Plaintiff v Defendants

2 The documents that Laen wants to use in this proceeding were produced or furnished in the course of the Court action taken by Laen in the first proceeding to aid enforcement of its judgment in that proceeding. Laen accepts that it cannot use those documents in this proceeding except with the leave of the Court if the "implied undertaking" still attaches.**

3 The "implied undertaking" is a reference to the legal principle which applies when documents are produced under compulsion of the Court's processes to the effect that the party obtaining the disclosure must not use those documents or information derived from documents for a collateral purpose.[2] In Hearne v Street[3] the High Court expressed the legal principle in the following terms:

Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than the purpose for which it was given, unless it is received into evidence. [4]

**Although described in terms of an implied undertaking, it is an obligation that arises by operation of law which is owed to the Court. This legal obligation serves to provide a measure of protection against parties using documents or information disclosed under compulsion beyond what may be required to secure justice between the parties. As the obligation is owed to the Court, it is not an obligation that the parties can unilaterally disclaim but requires the leave of the Court. [5]

4 The scope of the leave may be general or limited and may be granted on terms, but "special circumstances" are required to justify the grant of leave. In Hearne v Street the plurality of the High Court said:**

The importance with which the courts have viewed the obligation under discussion is indicated by the fact that although it can be released or modified by the court, that dispensing power is not freely exercised, and will only be exercised where special circumstances appear.[6]

**The "special circumstances" requirement has its origins in Crest Homes Plc v Marks[7] where Lord Oliver stated that a Court will not release or modify this obligation except in special circumstances.[8]

5 In Liberty Funding Pty Ltd v Phoenix Capital Ltd[9] the Full Federal Court stated that the notion of "special circumstances" did not require "extraordinary factors [to] bear on the question before the discretion will be exercised".[10] Rather "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".[11] To similar effect, in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd[12] Wilcox J said:**

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.[13]

**The factors listed do not prescribe any hard or fast test, but rather emphasise that all of the circumstances of the case must be examined to determine whether there are cogent and persuasive reasons for modifying or releasing a party from the implied undertaking.

6 Nonetheless some guidance can be found in other cases where the Court has been asked to exercise its discretion. The authorities indicate that an important consideration in weighing the various factors which may enliven the discretion is the purpose for the release from the obligation.[14] Where, as here, that purpose is for use in another proceeding, commonality between the proceedings may be a sufficient factor to warrant the exercise of the dispensing power.[15]**

**7 In the present case, Laen wants to use affidavits, subpoenaed documents and the transcript of an oral examination of the directors of Hill Family Investments that it obtained in the first proceeding in the course of attempting to enforce its judgment. Mr Herskope, counsel for Avid and At the Heads, conceded that Laen did not require the leave of the Court for one of the affidavits and the transcript of examination, because they were both in the public domain. Mr Borsky, counsel for Laen, submitted that three other affidavits were also in the public domain and that leave was not required for them either. The three affidavits in question were filed on behalf of Avid and At the Heads in opposition to freezing orders that Laen sought against them in the first proceeding. The submission that they were in the public domain was based upon their reference in submissions read by a judge before Court. It is apparent from the transcript of those applications however, that they were resolved by consent orders provided to the judge in the form of minutes of orders. There was no adjudication on the merits of the freezing order and no argument in open Court on the content of those affidavits. I reject the submission that these affidavits are in the public domain.

8 Laen argued alternatively that these affidavits were not subject to the implied undertaking because Avid and At the Heads were not "compelled" to file the affidavits in the first proceeding, in opposition to the freezing order applications, as there was no Court order requiring those defendants to file affidavits in opposition. This submission cannot be accepted. Avid and At the Heads were made subject to the Court's processes because an application for freezing orders was made against them. The Court's processes required any evidence that they may have wished to put before the Court, in response to that application, to be furnished in the form of an affidavit by a specified date. Those affidavits were served pursuant to a judicial direction that any affidavits on which they sought to rely be filed by a particular time. This was sufficient in my view to meet the requirement of compulsion. The implied undertaking attached to those affidavits.**

**9 Mr Borsky contended that special circumstances existed because the nature of the claims made against the defendants in this proceeding arose out of the attempts by Laen to enforce the judgment that it had obtained in the first proceeding. Mr Herskope, on the other hand, contended that Avid and At the Heads were not parties to the first proceeding and that there was no commonality of subject matter in the proceedings, and accordingly that special circumstances have not been shown. There are two primary reasons for rejecting Mr Herskope's contention.

10 First, the purpose of the implied undertaking is to protect against the misuse of material produced under coercion of the Court's processes, not to prevent a party's access to justice. If the proposed use is for the purposes of other proceedings, the Court's power in relation to its own proceedings will provide the necessary protection against misuse. The existence of the implied undertaking cannot fetter or restrict the Court's power in relation to its own processes in proceedings instituted before it.[16] Nor can it operate as an estoppel against the use of the processes of the Court in that other proceeding.[17] The mere fact of commonality of subject matter may be sufficient to establish that the party has a legitimate forensic purpose for the use of the material in the second proceeding, but the test is not commonality of subject matter. Generally, use in a subsequent proceeding would not be an improper use of material previously obtained subject to an implied undertaking, unless that material was obtained in the first proceeding for an ulterior purpose. There is no suggestion in this case that Laen had any improper motive in obtaining the disclosure to it in the first proceeding of the documents in question.

11 Secondly, and in any event, there is a clear link between the attempts at enforcement of judgment obtained in the first proceeding and the institution of these proceedings. These proceedings are the direct consequence of the disclosure in the first proceeding in the course of Laen's attempts to enforce its judgment against Hill Family Investments, that the company had owned and divested itself of an asset from which the judgment debt could have been wholly or partly satisfied. That link is sufficient to warrant the release of the implied undertaking for the purposes of the use of the documents in this proceeding. Insofar as these documents will bear upon the issues for determination in this proceeding, there is a public interest in ensuring that all relevant material is before a court to enable it properly to discharge its function.[18] I also take into account that their relevance would mean that the same documents could be the subject of discovery or a subpoena in this proceeding. As Pagone J stated in Griffiths & Beerens & Ors v Duggan & Ors (No 2)[19] "it would be a curious result if the effect of the implied undertaking would be to limit the powers of a court in subsequent cases to compel production of the documents necessary to ensure the integrity of its judicial function".[20]

12 It was also argued for Avid and At the Heads that I should take into account that they objected to the use of these affidavits in this proceeding. In Griffiths & Beerens & Ors v Duggan & Ors (No 2) Pagone J had a similar submission before him. His Honour stated:**

A court might be ready to release a party from an undertaking if the party affected is willing for the release to be granted; it does not follow, however, that the unwillingness of the party affected will always weigh against release. Indeed, it may be that a party's unwillingness to release an opposing party from an implied undertaking will be because the information sought to be relied upon will have direct, immediate and substantial adverse impact in the other proceedings. In such a case the opposition of a party affected by release from the undertaking may be to gain some forensic or tactical advantage and may suggest or supply the very reason why an implied undertaking should be released. Release may however, perhaps, be denied even in such cases if it be shown that a party affected will suffer prejudice or inconvenience greater than the probative value of the document sought to be relied upon.[21]

The opposition to Laen's release from its undertaking in some cases may be a factor but will not be determinative of the application. Here it is very relevant that some of the documents in question are documents sourced from Avid and At the Heads by way of subpoena or furnished by them by way of evidence in the form of affidavits. This in itself affords a reason for modifying or releasing the undertaking with respect to those documents for the purposes of their use in this proceeding in which Avid and At the Heads are parties as defendants.

**13 Next it was argued for Avid and At the Heads that the requirements on a party seeking to establish special circumstances to justify the release, require the party to specify the purpose for which the modification or release is sought. It was submitted that "the specific purpose" had not been identified by counsel for Laen, despite their submissions about the intended use of the documents in this proceeding. That submission must be rejected. The need to justify to the Court why Laen should be released from the implied undertaking did not require Laen to identify specifically how it would seek to use those documents in these proceedings. The purpose for which the release is sought is for the purposes of their use in this proceeding. That is sufficient. The Court's processes in this proceeding will then control how Laen may use those documents for the purposes of the proceeding.

14 Finally, Mr Herskope of counsel contended that Laen was in breach of the implied undertaking because it had already made use of those documents to plead out its case against the defendants in this proceeding. Mr Herskope contended that the drafter of the statement of claim could not have drawn paragraphs 3, 5, 13, 14 and 15 without reference to the documents in issue. Mr Borsky accepted that the particulars to paragraph 14 fell into that category but otherwise disputed that there had been a breach. Mr Borsky sought leave nunc pro tunc insofar as those documents were made use of to draw the statement of claim.

15 In Forty Two International Pty Limited v Barnes[22] Yates J considered the Court's power to grant leave nunc pro tunc where there has been a breach of the implied undertaking. Yates J held that the Court could grant leave retrospectively. His Honour reasoned as follows:**

The consequences of such a breach may include the exercise of a discretion by the court to strike out the proceeding or permanently stay it as an abuse of process: Riddick; K & S Corporation Ltd in [50]; Grocon Ltd v Alucraft Pty Ltd (in liq) (1992) 10 ACLC 1127 at 1128-1129. In my view the court also has the power to grant leave retrospectively: Miller v Scorey [1996] 1 WLR 1122 at 1133-1134; Eckert v National Australia Bank Ltd (unreported, Supreme Court of South Australia, Doyle CJ, 17 April 1997). The question is whether, as a matter of discretion, such leave should be granted. As Rimer J in Miller observed (at 1133):

... It is one thing to release a party from an undertaking to the court so as to permit him to do in the future that which he has been prevented from doing in the past. It is another thing for the court to find, as I have, that a party has abused the process of the court by his breaches of an undertaking to it and for it then to give that party a retrospective release from the undertaking so as to wipe away the abuse of the process which he has committed.

In my view it is a matter of significant concern that a breach of the obligation has taken place. It is not to be excused lightly. However, the matter must be viewed in a wider context.

Had the applicants sought the requisite leave at the time of production in October and November 2008 then, in my view, it is likely that such leave would have been granted. By their description in the CM(UK) subpoena, the documents were all documents relating, in one way or another, to the business and affairs of the applicants, which presumably came into the respondents' hands while they were still directors of the first applicant. In the correspondence that passed between the applicants' solicitors and each of the respondents in November and December 2008, neither of the respondents suggested otherwise. Indeed, each of the respondents, at that time, was at pains to stress that none of the documents were of commercial value. Their view was that they were entitled to possess the documents they had. No contrary view was advanced on the hearing of the motions.

Furthermore, there is obviously a contest between the parties about whether the conduct alleged in the statement of claim amounts to the infringements and breaches that have been pleaded. But the respondents raise no issue of prejudice concerning the use of the documents and information in this proceeding. They rely purely on the fact that the applicants have acted in breach of their obligations to the court. As there is no issue of prejudice now, it is difficult to see how there could have been an issue of prejudice to the respondents in November 2008.

As Wilcox J observed in Springfield at 225, perhaps the most important consideration of all in considering whether leave should be granted is the likely contribution of the documents in achieving justice. Had an appropriate application been made in November 2008 I believe that it is most likely that the interests of justice would have lain in permitting the applicants the opportunity of vindicating the rights they assert in their present pleading.[23]

**As stated by Yates J the question is whether the Court should exercise the power and the answer will turn on the particular circumstances of the case.

16 In the present case, for the reasons supporting my conclusion that special circumstances exist in this case, it is likely in my view that had Laen sought the leave of the Court before it issued this proceeding, the Court would have granted the release for the purposes of this proceeding. In the circumstances, I propose to grant leave nunc pro tunc.

17 Accordingly I will grant Laen leave nunc pro tunc to use the documents in respect of which leave was sought for the purpose of their use in this proceeding.**

1. [1] 172 Voluntary conveyances to defraud creditors

(1) Save as provided in this section, every alienation of property made, whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2) This section shall not affect the operation of a disentailing assurance, or the law of bankruptcy or insolvency for the time being in force.

(3) This section shall not extend to any estate or interest in property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the alienation, notice of the intent to defraud creditors.

[2] Harman v Secretary of State for the Home Department [1983] 1 AC 280

[3] [2008] HCA 36; (2008) 235 CLR 125.

[6] Ibid 159-60 [107] (footnotes omitted).

[7] [1987] AC 829.

[9] [2005] FCAFC 3; (2005) 218 ALR 283.

[12] (1992) 38 FCR 217.

[14] Australian Securities & Investments Commission v Marshall Bell Hawkins Limited [2003] FCA 833 (Merkel J); Ambridge Investments Pty Ltd v Baker [No 3] [2010] VSC 545 (Vickery J).

[15] Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217, 224.

[16] Esso Australia Resources Ltd v Plowman [1994 - 1995] 183 CLR 10, 33 (Mason CJ)

[17] P v Australian Crime Commission [2008] FCA 1336, [64].

[18] Ambridge Investments Pty Ltd v Baker [No 3] [2010] VSC 545 [35] (Vickery J).

[19] [2008] VSC 230

[22] [2010] FCA 397