Australian Vocational Driving Institute Pty Ltd v State of Victoria; State of Victoria v Austwide Institute of Training Pty Ltd
[2014] VCC 480
•2 May 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-12-04754
CI-12-01722
| AUSTRALIAN VOCATIONAL DRIVING INSTITUTE PTY LTD (ACN 140 216 413) | Plaintiff |
| v | |
| STATE OF VICTORIA (IN SUBSTITUTION FOR THE VICTORIAN SKILLS COMMISSION) | Defendant |
AND
| STATE OF VICTORIA (IN SUBSTITUTION FOR THE VICTORIAN SCHOOLS COMMISSION) | Plaintiff |
| v | |
| AUSTWIDE INSTITUTE OF TRAINING PTY LTD (ACN 118 002 216) | Defendant |
JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9, 10, 11 April 2014 | |
DATE OF JUDGMENT: | 2 May 2014 | |
CASE MAY BE CITED AS: | Australian Vocational Driving Institute Pty Ltd v State of Victoria; State of Victoria v Austwide Institute of Training Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 480 | |
REASONS FOR JUDGMENT
Subject: `Harman’ Obligation
Catchwords: `Harman’ Obligation; application for leave to use documents discovered in one proceeding as evidence in second proceeding; allegation that obligation already breached by use of documents for pleadings and by reason of search process itself; obligation not breached; search of materials not in itself a breach; leave to use granted; application to disqualify legal advisers to applicant dismissed.
Cases Cited:Home Office v Harman [1983] AC 280; Hearne v Street (2008) 235 CLR 125; Commonwealth v Temwood Holdings Pty Ltd (2001) 25 WAR 31; Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476; ASIC v Australian Property Custodian Holdings Ltd [2013] FCA 74; Re Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 SCR 217; ASIC v Marshall Bell Hawkins Ltd [2003] FCA 833; Ambridge Investments Pty Ltd v Baker (No 3) [2010] VSC 545; BSkyB Broadcasting Group PLC v Virgin Media Communications Ltd [2008] 4 All ER 1026; Laen Pty Ltd v At the Heads Pty Ltd & Ors [2011] VSC 315; Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283; Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580;
Judgment: AVDI’s summons is dismissed and the relief sought by the State is granted. The State is directed, within 14 days of this day, to bring in short Minutes to give effect to these reasons.
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. J. Williams SC with Mr A. P. Dickenson | Vernon Da Gama & Associates |
| For the Defendant | Mr M. K. Moshinsky SC with Dr K. O’Gorman | Victorian Government Solicitors |
HIS HONOUR:
Background
1 These two proceedings relate to a dispute between the State of Victoria as a funding authority and registered training organisations under the funding scheme for vocational education and training.
2 In proceeding CI-12-01722 the State of Victoria brought proceedings against Austwide Institute of Training Pty Ltd (“Austwide”) as successor to its now abolished agency, the Victorian Skills Commission, seeking an amount of approximately $800,000, or, alternatively, damages at common law, or under the Trade Practices Act, or the Australian Consumer Law. The State alleged inter alia that Austwide had engaged in misleading and deceptive conduct relative to its performance under the relevant funding agreement. It alleged that Austwide had been overpaid. Austwide denied the State’s allegations and counterclaimed for several hundred thousand dollars which it alleged was properly owing to it under the funding arrangements. The State had suspended the grant of further funding to Austwide and that situation persists to this day. Austwide continues to provide training and services to students but without the advantage of funding from the State of Victoria.
3 Following the usual interlocutory steps, this proceeding came on for hearing before Her Honour Judge Kennedy in February of this year. It settled after a couple of days of hearing, with her Honour making Consent Orders awarding certain amounts to Austwide on its counterclaim and to the State of its claim. The balance went in favour of the State as to some hundreds of thousands of dollars.
4 The litigation involving Australian Vocational Driving Institute Pty Ltd (“AVDI”) was of a broadly similar character except that AVDI commenced the proceedings and therefore had carriage of them as plaintiff.
5 In October 2013, the State proposed to amend its then defence and counterclaim. The application was opposed. The State’s case was that funding was payable relative to students only if they were “eligible” in accordance with the terms of the relevant funding agreement. The effect of the agreement, according to the State, was that the students would be “eligible” only if they were employed by an organisation meeting the definition of “National Enterprise” under the agreement. In the case of AVDI, the “national enterprise” said to have employed the relevant students was Metro Security Services (Vic) Pty Ltd.
6 According to an affidavit from Mr “M”, a solicitor in the employ of the Victoria Government Solicitors Officer, who had the care and conduct of both proceedings, a telephone survey conducted by the State of some 56 students, for which AVDI claimed an entitlement to funding, showed that none of them had “ … performed any work for Metro, and that they had not been employed by Metro”. It was with respect to these matters that the State sought to amend its defence and counterclaim. The application came on for hearing before His Honour Judge Anderson on 18 November 2013. Counsel for AVDI, Mr Dickenson, opposed the grant of leave and raised a number of objections to the form of the proposed amendments. Apparently, his Honour made a number of criticisms, too. The result was that the amendment in its initial form was not proceeded with and senior counsel for the State told his Honour that the State would deal with the various matters raised.
7 Mr M instructed senior and junior counsel to draw and settle the amendments in light of the matters raised at the hearing on 18 November. The State’s senior and junior counsel met with Mr Dickenson in December 2013 and Mr M forwarded certain documents to Mr Dickenson at the request of senior and junior counsel. Eventually, on 21 February a Minute of Consent Order was signed by the parties consenting to amendments along the lines of the revised amendments resulting from the matters raised before Judge Anderson. His Honour made orders in accordance with the consent minute in chambers on 27 February 2014 and the Amended Defence and Counterclaim was filed on 26 February 2014. Meanwhile, the AVDI proceeding stood fixed for hearing in early April.
8 Vernon Da Gama & Associates have acted for Austwide in the Austwide proceeding and Mr M provided a draft summons to Mr Da Gama on 17 March 2014 in the Austwide proceeding seeking a release of the State from its obligation in respect of certain matters discovered by Austwide in that proceeding to enable the use of those documents in the trial of the AVDI proceeding. The summons was filed on the 19th and served on Austwide on the 20th. Austwide has now retained a new firm of solicitors to act for it. AVDI filed and served a summons in its proceeding on 19 March seeking orders staying the State’s counterclaim permanently or, alternatively, restraining the Victorian Government Solicitors Office permanently from acting on the State’s behalf in the proceeding. The State’s summons was returnable initially on 21 March and was adjourned by consent to further hearing on 26 March.
9 The submissions made on behalf of AVDI in support of its summons, which were served on the afternoon of 25 March, indicated that AVDI’s contention was that the State and its solicitors and counsel had wrongfully used the Austwide documents for the purposes of the AVDI proceeding. As a result of this contention, Mr M took the view that senior and junior counsel, who had acted for the State in the AVDI matter until that time, should be replaced by new counsel for the purposes of dealing with the issues now raised. As a result, Mr Moshinsky SC was retained and appeared before me on 26 March 2014. Following preliminary discussions and arguments, I determined to vacate the hearing date and set down the two summonses for hearing on 9 April 2014.
The State’s summons
10 By its summons, dated 17 March 2014 and filed in the Austwide proceeding, the State sought an order against Austwide that “the State of Victoria (and its servants and agents) be released from its implied undertaking in relation to the following documents produced by way of discovery in this proceeding by [Austwide] …”. There then followed a description of some 38 documents being extracts from the student training files for a number of Austwide’s students. The documents are identified predominantly by reference to their identification of particular individuals as trainers or assessors.
AVDI’s summons
11 AVDI’s summons, filed in the AVDI proceeding on 19 March, sought to have the State’s counterclaim permanently stayed, or, alternatively, that the Victoria Government Solicitors Office “be permanently restrained from acting on behalf of [the State] in the proceeding”.
12 In the course of his submissions before me, Mr D Williams SC, who represented AVDI with Mr Dickenson of counsel, stepped back from the release sought in paragraph 1 of the summons. He persisted with the alternative or further release in paragraph 2, relative to the involvement of the Victorian Government Solicitors Office, and contended that such orders should be made, and in light of the material that had emerged in the course of the hearing should extend likewise to senior and junior counsel involved in drawing the Amended Defence and Counterclaim. As to the first prayer item in the prayer for relief, he conceded that the relief sought might be regarded as somewhat extreme.
13 Mr Williams submitted that an appropriate substitute piece of relief should be that paragraph 25 of the present Amended Defence and Counterclaim of the State in the AVDI proceedings should be struck out with an order that the State be prohibited from renewing any allegation which was in substance to the same affect as the struck out paragraph.
The Harman obligation
14 Where a party obtains documents from an opposing party in the course of litigation by compulsory disclosure processes such as discovery, the party receiving the documents is subject to an obligation not to use those documents for any purpose other than the purposes of the proceeding in which the disclosure has been made. To use those documents for any other purpose without the consent of the disclosing party, or of the court in which the proceeding was brought, constitutes contempt.
15 The leading case in the modern era establishing this proposition is the decision of the House of Lords in Home Office v Harman [1983] AC 280. Their Lordships stated the obligation relying on the person receiving the document as an implied undertaking. In Hearne v Street (2008) 235 CLR 125, 157-9 at [105]-[107] it was determined that the “implied undertaking” was better seen as a substantive obligation imposed by law rather than one which was assumed as an undertaking.
16 The “Harman principle” can be regarded as authoritatively stated for Australian purposes in the judgment of Hayne, Heydon and Crennan JJ in Hearne v Street as follows:
“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 arbitratorhttp:// - #, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.”
17 Like many legal principles, this is capable of clear statement in general terms and at a certain level of abstraction. Its application in particular cases, such as the present, may prove problematic.
18 Here, the documents in question were produced in the Austwide proceeding during the discovery process. There is no doubt that the Harman principle applies to that. AVDI, however, through its counsel, Mr Williams SC and Mr Dickenson, contend, first, that the Harman principle has already been breached by the State of Victoria in the use which, they say, the State has already made of the relevant documents. Secondly, they say, that no release should be given to the State from the operation of the principle, either retrospectively or prospectively.
19 Mr Moshinsky SC and Dr O’Gorman, who appear for the State, concede that the Harman principle applies here. They deny that the State has breached it by what it has done already. They contend that leave should be given. If their primary submission, that the principle has not been breached, were not accepted, they contend that a release should be given nunc pro tunc, that is, retrospectively.
20 Central to the issues for determination in this proceeding is paragraph 25 of the State’s Amended Defence and Counterclaim in the AVDI proceeding.
Paragraph 25 of the Amended Defence and Counterclaim
21 The State’s primary counterclaim is based on simple contractual and restitutionary principles. It says that AVDI received $653,460.07 for claims made under its 2011 service agreement with the State’s Skills Commission, to which it had no legal entitlement. As I understand paragraphs 23 and 24 of the Amended Counterclaim, the lack of the legal entitlement and certain alleged express entitlements under the contract for the State to require refund create, it is said, an obligation on AVDI to refund those monies.
22 Paragraph 25 of the Amended Counterclaim proceeds to allege that “AVDI knew or ought to have known that the payments received by AVDI purportedly under the 2011 Service Agreement were not used to provide Training Services to Eligible Individuals”. There then follow Particulars in paragraphs (a)-(j) which focus on the relationship of 1,600 alleged “Eligible Individuals” relative to their connection with the organisation referred to as “Metro”. The State says that students attracted funding as `Eligible Students’ under the relevant agreement only if they were employed by a “National Enterprise”. Metro was said to be the “National Enterprise” for AVDI’s students. The State says at all times Metro was a mere shell, incapable of employing 1600 students. Indeed, for a significant period Metro was deregistered under the Corporations Act.
23 Amongst the grounds on which it is contended that AVDI “knew” the true situation was its knowledge of the status of Metro. According to paragraph (c), “At all material times, Metro shared offices with a company called Austwide Institute of Training Pty Ltd…at Level 1, 27 Albert Street, Footscray, Victoria”. Paragraph (d) refers to certain officers of Austwide as being “associated with AVDI”. Paragraph (e) alleges, “Various officers of AVDI” were employees or former employees of Austwide. It specifically names them as: Mr Hammaad Hassan and Mr Rizwan Hassan.
24 Mr Hammaad Hassan, a director and 49 per cent shareholder of AVDI, was said to be a former employee of Austwide and to have attended meetings on Austwide’s behalf in 2010 (Particular (e)). An allegation which has turned out to be crucial appears as sub-paragraph (iii) of that paragraph as follows:
“Mr Rizwan Hassan was a trainer employed by Austwide. Mr Rizwan Hassan signed a number of documents apparently on behalf of AVDI.”
Evidence of Mr M
25 Mr M made a number of affidavits, both in the Austwide proceeding and the AVDI proceeding, relative to the matters before me now. He sought to explain precisely how the application for release came to be made.
26 Mr Moshinsky SC and Dr O’Gorman, on behalf of the State, submitted that his evidence conclusively rebutted the allegations of past or existing breaches of the Harman obligation on behalf of the State.
27 Mr M described the steps which he had taken as the officer in the Victorian Government Solicitor’s Office having the general conduct of the proceeding on behalf of the State. He gave evidence as to what senior and junior counsel had had resort to in framing paragraph 25 of the State’s Amended Defence and Counterclaim on the basis of the information imparted to him by them.
28 Mr M said that in the course of his day-to-day management of the Austwide proceeding on behalf of the State, he perused the documents discovered by Austwide:
“Purely for the purposes of my work on [that] proceeding”.
He said that it became evident to him, “that the names of training and administrative staff that appeared in the student files for each proceeding overlapped.”
29 As a result, he directed Ms Sneddon of the Department of Education to review a sample of the student files in the Austwide proceeding:
“…in order to identify for me the documents that contained the names of training or administrative staff whose names also appeared in the AVDI documents. I instructed the review to be conducted for the purposes of making an application to be released from the implied undertaking [viz the Harman obligation] in advance of the trial of [the AVDI] proceeding (which was previously fixed for 27 November 2013). At the time I instructed Ms Sneddon, my understanding was that the court would not make an order releasing the State from its implied undertaking in respect of all of the documents that Austwide had discovered in the Austwide Proceeding, or all information derived from those documents. For that reason, in an email to Ms Sneddon dated 8 November 2013, I instructed Ms Sneddon to ensure that the review of the Austwide documents was conducted in such a way as to enable the State to be able to specify with reasonable particularity the documents in respect of which the State sought leave to be released from its implied undertaking.”
30 Ms Sneddon sent an email to Mr M dated 7 November 2013 at 3.29pm, where she said, “I’ve looked at 43 AVDI files and then tried to find the same names on a selection of approx 30 [Austwide] files.” She said she found the following names appearing in both:
“- Rizwan Hassan
- Sidra (no last name, same signature)
- Faiza (no last name, same signature)
- Shabnam Thapa (mostly only Shabnam, no last name)
- Hafsa R Hassan (mostly only Hafsa, no last name)
- Sannia Azeemi
- Riaz Ahmed
- Mandeep Kaur”
31 Her email continued, “There were a few trainers and admin staff that were on AVDI and not in the sample from [Austwide] so far. I can look at a broader sample if necessary.”
32 At 11.49am the following day, 8 November 2013, Mr M responded in an email to Ms Sneddon thanking her for her work and continuing:
“As indicated, it may be necessary for us to make application to the Court for orders that we be granted leave to be released from our ‘Harman undertaking’ in relation to documents produced by Austwide in the course of discovery.
If such an application is made, the orders which we seek will seek to specify, with reasonable particularity, the documents in respect of which we are seeking leave. The court would not make an order releasing us from our undertaking in respect of all documents produced by Austwide, or all information derived from those documents; that would be considered too broad…”
33 At the same time, Mr M copied Ms Sneddon’s email to senior and junior counsel. He told them:
“In anticipation that we are likely to make an application to the court at some stage to be released from our implied undertaking in respect of such documents, I have asked Georgina to provide me with details of a range of these documents…Could you please advise approximately how many of these documents you think we would require (for example, would 1-2 documents with the name and/or signature of a particular individual from Austwide’s student files be sufficient, or would you require a sample of 10 or more?).”
34 Senior counsel responded subject to his junior’s views:
“I think we only need one sheet of paper for each officer-in-common to prove the point. (And if we have independent evidence from a source other than the Austwide discovery docs that a particular officer was an Austwide officer, then we don’t need to rely on the discovery doc at all, but I’m assuming we will need to rely on Austwide discovery docs to prove the point).”
35 Shortly afterwards, Mr M responded to senior counsel, thanking him for his advice and continuing:
“We may have some limited independent evidence that could establish that Rizwan Hassan was an Austwide officer, because a couple of students we have spoken to who received training in Security Operations qualifications have identified a ‘Rizwan’ as their trainer. However, on the fact (sic) of it, I don’t think it is the sort of evidence, in isolation, which could prove the connection. Documents from the Austwide student files specifically name ‘Rizwan Hassan’ in training plans and assessment worksheets as a trainer.
Other than this, I don’t believe there is any ‘independent evidence’ in relation to the other individuals from a source other than the Austwide student files.”
36 A few moments later, junior counsel commented:
“In addition, I understand that SVTS records [that is, the record of emails passing between the department and registered training operations] indicate that Rizwan Hassan made enquiries on behalf of Austwide in 2009 via that system. The email address is identical. SVTS is not subject to any Harman undertakings.”
37 Mr M responded, observing that this was “a fair point”. As it turned out, the subsequent investigation showed that junior counsel’s recollection on this point was inaccurate.
38 Mr M said:
“I have been informed by [senior and junior counsel] and believe, that, in drawing and settling the amendments contained in the Second Proposed ADCC, Counsel did not rely on, or otherwise use in any way, any information derived from documents discovered by Austwide in the Austwide Proceeding.”
39 In particular, he said they assured him that they did not rely on any information from the Austwide discovery to include the allegation in paragraph 25(e)(iii) that, “Rizwan Hassan was a trainer employed by Austwide”. He swore that counsel were aware that a telephone survey conducted by the State in late October 2013:
“…included instances where students identified “Austwide”, not AVDI, as the entity which delivered training to them, and further identified a trainer by the name of “Rizwan” as the person who provided training to them.”
40 He said that junior counsel had told him that she was aware, and had been for a considerable period before, that Mr Rizwan Hassan was associated with Austwide by virtue of an ASIC company search which showed that he had been a shareholder of that company and that he had engaged in correspondence with the Department on behalf of Austwide. Mr M said that he did not rely on or otherwise use in any way, information derived from documents discovered by Austwide.
41 In cross-examination, Mr M conceded that neither senior nor junior counsel could recall affirmatively what they might have had in mind, in drawing and settling paragraph 25(e)(iii).
42 Mr M said that senior and junior counsel requested him to provide certain documents to AVDI’s junior counsel, Mr Dickenson, relative to paragraph 25, which he forwarded to Mr Dickenson under cover of a letter dated 19 December 2013. He exhibited a copy of the letter, though not the documents which were forwarded under cover of that letter. He was shown the documents in question in the course of cross-examination but these documents were not themselves put into evidence before me.
43 Mr M said that senior and junior counsel had been briefed with the AVDI discovery material in the form of a compact disc. They were holding that brief at the time that paragraph 25(e)(iii) of the State’s Amended Defence and Counterclaim were drawn and settled. They did not hold the Austwide discovered documents in either hardcopy or electronic form as part of their brief in the AVDI proceeding.
44 He noted that, whilst he and counsel contemplated an application for release from the Harman obligation such as was filed in March 2014 and is now before me, in November 2013, it was determined not to bring the application then because it was feared that to introduce further, complex interlocutory matters would imperil the then trial date in November 2013.
45 Mr M said that, whilst it was not a part of the State’s pleaded case, “the narrative” which it had relied on was that Austwide was blocked from further participation in the State’s funding arrangements and that those behind Austwide established AVDI as a “Phoenix” company to continue the endeavours previously conducted by Austwide and thereby outflank the blockage on its continued funding.
Submissions on behalf of AVDI
46 Mr Williams SC and Mr Dickenson submitted, first, that I should find that the Particular at paragraph 25(e)(iii) of the Amended Defence and Counterclaim was based, “Whether knowingly or unknowingly, [on] information derived from Austwide’s discovery”. This necessarily entailed a breach by the State of its Harman obligation.
47 They noted that the draft pleading produced in October but not ultimately proceeded with, did not include this allegation. It was added, they said, during the 30 day gap between it and the final version during which Ms Sneddon carried out her survey of student files described in Mr M’s evidence.
48 The allegation included not only a statement that Mr Hassan was associated with Austwide but specifically that he was a trainer. They noted that Mr M had conceded that the discovered material from the Austwide proceeding included a rubber stamp used by Mr Rizwan Hassan, describing himself as “trainer”. They continued, “There is no other material which would tend to show that Mr Rizwan Hassan was a trainer employed by Austwide.”
49 They conceded that there was other material which might show connections between him and Austwide but not that he was a trainer. Insofar as the phone survey was concerned, it identified a person as “Rizwan”, but this provided no proper objective basis for a conclusion that this “Rizwan” was Mr Rizwan Hassan, a person shown by records at the Australian Securities & Investments Commission as being an Austwide shareholder.
50 Mr Williams had put to Mr M in cross-examination that to conclude the “Rizwan” referred to in the telephone survey was necessarily Mr Rizwan Hassan, was as unjustified as if the person identified in the survey was “Richard”, and the ASIC records showed that a Mr Richard Jones had been a shareholder of Austwide. Mr Williams had put it to Mr M that Rizwan was a very common given name in Pakistan. Mr M was unable to disagree.
51 Insofar as junior counsel had suggested that the Education Department’s database disclosed that Mr Rizwan Hassan was a trainer at Austwide, this turned out to be incorrect.
52 Insofar as Mr M denied that counsel relied upon the Austwide discovery in framing the contentious paragraph, limited weight should be given to that denial. They conceded that there were understandable reasons why the State might have wished to shield senior and junior counsel from cross-examination. Nevertheless, the fact remained that, objectively, the denials which were in hearsay form, only, and deprived AVDI of the opportunity to test the ultimate maker of the statements, meant that only limited weight should be given to them.
53 Aside from paragraph 25(e)(iii), they said that the very conduct of the search of materials conducted by Ms Sneddon at the request of Mr M was, in itself, a breach of the Harman obligations.
54 They referred to Commonwealth v Temwood Holdings Pty Ltd (2001) 25 WAR 31. They noted that the court’s judgment there rejected any view that a governmental party was entitled to regard its law enforcement functions as trumping the Harman obligation.
55 They referred also to the judgment of Lee J in Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476.
56 They conceded that an application for release from the obligation necessarily needed to identify specific documents. A blanket application to resort to discovered materials generally would not be sufficient. They referred to ASIC v Australian Property Custodian Holdings Ltd [2013] FCA 74 per Murphy J.
57 They said that the private interest of a party subjected to discovery or other compulsory disclosure processes in litigation should be overridden only in special circumstances and for clearly good reasons, “Because if that private interest was routinely overridden, then it would undermine, or tend to undermine confidence in the administration of justice”.
58 They conceded that counsel or solicitors would be entitled to investigate to recover a particular document which had been discovered in an earlier proceeding if that document could be identified specifically. It would not be proper, however, for a practitioner to set in train an investigation of documents discovered in a previous proceeding by reference only to belief or a memory that a particular class of document might be of use in the subsequent proceeding. Nor would it be proper for a search to be set in train of documents discovered in a previous proceeding merely by reference to a particular subject matter on the basis that it would likely yield fruitful material.
59 It followed that a legal team unable, from unaided memory, to identify one or more specific documents from discovery in a previous proceeding, would be unable to mount a tenable application for release from Harman obligation to the court in question. They would be precluded by that obligation from commencing an investigation without leave, even if there was no public deployment of any of the documents, whether by their use as the basis for a pleading or their being put into evidence in the second proceeding.
60 The effect of the evidence of Mr M and the email exchanges between him and senior and junior counsel was, they said, that the State approached this matter on the basis that it could use the discovered material in the Austwide proceeding to give it leads and ideas as to allegations that might be made in the AVDI proceeding. It would then seek to establish an evidentiary basis for these matters from unrestricted materials and would consider making an application for release from the Harman obligation only if no unrestricted materials could be found and proved relevant.
61 This approach to material discovered in the previous proceedings should be condemned.
62 They said that if the disputed documents in truth did disclose a case of fraud, they could implicate Austwide or persons associated with it. This sort of risk was a powerful public policy basis for the Harman obligation and a reason why release from it ought not readily be given, or should not be given at all, in this case.
63 They conceded that the application to strike out the whole of the counterclaim or have it stayed in totality was overambitious. The order which they ultimately sought in this respect was to strike out paragraph 25 with an order precluding anything which would, in substance, amount to its repleading.
64 They said the paragraph or, at least, the contentious part of it, was the result of misconduct, albeit not deliberate misconduct, on the part of those acting for the State.
65 They said the logic of their contention, that the Victorian Government Solicitors Office should be precluded from continuing to act, would require that senior and junior counsel involved, likewise, be precluded from continuing to appear. They continued:
“We would say that given that Ms Sneddon’s work has been disseminated to many in the Department, which is the claim, and which is the arm of the State of Victoria which is conducting the defence and counterclaim…It would seem to us that there has been such a pollution, if you like, of the relevant corporate mind of the State that it’s impossible to imagine that paragraph 25 could now be pursued by the State without that corporate mind bringing to bear information which, had it complied with its legal obligations, it would never have had.”
66 Trivial breaches of legal obligation could be excused but here, they said, the breach was not trivial. Moreover, they said, there had not been a frank and full disclosure in seeking release. They conceded that in the course of his cross-examination, Mr M had been frank and forthright in his answers. They submitted, however, that his affidavit which, according to the evidence, had been the subject of deliberation and settling by a member more senior in the Victorian Government Solicitor’s Office lacked in forthrightness insofar as it did not directly state, as Mr M conceded in cross-examination, that senior and junior counsel were now unable affirmatively to state what it was they had in mind and contemplation in framing paragraph 25(e)(iii) of the Amended Defence and Counterclaim.
67 They said that with respect to the future involvement of the relevant practitioners:
“…once one has in one’s mind information which has come from a forbidden source,…then the only way that the court can ensure that justice is done, and seen to be done is to restrain that lawyer, or lawyers from continuing to act in the matter.”
68 They accepted that, hypothetically, if a client briefed counsel to obtain a release from the Harman obligation, and that application was dismissed, necessarily, the counsel involved in the unsuccessful application would, on parity of reasoning, be disqualified from further involvement in the second proceeding.
Submissions on behalf of Austwide
69 Austwide was represented by Mr Twidale of counsel. Mr Twidale endorsed and supported the submissions made by Mr Williams and Mr Dickenson. He said, however, that his client was represented at the hearing, “Solely for the role of opposing the State’s summons”.
70 Mr Twidale submitted that I should make the findings, urged by Mr Williams and Mr Dickenson, that the State had already breached the Harman obligation. He continued:
“…then it must follow that it cannot be right for the State today to come before this Court and seek a release in relation to a portion of those documents, which they’ve already, according to AVDI, searched through in November for the purpose of pleading paragraph 25.”
71 Were that submission not accepted, he submitted more generally that it had not been established that release from the Harman obligation should be granted.
72 Mr Twidale submitted that the appropriateness of the release needed to be judged on the pleadings as they now stood. Most of the persons identified as overlapping between the two organisations in the memorandum by way of email prepared by Ms Sneddon were not mentioned in the pleadings at all. It was established, he said, that release should only be granted in “special circumstances”. What could constitute such special circumstances was considered by Wilcox J in Re Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 SCR 217, 225, where his Honour listed a large number of significant and relevant issues which he said were not exclusive and concluded by stating, “perhaps most important of all, the likely contribution of the document to achieving justice in the second proceeding.”
73 On the present state of the pleading, a favourable finding for the State could not be advanced by the contentious documents. He said:
“…here’s a pleaded case two weeks before the trial, there’s no mention of these other students – three of the other trainers – there’s no mention of this Metro Phoenix arrangement. What’s pleaded is what’s pleaded, that there [were] two common staff.”
74 Mr Twidale noted that the contentious documents here made no reference to “this Metro entity”.
75 Mr Twidale referred to an affidavit on behalf of his client sworn by Mr Syed. Mr Syed’s affidavit said that Austwide had shared two offices in Footscray, one for enrolment and the other for instruction. It was the enrolment office, only, that was shared with Metro. Austwide, said Mr Twidale, continues to operate with some 1,200 students. According to Mr Syed, Austwide did not train students at the Albert Street enrolment office. He said that Metro was a separate business and Austwide treated it as such. Austwide regarded confidentiality of student records as “paramount”. Materials were not shared between Austwide and Metro.
76 Mr Syed, who said that he was a Director of Austwide, deposed never to have been a Director of AVDI or a shareholder in AVDI. He said:
“It could be very damaging should the industry…come to know that Austwide’s student records were being disclosed to another RTO without Austwide’s or Austwide’s students’ consent.
It will be very hard to attract future students to Austwide if they know that Austwide’s past students’ records were disclosed to a competing RTO.”
77 Mr Syed said that it was “common industry practice for … trainers to be retained by a number of RTOs throughout a year”. The trainers were contractors, not employees, of Austwide. He concluded, “In fact I would be surprised if Austwide’s trainers have not worked for numerous other RTOs other than Austwide, AVDI and Metro.”
Submissions on behalf of the State
78 Mr Moshinsky SC, who appeared with Dr O’Gorman for the State, submitted:
(a) that there had been no breaches of the Harman obligation by the State; and
(b) that it would be proper for the State to be released from its obligations, if necessary, retrospectively, if it were considered that there had, in fact, been a breach already.
79 They said that the denials on behalf of both Mr M and counsel should be accepted. Mr M had been cross-examined at length and had presented as a truthful and forthright witness. They conceded that there were grounds for debate as to whether, had counsel sworn affidavits and been cross-examined on the interlocutory matters involved here, they would have been disqualified from acting as counsel hereafter.
80 Nevertheless, they said the view taken by the State that they might be, and that it would be contrary to the State’s interest to be deprived of their services, having regard to their long experience and knowledge of the proceeding, rendered the State’s decision not to offer them as deponents a reasonable one.
81 They also noted that there were other sources which could form the basis of the allegation of paragraph 25(e)(iii), including the material from ASIC and the telephone survey. Whether or not the conclusion that “Rizwan” was Rizwan Hassan was reasonable, it should be accepted as an honest inference drawn by Mr M. Merely because counsel were aware of information deriving from the Austwide documents did not mean that they were relied on.
82 Next, they said that counsel had assured Mr M that they had put the Austwide discovery out of their mind. This should be believed because counsel were aware of the Harman obligation. This was mentioned in the exchange between Mr M and counsel.
83 They said there was no ground for characterising what had occurred as an instance of the practitioners using the discovery as a quarry of information which could be used to give leads to non-restricted sources of evidence. They submitted this was not, in fact, what was being done.
84 Senior counsel made the obvious point that if matters could be established from unrestricted sources, no Harman application would be required. The motivation for the search conducted by Ms Sneddon was to form the basis for a Harman application. This appeared from the email which was sent by Mr M to Ms Sneddon. They said that, given this was done in November 2013, it should be regarded as a true statement of Mr M’s state of mind and motivations and should in no way be regarded as self-serving.
85 The investigation conducted by Ms Sneddon was one which it was necessary to conduct to enable a Harman application to be made. They referred to ASIC v Australian Property Custodian Ltd [2013] FCA 74 at [9] per Murphy J; ASIC v Marshall Bell Hawkins Ltd [2003] FCA 833 [13] per Merkel J. They also referred to Ambridge Investments Pty Ltd v Baker (No 3) [2010] VSC 545 [40] and [43] per Vickery J.
86 They said the evidence established that Mr M was already aware of the overlap of staff between Austwide and AVDI and, “His search was for the purpose of bringing a Harman application, and nothing else was done with the document for information apart from bringing the Harman application”.
87 They said the authorities established that it would not have been possible to bring a Harman application without the preliminary investigation to specify the relevant document.
88 The Harman principle focused on the use to which a document is disclosed in one proceeding to use outside that proceeding. The mere knowledge of the documents would not preclude a legal practitioner from acting in other proceedings. This set this area of the law apart from the rules governing legal practitioners holding confidential information relative to an opposing party in a subsequent proceeding. He referred to the decision of the English Court of Appeal in BSkyB Broadcasting Group PLC v Virgin Media Communications Ltd [2008] 4 All ER 1026.
89 Mr Moshinsky and Dr O’Gorman said the allegation of fraud made by the State was against AVDI alleging it made false claims:
“AVDI is the one who has made the claim. The knowledge of Austwide that we’re relying on is its knowledge of Metro. We’re not suggesting that Austwide had any knowledge that AVDI was making those claims, so I think that point just falls away.”
90 As to the court’s ability to order release nunc pro tunc, they referred to Laen Pty Ltd v At the Heads Pty Ltd & Ors [2011] VSC 315, where Davies J concluded that there was power to grant a release nunc pro tunc and that the primary consideration was whether the application would have succeeded if made in advance.
91 If, contrary to their primary submissions, it was found that the State had breached the obligation, the release sought by Austwide was, they submitted, “completely disproportionate”. If it were found that there had been a breach and no release was granted, the information derived from the Austwide discovery could be regarded as illicit information which would simply be excluded from evidence in the case against AVDI. They agreed with the suggestion from me that that might be analogous to the exclusion of tendency evidence in the criminal prosecution. The prosecution team knows about the tendency evidence but this does not disqualify them from continuing to act. Likewise, they said, judges are presumed to be able to put inadmissible materials out of their mind in determining proceedings before them.
92 As to the traditional formulation, that to make good an application for release from the Harman obligation, special circumstances need to be established, they referred to the decision of the Full Federal Court in Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283, 289 [31], where their Honours said that special circumstances did not require, “Extraordinary factors [to] bear on the question before the discretion of the exercise” but rather:
“…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.”
93 They said that this formulation was approved by Davies J in the Laen case at [5]. They noted at paragraph 10 of the same case that Her Honour concluded that the court’s power in relation to its own proceeding would provide control against misuse of the material in the second proceeding. They said this would meet the concerns raised by Austwide relative to confidentiality.
94 They said that establishment of fraud was difficult and, “Every little bit helped”. They conceded that the material the subject of the State’s application fell far short of being a “smoking gun”.
Submissions in reply
95 Mr Twidale, on behalf of Austwide, said that the State’s application did not delineate with sufficient specificity the significance of the documents which were the subject of the application. In particular, he said the pleading said nothing about the “Phoenix” narrative which Mr M referred to in his evidence. This was another reason, he said, why the State’s summons should be dismissed.
96 At the very least, there should be some redaction on these documents if the release were to be given relative to them.
97 Mr Williams and Mr Dickenson said that, even if it were found that there was good reason to shield counsel from cross-examination, “That doesn’t change the fact that less weight can be given to the evidence in circumstances where it was [impossible] to contest it.”
98 As to the connection made between “Rizwan” in the phone survey and Rizwan Hassan, Mr Williams and Mr Dickenson submitted that Mr M did not say in evidence that he had made that connection “at the time, or that he instructed counsel to do so and we do not have counsel saying that they did so.”
99 Mr Williams said, the mere fact that counsel were aware of the Harman issue and that they were trying to be careful, did not preclude them from having fallen into error. Moreover, the fact that there were names identified by Ms Sneddon beyond the name of Mr Rizwan Hassan, but not referred to in the Particular, might have been mere inadvertence rather than conscious abstention from the use of Ms Sneddon’s report.
100 They said, ultimately investigation conducted by Ms Sneddon at the behest of Mr M was untargeted and not such as the law would countenance.
101 The fact that an application for release from the Harman obligation was, on the authorities, capable of being made only with proper particularisation of the relevant documents did not mean that someone contemplating making such an application was, for that reason, authorised to research the documents. Rather, it meant that if the party could not identify the documents from the memory of himself/herself or a member of the legal team, it was simply incompetent to seek to be relieved from the Harman obligation.
102 As far as putting things out of one’s mind, judges are supposed to be able to do this, but their role requires them to be impartial. Here, the State’s legal team by definition is not impartial but is duty bound to advance the interests of its client, the State.
Conclusions
Was the search through the documents a breach?
103 Mr Williams and Mr Dickenson rightly conceded that a legal team which simply draws on its own memory, is entitled to use the memory of one set of discovered documents in a previous proceeding for the purposes of considering and mounting an application that their client be dispensed from the Harman obligation for the purposes of another proceeding.
104 This is in conformity with the decision of the English Court of Appeal in BSkyB Group plc v Virgin Media Communications Ltd [2008] 4 All ER 1026. In that case, there was a dispute between two pay television groups fought across a number of venues. There were proceedings in the High Court and at least two tribunals, one dealing with competition matters and the other dealing with telecommunications issues. One group operated with separate legal advisers in the various venues, the other used the same legal team of solicitors and counsel for all matters. The first group submitted that the other group’s legal team should be disqualified from appearing in the tribunal matters because of their access to compulsorily disclosed material in the High Court proceeding.
105 The Court of Appeal specifically rejected any analogy between counsel in this situation and counsel who had had access to confidential material or documents from one party and were now seeking to appear and act against that party in subsequent proceedings. The knowledge derived from discovery in one proceedings was not to be treated as confidential information in that way. Lord Phillips of Worth Matravers CJ said:
“In the unlikely event that information in the sensitive documents were to suggest that [one of the tribunals] were proceeding on a false basis in one of the other sets of proceedings, it seems to us desirable that the lawyers should be aware of this and in a position to apply to the High Court for permission to draw the documents in question to the attention of the relevant tribunal.” [2008] 4 All ER 1026, 1038 [29]
106 If a party seeking to rely on documents discovered in one proceeding seeks release from the obligation, it must properly particularise the documents. In ASIC v Marshall Bell Hawkins Ltd [2003] FCA 833, Merkel J rejected an application for release from ASIC where it could not specifically identify documents:
“…claiming that it would be a waste of public funds for its officers to trawl through about 40 boxes of documents without knowing whether the Court was prepared to release it from its implied undertaking.” [19]
107 At [25] his Honour said, “It is incumbent upon ASIC to specify the documents in respect of which the relief is sought and the precise purpose for the release.”
108 Mr Williams and Mr Dickenson contended that in circumstances such as those which presented in the Marshall Bell Hawkins case, there was simply no way forward for a litigant seeking to make use of documents from another proceeding. It could not mount an immediate application because of a lack of specific knowledge, but would be precluded from carrying out any searches to acquire that knowledge. This seems a perverse outcome which would render the attainment of justice dependent upon the idiosyncratic tricks of the memory of one or more individuals rather than upon some more definite and convincing principle.
109 It will be appropriate enough to pronounce in another case which presents as a situation where the party seeking release embarks on the exercise without much targeting and “on the off-chance” that something relevant will be found in the discovered documents from the first proceeding on the propriety of such a procedure. That is not the situation that confronts me here.
110 Mr M had a distinct recollection of trainers being identified in student files in the Austwide proceeding. When he directed Ms Sneddon to conduct her investigation, it was not a mere trawl `on the off-chance’ that something relevant might turn up. He had a specific class of documents in mind. Admittedly, it was not an individual document. The general legal principle is that the singular includes the plural. He had a particular group of documents sharing special characteristics in mind. It is, in my view, a distinction without a difference to compare this situation to a memory that the file for a particular student, for instance, Mr Y, identified the name of his trainer.
111 The contemporary emails from November 2013 describe the investigation put in hand by Ms Sneddon as being undertaken for the purposes of considering or mounting an application for release from the Harman obligation. I see no reason not to accept this material at face value, and Mr M’s subsequent evidence to the same effect. In my view, there was no impropriety or breach of the Harman obligation in the investigation of the Austwide files which has been disclosed here.
Paragraph 25(e)(iii)
112 More difficult questions arise with respect to the pleading of paragraph 25(e)(iii) of the Amended Defence and Counterclaim of the State. This Particular appeared immediately after an email from Mr M to senior and junior counsel at 12.18pm on 8 November 2013, which included the statement, “Documents from the Austwide student files specifically name ‘Rizwan Hassan’ in training claims and assessment worksheets as a trainer.”
113 This is a piece of information drawn directly from the Austwide discovery. With some hesitation, however, I believe I should accept the denials of Mr M and of senior and junior counsel as relayed through his evidence that this was the source of the relevant paragraph. Earlier in the relevant email, which is quoted above, Mr M referred to Mr Rizwan Hassan as having been an Austwide officer, “because a couple of students we have spoken to who received training in Security Operations qualifications have identified “Rizwan” as their trainer”.
114 Those involved were conscious of the Harman obligation and the most likely inference is that counsel treated what Mr M described as “independent evidence” from the phone survey as the basis for the pleading. That they did not rely on the investigation carried out by Ms Sneddon is, in my view, supported by the fact that the Particulars do not refer to any of the other “crossover” personalities identified by Ms Sneddon.
115 It follows from these findings that there is no occasion to strike out paragraph 25 or any part of it, or to impose any restraints upon the entitlement of Mr M, Victorian Government Solicitor’s Office or senior and junior counsel from continuing to act or appear on behalf of the State in the AVDI proceeding.
Should release be granted pursuant to the State’s summons?
116 In my view, the State should obtain the relief which it seeks.
117 First, I accept the assurance that Mr Moshinsky SC gave me, that the State contemplates amending his pleading so as to refer to the names of all of the persons identified by Ms Sneddon as representing an overlap between the personnel of Austwide and AVDI. Whilst at a purely theoretical level, the submission of Mr Twidale that the merit of an application for relief must be judged by reference to the pleadings as they stood when the application was made is plausible, the State’s experience in pleading paragraph 25(e)(iii) indicates it would be hazardous for a party in the State’s position to amend its pleadings before obtaining a release. Mr Williams suggested that a draft pleading could be put down. It would remain open to counsel in the position of Mr Williams SC and Mr Dickenson, however, to contend that even the preparation of a draft pleading represented a breach of the Harman obligation.
118 More generally, the formulation of considerations which should inform the disposition of an application such as this appears in the judgment of Wilcox J in the Re Springfield Nominees case. It has been referred to and applied many times over the years. His Honour stated:
“For “special circumstances” to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present. The matter then becomes one of the proper exercise of the Court's discretion, many factors being relevant. It is neither possible nor desirable to propound an exhaustive list of those factors. But plainly they include the nature of the document, the circumstances under which it 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 into the hands of the applicant for leave and, perhaps most important of all, the likely contribution of the document to achieving justice in the second proceeding.” (1992) 38 FCR 217, 225
119 If we consider these matters, we will note that the student records in question are intrinsically confidential. They were brought into existence for the purposes of a recording of the relationship between Austwide and its students. We may infer that the students would not be pleased to have their files, or parts of them, disclosed in litigation in which they have no interest. Austwide is on record as opposing the use of these documents for similar reasons. The documents pre-existed the litigation and were not brought into existence for the purpose of entering the public domain.
120 The information contained in the documents is sensitive, though the particular element which is sought to be put in evidence is not, as far as the students are concerned, particularly significant. The documents came into the hands of the State in the course of discovery. His Honour Wilcox J said, “perhaps most important of all is the likely contribution of the documents to achieving justice in the second proceeding”.
121 The contention of fraud to be found in paragraph 25 of the Amended Defence and Counterclaim is, so far as the State is concerned, a “fallback”. The main claim seems to be based on the principles of restitution and the contractual entitlement under the relevant funding agreements to obtain a refund in certain circumstances.
122 Nevertheless, fraud is the most powerful solvent of legal relationships. At common law, much could be undone upon the proof of fraud which could not be undone in the face of a mere innocent misrepresentation. Now, with extensive powers granted to courts under the Australian Consumer Law, there is much more extensive power to modify, set aside and rescind contractual obligations than existed under the common law or equity. Nevertheless, the exercise of those powers is attended by discretionary considerations. The present pleadings of the State do not invoke these powers. It goes without saying that a party which can prove that it is the victim of fraud will far more likely achieve a favourable exercise of a discretion to exercise a power than one who is merely the victim of some sort of innocent misrepresentation or more general breach of contract. I accept, therefore, that it would be a matter of high importance to the State to prove fraud against AVDI if it may do so.
123 On the other hand, the documents in question fall far short of what one might describe as a “smoking gun”. To show that a person who was a servant or agent of one party becomes aware of a piece of information in the course of his duties or functions in serving another party does not, it seems to me, make the second party for that reason alone necessarily, “knowing” of the relevant information or even afflicted with notice of it. Taken as an example, it is common commercial practice for publically listed companies to share prominent businessmen as directors so that one prominent businessman may hold, and frequently does hold, a substantial number of directorships. To prove that such a businessman knew fact “X” because he is a director of one company falls a long way short of proving that therefore the other companies of which he was a director were aware of fact “X”, cf Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580, 657-58.
124 I have heard no argument on these points, but what I have said so far indicates it is less than self-evident that proof of the matters for which these documents are proposed to be used would necessarily establish fraud on the part of AVDI. Even so, I am satisfied that they are sufficiently important that I can conclude that they will make a major contribution to the attainment of justice in the AVDI proceeding.
125 The powers of the court here in the AVDI proceeding will enable it to take whatever steps are necessary to ensure that there is no unreasonable intrusion upon the privacy of the students involved. The identity of the students whose files identify particular persons as trainers or administrators are really incidental to what it is the State seeks to prove.
126 Mr Syed’s concerns as to the effect of the intrusion on confidentiality are, in my view, substantially overstated. The existence of the Austwide proceeding itself would be far more likely to have damaging effects upon the standing and reputation of Austwide in the marketplace than the incidental use of the documents in question here for a limited purpose.
127 In my view, the matters referred to above, on balance, make out the special circumstances sufficient for the success of the State’s application, in the sense in which that expression was explained by the Federal Court in the Liberty Funding case as quoted above. I am fortified in that view by the thought that the AVDI proceeding purports to be an attempt by the State to achieve the proper application of public moneys. The interest at stake is public and not merely private.
128 Being of the view that the State’s application should succeed, I conclude that even were I wrong and it was established that the State is guilty of breaching the Harman obligation in one or other respects alleged against it, since such a breach would, according to the submissions made on behalf of AVDI and Austwide, be an inadvertent one, I would give the State a release from the Harman obligation with respect to the documents referred to in the summons nunc pro tunc.
Relief
129 It follows that I would dismiss AVDI’s summons and grant the relief sought by the State.
130 I direct the State, within 14 days of this day, to bring in short Minutes to give effect to these reasons.
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