Destec Pty Ltd v Mineral Resources Limited [No 2]
[2023] WASC 167
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: DESTEC PTY LTD -v- MINERAL RESOURCES LIMITED [No 2] [2023] WASC 167
CORAM: HILL J
HEARD: 27 APRIL 2023
DELIVERED : 22 MAY 2023
FILE NO/S: CIV 3173 of 2019
BETWEEN: DESTEC PTY LTD
Plaintiff
AND
MINERAL RESOURCES LIMITED
First Defendant
BULK ORE SHUTTLE SYSTEM PTY LTD
Second Defendant
Catchwords:
Practice and procedure - Application for leave to use pleadings and submissions to consider commencement of other proceedings - Substantive legal obligation not to disclose documents for a collateral purpose - Whether documents are subject of substantive legal obligation - Whether special circumstances exist - Turns on own facts
Legislation:
Nil
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | P D Evans |
| First Defendant | : | S Penglis SC |
| Second Defendant | : | S Penglis SC |
Solicitors:
| Plaintiff | : | HFW Australia |
| First Defendant | : | Bennett |
| Second Defendant | : | Bennett |
Cases referred to in decision:
Destec Pty Ltd v Mineral Resources Ltd [2020] WASC 95
Laen Pty Ltd v At the Heads Pty Ltd [2011] VSC 315
Murray Riverside Pty Ltd v Toscana (WA) Ravenswood Estate Pty Ltd [2022] WASCA 67
HILL J:
By letter dated 10 March 2023, the plaintiff applied for leave to use certain documents discovered by the first defendant for the purpose of considering the commencement of new proceedings in this court by the plaintiff and Wyatt Technologies Pty Ltd against a former employee of the plaintiff, who currently employed by the first defendant.
In support of the application, the plaintiff relied on the affidavit of Peter Edward Sadler filed 10 March 2023. Annexed to both the letter and the affidavit is Schedule 1 which sets out the specific documents that are the subject of this application.[1]
[1] Affidavit of Peter Edward Sadler filed 10 March 2023, 'PES-1'.
The plaintiff contends these documents on their face show the former employee breached the terms of an agreement with Wyatt Technologies, as well as obligations owed under the Corporations Act 2001 (Cth) (Act) and at law.
The defendants neither consented to, nor opposed, the application.
For the reasons which follow, I consider that the plaintiff should have leave to use the documents in Schedule 1 to the letter for the purpose stated.
These proceedings
On 23 December 2019, the plaintiff commenced these proceedings against the defendants by way of writ of summons. On 27 February 2020, I ordered that the writ of summon be treated as if it were an originating process filed under r 2.2 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) and subsequently published reasons for this decision.[2]
[2] Destec Pty Ltd v Mineral Resources Ltd [2020] WASC 95.
The primary issue in these proceedings is whether the first defendant has breached a shareholders' deed entered into between the plaintiff and first defendant in respect of the second defendant and the basis on which the development of a bulk ore shuttle system would occur. The plaintiff seeks damages for breach of the shareholders deed. The plaintiff also contends the first defendant's conduct constitutes oppressive conduct within the meaning of that term in s 232 of the Act. The plaintiff seeks various relief including an order pursuant to s 233 of the Act that the first defendant sell its shares in the second defendant to the plaintiff at a price to be determined.
In the course of these proceedings, the parties have been ordered to give discovery. On 11 January 2023, the first defendant filed its affidavit of discovery.
Mr Sadler's evidence is that in the course of reviewing the documents discovered by the first defendant, it became apparent that the first defendant's endeavours to develop and commercialise an ore transportation system in competition with the bulk ore shuttle system was facilitated by the conduct of a former director and employee of the plaintiff.
The former employee previously owned shares in Wyatt Technologies and sold them to the plaintiff on the terms of a share sale agreement (Agreement). It was an express term of the Agreement that for the period of one year from the date of execution of the Agreement, the former employee would not be involved or interested in a business involved in the design, manufacture, service and/or supply of a driverless bulk ore rail based transport system anywhere in Australia. The clause specifically provided that it did not apply to the first defendant or 'Bulk Ore Shuttle System'.
The Agreement was executed on 7 February 2018 and accordingly, on its terms, the restraint operated until 7 February 2019.
Mr Sadler's evidence is that the documents set out in Schedule 1 on their face support the commencement of fresh proceedings against the former employee for breach of the Agreement. The majority of these documents are dated between 20 February 2018 and 19 October 2018.
Mr Sadler deposed that until this application has been determined, a full consideration of the documents and whether they support any potential claim against the former employee has not been undertaken and no decision has yet been made to commence any proceedings.
Legal principles
The relevant legal principles were recently summarised by the Court of Appeal in Murray Riverside Pty Ltd v Toscana (WA) Ravenswood Estate Pty Ltd in the following terms:[3]
[3] Murray Riverside Pty Ltd v Toscana (WA) Ravenswood Estate Pty Ltd [2022] WASCA 67 [69] - [76].
Where one party to litigation is compelled, by reason of a rule or 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 the documents or information for any purpose other than that for which they are given, unless they are received into evidence. This principle applies to a range of material, including discovered documents, answers to interrogatories and documents produced on subpoena.
Traditionally, the obligation not to disclose was described as an implied undertaking. However, properly understood it is an obligation of substantive law.
Discovery is an invasion of the privacy and confidentiality of a litigant's affairs. The rationale for the imposition of the obligation in relation to discovered documents is to ensure that privacy and confidentiality are not invaded more than is necessary for the purpose of doing justice. The same rationale applies with equal force in the context of the production of documents on subpoena, as this is also an invasion of the privacy and confidentiality of the affairs of the subpoena recipient.
The power to dispense with or modify the Harman obligation is not freely exercised, but will be exercised if there are special circumstances.
In a passage in Liberty Funding Pty Ltd v Phoenix Capital Ltd that has been cited with approval many times, the Full Court of the Federal Court said as follows:
The notion of 'special circumstances' does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, 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. The discretion is a broad one and all the circumstances of the case must be examined.
Among the considerations that may be relevant to the exercise of the discretion are:
(a)the nature of the document;
(b)the circumstances under which the document came into existence;
(c)the attitude of the author of the document and any prejudice the author may sustain;
(d)whether the document existed before the litigation, or was created for that purpose and therefore expected to enter the public domain;
(e)the nature of the information in the document, in particular whether it contains personal data or commercially sensitive information;
(f)the circumstances in which the document came into the hands of the applicant; and
(g)the likely contribution of the document to achieving justice in another proceeding.
The last of these considerations has been recognised as being the most important. There is a public interest in ensuring that all relevant material is before a court to enable it to discharge its function. It has been said that special circumstances will fairly readily be found where it is established that the use of documents discovered in proceedings is reasonably required for the purpose of doing justice between the parties in other proceedings.
In the context of documents produced on discovery, it has been observed that, in weighing up the competing public interests, the importance of the public interest in the preservation of the confidentiality of discovered documents must be kept squarely in mind. Similarly, in the present case the private and public interest in protecting the confidentiality of a person's private documents produced under compulsion to a court must be kept in mind. (citations omitted)
Insofar as documents subject to an undertaking are relevant to issues to be determined in any proceedings which may be commenced, there is a public interest in ensuring all relevant material is before the court to enable it properly to discharge its function.[4]
[4] Laen Pty Ltd v At the Heads Pty Ltd [2011] VSC 315 [11].
The plaintiff, as the party moving to modify the implied undertaking, is not required to identify specifically how it would seek to use those documents. Rather, it is sufficient that the purpose for which the release is sought is for their use in considering the commencement of other proceedings.[5]
[5] Laen Pty Ltd v At the Heads Pty Ltd [13].
Disposition
It is not in dispute that the plaintiff is bound by the substantive obligation not to use documents obtained in these proceedings for any purpose other than these proceedings. It is also not in dispute that the plaintiff must not use documents obtained in these proceedings or the information contained in them unless given leave to do so by this court.
I am satisfied on the information before me that the obligation applies to each of the documents the subject of this application.
The documents the plaintiff seeks to use have been discovered in these proceedings. On this basis, it is clear that these documents fall within the terms of the substantive obligation.
For the following reasons, I am satisfied there are special circumstances in this case which make it appropriate to grant leave to the plaintiff to use the documents that are the subject of this application for the purpose of considering the commencement of proceedings against the former employee.
First, the purpose of the substantive obligation is to protect against the misuse of material produced under coercion of the court process. I accept that on their face, the documents that are the subject of these proceedings are relevant to consideration of and the commencement of the proposed proceedings. If proceedings were commenced, these same documents would be either discoverable or could be subpoenaed in those proceedings. Either way, these documents will be reasonably required in order to do justice in any proceedings. I accept there is a public interest in ensuring all relevant information is before the court to enable it to do justice in any subsequent proceedings. This public interest outweighs any privacy or interest in the documents not being used for purposes other than these proceedings.
Second, there is no assertion that any information contained in these documents is confidential or commercially sensitive. It is not in dispute that these documents pre-exist the commencement of these proceedings and were not created under compulsion or for the purpose of these proceedings.
Third, while the proposed new proceedings do not involve the same parties as these proceedings, I accept the plaintiff's submission that there is significant overlap between the potential proceedings and the issues in these proceedings.
Fourth, the first defendant, who produced these documents on discovery, does not object to the application. I accept the former employee is not aware of the application and has not had an opportunity to be heard about any potential prejudice they may suffer if leave was granted. However, on its face, it is difficult to see that the former employee will suffer any prejudice beyond that experienced by any party against whom a proceeding has been commenced.
Finally, the documents which the plaintiff seeks to use are clearly identified and set out in the application.
Conclusion
For these reasons, I consider it appropriate to grant leave to the plaintiff to use the documents in Schedule 1 to the application for the purpose of considering the commencement of, and commencing further proceedings by the plaintiff and Wyatt Technologies against the former employee.
I will hear from the parties as to the precise orders and as to the costs of the application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
22 MAY 2023
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