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Focus: Litigation & Dispute Resolution – August 2008

The fiction of the implied undertaking

In brief: The High Court has reaffirmed the importance of abiding by what is generally known as the 'implied undertaking' not to use documents received by way of discovery or other compulsory court processes for any purpose other than the conduct of the proceedings in which they were produced. Partner Alex Cuthbertson (view CV) reviews the Hearne v Street1 decision, which provides guidance on the scope of the implied undertaking, both as to what is caught and who is bound by the obligation. 

How does it affect you?

  • There is nothing voluntary about the implied undertaking.
  • The undertaking applies to all documents and information that a party is compelled to disclose in litigation and extends to third parties.

Key points

The High Court has confirmed that the implied undertaking is in fact a substantive obligation imposed by law. It is the 'condition' upon which documents are made available to a party to litigation. The expression 'implied undertaking' derives from the historical origin of the principle. There is nothing voluntary about the 'undertaking' and it is not to be likened to a term implied in a contract between the parties to the litigation. Rather:

it is an obligation to the court, not the other party, which is implied. It is for that reason that its breach is treated as contempt. The obligation is imposed as a matter of law.2

  

The implied undertaking applies to all documents and information that one party to litigation is compelled, whether by reason of a rule of court, a specific order of the court or otherwise, to disclose, including:

  • documents inspected after discovery;
  • answers to interrogatories;
  • documents produced on subpoena;
  • documents produced for the purposes of taxation of costs;
  • documents produced under a direction from an arbitrator;
  • documents seized under an Anton Pillar order;
  • witness statements served under a judicial direction;
  • affidavits; and
  • expert reports.3

The primary person bound by the implied undertaking is the litigant who receives documents or information from the other side according to litigious processes. However, the obligation would be of very limited protection if it were only personal to the litigant. Therefore, the implied undertaking extends to third parties, including a litigant's solicitor and barrister, expert witnesses, officers and agents of a litigant, and any other person who receives relevant material with the knowledge that it was generated in legal proceedings.4 The majority specifically noted that litigation funders who receive documents and information will be bound by the obligation.5

A third party who uses relevant documents for any purpose other than the conduct of the legal proceedings in which they were produced will be guilty of contempt of court so long as it is proved that the third party knew that the material originated in legal proceedings. It is not necessary to prove knowledge of the implied undertaking and its consequences.6

An important issue that remains unresolved is the scope of the concept of 'use of a document for purposes other than the conduct of the legal proceedings'.7

The implied undertaking is usually released once the relevant material is tendered or read in open court.

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Background

Residents living in North Sydney began NSW Supreme Court proceedings against the operator of Luna Park, Luna Park Pty Ltd (Luna Park Sydney), complaining that noise emanating from the amusement park was excessive and alleging the tort of nuisance (the nuisance proceedings). The first appellant, Mr Hearne, was the managing director of Luna Park Sydney. The second appellant, Mr Tierney, was a director of a company associated with Luna Park Sydney. While the nuisance proceedings were underway, both men lobbied the NSW Government to introduce legislation to protect Luna Park Sydney against noise complaints, including those raised in the proceedings.8 

In April 2005, shortly after the nuisance proceedings commenced, The Daily Telegraph published an article under the headline 'The NUMBY files' (Not Under My Balcony). The article referred, in fairly disparaging terms, to the residents' allegations, summarising parts of their affidavits.

Solicitors for the residents complained that Luna Park Sydney had released the affidavits to the newspaper and sought appropriate undertakings from Luna Park Sydney not to release any further unread affidavits to the media or any other person not properly connected to the proceedings. The solicitors for Luna Park Sydney apologised and provided the requested undertaking. The proceedings continued and, under orders made by the court, an expert's report and a further affidavit were prepared by the residents and served on Luna Park Sydney.

Subsequently, both Mr Hearne and Mr Tierney provided copies of the expert's report and extracts from the further affidavit to individuals in the office of the Minister for Tourism, Sport and Recreation as part of their dealings with the NSW Government in relation to the proposed legislation.

The residents brought contempt charges against Mr Hearne and Mr Tierney, alleging breach of the implied undertaking. The charges were dismissed at first instance, but upheld on appeal by the NSW Court of Appeal (Justices Ipp and Basten, with Justice Handley dissenting).

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The decision

The High Court unanimously dismissed the appeal, affirming the NSW Court of Appeal's decision that Mr Hearne and Mr Tierney were guilty of contempt. The matter was remitted to the primary judge for hearing as to penalty.

Justices Hayne, Heydon and Crennan delivered a joint judgment which, after considering the origins of the implied undertaking at common law, confirmed that:

  • it should now be regarded as an obligation of substantive law; and
  • it is not personal to a litigant but also binds third parties who receive documents and information produced in litigation, provided those third parties have knowledge that the documents originated in legal proceedings.

Chief Justice Gleeson agreed that the implied undertaking was an obligation of substantive law and held that, as agents of Luna Park Sydney, Mr Hearne and Mr Tierney were bound by the obligation. However, he found it 'unnecessary to decide how far beyond the class of persons consisting of servants and agents of a party the legal obligation extends'.9

Both Chief Justice Gleeson and Justice Kirby questioned whether the rationale for the application of the implied undertaking to witness statements and expert reports still applies in the modern litigation environment, where the pre-trial exchange of such documents is commonplace. Justice Kirby, in particular, expressed the need for a 'fundamental reconceptualisation of the relevant legal categories and the re-expression of the common law in less fictitious and artificial language'.10

The court was also required to consider whether the alleged contempt was civil or criminal. It held that this distinction will depend on the circumstances of the case and, in particular, whether the contempt proceedings are punitive (in which case they will be classified as criminal) or remedial or coercive in nature (in which case they will be classified as civil). The court unanimously held that this was a case of civil contempt.  

Footnotes
  1. [2008] HCA 36.
  2. Hayne, Heydon and Crennan JJ at [105] to [106 ], citing Harman v Secretary of State for the Home Department [1983] 1 AC 280 and Bourns Inc v Raychem Corp [1999] 1 All ER 908 among other cases.
  3. Hayne, Heydon and Crennan JJ at [96].
  4. Hayne, Heydon and Crennan JJ at [109] to [111].
  5. Hayne, Heydon and Crennan JJ at [109].
  6. Hayne, Heydon and Crennan JJ at [112].
  7. In particular, Kirby J regarded it as strongly arguable that the provision of documents to a Government Minister for parliamentary purposes could not breach the implied undertaking on the basis that such a use was protected by Parliamentary privilege (despite the Appellants declining to raise such an argument).
  8. The Luna Park Site Amendment (Noise Control) Act was passed in October 2005, with retrospective effect, preventing the residents' claim in nuisance from succeeding . 
  9. Gleeson CJ at [4].
  10. Kirby J at [46] to [47].

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