Hearne & Anor v Street & Ors [2008] HCATrans 129 (7 March 2008)

Last Updated: 12 March 2008

[2008] HCATrans 129

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S477 of 2007

B e t w e e n -

PETER HEARNE

First Applicant

DAVID TIERNEY

Second Applicant

and

JOAN STREET

First Respondent

ROSLYN ELIZABETH DWYER

Second Respondent

MICHAEL JOHN HESSE

Third Respondent

GLEN EIGHT PTY LIMITED

Fourth Respondent

SUSAN HESSE

Fifth Respondent

ROBERT SIMKIN

Sixth Respondent

GLEN FREDERICK BILLINGTON

Seventh Respondent

FIONA BILLINGTON

Eighth Respondent

Application for special leave to appeal

GLEESON CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 MARCH 2008, AT 10.38 AM

Copyright in the High Court of Australia

__________________

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR T.G.R. PARKER, SC, for the applicants. (instructed by Clayton Utz)

MR T.A. ALEXIS, SC: If the Court pleases , I appear with my learned friend, MS P.M. SIBTAIN, for the respondents. (instructed by Wise Legal)

GLEESON CJ: Yes, Mr Jackson.

MR JACKSON: I thank your Honours. Your Honours, there are two issues raised by the application. One concerns the test for determining whether contempt is criminal that relates to the ability to appeal. The other is whether, when a non-party is proceeded against for contempt for using material provided in litigation, the material thus being subject to an implied undertaking to use it only for the purposes of the litigation, it must appear not merely that the non-party was aware of the litigation and that the documents came from it but also was aware that there was such an implied undertaking by the party. Your Honours, may I deal with them in that order.

In relation to the right to appeal, the respondent purported to appeal to the Court of Appeal from Justice Gzell’s dismissal of the motion for contempt. If the proceedings were for a criminal contempt, there could be no appeal. That is because of the provisions of sections 101(5) and 101(6) of the Supreme Court Act (NSW). Those provisions are quoted by Justice Ipp at page 40 of the application book, paragraph 16. As your Honours will see, the question arising under those provisions was that posed by the words of section 101(6), namely, whether the order of Justice Gzell was made in proceedings that relate to criminal contempt.

Your Honours, in the Court of Appeal Justice Basten said at page 74, paragraph 130 that the test to be applied was that adopted in this Court in Witham v Holloway 183 CLR 525 at page 530. What he meant by that can be seen, if one goes back to page 72, in paragraphs 125 to 126 and, in particular, the quotation in paragraph 125 where a statement of the position in general terms was set out. Your Honours, the difficulty with that view is that the passage quoted from Witham v Holloway does not really reflect the reasoning which was essential to that decision.

May I take your Honours to that case for just a moment. It is within tab 4 of the materials we have provided. The relevant passage is at page 530 at about point 3 on the page. Your Honours will see it is the first new paragraph on that page and it goes through to the end of that page. It appears, if one looks at the context – and I will come to that in just a moment – to be reciting views expressed, in a sense, to that time but that really is the start of the discussion by the Court. The discussion continues and it continues through to page 534, about point 3 on the page, where the ratio of the decision really appears in the first new paragraph.

Could I just say, your Honours, the issue was, what was the standard of proof beyond reasonable doubt or otherwise and your Honours will see that in that paragraph it said that the differences between the distinction between the two classes of contempt are, in significant respects, illusory. They did not justify the allocation of different standards of proof. I will not read out the remainder of it except to say that it makes it clear, as Justice Deane said in Hinch, that:

all proceedings for contempt “must realistically be seen as criminal in nature”.

Then your Honours will see in the last sentence they applied that test to the conclusion that was arrived at. The reference to what was said by Justice Deane in Hinch takes one back to page 531 of that case where your Honours will see the reference to that commencing at about point 3 or 4 on the page where it says “Later, in Hinch v Attorney-General” going through to the end of that paragraph. Justice McHugh’s reasons were to similar effect at page 549 and your Honours will see it is a passage really, I think, that commences about five lines from the top of the page and goes to the end of the immediately following paragraph.

Pausing at that point, if I could go to the other member of the majority, Justice Ipp, your Honours will see his reasons at page 53 at paragraph 59. Your Honours will see that he says, “the Microsoft test is apt”. I will come to what that means in a moment. He goes on to add what he describes as a qualification. I will come to the qualification in a moment but when he referred to the Microsoft test he was referring to what is set out in paragraph 50 at page 50 of the application book where Justice Beaumont had said that a substance or object test was appropriate.

Your Honours will see it there set out, if the object was to punish, no appeal would lie; if the substance were remedial, an appeal was competent. At paragraph 59 at page 53 Justice Ipp added the matters to which he there referred. May I refer particularly to two of them. The first is paragraph (c) where he said:

Generally . . . a breach of an injunctive order or an undertaking that is wilful but not contumacious in the broad sense – and is not merely casual, accidental or unintentional – is regarded as a civil contempt –

I invite your Honours to bear in mind the way in which he puts it; wilful but not contumacious and not merely casual, accidental or unintentional and he says that is civil. Your Honours, that observation, in our submission, does not reflect the law. In one sense it may be setting out a substantive matter, in another sense it may be dealing with the question of onus but in either event, in our submission, it is an addition and that is apparent, we would submit, from, if I can describe it shortly, the Mudginberri case 161 CLR 100. It is behind tab 5, your Honours, and I want to go to a couple of references in it.

Could I just say in relation to it, your Honours, the point I am seeking to make about it is that in Mudginberri it was said that wilful on the one hand and not – to return to paragraph 59(c) – casual, accidental or unintentional described on the one hand criminal and on the other hand civil. What has been done by Justice Ipp in his reasons has been to add the two together and say if it is wilful and not merely casual, accidental or unintentional it is a civil contempt. So, your Honours, that is a different test, in our submission.

The relevant passages in Mudginberri are at page 108 and your Honours will see, speaking first more generally, commence about point 6 on the page where it says “The concept that” and that goes through to the bottom of the page. Then your Honours will see a reference at the bottom of the page to “wilful disobedience unaccompanied by defiance” and your Honours will see at the top of page 109 “much to be said for the view that all contempts should be punished as if they are quasi-criminal”. Then your Honours will see in the first new paragraph on page 109 a distinction drawn:

between casual, accidental and unintentional disobedience on the one hand and wilful disobedience on the other –

and it is said that that –

offers the prospect of a more limited basis for upholding the imposition of a fine by the Federal Court –

Your Honours, if one goes over to page 112, halfway down the page it says:

Thus, it would suffice that the relevant act or omission was wilful even if . . . the act or omission of the servant or agent was “through carelessness, neglect, or even in dereliction of his duty”.

Your Honours, the passage really goes through to page 113 and at about point 2 it says:

It follows that a deliberate commission or omission which is in breach of an injunctive order or an undertaking will constitute such wilful disobedience unless it be casual, accidental or unintentional.

The Court in that case was dealing with the power to fine but its observations do not, in our submission, support the view that a wilful breach of an undertaking is prima facie a civil contempt. Your Honours, could we refer also to what we have said in our written submissions at page 111 of the application book in paragraph 29. I will not read it out but your Honours will see what is there set out. The point we seek to make about it is that one does have to have a test which is capable of application at the time of institution of an appeal.

Could I come back, your Honours, to page 53 of the application book and to paragraph 59. One of the criteria or one of the tests referred to is in subparagraph 59(d) where it is said:

The fact that the application for an order that contempt has been committed is made within the main action, and not by a stranger to the suit, would tend to show that the contempt is civil in nature.

Well, your Honours, the proposition, we would submit, is rather too widely stated. It makes characterisation turn on the form of the action and, more importantly, it seems to focus unduly on the moving party rather than the position of the person moved against who may not be a party to the proceedings at all. Could I go to the dissenting reasons. Justice Handley, at page 80 in paragraph 152 through to paragraph 157 applied, in our submission, the decisions of the Court in Mudginberri and Witham.

Your Honours will see that at paragraph 156 he said that there was “a principled and workable distinction” available by adopting the test where it clearly appears that the proceedings are remedial or coercive in the sense of seeking to obtain something in the action itself or in the proceedings. I would refer also to the matters in support that he said at paragraphs 158 through to 161. Your Honours will see his conclusion at paragraph 166 where he said that the test should be that:

Proceedings for contempt for breach of an order, outside the established exceptions, are civil if they are remedial or coercive in the interest of a litigant but otherwise they are criminal.

Your Honours, the present proceedings, I will not go through the detail of them, but for the reasons set out by Justice Handley at paragraphs 167 to 174 the present case was one where the proceedings were by no means clearly remedial or coercive. We would submit that is an issue appropriate for the Court.

Could I come to the second aspect of the case. Your Honours, this issue concerns what has been called the implied undertaking. The content of the undertaking, if I could deal first with that, is that documents provided by one party to the other in litigation, in the particular case an affidavit and an expert report, should not be used other than for the purposes of the proceedings. There are exceptions, of course, but that is the general proposition. That implied undertaking is imposed as a matter of law. It is in the sense that it is treated as being given by the parties to the proceedings. The applicants were not parties, of course. It is also treated as being given by their lawyers. A convenient summary can be seen in Justice Ipp’s reasons at page 59, paragraphs 83 to 87.

Your Honours, the question, though, in this case is whether a person outside the category of a party or the party’s legal advisors is bound by the undertaking. May I say that this case was not one where the liability was one that was accessorial in the sense of a breach of the company’s undertaking, it was a case where the count made against each of the applicants was that each was a party to the undertaking. Your Honours can see that – if I could refer without taking your Honours to what was said by Justice Gzell at page 6, paragraphs 14 and 18 and summarised by Justice Handley at page 91, paragraph 199 – there he said:

Since in my judgment the law does not impose an implied personal undertaking on servants and agents of a corporate litigant the first charge of contempt against both respondents, based on an implied personal undertaking given by them to the Court, was not established.

Your Honours, the majority held that the implied undertaking was given by servants or agents and the reasoning of the majority is encapsulated in what was said by Justice Ipp at page 61 at paragraphs 88 through to 99. May I come back to those paragraphs in just a moment. His Honour’s conclusions appear at paragraph 99 where he said “the implied undertaking is not limited to the parties to an action”. In paragraph 103 at about line 49 he said:

the rule applies to all persons into whose hands the discovered documents come, if they know that the documents were obtained by way of discovery or other compulsory court process.

Your Honours will see the rejection of the submission in paragraph 104 and the proposition in paragraph 105. Your Honours, in our submission, the reasoning is effectively criticised in the reasoning of Justice Handley at page 88 in paragraphs 185 through to 191 and may we note particularly paragraph 187 where Justice Handley’s review of the cases was to the effect that they did “not support the existence of an implied undertaking which extends beyond the litigant party and his solicitor” and that the only other case was Hamersley, a decision in which Justice Ipp had participated.

At paragraph 190, your Honours, one sees a reference to the decision in Seaward v Paterson. One sees that also in paragraph 189. The principles to which his Honour is there referring are those set out at page 79 in paragraph 149 which your Honours will see is a form of accessorial liability. Could we refer also to page 90 and to paragraph 192 where again there is a reference to Seaward v Paterson.

Your Honours, our submission is that the analogy that is referred to at paragraphs 193 and 194 is correct, as is the conclusion at paragraph 199 to which I earlier took your Honours. Your Honours, our submission is that this is a case where there is an important issue arising in both these aspects and there are significant differences of view and could we refer to our written submissions at page 112, paragraphs 32 to 34. Those are our submissions.

GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Alexis.

MR ALEXIS: May it please the Court. The holding of the majority in the Court of Appeal that the implied undertaking was not limited to the parties to the litigation and their solicitors and applied relevantly to the applicants who were found to be servants or agents of Luna Park Sydney, one of the defendants in the proceedings that were on foot at the time, being persons into whose hands those protected documents came if they knew that those documents had been obtained in the proceedings by way of discovery or other compulsory court process, which was established beyond reasonable doubt, was a holding that is well supported by both English and Australian authority.

GLEESON CJ: Why did it have to be established beyond reasonable doubt?

MR ALEXIS: The fact to be established beyond reasonable doubt was that the source of the documents came from discovery in the proceedings or were served pursuant to other court process.

GLEESON CJ: I understand that, but why was that the standard of proof?

MR ALEXIS: Because his Honour the trial judge applied the standard held to be applicable in this Court’s judgment in Witham v Holloway and that was otherwise not the subject of any contest.

Justice Ipp set out those authorities and reviewed them in detail from pages 61 to 65 of the application book and it is our respectful submission that his Honour’s review of those authorities and the holding of the majority is not attended with any sufficient doubt to warrant a grant of special leave in relation to the first of the two special leave questions. Significantly, we would submit, the decision of the Full Court of the Supreme Court in Western Australia in Hamersley Iron is indistinguishable on the facts.

The contendor in that case, one Lovell, was an employee of a union who was a party to litigation that was pending in the Court. That party had obtained discovery in those proceedings from Hamersley Iron. Mr Lovell was described as an agent of the union, he happened to be an industrial advocate, and he published the contents of discovered documents during the course of a radio interview. There were other acts of contempt. Nonetheless, he was found liable on the implied undertaking as a person into whose hands those documents came knowing them to have been obtained in the course of discovery pursuant to pre-trial directions in that case.

We note of some significance that Justice Handley in his dissenting judgment at application book 90 accepted the decision in Hamersley Iron, if I can take your Honours to that, paragraph 192. His Honour accepted that the decision in Hamersley:

that Lovell, the industrial advocate, was personally bound by an implied undertaking may be a justifiable extension of the implied undertaking which binds the solicitor on the record –

but if the servant or agent of the party knows that the protected documents were obtained by discovery or otherwise by compulsory court process, the fact that they are an industrial advocate or a managing director or some other agent of the litigant is really of no significance, we would respectfully submit.

The holding of the majority of the Court of Appeal is also, in our respectful submission, entirely consistent with the important policy behind the implied undertaking and its operation in the administration of justice. The utility of the implied undertaking would be in question if it did not extend to servants or agents of a party into whose hands protected documents came. If, as the applicants submit, the obligation does not extend to servants or agents of the party, it will become, of course, necessary for the party giving discovery or serving evidence pursuant to pre-trial directions to obtain express written undertakings from servants or agents to whom the documents or the evidence are to be referred. That, of course, would defeat the very purpose of the implied undertaking in the first place.

The analysis of the position by Justice Handley in his Honour’s dissenting judgment commencing at application book page 87, in our submission, and, of course, with respect to his Honour, is not persuasive and would not be preferred. It certainly does not, in our submission, raise a sufficient doubt as to the correctness of the holding of the majority. His Honour principally relies upon the decision of the House of Lords in Marengo and the proposition that an injunction which expressly refers to servants or agents does not bind them personally. If I could take your Honours to application book page 90, paragraph 194 where your Honours will see Justice Handley said that:

If an injunction which expressly refers to the servants and agents of the defendant does not bind those servants and agents personally I fail to see how an implied undertaking can have a wider operation.

The difficulty with that observation is that it is, with respect, inconsistent with the reality of the situation because the implied undertaking operates in a far narrower compass and that must be so, in our submission, because the servant or agent into whose hands the protected documents come need to be aware that they were obtained by way of discovery or other compulsory
court process. That position of fact is not in issue here because all judges of the Court of Appeal found that it was obvious, on the face of the documents that were transmitted to the Minister, where they had come from. Justice Handley, of course, accepted this, if your Honours have page 91 of the application book at paragraph 198 where his Honour said:

Mr Hearne as a director of the company was its servant or agent, as was Mr Tierney and if by operation of law they gave implied undertakings to the Court they were in breach.

Coming to the second special leave question, it is our submission that the competency point does not raise an issue of statutory construction of general importance and that is so because the characterisation of the facts as they existed when the contempt motions were filed in the main pending proceedings is the matter that divided the Court of Appeal. That difference turned largely on their Honours’ interpretation of correspondence that passed between the parties prior to the filing of those motions.

Also, of course, the fact that the contempt motions were filed in the main proceedings which were then in their amended form after the passing of the noise legislation at a fairly early stage and were the subject of pre-trial directions to ready them for hearing and so it was that construction of matters of fact which informed the remedial purpose of the contempt proceedings which Justice Ipp and Justice Basten held was the basis upon which the first charge against each applicant that was the subject of the appeal were in fact civil contempts.

It is our submission that, therefore, no special leave question is raised with respect to section 101(5) and section 101(6) of the Supreme Court Act. The issues as to the appropriate tests were comprehensively addressed by the judgments of this Court in Witham and in Mudginberri and, accordingly, if leave is to be given on the first question, it would be our submission that leave should not extend to the second because the determination of that question will be of no general importance beyond this case. If the Court pleases.

GLEESON CJ: Thank you very much, Mr Alexis. Yes, Mr Jackson.

MR JACKSON: Your Honours, may I in relation to what we argue as the second point say this. Our learned friend referred to the review of the authorities by Justice Ipp and said there was not sufficient doubt about it. In our submission, Justice Handley’s reasons give a very strong criticism of them. If one looks at Hamersley and the case which is said to be in support of the argument, the present point was not taken in those proceedings, that is, the present point about knowledge was not taken in the proceedings, so the issue was not dealt with as a matter of argument.

The second point I would seek to make is this, that we accept, of course, that the party to the proceedings is liable for the conduct of its servants and agents, but if one looks at a case like the present and says there is an implied undertaking which applies to a matter of law, when, at what point, one asks, did the applicants not parties to the litigation become subject to that undertaking?

Their Honours, turning to the question of the competency of the appeal to the Court of Appeal, our learned friend said, well, we look at the approach taken by the majority and it is all, in a sense, a question of fact. What we would say is the approach taken by the majority depends on their approach taken to the task of characterisation and, your Honours, for the reasons we submitted earlier, that approach was erroneous.

GLEESON CJ: In this matter there will be a grant of special leave to appeal. Call the next matter, please.

AT 11.08 AM THE MATTER WAS CONCLUDED