BETWEEN : PERDAMAN CHEMICALS & FERTILISERS PTY LTD

Practice and procedure - Discovery - Implied undertaking or substantive obligation not to use discovered documents for a collateral purpose - Document discovered by defendants to plaintiff - Plaintiff wishes to commence a new action relying on the documents - Whether collateral use - Whether leave should be granted

Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 57 FCR 360

Andrew Koh Nominees Pty Ltd v Pacific Corporation Ltd [No 2] [2009] WASC 207

Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476

Bond v West Australian Newspapers Ltd [2008] WASC 121

Esso Australia Resources Ltd v Plowman [1995] HCA 19; (1995) 183 CLR 10

Hearne v Street [2008] HCA 36; (2008) 235 CLR 125

Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283

Mann v Medical Defence Union Ltd (Unreported, FCA, 7 February 1997)

Minister for Education v Bailey [2000] WASCA 377; (2000) 23 WAR 149

North East Equity Pty Ltd v Goldenwest Equities Pty Ltd [2008] WASC 190

Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188

Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217

Temwood Holdings Pty Ltd v Oliver [1999] WASC 212

Western Areas Exploration Pty Ltd v Streeter [No 2] [2008] WASC 217

1 The plaintiff (Perdaman) applies for leave to use two documents discovered by the first defendant (Griffin) to commence and prosecute a new action against the defendants in this action. I will publish these reasons at the same time as my reasons in Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188 (Perdaman (No 1)). The dispute between the parties, Perdaman's claim, the relevant instruments and the background facts are explained in those reasons. These reasons must be read with my reasons in Perdaman (No 1).

2 By chamber summons dated 29 June 2011, Perdaman sought an order that Griffin and the third defendant (Lanco Australia) give discovery of two documents: the Facility Agreement and the Negative Pledge Deed. The documents are more precisely identified in Perdaman (No 1).

3 These two documents were described as confidential exhibits to the affidavit of Mr Amarendran sworn 11 July 2011.

4 On 13 July 2011, the documents were produced subject to agreed confidentiality orders.

5 At the hearing of Perdaman's application for a freezing order on 27 July 2011, Griffin consented to the discharge of the confidentiality orders on the basis that the two documents be subject to the usual implied undertaking, or what is now called the substantive obligation, not to use the documents for any purpose collateral to the litigation.

6 Perdaman wishes to use the documents in commencing a new action. In the new action, Perdaman proposes to plead that Griffin's execution of the Negative Pledge Deed constitutes a breach of cl 24.2(c) of the Coal Supply Agreement (CSA): the obligation for Griffin to use reasonable endeavours to satisfy the condition precedent in cl 24.2(ii). That condition requires execution of the CSA Securities and of an intercreditor deed in the form of sch 6 to the CSA. By cl 2.2 of the Negative Pledge Deed, Griffin is obliged not to create or permit to subsist any security over any of its assets. Perdaman contends that by entering into that obligation, Griffin acted inconsistently with its obligation to use reasonable endeavours to execute the CSA Securities. It also contends that:

(1) the other defendants tortiously interfered with the CSA by procuring Griffin to execute the Negative Pledge Deed and thereby breach the CSA; and

(2) the defendants engaged in unconscionable conduct contrary to s 21 and s 22 of the Australian Consumer Law.

7 It proposes to use the documents to commence and prosecute an action to pursue these claims.

8 Griffin contends that to use these documents in that way would be an impermissible collateral use of the documents, contrary to the substantive obligations, and opposes the grant of leave.

(1) leave is not required because the use of the documents for the purpose identified is not collateral or improper;

(2) alternatively, in any event, the relevant parts of the Negative Pledge Deed have been disclosed in open court, with the result that use of the Negative Pledge Deed is no longer impermissible; and

(3) in any event, the court should grant leave to permit Perdaman to use the documents for the purposes of commencing and prosecuting the proposed further proceedings.

10 For the reasons that follow, to the extent necessary I would grant leave to Perdaman to use the Facility Agreement and the Negative Pledge Deed to commence and prosecute the proceedings to the effect proposed.

11 The following summary of the relevant legal principles draws heavily from the decision of Newnes J in North East Equity Pty Ltd v Goldenwest Equities Pty Ltd [2008] WASC 190 [35] - [45]. See also my summary in Andrew Koh Nominees Pty Ltd v Pacific Corporation Ltd [No 2] [2009] WASC 207 [11] - [16], [18].

12 Where one party to litigation is compelled, by reason of a rule of the court or a specific order of the court or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use that disclosure for any purpose other than that for which it was given, unless it is received into evidence. This principle applies to a range of material including discovered documents and answers to interrogatories: Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 [96].

13 Traditionally, the obligation has been described as an implied undertaking. However, it is properly understood as an obligation of substantive law: Hearne v Street [106] - [108].

14 Discovery is an invasion of the privacy and confidentiality of a litigant's affairs. The rationale for the imposition of this obligation is to ensure that privacy and confidentiality are not invaded more than is necessary for the purpose of doing justice: Hearne v Street [107]; Minister for Education v Bailey [2000] WASCA 377; (2000) 23 WAR 149 [25] - [27].

15 The power to dispense with or modify the obligation is not freely exercised, but it will be exercised if there are special circumstances which make it just to do so: Esso Australia Resources Ltd v Plowman [1995] HCA 19; (1995) 183 CLR 10, 37; Hearne v Street [107].

16 The obligation should be modified or released only to the extent that it is in the interests of the administration of justice or in the public interest to do so: Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217, 225; North East Equity Pty Ltd [40].

17 In Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283 (a passage cited with approval by Newnes J in North East Equity Pty Ltd [41]) the Full Court of the Federal Court said the following in relation to the requirement of special circumstances:

The notion of 'special circumstances' does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined [31].

18 In weighing up the competing public interests, the importance of the public interest in the preservation of the confidentiality of discovered documents must be kept squarely in mind: North East Equity Pty Ltd [45]; Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476, 488.

19 In this case, Perdaman proposes to commence a new action, rather than add a claim to the existing action. That is because the Negative Pledge Deed was executed after the existing action was commenced. Nevertheless, I think the principles outlined in the following paragraphs are of assistance.

20 There are authorities to the effect that it will not be a collateral or ulterior purpose to use documents disclosed on discovery to add new causes of action or parties to the action to which the documents have been disclosed: see, for example, Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 57 FCR 360, 378 - 379; Bond v West Australian Newspapers Ltd [2008] WASC 121 [37]. As Steytler J pointed out in Temwood Holdings Pty Ltd v Oliver [1999] WASC 212 [35] - [36], the position in this respect is not entirely settled. In Mann v Medical Defence Union Ltd (Unreported, FCA, 7 February 1997), Ryan J expressed the view that there was no absolute rule that the use of documents to add a new claim or commence a cross-claim was always permissible. His Honour accepted that it generally would be, but that it would depend upon whether the proposed use of the material bore a reasonable relation to the prosecution of the case sought to be made by the proposed amendment.

21 In Western Areas Exploration Pty Ltd v Streeter [No 2] [2008] WASC 217 [21] - [23], Le Miere J referred to these statements of principle. His Honour did not consider it necessary to reach a concluded view because he found the proposed amendment was sufficiently connected to the existing case to satisfy the test proposed by Ryan J.

22 As will appear, I take the same approach in this case.

23 In accordance with the principles I have stated, my starting point is that it is for Perdaman to demonstrate special circumstances that justify the release or modification of the obligation. Further, in weighing up the competing considerations, I keep in mind the importance of the public interest in the preservation of the confidentiality of discovered documents.

24 In my opinion, the new claim proposed to be made by Perdaman is closely connected to the claims already made in the existing proceedings.

25 Some of the primary claims in the existing proceedings are explained in my reasons in Perdaman (No 1). In the existing action, Perdaman complains, among other things, of breaches by Griffin of its obligation under cl 24.2(c). Perdaman contends that, prior to the execution of the Negative Pledge Deed, Griffin sought the consent of ICICI to its execution of the CSA Securities, in circumstances when Griffin had no obligation to seek that consent.

26 In the proposed action, Perdaman seeks to complain that by executing the Negative Pledge Deed, Griffin disabled itself from executing the CSA Securities without ICICI's consent. Further, Perdaman will contend that Griffin was under no obligation to execute the Negative Pledge Deed, so that the undertaking of the obligations in the Negative Pledge Deed was inconsistent with the exercise by Griffin of reasonable endeavours to satisfy the relevant condition, including by execution of the CSA Securities.

27 In my view, the breach proposed in the new action is well and truly sufficiently closely connected to the breaches complained of in the existing action to make it appropriate that, to the extent leave may be necessary, leave be granted.

28 Moreover, as my reasons in Perdaman (No 1) illustrate, substantial portions, at the least, of the two documents have lost and will anyway lose their confidentiality in the course of the existing action.

29 The defendants contend that the new proceedings contemplated by Perdaman do not disclose an arguable cause of action. I do not accept that submission. I am satisfied that the proposed claim has sufficient merit to make it appropriate to grant the leave sought by Perdaman.

30 In all the circumstances, I am satisfied leave should be granted.

31 For these reasons, I would grant leave, to the extent it may be necessary, for Perdaman to use the Negative Pledge Deed and the Facility Agreement to commence and prosecute the proposed new proceedings.