Practice and procedure - Discovered documents - Whether documents evidence of criminal offence by defendants - Application by plaintiff to be released from implied undertaking in order to provide documents to police - Relevant principles - Turns on own facts

1 NEWNES J: This is an application by the plaintiff (Sumich) for an order that, in respect of certain documents discovered by the defendants, it be relieved of its implied undertaking that the documents will be used only for the purposes of the litigation. Sumich wishes to provide the documents to the police as evidence of alleged criminal offences by one or more of the defendants. The application is opposed by the defendants.

2 It is necessary, in order to set the current application in context, to refer to the nature of the dispute between Sumich and the defendants in the action.

3 Sumich carries on business as a vegetable grower, packer, exporter and trader. The second defendant was, until about 10 January 2007, the sales and export manager of Sumich. The third defendant was the assistant sales and export manager of Sumich until about 10 January 2007.

4 The second and third defendants were, from 10 July 2006, directors and shareholders of the first defendant (Goldenwest).

5 In January 2007, Sumich made complaints to the police that, among other things, while employees of Sumich, the defendants had received secret commissions from suppliers to Sumich. Subsequently, the second defendant was charged with two counts of receiving secret commissions, contrary to s 529(a) of the Criminal Code (WA). Those charges have since been discontinued and replaced with a single charge under s 409(1)(c), that, on 21 July 2006, with intent to defraud, by deceit or fraudulent means the second defendant gained a benefit for his wife. The third defendant has not been charged with any offence.

6 The current proceedings were commenced by Sumich on 19 March 2007. In the action, Sumich alleges that while they were employed by Sumich, the second and third defendants incorporated Goldenwest in order to establish a business in competition with Sumich and to enable them to divert to Goldenwest business that would otherwise have gone to Sumich. Sumich further pleads that the second and third defendants used the property and resources of Sumich for that purpose.

7 Sumich alleges that, in breach of their duties as employees of Sumich, the second and third defendants, from about July 2006 to about January 2007, did in fact divert or attempt to divert to Goldenwest business that otherwise would have been or might have been obtained by Sumich. Particulars are given of 10 alleged occasions on which that occurred. Sumich says that further particulars will be provided after discovery and interrogatories.

8 It is also alleged that the second and third defendants unlawfully used Sumich's name in connection with the promotion of Goldenwest and represented that Goldenwest was associated with Sumich.

9 Sumich further alleges that the second and third defendants obtained, copied and made use of, for the purposes of the business of Goldenwest, commercial documents that were confidential to, and the property of, Sumich.

10 Sumich alleges that, in or about 2006, the second defendant negotiated with a particular supplier to the business of Sumich for the second defendant to obtain from the supplier commissions upon the orders he placed with it on behalf of Sumich. It is alleged that subsequently the second defendant received sums of money in accordance with the agreement.

11 It is also alleged that, between August 2006 and October 2006, Goldenwest raised and issued invoices to various suppliers for commissions to be paid to Goldenwest in respect of transactions involving the purchase of vegetables by Sumich from those suppliers. Sumich has given particulars of six specific transactions in which it alleges that occurred and says further particulars will be provided after discovery and interrogatories. The suppliers concerned included Weifang Saindant Imp & Exp Imp Co Ltd (Weifang Saindant).

12 Sumich further says that by reason of those particularised matters it is to be inferred that, at a time currently unknown but in or about 2006, the second defendant negotiated with suppliers of Sumich to pay to Goldenwest commissions upon orders being placed with that supplier on behalf of Sumich. Sumich says that the amount so derived by those defendants is held by them on constructive trust for Sumich.

13 The defendants deny that they engaged in the alleged unlawful conduct and say that their activities and the operations of Goldenwest were known to and approved by officers of Sumich. The defendants also say, in effect, that to the extent they used Sumich's property they did so with the knowledge and approval of Sumich. The defendants deny that they used confidential information of Sumich for their own purposes.

14 The defendants deny Sumich's allegations in relation to the alleged secret commissions.

15 The defendants gave discovery of documents on 5 July 2007 and, pursuant to an order of the court, served a supplementary list of discovered documents on 18 December 2007.

16 In an affidavit sworn on 8 April 2008, Ms Tana, the corporate accountant of Sumich, says that, on 14 February 2008, she inspected the defendants' supplementary discovered documents. Ms Tana says that among those documents she identified two further invoices that had been issued by Goldenwest to Weifang Saindant and which she believes disclose further secret commissions. They are referred to as invoice 37 and invoice 57, and are annexures LT 5 and LT 6 respectively to Ms Tana's affidavit. In the defendants' discovered documents, Ms Tana also located three other documents which she believes identify the manner in which payment was made of certain alleged secret commissions. They are annexures LT 9, LT 10 and LT 11 to Ms Tana's affidavit.

17 Invoice 37 is an invoice dated 7 November 2006 from Goldenwest to Weifang Saindant for 'commission' in the sum of USD$945. It appears from the invoice that the commission relates to a container identified as '#HDMU 5420883' and Seal '#HD 556187'. Ms Tana has annexed to her affidavit (as annexure LT 7) a copy of an invoice from Weifang Saindant to Sumich of 26 October 2006 for fresh carrots in the sum of USD$9,990. The container and seal number are the same as invoice 37.

18 Invoice 57 is an invoice dated 29 November 2006 from Goldenwest to Weifang Saindant for 'commission' in the sum of USD$1,375. It refers to container '#CRXU 6961620' and Seal '#N77665'. Ms Tana has annexed to her affidavit (as annexure LT 8) a copy of an invoice dated 21 November 2006 from Weifang Saindant to Sumich for fresh carrots in the sum of USD$9,625. The container and seal number are the same as invoice 57.

19 The document which is annexure LT 9 is a copy of a facsimile dated 6 November 2006 from Goldenwest to National Australia Bank (NAB) setting out a summary of invoices for the purposes of a telegraphic transfer of funds to be made from the bank account of Goldenwest to Weifang Saindant. In the facsimile, Goldenwest refers to six invoices it has received from Weifang Saindant totalling USD$61,679.30. It then refers to three invoices from Goldenwest to Weifang Saindant (numbered 20, 22 and 25) totalling USD$2,970 and instructs NAB to transfer the balance of USD$58,709.30 to Weifang Saindant. The facsimile is signed in the name of the second defendant.

20 Annexure LT 10 is a printed telegraphic transfer application form of NAB, dated 7 November 2006. The form contains instructions, apparently written by the second defendant, to NAB to transfer the sum of USD$66,673 from Goldenwest's account to Weifang Saindant. The form describes the amount as being payment of a number of invoices totalling $67,618 'less inv 037 $945'.

21 Annexure LT 11 is also a printed telegraphic transfer application form of NAB. That form, too, appears to have been completed by the second defendant. It is dated 5 January 2007. It instructs the NAB to transfer the sum of USD$38,470 from Goldenwest's account to Weifang Saindant. In the form that amount is described as being payment of a number of invoices totalling $39,845 'less inv 057 $1375'.

22 Sumich seeks to be released from its undertaking to allow it to provide to the police copies of the documents referred to above; that is, annexures LT 5, 6, 7, 8, 9, 10 and 11 to Ms Tana's affidavit.

23 Ms Tana says in her affidavit that it has never been the practice of Sumich to permit its employees to receive commissions from suppliers in respect of goods purchased from the supplier. Ms Tana says that she believes that invoices 37 and 57 (read in conjunction with annexures LT 7 and LT 8) evidence secret commissions additional to those already the subject of the complaint to the police, and that annexures LT 9 and LT 10 show how the proceeds of those secret commissions were applied. Annexure LT 11 shows how secret commissions already the subject of complaint were applied. I was informed that invoices 20, 22 and 25, referred to in LT 11, had previously been provided to the police.

24 Ms Tana says that the complaint previously made to the police was based on information which had been obtained by Sumich from its own computer. Sumich now wishes to provide the police with the further documents produced in the defendants' supplementary discovered documents. Ms Tana says that that information will provide the police with a more comprehensive picture of the circumstances in which the secret commissions were obtained and the way in which they were applied.

25 In an affidavit in opposition to the application, the second defendant says that, on 5 October 2007, the police executed a search warrant at his home. The search warrant was expressed to cover, among other things, 'computer and related media storage devices used by the first defendant'. The second defendant says that LT 9 is a document of Goldenwest and a copy is held on 'computer and related media storage devices used by the first defendant'. He further says that it appears from a notice served on him under s 42(2)(a) of the Criminal Code that the police hold 'spreadsheets, invoices and documents relating to dealings with ... Weifang Saindant', 'requests for information memos to [NAB]' and 'orders to produce documents served on [NAB] and interim receipts of documents received'.

26 The second defendant says in his affidavit that he has been charged with two offences under s 529(a) of the Criminal Code relating to another supplier but not with any offence relating to Weifang Saindant. Shortly after the application was heard, I was informed that those charges had been discontinued and the second defendant had been charged with an offence under s 409(1)(c) of the Criminal Code. That offence relates to the same supplier as the two original charges.

27 It was submitted on behalf of Sumich that in the present case there existed 'special circumstances' which provided a sufficient reason for releasing Sumich from its undertaking. The documents provided further evidence of the commission of criminal offences of the same nature as those which were the subject of the complaint made to the police prior to the commencement of the civil proceedings and also, by annexure LT 11, further evidence in respect of that earlier complaint.

28 Counsel argued that the application is not in furtherance of any private interest of Sumich. Sumich will not benefit from the prosecution. There is, however, a public interest in the detection and prosecution of serious criminal offences, such as breaches of s 529(a) or s 409(1)(c) of the Criminal Code. The release from the undertaking is sought in order to provide the police with more complete information in relation to a matter that is already the subject of a complaint to the police.

29 The fact that there were no current charges against any of the defendants relating to Weifang Saindant, or that the charges against the second defendant under s 529(a) have been discontinued and replaced with a single charge under s 409(1)(c) of the Criminal Code, is irrelevant. The documents sought to be provided to the police were capable of establishing serious criminal conduct, however that conduct might be characterised for the purposes of a prosecution.

30 It was submitted there would be no injustice to the defendants in releasing the documents to the police. The provision to the police of a document which evidences the commission of a criminal offence does not occasion injustice but, on the contrary, is important to the administration of justice. In any event, if there were any injustice or prejudice to the defendants, it is relatively low and is outweighed by the public interest in the proper investigation and prosecution of serious criminal offences.

31 It was submitted on behalf of the defendants that the documents were not, as stated by Ms Tana in her affidavit, directly relevant to the criminal charges that had been laid against the second defendant and none of the documents which Sumich seeks to release to the police relate to the supplier referred to in the existing charge. The documents relate solely to the transaction involving Weifang Saindant.

32 The police have previously investigated complaints by Sumich in connection with transactions involving Weifang Saindant and no charges have been laid against any of the defendants in respect of those matters. In connection with that investigation, the police have already executed a search warrant at the home of the second defendant covering documents relating to Weifang Saindant and computer-related storage devices used by Goldenwest. The police already hold a number of documents relating to Weifang Saindant.

33 Moreover, the only charge now brought against the second defendant is brought under s 409(1)(c) of the Criminal Code, not for a secret commission under s 529(a). No charges have been laid against Goldenwest or the third defendant.

34 It was submitted that the purpose of the application appears to be simply to cause the police to re-assess the decision they seem to have made not to bring charges against any of the defendants in relation to transactions involving Weifang Saindant. That does not constitute special circumstances which would entitle Sumich to be relieved of its implied undertaking in relation to documents produced on discovery.

35 It is well-established that a party to litigation is under an implied undertaking not to make use of documents discovered by another party, or the contents of those documents, other than for the legitimate purposes of the litigation. While described as an 'undertaking', it is in truth an obligation of substantive law: Hearne v Street [2008] HCA 36 [106] - [107].

36 The basis of the implied undertaking lies in the compulsive nature of the process of discovery of documents. Two rationales are commonly advanced for it. One is that it encourages the full disclosure required by the discovery process and minimises the temptation to destroy or conceal the existence of relevant documents: Sybron Corporation v Barclays Bank Plc [1985] Ch 299, 322; Riddick v Thames Board Mills Ltd [1977] QB 881, 895, 912; Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316, 321.

37 The other is that, as a matter of justice and fairness, the privacy and confidentiality of a party is not to be invaded more than is necessary for the purposes of justice: Taylor v Serious Fraud Squad [1998] UKHL 39; [1999] 2 AC 177, 210. In Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10, Mason CJ said: 'It would be inequitable if a party were compelled by court process to produce private documents for the purposes of the litigation yet be exposed to publication of them for other purposes' [30].

38 These rationales are generally regarded as inter-related rather than distinct. Thus in British American Tobacco Australia Services Ltd v Cowell (No 2) [2003] VSCA 43; (2003) 8 VR 571 [20], the Court of Appeal of Victoria considered that the primary purpose of the undertaking was to protect the subject party's privacy and thereby, among other things, to encourage full and frank disclosure whenever required for the purposes of the litigation.

39 In the very recent decision of Hearne v Street, the High Court described the implied undertaking as a formula by which the law ensures that there is not placed upon litigants, who in giving discovery are suffering a very serious invasion of the privacy and confidentiality of their affairs, any burden which is harsher or more oppressive than is strictly required for the purpose of securing that justice is done.

40 The court may, however, relax or waive the undertaking if there are 'special circumstances' which make it just to do so: Esso Australia Resources Ltd v Plowman (37). What will amount to 'special circumstances' cannot be exhaustively described and, given the almost infinite variety of circumstances that might arise, any attempt to do so would be unwise. Each case must be judged on its own facts and circumstances. But the implied undertaking should only be modified or released to the extent that it is in the interests of the administration of justice or in the public interest to do so: Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217, 225; Moage Ltd (in liq) v Jagelman [2002] NSWSC 953; (2002) 43 ACSR 173, 176.

41 In Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; (2005) 218 ALR 283, the Full Court of the Federal Court said in relation to the requirement of special circumstances:

The notion of 'special circumstances' does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined [31].

42 The courts have recognised that there can be a public interest in favour of disclosure in respect of information that is relevant to the investigation and prosecution of a criminal offence, which can override the public interest in the administration of justice in the preservation of the confidentiality of discovered documents: Rank Film Distributors Ltd v Video Information Centre [1982] AC 380, 447; Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476, 486 - 487, 490 - 491; Moage v Jagelman [16], [21]. Where a conflict arises, the court must weigh up the competing public interests, as it will not necessarily be in every case where documents are sought in respect of the investigation and prosecution of an offence that the public interest in disclosure will outweigh the public interest in the preservation of the confidentiality of discovered documents: Bailey (486). As Lee J pointed out in Bailey, the alleged infringement may be trivial or inconsequential, or the application to be released from undertaking might have been brought not to promote the public interest but from malice or to harass the other side or for some other improper purpose. It is therefore necessary that the court examine all of the relevant circumstances in deciding where the public interest truly lies.

43 In Bailey, Lee J identified some of the factors relevant to the exercise of the court's discretion on an application such as the present, namely:

• the nature of the offence alleged;
• the cogency of the evidence sought to be adduced in support of it;
• the authority to which the documents are sought to be disclosed;
• the manner of the authority's intended use and the possibility of misuse by that authority;
• any prejudice, actual or potential, which may be occasioned to the respondent by the disclosure.

44 As Lee J expressly recognised, those factors are not exhaustive. I would add a further factor, namely, whether the application has been brought for some personal advantage or improper purpose rather than to advance the public interest.

45 It is, of course, necessary in weighing up the competing public interests not to lose sight of the importance of the public interest in the preservation of the confidentiality of discovered documents. There is otherwise a danger that the safeguard it provides will become so eroded that the compulsive process of disclosure of documents will become a vehicle for injustice.

46 I did not understand it to be suggested by the defendants that this application was brought by Sumich for some personal advantage or improper purpose. In any event, there is no evidence to suggest that that is the case. It is clear, too, that the nature of the offences of which the documents are said to be evidence is a serious one, whether they be under s 529(a) or s 409(1)(c) of the Criminal Code. In either event, the maximum penalty for such an offence, in the case of an individual, is imprisonment for 7 years.

47 There can be no suggestion that the police service is not an appropriate authority to which to provide documents relevant to an investigation into whether criminal offences of the nature alleged have been committed, nor can it be said that there is any question of any misuse of the documents by the police. The defendants did not contend to the contrary.

48 It was also not suggested (and, in my view, nor could it have been) that the prospect that the provision of these documents to the police might lead to the prosecution of one or more of the defendants is prejudice of a kind which is to be taken into account in weighing the competing public interests. It was, however, submitted that the provision of these documents to the police may lead to further investigations which would involve the defendants in further expense and inconvenience.

49 But I understood the defendants' primary objection to the release of the documents to rest upon a contention that the release of the documents was unnecessary and would serve no useful purpose. The defendants argued that the only purpose of providing the police with the documents could be to seek to cause them to re-assess their decision not to lay such charges against the defendants in respect of transactions involving Weifang Saindant. That was not sufficient to constitute 'special circumstances'.

50 I do not accept that submission. It is not enough for the defendants to say that the police have already investigated the defendants' dealings with Weifang Saindant and laid no charges, unless it appears that the documents were not material to the investigation or that when they conducted the investigation the police were aware of the matters referred to in the documents. Neither is apparent.

51 The defendants do not say that the police have already had access to the documents in question or to documents containing the same information. The affidavit of the second defendant goes no further than suggesting that that might be the case. It is by no means evident that it is in fact the case.

52 It is not relevant that there are no existing charges to which the documents relate. It is sufficient that they appear to warrant further investigation by the police as to whether a criminal offence has been committed. I consider that they do. The documents appear to be relevant to the complaints Sumich previously made to the police about the allegedly corrupt conduct of the second and third defendants in receiving secret commissions or benefits. They appear to show additional commissions or benefits received by Goldenwest at the instigation of the second defendant. They also appear to show (by a set-off arrangement put into effect by the second defendant) the means by which amounts obtained from a supplier to Sumich, Weifang Saindant, were applied for the benefit of Goldenwest (a company controlled by the second and third defendants), while the second and third defendants were employed by Sumich.

53 I accept that there may be some inconvenience and possibly expense incurred by one or more of the defendants if the provision of the documents were to lead to further investigation by the police. In the circumstances, I do not, however, consider that that weighs significantly in the balance.

54 I am satisfied that in the circumstances of this case the public interest in favour of disclosure of the documents to the police outweighs the public interest in the administration of justice in the preservation of the confidentiality of them as discovered documents.

55 I would order that Sumich be released from its undertaking to the extent necessary to enable it to provide a copy of the documents to the Western Australian Police Service.

56 I will hear the parties on the terms of the order and on costs.