WOOD (AS CO-EXECUTOR AND TRUSTEE OF THE WILL OF THE DECEASED) -v- WOOD [No 2] [2014] WASC 387 (27 October 2014)

2 The firms are the solicitors for the plaintiffs in this action. On Monday week, there is listed before me an application made by Morgan Howard Solomon and Professor Fiona Melanie Wood (the Executors) for directions under s 92 of the Trustees Act 1962 (WA).

3 An amended originating summons filed by the Executors seeks directions as executors and trustees of the will of Jennifer Ballantyne (deceased), pursuant to s 92 of the Trustees Act, in these proceedings, in which, I note, there are currently some 21 different defendants.

4 The application relates to the estate of the late Jennifer Ballantyne, who died on 7 July 2012. Directions are sought by the Executors across litigation, which has occupied myself and another CMC list judge of this court. The particular directions sought may be identified in respect of the subsisting litigation under pars 1, 3, 4, 5 and 6 of that amended originating summons filed 4 August 2014.

5 In assessing the subpoenas issued and their utility, the approach of a court in addressing a trustee or an executor's application for directions seeking private advice needs to be kept in mind from the outset. The first thing that needs to be recognised is that s 92 Trustees Act proceedings are not adversarial in character. They are private proceedings designed to assist trustees in the administration of their trustee responsibilities and, consequently, carry a repercussion of assisting the administration of the estate. I mention, in the context of s 63 of the Trustee Act 1925 (NSW), Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, with s 63 stated at [34] of the plurality reasons. I mention from that decision the plurality's eight general points at [55].

6 There are some variations, of course, as between the New South Wales and Western Australian legislation. But a major repercussion as regards a trustee's costs indemnity under the Trustees Act 1962 (WA) can be seen under s 95(1) qualified, of course, by s 95(2).

7 A trustee carries an exposure, even after obtaining and following the directions of a court, if there has been fraud, or wilful concealment or misrepresentation in obtaining the directions or in acquiescing in the court making orders giving a direction.

8 In providing private advice to trustees under s 92 I re-emphasise I am not determining the ultimate merits of the underlying litigation.

9 This trustees' private advice application is summary in its workings. There will be no drilling down to resolve the merits of finer points of multifaceted aspects of what is, on any view, a complex series of surrounding actions.

10 That overall perspective bears upon the utility of Mr Rudolf Baur's present subpoenas issued to the two firms of solicitors currently acting for the Executors.

11 For the purposes of a looming s 92 hearing next Monday, I have already issued a number of case management directions.

12 The present applications to set aside the subpoenas arise out of the circumstances in which only last Friday, 15 August 2014, two subpoenas were issued by Mr Baur's solicitors to the Executors' two firms of solicitors (acting in the Robert Charles Scott and Baur litigation distinctly, for the Executors). Mr Baur, of course, is the second defendant in CIV 1786 of 2014. The document production subpoenas as issued are made returnable to me today.

13 The subpoenas have been issued to the proper officer for the respective solicitors. There are, as mentioned, the two firms of solicitors involved for the Executors, who are the first and second plaintiffs in CIV 1786 of 2014. The first subpoena was issued to the proper officer of Dwyers Legal Pty Ltd. The other was to the proper officer of BBV Legal Pty Ltd.

14 The requests for documents to be produced under each subpoena are formulated in similar terms, albeit issued to the different legal corporations.

15 After some schedule definitions, the proper officer of the law firms has been required to produce (working from the document subpoena directed to Dwyers Legal):

'Communications', other than 'Excluded Communications' (these being defined terms) between:

(e) BBV Legal and 'Counsel' (another defined term);

'concerning the administration of or the management of the Estate'.

16 By the definitions, which precede that request, 'the Estate' is the estate of the late Jennifer Ballantyne.

17 A defined term 'Excluded Communications' is seen to be the subject of a 'carveout' by the first line.

18 'Excluded Communications' is seen to be defined as meaning 'Communications which contain legal advice: (a) for the benefit of Dr Wood and Mr Solomon, or either of them, personally; and (b) for which the Estate has not paid, and for which it has no liability to make payment'.

19 I was told that this carve-out for 'Excluded Communications' was framed by reference to some observations in Schreuder v Murray [No 2] [2009] WASCA 145; (2009) 41 WAR 169. There was mentioned in that appeal a privileged category of legal proceedings. Buss JA said:

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

It is unnecessary to consider the position of a beneficiary who has a contingent interest or a mere expectancy in relation to the trust fund. At all material times Mrs Murray has had a vested interest in the residuary estate. [94]

20 Arguments unfolded today in terms of whether the present subpoenas which, by the term 'Excluded Communications' exclude legal advice which the Executors have taken or obtained personally (and for which the estate had not paid), do in fact render any protection against production in respect of an abiding legal professional privilege. That formulation would not cover legal advice obtained by the Executors, albeit paid for by the estate. Hence any legal advice obtained by the Executors in the capacity of executors and trustees, given as to the merits or demerits of a claim by one or more of the beneficiaries like, such as in this case, the claims against the estate by Mr Baur, would not be privileged from production and would be caught by these subpoenas.

21 These are urgent circumstances where I am determining the objections to answering upon these subpoenas. It is enough for me to say only that after hearing the arguments I would be very concerned if, in fact, any or all of an estate's beneficiaries might obtain access to executors' and trustees' confidential legal advice by reason of the beneficiary sharing in a joint or common interest in what is otherwise privileged legal advice for situations where there were adversarial proceedings on foot, as between a trustee/executor and a particular beneficiary. That would seem to me a surprising outcome, extending in its implications somewhat further than what was contemplated under the Schreuder [94(f)] formulation and there dealing with far different circumstances than manifest currently before me. A litigious dispute as between a beneficiary and trustees would also seem to remove the basis for the continuance of any level of common interest privilege.

22 But, in the end, it is not necessary for me to determine that issue.

23 A number of affidavits were put up on either side today, objecting to and resisting the subpoenas being answered. I refer to the affidavit sworn by David Vilensky for BBV Legal Pty Ltd on 21 August 2014, and an affidavit of Daniel Ryan Gill sworn 21 August 2014 on behalf of Dwyers Legal Pty Ltd.

24 Opposing counsel for both legal corporations, Mr Penglis, appeared today and assisted me with both written and oral submissions. It was contended both subpoenas should be set aside on various grounds. First it was contended the subpoenas were a de facto application for general discovery, made against the solicitors for the Executors. It was then said this was unprecedented, inappropriate and in the end, an abuse of process. Emphasis was directed to a point that even in fully adversarial proceedings, on an originating summons there is no right to general discovery. It is necessary to make an application to the court in such proceedings for leave to obtain general discovery.

25 Effectively then, these two subpoenas were contended by Mr Penglis to have been used as a 'backdoor' way to obtain general discovery. They were defective on that basis alone, so it was put.

26 The further submission was advanced that both subpoenas were, in effect, far too widely drawn in any event. Consequently, they were thereby oppressive and should be set aside. That was particularly so bearing in mind the time frame in which they were issued. Here there was effectively uncontradicted evidence in terms of an extremely onerous compliance burden these subpoenas would impose, time wise and resource wise, upon the solicitors for the Executors. This was in circumstances where all parties are urgently preparing for the s 92 Trustees Act directions and advice hearing, now only five and a half working days away.

27 Hence it was said, in effect, the Executors' solicitors' efforts in preparing for the looming hearing ought not be diverted in that quarter by a last minute requirement to urgently assemble vast amounts of documentary material at the behest of Mr Baur.

28 Mr Penglis submitted as well that the nonadversarial character of the s 92 proceedings had not been appreciated by these requests in the sense that the stance of Mr Baur in seeking to have all this material was effectively to second-guess the materials already assembled by the Executors. Mr Baur's asserted position was that this court may not be being shown absolutely everything it needs to be shown by the Executors in making the directions currently sought by them.

29 Mr Penglis submits that this approach is, in effect, a misconception of the character of private advice proceedings which, as I have now explained, are not ultimately adversarial proceedings, which do not ultimately determine the merits or demerits of the underlying litigation.

30 The last ground of objection against answering the subpoenas, invoked by Mr Penglis, was by reference to general case management principles. This objection was that the time involved in dealing with answering these subpoenas and the amount of resources required to devote to that task, in circumstances where they had only emerged last Friday, not having even been foreshadowed beforehand (whether or not there may be a legitimate basis for giving some more limited aspects of discovery) was unsatisfactory and ought not to be countenanced.

31 Mr Baur has sought to justify the requests under the subpoenas for the documentary materials. Submissions were put there in terms of the current state of the materials for the looming s 92 Trustees Act directions application, assembled by the Executors, being inadequate. Illustrations were given verbally and under an affidavit of Alexander James Tharby affirmed 21 August 2014 by reference to annexures, and in submissions I heard this morning about 'lines of enquiry'.

32 Mr Baur expressed his concerns in terms of whether the Executors have acted properly in terms of the directions they seek from the Court - by reference to contentions that there needs to be a fulsome document disclosure by the Executors for directions sought.

33 But that concern, I think, says more about the scope of the underlying surrounding litigation. In CIV 1412 of 2014 Mr Baur seeks that the Executors be removed and that he have transferred to him in specie all Ondit Pty Ltd (Ondit) shares he was left by the will of his late partner, Ms Jennifer Ballantyne.

34 It was put to me by counsel for Mr Baur on a number of occasions as a concern that the funds of the Ballantyne estate were being consumed in terms of an assembly of the materials that are now being sought. If that extends to requesting legal advice that was being paid for by the estate's funds, then there was, it was said, no reason why that advice ought to be kept from the Court and, indeed, from Mr Baur.

35 Mr Baur, axiomatically, is not a direct party as such in adversarial litigation, as regards CIV 1786 of 2014. He is only a participant who will be heard, but he is not an adverse party. Yet the objective today under these subpoenas, in effect, betrays Mr Baur's attempt to audit and effectively 'second guess' the materials that have been put before the Court by the Executors to seek their s 92 directions.

36 Mr Baur's requests under his two document subpoenas to the Executors' solicitors reflects an unprincipled approach. It is, as well, highly impractical to achieve in terms of possible implementation.

37 I also appreciate an underlying history of distrust here, in terms of what has led to the present document requests and the underlying correlative litigation that falls to be determined elsewhere. It is almost inevitable that the existence of the surrounding, unresolved litigation will generate suspicion, distrust and concern. That is frequently the nature of unresolved litigation, unfortunately.

38 Nevertheless, there is a sheer impracticality in Mr Baur, in effect, asking the Court to weigh the already voluminous levels of Executor documentation for the pending advice application already attached to affidavits, then assess it all from a perspective of asking what further genres of documentation might have possibly accompanied it and give the Executors' affidavits and appended documents a different colour or meaning. That is simply not practical. Moreover, it presents as a time consuming and ultimately unduly costly exercise - of minimal end utility in the looming s 92 application.

39 Effectively then, I must accept the submissions of Mr Penglis on behalf of the subpoena recipients, in terms of setting aside each subpoena - on the primary basis it will be clearly oppressive for the respective solicitors at this time to assemble potentially vast amounts of documentation. It would also be contrary to recognised case flow management principles for that to be required of them at this time.

40 I said in Wookey v Quigley [No 5] [2011] WASC 275 that the Court must still keep a firm curial oversight over the issues of document subpoenas, albeit they are now issued without leave before a trial or other hearing. This is one such occasion. They may, of course, issue out of this court without leave and thereby without the former levels of oversight under the regime of leave that used to be required. That was discussed by the Chief Justice in the Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd [2007] WASC 276 decision.

41 The Court's vigilance in terms of overseeing the proper invocation of its compulsive processes has not abated.

42 Here, in particular, I am influenced first by the character of the underlying s 92 Trustees Act proceedings, which are not adversarial. They would not ordinarily support even a request for general discovery. Second, I am also influenced by the imminent proximity of the hearing of the s 92 Trustees Act advice application, which now looms only five and a half working days away. There is an already large enough amount of documentary materials assembled by the Executors that will need to be evaluated on that application - without adding even more to the mix for what presents as little discernible end result.

43 Third, I am also influenced by the fact that the document requests under these subpoenas of Mr Baur are framed far too widely. They are omnibus in their reach and insufficiently targeted - in terms of specifying a particular document or a more limited category of document. There is a vast amount of documentary material already assembled by the Executors to date which can be seen via Mr Solomon's six affidavits - all proposed to be read on the s 92 application. Careful analysis of that material by Mr Baur might otherwise have led to a more targeted request for a handful of documents as a particular category, class or by a requested topic of document - identified as potentially missing. A limited document request of that nature may then generate a basis for a properly focused and more intelligent dialogue over whether such a document really was, or was not, needed to be produced. Such a focused debate could not unfold here due to the undue breadth of the two subpoenas, as drawn.

44 The omnibus character of the document requests effectively requires any classes of communication concerning the administration and management of the Ballantyne estate - with the (ungenerous) exception as mentioned, of certain defined excluded documents.

45 For the ordinary case, I would express my concerns over the legitimacy of the wide ambit of an unfocused request of that kind under any document subpoena. Trawling documents of that kind are to be discouraged. But here, given a special non-adversarial character of the advice hearing, such wide ranging document requests now seen formulated are demonstrably inappropriate.

46 I also assess these to be an unacceptable prejudice against the Executors by their solicitors from a hearing preparation interruption perspective, given the s 92 Trustees Act hearing now looms as so close at this time.

47 None of that, of course, detracts from the fact that parties engaged in litigation, even of this special character, ought to act reasonably and sensibly. They should confer first where one side thinks it can identify some obvious gap or important missing documents that might bear upon what the Court properly needs to consider on an application such as that presently pending.

48 I will not set aside the subpoenas on the basis of abuse of process, as was asserted. Whilst I am not satisfied to that level, I will accept the submission of Mr Penglis that the nature and scope of the document requests under the two subpoenas considered is unprecedented. Nevertheless, I prefer to set both subpoenas aside on the basis, first, that they are oppressive as formulated; and second, that they are in violation of case flow management principles, bearing in mind the underlying circumstances in which they have issued.