Cadence Asset Management Pty Ltd v Concept Sports Ltd

[2006] FCA 711

FEDERAL COURT OF AUSTRALIA

Cadence Asset Management Pty Ltd v Concept Sports Limited
[2006] FCA 711

PRACTICE AND PROCEDURE – discovery – implied undertaking not to use discovered documents for a collateral or ulterior purpose – whether discovered documents may be provided to a person funding the action

Alterskye v Scott [1948] 1 All ER 469 cited
Distillers Co (Bio-Chemicals) Ltd v Times Newspapers Ltd [1975] 1 QB 613 cited
Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316 cited
Harman v Secretary of State, Home Department [1983] 1 AC 280 cited
Reynolds v Godlee (1858) 4 K & J 88 cited
Richardson v Hastings (1884) 7 Beav 354 cited
Sofilas v Cable Sands (WA) Pty Ltd (1993) 9 WAR 196 cited

Bray on Discovery (1^st ed, 1885)
P Matthews & H Malek, Disclosure (2^nd ed, 2000)

CADENCE ASSET MANAGEMENT PTY LTD v CONCEPT SPORTS LIMITED, GARY MARCH, LEON DAPHNE, JEFFREY TAYLOR, STEVEN ROLTON, DAVID CARTER, JOHN MOORE and TIM JONAS and OTHERS (carrying on business as PITCHER PARTNERS)

VID 1605 of 2004

FINKELSTEIN J
2 JUNE 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1605 of 2004

BETWEEN:	CADENCE ASSET MANAGEMENT PTY LTD and ORS Plaintiffs
AND:	CONCEPT SPORTS LIMITED, GARY MARCH, LEON DAPHNE, JEFFREY TAYLOR, STEVEN ROLTON, DAVID CARTER JOHN MOORE and TIM JONAS AND OTHERS CARRYING ON BUSINESS AS “PITCHER PARTNERS” (a firm) (Registered no. 1021540T) Defendants
AND BETWEEN:	CONCEPT SPORTS LTD First Cross-Claimant
AND:	CGU INSURANCE LTD, BAKER & McKENZIE (a firm) and SCOTT MUNRO trading as MUNRO LEGAL First Cross-Defendants
AND BETWEEN:	LEON DAPHNE, DAVID CARTER and JOHN MOORE Second Cross-Claimants
AND:	CONCEPT SPORTS LTD Second Cross-Defendant
AND BETWEEN:	GARY MARCH, JEFFREY TAYLOR and STEVEN ROLTON Third Cross-Claimants
AND:	CGU INSURANCE LIMITED, BAKER & McKENZIE and SCOTT MUNRO trading as MUNRO LEGAL Third Cross-Defendants
JUDGE:	FINKELSTEIN J
DATE:	2 JUNE 2006
PLACE:	MELBOURNE

THE COURT ORDERS THAT:

1.        The notice of motion filed on 3 May 2006 be dismissed with no order as to costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1605 of 2004

BETWEEN:	CADENCE ASSET MANAGEMENT PTY LTD and ORS Plaintiffs
AND:	CONCEPT SPORTS LIMITED, GARY MARCH, LEON DAPHNE, JEFFREY TAYLOR, STEVEN ROLTON, DAVID CARTER JOHN MOORE and TIM JONAS AND OTHERS CARRYING ON BUSINESS AS “PITCHER PARTNERS” (a firm) (Registered no. 1021540T) Defendants
AND BETWEEN:	CONCEPT SPORTS LTD First Cross-Claimant
AND:	CGU INSURANCE LTD, BAKER & McKENZIE (a firm) and SCOTT MUNRO trading as MUNRO LEGAL First Cross-Defendants
AND BETWEEN:	LEON DAPHNE, DAVID CARTER and JOHN MOORE Second Cross-Claimants
AND:	CONCEPT SPORTS LTD Second Cross-Defendant
AND BETWEEN:	GARY MARCH, JEFFREY TAYLOR and STEVEN ROLTON Third Cross-Claimants
AND:	CGU INSURANCE LIMITED, BAKER & McKENZIE and SCOTT MUNRO trading as MUNRO LEGAL Third Cross-Defendants
JUDGE:	FINKELSTEIN J
DATE:	2 JUNE 2006
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. I do not think the plaintiffs require permission before they give discovered documents to IMF (Australia) Ltd, the company that is providing them with the funds to prosecute this action.

2. Early cases, such as Richardson v Hastings (1884) 7 Beav 354 and Reynolds v Godlee (1858) 4 K & J 88, state that discovery may be refused unless the party gives an undertaking that the documents would not be used for any purpose other than the action then proceeding.  The principle was stated in Bray on Discovery (1^st ed, 1885) at 238:  “A party who has obtained access to his adversary’s documents under an order for production has no right to make their contents public or communicate them to any stranger to the suit … nor to use them or copies of them for any collateral object … If necessary an undertaking to that effect will be made a condition of granting an order …”.  An express undertaking is not now required.  It is to be implied in every case:  Alterskye v Scott [1948] 1 All ER 469. The modern statement of the rule is to be found in Harman v Secretary of State, Home Department [1983] 1 AC 280.

3. What is the reason for the rule?  The purpose for compelling discovery is to enable the court to get at the truth.  This is more important than the right to privacy.  But, privacy is only to be overridden for the limited purpose of the action.  Privacy still requires protection against the use of documents otherwise than for the action in which the documents are disclosed.

4. At first sight, the application of the rule seems to be clear.  On closer examination, however, the boundaries of it are somewhat uncertain.  In this case, for example, the plaintiffs were not sure whether they could produce discovered documents to IMF and approached the court for the necessary permission.

5. The purpose for providing the documents to IMF is as follows.  IMF is in the business of funding litigants.  Under its agreement with the plaintiffs, IMF is required to pay the plaintiffs’ costs and disbursements reasonably incurred in commencing and prosecuting the action and to pay any costs orders made against the plaintiffs.  IMF is, however, entitled to terminate its obligations upon seven days notice.  IMF’s investment protocols provide that a claim should not be funded or funding continued unless it considers that the claim has sufficient prospects of success.  Hence it keeps funded cases constantly under review.  It is not, however, possible for IMF to properly review any case (or at least many cases, of which this is one) unless it has access to discovered documents.  The question is whether the use of documents for that purpose is for a purpose that is foreign to the action. 

6. The view that I take is that the implied undertaking does not prevent absolutely a party giving discovered documents to a non-party.  There are circumstances in which a party has a legitimate interest in disclosing discovered documents to a non-party.  Obvious examples include showing a discovered document to an actual or prospective witness or to an expert non-witness.  Of course that is permissible; because in each case the document is being used for the action.  There are also cases where a non-party has a legitimate interest in seeing discovered documents.  I have in mind, for example, a parent company whose subsidiary is involved in litigation to which the parent is not a party.  Or take the case of an insured person whose insurer has not assumed the conduct of an action and the insured wishes to keep his insurer informed of what is going on in a case where he claims to be indemnified.  I have never heard it suggested that in those instances it would be wrong to hand the documents over.  No doubt this is what occurs every day, without anyone believing that it is necessary to approach the court for permission.  The reason permission is not required is that the provision of the documents is not for an ulterior or foreign purpose.  Another way of putting it is that the non-party is not a true stranger to the action. 

7. The private interests of the opposite parties are not affected if the documents are handed over.  This is because the implied undertaking will bind any person to whom the documents are given (Distillers Co (Bio-Chemicals) Ltd v Times Newspapers Ltd [1975] 1 QB 613; Sofilas v Cable Sands (WA) Pty Ltd (1993) 9 WAR 196, Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316) at least once he is aware that the documents have been obtained by way of discovery (P Matthews & H Malek, Disclosure (2^nd ed, 2000) at [13.09]). 

8. IMF is not a stranger to the action; it has a sufficient interest to be provided with discovered documents, at least those documents it needs to assess the merits of the action.  In any event, were I wrong in this conclusion, I would have granted the plaintiffs leave to make the documents available. 

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Judgment herein of the Honourable Justice Finkelstein.

Associate:

Dated:             2 June 2006

Counsel for the Plaintiffs:	Mr A Watson
Solicitor for the Plaintiffs:	Maurice Blackburn Cashman
Counsel for the 8th Defendant:	Mr P Cawthorn
Solicitor for the 8th Defendant:	Herbert Geer & Rundle
Date of Hearing:	19 May 2006
Date of Judgment:	2 June 2006