Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor

Court of Appeal (NSW)|2006-06-05|Before: Beazley JA, Giles JA, Hodgson JA, Young CJ

Introduction 2 The claimant, the Macedonian Orthodox Community Church St Petka Incorporated, has pending before the Equity Division of the Supreme Court an application pursuant to the provisions of s 63 of the Trustee Act 1925 (NSW) (the Trustee Act), seeking judicial advice as to whether it would be justified in defending proceedings brought by the opponents against it and members of the executive council of the claimant (the Main Proceedings). The nature of the Main Proceedings and their progress within the Court thus far are set out in the judgment of Palmer J of 7 May 2004 (Application of Macedonian Orthodox Community Church St Petka Incorporated [2004] NSWSC 388). 3 The s 63 application is still pending. The matter had come before Palmer J on 6 May 2004. At that time, the claimant did not have a legal opinion as to the prospects of success, due to a lack of funds to obtain that opinion unless it had access to trust property, or alleged trust property. Palmer J considered that in the absence of such legal opinion it was not appropriate to give unqualified judicial advice that the claimant was justified in defending the Main Proceedings. His Honour considered that there was sufficient information before him to justify expenditure out of trust funds for the purpose of getting that opinion. Subsequently the opponents, the Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand and the Very Reverend Father Mitko Mitrev, sought access to the legal opinion that had been obtained by the claimant in support of its application for judicial advice (the legal opinion) and which had been placed before the Court on a 'confidential basis'. The opponents contended they were entitled to the opinion because it had been 'tendered' as evidence in the proceedings. 4 The application was determined by Young CJ in Eq on 8 May 2006. His Honour permitted inspection of the legal opinion save for specified paragraphs and so much of the table of contents as refer to those paragraphs: Application of Macedonian Orthodox Community Church St Petka Incorporated [2006] NSWSC 392 at [51]. The claimants seek leave to appeal from his Honour's determination. The summons for leave to appeal and, if leave is granted, the appeal, have been heard together. 5 Two essential issues are raised on the appeal. The first is whether, in an application for judicial advice pursuant to s 63 of the Trustee Act where specified persons have been given notice of the application pursuant to s63(4), the rules of natural justice permit and/or require the Court to give those persons access to the trustee's privileged legal opinion or specified parts thereof; the second is whether, in this case, the claimant waived legal professional privilege by providing the legal opinion to the Court in support of its application for judicial advice. 6 Before turning to a consideration of these issues, it should be noted that at the hearing before Young CJ in Eq the parties took diametrically opposed positions. The claimant contended that the legal opinion was privileged and should not be disclosed at all, but indicated that if the Court was against it, certain paragraphs only of the opinion should be disclosed. The basis upon which the alternative position was taken is not apparent. The claimant rejected that there had been waiver. The opponents considered that the only matter in contention before his Honour was waiver. Their position on that was once the legal opinion was placed before the Court, privilege was waived in its entirety and the whole of the legal opinion should be disclosed. 7 On the hearing before this Court, the parties' positions had modified. The claimant contended that the opinion was privileged in its entirety. Its position was that the doctrine of waiver did not apply in an application for judicial advice under s 63 and there was no other basis for disclosure. It submitted in any event that there had been no waiver in whole or part. The opponents contended that there had been waiver of privilege, but were content to accept the extent of the waiver encompassed in Young CJ in Eq's judgment. In that regard, the opponents accepted that once privilege had been waived, it was a matter for the discretion of the Court to determine the extent to which, as a matter of natural justice, access be given to the legal opinion. It was submitted that as such a decision was a purely discretionary one within the province of the trial judge's determination, leave to appeal should not be granted.

Nature of the application for judicial advice 8 A trustee, pursuant to the provisions of s 63(1), may apply to the Court for advice or directions on any question respecting the management or administration of trust property. If a trustee acts in accordance with the advice or directions so given then, pursuant to s 63(2), the trustee is deemed, so far as the trustee's own responsibility is concerned, to have discharged the trustee's duty as trustee in the subject matter of the application. The protection does not extend to the circumstance where the advice or directions have been obtained as a result of fraud, wilful concealment or misrepresentation by the trustee. An application for judicial advice is a non-adversarial proceeding and may be heard ex parte by the Court. However, the Court may direct that the application be served on specified persons: s 63(4). Persons served with an application are bound by the advice or direction made by the Court "as if the advice or direction had been given or made in proceedings to which the person was a party": s 63(11). 9 Section 63 does not specify whether a person given notice of the application has any entitlement to place material before or make submissions to the Court or to be provided with the material that is placed before the Court by the trustee in support of the application. This case is concerned with the last of these matters. In particular, the appeal is concerned with the question whether the opponents, who are the parties who have brought the Main Proceedings against the claimant, and who were served with notice of the application pursuant to s 63(4), are entitled to have access to the legal opinion in whole or in part. 10 Before proceeding further, it is useful to set out ss 63(3) and (4). They provide: "(3) Rules of court may provide for the use, on an application under this section, of a written statement signed by the trustee or the trustee's counsel or solicitor, or for the use of other material, instead of evidence. (4) Unless the rules of court otherwise provide, or the Court otherwise directs, it shall not be necessary to serve notice of the application on any person, or to adduce evidence by affidavit or otherwise in support of the application." 11 Part 70 r 3 of the Supreme Court Rules 1970 (NSW) makes provision for the use of a written statement on a s 63 application. The Rule does not proscribe the use of affidavits, although the usual practice is to proceed by way of statement. 12 The Court was informed that, in this case, the matter has proceeded by way of statement and the legal opinion was an annexure to that statement. The question that has arisen is whether, by placing the material before the court, the legal professional privilege that would otherwise attach to the legal opinion has been modified or abrogated by an overriding application of the rules of natural justice, or, alternatively, whether, in the circumstances, the claimant waived legal professional privilege in the legal opinion.

Does natural justice abrogate in whole or in part the claim for legal professional privilege? 13 Young CJ in Eq considered that the question that arose in these proceedings had been the subject of judicial determination in England, commencing with In re Moritz, Deceased [1960] Ch 251. In that case, a trustee had asked the Court for directions as to whether or not certain proceedings should be taken against two of the beneficiaries. All the beneficiaries had been joined as parties to the application in accordance with the practice of the English courts. Two of the beneficiaries who would be directly affected by any Order the Court might make on the application sought access to the material that the trustee had placed before the Court. Wynn-Parry J, at 254-255, considered that he ought to apply the "established practice" of the Court on such applications and exclude the affected parties when the subject matter of the proposed proceedings was debated and that they should not be furnished with the evidence upon which the Court was asked to act. He considered that the usual principle, that parties who had access to affidavit material should likewise have access to any exhibit to any affidavit (see In re Hinchliffe [1895] 1 Ch 117), did not apply. Wynn-Parry J distinguished the case of In re Kay's Settlement [1939] Ch 329, where Simonds J had decided that the action should not proceed. However, that case involved a pure question of law. 14 In In re Eaton, Deceased [1964] 1 WLR 1269 Wilberforce J accepted that In re Moritz correctly reflected the practice of the Chancery Division of the High Court on such applications. However, Wilberforce J stated, at 1270, that In re Moritz did no more than state a general rule and that the Court should adjust the procedures to the circumstances of a particular case "with a view to doing justice so far as possible to all the parties". His Honour observed that the principal proceedings in that case were likely to involve contentious issues of fact, so that there would be considerable difficulty in disclosing to the beneficiary defendants all of the material that the plaintiff had placed before the Court on the application for judicial advice, but that it was appropriate that they have access to some material. He thus invited the trustee, at 1271, to consider providing the defendant "with a good deal of the material which has been in his hands", indicating that on his examination of the material he considered that much of it could be made available. He also invited the defendants to submit to the Court any material they thought that the Court should have at that stage when considering whether to authorise the proceedings or not. 15 In Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547, Young J (as he then was) dealt with an application by a person, to whom notice had been given under s 63(4) of a trustee's application for judicial advice, to have served on them all the material that was to be placed before the judge on the hearing of the application and that that person be heard as if they were a party. The trustee resisted the application. In determining whether to accede to the application, his Honour considered both In re Moritz and In re Eaton. 16 Young J also referred to Smith v Croft [1986] 1 WLR 580, in which Walton J had observed that in such applications in the English courts, the beneficiaries were always made a party, allowed to be present and permitted to address the Court. Smith v Croft was a minority shareholders action, but Walton J considered such action was analogous to a trustee's action. His Honour specifically addressed the question of what part of the evidence filed in support of the application should be provided to the joined party. His Honour considered that such a party must be allowed to see all the affidavits, this being a requirement of the rules of court. His Honour observed, however, that it had been decided in In re Moritz that exhibits should not be furnished to the joined parties in such applications, notwithstanding that such practice was contrary to the principle established in In re Hinchliffe. His Honour considered (at 588) that in the case before him, the parties should have all such material "save to the extent that it consists of matters covered by legal professional privilege (this will always extend to counsel's opinion) or where there is some other excellent reason for this being held back". 17 Young J also referred to Midland Bank Trust Co Ltd v Green [1980] Ch 590 at 608-611. The question in that case was different from that which arises here. However, Oliver J in the course of his judgment appears to have accepted that certain material before a judge on a judicial advice application could be treated confidentially. Young J concluded that he did not think that he should be directly governed by the English practice because in that jurisdiction, there was a requirement that everyone interested should be joined as parties. That is not the position under s 63, where the Court may direct that persons may be given notice of the application. They are not joined as parties but, if given notice, are bound as if parties: s 63(11). His Honour said, that because the Court had decided that the applicant should be served with the s 63 application: "… I cannot see how the Court can proceed further, unless [the applicant] is permitted to take a meaningful part in the proceedings. That would require service, at least on a USSC undertaking basis ( United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766), of the non-controversial material before the Court. The Court would be justified in considering confidential material without it being shown to [the applicant] but basic principles of natural justice mean that that material should be kept to a minimum." 18 The circumstances governing the making of an application for judicial advice was also considered in Alsop Wilkinson v Neary & Ors [1996] 1 WLR 1220 at 1225-1226. In that case, the trustees had, during the course of proceedings commenced by Alsop Wilkinson to set aside two settlements, sought judicial advice. Lightman J held that the proposed application was flawed. He stated that the application for judicial advice must be made in separate proceedings, because, inter alia, the purpose of such an application was to inform a judge as to the strengths and weaknesses of the trustee's case and the course proposed to be taken. His Honour pointed out that it would be inappropriate for that material to be revealed to the court which had to try the case or to the other parties to the litigation. He stated that as a matter of principle, each of the parties to the litigation was entitled to know everything that was communicated to the court in the action. 19 Young CJ in Eq, in his decision in this matter, referred to Alsop Wilkinson but, with respect to his Honour, did so erroneously. His Honour stated that Lightman J had said, in an application for judicial advice, that "each party is entitled to know everything that is communicated to the court": at [21]. This is wrong. Reference has already been made to what Lightman J said, namely, that in the substantive proceedings before the court a party was entitled to know everything that was communicated to the court. This is an undoubted principle. It was one of the reasons why Lightman J considered that it was not appropriate for judicial advice to be given within the substantive proceedings. 20 Young CJ in Eq then correctly quoted that part of the judgment in which Lightman J explained the justification for the protection afforded to a trustee by an order made on such an application, namely, "that the beneficiaries are given the opportunity to make representations to the court". In this regard, it must be borne in mind that the English procedure is different from that in New South Wales. In England, the beneficiaries are made parties. In New South Wales, the Court may direct that the beneficiaries be given notice. However, even in the English system, there is nothing in Alsop Wilkinson that suggests that the joined beneficiaries in the judicial advice application are entitled to all material before the court. The case stands for no such proposition. Rather, it accepts, albeit impliedly, that beneficiaries may not be made privy to all material before the Court. Thus to the extent that any assistance can be drawn from Alsop Wilkinson, it is the opposite of that found by his Honour. Persons given notice under s 63(4) are not entitled necessarily to all of the material placed before the Court by the trustee. This is the more so in the case where those persons are parties to the substantive litigation. For the reason given by Lightman J to which reference has been already made, it would be inappropriate to reveal to the parties to the substantive litigation the matters necessary to be put before the judge hearing the judicial advice application relating to, for example, the strength and weaknesses of the trustee's case and the course to be taken in it. 21 In re Moritz and In re Eaton were also approved by the English Court of Appeal in Craig v Humberclyde Industrial Finance Group Ltd & Ors [1999] 1 WLR 129, especially at 135-136. That case involved an application by a liquidator for directions. However, in considering the procedure to be adopted on that application, the Court considered that the approach adopted on judicial advice application, as outlined by the Court in In re Moritz and in In re Eaton was correct and applied that approach by analogy to the application before it. 22 In this matter, Young CJ in Eq, having reviewed these authorities, stated at [27] that he did not consider there was any established practice in judicial advice applications to deny complete access to other parties who were properly endeavouring to assist the Court in the determination of the application. He considered, therefore, that the submission made on behalf of the claimant that the established practice in such applications was not to compel disclosure of the legal opinion obtained by the trustee, and that the principle of natural justice did not require provision of the legal opinion, was too widely stated. 23 Having reached that position, his Honour then moved to determine what material should be provided to the opponents. His Honour dealt with that question by identifying the underlying purpose of a s 63 application, namely, that the Court was essentially engaged in determining what ought to be done in the best interests of a trust estate and not in determining the rights of adversarial parties. His Honour emphasised that both aspects of that underlying rationale were equally important and emphasised that the Court was not, when dealing with a s 63 application, engaged in a task that gave some advantage in litigation to a trustee by allowing it to use trust funds to defend its position. Rather, the Court was engaged in a process of determining what was best for the trust estate. Those propositions are not disputed. His Honour then stated that, normally, the Court is best placed to make a decision in any matter where it was assisted by hearing the best statements of two opposing views. With that in mind, his Honour then approached the question of what material should be made available to the opponents. 24 His Honour considered that the approach that he had taken in Re Application of Perpetual Trustee Co Ltd [2003] NSWSC 1185 should be applied. On that approach, the Court would withhold confidential information from the opponent. This case, so far as this Court knows, is not concerned with confidential information. His Honour then added "or perhaps material which would be privileged in the principal application". His Honour then stated that the Court was interested in obtaining the comments of the opponents on the material before the court "whether that material is contained in counsel's advice or otherwise". His Honour purported to draw in aid the practice in the English courts, contained in Practice Direction 64B of the Civil Procedure Rules 1998 (UK), in reaching this conclusion. His Honour referred to the provisions of rule 7 which, he considered were "common sense and … relevant to [s 63 applications]". So far as is relevant to the determination of the matters in issue here, those rules provided: "7.2 Applications for directions whether or not to take or defend or pursue litigation should be supported by evidence including the advice of an appropriately qualified lawyer as to the prospects of success and other matters relevant to be taken into account … 7.6 If a beneficiary of the trust is a party to the litigation about which directions are sought, with an interest opposed to that of the trustees, that beneficiary should be a defendant to the trustees' application, but any material which would be privileged as regards that beneficiary in the litigation should be put in evidence as exhibits to the trustees' witness statement, and should not be served on the beneficiary . However if the trustees' representatives consider that no harm would be done by the disclosure of all or some part of the material, then that material should be served on that defendant. That defendant may also be excluded from part of the hearing, including that which is devoted to discussion of the material withheld." (Emphasis added) 25 His Honour considered that the effect of the English rules was to favour an approach whereby parties to whom notice was given under s 63(4) were to be given as much material as possible, even if those persons were "hostile" to the trustee's interests, provided that the trustee's case was not prejudiced. His Honour then stated at [40]: "All this material reinforces the view that the [opponents] should be given access to as much of [the legal advice] as does not … (b) contain material which is privileged in the principal litigation." 26 The claimant accepts this as a correct statement of law in the sense that it confirms the principle that there is nothing in a s 63 application which can or does undermine the substantive right of legal professional privilege. That, of course, is the position that is propounded by the claimant on the appeal. The claimant contends, however, that having correctly stated the law, his Honour failed to apply that principle because he then engaged in a process of analysing the legal opinion, indicating that he would permit inspection of it save for certain specified paragraphs. In doing so, his Honour at [41] said this: "I cannot give this judgment without referring to some parts of the [advice], but I will be very conservative and only refer to those matters which could not be the subject of confidentiality or privilege." 27 His Honour then referred to substantial portions of the legal opinion, by reference to paragraph number and content. For example, he indicated that certain paragraphs set out various parts of the Canons of the Church and judgments of the court bearing upon them; that other parts dealt with facts which were already in affidavits filed in the proceedings and yet other paragraphs referred to documents which were already in the public domain. Other paragraphs, again, contained a discussion of case law. His Honour considered that those and other such matters should be disclosed. 28 The claimant contends that this approach was erroneous and directly contrary to the principle that his Honour had stated applied, namely, that privileged material should not be disclosed to persons given notice under s63(4). The claimant submitted that the legal opinion was privileged in its entirety and that it was not for the trial judge to determine which parts ought to be produced to an opposing party. 29 It is correct that, subject to any waiver, the legal opinion was privileged in its entirety. It was a privileged communication, even if it set out Canons of the Church or dealt with facts and documents in the public domain. As Gaudron J said in Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 at 543: "… legal professional privilege does not protect documents, as such, but protects communications between lawyer and client".

Hence in that case it was held that copies of documents made for the purpose of obtaining legal advice or for use in legal proceedings and provided to the lawyer, were privileged even though the originals were not; the copies were communications to the lawyer. 30 It is settled law that legal professional privilege is a rule of substantive law that may be availed of to resist the giving of information or the production of documents that would reveal communications between a client and the client's legal advisor made for the dominant purpose of obtaining legal advice: Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 490 per Deane J; Baker v Campbell (1983) 153 CLR 52 at 115-116; Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 at [19]; Daniels Corp International Pty Ltd & Anor v Australian Competition & Consumer Commission (2002) 213 CLR 543; [2002] HCA 49 at [9]. It is not a rule of evidence: Daniels at [10]. Being a rule of substantive law, legal professional privilege applies regardless of whether legal proceedings are on foot: Baker v Campbell; Daniels at [9] - [10]. 31 The privilege has been described as "the very highest - so high that the solicitor is absolutely privileged and cannot be made to state what passed between him and his client": Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 per Fletcher Moulton LJ at 840. 32 In Baker v Campbell, Deane J at 117 described the privilege as "a fundamental and general principle of the common law". Earlier, at 116, his Honour indicated that the consequence of the underlying rationale of legal professional privilege (see [30] above) was such that: "… the courts themselves do not require disclosure of the content of such communications even if it appears that such disclosure would be conducive to justice in a particular case. " (Emphasis added)

33 Legal professional privilege also protects against compulsory processes of law unless there has been a clear statutory abrogation of the right. Thus, in Baker v Campbell it was held that privileged documents could not be seized under a search warrant issued under s 10 of the Crimes Act 1914 (Cth). In Daniels, the High Court held that the privilege was not abrogated by s 155 of the Trade Practices Act 1974 (Cth). 34 Given therefore the nature and reach of legal professional privilege it would be extraordinary if it was abrogated in statutory proceedings of the type constituted by an application under s 63. This is even more so given that there is nothing in s 63 itself which deals with the manner in which material is to be put before the court and where the rules of court do not expressly or impliedly abrogate the privilege (assuming, without deciding, that a procedural rule could do so). 35 It follows therefore that, as a matter of principle, legal professional privilege cannot be abrogated by the principles of natural justice. Legal professional privilege may be waived, but that is a separate question.

36 Accordingly, either in the absence of a finding that the claimant waived privilege, or alternatively that being a basis upon which his Honour could have determined the case (the opponent indicating that it formally contended that his Honour should have found waiver), Young CJ in Eq erred in directing that access could be had to portions of the legal opinion.

Waiver of privilege 37 Senior counsel for the opponents contended that the legal opinion had been formally tendered by the claimant, so as to become 'evidence' in the application. The consequence, on this submission, was that the Evidence Act 1995 (NSW) (the Evidence Act) applied. Alternatively, it was submitted that in any event, as the application was a proceeding in the Court, the Evidence Act applied (see s 4(1)), so that any material placed before the Court was 'evidence' within the meaning of that Act. On either basis, it was contended that Pt 3.10 Div 1, relating to client legal privilege, governed the provision of the legal opinion. 38 On the basis that the Evidence Act did apply, the opponents, although accepting that the legal opinion was privileged within the meaning of s118, contended that the privilege had been lost pursuant to s 122. That section provides, relevantly: "(1) This Division does not prevent the adducing of evidence given with the consent of the client or party concerned. (2) … this Division does not prevent the adducing of evidence if a client or party has knowingly and voluntarily disclosed to another person the substance of the evidence and the disclosure was not made: (a) in the course of making a confidential communication … (c) under compulsion of law …" 39 The first basis upon which the opponents pressed this argument must be rejected. The legal opinion was not adduced as evidence in the proceedings. Rather, it was provided to the Court in accordance with the rules of court as an annexure to a statement. 40 Nor should the second basis upon which the opponents rely, namely that the s 63 application was a proceeding in the Court, so that any material before the court becomes 'evidence' to which the Evidence Act applies, be accepted. Applications for judicial advice have a peculiar pedigree. This was discussed by Palmer J in Application of Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2005] NSWSC 558 and earlier by Young CJ in Eq in Re Application of Perpetual Trustee. As Palmer J pointed out in his judgment at [23], the court's jurisdiction under s63 is "an exception to the Court's ordinary function of deciding disputes between competing litigants" and is in the nature of "private advice". See also Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 440 per Sheller JA. 41 Part 70 r 4 provides that an opinion, advice or direction given under s 63 "shall be given by way of order". However, such an order is permissive in nature: the usual form is that the trustee "would be justified" in taking certain action: see Ritchie's Supreme Court Procedure (NSW) [70.4.1]. As such, the order does not carry with it the usual consequences of an order made by the Court in adversarial proceedings, regardless whether parties have been given notice of the application under s 63(4). Thus, it does not create a res judicata. It does not finally determine the rights of parties. Indeed, it does not, of itself, determine any rights, although, as explained, it has the potential to affect the rights of the parties given notice under s 63(4). It does not carry with it the consequences of breach, including, e.g. the exposure to contempt proceedings should an order be disobeyed. As the order is 'permissive' it cannot be breached. The consequences for obtaining an order improperly, e.g. by fraud or misrepresentation, is revocation. Further, in this case, the order sought by way of judicial advice has been specifically requested on the basis that it may be revoked and such orders as have been made to date have been made on that basis: see e.g. order made by Palmer J on 10 June 2005, Association of Macedonian Orthodox Community Church St Petka Incorporated (No 2). 42 Subsections 63(4) and (11) do not convert non-adversarial proceedings into adversarial ones. Whilst an order does have the binding effect provided for by s 63(11), that provision merely underscores the ultimate protective nature of the advice, should the trustee act upon it. We should add however, that a Court is not bound to accede to an application to give judicial advice. As Hodgson JA has pointed out at [65], s 63 proceedings have been held to be inappropriate to resolve disputes between trustees: see Harrison v Mills [1976] 1 NSWLR 42; nor are they an appropriate vehicle by which to settle disputes between parties to a trust: see Hartigan Nominees Pty Limited v Rydge (1992) 29 NSWLR 405. Thus, if a Court, on an application for judicial advice, came to the view that it was inappropriate to do so because it would otherwise be determining a dispute between the trustee and those to whom notice is or should be given under s 63(4), it may refuse the application. Indeed, that underscores that judicial advice proceedings are not adversarial. 43 The Supreme Court is entitled to govern the manner in which proceedings are conducted before it and, as already indicated, has done so in respect of s 63 applications by providing that material may be put before the Court by way of statement: Pt 70 r 3. A statement is not evidence. Nor is it treated by the Court as such. The maker of the statement is not liable to be cross-examined as would be an ordinary incident of the proceeding if the statement was evidence in proceedings. Rather, the Court by Pt 70 r 3 has, by its Rules, formalised the manner in which the material it needs in order to give the advice is put before it. 44 In any event, or alternatively, should we be wrong in relation to the above, s122 does not assist the opponents. Leaving aside the definitional provisions of s 117, the effect of Pt 3.10 Div 1 of the Evidence Act is to regulate the adducing of privileged evidence. Thus, ss 118 and 119 provide that evidence is not to be adduced if, on objection by a client, the Court finds that the adducing of the evidence would result in the disclosure of, relevantly, privileged material. Section 122 then permits privileged evidence to be adduced if the party consents: subs (1); or, alternatively, if there has already been a knowing and voluntary disclosure to another person of the substance of the material in circumstances where the disclosure was not made, for example, as a confidential communication or under compulsion of law: subs (2)(a), (c). The opponent relied upon s122(2). 45 In this case there has been no knowing and voluntary disclosure made "to another person". The Court is not "another person" within the meaning of subs (2). For that reason alone, subs (2) does not assist the opponents and in the circumstances in which the legal opinion was provided as an annexure to the statement and on a 'confidential basis', the claimant was plainly enough objecting to further disclosure and so any disclosure was as a confidential communication. Subsection (1) was not relied on, but it did not apply because the claimant consented to the legal opinion being provided to the Court otherwise than as by adduction of evidence, see above. 46 However, regardless of whether s 122 applies, the common law rules of waiver may apply so as to require that the legal opinion be provided to the opponents. Waiver may be intentional or may arise by implication: "An implied waiver occurs when, by reason of some conduct on the privilege holder's part, it becomes unfair to maintain the privilege": Maurice at 487 per Mason and Brennan JJ. See also Mann v Carnell at [28] ff. 47 An implied waiver will arise, for example, where a party has disclosed portion of otherwise privileged material, but seeks to maintain privilege in the remainder: see Wigmore, Evidence in Trials at Common Law (1961) Vol 8 par 2327 p 636. As Mason and Brennan JJ pointed out in Maurice at 488, fairness will require that waiver as to one part of a protected communication should result in waiver of the rest, so as to ensure that the opposing litigant is not misled by an inaccurate perception of the disclosed communication. However, waiver of portion of the material does not necessarily constitute a waiver of the whole. As their Honours pointed out in Maurice, the focus of the enquiry as to whether there has been waiver of the whole focuses upon the fairness of imputing such a waiver. 48 In Maurice, the Court was concerned with whether the claimant in an Aboriginal land claim had waived legal professional privilege in the source materials of a Claim Book that had been tendered in evidence. The Claim Book specified the claimants, the claimed land and the basis of the claim. It contained a substantial amount of historical and anthropological information. The Court held, however, that the inclusion of that material should not undermine the protection of the privilege of the source materials. The Claim Book was not treated as evidence of the facts alleged in it. In the circumstances, the Court considered that privilege had not been waived. As Mason and Brennan JJ said at 489: "…it would be unfair to impute to the respondents a waiver of the privilege attaching to source materials merely because the respondents, in complying with Practice Directions without clear procedures to follow, provided information tracing the basis of their claim." 49 Their Honours further held that the appellants had not been prejudiced by a partial disclosure. 50 In Mann v Carnell, their Honours in the joint judgment pointed out, at [28], that it was "the inconsistency between the conduct of the client and maintenance of the confidentiality which effects waiver of the privilege". As their Honours explained at [29]: "Disputes as to implied waiver usually arise from the need to decide whether the particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law": eg, Goldberg v Ng (1995) 185 CLR 83 at 95 … What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large." 51 In this case, the claimant sought to protect the legal opinion from disclosure by placing it before the Court on a 'confidential basis'. Young CJ in Eq queried what that meant. For present purposes, however, it is sufficient to note that by doing so it is apparent that the claimant sought to protect the material from disclosure in circumstances where, at an earlier point of time in the proceedings, Palmer J had indicated that such legal opinion was in effect necessary before he was in a proper position to give the judicial advice sought. In other words, the intent of placing the legal opinion before the Court was to respond to Palmer J's indication, and on the basis that it should not be further disclosed. 52 As was pointed out in Mann v Carnell, the intention of the party does not determine whether or not there has been an implied waiver. Thus, in Benecke v National Australia Bank (1993) 35 NSWLR 110, the plaintiff was held to have waived privilege that otherwise would have attached to the instructions that she gave to her barrister by giving evidence of those instructions in legal proceedings against her former solicitors. It was accepted in that case that, subjectively, the plaintiff had not intended to waive privilege and indeed may not have turned her mind to it: see Mann v Carnell at [29]. However, by herself giving evidence of those instructions she could not prevent the barrister from giving the barrister's version of events. 53 In our opinion, the claimant did not waive privilege when the legal opinion was placed before the Court as an annexure to the statement. It is a usual practice in proceedings of this type for a Court to be assisted by a legal opinion. Indeed, the Court would, in many instances, be at a serious disadvantage if it did not have that assistance. However, in circumstances where the judicial advice proceedings remain essentially non-adversarial, notwithstanding that there is a contradictor, it would be contrary to principle to find an implied waiver in the claimant's conduct in placing the matter before the Court. This is the more so in the circumstances in which the material was placed before the Court here. Conclusion 54 That, however, is not the end of the matter. We have already stated above that an application under s 63 is not an adversarial proceeding. This is so notwithstanding that in this case the claimant and the opponents are adversaries in other proceedings. There is a significant difference between parties being adversaries and proceedings being or not being adversarial. The mere fact that parties are adversaries does not convert the essential nature of a non-adversarial proceeding, as a s 63 application is, into an adversarial one. This was emphasised by Lord Oliver in Marley & Ors v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 where his Lordship, delivering the judgment of the Privy Council, said at 201: "… it should be borne in mind that in exercising its jurisdiction to give directions on a trustee's application the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties. That is not always easy, particularly where, as in this case, the application has been conducted as if it were hostile litigation; but it is essential that the primary purpose of the application - indeed, its only legitimate purpose - be not lost sight of …" 55 His Lordship pointed out at 202 that the hostility with which the beneficiaries had received the trustee's application led to the application for judicial advice being conducted as if it involved the resolution of issues between the parties rather than "an in-depth consideration of the sufficiency of the evidence required to enable the court to give fully and properly informed directions to the … trustee".

56 As has been recognised in the English authorities, as well as in both the Re Permanent Trustee Australia decisions, the Court is assisted by having the views of those persons who are likely to be affected by the judicial advice. For those persons to be able to make a meaningful contribution to the Court's determination of the s 63 application, it is appropriate that they have as much material as possible and be entitled to make legal submissions to the Court. However, the essential non-adversarial nature of the application is not, thereby, transformed into an adversarial one. It might be, however, that the Court would indicate material to which it suggests the persons given notice under s 63(4) should have access to: see e.g. In re Eaton, where Wilberforce J invited the trustee to make material available, indicated that he thought much of the material upon which the trustee relied could be made available, but did not otherwise direct the trustee to provide material to the beneficiaries. 57 A like approach could be taken in judicial advice proceedings brought under s 63. Thus, the Court could invite the claimant to make material available to persons to whom notice had been given under s 63(4), but, it seems to us that there is nothing in the practice of the English Courts upon which Young CJ in Eq relied to indicate that the Court could compel the trustee to give information or documents to that persons. The Court could, however, indicate to a trustee that unless it was prepared to make certain material available then the advice that the Court was able to give might be qualified or limited because it would not have the assistance it might have been afforded had the affected persons had access to more material than the trustee was prepared to provide. 58 Our view in this regard is reinforced by the practice, entrenched in the English decisions, to exclude persons from the hearing when matters relating to the contested proceedings (in this case the Main Proceedings) are being considered. But, whether or not a judge hearing such an application is entitled to be more prescriptive than we have indicated, that does not entitle persons served under s 63(4) to privileged material, and the judge cannot compel disclosure. 59 Nor in our opinion, does the approach adopted in United States Surgical Corporation, that was adopted by Young J in In re Permanent Trustee Australia, apply to privileged material. It would be contrary to principle if that were the case, save to the extent that a trustee otherwise consented. 60 It may also be that, as indicated in [42] above, the Court hearing the judicial advice proceedings comes to the view that judicial advice should not be given. In that event, we would anticipate that no question would arise of inviting the claimant to make material available. 61 We add one thing. Young CJ in Eq stated at [42] that, having indicated the paragraphs of the legal opinion that he considered should be made available to the opponents, he would stand the matter over to allow objection to be made to any of his "preliminary rulings". The claimant did not avail itself of that opportunity but rather sought leave to appeal. No criticism should be made of the claimant in failing to do so. His Honour had proceeded upon a basis that what the claimant contended was wrong in principle and have upheld that contention. It would not have been of any assistance, therefore, for the claimant to have returned before his Honour to object as to particular paragraphs of the legal opinion when his Honour's decision was made on a basis which has been established to have been wrong in law. 62 Accordingly, we propose the following Orders:

Remit the matter to the Equity Division for determination in accordance with these reasons;

The opponents pay the costs of the summons for leave to appeal and of the appeal and are to have a certificate under the Suitors' Fund Act 1951 if otherwise entitled;

The opponents pay the claimants' costs of the hearing before Young CJ in Eq. 63 HODGSON JA: I agree with Beazley and Giles JJA that leave should be granted and the appeal upheld, and the matter remitted to the Equity Division, for the reason that the primary judge did not deal adequately with the question of legal professional privilege. However, I respectfully disagree with one important aspect of their Honours' judgment and with the orders as to costs. 64 At pars.[41], [42] and [56], their Honours say that s.63 proceedings are not adversarial proceedings, do not determine any rights, and do not create any res judicata, even in respect of parties bound by the advice pursuant to s.63(11). It seems to me that the whole point of having parties bound pursuant to s.63(11) is to affect their rights to claim against the trustee for breach of trust, and to that extent to determine their rights. In any event, even if it is generally the case that s.63 proceedings are not adversarial proceedings, do not determine any rights, and do not create any res judicata, this is not necessarily so, and in my opinion it is not so in this case. 65 It has been held that s.63 proceedings are inappropriate to resolve disputes between trustees (Harrison v. Mills [1976] 1 NSWLR 42), and that advice under s.63 is generally not an appropriate resolution of disputes between parties to a trust (Hartigan Nominees Pty. Limited v. Rydge (1992) 29 NSWLR 405). However, if a trustee does seek to resolve what is in substance a dispute with a beneficiary or other claimant to trust property by making an application for advice under s.63, then, unless and until the Court dismisses the application because it is an inappropriate procedure, the proceedings are not prevented from being adversarial proceedings simply because the trustee has chosen to bring them in that way. 66 The judicial advice sought in this case is to the effect that the trustee would be justified in using trust property in defending proceedings in which a claim is made to the effect that the trust requires this very property to be used, not as it is used by the trustee, but rather in accordance with decisions of the plaintiffs. Plainly, part of the plaintiffs' claim is that any use of the property to defend their claim would be a breach of trust. 67 In these circumstances, judicial advice to the effect that the trustee is justified in using the property for the purpose of defending this claim, which bound the plaintiffs pursuant to s.63(11), would protect the trustee against a subsequent claim by the plaintiffs that property actually used for that purpose, pursuant to the judicial advice, was so used in breach of trust, at least unless the plaintiffs could show that the judicial advice was given on the basis of facts that were incorrect or incomplete in some material respect. In that way, particularly having regard to the extent of trust property that could be thus affected, in my opinion the judicial advice would affect the rights of the trustee and the rights of the plaintiffs to a very substantial degree. It would do this to a far greater extent than in the more usual case where advice is sought about bringing or defending legal proceedings, in which the advice sought relates to claims by or against parties not associated with the trust itself. 68 So considered, in my opinion, despite these proceedings being s.63 proceedings, they are in substance adversarial. Provision for revocation of the advice does not alter this, in my opinion, as use of the property in reliance on the advice before revocation occurred would be protected, again unless its factual basis was impugned. This view is strongly confirmed by the circumstance that an interlocutory injunction has been granted that restrains the trustee from using the trust property for defending the proceedings except in accordance with such judicial advice. 69 Because the proceedings are in substance adversarial, in my opinion the principles discussed in Attorney-General for the Northern Territory v. Maurice (1986) 161 CLR 475 are applicable. Even if the trustee has not intentionally waived privilege, its conduct in relation to the proceedings may be such that waiver is imputed to it. This occurs when a person having legal professional privilege in respect of communications concerning legal advice intentionally makes assertions about the content of these communications to a court hearing adversarial proceedings, so that it would be a denial of procedural fairness if the other party to the proceedings is not given access to those communications. In that event, legal professional privilege is waived, at least to the extent that the Court considers necessary in the interests of procedural fairness: Maurice; Standard Chartered Bank of Australia Limited v. Antico (1993) 36 NSWLR 87. If a question arises as to admissibility of such material under the Evidence Act 1995, a waiver so imputed amounts to consent in terms of s.122 of the Act: Telstra Corporation Limited v. BT Australasia Limited (1998) 156 ALR 634. 70 It may be that such waiver has not occurred yet. I agree in substance with pars.[45] and [51] of the judgment of Beazley and Giles JJA. Submission to the Court of legal advice given to a trustee is such a usual incident of s.63 applications that, before waiver is imputed in this case, the trustee should be given a choice as whether or not to continue to ask the Court to have regard to this advice. If the trustee does so continue, in my opinion that would amount to waiver of legal professional privilege at least to the extent indicated above; and in my opinion, it would then be a matter for the judge of the Equity Division to consider the extent to which disclosure of the advice to the other parties is required in order that procedural fairness be afforded, having regard to the nature of the adversarial issues between the trustee and those parties. 71 It may be that the judge will come to the same conclusions as arrived at by the primary judge; but it is necessary that the matter be reconsidered on the basis of these principles. Because the matter has proceeded in this Court on an issue not clearly articulated before the primary judge, and because the appeal may turn out to yield no benefit to the trustee, I would leave the costs of the appeal, as well as the further hearing, in the discretion of the judge of the Equity Division. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)s 155

Trustee Act 1925(NSW)ss 63, 64

Evidence Act 1995(NSW)ss 4(1), 118, 122

CITATION: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor [2006] NSWCA 160

Alsop Wilkinson v Neary & Ors [1996] 1 WLR 1220 Application of Macedonian Orthodox Community Church St Petka Incorporated [2004] NSWSC 388 Application of Macedonian Orthodox Community Church St Petka Incorporated [2006] NSWSC 392 Application of Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2005] NSWSC 558 Attorney-General (NT) v Maurice (1986) 161 CLR 475 Baker v Campbell (1983) 153 CLR 52 Benecke v National Australia Bank (1993) 35 NSWLR 110 Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 Craig v Humberclyde Industrial Finance Group Ltd & Ors [1999] 1 WLR 129 Daniels Corp International Pty Ltd & Anor v Australian Competition & Consumer Commission (2002) 213 CLR 543; [2002] HCA 49 Harrison v Mills [1976] 1 NSWLR 42 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 In re Eaton, Deceased [1964] 1 WLR 1269 CASES CITED: In re Hinchliffe [1895] 1 Ch 117 In re Kay's Settlement [1939] Ch 329 In re Moritz, Deceased [1960] Ch 251 Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66 Marley & Ors v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 Midland Bank Trust Co Ltd v Green [1980] Ch 590 Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 Re Application of Perpetual Trustee Co Ltd [2003] NSWSC 1185 Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 Ritchie's Supreme Court Procedure (NSW) Smith v Croft [1986] 1 WLR 580 Standard Chartered Bank of Australia Limited v Antico (1993) 36 NSWLR 87 Telstra Corporation Limited v. BT Australasia Limited (1998) 156 ALR 634 United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 Wigmore, Evidence in Trials at Common Law (1961) Vol 8

LOWER COURT MEDIUM NEUTRAL CITATION: Application of Macedonian Orthodox Community Church St Petka Incorporated [2006] NSWSC 392

Whether the claimant waived legal professional privilege by providing the legal opinion to the Court in support of its application for judicial advice. Abrogation of legal professional privilege Held per Beazley and Giles JJA, Hodgson JA agreeing: (i) Persons served with notice of an application for judicial advice are not necessarily entitled to all of the material the trustee places before the Court, particularly where those persons are party to the substantive litigation, in relation to which judicial advice is sought. In re Moritz, Deceased [1960] Ch 251 (considered); In re Eaton, Deceased [1964] 1 WLR 1269 (considered); Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547; Midland Bank Trust Co Ltd v Green [1980] Ch 590 (discussed); Alsop Wilkinson v Neary & Ors [1996] 1 WLR 1220 (followed); Craig v Humberclyde Industrial Finance Group Ltd & Ors [1999] 1 WLR 129 (ii) There is nothing in a s 63 application which can or does undermine the substantive right of legal professional privilege. Subject to any waiver, the legal opinion was privileged in its entirety. Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 (discussed) (iii) Legal professional privilege is a rule of substantive law, and absent express or implied abrogation by statute or the rules of the court (assuming a procedural rule could do so), it is not abrogated by the principles of natural justice. Attorney-General (NT) v Maurice (1986) 161 CLR 475; Baker v Campbell (1983) 153 CLR 52 (followed); Mann v Carnell (1999) 201 CLR 1; [1999] HCA 66; Daniels Corp International Pty Ltd & Anor v Australian Competition & Consumer Commission (2002) 213 CLR 543; [2002] HCA 49 (followed); Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 (discussed) (iv) The primary judge erred in allowing the opponents access to parts of the legal opinion, in the absence of a finding that the claimant had waived privilege.

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