That's how I've always interpreted (1 trout over 50cm allowed in the daily quota of four trout/day, but two hatchery steelhead are allowed), until a colleague told me otherwise so not sure which one is correct anymore.
Not sure where the confusion for your friend is Rod, as the reg clearly states:
Trout/Char 4, but not more than
- 1 over 50cm
(2 hatchery steelhead allowed)
This clearly indicates that
if the trout are hatchery steelhead then you are allowed 2 over 50cm. The real question is, if I catch a hatchery steelhead over 50 cm on the Stave, and then catch a hatchery cuttie over 50 cm, can I continue to fish for my 2nd steelhead or does the cuttie count as my 2nd hatchery steelhead allowed? Can you imagine someone actually killing 3 fish over 50 cm from that system, hatchery or not?