Lombe v Pollak

REASONS FOR JUDGMENT Introduction 1 This is a motion by the applicant ("the Trustee") to be released from the implied undertaking which flows from the decision of the House of Lords in Harman v Secretary of State for the Home Department [1983] AC 280 ("Harman") not to use documents produced by a party in the course of discovery otherwise than in relation to the litigation in which the documents were disclosed. 2 That there is such an implied undertaking has been affirmed by the High Court; see Esso Australia Resources Limited v Plowman (1994-1995) 183 CLR 10 at 32. 3 The motion is not opposed by the respondent to the proceedings or by the National Australia Bank or Dr Pollak, both of whom appeared at the hearing. Nevertheless, the orders are not made by consent. Dr Pollak's sister, Mrs Ilana Stern, may have had an interest in the outcome of the motion. She was served with a copy of it but did not appear at the hearing. It was not until the hearing resumed on 29 April 2004 that the respondent and Dr Pollak indicated that they did not oppose the relief sought. 4 For reasons mentioned below, the motion is brought out of an abundance of caution but that is not to say that it has not been properly brought before me. 5 In the present proceedings the Trustee claims that transfers of the interests of Dr Joseph Pollak to his wife, who is the respondent to the proceedings, are void against the Trustee under s 121 of the Bankruptcy Act 1966 (Cth). 6 On 11 September 2003 and 18 March 2004 I made orders that the Trustee give discovery. However, it appears from evidence filed in the present application that there is a possibility that some of the documents which fall within the orders were obtained by the National Australia Bank ("the NAB") on discovery in earlier proceedings and that those documents were provided by the NAB to the solicitors for the Trustee. 7 The earlier proceedings were brought in the Federal Court and were heard at first instance by Tamberlin J. The parties to the proceedings were Dr Pollak and the NAB. Mrs Stern, was also a party to the proceedings. 8 The earlier proceedings in this Court arose out of litigation in California in which the NAB obtained a judgment in an amount in excess of $US3m against Dr Pollak and Mrs Stern. The proceedings in this Court were for an anti-suit injunction and, subsequently for the enforcement by the NAB of the California judgment against Dr Pollak and Mrs Stern. Dr Pollak and Mrs Stern opposed the registration and enforcement of the California judgment. They were unsuccessful in the proceedings and subsequently brought unsuccessful appeals in each case; Stern and Pollak v National Australia Bank Ltd (1996) 34 IPR 565, Stern and Pollak v National Australia Bank (unreported, Beaumont, Sundberg and Lehane JJ, 12 March 1996), Stern v National Australia Bank Ltd [1999] FCA 1421, Stern v National Australia Bank Ltd (2000) 171 ALR 192. 9 Further proceedings were brought by the NAB against Dr Pollak for a sequestration order. The order was made on 5 October 2001. It is possible that some documents were obtained by compulsory process in this proceeding which was of course a proceeding in the Federal Court. 10 The NAB obtained discovery of various documents from Dr Pollak and Mrs Stern in the course of discovery in the earlier proceedings. Some documents have been provided by the NAB to the Trustee, but the solicitor for the Trustee has given evidence that he is not aware that any of the documents which are the subject of the present application were obtained by the NAB by means of compulsion in the earlier proceedings. However, the solicitor has said that he cannot rule out the possibility that they were so obtained. 11 It is entirely possible that none of the documents the subject of the present proceedings were obtained by the NAB through compulsory process in the earlier proceedings. That is why I have said the application is a precautionary one. 12 Nevertheless, the possibility having been raised, prudence dictates the course which has been adopted. The documents fall within the discovery order which I made. Discovery of the documents would amount to a use of them. If they were obtained by the NAB by compulsory process in the earlier proceedings, the discovery of the documents by the Trustee in the present proceedings would amount to a contempt unless the implied undertaking has been released either by the person who holds the corresponding right or by the Court or unless the documents have been read out in open court; see O 15 r 18. 13 The implied undertaking is given to the Court and to the persons who produced the documents under compulsory process in the earlier proceedings; see Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316 at 338 ("Hamersley Iron"). See also J D Heydon Cross on Evidence 6th edn, Butterworths, Sydney 2000 at 25,036. 14 The Trustee seeks a release to the extent necessary to give discovery of the documents set out in Schedule A to the Notice of Motion. The documents include correspondence, agreements, conveyancing documents, bank statements and unsigned tax returns of Dr Pollak. 15 The Trustee also seeks, to the extent necessary, a release to be able to rely on the documents set out in Schedule B for the purpose of evidence in the proceedings. This would, of course, be subject to any proper objection to the admission of the document into evidence. The document is a deed of grant of certain interests in real property in the city of Burbank in California. 16 Since all of the earlier proceedings were brought in the Federal Court, it seems to me to be appropriate that the application is made to me: See Holpitt Pty Ltd v Varimu Pty Ltd (1991) 29 FCR 576 ("Holpitt") at 577. If that were not so, it would be necessary for the Trustee to assemble multiple applications, perhaps before a number of separate judges of the Court. Such a course would be quite impractical and cannot be consistent with the purpose which underlies the giving of the implied undertaking. 17 It is generally for the Court to control or release a party from the implied undertaking but where there has been a clear and informed consent by the adversary, the Court will treat the obligation arising from the undertaking as having been waived and will not enforce it; see Hamersley Iron at 338. The effect of Dr Pollak's bankruptcy was that upon the making of a sequestration order, his property vested in the Trustee; see Bankruptcy Act 1966 (Cth) s 58(1). Any of Dr Pollak's documents, which are the subject of this application, would have vested in the Trustee. So too would his rights to enforce the implied undertaking. 18 The right to enforce the undertaking has vested in the Trustee in the same way that a client's legal professional privilege passes to his or her successor in title, see Lake Cumberlene Pty Ltd v FM Foods Pty Ltd (1994) 126 ALR 58 at pp 64 to 65. Thus, it seems plain that no question of breach of the undertaking arises in relation to any of Dr Pollak's documents because his rights now rest with the Trustee who, of course, consents to the use of the documents. Mrs Stern has not been made bankrupt. Accordingly, there can be no suggestion of any consent by Mrs Stern to the use of the documents. 19 It is well established that the Court has jurisdiction to grant a release from the obligation arising under the implied undertaking if special circumstances are established. Wilcox J said in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 35 FCR 217 ("Springfield Nominees")at 225 that if a special circumstance is to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking. His Honour observed that the matter then becomes one for the proper exercise of the court's discretion as to which many factors are relevant. The factors include the nature of the document, the circumstances under which it came into the hands of the person applying for leave and whether any prejudice may be sustained by the owner of the document. 20 It does not seem to me that any prejudice will be sustained either by Dr Pollak or by Mrs Stern if the documents are discovered by the Trustee. No prejudice has been pointed to in argument. 21 Moreover, Mr Kang's evidence is that the applicant does not propose to use in evidence any of the documents identified in schedule A because the Trustee has obtained further copies of the relevant documents from sources other than the NAB. This suggests that there cannot be any prejudice to either Dr Pollak or Mrs Stern. In any event, any prejudice that Dr Pollak may suffer must be subordinated to the interests of the Trustee and the creditors of the estate. Dr Pollak has duties under s 77 of the Bankruptcy Act to do all such acts and things in relation to his property and its realisation as are required by the Act or a Trustee and to aid to the utmost of his power in the administration of his estate; see s 77(e) and (g). 22 As Sheppard J observed in Re Bond Ex Parte Ramsay (1994) 54 FCR at 401, it appears of the essence of the obligation of a bankrupt that he or she cooperate with the Trustee and the bankrupt may be required to do many things that he or she is probably unwilling to do. 23 It seems to me that there is a further special feature of this case which justifies the grant of a release. The Trustee is bound by competing obligations. On the one hand, he is bound by the implied undertaking arising from Harman but on the other hand, he is obliged to give discovery in accordance with the orders which I have made in these proceedings. 24 The Trustee is unable to rule out the possibility that some of the documents which fall within the orders were obtained under compulsion and that he is bound by the implied undertaking. These potentially competing obligations together with the Trustee's inability to determine whether any, and if so, what documents were obtained by the NAB under process of compulsion in the earlier proceedings, constitute a special feature which justifies the release of the Trustee from any obligation to which he may be otherwise bound under the implied undertaking. 25 The decision of Burchett J in Holpitt at 579 is authority for the proposition that it is appropriate to exercise my discretion in the interests of justice in the current litigation. 26 Dr Pollak submitted that I ought not to exercise my discretion in favour of an order for release because the Trustee does not intend to use the schedule A documents in evidence. Dr Pollak referred me to the decision of Lindgren J in ACCC v Telstra Corporation [2000] FCA 28 at [32] and [36]. However, in Telstra the issue was whether a release ought to be given to permit a party to use witness statements filed in the Federal Court in cross-examination in other proceedings between the same parties in the Administrative Appeals Tribunal. 27 His Honour decided the application on the ground that the statements retained their privileged status but went on to consider whether, if the documents were not privileged, he would have exercised his discretion to order a release. His Honour said at [36]: "… it is far from clear to me that Telstra really needs to be able to use the statements next week, that is, that it will suffer an injustice if it is not permitted to do so. Although the case is, I think, a borderline one, I would not have thought, even apart from the legal professional privilege point, that the order sought by Telstra should be made." 28 The position in the present case is different because the Trustee is bound by an order of the court to give discovery of the documents. Accordingly, I do not think that the considerations which arose in Telstra are relevant to the present application. 29 There is a further consideration which favours the exercise of my discretion in relation to the document referred to in Schedule B. It is a public document which was brought into existence before the Trustee obtained a copy of the document from the NAB. The document does not contain personal data or commercially sensitive material. Those are factors to which Wilcox J referred in Springfield Nominees as considerations which favour the exercise of the discretion to order a release from the implied undertaking. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.