Federal Court of Australia

Woods, in the matter of T & F.S. Woods Pty Ltd v Woods [2021] FCA 1220

ORDERS

THE COURT DECLARES THAT:

1.    The affidavits of Mark Smith filed on 24 July 2019, of David Woods filed on 24 July 2019, and of Christian Dreyer filed on 27 August 2019 in the proceedings are not the subject of an obligation owed to this Court not to use them for any purpose other than that for which they were given.

AND THE COURT ORDERS THAT:

2.    The second plaintiff’s interlocutory application filed on 28 September 2021 is otherwise dismissed.

3.    The costs of the interlocutory application follow the event in the Federal Circuit and Family Court of Australia proceeding, BRG 627 of 2020: David Woods v T&FS Woods Pty Ltd (ACN 055 880 496).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

DERRINGTON J:

1    The first plaintiff, Mr David Woods, commenced the present proceedings on behalf of the second plaintiff, T & F.S. Woods Pty Ltd (TFS) and sought leave, nunc pro tunc, to bring and conduct the proceedings on its behalf pursuant to s 237 of the Corporations Act 2001 (Cth) (Corporations Act). In the course of the proceeding, Mr Woods filed an affidavit of Mr Mark Smith on 24 July 2019, an affidavit sworn by himself on 24 July 2019, and one sworn by Mr Christian Dreyer on 27 August 2019. The only orders in the proceedings were made on 30 August 2019. By a notice filed 29 November 2019, the plaintiff discontinued the proceedings with the defendants’ consent.

2    TFS now seeks leave to rely on the three affidavits in proceedings in the Federal Circuit and Family Court of Australia (BRG627/2020: David Woods v T&FS Woods Pty Ltd (ACN 055 880 496)) (the FCFCOA Proceedings). For the reasons discussed below, those affidavits are not the subject of the implied undertaking described in Hearne v Street (2008) 235 CLR 125 and, accordingly, leave is not required to rely upon them.

Background

3    By an Originating Process filed on 24 July 2019, the first plaintiff sought leave to bring and conduct the proceedings on behalf of TFS, and sought the following relief on its behalf:

(a)    declarations that the first and second defendants had misappropriated the company’s funds and had breached fiduciary and statutory duties owed to the company;

(b)    orders for the recovery of the allegedly misappropriated funds and for the appointment of independent accountants to investigate and report on the affairs of the company;

(c)    damages and interest in respect of the first and second defendants’ breach of their statutory duties; and

(d)    in the alternative, orders for the appointment of liquidators and the winding up of the company.

4    As the affidavits filed in support of the Originating Process were not ultimately read in the proceedings, it would be inappropriate to describe their contents in detail here. It suffices to note that the first affidavit, filed on 24 July 2019, was of Mr Smith, an accountant, who deposed to his investigations as to the financial affairs of TFS. The second affidavit, filed on the same date, was of the first plaintiff, Mr David Woods, who was a director of TFS at that time. In that affidavit, he deposed to further matters relating to the affairs of the company and made certain allegations in support of the relief sought.

5    As the first plaintiff’s action was one commenced under the Corporations Act, the Originating Process was filed in accordance with r 2.2 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules). In connection with that rule, r 2.4 provides:

2.4    Supporting affidavits

(1)      Unless the Court otherwise directs, an originating process, or interlocutory process, must be supported by an affidavit stating the facts in support of the process.

…

6    There having been no direction to the contrary, it may be accepted that the first two affidavits filed in the proceedings were filed by the first plaintiff in accordance with that rule. In one sense, it might therefore be said that he was “required” by r 2.4 to file them, however it is not clear that such a rule constitutes “compulsion” sufficient to attract the implied undertaking and thus create a need for the present application. As is concluded below, it does not.

7    On 25 July 2019, the first plaintiff filed an interlocutory process seeking orders for the appointment of provisional liquidators to TFS.

8    On 27 August 2019, the first plaintiff filed the affidavit of its solicitor, Mr Dreyer, in which he deposed to communications with the second plaintiff’s accountants. The evidence does not disclose the reasons for why that affidavit was filed in the proceedings and its contents do not assist in answering that question either. It might be thought that it was a further affidavit in support filed in accordance with r 2.4 of the Corporations Rules. If that is accepted, then the principles concerning whether the first two affidavits are the subject of the implied undertaking also apply to it. If that is not accepted, it appears that the affidavit was filed voluntarily such that it cannot be said that any implied undertaking attaches to it on the basis that Mr Woods was compelled to file it.

9    The first plaintiff’s interlocutory application for the appointment of a provisional liquidator came on for a hearing on 30 August 2019, but was then adjourned to facilitate a mediation of the dispute. The mediation was successful and it seems that a settlement agreement was entered into. A notice of discontinuance was filed on 29 November 2019 with the consent of the defendants.

10    Mr Woods and TFS are now engaged in further litigation in the Federal Circuit and Family Court of Australia and the company wishes to rely upon the affidavits filed in the proceedings in this Court. In those proceedings, there is an issue as to whether the claim there sought to be agitated is barred by the settlement agreement with respect to the prior action in this Court.

Are the affidavits the subject of the implied undertaking?

11    The immediate question is whether the affidavits are the subject of the implied undertaking, commonly referred to as the “Harman undertaking”, a name which derives from Harman v Secretary of State for the Home Department [1983] 1 AC 280 (Harman). The leading Australian authority is Hearne v Street, in which Hayne, Heydon and Crennan JJ, with whom Gleeson CJ and Kirby J agreed, described the fundamental principle as follows (at 154 – 155 [96]):

Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.

(Citations omitted).

12    Despite still being referred to as an implied “undertaking”, the High Court in that case confirmed that it is a substantive obligation and one that can only be released by the Court: at 157 – 160 [105] – [107]. The corollary is that the “undertaking” cannot be released merely by the consent of the party which disclosed the relevant information or document. At the hearing of the present application, the respondent to the application somewhat belatedly acknowledged that leave was not required as the filing of the affidavits had not been compelled.

13    Although those principles are clear enough, recent authorities concerning the scope of the implied undertaking – as it applies to affidavits filed in a proceeding – diverge as to whether, and to what extent, a compulsory requirement to file an affidavit is necessary for the implied undertaking to arise with respect to the affidavit.

14    In Sinnott v Chief of Defence Force [2020] FCA 643 (Sinnott), Logan J considered an application by the Chief of Defence Force (the CDF) for leave to use an affidavit beyond the proceedings in which it had been filed. The relevant affidavit had been filed by Ms Sinnott in support of her application for judicial review and an application for an extension of time in which to bring that application. In reasons which were delivered ex tempore, his Honour considered that the affidavit had been “necessarily filed and served in support of the application for an extension of time”, and referred to r 31.02(2) of the Federal Court Rules 2011 (Cth) which provides that such an application “must be accompanied by” an affidavit in support. Ultimately, his Honour considered himself bound by Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 (Liberty Funding) and Hearne v Street to hold that the CDF was bound by an obligation not to use the affidavit other than for the purposes of the proceedings in which it had been filed: at [29].

15    That conclusion, being that the implied undertaking applies where the rules of court require an affidavit to be filed in support of an originating or interlocutory application which itself is voluntarily made, illustrates the broadest line of authority concerning the level of compulsion required for the implied undertaking to arise. However, Logan J also described that position as being “subject” to an underlying principle, described as follows by McPherson J in Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509 (Central Queensland Cement) at 510:

… a document furnished for use for one purpose may not legitimately be used for another.

16    That principle, if it ever represented good law in Australia, would extend the implied undertaking beyond the circumstances considered in Sinnott to circumstances where no element of compulsion existed. Indeed, if an affidavit had been voluntarily furnished in one proceeding, that principle would make it impermissible for another party to rely upon it in other proceedings without the leave of the court. However, the correctness of that statement of principle has subsequently been doubted, at the very least because it pre-dates and is directly inconsistent with the authoritative statement of principle in Hearne v Street: see Frigger v Trenfield (No 5) [2020] FCA 827 [46].

17    In R v Silverstein [2020] VSCA 233 (Silverstein), the Victorian Court of Appeal (Kyrou, Kaye & McLeish JJA) considered an application for leave to appeal from a decision dismissing an application for contempt, in part arising from the respondents’ alleged misuse of certain affidavits. Three of the affidavits had been filed in debt recovery proceedings brought by the applicant for leave, Mr Davey, against the second and third respondents, and he had filed the other in support of a preliminary discovery application. The first respondent, the solicitor for the second and third respondents, later sent the affidavits to Mr Davey’s trustee in bankruptcy in an attempt to have the bankruptcy extended. Mr Davey then brought proceedings for contempt, in part on the basis that the respondents had breached the implied undertaking with respect to the affidavits by disclosing them to the trustee. Those charges were dismissed, with the primary judge concluding that the affidavits were not the subject of the undertaking.

18    In unanimously dismissing the application for leave to appeal, the Court of Appeal surveyed the relevant authorities concerning when documents are taken to have been filed, served or produced under “compulsion”: at [58] – [91]. As the extracts from Harman set out in the Court of Appeal’s reasons identify, the rationale for the implied undertaking is explained in terms of the need to limit the invasion of privacy where a party is compelled to disclose documents or information: Silverstein [61] – [62]. See also Hearne v Street at [107]; Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 33. The undertaking achieves this by limiting the use to which such documents or information may be put to that which is required by the course of justice, in general being their use in the relevant proceedings.

19    It is to be acknowledged that affidavits are specifically identified in Hearne v Street as a kind of document which attracts the implied undertaking. However, as the reasons of the Court of Appeal identify, the two cases cited by the High Court in support of that proposition concerned an affidavit in the nature of disclosure and an affidavit which had been ordered to be confidential: Silverstein at [74] – [76] discussing Medway v Doublelock Ltd [1978] 1 WLR 710 and Re Addstone Pty Ltd (in liq); Ex parte Macks (1998) 30 ACSR 156.

20    Turning to the issue before it, the Court of Appeal observed that the cases demonstrate that not every affidavit filed in compliance with a rule of court is produced under compulsion: at [78]. It doubted whether Liberty Funding supported the proposition applied in Sinnott that affidavits in support filed in accordance with a rule of court were sufficiently “compelled”: at [83] – [84]. While it did not seek to define the precise limits of the principles concerning affidavits, it concluded that “the affidavits in question in this case fell well outside the scope of the kind of documents considered to have been provided under compulsion for the purposes of the principles discussed in the authorities”: at [89]. Two of the affidavits filed in the debt recovery proceedings had been filed by Mr Davey in support of an application for summary judgment where the relevant rules of court required the application to be supported by an affidavit. Nevertheless, he was under no compulsion to make the application and, accordingly, the affidavits were held not to be the subject of the implied undertaking: at [85]. Likewise, Mr Davey was not compelled to make the application for preliminary discovery and the affidavit in support of that application was also not the subject of the implied undertaking: at [86]. The fourth affidavit, which had been filed by the second defendant in the debt recovery proceeding, was also filed voluntarily and thus was not the subject of the implied undertaking.

21    This Court is bound to follow the conclusions reached by the Court of Appeal in Silverstein: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 151 – 152 [135]: with the consequence that it must be concluded that the affidavits filed in these proceedings are not the subject of any implied undertaking and that the second plaintiff does not require leave to rely upon them in the FCFCOA Proceedings. Nevertheless, it ought to be observed that, on one view, the Court of Appeal’s decision appeared to emphasise the issue of whether the relevant originating or interlocutory application was made voluntarily, rather than on whether a party was compelled to file, serve or produce the specific documents or information in the relevant affidavit: see at [85] – [86]. The difficulty with the former approach is that it might be taken to follow that no documents or information which a party produces in the course of the proceedings (or in respect of an interlocutory application) which it brought voluntarily can be the subject of the implied undertaking, regardless of whether it was produced under compulsion of a rule or order of the court. Plainly, that would be wrong in the case of documents or information disclosed pursuant to an order requiring an applicant to produce specific documents or information, or specific categories of documents or information in proceedings it commenced voluntarily. Indeed, the quintessential case of compulsion is the production of documents as part of the process of disclosure or discovery.

22    Likewise, where a party is required by the rules of court or an order of the court to file and serve an affidavit deposing to specific information or categories of information, such an affidavit is in substance disclosure and would also be the subject of the implied undertaking. That may be contrasted with affidavits which are voluntarily made in support of an originating or interlocutory process. Even if the relevant rule of court requires such affidavits to be filed with or in support of the process, the specific information or documents included in the affidavits is not prescribed. The documents disclosed or information evidenced is a matter of the litigant’s choice. The position seems to be the same where, as here, the rules of court requires the affidavit to state “the facts in support of the process”. The information and documents included in the affidavits is nevertheless produced “voluntarily”. The same is broadly true of affidavits filed in response to the relevant process.

23    For similar reasons, timetabling orders which require a party to file and serve any affidavits on which it intends to rely by a particular date, in general, do not compel the disclosure of the specific information or documents included in affidavits filed and served in compliance with such orders: Leagou Pty Limited v Commissioner of Taxation [2020] FCA 1162 [19] – [24]. In Helicopter Aerial Surveys Pty Ltd v Robertson [2015] NSWSC 2104, Brereton J doubted whether such orders constituted sufficient compulsion to attract the implied undertaking, but considered himself bound by Hearne v Street to conclude that it did: at [39] – [40].

CONCLUSION

24    For the foregoing reasons, the affidavits filed by Mr Woods in this Court on his own behalf and on behalf of TFS are not the subject of the implied undertaking. The leave sought by TFS in its interlocutory application is not required.

25    Where, on an application such as this, it is concluded that a document or information is not the subject of the implied undertaking or that a particular use of it would not constitute a breach of that obligation, the appropriate relief is a declaration to that effect: see e.g. Roufeil v Fiore, in the matter of the Bankrupt Estate of Peter Andrew Fiore (No 4) [2020] FCA 1458 [19]. As Jackson J observed in that case, the granting of leave to use a document or information out of an abundance of caution may encourage the making of unnecessary applications in which the moving party disputes the very need for the application. It is also incongruent to make an order relieving a party from an obligation which the Court has found does not exist. The making of a declaration satisfactorily determines the issue, whilst affording any other party a basis from which to appeal.

26    It follows that the appropriate relief is a declaration that the affidavits are not the subject of an obligation owed to this Court not to use them for any purpose other than that for which they were given. The second plaintiff’s interlocutory filed on 28 September 2021 should otherwise be dismissed.

Costs

27    There is some difficulty in determining the appropriate order as to costs. Counsel for TFS, Mr Rawlings, somewhat bravely submitted that the law is not entirely settled. Counsel for Mr Woods, Mr Harding, submitted that the issue might have been resolved by the parties outside of Court and there is also force in that. Nevertheless, the context of the application was that a degree of urgency existed as the FCFCOA Proceedings are ongoing and the applicants needed to ascertain quickly where they stood.

28    It is relevant that the dispute between the former protagonists in this Court appears to be continuing. The mediation in this Court apparently resolved or brought a truce to a battle but did not actually settle the war which continues to rage in the Federal Circuit and Family Court. The present application appears, in substance, to be part of that continuing dispute. As each party has acted reasonably, the proper course is that the costs of the interlocutory application before this Court should follow the event of those proceedings.

Associate:    

Dated:    8 October 2021