The implied undertaking
26By this motion Royal Guardian sought to be released from its implied undertaking in respect of certain business records produced on subpoena by the National Australia Bank, Westpac Banking Corporation, Commonwealth Bank of Australia, Andrew Kotrolos trading as Andrew Court & Associates and Nexia Court & Co, in order that they could be provided to the police. There was no issue between the parties that the documents were the subject of the implied undertaking.
27Those who have produced the documents to the Court have not been given any notice of this application. Whether they have any objection to the leave sought is not known. Contrary to the submissions advanced for Royal Guardian, it seems to me that before such leave is granted, they must be put on notice of the application and be given an opportunity to be heard, in the event that they have any opposition to the grant of the leave sought. Until that occurs, the orders sought should not be granted. It ought not to be assumed that the grant of the leave could give rise to no prejudice to the third parties who have produced the documents to the Court, or that they might not wish to be heard on the application.
28The position is that, as yet, Royal Guardian has not made any report to the police about any alleged fraud on the part of Ms Nguyen and Mr Stolyar. It does not require the documents in question in order to do so. On the evidence, it has now received legal advice that the documents produced show a money trail from Royal Guardian to Ms Nguyen and Mr Stolyar, relevant to the commission of a criminal fraud. Royal Guardian's solicitor deposed that the police were likely to take an allegation of fraud more seriously, if accompanied by the documents in question.
29It was not in issue that the documents may assist the police in their consideration of an allegation of fraud, or that the police could themselves take steps to obtain the documents, if a decision was made to investigate any alleged fraud. The offence in question is that provided by s 192E of the Crimes Act 1900, which provides:
"192E Fraud
(1) A person who, by any deception, dishonestly:
(a) obtains property belonging to another, or
(b) obtains any financial advantage or causes any financial disadvantage,
is guilty of the offence of fraud.
Maximum penalty: Imprisonment for 10 years.
(2) A person's obtaining of property belonging to another may be dishonest even if the person is willing to pay for the property.
(3) A person may be convicted of the offence of fraud involving all or any part of a general deficiency in money or other property even though the deficiency is made up of any number of particular sums of money or items of other property that were obtained over a period of time.
(4) A conviction for the offence of fraud is an alternative verdict to a charge for the offence of larceny, or any offence that includes larceny, and a conviction for the offence of larceny, or any offence that includes larceny, is an alternative verdict to a charge for the offence of fraud."
30It was Royal Guardian's case that the factual matters advanced in its statement of claim could constitute a fraud under s 192B, even though the only fraud there pleaded was a claim of fraudulently concealing certain things, for the purpose of the Limitation Act 1969. Its position was that it was entitled to pursue its contractual rights in relation to the money in question and did not have to allege fraud, to make out its case.
31The parties were agreed that a party will be released from the implied undertaking if special circumstances are shown and that the way in which the exercise of the discretion in question should be approached, is as discussed by Wilcox J in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 110 ALR 685 at 693:
"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."
32In Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FLAFC 3; (2005) 218 ALR 283, the Full Court of the Federal Court observed at [31]:
In order to be released from the implied undertaking it has been said that a party in the position of the appellants must show "special circumstances": see, for example, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 ; 110 ALR 685. It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. 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. In Springfield Nominees ..."
33The application was opposed by Ms Nguyen and Mr Stolyar, who submitted that it was relevant that the case brought against them in these proceedings advanced no allegation of fraud, but merely a breach of contract; that there has been no complaint to police to date, notwithstanding that Royal Guardian had been in possession of the relevant facts for many years; that the police had relevant powers to issue warrants, which would compel production of the documents in question, if an investigation was ever pursued; that the release of the undertaking would involve an invasion of the privacy of various third parties; that there was no evidence of consent from those who had produced the documents; and that the application amounted to nothing more than an attempt to intimidate them, which would not be condoned by the Court.
34It was also submitted to be bizarre that Royal Guardian urged the Court to release the documents to police, who would have to prove the essential elements of any fraud offence beyond reasonable doubt, but itself did not pursue any allegation of fraud in these proceedings, which would have to be proven only on the balance of probabilities. It was submitted that Royal Guardian had not provided a sufficient explanation as to why it had not gone to police in 2005 with allegations of fraud, or even pursued an application to this Court for relief such as freezing orders. It was submitted that it would be of concern to the Court that documents produced to the Court in 2012 would be released to the police. It defied belief that complaint could not have been earlier made, so that the police could have obtained warrants in respect of the relevant documents. There would be significant prejudice to Ms Nguyen and Mr Stolyar if the release from the undertaking was granted. If charges were laid, an application to stay the proceedings would have to be made. The proceedings could not be maintained until the criminal proceedings were disposed of.
35For Royal Guardian it was submitted that the fact that there had never been a complaint made to police was not determinative (see Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476). It was a matter for the police to determine whether or not an investigation would not proceed because of a delay in complaint. What was important was whether the documents appeared to warrant investigation as to whether a criminal offence had been committed (see Andrew Koh Nominees v Pacific Corporation Ltd (No 2) [2009] WASC 207 at [52]). Even if there had been a complaint, which the police were not interested in pursuing, that would not be a basis upon which a release from the undertaking would be refused (see North East Equity Pty Ltd v Goldenwest Equities Pty Ltd [2008] WASC 190). It was sufficient if the documents provided significant evidence as to one of the elements of a fraud.
36Royal Guardian also submitted that the documents showed the financial advantage which Ms Nguyen and Mr Stolyar had obtained, given declarations of trust in their favour, in relation to shares held in the entities to which the Dibelle payments had been made, entities in which, by their pleadings, they claimed they had no interest. This provided cogent evidence relevant to the investigation of a fraud and was not information known to Royal Guardian, until the documents in question were produced.
37The application raises two competing public interests, discussed by Lee J in Bailey v Australian Broadcasting Corporation at 488, namely the protection of a party's right to privacy and confidence with respect to his or her documents, save to the extent necessary for the conduct of the proceedings and the location and prosecution of offenders. His Honour discussed the difference between offences which involve the infringement of private or individual rights, in respect of which, if infringed, there may be adequate civil remedies available to the wronged party and other types of offences.
38This distinction was considered by Jessup J in Websyte Corporation Pty Ltd v Alexander [2012] FCA 69, who observed at [17]:
" The offences which Victoria Police are investigating correspond with civil wrongs in relation to which the applicant sues in this proceeding. Broadly, what is under consideration is the addition of a criminal sanction to the civil remedies which are available here. The offences being investigated fall into the category of those described by Lee J, in Bailey, as involving the infringement of private or individual rights rather than, by contrast, involving conduct which injures or damages the community or a section of it, or alleged criminal conduct which "it may be in the greater public interest to uncover". This is not for a moment to diminish the importance, in the public interest, of offences such as those now being investigated by Victoria Police being uncovered and, where appropriate, prosecuted, but it is a valid distinction nonetheless and one which, like Lee J, I consider relevant to the discretionary exercise upon which I am engaged."
39In this case, of course, civil remedies have, in fact, been pursued, against Mr Stolyar and Ms Nguyen, but not in relation to any fraud. There has, as yet, been no complaint to the police. That is not fatal to Royal Guardian's application, but the fact that there is no criminal investigation, because there has never been any complaint made to the police, is relevant to the exercise of the discretion. The parties did not attempt to make any assessment as to the viability of any criminal charge, resting on the documents in question. Given the nature of the documents in question, however, it must be accepted that they may be relevant to an assessment of whether there has been any offence committed. That would also depend, it would appear, on an assessment of the case advanced in these proceedings by Ms Nguyen and Mr Stolyar, as to Royal Guardian's knowledge as to the basis of the payments in question and the circumstances in which they were made.
40The documents have been obtained by subpoena from a number of third parties. In Websyte Jessup J was concerned that the court should not give currency to the notion that the search order there in question, would become in effect 'the first of a two-step process, in which if the documents so recovered appeared to be incriminating, the second step might involve a criminal prosecution for what is essentially the same delict' (see at [23].) His Honour refused to grant the release sought, having in mind the earlier conduct of the party then seeking that relief, which he considered had already breached the undertaking. That is not this case.
41The circumstances here are in summary that Royal Guardian has for some years been aware of the Dibelle payments which caused it in 2010 to bring civil proceedings against Ms Nguyen and Mr Stolyar; even so, it has not alleged any relevant fraud in these proceedings; nor has it ever complained to police that the matters which lie at the heart of these proceedings involve any offence; documents have now been produced on subpoena, which have revealed certain information of which Royal Guardian says it was not previously aware, namely Ms Nguyen and Mr Stolyar's interest in the entity to which the Dibelle payments were made; it has received legal advice that the documents evidence that an offence has been committed; it is in these circumstances that it seeks to be released from the implied undertaking; but it has not given any notice of the application to be released from the undertaking, to those who have produced the documents in question to the Court.
42In all of those circumstances I am not satisfied that Royal Guardian should, as yet, be released from its implied undertaking in relation to the documents in question. A different view may be taken if those who produced their business records to the Court are given an opportunity to be heard. They may oppose Royal Guardian's application and if they do, their position must be considered.
43In these proceedings Royal Guardian pursues the payments in issue, relying on contractual and statutory obligations which it claims lay between it and Ms Nguyen and Mr Stolyar. It does not pursue a claim in fraud. It does not seem to me that it is obliged to do so. It is not in issue that Royal Guardian is entitled to make a report to the police. Given the nature of the documents which have now come into its hands, it is apparent that they are relevant to a consideration of an allegation of fraud, if made to the police. That there is a possibility that the police will decide to investigate and may take a view that an offence has been committed, with the result that charges are laid and that this may have an impact on the parties' pursuit of these proceedings, is not itself a basis for refusing the release which Royal Guardian seeks from the undertaking.
44If those who produced the documents in question to the Court have no objection to their business records being produced to the police, it is difficult to see that a basis for Royal Guardian's release from its implied undertaking would not thereupon arise in the present circumstances
45I have not been persuaded, however, that the Court's discretion should at this stage be exercised in the way which Royal Guardian has urged. In the circumstances I take the view that its motion should not be dismissed, but it should be given leave to further pursue its application, if it wishes, after service of the motion upon those who have produced the documents to the Court.