Federal Court of Australia Sentinel Orange Homemaker Pty Ltd v Bailey, in the matter of Davis Investment Group Holdings Pty Ltd (in liq) [2022] FCA 85 File number(s): NSD 954 of 2021 Judgment of: STEWART J Date of judgment: 4 February 2022 Catchwords: PRACTICE AND PROCEDURE – whether release from Hearne v Street implied undertaking is required where plaintiff seeks to use document for resolution of the dispute for which the document was filed – if required, whether release should be granted – whether the implied undertaking applies to evidence already adduced – whether the implied undertaking applies to pleadings – whether the implied undertaking applies to the party's own evidence Legislation: Federal Court of Australia Act 1976 (Cth) ss 37M, 37N Cases cited: Hazell-Wright v 32 Domain Pty Ltd [2020] VSCA 129 Hearne v Street [2008] HCA 36; 235 CLR 125 LCM Operations Pty Ltd (in its capacity as eligible applicant of 316 Group Pty Ltd (in liq) [2021] FCA 324 Royal Express Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) v Huang, in the matter of Royal Express Pty Ltd (No 5) [2021] FCA 1302 Treasury Wine Estates Ltd v Maurice Blackburn Pty Ltd [2020] FCAFC 226; 282 FCR 95 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 20 Date of hearing: 4 February 2022 Counsel for the Plaintiff L Gor Solicitor for the Plaintiff Russells Law Counsel for the Defendant R Size Solicitor for the Defendant Pure Legal ORDERS NSD 954 of 2021 IN THE MATTER OF DAVIS INVESTMENT GROUP HOLDINGS PTY LIMITED (IN LIQUIDATION) ACN 627 758 285 BETWEEN: SENTINEL ORANGE HOMEMAKER PTY LTD ACN 167 089 821 ATF THE SENTINEL ORANGE HOMEMAKER TRUST Plaintiff AND: LIAM THOMAS BAILEY Defendant order made by: stewart j DATE OF ORDER: 4 fEBRUARY 2022 THE COURT ORDERS THAT: 1. The applicant is released from its Harman undertaking in respect of the affidavit and expert report of Graham Scrymgeour of 24 November 2021 for the use of those documents in an application by the applicant to seek a release from its Harman undertaking to the Supreme Court of NSW in respect of the affidavit of Benjamin John Davis sworn 27 November 2020 and filed on that day in Supreme Court proceeding 2020/00115242. 2. The respondent pay the costs of the interlocutory application. 3. The matter be listed for case management on 3 March 2022. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from the transcript) STEWART J: Introduction 1 The plaintiff seeks release from the "implied undertaking", also referred to as the Harman undertaking, in respect of four documents filed in this proceeding. The defendant opposes the release in respect of one of the documents and says that it is not required in respect of the other three. 2 The implied undertaking is described as follows in Hearne v Street [2008] HCA 36; 235 CLR 125 at [96] per Hayne, Heydon and Crennan JJ (footnotes omitted): 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. 3 The plaintiff seeks the release in order to be able to use the documents in question in an application it intends to make in the Supreme Court of New South Wales. That application is in turn for the release of the plaintiff from its implied undertaking given in that Court in respect of an affidavit filed by the defendant in a completed proceeding in that Court. The plaintiff wishes then to use that affidavit in the proceeding in this Court. The defendant in the Supreme Court proceeding is the company in liquidation of which the defendant in this Court is the liquidator, as he was during the course of the Supreme Court proceeding. He gave the instructions for the defendant in the Supreme Court proceeding. 4 The parties to the proceeding in the Supreme Court are essentially the same parties to the proceeding in this Court – the liquidator is the privy of the company – and the controversy between the parties is essentially the same in both courts. In the Supreme Court, the dispute was about the entitlement to a deposit that had been paid by the company. The company had paid the deposit as purchaser of real property under a contract which was subsequently purportedly terminated by the company and then later terminated by the plaintiff when the company failed to complete on the contract. The Supreme Court held that the plaintiff validly terminated the contract with the result that the plaintiff was entitled to the deposit, together with any interest earned thereon: Sentinel Orange Homemaker Pty Ltd v Davis Investment Group Holdings Pty Ltd (in liquidation) [2021] NSWSC 550. However, the question of the plaintiff's loss as a consequence of the repudiation was not addressed in the Supreme Court proceeding. 5 The plaintiff then submitted a proof of debt to the liquidator for the loss which it says that it suffered as a consequence of the repudiation. The defendant rejected the proof of debt. In the proceeding in this Court, the plaintiff appeals against the defendant's decision. The central question in determining whether the plaintiff suffered any loss as a consequence of the repudiation, and, if so, the quantum of the damages to which it is entitled, is the difference between the price at which the plaintiff and the company contracted for the sale of the property in August 2018 and its fair market value in April 2020 when the company failed to complete the contract. Since the price is recorded in the contract, the real issue in dispute is the market value of the property in mid-April 2020. The defendant's expert report 6 In this Court, the defendant has filed an expert report in which the price agreed between the plaintiff and the company in August 2018 is taken as evidence of fair market value in April 2020 on the basis that the sale by the plaintiff to the company was recent and at arm's length between a willing buyer and a willing seller. The plaintiff wishes to demonstrate that the sale was not an arm's length transaction – at least at the time that the last extension of time to complete was agreed in about March 2020 – by relying on an affidavit about the transaction that was filed by the company in the Supreme Court proceeding. In order to do that, it says that it requires release from its implied undertaking to the Supreme Court. It says that it requires release from its implied undertaking to this Court in respect of the defendant's expert report in order to make its application to the Supreme Court. 7 The defendant opposes the release of the plaintiff from its implied undertaking to this Court in respect of its expert report for three reasons. 8 First, it says that those parts of the affidavit in the Supreme Court that were adduced in evidence, and in respect of which the implied undertaking to the Supreme Court therefore does not apply, are sufficient to make good the plaintiff's proposition that as at mid-April 2020 the sale between the plaintiff and the company was not at arm's length. The plaintiff refers to first instance authorities in the Supreme Court of NSW and the Land and Environment Court (NSW) which it says support the proposition that it may be that publicly adduced evidence is subject to the implied undertaking. At least in this Court that is not so; a document or information received into evidence is not subject to the implied undertaking: Treasury Wine Estates Ltd v Maurice Blackburn Pty Ltd [2020] FCAFC 226; 282 FCR 95 at [85] per Jagot, Markovic and Thawley JJ. 9 Secondly, it says that the affidavit in the Supreme Court is not necessary because the proposition that the company was not willing or anxious to purchase the property by mid-April 2020 is not in controversy. It says that that is not the relevant time. The relevant time is when the sale price was agreed which was in August 2018. 10 Thirdly, it says that the affidavit may be inadmissible in the proceeding in this Court, and it advances submissions in that regard. 11 In my assessment, all of the defendant's contentions against the release fail because this is not the appropriate time to make any judgment about the admissibility or ultimate value of the affidavit in the proceeding in this Court. The affidavit is by a director of the company and it is about the very transaction in question. It may, therefore, be relevant to the issues in dispute in this Court; it is certainly within the corpus of potentially relevant documents and may be of value in cross-examining the defendant's expert. Also, it may be admissible, although the defendant submits that ultimately it will not be. It is neither possible nor desirable to determine that question at this stage – it depends on facts not yet known including the purpose for which it might be sought to be used in the proceeding in this Court. 12 The special circumstance that justifies the release of the plaintiff from the implied undertaking in respect of the expert report filed in this Court is that the expert report is sought to be used to obtain, in the Supreme Court, release from the implied undertaking in respect of an affidavit filed in that Court for the purpose of the proceeding in this Court where, as mentioned, the parties in both proceedings and the underlying dispute are essentially the same. There is no reason why there should be no release from the undertaking. The expert report is not being sought to be used for some collateral purpose; the plaintiff seeks to use it for the very purpose of the resolution of the dispute for which the report was filed: Hazell-Wright v 32 Domain Pty Ltd [2020] VSCA 129 at [19] (Tate, McLeish and Hargrave JJA); LCM Operations Pty Ltd (in its capacity as eligible applicant of 316 Group Pty Ltd (in liq) [2021] FCA 324 at [25]-[27] (Stewart J); Royal Express Pty Ltd (Receivers and Managers Appointed) (Administrator Appointed) v Huang, in the matter of Royal Express Pty Ltd (No 5) [2021] FCA 1302 at [20] (Anastassiou J). 13 It is therefore doubtful that release from the undertaking is even required. But if it is, there is certainly good reason to give it. It is also doubtful whether release is required from the Supreme Court for the use in the proceeding in this Court of those parts of the affidavit there that were not read because the two proceedings are between the same parties or their privies in respect of the same dispute. 14 The defendant justifies his opposition to the release of the plaintiff from the undertaking on the basis that release from the undertaking would necessarily increase the costs of the present litigation. That is because, as he explains, the affidavit will ultimately not be admissible in the proceeding in this Court, or even if admissible, will not advance the resolution of the dispute in this Court. However, as I have said, these are matters to be dealt with in due course. It is the defendant's opposition to the release that has unnecessarily increased the costs. It is hard to see how the defendant's conduct in opposing the release contributes to the resolution of the real dispute between the parties as quickly, inexpensively and efficiently as possible, as is required of such conduct: ss 37M and 37N, Federal Court of Australia Act 1976 (Cth). 15 I will therefore order that the plaintiff is released from its implied undertaking in respect of the affidavit and expert report of Graham Scrymgeour of 24 November 2021 for the use of those documents in an application by the plaintiff to seek a release from its implied undertaking to the Supreme Court of New South Wales in respect of the affidavit of Benjamin John Davis, sworn 27 November 2022 and filed on that day in Supreme Court proceeding 2020/00115242. The concise statements 16 The plaintiff also seeks release from the implied undertaking in respect of its own originating process and concise statement of 13 September 2021 and the defendant's amended concise statement of 24 November 2021 in order to support its proposed application in the Supreme Court. However, those are public documents in respect of which there is no implied undertaking: Treasury Wine Estates at [89]. The one document is also the plaintiff's own document. No release is required. The defendant accepts that and rightly submits that the plaintiff's request for a release is unnecessary. The plaintiff's own expert report 17 The plaintiff also seeks release from the implied undertaking in respect of an expert report filed by it. However, there is no implied undertaking by the party who files a document. The implied undertaking is by the party who gets access to the document, and would not otherwise have such access, because it has been produced to it by another party under a process of compulsion in a proceeding before the court: Hearne v Street at [96]. The defendant also accepts that. In case I am wrong and a release is required, the plaintiff would be entitled to a release from the undertaking for the same reasons as in respect of the defendant's expert report considered above. Thereafter on costs 18 On the question of costs, the plaintiff submits that it should have its costs, and the defendant submits that the costs should be reserved. That is on the basis that it may be that the affidavit in the Supreme Court, if the plaintiff is released from its undertaking there, will, in any event, serve no purpose in the proceeding in this Court because it will be inadmissible or not otherwise relevant to the disputes in this Court. Whilst the defendant's submission that the affidavit will serve no purpose in the proceeding in this Court because the plaintiff focuses on the wrong time to consider whether the relevant transaction was at arm's length (i.e., when the last extension was given rather than when the price was agreed) may have merit, ultimately it falters on the consideration that it is premature to make that determination now. Had the defendant merely consented to a release from the undertaking to this Court, most of the costs of the interlocutory application would have been avoided. Arguably, an application would still have had to have been made, but that could have been done relatively informally and without significant expense at a case management hearing. 19 I will therefore order that the defendant pay the costs of the application. Orders 20 I therefore make the following orders: (1) the plaintiff be released from its implied undertaking in respect of the affidavit and expert report of Graham Scrymgeour of 24 November 2021 for the use of those documents in an application by the plaintiff to seek a release from its implied undertaking to the Supreme Court of NSW in respect of the affidavit of Benjamin John Davis sworn 27 November 2020 and filed on that day in Supreme Court proceeding 2020/00115242; and (2) the defendant pay the costs of the interlocutory application. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 8 February 2022