Hunter Grain Limited v Price HC Tauranga CIV 2008-470-192

[2010] NZHC 1334

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2008-470-192

BETWEEN  HUNTER GRAIN LIMITED First Plaintiff

ANDROSSOD HOLDINGS LIMITED Second Plaintiff

ANDRICHARD WILLIAM PRICE First Defendant

ANDPRICE COMMODITIES LIMITED Second Defendant

ANDR W PRICE, T L PRICE AND S W E SWAP AS TRUSTEES OF A PRICE FAMILY TRUST

Third Defendant

Hearing:         8 and 9 July 2010 (Heard at Auckland)

Counsel:         LJ Taylor and I Thorpe for Plaintiffs

H Fulton for Defendants

Judgment:      3 August 2010 at 10.00 a.m.

JUDGMENT OF RODNEY HANSEN

This judgment was delivered by me on 3 August 2010 at 10.00 a.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Izardweston, P O Box 5348, Wellington

Simpson Aspen Law, P O Box 13537, Tauranga

HUNTER GRAIN LIMITED AND ANOR V RICHARD WILLIAM PRICE AND ORS HC TAU CIV-2008-

470-192  3 August 2010

TABLE OF CONTENTS

Introduction  [1] Further background  [3] The way publication occurred  [9] Implied undertaking  [18]

Breach of undertaking

Email of 9 October 2007  [20]

McKenzie catalogue and emails of 3 December 2007

and 7 January 2008  [25] Action plan  [33] Emails of 14 November 2007  [40] Summary  [41]

Consequences of breach  [42] Application for leave to use discovered documents  [50] Result  [63]

Introduction

[1]      The defendants apply to review a decision of Associate Judge Doogue [1]  in which he declined the defendants’ application to strike out the plaintiffs’ claim and granted the plaintiffs’ application for leave to use documents obtained on discovery in this proceeding in separate proceedings brought by the first plaintiff.[2]

[1] Hunter Grain Ltd v Price HC Tauranga CIV-2008-470-192, 23 April 2010. 

[2] Hunter Grain Ltd v J Swap Contractors Ltd HC Tauranga CIV-2008-470-837, 2 October

2009 (the Swap proceedings).

[2]      The  documents  were  obtained  initially  pursuant  to  a  search  and  seizure (Anton Piller) order and later discovered in the usual way.   The defendants claim some of the documents have already been used by the plaintiffs, in breach of the implied undertaking not to use such documents for a collateral purpose without leave and of an express undertaking to the same effect given as a condition of the search and seizure order.  The alleged breaches were the basis of the strike out application.

Further background

[3]      The first defendant, Mr Price, was the managing director of the first plaintiff (Hunter Grain) which, through a subsidiary company, was in the business of importing and distributing stock feed (much of it palm kernel meal), principally for the dairy industry.   J Swap Contractors Limited (Swap) was initially used as its storage and cartage contractor and, in later years, as a retailer of stock feed, under what Hunter Grain alleges was a joint venture agreement.

[4]      Mr Price formed a close personal relationship with one of the directors of Swap, Stephen Swap.  The plaintiffs claim that during 2007 Mr Price and Mr Swap developed plans to subvert Hunter Grain’s relationship with its major supplier of stock feed and its joint venture with Swap to set up a competing business.  Among other things, they are alleged to have negotiated with one of Hunter Grain’s suppliers of stock feed, Toepfer International GmbH (Toepfer), to supply produce to the new business.

[5]      In December 2007, Mr Price gave notice of his resignation as managing director of Hunter Grain.   When he left he took a computer belonging to Hunter Grain which he had used for the business purposes of his employer, as well as for personal matters.  He copied the hard drive onto a disc and destroyed the hard drive, returning the computer with a replacement hard drive that was blank, save for basic programmes.

[6]      Hunter Grain commenced proceedings in March 2008 and pursuant to the search and seizure order obtained documents and computer records.  They included two optical discs containing information taken from the hard drive.

[7]      Mr  Price  applied  for  the  search  order  to  be  discharged.    In  a  judgment delivered on 25 July 2008, Allan J declined the application.   He held there was a serious question to be tried that Mr Price was liable in conversion, for misuse of confidential information and breach of duties as an employee and director of Hunter Grain.  He made directions, in accordance with an agreed protocol, for the records seized pursuant to the search orders to be catalogued.  An independent accountant, Mr  Campbell  McKenzie  of PricewaterhouseCoopers,  was  directed  to  search  the optical discs and produce a catalogue of the contents.  The agreed protocol provided for the catalogue to include a description of each document sufficient to identify it and to list emails by reference to the sender, recipient, the date of the email and the subject heading.  The protocol provided that Mr Price would identify Hunter Grain’s business records in the catalogue and that they would immediately be released to Hunter Grain.

[8]      The catalogue produced by Mr McKenzie pursuant to the protocol (the McKenzie catalogue) listed over 30,000 documents, of which some 22,000 were identified by Mr Price as business records of Hunter Grain.  Mr Price claimed that the remainder were personal documents.  The documents which the defendants claim to have been misused by the plaintiffs comprise the McKenzie catalogue itself and six documents which Mr Price says are personal.   The breaches of the implied undertaking are said to have occurred as a result of publication of documents or particulars  of  documents  to  Swap,  its  representatives  and  its  advisers.    It  is convenient to describe the documents and recount the way in which publication

occurred before considering whether in any case publication involved a breach of the implied undertaking.

The way publication occurred

[9]      The first instance of alleged misuse of the documents concerned an email dated 9 October 2007 written by Mr Price to Simon Murphy (of Toepfer).  A hard copy  of  the  email  had  been  released  to  Hunter  Grain  with,  the  plaintiffs  say, Mr Price’s express consent.  It had been annexed to an affidavit sworn on behalf of the plaintiffs on 23 April 2008.  A copy of that affidavit was then attached to a letter sent to Mr Swap on 28 May 2008 by the plaintiffs’ solicitors for the purpose of setting out the factual basis on which the plaintiffs alleged they were in a joint venture relationship with Swap.

[10]     The claimed misuse of the remaining documents had its genesis in a letter written on 7 August 2008 by the solicitors for the plaintiffs to Mr Fulton, counsel for the defendants.  The letter was written specifically in response to the disclosure of documents  two  days  earlier  and  referred  to  “disturbing  discoveries”  that  had emerged  from the search protocols.   It claimed  that many of the documents in categories marked “personal” were business documents in that they were Mr Price’s business-related  activities  undertaken  for  the  purpose  of  competing with  Hunter Grain at a time when he was still managing director.  Among the examples listed are two emails which the letter asserted were clearly not “personal” items or subject to legal privilege.  The emails were described in the way they had been identified in the McKenzie catalogue as:

•An email from your client to Simon Murphy dated 3 December 2007 with the subject heading “NZ Agreement”;

•An email from your client to Stephen Swap dated 7 January 2008 with the subject heading “establishment of our JV”.

[11]     The letter then referred to the email of 9 October 2007 from Mr Price to

Mr Murphy  (which  is  discussed  in  [9]  above)  in  support  of  an  argument  that

Mr Price’s negotiations with Toepfer were Hunter Grain’s business, and documents relating to those negotiations should be made available “in precisely the same way that  the  9th October  email  from  Richard  Price  to  Simon  Murphy  relating  to negotiations of the agency agreement was made available”.

[12]     The letter went on to refer to an “action plan”.  The action plan is a two-page document headed “Price Commodities Limited” which the plaintiffs allege is the company Messrs Price and Swap would use as the vehicle for the new joint venture. The document sets out the steps to be taken in January and February 2008 to launch the business.

[13]     The action plan was among the business records released electronically to the plaintiffs by Mr McKenzie on 5 August 2008.   The release of the action plan is acknowledged to have been an error.  It was identified by Mr Price in the McKenzie catalogue as personal, as was an email to which it was attached.   It is accepted, however, that it would not have been obvious to the plaintiffs that it was a personal document.   The letter observes, correctly it seems, that the action plan appears to have been attached to the email sent on 7 January 2008 from Mr Price to Mr Swap. The letter went on to assert that the documents disclosed supported Hunter Grain’s claims against J Swap Contractors Limited and “conceivably” Mr Swap personally.

[14]     The plaintiffs’ solicitors were, of course, quite within their rights to refer to the documents in their letter to the defendants’ counsel.  The alleged misuse occurred when the letter of 7 August and its attachments were given wider currency.

[15]     On 2 September 2008 the plaintiffs’ solicitors wrote to Swap.   The letter began:

This is a letter before action to formally put you on notice of our client’s intention to issue High Court proceedings against your company in respect of various causes of action and to provide you with one final opportunity to admit  liability and  make  satisfactory proposals  for  payment  of compensation.

[16]     The letter went on to say that since interim relief was granted by Allan J against Mr Price on 25 July, further information relevant to alleged knowing assistance by Swap had emerged from search protocols undertaken in accordance

with the judgment.  These were said to have been detailed in the letter of 7 August

2008 to Mr Fulton.  A copy was attached.  The letter of 7 August was published for a second time on 13 March 2009 when it was attached to a letter to Swap’s solicitors.

[17]     The  letter  of  13  March  2009  also  attached  copies  of  two  emails  dated

14 November 2007, one from Mr Price to Mr Swap, the other from Rabobank to

Mr Price.

Implied undertaking

[18]     There is an implied undertaking not to use documents obtained by discovery or other compulsory process of the court for collateral or ulterior purposes.[3]  As it relates to discovered documents, the principle finds expression in r 8.36(4) of the High  Court  Rules.    The  reasons  for  the  implied  undertaking  were identified  in Wilson v White:

[3] Wilson v White [2005] 3 NZLR 1619 (CA) at [20], Telstra New Zealand Ltd v Telecom New Zealand Ltd (2000) 14 PRNZ 541 (HC). 

(a)The first is a concern that unless there are restrictions on the uses to which discovered documents can be put, parties to litigation may not comply with their discovery obligations; and

(b)Secondly,   a   sense   of   fairness   associated   with   the   privacy expectations of a party who is required to produce documents for one purpose and is entitled to expect that they will not be used for another.

[19]     The implied undertaking is an undertaking to the Court imposed by operation of law which can, in appropriate cases, be released or modified by the Court.[4]    It applies  to  a  search  and  seizure  order.    While  the  purpose  of  such  an  order  is primarily the preservation of evidence which might otherwise be removed, destroyed or concealed, it operates also as an order for discovery in advance of pleading.[5]

[4] Wilson v White at [21]; Crest Homes plc v Marks [1987] 3 WLR 293 at 298.

[5] Crest Homes plc v Marks at 297.

Breach of undertaking

Email of 9 October 2007

[20]     As  earlier  mentioned,  a  hard  copy of  the  email  of  9  October  2007  was obtained when the search and seizure order was executed.  It was written by Mr Price in the course of negotiating a supply agreement for his proposed business venture with Swap.

[21]     For the plaintiffs, Mr Taylor submitted that it is a document which belongs to Hunter Grain.  He said that it was written by Mr Price when he was Hunter Grain’s managing director for the purpose of negotiating an agency agreement for the supply of certain products.   As Mr Price was bound as a fiduciary to negotiate for the benefit of his employer, the document is a record made by him on behalf of Hunter Grain.

[22]     The question of who a document “belongs to” is raised by the way in which the implied undertaking is often expressed – see, for example, the speech of Lord Diplock in Home Office v Harman[6] and of Lord Oliver in Crest Homes plc v Marks,[7] who said:

It is clearly established and has recently been affirmed in this House that a solicitor who, in the course of discovery in an action, obtains possession of copies of documents belonging to his client’s adversary gives an implied undertaking to the court not to use that material nor to allow it to be used for any purpose other than the proper conduct of that action on behalf of his client: see Home Office v Harman.  (emphasis added.)

[6] Home Office v Harman [1983] 1 AC 280 at 302.

[7] Crest Homes plc v Marks at 297-298.

[23]     However, it does not appear that ownership of the documents or information by the party making disclosure is a necessary condition of the implied undertaking. “Ownership” is assumed of the party obliged to make disclosure but the obligation to disclose is not conditional on ownership.  In the context of discovery, it applies to documents in the power or possession (or, as now expressed in the High Court

Rules, control[8]) of the party regardless of the party’s proprietary or possessory rights in the document.

[8] Rule 8.18.

[24]     Any competing claims to the documents by the person to whom disclosure is made should not affect the undertaking, at least not until such claims have been resolved - probably in the context of an application to be released from the undertaking.  The obligation is owed to the Court.  As observed by Scott J in Sybron Corporation v Barclays Bank plc,[9] because a breach of the obligation is a contempt of court, it is obviously desirable that it should be formulated in clear terms that permit a minimum of doubt as to its scope.  The party to whom disclosure has been made  should  be  bound  by  the  undertaking  unless  and  until  the  Court  orders otherwise or the party making disclosure consents.[10]

McKenzie catalogue and emails of 3 December 2007 and 7 January 2008

[9] Sybron Corporation v Barclays Bank plc [1985] 1 Ch 299 at 320.

[10] EMI Records Ltd v Spillane [1986] 1 WLR 967 at 976.

[25]     A breach of the undertaking in relation to the McKenzie catalogue itself and the emails of 3 December 2007 and 7 January 2008 is alleged to have occurred when on 2 September 2008 and 13 March 2009 the letter of 7 August was copied to Swap or its solicitors.   The breach is said to arise because information contained in the catalogue was used for collateral purposes, namely to advance the plaintiffs’ claim against Swap.

[26]     Mr Taylor submitted that the contents of the McKenzie catalogue were not subject to the undertaking.  He said, comprising, as it did, a list of the documents on the  hard  drive  of  the  plaintiffs’  computer  wrongfully  taken  and  destroyed  by Mr Price, it was information which would have been available to the plaintiff but for Mr Price’s unlawful actions.   As the catalogue merely describes the documents without revealing their contents, it was submitted that it simply comprised Hunter Grain’s business information which it was free to use as it saw fit.

[27]     Asher J rejected a similar submission when asked to review a decision of Associate Judge Doogue  in the Swap proceedings in which he refused to stay or delay discovery in the proceeding pending the hearing of a strike out application.[11]

Asher J said:[12]

The policy reasons behind the implied undertaking support its application to a subject heading or summary of material obtained by way of a search order. The summary will give the party receiving it knowledge that it would not have had, but for the search order, and it would be unfair if, without leave, the plaintiff could use the search order summary for purposes other than the pursuit of the proceeding in which the search order was made.  The implied undertaking applies, therefore, to the  words  used to  describe documents when a search order is executed.  The listed reference to the 7 January 2008 email and “establishment of our JV” should not have been used by the plaintiffs for any purpose other than the Price proceedings.

[11] Above n2.

[12] At [31].

[28]     Asher J’s finding is not accepted by the plaintiffs.  It is the subject of a cross- appeal in an appeal by Swap against Asher J’s decision to dismiss the application for review.

[29]     The  implied  undertaking  is  frequently  expressed  by  reference  only  to discovered documents.   It involves, however, the application of a wider principle which  extends  to  information  disclosed  under  compulsion  in  litigation.    That principle was expressed in this way in the joint judgment of Hayne, Heydon and

Crennan JJ in Hearne v Street:[13]

[13] Hearne v Street [2008] 235 CLR 125 (HCA) 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.

Among the types of materials listed by the Court to which the principle applies are answers to interrogatories, witness statements served pursuant to a judicial direction and affidavits.

[30]     The contents of the McKenzie catalogue appear to come within the rule.  The defendants were required pursuant to the court order to disclose to their adversary,

per the medium of Mr McKenzie, the contents of the hard drive.  They were obliged to provide identifying particulars of each document listed in the catalogue.  The fact that   the   hard   drive   from   which   the   information   was   derived   had   been misappropriated by Mr Price does not seem to me to affect the position.   It is sufficient that the information was disclosed pursuant to a court order.  The way the information was acquired is irrelevant to this part of the inquiry.

[31]     As   Asher   J   observed,   this   outcome   is   consistent   with   the   policy considerations which underpin the implied undertaking.   The importance of promoting compliance with discovery obligations is as great, if not greater, when documents or information have been acquired by unlawful or questionable means which the acquirer will have an additional incentive to conceal.  Privacy expectations may have less force in such circumstances but continue to apply.

[32]     The plaintiffs’ solicitor was not therefore entitled to publish extracts from the list for the purpose of advancing the plaintiffs’ claim against Swap.  The disclosure of the identifying particulars of the emails of 3 December 2007 and 7 January 2008 was a breach of the undertaking.

Action plan

[33]     It is not in dispute that the action plan should not have been released by Mr McKenzie.  It had been identified by Mr Price as a personal document.  In terms of the protocol, it should not have been released unless the plaintiffs successfully challenged the claim that it was a personal document.

[34]     Associate   Judge   Doogue   gave   lengthy   consideration   to   whether   Mr McKenzie had deliberately released the action plans.   Mr Fulton’s position, articulated in a memorandum filed after the hearing (in response to a minute from the Judge), was and is that Mr McKenzie’s state of mind is irrelevant.   I agree.   The focus must be on the state of mind of the plaintiffs and the action by or on their behalf after the documents came into their hands.

[35]     Associate  Judge  Doogue found  (at  [75])  that  Hunter  Grain  and  its  legal advisers “probably appreciated” that a mistake had been made and, notwithstanding that, elected to make use of the document.  However, he went on to say (at [78]) that given the high standard of proof required to establish allegations of serious misconduct, he was not prepared to conclude that the plaintiff deliberately breached its “confidentiality duty”.

[36]     The terms of the letter of 7 August 2008 suggest to me that the author did not believe the action plan was a personal record.  He maintained that emails, including that of 7 January 2008, to which he surmised the activity plan was attached, were not personal documents.   While the fact that the email itself had been categorised “personal” by Mr Price might have alerted the solicitor to the possibility of the action plan being released in error, all the other indications are that he did not believe that to be the case.

[37]     In the letter he treated the document as one which the plaintiff was entitled to have and to use.   He pointed out that it contradicted sworn evidence given by Mr Swap, relied on by Allan J in finding that there was insufficient evidence to suggest that Mr Price had been engaged in unlawful commercial behaviour with Swap.  He was explicit in claiming that false evidence had been given by Mr Swap.

[38]     There was no claim in response to the letter that the action plan had been mistakenly released.  It was not until June 2009 that the plaintiffs were advised that it had been released to them in error.

[39]     In the circumstances, I consider that the plaintiffs were entitled to treat the action plan as a business record which, in terms of the protocol, it could use as it saw fit.  Its release as an attachment to the letter of 2 September 2008 to Swap and again on 13 March 2009 was accordingly not a breach of the implied undertaking.

Emails of 14 November 2007

[40]     Although the defendants presented their case on the basis that the use of all the documents was a breach of the undertaking, as I understand it, they accepted that

there was no claim by Mr Price that the two  emails dated 14  November 2007 (refer [17])  above)  were  personal.    Accordingly,  in  terms  of  the  protocol,  the plaintiffs could use those documents as their own business records.

[41]     In summary, I find that there was a breach of the implied undertaking in sending a copy of the email of 9 October 2007 to Mr Swap and in the disclosure of the emails of 3 December 2007 and 7 January 2008 from the McKenzie catalogue.

Consequences of breach

[42]     Associate Judge Doogue declined to strike out the proceedings.  He relied, in part, on his earlier finding that the plaintiffs should be permitted to use documents discovered  in this proceeding in the Swap proceeding.   He said that,  in effect, involved a finding that there had been no abuse of process by the plaintiffs in using the documents in the way they did.

[43]     As a further reason for declining the strike out application, Associate Judge Doogue held that a strike out order would be disproportionate to the plaintiffs’ breach.  It would, in effect, rule out any opportunity for Hunter Grain to pursue its remedies  against  Mr  Price.    While  acknowledging that  a  failure  to  observe  the privacy and confidence attaching to documents obtained by way of an Anton Piller order is a serious matter, Associate Judge Doogue said the Court has to strike a balance between marking its disapproval and the consequences if a party is denied a remedy.   He said it would “be quite out of proportion” for the Court to view the breach of the implied undertaking as so grave as to preclude the plaintiff from continuing with its claim.

[44]     Mr Fulton submitted that in excusing the breach of the undertaking on the ground that he had authorised use of the documents, the Judge “capitulated to the plaintiff’s convenience”.  He argued that in approaching the issue of contempt in this way, the Judge had conflated the two issues.  Mr Fulton said the defence position was  and  is  that  a  strike  out  order  would  be  merited  but  it  accepted  that  the appropriate sanction was a matter for the Judge.  He submitted that the action should

at least be stayed until after the Swap proceedings have been determined without the use of documents discovered in this proceeding.

[45]     A breach of the implied undertaking will ordinarily constitute contempt.[14]

The punishment will depend on the nature and gravity of the breaches.  Mr Fulton characterised them as systematic and deliberate.  I do not agree with this description.

[14] Miller v Scorey [1996] 1 WLR 1122 at 1132.

[46]     It is clear that the plaintiffs’ solicitor believed he was entitled to use the documents and to draw on the McKenzie catalogue in order to advance his client’s cause.  There is no reason to think that he knew or suspected that the action plan was released by mistake.  Indeed, Mr Fulton expressly disavowed any such suggestion. It is understandable that he should proceed on the basis that the defendants had consented to its release.  While it was not incumbent on Mr Fulton to question the use made of the document in the letter of 5 August, the plaintiffs were entitled to expect that any objection to its release would have been made then.  The use of the other documents referred to was premised on the basis that they were the business documents of the plaintiffs.

[47]     The plaintiffs’ solicitor’s argument that all documents should be treated as business records of the plaintiff could not survive a rigorous application of the implied undertaking but it was not without merit.   The documents in question all appear to have been generated in breach of Mr Price’s fiduciary duty as an employee and director.  Hunter Grain was obliged to rely on the search and seizure order to access documents because of his dishonest actions.

[48]     When the documents were relied on in communications with Swap and its solicitors, it was to refute apparently false claims (including assertions in sworn evidence) in defence of Mr Price’s actions.  They were not used in any material way for the purpose of advancing the plaintiffs’ claim against Swap, a matter I will discuss in more detail later.   There could be little concern that disclosure raised confidentiality issues as Mr Swap said he had read the plaintiffs’ affidavit.  It is not without significance also that disclosure was by way of copies of the 7 August letter and an affidavit in which the documents had been used legitimately.   So, while it

could not be said that the breaches were inadvertent, they were far from a wilful and flagrant violation of the undertaking.

[49]     In my view, Associate Judge Doogue was right to find that to strike out the proceeding would be a disproportionate response.   Nor do I consider justified the alternative sanction proposed by Mr Fulton of staying the proceeding until after the Swap proceedings have been determined without the use of documents discovered in this  proceeding.     That  too  would  have  consequences  disproportionate  to  the breaches.  I am satisfied that no sanction is called for in the circumstances.

Application for leave to use discovered documents

[50]     The plaintiffs sought an order in general terms which would permit them to use  documents  discovered  in  this  proceeding  for  the  purpose  of  the  Swap proceeding.   If Associate Judge Doogue’s decision on this issue is upheld, the plaintiffs propose that leave be reserved to enable a protocol to be established by which the documents intended to be used would be identified and any issues of privilege and confidentiality could be resolved.

[51]     The general rule is that the Court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery.[15]

[15] Crest Homes at 303; see also Wilson v White at [21].

[52]   A consideration of the circumstances necessarily begins with the close connection between the two proceedings.  The claim in the Swap proceedings is that Swap assisted Mr Price in breaching his fiduciary duties to Hunter Grain which is, of course, the central issue in this proceeding.  Many of the factual and legal issues will inevitably be common to the two proceedings.   They are claims which, in normal circumstances, would have been combined in the one proceeding and heard together. Had that occurred, this application would not have been necessary.

[53]    The plaintiffs ended up issuing separate proceedings because, when this proceeding was issued under urgency, they did  not have the information which would  have  enabled  Swap  to  be  joined.    That  emerged  over  the  months  that followed.   In his judgment, Asher J recounted the evolution of the case against Swap.[16]    He concluded that the plaintiffs’ decision to issue proceedings was made independently of evidence obtained pursuant to the search order.  He found that the information obtained was of peripheral importance.[17]     Much of the evidence considered by Asher J is also available to me.   I respectfully agree with his assessment.  It is clear that, well before the bulk of the documents were released on

2 August, Hunter Grain had sufficient evidence in its possession to justify the issue of proceedings against Swap.

[16] At [38]–[44].

[17] At [45].

[54]     Instead of issuing separate proceedings against Swap, the plaintiffs could have joined Swap to the existing proceeding.  I was told that they did not do so in order to maintain momentum in this proceeding.   There were other avenues of avoiding the inefficiencies and duplication which result from two closely related claims being pursued separately, among them an application to consolidate the proceedings or for an order that they be heard together.  It is unnecessary for me to consider these possibilities except to observe that, had the plaintiffs employed alternative strategies, they would have been able to rely on the discovered documents as of right.

[55]     Although I have found that the way in which Mr Price came into possession of the documents did not release the plaintiffs from the implied undertaking, it is a weighty factor in their favour on this aspect of the case.  Were it not for Mr Price removing the computer and destroying the hard drive, the plaintiffs would have been free to use the documents in the Swap proceedings.

[56]     A consequence of this  is that, theoretically at least, the documents were discoverable by the plaintiffs in the Swap proceeding as documents which had been in their control and relate to a matter in question in the proceeding (r 8.18 of the

[57]     High Court Rules) and which, through discovery by the defendants, have been restored to their possession.  It is ironic that the plaintiffs must seek leave to use documents which they are obliged to discover.

[58]     As I observed earlier, the use of the documents is unlikely to give rise to any confidentiality concerns.   Mr Swap was a founding shareholder of the second defendant, Price Commodities Limited.   He is one of the third defendants in his capacity as trustee of Mr Price’s family trust.  He has given affidavit evidence in this proceeding and deposed that he had read all of the affidavits filed on behalf of Hunter Grain.

[59]     Mr Fulton, nevertheless, argued that the circumstances relied on did not reach the high threshold required by the authorities.  He submitted that the prior breaches of the undertaking militated decisively against the grant of an indulgence.  He relied, in particular, on Miller v Scorey[18] where, in circumstances bearing some similarities to the present, Rimer J refused retrospectively to grant leave to use discovered documents for the purpose of a second proceeding and struck out the proceeding.

[18] Above n15.

[60]     The original proceedings had been issued by the trustees of a group pension scheme against the original trustees and others.  In the course of discovery, one of the defendants disclosed documents indicating that it had made payments amounting to bribery to two other defendants.  Anticipating delay and the expiry of a limitation period if they sought to amend the pleadings to incorporate the new cause of action, the plaintiffs commenced a fresh action against the three defendants.   The action could not have been commenced but for the information obtained on discovery.  It was held that, as the trustees had made no application for leave to use the documents for the purpose of the second proceeding, its prosecution had involved a contempt of court and was an abuse of process.   The action was struck out against two of the three defendants.

[61]     Rimer J would not countenance granting the plaintiffs retrospective leave to use the documents even if the Court had jurisdiction to do so.  He said:[19]

It is one thing to release a party from an undertaking to the court so as to permit him to do so in the future that which he had been prevented from doing in the past.  It is another thing for the court to find, as I have, that a party has abused the process of the court by his breaches of an undertaking to  it  and  for  it  then  to  give  that  party a  retrospective  release  from the undertaking so as to wipe away the abuse of the process which he has committed.

[19] At 1133

[62]     A critical issue in Miller v Scorey was, of course, that the second action could not have issued without reliance on the documents discovered in the first action and involved a clear breach of the undertaking.   That is not the case here.   As earlier discussed, the documents and information used in breach of the undertaking played no material part in the issue of proceedings against Swap.  It is to be noted also that Rimer J did not take the view that the plaintiffs should be permanently barred from using the documents for the purpose of a second action.  He said that if they wished to issue a fresh action raising claims of the same nature, then their implied undertaking ought to be relaxed so as to entitle them to make use of the documents in

question.[20]

[20] At 1135

[63]     I am satisfied there are special circumstances in this case which justify the grant of leave to use the documents.   They include the events which led to the plaintiffs’ reliance on court orders to access documents which should have remained in their control and Mr Price’s role in putting the documents beyond the plaintiffs’ reach.  The breaches were not of a contumacious nature and played no real part in the issue of the Swap proceedings.  There will be no injustice to the defendants if leave is granted.

Result

[64]     The application for review is dismissed.  A further hearing will be required to deal with issues arising out of the order granting leave to use documents discovered in this proceeding in the Swap proceeding.