Practice and procedure - Discovery - Implied undertaking against collateral use of discovered document - Appropriate test for the grant of leave to make use of discovered document in subsequent proceedings

Education Regulations 1960, reg 25

Limitation Act 1935, s 47A

Applicant (Defendant) : Mr G T W Tannin & Mr D J Matthews

Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc [1981] HCA 39; (1981) 148 CLR 170

Bibby Bulk Carriers Ltd v Cansulex Ltd & Ors [1998] 1 QB 155

Hamersley Iron Pty Ltd v Lovell & Anor (1998) 19 WAR 316

Miller & Anor v Scorey & Ors [1996] 1 WLR 1122

Wilson v Metaxas [1989] WAR 285

1 STEYTLER J: This is an application for leave to appeal against the decision of a Master of this Court, given in interlocutory proceedings, in respect of the use which might be made of a discovered document.

2 The respondent is the plaintiff in an action for damages commenced by him on 17 December 1998 against the applicant, the Western Australian Minister for Education ("the Minister"). In his statement of claim the respondent pleads that he has, since 1994, been employed as the Principal of the Cunderdin Agricultural College ("the College"). He says that the Minister is and has at all material times been his employer. He alleges that the Minister has, in a number of respects, breached the contract of employment pursuant to which he was so employed. I will refer to this action as "the first proceedings".

3 The respondent wishes to commence a second set of proceedings ("the second proceedings") against the Minister alleging misfeasance by him in his public office. He contends that these proceedings are justified by the Minister's conduct as it appears from correspondence between the respondent, on the one hand, and the Minister and the Department of Education on the other.

4 He says that on 9 October 1998 he received a written direction from Mr R Lowther, the District Director of the Midlands Education District which presented him with two choices. The first was that he take leave on full pay until a particular date in order to enable him to prepare a submission to the Executive Director of the Department of Education's Strategic Planning and Direction Department. The second was that he present for duty as principal of the College at the Department's district office in Northam, notwithstanding that the College was located in Cunderdin. He decided to appeal, pursuant to reg 25 of the Education Regulations 1960, against what he saw as an unfair direction. On 31 December 1998 he received a letter, to which I shall refer as "the 31 December letter", from the Minister in the following terms:

"I refer to your notice of appeal dated 2 November 1998, 'in respect of a written direction dated 9 October 1998 from Rod Lowther, District Director of the Midlands Education District'.

As I understand that [sic], by letter of 9 October 1998, Mr Lowther offered to 'grant you leave on full pay until 5 pm Friday 16 October 1998', to facilitate preparation of a submission to Mr Neil Jarvis, Executive Director, Strategic Planning and Direction. By facsimile dated 15 October 1998 you accepted Mr Lowther's offer of paid leave for 16 October 1998.

In view of the circumstances described in the previous paragraph, you did not become the subject of any direction and therefore there is no proper appeal before me pursuant to Regulation 25(2) of the Education Act Regulations 1960.

In any event, I am aware that you have, through your solicitors, given notice of your intention to institute proceedings against the State of Western Australia in relation to the following matter:

'Breach of the implied term in the contract of employment that our client discharge and be permitted to discharge his duties as Principal of the Cunderdin Agricultural College at the Cunderdin Agricultural College.'

In view of your proposed action, it would be inappropriate for me to comment on this matter at this time."

5 The respondent contends that the Minister delayed improperly in responding to his appeal, thereby effectively defeating his right to resume his position as Principal of the College, and also that the Minister demonstrated bias in his response.

6 The allegation of bias is said to be supported by later correspondence. On 24 February 1999 the respondent's solicitors received from the Department of Education a letter written by its Director General in answer to a number of queries which had been made to the Department by those solicitors. That letter said that there had been written communication between the Department of Education and the Minister but declined to forward to the respondent's solicitors copies of that correspondence. The letter also recorded that the Director General was not aware of any oral communications between the Department, or anyone acting on its behalf, and the Minister in relation to the appeal but added that the Minister was advised by the Department. The Director General said that she was not prepared to enter into correspondence about that advice. The respondent contends that the terms of this letter strongly suggest that an officer of the Department of Education drafted the 31 December letter. This, he says, amounts to a denial of natural justice and a display of bias.

7 Next the respondent says that some two weeks later he lodged a fresh notice of appeal in respect of what he described as Mr Lowther's "direction" that he act as the principal of the College while based at Northam. He contends that the Minister's delay in dealing with this appeal establishes that "he knowingly or recklessly engaged in an abuse of his office, alternatively that he was negligent".

8 Because of the provisions of s 47A of the Limitation Act 1935 the respondent required the leave of the court in order to bring the second proceedings. He consequently brought an application accordingly ("the s 47A leave application"). That application was heard by an Acting Master on 9 December 1999. The Minister opposed it. In the course of submissions which he made in opposition to a grant of leave the then counsel for the Minister said, of the letter dated 24 February 1999, that:

"Now, I don't know from reading that letter where the plaintiff's solicitors could possibly come to the conclusion that in fact someone from the Education Department had drafted the [31 December] letter signed by the Minister. It's, in my submission, mere speculation and that's the kind of thing which marks this letter; that there is very little actual evidence in it or anything tending towards evidence. What there is is rash and rank speculation."

9 The learned Acting Master concluded that no decision should be made on the respondent's application until such time as the solicitors for the respondent had formulated a draft statement of claim proposed to be filed in the second proceedings as this would assist the court in turning "its mind to the cause of action and its prospects of success" as well as enable the Minister to know what case he was required to meet and what prejudice might be suffered should leave be given. He adjourned the application accordingly.

10 On a date which is not apparent from the papers, but before the s 47A leave application was heard, the Minister had given discovery in the first proceedings. One of the documents so discovered was a draft of the 31 December letter. It appears from a stamp on that draft that the author of the draft was a Mr D Cloghan and that Mr Cloghan recommended that the Minister should sign the letter as drafted. Mr Cloghan is said by the respondent to have been, at the time, the Director of the Department of Education's Employee Relations Branch. The respondent also says that Mr Cloghan was directly involved in the dispute between the respondent and the Department of Education.

11 The respondent's solicitors formed the opinion that the discovered document added weight to the respondent's claim against the Minister in the proposed second proceedings. They consider that it puts beyond doubt their proposition that the 31 December letter was drafted by an officer of the Department of Education and, indeed, by one who, the respondent says, was closely concerned with the dispute the subject of the first proceedings. They contend that it consequently provides evidence of partiality or bias on the part of the Minister.

12 The respondent's solicitors therefore brought an application to the learned Master for leave to use the discovered document in the adjourned s 47A leave application on the basis that it was critical to the second proceedings and might assist in the obtaining of leave. They accepted that leave of the court was required if use was to be made of the document in the s 47A leave application by virtue of the implied undertaking which each party gives to the other in contested litigation not to use a discovered document for any purpose otherwise than in relation to the litigation in which it is disclosed. (See Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32.) They contended that if leave to commence the second proceedings was given the document would become discoverable, in any event, in those proceedings.

13 The Minister opposed the application for leave to use the discovered document. However the learned Master acceded to the application. He said that he had a "number of reasons" for doing so.

14 First he expressed the opinion (with which no issue has been taken) that the discovered document was "highly relevant" to the matters in issue between the parties in the s 47A leave application. The importance of the document for that purpose, he said, took "the application out of the ordinary".

15 Next, he said, the respondent might have obtained the document by obtaining pre action discovery under the provisions of O 26A of the Rules of the Supreme Court of Western Australia 1971 ("the Rules"). He said that it was the clear intent of the Rules that documents be available as soon as possible so that the parties and the court know the true position and that to refuse this application would fly in the face of that policy. He said that an application would (if leave was not given to make use of the discovered document) undoubtedly be made under O 26A and that this would result in a waste of time and money.

16 The learned Master also said, albeit it is not clear that this was a factor which influenced his decision, that the then counsel for the Minister had "come dangerously close to misleading the court" in the course of his submissions to the Acting Master on the hearing of the s 47A leave application. He said, in relation to the extract from those submissions which I have set out above:

"I should say immediately that counsel for the defendant in his submissions has not misled the court - he has not said that the document supporting the plaintiff's position does not exist. What he did say is that the documents before the court did not support the plaintiff's position. He was entitled to make that submission. Nonetheless, the result might well be the court would conclude that the document does not support the plaintiff's position, when in fact that conclusion is or might be wrong. To my mind that smacks of legal sophistry and is to be avoided if at all possible."

17 The Minister appeals against the learned Master's decision on six grounds. The first is that he erred in law in finding that the appropriate test is that of whether or not the case be "out of the ordinary". The second is that he erred in finding that the case is one which is out of the ordinary. The third is that he failed to require the respondent to demonstrate cogent and persuasive reasons why the undertaking should be modified. The fourth is that he erred in finding that it was a sufficient reason to modify the undertaking that the discovered document was highly relevant to another proceeding. The fifth is that he erred in law in taking into account the fact that the respondent might have been able, or might be able, to make an application under O 26A of the Rules. The last is that he erred in finding that the then counsel for the Minister had come dangerously close to misleading the court in the course of the s 47A leave application and in taking into account that finding.

18 There are cases in England which suggest that leave to use a discovered document for a collateral purpose will not easily be granted. Perhaps the high-water mark of these is the case of Halcon International Inc v Shell Transport & Trading Co [1979] RPC 97 in which Whitford J suggested (at 109 - 110) that furtherance of a private interest would not justify the grant of leave to use discovered documents for the purposes of other proceedings and that some overriding public interest would normally be required. However in Sybron Corporation v Barclays Bank Plc [1985] Ch 299 Scott J, at 328, while finding that what had been said by Whitford J was "a valuable general guide", was prepared to grant such leave in a case in which there was nothing more than the furtherance of a private interest in what he said were the "unusual circumstances of the present case".

19 Each of these cases was later referred to by Lord Oliver (with whom the other members of the House of Lords were in agreement) in Crest Homes Plc v Marks [1987] 1 AC 829 at 860 as being only examples which illustrate the general principle that "the court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery". His Lordship offered no guidance on what might be regarded, for this purpose, as a "special circumstance" (save to say that in the case under consideration the determinative point was that it was there purely adventitious that there happened to be two actions rather than one set of proceedings) and agreed with Nourse LJ, in the Court of Appeal, that each case must turn on its own individual facts.

20 More recently, in Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 775, Hobhouse J, while acknowledging that the court has the power wholly or partially to release the recipient of discovered documents from the duty, or undertaking, and to permit use to be made of the documents, said that circumstances under which the relaxation would be allowed without the consent of the serving party were "hard to visualise, particularly where there was any risk that the statement might be used directly or indirectly to the prejudice of the serving party", subject to any overriding principle of public policy.

21 This notion of "special circumstances" has since been considered in a number of Australian cases. In Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 29 FCR 576 at 578 Burchett J said:

"As far as the expression 'special circumstances' is concerned, it is an expression which is liable to be misunderstood unless care is taken to ask and answer the question, special in relation to what? 'Special' is one of those words which derive almost all their meaning from the context ... if all that is required is that, among the great number of cases in the court in which documents have been discovered, this one must evince some special feature which affords a reason for releasing or modifying the undertaking, there will be no difficulty. Circumstances in which there is a legitimate reason why documents discovered in one proceeding should be made available in another will, viewed in this way, be rare. In the ordinary course, the ordinary rule should apply, there being no special circumstance to suggest otherwise."

22 His Honour went on to compare the case of Jess v Scott (1986) 12 FCR 187 in which the Full Court had been concerned with the construction of a rule by which leave to file an appeal out of time could be granted "for special reasons". He pointed out that the joint judgment (of Lockhart, Sheppard and Burchett JJ) had there (at 195) described the expression "special reasons" in the rule as:

"an expression describing a flexible discretionary power, but one requiring a case to be made upon grounds sufficient to justify a departure, in the particular circumstances, from the ordinary rule prescribing a period within which an appeal must be filed and served."

"Of course, if Lord Oliver should be taken to have required the circumstances to be special, not in relation to all the various circumstances of the actions in which the relevant implied obligation has arisen, but in relation to the very small number of cases in which a reason appears why the undertaking might be relaxed, the discretion of the court would be entangled in a rule of quite uncertain import. I do not know on what footing one would say that a particular circumstance among these relatively rare circumstances would be 'special' and another not. I do not think his Lordship intended to fetter the court's discretion in this way. I think he was using the words 'special circumstances' to express the same idea which is expressed in the rule discussed in Jess v Scott (supra) by the words 'for special reasons', of which the Full Court said (at 195):

'What is needed to justify an extension of time is indicated ... by the words "for special reasons". It is that there be shown a special reason why the appeal should be permitted to proceed, though filed after the expiry of 21 days. In that context, the expression "special reasons" is intended to distinguish the case from the usual course according to which the time is 21 days. But it may be so distinguished (not necessarily will, for the rule gives a discretion) wherever the court sees a ground which does justify departure from the general rule in the particular case. Such a ground is a special reason because it takes the case out of the ordinary. We do not think the use of the expression "for special reasons" implies something narrower than this.' "

"In my opinion, the court's duty, in an ... [application] of this kind, is to consider whether the applicant has shown some circumstance which takes the matter out of the ordinary course, according to which production of documents pursuant to an obligation to make discovery involves the implied undertaking to the court; and, if so, whether an exercise of the court's discretion in favour of the application would be in the interests of justice ... "

23 This approach was followed by Lockhart J in Sweetman v Australian Thoroughbred Finance Pty Ltd, unreported; Federal Court (Lockhart J); 23 July 1992, mentioned in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 at 224, in which case Wilcox J (at 225) adopted the explanation of the term "special circumstances" given by Burchett J and applied by Lockhart J. Wilcox J there said (at 225):

"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."

24 More recently, in Australian Trade Commission v McMahon (1997) 73 FCR 211 at 217 Lehane J has said:

"The general principle is, no doubt, that a release of the implied undertaking will be given only if 'special circumstances' are established: Crest Homes PLC v Marks [1987] AC 829. Where an application for release is decided in contested proceedings, it seems that 'special circumstances' will fairly readily be found where it is established that the use of documents discovered in a proceeding is reasonably required for the purpose of doing justice between the parties in other proceedings: see, for example, Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 29 FCR 576; Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217."

25 The implied undertaking is in truth a legal obligation, owed to the court for the benefit of the parties, which arises by operation of law (cf Prudential Assurance Co, above, at 764). It has often been said that the policy considerations underpinning the implied undertaking or obligation are those of encouraging the making of full disclosure as required by the discovery process and of minimising the temptation to destroy or conceal the existence of relevant documents. So, by way of illustration, in Riddick v Thames Board Mills Ltd [1977] QB 881 Lord Denning MR said, at 896 (and his Lordship has many times since been quoted in this respect) that in order to encourage "openness" and "fairness" the public interest requires that documents disclosed on discovery are not to be made use of except for the purposes of the action in which they are disclosed. What was said by Lord Denning was approved by Lord Scarman in Home Office v Harman [1983] 1 AC 280 at 321 although Lord Diplock said in that case (at 302) that the implied undertaking was to the effect that the documents could not be used for " ... some purpose different from that which was the only reason why, under a procedure designed to achieve justice in civil actions, ... [the person giving the undertaking] was accorded the advantage, which she would not otherwise have had, of having in her possession copies of other people's documents". This suggests that the policy consideration is that of minimising invasions into the privacy and confidentiality of others.

26 A like rationale to that mentioned by Lord Diplock was offered by Hobhouse J in Prudential Assurance Co, above at 765. He said that the rational basis for the rule is that where one party compels another, either by the enforcement of a rule of court or a specific order of the court, to disclose documents or information whether that other wishes to or not, the party obtaining the disclosure is given this power because the invasion of the other party's rights has to give way to the need to do justice between those parties in the pending litigation between them. To similar effect are the comments of Lord Hoffman in Taylor v Serious Fraud Office[1998] UKHL 39; [1999] 2 AC 177 at 210, that the implied undertaking should not be seen merely as an inducement to a litigant to disclose documents which she or he might otherwise have been inclined to conceal but that it was more a matter of justice and fairness to ensure that privacy and confidentiality were not invaded more than was absolutely necessary for the purposes of justice.

27 It is apparent from the terms in which the implied undertaking or obligation has been formulated, and from this last rationale which has been offered for it, that the invasion of privacy and confidentiality inherent in the giving of discovery is seen as being justified for the purpose of doing justice in the proceedings in which discovery is given. It is only for that limited purpose that discovery is required to be given and it is no doubt for that reason that other uses of a discovered document have, in the cases (see for example Harman, above, at 302 and Crest Homes, above, at 853) been described as "ulterior or collateral". This expression is said by Borrie and Lowe, "The Law of Contempt", 3rd ed at 593 to have originated in "Seton's Judgments and Orders" (7th ed, 1912) vol 1 at 76 which referred to "vexatious or improper use" for a "collateral object" (although the phrase "collateral object" appeared in "Bray on Discovery", 1st ed (1885) P 238). That, in turn, appears to have led to the use of the expression "collateral or ulterior purpose" in the judgment of Jenkins J in Alterskye v Scott [1948] 1 All ER 469 (although Jenkins J remarked at 470 that there was room for considerable argument as to what a collateral or ulterior purpose is).

28 It is against this background that the courts have concluded that the implied undertaking or obligation will only be waived or relaxed when special circumstances are present. While I would not, with great respect, have thought that circumstances of that kind would be quite so hard to visualise as Hobhouse J expressed them to be in Prudential Assurance, the fact remains that it will ordinarily be no easy matter to secure the court's indulgence.

29 It is neither necessary nor appropriate, in this case, to attempt any general definition of what might amount to "special circumstances". Each case must, inevitably, depend upon its own peculiar facts and circumstances. It is enough to say that in my opinion the learned Master was right in finding that special circumstances were present.

30 I have mentioned that no issue has been taken with the learned Master's expression of opinion that the discovered document was "highly relevant" to the matters in issue between the parties on the s 47A leave application. It was (and still is) acknowledged that production of the discovered document might well influence the outcome of that application. Indeed that was, as I have said, the very prejudice on the Minister's side which was pointed to by his counsel. It must consequently be accepted, for the purposes of the appeal, that the non-production of the document might well have the consequence that the respondent would forever be barred from bringing the second proceedings. It is, I think, important to bear in mind that the learned Master exercised his discretion in a context in which the second proceedings (and the s 47A leave application) involve the same parties as are involved in the first proceedings and, although raising different issues, are related to the first proceedings. It is also important to bear in mind that, if this was not a special category of case in which leave to bring the second proceedings was required, the document in question would, in any event, have been discovered in the course of those proceedings. Indeed, it may well be discoverable, if discovery was to be sought, in the s 47A leave application proceedings themselves (see O 26 r 1(1) of the Rules). When all of these circumstances are taken together there is, in my opinion, enough in them to justify their categorisation as "special" and to warrant the grant of leave to make use of the discovered document in the s 47A leave application.

31 While it is true that the learned Master did not, in the course of his reasons, describe the circumstances to which he referred as "special" but said only that they took the application "out of the ordinary", it is apparent from his reference to the case of Holpitt and to the submission that the grant of leave "required special circumstances", and from his comments in respect of the importance of the document to the outcome of the s 47A leave application, that he was aware of the test to be applied and that he applied it appropriately.

32 It follows that there is, in my opinion, insufficient in any of the first four grounds of appeal to justify a grant of leave to appeal.

33 As to the fifth ground of appeal, even if counsel for the appellant is right in his submission that the potential availability of O 26A, in circumstances in which no use had been made of that procedure, should not have borne upon the outcome of the application, the other circumstances to which I have referred above are, as I have said, sufficient to sustain the order which was made by the learned Master.

34 As to the sixth, and last, ground of appeal, I have already mentioned that it is not clear from the learned Master's reasons that he regarded the conduct of the then counsel for the defendant as being material to the

outcome of the application before him. However, even if he did, this does not, once again, alter the fact that the other circumstances to which I have referred provided a sufficient justification for the grant of leave. I should, perhaps, say in this respect that it may be that the conduct of a defendant, by his counsel, in creating a misleading impression of the true state of affairs in circumstances in which the production of a document might correct that impression could, depending upon the circumstances, amount to a special circumstance sufficient to justify a relaxation of the obligation. However it is unnecessary, having regard for the conclusions at which I have already arrived, for me to consider that question in the context of this application. I should add that it seems to me that the learned Master was right in saying that the then counsel for the applicant did not go so far as actually to mislead the court in the course of that extract from his submission which I have quoted above, although it also seems to me that his use of the description "rash" in respect of the respondent's solicitors' speculation as to who had drafted the 31 December letter was ill-chosen in the circumstances.

35 It follows from what I have said above that I am not persuaded that the decision of the learned Master was wrong, or attended with sufficient doubt, to justify the grant of leave. Nor am I satisfied, in all of the circumstances, that substantial injustice would be done by leaving the decision of the learned Master unreversed (as to which see Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 40 at 54.)

37 PARKER J: I have had the advantage of considering in draft the reasons now published by Steytler J. I respectfully agree that for those reasons, leave to appeal should be refused.