Australian Prudential Regulation Authority v Rural & General Insurance Limited

REASONS FOR JUDGMENT 1 On 21 October 2005 I dealt with one aspect of a motion by Aaron Stephenson for access to subpoenaed documents for the purpose of use in other proceedings and for related relief. I stood over the motion in order to give further consideration to the wider issues involved (Australian Prudential Regulation Authority v Rural & General Insurance Limited (ACN 000 007 492) (Subject to Deed of Company Arrangement)[2005] FCA 1548). 2 In 2003 and 2004, Australian Prudential Regulation Authority (APRA) was proceeding in this Court seeking to wind up Rural & General Insurance Limited (as it then was) (Rural & General) pursuant to s 462(3) of the Corporations Act 2001 (Cth). Rural & General was represented by solicitors and counsel and actively opposed the winding up. APRA had earlier appointed Peter John McCarthy of the accountancy firm of Ernst & Young to make an investigation in respect of the company under s 52 of the Insurance Act 1973. In the course of the proceeding several sets of documents were subpoenaed from McCarthy and his firm and a significant volume of documents was produced. Stephenson was the Managing Director of Rural & General and was actively involved in instructing solicitors and counsel. Leave to discontinue the proceeding was granted on 17 March 2004 following the execution by Rural & General of a Deed of Company Arrangement on 15 March 2004. The documents produced on subpoena on behalf of McCarthy and his firm should have been returned promptly. Due to an administrative oversight they were not. 3 Stephenson is the applicant in proceedings in the Administrative Appeals Tribunal (AAT) against APRA appealing against APRA's decision to disqualify him under s 25A of the Insurance Act 1973. On 15 June 2005 he signed a statement in connection with that proceeding to which were annexed a number of documents, being copies of communications which passed between McCarthy and officers of APRA prior to the disqualification. Stephenson wishes to rely upon those communications to contend that the decision to disqualify him was affected by extraneous considerations. APRA took exception to the use of those documents contending, amongst other things, that they had been obtained as a result of inspection of documents produced to this Court in the course of the winding up proceeding in breach of the implied undertaking as to proper use of such documents. 4 As the subpoenaed documents remained in the custody of the Court, this led to the present motion by Stephenson for leave to inspect those documents. The motion was later amended to include alternative relief that he have leave to use the particular exhibits concerned in the AAT proceeding or that he have leave to the extent required to seek production from APRA of APRA's copies of those documents for use in the AAT proceedings. I made clear when the matter came on for hearing that I would not grant inspection of the documents, although I did make an order granting leave to use one of the documents in question. I was satisfied that it had been sufficiently deployed in public to justify its use in the proceedings under all of the circumstances. 5 The evidence is that the other documents were received by the solicitors currently acting for Stephenson from the solicitors who acted for Rural & General in the winding up proceeding. As orders permitting inspection and copying were made in that proceeding, it can be assumed that the copies were regularly made. There is little doubt that those who inspected and copied the documents were subject to an obligation to the Court to use them, and the information disclosed in them only for the purposes of the winding up proceeding pursuant to the implied undertaking usually described by reference to the decision of the House of Lords in Harman Appellant v Secretary of State for the Home Department Respondent [1983] 1 AC 280. I am also satisfied that the circumstances surrounding the obtaining of the copies of the documents would have been known to Stephenson and the solicitors acting for him in the AAT proceedings, whether or not all of the implications were understood. In any event, those implications are understood now and he and they are plainly bound by the implied undertaking. Hence, the prudent course of seeking to be relieved from the consequences of it. 6 It is well established that the implied undertaking can, in appropriate circumstances, be released or modified by the Court. There are many cases discussing the exercise of that power in differing circumstances, a recent example being the decision of the Full Court in Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) ALR 283; [2005] FCAFC 3 at [31]-[33]. (See also, for example, Esso Australia Resources Ltd v Plowman (Minister for Energy & Minerals) (1995) 183 CLR 10 per Brennan J at 36-37; and the authorities cited in British American Tobacco Australia Services Ltd v Cowell (No 2) (2003) 8 VR 571 at [52].) 7 With some hesitation I have decided that Stephenson should not be precluded from using the particular documents identified in the proposed alternative order by reason of operation of the implied undertaking. That ruling applies to the future and not to the past. Furthermore, it is not intended in any way to bind the AAT as to any ruling it may have to make about the use of the documents in question nor to indicate any implicit view on that topic. Further, I do not intend to relieve those involved in any breach of the undertaking from responsibility. 8 On the one hand, it is argued that the documents are confidential and would not normally be available to a party such as Stephenson. It was only the use of the compulsory processes of the Court which brought them to light and that should not advantage Stephenson. The value of the implied undertaking would be diminished if these orders are granted, particularly as use in breach has already occurred. Breach should not be rewarded. On the other hand, it is contended that the use of documents is necessary for the proper pursuit of a legitimate appeal concerning a matter seriously affecting the livelihood and reputation of Stephenson and there is no inherent quality about the documents protecting them from disclosure where appropriate. 9 The documents concerned have an apparent relevance to the matter before the AAT, in the sense that that term is used in the judgment of Moffitt P in National Employers' Mutual General Insurance Association Ltd v Waind and Hill [1978] 1 NSWLR 372, although I cannot conclude that they are central to that case or that they will ultimately be considered as significant, or even admissible, by the AAT. There is no doubting the importance of the appeal against a disqualification of this kind to the individual concerned. Those matters in themselves may not be sufficient to counter the powerful considerations referred to on behalf of APRA. The factor which, in my opinion, makes the circumstances special enough to warrant not prohibiting use of the documents is the connection between the two proceedings. In a practical sense, the investigation under the Insurance Act 1973 led to both the winding up proceeding and to the disqualification. Again, in a practical sense, there could well be an overlap between the factors which would have been relevant to a contested winding up hearing and those likely to be relevant to a contested hearing as to disqualification. Furthermore, the reality is that, in pursuing an appeal against disqualification in these circumstances, it is more than likely that the very documents would have been subpoenaed for production regardless of any knowledge obtained through the winding up proceeding. It would be unfortunate if material which would have come to light in that way were precluded from use by reason of the documents having come to the attention of the solicitors for Stephenson by virtue of the apparent breach of the implied undertaking. 10 I am therefore disposed to make an order along the lines of Order 2 in the amended notice of motion. However, neither McCarthy nor Ernst & Young have been heard. Whilst I appreciate that all that could have been said against the proposed order is likely to have been said on behalf of APRA, they are necessary parties as they produced the documents. They should be joined, and have the opportunity of appearing and opposing the proposed orders. The matter will stand over enable to that to be done. I should indicate that I propose to order that Stephenson should pay the costs of APRA, and any other party that appears, on a solicitor client basis. He is seeking an indulgence. APRA was quite entitled to put what it did in the circumstances as an interested party and as a contradictor. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.