he struck out BAT’s defence, and entered judgment for the plaintiff, with damages to be assessed.

This itself does not mean that BAT or its solicitors acted illegally. It was not for Justice Eames to decide whether they had acted illegally. He was not hearing a criminal prosecution against the defendant or its solicitors. Rather, Justice Eames was hearing a civil claim for damages, and he was required to decide what the consequences of BAT and its solicitors’ conduct should be in Mrs McCabe’s case. Any issues relating to criminal conduct could only be dealt with in separate proceedings, with different witnesses called, different evidence relevant, and the criminal standard of proof of beyond reasonable doubt, rather than the civil standard of balance of probabilities.

There are, however, in Justice Eames’ judgment, references to the criminal offences of contempt of court and attempting to pervert the course of justice. These can be found both in the extracts of legal advice received by the defendant, and in the body of the judgment itself.

The offence of contempt of court was discussed in a letter written by Brian Wilson, a partner at Clayton Utz, to Mr F.T. Gulson, legal counsel and secretary for the defendant, on 29 March 1990. Mr Wilson cited a 1981 High Court case, Lane v Registrar of Supreme Court of New South Wales, and reproduced the following quote:

“It was submitted on behalf of the respondent that conduct otherwise lawful can amount to a contempt of court if done with a particular intention. That is correct, but the intention must be to do something likely to interfere with the course of justice.

An intention to interfere with the administration of justice is not necessary to constitute a contempt; the critical question is whether the act is likely to have that effect, but the intention with which the act was done is relevant and sometimes important.”

The offence of attempting to pervert the course of justice was referred to by Justice Eames, when he said [359]:

“The courts have an overriding concern to protect the administration of justice, that concern being reflected in both the Rules and in the common law principles concerning such matters as the criminal offence of perverting the course of justice, and the laws of contempt. An attempt to pervert the course of justice can be committed even though there is no particular case in contemplation by the person committing the offence: see The Queen v Rogerson.”

The material below sets out the basic principles of these two offences.

Contempt of court

The relevant principle is that set out in the quote from Lane v Registrar of Supreme Court of New South Wales, found in Mr Wilson’s letter, referred to above. In Lane’s case, Chief Justice Gibbs, and Justices Mason, Murphy, Wilson and Brennan said:

“An intention to interfere with the administration of justice is not necessary to constitute a contempt; the critical question is whether the act is likely to have that effect, but the intention with which the act was done is relevant and sometimes important.”

The critical question, in the words of the High Court justices, was whether the act is “likely to have the effect” of “interfer[ing] with the administration of justice”. This is to be judged objectively, ie the effect of the act, rather than its intention.

There is also judicial authority for the proposition that where a barrister or solicitor conducts a case in a fashion so as to knowingly deceive the court, he or she may be guilty of contempt.

The court has a broad discretion in cases of contempt to imprison or fine a guilty party.

Attempting to pervert the course of justice

In Victoria, attempting to pervert the course of justice is a common law offence. Section 320 of the Crimes Act 1958 (Vic) specifies that it carries a maximum penalty of 25 years imprisonment or a $300,000 fine.

The offence is made out in “the doing of an act which has a tendency to pervert the course of justice with an intent to pervert the course of justice.”

The classic Australian formulation of the test of attempting to pervert the course of justice was set out by Justices Brennan and Toohey in the High Court case of The Queen v Rogerson. The course of justice is “perverted (or obstructed) by impairing (or preventing the exercise of) the capacity of a court or competent judicial authority to do justice”. There are various ways in which this may be done. One is by “denying [the court] knowledge of the relevant law or of the true circumstances of the case”. Justices Brennan and Toohey said:

“The course of justice consists in the due exercise by a court or competent judicial authority of its jurisdiction to enforce, adjust or declare the rights and liabilities of persons subject to the law in accordance with the law and the actual circumstances of the case. The course of justice is perverted (or obstructed) by impairing (or preventing the exercise of) the capacity of a court or competent judicial authority to do justice. The ways in which a court or competent judicial authority may be impaired in (or prevented from exercising) its capacity to do justice are various. Those ways comprehend, in our opinion, erosion of the integrity of the court or competent judicial authority, hindering of access to it, deflecting applications that would be made to it, denying it knowledge of the relevant law or of the true circumstances of the case, and impeding the free exercise of its jurisdiction and powers including the powers of executing its decisions. An act which has a tendency to effect any such impairment is the actus reus [ie the act] of an attempt to pervert the course of justice.

In the quote reproduced above, Justice Eames noted that “[a]n attempt to pervert the course of justice can be committed even though there is no particular case in contemplation by the person committing the offence”.

The offence requires the act of the accused to have the “tendency” to pervert the course of justice. It is not necessary for the prosecution to prove that the tendency actually materialised, ie that the course of justice was, in fact, perverted. It is enough if there is a possibility that what the accused has done “without more” might lead to injustice.51

The offence may be committed both by individuals, and also by a company where the individuals committing the offence are part of the “directing mind and will” of the company.

Prosecutions

In Victoria, prosecutions are generally instituted by the Director of Public Prosecutions. Under s22(i)(c) of the Public Prosecutions Act 1994 (Vic), the Director of Public Prosecutions may refer a possible contempt of court to the Attorney General who may then make an application to the court for punishment.

FURTHER DETAIL CONTAINED IN THE JUDGMENT

At this point it is 12.20am and I’m jack of formatting but only half way through the total document. If anyone is really thirsty for more please email me at [email protected]

Peter Fray

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