Federal Court of Australia

Brontes Security LLC v “Lihir Chief” (formerly “Charlie B”) [2023] FCA 388

ORDERS

THE COURT ORDERS THAT:

1.    The second defendant be released from the implied undertaking not to use the following documents or information contained in them, being documents that the plaintiff produced or filed in this proceeding, to the extent that it would otherwise be precluded from doing so, for the purpose of bringing proceedings in the courts of the Hong Kong Special Administrative Region against Charles Nicholas Alling Brown and Torsten Steffen Hartmann:

(a)    affidavit of Henrike Koch sworn 16 August 2022 and exhibits thereto;

(b)    affidavit of Sven Lundehn sworn 16 August 2022 and exhibits thereto;

(c)    unredacted purported loan agreement attached to the email from Colin Biggers & Paisley to HFW Australia on 19 August 2022;

(d)    partial unredacted purported loan agreement attached to the email from Colin Biggers & Paisley to HFW Australia on 21 August 2022; and

(e)    partial unredacted purported loan agreement attached to the email from Colin Biggers & Paisley to HFW Australia on 22 August 2022.

2.    Order 1 be stayed up to and including 8 May 2023.

3.    There be no order as to costs.

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

REASONS FOR JUDGMENT

(Revised from the transcript)

RARES J:

Background

1    On 4 August 2022, the plaintiff, Brontes Security LLC, commenced this proceeding by filing a writ in rem and sought the arrest of Lihir Chief, as a result of which an arrest warrant issued. On 10 August 2022 the Admiralty Marshal arrested the ship at Brisbane. The second defendant, Swire Shipping Pte Limited, was the bareboat charterer of Lihir Chief under a charterparty with her owners, Inter Ocean Express Ltd, a company controlled by a Mr Charles Brown, who appears to reside in Hong Kong and control a considerable commercial empire, together with his co-director, Mr Torsten Hartmann.

2    On 16 June 2022, Swire had exercised an option to purchase the ship contained in the charterparty, and gave notice of it to Inter Ocean and Brontes well before the arrest. On 23 June 2022, Inter Ocean acknowledged receipt of the notice of the exercise of the option, and on 6 and 7 July 2022, Inter Ocean and Swire executed a memorandum of agreement dated 16 June 2022 recording the sale of the vessel.

3    During the course of the period while the vessel remained under arrest, I held a number of interlocutory hearings, and each of Brontes and Swire filed affidavits as to whether or not Brontes could defeat Swire’s application to set the arrest aside for want of jurisdiction.

4    On 9 August 2022, Swire commenced arbitration proceedings against Inter Ocean with the London Maritime Arbitration Association, asserting a dispute in relation to the bareboat charter. On 11 August 2022, Swire commenced another proceeding against Inter Ocean in the same forum asserting a dispute arising in relation to the memorandum of agreement for sale.

5    On 11 August 2022, Swire filed in this proceeding a notice of appearance as the relevant person and on 12 August 2022 filed an interlocutory application seeking the dismissal of the proceeding and the setting aside of the warrant to arrest the ship.

6    On 22 August 2022, after a case management hearing, Brontes applied to the Marshal to release Lihir Chief from arrest, which promptly occurred.

7    On 1 September 2022, Brontes, Inter Ocean and Swire entered into a settlement deed in respect of the proceeding, which is in evidence, under which, among other things, Swire, Brontes and their solicitors released one another from all claims relating to the circumstances of the arrest and related matters.

8    On 2 September 2022, mortgages over the Lihir Chief that previously had been entered into the Liberian Ship Registry, the validity of which Swire contested, were deleted from the register and a clean, unencumbered certificate of ownership issued in that register. On the same day, Swire became registered owner of the vessel, without any encumbrances.

9    On 8 September 2022, I made orders dismissing the proceedings, including the writ and cross-claim, with no order as to costs, and granted the parties liberty to apply in respect of the payment of the Marshal’s costs and expenses under rr 41 and 53 of the Admiralty Rules 1988 (Cth).

10    On 19 September 2022, the vessel was registered under the flag of New Zealand with the name Takutai Chief.

This application

11    Swire seeks an order releasing it from the implied undertaking not to disclose or use documents, or information that it had obtained from them, without the leave of the Court, for use for any purpose other than that for which the documents or information were given in respect of the following affidavits and material (the five documents) filed or produced by Brontes in the proceeding:

(a)    an affidavit of Henrike Koch sworn 16 August 2022 and exhibits thereto

(b)    an affidavit of Sven Lundehn sworn 16 August 2022 and exhibits thereto;

(c)    an unredacted purported loan agreement attached to the email from the solicitors acting for Brontes, Colin Biggers & Paisley, to the solicitors acting for Swire, HFW Australia, on 19 August 2022 (which was produced pursuant to an order I made on 19 August 2022);

(d)    a partial unredacted purported loan agreement attached to the email from Colin Biggers & Paisley to HFW Australia on 21 August 2022; and

(e)    a partial unredacted purported loan agreement attached to the email from Colin Biggers & Paisley to HFW Australia on 22 August 2022.

12    Swire learnt of a considerable body of information concerning dealings between or involving Inter Ocean and Brontes as a result of the provision to it of the five documents. It is common ground that none of the five documents was received into evidence so as to bring about Swire’s release from the implied undertaking: see Hearne v Street (2008) 235 CLR 125 at 154-156 [96] per Hayne, Heydon and Crennan JJ.

13    Subsequently, Swire instructed its Hong Kong solicitors, Holman Fenwick Willan, to commence proceedings in the High Court of the Hong Kong Special Administrative Region against Mr Brown and Mr Hartmann for the tort of conspiracy to injure by unlawful means. The solicitors obtained a draft statement of claim from Hong Kong counsel and, I infer, the Hong Kong firm of Holman Fenwick Willan. The claims in the draft statement of claim are grounded in information contained in or derived from the five documents. Meike Mtshali, Swire’s legal counsel, deposed, and it is common ground, that essential allegations in the draft statement of claim are supported by one or more of the five documents or information within them, about which Swire’s source of knowledge derived from their production or disclosure in this proceeding.

14    On 3 April 2023, a solicitor acting for Swire gave notice of Swire’s interlocutory application and Ms Mtshali’s affidavit to each of Ms Koch, Mr Brown and Mr Hartmann. Ms Koch made no response, but late yesterday afternoon Mr Brown and Mr Hartmann emailed Swire’s Australian solicitors acknowledging receipt of the email and advising that they understood that the interlocutory application was listed for hearing today. They informed Swire’s solicitors that they objected to Swire using the five documents and being released from its implied undertaking.

Conditional appearance by Inter Ocean

15    Earlier today, senior counsel instructed on behalf of Inter Ocean by another firm of solicitors appeared conditionally, seeking leave to apply for an adjournment of the hearing of this interlocutory application. I expressed concern that, given that the parties were ready for the hearing today and no notice of Inter Ocean’s application had been given until minutes before senior counsel’s appearance, were I to accede to the request, there were no assets in the jurisdiction against which anyone could recover costs thrown away by reason of any adjournment. Swire opposed any adjournment while Brontes embraced it.

16    In the end, the position was reached that Inter Ocean did not press its application for an adjournment, but sought there being a stay until 8 May 2023 were I to grant Swire’s application to be realised from its implied undertaking in respect of the use of the five documents. Such a stay would give Inter Ocean an opportunity to apply to set aside any order releasing Swire from its implied undertaking. Senior counsel withdrew thereafter.

Brontes’ submissions

17    Brontes opposes Swire being released from its implied undertaking in respect of the five documents because it says:

(1)    it is not necessary in the interests of justice within Australia to release Swire from the implied undertaking;

(2)    the Court cannot make an enforceable order that could confine Swire’s subsequent use of the five documents or the information in them, and there are currently no foreign proceedings on foot which could give any comfort as to how that material may be used elsewhere;

(3)    Swire had already made a substantive breach of the implied undertaking because it had used the five documents and information in them to obtain advice and prepare the draft statement of claim in Hong Kong based on the disclosure in Ms Mtshali’s affidavit as the purpose for seeking its release from the undertaking. Brontes contended that Swire had not apologised for this supposed breach;

(4)    Swire had provided no evidence that it needed to be released from the implied undertaking anyway in order to be able to bring the Hong Kong proceedings. Brontes said I should draw an inference based on Handley JA’s observation Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 417-418 that, because Swire led no evidence from Ms Mtshali about the law of Hong Kong (I note that there is no evidence of where she obtained her legal qualification or may be able to practice), her evidence would have been against it being necessary for Swire to rely on or use the five documents or information in them as they are used in the draft statement of claim;

(5)    there was no evidence:

(a)    that the five documents, if Swire were released from the implied undertaking, would be applied or used in a proper way;

(b)    as to whether the draft statement of claim revealed a bona fide cause of action under the law of Hong Kong or what relevance or necessity to support such a cause of action the material in the five documents might have;

(6)    Swire had not sought permission in the deed of settlement to use the material or information in the five documents and that its current application would undermine the finality of the settlement.

Consideration

Necessity of reinstatement of the proceeding

18    In its interlocutory application Swire sought an order to reinstate the proceeding under r 39.05(f) of the Federal Court Rules 2011 as a preliminary step for the purposes of obtaining an order granting relief from its obligations under the implied undertaking in respect of the five documents. That application was, in my opinion, misconceived.

19    The implied undertaking contains, as a term, that any document produced to the Court and information disclosed under compulsion cannot be used without the Court’s leave for any purpose other than that for which it was given unless received into evidence. The requirement for the Court’s leave confirms that the implied undertaking has the character of an interlocutory order. Although the suit in which the five documents were produced has concluded so that the rights of the parties have merged in its resolution and in the deed of settlement, procedural matters relating to the suit, as distinct from substantive ones, remain within the control of the Court.

20    The continuation of the implied undertaking, which includes the ability for the Court to otherwise order or grant leave, remains undisturbed by the resolution of the substantive proceeding that no longer exists. That is because the implied undertaking in terms provides that the Court has power to release a party from that undertaking, including in the absence of the consent of any other party. Just as an interlocutory injunction continues ‘until further order’ so must an interlocutory undertaking that has the effect of an order. The Court must remain in control of its interlocutory orders and undertakings given to it. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render the enforcement of an interlocutory order or undertaking unjust or inappropriate: see Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 at 177-178, per Gibbs CJ, Aickin, Wilson and Brennan JJ.

Release from the implied undertaking

21    In Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 at 289-290 [31], Branson, Sundberg and Allsop JJ said:

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. These were:

•    the nature of the document;

•    the circumstances under which the document 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 in to the hands of the applicant; and

•    most importantly of all, the likely contribution of the document to achieving justice in the other proceeding.

(emphasis added)

22    Their Honours said that the matters to which Wilcox J referred were a helpful guide (218 ALR at 290 [32]). Both parties accepted that those principles were apposite here.

23    I reject Brontes’ arguments. In my opinion, there is a compelling case for Swire to be released from the implied undertaking not to use each of the five documents, so that it can have the opportunity to put forward its claim in Hong Kong, if so advised and after any further exploration or inquiry as needed.

24    I accept the unchallenged evidence of Ms Mtshali that, first, the claims in the draft statement of claim arose out of the five documents and the information in them that were not known to Swire prior to the commencement of the arrest proceeding and, secondly, the essential allegations that require the use of the documents and information form the core part of the draft pleaded cause of action against Mr Brown and Mr Hartmann for the tort of conspiracy to injure by unlawful means.

25    A reading of the draft statement of claim makes pellucid that that material and information in or disclosed by the five documents is necessary in order for the pleader to have a reasonable basis to consider that he or she could make the pleading to be used in a court proceeding so that Swire would have a bona fide basis to seek relief against Messrs Brown and Hartmann, on the assumption and evidence before me that the law of Hong Kong is no different, on these matters, than the law of Australia. There was no suggestion by Brontes that the proposed pleading of the cause of action was deficient in the sense that, if the allegations could be proved, the pleading failed to identify a cause of action that could result in Swire obtaining the relief sought.

26    There is no authority to suggest that the ability to release a party from the implied undertaking is confined to a contemplated use of the documents or information to which it attaches in proceedings within Australia. Such a limitation would be commercially and legally unworkable and calculated to cause injustice. For example, it is a commonplace in Admiralty proceedings such as this that there will be arbitrations or court proceedings overseas. Often all of the parties, again such as here, are overseas and have no connection to Australia other than the happenstance of an arrest in a proceeding in rem of a ship and the appearance of a relevant person.

27    Brontes commenced this proceeding here seeking to enforce rights which it asserted had arisen in other places around the world, including through the use of the material and information contained in the five documents. None of the parties had any relevant connection to Australia save for the presence of Lihir Chief when she entered Australian waters and was arrested on 10 August 2022. Brontes cited no case in which it is suggested that the implied undertaking is confined to the use of documents or information within this jurisdiction.

28    I reject as specious Brontes’ argument that there was reason to think that Swire would not abide by any implied or express constraint on use of the documents or information in them were I to grant a complete or partial release from the implied undertaking. The simple fact is that Swire, albeit not present in Australia, has come to the Court and sought this relief because of its apparent respect for the authority of the Court and the solemnity of its undertaking to this Court not to use these documents without the Court’s leave. I infer that Swire would act responsibly and in accordance with any constraint that might be imposed.

29    I reject Brontes’ argument that Swire has already breached the implied undertaking because of the use of the information and documents to obtain the draft statement of claim. A party is entitled to look at documents and material that it has and consider them, including to determine whether it can formulate some cause of action or course of action that it wishes to take, before it seeks release from the implied undertaking in order to deploy the documents or information or dislcose them to third parties. It would be difficult for any party to make a substantive application seeking release from an implied undertaking that had a coherent framework without also identifying how it wanted to use the relevant documents or information, and a reasonable basis for doing so.

30    On the evidence before me, the draft statement of claim has been kept internal to Swire and its lawyers. It has not been used in relation to doing anything with respect to a third party, save to deploy it, in Ms Mtshali’s affidavit, for the purposes of seeking relief today.

31    I reject Brontes’ argument that I should refuse the application for the want of evidence from Ms Mtshali or any lawyer in Hong Kong that the five documents or information in them is necessary for the purposes of Swire being able to pursue the proceeding in Hong Kong. There is no evidence that they are not, and Ms Mtshali’s affidavit, as I have found, demonstrates that it is necessary, having regard to the structure of the pleading and the nature of the tort alleged in it. Indeed, Brontes’ argument went so far as to assert that a lawyer had to give evidence as to each paragraph in the statement of claim, to see whether or not the allegations in it could be advanced in some other way without having some resort to any of the five documents or information in them. No authority was cited to support that proposition, and its acceptance would make applications to seek relief from the implied undertaking unduly burdensome, where, prima facie, it is obvious, as it is here, that the ability to use the documents and information in them is necessary to enable Swire to pursue the claim in Hong Kong that it wishes to make, as currently formulated in the draft statement of claim.

32    I also reject Brontes’ argument that, somehow, Swire should have asked Ms Koch, who said in her affidavit of 16 August 2022 that she was Inter Ocean’s attorney-in-fact, whether she would give evidence or produce all of the material in her affidavit. Brontes asserted that Swire should have made such requests because there was no property in a witness. The logic of the proposition that Ms Koch, having been informed of the proceeding today and having been the attorney-in-fact and German lawyer acting for Inter Ocean, would be willing to give evidence on behalf of Swire, is not readily apparent to me at this stage as a reason why I should decline to grant the application.

33    As the Full Court said in Liberty Funding 218 ALR at 289-290 [31], special circumstances can exist in order to support a party’s release from the implied undertaking that do not need to amount to extraordinary factors before the Court’s power to grant relief is enlivened. As their Honours said, “in all the circumstances, good reason must be shown” why the documents or information should be used for “the advantage” of a person in Swire’s position in other litigation.

34    The likely contribution of each of the five documents and the information contained in them to Swire’s ability to commence and pursue its cause of action the subject of the draft statement of claim is obvious and provides good reason to release Swire from the implied undertaking.

35    Of course, in these reasons, I have refrained from disclosing any of the material or information to which the implied undertaking attached and which may or may not be the subject of any further application by Inter Ocean, if so advised, once the stay I impose on Swire being able to use the documents expires.

Conclusion

36    I am satisfied that it is in the interests of justice, having regard to the nature of the information the subject of the five documents and Swire’s proposed use of that information and those documents, that Swire be released from its implied undertaking in relation to those documents and that information. I will so order.

37    I make no order as to costs, no such order having been sought by Swire.

Associate:

Dated:    27 April 2023