Oztech Pty Ltd v Public Trustee of Queensland

2.1 The proceedings and the first application for production 5 The substantive proceeding is a representative proceeding instituted by Oztech under Pt IVA of the Federal Court of Australia Act 1976 (Cth). The issues were summarised by Yates J in Oztech Pty Ltd v Public Trustee of Queensland [2015] FCA 1010 (Oztech (No 1)) at [1]: [The proceeding] arises out of the respondent's role as the trustee for noteholders in respect of senior unsecured notes issued by the company now called Octaviar Investment Notes Limited (in liquidation) (OIN). A company now called Octaviar Limited (receivers and managers appointed) (in liquidation) (OL) was a guarantor of OIN's obligations under the notes. The applicant alleges that, following a sharp drop in OL's share price in January 2008, and OL's sale of a business (the Stella Group) which was completed on 29 February 2008, the respondent acted too slowly to protect the interests of noteholders, in particular by failing to apply to wind-up OIN and OL, and to take other steps, by 29 February 2008, with the consequence that the respondent breached his statutory, contractual and general law duties to noteholders. 6 Relevantly, the applicant asserts in broad terms that after 18 January 2008, the Public Trustee acted too slowly in seeking the winding up of OIN and OL. In his defence, the Public Trustee alleges among other things that after 18 January 2008 (and specifically from 4 February 2008) he acted upon legal advice in fulfilling his obligations as trustee. In this regard, it was not in dispute that the Public Trustee waived privilege over the advice he received from his solicitors relating to steps which he should take in relation to limiting any liabilities that might arise in the future (the future conduct advice): Oztech (No 5) at [9] and [13]. As Perram J explained: "Plainly enough, it would be inconsistent for him to assert that he relied upon legal advice after 18 January 2008 in acting as he did whilst maintaining the confidentiality of that advice and, no doubt, that is why the Public Trustee does not dispute the entitlement of Oztech to examine that material": Oztech (No 5) at [13]. Rather, the documents sought in Oztech (No 5) and here comprise legal advice sought by the Public Trustee (and the associated briefing documents) in relation to the past conduct of the Public Trustee and its officers, including as trustee of OIN (formerly known as the MFS Investments Notes Limited (MFS)) Note Trust, and on any potential liability arising out of those past actions: Oztech (No 5) at [22] (the past conduct advice). Justice Perram concluded that there had been no waiver of privilege of the past conduct advice on the ground that there was no inconsistency between the Public Trustee's allegation in his defence that he acted on the future conduct advice, on the one hand, and the maintenance of privilege by the Public Trustee over the past conduct advice, on the other hand: Oztech (No 5) at [26].

2.2 The further supplementary discovery 7 Following delivery of judgment in Oztech (No 5), the Public Trustee served further supplementary discovery on Oztech in May 2016. Oztech submits that by producing certain documents identified in the further supplementary discovery without redaction, the Public Trustee has waived privilege in the past conduct advice. These documents were, in turn, attachments to letters sent to the Queensland Crime and Misconduct Commission (CMC) by the Public Trustee concerning the referral of one of his employees, Mr Ian Kelly, in relation to the MFS Note Trust. Mr Kelly had been the Director, Client Services, of the Public Trustee. 8 In particular, the further supplementary discovery comprised the following. (1) A letter dated 4 June 2008 with attachments (the 4 June 2008 letter) from Mr McKay, the then Acting Deputy Director General, Crown Law, to Hall Payne Lawyers, the solicitors then acting for Mr Kelly. Mr Kelly's employment with the Public Trustee at that time was suspended and later terminated. In the letter, Mr McKay set out particulars of the Public Trustee's allegations in the employment dispute between Mr Kelly and the Public Trustee then before the Queensland Industrial Relations Commission (the IR Commission). (2) A letter dated 10 July 2008 with various attachments from Hall Payne Lawyers on behalf of Mr Kelly to the CMC (the 10 July 2008 letter). 9 As I explain below, Oztech ultimately relied only upon production of an unredacted passage in the transcript of proceedings on 5 June 2008 in the IR Commission which was attached to the 10 July 2008 letter as the ground on which it was said that the Public Trustee has waived privilege over three legal advices and associated briefing documents, namely: (1) an opinion of Mr Gotterson QC (now the Hon Justice Gotterson of the Supreme Court of Queensland Court of Appeal) obtained by Crown Law and provided to the Public Trustee on 17 March 2008; (2) advice in relation to aspects of Mr Gotterson QC's opinion, provided by Clayton Utz to the Public Trustee on 10 and 17 April 2008; and (3) advice in relation to aspects of Mr Gotterson QC's opinion, provided by Mr Sofronoff QC in conference on 17 April 2008. 10 For convenience, I will refer to the three advices and briefing documents collectively as the Legal Advices. The circumstances in which the Legal Advices were prepared are explained in Oztech (No 5) at [16]-[23]. 11 It is not in dispute that the Legal Advices themselves have not been produced and that the Public Trustee has consistently asserted privilege over them.

2.3 The 10 July 2008 letter 12 The 10 July 2008 letter is from Hall Payne Lawyers, the solicitors then acting for Mr Kelly, to the CMC, and is accompanied by some 500 pages of attachments. 13 Among the attachments to that letter is the transcript of a conciliation conference on 5 June 2008 before the IR Commission between Mr Kelly and the Public Trustee in relation to Mr Kelly's employment. That transcript is stamped "RELEASED TO PARTIES AND PUBLIC State Reporting Bureau Date: 6 June 2008 Attachments - NO". The State Reporting Bureau is identified as the author of the transcript at the top of the first page. By contrast, the transcript of proceedings in the IR Commission on 30 May 2008 (which was also included as an attachment to the 10 July 2008 letter) was stamped "RELEASED TO PARTIES ONLY…". I infer from this that the transcript of proceedings in the IR Commission on 5 June 2008 was publicly available and was not the subject of any confidentiality orders. No evidence was led to the contrary. 14 The transcript records that during the conference on 5 June 2008, the following exchange occurred between counsel for Mr Kelly (Mr Amerena) and counsel for the Public Trustee (Ms Watson) in which Mr Amerena sought to obtain copies of the Legal Advices following receipt of the particulars in the 4 June 2008 letter from Mr McKay: MR AMERENA: All right. Now, the documents, in our letter to you today we have listed a number of documents that we're entitled to from - assisted by the instructions we've received by the client and in ignorance of what are the true allegations against us. But these documents are being asked for because of the nature of what you're [sic] said in your letter of 4 June, let's deal with 4 June. The fact of the matters is that my client is aware, because it was part of the process, that advice was obtained from Mr Gotterson QC, relating to the very issue which is held against him as part of the conflict of interest, namely whether or not the note holder should have been informed as to certain matters which were contained in the Price Waterhouse Cooper reports. Now my client is also aware that Mr Sofronoff of Council [sic], instructed by Clayton Utz, was briefed on the very same matter and gave a contrary opinion, that's at the very heart of this, because Mr Sofronoff QC's advise [sic] said that there was no obligation to inform the note holders of the things which you're now alleging against my client here. Now, why is it - why is it when we made it very plain we wanted all the relevant documents, that we're not given documents which are of an exculpatory nature. MS WATSON: Mr McKay, to my knowledge, does not have the advice by Gotterson and does not have the advice by Walter Sofronoff or anything from Clayton Utz. The second point is, Mr McKay would not have the power to waive legal professional privilege in relation to those matters, on the Attorney-General could do that, so that's all I have to stay at this stage. Mr McKay does not have those documents. MR AMERENA: Mr McKay has been made the delegate of the Public Trustee. The Public Trustee has those documents, are you suggesting that Mr McKay is not entitled to them? MS WATSON: No, I'm not suggesting that, I'm just telling you that at this stage today he does not have those documents. 15 The reference to "our letter to you today" appears to be a reference to a letter from Hall Payne Lawyers to Crown Law dated 5 June 2008, which is also included as an attachment to 10 July 2008 letter. That letter sought among other things, the Legal Advices together with instructions and any brief to Mr Gotterson QC and Mr Sofronoff QC and any file notes taken at a meeting with Mr Sofronoff.

2.4 The circumstances in which the allegedly privileged material was produced 16 The Public Trustee led evidence from Mr Sammut, a partner at Clayton Utz, the solicitors for the Public Trustee, as to the circumstances in which the allegedly privileged material was produced. Mr Sammut was not cross-examined on his evidence, although as I later explain Oztech seek to rely upon what it submitted were gaps in his evidence. 17 On 6 May 2016, Mr Sammut prepared an advice for the Official Solicitor to the Public Trustee, a redacted copy of which was in evidence. (The redactions related to advice on a document which is not relevant to this application.) That advice concerned the discoverability of, relevantly, the 4 June 2008 and 10 July 2008 letters which, with their attachments, together total approximately 600 pages in length. Those documents had been located in the file maintained by Crown Law on behalf of the Public Trustee in 2008. 18 Mr Sammut explained that, as part of his review of the Crown Law file, he has a clear recollection of "closely reviewing the material including the 4 June and 10 July letters (excluding their attachments)". He could "clearly recall scanning the attachments but …did not review them closely". 19 Mr Sammut obtained advice on behalf of the Public Trustee from Mr O'Sullivan QC as to the discoverability of the documents that had been located on the Crown Law file. Mr Sullivan QC's opinion dated 6 May 2016 (which was in evidence with some redactions relating to other matters) was that the 4 June 2008 Letter and the 10 July 2008 Letter were discoverable and not immune from inspection. The key reasons for that conclusion were that the documents fell within the scope of the order for discovery made by Justice Yates on 23 December 2015, and the communications contained in the letters were not protected by privilege. Mr Sammut agreed with that advice and he recommended that the Public Trustee provide instructions to deliver the documents to Oztech by way of discovery. On receiving those instructions, the letters were produced on 10 May 2016 and the attachments on 11 May 2016. 20 Mr Sammut has no recollection of reading the extract from the transcript excised above, and believes that it is likely that he would have drawn it to the attention of Queen's Counsel and discussed it with him if he had read it. He deposes that he "…certainly did not take a deliberate decision not to redact the extract or to waive privilege in the underlying advice of Mr Gotterson QC, Mr Sofronoff QC or Clayton Utz referred to in the extract". He further explained that: At no stage has Clayton Utz received instructions from the Public Trustee to waive privilege in the documents referred to in paragraphs 1(a) and 1(b) of the Application. Instead, the Public Trustee's instructions to Clayton Utz have at all times been to maintain privilege in respect of all privileged communications other than those on which the Public Trustee relies in his defence of the proceeding. 21 In his second affidavit sworn on 8 June 2016, Mr Sammut attached a letter received from Mr O'Sullivan QC that day. In the letter, Mr O'Sullivan QC states that he "did not read or consider that part of the transcript of the hearing before the Queensland Industrial Relations Commission extracted at paragraph 8 of the [applicant's] submissions" and that when he provided his advice, he "had not considered whether that part of the transcript was amenable to a claim for legal professional privilege, or whether those lines of the transcript ought to be redacted". As was pointed out at the hearing, this did not amount to a statement by Mr O'Sullivan QC that he did not read or consider any part of the attachments to the letters, as Oztech initially submitted.

3. OZTECH'S SUBMISSIONS 22 As mentioned, Oztech's case that privilege in the past conduct advice had been waived ultimately relied upon production by the Public Trustee of the alleged description of the Legal Advices by Mr Kelly's legal representative recorded in the unredacted passage of the transcript of the IR Commission proceedings on 5 June 2008 (quoted at [14] above). As Mr Withers, counsel for Oztech, explained at the hearing: The first waiver -act of waiver is producing a transcript in unredacted form which discloses the substance of the advice of Mr Gotterson and Mr Sofronoff, and we say that that means that we should be entitled to inspection of the advice itself and the materials with which they are supplied in order to provide their opinions. That is, in effect, the universe of what we say there has been a waiver over. 23 This act was said to be inconsistent with the maintenance of privilege and thereby to constitute a waiver of the privilege, irrespective of whether or not there was any subjective intention to waive the privilege. 24 In support of their submission as to waiver, Oztech contended first that that transcript made clear: (a) the subject matter of the advice, namely, whether the Public Trustee was obliged to disclose to noteholders its decision to resign as trustee of the MFS Note Trust and the concerns about MFS's ability to repay the Notes, as expressed in the reports from PricewaterhouseCoopers, which underpinned that decision; and (b) the conclusions of the advice, namely that Mr Gotterson QC considered that the Public Trustee was obliged to inform the noteholders of those things, Clayton Utz disagreed, and Mr Sofronoff QC agreed with Clayton Utz's advice. 25 Secondly, Oztech submitted that the evidence demonstrated that Mr Kelly was aware of the content of the Legal Advices. In this regard, Oztech relied upon the affidavit of Mr Scott Sharry, a partner of Clayton Utz, which had been prepared for the first privilege application before Perram J. Mr Sharry gave evidence that Mr Kelly had attended the conference on 17 April 2008 at Clayton Utz in which the past conduct advice was discussed. Present also at that meeting were Mr Sofronoff QC and legal representatives for the State of Queensland and the Public Trustee. Mr Sharry had also given evidence that Mr Kelly had been sent a copy of the additional past conduct advice by email on 17 April 2008. I accept for the purposes of this application that Mr Kelly had been privy to the content of the Legal Advices. On the basis of this evidence Oztech submits that it should be inferred that Mr Kelly's legal representative at the IR Commission conference had been appraised of the content of the legal advice by his client and that his description in the relevant passage of the transcript of the advice given in the Legal Advices was accurate. 26 Thirdly, Oztech relied upon the fact that at no time after this application was filed on 26 May 2016 and the issue had been drawn to the Public Trustee's attention, was any claim of privilege made over the transcript. The Public Trustee did not say that the unredacted document had been produced for inspection in error and did not seek the document's return or redaction of the relevant passage. 27 Fourthly, at the hearing Oztech also relied upon the Public Trustee's allegedly inconsistent conduct with respect to production of an unsigned statement of Mr Kelly which was described by the parties as the February statement, over which privilege had previously had been claimed and successfully defended before Perram J.

4.1 Relevant principles 28 It is not in issue that there has been no express waiver of privilege. The most recent statement by the High Court of waiver implied from inconsistent conduct is found in the decision in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited [2013] HCA 46; (2013) 250 CLR 303 (Expense Reduction). Specifically at 315 [30], the Court held that: According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege). It may be expressed or implied. In most cases concerning waiver, the area of dispute is whether it is to be implied. In some cases waiver will be imputed by the law with the consequence that a privilege is lost, even though that consequence was not intended by the party losing the privilege. The courts will impute an intention where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. (emphasis added) See also Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at 13 [29] (Gleeson CJ, Gaudron, Gummow and Callinan JJ); and Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275 at 298 [49] (Gleeson CJ, Gummow, Heydon and Kiefel JJ). 29 Thus as their Honours then explained, waiver looks chiefly to the conduct and position of the person said to have waived privilege in order to see whether she or he has "approbated" so as to prevent her or him from "reprobating" (Expense Reduction at 315-316 [31] (quoting with approval Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326)). 30 Consistently with this, Perram J summarised the relevant legal principles in Oztech (No 5) at [25] : First, what is involved is the application of classical concepts of waiver from the general law which are sometimes also referred to as election: Craine v Colonial Mutual Fire Insurance Co (1920) 28 CLR 305 at 326; Commonwealth v Verwayen (1990) 170 CLR 394 at 423; secondly, the doctrine will apply where there is a choice between inconsistent legal rights which, in the case of a privilege debate, will generally mean the choice between maintaining the privilege by resisting production and disclosing the content of the communications: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641-642 and 655-656; thirdly, in the context of a privilege debate, this will require a judgment as to whether the conduct of the party entitled to the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect; fourthly, that judgment is to be made in the light of the context and circumstances of the case and in the light of any considerations of fairness arising from that context or those considerations. Finally, in this forensic calculus, the issue of fairness is clearly to be understood as only arising as part of the inconsistency analysis. It is not to be thought as warranting some kind of general inquiry into the fairness of the case. As to the third and fourth propositions, see Osland v Secretary, Department of Justice (2008) 234 CLR 275 at [45]. As to the fifth, see Mann v Carnell (1999) 201 CLR 1 at [29].

4.2.1 Production of the unredacted document and failure to request its return 31 Applying these principles, I do not accept that the Public Trustee's conduct in producing the relevant portion of the transcript and in not seeking its return or redaction is inconsistent with the Public Trustee maintaining privilege in the Legal Advices, let alone that it is "plainly inconsistent". 32 As Mr O'Meara, counsel for the Public Trustee submitted, it is necessary to start with the document which was produced and is said to have disclosed the substance of the Legal Advices. That document constitutes a transcript of proceedings held in public in the IR Commission. It records assertions made by a third party, namely, counsel for a suspended employee litigating against the Public Trustee, as to the alleged content of advice received by the Public Trustee. It is evident from the transcript that those assertions were made in circumstances where neither Mr Kelly's counsel nor Mr Kelly were in possession of the legal advices. To the contrary, they were made in support of a submission that they should be entitled to production of the Legal Advices. As such, the allegations by Mr Kelly's counsel as to the content of the Legal Advices were no more than his "second-hand" understanding, uninformed as they were by the documents themselves and based no doubt upon what his client had conveyed to him as to their content. Moreover, plainly neither Mr Kelly nor his counsel could waive the Public Trustee's privilege in the Legal Advices. Only the Public Trustee could waive his privilege, yet the Public Trustee disclosed nothing of the content of the Legal Advices. To the contrary, counsel for the Public Trustee immediately responded at the IR Commission conference with an assertion of privilege over them. 33 As counsel for the Public Trustee submitted, "the stream cannot rise higher than its source". In the same way that statements uttered by a third party publicly at the IR Commission conference could not waive the Public Trustee's privilege, equally it follows in my view that the discovery and production of those statements cannot waive the Public Trustee's privilege in the Legal Advices. In these circumstances, the question of whether or not it can be inferred that Mr Kelly's legal representative accurately described the conclusions reached in the Legal Advices is irrelevant and it would not be appropriate for me to rule upon the issue in an application of this kind. The circumstances of the disclosure were not in any event such as to create any inconsistency between maintenance of the privilege and the conduct of the Public Trustee in producing the document or, for that matter, in not seeking in the IR Commission to have the relevant portion of the transcript redacted. Indeed, if the Public Trustee had sought such a redaction in the IR proceedings, it may have implied that what was said about the advices by Mr Kelly's counsel was accurate, thereby undermining the Public Trustee's expressed intention to maintain the confidentiality of the Legal Advices. 34 It follows that this is not a case where legal advice was mistakenly provided to a party and the failure (promptly or otherwise) to request the return of the unredacted transcript might therefore be regarded as inconsistent with the assertion of privilege over the advices in response to this application. By contrast, in Expense Reduction, the legal advices themselves had been inadvertently produced, having been mistakenly listed in the discovery process in both the privileged and unprivileged sections of the Lists of Documents - a factor which the High Court found did not clearly suggest abandonment of privilege (Expense Reduction at 316 [33]). In those circumstances, the Court considered that the letter from the solicitors for what was termed "the ERA parties" promptly advising of the error and requesting the documents return "was important to convey the true position" and concluded that no inconsistent position had been taken by the ERA parties such that waiver should be imputed to them (Expense Reduction at 316 [34]-[35]). 35 For these reasons, there is no inconsistency in the Public Trustee's conduct in producing the relevant portion of the transcript and in not seeking its return or redaction while maintaining confidentiality in the Legal Advices themselves.

4.2.2 The alleged inconsistency in producing the February statement: a 'red herring' 36 Finally, at the hearing Oztech also relied on the Public Trustee's conduct in successfully defending a claim for privilege in Oztech (No 5) over the February statement which had been prepared by Mr Kelly for the purposes of the past conduct advice, yet in the further supplementary discovery intentionally producing an unsigned version of that statement to Oztech, together with the unredacted transcript: see Oztech (No 5). While no express reference was made by Perram J in Oztech (No 5) to the February statement, no objection was made to Oztech's submission that it was covered by that decision. 37 As to the basis on which the Public Trustee subsequently produced the February statement, Oztech relied on the email from the Public Trustee's solicitors advising the Public Trustee as follows: We draw to your attention that the unsigned "February 2008" statement of Mr Kelly is included as an attachment to both documents (1) and (2) [being the June 2008 and July 2008 letters]. The Public Trustee previously successfully resisted production of that draft statement as a stand-alone document. However, as it forms an attachment to otherwise discoverable documents, it must now be produced. 38 That advice was consistent, in Oztech's submission, with the proposition that, even if the Public Trustee's legal representatives had considered the passage of the transcript in question in advising on the issue of privilege contrary to their evidence, they would have given the same erroneous advice, namely, that the whole of the transcript must be produced because it was attached to an otherwise discoverable document. This in turn was said to explain why the Public Trustee did not assert that the passage in the transcript had been produced for inspection by mistake and sought the return of the document - the so-called "gap" in the Public Trustee's evidence. 39 Counsel for the Public Trustee, however, submitted that this was a "red herring". He explained that the reason why the February statement had been produced was because it was a copy and not the same document which had been the subject of argument before Perram J. He submitted that: What occurred was that the previous versions of the February 2008 statement were considered to attract a Propend privilege, that is to say, they were copies of a document made for the purposes of obtaining legal advice and, therefore, production was resisted on that basis. This version of the February statement was not such a document. It was a document which was attached to … a letter from the Crown Law - Queensland Crown Law to the solicitors for Mr Kelly, Hall Payne. Therefore, it was not a document which attracted Propend privilege. 40 Oztech said that it did not accept this explanation: …because it's one that was given from the bar table. It is addressed in paragraph 21 of our written submissions. We referred it to and relied upon the February statement, and it is - there is no evidence about it. What happened was, they provided two affidavits which specifically referred to the written submissions that we filed and addressed Mr O'Sullivan's conduct in reviewing the documents et cetera but did not address this point. 41 As a result, Oztech contended that the explanation given by counsel for the Public Trustee should be disregarded. 42 I do not agree. First, while it is true that Oztech referred to the production of Mr Kelly's unsigned February statement in their written submissions, they did not submit at that stage that the Court should draw the inference identified later in Oztech's oral submissions. Rather in its written submissions at [21], Oztech submitted simply that "[t]he fact that the Respondent has now made a positive decision to disclose that statement (rather than redact the document or withhold it from production as per the Respondent's usual practice) supports the view that the Respondent has acted inconsistently with the maintenance of confidentiality in respect of the advice and the documents created for the purpose of informing that advice." That being so, I do not consider that the Public Trustee can be said to have been fairly on notice that the Court would be asked to draw the specific inference identified at the hearing so as to afford him a fair opportunity to lead evidence to dispel that inference. 43 Secondly, the onus lies upon Oztech to establish waiver of the privilege. Irrespective of the position adopted with respect to previous versions of the February statement before Perram J, the February statement does not in terms contain legal advice so could not attract client legal privilege in itself. Whether a particular version and copy of the statement attracted privilege must therefore turn upon the purpose for which the particular document or copy in question was created, supporting the Public Trustee's version of events. 44 Finally and in any event, any privilege over the unsigned version of the February statement in issue here would have been expressly waived when it was provided by Crown Law to Mr Kelly's solicitors, as the Public Trustee submitted. In those circumstances, there is no inconsistency between the Public Trustee maintaining privilege over the Legal Advices and other briefing documents, on the one hand, including those copies which were the subject of argument in Oztech (No 5), and production by the Public Trustee of this particular version of the February statement, on the other hand.

5. CONCLUSION 45 For these reasons, Oztech has failed to establish any waiver of privilege over the Legal Advices and its application for production must be dismissed with costs. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.