Kirby v Centro Properties Limited

Federal Court of Australia|2009-06-26|Before: Ryan J

For the reasons already explained, documents relating to insurance cover do not fall into any of those categories and therefore are not documents "relating to matters in question" in the proceeding. 28 It follows from the conclusions outlined above that it is not within the power or discretion of the Court to compel disclosure to the applicant of the presumptive insurance policies. I therefore decline to order the respondents to make available for inspection by the applicant "any policy of insurance which responds (or is alleged by either of the respondents) to any of the claims made by the applicant in the proceeding."

The respondents' other documents 29 Another issue has arisen in relation to the initial tranche of documents of which the respondents have already given discovery. The applicant seeks an order that his use and disclosure to other persons of more documents be subject only to the "usual implied undertaking". The respondent, on the other hand, contends that, given the commercial sensitivity of some of the documents, the applicant's solicitors should execute an express undertaking. 30 On 17 December 2008, I ordered, by consent, inter alia, that: '6. The parties agree by 23 January 2009 the categories of documents to be discovered as an initial tranche of discovery ("initial tranche of discovery") and the format of the initial trance of discovery

The parties provide an initial tranche of discovery on or before 4pm on 13 February 2009.'

31 In his affidavit affirmed 4 March 2009, Mr Holloway, of the solicitors for the respondents in VID 326 of 2008, has deposed to negotiations which took place between him and solicitors for the applicants. He deposes that the "vast majority" of the documents discovered by the respondents in the initial tranche of discovery concerned dealings between the Centro interests and various financial institutions, about the extension of finance facilities, but did not include, as had apparently first been contemplated, policies of insurance. Those documents included, he deposed, board papers and reports and other internal documents; correspondence; documents relating to finance facilities provided to Centro entities and trusts managed by Centro; and various documents "that provide commercially sensitive information concerning the underlying businesses operated by [the Centro interests]", which includes, for example, rent data and other financial and occupancy information in relation to properties controlled by Centro. 32 That last category of documents has evidently given rise to most of the expressions of concern about confidentiality. Those documents are, Mr Holloway says, "regarded … as being highly commercially sensitive and … their confidentiality should be preserved to the maximum extent possible". 33 To that end, Mr Holloway suggested that the applicant provide an undertaking, essentially, in the form of the implied undertaking articulated in Harman. He suggested another course for IMF, the litigation funder: that the applicant's solicitors should indicate the categories or types of documents which they wished to provide to IMF, and that IMF should then give, in essence, an express Harman undertaking andundertake not to give access to the documents to any class members without the prior written consent of the respondents' solicitors. The applicant's solicitors were prepared to give and procure such an undertaking but that did not dispel the respondents' concern about dissemination of the contents of sensitive documents to group members.

The "usual implied undertaking" 34 The "usual implied undertaking" which is taken to have been given when documents are provided by one party for inspection by another is that they will be used only for the purpose for which access was given, and not otherwise. That rule is often regarded as having been derived from Home Office v Harman [1983] 1 AC 280, where Lord Diplock said, at 304: '[A]n order for production of documents to a solicitor on behalf of a party to civil litigation is made upon the implied undertaking to the court (of which he is an officer) that he himself will not use or allow the documents or copies of them to be used for any collateral or ulterior purpose of his own, his client or anyone else; and any breach of that implied undertaking is contempt of court by the solicitor himself.'

The effect of an express undertaking 35 Effect has consistently been given in Australia to the implied undertaking identified by his Lordship; see, eg, Dale v Veda Advantage Information Services and Solutions Ltd [2007] FCA 1603. Nevertheless, express, rather than implied, undertakings as to the use of discovered documents have frequently come to be extracted in commercial litigation, especially where the documents are particularly sensitive. As Hayne, Heydon and Crennan JJ said in Hearne v Street (2008) 235 CLR 125, at 162 [116]; 'The point of insisting on an express undertaking, commonly employed in relation to documents which it is particularly desired to keep secret, is to bring explicitly home to the minds of those giving it how important it is that the documents only be used for the purpose of proceedings. It does not follow that the obligation in question does not exist in more routine cases without the need for an express undertaking.' 36 The purpose of the express undertaking, then, is merely to "bring home" to those who sign them the seriousness of their obligation to the Court not to use the documents for a collateral purpose.

The express undertaking proposed in this case 37 Here, the respondents' concern centres on cl 14 of the Funding Agreement concluded between the applicant and IMF (Australia) Ltd, the litigation funder. It provides, in relevant part, that: '14.2 Unless specifically prohibited by the terms of a court order or some other professional obligation, the Lawyers will provide to IMF a copy of any document obtained in the Proceedings by way of discovery, subpoena or any other coercive power of the Court, subject to IMF's, its officers and employees, implied undertaking given to the Court.' 38 The respondents, accordingly, have sought an express undertaking from the solicitors for the applicant in substantially the form of Schedule A to these reasons but including a formula to which the solicitors for the applicant objected. The clause to which the main objection is taken on behalf of the applicant was as follows: '2. Subject to paragraph 4 below, I will not disclose, discuss or enable access to the Confidential Documents or any part of them or any information contained in them, either directly or indirectly to any person (including class members or potential class members or any funder of the proceedings, or their servants or agents) without the prior written consent of the Respondents…' (emphasis added) 39 As is evident from its text, the proposed express undertaking does not travel far beyond, if at all, the implied Harman undertaking. Strictly speaking, IMF, the litigation funder, is not a party so the provision of the documents to it would be in breach of the implied undertaking as well as the proposed express undertaking which seeks to deny access to "any funder of the proceedings". Similarly, the group members in a Pt IVA proceedings are no more plaintiffs or applicants, and therefore parties, than group members under Pt 4A of the Supreme Court Act 1986 (Vic) which is the Victorian analogue of Part IVA of the Act; see Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 per Gaudron, Gummow and Hayne JJ, at 34. Supplying the documents to group members, would, therefore, probably be sufficiently collateral to the purposes of the class action to constitute a breach of the Harman implied undertaking. 40 Once these features are understood, it becomes clear that the result of the applicant's solicitors signing the proposed express undertaking, with the exception of the prohibition on the provision of documents to IMF, is not as "extraordinary" as Mr Lee for the applicant contends. The fact that the applicant's advisers cannot disclose to group members the contents of confidential documents does not, of course, mean that they cannot provide considered legal advice to group members based on the contents of those documents. Nor does the proposed express undertaking preclude altogether the possibility of disclosure of the contents of the documents. It would remain open, after execution of the proposed express undertaking for the applicant or his advisers to approach the respondents' solicitors for consent to disclose identified documents or parts of them to group members. Should that consent be unreasonably withheld, recourse to the Court will remain available pursuant to the liberty to apply which I propose to reserve.

Disclosure to IMF 41 I can see no difficulty in a prescription which allows the solicitors for the applicant to provide to IMF documents which have been identified as confidential by the solicitors for the applicant, provided that access to such documents is confined to those employees or agents of IMF who are directly concerned in the conduct of the present litigation. Any such recipient of the documents should be required to sign an express undertaking in the form annexed as Schedule A to these reasons. 42 In light of the High Court's decision in Campbells Cash and Carry Pty Ltd v Fostif (2006) 229 CLR 386, IMF's proper role in these proceedings will be limited: see esp, per Callinan and Heydon JJ, at 493. The concerns discussed by French J (as his Honour then was) in QPXS Ltd v Ericsson Australia (No 5) [2007] FCA 244, at [20] then have to be met. Unlike the applicant's solicitors, IMF is involved in these proceedings on a purely commercial basis: it is, relevantly, in the business of funding and profiting from litigation. It is not constrained by the professional or ethical restraints which bind the parties' legal representatives. It is, therefore, without imputing to IMF any tendency to impropriety, right for the respondents to be concerned, as French J said, about "the generic risk associated with the wider disclosure of the discovered documents… [They are] is entitled to seek specificity as to the documents to be disclosed and the purpose for which they are to be disclosed". To require an express undertaking from the relevant officers and agents of IMF is, therefore, not unusual and, in the light of Hearne v Street (supra) is not unreasonable.

Conclusion 43 In the result, I shall order that the applicant's motion on notice dated 24 December 2008 in relation to the insurance policies be refused. In relation to the confidential documents included in the respondents' first tranche of discovery, I shall order that they may be inspected by the plaintiff and his counsel and solicitors directly concerned in the conduct or funding of these proceedings and to any officer or agent of IMF directly concerned in the conduct of these proceedings subject to each such person signing an express undertaking in the form appended as Schedule A to these reasons. The costs of each party of the said motions on notice dated 24 December 2008 will be reserved. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Associate: Dated: 26 June 2009 VID 326 of 2009 Counsel for the Applicant: Mr M B J Lee

Counsel for the Respondents: Mr J Beach QC with Mr N Hopkins

SCHEDULE A CONFIDENTIALITY UNDERTAKING I, ………………………………………… undertake to the respondents in Federal Court proceeding No …………………….. ("the proceeding") in respect of the documents produced by the respondents as an initial tranche of discovery in accordance with the orders made by his Honour Justice Ryan on 17 December 2008 ("the confidential documents") that:

I will not use the confidential documents, or any part of them, or any information contained in them other than for the purposes of the proceeding;
Subject to paragraph 4 below, I will not disclose, discuss or enable access to the confidential documents or any part of them or any information contained in them, either directly or indirectly to any person (including any class members or potential class members);
I will make all reasonable efforts to store the confidential documents and any documents or records which I make arising from my access to the confidential documents (including copies thereof) in such a way that persons other than those entitled to access them cannot obtain access to them. Without in any way limiting the generality of this undertaking, the reference to documents, records or copies shall include records of information stored electronically;
The confidential documents may be disclosed by me to: a) the Federal Court of Australia and Judges of the Federal Court of Australia; b) any solicitor who is a member of or employed by Maurice Blackburn, solicitors for the applicant and any counsel retained on behalf of the applicant in the proceeding who has signed an undertaking in this form which has been served on the respondents; c) any officer or agent of IMF (Australia) Ltd authorised in writing by it to receive such disclosure who has signed an undertaking in this form which has been served on the respondents; d) any expert retained on behalf of the applicant in the proceeding who has signed an undertaking in this form which has been served on the respondents.
When the proceeding is resolved by way of judgment, settlement or otherwise, I will ensure that any document created by me or given to me recording or containing information contained in the confidential documents given to me is returned to the solicitors for the respondents or destroyed. Signed by:

Australian Securities and Investment Commission Act 2001(Cth)

Fair Trading Act 1999(Vic)

Statutes Amendments (Mediation, Arbitration and Referral) Act 1996(SA)

9 The resolution of the present issue, however, does not turn on whether the respondents have the capacity to satisfy a judgment should one eventually be entered against them. The question is rather, whether the perceived financial frailty of the respondents or, as Mr Lee of Counsel for the applicant put it, the general circumstances of the case, should require the disclosure to the applicant and his advisers of what policies of insurance are held by the respondents and the terms of those policies. 10 Courts have traditionally been reluctant to accord any relevance to the possession of insurance cover in determining the existence or measure of liability against which the policy indemnifies a defendant; see Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 per Viscount Simonds, at 576-577; Hunt v Severs [1994] 2 AC 350 per Lord Bridge of Harwich, at 363 and see generally the authorities collected by Kirby J in Imbree v McNeilly (2008) 248 ALR 647, at 682-690. 11 In submissions, and against that background, reliance was placed on an observation of Lord Griffiths in Smith v Bush [1990] 1 AC 831, at 858, that: 'Everyone knows that all prudent, professional men carry insurance and the availability and cost of insurance must be a relevant factor when considering which of two parties should be required to bear the risk of a loss.' 12 It should be noted, before reading his Lordship's words at too high a level of abstraction, that Smith v Bush concerned whether a negligent building surveyor was entitled to rely upon his contractual disclaimer of liability. The availability of insurance was merely one of a number of factors going to the notion of "reasonableness" of a valuer's insertion of a disclaimer of liability which was a notice within the meaning of the Unfair Contracts Terms Act 1977 (UK) and which "involve[s] the sums of money potentially at stake and the ability of the parties to bear the loss involved" was one criterion among four in a list which was expressly stated not to be exhaustive. In identifying those factors his Lordship was concerned only to ascertain policy considerations bearing on a difficult but very specific question of statutory construction. Smith v Bush, therefore, is authority only for the proposition that in some circumstances, in relation to some causes of action, a defendant's insurance cover or the lack of it will be relevant to the resolution of a matter in issue. However, I am not persuaded that the circumstances of the causes of action raised by the present litigation make questions of the respondent's insurance cover relevant in that way. 13 The traditional reluctance of courts to compel the disclosure of details of a party's insurance cover doubtless owes much to a concern with shielding juries from the temptation to effect redistributive justice (see Rodolfo Lopez v Star World Enterprises Pty Ltd [1997] FCA 454, per Olney J). However, the underlying justification for the traditional view remains. That is, that the existence of policies of insurance held by a party or the details of such policies will not normally be relevant to the proof of any cause of action pleaded against that party. 14 It therefore does not avail the applicant to cite examples of circumstances in which the existence or terms of a policy of insurance are relevant to the cause of action or exercise of judicial discretion as in applications for leave to proceed against an insolvent respondent under s 4712B of the Corporations Act 2001 (Cth) or s 58(3)(b) of the Bankruptcy Act 1966 (Cth) or applications for the declaration of a priority charge under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) or its cognates or to enforce rights conferred on third parties by s 562 of the Corporations Act or s 117 of the Bankruptcy Act, each of which expressly refers to contracts of insurance. Those exceptions tend, if anything, to reinforce the general rule that a contract of insurance between a defendant or respondent and a third party will be irrelevant to any cause of action pleaded against that respondent or defendant. 15 The question then arises whether, if insurance is irrelevant to a cause of action invoked in proceedings in the Court, disclosure of details of a party's insurance can be compelled in aid of mediation of those proceedings. Mediation is usually conducted under different rules, by different persons, using methodology quite different from litigation (see, for example, Hopeshore Pty Ltd v Melroad Equipment Pty Ltd (2004) 212 ALR 66, per Branson J, at 75-76). However, at least in a commercial context, mediation shares many of the commercial objectives of litigation: the resolution of a dispute so that each party may come - by a traditional exercise of judicial power or by way of a mediated outcome - to know its rights, obligations and liabilities upon the resolution of the dispute. For that reason, any analysis of the availability of compulsory production of documents for the purpose of litigation has a strong bearing on whether a similar facility can be made available for purposes of mediation. 16 It is said by the applicant that, unless he is informed of the details of the respondents' insurance cover, any mediation would be "hollow", as well as being inefficient and contrary to the case management principles of this Court. Thus it was submitted that; '[I]t is neither quick nor inexpensive nor efficient to waste time, money and effort on a mediation which the evidence makes plain is likely to be rendered futile in the absence of information regarding insurance limits.' 17 In support of that contention, the applicant relied on Lampson (Australia) Pty Ltd v Ahden Engineering (Aust) Pty Ltd [1999] 2 Qd R 252 as illustrating a requirement to disclose before a mediation. 18 As far as it is relevant for present purposes, Lampson turned around O 35 r 14 of the Rules of the Supreme Court of Queensland as they then stood, in particular, r 14(4) which displaced the traditional test for discovery erected in Compaigne Financiere Et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55. Order 35 rule 4 provided, in relevant part; '14.(1)The Court or a Judge may order a party to any proceeding to disclose to another party a document or class of documents by -

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