Oztech Pty Ltd v Public Trustee of Queensland (No 12) [2016] FCA 1128

FEDERAL COURT OF AUSTRALIA

Oztech Pty Ltd v Public Trustee of Queensland (No 12) [2016] FCA 1128 File number: NSD 937 of 2014

Judge: YATES J

Date of judgment: 15 September 2016

Catchwords: PRACTICE AND PROCEDURE – notice to produce –where notice seeks production of draft affidavit – where witness made reference to draft affidavit in cross-examination – legal professional privilege – relevance

Cases cited: Searle v Keayes (1994) 126 ALR 728; [1994] FCA 970

Date of hearing: 8 September 2016

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 26

Counsel for the Applicant: Mr RPL Lancaster SC with Mr CH Withers, Mr AM Hochroth and Mr RJ May

Solicitor for the Applicant: Squire Patton Boggs

Counsel for the Respondent: Mr W Sofronoff QC with Mr DB O'Sullivan QC, Mr MJ O'Meara, Mr JP O'Regan, Ms E Hoiberg and Ms F Lubett

Solicitor for the Respondent: Clayton Utz

ORDERS NSD 937 of 2014

BETWEEN: OZTECH PTY LTD ACN 005 907 871 Applicant

AND: THE PUBLIC TRUSTEE OF QUEENSLAND Respondent

JUDGE: YATES J DATE OF ORDER: 15 SEPTEMBER 2016

THE COURT ORDERS THAT:

1. The notice to produce dated 6 September 2016 which was served by the applicant on the respondent be set aside. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

YATES J:

The issue 1 The applicant has served on the respondent a notice to produce dated 6 September 2016, which seeks production of: A copy of the draft affidavit of Mr Gregory Edward Klein prepared by Clayton Utz and provided to Mr Klein referred to at page 466, lines 6-8 of the transcript in these proceedings. 2 The respondent resists production on the ground that Mr Klein's draft affidavit is subject to legal professional privilege. The respondent also resists production on the ground of relevance. 3 The applicant's position is that any claim of privilege has been waived by evidence that has been given by Mr Klein in this proceeding and that whatever has been said in Mr Klein's draft affidavit is adjectively relevant.

Background 4 The background facts are as follows. Mr Klein made an affidavit on 7 June 2016, which has been read in this proceeding and stands as his evidence in chief. On 5 September 2016, Mr Klein was cross-examined. There was no re-examination. At the conclusion of his oral evidence, Mr Klein was excused from further attendance in the proceeding as a witness. No objection was taken to this course. 5 In the course of his examination, Mr Klein was asked questions about a draft of his affidavit. The questions arose from Mr Klein being asked why, in his affidavit, he expressed himself, in the particular way he did, in relation to an instruction concerning the resignation of the respondent as the trustee of the Octaviar Note Trust. 6 Paragraph 15 of Mr Klein's affidavit is: I have been shown a copy of the letter of resignation from the MFS Note Trust dated 6 July 2007 which is annexed at "GEK-2". [PTQ.001.008.0083]. I do not now recall why I gave the instruction to resign from the MFS Note Trust. I do not doubt however that, although I am unable to specifically recall it, I did give such an instruction. This is because I regarded a decision to resign from a corporate trust to be solely a matter for me, and Mr Kelly was well aware of this. I am confident that Ian Kelly would have obtained my instructions to resign prior to sending the letter dated 6 July 2007. 7 At T453 (lines 17-36) the following exchange took place between cross-examining counsel and Mr Klein. And in your affidavit in paragraph 15, if you have that with you, you say you don't recall why you gave the instruction to resign; correct?---Yes. And then you say: I don't doubt, although I can't specifically recall it, that I did give such an instruction to resign. ?---Yes. And is it right that you expressed yourself in your affidavit that way because you had been shown the notice of resignation that was under the hand of Mr Prostamo?---It was - - - I'm sorry – of Mr Kelly. Yes?---Well, I expressed it that way. I didn't draft this. I gave the detail to this affidavit and if there is a problem with the English as she has used, then that's a matter you will have to take up with the draftsman. But what I was trying to convey there quite simply was that I don't recall giving an instruction to resign but if Kelly says that I did, and I think he does say that, then I accept that that's what happened because quite simply I trust him. 8 Further questions were asked of Mr Klein to elicit whether he had been told, in the period leading up to the swearing of his affidavit, "that Mr Kelly's evidence is that you gave him an instruction to resign from" the Octaviar Note Trust. Mr Klein rejected that proposition saying, amongst other things, that he knew "nothing about what Mr Kelly is going to say". Mr Klein was pursued on that answer. He was asked whether he had seen Mr Kelly's affidavit in the proceeding (Mr Klein denied that he had) and whether Mr Kelly had informed him as to what he, Mr Kelly, said about "who made the decision to resign from" the Octaviar Note Trust (Mr Klein also denied that this had happened). 9 Mr Klein was also asked about why paragraph 14 was included in his affidavit. Paragraphs 13 and 14 of his affidavit are: 13. I had attended a number of Australian Public Trustee Conferences where the developing mood was that this work was not a good match for the ordinary business of a Public Trustee. The view was developing among Public Trustees that the view promoted by Treasury Officers was misguided. This reinforced my opinion that corporate trustee work should be left to the private sector trustees. It would not have taken much in this mood to instruct that the PTO should resign from any corporate trust regardless or not of whether there was any reason. And as I recall it a trustee does not have to give a reason. 14. I have no particular recollection of resigning from the MFS Note Trust. I do recall giving instructions to pull out of a number of corporate trusts where I thought on balance and for various reasons that the business of the trust was not a good match for the culture of the PTO. 10 At T465 (lines 39-45) the following exchange took place: So was your purpose in including that material in your affidavit about the developing mood to try to suggest that there was some causal connection between your appreciation of that mood and your resignation from the MFS note trust?---Well, what's in my affidavit is what's in my affidavit, but I supplied as much information as I could think of and thought relevant to the solicitors and they drafted the affidavit. I found no fault with it but if you find a fault with it now then I will answer to that, but I really can't describe why it's drafted in that way. 11 Later in his cross-examination, Mr Klein was asked about his recollection of making any amendments or corrections to the affidavit that was given to him in type-written form. Mr Klein said that he remembered making corrections. He was then questioned on that matter, without objection. Mr Klein was asked about the corrections that he might have made to paragraphs 12 and 13 of his affidavit. The substance of his answer was that he did not recall making any corrections to those paragraphs. 12 The following exchange then occurred at T466 (lines 16-25): What were the corrections that you did make? Do you have a recollection of that?---I think I made some corrections mostly to the lead-in. To what, I'm sorry?---Mostly to the lead-in to the affidavit. I wanted it to be pointed out that although this particular trust may well be the whole subject matter of this trial, it was a very small matter in terms of the total context of work of the Public Trust Office for which I was responsible and I didn't want it to be overlooked that, in fact, I spent a fair bit of my time on that other work, and naturally a much smaller time on this work. I didn't want it to be thought that I had – I was doing this work which, in fact, I wasn't. 13 The cross-examination then turned to other paragraphs of Mr Klein's draft affidavit at T466 (lines 27-33): And do you recall making any other amendments or additions or deletions from the balance of the affidavit?---Certainly as I say, question – paragraph 2. I've – we have just spoken about that. Paragraph 3 in the same way. Paragraph 4 in the same way. I think paragraph 5 stood by itself. I think I made suggestions in relation to delegations. I actually said further that these delegations were right across the whole of the office but I presume that it was thought that that wasn't terribly relevant to my affidavit.

The applicant's submissions 14 The applicant advances two grounds to support the adjectival relevance of the draft affidavit sought by the notice to produce. 15 First, the applicant argues that, in the passages quoted at [7] and [10] above, Mr Klein sought to distance himself from the form of words used in paragraphs 15 and 14 respectively of his affidavit, by attributing the drafting to others. The applicant submits that the draft affidavit is "likely to shed light upon whether that evidence is cogent and should be accepted". 16 Secondly, the applicant says that there is an unresolved issue on the evidence as to how Mr Klein came to know that Mr Kelly's evidence would be that he (Mr Klein) gave an instruction to resign the respondent as trustee of the Octaviar Notes Trust. The applicant submits that Mr Klein was not in a position to positively deny that he had been told this by a solicitor at Clayton Utz (the respondent's solicitors). The applicant submits that paragraph 15 of the affidavit, which deals with this subject, is carefully worded and that this was "an important issue in the proceedings". 17 As to the question of privilege, the applicant submits that Mr Klein was cross-examined about the contents of his draft affidavit and gave specific answers about amendments made to various paragraphs. The applicant says that none of these questions was objected to and led to the disclosure of the contents of the paragraphs in question, which amounted to a waiver of privilege. The applicant submits that, as a consequence, privilege in the draft affidavit, as a whole, has been waived.

Consideration 18 In my view, privilege has not been waived in the draft affidavit as a whole. However, I would accept that it is arguable that, in light of the answers recorded at [11] and [13] above, the contents of paragraphs 12 and 13, and possibly paragraph 5, of the draft affidavit were disclosed in the course of cross-examination and that the privilege claimed in those paragraphs may have been waived accordingly. 19 In this connection, paragraphs 5, 12 and 13 of the affidavit, as read, are: 5. My recollection is that corporate trustee services such as the administration of the MFS Note Trust were performed by the Investments Branch of the Office under the direct supervision of the person who held the role of Director of Investment Services from time to time. Although I do not have a particular memory. I believe that the Director of Investment Services held a delegation from me pursuant to section 11A of the Public Trustee Act. During my tenure I think two individuals held this role in charge of the corporate trusteeships. It is my recollection they were Ian Kelly and Frank Prostamo. … 12. There had been a view promoted by Treasury Officers, arising out of their administration of the National Competition Policy, that public and private trustees should have the same powers if they were to undertake the same work. I personally was not a supporter of the Public Trustee doing corporate trust work. I regarded this to be work that should be performed by the private trustee companies. I considered that the Public Trustee's role was to do good for the community, rather than act primarily as a business (like a private trustee). There was no personal advantage to me or to any of the Public Trustee staff to run a business, while a private trustee's existence was for the purpose of making a profit. Nevertheless, all steps were taken to protect the interests of noteholders and comply with the legal obligations imposed on the Public Trustee as a Chapter 2L Trustee. The interests of the noteholders were paramount just like all beneficiaries of a Public Trustee trust. 13. I had attended a number of Australian Public Trustee Conferences where the developing mood was that this work was not a good match for the ordinary business of a Public Trustee. The view was developing among Public Trustees that the view promoted by Treasury Officers was misguided. This reinforced my opinion that corporate trustee work should be left to the private sector trustees. It would not have taken much in this mood to instruct that the PTO should resign from any corporate trust regardless or not of whether there was any reason. And as I recall it a trustee does not have to give a reason. 20 I do not accept that the contents of paragraphs 2, 3 or 4 of the draft affidavit were disclosed and that, correspondingly, the privilege claimed in those paragraphs has been waived. 21 Proceeding on the assumption that the privilege in the contents of paragraphs 5, 12 and 13 of the draft affidavit has been waived, should those parts of the draft affidavit be produced in response to the notice that has been given? In my view, those paragraphs should not be produced because such production could serve no proper purpose in the litigation, for the following reasons. 22 First, based on their assumed contents (in light of the cross-examination), those paragraphs do not go to the two matters which the applicant says are adjectivally relevant, namely whether the evidence given in paragraphs 14 and 15 of the affidavit should be accepted and whether Mr Klein was informed of Mr Kelly's intended evidence: see [15]-[16] above. 23 Secondly, the contents of paragraphs 5, 12 and 13 of the draft affidavit could be deployed only to challenge Mr Klein's credit in respect of his evidence in chief given in the corresponding paragraphs of his affidavit as read. If the contents of those paragraphs of Mr Klein's draft affidavit were to be relied upon for that purpose, fairness dictates that this should only be done by recalling Mr Klein to be questioned again. In the absence of that being done, it is highly likely that I would reject any tender of the draft paragraphs in question on the basis that the probative value of those paragraphs as evidence would be substantially outweighed by the danger that the evidence might be unfairly prejudicial to the respondent or, alternatively, by the danger that the evidence might be misleading or confusing: see s 135 of the Evidence Act 1995 (Cth). 24 Thus, any proposed use of paragraphs 5, 12 or 13 of the draft affidavit could only lead to an application to recall Mr Klein to given further evidence. If such an application were to be made, I would refuse it. The plain fact is that Mr Klein has been cross-examined and excused from further attendance. The fact that Mr Klein's affidavit might have been preceded by a draft or drafts of that affidavit could hardly be a matter of surprise. If his evidence in chief was to be challenged by anything that might have appeared in a previous draft of his affidavit, then it was always open to the applicant to serve a notice to produce requiring the production of the draft or drafts before Mr Klein was cross-examined, subject of course to any claim of privilege that might be made in that regard. It was also open to the applicant to call for the production of the draft or drafts in the course of and before the conclusion of Mr Klein's cross-examination. Neither course was adopted. The applicant accepted that Mr Klein should be excused from further attendance as a witness. It has made and should not be permitted to depart from its forensic decision. 25 There is no doubt that a trial judge has a discretion as to the recalling of witnesses: Searle v Keayes (1994) 126 ALR 728; [1994] FCA 970 at 729. However, there must be good reason to do so. Such reason does not exist here. The applicant has had ample opportunity to test Mr Klein's evidence, including on matters of credit. For this reason, the notice to produce should be set aside.

Disposition 26 Orders will be made accordingly. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.

Associate: Dated: 15 September 2016