The implied undertaking yields to compulsion; relevance to a second proceeding a powerful ‘special circumstance’

Justice Pagone’s decision in Griffiths & Beerens Pty Ltd v Duggan [2008] VSC 230 came along just at the very moment I needed to find out the answer to a question I have always been unsure about. Say you have documents from one proceeding obtained from the other side on discovery. They are relevant to a related subsequent proceeding. Do you have to discover them? If so, do you have to give inspection of them? If not, would it be a contempt of Court to discover them? Justice Pagone says you should discover away and give inspection subject to anything the second Court might do in the interests of justice, because the implied undertaking yields both to statutory compulsion (e.g. an ATO examination) and also to ‘curial process’ such as discovery and subpoenas. He also said something which, it appears to me, comes close to an assertion that the implied undertaking prima facie does not preclude use of a document obtained in one proceeding in another proceeding, and that what the undertaking is really about is the use of documents obtained in litigation for purposes other than litigation (e.g. publication to the media).

A company sued a defendant in the Supreme Court. The trial ran for 33 days. Judgment was given, and all that remained was the question of costs. Then the plaintiff company applied to the trial judge for an order releasing it from the implied undertaking not to use a witness statement of a Mr Lin, one of the defendant’s witnesses. Because the witness statement was provided under compulsion, the recipient, the plaintiff, was under an obligation not to use it for any purpose other than the prosecution of the case in which it was served. Mr Lin’s company applied in different proceedings to wind up the plaintiff company. The plaintiff wanted to use Mr Lin’s affidavit in the winding up proceedings against Mr Lin’s company. It said that the affidavit’s use of language suggesting that Mr Lin rather than his company was entitled to commission was telling of an issue about who was the contracting party in the winding up proceeding.

Justice Pagone granted the application to be released from the undertaking, but indicated that he thought the more appropriate course would have been for the plaintiff to subpoena the document in the winding up proceeding, or seek discovery of it. That is because, as Chief Justice Mason said in Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 33, ‘the implied obligation must yield to inconsistent statutory provisions and to the requirements of curial process in other litigation, e.g. discovery and inspection’. His Honour was unmoved by the argument that the winding up proceeding was, like the proceeding his Honour had presided over, nearly concluded, and that the document was of very marginal relevance. That was a question for the judge in the winding up proceeding.

Though I would not exactly call myself an implied undertaking expert, it strikes me that the following passage is novel in the development of the law about the implied undertaking in that it tends to suggest that the mere fact of relevance to a second proceeding will be a ‘special circumstance’ of the kind you have to demonstrate before you’ll be released from the undertaking, and it will be interesting to see what future courts make of it:

‘9 The primary case in the undertaking proceeding was, not that leave was unnecessary, but rather that there existed special circumstances that justified my release of the plaintiffs from their implied undertaking. In Holpitt Pty Ltd v Varimu Pty Ltd[24] Burchett J adopted the dicta in Crest Homes PLC v Marks[25] that the court will not release or modify the implied undertaking “save in special circumstances”. In Springfield Nominees Pty Ltd v Bridgelands Ltd[26] 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 in achieving justice in the second proceedings.[27] (My emphasis)

10 In my view those plaintiffs in the proceeding before me, who are also parties to the winding up proceeding and the debt recovery proceeding, should be released from the implied undertaking not to use Mr Lin’s affidavit for purposes other than the proceeding which I have previously heard and determined in all respects except for costs. I base that conclusion primarily upon my view that questions about the relevance, admissibility and probative value of Mr Lin’s affidavit in those proceedings should be determined in those proceedings, and by the judicial officer charged with those proceedings, and not collaterally by me. The material before me suggests that Mr Lin’s affidavit is likely to have little, if any, weight in the other proceedings, but I would not wish the integrity of those proceedings to be in any way undermined by such decision as I may make without the benefit of the full argument which can only occur properly in those proceedings. Indeed, I think it undesirable to encourage, in proceedings before me, the parties in a subsequent proceeding to conduct a mini hearing about relevance, admissibility or probative value of material that may be sought to be tendered in evidence in the other proceedings. Such a course is likely to undermine the integrity of the judicial system rather than to enhance it.

11 Each case must, of course, depend upon its own facts, and there may be other cases where the mere existence of subsequent judicial proceedings will not be sufficient to warrant the release of an implied undertaking, but in my view it is a powerful factor in favour of release if release be necessary and in this case is a special circumstance to warrant release from the implied undertaking. It would also be undesirable for a judge in one proceeding not to release a party from its implied undertaking and find that the same party was bound by a contrary order (for example to make discovery of a document subject to an “unreleased” implied undertaking) by another judge in the same court or by a judge of a different court whether in the same jurisdiction or elsewhere. That may be a reason to conclude that the implied undertaking should not be construed to restrict the obligations which subsequent proceedings may impose upon a party. It is, however, also a reason in support of releasing a party from an implied undertaking. The foundation of the implied undertaking is that it is given to the court, not to the parties[28], to prevent the misuse of information provided pursuant to the court’s powers of compulsion. Any information which is truly relevant, admissible and probative in subsequent proceedings will, all things being equal, generally not be an improper use of material previously obtained subject to an implied undertaking. If Mr Lin’s affidavit is decided to be relevant, admissible and probative by Master Efthim, or a judge or any other judicial officer who may determine the issues in dispute in the winding up proceeding and the debt recovery proceeding, I would find it difficult to conclude either that its use by a party had been improper or that the party should not have been able to use something which the judge or judicial officer received as relevant, admissible and probative to the outcome. I would be reluctant to permit the implied undertaking to cloak a document with protection from use in other judicial proceedings where there are ample powers to ensure that its processes are not abused: especially in this case, where one of those other proceedings (the winding up proceeding) was commenced by Mr Lin’s company Proline. It may be, as I have said, that the affidavit will be found to be irrelevant, inadmissible or of little probative value in those proceedings, but that is within the province of those proceedings.

12 I do not accept, therefore, that arguments about the relative insignificance of the material in Mr Lin’s affidavit should be accepted by me. That is a matter for the judicial officer in the other proceedings. What is for me is primarily to ensure that those proceedings are not compromised by my decision in [this application].’

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