FEDERAL COURT OF AUSTRALIA

Barnes v Fortytwo International Pty Ltd [2010] FCAFC 87

THE COURT ORDERS THAT:

1.                  The application for leave to appeal is dismissed.

2.                  The Applicants are to pay the First and Second Respondents’ costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

THE COURT ORDERS THAT:

1.                  The application for leave to appeal is dismissed.

2.                  The Applicants are to pay the First and Second Respondents’ costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

The court:

1                                             Before the Court are two applications for leave to appeal against orders made by Yates J.  There are three orders against which the applicants (Barnes and Hawksley) seek leave to appeal.  The first and second are orders granting the respondents (Fortytwo and Bluefreeway) leave nunc pro tunc to use documents produced by Barnes and Hawksley in answer to subpoenas issued on 22 October 2008, and information derived from those documents, for the purposes of proceeding no. NSD 2018 of 2008 commenced by Fortytwo and Bluefreeway against Barnes and Hawksley (the 2018 proceeding) on 24 December 2008.  Those orders were made in a proceeding commenced by Campaign Master (UK) Limited against Fortytwo and Bluefreeway (the 651 proceeding) which is the proceeding in which the subpoenas to Barnes and Hawksley were issued.  The third order against which Barnes and Hawksley seek leave to appeal is his Honour’s order dismissing Barnes’ and Hawksley’s application to strike-out the 2018 proceeding as an abuse of process. 

2                                             In the 2018 proceeding Fortytwo and Bluefreeway allege (among other things) that Barnes and Hawksley have infringed copyright in a number of documents.  Copies of these documents had been produced by Barnes and Hawksley in answer to the subpoenas issued in the 651 proceeding and Fortytwo and Bluefreeway were given access to them in that proceeding.  They were, apparently, copies of documents obtained by Barnes and Hawksley at a time when they were directors of Fortytwo and Bluefreeway. 

3                                             On 4 December 2009 Barnes and Hawksley filed a notice of motion seeking to have the 2018 proceeding stayed or dismissed as an abuse of process.  One of the grounds relied upon by Barnes and Hawksley was that in commencing the 2018 proceeding Fortytwo and Bluefreeway acted in breach of their implied obligation to the Court not to use information derived from the documents produced by Barnes and Hawksley in the 651 proceeding without the leave of the Court. 

4                                             It is accepted that the documents produced by Barnes and Hawksley in the 651 proceeding were used by Fortytwo and Bluefreeway to commence the 2018 proceeding.  It is also accepted that Fortytwo and Bluefreeway did not obtain leave to use the documents produced by Barnes and Hawksley for that purpose. 

5                                             It was argued for Fortytwo and Bluefreeway before the primary judge that there had been earlier disclosures of the contents of the documents in open court in the 651 proceeding which entitled Fortytwo and Bluefreeway to use them in the manner in which they did without first obtaining leave.  The primary judge rejected that argument and the correctness of his conclusion is not in issue.  However, as previously mentioned, his Honour made orders granting Fortytwo and Bluefreeway leave nunc pro tunc to use the documents in question for the purpose of the 2018 proceeding.  It is necessary to say a little more about how those orders came to be made.

6                                             No such order was sought in any motion filed by Fortytwo or Bluefreeway in either the 651 or 2018 proceedings.  However, in a written outline of submissions relied upon by Fortytwo and Bluefreeway when resisting the application to have the 2018 proceeding dismissed as an abuse of process, Fortytwo and Bluefreeway stated:

If, contrary to the submissions above, the Court were to find that the filing of the application and statement of claim involved a misuse of the documents produced by the Respondents in the Campaign Master proceedings, then the Applicants would seek leave nun pro tunc [sic].

7                                             During the course of oral submissions, there was a brief exchange between the Senior Counsel for Fortytwo and Bluefreeway and the primary judge concerning the question of whether or not leave should be granted nunc pro tunc.  It appears from the transcript that the arguments by Fortytwo and Bluefreeway in support of the proposition that leave was not required were also relied upon by them in support of the argument that leave should be granted nunc pro tunc.  It would therefore be incorrect to proceed on the basis that there was nothing put by Fortytwo and Bluefreeway in support of the orders sought by them beyond what appears in the paragraph of the written outline of submissions to which we have referred.  On the other hand, it is fair to say that the submissions advanced by them in support of such orders were not the subject of any significant elaboration.  In particular, Fortytwo and Bluefreeway did not refer his Honour to any authority on the question of whether such orders should be made.  Nor did Barnes and Hawksley make any submission to his Honour in relation to that question. 

8                                             In this Court the parties tendered an agreed statement of facts which states:

The parties agree for the purposes of the present application before the Full Court and if leave is granted for the purposes of the appeal that at the hearing before the Primary Judge those representing the applicants Messrs Barnes & Hawksley did not appreciate that any application was on foot on behalf of FortyTwo International and BlueFreeway Limited that leave be granted nunc pro tunc for the use of the documents and recordings produced by Messrs Barnes & Hawksley upon subpoena in proceedings 651 of 2008 for the purposes of proceedings 2018 of 2009.

9                                             It is convenient to first consider the argument put to us by Barnes and Hawksley that they were not given reasonable notice of any application for the order made by the primary judge and that they were, consequently, denied procedural fairness.  We are not satisfied that Barnes and Hawksley were denied procedural fairness. 

10                                          Fortytwo’s and Bluefreeway’s outline of submissions was filed and served some weeks before the hearing before his Honour took place.  We do not think it was reasonable for Barnes and Hawksley to say or do nothing about the relevant paragraph in the outline of submissions to which we have referred.  It was argued by Barnes and Hawksley that the paragraph did no more than foreshadow that an application might be made at some later stage if his Honour was to dismiss the 2018 proceeding as an abuse of process.  But postponing such an application until after the primary judge had dismissed the 2018 proceeding would make no sense if it was to be relied upon by way of an answer to Barnes’ and Hawksley’s application to have the 2018 proceeding dismissed as an abuse of process.  We do not think the paragraph can be understood in the manner submitted by Barnes and Hawksley.

11                                          Even if the legal representatives of Barnes and Hawksley did not appreciate that an application for an order that leave be given nunc pro tunc was before his Honour (as is now agreed between the parties), that is not enough to justify a finding that Barnes and Hawksley were denied procedural fairness.  It was open to Barnes and Hawksley to have the position clarified in correspondence or in court and, if necessary, require that a motion seeking the order referred to in the outline of submissions be filed if such orders were to be sought.  Clearly enough, the primary judge was of the view that an application for such orders was before him and in our opinion he was entitled to assume that Barnes and Hawksley were content to have that application determined even though it had not been made by notice of motion. 

12                                          It was also argued by Barnes and Hawksley that the primary judge lacked the power to make an order giving Fortytwo and Bluefreeway retrospective leave to use the documents in question for the purpose of commencing the 2018 proceeding.  It may be, as Senior Counsel for Fortytwo and Bluefreeway submitted, that this argument was not ultimately pressed before us.  In any event, we are satisfied that his Honour had power to grant leave nunc pro tunc by virtue of s 23 of the Federal Court of Australia Act 1976 (Cth). 

13                                          That brings us to Barnes’ and Hawksley’s final argument which was that if the primary judge had the power to make such an order, he still ought not to have made it.  The submission made by Barnes and Hawksley was, in substance, that it was not open to his Honour to exercise his power in the manner that he did given the circumstances in which the breach of the implied obligation occurred.  It was submitted that a court would rarely grant retrospective leave to use documents produced on discovery or subpoena for the purpose of other proceedings and then only in special circumstances. 

14                                          There is no doubt that the primary judge was mindful of the importance of the implied obligation to the administration of justice.  His Honour’s reasons for judgment refer to well known authorities concerning the obligation including Hearne v Street (2008) 235 CLR 125, Riddick v Thames Board Mills Ltd [1977] QB 881 and Crest Homes Plc v Marks [1987] 1 AC 829.  His Honour also referred to the decision of the Full Court in Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 (Branson, Sundberg and Allsop JJ) where their Honours said 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.

15                                          On the question of retrospective leave, his Honour referred to a number of relevant decisions including that of Rimer J in Miller v Scorey [1996] 1 WLR 1122.  His Honour then stated at [95] that he considered the fact that there had been a breach of the implied obligation to be “a matter of significant concern” and one “not to be excused lightly”.  These are remarks which we fully endorse.

16                                          However, in deciding to make the orders sought by Fortytwo and Bluefreeway his Honour took into account three additional matters.  First, his Honour found that if Fortytwo and Bluefreeway had made an application for leave prior to using the documents for the purpose of commencing the 2018 proceeding then it was likely that such leave would have been granted.  Secondly, his Honour found that Barnes and Hawksley could not point to any prejudice which would be suffered by them as a consequence of Fortytwo and Bluefreeway using the documents produced in the 651 proceeding.  Thirdly, his Honour found that it must have been apparent, or should have been apparent, to Barnes’ and Hawksley’s legal advisers in January 2009, when the application and statement of claim filed in the 2018 proceeding were served, that the documents in question had been used in the way that Barnes and Hawksley later complained.

17                                          So far as the first of his Honour’s findings is concerned, in our opinion it was plainly open.  It was submitted by Barnes and Hawksley that for a judge to grant leave to use the documents in question for the purpose of enabling proceedings to be commenced against them would necessarily involve an impermissible exercise of power.  Particular reliance was placed by Barnes and Hawksley upon the fact that they were not parties to the 651 proceeding.  Reliance was also placed upon the nature of the causes of action relied upon in the 2018 proceeding in that the copyright claim was said to be analogous to a defamation claim of the kind brought by the plaintiff in Riddick.  However, we are not persuaded that it would not have been open to a judge to give leave in such circumstances.  The discretion to grant leave is a broad one.

18                                          On the question of prejudice, we understand his Honour to have found that Barnes and Hawksley could not point to any prejudice beyond that experienced by any litigant against whom a proceeding has been commenced based upon documents he or she was required to produce in another proceeding.  Of course, there may be cases where the prejudice suffered is greater than that.  Miller v Scorey [1996] 1 WLR 1122 was a case in which application was made to strike out a proceeding (the 1995 action)commenced using documents obtained on discovery in an earlier proceeding.  Rimer J said at 1133:

If, in principle, I considered it just to allow the plaintiffs to use the discovered documents for the purposes of a separate action raising the same claims as the 1995 action, then, absent any special considerations pointing in a different direction, there would in my view be much to be said for declining to strike out that action and for giving leave to the plaintiffs to make use of the documents for its further prosecution. Such an order would, no doubt, amount to a de facto validation of what had happened to date, although the court could perhaps reflect its disapproval of that by the making of appropriate costs orders. The alternative course would be to strike the action out, with the usual orders as to costs, but to give leave to the plaintiffs to start a new like action. The latter course is one which would no doubt visit a greater penalty on them and it may be that, in appropriate cases, it would be the right type of order to make. In the circumstances of the present case, however, I would, in principle, subject to the special consideration to which I shall come, favour the former alternative, which would be likely to achieve both an overall saving of costs and the prospect of an earlier trial of a proper claim.

19                                          But there was an additional factor present in that case which led the judge to take a different course: if the plaintiffs had been permitted to maintain the 1995 action then the defendants would have been denied the opportunity to raise a limitation defence.  It is for that reason that Rimer J struck the 1995 action out.  It was not suggested that Barnes and Hawksley would suffer any such prejudice. 

20                                          As to the matter of delay, it was clearly open to his Honour to find that the solicitors for Barnes and Hawksley knew, or should have known, in January 2009 that the documents produced by their clients in the 651 proceeding had been used to commence the 2018 proceeding but that they did nothing about it until 19 November 2009 when their solicitors first raised the matter in correspondence.  That was almost two months after they had filed a defence in the 2018 proceeding (which did not allege abuse of process) and almost ten months after the pleadings in the 2018 proceeding were served.  It was not suggested by Barnes and Hawksley that delay was not a relevant factor which his Honour was entitled to have regard to when exercising the discretion.

21                                          In our opinion it was open to the primary judge to grant retrospective leave to use the documents produced by Barnes and Hawksley.  We are not satisfied that the primary judge’s decision is attended by sufficient doubt to justify a grant of leave to appeal.  The applications for leave to appeal are dismissed with costs. 

Associate:

Dated:         13 July 2010