Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

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

Trusts - Proceedings by beneficiary to remove trustee - Beneficiary with vested interest in trust fund - Interlocutory application by beneficiary for production of documents for inspection - Documents relevant to the issues and final relief in the proceedings - Trustee claimed legal professional privilege in respect of documents - Whether trustee and beneficiary entitled to a joint privilege - Trustee ordered to produce documents for inspection

Avanes v Marshall [2007] NSWSC 191; (2007) 68 NSWLR 595

Breen v Williams [1996] HCA 57; (1996) 186 CLR 71

Camosun College Faculty Association v British Columbia (College Pension Board of Trustees) (2004) BCSC 941

Cooke v Canada Trust Co (2005) BCCA 112

Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543

Esso Australia Resources Limited v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49

Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601

Floyd v Floyd 615 SE 2d 465 (SC App 2005)

Grant v Downs [1976] HCA 63; (1976) 135 CLR 674

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

McDonald v Ellis [2007] NSWSC 1068

Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151; (2004) 13 ANZ Ins Cas 61-612

Murray v Schreuder [2009] WASC 51

O'Rourke v Darbishire [1920] AC 581

Pulitano v Ginbey [1999] WASC 5

Re Ballard Estate (1994) 20 OR (3d) 350

Re Cowin (1886) 33 Ch D 179

Re Doran Constructions [2002] NSWSC 215; (2002) 194 ALR 101

Re Grand Jury Proceedings Grand Jury No 97-11-8 [1998] USCA9 1951; 162 F 3d 554 (9th Cir 1998)

Re Mason; Mason v Cattley (1883) 22 Ch D 609

Re Postlethwaite (1887) 35 Ch D 722

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

Riggs National Bank of Washington DC v Zimmer 355 A 2d 709 (Del Ch 1976)

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

Samson Indian Nation and Band v Canada [1995] 2 FC 762

Schaverien v Jones [2007] NSWSC 1429

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

Talbot v Marshfield (1865) 2 Dr & Sm 549; (1865) 62 ER 728

Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 967

Wachtel v Health Net, Inc [2007] USCA3 59; 482 F 3d 225 (3rd Cir 2007)

Wells Fargo Bank v Superior Court 990 P 2d 591 (Cal 2000)

Yunghanns v Elfic Pty Ltd (No 2) [2000] VSC 113; (2000) 1 VR 92

2 PULLIN JA: The respondent is a beneficiary of a testamentary trust. She commenced proceedings seeking an order of the court that the appellant be removed as trustee of the trust because of alleged breaches of trust. During the course of the proceedings, an issue arose about whether the appellant was obliged to produce for inspection certain letters, emails and/or invoices for which he claimed legal professional privilege.

3 In Murray v Schreuder [2009] WASC 51, Newnes J (as he then was) held that the documents were relevant to an issue in the proceedings, namely whether legal costs incurred by the appellant were reasonably and properly incurred [64]. That is not challenged on this appeal. The documents and the invoices all related to legal advice obtained for the purposes of the administration of the trust and not for the benefit of the appellant personally (Murray v Schreuder [35]). Newnes J held that no proper claim for privilege had been made and that it was not sufficient merely to assert that a document was the subject of legal professional privilege [38]. Secondly, his Honour observed that the appellant's claim for legal professional privilege was based on the 'premise that [the respondent], as a beneficiary, has no entitlement, as of right, to inspect the documents held by [the appellant] relating to the administration of the trust' [44]. Newnes J noted that in this respect counsel for the trustee relied on Avanes v Marshall [2007] NSWSC 191; (2007) 68 NSWLR 595. Newnes J observed that it had long been regarded as law that in the case of nondiscretionary 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 the trust documents used by the trustee in the administration of the trust [45]. His Honour observed at [54] that in Avanes v Marshall Gzell J concluded that the approach of the Privy Council in Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709 should be adopted by Australian courts. The Privy Council said in that case that:

[N]o 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 (734).

Newnes J referred to the reasons of Bryson AJ in McDonald v Ellis [2007] NSWSC 1068 who took a contrary view and declined to follow Avanes v Marshall [55]. Newnes J said that he too would decline to follow Avanes v Marshall or Schmidt insofar as they might be thought to apply to a nondiscretionary trust where the beneficiaries had a vested or contingent interest. Newnes J pointed out that the trust in this case was

not a discretionary trust. In the circumstances, his Honour was unable to see any basis upon which the appellant was entitled to maintain a claim of legal professional privilege in respect of legal advice obtained in relation to the administration of the trust against the respondent. The conclusion was that the respondent was entitled as a beneficiary to inspect such advice [60]. Newnes J also made some observations about O 26 r 8 to which I do not need to refer. The result was that the appellant was ordered to file and serve an affidavit containing a list of all the legal advice he had received and the invoices he had received from his legal advisors in respect of the administration of the estate, and to produce the documents referred to on the list.

4 The appellant appeals on three grounds, they being that:

(1) his Honour erred in law by determining that no claim for privilege had been made out due to lack of evidence;

(2) his Honour erred in law in his determination that the respondent had an entitlement to inspect the documents for which privilege was claimed; and

(3) his Honour erred in his determination of the significance of O 26 r 8.

5 If ground 2 fails, then grounds 1 and 3 fall away.

6 In the written submissions to this court, the appellant again relied upon Avanes v Marshall and in effect, submitted that if the reasoning in that case had been applied, the respondent's application should have been dismissed.

7 Avanes v Marshall was a case in which the plaintiffs sued for various breaches of trust and in the course of those proceedings, discovery was given. The first and second defendants, who were the trustees of a testamentary settlement, claimed client legal privilege with respect to certain documents. Gzell J reviewed various authorities and considered Schmidt's case in some detail and then said:

The consequence is that according to Schmidt, there is no longer a general rule that a beneficiary has a right to inspect trust documents that is subject to exceptions, notably concerning the reasons for the exercise of the trustee's discretion and confidentiality in third parties. In each case it is a matter for the Court to exercise its discretion by balancing competing interests. Lord Walker suggested (at 730) that in Re Londonderry's Settlement and more recent cases, including the Australian decisions of Spellson, Hartigan Nominees and Rouse, the courts have begun to work out in detail the way in which the Court should exercise its discretion [11].

...

In my view, the approach in Schmidt should be adopted by Australian courts. The decision should not be regarded as abrogating the trustee's duty to keep accounts and to be ready to have them passed, nor the trustee's obligation to grant a beneficiary access to trust accounts. But when it comes to inspection of other documents there should 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. I propose to adopt that approach in determining this application [15].

8 Gzell J then perused the documents and reached a decision about the individual documents in question.

9 It may be assumed that, in both Avanes and this case, the documents detailing communications between the trustee and legal advisors were documents with respect to which the trustee was entitled to maintain the privilege 'against the rest of the world' (Phipson on Evidence, 14th ed, 20 - 29). However, the beneficiary is not a person who falls within the category of persons against whom privilege may be claimed. In Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 608, Sheller JA, Waddell AJA agreeing said:

Two or more persons may join in communicating with a legal adviser for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege. So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication. Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication. But the parties together are entitled to maintain the privilege 'against the rest of the world': Phipson, par 20-28 and par 20-29.

This part of Farrow has subsequently been either adopted as correct or referred to with approval in Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151; (2004) 13 ANZ Ins Cas 61-612 [41] (Mason P, Handley JA and Brownie AJA agreeing); Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 967 [12] (Ryan JA); Re Doran Constructions [2002] NSWSC 215; (2002) 194 ALR 101 [7] (Campbell J); Yunghanns v Elfic Pty Ltd (No 2) [2000] VSC 113; (2000) 1 VR 92 [22], [30], [34] - [35] (Warren J) and Pulitano v Ginbey [1999] WASC 5 [22] (Sanderson M).

10 A trustee is the trustee of property for the benefit of the beneficiaries of the trust. The trustee and beneficiaries have a correlative duty and interest in the proper administration of the trust. The duty of the trustee includes a duty to properly perform the trust by adhering to and carrying out the terms of the trust. The beneficiaries have an interest and, indeed, a right to compel proper administration of the trust. The trustee and the beneficiaries are in a 'formal legal relationship' and if the trustee obtains legal advice concerning the proper administration of the trust, then any legal professional privilege attaching to the advice obtained is the joint privilege of both the trustee and the beneficiaries. As such, the trustee and the beneficiaries, being entitled to joint privilege, may not maintain the privilege against each other.

11 The appellant's reliance on Schmidt, as approved in Avanes v Marshall, is, with respect, misplaced. The issue dealt with in Schmidt was the issue about the right of a beneficiary of a discretionary trust to inspect trust documents. Schmidt said nothing about whether a trustee could refuse to disclose to a beneficiary documents containing legal advice about due administration of the trust on the ground of legal professional privilege. In Avanes, legal professional privilege had been claimed by the trustee, but the reasons of Gzell J did not examine the basis for that claim or consider whether or not the trustee and the beneficiary had joint privilege. Gzell J explained the issue he was examining in his reasons where he said:

In the course of discovery, the first and second defendant trustees of a testamentary settlement claimed client legal privilege with respect to certain documents numbered 1 to 3 and 5 to 10.

The plaintiff challenged the claim on the principal basis that the documents were trust documents in which the plaintiff had a proprietary interest. Re Londonderry's Settlement [1965] 1 Ch 918 was relied upon. Aspects of that case were over-ruled by the Privy Council in Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709 and I invited further submissions on the impact of that decision [1] - [2].

Having reached the conclusion that Schmidt should be followed, Gzell J then examined the documents in question and decided whether or not they should be disclosed. I note that at [20] there was a concession by the

trustee that a legal opinion of counsel apparently concerning the due administration of the trust was a trust document, and this was made available for inspection.

12 In this case, ground 2 of the appeal raises an issue about whether legal professional privilege may be maintained, and not whether a beneficiary may inspect trust documents because of a proprietary interest in them. That being so, it is not necessary to decide whether I should decline to follow Avanes for the reasons given by Bryson AJ in McDonald v Ellis.

13 Ground 2 therefore fails, and therefore it is unnecessary to consider grounds 1 and 3. It is also unnecessary to deal with the notice of contention. The appeal should be dismissed.

14 BUSS JA: This is an application for leave to appeal against interlocutory orders made by Newnes J in pending Supreme Court proceedings CIV 1805 of 2008. His Honour ordered, relevantly, that the appellant (the defendant in the proceedings) produce certain documents for inspection by the respondent, Mrs Murray (the plaintiff in the proceedings). The appellant had objected to producing the documents for inspection on the ground that he was entitled to legal professional privilege in respect of them.

15 Mrs Murray is a beneficiary under the will of her late husband, John Clauscen Murray, who died on 16 November 2003. The appellant is the executor and trustee of Mr Murray's estate.

16 By his will, Mr Murray appointed 'the Vice-Chancellor of the University of Western Australia' as his executor and trustee. At the date of Mr Murray's death, the appellant was the Vice-Chancellor of the University. The will made various bequests and then provided for the residuary estate to be disposed of, relevantly, 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.

17 On 6 April 2006, a grant of probate was made to the appellant. At that time, Cahill Billington, solicitors of Perth, acted for him.

18 On 16 May 2006, Mrs Murray filed an application in the Supreme Court under s 6(1) of the Inheritance (Family and Dependants Provision) Act 1972 (WA) (Inheritance Act). In the application Mrs Murray claimed that, by his will, Mr Murray had failed to make adequate provision for her proper maintenance and support.

19 On or about 29 June 2006, the appellant terminated Cahill Billington's retainer and appointed Roach & Halligan, solicitors of Sydney, to represent him. It appears that Roach & Halligan subsequently changed its name to Schreuder Partners. The appellant's son is the principal of the firm.

20 On 15 September 2006, Mrs Murray's application under the Inheritance Act was settled at a mediation conference. The terms of the settlement between the appellant, Mrs Murray and the University were, relevantly, as follows:

1.2 The University and [the appellant] 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 [Mrs Murray's] lifetime, with the first quarter commencing on 16 September 2006.

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

21 Pursuant to the settlement agreement, Mrs Murray became entitled to a life interest in the whole of the residuary estate, instead of a life interest in the sum of $200,000. The residuary estate was to be invested in the Hackett Foundation and the income derived from its investment was to be paid to Mrs Murray, in quarterly instalments, during her lifetime.

22 On 27 November 2006, Schreuder Partners received $414,059.52 from the National Australia Bank, being money held in Mr Murray's accounts with the bank. This amount constituted the residuary estate. Schreuder Partners deposited the money in its trust account. Certain payments in connection with Mr Murray's estate were made, but otherwise the $414,059.52 remained in the trust account until October 2007. Money held in Schreuder Partners' trust account did not bear interest.

23 The appellant has not invested the residuary estate in the Hackett Foundation. The settlement agreement requires that interest be paid to Mrs Murray on a quarterly basis, but the Hackett Foundation pays interest only on an annual basis. As a result, if the funds were to be invested in the Hackett Foundation, it would not be possible for the income derived from the investment to be paid to Mrs Murray each quarter.

24 By the end of September 2008, the appellant as executor and trustee of Mr Murray's estate had incurred legal costs in excess of $112,000. Of this amount about $97,000 were costs charged by Schreuder Partners and about $15,000 were counsel fees. The $112,000 does not include the legal costs incurred by the appellant in connection with Mrs Murray's application under the Inheritance Act. These costs were paid by the University.

The pending proceedings in the Supreme Court

25 On 4 July 2008, Mrs Murray commenced the pending proceedings by filing an originating summons in the Supreme Court. In the summons, Mrs Murray claimed, relevantly:

1. Pursuant to Section 43(1)(b) of the Administration Act 1903 that the [appellant] file an inventory of the estate of the deceased and pass his accounts relating thereto within such time and such manner as the Court may order.
2. That there is a proper cause for an order removing the [appellant] as Executor of the Will of John Clauscen Murray, deceased.

26 The originating summons is supported by an affidavit sworn 3 July 2008 by Mrs Murray and filed on 4 July 2008. In the affidavit, Mrs Murray deposes, relevantly:

(a) On 29 August 2007, Schreuder Partners deposited the sum of $2,294.04 into her bank account (par 9(a)).

(b) By letter dated 5 May 2008, Schreuder Partners sent her a cheque for $8,718.86, which she has not banked (par 9(b)).

(c) Otherwise, she has not received any payments in respect of income on the fund which constitutes the residuary estate (par 9).

27 Mrs Murray annexed to her affidavit numerous items of correspondence including correspondence between the appellant's solicitors (Schreuder Partners) and her solicitor (Jonathan Eastoe). I will recount relevant aspects of the correspondence.

28 By letter dated 25 July 2007, David Baldry (a solicitor and an associate at Schreuder Partners) sent to, amongst others, Mr Eastoe, a trust account reconciliation in respect of the relevant funds held in Schreuder Partners' trust account.

29 By letter dated 3 October 2007, Mr Eastoe requested Schreuder Partners to send him:

1. A copy of the Statement of Assets & Liabilities filed with the application for probate. (In fact it would be helpful if I could be given a copy of all documents filed in connection with the probate application.)
2. A statement showing all receipts and disbursements concerning the funds of the Estate from the date of death to the present time.
3. Insofar as disbursements have been made in respect of your firm's legal fees, itemised accounts in respect of those charges.

30 By letter dated 15 October 2007, Schreuder Partners sent Mr Eastoe various documents including tax invoices in respect of legal fees for work undertaken in connection with Mr Murray's estate. They asserted that the tax invoices 'fully [itemise] the work that we have performed'.

31 By letter dated 26 March 2008, Mr Eastoe complained to Schreuder Partners about the residuary estate not having been invested in the Hackett Foundation, the alleged failure of Schreuder Partners to justify the amount of their costs, and the regular deduction of these costs from the residuary estate on a monthly basis without reference to the beneficiaries (that is, Mrs Murray and the University). The letter concluded that 'if a prompt resolution [of the matters complained about in the letter] cannot be reached', Mr Eastoe had instructions to commence proceedings for the appellant's removal as executor and trustee 'together with appropriate orders concerning taxation of Schreuder Partners' costs'.

32 By letter dated 19 June 2008, from Mr Eastoe to Schreuder Partners, Mr Eastoe claimed that since the making of the settlement agreement:

1. [The appellant] has failed to invest the Residuary Estate in the Hackett Foundation as was agreed.
2. For reasons which are entirely unclear [the appellant] failed even to invest the Residuary Estate in an interest bearing account and left the Residuary Estate in an account which did not bear any interest for a period of approximately 12 months.
3. [The appellant] has permitted your firm to incur and deduct very extensive legal fees which have significantly diminished the Residuary Estate, in particular which have had the effect of reducing the Residuary Estate to well below the sum that it was represented to Mrs Murray would be the minimum sum in the Residuary Estate.

Mr Eastoe proposed that the appellant retire as executor and trustee in favour of the current Vice-Chancellor of the University, and that the appellant file an inventory of the estate and pass his accounts. He also noted that Mrs Murray wished to be heard concerning the passing of the accounts and that she would contend the fees charged by Schreuder Partners to the estate were not properly chargeable and should not be allowed.

33 By letter dated 30 June 2008, Schreuder Partners responded to Mr Eastoe. They said the appellant was unwilling to retire as executor and trustee unless the beneficiaries of the estate provided him with 'the usual releases and indemnities'. As to the passing of accounts and the legal fees charged to the estate, Schreuder Partners said:

Our client believes that he has already provided the estate beneficiaries with a full accounting and that the details of work performed by us were fully itemised in our tax invoices, copies of which were also provided to you and to Cahill Billington [the University's solicitors]. We therefore request that you let us know which costs rendered by us your client considers to be unreasonable and upon what basis.

Nevertheless, as you have now indicated that your client wants our client to submit formal accounts we will arrange for him to do so.

The legal costs charged by our firm which have continued to be incurred by the Estate after the initial Deed of Release [that is, the settlement agreement] was entered into have essentially arisen because of the need to respond to what we consider to be your client's unfounded assertions in relation to our client's and our firm's conduct and because the beneficiaries have repeatedly failed to provide our client instructions sought by him in relation to the long term investment of the Estate assets after it became evident that it was not possible to invest the monies with the Hackett Foundation in the manner provided in the initial Deed of Release.

34 The appellant opposed the relief sought by Mrs Murray in her originating summons. He filed three affidavits sworn by Mr Baldry of Schreuder Partners. The first affidavit was sworn 25 July 2008 and filed on 5 August 2008. The second was sworn 4 August 2008 and filed on 5 August 2008. The first and second affidavits were filed contemporaneously. The third was sworn 26 August 2008 and filed on 4 September 2008.

35 In his affidavit sworn 25 July 2008 (filed 5 August 2008), Mr Baldry refers to and annexes numerous documents. He describes and, to some extent, summarises them. The documents he annexes are marked 'DRB-1' to 'DRB-9'. Each annexure comprises several and, in some cases, many documents. In the index to the affidavit, reference is made to 'Confidential Exhibit DRB-10' and 'Confidential Exhibit DRB-11', as follows:

Confidential Exhibit 'DRB-10' consisting of copies of a bundle of tax invoices rendered by [Schreuder Partners] to the defendant Nos. 885, 898, 944, 945, 950, 972 and 994.

Confidential Exhibit 'DRB-11' consisting of copies of a bundle of tax invoices rendered by various entities to [Schreuder Partners]

The 'Confidential Exhibits DRB-10 and DRB-11' were not otherwise referred to in the affidavit. Also, they were not annexed to the affidavit. Rather, they were lodged separately with the Supreme Court Central Office under cover of a letter dated 4 August 2008 from Marks & Sands, the appellant's Perth solicitors. The so-called confidential exhibits were not served on Mrs Murray's solicitors.

36 In his affidavit sworn 4 August 2008 (filed 5 August 2008), Mr Baldry refers to 'Confidential Exhibits DRB-10 and DRB-11' as follows:

1. The confidential exhibits marked 'DRB-10' and 'DRB-11' to My First Affidavit contain documents to which a claim for legal professional privilege is made by the [appellant].

37 In his affidavit sworn 26 August 2008 (filed 4 September 2008), Mr Baldry refers to a tax invoice number 1022 dated 11 August 2008 from Schreuder Partners to Mrs Murray. This tax invoice is 'Confidential Exhibit DRB-13'. The document was not annexed to the affidavit. It was lodged separately at the Supreme Court Central Office and a copy was not served on Mrs Murray's solicitors. The affidavit reads, relevantly:

1. On 11 August 2008 Schreuder Partners rendered another tax invoice to the [appellant] relative to this matter which totaled [sic] $24,630.47.
2. A copy of that tax invoice is confidentially exhibited to this affidavit and marked 'DRB-13'. A claim for legal professional privilege is made by the [appellant] in relation to such confidential exhibit.
3. The total amount of costs and disbursements rendered in tax invoices by Schreuder Partners to the [appellant] in this matter to date, inclusive of the aforesaid tax invoice rendered on 11 August 2008, is $96,506.44.
4. As at the date of swearing this affidavit the aforesaid tax invoice has not been paid and a further $108.31 remains owing in respect of a tax invoice previously rendered by Schreuder Partners to the [appellant] making the current unpaid total, in relation to all of such tax invoices, the sum of $24,738.78.
5. The amount of $96,506.44 does not include payments made by the [appellant] to third parties directly, using Estate monies, in payment of tax invoices rendered by such third parties in respect of work performed by them in respect of this matter ('Direct Third Party Payments').
6. The third party services which related to the Direct Third Party payments were not included as disbursements in any of the tax invoices rendered by Schreuder Partners in respect of this matter but I believe that all of the Direct Third Party Payments have been fully accounted for and particularized in My First Affidavit and in My Second Affidavit and the exhibits thereto.

38 The affidavits sworn by Mr Baldry were not filed pursuant to an order of the court. They were filed voluntarily in opposition to the final relief claimed in the originating summons.

39 On 18 September 2008, the parties appeared before the learned judge for, relevantly, directions on the originating summons. Mrs Murray's solicitors had filed and served a minute of proposed orders dated 3 September 2008.

40 Paragraph 2 of the minute sought an order that the appellant file and serve an affidavit annexing copies of:

(a) all written legal advice received by the appellant concerning the administration of Mr Murray's estate; and

(b) copies of all accounts for legal services rendered to the appellant concerning the administration of the estate.

41 Alternatively, Mrs Murray sought an order under O 26 r 8(2) of the Rules of the Supreme Court 1971 (WA) for production of the documents comprising 'Confidential Exhibits DRB-10, DRB-11 and DRB-13'. Order 26 r 8(2) provides:

Any party to a cause or matter shall be entitled at any time to serve a notice on any other party in whose pleadings or affidavits reference is made to any document requiring him to produce that document for inspection by the party giving the notice.

42 Mrs Murray's solicitors had not previously made a request for discovery of the documents in question or obtained an order for discovery from the court.

43 The appellant opposed the orders sought. The learned judge directed that the issues be argued at a special appointment.

44 Mrs Murray's written submissions for the special appointment asserted that the basis on which the originating summons had been filed was as follows:

(a) The [appellant] failed to invest the residuary estate in the Hackett Foundation in accordance with the agreement made in settlement of the Inheritance Act proceedings on 15 September 2006 or at all.

(b) The [appellant] failed for a period of approximately one year (24 November 2006 to 16 October 2007) even to invest the residuary estate in an interest bearing account.

(c) The residuary estate itself has been diminished by the extensive legal fees charged to it by the [appellant]. The quantum of the legal fees to date, assessed against the nature and extent of the work that has been done in respect of the administration of the estate, absent explanation, suggests that the extent of the work done and/or the cost of that work, was not reasonable and accordingly the [appellant] ought not to have authorised payment for that work from the estate.

45 After hearing argument at the special appointment, the learned judge reserved his decision. On 10 March 2009 he published reasons for decision, and on 3 April 2009 he made the orders which are challenged in the appellant's application for leave to appeal.

The relevant orders made by the learned judge

46 The relevant orders made by the learned judge on 3 April 2009 were these:

1. The [appellant] do by not later than 14 April 2009 produce for inspection by [Mrs Murray] and her legal advisors at the offices of Marks & Sands a copy of exhibits DRB 10 and DRB 11 to the affidavit of Mr David Baldry sworn 25 July 2008 and copy of exhibit DRB 13 to the affidavit of Mr David Baldry sworn 26 August 2008.
2. By not later than 14 April 2009 the [appellant] 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 of the late John Clauscen Murray and by not later than 18 April 2009 the [appellant] produce the documents referred to on the list for inspection by [Mrs Murray] and her legal advisors at the office of Marks & Sands.

47 On 8 April 2009, I granted a stay of orders 1 and 2, to the extent they related to inspection, until the determination of this appeal or further order. Also, I ordered that the appellant's application for leave to appeal be heard together with the appeal.

Concessions made by the appellant at the primary hearing

48 At the hearing before the learned judge, counsel for the appellant made some concessions concerning the documents in respect of which legal professional privilege was claimed.

49 It was conceded that all of the legal advice embodied in the documents was obtained for the purposes of the administration of Mr Murray's estate, and not for the benefit of the appellant personally [35]. Also, although it was initially suggested in argument 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 the appellant, as trustee, in relation to the administration of the estate, was privileged as against Mrs Murray [37].

50 The learned judge said the application before him was 'in effect' an application for limited discovery [36].

51 The learned judge held that no proper claim of legal professional privilege had been made. His Honour said:

[T]he specific basis of [the appellant'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 [the appellant'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 [the appellant], as trustee, in relation to the administration of the trust is privileged as against Mrs Murray.

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 [the appellant] and on that basis alone the claim for legal professional privilege must fail [37] - [38].

He then decided it was inappropriate to give the appellant an opportunity to file another affidavit making a proper claim of legal professional privilege. On the material before him, there was no reasonable prospect that the claim could be made out [39].

52 Counsel for the appellant accepted in argument before the learned judge that, in any event, the claim of legal professional privilege in respect of the entire contents of all of the fee notes was excessive. Counsel did not, however, suggest how the claim might be confined within proper limits, beyond suggesting that his Honour should review all of the documents to determine what was privileged. His Honour refused to proceed on this basis [43].

53 The learned judge noted that the appellant's claim of legal professional privilege was based on his counsel's contention that Mrs Murray, as a beneficiary, had no entitlement, as of right, to inspect documents held by the appellant in relation to the administration of the trusts created by the will, as varied by the settlement agreement [44]. Counsel cited Avanes v Marshall [2007] NSWSC 191; (2007) 68 NSWLR 595. His Honour rejected counsel's contention. After referring to numerous authorities, including O'Rourke v Darbishire [1920] AC 581, Re Londonderry's Settlement [1965] Ch 918, Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] 2 AC 709 and McDonald v Ellis [2007] NSWSC 1068, he said:

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).

In the present case, the trust is not a discretionary trust. During Mrs Murray's lifetime, [the appellant], 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 [the appellant] 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 [the appellant] 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 [58] - [59].

His Honour concluded that no basis existed upon which the appellant was entitled to maintain, as against Mrs Murray, a claim to legal professional privilege in respect of legal advice obtained by him in connection with the administration of the residuary estate. Mrs Murray was entitled, as a beneficiary, to inspect the advice [60].

54 Accordingly, the learned judge decided that the appellant's claim of legal professional privilege failed on two grounds. First, the privilege was not claimed in a proper form. Secondly, the appellant was not entitled to assert legal professional privilege as against Mrs Murray.

55 In the circumstances, it was unnecessary for the learned judge to consider whether Mrs Murray was entitled to rely on O 26 r 8(2). Nevertheless, his Honour made some observations about this provision. In particular, he noted:

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.

In this case, I am not satisfied that [the appellant] 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.

In relation to this ground of the application, the documents containing the legal advice obtained by [the appellant] stand in a slightly different position because they are not annexed or referred to in the affidavits filed on [the appellant'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) [67] - [69].

1. His Honour erred in law by determining that no claim for privilege had been made out in Exhibits DRB10, DRB11 & DRB13 due to a lack of evidence in the affidavits and in reliance upon Gardener v Irwin (1878) 4 Ex D 49, 52; City of Baroda (1926) 134 LT 576, 577.
2. His Honour erred in law in his determination that the respondent had an entitlement to inspect documents that are otherwise privileged as a result of legal professional privilege as a beneficiary under a Trust upon the basis that such documentation constituted Trust documents irrespective of the fact that they were otherwise privileged.
3. His Honour erred in law in his determination of the significance or [sic] Order 26, Rule 8, Sub-rule 2.

57 I will set out the relevant principles relating to legal professional privilege and joint privilege. I will then examine the grounds of appeal. It is convenient to consider ground 2 before turning to the other grounds.

58 Legal professional privilege is a rule of substantive law. A person may invoke the privilege to resist giving information or producing documents that would reveal confidential communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or providing legal services (including representation in legal proceedings). See Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 [9] - [11] (Gleeson CJ, Gaudron, Gummow & Hayne JJ); Esso Australia Resources Limited v Federal Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49 [35], [61], [62] (Gleeson CJ, Gaudron & Gummow JJ), [167] (Callinan J).

59 Legal professional privilege comprises two categories, namely, legal advice privilege and litigation privilege. Legal advice privilege can be claimed in respect of information or documents which contain or reveal confidential communications between a client and his or her lawyer made for the dominant purpose of giving or receiving legal advice, whether or not litigation is subsisting or within the reasonable contemplation of the client. Litigation privilege can be claimed where litigation is subsisting or within the reasonable contemplation of the client, and applies to confidential communications passing between a lawyer and his or her client or between the lawyer and third parties, and confidential information or documents brought into existence, for the dominant purpose of preparing for the litigation.

60 The person claiming legal professional privilege must prove that the information or documents in question are privileged. See Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 689 (Stephen, Mason & Murphy JJ).

61 A claim of legal professional privilege is not established conclusively by the use of a verbal formula. See Esso [52]. A court may examine documents where there is a disputed claim. It should not be hesitant to exercise the power. Also, in appropriate cases, a court may permit cross-examination of a deponent of an affidavit claiming privilege. See Esso [52]; Grant, 689.

62 However, a party who claims legal professional privilege must properly identify the basis on which the privilege is claimed. It is not appropriate for the party merely to assert the existence of the privilege, deliver the documents to the presiding judicial officer and request him or her to analyse them and determine whether there is a proper basis for the claim. In the present case, the learned judge, appropriately, refused the invitation of counsel for the appellant to embark on this task.

63 Order 26 r 4(2) provides, in the context of discovery and inspection between parties to litigation, that if it is claimed that any documents are privileged from production, the claim must be made in the list of documents made in compliance with O 26 r 1, and with a sufficient statement of the grounds of the privilege. The list of documents must be verified by an affidavit in form no 18. The purpose of the requirement in the rule for identification and description of documents in respect of which privilege is claimed, is explained in Kendall C and Curthoys J, Civil Procedure Western Australia (at 2 July 2009):

Where a claim of privilege is made, it is necessary that any documents for which privilege is claimed be properly described. Unless such documents are sufficiently described, it will be impossible for the other party to discern whether the claim of privilege is properly made. It is not sufficient merely to assert that the documents are privileged, which is a statement of law. The facts relied upon as giving rise to the privilege must be set out so the claim for privilege can be tested, although the facts should not be set out in such detail as would enable the contents of the documents to be ascertained indirectly: Gardiner v Irvine [1879] 4 Ex D 49 at 53. That is, an adequate description is required of each of the documents for which privilege is claimed, but not one which indirectly reveals its contents: Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223 at 265; [1980] 3 All ER 475; [1980] 3 WLR 668 [26.4.6].

64 Legal professional privilege may exist as a joint privilege. Joint privilege arises where two or more persons jointly communicate with a lawyer for the dominant purpose of obtaining or providing legal services (including giving or receiving legal advice or representation in legal proceedings). Similarly, joint privilege arises if one of two or more persons in a formal legal relationship communicates with a lawyer for the dominant purpose of obtaining or providing legal services (including giving or receiving legal advice or representation in legal proceedings) if the other person or persons share an interest in the subject matter of the services. See Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601, 608 (Sheller JA, Waddell AJA agreeing); Yunghanns v Elfic Pty Ltd (No 2) [2000] VSC 113; (2000) 1 VR 92 [22], [30], [34], [35] (Warren J); Cross on Evidence (7th Aust ed, 2004) [25265].

65 Persons entitled to joint privilege may not maintain the privilege against each other. They are together entitled to maintain their privilege against third parties. Waiver by one person is insufficient to affect the privilege of the other person or persons. See Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWCA 151 [41] (Mason P, Handley JA & Brownie AJA agreeing).

66 After sustained questioning from this court, counsel for the appellant eventually formulated the legal principle on which he submitted ground 2 is based. He said that a trustee can always assert legal professional privilege against a beneficiary, and claimed that this proposition is supported by the decisions in Avanes and Re Cowin (1886) 33 Ch D 179.

Ground 2: the relevant case law and academic writings

67 The circumstances in which a trustee may claim legal professional privilege as against a beneficiary were considered in numerous English cases decided in the 19th century. Academic writers have expressed opinions on the point. There appears, however, to be a remarkable dearth of Australian case law on the applicable principles and their juridical basis.

68 In Talbot v Marshfield (1865) 2 Dr & Sm 549; (1865) 62 ER 728, trustees obtained an opinion from counsel as to whether they should exercise a discretionary power to advance part of the trust fund to some of the beneficiaries. After other beneficiaries filed a bill to restrain them from exercising this discretion, the trustees obtained a second opinion in relation to their prospects of defending the suit. The plaintiffs issued a summons for production of the opinions of counsel. The Vice-Chancellor, Sir R T Kindersley, held that all of the beneficiaries (including the plaintiffs) had a right to inspect the first opinion because it had reference to the trustees' dealings with the trust estate. However, the plaintiffs had no right to production of the second opinion because it was sought after the suit was commenced. His Lordship said:

The first case and opinion, the production of which is sought, were respectively stated and taken by the Defendants to guide them in the exercise of a power delegated to them by the trusts of the will, and which, if exercised, would affect the interests of the other cestuis que trust. The opinion was taken before proceedings were commenced or threatened, and in relation to the trust. Under these circumstances it appears to me that all the cestuis que trust have a right to see that case and opinion. It was contended that it was not taken for the benefit of all the cestuis que trust; but all the cestuis que trust have an interest in the due administration of the trust, and in that sense it was for the benefit of all, as it was for the guidance of the trustees in their execution of their trust. Besides, if a trustee properly takes the opinion of counsel to guide him in the execution of the trust, he has a right to be paid the expense of so doing out of the trust estate; and that alone would give any cestuis que trust a right to see the case and opinion.

The other case and opinion, however, stands on a totally different footing. 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.

The trustees must be ordered to produce the first case and opinion; but not the second (729).

69 In Re Mason; Mason v Cattley (1883) 22 Ch D 609, some of the beneficiaries under a will brought an action against one of the trustees of the will and the executors of the other trustee (who was dead) alleging, relevantly, that the trustees had committed a breach of trust. The surviving trustee was required to make an affidavit of documents in his possession. In the affidavit he objected to producing, relevantly, some letters and copies of letters which had passed between him and his co-trustee and their solicitors in relation to matters in question in the action before the commencement of the litigation. Fry J, in deciding that the documents in question must be produced, said:

It is admitted that they are relevant to the matters in issue in the action. They are communications by and to the trustees and their solicitors in relation to the trust estate, made before the action was brought. It appears to me that Talbot v Marshfield applies (610).

70 Re Postlethwaite (1887) 35 Ch D 722 involved an action brought for an account of profits in respect of a purchase of trust property. It was alleged that the sale was made secretly for the benefit of Rickman, one of the trustees, with the connivance of Tourle, another trustee who was a solicitor. Rickman claimed privilege from production for letters from Tourle to Rickman and for Tourle's bill of costs on the ground that the communications were made by Tourle acting as solicitor to Rickman in his private capacity. Production was ordered because the communications passed between two trustees, and also because the solicitor and his client were charged with fraud. North J said, relevantly:

If two trustees acted together, not fraudulently, but unfairly to their cestui que trust, I think it would be a novel doctrine to say that they had a right to keep within their own bosoms that which they had done because one of them was acting as solicitor for the other (727).

71 In O'Rourke, Lord Parmoor said that a beneficiary, in an action against the trustee, is generally entitled to the production for inspection of all documents relating to the affairs of the trust (619). His Lordship added:

It is not material for the present purpose whether this right is to be regarded as a paramount proprietary right in the cestui que trust, or as a right to be enforced under the law of discovery, since in both cases an essential preliminary is either the admission, or the establishment, of the status on which the right is based. I agree in the view expressed by Peterson J [the primary judge], that the rule as to the right of a cestui que trust to the production of trust documents for inspection does not apply when the question to be tried in the action is whether the plaintiff is a cestui que trust or not. In the present case not only is the status of the appellant as a cestui que trust disputed, but in addition a release was executed, which, unless it can be set aside, is a bar to his claim (619 - 620).

72 The speech of Lord Wrenbury in O'Rourke contains the following passage, which has been cited frequently in later cases:

If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this 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. The 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. The first case in Talbot v Marshfield (2 Dr & Sm 549) is an instance (626 - 627).

73 The House of Lords in O'Rourke considered and explained the decision of North J in Postlethwaite. In essence, their Lordships decided that legal professional privilege is not displaced merely because the solicitor consulted is himself a trustee and is acting as a professional adviser to himself and his co-trustees.

74 As Doyle CJ (Perry & Martin JJ agreeing) observed in Rouse v IOOF Australia Trustees Ltd [1999] SASC 181; (1999) 73 SASR 484, some later decisions have taken Lord Wrenbury's observations in O'Rourke 'quite literally', and have treated him as deciding that a beneficiary has an actual proprietary interest in 'trust documents' [89]. Like Doyle CJ, I doubt whether this was intended by Lord Wrenbury and I consider the true position is as explained by Dawson and Toohey JJ in Breen v Williams [1996] HCA 57; (1996) 186 CLR 71:

[Lord Wrenbury's] remarks were accepted or referred to without demur in In re Londonderry's Settlement ([1965] Ch 918 at 932 - 933, per Harman LJ; at 935, per Danckwerts LJ; and at 937, per Salmon LJ) and have been accepted in this country (See Re Fairbairn [1967] VicRp 72; [1967] VR 633 at 637 - 638; Re Simersall; Blackwell v Bray [1992] FCA 221; (1992) 35 FCR 584 at 588; cf Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 443). But the right of access of a beneficiary to trust documents arises because of the beneficial interest of the beneficiary in the trust property and it is in that sense that the right may be described as proprietary (89).

75 Similarly, in Re Simersall; Blackwell v Bray [1992] FCA 221; (1992) 35 FCR 584, Gummow J said that an essential element of a private trust is that the trustee is subject to a personal obligation to hold and deal with the trust fund for the benefit of the beneficiaries. A necessary incident of that obligation is the trustee's liability to account to the beneficiaries for his or her dealings with the trust fund. His Honour continued:

That being so, a further necessary incident of the control of the trust property by the trustee is the trustee's obligation to keep proper accounts and to allow inspection of them by the cestui que trust: see Spellson v George (supra) (at 315 - 316). Hence, the description of Lord Wrenbury of the right of inspection as 'proprietary' in character, annexed as it is to the beneficial interest of the beneficiary in the trust property (589).

76 In Londonderry's Settlement, Salmon LJ distinguished between a beneficiary who seeks disclosure of documents from the trustee 'in the air' and a beneficiary who seeks discovery of documents in an action in which allegations are being made against the bona fides of the trustee. According to his Lordship:

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 (938).

77 The plaintiffs in Re Ballard Estate (1994) 20 OR (3d) 350 were beneficiaries under a deceased estate. They applied for an order directing the production by the executors of all communications concerning the management of the estate, including all communications from the executors' solicitors to the executors relating to the matters in issue in the action. The executors asserted that the documents were protected by legal professional privilege. In the Ontario Court of Justice (General Division), Lederman J ordered the production of the relevant communications between the solicitors and executors.

78 Lederman J referred to the speech of Lord Wrenbury in O'Rourke and said that when his Lordship used the phrase 'proprietary right', he was merely saying that the documents in question were in a sense the documents of the beneficiaries and in consequence the beneficiaries were entitled to inspect them:

They are said to belong to the beneficiary not because he or she literally has an ownership interest in them but, rather, because the very reason that the solicitor was engaged and advice taken by the trustees was for the due administration of the estate and for the benefit of all beneficiaries who take or may take under the will or trust [6].

79 After referring to Talbot, Lederman J said:

[T]here is no need to protect the solicitor-client communication from disclosure to those very persons who are claiming under the estate. The communications remain privileged as against third parties who are strangers or are in conflict with the estate, but as was stated in Stewart v Walker, supra, not those who are claiming under the estate. And that is because the trustee and beneficiary have a joint interest in the advice as Phipson has suggested [Phipson On Evidence, 14th ed, London, Sweet & Maxwell, 1990]:

'No privilege attaches to communications between solicitor and client as against persons having a joint interest with the client in the subject matter of the communication, eg as between ... trustee and cestui que trust.'

Similarly, in Solicitor-Client Privilege in Canadian Law (Butterworths, 1993) by R D Manes and M P Sinclair, the authors after recognizing that there can be no privilege asserted against beneficiaries of a trust over communications between a trustee and a trustee's solicitors with respect to the business and affairs of the trust, go on to state at pp 62- 63:

'This rule is consistent with the principle underlying privileged communications between co-parties or joint clients, that the privilege does not maintain between them.' [9] (original emphasis)

80 In Samson Indian Nation and Band v Canada [1995] 2 FC 762, the Federal Court of Canada (Court of Appeal) held that it was 'settled law' in Canada that legal professional privilege does not attach to communications between a solicitor and a trustee as against the beneficiaries who have a joint interest with the trustee in the subject matter of the communications [14]. MacGuigan and Décary JJA (Pratte JA agreeing) referred with approval to Lederman J's reasons in Re Ballard Estate. See also Camosun College Faculty Association v British Columbia (College Pension Board of Trustees) (2004) BCSC 941; Cooke v Canada Trust Co (2005) BCCA 112.

81 Riggs National Bank of Washington DC v Zimmer 355 A 2d 709 (Del Ch 1976) involved proceedings brought by certain beneficiaries under a trust estate against the trustees in the Court of Chancery of Delaware for an order compelling the trustees to reimburse the estate for alleged breaches of the trust in regard to certain taxation matters. The plaintiffs sought discovery of a memorandum of advice prepared in 1973 (before the proceedings were commenced or reasonably contemplated) by a lawyer acting on instructions from the trustees. The question in issue was, relevantly, whether the trustees were entitled to refuse to produce the document in question on the ground of 'attorney-client privilege'. Chancellor Quillen commenced his analysis by referring to the nature of the relationship between the beneficiaries and the trustees, and the apparent absence of any American case law on the point:

Initially, and most importantly, it must be noted that the trustees have substantive fiduciary duties to the beneficiaries. The special relationship puts this case in an entirely different context than a simple motion for discovery against a claim of privilege. Incredibly, counsel agree that American case law is practically nonexistent on the duty of a trustee in this context (712).

82 The Chancellor referred to Scott on Trusts (3rd ed) [173], the old English cases on whether a trustee can claim legal professional privilege as against a beneficiary, and some American authorities on attorney-client privilege, and then held:

With these principles in mind, it is apparent that the trustee's claim of attorney-client privilege here is unfounded. As a representative for the beneficiaries of the trust which he is administering, the trustee is not the real client in the sense that he is personally being served. And, the beneficiaries are not simply incidental beneficiaries who chance to gain from the professional services rendered. The very intention of the communication is to aid the beneficiaries. The trustees here cannot subordinate the fiduciary obligations owed to the beneficiaries to their own private interests under the guise of attorney-client privilege. The policy of preserving the full disclosure necessary in the trustee-beneficiary relationship is here ultimately more important than the protection of the trustees' confidence in the attorney for the trust ... The fiduciary obligations owed by the attorney at the time he prepared the memorandum were to the beneficiaries as well as to the trustees. In effect, the beneficiaries were the clients of Mr Workman [the attorney] as much as the trustees were, and perhaps more (713 - 714). (original emphasis)

See also Wachtel v Health Net, Inc [2007] USCA3 59; 482 F 3d 225 (3rd Cir 2007), 230 - 232 (United States Court of Appeals, Third Circuit) and Floyd v Floyd 615 SE 2d 465 (SC App 2005) [34] - [35] (Court of Appeals of South Carolina), where the principle stated in Riggs was approved. The United States Federal Courts have largely followed Riggs but some State courts have been more reluctant. See Re Grand Jury Proceedings Grand Jury No 97-11-8 [1998] USCA9 1951; 162 F 3d 554 (9th Cir 1998), 556 - 557; Wells Fargo Bank v Superior Court 990 P 2d 591 (Cal 2000) [2].

83 In Kerr W, A Treatise on the Law of Discovery (1870) the following views are expressed:

So also a cestui que trust has a right to call for the production of documents in the hands of his trustee which relate to the matters of the trust (Att-Gen v Berry, 2 Coll 33). If the trustee has taken counsel's opinion to guide him in the execution of his trust, or on behalf of the trust estate, he must produce the case and opinion in a suit instituted by the cestui que trust against him (Woods v Woods, 4 Ha 84; Devayne v Robertson[1855] EngR 147; , 20 Beav 42; Wynne v Hamberstone[1858] EngR 1253; , 27 Beav 421; on appeal, 32 LT 307; Talbot v Marshfield, 2 Dr & Sm 549. See Phillipps v Holmer, 15 WR 578). In a case where trustees had taken counsel's opinion as to whether they should exercise a discretionary power to advance part of their trust funds for the benefit of some of cestuis que trustent, and others of the cestui que trustent filed a bill to restrain them from exercising such discretion; it was held, on motion for production of the case and opinion, that all the cestuis que trustent had a right to inspection and production (Talbot v Marshfield, 2 Dr & Sm 549).

So also in a suit by residuary legatees against the personal representatives of a testator, all the documents must be produced, because from the very relation of the legatees to the testator they have a right to such production (Greenwood v Greenwood, 6 WR 119) (30 - 31).

84 Some years later, the learned author of Bray E, Digest of the Law of Discovery with Practice Notes (2nd ed, 1910) enunciated these propositions in relation to the operation of legal professional privilege as between a trustee and a beneficiary:

A cestui que trust is entitled to see cases and opinions submitted and taken by the trustee for the purpose of the administration of the trust; but where stated and taken by the trustees not for that purpose, but for the purpose of their own defence in litigation against themselves by the cestui que trusts, they are protected (Wynne v Humberston[1858] EngR 1253; , 27 Beav 421; Talbot v Marshfield, 2 Dr & Sm 549; Mason v Cattley, 22 CD 609; Postlethwaite v Rickman, 35 CD 722) (28).

85 More recently, in Scott A and Fratcher W, The Law of Trusts (4th ed, 1987) it was said:

A beneficiary is entitled to inspect opinions of counsel procured by the trustee to guide him in the administration of the trust (England: Wynne v Humberston[1858] EngR 1253; , 27 Beav 421 (1858); Talbot v Marshfield, 2 Dr & Sm 549 (1865); In re Mason, 22 Ch D 609 (1883). California: Lasky, Haas, Cohler & Munter v Superior Court, 172 Cal App 3d 264, 218 Cal Rptr 205 (1985) (but not memoranda and notes of discussions prepared by the trustee's attorneys but not communicated to the trustee)). It is held, however, that where there is a conflict of interest between the trustee and the beneficiaries and the trustee procures an opinion of counsel for his own protection, the beneficiaries are not entitled to inspect the opinion (Wynne v Humberston[1858] EngR 1253; , 27 Beav 421 (1858), semble; Talbot v Marshfield, 2 Dr & Sm 549 (1865); Thomas v Secretary of State, 18 WR 312 (1870). See In re Prudence-Bonds Corp, 76 F Supp 643 (EDNY 1948) (corporate trustee under bond issue). In In re Postlethwaite, 35 Ch D 722 (1887), it was held that the beneficiaries were entitled to the production of letters between the trustees who were accused of fraudulently profiting at the expense of the estate, although one of the trustees was acting as solicitor for the other) [173].

86 Thanki B (ed), The Law of Privilege (2006) undertakes an analysis of various communications which are not protected by legal professional privilege, even though they appear to satisfy the relevant requirements. The exceptions to privilege which are enumerated include relationships where a joint interest may arise, including as between trustee and beneficiary:

There exist relationships within which the parties will be unable to claim privilege in certain communications as against each other. More specifically, privilege cannot be claimed in circumstances where the parties to the relationship have a joint interest in the subject matter of the communication at the time that it comes into existence ... Examples of relationships where a joint interest may arise are between: trustee and beneficiary (Talbot v Marshfield (1865) 2 Dr & Sm 549; Re Mason (1883) 22 Ch D 609; Postlethwaite v Rickman (1887) 35 Ch D 722. See also O'Rourke v Darbishire [1919] 1 Ch 320, CA; affirmed [1920] AC 581) [4.71].

See also, Matthews P and Malek H, Discovery (1992) [8.51], [8.58], [9]; Cross on Evidence (7th Aust ed) [25265].

87 Ground 2 asserts in essence that the appellant, as trustee of the trusts created by Mr Murray's will as varied by the settlement agreement, is entitled to claim, as against Mrs Murray, legal professional privilege in respect of documents relating to the administration of the trusts.

88 The appellant's claim of privilege arises on an interlocutory application in the context of the pending Supreme Court proceedings brought by Mrs Murray for the appellant's removal as trustee and for other relief, including the passing of the appellant's accounts, and the determination of whether the appellant reasonably and properly incurred the legal costs charged by Schreuder Partners and counsel.

89 Although the originating summons does not refer to the legal costs charged by Schreuder Partners or claim that the costs were not reasonably and properly incurred by the appellant, counsel for the parties were agreed that the hearing before the learned judge was conducted on the basis that the dispute relating to the legal costs was in issue in the proceedings.

90 The relief claimed in the originating summons does not include production of or access to 'trust documents' or information. (In Re Simersall, Gummow J noted that there has been, in some authorities, difficulty with identifying what is comprised within the class of 'trust documents' for the purpose of any right of a beneficiary to examine the accounts, vouchers and other documents relating to the trust and its administration (587 - 588).)

91 Before this court, counsel for the appellant accepted, properly, that:

(a) The documents in question are relevant to the issues in dispute in the pending Supreme Court proceedings (appeal ts 39).

(b) The documents contain or relate to legal advice obtained for the purposes of the administration of the residuary estate, and not for the benefit of the appellant personally (appeal ts 48, 65).

(c) The legal costs have been discharged from the residuary estate (appeal ts 53).

92 In my opinion, it is critical, in examining the merits of ground 2, to distinguish between:

(a) legal proceedings by a beneficiary against the trustee where the cause of action is based on the trustee's alleged breach of duty in failing to provide the beneficiary with access to 'trust documents' or information; and

(b) legal proceedings by a beneficiary against the trustee on other causes of action (that is, causes of action which are not based on the trustee's alleged breach of duty in failing to provide the beneficiary with access to 'trust documents' or information) and, in the course of the proceedings, the beneficiary makes an interlocutory application against the trustee for discovery and inspection of 'trust documents' which are relevant to the pleaded causes of action and in respect of which legal professional privilege exists as against strangers to the trust.

93 In the first category of legal proceedings, it will be necessary to identify and apply the legal principles which govern the duty (if any) of the particular trustee to provide 'trust documents' or information to any of the beneficiaries or possible beneficiaries. Two different approaches are discernible from the case law in relation to the right (if any) of a beneficiary to inspect 'trust documents' or receive information. See Rouse [88]. One approach is based on the observations of Lord Wrenbury in O'Rourke, 626, as explained by Gummow J in Re Simersall, 588 and by Dawson and Toohey JJ in Breen, 89. See [72] - [75] above. The other approach is based on a trustee's fiduciary duty to keep the beneficiaries informed and to render accounts. See Hartigan Nominees, 421 - 422 (Kirby P, dissenting), 438 - 447 (Sheller JA). Traditionally, there has been a distinction between strict trusts on the one hand and discretionary trusts on the other in relation to access to 'trust documents' or information. In Schmidt, however, the Privy Council held that a beneficiary's right to inspect 'trust documents' or receive information in the possession of the trustee was merely a procedural right for the court to make an order in its discretion as part of its supervisory jurisdiction in relation to trusts. The decision in Schmidt was followed by Gzell J in Avanes. However, in McDonald and in Schaverien v Jones [2007] NSWSC 1429, Bryson AJ declined to follow Schmidt and Avanes. See, generally, Jacobs' Law of Trusts in Australia (7th ed, 2006) [1716]. The current state of the non-statutory law on this issue is attended by some uncertainty. It is unnecessary, in the present case, to express an opinion on these issues (including whether the approach of the Privy Council in Schmidt represents the law of Australia) because the pending Supreme Court proceedings by Mrs Murray against the appellant are not proceedings where the cause of action is based on the appellant's alleged breach of duty in failing to provide Mrs Murray with access to 'trust documents' or information. I note, for completeness, the intervention of statute in Western Australia. By s 94 of the Trustees Act 1962 (WA), the court can call on trustees to substantiate and uphold their conduct.

94 In the second category of legal proceedings, it will be necessary, in determining the interlocutory application, to identify and apply the relevant legal principles from the case law and academic writings discussed or referred to at [64] - [65] and [76] - [86] above. In my opinion, the relevant principles, in the context of a trustee and a beneficiary who has a vested interest in the trust fund, include, relevantly, the following:

(a) Legal advice privilege will exist in relation to information and documents that would reveal confidential communications between a trustee client and his or her lawyer made for the dominant purpose of giving or receiving legal advice, whether or not litigation is subsisting or within the reasonable contemplation of the trustee client.

(b) Litigation privilege will exist where litigation is subsisting or within the reasonable contemplation of the trustee client, and applies to confidential communications passing between a lawyer and his or her trustee client or between the lawyer and third parties, and confidential information or documents brought into existence, for the dominant purpose of preparing for the litigation.

(c) The legal advice privilege or litigation privilege referred to in pars (a) and (b) above may not be invoked by the trustee client against a beneficiary of the trust if the trustee and the beneficiary have a joint privilege in relation to the confidential communications, information or documents in question.

(i) the confidential communications, information or documents relate to legal services in connection with the management or administration of the trust; and

(ii) the trustee (in his or her capacity as trustee) and the beneficiary (in his or her capacity as a beneficiary, and either alone or as a member of a class of beneficiaries) have a joint interest in the subject matter of those confidential communications, information or documents when they occur or come into existence.

(e) The joint interest of the trustee will derive from his or her duties to the beneficiaries or in respect of the trust fund, and the joint interest of the beneficiary will derive from his or her vested interest in the trust fund, in combination with the nature and character of the relevant communications, information or documents.

(f) The beneficiary will not be entitled to a joint privilege with the trustee if the confidential communications, information or documents relate to legal services obtained for the benefit of the trustee personally (for example, if the trustee seeks legal advice as to his or her personal rights or liabilities in connection with an alleged breach of trust or threatened legal proceedings against him or her personally).

It is unnecessary to consider the position of a beneficiary who has a contingent interest or a mere expectancy in relation to the trust fund. At all material times, Mrs Murray has had a vested interest in the residuary estate.

95 In my opinion, on the assumption (favourable to the appellant) that all of the documents comprised in 'Confidential Exhibits DRB-10, DRB-11 and DRB-13' are properly the subject of legal professional privilege as between the appellant and strangers to the trusts created by the will as varied by the settlement agreement, the appellant is not entitled to claim privilege as against Mrs Murray. The documents in question contain or relate to legal advice obtained by the appellant for the purposes of the administration of the residuary estate, and not for the benefit of the appellant personally. The appellant has not established that litigation between him and Mrs Murray was within his reasonable contemplation when any of the documents was brought into existence or when any of the legal advice referred to in any of the documents was given or received. At all material times, Mrs Murray has had a vested interest in the residuary estate and an interest in the subject matter of the legal advice. The appellant in his capacity as trustee and Mrs Murray in her capacity as a beneficiary are entitled to a joint privilege. It is conceded by the appellant that the documents are relevant to the ultimate issues in dispute in the pending Supreme Court proceedings.

96 The decisions relied on by counsel for the appellant, namely, Avanes and Re Cowin, do not advance the proposition he articulated in support of ground 2.

97 The plaintiff in Re Cowin was a beneficiary under a will. He was entitled in remainder to one-eighth of the trust property, subject to the interest given to the testator's widow during her widowhood. The property consisted of real and personal estate. The plaintiff sought a declaration as to whether he was entitled as of right, at all reasonable times and at his own expense, to inspect the documents relating to the trust property and held by the defendants as trustees. North J held that the plaintiff had a prima facie right to inspect the documents in that he and the other beneficiaries were the beneficial owners of the trust property (185). His Lordship said:

It seems to me, therefore, that the Plaintiff is entitled to see the deeds, subject to this, that there might be circumstances which would justify the trustees in withholding them from him. But nothing has been shewn which can justify them in doing so. The trustees' solicitor has not looked at the deeds at all, and yet it is said that the production of them to the Plaintiff might possibly tend to the disclosure of some flaw in the title to the property, and I am told that there is a presumption that every title has some flaw in it. In my opinion no case has been established for withholding the deeds from the Plaintiff, and I think he is entitled to the production of them for the inspection of himself or his solicitor. I do not say that he is entitled as of right, but only that he is entitled under the circumstances, because there might be a state of circumstances under which the right to production would not exist (186 - 187).

This case concerned the right of a beneficiary with a vested interest in the trust fund to inspect documents relating to the fund. It was not concerned with whether or in what circumstances a trustee may or may not assert legal professional privilege as against a beneficiary.

98 In Avanes, the plaintiff beneficiary made an interlocutory application against the defendant trustees seeking production and inspection of documents in respect of which the trustees had claimed legal professional privilege. Gzell J dismissed the plaintiff's application. His Honour decided the case by reference to what he considered were the principles governing disclosure by a trustee to a beneficiary of documents relating to the trust. He expressed the view that the approach of the Privy Council in Schmidt should be adopted by Australian courts and he applied that approach in considering the plaintiff's application [15]. Gzell J also held that the defendants had not waived privilege in respect of the documents [33] - [34].

99 As I have mentioned, it is unnecessary, in the present case, to express an opinion on the correctness, with respect, of Gzell J's reasoning in Avanes as to the circumstances in which a beneficiary of a trust fund may inspect 'trust documents' or have access to information relating to the trust. It is sufficient, for present purposes, to make two points. First, his Honour did not cite or consider any of the case law or academic writings which I have discussed at [64] - [65], [68] - [70] and [77] - [86] above. It appears that counsel for the plaintiff did not argue that the plaintiff and the defendants were entitled to joint privilege in the documents. Secondly, legal professional privilege is a substantive rule of law which cannot be overridden by the exercise of a non-statutory judicial discretion.

100 Ground 2 is without merit. The appellant must produce the documents in question for inspection by Mrs Murray and her legal advisers.

101 The appeal must fail unless the appellant makes out grounds 1, 2 and 3 of the appeal. I have decided that ground 2 fails, and it is therefore unnecessary to consider grounds 1 and 3.

102 Mrs Murray filed a notice of contention in which she seeks to uphold the decision of the learned judge on other grounds. It is unnecessary to deal with the notice.

103 I would grant leave to appeal on ground 2, but not on grounds 1 and 3.

104 However, for the reasons I have given, ground 2 is without merit, and the appeal should be dismissed.