Rollo Ventry Wakefield Gray v BNY Trust Company of Australia Limited (formerly Guardian Trust Australia Limited) [2009] NSWSC 789 (18 August 2009)

Last Updated: 19 August 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Rollo Ventry Wakefield Gray v BNY Trust Company of Australia Limited (formerly Guardian Trust Australia Limited) [2009] NSWSC 789


JURISDICTION:


FILE NUMBER(S):
114938 of 1999

HEARING DATE(S):
20 and 22 April 2009

JUDGMENT DATE:
18 August 2009

PARTIES:
Rollo Ventry Wakefield Gray (Plaintiff)
BNY Trust Company of Australia Limited (formerly Guardian Trust Australia Limited) (Defendant)

JUDGMENT OF:
Bergin CJ in Eq

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
R Wilson (Defendant)

SOLICITORS:
Mallesons Stephen Jaques (Defendant)


CATCHWORDS:
TRUSTS - Trust documents - Access by beneficiary - PRIVILEGE - Whether an order that defendant executor/trustee entitled to indemnification out of estate for costs of litigation entitles plaintiff beneficiary to access to legal advices obtained during that litigation

LEGISLATION CITED:
Supreme Court Rules 1970
Uniform Civil Procedure Rules 2005


CASES CITED:
Avanes v Marshall & Ors [2007] NSWSC 191; (2007) 68 NSWLR 595
Bacon v Bacon (1876) 34 LT 349
Brown v Oakshott (1849) 12 Beav 252
Bulk Materials (Coal Handling) Services Pty Ltd v Coal & Allied Operations Pty Ltd (1988) 13 NSWLR 689
Buzzle Operations Pty Ltd (in Liq) v Apple Computer Australia Pty Ltd [2009] NSWSC 225
Devaynes v Robinson (1855) 20 Beav 42
Garratt’s Limited v Thanga Thangathurai [2002] NSWSC 39
Gouraud v The Edison Gower Bell Telephone Company of Europe (1888) 57 LJ Ch 498
Gray v Gray [2004] NSWCA 408
Gray v Gray [2005] NSWCA 129
Gray v Guardian Trust Australia [2002] NSWSC 1218
Gray v Guardian Trust Australia Ltd [2003] NSWSC 704
Gray v Guardian Trust Australia Ltd [2003] NSWSC 887
Re Londonderry’s Settlement [1965] Ch 918
Mayor and Corporation of Bristol v Cox (1884) 26 Ch 678
McDonald v Ellis [2007] NSWSC 1068
Minet v Morgan (1873) LR 8 Ch App 361
Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709
State of South Australia & Anor v Barrett & Ors [1995] SASC 5055; (1995) 64 SASR 73
Talbot v Marshfield [1865] 62 ER 728
Thomas v Secretary of State for India in Council (1870) 18 WR 312

TEXTS CITED:


DECISION:
Plaintiff entitled to access to limited category of documents



JUDGMENT:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
PROBATE LIST


BERGIN CJ IN EQ

18 AUGUST 2009

114938 of 1999 ROLLO VENTRY WAKEFIELD GRAY v BNY TRUST COMPANY OF AUSTRALIA LIMITED (FORMERLY GUARDIAN TRUST AUSTRALIA LIMITED)

JUDGMENT

1 The plaintiff, Rollo Ventry Wakefield Gray (known as Ventry Rollo Wakefield Gray), is the son of Lillian Ethel Ashton Gray (the deceased), who died on 21 January 1999. Probate of the deceased’s Will, executed on 25 June 1998, was granted on 8 March 1999 to the defendant, BNY Trust of Australia Limited (then known as Guardian Trust Australia Limited and later as JPY Morgan Trust Australia Limited) the sole executor appointed under that Will. The whole of the net distributable estate was divided equally between the plaintiff and his brother, Robert John Charles Gray, who are the only children of the deceased.

Application

2 There is a lengthy history of litigation between the plaintiff and the defendant and the plaintiff and his family. The plaintiff filed a Notice of Motion on 28 August 2008 seeking a variety of orders against the defendant, including answers to questions and production of various documents. Over the ensuing months the parties reached agreement in respect of many of these orders and the only remaining application by the plaintiff is for an order that the defendant produce documents that contain communications between the defendant and its solicitors, Mallesons Stephen Jaques (Mallesons), in connection with the previous litigation between the plaintiff and the defendant and a full disclosure of legal fees charged in respect of that litigation (the previous litigation). The defendant resists production of those documents on the basis of a claim of solicitor-client privilege. The plaintiff’s contention is that once the defendant paid for the advice out of the Estate, any privilege was waived.

3 The application was heard on 20 and 22 April 2009 when the plaintiff was unrepresented and Mr R Wilson, of counsel, appeared for the defendant.

Previous Litigation

4 The plaintiff commenced the previous litigation against the defendant on 5 October 1999 when he filed a Statement of Claim seeking an order for revocation of the grant of Probate. Prior to the commencement of the proceedings the plaintiff had communicated with the defendant claiming that the deceased had made loans to his brother and that those loans should be repaid to the Estate. The basis of the plaintiff’s claim against the defendant was that it had inappropriately refused to pursue his brother in respect of those loans. The defendant filed a Cross-Claim against the plaintiff’s brother on 5 June 2001 seeking declaratory relief to establish that the plaintiff’s brother owed the Estate the amounts of the loans made to him by the deceased. At that time the plaintiff abandoned his claim for an order for the revocation of the grant of Probate but continued with some minor claims against the defendant in respect of two items of jewellery and a small amount of money.

5 Austin J heard the proceedings on 13 and 14 August 2002 and in his judgment delivered on 18 December 2002, his Honour concluded that the loans were made to the plaintiff’s brother and directed the filing of Short Minutes of Order to finalise the matter. His Honour also directed that there should be an order in those Short Minutes that the defendant verify and file its accounts: Gray v Guardian Trust Australia [2002] NSWSC 1218. Those orders were filed and made by his Honour on 21 February 2003.

6 In his judgment of 1 August 2003 in relation to costs in respect of those proceedings (Gray v Guardian Trust Australia Ltd [2003] NSWSC 704 (the Costs Judgment)) Austin J identified the issues before him as follows:

6 It is now necessary to deal with the costs of the proceeding and the costs of the cross-claim. As the argument has developed, the following issues are to be determined:

1. Which party should pay the costs of the proceeding so far as it raised the issue whether the grant of probate to Guardian should be revoked - that is, costs from 5 October 1999 to 5 June 2001 (when the cross-claim was filed)?

2. Which party should pay the costs of the proceeding from 5 June 2001 to 27 March 2002 (when the amended statement of claim was filed and Robert was joined as second defendant)?

3. Which party should pay the costs of the proceeding from 27 March 2002 to 21 February 2003 (when final orders were made, except as to costs)?

4. Which party should pay the costs of the cross-claim?

5. Which party should pay the costs of the argument with respect to costs heard on 29 July 2003?

7 In response to a question from me, the parties conceded that it was appropriate for the Court to deal with all questions of costs of the proceeding (including the cross-claim) and also Guardian's claim to be indemnified for any costs from the assets of the estate. The parties did not agree that I should deal with any aspect of Guardian's right of recourse to the estate for the costs of administration other than costs in respect of the proceeding and cross-claim.

7 His Honour referred to a number of additional matters that needed consideration where executors or other personal representatives are involved in litigation and concluded that there were good reasons for the defendant to have remained represented during the hearing, given the particular antagonism between the plaintiff and his brother and the need for the Court to be given relatively impartial assistance on some difficult issues of law: at [9]-[11]. In respect of the plaintiff’s abandoned claim for the revocation of the grant of Probate, his Honour identified the issue as being whether the circumstances were sufficient to justify the plaintiff’s commencement and subsequent maintenance of the proceedings and whether the defendant’s conduct disentitled it from recovery of any costs. The plaintiff contended before Austin J that his costs for the period 5 October 1999 to 5 June 2001, when the claim for revocation was abandoned, should be paid by the defendant, with no right of reimbursement from the estate.

8 His Honour concluded that: the plaintiff was not justified in commencing the proceedings for the revocation of the grant of Probate: [49]; the plaintiff should pay the defendant’s costs of the proceedings in the period from November 1999 to 5 June 2001 when the Cross-Claim was filed: [59]; the defendant should pay the plaintiff’s costs of the proceedings from 5 June 2001 to 21 February 2003 but that the defendant was entitled to be indemnified from the assets of the estate in respect of its own costs as defendant and in respect of the payment of the plaintiff’s costs during that period: [64] and [78]; that although the plaintiff was substantially successful in the main claim the defendant “was acting reasonably in its role as a litigant and did not in substance” contest the plaintiff’s claims after the revocation claim was abandoned and in the circumstances the defendant was entitled to be indemnified out of the Estate: [78]; and that there should be no order that the plaintiff’s brother pay the defendant’s costs of the Cross-Claim, but that the defendant be indemnified out of the assets of the Estate for all costs of the Cross-Claim reasonably incurred. Austin J noted that the practical effect of such an order would be that the defendant’s costs of the Cross-Claim would be borne by the plaintiff and his brother equally: [89].

9 Austin J delivered a further judgment in respect of an application for interest on costs: Gray v Guardian Trust Australia Ltd [2003] NSWSC 887. His Honour ordered that interest be paid on costs from the date of the order for costs and made no order as to costs in relation to the application for interest on costs: [36]-[ 37].

10 The plaintiff’s brother appealed from Austin J’s judgment in relation to the findings that the deceased had loaned certain moneys to him and in respect of the question of interest on those loans: Gray v Gray [2004] NSWCA 408. That appeal was, in the main, unsuccessful and the Court of Appeal stood the matter over for the filing of Short Minutes of Order in respect of its judgment but that took what was described as “an inordinate length of time”: Gray v Gray [2005] NSWCA 129. The plaintiff’s brother then sought to adjust the orders for costs made by Austin J. Those costs orders were not adjusted and the plaintiff’s brother was ordered to pay 90% of the plaintiff’s costs of the appeal and the defendant’s costs of the appeal. There was also a declaration that the defendant was entitled to be indemnified out of the Estate in respect of its costs of the appeal.

11 As can be seen from this history, the Court ordered that the defendant was entitled to have part of its costs of the previous litigation paid by the plaintiff or the plaintiff’s brother and was entitled to indemnification out of the Estate in respect of those costs and the costs it was ordered to pay to the plaintiff. There was a relevant reservation in relation to those orders, referred to by his Honour at par [94] of the Costs Judgment as follows:

In his written submissions, Ventry asked the Court to record that neither his submissions concerning costs nor the Court’s determination of costs issues in respect of the matters litigated to date constitutes any admission by Ventry, or any determination by the Court, admissible for any purpose in relation to Guardian’s accounting as executor of Mrs Gray’s will. That, as I understand it, was the basis upon which the costs hearing proceeded. As I have said, this judgment does not deal with any aspect of Guardian’s right of recourse to the estate for costs of administration other than costs in respect of this litigation. I assume nothing more formal is needed than for me to agree with these propositions at this stage in my reasons for judgment.

Context of application

12 The plaintiff’s Motion, part of which he moves on in this application, was, as I have said, filed on 28 August 2008. The plaintiff’s affidavit in support of that Motion included a document entitled “Questions Arising from the Estate Accounts”. One of the matters raised in those questions was the production of the documents that the plaintiff seeks in the present application.

13 The defendant filed a Notice of Motion on 1 December 2008 seeking the appointment of a hearing for passing of first accounts of the administration of the Estate by the defendant for the period 21 January 1999 to 28 October 2008 (the Accounts Motion). The Accounts Motion was filed pursuant to the order made by Austin J on 21 February 2003 and was accompanied by an affidavit verifying First Accounts and setting out payments made for the period 21 January 1999 to 28 October 2008 including the legal costs paid to Mallesons for legal services rendered during the previous litigation.

14 On 27 January 2009 the plaintiff filed and served a document entitled “Notice of Surcharges and Falsifications” (the Notice). In Equity Proceedings with Precedents (New South Wales), AG Nevill and AW Ashe, Butterworths (1981), the learned authors referred to the process of surcharges and falsifications as follows (at [312]):

The terms “surcharge” and “falsification” are omitted from the Supreme Court Rules 1970 but, as in England, they remain current: see O 43 para 43/5/2 RSC 1965 in the White Practice. A description of both terms occurs in Pit v Cholmondeley [1754] EngR 174; (1754) 2 Ves Sen 565; 28 ER 360 where it appears inter alia that “to surcharge” is to show an omission for which credit ought to have been given and “to falsify” is to show that an item is erroneous. Compare Pt 48 r 6 SCR.

After any cross-examination has taken place the party disagreeing with the account gives formal notice in succinct particulars of the surcharges and falsifications. They should be individually numbered and should refer specifically to the number of the item in the accounts to which they refer, if appropriate: Precedent 3(11). The notice is supported by affidavit. Further cross-examination and evidence is then taken before the Master.

15 Part 48, Rule 6 of the Supreme Court Rules 1970 referred to in this extract required notice to be given to the accounting party of the “brief particulars” of the amount sought to be charged. Part 46 Rule 7 of the Uniform Civil Procedure Rules 2005 (UCPR) provides that if a party alleges that any item in an account is erroneous “in amount or otherwise”, notice of the allegation stating the grounds for alleging the error must be given to the accounting party. There is no form in the Rules pursuant to which such notice is to be given. However, Precedent 3(11) in Nevill & Ashe was a Notice of Surcharges and Falsifications and it appears the plaintiff has adapted that Precedent to give notice under UCPR Pt 46 r 7. The Notice included the following in respect of Surcharges:

The Defendant [the plaintiff in this application] seeks to charge the Plaintiff [the defendant in this application] beyond the amounts admitted by it by its said account that have been received by it with the several sums of money hereinafter particularised being moneys which but for its wilful neglect and default the Plaintiff [the defendant in this application] would have received.

16 Under a heading “Amount That Would Have Been Received”, the plaintiff makes allegations that certain realisations of investments were premature and “made without regard to the interests of the beneficiaries”. There is a claim that the investments could and should have been left unrealised and that if they had been, further earnings of $30,000 could have been made. There is also an allegation that the defendant failed to account to the plaintiff for the value of all chattels forming part of the Estate which were not transferred in specie to the beneficiaries and in respect of which the plaintiff estimates a claim for $10,000. There is also a claim for $250 in respect of a ladder.

17 Under the heading “Falsifications” the plaintiff objects to the allowance in the accounts of all of the Mallesons’ accounts from 13 May 2002 to 19 January 2006 on the following grounds:

After 27 March 2002 there was no claim for revocation of the grant of probate. From that date the executor had no interest at stake in the proceedings. The issues were between the beneficiaries who both actively participated and fulfilled the role of contradictor. Hence the executor was not reasonably justified in continuing any active role in the proceedings and is not justified in recovering indemnity from the estate for the costs incurred in doing so.

18 The last sentence of this part of the plaintiff’s objection is inconsistent with Austin J’s findings in the Costs Judgment: [9]-[11] and [78]. There is also objection to the Mallesons’ accounts from 13 October 2003 to 22 November 2005 on the following basis:

These payments relate to the executor’s active participation in the appeal from the proceedings above when it had no substantive interest at stake and the contest was between the beneficiaries who each actively participated as protagonists in the appeal wherein the executor had no reasonable justification for recovering indemnity from the estate for the costs incurred in doing so.

19 There is also an objection to an account of 4 April 2008 on the basis that it was a payment relating to legal advice “obtained without reasonable necessity by the executor as a professional executor and trustee remunerated as such”. The plaintiff also objects to counsel’s fees throughout the previous litigation. When the plaintiff served the Notice on the defendant he advised that it was a “first” Notice and that there may be further Surcharges and Falsifications after he “obtains access to all trust documents to which the executor and trustee presently refuses him access”.

20 The delay in complying with Austin J’s order of 21 February 2003 is prima facie quite extraordinary. However these parties have been fighting on many fronts. There was also a Deed executed by the plaintiff and his brother on 23 June 2006 pursuant to which the plaintiff’s brother’s right, title and interest in the Estate as at that date was transferred to the plaintiff.

21 Although the plaintiff’s Motion was filed before the Accounts Motion, the plaintiff accepted that the Accounts Motion may be relevant in determining whether the documents are to be produced. That acceptance was made during the following cross-examination in the present application (tr 17-20):

Q. Notwithstanding Austin J’s findings in relation to the entitlement of the executor to have its legal costs indemnified out of the estate, you seek by filing the Notice of Surcharges and Falsifications to, in effect, review that finding in a different context, don’t you?

A. In one sense, yes. That was a finding as between litigants to a disputed hearing in which particular matters were in issue. The surcharges question is a question as between a trustee and the beneficiaries of the trust about the trustee’s entitlement to charge the estate.

Q. But what you are seeking here today is access to the whole of the executor’s file, including its communications with their solicitors Mallesons Stephen Jaques in order to challenge the entitlement of the executor’s solicitors to be indemnified out of the estate. That is in substance what you are seeking to do here today, isn’t it?

A. I couldn’t say that access to this material would be totally irrelevant to the surcharges question, but it is certainly not the way in which I saw the question and I would have proceeded with the surcharges issue regardless of access to this material.

...

Q. Mr Gray, reducing it to its simplest, Austin J ordered that the executor was entitled to be indemnified out of the estate in respect of certain of the costs of the substantive proceedings which he referred to, did he not?

A. Yes.

Q. And you, in your Notice of Surcharges and Falsifications, challenged the entitlement of the executor to pay any of the amounts in respect of all of the invoices rendered by Mallesons appearing in the Notice of Surcharges and Falsifications, that’s the situation, isn’t it?

A. Yes. That was why the reservation was noted in that order.

...

Q. Even though it may not be the only reason why you are bringing this application today, a not insignificant reason is that the receipt of the documents you seek may assist you in the ultimate hearing of your claim regarding surcharges and falsifications, isn’t that correct?

A. It’s possible.

Q. It’s more than possible in your mind, isn’t it?

A. Well, the only way in which it would assist or two ways really. The two ways that I see in which it would or might assist is whether or not any of the fees charged appear manifestly excessive, which is not a subject of the existing notice of surcharges at all and in practice I can’t say that I am really anticipating that’s likely to happen.

The second leg is whether or not the trustee turns its mind to the question should I spend trust money on this litigation now that I have no interest at stake. I am certainly interested in that.

Q. Justice Austin found that the trustee did have a relevant interest in the litigation, did he not?

A. No, he was never asked to decide that.

22 That last answer is technically accurate. Austin J was not asked to decide whether the defendant had a “relevant interest” in the litigation, however the defendant was sued and certainly had an interest in defending itself until the plaintiff abandoned his case for an order for revocation. The plaintiff did not abandon the rest of the claims in the Statement of Claim and thus kept the defendant in the litigation. As Austin J said, the defendant did not “in substance” contest those other claims and acted “reasonably in its role as a litigant”: [78]. The defendant, as cross-claimant, was successful against the plaintiff’s brother.

23 Because the plaintiff was unrepresented in the present application the following occurred by way of re-examination (tr 21-22):

HER HONOUR: Mr Gray did you want to give any evidence by way of re-examination?

A. Only on the last issue, to say that when the order was made for the executor to file and pass its accounts subject to the explicit reservation of my rights to challenge them, that was done by consent of both parties, so that I certainly understood that neither party was prejudiced one way or the other by any order that was being made in those proceedings.

...

Q. Mr Gray, what Justice Austin said was as he understood it the costs hearing in the judgment didn’t deal with any aspect of Guardian’s rights of recourse to the estate for costs of administration other than costs in respect of the litigation. It does seem that his Honour dealt with the trustee’s or executor’s rights to the costs of the litigation but you say that you reserved your rights to challenge that did you?

A. On a yes, no basis, yes.

Q. What is the no part of it?

A. If I am asked, answer that question yes or no, the answer to the question is yes.

Q. How did you reserve those rights?

A. I apprehended that what had transpired that led to the Judge making those comments was a reference to the fact that, both beneficiaries for that matter, at that time had a right to challenge the executor’s accounts in any respect when it filed them and that the question of whether or not the executor was justified in conducting the litigation using trust money at the time was never part of the hearing before the Judge.

24 This last answer is in my view inaccurate, or, at least, a misunderstanding of Austin J’s judgment. His Honour made quite clear that the defendant was justified in defending and remaining in the litigation. It was the plaintiff who was unjustified in suing the defendant. Austin J also said that there were “good reasons” for the defendant to remain represented during the hearing after the plaintiff’s abandonment of the revocation claim and that the defendant acted reasonably as a litigant: [11] and [78].

25 The “reservation” noted in par [94] of the Costs Judgment is a reservation of the plaintiff’s right to challenge the costs of the administration and inferentially the reasonableness of the costs of the litigation. The plaintiff is not entitled to claim that the defendant was not justified in being indemnified out of the assets of the Estate for its costs of the litigation or for the costs it was ordered to pay in the litigation. That has been decided by Austin J. The only aspect of the costs of the litigation that the plaintiff is entitled to question is the reasonableness of those costs.

26 The defendant’s claim for privilege was supported by an affidavit of Katherine Murphy sworn on 1 April 2009. Ms Murphy is a senior trust administrator who has been involved in the administration of the Estate from 21 April 2007. Ms Murphy’s affidavit sets out the litigious history and the correspondence between the plaintiff and the defendant in respect of the present Motion and the Accounts Motion. Paragraph 63 of that affidavit was as follows:

Mallesons has issued over 70 invoices to the executor and trustee in a form in which details relate to discussions, advice and correspondence between BNY and Mallesons. I believe that most of the invoices are privileged and confidential in whole or in part. I believe that it would be an onerous, lengthy and costly task to review each invoice to identify those invoices that are privileged and confidential in whole or in part. I also believe that it would be an onerous, lengthy and costly task to have BNY’s solicitors review each invoice and identify and redact each entry that is confidential to the executor and trustee and its agent or in relation to which privilege is claimed.

27 Ms Murphy also gave the following affidavit evidence in respect of the defendant’s communications with its solicitors during the litigation:

67. Such communications have been made since 1999 and relate, inter alia, to various legal proceedings and matters in respect of the estate. They in large part pertain to communication between BNY and Mallesons in respect of litigation in the estate and are privileged and confidential in whole or in part. I believe that it would be a very onerous, lengthy and costly task for our solicitors to review the communications to identify and redact each communication that is confidential to the executor and trustee and its agent or in relation to which privilege is claimed and in relation to which charges were made. This is because there are approximately 7 boxes containing documents and files held by TCL in relation to the estate of Lillian Gray. I am aware that BNY has received a significant amount of correspondence from either Ventry or Robert over time that may not have been intended to have been disclosed to the other brother, and that may be confidential. I believe that some of the correspondence and documents on the BNY file are privileged. Some of the correspondence and documents are communications with the executor and trustee’s solicitors relating among other things to ongoing legal proceedings involving the estate and Ventry and Robert. Specifically, Ventry commenced proceedings under the Family Provision Act 1982 (NSW) in 2000 in respect of the estate and also commenced proceedings for defamation against Robert in 2000 in respect of a letter sent to the executor and trustee...It would be very difficult and time consuming to assess each piece of correspondence to determine whether it is confidential, was sent by one of Ventry or Robert with the intention that it not be disclosed to the other, or is privileged.

28 Ms Murphy gave the following evidence in cross-examination (tr 24):

Q. Is it the case that as far as you are aware nobody has examined the estate files relating to the litigation to ascertain whether there is anything in them that might remotely be described as confidential, is that the case?

A. They’ve not been examined in any great detail, no.

Q. When you say in any great detail, have you examined them at all?

A. I’ve read some of the correspondence but my focus has been on answering your enquiries.

Q. As far as you are aware are you the only person who has read the correspondence at all in recent times?

A. No, there’s been a number of people involved.

29 Ms Murphy gave evidence that she had looked at all the accounts received from Mallesons and that the advice of her “legal people” was that the narration in those accounts should be redacted because they contained things that “might be subject to legal privilege” (tr 54). Ms Murphy who has no legal training but has had over 19 years experience in estate administration gave the following evidence in cross-examination (tr 56):

Q. If you looked at one of these narrations attached to or showing some bill from Mallesons and the narration said on a particular date --

A. Yes.

Q. --Somebody at Mallesons had written a letter to BNY and spent an hour doing it and they charged a particular sum of money for it, is that something that you say legal privilege would attach to?

A. It depends what they are writing about, whether they are giving advice or something like that.

Q. Are you drawing a distinction between the narration that I have just hypothesized that somebody wrote a letter on a particular date and the letter itself?

A. No, it’s the amount of research, things like that that goes into it.

Q. So if the narration says research into this topic, three hours, do you say that that is something to which legal privilege would attach?

A. Not necessarily.

Q. What is the difference, why would it attach in one case and not another?

A. Yeah, I don’t quite know the answer to that, I’m sorry. I don’t quite understand that, Mr Gray, as to where we are going with it, no.

30 I raised with Mr Wilson, counsel for the defendant, the issue of whether the defendant had waived any claim for privilege in respect of the narratives in Mallesons’ accounts once it filed the Accounts Motion. The defendant did not object to and, as I understand the history of the litigation, it consented to the order made by Austin J on 21 February 2003 that it verify its accounts. That consent order needs to be viewed in the context of the reservation noted in the Costs Judgment that the plaintiff did not give up his right to contest or question the defendant’s costs of the administration of the Estate, excluding the costs of the litigation. There is a serious issue to be determined as to whether, when the defendant filed its Accounts Motion and affidavits in support, it was no longer entitled to hold back part of the detail in those accounts on the basis of a claim of privilege: Garratt’s Limited v Thanga Thangathurai [2002] NSWSC 39 at [69].

31 Mr Wilson submitted that the defendant should not have to decide which of the Mallesons’ accounts it will seek to have approved until the hearing of the Accounts Motion. I disagree. That would be a most unruly course and the parties would have no certainty as to the process in which they are engaged. It seems to me that, if the defendant is pressing on to have its accounts passed or approved which include the payments to Mallesons, it must produce the full accounts. However, having regard to the way in which this case was argued, which lacked some discipline, I will allow the defendant an opportunity to make a decision within a short timeframe as to whether it wishes to press all of the items in the accounts relating to the Mallesons’ accounts.

32 Ms Murphy’s evidence that the Mallesons’ accounts contain material that “might be subject to legal privilege” combined with the defendant’s failure to address with particularity each of the documents in respect of which privilege was claimed does not justify a claim in respect of any particular documents: Buzzle Operations Pty Ltd (in Liq) v Apple Computer Australia Pty Ltd [2009] NSWSC 225 at [21]- [22]. However Ms Murphy’s evidence in relation to the expense that would be incurred if analysis of the individual documents were to occur is a reasonable concern for the defendant in its administration of the Estate. Although the defendant’s evidence is, at this stage, inadequate to support a claim for privilege, it seems to me that the better course is for me to decide the matter of principle raised by the plaintiff and deal with the categories of documents during the different phases of the litigation.

Consideration

33 There are different views in the Equity Division of this Court regarding the approach to be adopted in relation to applications by beneficiaries to access trust documents which have been the subject of extra-curial and academic commentary: Avanes v Marshall & Ors [2007] NSWSC 191; (2007) 68 NSWLR 595; McDonald v Ellis [2007] NSWSC 1068; JC Campbell, Access by Trust Beneficiaries to Trustees’ Documents Information and Reasons (2009) 3 Journal of Equity 97; Georgia Dawson, A Fork in the Road for Access to Trust Documents (2009) 3 Journal of Equity 39. There is no need to analyse these different approaches in this application. It is accepted that the documents over which privilege is claimed were paid for out of the Estate. There is however an issue as to whether payment in the circumstances of this case, by order of the Court after protracted litigation, means that such documents are “trust documents”, in the sense that entitles the plaintiff to claim a proprietary interest and an entitlement to access to those documents.

34 The plaintiff’s contention in respect of his entitlement to see the documents is based on the decision in Talbot v Marshfield [1865] 62 ER 728. In that case there were two occasions on which the trustees sought counsel’s opinion, the second being in relation to a suit against the trustees. In refusing the application for production of the second opinion the Vice-Chancellor, Sir RT Kindersley, said at 729:

This was not to guide the trustees in the execution of their trust; but, after proceedings had been commenced against them, they took advice to know in what position they stood, and how they should defend themselves in the suit. It appears to me that the cestuis que trust have no right to see this case and opinion, unless they can make out that the trustees can charge the expense thereof on the trust funds. As to this there is no proof; the trustees may themselves have to bear the expense of this case and opinion, as having been stated and taken by them as litigant parties with the cestuis que trust.

35 The plaintiff submitted that the relevant principle to be drawn from Talbot v Marshfield is that if in the present application it can be shown that the defendant could, or did, charge the expense of its legal advice or legal services to the Estate, access to the documents should be granted. The plaintiff submitted that if the defendant had paid for the advice out of its own pocket, as was the case with the post-litigation counsel’s opinion in Talbot v Marshfield, then the defendant would be entitled to say it belonged to it and it could maintain its privilege claim.

36 The plaintiff also relied upon the following passage from Lewin on Trusts, 18^th Edition, Thomson Sweet & Maxwell (2008) as follows (footnotes omitted):

Legal advice and communications with lawyers in breach of trust actions

23-49 Trustees who are sued for breach of trust or other relief in contentious trust proceedings are not liable to disclose legal advice obtained and paid for by them for the purpose of their defence. They may assert privilege for such advice in the normal way and beneficiaries’ rights to disclosure under trust law make no difference. Similar considerations apply to communications with their lawyers for the purpose of their defence after commencement of proceedings, and in our view communications with their lawyers (paid for by themselves) before the commencement of proceedings in relation to their liability for breach of trust, though not to communications before commencement of proceedings in relation to the trust property.

37 In support of the proposition that the trustees were not obliged to disclose legal advice obtained and paid for by them for the purpose of their defence, the learned authors referred to Talbot v Marshfield with specific reference to it being explained in Re Londonderry’s Settlement [1965] Ch 918 at 931-933, CA. That explanation by Harman LJ included reference to Lord Wrenbury’s statement in O’Rourke v Darbishire [1920] AC 581 at 626-627:

The beneficiary is entitled to see all the trust documents because they are trust documents and because he is a beneficiary. They are in a sense his own. Action or no action, he is entitled to access to them. This has nothing to do with discovery. The right to discovery is a right to see someone else’s documents. A proprietary right is a right to access to documents which are your own. No question of professional privilege arises in such a case. Documents containing professional advice taken by the executors as trustees contain advice taken by trustees for their cestuis que trust, and the beneficiaries are entitled to see them because they are beneficiaries.

38 In Re Londonderry’s Settlement Salmon LJ said at 938:

The position is quite different where the beneficiary seeks disclosure of documents from the trustees in the air, as in this case, from the position where the beneficiary seeks discovery of documents in an action in which allegations are being made against the bona fides of the trustees. If the documents in question are in the possession or power of the trustees and are relevant to the issues in the action, they must be disclosed whether or not they are trust documents. In some instances, however, the fact that they are trust documents may nullify the privilege that would otherwise exist, as for example if the document consists of counsel’s opinion taken before the issue of the writ, clearly the beneficiary is entitled to see any opinion taken on behalf of the trust.

39 These two statements do not deal directly with the present circumstances where the defendant/trustee did not charge the Estate with the expense of the advice at the time it was taken in adversarial litigation, but was, at the conclusion of the litigation, held to be entitled to costs of the litigation from the adversarial beneficiary, including indemnification out of the Estate.

40 In Brown v Oakshott (1849) 12 Beav 252, the trustees took advice in contemplation of litigation, such advice being paid for out of the estate. The litigation in contemplation was a motion for the appointment of a receiver and manager to a brewery which was carried on by the executors and the trustees. The beneficiaries sought access to the legal advice and the trustees claimed it was privileged. The plaintiff argued that had the trustees taken the opinion for their own personal guidance and had they paid for it out of their own funds the opinion may have been privileged, however since the trustees took the advice at the expense of the estate the plaintiff ought to be allowed to inspect it. The Master of the Rolls, Lord Langdale, without hearing the defendants, said:

I do not know what motive the Defendants may have for not permitting an inspection; but if they refuse to produce them, I think they have a right to do so.

41 This decision is cited in Lewin in support of the proposition that trustees do not have to disclose legal advice obtained and paid for by them. Although in Brown v Oakshott the legal advice was paid for by the beneficiaries, and access was not granted, the absence of any reasons makes it difficult to rely upon it for support for any particular proposition.

42 In Devaynes v Robinson (1855) 20 Beav 42, parties interested in the estate of the testator sought an account of the estate and a decree against the assets of the trustees for breach of trust or loss sustained by their delay in selling certain real estate. Advice was taken by the administratrix prior to any knowledge of the commencement of proceedings. It would appear that in this case the Master of the Rolls, Sir John Romilly, concluded that the opinions taken prior to the knowledge of litigation had to be produced but that the advice taken with knowledge of the impending litigation was not required to be produced. In that case there was no indication of the source of the funds used to pay for the opinions.

43 In Thomas v Secretary of State for India in Council (1870) 18 WR 312, subscribers to an annuity fund asserted claims to surplus money belonging to the fund. The trustees took advice in relation to that claim. One of the subscribers filed a Summons to compel the production of the legal opinion. James VC said:

There is a difference between an opinion taken by a trustee on his own behalf, and one taken on behalf of the trust estate. In this case the opinion was taken by the trustees on their own behalf, after litigation had been commenced, and with a view to resisting future litigation. It is absurd to say that that is taken by a trustee on behalf of his cestuis que trustent. You might as well ask for production of the instructions given by the defendants to their counsel in this present case. The application must be refused.

44 There was no mention in that case of the source of the funds used to pay for the opinion.

45 In Bacon v Bacon (1876) 34 LT 349 the plaintiff sought to set aside certain deeds of appointment in favour of the defendant purporting to be in pursuance of a power contained in a marriage settlement, but alleged by the plaintiff to be a fraud on the power. The plaintiff also sought to set aside a Deed of Release by which the trustees had been exonerated from liability in respect of £5,000 which had allegedly been lost to the trust estate. The previous suit of Bacon v Davidson instituted in the year 1871 against the same trustees also sought an order setting aside the Deed of Release and was compromised. The trustees in Bacon v Bacon claimed privilege over memoranda and instructions written by them for their defence and communications with their solicitors in respect of the suit of Bacon v Davidson. None of the communications had been charged to the trust estate. An order was made in Chambers for production of the documents and the trustees then moved to discharge that order. Hall VC said at 350:

I think that the principle of Minet v Morgan covers this case. I find that amongst the letters there held privileged were some which had passed between the plaintiff and his mother and their respective solicitors with reference to questions connected with matters in dispute in the cause. Now the claim here is for privilege in respect of confidential communications which have passed between the defendants and their solicitors or between their solicitors and their counsel with reference to matters connected with this or the preceding suit. The conclusion which I draw from Minet v Morgan is that, generally speaking, all communications between solicitor and client are privileged. Then does the relationship of trustee and cestui que trust distinguish this case from the general rule? In the former suit of Bacon v Davidson the communications which had passed between the trustees and their solicitors with reference to that suit were privileged, and must be held privileged in the present also, inasmuch as the two suits have, to some extent, the same object; the release which was impeached in the former suit being impeached in this also. It seems to me that the letters and documents for which privilege is claimed could not have been charged to the trust estate.

46 Minet v Morgan (1873) LR 8 Ch App 361 was restricted to the principle identified by Hall VC and did not deal with any issue of payment for advice or trustees’ entitlements to charge the trust estate for legal advice.

47 In Mayor and Corporation of Bristol v Cox (1884) 26 Ch 678, the plaintiff sought an injunction to restrain the former president of the City’s Law Society, the defendant Mr Cox, from issuing a circular alleging that the Corporation had been deluding the public into the belief that they were selling land with good title when in fact it was defective. The defendant sought the production of various documents from the plaintiffs, including their legal advice. The Corporation claimed privilege over those documents. The defendant argued that as a ratepayer of the City of Bristol, he had contributed to the legal advice taken by the Corporation and that the case came within the authorities that where trustees had taken counsel’s opinion at the expense of the trust estate, the cestuis que trust are entitled to see it.

48 The plaintiffs had filed their affidavit of documents in the discovery process and had claimed privilege in respect of certain documents. After reviewing the claims for privilege and deciding that they were properly made in the affidavit, Pearson J recounted what he described as a “curious and ingenious argument” used by counsel for the defendant as follows (at 683):

He says: Oh! but Mr Cox is not only an excellent President of the Incorporated Law Society but he is also a ratepayer of the city of Bristol, and being a ratepayer he has contributed towards paying for all those cases and opinions, and having done that the case comes within the authorities of those cases where trustees have taken counsel’s opinion at the expense of the trust estate and the cestuis que trust are entitled to see it ... I think that if this was an action by Mr Cox as a ratepayer against the corporation of the city of Bristol with regard to some matter or other which related to the raising of the rates, or to the expenditure of the rates, it may be quite possible, and it is very probable, that Mr Cox would have a right to see them, but this is an action by the mayor, alderman, and burgesses of the city of Bristol, not as against Mr Cox in any way whatever as a ratepayer, but as a corporation really defending the interests of the ratepayers themselves against the Defendant, who they say is injuring those interests.

49 Access to the legal opinions, except for that which had been disclosed in the pleading, was refused.

50 Gouraud v The Edison Gower Bell Telephone Company of Europe (1888) 57 LJ Ch 498 was an action by a shareholder on his own behalf and that of other shareholders of the defendant to set aside an agreement entered into by the defendant allegedly entered into in fraud of the rights of the plaintiff and the other shareholders. In answer to the defendant’s claim of privilege over certain documents in the discovery process, the plaintiff argued that the defendant was not entitled to claim privilege because the directors were acting on behalf of the defendant Company as a whole when they obtained legal advice and that they made payment out of the funds of the Company for that legal advice. The defendant argued that because adverse litigation existed between it and the plaintiff, it was not to be put in a worse position than other litigants with respect to discovery and that there was no rule which exempted it from the ordinary privilege of being protected from discovery of professional communications. Chitty J referred to Pearson J’s statement in the Mayor and Corporation of Bristol v Cox that “it might be quite possible” and it was “very probable” that access to advices would have been granted to Mr Cox if it had been an action by Mr Cox as a ratepayer against the Corporation of Bristol in relation to the raising or expenditure of rates, and said at 499:

...He founds that statement, as I understand him, on the general principle that obtains in partnership actions, and also in actions by a cestui que trust against a trustee – namely, that a party cannot resist production of documents which have been obtained by means of payment from the moneys belonging to the party applying for their production. I think that that is the general principle, and one which, to my mind, applies as between a shareholder and the directors who manage his property, when the documents are paid for out of his property. I hold that the principle applies between a shareholder and the managing directors of a company.

51 In that case the defendant argued that a provision in one of the Articles of Association of the Company which allowed the directors to determine when shareholders or members could have access to the books of account and other documents of the Company, was a bar to the plaintiff’s right of discovery. Chitty J concluded that the particular Article was only intended to regulate ordinary cases and was not framed with reference to adverse litigation and that even if the particular Article contemplated litigation some limitation would have to be put on it, but the plaintiff would not be excluded from access to documents relating to the agreement, the subject of the litigation. In that case it was the directors who decided to pay for the legal advice out of the Company’s funds. In that regard it is distinguishable from the present case in which the Court ordered that the defendant was entitled to payment of its costs and that it was entitled to indemnification of those costs out of the Estate.

52 In State of South Australia & Anor v Barrett & Ors [1995] SASC 5055; (1995) 64 SASR 73 the Full Court of the Supreme Court of South Australia (Cox, Olsson and Mullighan JJ) (the SA Bank case) dealt with an appeal against an order directing production of a series of documents in respect of which the plaintiff Bank had claimed privilege. The documents were in the nature of legal advices to the Bank or requests for legal advice by the Bank with respect to aspects of transactions which were the subject of the main litigation. The main litigation involved allegations of breaches of duty and breaches of trust and statutory obligations by the directors of the Bank (the eight respondents) as a consequence of entry into certain commercial transactions. The respondents argued that they were entitled to see the Bank’s documents because they were brought into existence in circumstances which gave rise to a joint privilege between the Bank and the respondents. In support of this argument the respondents relied on Gouraud v Edison Gower Bell Telephone Co of Europe. Olsson J said at 78:

The dicta upon which he [Chitty J] relied were directed towards situations in which documents are brought into existence as a consequence of expenditure from a common fund in which both parties have a beneficial interest and which are expressly raised in their common interest. ...

I have some doubt as to what is there said can be considered good law in light of more recent authorities – the more so as the reasoning is said to be based upon partnership law and actions against trustees by a cestui que trust, the principle being that a party cannot resist production of documents which have been obtained by means of payment from the moneys belonging to the party applying for their production. With all due respect, it is difficult to perceive a parity of logic between that situation and the position of shareholders vis-a-vis a corporation, where the legal relationships are quite different.

53 Mullighan J said at 83-84:

Our attention was also drawn to cases which state the principle that a party cannot resist production of documents which have been obtained by means of payment from moneys belonging to the party applying for their production, eg a cestui que trust. In Gouraud v Edison Gower Bell Telephone Co of Europe (1888) 57 LJ Ch 498 Chitty J applied this principle between shareholders and the directors of a company with respect to confidential communications between the company and its solicitors for the purpose of obtaining legal advice in connection with the subject matter of the action brought on behalf of the shareholders against the company. In Woodhouse & Co Ltd v Woodhouse (1914) 30 TLR 559, the Court of Appeal acknowledged the principle between shareholder and company but held that it did not apply where the interests of the company and the shareholders were adverse. In my view this principle could not apply in the present circumstances between a corporation and its former directors who are being used (sic) by the corporation and whose interests are clearly adverse.

The application of all of the principles discussed does not lead to the conclusion that the legal professional privilege does not apply against the first eight respondents. They are no longer directors of the Bank. Their interests are adverse to those of the Bank. Their purpose in seeing the documents is not to serve the interests of the Bank or to enable the discharge of their duties as directors but to serve their own interests in the litigation.

54 The real issue for determination in this application is whether the privilege claim made by the defendant is unsustainable by reason of the Court’s order that the plaintiff pay part of the defendant’s costs and that the defendant was entitled to indemnification out of the assets of the Estate for its costs of the previous litigation. The cases referred to above do not address this particular issue. However the SA Bank case points up the character of the relationship between the plaintiff and the defendant in this case. In aspects of the previous litigation the plaintiff was an adversary of the defendant. His present purpose in seeing the documents is, in part, to support his claims in the Accounts Motion in which he is attempting to allege, inappropriately in my view, that the defendant was not justified “in recovering indemnity from the estate” for the costs that were awarded by Austin J. Austin J has already decided that matter adversely to the plaintiff. Be that as it may, it is necessary to focus on the relationship at the time the documents were created. There is no doubt that at the time the documents were created in relation to the main proceedings in which the plaintiff was suing the defendant the communications were privileged. The plaintiff’s claim against the defendant for revocation was unjustified and he was ordered to pay the defendant’s costs. The defendant was also entitled to be indemnified out of the assets of the Estate for its costs. This does not in my view mean that the plaintiff has a proprietary interest in the documents in the sense that the cases recognise beneficiaries’ entitlement to access trust documents. These documents were not for the benefit of the plaintiff. They were documents created for the purpose of the defendant defending itself against the unjustified litigation against it by the plaintiff. The fact that an order was made that the plaintiff pay the defendant’s costs coupled with an order of its entitlement to indemnification, does not in my view convert the privileged advice received by the defendant to defend itself into an advice for the benefit of the plaintiff and thus a trust document to which the plaintiff is entitled to access.

55 At the time he abandoned his revocation claim the plaintiff did not discontinue the balance of his proceedings against the defendant. There were still some minor claims against the defendant but the defendant did not seriously resist the remaining minor claims. These related to the items of jewellery and a small amount of money. The defendant was ordered to pay the plaintiff’s costs of that aspect of the previous litigation against it from the time of the abandonment of the revocation claim once again with an entitlement to indemnification out of the Estate. It appears that the reason Austin J allowed indemnification in relation to this aspect of the defendant’s costs and its obligation to pay the plaintiff’s costs was because his Honour regarded it as appropriate for the defendant to remain represented in the litigation to assist him impartially with some difficult questions of law where the two beneficiaries were adversaries. The documents created during this phase of the litigation were however paid for out of the Estate and at a time when the plaintiff and the defendant were not, in reality, adversaries. In my view the plaintiff is entitled to access to the documents in relation to the main claim (excluding the communications in relation to the revocation claim) in the previous litigation.

56 The plaintiff and the defendant were not adversaries in relation to the Cross-Claim against the defendant’s brother. They were litigating for the same outcome – that the plaintiff’s brother should repay to the Estate the loans he received from the deceased. The defendant’s communications with its solicitors and barristers were to assist the defendant in achieving an outcome that would be to the plaintiff’s benefit, at least as to half of the amounts to be repaid. If there had been an application by the plaintiff’s brother to access those communications, the plaintiff may well have been able to claim common interest privilege to object to access being granted to his brother: Bulk Materials (Coal Handling) Pty Ltd v Coal & Allied Operations Pty Ltd (1988) 13 NSWLR 689. The plaintiff is entitled to have access to the communications between the defendant and its solicitors and barristers in respect of the Cross-Claim against the plaintiff’s brother.

Conclusion

57 The plaintiff is not entitled to access to the communications between the defendant and its solicitors and barristers in respect of the plaintiff’s claim against the defendant for the revocation of the grant of Probate. The plaintiff is otherwise entitled to access to the communications between the defendant and its solicitors and barristers in relation to the previous litigation. I will grant the defendant a short adjournment to decide whether it wishes to maintain a claim of privilege over the narratives in the Mallesons’ accounts in respect of which approval is sought in the Accounts Motion. I list the matter on 4 September 2009 at 9.30 am for the purpose of the defendant indicating its position in that regard. On that date I will also hear any argument as to costs of this application if the parties are unable to agree on a costs order.

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LAST UPDATED:
18 August 2009