Idoport Pty Limited v Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited and Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited

• THE SUPREME COURT
  OF NEW SOUTH WALES
  EQUITY DIVISION - COMMERCIAL LIST
  

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED ("JMG") v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT - dealing with access to documents produced by plaintiffs in response to notices to produce documents issued on security for costs applications The Notices of Motion 1 There are before the court two notices of motion in identical form filed by the defendants on 20 July 2000, the first [No 39] filed in the main proceedings [50113 of 1998] and the second [No 40] filed in the MLC proceedings [3991 of 2000]. Copies of the notices of motion are appended to this judgment.

The essential issue 2 The essential issue for decision concerns the conditions to be imposed by the court by way of confidentiality undertakings and otherwise in relation to use of documents sought by the defendants for the purposes of the defendants' pending motions for security for costs. The documents in question ["the confidential documents"] were: (a) produced or are in part still to be produced in answer to notices to produce dated 29 May 2001 issued in the main proceedings;

(b) produced on notice to produce in separate Equity proceedings before Young J. 3 Questions arise as to which persons (the "identified persons"), whether legal or client representatives of the defendants, are to be required to give such undertakings and upon that basis to have access to the documents. 4 The defendants pursue a form of undertaking which would oblige the identified persons not to use the confidential documents or the contents of those documents ["the confidential information"] or any part of them other than for the purpose of the proceedings. 5 The plaintiffs pursue a form of undertaking which would oblige the identified persons not to use the confidential documents or the confidential information or any part of them other than for the purposes of the security for costs motions in the proceedings.

The background to the notices of motion 6 I do not see it as necessary to examine in any detail the main proceedings or the MLC proceedings. It is common ground that the final hearing of the main proceedings commenced on 24 July 2000 and that the MLC proceedings which commenced on 19 September 2000 were ordered to be heard together with the main proceedings on 5 October 2000 ([2000] NSWSC 945). The issues in the connected sets of proceedings have been identified in the pleadings, in the openings and in over 50 interlocutory judgments given over the last two years. 7 Two further sets of proceedings ["the Liquidator proceedings"] were heard before Young J. The first proceedings concerned the original meeting of creditors of Market Holdings which had purported to appoint Mr Sheahan as liquidator of that company. Young J. held that the first creditors meeting had been invalid. At the very least this is said to have raised a question mark over that appointment. The second proceedings concerned an attempt to hold a subsequent meeting to confirm Mr Sheahans appointment and also concerned his removal. In the result Young J appointed Mr Silvia as liquidator. 8 In response to a notice to produce served upon the plaintiffs [Market Holdings and Mr Sheahan] in one of the proceedings before Young J. [4091 of 2000], questions arose in the course of an application to set the notice aside, as to the appropriate confidentiality regime to be imposed as a condition of NAB (as defendant in those proceedings) gaining access to the documents produced in response to the notice. The materials produced included documents which included arrangements or agreements entered by one or other of the plaintiffs in the main proceedings (or by companies related to those plaintiffs) with persons providing funding for the conduct of those proceedings, together with documents recording the implementation of such arrangements. Both counsel who argued the motions before me accepted this as an appropriate description of those documents, and as I understand it, of the further documents sought by the Notice to Produce of 29 May 2001. 9 Counsel briefed by NAB before Young J. were Mr Gleeson SC and Mr Dick. They had not and have never been briefed as counsel in the main proceedings [by which expression I intend hereafter to include the MLC proceedings]. The issue which was raised before Young J. concerned whether access to the documents produced should extend beyond Mr Gleeson and Mr Dick to Mr Healey and to Ms D'Arcy. 10 Mr Healey is the solicitor on the record for the defendants in the main proceedings. He has had a principal involvement in giving instructions and in preparing for and conducting of the main proceedings. 11 Ms D'Arcy is an employee of NAB who had been instructing in the main proceedings. 12 The defendants had submitted before Young J. that if this form of access were not permitted to those two persons, this would impose a serious burden and restraint on the NAB in the conduct of the Equity proceedings. The defendants submitted that in the absence of the benefit of instructions from a solicitor with full knowledge of the main proceedings, counsel for NAB in those proceedings would be in an impossible situation in having to make decisions as to how those documents would be used in those proceedings. The defendants submitted before Young J. that it would be important and necessary for that solicitor in turn to be in a position to make decisions based on instructions obtained at least from one representative of NAB who also had full knowledge of the main proceedings. The plaintiffs had submitted that no access should be granted to any counsel or solicitors instructing or involved in the conduct of the main proceedings. 13 On 17 October 2000, Young J. fixed the Equity proceedings for final hearing before himself on 19 October 2000 and at the same time acceded to the defendant's submissions. Without furnishing reasons, Young J. imposed a confidentiality regime accordingly. Part of that regime permitted access to the subject documents to Mr Healey, and allowed him to see the entirety of the documents including numerical figures concerning the precise dollar amounts recording funding coming from various people. The regime did not permit Ms D'Arcy to see these figures which were required to be blacked out although she was entitled to see the balance of those documents. Confidentiality undertakings were given in due course, pursuant to this regime. 14 An application for leave to appeal from the decision of Young J. in this respect was heard by the Court of Appeal on 18 October 2000. Leave was not granted. 15 The transcript of argument before the Court of Appeal on the leave application was tendered before me together with the short judgment delivered by Stein JA and Giles JA. 16 The notices of motion presently before the court are being dealt with upon the basis that the court deal with two categories of documents in respect of which the defendants seek access. The first category comprises those documents produced before Young J. in answer to the notice to produce served in the Liquidator proceedings. The second category comprises documents sought by the notices to produce dated 29 May 2001 which have now been marked MFI D130. It was not suggested by either of the counsel who argued the notices of motion before me that any different regime should govern the two categories of documents produced. 17 The defendants tendered a bundle of material [admitted into evidence on the hearing of the notices of motion as MFI D146] which generally set out the chronological history in relation to the hearing of the notices of motion. This bundle includes transcript excerpts as well as recent correspondence between the solicitors outlining the stances taken by both parties as to the confidentiality regime now said to be appropriately imposed in relation to the confidential documents. It is fair to say that the position of both parties has changed from time to time and that the Court is now asked to determine the matter as one of principle in circumstances where the parties are unable to agree. 18 It is also fair to say that the position of both parties is that the court is not bound by the approaches taken by Young J. or by the Court of Appeal and although entitled to take those approaches into account in terms of being appropriately informed, should determine the matter afresh particularly as the Equity proceedings were separate proceedings. It is necessary to appreciate however that access to at least some of the documents has already been had by Mr Healey and Ms D'Arcy, following the confidentiality regime set in place by Young J.

The significance of the Confidential Documents 19 The so-called confidential documents were not placed into evidence on the hearing of the motions by either party. Mr Gleeson who argued the motions for the defendants made plain however that the defendants were prepared to assume that some or all of the documents may be entitled to a claim of confidentiality albeit seeking to reserve the defendants' position to have that matter tested. [Transcript 11312] Importantly, it is common ground that the confidential documents have not been discovered by the plaintiffs in the main proceedings and that the defendants have not, at least up to this time, sought to go behind that discovery. No doubt any such application would have to be dealt with on its merits when and if it was made. 20 It seems to me permissible in dealing with the notices of motion for the court to proceed: (a) on the basis that the subject documents do not go to any issue in the main proceedings, and (b) on the basis that the subject documents are sensitive in the extreme in terms of containing information as to the capacity/resources of the plaintiffs to continue the litigation. Clearly that form of information if falling into the hands of the defendants at this point in time may be assumed as giving a critical weapon to the defendants. The importance of knowledge in the defendants' camp of the sinews of war in the plaintiffs' war chest cannot be overemphasised in relation to these particular proceedings. It seems to me that an acceptance of this proposition was common ground in the way in which each party addressed on the notices of motion. 21 At the commencement of his address Mr Gleeson took the court to some of the basic matters which he submitted had to be regarded as a given. [Transcript page 1311] These were firstly, that the documents had been produced to the court by the plaintiffs in answer to the notices to produce so that there had been no attempt to set aside the notices to produce. Second, that the plaintiffs had not announced any objection to some form of access being given to the defendant or to its advisers. Third, that the relevant question was what terms or conditions should be imposed upon the rights of access so as to protect the confidentiality which the plaintiffs alleged subsisted in the documents. 22 The fourth point which Mr Gleeson sought to put was that there was before the court no evidence of either the content of the documents, or the reasons why they are entitled to confidentiality protection, or indeed, if they are confidential, as to how great was the confidentiality or sensitivity. 23 It was in this context that the defendant indicated that it was prepared to assume that some or all of the documents may be entitled to a claim of confidentiality, whilst seeking to reserve their position to have that matter tested, either closer to or more likely on the motion itself. As Mr Gleeson put it: "We are prepared to make that assumption for the purpose of moving the matter forward, rather than asking your Honour to devote some number of hours to assessing the strength of the claim for confidentiality… but we do it by reserving the matter I have mentioned" [Transcript page 11312] 24 Quite obviously the first occasion for the court to outline a regime for inspection of the subject documents is of the greatest importance because once that regime opens the documents for inspection to members of the defendant's legal team participating in the main proceedings, that position can never be undone. 25 Notwithstanding the defendants' reserved position referred to in paragraph 23, the assumption as well as the way in which the motions were argued make plain that in dealing with the motions it is both necessary as well as appropriate to proceed on the bases set out in paragraph 20 (b) above.

The Principles 26 I do not understand there to be a serious dispute as to the principles germane to the motions. In essence, the two questions raised by the motion are firstly, what is the general rule for use of documents and information disclosed in proceedings and second, whether that general rule ought to govern access to the confidential documents.

The general rule for use of documents and information disclosed in proceedings 27 The submissions of Mr Gleeson as to the first question seemed to me to be entirely correct. Those submissions were: " There is an implied undertaking that documents obtained during the course of proceedings will only be used for the purpose of the proceedings: Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32; Akins v Abigroup Ltd (1998) 43 NSWLR 539 at 548; Harman v Secretary of State for the Home Department [1983) AC 280; Riddick v Thames Board Mills Ltd [1977] QB 881 at 896. The implied undertaking applies to all documents disclosed by a party under compulsion of court process. It applies, for example, to documents produced on subpoena by a non party to the proceedings: see for example Telnet Pty Ltd v Takepuna Investments Pty Ltd (1994) 51 FCR 520 at 527; statements filed in proceedings: see for example Akins at 548 and to the answers given to interrogatories: Ainsworth v Hanrahan (1991) 25 NSWLR 155. The rationale for the rule is that being compelled to produce documents or information is an invasion of a party's right to keep documents and information confidential and that it would be inequitable for a party to be exposed, through compulsory court processes, to publication of such documents or information for purposes other than that which compelled of their production: Esso at 33, 35; Harman at 312 per Lord Scarman citing Riddick at 896. The undertaking prohibits use of documents and information for a collateral or ulterior purpose not reasonably necessary for the proper conduct of the action on his client's behalf: Esso at 32-33; Harman at 304 per Lord Diplock. This formulation was adopted as far back as 1885, where Bray in The Principles and Practice of Discovery stated (at 238): "A party who has obtained access to his adversary's documents under an order for production has no right to make their contents public or communicate them to any stranger to the suit… nor to use them all copies of them for any collateral object…" As to what constitutes a collateral or ulterior purpose generally: (a) The use of documents disclosed in one action for the purposes of another action will be a collateral or ulterior purpose: Crest Homes plc v Marks [1987] 1 AC 829 at 837, Tate Access Floors Inc v Boswell [1991] Ch 512 at 526; even where the parties to both actions are identical: see Riddick at 896-897, 901-902 and 912; and where the causes of action are identical: Sybron Corporation v Barclays Bank Plc [1985] Ch 299 at 319-320. (b) It encompasses "purposes different from the conduct of the proceedings in or in relation to which the inspection was had": Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 18 ACSR 218 at 221 Giles CJ in CommD. (c) It is a collateral or ulterior use of documents disclosed to leak them to the press in order to expose alleged wrongdoing: Distillers Co v Times Newspapers [1975] 1 QB 613 at 621. (d) It is not a collateral or ulterior use for documents disclosed on discovery to be used for the purposes of adding new causes of action or parties to the action in which the documents have been disclosed: Sybron at 328; Allstate Life Insurance Co Ltd v ANZ Banking Group Ltd (1995) 57 FCR 360 at 378-379. (e) In principle, there is no difference between the use of discovered materials by a party in adding new causes of action and an application for leave to cross-claim against a party not a party to the main proceedings or for the bringing of a cross-claim by one party to the proceedings against another as the use of the documents for the purpose of legal proceedings. Allstate at 380."

28 In the result, I accept as correct Mr Gleeson's submission that the general rule is that use of documents or information disclosed in the course of the proceeding may be used generally for those proceedings.

Should the general rule govern access to the particular confidential documents to be disclosed in these proceedings? 29 The real question for the court is the second question. Have the plaintiffs advanced any proper reason for any greater restriction on access than that provided for under the implied undertaking? As I understood the written submissions, it was on this principle matter that issue was joined. 30 There are a number of factors to be taken into account in relation to this question. At a pragmatic level, I approach the question accepting as correct the grave difficulties imposed upon the legal representative of any party who becomes subject to an undertaking of non-disclosure of information to the client. Toohey J made this point in The Commonwealth v Northern Land Council (1992) 176 CLR 604 at 630: "Inspection by an applicant's legal representatives, subject to an undertaking of non-disclosure, will often place them in a position of difficulty vis-a-vis their client. It may even tie their hands in the further conduct of the litigation" [See also the majority judgment at 620] 31 Clearly any attempt to impose a non-disclosure undertaking upon the defendants legal representatives would place those legal representative in the invidious and impossible position of attempting to divorce knowledge which they obtain through access to confidential documents from their otherwise participation in the main proceedings. As I construe the comments by Giles JA at page 16.20 of the transcript of argument during the leave application, his Honour was merely pointing out that a consensual undertaking of non-disclosure constituted a burden which the giving of the undertaking carried with it. Giles JA was there referring to the circumstance that the regime imposed by Young J. if accepted for better or for worse by the defendants, simply resulted in Mr Healey being necessarily bound by his undertaking. Mr Healey remains bound by that undertaking. 32 The plaintiffs assert that in all of the circumstances, the exercise of the court's discretion should deny access to the confidential documents and confidential information being granted to any person involved in the ongoing conduct of the proceedings in any capacity that is to say, whether an employee or officer of the defendants or a solicitor or counsel. 33 The short proposition for which the plaintiffs contend is that the issues raised by the security for costs application are capable of being dealt with by a bifurcated defendants team ["the separate team notion"]. The first part of that team to be given access to the confidential documents and confidential information following the signing of appropriate confidentiality undertakings would comprise nominated employees or officers of the defendants, as well as nominated solicitors or counsel not involved in the ongoing conduct of the proceedings. The second part of that team to be denied that access would comprise employees or officers of the defendants as well as the defendants' solicitors or counsel involved in the ongoing conduct of the proceedings. The plaintiffs' proposition is that issues to be dealt with on the application for security for costs could be dealt with notwithstanding the restrictions imposed upon members of the first part of the team who could not use the confidential documents/information or any part of them other than for the purposes of the security for costs motion. As I understood the plaintiffs submissions, there was no special reason to suggest that members of the first part of the team would need to be able to speak with members of the second part of the team in order to better assess how the confidential documents/information could or should be mobilised in relation to the issues raised on the security for costs application. As I understood the plaintiffs submissions, whilst it was possible that had those inter-team discussions been permitted, the second part of the team might by dint of their extensive knowledge of the main proceedings have been able to point to some materials or information going to the security for costs application which could be taken into account as in some way having a relationship to the confidential documents/information, this was no more than a vague possibility which may well be non-existent. 34 The defendants on the other hand submit that: "The separate team notion for the security for costs has the disadvantage that the defendant is deprived of all of the knowledge its solicitors, agents and counsel have acquired in the main proceedings when it comes to security for costs. What Mr Dicker is forced to is contending that the defendant is required to [use] separate counsel, separate solicitors and a separate instructing officer from the client who do not have the knowledge from the main proceedings, and yet those persons are expected to run the security for costs motions. That is clearly a significant disadvantage." [Transcript 11357] 35 The defendants further submit that there is no special reason to differentiate the subject security for costs application in these proceedings from any other interlocutory applications made in any proceedings. The defendants contend that there is simply no reported case where the court has approached documents produced during the course of any interlocutory hearing in the proceedings in a manner which obliges the parties to use those documents only for the purposes of that interlocutory hearing and not for the purposes of the proceedings generally. The plaintiffs accept this proposition as correct. The question is however whether the generally accepted practice in this regard should be departed from in relation to what I take to be the sensitive and confidential documents in these particular proceedings. 36 I have given the detailed submissions of both parties very close consideration indeed. In my view, it is particularly important to bear in mind that the exercise of the Court's discretion in terms of the nature and reach of the confidentiality undertakings to be extracted (as the price paid for the Court granting leave to the defendants to inspect the confidential documents) should take into account the very unusual circumstances of this litigation. It is trite to note that every exercise of discretion must take into account the particular circumstances against which that exercise is made. Generalisations are sometimes useful, but by and large the court must step back from issues which may or may not be raised in other proceedings and must focus squarely upon the interests of justice as thrown up by the matrix of circumstance against which the discretion in the particular case requires to be exercised. 37 The parties are committed to litigation of a high order. The proceedings being heard together have already continued for over a calendar year and will clearly continue well into 2003. The lead up to the actual hearing itself involved a period of years, and the issues as pleaded are clearly of the greatest significance to both parties. In terms of volume, the extent of the evidence sought to be mobilised by both parties quite probably outdistances the extent of evidence sought to be mobilised in any other proceedings in this country at any time. The issues are very complicated indeed. The defendants' resources in terms of the team conducting the litigation have previously been described by the court as "massive" ([2001] NSWSC 509 at paragraph 39). As at 1 July 2001, the evidence was that approximately 20 solicitors were working full-time on the case and some six counsel briefed. The plaintiffs' resources have previously been referred to and are of altogether a different order. Having said that, the Court has not been able to discern any overt signs of the plaintiffs being unable to handle the continued litigation, notwithstanding the extent of the hearing nor the need to deal with innumerable issues at an evidentiary level. Disclosure of the confidential documents would require the plaintiffs to disclose their hand in this regard. 38 Having case-managed the proceedings for an extended period prior to the commencement of the final hearing and having now sat through opening addresses, sundry arguments on pleadings and on admissibility of expert evidence and having dealt with the many interlocutory applications now the subject of judgments, I believe that I am in a reasonable position to adjudicate upon the appropriate exercise of the discretion dictated by the interests of justice having due regard to the respective positions of both sets of parties. It seems to me that the proper exercise of the discretion is to hold as I do, that a greater restriction on access than that provided for under the usual implied undertaking should be imposed. The extent of the possible and it seems to me likely, as well as probable, prejudice which would be suffered by the plaintiffs if the defendants' suggested regime for dealing with the confidential documents was accepted, is very great indeed. It extends to the clear possibility that the entirely unexceptional [in terms of compliance with the rule in Harman] forensic use by the defendants of the confidential information could lead to the plaintiffs being forced to abandon the whole of the litigation. On the other hand the extent of the possible prejudice which would be imposed upon the defendants if the plaintiffs' bifurcated or 'separate team' regime was imposed upon the defendants in terms of the confidentiality undertakings, is altogether of another order. Whilst that possible prejudice may indeed exist, it seems to me that it pales into insignificance when compared to the magnitude of the prejudice which the plaintiffs may suffer if the defendants' suggested regime for dealing with the confidential documents was adopted. The nature of the case; the point in time at which the issue is raised; the matters at stake for each party; the obviously enormous sums expended on both sides of the bar table in terms of the nature of and preparation for the procedural issues raised; the conduct of the hearing up to this point in time; and the obviously enormous sums which will be required to be expended by both teams in taking the proceedings up to final argument all provide eloquent testimony to the fact that the parties appear to regard themselves as engaged in what amounts to a war. In those circumstances, it is particularly important for the Court to avoid taking a step which may have the logical consequence of placing a weapon into the hands of the defendants, with the clear capacity of being used to force the plaintiffs to their knees. A further integer in all of this is that the so-called confidential documents have not been shown to be discoverable in relation to issues in the main proceedings and presently, as it seems to me, should be regarded as relevant only to the application for security for costs. For all those reasons, the special facts of this one off litigation to my mind compel an exercise of the Court's discretion by way of requiring that the plaintiffs' regime be adopted.

Ancillary matters 39 As to paragraph 3 (a) of the Confidentiality undertaking appended to the notices of motion it seems to me that either the persons stipulated should be obliged to personally ensure the safe custody of the documents or alternatively their secretaries should be named and should furnish undertakings. [Transcript page 11353.10] 40 I see no particular reason why paragraph 5 of the confidentiality undertaking in form proposed by the defendants should not be permitted to remain. This does no more than reflect the fact that this judgment is given upon the as yet untested assumption identified in paragraph 23.

Short minutes of order 41 The plaintiffs should bring in short minutes of order to reflect these reasons.

I certify that paragraphs 1 - 41 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 31 July 2001

  Susan Piggott
  Associate

Last Modified: 06/13/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.