Kayler-Thomson v Colonial First State Investments Limited

Federal Court of Australia|2021-07-27|Before: Colvin J

C 12 Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 Kennon v Spry; Spry v Kennon [2008] HCA 56; (2008) 238 CLR 366 Krok v Szaintop Homes Pty Ltd (No 1) [2011] VSC 16 McDonald v Ellis [2007] NSWSC 1068; (2007) 72 NSWLR 605 Mercanti v Mercanti [2014] WASC 64 Palmer v Ayres [2017] HCA 5; (2017) 259 CLR 478 Queensland Local Government Superannuation Board v Allen [2016] QCA 325 Re Combined Projects (Arncliffe) Pty Ltd [2018] NSWSC 649 Re Estate Late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844 Re Gulbenkian's Settlement Trusts; Whishaw v Stephens [1970] AC 508 Re Londonderry's Settlement [1965] Ch 918 Re Simersall; Blackwell v Bray (1992) 35 FCR 584 Re Tillott [1892] 1 Ch 86 Schreuder v Murray (No 2) [2009] WASCA 145; (2009) 41 WAR 169 Schreuders v Grandiflora Nominees Pty Ltd [2014] VSC 310 Shimshon v MLC Nominees Pty Ltd [2020] VSC 640 Silkman v Shakespeare Haney Securities Ltd [2011] NSWSC 148 Spellson v George (1987) 11 NSWLR 300 Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212 Watson v Schreuder Partners Lawyers [2020] FCA 1044 Webster (Trustee) v Murray Goulburn Co-Operative Co Limited (No 3) [2018] FCA 990 Wigmans v AMP Limited [2021] HCA 7 Wright v Stevens [2018] NSWSC 548

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Counsel for the Applicants: Dr KP Hanscombe QC with Ms AM Folie

Counsel for the Respondents: Mr SG Finch SC with Ms S Mirzabegian

Solicitor for the Respondents: Herbert Smith Freehills

BETWEEN: KEITH KAYLER-THOMSON First Applicant

AND: COLONIAL FIRST STATE INVESTMENTS LIMITED (ACN 002 348 352) First Respondent

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) Second Respondent

AVANTEOS INVESTMENTS LIMITED (ACN 096 259 979) Third Respondent

order made by: COLVIN J DATE OF ORDER: 27 JULY 2021

Subject to order 2, the interlocutory application by the first applicant dated 19 October 2020 be dismissed.
There be liberty to the first applicant to apply within 14 days to pursue any part of the application that the first applicant maintains was not determined by these reasons.
The first applicant do pay the costs of and incidental to the interlocutory application to date in any event, such costs to be assessed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 Mr Keith Kayler-Thomson is an applicant in representative proceedings brought against Colonial First State Investments Limited (Colonial) and other parties, one being the Commonwealth Bank of Australia (CBA). Colonial is alleged to be a subsidiary and close associate of the CBA. 2 The claims made against Colonial concern its conduct as the trustee of two superannuation funds (Funds). The Funds are the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund) and the Commonwealth Essential Super Fund (Essential Fund). 3 Colonial has provided discovery of documents in the proceedings. It has claimed that legal professional privilege applies to a considerable number of the discovered documents. On that basis it resists inspection of those documents by solicitors acting for Mr Kayler-Thomson as representative applicant. 4 Based on the available information supporting the privilege claim, Mr Kayler-Thomson says that many of the documents appear to concern the management or administration of the Funds. He claims that by reason of his status as a beneficiary of the Funds and the status as beneficiaries of other group members in the representative proceedings any privilege as to those documents is a joint privilege. He applies for orders requiring Colonial to produce those documents for inspection. 5 There is no issue between the parties as to the validity of the claim for privilege. Rather, the issues between them concern the application of relevant principles as to joint privilege that may exist as between trustee and beneficiary to the circumstances of the present case. Although the existence of such a joint privilege is well established, issues arise in the present case as to the extent of the privilege and its application to the privileged documents that have been discovered by Colonial. There are also issues as to the extent to which a representative applicant might obtain access to documents on the basis of a claim to joint privilege by members of the represented class that do not include the representative applicant. 6 After a process of conferral, sample documents comprising 31 items were identified on the basis that determination of the dispute as to the sample documents will facilitate resolution of the issues between the parties as to all documents.

Joint privilege as between trustee and beneficiary 7 Legal professional privilege belongs to all those who join together in seeking particular legal advice. Further, as was held in Farrow Mortgage Services Pty Ltd (in liq) v Webb (1996) 39 NSWLR 601 at 608 (Sheller JA, Waddell AJA agreeing): [The privilege is a joint privilege] 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'… 8 Therefore, joint privilege arises where more than one party seeks the advice or the advice is sought by a party when acting in a capacity where the party has a duty or obligation to disclose to others the content of the communication. 9 The relevant principles concerning joint legal professional privilege as between trustee and beneficiary were summarised by Buss JA (McLure JA agreeing) in Schreuder v Murray (No 2) [2009] WASCA 145; (2009) 41 WAR 169. As his Honour there stated (at [94(c)]), 'legal advice privilege or litigation privilege … 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'. His Honour then described the joint privilege in the following terms: (d) There will be a joint privilege if: (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. 10 Buss JA went on to state that: (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). 11 These principles derive not from the status of the trustee simpliciter. Rather, as will be explained, they derive from the extent to which legal advice was sought by the trustee in discharge of a duty, enforceable in equity, to undertake the due and proper administration of the trust. Outside of a litigation context, a beneficiary may request access to documents relating to the administration of the trust. In such circumstances, the beneficiary will need to demonstrate a proprietary right to the documents or a sufficient reason why the supervisory jurisdiction of a court exercising jurisdiction in equity should require the production of the documents. If such a basis exists then the access to documents to which the beneficiary is entitled will include any legal advice obtained by the trustee in undertaking the due and proper administration of the trust because there will be joint privilege in such documents. 12 Although similar issues may arise where documents have been discovered and privilege is claimed as to where access is sought to documents outside the discovery process, there is an important difference. The obligation to provide discovery means that unless documents are shown to be privileged from production to a party seeking their inspection, they must be produced upon request. It is the obligation to discover that affords the reason for producing the documents: Re Londonderry's Settlement [1965] Ch 918 at 938. Authorities concerned with the basis that might justify access by a beneficiary to the documents that relate to the due and proper administration of the trust do not provide the foundation for the obligation to produce the documents. Therefore, and significantly for present purposes, if there is joint privilege that is shared with the party seeking inspection then the documents are not privileged from production for inspection. There is no need to satisfy any further requirement that may exist where a beneficiary seeks access, outside of discovery in court proceedings, to documents relating to the management and administration of a trust.

The scope of management and administration 13 As has been observed, the joint privilege applies to legal advice obtained in connection with the management and administration of the trust. The scope of what may be involved in the management and administration of a trust must be a contextual question that depends upon the nature of the trust being administered. Put another way, the nature and terms of the trust will determine the scope of the activities that must be undertaken as part of its due management and administration. For that reason, it is necessary to understand what is involved in administering the particular trust. 14 Legal advice obtained for the personal benefit of the trustee does not fall within those documents that concern the management and administration of the trust. In Schreuder, Buss JA at [94(f)] said that the joint privilege would not extend 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 threaten legal proceedings against him or her personally)'. 15 The contextual nature of the inquiry is evident from the following observations by Brereton J in Hancock v Rinehart [2015] NSWSC 2140 at [9]: Whether documents - particularly documents prepared by legal advisers for a person who happens to be the trustee of a trust - are to be characterised as trust documents or as personal documents of that person, is likely to be informed by a range of evidence casting light on the person or persons who gave the instructions, the person or persons to whom the advice was provided, the purpose for which the advice or legal work was sought and provided, and the person who paid for it. The files of the solicitors acting in matters, in respect of which the trust paid for the legal advices in question is likely to contain relevant evidence of that kind. 16 In the present case, it was common ground that the administration of the trust involved presenting to members (beneficiaries) various investment options. The choices made by the member (perhaps with the assistance of an investment adviser) would then be implemented by Colonial in the management and administration of the Funds such that the requisite part of the funds being administered would be invested in that way and the interest of the member would be determined by the outcomes of those choices. Information would be made available by Colonial as trustee of the Funds to enable those choices to be made. Therefore, a significant part of the administration of the Funds involved the identification of the investment options and their appropriate presentation to members. 17 In the course of oral submissions, there was reference to the circumstances in which a 'default' option might apply such that the funds being administered for a member may be invested in a particular option without any choice being made by the member. Reference was made to the particular case of Mr Kayler-Thomson, he received a lump sum payment from insurance that formed part of the benefits provided to members and the terms of that insurance specified the way those funds would be invested in the first instance. Other possibilities were raised. However, those matters did not detract from the importance which the investment options played in the overall administration of the Funds.

The nature of the representative proceedings 18 As has been explained, it is claimed in the representative proceedings that the Funds were administered according to governing rules pursuant to which members (beneficiaries) could request or direct Colonial to allocate part or all of the funds being administered for the benefit of the member to particular investment options. The investment options could be selected by a member (beneficiary) with a superannuation account that formed part of one of the Funds. The Trustee would then administer that part of the Fund which represented the member's account by allocating funds to the investment options as selected by the member (beneficiary). 19 In broad terms, the proceedings concern the rates of interest paid on a particular category of investments made by Colonial as trustee of the Funds. They comprised investment options where the funds were invested on deposit with the CBA (Deposit Options). It is claimed that the interest rates set for the Deposit Options were lower than available rates from other deposit taking institutions, being an arrangement favourable to the interests of the CBA. It is alleged that the CBA paid margins to Colonial where the Deposit Options were selected, which Colonial retained for its own benefit. It is said that it was in the interests of Colonial to invest funds at lower rates allowing CBA to make a higher margin which it shared with Colonial. 20 The alleged practices of Colonial concerning the Deposit Options are said to have breached Colonial's obligations both at general law and under statute. It is said that CBA participated in those breaches. The nature of the alleged breaches include claims that Colonial breached covenants in the trust instrument for the Funds, claims that Colonial's dealings with CBA were not at arm's length, claims that Colonial acted in its own interests and not in the best interests of the members (beneficiaries) and claims concerning the disclosures made to those members. 21 Broadly speaking, the proceedings are brought on behalf of those persons who were members of the Funds and who, at any time, had part or all of their funds in a superannuation account that formed part of the Funds invested in one of the Deposit Options.

The nature of the claim to privilege in the present case

The significance of the relevance of the documents 22 Before considering the particular nature of the claim to privilege, it may be emphasised that all the documents in dispute are relevant to the issues in the proceedings. As has been noted, those issues concern conduct undertaken by Colonial concerning the Deposit Options in relation to the Funds. There are also allegations made concerning the characteristics of the Deposit Options and how interest rates were established for the deposits with CBA. The claims made against Colonial do not concern how the Funds came to be brought into existence, how Colonial came to be managing the superannuation accounts of its members, the ways in which the Deposit Options may be offered to persons outside the Funds or the origins of the structure by which members may select options as members of the Funds. 23 One of the particular aspects of the Deposit Options is that they appear to have been conceived and set up as options that might be made available in a range of different investment contexts. Therefore, even though they might be set up by Colonial with the prospect that they would be offered as an investment option to members of the Funds, they may also be conceived as an investment option that might also be made available outside that context. It is that aspect that appears to have given rise to much of the dispute between the parties. 24 The position of Colonial appears to be that there is a category of documents that are relevant to the issues in the proceedings but do not concern the management and administration of the Funds even though those documents concern the arrangements for the Deposit Options. As will emerge, the distinction that Colonial appears to draw is between documents concerning the formulation of the characteristics of the Deposit Options and the establishment of the Deposit Options as available investment options (what might be termed the set-up phase) and documents concerning the way in which the Funds were thereafter administered with the Deposit Options forming one of many investment options that may be selected by a member to apply to the member's superannuation account as managed by Colonial (what might be termed the operation phase). 25 To be clear, the position of Mr Kayler-Thomson on the application was that both the set-up phase and the operation phase formed part of the management and administration of the Funds. Further, the fact that the set-up phase might have been undertaken by Colonial both for the purposes of creating a 'product' that may be offered as an investment option in the Fund as well as for other investors did not detract from it forming part of the management and administration of the Funds. It was submitted for Mr Kayler-Thomson that the joint privilege pertained to such documents because they related to the management and administration of the Funds even though they might have also been brought into existence for some other commercial purpose of Colonial. As to that proposition, the submission of Colonial was to the effect that where legal advice was obtained for such broader commercial purposes that were not confined to the activities of the Funds, that characteristic indicated that the activity to which the advice related was not the management and administration of the Funds but rather the development and setting up of an investment product which thereafter came to be included as one of the investment options for members of the Funds (as well as for other investors outside the Funds). 26 For Mr Kayler-Thomson it was submitted that the distinctions maintained by Colonial would lead to an 'unscrupulous' trustee arranging the trustee's affairs in a way that circumvented the joint privilege that would otherwise be enjoyed by a beneficiary. This seemed to be a long bow as the issues thrown up by the present case appeared to arise from characteristics inherent in the nature of the business conducted by Colonial rather than attributes that might be adopted or affected by a trustee in order to prevent access by beneficiaries of the trust to legal advice obtained by the trustee for purposes that include managing and administering the trust. 27 Therefore, even though it may be assumed that the disputed documents relate to the conduct complained of by the applicants in the representative proceedings there is an issue between the parties as to the extent to which that conduct, especially the conduct during the set-up phase, formed part of the management and administration of the Funds for the purposes of joint privilege principles.

The affidavit of Mr Hanson 28 The claim to privilege was made by an affidavit sworn by a partner of the law firm with conduct of the proceedings on behalf of Colonial. Mr Cameron Hanson did not make the affidavit based upon what he had been told by officers and employees of Colonial involved in the events at the time the legal advice was obtained. Rather, he deposed to 'knowledge of Colonial's business arising from these proceedings as well as other proceedings … and my review of documents discovered by [Colonial and another respondent]'. He said that through his review of the discovered documents he had an understanding of the factual matters the subject of the proceedings 'including the establishment of the investment options the subject of [the claim by Mr Kayler-Thomson as representative applicant]'. Mr Hanson's evidence was given in a form that gave rise to criticism on behalf of Mr Kayler-Thomson. However, an objection to the manner in which his hearsay evidence was given was not pressed. 29 The affidavit deposed to the following matters concerning Colonial: (1) Colonial is the trustee of the FirstChoice Fund and the Essential Fund. (2) The business of Colonial consists of 'two inter-related activities', namely: (a) 'development and ongoing management of platforms through which investments can be made in financial products'; and (b) 'development and ongoing management of financial products in which investments can be made, either through investment platforms developed and managed by Colonial or through investment platforms developed and managed by third parties'. (3) The Funds were two of the 'platforms' developed and managed by Colonial. (4) 'The platforms developed and managed by Colonial enable investments to be made in a wide range of investment options, which generally take the form of managed funds rather than direct investments in underlying assets such as shares'. (5) 'The investment options available to investors in those platforms include managed funds developed and managed by Colonial and managed funds developed and managed by third parties'. (6) 'The financial products developed and managed by Colonial generally take the form of registered managed investment schemes, with Colonial being the responsible entity of the managed investment scheme responsible for, among other things, appointing investment managers to manage the assets of the scheme in accordance with a stated investment strategy'. (7) As at November 2008, there were 104 investment options in the FirstChoice Fund and 45 were options in respect of which Colonial was the responsible entity. (8) Some of the 'financial products developed and managed by Colonial' are made available to investors on 'platforms' where Colonial is not the trustee or related entity. (9) The financial products are identified and developed by 'Colonial's Product team'. 30 Mr Hanson also deposed that he is informed by Mr Peter Labrie, 'currently Head of Platforms and Investment Products, Colonial First State' that at all relevant times: (a) the function of Colonial's Product team has been to identify concepts for new financial products that may be made available as investment options on Colonial's platforms or third party platforms, and then to develop those products; (b) in identifying new potential financial products, the Product team takes into account a range of considerations, such as market conditions, feedback from members or investors and advisers, and other investment products available in the market; (c) once a potential new financial product has been identified, the Product team then develops the financial product in conjunction with relevant third parties such as the investment manager, for example by establishing the relevant legal structures to facilitate the investments (such as any managed investment scheme through which the investments will be made) and establishing systems with the capability to facilitate the investments. These are matters that are not dependent on the platform through which the financial product will be offered; (d) the Product team also considers issues that are specific to the platform on which the financial product may be offered as an investment option, for example by considering information to be disclosed in product disclosure statements or other documents specific to the platform; (e) once the financial product has been developed, the Board of Colonial is responsible for approving the addition of the product to the investments menu for either FirstChoice Investments (in Colonial's capacity as either responsible entity or administrator depending on the nature of the financial product) and/or the FirstChoice Fund or Essential Fund (in its capacity as trustee of the relevant fund); and (f) once the financial products have been developed and made available on one or more platforms, Colonial has an ongoing role managing the products, for example by facilitating investments in the products and issuing communications to members in relation to the performance of the products. 31 It must be noted that Mr Hanson's affidavit evidence was given in a form which suggests a linear process by which products are conceived, developed and then a choice is made as to whether the product will be offered by Colonial as one of the investment options for the Funds. Resenting the evidence in that way suggested, without stating, that the conception of the investment options arose in a way that was entirely separate from the activities of Colonial in administering the Funds. However, as the evidence of Mr Hanson discloses, Colonial is an integrated business in which it both operates the Funds (and other 'platforms') and develops investment 'products' to be made available on those platforms (and elsewhere). 32 Further, in key respects the evidence involves characterisation of the activities of Colonial, rather than description by way of direct evidence. Significantly, Mr Hanson describes the business as involving two inter-related activities; (a) development and ongoing management of platforms; and (b) development and ongoing management of financial products for those platforms (and the platforms of third parties). 33 Importantly, the integrated nature of the business means that there may be a different way of characterising the activities of Colonial. It may take the following form. Colonial is the trustee of the Funds. The Funds are structured in a manner that allows members (beneficiaries) to have input into the investment options that apply to their superannuation funds that are being managed by Colonial as trustee of the Funds. Colonial makes decisions as to the investment options to be presented to members. In discharging its responsibilities as trustee of the Funds it is involved in the development of investment options to be presented to members. In some cases, those investment options are developed on the basis that they may also be made available to investors outside the Funds. However, the options are developed for inclusion in the 'investments menu' for 'platforms' that include the Fund. 34 It is difficult to know whether there is any basis for the characterisation implicit in the form in which Mr Hanson presents his evidence because of the manner in which the affidavit is expressed. It takes the form of a summary expressed as conclusions rather than a description of what occurred. Also, much of the affidavit is expressed in a form of coagulated finance-speak that obscures rather than edifies. It contains no description of the process by which concepts for new products might be identified. It does not explain the source of those concepts, who is involved in developing them and the extent to which they are developed with a particular platform or platforms in mind. In addition, as has been observed, the evidence of these matters was given by a person who was neither involved in the relevant events nor sought to give evidence based upon conversations with such persons. 35 These aspects gave rise to criticisms that flowed through the submissions advanced for Mr Kayler-Thomson as to whether there was a proper foundation for the claim that the activities that gave rise to the documents in respect of which there was a claim for legal professional privilege did not concern the management and administration of the Funds. What the evidence does show is that legal advice that was obtained during the 'development' of the 'products' that became the Deposit Options the subject of the proceedings and it was obtained at a time and in circumstances where Colonial was formulating those Deposit Options so that they may form part of the way the Funds were managed and administered. 36 Further, what is apparent is that, at the relevant time, Colonial was both the trustee of the Funds and involved in the development of investment options that become included in the investment options for the Funds. Further, the investment options were a key aspect of the manner in which the Funds were managed and administered because Colonial provided to its members the ability to participate through the 'menu' of options. Indeed, on the evidence, the development and inclusion of the investment options was a key aspect of the way in which the Funds were managed and administered. It was the presentation of the investment options to members that was the mechanism that determined the manner in which the superannuation account of the member was invested. Colonial did not just include investment options that were provided by third parties. It developed options itself and in doing so determined the characteristics and attributes of a significant number of the options that might be selected by members. Its involvement in the development of those options was not an entirely separate activity. It was developing those options for purposes that encompassed inclusion in the menu of the investment options for the Funds. 37 Significantly, the affidavit of Mr Hanson went on to describe the circumstances in which particular Deposit Options were developed by Colonial. For example, as to the FirstRate Saver, he deposed: FirstRate Saver was identified as a potential financial product to be offered on Colonial's platforms by the members of Colonial's Product team in 2008, developed by that team in conjunction with CBA as the issuer of the deposit, and first made available to investors in FirstChoice Investments, and as an investment option to members of the FirstChoice Fund, in November 2008. 38 The sequence is significant. Mr Hanson says that FirstRate Saver was 'identified as a potential financial product to be offered on Colonial's platforms' in 2008. Those platforms included the Funds. The products were developed as potential products for the Funds and were made available for those Funds. Colonial had many hats as trustee and responsible entity, but that did not mean that when it identified a potential product and developed it for inclusion on platforms that included the Funds that it was undertaking an activity that was not part of the ongoing management and administration of the Funds. Indeed, the documents produced by Mr Hanson indicate that the FirstRate Saver 'product' was developed to be offered to those who were 'investors' in superannuation and was a response to demand from financial planners because cash products were under-represented on the 'FirstChoice platform'. Therefore, in the case of the FirstRate Saver product it was developed for inclusion as an investment option in the FirstChoice Fund. 39 Therefore, on the evidence, it has not been established that the process of developing the Deposit Options was a distinct and separate activity that was not part of the management and administration of the Funds. Rather, on the evidence, the identification and development of the Deposit Options by Colonial was undertaken in order to have suitable investment options for members of the Funds (and other platforms). It was an integrated activity that formed part of the business of Colonial. It was a key part of the way in which the Funds were managed and administered to present suitable investment options and the activities of Colonial in developing those options for inclusion in the Funds (and other platforms) was part of the management and administration of the Funds. The fact that the activities were undertaken for the purposes of the management and administration of other platforms (both for Colonial and third parties) did not detract from that character. Given the description by Mr Hanson of the activities of Colonial as being 'inter-related' and the absence of any detailed evidence to the effect that the development activities were separate and distinct from the consideration by Colonial as trustee of the Trusts as to what products should be developed, the submission to the effect that the set-up phase for the investment products, particularly the Deposit Options, was not part of the management and administration of the Funds should not be accepted. 40 The above conclusions are also supported by those particular documents the subject of the legal professional privilege claims to which I have had regard in considering the specific items (see below). 41 In addition to evidence about the development of the 'products', Mr Hanson gave evidence of the 'size and complexity' of the Funds. At relevant times, the FirstChoice Fund had hundreds of thousands of members with billions of dollars of funds under management. The selection of the FirstRate Saver option was made by many members and for much of the relevant time there were over 100,000 members who held a balance in FirstRate Saver with total funds in the billions. The selection of the FirstRate Term Deposit was made by thousands of members with hundreds of millions invested. 42 For most of the relevant times, the Essential Fund had hundreds of thousands of members with billions of dollars under management. The members who selected the Deposit Options were less but still in the thousands, accounting for hundreds of millions of dollars at most times. 43 Mr Hanson also gave evidence to the effect that save for two instances where external advice was obtained, all of the legal advice sought or provided in the sample documents 'was legal advice sought from or provided by internal lawyers within CBA Group's Banking Services legal team or CBA Group's Wealth Management legal team'. His evidence, on information and belief, was to the effect that the costs of the legal teams were 'not recharged to Colonial or to the FirstChoice Fund or the Essential Fund'. 44 Mr Hanson then deposed to matters concerning the sample documents. He introduced that part of his evidence in the following way: In the paragraphs that follow, I set out further information regarding the context in which [the sample] documents were created. This further information is based on my review of those documents, as well as knowledge of Colonial's business, referred to … above, and the background to the development of FirstRate Saver and FirstRate Term Deposits, and the establishment of the Essential Fund, as set out above, including the information provided to me by Mr Peter Labrie as set out [above]. 45 The information provided by Mr Labrie to which reference is made by Mr Hanson concerns the general description of the way in which financial products were identified and developed (quoted above). The evidence based upon the information given by Mr Labrie and the issues with the form of that evidence have already been addressed. 46 Therefore, the evidence given by Mr Hanson concerning the individual documents rests substantially upon what he has discerned from reading the documents. His evidence in that regard, where relevant, is considered below when addressing the particular sample documents still in dispute.

The relevance of the standing of Mr Kayler-Thomson as a representative applicant 47 It may be noted that it was common ground that any joint interest in the subject matter for the purposes of a claim to joint privilege arose at the time the communications, information or document came into existence: Schreuder at [94]. Therefore, in order to succeed on the application, Mr Kayler-Thomson had to demonstrate that he had an interest in the management and administration of the Funds at the time the documents came into existence. 48 For the most part, the claim by Mr Kayler-Thomson depended upon his status as the representative applicant. In effect, he claimed that there were members of the class of persons in respect of whom common questions arose for determination, who were joint privilege holders with Colonial as to certain of the documents. Therefore, according to his claim, because he was the representative applicant he was able to inspect those documents. He accepted that he was not the joint privilege holder as to many, if not most, of the privileged documents. Rather, his claim was that as to each of the documents there were one or more members of the class who held joint privilege and that was enough when it came to inspection for the purposes of the conduct of the representative proceedings. 49 For Colonial, emphasis was placed upon the extent to which Mr Kayler-Thomson had no personal right to joint privilege. Colonial maintained that Mr Kayler-Thomson gained no special access by reason of his status as a representative applicant. Instead, Colonial maintained that Mr Kayler-Thomson had to point to some basis personal to him which gave rise to joint privilege. In that regard, the following matters were said to assume significance concerning Mr Kayler-Thomson: (1) he was not a member of the Funds (and therefore not a beneficiary) prior to 15 October 2009; (2) he became a member of the FirstChoice Fund on 15 October 2009; (3) he has never been a member of the Essential Fund; (4) the extent of his own interest was confined to documents that related to the FirstRate Saver Select investment option being the only Deposit Option in which funds to which he was entitled were invested; (5) the investment in the FirstRate Saver Select option was not selected by Mr Kayler-Thomson but was the investment option that was applied under the terms of insurance arrangements pursuant to which he received a lump sum; and (6) the investment of the lump sum in the FirstRate Saver Select investment option commenced on 2 April 2015. 50 Therefore, irrespective of the merits of the claims made by Colonial concerning the distinction between the set-up phase and the operation phase, each of those matters were advanced as reasons why Mr Kayler-Thomson was not entitled to inspect the material in respect of which there had been a claim to legal professional privilege (assuming his standing as a representative applicant was not sufficient). 51 The evidence produced for Mr Kayler-Thomson on the application included the trust deeds in respect of each of the Funds. Neither party developed their submissions on the application by reference to the detail of the trust instruments. Late in the oral argument, some aspects of the trust instruments were addressed. Given the manner in which the arguments were presented it is not necessary to consider the detail of the trust instruments.

Onus 52 Colonial objects to providing inspection based upon its claim that it is entitled to legal professional privilege in the documents which is of a kind that may be asserted against Mr Kayler-Thomson. As the party asserting the claim to privilege, Colonial bears the evidentiary onus: see Hancock v Rinehart [2016] NSWSC 12 at [5] (and the authorities collected at fn 1). Therefore, it is for Colonial to demonstrate not only that the documents are privileged but that they are privileged from production to Mr Kayler-Thomson. If, as is the present case, there is evidence that supports the conclusion that the documents, though privileged, were the subject of a joint privilege held with the person seeking production, then the party objecting to production must establish that there is no joint privilege. To determine otherwise would be to undermine the disclosure process. It would cast upon the person who did not have the documents and was otherwise entitled to inspect the documents the obligation to prove that they were the subject of joint privilege. In a context where privilege is raised by Colonial as a basis for refusing inspection the burden of proof of all matters needed to establish the privilege falls on Colonial. So in the present case where there is sufficient evidence to raise the real possibility that joint privilege applies by reason of the existence of a trust relationship Colonial must demonstrate that the documents were not the subject of joint privilege.

Items no longer in dispute 53 By the time of the hearing of the application, Mr Kayler-Thomson accepted that there was no joint privilege in the documents comprising the following items: 1, 3, 4, 5, 10, 14, 15 and 20.

Issues 54 Given my conclusion that the set-up phase for the Deposit Options formed part of the management and administration of the Funds, the following issues remain for determination: (1) Are the principles as to joint privilege as between trustee and beneficiary confined to small trusts with few, identifiable beneficiaries who have vested interests? (2) Can a representative applicant in class action proceedings claim production of discoverable documents on the basis of a joint privilege not held by the representative applicant and to which only some members of the class are entitled? (3) Do any of the categories as described relate to the management and administration of the trust? (4) Having regard to the answers to Issues (1), (2) and (3), are any of the disputed discovered documents the subject of joint privilege that may be asserted by Mr Kayler-Thomson with the consequence that they must be produced by Colonial for inspection?

Issue (1): Are the principles as to joint privilege as between trustee and beneficiary confined to small trusts with few, identifiable beneficiaries who have vested interests? 55 For Colonial it was submitted that the joint privilege between trustee and beneficiaries that arises in the circumstances explained in Schreuder is confined to instances where the trust being administered is a 'closed trust with a known and relatively static cohort of beneficiaries'. The submission is advanced not by reference to any statement of principle to that effect in the decided cases but rather by referring to the factual context in which the joint privilege has been recognised to exist. It is pointed out that Schreuder itself was a case concerned with proceedings brought by a beneficiary under a will to remove the executor and trustee of the estate under the will. 56 For reasons which follow, the decided cases do not support the existence of a limitation of the kind submitted by Colonial. 57 In Schreuder, Buss JA at [94] observed as follows: 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, [the claimant] has had a vested interest in the residuary estate. 58 The terms in which that observation was made simply mark out the limits of what was being decided in that particular instance. There is no suggestion one way or the other as to whether a beneficiary who had something less than a vested interest would have joint privilege in legal advice obtained for the purposes of administration of the trust. 59 It has long been recognised that a beneficiary with a vested or contingent interest has 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: Re Tillott [1892] 1 Ch 86 at 88-89; Re Londonderry's Settlement at 932-933 (Harman LJ), 935 (Danckwerts LJ), 937 (Salmon LJ); Re Simersall; Blackwell v Bray (1992) 35 FCR 584 at 587-588; and Breen v Williams (1996) 186 CLR 71 at 89 (Dawson and Toohey JJ). It is a right which is enjoyed by a beneficiary with a future interest as well as a beneficiary with a present entitlement to income and applies whether the interest of the beneficiary is vested or contingent. 60 Where a beneficiary has a mere expectancy then the beneficiary has no proprietary interest and only a right to due consideration and due administration of the trust: Kennon v Spry; Spry v Kennon [2008] HCA 56; (2008) 238 CLR 366 at [74]-[75] (French CJ), [125] (Gummow and Hayne JJ); and Re Gulbenkian's Settlement Trusts; Whishaw v Stephens [1970] AC 508. 61 In addition, it may be observed that a court of equity has inherent authority to supervise, and if necessary, to intervene in the administration of trusts which authority 'does not depend on entitlement to a fixed and transmissible beneficial interest': CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 at [17]; and also Blenkinsop v Herbert [2017] WASCA 87; (2017) 51 WAR 264 at [72]. 62 Some of the authorities would confine the right of a beneficiary to inspect documents concerning the management and administration of a trust to the extent of the proprietary interest. Others relate the right to the supervisory jurisdiction of the Court when it comes to the administration of trusts. The debate is extensive: see, for example, Spellson v George (1987) 11 NSWLR 300 at 315-317; Re Simersall; Blackwell v Bray at 587-588; Avanes v Marshall [2007] NSWSC 191; (2007) 68 NSWLR 595 at [11]; McDonald v Ellis [2007] NSWSC 1068; (2007) 72 NSWLR 605 at [52]; Fay v Moramba Services Pty Ltd [2009] NSWSC 1428 at [99]; Silkman v Shakespeare Haney Securities Ltd [2011] NSWSC 148 at [27]; Re Estate Late Chow Cho-Poon; Application for Judicial Advice [2013] NSWSC 844 at [208]; Hancock v Rinehart [2013] NSWSC 1402 at [24]; Mercanti v Mercanti [2014] WASC 64 at [33]-[34]; Schreuders v Grandiflora Nominees Pty Ltd [2014] VSC 310 at [43]; Fast v Rockman [2015] VSCA 61 at [45]; AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Ltd [2015] NSWSC 216 at [74]; Guest v Guest [2015] VSC 761 at [71]-[72]; Deutsch v Trumble [2016] VSC 263; (2016) 52 VR 108 at [73]; Wright v Stevens [2018] NSWSC 548 at [252]-[286]; Re Combined Projects (Arncliffe) Pty Ltd [2018] NSWSC 649 at [29]; and Chan v Valmorbida Custodians Pty Ltd (Ruling) [2020] VSC 590 at [71]. 63 However, the supervisory jurisdiction extends to being able to compel a trustee to provide information, as was recognised by Gageler J in Palmer v Ayres [2017] HCA 5; (2017) 259 CLR 478 at [103]. 64 It may be that for parties with a proprietary interest there is a right to access the documents and for parties with a lesser interest the Court will require access to be provided where it is persuaded that it is necessary or appropriate to do so in the exercise of its supervisory jurisdiction. There is much to be said for the observation of Beach J in Webster (Trustee) v Murray Goulburn Co-Operative Co Limited (No 3) [2018] FCA 990 at [115] that 'it is surprising that one still needs to debate these matters'. 65 Whatever the position, its significance for present purposes concerns the extent to which it informs the rationale for the joint privilege. It may be that the rationale is to be found in the fact that the advice relates to the management and administration of the trust alone or it may be that the rationale is to be found in the extent to which there is, to use the language of Pullin JA in Schreuder at [10] 'a correlative duty and interest in the proper administration of the trust'. Indeed, there would appear to be some difficulty with the notion that legal advice obtained by a trustee when acting in the administration of a trust where there is no vested or contingent interest might be said to be enjoyed jointly with parties whose identity cannot be ascertained (such as where there is a class of discretionary objects). The consequence of recognising joint privilege in such circumstances may be that the precise limits of those who share in the privilege can never be ascertained and therefore the privilege can never be waived by all holders. Such an outcome seems unlikely. 66 However, in my view, these difficulties can be put to one side because the interest of the members as beneficiaries of the Funds was a proprietary interest of a kind recognised by equity. It may be debatable whether it is a vested or contingent interest. It was not vested in possession because it is the nature of a superannuation fund that in order to maintain its beneficial tax status, the right to access the funds must be limited to the circumstances permitted by the legislation. Broadly speaking, they are funds which are distributed on retirement according to the terms of the Superannuation Industry (Supervision) Act 1993 (Cth) and regulations made thereunder. Therefore, it is probably the case that the interest is contingent on those events: see the conclusion reached by Dixon J in Shimshon v MLC Nominees Pty Ltd [2020] VSC 640 at [107]. However, as the analysis of his Honour indicates, there are complexities in characterising the nature of the interest of the member of a superannuation fund because benefits can have different characteristics depending upon the parts of the legislation which apply. Although the rights comprise a beneficial interest in a form of statutory trust, they have some distinct aspects. In certain respects, the statutory rights have the characteristics of a vested interest because of the ability to access the funds by an administrative process in circumstances of financial distress or as otherwise permitted by the regulations and also, on death, the balance of the superannuation fund may be directed accorded to the wishes of the person for whose benefit the funds are held. For those reasons, in my view, it would not be correct to characterise the interest as a mere expectancy or the person involved as a discretionary object. Rather, it should be recognised as an equitable proprietary interest: Benson v Cook [2001] FCA 1684; (2001) 114 FCR 542 at [20]-[21] (Beaumont J), [80] (Kiefel J), [141] (Hely J). As such, it is a sufficient interest to found the existence of a joint privilege in legal advice obtained by the trustee in undertaking the management and administration of the statutory trust. 67 It was submitted for Colonial that the existence of statutory rights under the Superannuation Industry (Supervision) Act means that the principle of joint privilege does not apply. Those provisions provide rights to access documents in terms that are confined. Possibly, the existence of those statutory rights may limit the circumstances in which a person may seek documents relating to the management and administration of a statutory trust in respect of the superannuation funds or benefits of members. However, it does not follow that the established principles as to joint privilege would be affected by such provisions. Indeed, for reasons expressed below in relation to Issue (2), any such outcome would require unmistakable and unambiguous language in order to alter the common law privilege. Therefore, I do not accept that submission. 68 It follows that it is not necessary to consider the correctness of reasoning to the effect that joint privilege might arise in favour of a party who is merely a discretionary object of a trust: see Krok v Szaintop Homes Pty Ltd (No 1) [2011] VSC 16. There was no submission by Colonial to the effect that the interest of Mr Kayler-Thomson (and other members of the class of persons who would be bound by the answers to the common questions raised determined by the representative proceedings) were mere discretionary objects. 69 Rather, the submission advanced by Colonial concerned the character of the Funds. They were said to be too big and have too many members for joint privilege to apply. It may mean that there are many holders of the privilege, but it would not mean that they are uncertain. No authority was cited for that proposition and no principle was advanced which would mean that the joint privilege depended upon the size or characteristics of the trusts being administered as distinct from the interest of the beneficiary. Superannuation funds are required to be held within a trust structure and it is to be expected that the incidents of the law that apply would not come and go with the number of members of a particular superannuation fund. 70 In that regard, I note that it appears to have been assumed in Queensland Local Government Superannuation Board v Allen [2016] QCA 325 at [92]-[95] (Burns J, McMurdo P and Philippides JA agreeing) that joint privilege applies in respect of legal advice obtained in course of the management and administration of a superannuation fund: see also, Crowe v Stevedoring Employees Retirement Fund Pty Ltd [2003] VSC 316 at [37]. 71 For those reasons, the characteristics of the Funds referred to by Colonial are not reasons why there is no joint privilege.

Issue (2): Can a representative applicant in class action proceedings claim production of discoverable documents on the basis of a joint privilege not held by the representative applicant and to which only some members of the class are entitled?

Legal professional privilege and its abrogation 72 As the issues raised on the present application concern the pre-trial procedures of the Court, it is the common law as to legal professional privilege that applies, not the provisions of the Evidence Act 1995 (Cth) as to client legal privilege: Esso Australia Resources Ltd v Commissioner of Taxation (Cth) [1999] HCA 67; (1999) 201 CLR 49 at [17]-[28] (Gleeson CJ, Gaudron and Gummow JJ), [64] (McHugh J). 73 Legal professional privilege is a rule of substantive law: Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 490 (Deane J); approved in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 at [9]. Further, as was observed in Daniels at [11]: Legal professional privilege is not merely a rule of substantive law. It is an important common law right or, perhaps, more accurately, an important common law immunity. It is now well settled that statutory provisions are not to be construed as abrogating important common law rights, privileges and immunities in the absence of clear words or a necessary implication to that effect. 74 The principle of statutory construction identified in Daniels finds its modern formulation in Coco v The Queen (1994) 179 CLR 427 in the following terms at 437: The insistence on express authorization of an abrogation or curtailment of a fundamental right, freedom or immunity must be understood as a requirement for some manifestation or indication that the legislature has not only directed its attention to the question of the abrogation or curtailment of such basic rights, freedoms or immunities but has also determined upon abrogation or curtailment of them. The courts should not impute to the legislature an intention to interfere with fundamental rights. Such an intention must be clearly manifested by unmistakable and unambiguous language. General words will rarely be sufficient for that purpose if they do not specifically deal with the question because, in the context in which they appear, they will often be ambiguous on the aspect of interference with fundamental rights. 75 On the present application, there may be a joint privilege as between Colonial and some of its beneficiaries but not others and, in particular, not the representative applicant. If so, Colonial has a common law right against all those persons who are not joint holders of privilege to refuse to produce the documents. The common law right is personal to the joint holders of the privilege. It is a right that cannot be asserted by an agent or representative of the privilege holder without the authority of the privilege holder. 76 In those circumstances, there are two difficulties for Mr Kayler-Thomson if he is not himself the holder of the joint privilege. First, it is well established that a joint privilege can only be waived by the actions of all holders of the privilege. Authority conferred by beneficiaries who are holders of joint privilege but not by Colonial as the other joint holder would not be sufficient for Mr Kayler-Thomson to obtain access to the documents unless there was some statutory abrogation or curtailment of the privilege. Second, the provisions of Part IVA of the Federal Court of Australia Act 1976 (Cth) concerned with representative proceedings contain no express provision altering the common law right to legal professional privilege. 77 Further, even if Mr Kayler-Thomson was entitled to access the documents because he was a joint holder of privilege but it was not shown that all class members were joint holders then issues would arise as to whether Mr Kayler-Thomson and lawyers acting on his behalf as a representative applicant could have access to the privileged information for the purpose of using that information in the conduct of the representative proceedings. However, this particular aspect is a matter that need not be considered on the present application because Colonial raised no issue as to the use to which documents the subject of joint privilege as between Colonial and Mr Kayler-Thomson may be put in the conduct of the representative proceedings if his claim to inspection is upheld.

The submission by Colonial should be upheld 78 For Colonial it was submitted that Mr Kayler-Thomson's standing as a representative applicant does not confer authority upon him to share in the legal professional privilege that exists as between Colonial and other members of the Fund that do not include Mr Kayler-Thomson. For the following reasons that submission should be upheld. 79 First, as has been observed, legal professional privilege is an important common law right. If it is to be abrogated by legislation then the intention to do so must be clearly manifested. 80 Secondly, there is no suggestion in the language of Part IVA that the issue of legal professional privilege was intended to be addressed let alone abrogated in some way. 81 Thirdly, the representative proceedings procedure is conducted in a manner that identifies issues the determination of which will bind members of the class and the respondents to the representative action in future litigation between them. Absent instances where there is a settlement reached that applies to some or all claims (which is presented to the Court for approval), the representative role of the applicant is limited to the conduct of the questions of commonality: Dillon v RBS Group (Australia) Pty Ltd [2017] FCA 896; (2017) 252 FCR 150 at [66]-[67] (Lee J). Group members are bound by the determination of the claims giving rise to the common questions but not otherwise: Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212 at [53] (French CJ, Kiefel, Keane and Nettle JJ). Their claims, to the extent that they depend upon the resolution of issues other than the common questions must still be determined. The representative applicant does not conduct the entirety of claims on behalf of group members. 82 Fourthly, lawyers have the conduct of representative proceedings under Part IVA for the representative applicant not for each of the members of the representative class. They conduct the proceedings on behalf of the representative applicant. The representative applicant (and the lawyers acting for that representative) will owe duties to the class members: Wigmans v AMP Limited [2021] HCA 7 at [117] (Gageler, Gordon and Edelman JJ); and Dyczynski v Gibson [2020] FCAFC 120 at [209]-[210] (Murphy and Colvin JJ), [379] (Lee J). However, the representative applicant does not by reason of that capacity, acquire the privileges, immunities or other legal characteristics of particular members of the class. 83 Fifthly, save in the respects already described, the representative proceedings are conducted according to the usual procedures of the Court. 84 Sixthly, to the extent that a procedure is sought to be availed of to advance an aspect of the representative proceedings that concerns the determination of the questions of commonality (rather than any individual aspects of claims by group members) then the representative applicant can resort to that procedure: Watson v Schreuder Partners Lawyers [2020] FCA 1044 at [12] (Lee J). However, the right to assert joint privilege is not of a procedural character such that it might be said to form part of the steps that may be taken in the capacity as a representative applicant. 85 Seventhly, in certain respects a representative applicant may advance evidence and address common questions the determination of which are not necessary to resolve the individual claim of the representative applicant (provided those questions otherwise meet the requirements for common questions): Asirifi-Otchere v Swann Insurance (Aust) Pty Ltd (No 2) [2020] FCA 1355 at [17]-[24] (Gleeson J). However, the privy in interest that arises in respect of the common questions of fact or law as between the representative applicant and other class members does not confer upon the representative applicant the right to the legal professional privilege that particular class members may share with a respondent. 86 Different considerations may apply at the point where evidence is to be led by the representative applicant of material to which common interest immunity applies as between a respondent and some but not all class members and that material is said to be relevant to the determination of a common question. In such a case it will be the terms of the Evidence Act that will assume significance: Great Southern Managers Australia Ltd (Receivers and Managers Appointed) (in liq) v Clarke [2012] VSCA 207; (2012) 36 VR 308 at [31]. 87 However, for the reasons that have been given, I am not persuaded that a representative applicant takes on the joint privilege in legal advice of each and every class member. 88 I am conscious that the conclusion I have reached has the potential to give rise to difficulty in the conduct of representative proceedings where issues as to joint privilege arise concerning documents that are relevant to the determination of common questions. However, in the end it seems to me that without a clear legislative provision, the procedural characteristics of a representative action and the standing of the representative applicant cannot be called in aid to confer a right upon a representative party to access documents the subject of legal professional privilege that is not jointly held with the representative party. 89 Finally, I observe that it was submitted for Mr Kayler-Thomson that the principle sometimes called the implied undertaking or the Harman obligation (as described in Hearne v Street [2008] HCA 36; (2008) 235 CLR 125) might support his case. However, the protection afforded by that principle is not a basis for concluding that the joint privilege might be affected by the character of the representative proceeding.

Issue (3): Having regard to the nature of the Funds, do any of the categories as described relate to the management and administration of the Funds by Colonial as trustee? 90 For reasons given in relation to Issue (2), there is no joint privilege held by Mr Kayler-Thomson in respect of legal advice obtained by Colonial in the management and administration of the Funds on behalf of other persons who will be bound by the answers to the common questions in the representative proceedings. As will emerge, none of the categories of documents identified by the parties relate to the administration of the Funds on behalf of Mr Kayler-Thomson personally. Therefore, as there is no joint privilege as between Colonial and Mr Kayler-Thomson in his personal capacity, the answer to Issue (2) means that the documents are privileged from production irrespective of whether they relate to the management and administration of the Funds by Colonial as trustee. 91 Nevertheless, as the parties presented their evidence and fully argued the claim that the documents relate to the management and administration of the Funds by Colonial as trustee, I will deal with that question (as well as whether the documents related to administration of the Funds for Mr Kayler-Thomson personally). The findings will then be there in case the matter goes further.

Mr Kayler-Thomson personally 92 The position in relation to Mr Kayler-Thomson may be stated succinctly. 93 Of the categories of documents that remain in issue, items 2, 6, 7, 8, 9, 11, 12, 13, 16, 17, 18, 19, 21, 22 and 23 were brought into existence before Mr Kayler-Thomson was a member. 94 Of the remaining items (24 to 31 both inclusive), they were brought into existence before any funds of Mr Kayler-Thomson were invested in any of the Deposit Options. As has been explained the complaints raised in these proceeding concern conduct in relation to the rates of interest applicable for the Deposit Options. No other aspect of the management or administration of the Funds is in issue. Therefore, even though Mr Kayler-Thomson was a member at the time of the documents in items 24 to 31, he had no interest in the management or administration of the Deposit Options at that time. 95 It was suggested for Mr Kayler-Thomson that his interest as a member was sufficient. In effect, he had a personal joint privilege in respect of all documents that related to the management and administration of the Funds when he was a member. The Court was not taken to any authority that considered a case where the nature of the member's interest in the trust meant that he was unaffected by the management and administration of a considerable part of the investment and returns earned by the trust. The point may be a significant one in different circumstances such as where the trustee seeks to resort to the assets of the trust by way of exoneration or where a trustee seeks to enforce a right to be indemnified out of the trust assets. However, where the basis upon which the documents are produced is the performance of a discovery obligation that relates to a complaint about a particular aspect of the administration of the trust being an aspect in which Mr Kayler-Thomson has no personal interest, it is difficult to see how there is a joint privilege. The joint privilege must be co-extensive with the right to due management and administration. There is no evidence to suggest that, in the circumstances, Mr Kayler-Thomson had such a personal right in respect of the management and administration of the affairs of the Funds to which the discovered documents relate. 96 In addition documents comprising items 26, 27 and 28 relate to the Essential Trust of which Mr Kayler-Thomson was never a member. Therefore, the reasoning in the previous paragraph only has significance as to items 29, 30 and 31 when it comes to the claim by Mr Kayler-Thomson that he is personally entitled to joint privilege in the documents. 97 For those reasons, Mr Kayler-Thomson personally had no joint privilege in any of the disputed documents.

Mr Kayler-Thomson as representative applicant 98 If, contrary to my conclusion as to Issue (2), Mr Kayler-Thomson can assert a claim to joint privilege as representative applicant then Colonial maintains that as to items 1 to 28 they were not brought into existence in connection with the management or administration of the Funds as trustee. Rather, it contends that they were brought into existence by Colonial as part of the development of the Deposit Options as products. That is, they were brought into existence in the set-up phase and did not concern the manner in which the Funds were administered by Colonial as trustee. 99 For reasons I have given, I do not accept that a contention to that effect is made out by the general statements in the affidavit of Mr Hanson. The evidence is consistent with Colonial undertaking the steps of developing products such as the Deposit Options in the course of carrying out its responsibilities as trustee of the Funds (albeit in circumstances where it was carrying out those responsibilities for the purposes of other 'platforms' where it was the trustee or responsible entity). On the evidence, the development of the products was ongoing and was informed by Colonial's dealings as trustee with finance advisers. As trustee of the Funds it had an interest in developing new products to be added to the 'investment menu' for the Funds (and other platforms). 100 Therefore, it is necessary to consider the evidence advanced as to the particular categories of documents to see what is established by that evidence.

Items 2, 7 and 8 101 As to these items, Mr Hanson deposed as follows: Some of the sample documents comprise legal advice sought or provided in the course of development of the FirstRate Saver investment option, which was ultimately made available to members of the FirstChoice Fund. The documents referred to below relate to the Product team undertaking the activities as described in paragraph 24(d), where the investment option was subsequently to be made available to members in the FirstChoice Fund. In particular: (a) Item 2 is an email chain between internal lawyers in CBA's Wealth Management legal team considering whether amendments to the trust deed for the FirstChoice Fund were required in the context of the establishment of the FirstRate Saver investment option. (b) Item 7 is an email from a member of Colonial's Product team to an internal lawyer in CBA's Wealth Management legal team concerning the draft product specification for the FirstRate Saver investment option. (c) Item 8 is an email between internal lawyers in CBA's Wealth Management legal team concerning proposed amendments to the Product Disclosure Statement for FirstChoice Super and Pension. 102 The reference to para 24(d) is to an earlier statement of the general approach adopted in developing products for the Colonial platforms. It has already been quoted but for convenience of reference I will set it out again. It was expressed as follows: … the Product team also considers issues that are specific to the platform on which the financial product may be offered as an investment option, for example by considering information to be disclosed in product disclosure statements or other documents specific to the platform; 103 Putting his evidence in the context of para 24(d), on Mr Hanson's evidence the legal advice the subject of these items concerned matters specific to the platform on which the investment option was to be offered which was, in the case of items 2, 7 and 8, the FirstChoice Fund. Therefore, the documents concerned what needed to be done in order to be able to present FirstRate Saver as one of the Deposit Options for the FirstChoice Fund. The contents of the documents may be assumed to relate to the issues in the proceedings concerning the conduct of Colonial as to the Funds, particularly the FirstChoice Fund. 104 The management and administration of a trust is not confined to the way in which the funds are actually administered, but includes the process by which choices are made as to where to place the funds. That is especially so where the rules that apply to the Funds allow for a member to make a choice as to which investment option to select from the 'menu' which choice must then be given effect by the trustee. The evidence of Mr Hanson demonstrates that the documents concern the management and administration of the Funds. There is no need to consider the individual documents and I do not do so.

Item 6 105 As to item 6, Mr Hanson deposed as follows: Specifically, item 6 is an email from an internal lawyer in CBA's Wealth Management legal team to a member of Colonial's Product team concerning disclosures to investors in FirstChoice Investments and members of the FirstChoice Fund in respect of cooling off. 106 For reasons already given, the fact that the advice concerned another platform as well as the FirstChoice Fund does not mean that the document did not concern the management and administration of the FirstChoice Fund. The advice concerns the disclosures to be made to members about cooling off. Given the particular character of the Funds and the choices that can be made by a person as to where to place their superannuation funds, the administration of a trust with the characteristics of the Funds includes the disclosures that are to be made to members if they are to place their funds with Colonial for management within the Funds. For the same reasons as applied to items 2, 7 and 8 the evidence of Mr Hanson demonstrates that the documents concern the management and administration of the Funds. There is no need to consider the individual document and I do not do so.

Item 9 107 As to item 9, Mr Hanson deposed: Specifically, item 9 … is an email between members of Colonial's Product team dated 26 September 2008 where parts of the email are redacted for legal professional privilege. In the email chain, those personnel are considering the options relating to rebates that may be payable to advisers whose clients may invest in FirstRate Saver or FirstRate Term Deposits. The email chain includes emails with internal lawyers in CBA's Wealth Management legal team providing advice concerning that matter, and emails between the Colonial team members summarising aspects of that advice. 108 It appears from the evidence that Colonial pays rebates to financial advisers where their clients choose the FirstRate Saver as one of their investment options. Mr Hanson says that the advice was provided where the product was to be made available to platforms that included FirstChoice Fund. Therefore, it concerned the circumstances in which Colonial as trustee of that Fund might pay rebates to financial advisers where, in the course of administration of the Fund, a client of the financial adviser selected the FirstRate Saver. Therefore, the advice relates to the administration of the FirstChoice Fund. There is no need to consider the unredacted document and I do not do so.

Items 12, 17, 18, 19, 22 and 23 109 As to these items, Mr Hanson deposed as follows: A number of the sample documents comprise legal advice sought or provided in the course of development of the FirstRate Term Deposits product that was offered by CBA and made available to investors in FirstChoice Investments and the development of the FirstRate Term Deposits investment option that was ultimately made available to members of the FirstChoice Fund. These documents arose in the course of the Product team undertaking the activities as described in paragraph 24(c) above, where the issues being considered were common to both platforms and not dependent on the platform through which the financial product will be offered. In particular: (a) Item 12 is an email from an internal lawyer in CBA's Wealth Management legal team to a member of Colonial's Product team attaching a memorandum providing legal advice concerning various issues associated with the establishment of the FirstRate Term Deposits. (b) Item 17 is an email from an internal lawyer in CBA's Wealth Management legal team to a member of CBA's Wealth Management IT division concerning disclosures to members in relation to FirstRate Term Deposits. (c) Item 18 is email chain between an internal lawyer in CBA's Wealth Management legal team and a member of Colonial's Product team concerning proposed amendments to the Product Disclosure Statements for FirstChoice Investments and FirstChoice Super and Pension. (d) Item 19, which is now produced and shown to me … is an email chain between members of Colonial's Product team dated 31 March 2009, where parts of the email chain are redacted for legal professional privilege. The email chain follows on from the communications described in sub-paragraph (c) above, and concerns seeking clarification in respect of legal advice that was provided by an internal lawyer in CBA's Wealth Management legal team. (e) Item 22 is an email from an internal lawyer in CBA's Wealth Management legal team to a member of Colonial's Product team concerning the Product Disclosure Statements. (f) Item 23 is an email chain between members of Colonial's product team which forwards an email from an internal lawyer in CBA's Wealth Management legal team providing legal advice concerning application forms for investors in FirstChoice Investments and members of FirstChoice Super and Pension. 110 The reference to para 24(c) is to an earlier statement of the general approach adopted in developing products for the Colonial platforms. It has already been quoted but for convenience of reference I will set it out again. It was expressed as follows: … once a potential new financial product has been identified, the Product team then develops the financial product in conjunction with relevant third parties such as the investment manager, for example by establishing the relevant legal structures to facilitate the investments (such as any managed investment scheme through which the investments will be made) and establishing systems with the capability to facilitate the investments. These are matters that are not dependent on the platform through which the financial product will be offered; 111 On the evidence of Mr Hanson, it is not clear whether the documents are confined to considering matters that must be established within CBA because the terms of para 24(c) suggest that the subject matter of the communications concerns the legal structures and systems to be established within the relevant third party. However, it is to be noted that the communications are with CBA's Wealth Management legal team and they concern the development of a product that was made available to members of the FirstChoice Fund. As has been noted, the evidence of Mr Hanson does not establish that the identification of new products for inclusion in the investment options for the Funds and the development of those products was an activity that was outside the management and administration of the Funds. 112 However, given the possibility that the documents may be confined to matters that concern CBA rather than the form of a product (and its associated disclosures) which would be suitable for inclusions as an option in the FirstChoice Fund, I have examined the documents. Having examined the documents I am satisfied that they are concerned with the formulation and development of the characteristics of investment options for the FirstChoice Fund and concern, in particular, amongst other things, the superannuation environment pertaining to the Fund. They also concern the manner in which information will be provided to members of the FirstChoice Fund (and their advisers) concerning the investment options for the purposes of making the choices facilitated by the manner in which the Fund is administered. To the extent that they address these matters for the investors in FirstChoice Investments, for reasons that have been given the fact that they also concern matters relating to the management and administration of another platform does not mean that they do not relate to the management and administration of the FirstChoice Fund. 113 Therefore, I conclude that the advice related to the management and administration of the FirstChoice Fund.

Items 11, 16 and 21 114 As to these items, Mr Hanson deposed: Some of the sample documents comprise legal advice sought or provided in the course of development of the FirstRate Term Deposit investment option, which was ultimately made available to members of the FirstChoice Fund. The documents referred to below arose in the course of the Product team undertaking the activities as described in paragraph 24(d), where the Product was subsequently to be made available [to] members of the FirstChoice Fund. In particular: (a) Item 11 is an email from an internal lawyer in CBA's Wealth Management legal team to a member of Colonial's Product team concerning the disclosures relating to the investment options. (b) Item 16 is an email from an internal lawyer in CBA's Wealth Management legal team to a member of Colonial's Product team concerning proposed amendments to the Product Disclosure Statement for FirstChoice Super and Pension. (c) Item 21 is an email from an internal lawyer in CBA's Wealth Management legal team to members of Colonial's Product team concerning disclosure to be given in member statements. 115 For reasons already given, the documents described concern the management and administration of the FirstChoice Fund. 116 It was submitted for Colonial that it had statutory obligations as the holder of an Australian financial securities licence to issue product disclosure statements in respect of investment options that it offered and the legal advice related to those statutory obligations and not to the management and administration of the trust comprising the FirstChoice Fund. I do not accept that distinction. Colonial operated in a regulated environment in managing and administering the Funds. By operating the Funds in the manner that it did, it was necessary for Colonial to take steps to ensure that a product which was to be included as an investment option was a product in respect of which there was a proper product disclosure. 117 Where Colonial acted within its integrated business activities both as trustee of the Funds and as the developer of the product to be included as an investment option then it was discharging responsibilities that included the management and administration of the Funds. On the evidence, the activities were not segregated. The set-up phase was undertaken with the prospect of inclusion of the Deposit Options in the investment options in the Funds. For reasons that have been given, the development of products to be included as part of the options that formed part of the manner in which the Funds were administered meant that legal advice taken as part of the process was undertaken as part of the management and administration of those Funds (even though the products were also being developed for other platforms). 118 For those reasons, the documents concern the management and administration of the Funds. There is no need to consider the individual documents and I do not do so.

Item 13 119 Item 13 is an email from a members of Colonial's product team to an internal lawyer in CBA's Wealth Management legal team concerning approval procedures for the product disclosure statement which concerned the FirstRate Saver. It was prepared at a time when the FirstRate Term Deposit investment option was to be launched. 120 For reasons already given, advice as to such matters concerns the management and administration of the Funds. There is no need to consider the individual documents and I do not do so.

Items 24 and 25 121 As to these items, Mr Hanson deposed as follows: From time to time after the FirstRate Term Deposit product was made available in and from June 2009, Colonial's Product team corresponded on a range of matters relating to its ongoing operation in the context of undertaking activities of the kind described in paragraph 24(f) above. This included correspondence with internal legal advisers from CBA's Wealth Management legal team. 122 The reference to para 24(f) is to an earlier statement of the general approach adopted in developing products for the Colonial platforms. It has already been quoted but for convenience of reference I will set it out again. It was expressed as follows: … once the financial products have been developed and made available on one or more platforms, Colonial has an ongoing role managing the products, for example by facilitating investments in the products and issuing communications to members in relation to the performance of the products. 123 It is to be noted that the capacity or function being undertaken by Colonial that gives rise to the need for the 'ongoing role' is not specified. For present purposes, the way in which parties are introduced to the financial products is as members of the Funds who are invited to make choices as between investment options. The decision where to invest is not made by Colonial, but the decision to present the option as part of the way the Funds are administered by Colonial is one that is made by Colonial as trustee. Further, as has been explained, by reason of the integrated nature of its business, where Colonial develops products its does so for the purposes of its platforms (and in some instances third party platforms). On the evidence the FirstRate Saver and FirstRate Term Deposits were developed as products to be suitable for the FirstChoice Fund. 124 Mr Hanson went on to say as to items 24 and 25: Some of the sample documents comprise legal advice provided after the FirstRate Term Deposits product was offered by CBA and made available to investors in FirstChoice Investments and the FirstRate Term Deposits investment option was made available to members of the FirstChoice Fund. These documents arose in the course of the Product team undertaking the activities as described in paragraph 24(f) above, where the issues being considered were common to both platforms and not dependent on the platform through which the financial product was to be offered. 125 For reasons that have been given, the evidence does not establish that the business of Colonial was conducted in a manner that separated the development of the products from the prospect of their inclusion as investment options in the Funds. Rather, the prospect of inclusion formed part of the consideration undertaken during the set-up phase. Therefore, it was part of the management and administration of the Funds by Colonial. The fact that the ongoing issues as to product disclosure were being considered both for the purposes of the investment option in the Funds and in other platforms did not detract from that characterisation. 126 Therefore, items 24 and 25 contain legal advice in connection with the management and administration of the FirstChoice Fund.

Items 26, 27 and 28 127 The written submission advanced by Colonial as to items 26, 27 and 28 was as follows: Essential Fund: Various of the Sample Documents concern correspondence between Colonial's Product team and internal legal advisers in the period before the investment options in the Essential Fund were made available. In particular, items 26, 27 and 28 comprise legal advice sought or provided during the development of the Essential Cash Deposit, and the Balanced and Lifestage investment options, which were both deposits offered by CBA to members in the Essential Fund … In circumstances where the Essential Fund was only made available to members of the general public from in or around July 2013 …, documents recording advice provided in May 2013 do not concern the management or administration of the trust 128 These submissions seek to rely upon submissions to the same effect as those advanced in relation to the FirstChoice Fund which have not been accepted. Therefore, for reasons that have been given in relation to documents concerning the FirstChoice Fund, the legal advice is in connection with the management and administration of the Essential Fund.

Items 29, 30 and 31 129 As to these items, Colonial's position was explained in its written submissions in the following terms: Colonial accepts that three of the Sample Documents, properly construed, are likely to relate to legal services in connection with 'the management or administration' of the superannuation fund. This is because, while not falling within the previously accepted categories, the documents relate to legal services sought by Colonial as trustee concerning changes to liquidity conditions of, or terms and conditions of, cash investment options. One of the Sample Documents (item 29) summarises legal advice provided after the FirstRate Saver investment option was made available to members of the FirstChoice Fund in relation to disclosure to members of the FirstChoice Fund, in the context of changes to the way in which at call deposits would be treated in light of APRA's Prudential Standard APS 210 'Liquidity' … Finally, items 30 and 31 comprise legal advice provided after the FirstRate Saver and FirstRate Term Deposits investment options, which were administered by Colonial, were made available to members of the FirstChoice Fund (again, in the context of APS 210) … 130 It appears that the concession made by Colonial was on the basis that the advice sought concerned disclosure obligations of Colonial as trustee of the Funds which obligations existed once the FirstRate Saver was included as an investment option for members of the Fund. Once it is accepted that advice concerning the form of disclosure was part of management and administration of the Funds when a product was included as an investment option, then the same logic applies when advice is taken as to the form of the disclosure as part of the integrated business activities of Colonial during the set-up phase.

Payment of legal fees 131 The evidence to the effect that Colonial in its capacity as trustee of the Funds did not pay for the legal advice is not determinative. The arrangements in relation to the provision of legal advice may be explained by the relationship between Colonial and CBA and the manner in which arrangements were made for the provision of internal legal advice. As to the external legal advice the evidence is to the effect that it was allocated to Colonial's Head Office function. Again an allocation of that kind is consistent with the nature of Colonial's business. There was no evidence as to how the costs of the Head Office function are treated and whether any part of them is allocated to the Funds. Even assuming there was no such allocation, the evidence is not determinative and in the circumstances of this case provides little indication as to whether the legal advice was obtained as part of the management and administration of the Funds. In that regard, I note that it is accepted that the advice that was not recharged for items 29, 30 and 31 was nevertheless likely to relate to the management and administration of the Funds.

Concessions by Colonial 132 Finally, I note that it was accepted by Senior Counsel for Colonial that the documents in issue were discovered because they go to the common questions. Therefore, if I am wrong and the interest of Mr Kayler-Thomson as representative applicant was sufficient for him to be entitled to rely on the joint privilege of class members then, to the extent that I have found that the documents relate to the management and administration of the Funds the documents that remain in issue between the parties would not be privileged from production for inspection. As has been observed, it was accepted that items 29, 30 and 31 do relate to the management and administration of the Funds by Colonial as trustee.

Issue (4): Having regard to the answers to Issues (1), (2) and (3), are any of the disputed discovered documents the subject of joint privilege that may be asserted by Mr Kayler-Thomson with the consequence that they must be produced by Colonial for inspection? 133 For reasons that have been given none of the disputed documents must be produced by Colonial for inspection.

Conclusion and orders 134 Although the interlocutory application related only the part of the representative proceedings that concerned Mr Kayler-Thomson as representative applicant, the interlocutory application was brought by both representative applicants. It was common ground that the position of the second applicant was not to be determined on the interlocutory application and the position of the second applicant was to be reserved. Therefore, the issues were joined as between Mr Kayler-Thomson as first applicant and Colonial as first respondent. 135 It follows from the reasons that have been given that the application by Mr Kayler-Thomson for orders that Colonial do produce the sample documents for inspection on an unredacted basis should be dismissed. It appears that the determination of those sample categories will apply more generally. Therefore, the appropriate course is to make orders dismissing the interlocutory application. However, I will reserve liberty to Mr Kayler-Thomson to apply within 14 days to pursue the balance of the application if there is a basis to do so. 136 Colonial having been successful on the application which raised a discrete question for determination there should be an order that Mr Kayler-Thomson do pay the costs to date of and incidental to the interlocutory application. I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

Part IVA Superannuation Industry (Supervision) Act 1993(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (43 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (59)

Cited By (2)