Guidance from the FCA regarding the use of documents in ‘other’ proceedings

  • TurkAlert
  • Published 11.08.2021

Key Takeaways 

The FCA has provided useful guidance on when leave is required from the Court to use documents produced in separate proceedings.

The Harman obligation prevents a party who has obtained documents or information from another party through a court order, from using those documents or information produced for any other purpose than that for which it was given. A party can only be released from this obligation by the Court. 1 

In LCM Operations Pty Ltd, in the matter of 316 Group Pty Ltd (In Liquidation) (FCA 2021), Stewart J found that while the Harman obligation applied, the purpose for which the documents was intended to be used was the same in both proceedings, and accordingly, held that leave was not required for use.

 

Brief Facts

316 Group Pty Ltd (In Liquidation) (the Company), its liquidator and LCM Operations Pty Ltd (LCM) entered into an agreement whereby potential claims of the Company against Rabah Enterprises Pty Ltd (Rabah) were assigned to LCM.

Following an application made by LCM, ASIC authorised LCM as ‘eligible applicant’ for the purposes of Division 1 of Pt 5.9 of the Corporations Act (Cth) 2001 (the Act) in relation to the Company. LCM then applied to the Court under ss596A and 596B of the Act, for the issue of various examination summonses and orders of production. The purpose of the proposed orders for production was to investigate the quantum and prospects of the claims against Rabah.

LCM relied on the documents produced to subsequently commence proceedings against Rabah in respect of amounts said to be owed to the Company (assigned to LCM).

Rabah asserted:

  1. The Harman obligation prevented LCM from relying on the documents produced under the orders for production. 
     
  2. LCM is in a different position to that of a liquidator, and has no relationship with the Company, owes no duties to the Company or its creditors, and is not subject to the same duties to the Court as a liquidator. Accordingly, it requires leave of the Court to use the documents, even where the purpose for which the documents are sought to be used is the same purpose for which those documents were obtained.
     
  3. Use of the documents would be an abuse of power as the documents were produced to pursue the private interests of LCM and not to benefit the Company or its creditors. 

Judgment

In Hearne v Street (HCA 2008), Hayne, Heydon and Crennan JJ described the ‘implied undertaking’ found in Harman in the following terms:

‘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.’

Stewart J found the Harman obligation applied as the documents LCM sought to rely on to pursue the claim against Rabah (for a debt allegedly owed to the Company but assigned to LCM), were produced pursuant to orders for production properly obtained. 

In doing so, Stewart J found the principles that entitled a liquidator to use documents produced in answer to an order for production without leave could also apply to an ‘eligible applicant’ intending to use the documents for the purpose of bringing claims that were the subject of the order. 2  

His Honour found that the documents were sought to be used for the same purpose for which the documents were first obtained under the order for production. Accordingly, leave was not required. 

The Court rejected the submission that use of the documents was an abuse of process or for a private purpose, noting that while the purpose was missed, the liquidator and creditors retained a 15% interest in the claim pursuant under the terms of the deed of assignment. 

Implications

The decision provides useful clarity to parties seeking to rely on documents produced in one proceeding in another. In circumstances where the purpose is the same, leave is not required to be sought by an ‘eligible applicant’.
 


1 Harman v Secretary of State for Home Department [1983] 1 AC 208

2 Re Southern Equities Corporation Ltd (in liq); Bond & Caboche v England (1997) 25 ACSR 394; Re Endeavour Securities (Australia) Ltd (in liq) (FCA 2020) 

Lisa Morrissey

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