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Supreme Court of Victoria |
Last Updated: 9 March 2023
AT MELBOURNE
IN THE MATTER OF CLARINDA PTY
LTD (IN LIQUIDATION) (ACN 166 128 892)
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Second Plaintiff
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v
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BETTINA EVERT
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Second Defendant
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JUDGE:
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WHERE HELD:
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DATE OF HEARING:
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CASE MAY BE CITED AS:
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MEDIUM NEUTRAL CITATION:
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PRACTICE AND PROCEDURE — Application pursuant to s 27(3)(b) of the
Civil Procedure Act 2010 (Vic) and inherent jurisdiction — Release
of obligation imposed in respect of documents and information used in a previous
proceeding to allow use in the current proceeding — Requirement for
special circumstances — Harman undertaking — Implied
undertaking not to use documents or information for a purpose other than the
legal proceeding —
Documents and information required to have been
produced under compulsion — Only the court can release a party from the
implied
undertaking — Application granted.
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APPEARANCES:
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Counsel
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Solicitors
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For the Plaintiffs
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Mills Oakley
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For the Defendants
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Madgwicks
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1 By summons filed on 24 February 2023, the plaintiffs seek an order pursuant to s 27(3)(b) of the Civil Procedure Act 2010 (Vic) (CP Act) and the inherent jurisdiction of the court that they and the defendants be released from:
(a) their respective obligations under s 27(1) of the CP Act not to use the documents and information referred to in Schedule A to these reasons (Schedule A), being documents that were filed or produced in proceeding S ECI 2019 04519 (Previous Proceeding), for a purpose other than in connection with the Previous Proceeding; and
(b) their respective implied undertakings not to disclose or use the documents and information in Schedule A for a purpose other than in connection with the Previous Proceeding.
2 The implied undertaking referred to in
paragraph 1(b) is commonly referred to as the ‘Harman
undertaking’, which is how it is referred to in the balance of these
reasons.[1]
3 The
purpose for which it is said that the plaintiffs and defendants wish to use the
documents and information is to assist the parties
with the conduct of this
proceeding, which is said to involve ‘the same or substantially the same
issue in dispute’ regarding
the solvency of the second plaintiff
(Company).
4 The Previous Proceeding was
commenced by the same plaintiffs against the Commissioner of Taxation and
involved allegations against
the Commissioner that various transactions
constituted unfair preferences, insolvent transactions and/or voidable
transactions under
ss 588FA, 588FC and 588FE of the Corporations Act
2001 (Cth) (Act). The defendants to this proceeding also became
defendants to the Previous Proceeding as interested
parties.
5 The Previous Proceeding was resolved by
consent without adjudication on the merits. Its resolution included the making
of consent
orders requiring the Commissioner of Taxation to pay a material
amount to the plaintiffs pursuant to s 588FF of the Act and orders
dismissing the Previous Proceeding.
6 In the current
proceeding, which was commenced by originating process filed on 8 March
2022, the plaintiffs allege that the defendants,
who were former directors of
the Company, engaged in insolvent trading. The relief sought is said to include
compensation for loss
and damage under ss 588G, 1317H and 588M of the
Act.
7 A question to be determined in the Previous
Proceeding was the state of the company’s solvency from around May 2018
until
April 2019. Because the Previous Proceeding was resolved by consent this
question was not determined by the court.
8 In the
current proceeding the plaintiffs allege that the Company was insolvent from at
least March 2018 until April 2019, which
is disputed by the defendants. This is
why it is said that the same or substantially the same issues arise regarding
the Company’s
solvency in this proceeding as arose in the Previous
Proceeding.
9 All of the documents and information
referred to in Schedule A are said by the parties to be relevant to the solvency
issue in this
proceeding.
10 For the reasons that
follow, the plaintiffs and the defendants will each be released from their
respective obligations under s
27(1) of the CP Act and the Harman
undertaking for the purpose of allowing them to use the documents and
information referred to in Schedule A for the purpose of this
proceeding.[2]
Affidavit evidence and submissions
11 The plaintiffs relied upon the
affidavits of their solicitor, Ms Ivana Griggs, affirmed on 24 February
2023 and 7 March 2023.
They also relied upon their written submission, filed 28
February 2023, which was supplemented orally by counsel at the hearing of
the
application.
12 The defendants relied upon the
affidavit of their solicitor, Mr Alexander McGregor, affirmed on 7 March
2023.
13 It is not necessary to recite the detail of
the affidavit material, the content of which I have read and considered.
Briefly,
the affidavits address:
(a) the background to the Previous Proceeding and its resolution;
(b) the evidence filed in the Previous Proceeding and its connection with the solvency issue regarding the company;
(c) why it is that the solvency issue that arose in the Previous Proceeding arises in the current proceeding;
(d) the documents and information the subject of Schedule A having been produced under compulsion;
(e) the attitude of the defendants in this proceeding, and the Commissioner of Taxation in the Previous Proceeding, to the application; and
(f) the consent and non-opposition to the application of each of the deponents and experts referred to in Schedule A.
14 As Ms Griggs deposed to and was made clear at the hearing of the application, the defendants consent to orders being made releasing the parties from their respective obligations and positively support the application. The Commissioner of Taxation did not oppose the application.[3]
15 The documents and information the
subject of the application were identified in the schedule to the summons and
comprised: affidavits
filed in the Previous Proceeding, expert reports styled
as ‘solvency reports’ filed in the Previous Proceeding, and expert
reports referred to as property reports filed in the Previous
Proceeding.
16 The annexed Schedule A is reproduced
in the same form as Schedule A to the plaintiffs’ summons.
Legal principles and related observations
17 Principles relevant to the application
under s 27(3)(b) of the Act and applications to be released from the
Harman undertaking have been addressed in numerous authorities, are well
known, and were not the subject of any controversy. I recently
referred to
these matters in Williams v TT-Line (No 2) (Williams No
2).[4] It is efficient and
convenient to repeat in large part what I set out in that case, which I do
below.
18 In Williams v TT Line
(Williams),[5] Digby
J said as follows:
[31] Section 27(1) of the CPA imposes an obligation upon any person to whom the overarching obligations apply and who receives information or documents provided by another person in a civil proceeding as a result of disclosure made in accordance with s 26 of the CPA, not to use the information or documents other than in connection with the civil proceeding in which the information or documents were produced.
[32] This obligation is the statutory equivalent of the common law obligation in the nature of an implied undertaking to the Court pursuant to which documents are produced, commonly referred to as the ‘Harman undertaking’, see Harman v Secretary of State for Home Affairs,[6] and recognised in Australia in Hearne v Street.[7]
[33] In considering whether to make an order under s 27(3)(b) of the CPA releasing a party from its obligation under s 27(1), the Court will generally be guided by principles developed in relation to granting release from a common law undertaking.[8]
[34] Both Williams and TT-Line rely on the Federal Court of Australia decision in Springfield Nominees Pty Ltd v Bridgelands Securities Ltd[9] (Springfield Nominees) as authority for the proposition that there must be ‘special circumstances’ which afford good reason for releasing a party from its obligation under s 27(1) of the CPA.
[35] Accordingly, the Court will exercise its discretion to release a party from the obligation not to disclose or use documents for purposes other than the proceedings in which they are produced or disclosed where ‘special circumstances’ are sufficiently identified.[10]
[36] In describing such ‘special circumstances’ in Springfield Nominees, Wilcox J observed that it was neither possible nor desirable to state an exhaustive list of matters that might justify the grant of release from the obligation under s 27(1), stating that:[11]
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.
19 Without setting them out, I refer also
to the observations regarding the relevant principles in Springfield Nominees
Pty Ltd v Bridgelands Securities
Ltd,[12] Australian
Securities and Investments Commission v Marshall Bell Hawkins
Limited,[13] Hearne v
Street,[14] Barrow v
McLernon,[15] Clare
Hazell-Wright v 32 Domain Pty Ltd (ACN 163 035
603),[16] Khoury v Kirwan (No
4),[17] and R v
Silverstein.[18]
20 As counsel for the plaintiffs on this
application pointed out, in Liberty Funding Pty Ltd v Phoenix Capital
Ltd,[19] the Full Federal Court
stated that:
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. 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, Wilcox J identified a number of considerations which may, depending upon the circumstances, be relevant to the exercise of the discretion. ...[20]
21 Whilst questions can arise in a given case as to whether the obligations under one or both of s 27(1) of the CP Act or the Harman undertaking are engaged in relation to particular documents or items of information, it is not necessary for this issue to be addressed on this application and it was not suggested that the position was otherwise. As was the case in Williams No 2, this is because:
(a) as the authorities establish, when the court is considering whether to make an order under s 27(3)(b) of the Act releasing a party from its obligation under s 27(1) of the Act, the court will generally be guided by principles developed in relation to the granting of a release from the Harman undertaking. See, for example, Barrow v McLernon[21] and the observations of Digby J on the point in Williams;[22]
(b) the current application was conducted on the basis that all of the documents and information in Schedule A are subject to the obligations under one or both of s 27(1) of the CP Act or the Harman undertaking;
(c) in any event, the grant of any release from the obligations under s 27(1) of the CP Act or the Harman undertaking can be expressed in the order in a way that appropriately covers the obligations under each; and
(d) proceeding in this way is also efficient and well serves the court’s obligations under the CP Act.
22 Counsel for each of the plaintiffs and
defendants confirmed that they considered that this was an appropriate course to
follow
in the present case.
23 In the context of
the consideration of applications to be released from Harman
undertakings, issues can arise as to whether or not relevant documents and
information were disclosed or produced by a party under
compulsion. This issue
was recently addressed by the Court of Appeal in R v
Silverstein,[23] where Kyrou,
Kaye and McLeish JJA undertook a detailed analysis of the cases on the topic, to
which I refer but will not recite.
The primary cases to which reference was
made in this context included: Harman v Secretary of State of the Home
Department;[24] Esso
Australia Resources v
Plowman;[25] Mobil Oil
Australia Ltd v Guina Developments Pty
Ltd;[26] and Hearne v
Street.[27]
24 For present purposes it is not necessary to
address this ‘compulsion’ issue with respect to each of the
documents in
Schedule A. This is because the parties conducted the application
and proceeded on the basis that each of the items in Schedule
A were disclosed
or produced in the Previous Proceeding pursuant to one of more of: the
discovery obligations of the parties, the
obligation under s 26(1) of the CP
Act, or court orders and directions made in relation to the filing and service
of various documents.
25 The plaintiffs — supported by
the defendants — submitted that special circumstances and good reason had
been shown
as to why the parties ought to be released from their respective
obligations. In support of this position reference was made to
the consent of
the defendants, the position of the Commissioner of Taxation, the consent or
non-opposition of each of the deponents
and experts referred to in
Schedule A, and the relevance to the common issue of solvency.
26 It was emphasised that the documents were filed
and served by the respective parties in the Previous Proceeding and came into
existence
as evidence to be relied upon by the parties regarding the question of
the Company’s solvency. It was submitted that, because
the same or
substantially the same issues in dispute arise in the current proceeding
regarding the Company’s solvency, the
administration of justice will be
advanced in the current proceeding by allowing the documents and information to
be used by the
parties for the purpose of this proceeding. Reference was made
to the overarching purpose in s 7 of the CP Act and facilitating
the just,
efficient, timely and cost-effective resolution of the real issues in dispute in
this proceeding.
27 It was submitted that if the
application is refused it will be likely that additional evidence of the same or
substantially the
same character to the evidence filed and served in the
Previous Proceeding will need to be prepared in this proceeding without the
benefit of the documents and information in Schedule A, and that this will
result in additional costs, delay, and
inefficiency.
28 Having regard to the evidence, the
submissions, and applying the relevant principles earlier referred to, I am
satisfied that,
insofar as the obligations under s 27(1) of the CP Act
or the Harman undertaking apply to the documents and the information in
Schedule A, the plaintiffs and the defendants should be released from their
respective obligations to enable the documents and information to be used by
them for the purpose of the current
proceeding.[28]
29 I am satisfied that there are special
circumstances which afford good reason for releasing the plaintiffs and the
defendants from
their respective obligations insofar as they apply to one or
more of the documents or items of information in Schedule A. I elaborate
briefly below regarding the factors and circumstances that have caused me to be
so satisfied.
30 First, I accept that the
documents and information are likely to be relevant to the central solvency
issue that is raised in this
proceeding.
31 Second, I accept that it is at
least likely that there will be considerable or extensive overlap between
considerations of solvency in this
proceeding and those which arose in the
Previous Proceeding.
32 Third, I accept that
the documents and information in Schedule A were largely prepared for the
purpose of addressing the solvency question
in issue in the Previous Proceeding.
That issue was not determined or adjudicated upon in the Previous Proceeding
because the Previous
Proceeding was resolved by
agreement.
33 Fourth, allowing the
application has the potential to result in cost and other efficiencies in the
conduct of this proceeding. Provided
it is otherwise appropriate and the
necessary special circumstances are shown, granting the relief sought well
serves the obligations
of the parties and the court under the CP
Act.
34 Fifth, it was not suggested by the
parties that any of the expert reports in question are qualified by disclaimers
or statements that seek
to impose a requirement upon the recipient of the
reports that they are not to be used for any purpose other than the Previous
Proceeding
unless the consent of the expert is first
obtained.
35 Sixth, the defendants do not
oppose the application, but positively support it. This appeared to be an
understandable position for the
defendants to take, noting also that the
defendants were parties to the Previous
Proceeding.
36 Seventh, the other party to
the Previous Proceeding, the Commissioner of Taxation, did not oppose the
application and confirmed that position
in
writing.
37 Eighth, each of the deponents
referred to in Schedule A either consented to or did not oppose the documents
and information being used in
this
proceeding.
38 Ninth, each of the experts
referred to in Schedule A either consented to or did not oppose the documents
and information being used for
the purpose of this
proceeding.
39 I add for completeness that, although
the question of being released from the implied undertaking or statutory
obligation is not
a matter that can be addressed solely between the parties by
consent or non-opposition, in the circumstances of this case the position
of the
persons and parties to whom I have referred is appropriate to take into account
in the exercise of my discretion.
40 Tenth,
the plaintiffs and defendants confirmed that they were not aware of any
prejudice that might be raised or suffered as a result of
one or more of the
documents or parts of the information being used for the purpose of this
proceeding.
41 Eleventh, although the
documents referred to in Schedule A were all prepared prior to the commencement
of this proceeding, having regard to
the other circumstances referred to, this
consideration does not weigh against the grant of the relief sought by the
application.
42 Finally, there was no
evidence before the court to suggest that one or more of the documents referred
to in Schedule A is the subject of
any extant confidentiality or related
orders.
Conclusion and proposed orders
43 For the reasons stated above I have
determined that, insofar as the documents and information referred to in
Schedule A are subject
to the plaintiffs’ or defendants’ obligations
under s 27(1) of the CP Act or the Harman undertaking, each of the
plaintiffs and the defendants should be released from those obligations to
enable them to use the documents
and information for the purpose of this
proceeding.
44 Subject to hearing from the parties
regarding the precise terms of the order and the question of costs, I propose to
make orders
to the following effect:
[1] Being a reference to the case of Harman v Secretary of State for Home Departments [1983] 1 AC 280. See also Hearne v Street [2008] HCA 36; (2008) 235 CLR 125, [96] (Hayne, Heydon and Crennan JJ).
[2] That is not to say that the documents in Schedule A can be filed in their current form as proposed evidence in this proceeding. If that is desired by any party that will need to be addressed with the managing judge in due course.
[3] And did not file any expert evidence in the Previous Proceeding in any event.
[4] [2022] VSC 413, [18]–[24].
[5] [2021] VSC 150, [31]–[36].
[7] [2008] HCA 36; (2008) 235 CLR 125.
[8] Barrow v McLernon [2012] VSC 134, [23]. See also Perez v Reynolds & Anor (Ruling No 2) [2020] VSC 298, [6]; Moodie v Perna (Ruling No 1) [2018] VSC 158, [8]; Ubertas Funds Management Pty Ltd v PwC (release from implied undertaking) [2017] VSC 735, [15].
[9] (1992) 38 FCR 217. See Williams Submissions, [7]; TT-Line Submissions, [2]; TT-Line Supplementary Submissions, [7].
[10] Hearne v Street [2008] HCA 36; (2008) 235 CLR 125, [107].
[11] (1992) 38 FCR 217, 225.
[14] [2008] HCA 36; (2008) 235 CLR 125.
[19] [2005] FCAFC 3; (2005) 218 ALR 283, [31] (Branson, Sundberg and Allsop JJ) (Liberty Funding).
[20] The Court then set out in a bullet point list the matters referred to by Wilcox J, being the matters set out in the extract in paragraph 18 above.
[21] [2012] VSC 134, [23].
[22] [2021] VSC 150, [33] and footnote 32.
[25] (1995) 183 CLR 10.
[26] [1996] VicRp 54; (1996) 2 VR 34, 37–38.
[27] [2008] HCA 36; (2008) 235 CLR 125, [96]–[97].
[28] As I have mentioned, it is a separate and different question for the managing judge as to whether one or more of the documents can be relied upon in their current form as proposed evidence in this proceeding.
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