Supreme Court of WA|2009-03-10|Before: Newnes J

MURRAY -v- SCHREUDER [2009] WASC 51 (10 March 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MURRAY -v- SCHREUDER [2009] WASC 51

MATTER : The estate of the late John Clauscen Murray of 19 Pandora Drive, City Beach in the State of Western Australia (Dec)

DERYCK MARSHALL SCHREUDER (in his capacity as executor of the will of JOHN CLAUSCEN MURRAY (Dec))

Practice and procedure - Production of documents for inspection - Claim of legal professional privilege - Whether facts relied upon for claim must be on affidavit - Application under O 26 r 8(2) for production of document referred to in affidavit - Whether applies to document referred to in exhibit to affidavit

Trusts - Proceedings to remove trustee - Application by beneficiary for production of documents for inspection - Whether beneficiary of nondiscretionary trust has right to inspect documents relating to administration of trust

ACN 007 528 207 Pty Ltd (in liq) v Bird Cameron [2002] SASC 144

Century Drilling Ltd v Gerling Australia Insurance Co Pty Ltd [2004] QSC 120

City of Baroda (1926) 134 LT 576

Gardner v Irvin (1878) 4 Ex D 49

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405

McDonald v Ellis [2007] NSWSC 1068

Morris v Morris (1993) 9 WAR 150

O'Rourke v Darbishire [1920] AC 581

Quilter v Heatly (1883) 23 Ch D 42

Rafidain Bank v Agom Universal Sugar Trading Co Ltd [1987] 3 All ER 859

Re Simersall; Blackwell v Bray [1992] FCA 221; (1992) 35 FCR 584

Re Tillott [1892] 1 Ch 86

Roberts v Oppenheim (1884) 26 Ch D 724

Rouse v IOOF Australia Trustees Ltd [1999] SASC 181; (1999) 73 SASR 484

Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709

Spellson v George (1987) 11 NSWLR 300

Taylor v Batten (1878) 4 QBD 85

1 NEWNES J: This application arises out of a dispute between a beneficiary of the will of her late husband and the executor and trustee of the will. In the substantive proceedings, so far as relevant, the plaintiff/beneficiary (Mrs Murray) seeks the removal of the defendant (Professor Schreuder) as executor and trustee. In the application that is currently before me, Mrs Murray seeks, in effect, an order that Professor Schreuder produce for inspection all written legal advice received by him, and copies of all accounts for professional legal services rendered to him, concerning the administration of the estate.

2 John Clauscen Murray (Mr Murray) died on 16 November 2003. At the date of Mr Murray's death, his assets consisted of a property in Pandora Drive, City Beach (together with personal effects and household chattels), money held in bank accounts with National Australia Bank (NAB) totalling some $356,600, shares to the value of $162 and a funeral benefit grant of $572. His funeral expenses totalled $5,599.86.

3 By his will, Mr Murray appointed 'the Vice Chancellor of the University of Western Australia' as his executor and trustee. Mr Murray left to his wife, Mrs Murray, all of his interest in the Pandora Drive property and his personal effects and household chattels. (It appears in fact that the Pandora Drive property was held by Mr Murray as a joint tenant with Mrs Murray and his interest passed by way of survivorship.) Mr Murray made five specific bequests, totalling $30,000, and then, relevantly, provided as follows:

My Trustee will hold the rest and residue of my real and personal property on trust ...

(f) to hold the sum of two hundred thousand dollars ($200,000) upon trust to pay the income therefrom to my wife [Mrs Murray] by quarterly instalments during her lifetime;

(g) the balance of my residuary estate then remaining shall be held on trust for the University of Western Australia. I direct that the money be used to establish a scholarship in the name of John Clauscen Murray for the purpose of bowel cancer research.

4 An application for probate was made in the name of the Vice Chancellor of the University of Western Australia (the University) but, following requisitions from the Probate Office, ultimately it was determined that the appointment in the will referred to the holder of the office at the date of Mr Murray's death. At that date, Professor Schreuder was the Vice Chancellor of the University. Probate of the will was granted to Professor Schreuder on 6 April 2006. At that time, Professor Schreuder was represented by Perth solicitors, Cahill Billington.

5 On 16 May 2006, Mrs Murray commenced proceedings in this court under s 6(1) of the Inheritance (Family and Dependants Provision) Act 1972 (WA) (the Inheritance Act) claiming that by his will Mr Murray had failed to make adequate provision for her.

6 On 29 June 2006, a firm of Sydney solicitors, Roach & Halligan, wrote to Cahill Billington to say that Professor Schreuder was dissatisfied with the services of Cahill Billington and that he had appointed Roach & Halligan as his solicitors. The grounds of Professor Schreuder's dissatisfaction with Cahill Billington were not explained. It seems that Roach & Halligan subsequently changed its name to Schreuder Partners. It emerged in the course of the hearing that the principal of Schreuder Partners is Professor Schreuder's son, although the substantive legal work in this matter appears to have been carried out by employee solicitors.

7 Notwithstanding Professor Schreuder's apparent dissatisfaction with the services of Cahill Billington, on 24 July 2006 Schreuder Partners requested that Cahill Billington act as its agent in respect of the administration of the estate and the Inheritance Act proceedings. In fact, it appears that Professor Schreuder played little active part in the Inheritance Act proceedings and Cahill Billington's fees have been paid by the University.

8 The Inheritance Act proceedings were settled at a mediation conference held on 15 September 2006. The University participated in the mediation as a beneficiary under the will.

9 The terms of the settlement provided (relevantly) as follows:

1.2 The University and [Professor] Schreuder agree to invest the Residuary Estate in the Hackett Foundation and pay [Mrs Murray], in quarterly instalments, all of the interest earned annually on the residuary estate during [the plaintiff's] lifetime, with the first quarter commencing on 16 September 2006.

1.3 The University and [Professor] Schreuder must administer the Estate in accordance with the terms of the Will as varied by this Deed.

10 The University and Professor Schreuder also agreed to pay to Mrs Murray from Mr Murray's estate the sum of $19,000 as a contribution towards her legal costs and, within 30 days, a sum equal to all of the interest owing to Mrs Murray pursuant to the bequest in the will, up to and including 15 September 2006.

11 The substantive effect of the settlement, therefore, was that instead of the sum of $200,000, the whole of the balance of the residuary estate was to be invested in the Hackett Foundation and the income was to be paid to Mrs Murray, in quarterly instalments, during her lifetime. Thereafter the residuary estate was to be held in trust to establish the scholarship specified in Mr Murray's will. Although cl 1.3 of the deed contemplated that the estate would be administered by the University and Professor Schreuder, I did not understand it to be in issue that in fact Professor Schreuder continued to assume the administration of the estate, although by the time the settlement was reached he was no longer Vice Chancellor of the University. He had moved to Sydney where he had taken up another academic appointment. When that occurred is not apparent from the evidence. (I might mention that the Hackett Foundation is associated with the University.)

12 On 30 October 2006, Schreuder Partners asked NAB to forward to it the money held in Mr Murray's bank accounts. Schreuder Partners received the money on 27 November 2006. Together with accumulated interest, the total amount was $414,059.52. Schreuder Partners placed the money in its trust account. There, subject to certain payments made from it, it remained until October 2007.

13 Several payments due under the will or settlement deed were made from the funds in the trust account. On 7 December 2006, Schreuder Partners paid the five specific bequests under the will; on 14 May 2007, they paid the sum of $19,000 to Mrs Murray in respect of her costs of the Inheritance Act proceedings, pursuant to the settlement deed; and, on 23 May 2007, they paid the sum of $29,254.27 to Mrs Murray as the interest earned on the bequest of $200,000 under the will up to 15 September 2006. As I understand the position, in substance all that then remained to be done was to invest the balance of the residuary estate in the Hackett Foundation and pay the interest on it to Mrs Murray.

14 In an affidavit filed in the current proceedings, Mrs Murray says that, on 29 August 2007, she received the sum of $2,294.04 and, by letter dated 5 May 2008 from Schreuder Partners, a cheque for $8,718.86 (which Mrs Murray has not banked). Mrs Murray has received no other payments in respect of interest on the money constituting the residuary estate.

15 On 8 August 2007, Schreuder Partners wrote to the Hackett Foundation to make arrangements for the investment of the balance of the residuary estate. Following delays in resolving the manner in which it was to be invested in the Hackett Foundation, on 17 October 2007 Schreuder Partners lodged the money in an interest-bearing account with NAB. The money had, as I have mentioned, been in the (non-interest bearing) trust account of Schreuder Partners since that firm obtained the funds from NAB in November 2006.

16 It was common ground that Professor Schreuder has not yet invested the residuary estate in the Hackett Foundation. The difficulty, as I understand it, is that while the settlement deed specifies that interest is to be paid to Mrs Murray on a quarterly basis, it has turned out that the Hackett Foundation pays interest only on an annual basis. Accordingly, if the funds were invested in the Hackett Foundation it would not be possible for quarterly payments of interest to be made to Mrs Murray.

17 It seems that that relatively straight-forward problem has held up the investment of the funds for a period of more than 12 months, and the affairs of the estate remain unresolved although more than two years have passed since the settlement of the Inheritance Act proceedings.

18 Of even greater concern is that, to the end of September 2008, Professor Schreuder had incurred total legal costs in excess of $112,000 in his capacity as executor and trustee of the estate, some $97,000 in costs charged by Schreuder Partners and the balance in counsel fees. Most, if not all, of those costs have already been paid from the residuary estate. That amount excludes any legal costs incurred by Professor Schreuder in respect of the claim by Mrs Murray under the Inheritance Act, any such costs having been met by the University.

19 I must say that legal costs of that magnitude beggar belief. I am not in a position on this application to determine how they have come about, or where the fault lies, and I make no comment on that. But, wherever the fault lies, it is simply appalling that an estate of this size and nature should end up encumbered with costs of that magnitude.

20 Throughout 2007, there was extensive correspondence between Mrs Murray's solicitors, Schreuder Partners on behalf of Professor Schreuder, and Cahill Billington on behalf of the University, concerning the investment of the residuary estate in the Hackett Foundation, the fact that between November 2006 and October 2007 the residuary estate was not invested in an interest-bearing account, and the extent of the legal fees charged by Schreuder Partners to Professor Schreuder and paid from the residuary estate. The correspondence continued in 2008.

21 In the course of that correspondence, on 31 May 2007, the University (by Cahill Billington) invited Professor Schreuder to retire as executor and trustee in favour of the current Vice Chancellor of the University and offered to indemnify Professor Schreuder for his reasonable costs between the date of acceptance of that invitation and the date of his retirement. On 13 July 2007, Professor Schreuder (by Schreuder Partners) said that he would rather complete the administration of the estate before retiring. That invitation by the University has been repeated subsequently, but Professor Schreuder has declined to accept it unless he is released and indemnified in respect of any liability that he may have in connection with the administration of the estate.

22 The current proceedings were commenced by originating summons on 4 July 2008. In the proceedings Mrs Murray seeks, among other things, the removal of Professor Schreuder as executor and trustee. That application is based on three substantive grounds. It is alleged, in effect, that Professor Schreuder:

(1) failed to invest the residuary estate in the Hackett Foundation in accordance with the terms of settlement and has continued to fail to do so;

(2) failed for a period of almost 12 months to invest the residuary estate in an interest-bearing account, the funds remaining in the trust account of Schreuder Partners; and

(3) has incurred legal costs of not less than $112,000, which he has paid from the estate, in circumstances where those costs are excessive and were not reasonably incurred.

Mrs Murray says that in light of the amount and nature of the work involved in the administration of the estate, the total of the legal fees incurred by Professor Schreuder to date suggests that a substantial portion of the costs have not been reasonably incurred and that Professor Schreuder ought not to have authorised payment of them from the estate.

23 A solicitor for Professor Schreuder, Mr David Baldry, has sworn three affidavits in the proceedings. They are affidavits sworn on 25 July, 4 August and 26 August 2008 respectively.

24 In his affidavit of 25 July 2008, Mr Baldry sets out a chronology of events and brief descriptions of certain correspondence. He also annexes (among other things) invoices from Schreuder Partners to Professor Schreuder for legal work in the period 29 June 2006 to 29 August 2007. The last invoice is dated 10 September 2007. In addition, there is annexed to the affidavit a document described as 'Estate Residue and Income Statements', which refers to further fee notes in the sum of $5,698.53 and $7,168.69. Also exhibited to the affidavit are documents which are the subject of the current application. They consist of two confidential exhibits, contained in sealed envelopes, one described as 'DRB10' and the other as 'DRB11'.

25 In the affidavit itself, Mr Baldry does not refer specifically to either of those exhibits. However, in the index to the affidavit, DRB10 is said to comprise 'copies of a bundle of tax invoices rendered by [Schreuder Partners] to [Professor Schreuder] Nos. 885, 898, 944, 945, 950, 972 and 994'. DRB11 is said to comprise 'copies of a bundle of tax invoices rendered by various entities to [Schreuder Partners]'. It appears that those two exhibits comprise invoices rendered since 10 September 2007.

26 In his affidavit of 4 August 2008, Mr Baldry says that exhibits DRB10 and DRB11 'contain documents to which a claim for legal professional privilege is made by [Professor Schreuder]'.

27 Mr Baldry has sworn another affidavit, dated 26 August 2008, to which is exhibited (in a sealed envelope) as 'DRB13' a copy of a further account which was rendered by Schreuder Partners to Professor Schreuder on 11 August 2008 in the sum of $24,630.47. In the affidavit, Mr Baldry says that 'a claim for legal professional privilege is made by [Professor Schreuder] in relation to such confidential exhibit'.

28 In the course of argument, I was provided by counsel for Mrs Murray with a list of the documents which Professor Schreuder resists producing for inspection on the ground that they are the subject of legal professional privilege. They consist of 83 letters or emails covering the period 12 April 2006 to 23 September 2008 and 16 invoices covering the period 8 October 2007 to 30 September 2008.

29 It was submitted on behalf of Mrs Murray, first, that there had been no proper claim for legal professional privilege in respect of any of the documents. Professor Schreuder had not put on affidavit the basis upon which the privilege was claimed. Secondly, in any event, legal professional privilege could not apply as between a trustee and beneficiary in respect of legal advice received by the trustee in connection with the administration of the estate. It could only arise where a trustee obtains advice for his or her own personal benefit, such as where advice is sought on whether a matter has constituted or would constitute a breach of trust. But in that event, the costs of the advice would not be chargeable to the estate.

30 As the legal costs which are the subject of the invoices have been charged to the estate, it is evident that they relate to work done for the benefit of the trust and therefore no claim for privilege can be made against a beneficiary.

31 Alternatively, it was argued that if legal professional privilege did apply, the conduct of Professor Schreuder in filing the affidavit operated as a waiver of privilege, the obvious intention of the confidential annexures being as a foundation for submissions to be made to the court. There was therefore an implied waiver.

32 Mrs Murray also relied on upon O 26 r 8(2) of the Rules of the Supreme Court 1971 (WA) in seeking an order for inspection of the documents contained in the confidential exhibits to the affidavits of Mr Baldry, that is, DRB10, DRB11 and DRB13. That rule entitles a party to call for the production for inspection of any document referred to in the pleadings or affidavits of another party.

33 Counsel for Professor Schreuder argued that a beneficiary does not have an unconditional right to inspect all trust documents. On the contrary, a beneficiary is only entitled to inspect documents in the nature of financial records which demonstrate how the estate has been administered, how funds have been spent or invested and so forth. A beneficiary has no entitlement to inspect other documents in the possession of the trustee or his or her lawyers.

34 It was submitted that legal professional privilege attached to any legal advice obtained by a trustee for the benefit of the trust and that there was no entitlement in a beneficiary to inspect such legal advice. That is, the entitlement to legal professional privilege in respect of such advice lay in the trustee and was maintainable against the beneficiary. Therefore, Professor Schreuder was entitled to decline to produce the documents sought on the ground that they were the subject of legal professional privilege.

35 I should say that counsel for Professor Schreuder made it clear (ts 44 - 45) that all of the legal advice in question was obtained for the purposes of the administration of the trust, not for the benefit of Professor Schreuder personally, and that the claim for privilege was made simply on the basis that the documents related to legal advice obtained by Professor Schreuder for the benefit of the trust.

36 The present application is in effect for limited discovery, being for an order that Professor Schreuder produce for inspection the invoices he has received from Schreuder Partners, and the legal advice provided to him, in respect of the administration of the estate, and alternatively for an order under O 26 r 8(2) for production of the documents comprising the confidential exhibits described as DRB10, DRB11 and DRB13.

37 As I have said, the specific basis of Professor Schreuder's claim for legal professional privilege was not made on affidavit, nor were the facts relied upon for the claim set out on affidavit. The claim for privilege, which was made in Mr Baldry's affidavits, did not rise any higher than a bald assertion of that right. The affidavits filed on Professor Schreuder's behalf are silent on the specific basis upon which the privilege is claimed and the facts relied upon for the privilege. In argument, while there was initially a suggestion that some of the documents had come into existence in contemplation of litigation by Mrs Murray, ultimately the claim of privilege was put on the basis that any legal advice obtained by Professor Schreuder, as trustee, in relation to the administration of the trust is privileged as against Mrs Murray.

38 In my view, no proper claim of privilege has been made. It is not sufficient merely to assert that a document is the subject of legal professional privilege. Whether or not a document is privileged is a question of law. The party claiming the privilege must state on oath the facts relied upon as giving rise to the privilege: Gardner v Irvin (1878) 4 Ex D 49, 52; City of Baroda (1926) 134 LT 576, 577. The facts must be stated in sufficient detail that the claim for privilege can readily be tested (although not in such detail as would disclose the contents of the document for which the privilege is claimed). There is no affidavit stating the facts relied upon by Professor Schreuder and on that basis alone the claim for legal professional privilege must fail.

39 This is not a case where I consider that it is appropriate to give Professor Schreuder an opportunity to file another affidavit in order to make the claim in a proper form: cf Taylor v Batten (1878) 4 QBD 85, 88; Roberts v Oppenheim (1884) 26 Ch D 724, 733. On the material before me, there is no reason to believe there is any prospect that the claim could be made good.

40 In the first place, the claim for privilege in respect of the invoices is plainly too wide, as I understood counsel for Professor Schreuder to concede in the course of argument.

41 I have earlier mentioned that invoices for the period 29 June 2006 to 29 August 2008 are annexed to Mr Baldry's affidavit of 25 July 2008. No claim for privilege is made in respect of those. It is significant that most - if not all - of the entries in those invoices refer to legal work of a nature which, on any view, would not attract legal professional privilege. It is work of a routine nature in connection with the estate and includes, for example, correspondence with the solicitors for Mrs Murray.

42 There is, as counsel for Mrs Murray submitted, no reason to believe that all of the subsequent accounts - which Professor Schreuder now resists producing - and the whole of the contents of each of those accounts, disclose legal work of a nature to which legal professional privilege applies. Indeed, presumably the accounts include, for instance, charges for the correspondence and other communications with the solicitors for Mrs Murray which have continued during the period for which privilege is claimed.

43 And while I understood counsel for Professor Schreuder to concede that the claim for privilege in respect of the entire contents of all of the accounts went too far, he did not suggest how the claim to privilege might be limited, beyond suggesting that I should review the documents to determine what was privileged. It was an invitation I declined to accept. It is not sufficient simply to deliver a bundle of documents to the court with a general, and on the face of it excessive, claim of privilege and ask the court to sort out what is privileged and what is not.

44 Secondly, in relation to both the invoices and the letters and emails, Professor Schreuder's claim to privilege was based on the premise that Mrs Murray, as a beneficiary, has no entitlement, as of right, to inspect the documents held by Professor Schreuder relating to the administration of the trust. Counsel for Professor Schreuder relied on Avanes v Marshall [2007] NSWSC 191; (2007) 68 NSWLR 595. I do not, however, accept that premise. To the extent that Avanes v Marshall is to be understood to be authority for such a proposition, I do not, with respect, consider that it correctly states the law.

45 It was long regarded as the law that in the case of a non-discretionary trust, where a beneficiary had a vested or contingent interest, the beneficiary had a prima facie right to inspect any property forming part of the trust estate, including trust documents used by the trustee in the administration of the trust: see Re Tillott [1892] 1 Ch 86, 88 - 89.

46 In Fratcher WF, Scott on Trusts (4th ed, vol IIA, 1987), the relevant principle was stated as follows:

The trustee is under a duty to the beneficiaries to give them on their request at reasonable times complete and accurate information as to the administration of the trust. The beneficiaries are entitled to know what the trust property is and how the trustee has dealt with it. They are entitled to examine the trust property and the accounts and vouchers and other documents relating to the trust and its administration. Where a trust is created for several beneficiaries, each of them is entitled to information as to the trust. Where the trust is created in favour of successive beneficiaries, a beneficiary who has a future interest under the trust, as well as a beneficiary who is presently entitled to receive income, is entitled to such information, whether his interest is vested or contingent.

A beneficiary is entitled to inspect opinions of counsel procured by the trustee to guide him in the administration of the trust. (462 - 465)

47 That statement of the law was adopted by Kirby P in Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 422 - 423, and by Gummow J in Re Simersall; Blackwell v Bray [1992] FCA 221; (1992) 35 FCR 584, 587 - 588. It is supported by dicta in O'Rourke v Darbishire [1920] AC 581, 619 and 626. See also, Re Fairbairn [1967] VicRp 72; [1967] VR 633, 635 - 640; Spellson v George (1987) 11 NSWLR 300, 315 - 316.

48 In Re Londonderry's Settlement [1965] Ch 918, the defendant was an object of a power of discretionary appointment under a trust. Being dissatisfied with the amount distributed to her by the trustees, the defendant sought copies of certain documents, including documents which would reveal how the trustees had exercised their discretion. While the Court of Appeal did not dissent from the general proposition that a beneficiary of a trust has a prima facie right to inspect trust documents, their Lordships observed that such a proposition begs the question of what is a 'trust document'. The right of a beneficiary to inspect trust documents did not necessarily extend to all documents in the hands of the trustee. Their Lordships did not attempt a comprehensive definition of a 'trust document', but Harman LJ regarded the principle which protects trustees' deliberations on a discretionary matter from disclosure as overriding the general rule. Harman LJ concluded that such documents 'are not trust documents in the proper sense at all' (933). Danckwerts LJ and Salmon LJ reached a similar conclusion in separate reasons.

49 The New South Wales Court of Appeal had occasion to consider the question in Hartigan v Rydge. In that case, a discretionary trust had been established for the purpose of carrying out the wishes of its instigator (not the settlor), who provided the trustees with a memorandum indicating his wishes as to what the trustees should do. An object of the trust, who had a contingent or possible interest in the trust funds, sought to inspect the memorandum.

50 Mahoney JA considered that there were limits to the right of such a beneficiary to inspect documents of the trust (431 - 434). His Honour considered that the right of a beneficiary to inspect documents is limited to documents which are the property of the trust and does not extend to documents as to which the beneficiary, as beneficiary, has no proprietary interest. A document (such as notes made by the trustee of discussions with other beneficiaries or possible beneficiaries) which is prepared by the trustee, not for the purposes of the beneficiaries but for the trustee's own purposes, is not the property of the trust. Nor will a beneficiary be entitled to see a document which has been given to the trustee on the basis that it is confidential, such as a document relating to the personal affairs of a particular beneficiary or correspondence to and from other beneficiaries. And a document need not be disclosed if it will reveal the reasons why a discretionary power was exercised.

51 Sheller JA considered (444) that, in determining what documents a beneficiary was entitled to inspect, an inquiry as whether or not the beneficiary has what can be described as a proprietary interest in the document was not a helpful one. His Honour regarded the determinant in the decision in Re Londonderry's Settlement as being the preservation of the trustee's right not to disclose the reasons for exercising a discretion. He concluded that that case was authority for the proposition that beneficiaries have no right to see documents private to the trustees which may evidence the reasons why the trustees have made their decisions. Sheller JA considered (445) that the class of documents to which beneficiaries are denied access should not be extended beyond those. His Honour agreed with the observations of Harman LJ in Re Londonderry's Settlement (932) that the trustees were bound to disclose the trust accounts and counsel's advice to the trustees as to their rights and duties, although that material may have influenced the trustees, because it does not reveal motives, reasons or the process of reasoning. His Honour also concluded that a settlor (or in that case, the instigator) of the trust could effectively impose conditions of confidentiality on trustees in respect of information.

52 Kirby P, dissenting, held that the applicant was entitled to inspect the memorandum. His Honour took a wider view of a beneficiary's right to inspect documents of the trust, concluding (422) that the right extended to trust property and the accounts and vouchers and other documents relating to the trust and its administration. As I have mentioned, his Honour adopted the statement of principle in Scott on Trusts to which I referred earlier.

53 Subsequently, the Privy Council delivered its advice in Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709, on an appeal from the Isle of Man. In that case, the appellant sought fuller disclosure of trust accounts and information about trust assets in respect of which he claimed discretionary rights or expectations. Their Lordships made an extensive review of the authorities, including Hartigan v Rydge, in respect of which they expressed their general agreement with the judgments of Kirby P and Sheller JA. Lord Walker of Gestingthorpe, delivering the advice of their Lordships, said:

Their Lordships have already indicated their view that a beneficiary's right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the court's inherent jurisdiction to supervise, and where appropriate intervene in, the administration of trusts. There is therefore in their Lordships' view no reason to draw any bright dividing line either between transmissible and non-transmissible (that is, discretionary) interests, or between the rights of an object of a discretionary trust and those of the object of a mere power (of a fiduciary character). The differences in this context between trusts and powers are (as Lord Wilberforce demonstrated in In re Baden [1970] UKHL 1; [1971] AC 424, 448 - 449) a good deal less significant than the similarities. The tide of Commonwealth authority, although not entirely uniform, appears to be flowing in that direction.

However, the recent cases also confirm (as had been stated as long ago as In re Cowin 33 Ch D 179 in 1886) that no beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief. (734 - 735)

54 In Avanes v Marshall (599), Gzell J, after considering a number of authorities, concluded that the approach in Schmidt should be adopted by Australian courts. His Honour considered that the decision should not be regarded as abrogating the trustee's obligation to grant a beneficiary access to trust accounts. But that when it comes to inspection of other documents there should be no longer be an entitlement as of right to disclosure of any document. It should be for the court to determine to what extent information should be disclosed.

55 Some months later, in McDonald v Ellis [2007] NSWSC 1068, Bryson AJ took a contrary view ([52]) and declined to follow Avanes v Marshall. His Honour considered that the approach of Schmidt might be appropriate where the interest of the beneficiary is no higher than those of the potential objects of a discretionary trust - although New South Wales authority was otherwise - but where the right was already vested in interest it would be an unwarranted departure from established authority. Bryson AJ considered that neither earlier judicial decisions nor policy considerations supported the law as expressed in Schmidt. It was a departure from a well-established and relatively concrete rule, and, by introducing discretion, would lead to 'no certainty on so elementary a matter as to whether or not a beneficial owner is entitled to information about property in which the beneficial owner has an equitable interest' [51].

56 Bryson AJ held ([46]) that the law in New South Wales was to be found in the judgments of the majority in Hartigan v Rydge; that is, that the starting point is that a beneficiary is entitled to see trust documents and to have information about trust property. Enforcement of the beneficiary's entitlement will be withheld only where it is necessary because of some competing entitlement of the sort referred to in Re Londonderry's Settlement.

57 I, too, would respectfully decline to follow Avanes v Marshall insofar as it might be thought to apply to a non-discretionary trust, where the beneficiaries have a vested or contingent interest. Schmidt was concerned with the right of inspection of an object of a discretionary power and, for the reasons expressed by Bryson AJ in McDonald v Ellis, I would not apply what was said in Schmidt to a non-discretionary trust. It is unnecessary for present purposes to consider the position in relation to discretionary trusts. Nor do I think it is necessary to enter into the debate about whether a beneficiary's right of inspection arises from a proprietary interest of the beneficiary in the trust documents or from the general doctrine that trustees are fiduciaries with a high obligation to account and to provide information to the beneficiaries.

58 In the case of a non-discretionary trust, I take the law to be that a beneficiary has a right - subject to exceptions - to inspect trust documents used by the trustee in the administration of the trust. An exception will arise in the case of documents which are private to the trustee that may evidence the reasons that the trustee has made his or her decision or exercised a discretion, in circumstances where disclosure is not required and has not been made by the trustee: Hartigan v Rydge (434, 442, 445); or where the document is the subject of a duty of confidence owed to a third party: see, for example, Hartigan v Rydge (433, 446); Schmidt (734); Morris v Morris (1993) 9 WAR 150, 154; or where disclosure is not in the interests of the beneficiaries as a whole: Rouse v IOOF Australia Trustees Ltd [1999] SASC 181; (1999) 73 SASR 484, 499; or where the terms of the trust deed give rise to an express or implied limit on a beneficiary's right of access to trust documents: Hartigan v Rydge (446).

59 In the present case, the trust is not a discretionary trust. During Mrs Murray's lifetime, Professor Schreuder, as trustee, is simply to invest the funds in the Hackett Foundation and to pay the income to Mrs Murray. The trust involves no exercise of discretion which could found an exception to Mrs Murray's right to inspect trust documents. Nor is there anything which might suggest a duty of confidence owed by Professor Schreuder to a third party or arising from the terms of the trust. Nothing has been put forward which could constitute a competing consideration which might entitle Professor Schreuder to decline to permit Mrs Murray access to the documents relating to the administration of the trust. In short, nothing has been advanced which might displace Mrs Murray's prima facie right as beneficiary to inspect the trust documents.

60 In the circumstances, I am unable to see any basis upon which Professor Schreuder is entitled to maintain, as against Mrs Murray, a claim of legal professional privilege in respect of legal advice obtained by him in respect of the administration of the trust. Mrs Murray is entitled, as a beneficiary, to inspect such advice.

61 It follows, in my view, that the claim by Professor Schreuder to legal professional privilege must fail on that further ground.

62 In light of the conclusions I have reached, it is unnecessary to consider the application so far as it is based on O 26 r 8(2), but I will nevertheless say something about it.

63 A party who refers to a document in an affidavit ordinarily does so by choice, usually because the document is of probative value to that party. The purpose of O 26 r 8(2) is to put the party seeking production of the document for inspection in the same position as they would have been in if the document referred to had been set out in full in the affidavit: Rafidain Bank v Agom Universal Sugar Trading Co Ltd [1987] 3 All ER 859, 862. The document must be produced unless good cause is shown why it should not be: Quilter v Heatly (1883) 23 Ch D 42, 51; Rafidain Bank.

64 The documents contained in the exhibits concerned are plainly relevant to an issue in the proceedings, namely whether the legal costs incurred by Professor Schreuder were reasonably and properly incurred.

65 The circumstances in the present case, however, are somewhat unusual. As I have mentioned, while exhibits DRB10 and DRB11 are exhibited to Mr Baldry's affidavit of 25 July 2008, Mr Baldry does not refer to those exhibits in the affidavit. He does, however, say in his affidavit of 4 August 2008 that those exhibits contain documents for which a claim for legal professional privilege is made. No point was sought to be taken by counsel for Professor Schreuder that O 26 r 8(2) did not apply to the exhibits concerned and I consider that, apart from anything else, in relation to exhibits DRB10 and DRB11 that rule is applicable by reason of the reference to the exhibits in Mr Baldry's affidavit of 4 August 2008.

66 In his affidavit of 26 August 2008, Mr Baldry refers specifically to exhibit DRB13 as an invoice rendered by Schreuder Partners to Professor Schreuder 'relative to this matter' but says that privilege is claimed for it.

67 It is not, of course, an answer to an application by a beneficiary under O 26 r 8(2) in respect of a document referred to in an affidavit filed on behalf of the trustee, or to discovery of documents in the course of litigation between the trustee and the beneficiary, to say that the beneficiary is not entitled as of right to inspect the document. The right to inspection under O 26 r 8(2), or to discovery, does not depend upon any entitlement of the beneficiary to inspect the document as of right by virtue of their capacity as a beneficiary. Indeed, ordinarily the right under O 26 r 8(2), or to discovery, will be sought to be exercised in circumstances where there is no other right of inspection.

68 In this case, I am not satisfied that Professor Schreuder has shown any reason why an order for production should not be made. The claim of legal professional privilege has not been made out. No other ground has been advanced. I would therefore order that the annexures referred to as DRB10, DRB11 and DRB13 be produced for inspection.

69 In relation to this ground of the application, the documents containing the legal advice obtained by Professor Schreuder stand in a slightly different position because they are not annexed or referred to in the affidavits filed on Professor Schreuder's behalf. While I understand they are referred to in the invoices which are contained in annexures DRB10, DRB11 and DRB13, I do not consider that is sufficient for the purposes of an application under O 26 r 8(2). A reference to a document in an exhibit does not give rise to an entitlement to its production under O 26 r 8(2): ACN 007 528 207 Pty Ltd (in liq) v Bird Cameron [2002] SASC 144, [7]; Century Drilling Ltd v Gerling Australia Insurance Co Pty Ltd [2004] QSC 120, [13]. Accordingly, I would not have acceded to the application in relation to the documents containing legal advice so far as it was based on O 26 r 8(2).

70 I would order that, within such time as is specified, Professor Schreuder file and serve an affidavit containing a list of all the legal advice he has received, and the invoices he has received from his legal advisors, in respect of the administration of the estate and, within such further time as is specified, that he produce the documents referred to on the list for inspection by Mrs Murray and her legal advisors. I would hear the parties on the time within which each of those steps is to be taken.

(Family and Dependants Provision) Act 1972

ACN 007 528 207 Pty Ltd (in liq) v Bird Cameron

At a glance

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Before

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Judgment (104 paragraphs)

MURRAY -v- SCHREUDER [2009] WASC 51 (10 March 2009)

Parties

Legislation Cited (1)

Cases Cited (6)