Abuse of process
66 It is not in dispute that a document produced pursuant to the compulsory processes of the court is entitled to special protection, such that it may not be used for any purposes other than those related to the litigation in the course and for the purposes of which the document is produced. This obligation is qualified to the extent that it must yield to inconsistent statutory provisions and to the requirements of curial processes in other litigation: Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32-33.
67 This principle is one of general application. Examples of the application of the principle include: where the document is produced on discovery (Riddick v Thames Board Mills Ltd [1977] QB 881; Distillers Co (Biochemicals) Ltd v Times Newspapers Ltd [1975] QB 613; Harman v Secretary of State for the Home Department [1983] 1 AC 280; Crest Homes Plc v Marks [1987] 1 AC 829; Kimberley Mineral Holdings Ltd (In Liq) v McEwan [1980] 1 NSWLR 210; Arnold Mann v Medical Defence Union Ltd [1997] FCA 45; K & S Corporation Ltd v Number 1 Betting Shop Ltd (2005) 240 LSJS 398; [2005] SASC 228; Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316) including where the document is made available in an arbitration as on discovery (Esso); where the document is produced on subpoena (Registrar of the Supreme Court, Equity Division v McPherson [1980] 1 NSWLR 688; Welfare v Birdon Sands Pty Ltd (1997) 79 FCR 220); where answers are provided to interrogatories (Ainsworth v Hanrahan (1991) 25 NSWLR 155); and in respect of witness statements (Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509; Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217; Complete Technology Pty Ltd v Toshiba (Australia) Pty Ltd (1994) 53 FCR 125 at 132-133).
68 The principle has been expressed in terms of an implied "undertaking" given to the court. However, as explained in Hearne v Street (2008) 235 CLR 125 in [105]-[108], this characterisation of the obligation is a conceptual artefact having its origins in the historical requirement that the use of documents generated by litigious processes depended on the giving of an express undertaking: Richardson v Hastings (1844) 7 Beav 354; Hopkinson v Lord Burghley (1867) LR 2 Ch App 447. Since at least the decision in Alterskye v Scott [1948] 1 All ER 469, the principle has also been described in terms of an implied "obligation". The plurality in Hearne characterised the principle as an obligation of substantive law, quoting with approval (in [108]) the observations of Hobhouse J in Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 764:
The expression of the obligation as an implied undertaking given to the court derives from the historical origin of the principle. It is now in reality a legal obligation which arises by operation of law by virtue of the circumstances under which the relevant person obtained the documents or information.
69 As the above quote makes clear, the obligation is to be understood as applying to documents and information. In Crest at 854, Lord Oliver said:
It has recently been held by Scott J. in Sybron Corporation v. Barclays Bank Plc. [1985] Ch. 299 - and this must, in my judgment, clearly be right - that the implied undertaking applies not merely to the documents discovered themselves but also to information derived from those documents whether it be embodied in a copy or stored in the mind. But the implied undertaking is one which is given to the court ordering discovery and it is clear and is not disputed by the appellants that it can, in appropriate circumstances, be released or modified by the court.
70 What lies at the root of the principle involved is the fact that information has been disclosed compulsorily by use of the court's process. This is, after all, the rationale for the imposition of the obligation with respect to answers to interrogatories and witness statements: Central Queensland Cement at 510-511; Ainsworth at 165. Ainsworth was a proceeding for contempt arising from the use of answers to interrogatories administered in one proceeding in another proceeding for the purpose of cross-examining a witness who had verified the answers to the interrogatories. Handley JA at 169-170 said:
Prior to the Common Law Procedure Act 1854 (Eng) a party to proceedings at law could only obtain general discovery by filing a bill for discovery in the auxiliary jurisdiction of the Court of Chancery. This was a proceeding "for the discovery of facts resting in the knowledge of the defendant, or of deeds, or writings, or other things in his custody, possession, or power, but seeking no relief in consequence of the discovery": see Story on Equity Jurisprudence, 2nd ed (1839) vol 2 at 1. Accordingly there is no basis either in history or in principle for distinguishing, for the purposes of the law of contempt, between disclosure to third parties of answers to interrogatories and the disclosure of documents obtained on discovery.
71 In my view, in the case of documents produced in answer to a subpoena, the protection of the obligation extends beyond the documents themselves to information derived from the fact of production, including the fact that the documents are or were in the possession of the person who produced them and the fact that, at least prima facie, the documents are of a description that answers the call of the subpoena.
72 The obligation restricts not only the disclosure of the documents or information, but also more general instances of use of the documents or information outside the purposes of the proceeding in and for which the documents or information were disclosed. In Springfield application was made to use in one proceeding a witness statement prepared but not used in another proceeding. Wilcox J at 220 observed:
… Counsel for Hongkong Bank mentioned the possibility of calling Mr Preston, using the statement as his evidence in chief. Whether that course will eventually commend itself, I do not know. But, even if Mr Preston is not called by either party, it is possible that the statement will prove useful in opening up avenues of inquiry. Without wishing to predict the most likely form of use, I think it probable that the statement will assist Hongkong Bank in relation to the Aetna claim. No doubt that is why Aetna opposes the order now sought.
73 Plainly the obligation to the court can be released or modified by leave granted by that court. The scope of the leave may be general or limited, and leave may be granted on terms.
74 In Crest, Lord Oliver at 860 stated that a court will not release or modify this obligation except in special circumstances. In Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283; [2005] FCAFC 3, a Full Court of this court, following the approach in Springfield, which approved Holpitt Pty Ltd v Varimu Pty Ltd (1991) 29 FCR 576 and Sweetman v Australian Thoroughbred Finance Pty Ltd (unreported, Lockhart J, 23 July 1992), said in [31]:
… It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. 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. …
75 In Springfield at 225, Wilcox J said:
… For "special circumstances" to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present. The matter then becomes one of the proper exercise of the court's discretion, many factors being relevant. It is neither possible nor desirable to propound an exhaustive list of those factors. But plainly they include the nature of the document, the circumstances under which it came into existence, the attitude of the author of the document and any prejudice the author may sustain, whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain, the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information), the circumstances in which the document came into the hands of the applicant for leave and, perhaps most important of all, the likely contribution of the document to achieving justice in the second proceeding.
76 In the present case the applicants did not seek the leave of the court to use in this proceeding the documents or information derived from the documents produced in answer to the CM(UK) subpoena. They submit that it was not necessary for them to seek that leave because:
(a) The information obtained by them from the documents produced in answer to the CM(UK) subpoena was their "property", and therefore their use of it was never restricted in law;
(b) The documents produced in answer to the CM(UK) subpoena were not in any event "used" in a manner which offends the relevant principle or restriction. It was the fact that those documents were retained by the respondents after they ceased their employment with the applicants that was used; and
(c) The implied obligation in relation to the documents produced in answer to the CM(UK) subpoena ceased as a result of the documents being referred to in open court in a manner which disclosed their nature and content pursuant to O 15 r 18.
77 I reject the submissions in paragraphs (a) and (b).
78 It is plain from the correspondence between the applicants' solicitors and the respondents in the period 19 November 2008 to 12 December 2008 that the applicants' solicitors had given consideration to the documents that had been produced by the respondents in answer to the CM(UK) subpoena. As the cross-examinations of Mr Petrucco and Mr Yamine made clear, that consideration included inspecting the documents and listening to parts of the recordings to an extent that enabled a view to be formed about which documents contained confidential material and which documents contained privileged communications, and about whether the recordings included unlawfully made recordings. That consideration, coupled with the information that the documents had been produced in answer to the CMUK subpoena by the respondents, must have revealed the very information that enabled the applicants, through their legal advisers, to make the claims and demands in their correspondence with each of the respondents and, eventually, to plead the statement of claim. The information included the fact that each of the respondents had possessed documents in the terms described in the CM(UK) subpoena; that those documents were retained by each of the respondents after they ceased holding office with the first respondent; that, on or prior to 8 November 2007, each of the respondents made copies of documents and sound recordings of telephone conversations between the respondents and third parties, including lawyers; that these copies had been made from a computer server maintained by the first applicant for the purpose of its business; that the documents and sound recordings contained information that was confidential to the first applicant; and that the documents and sound recordings were copyright works or other subject matter, in which the first applicant owned the copyright. It was this body of information, and perhaps other information derived from the documents that had been produced, that was deployed by the applicants' solicitors to direct their correspondence to the respondents and ultimately to file the application and statement of claim commencing the present proceeding against the respondents, who were strangers to the 651 proceeding. This was clearly a use of the documents and of information that had been derived from their production by the respondents under the compulsion of court process (the CM(UK) subpoena) in the 651 proceeding. The dichotomy raised by the applicants in paragraph (b) is a false one and does not provide a reason why leave was not necessary.
79 In oral argument it was submitted that, independently of the fact that inspection had taken place of the documents produced in answer to the CM(UK) subpoena, the applicants' solicitors had other information the use of which was not subject to any obligation to the court. In this connection the applicants sought to rely on the correspondence to which I have referred that emanated from the respondents themselves in response to the correspondence from the applicants' solicitors. It is clear on the evidence, however, that the claims which the applicants' solicitors commenced to articulate against the respondents from at least 25 November 2008, which subsequently translated into the allegations pleaded in the statement of claim, were based substantially on their inspection of the documents that had been produced and the fact that the respondents had produced them. Moreover, the terms of the CM(UK) subpoena and the fact that documents had been produced by the respondents in answer to that subpoena, was not information that was based on anything the respondents had said in correspondence.
80 Furthermore, the contention that the information was the "property" of the applicants (a proposition that the applicants did not seek to sustain, in any event, on the hearing of the motions by evidence or elaboration of legal principle), seems to me to miss the point. What lies at the heart of the applicants' claims as pleaded in the statement of claim is not what the content of the documents reveals about the respondents but the fact that the respondents were or had been in possession of documents having that content (based on the applicants' solicitors inspection of those documents). It has not been shown by any evidence that, if the CM(UK) subpoena had never been issued, the information which the applicants allege was their "property" would ground the claims now pleaded against the respondents in the statement of claim.
81 Unless the applicants can point to a circumstance by which they have been released from the obligation imposed upon them relating to the production of documents in answer to the CM(UK) subpoena, their use of the documents and information, as described, will have been in breach of their obligation to the court not to use the documents or information for any purpose other than the 651 proceeding.
82 The submission in paragraph (c) requires consideration of the terms of O 15 r 18. The rule provides:
Any order or undertaking, whether express or implied, not to use a document for any purpose other than those of the proceedings in which it is disclosed shall cease to apply to such a document after it has been read to or by the Court or referred to, in open Court, in such terms as to disclose its contents unless the Court otherwise orders on the application of a party, or of a person to whom the document belongs.
83 This rule finds its context in that part of the Federal Court Rules dealing with documents produced as part of the process of discovery between parties to a proceeding. Here the documents were produced not by way of discovery between parties but by subpoena issued to strangers to the proceeding in which the subpoena was issued.
84 Although the context may suggest that O 15 r 18 should be confined to documents produced on discovery, the rule has been construed as applying to all documents and information in respect of which the implied obligation arises, the rationale being that O 15 r 18 was inserted to abrogate the Harman principle which is not limited to documents produced on discovery: Chapmans Ltd v Australian Stock Exchange Ltd (unreported, Tamberlin J, 25 August 1995); Australian Rugby Union Ltd v Hospitality Group Pty Ltd [1999] FCA 1136; King v AG Australia Holdings Ltd (2002) 121 FCR 480. Instructed by the approach adopted in these decisions, I will proceed on the basis that the applicants can call in aid O 15 r 18 in the circumstances of the present case.
85 It is to be observed that, under O 15 r 18, the obligation only ceases when a document is read or referred to, in open court, in such terms as to disclose its contents. This stands in contrast to rule 31.22(1) of the Civil Procedure Rules 1998 (United Kingdom), which provides:
(1) A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where -
(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;
(b) the court gives permission; or
(c) the party who disclosed the document and the person to whom the document belongs agree.
86 In respect of the obligation owed to this court, the disclosure must be of the contents of the document. In my view, a mere reference to the nature of the document or its general subject matter will not suffice for this purpose. What is required, as a minimum, is a disclosure of the substance of what is stated in the document. Unless this is done it cannot be said in any real sense that the contents of the document have been disclosed. Support for this view is to be found in King in [78] and Fina Research SA v Halliburton Energy Services Inc [2002] FCA 1281 in [18]-[21].
87 The applicants contended that O 15 r 18 has an ambulatory operation, such that a partial disclosure will result in a cessation of the obligation to the extent of the disclosure. In my view that it not what O 15 r 18 says. Order 15 r 18 speaks in terms of an obligation with respect to a document and the cessation of that obligation with respect to that document, not the cessation of the obligation with respect to some part of it. The obligation with respect to the document as a whole ceases once its contents have been disclosed in one of the ways identified in the rule. In my view, absent such a disclosure, O 15 r 18 does not assist a person who seeks to use a document for any purpose outside the proper purposes of the proceeding.
88 The disclosures relied on by the applicants do not satisfy the requirements of O 15 r 18.
89 First, as to the hearing on 19 November 2008, I am not satisfied that any relevant disclosure was made.
90 Secondly, as to the hearing on 23 February 2009, neither of Mr Petrucco's affidavits was read as contemplated by the rule. Thus it is irrelevant what those affidavits said about the documents and sound recordings. In any event, as I have already noted, the most that can be put in that regard is that the descriptions in the affidavit of 26 November 2008 of the documents and sound recordings revealed their nature and character and, in some cases, general subject matter, but not their actual contents.
91 Furthermore, the casual and occasional references to the affidavits in the course of proceedings in open court on 23 February 2009 did not disclose the contents of the documents or the sound recordings to which the affidavits related. In any event, I am satisfied, for the reasons given in [78] above, that much more information than was mentioned in open court on that day was derived by the applicants' solicitors from the production of documents in answer to the CM(UK) subpoena and used by them to make the claims and demands in their correspondence with each of the respondents and, eventually, to plead the statement of claim in this proceeding.
92 I should add this as well: the instances of disclosure relied upon by the applicants relate to only some of the documents that were produced under the CM(UK) subpoena. Thus, even if, contrary to my view, there was a sufficient disclosure of the contents of some documents or recordings, it is plain that the applicants can point to no disclosure in relation to all of that which was produced in answer to the CM(UK) subpoena. It is clear on the evidence that the formulation of the claims in the applicants' solicitors' correspondence and the causes of action in the statement of claim were based upon a consideration of the totality of the material produced in answer to the subpoena. Thus reliance on O 15 r 18 in the particular circumstances of this case would not provide a complete answer to the respondents' contention that the documents they produced, and the information derived from that production, have been used in breach of the applicants' obligation owed to the court.
93 Finally, and perhaps most importantly of all, any disclosure made on 23 February 2009 occurred after the impugned use and cannot be an answer to the fact that the breach of the obligation was complete no later than the filing of the application and statement of claim on 24 December 2008.
94 The consequences of such a breach may include the exercise of a discretion by the court to strike out the proceeding or permanently stay it as an abuse of process: Riddick; K & S Corporation Ltd in [50]; Grocon Ltd v Alucraft Pty Ltd (in liq) (1992) 10 ACLC 1127 at 1128-1129. In my view the court also has the power to grant leave retrospectively: Miller v Scorey [1996] 1 WLR 1122 at 1133-1134; Eckert v National Australia Bank Ltd (unreported, Supreme Court of South Australia, Doyle CJ, 17 April 1997). The question is whether, as a matter of discretion, such leave should be granted. As Rimer J in Miller observed (at 1133):
… It is one thing to release a party from an undertaking to the court so as to permit him to do in the future that which he has been prevented from doing in the past. It is another thing for the court to find, as I have, that a party has abused the process of the court by his breaches of an undertaking to it and for it then to give that party a retrospective release from the undertaking so as to wipe away the abuse of the process which he has committed.
95 In my view it is a matter of significant concern that a breach of the obligation has taken place. It is not to be excused lightly. However, the matter must be viewed in a wider context.
96 Had the applicants sought the requisite leave at the time of production in October and November 2008 then, in my view, it is likely that such leave would have been granted. By their description in the CM(UK) subpoena, the documents were all documents relating, in one way or another, to the business and affairs of the applicants, which presumably came into the respondents' hands while they were still directors of the first applicant. In the correspondence that passed between the applicants' solicitors and each of the respondents in November and December 2008, neither of the respondents suggested otherwise. Indeed, each of the respondents, at that time, was at pains to stress that none of the documents were of commercial value. Their view was that they were entitled to possess the documents they had. No contrary view was advanced on the hearing of the motions.
97 Furthermore, there is obviously a contest between the parties about whether the conduct alleged in the statement of claim amounts to the infringements and breaches that have been pleaded. But the respondents raise no issue of prejudice concerning the use of the documents and information in this proceeding. They rely purely on the fact that the applicants have acted in breach of their obligations to the court. As there is no issue of prejudice now, it is difficult to see how there could have been an issue of prejudice to the respondents in November 2008.
98 As Wilcox J observed in Springfield at 225, perhaps the most important consideration of all in considering whether leave should be granted is the likely contribution of the documents in achieving justice. Had an appropriate application been made in November 2008 I believe that it is most likely that the interests of justice would have lain in permitting the applicants the opportunity of vindicating the rights they assert in their present pleading.
99 Looking at the matter now, I also take into account the fact that, in light of the correspondence that had passed between the applicants' solicitors and the respondents in November and December 2008, it must have been apparent, or should have been apparent, to the respondents' legal advisers shortly after the application and statement of claim had been served on the respondents in January 2009, that the applicants had used the documents and information in the way about which the respondents now complain. Their first query in that regard was raised in correspondence with the applicants' solicitors by the letter dated 19 November 2009, the better part of a year after the pleadings had been served and almost two months after the respondents had filed their defence. As the respondents' solicitors made clear in that letter, it was obvious to them that the documents had been used in the formulation of the statement of claim. If that was obvious then, it must have been or should have been equally obvious in January 2009. In this connection it is no answer for the respondents to say, as they now do, that they had no way of knowing whether the documents had been used in the impugned way by the applicants until the applicants' solicitors replied to the letter of 19 November 2009. The fact is that the respondents did not seek to raise the matter in early 2009 but in late 2009. The occasion seems to have been prompted by the applicants informing the respondents that they had been instructed to amend the statement of claim to include an account in respect of the payment to the respondents of $16 million pursuant to the exit agreement.
100 In the particular circumstances of this case it seems to me that the interests of justice now lie in granting leave nunc pro tunc to use the documents produced in answer to the CM(UK) subpoena, and the information derived from those documents and their production, in and for the purpose of this proceeding. It is appropriate that the order granting that leave be made in the 651 proceeding.
101 In coming to this decision I have given consideration to the respondents' contention that this proceeding was commenced solely or substantially for the collateral and improper purpose of intimidating or harassing the respondents and assisting the applicants, as respondents in the 651 proceeding, in the prosecution of their defence in that proceeding.
102 In that connection the respondents have pointed to a number of matters from which they say I should infer that this was the purpose to be attributed to the applicants in commencing the proceeding. They submit that the Chief Executive Officer of the first applicant, Sean Newell, had suspicions that the respondents had funded the payment of the licence fee from at least August 2008. They submit that, as at 19 November 2008, the applicants were concerned that the respondents would speak to the solicitors acting for CM(UK) in the 651 proceeding and may give evidence on behalf of CM(UK). They submit that the demands placed upon the respondents by the applicants' solicitors in the correspondence to which I have referred were unreasonable, and that this proceeding was commenced precipitously without issuing a letter of demand, in circumstances in which reasonable undertakings were proffered and no urgency was evident. They submit that, once the proceeding was commenced, it was not prosecuted with diligence and that the applicants abandoned their claim to an interlocutory hearing for the return of the documents.
103 In my view the respondents' contention is not made out on the evidence, and I reject it. There is no reason to doubt, on the material before me, that the claims, advanced through the correspondence between the applicants' solicitors and the respondents in November and December 2008, were genuinely raised by the applicants to protect what they saw to be a misuse or threatened misuse of the documents in question, including allegedly privileged or otherwise confidential communications and allegedly unlawful recordings of communications. I do not accept that, objectively considered, the demands in the applicants' solicitors' letters could be said to have been unreasonable or that the proceeding was commenced precipitously. Whether the applicants' claims in this regard are valid is a matter to be determined at trial. While it is true that the proceeding has not been prosecuted with diligence, and that the applicants did not proceed with their foreshadowed application for interlocutory relief, these matter seems to me to be neutral considerations. There is some evidence (see Campaign Master (UK) Limited v Forty Two International Pty Ltd (No 4) [2010] FCA 398 at [56]-[60]) that Mr Newell, and perhaps others within the applicants, had the suspicions to which the respondents refer. However, I would not draw from this evidence, considered alone or in combination with the other matters on which the respondents rely, the inference that the proceeding was commenced solely or substantially for the collateral and improper purpose which the respondents assert.