Legal Briefing No. 75

Number 75

14 September 2005

Implied undertakings in litigation

Tom Howe

Tom Howe Chief Counsel Litigation
Australian Government Solicitor
T 02 6253 7415 F 02 6253 7384
tom.howe@ags.gov.au

In the course of litigation before courts and tribunals,
government departments and other agencies, and the lawyers
acting for them, may gain access to information recorded
in documents made available by the other party or non-parties.
If such access is obtained under compulsory court or
tribunal process, it will automatically be subject to
an implied undertaking prohibiting use or disclosure
of the material except for the purposes of the subject
proceedings.

The following statement of principle has received repeated
judicial endorsement:

A party who has obtained access to his adversary's
documents under an order for production has no right
to make their contents public or communicate them to
any stranger to the suit … nor to use them or copies
of them for any collateral object …1

Summary of relevant principles

The implied undertaking:

  • applies to information obtained as a result of discovery,
    answers to interrogatories, subpoenas, notices to produce
    etc. 2
  • applies to witness statements and affidavits served
    in accordance with court/tribunal orders, directions
    or rules 3
  • extends to and binds a stranger who is not a party
    to the proceeding in which the documents were obtained. 4 The
    undertaking also extends to material of a secondary character
    derived from the documents 5
  • prohibits use or disclosure of information even for
    the purpose of enforcement of the criminal law
  • will subsist at least until the information is received
    into evidence or is referred to in 'open court' in
    such a way as to disclose its contents
  • is capable of being waived by the party who produced
    the information. 6 Waiver may be express or
    implied, although it has been stated that 'it would
    be imprudent for a party too readily to infer consent
    or waiver from some equivocal conduct of the other' 7
  • does not apply to information disclosed voluntarily
    in support of a case to be argued in open court 8
  • probably does not forestall disclosure of the information
    in accordance with a legal obligation to which the recipient
    party is otherwise subject.

Whether a use or disclosure is collateral, and therefore
in breach of the undertaking, may involve difficult questions
of judgment and characterisation. 9 If a use
or disclosure is not reasonably necessary or conducive
to the proper conduct of the proceedings it is likely to
be regarded as collateral and in breach of the implied
undertaking.

The relevant court or tribunal has power to release a
party from the implied undertaking prospectively (which
is preferable) or ex post facto (if the breach has
already occurred). 10

Breach of the implied undertaking is unlawful and involves
non-compliance with the Commonwealth's obligations
to act as a model litigant (and should, therefore, be notified
to the Office of Legal Services Coordination, Attorney-General's
Department). Breach may amount to a contempt of court 11 and
will require an application to be made to the relevant
court or tribunal to be released from the undertaking (at
least in relation to a breach which is continuing).

Particular aspects of implied undertaking

Duration of the undertaking

The duration of the undertaking may be dealt with in rules
of court, practice directions or by way of specific court
or tribunal order or direction. For example, Order 15 Rule
18 of the Federal Court Rules provides that any implied
undertaking shall cease to apply to a document:

after it has been read to or by the Court or referred
to, in open Court, in such terms as to disclose its contents …

Otherwise, the duration of the undertaking is somewhat
unclear. The better view, in terms of principle, is considered
to be that the undertaking ceases once the information
is received into evidence (without restriction as to publication). 12 However,
the Victorian Court of Appeal has held that, in Victoria,
a party may continue to be bound by the implied undertaking
even after the information is received into evidence without
restriction. 13 All Victorian courts will be
either bound, or strongly inclined, to follow the Court
of Appeal's judgment, unless it is set aside by the
High Court.

Jurisdiction and power to grant release

In the case of both courts and tribunals, it has been
held that 'the power to release from the implied
undertaking of confidentiality is incidental to the power
to require the documents to be produced. Production under
compulsion gives rise to the undertaking. The power to
release is intrinsically associated with that undertaking.
It is the other side of the coin'. 14

There are many cases in which courts have held that the
application for release must be heard and determined in
the same proceedings in which the implied undertaking was
generated. 15

What if original proceedings have resolved or been discontinued?

In Caboolture Park Shopping Centre v White Industries (1993)
117 ALR 253 the Full Court of the Federal Court considered
whether a supplemental costs order could be made against
a firm of solicitors in relation to proceedings in which
final judgment had already been entered. The court held
that there was a power to make supplemental orders where
circumstances make it appropriate to do so and where such
orders would not in any way vary or alter the initial orders.

This principle was discussed in relation to an application
for release from an implied undertaking in Camp Curlewis
Resorts Pty Ltd v Hamersley Iron Pty Ltd, unreported,
Federal Court of Australia, 14 December 1994. In that matter
Branson J suggested that the appropriate course would be
to make the application for release in the original proceedings
notwithstanding that those proceedings had been otherwise
disposed of. This course was adopted in Playcorp v Tyco
Industries Inc [2000] VSC 440. 16

Whether use or disclosure to enforce criminal law is
prohibited by implied undertaking

Use or disclosure of information for the purpose of enforcing
the criminal law (e.g. to a police force, prosecutorial
or regulatory body) may, at first blush, be thought to
be outside the implied undertaking. However, this is not
the case. In the absence of release from the implied undertaking,
subject information cannot be used or disclosed for enforcement
of the criminal law or to assist executive agencies to
enforce a particular regulatory regime or the law generally. 17 In Commonwealth
v Temwood (2001) 25 WAR 31 at [41], Pullin J stated
as follows (emphasis added):

My conclusion is that the Commonwealth is bound, like
any other third party, not to use information which is
gained by one party from the other via the court proceedings
under the court's compulsory processes for any
purpose other than use in those proceedings. To seek
to use the documents in deciding whether or not to prosecute,
or whether or not to take enforcement action, is a "collateral
or ulterior" use which requires the leave of the
court.

Accordingly, if the information in question is relevant
to some kind of enforcement action, application should
be made to be released from the implied undertaking. In
an appropriate case, a court or tribunal should be prepared
to entertain an application on an ex parte basis (if notice
of the application might be contrary to some identifiable
public interest). 18

Interaction with other curial processes and statutory
powers

In Esso Australia Resources Limited v Plowman (1995)
183 CLR 10 at 33, Mason CJ stated that the implied undertaking 'must
yield to inconsistent statutory provisions and to the requirements
of curial process in other litigation, e.g. discovery and
inspection …'

In Spalla v St George Motor Finance Ltd [2004]
FCA 1014 at [32], Ryan J held that this principle only
applies where 'the litigation in which the requirements
of discovery and inspection have arisen has been instituted
without recourse to documents or information subject to
the implied obligation'.

Whilst doubts about the breadth of Mason CJ's statement
have been expressed from time to time, his Honour's
approach was followed by the NSW Court of Appeal in Australian
Securities Commission v Ampolex Ltd (1995) 38 NSWLR
504. In that case the ASC became aware of allegations of
possible insider trading as a result of publicity given
to observations by a Supreme Court judge, in proceedings
before him. The ASC then issued a statutory notice to a
solicitor for a party requiring him to produce all records
relating to the proceedings. The solicitor objected on
the basis that some of the documents in his possession
were subject to the implied undertaking and, hence, he
had a reasonable excuse for non-production. The Court of
Appeal held that it was not necessary to first obtain leave
of the court before producing documents to the ASC because
the obligations attracted by the undertaking were overridden
by the obligation imposed by the statutory notice. 19

In Blanch & Ors v Deputy Commissioner of Taxation [2004]
NSWCA 461 the Court of Appeal dealt with a similar situation,
this time in connection with a statutory notice under section
264 of the Income Tax Assessment Act, 1936. 20 The
Court did not consider it necessary to decide the 'important
question of the relationship between ... [the] undertaking
and s 264'. Importantly, Giles JA (with whom Hodgson
and Ipp JJA agreed) stated:

Even if s 264 trumps the undertakings, release of the
undertaking [sic] will have to be considered, although
the result may be automatic.

Moreover, it must be remembered that the case of Ampolex involved
the exercise of statutory powers by an agency of the Commonwealth
which was not a party to the proceedings and which had
not acquired knowledge of the documents as a result of
compulsory court process. In ASIC v Marshall Bell Hawkins
Ltd [2003] FCA 833 Merkel J held that ASIC, as a party
to the proceedings, was 'not entitled to have access
to the discovered documents for the purpose of exercising
its statutory powers in relation to [a related entity's
affairs] unless the Court has released it from the implied
undertaking.'

Principles relevant to release from undertaking

In Springfield Nominees Pty Ltd & Ors v Bridgelands
Securities Ltd & Ors (1992) 38 FCR 217 Wilcox
J outlined a range of factors relevant to the court's
consideration of release from the implied undertaking. 21 His
Honour's approach was endorsed by the Full Federal
Court in Liberty Funding Pty Ltd v Phoenix Capital
Ltd [2005] FCAFC 3 as a 'helpful guide' at
[31]–[33]. Relevant factors include:

  • whether the subject information was prepared for the
    purposes of becoming evidence in the proceedings and
    was therefore expected to enter the public domain 22
  • whether the information is sensitive, personal or
    commercial-in-confidence
  • the attitude of the other party and whether the other
    party could suffer any prejudice as a result of the information
    being used or disclosed for extraneous purposes
  • whether the subject proceedings are still on foot
    and whether, in particular, there is a real risk that
    the administration of justice, in respect of those proceedings,
    could be compromised
  • the circumstances in which the information came into
    the hands of the party seeking release and, in particular,
    whether those circumstances involved any impropriety
  • if the information has already been used or disclosed,
    whether breach of the implied undertaking was inadvertent
    and timely application was made to the court or tribunal 23
  • most importantly, whether the proposed use or disclosure
    is consonant with the 'public interest' purposes
    served by the administration of justice in courts (e.g.
    if the information is highly relevant to other legal
    proceedings). 24

There are a range of other matters which have been held
in various cases to be relevant to the exercise of discretion
to release a party from the implied undertaking:

  • the mere fact that the document in question may never
    have been tendered or may, theoretically, have been the
    subject of a confidentiality order is not a persuasive
    reason to refuse release 25
  • whether the party seeking release does so for their
    own purposes or to assist other persons. Courts will
    more readily release a party from their undertaking if
    the purpose is to assist that party rather than third
    persons 26
  • the length of time since the implied undertaking was
    given and/or the subject proceedings were resolved – the
    longer the period of time the more likely it is that
    the undertaking will be released 27
  • whether release from the undertaking is sought to
    enable the document to be used against the other party
    in the principal proceedings or some other person. It
    seems that courts are more likely to release a party
    from an undertaking where the purpose is to enable the
    document to be used against a person other than the opposing
    party in the principal proceedings. 28

Conclusion

It may be difficult in a particular case to know whether
the implied undertaking applies or not. Was the information
obtained pursuant to compulsory process or otherwise? Was
the information received into evidence in open hearing
(some paragraphs of affidavits contain statements which
are either not read or ruled to be inadmissible)? Is the
proposed use or disclosure collateral or not?

Given the seriousness of the consequences which might
be involved in breaching an implied undertaking, legal
advice should be sought whenever it is proposed to use
or disclose information which may have been obtained as
a result of the compulsory process of a court or tribunal.

Tom Howe has 19 years' experience providing
general legal advice and assistance on all issues relating
to administrative law matters, including appearances
before the Administrative Appeals Tribunal, disciplinary
tribunals, Magistrates and Supreme Courts of the states
and territories, Federal Court and High Court. In recent
years, Tom has specialised in the delivery of in-house
counsel services. He has been involved as counsel in
many precedent-setting cases in the public law field.

Notes

1 Bray J, Bray on Discovery, 1st Edition (1885)
at page 238 endorsed, for example, in Riddick v Thames
Board Mills [1977] QB 881 per Lord Denning MR at 895 and
in Esso Australia Resources Ltd v Plowman (1995) 183 CLR
10 per Mason CJ at 32.

2 The implied undertaking applies equally to
documents produced by parties and non-parties.

3Complete Technology Pty Ltd v Toshiba
(Australia) Pty Ltd (1994) 53 FCR 125; Springfield
Nominees Pty Ltd & Ors
v Bridgelands Securities Ltd & Ors (1992) 38 FCR 217;
Australian Trade Commission v McMahon (1997) 73 FCR 211
per Lehane J at 216; Commonwealth v Temwood Holdings
Pty Ltd (2001) 25 WAR 31 per Pullin J; Moage Ltd
v Jagelman & Ors [2002] NSWSC 953; Liberty
Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3 (8 February, 2005 per Branson, Sundberg
and Allsop JJ). It would also appear that the undertaking,
or a species of it, applies to documents produced compulsorily
in an arbitration pursuant to a direction by the arbitrator:
see Esso Australia Resources Ltd v Plowman (1995) 183 CLR
10 per Mason CJ at 32–33.

4Patrick v Capital Finance Pty Ltd (No
4) [2003] FCA 436 per Tamberlin J; Distillers
Co v Times Newspapers [1975] QB 613 at 621 and the cases discussed therein by
Talbot J at 619–620; Spalla v St George Motor
Finance Ltd [2004] FCA 1014 at [40]; Commonwealth
v Temwood Holdings Pty Ltd (2001) 25 WAR 31 at [28]; Hamersley
Iron Pty Ltd & Ors
v Lovell & Ors [1998] WASCA 133. However, the extent
to which the undertaking will bind a stranger may depend
very much on the circumstances. In Capital Television
Group Ltd & Anor v Northern Rivers Television Pty Ltd unreported,
NSWSC 4 September, Bainton J stated at [24]: 'I would
be surprised if a person who picked up and read a copy
of an affidavit, or a witness statement carelessly dropped
on the footpath in Phillip Street, and who read it could
be restrained from making any use of what he thereby learned.
It could not be said, surely, that he is bound by an undertaking … He
simply would not have got the document in the circumstances
from which the implication arises'.

5Sofilas v Cable Sands (WA) Pty Ltd (1993)
9 WAR 196; Hamersley Iron Pty Ltd & Ors v Lovell & Ors [1998] WASCA 133 per Anderson J; Sentry
Corporation v Peat Marwick Mitchell and Co (1990) 95 ALR 11 per Sweeney J
at p 23 and Lockhart J at p 38.

6Hamersley Iron Pty Ltd & Ors v Lovell & Ors [1998] WASCA 133 per Pidgeon and Anderson JJ (Ipp J dissenting);
Spalla v St George Motor Finance Ltd [2004] FCA 1014 per
Ryan J at [29]; Sentry Corporation v Peat Marwick Mitchell
and Co (1990) 95 ALR 11.

7Dagi v Broken Hill Pty Co Ltd [1996] 2 VR
567 at 572.

8Uniflex (Australia) Pty Ltd v Hanneybel [2001]
WASC 138 per Hasluck J at [142, 148, 151].

9 See Idoport Pty Limited v National Australia
Bank Limited and Ors [2001] NSWSC 648 per Einstein J at
[27]. Much will depend on the closeness of the connection
between the subject proceedings and the use or disclosure
in question. A 'rule of thumb' is to ask whether
the use or disclosure is calculated to vindicate an asserted
right in the subject proceedings or some other alleged
right. A collateral purpose encompasses 'purposes
different from the conduct of the proceedings in or in
relation to which the inspection was had' Ampolex
Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 18 ACSR
218 at 221 per Giles J in CommD. Difficult questions arise
in relation to amendment of pleadings and counterclaims
by reference to documents attracting the undertaking: see
Arnold Mann v Medical Defence Union [1997] FCA 45; Spalla
v St George Motor Finance Ltd [2004] FCA 1014; Allstate
Life Insurance Co v ANZ Banking Group (1995) 57 FCR 360;
Eckert v National Australia Bank (1997) 191 LSJS 221; Morgan
v Mallard [2000] SASC 445.

10 See Commonwealth v Temwood Holdings Pty
Ltd (2001) 25 WAR 31 per Pullin J at [46].

11 Particularly if a breach is deliberate and
contumelious: see Hamersley Iron Pty Ltd & Ors v Lovell & Ors [1998] WASCA 133.

12Esso Australia Resources Limited v Plowman (1995) 183 CLR 10 at 32; United
States Surgical Corp v Hospital Products International
Pty Ltd SC NSW Per McLelland
J, unreported, 7 May 1982; Moage Ltd v Jagelman [2002]
NSWSC 953; Eltran v Westpac (1990) 98 ALR 141; Australian
Securities and Investments Commission v Marshall Bell Hawkins
Ltd [2003] FCA 833, at [14] per Merkel J; K & S Corporation
Ltd & Anor v Number 1 Betting Shop Ltd & Ors [2005]
SASC 228 (24 June 2005); Hamersley Iron Pty Ltd v Lovell [1998] WASCA 133 per Pidgeon and Ipp JJ (Anderson J dissenting);
Ainsworth v Hanrahan (1991) 25 NSWLR 155 per Kirby P (with
whom Samuels JA agreed); Registrar of Supreme Court
v McPherson [1980] 1 NSWLR 688; Ampolex
Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 18 ACSR 218; Chapmans
Ltd v Australian Stock Exchange Ltd, Federal Court, 14 August 1995 per Tamberlin
J; Commonwealth v Temwood Holdings Pty Ltd (2001) 25 WAR
31 at [29].

13British American Tobacco Australia Services
Ltd v Cowell [2003] VSCA 43 (28 April 2003).

14Otter Gold Mines Ltd v McDonald & Ors
(1997) 147 ALR 322 per Sundberg J at 328.

15 See, for example, Holpitt Pty Ltd v Varimu
Pty Ltd (1991) 29 FCR 576 per Burchett J; Morgan
v Mallard [2000] SASC 445 per Lander J at [115] and Springfield
Nominees Pty Ltd & Ors v Bridgelands Securities Ltd & Ors (1992) 38 FCR 217.

16 A similar situation appears to have pertained
in Springfield Nominees Pty Ltd & Ors v Bridgelands
Securities Ltd & Ors (1992) 38 FCR 217. In that case
the original proceedings had been disposed of more than
12 months before the application was brought for release
from the implied undertaking. Wilcox J apparently had no
difficulty with hearing the application in those circumstances.

17 See Dart Industries Inc & Anor v David
Bryar & Associates Pty Ltd & Ors [1997] 481 FCA
(10 April 1997) per Goldberg J; Bailey v Australian
Broadcasting Corporation (1995) 1 Qd R 476; Australian
Trade Commission v McMahon (1997) 73 FCR 211 per Lehane J ; and Moage
Ltd v Jagelman & Ors [2002] NSWSC 953.

18 See Australian Trade Commission v McMahon (1997) 73 FCR 211.

19 Accordingly, documents subject to the undertaking
are nonetheless discoverable in other legal proceedings,
although the court concerned would retain a discretion
as to whether to permit inspection: Patrick v Capital
Finance Pty Ltd (No 4) [2003] FCA 436 at [21]–[22].

20 In Commercial Bureau (Aust) Pty Ltd v
Allen; Ex parte Federal Commissioner of Taxation (1984) 1 FCR
202 at [15]–[16], Northrop J had previously held
that section 263 of the Income Tax Assessment Act 1936 displaced the undertaking (where the Commissioner was a
non-party).

21 These factors have been endorsed and applied
in a range of subsequent decisions: see, for example, Complete
Technology Pty Ltd v Toshiba (Australia) Pty Ltd (1994)
53 FCR 125 at 133 and Otter Goldmines Ltd v McDonald & Ors (1997) 147 ALR 322 at 328–9.

22 See also the observations of Kirby P in
Ainsworth v Hanrahan (1991) 25 NSWLR 155 at 167.

23 See Wheeler J in Commonwealth v Temwood
Holdings Pty Ltd [2002] WASC 107 at [12].

24Liberty Funding Pty Ltd v Phoenix Capital
Ltd [2005] FCAFC 3 at [33]. In Australian Trade
Commission v McMahon 73 FCR 211 Lehane J held (at 217) that 'special
circumstances' will 'fairly readily be found
where it is established that the use of [the] documents
... is reasonably required for the purpose of doing justice
between the parties in other proceedings'.

25Australian Competition and Consumer Commission
v Telstra [2000] FCA 28 per
Lindgren J at [34]–[35].

26British American Tobacco Australia Services
Ltd v Cowell [2003] VSCA 43 (28 April 2003) at [53]; Spalla
v St George Motor Finance Ltd [2004] FCA 1014 per Ryan
J at [43].

27Morgan v Mallard [2000] SASC 445 per Lander
J at [116].

28Playcorp Ltd v Tyco Industries Inc [2000]
VSC 440; Australian Trade Commission v McMahon 73 FCR 211;
Holpitt Pty Ltd v Varimu Pty Ltd (1991) 29 FCR 576 per
Burchett J.

AGS contacts

This briefing was prepared by Tom Howe of our Canberra
office.
For further information please contact Tom on tel 02 6253
7415
email tom.howe@ags.gov.au or
any of the following lawyers:

Sydney

Simon
Daley

02 9581 7490

Melbourne

Libby
Haigh

03 9242 1499

Brisbane

Maurice
Swan

07 3360 5702

Perth

Peter
Macliver

08 9268 1100

Adelaide

Sarah
Court

08 8205 4231

Hobart

David
Wilson

03 6220 5471

Darwin

Jude Lee

08 8943 1405

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