Supreme Court New South Wales Medium Neutral Citation: Universal Music Australia Pty Ltd v Pavlovic & Ors; Pavlovic & Anor v Universal Music Australia Pty Ltd (No 2) [2017] NSWSC 314 Hearing dates: 27 March 2017 Decision date: 31 March 2017 Jurisdiction: Equity - Corporations List Before: Gleeson JA Decision: (1) Insofar as and to the extent necessary, grant leave to Universal Music Australia Pty Limited and Modular Recordings Pty Limited to use the following affidavits of Mr Pavlovic, in proceedings numbered 2015/347134 (the Pavlovic proceedings) and proceedings numbered 2015/77691 (the Universal proceedings): (a) Affidavit of Stephen Pavlovic sworn 24 December 2015. (b) Affidavit of Stephen Pavlovic sworn 28 January 2016. (c) Affidavit of Stephen Pavlovic sworn 12 February 2016. (d) Affidavit of Stephen Pavlovic sworn 25 February 2016. (e) Affidavit of Stephen Pavlovic sworn 26 February 2016. (f) Affidavit of Stephen Pavlovic sworn 2 March 2016. (g) Affidavit of Stephen Pavlovic sworn 21 March 2016 (together, "the Pavlovic affidavits"). (2) Stand over to the trial the balance of par 1 of Universal's interlocutory process filed 19 March 2017, insofar as Universal seeks an order nunc pro tunc for leave to use the Pavlovic affidavits prior to the date of this order. (3) Costs of Universal's application filed 19 March 2017 shall be costs in the Pavlovic proceedings and the Universal proceedings. Catchwords: PROCEDURE – disclosure – interlocutory orders – where leave sought to rely on affidavit evidence sworn and served in response to disclosure orders – where grant of leave not opposed – whether imposition of conditions on grant of leave appropriate – whether grant of leave should be made nunc pro tunc. Category: Procedural and other rulings Parties: 2015/77691 Universal Music Australia Pty Limited (Plaintiff) Stephen Pavlovic (First Defendant) Modularpeople Ltd (Second Defendant) Pavlovic Investments Pty Limited (Third Defendant) Angela Margaret Pavlovic (Fourth Defendant) Modular Recordings Pty Limited (Fifth Defendant) Modular Ideas Pty Limited (Sixth Defendant) Modular Ltd (Seventh Defendant) Modular Recordings Pty Ltd (Eighth Defendant) 2015/347134 Stephen Pavlovic (First Plaintiff) Angela Margaret Pavlovic (Second Plaintiff) Universal Music Australia Pty Limited (Defendant) Representation: Counsel: Mr DB Studdy SC and Mrs F St John (Universal Parties) Mr D Cook SC (Pavlovic Parties) Solicitors: Gilbert & Tobin (Universal Parties) Blueprint Law (Pavlovic Parties) File Number(s): 2015/776912015/237134 Judgment 1. GLEESON JA: Application is made by Universal Music Australia Pty Ltd (Universal) for leave to use certain affidavits of Mr Stephen Pavlovic, together with all annexures and exhibits thereto, in proceedings numbered 2015/347134 (the Pavlovic proceedings) and in related proceedings numbered 2015/77691 (the Universal proceedings). 2. The affidavits of Mr Pavlovic were sworn and filed in the Pavlovic proceedings in compliance, or at least purported compliance, with disclosure orders made on 14 December 2015, 11 February 2016 and 14 March 2016. Those orders were made by consent following three separate applications by Universal for interlocutory relief including disclosure orders and freezing orders in connection with its cross application for final relief (in effect by way of cross-claim) in the Pavlovic proceedings. 3. The final relief sought by Universal in the Pavlovic proceedings includes declarations that Mr Pavlovic has breached his duties as a director of Modular Recordings Pty Ltd (a joint venture between Universal and Mr Pavlovic in respect of Modular's business as a music recording label) and an order for an accounting in respect of monies received by him or related entities (the Pavlovic parties) or for compensation under s 1317H of the Corporations Act 2001 (Cth). 4. In the Universal proceedings, Universal has made a number of claims against the Pavlovic parties alleging breach of contract, breach of fiduciary and directors' duties, infringement of copyright, a wrongful application for a trade mark and breach of confidence. 5. On 14 December 2015, Universal gave an undertaking to the Court that it would "not, without leave of the Court, use any information or documentation obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, or for any other purpose, other than to give effect to these orders". The subject matter of that undertaking is three affidavits sworn by Mr Pavlovic which were filed and served dated 24 December 2015, 28 January 2016 and 12 February 2016, in response to the disclosure order made on 14 December 2015. 6. Following further disclosure orders made by consent on 11 February 2016 and 14 March 2016, Mr Pavlovic filed and served further affidavits sworn by him on 25 February 2016, 26 February 2016 and 2 March 2016 (in response to the 11 February 2016 order) and an affidavit sworn 21 March 2016 (in response to the 14 March 2016 order). Universal gave an undertaking to the Court on 11 February 2016 and again on 14 March 2016 in the same terms as that given on 14 December 2015. 7. On each occasion the disclosure orders were made, an order was made in terms of order 9 of the standard form of order in Practice Note Gen 14, relating to the procedure for making claims of privilege against self-incrimination, where the person subject to the disclosure order is an individual (see order 7, 14 December 2015; order 9, 11 February 2016; and order 5, 14 March 2016). Mr Pavlovic did not avail himself of that procedure. 8. On 14 March 2016, Brereton J made an order that the Universal proceedings and the Pavlovic proceedings be heard together, with evidence in one being evidence in the other (order 8). It seems that in about October 2016, Universal obtained leave pursuant to s 237 of the Corporations Act to bring a derivative claim on behalf of Modular Recordings Pty Ltd. That claim is the subject of Universal parties' cross application in the Pavlovic proceedings. The proceedings have been fixed for hearing for a number of weeks commencing on 2 May 2017. Universal's use of the disclosure affidavits 1. It is accepted by Universal that it has made use of the information and documentation in the Pavlovic affidavits in both the Pavlovic proceedings and the Universal proceedings. That use includes relying on information in the Pavlovic affidavits in support of subsequent applications against Mr Pavlovic that he swear and serve further disclosure affidavits; giving particulars of various allegations in pleadings by Universal, including in an amended statement of claim filed 19 May 2016 in the Universal proceedings; in affidavits filed and served by Universal in support of interlocutory applications in the proceedings; and in evidence-in-chief and an expert report filed and served in the two proceedings. 2. Universal emphasised that the information in the Pavlovic affidavits has also been referred to by the Pavlovic parties, both in admissions made in answer to requests for particulars; in various affidavits filed on behalf of the Pavlovic parties; and in submissions served by the Pavlovic parties on contested interlocutory applications. 3. Universal acknowledges that it did not seek the prior leave of the court before making such use of the Pavlovic affidavits. Its primary position is that leave was not required for such use. It seems that no complaint was made by about such use until recently. 4. On 13 March 2017, during the hearing of an interlocutory application by the Universal parties for disclosure by the Pavlovic parties (by way of discovery), counsel then appearing for the Pavlovic parties objected to Universal reading an affidavit of Mr Michael Williams, the solicitor for the Universal parties, which referred to information contained in the Pavlovic affidavits. Reference was made to such use being contrary to s 138 of the Evidence Act 2005 (NSW). Ultimately the objection was not pressed on that occasion, although Mr Pavlovic reserved his right to object to use of the Pavlovic affidavits by Universal at the forthcoming trial: Universal Music Australia Pty Ltd v Pavlovic & Ors; Pavlovic & Anor v Universal Music Australia Pty Ltd [2017] NSWSC 247. 5. It should be noted that Mr Pavlovic does not press his objection by reference to s 138 of the Evidence Act. Universal's application for leave 1. Universal's interlocutory process dated 19 March 2017 was filed in both the Universal proceedings and the Pavlovic proceedings. Universal seeks the following relief in par 1: 1 Universal and Modular Recordings Pty Ltd be granted leave to use information and documentation obtained as a result of the orders made by this Court in proceedings no. 2015/347134 on 15 December 2015, 11 February 2016 and 14 March 2016 in proceedings no. 2015/77691 and 2015/347134, being the affidavits of Mr Stephen Pavlovic sworn on 24 December 2015, 28 January 2016, 12 February 2016, 25 February 2016, 26 February 2016, 2 March 2016 and 21 March 2016 (including all exhibits and annexures), including in respect of such use as occurred before the date of this order. 1. As indicated Universal's primary position is that it does not require leave to use the Pavlovic affidavits. Universal submits that on proper construction of the undertaking the concluding words "other than to give effect to these orders" are to be understood as referring to giving effect to the purpose of the orders. That purpose, it was submitted, was to produce information and documents for use in proceedings in which Universal seeks final relief against Mr Pavlovic for an accounting in respect of monies received by him or entities with which he is associated. 2. Nonetheless, Universal seeks leave (for more abundant caution) to use the Pavlovic affidavits in the two proceedings, in circumstances where Mr Pavlovic has foreshadowed an objection to such use by Universal at the trial. 3. On the hearing of the application, senior counsel for Mr Pavlovic submitted that it is not necessary for the court to determine the anterior question of the proper construction of the undertaking; that is, whether or not the use of the Pavlovic affidavits by Universal in the two proceedings required the prior leave of the court. Counsel indicated that Mr Pavlovic does not object to the grant of leave to Universal to use such affidavits in the proceedings, while submitting that the court should impose two conditions of leave which are referred to below. 4. It is convenient to deal with the matter on that basis. Among other things, the construction question potentially has wider implications than the issues in the present proceedings and the court has only limited time available in the Corporations List to deal with interlocutory disputes; particularly having given considerable time recently to dealing with other pre-trial applications in these proceedings. Whether any conditions of leave should be imposed? (a) Should a nunc pro tunc order be made 1. The first proposed condition is that the leave operate ex nunc not nunc pro tunc as sought by Universal. The explanation for this condition is that to the extent that Mr Pavlovic has suffered any harm consequent upon the alleged breach of the undertaking his remedies, it was submitted, including seeking compensation under the usual undertaking as to damages, should be preserved. 2. Counsel for Mr Pavlovic initially submitted that the Court did not have power to grant leave nunc pro tunc to the Universal parties to use the Pavlovic affidavits in the two proceedings. As will appear it is not necessary to address that submission. Nonetheless, it should be observed that there seems to be no reason in principle why a nunc pro tunc order could not be made if the circumstances warranted such an order. Such an order was made by Bromwich J in Nicholls (Trustee) v Hertslet [2016] FCA 655 at [47]. 3. Next, counsel contended that Mr Pavlovic had suffered harm at least in respect of Universal's commercial decisions in relation to a "sale notice" being informed by the disclosure material in breach of the undertaking. Reference was made to certain paragraphs of the affidavits of Ms Don and Mr Forato filed on behalf of Universal. Counsel for Universal responded that on a proper reading of those affidavits no such use had been made of the information in Pavlovic affidavits and that no prejudice to Mr Pavlovic had been demonstrated if a nunc pro tunc order was made. 4. In my view it is preferable to stand over this question until the trial, when the court should be in a better position to assess whether a nunc pro tunc order, if pressed by Universal, would prejudice Mr Pavlovic in relation to any use which Universal has made of the Pavlovic affidavits without the prior leave of the court. 5. One further matter should be mentioned. Counsel for Mr Pavlovic acknowledged that if the court deferred the question of a nunc pro tunc order to the trial, no point would be taken by Mr Pavlovic that it was necessary for the Universal parties to reserve any of their evidence or documentary tender material in so far it included information or documents obtained from the Pavlovic affidavits prior to the Universal parties obtaining the leave of the court to use those affidavits in these proceedings. (b) Protection against self-incrimination 1. The second proposed condition (as revised by the Pavlovic parties after the conclusion of oral argument) is in the following terms: The leave is granted on condition that the Pavlovic's right to object to the use of any of the material in any subsequent proceeding brought by Universal or Modular Recordings against the Pavlovic Parties on the grounds contemplated by [9] of the standard form of ex parte Freezing Order included in PN SC Gen 14 is preserved. 1. Counsel for Mr Pavlovic submitted that such a condition was appropriate in circumstances where Mr Pavlovic had not claimed privilege from self-incrimination when swearing and serving the disclosure affidavits and it was now apprehended that the Universal parties might seek to use the Pavlovic affidavits for the purpose of fresh proceedings against Mr Pavlovic for alleged breach of the Copyright Act 1968 (Cth). 2. Notably this submission was not supported by an affidavit from Mr Pavlovic explaining why he had not made a claim of privilege against self-incrimination when swearing and serving the disclosure affidavits (as permitted by the orders referred to at [4] above). In particular, there is no evidence presently before the court that Mr Pavlovic did not claim the privilege because, notwithstanding that the terms of Universal's undertaking were expressed to be "subject to the leave of the Court", he believed (whether or not upon legal advice) that the terms of the undertaking precluded Universal from later seeking leave to use the Pavlovic affidavits for the purpose now apprehended by Mr Pavlovic, and had he understood that Universal might seek leave to use the disclosure affidavits for that purpose in other proceedings, he would have availed himself of the procedure in the orders for claiming privilege against self-incrimination. 3. Universal submitted that the proposed condition was inappropriate for three reasons. First, that Universal would need to obtain the court's leave to use the Pavlovic affidavits outside these two proceedings, including in any proceedings against Mr Pavlovic for alleged copyright offences, and in any event, the question of use in other proceedings is entirely hypothetical, there being no evidence that other proceedings are contemplated. Second, that Mr Pavlovic should not obtain an advantage by the imposition of a condition which he does not presently enjoy, since he did not claim privilege against self-incrimination when swearing and serving his disclosure affidavits. Third, that the terms of the proposed reservation of rights are vague and uncertain in that they do not accurately describe the information and documents that were the subject of the disclosure orders made by the court. 4. There is force in Universal's submissions, although some qualifications should be noted. First, it can be accepted that, at present, the Pavlovic affidavits cannot be used by the Universal parties in other proceedings without leave of the court. This follows from both the express terms of the undertaking, and also the so-called "implied undertaking" not to use documents disclosed in proceedings for a purpose other than the conduct of the legal proceedings in question: Hearne v Street (2008) 235 CLR 125 at [1]. However, the implied undertaking ceases to apply to a document which is read or referred to in open court in a way that discloses its contents. In Hearne v Street, Hayne, Heydon and Crennan JJ said at [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. (emphasis added; footnotes omitted) 1. Second, as I understand the submissions of the Universal parties they accept that the express undertaking will continue to apply even if documents or information from the Pavlovic affidavits is received into evidence in the present proceedings. 2. Third, I accept Universal's submission that the proposed condition reserving a right to Mr Pavlovic to object to the use of the material in the Pavlovic affidavits in any subsequent proceedings brought by the Universal parties against the Pavlovic parties, would afford Mr Pavlovic an advantage he does not presently have. In addition, Mr Pavlovic has not made out a case at this point which would otherwise justify imposing the proposed condition. 3. Fourth, and in any event, I accept Universal's submission that the proposed condition is too widely expressed. It does not identify the material in the Pavlovic affidavits which is now suggested might have been the subject of a claim for privilege against self-incrimination. Further, it is inappropriate to speak in terms of preserving a privilege that has yet to be enlivened. A condition in the wide and unqualified terms sought by Mr Pavlovic is not justified. 4. I decline to impose the second proposed condition. 5. I would mention one further matter. Refusal of the proposed condition does not preclude the Pavlovic parties seeking an order at trial restricting the disclosure or use of any document, received into evidence. See, Uniform Civil Procedure Rules 2005 (NSW) r 21.7, in relation to discovered documents. Undoubtedly the court can also, in appropriate circumstances, restrict the disclosure and use (in other proceedings) of the information and documents contained in the Pavlovic affidavits insofar as it is received into evidence. That however is a matter for trial, if and when particular information or documents is sought to be tendered by the Universal parties. Conclusion and orders 1. Since it is not necessary to determine the construction of the undertakings given by Universal, and the grant of leave is not opposed, leave should be granted to Universal, in so far as and to the extent necessary, to use the Pavlovic affidavits in these two proceedings. The question of a nunc pro tunc order should be deferred to the trial. 2. As to costs, it was common ground that the costs of the application should be costs in the cause. 3. Accordingly I make the following orders: 1. Insofar as and to the extent necessary, grant leave to Universal Music Australia Pty Limited and Modular Recordings Pty Limited to use the following affidavits of Mr Pavlovic, in proceedings numbered 2015/347134 (the Pavlovic proceedings) and proceedings numbered 2015/77691 (the Universal proceedings): 1. Affidavit of Stephen Pavlovic sworn 24 December 2015. 2. Affidavit of Stephen Pavlovic sworn 28 January 2016. 3. Affidavit of Stephen Pavlovic sworn 12 February 2016. 4. Affidavit of Stephen Pavlovic sworn 25 February 2016. 5. Affidavit of Stephen Pavlovic sworn 26 February 2016. 6. Affidavit of Stephen Pavlovic sworn 2 March 2016. 7. Affidavit of Stephen Pavlovic sworn 21 March 2016 (together, "the Pavlovic affidavits"). 1. Stand over to the trial the balance of par 1 of Universal's interlocutory process filed 19 March 2017, insofar as Universal seeks an order nunc pro tunc for leave to use the Pavlovic affidavits prior to the date of this order. 2. Costs of Universal's application filed 19 March 2017 shall be costs in the Pavlovic proceedings and the Universal proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 March 2017