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When can a beneficiary claim joint legal professional privilege over advice obtained by a trustee?

18 August 2021

#Dispute Resolution & Litigation, #Superannuation, Funds Management & Financial Services

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When can a beneficiary claim joint legal professional privilege over advice obtained by a trustee?

The judgment in the recent case of Kayler-Thomson v Colonial First State Investments Limited (No 2) [2021] FCA 854 (Kayler-Thompson) provides clarification on the principles concerning joint legal professional privilege in the context of superannuation funds and class actions.

In Kayler-Thomson, representative proceedings (also known as class actions) were brought against Colonial First State Investments Limited (Colonial), amongst others, concerning its conduct as a trustee of two superannuation funds (Funds).

Colonial provided discovery but claimed legal professional privilege over a “considerable number” of discoverable documents and resisted inspection of those documents by the solicitors acting for the lead applicant, Mr Kayler-Thomson.

Mr Kayler-Thomson then sought orders requiring Colonial to produce those documents for inspection on the basis that, as a beneficiary of the Funds representing other group members, he was a joint holder of the privilege.

The nature of joint privilege between a trustee and a beneficiary

In this case, Colvin J confirmed that joint privilege arises where:

  • more than one party seeks advice; or
  • the advice is sought by a party who has a duty or obligation to disclose the content of the communication to the other parties.

Between a trustee and a beneficiary, legal professional privilege is held jointly when the trustee seeks legal advice in discharge of a duty, enforceable in equity, and undertakes the due and proper administration of the trust.

Issues in this dispute

1. Are the principles regarding joint privilege between a trustee and a beneficiary confined to small trusts with few identifiable beneficiaries who have vested interests?

Colonial submitted that joint privilege between the trustee and the beneficiaries is confined to instances where the trust being administered is a “closed trust with a known and relatively static cohort of beneficiaries”. However, Colvin J rejected this argument, noting that it was not supported by any cited authority.

His Honour held that superannuation funds are required to be held within a trust structure and that the law applies regardless of the number of members of a particular superannuation fund.

2. In a class action, can a representative applicant inspect discoverable documents over which a claim to privilege has been made on the basis that one or more of the class members hold joint privilege with the producing party, even though the representative applicant is not a holder of the joint privilege?

Mr Kayler-Thomson accepted that he had no ‘personal’ right of joint privilege over the documents in question. However, he claimed that as to each of the documents, one or more of the group members did hold joint privilege with Colonial, therefore, as the representative applicant in the proceedings, he was entitled to inspect the documents for the purposes of the class action.

Colonial argued that Mr Kayler-Thomson was not entitled to special access to the privileged documents as a representative applicant. Instead, Colonial argued that Mr Kayler-Thomson was required to establish a personal right of joint privilege to gain access to the documents.

Colvin J accepted Colonial’s argument, stating that he was not persuaded that a representative applicant has joint privilege in legal advice, solely on the basis that other class members have that privilege.

His Honour observed that the “common law right is personal to the joint holders of the privilege. It is a right that cannot be asserted by an agent or representative of the privilege holder without the authority of the privilege holder”.

In those circumstances, Colvin J held that:

“…there are two difficulties for Mr Kayler‑Thomson if he is not himself the holder of the joint privilege. First, it is well established that a joint privilege can only be waived by the actions of all holders of the privilege. Authority conferred by beneficiaries who are holders of joint privilege but not by Colonial as the other joint holder would not be sufficient for Mr Kayler‑Thomson to obtain access to the documents unless there was some statutory abrogation or curtailment of the privilege. Second, the provisions of Part IVA of the Federal Court of Australia Act 1976 (Cth) concerned with representative proceedings contain no express provision altering the common law right to legal professional privilege”.

Outcome

His Honour concluded that “the procedural characteristics of a representative action and the standing of the representative applicant cannot be called in aid to confer a right upon a representative party to access documents the subject of legal professional privilege that is not jointly held with the representative party”.

As a result, Colonial did not have to produce any of the disputed documents for inspection.

Key takeaway

Beneficiaries of trusts, including members of superannuation funds, can be assured that they can claim joint privilege over advice obtained by the trustee regardless of the size of the trust. 

However, group members of class actions do not have joint privilege over documents just because other members of the class are entitled to claim legal professional privilege over documents.

Authors: Susan Goodman & Leah Munk

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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