Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 6)

1. [1]

   This judgment concerns an application by the plaintiff, Rodriguez & Sons Pty Ltd, for the imposition of a condition on an order that requires it to serve some hydraulic model software and associated data files on the defendants. The condition sought is that the material is only required to be served on a defendant if that defendant as well as its witnesses and members of its legal team enter into a written undertaking respecting the confidentiality of that material.

2. [2]

   For the reasons that follow, I will impose such a condition but the written undertaking will not be in the form sought by the plaintiff.

Background

1. [3]

   The nature of the proceedings and the structure of an earlier version of the statement of claim were outlined by Garling J in Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater [2014] NSWSC 1565 at [1] to [27]. I will not repeat that discussion.

2. [4]

   In Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 3) [2015] NSWSC 838 at [43] to [47], I noted that the plaintiff had retained an expert who has constructed a hydraulic model that incorporates detailed topological mapping of the greater Brisbane area, as well as information concerning water flow into that area during the period December 2010 to January 2011. The model is said to be capable of taking as an input hypothetical outflows from the Wivenhoe Dam system and reconstructing what the level of flooding would have been for every 10 square metres in the Brisbane area during that period.

3. [5]

   In Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 4) [2015] NSWSC 1352, I vacated a hearing date of 18 July 2016 because of delays in the service of the model and an accompanying expert’s report. The proceedings are now due to be heard in October 2017.

4. [6]

   In September and October 2015, the plaintiff served copies of two expert reports concerning the model. Both were prepared by Dr Mustafa Altinakar from the University of Mississippi. The reports were dated 25 September 2015 and 29 October 2015 respectively.

5. [7]

   On 26 June 2016, I ordered that on or before 8 August 2016 the plaintiff provided to the defendants’ copies of certain material, namely:

6. [8]

   On 20 July 2016, the solicitors for the plaintiff wrote to the solicitors for the defendants stating, inter alia, that “[c]opies of the Dr Altinakar’s model will be provided on the condition that each defendant enters into an undertaking with respect to its use and dissemination”. The letter stated that the undertaking would include an obligation that “the model will only be used for the purpose of this litigation, and not for any other purpose”, that at the conclusion of the litigation any copy of the model would be returned to the plaintiff’s solicitor or destroyed and what was otherwise said to be (unspecified) “[c]onfidentiality obligations regarding the model and its dissemination”. The letter stated that the “terms of [the] proposed undertaking will be provided to you in due course”.

7. [9]

   On 22 July 2016, there was another directions hearing for the proceedings. In that hearing Counsel for the plaintiff made reference to the service of Dr Altinakar’s report which was due to occur on 8 August 2016 and stated:

8. [10]

   On 5 August 2016, being the Friday before the date upon which the model and supporting data files was due to be served, the plaintiff’s solicitors wrote to the defendants and enclosed the form of undertaking that was sought. It is reproduced as Annexure 1 to this judgment (the “proposed undertaking”).

9. [11]

   An exchange of correspondence followed in which the defendants’ solicitors objected to providing the proposed undertaking on various bases.

10. [12]

    The proceedings were listed before the Court on 23 August 2016 for directions in respect of a notice of motion filed by the plaintiff seeking further discovery. At that time, Counsel for the plaintiff also applied to vary the order noted in [7] so that it only required the material the subject of that order be served on a defendant who provided the proposed undertaking. The application was opposed by the defendants. The only affidavit that was read at that time was an affidavit of the first defendant’s solicitor, Justin Anthony McDonnell, sworn 22 August 2016, which annexed the chain of correspondence to which I have already referred. During the course of submissions, reference was made, inter alia, to the absence of any evidence that the material the subject of the order in [7] was confidential.

11. [13]

    At the conclusion of oral submissions, the Court reserved its judgment, stayed the order noted in [7] and made orders for the service of short written submissions by the parties. Those written submissions were filed on 1 September 2016. Enclosed with the plaintiff’s submissions was an affidavit of Vavaa Mawuli, sworn 1 September 2016, which is addressed below.

12. [14]

    Amongst other matters, the plaintiff’s submissions stated:

13. [15]

    These submissions enclosed a marked up version of the undertaking (the “revised undertaking”). The revised undertaking modified sub-clause 1(b) of the definition of confidential information so as to limit it to documents or information “recording instructions for the use and operation of” the model, removed clause 2 and 3 and added the words “or any witness proposed to be called by the defendants” to sub-clause 4(d) after the word “Defendants” in line 2.

Ms Mawuli’s Affidavit

1. [16]

   In her affidavit, Ms Mawuli stated that Dr Altinakar is the Director and Research Professor at the National Centre for Computational Hydroscience and Engineering (“UM-NCCHE”) at the University of Mississippi. She attached material describing the Decision Support System for Water Infrastructural Security (“DSS-WISE”) used by Dr Altinakar. She also stated:

2. [17]

   The status of this affidavit is difficult to determine. Given the manner in which this application unfolded I assumed that, if any other party objected to the reading of the affidavit, they would have advised the Court. Although the first defendant correctly noted that it was hearsay, no objection to the affidavit being read was notified.

3. [18]

   Accordingly, I have proceeded on the basis that the affidavit was read but the limitations on its utility should be noted. I accept that on its face the affidavit sets out a bona fide basis for the assertions noted in [16] and that is sufficient to warrant consideration of whether a written undertaking should be required before access is granted. However, I do not accept that the affidavit establishes the facts asserted on any final basis such that the defendants, or their legal advisors and witnesses, are bound by those assertions even if that were otherwise possible.

The “Implied Undertaking”

1. [19]

   Where a party to litigation is compelled by, inter alia, “a specific court order to disclose documents or information” then the party who obtained the benefit of that 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 in evidence” (Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 at [96] per Hayne, Heydon and Crennan JJ; (“Hearne”). While this obligation is often referred to as an “implied undertaking”, that being the terminology utilised in Harman v Secretary of State for Home Department [1983] 1 AC 280, it is nevertheless “a rule [of law] which neither party can unilaterally disclaim” (Mahon v Rahn [No 1] [1998] QB 424 at 453; Hearne at [107] per Hayne, Heydon and Crennan JJ and [3] per Gleeson CJ).

2. [20]

   In Hearne at [107] Hayne, Heydon and Crennan JJ approved a passage from the judgment of Hobhouse J in Prudential Assurance Co Ltd v Fountain Page Ltd [1991] WLR 756 at 764-765, which stated that to refer to an "undertaking" serves:

3. [21]

   A third party is bound by the undertaking if they know of the origins of the material in legal proceedings (Hearne at [112] per Hayne, Heydon and Crennan JJ and at [3] per Gleeson CJ).

4. [22]

   In some circumstances the Court will require that a written undertaking be provided. In Hearne at [116] Hayne, Heydon and Crennan JJ observed that:

5. [23]

   In Kirby v Centro Properties Ltd [2009] FCA 695 (“Kirby”), Ryan J cited this passage (at [35]) before concluding that “[t]he purpose of the express undertaking, then, is merely to ‘bring home’ to those who sign them the seriousness of their obligation to the Court not to use the documents for a collateral purpose” (at [36]; emphasis added). In Kirby, Ryan J refused the applicant’s legal representatives access to the respondent’s insurance policies for the purpose of a mediation but allowed access to commercially sensitive material on the condition they each provide a written undertaking. The form of the undertaking included an agreement not to use the documents for any purpose other than the proceedings, to make “all reasonable efforts to store the confidential documents … in such a way that persons other than those entitled to access them [could not] obtain access to them” and to return the documents or destroy them when the proceedings were completed.

6. [24]

   In Alcoa of Australia Ltd v Apache Energy Ltd [2014] WASCA 148 (“Alcoa”), the trial judge’s determination that a written undertaking was required was upheld on appeal because of, inter alia, the “size, scope and complexity of the litigation” (at [67]), the “adverse security implications for critical infrastructure” that might flow from disclosure (at [68]), the difficulty for the plaintiff’s solicitors and insurers in not using the documents they obtain to assist other plaintiffs (at [69]) and a concern that there would “no effective remedy” against the plaintiff’s insurers for any misuse of the documents as they were not registered foreign companies and did not have a registered office in Australia (at [70]). While the confidentiality regime in Alcoa was said to be “lengthy and detailed” it, nevertheless, only specified the means of giving effect to the implied undertaking. It did not expand its content and was only given to the Court (at [13]).

Written Undertaking

1. [25]

   The first issue that arises is whether it is appropriate to require a written undertaking. I consider that it is.

2. [26]

   The proceedings are large and complex. I expect that each defendant has engaged legal teams of significant size. They have retained experts and at least some of them are consulting witnesses. The entities with the interest in maintaining the confidentiality and commercial value of the DSS-WISE, namely, Dr Altinakar and the University of Mississippi, are not parties to the litigation and reside overseas. They are dependent on the plaintiff’s solicitors for information about the proceedings and, in particular, for advice about the extent of the dissemination of the DSS-WISE system, including the identity of the persons who have received it and the circumstances in which they did so. It is true that they are engaged for reward to provide expert assistance to the plaintiff and in so agreeing they subject themselves to the risk of disclosure of their work in open Court. However, they are entitled to expect that the implied undertaking will be observed so far as the DSS-WISE is concerned. Their interests should be considered at least to the extent of knowing that the terms of the implied undertaking have been brought home “to the minds of those giving it” and what the precise scope of the obligation is. Further, as copies of the undertakings will be provided to the plaintiff’s solicitors, Dr Altinakar and the University of Mississippi will have the means of ascertaining the identity of the persons and entities bound by the undertaking.

3. [27]

   The submissions of the defendants opposed the imposition of any requirement for the provision of a written undertaking on a number of bases, although some of them were more concerned with the content of the undertaking, a matter I will return to. The first defendant, Queensland Bulk Water Supply Authority trading as Seqwater (“Seqwater)” contended that written undertakings were usually confined to proceedings between trade rivals and that did not apply to this matter (citing Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] VR 2 34 at 48; (“Mobil”) and Lenark Pty Limited v TheChairmen1 Pty Ltd [2012] NSWSC 124 at [11] to [12]). However, those decisions concern the circumstances in which access to discovered documents is restricted to the legal representatives of parties (as opposed to the parties themselves) rather than the circumstances in which written undertakings will be required before access to documents is granted.

4. [28]

   Seqwater also contended that there was no evidence that the material the subject of the order noted in [7] was confidential. I have addressed the evidence relevant to that contention in [18] above. Seqwater also noted that the Court has not had the opportunity to inspect the materials the subject of the order noted in [7], which is also said to be contrary to the “approach in cases where express undertaking are sought” (citing Mobil at 39 to 40). I do not accept that there is any requirement in a case such as this for the Court to inspect the materials. In ICAP Australia v Forrest Moebes [2010] NSWSC 738 at [10], Ball J noted that it is “not uncommon” for parties to “develop regimes to avoid the necessity and expense of having to deal with claims of confidentiality on a document by document basis”. Given the specialised nature of the DSS-WISE system, I doubt that the Court would be assisted by inspecting the material the subject of the order noted in [7].

5. [29]

   Given the size and complexity of the litigation and the fact that the intellectual property in the material is owned by a third party located in a different jurisdiction, I consider that this is an exceptional case where it is appropriate to only grant access to the DSS-WISE on condition that a suitable form of written undertaking is provided by the defendants, their legal representatives, witnesses and experts.

The Form of the Undertaking

1. [30]

   Three feature of the proposed undertaking should be noted. First, the proposed undertaking is proffered in favour of Dr Altinakar and the University of Mississippi (and presumably the Court as well). This feature is retained in the revised undertaking. Second, clauses 2 and 3 require the subscriber to agree and acknowledge that the material the subject of the order noted in [7] is confidential and commercially valuable, so much so that they are precluded from arguing that Dr Altinakar and the University of Mississippi would not suffer financial detriment as a result of any disclosure. This feature is not retained in the revised undertaking. Third, the balance of the proposed undertaking specifies the steps that must be taken to preserve the confidentiality of the material. These features are retained and slightly expanded upon in the revised undertaking.

2. [31]

   In relation to the first two features, the written submissions of the second defendant, SunWater Limited (“SunWater”) contended:

3. [32]

   I accept these submissions.

4. [33]

   The material the subject of the order noted in [7] may or may not be confidential and commercially valuable as Dr Altinakar and the University of Mississippi contends. Irrespective of whether that is the case, a written undertaking proffered to the Court that only reflects the implied undertaking will nevertheless facilitate the preservation of such rights as they may in fact have. In the event that the undertaking is breached, then Dr Altinakar and the University of Mississippi will then be able to enforce such substantive rights as they may have with the comfort of knowing that the disclosure of material pursuant to the order noted in [7] did not jeopardise those substantive rights. Further, they may have standing to invoke the Court’s contempt power in relation to any breach of the undertaking (see Director of Public Prosecutions v Australian Broadcasting Corporation and Others (1987) 86 FLR 153 at 159; European Asian Bank AG v Wentworth (1986) 5 NSWLR 445 at 459 to 460).

5. [34]

   However, the first two features of the proposed undertaking noted in [29] travel well beyond preserving or maintaining any substantive rights that may exist. Instead, if it is executed, the proposed undertaking will of its own force confer fresh substantive rights on Dr Altinakar and the University of Mississippi and impose fresh legal obligations on the defendants, their legal representatives and witnesses. An undertaking that has that effect is objectionable for a number of reasons.

6. [35]

   First, it is inconsistent with the statement in Hearne at [116] that the purpose of a written undertaking is “to bring explicitly home to the minds of those giving it how important it is that the documents only be used for the purpose of proceedings”. Nothing in Hearne or any other decision cited by the plaintiff provides support for subjecting parties, their legal representatives and their witnesses to a fresh set of legal obligations over and above what they owe to the Court when receiving documents obtained as a result of a compulsory process.

7. [36]

   Second, to require the defendants’ legal representatives to subject themselves to such obligations would be likely to place them in a position of conflict between their personal interests and their duty to their clients. The Court should not impose conditions on orders for access that places legal representatives in that position. The duty owed by each of the legal representatives to their clients may require them to scrutinise the DSS-WISE system for the purpose of their presenting their client’s response to so much of the plaintiff’s case that relies upon that system. However, their personal interests are best served by them not subjecting themselves to substantive obligations to a third party beyond those that are an ordinary incident of them carrying out their profession as practising lawyers specifically their obligations to the Court and their clients. For example, it is conceivable that their insurance position maybe affected by their entering into written agreements that impose obligations in favour of third parties.

8. [37]

   Similarly, witnesses should not be placed in a position where their preparedness to provide evidence for a party is tested by their willingness to subject themselves to a document that imposes substantive obligations in favour of a third party. An order that places witnesses in that position is inimical to the interests of justice.

9. [38]

   Third, imposing a requirement that the defendants enter into an undertaking that has the first two features noted in [29] as the price of obtaining access to the DSS-WISE system will impair the Court’s ability to control its own processes. If the relevant conditions merely reflected the effect of the implied undertaking then there is no restriction on the Court’s power to modify the terms of the undertaking. If the undertaking is only proffered to the Court then it retains complete control over its processes included the power to grant access to documents produced pursuant to orders of the Court (see [20]). However, if the Court was to require the defendants, their representatives and their witnesses to enter into an undertaking that had the first two features noted in [29] then any later attempt by the Court to modify the undertaking would involve the Court altering substantive rights between those persons and a third party resident overseas. If suffices to state that the basis upon which the Court could so order is unclear.

10. [39]

    It follows that the form of the undertaking that will be required will not have the first two features that I have identified in [29] above. It also follows that it will not be in the form of the proposed undertaking. Nevertheless, it is useful to use that undertaking as a template. It will be modified as follows:

    1. (1)

       The entity to whom the undertaking is proffered will be the Court (and not Dr Altinakar and the University of Mississipi);

    2. (2)

       In clause 1 and throughout the phrase, “Confidential Information” will be described as the “Alleged Confidential Information”;

    3. (3)

       The definition of “Alleged Confidential Information” will reflect the definition in the revised undertaking;

    4. (4)

       Clauses 2 and 3 will be deleted;

    5. (5)

       Former clause 4 will be deleted. Former clauses 5 and 6 impose sufficient obligations to give effect to the implied undertaking;

    6. (6)

       Former clause 6 will be modified to accord with the revised undertaking;

    7. (7)

       The undertaking will include former clause 7 which is similar to that imposed in Kirby, except that former clause 7(b) will be deleted as the requirement for each subscriber to maintain personal control of the Alleged Confidential Information appears cumbersome and potentially unworkable;

    8. (8)

       Former clauses 8 and 10 will remain;

    9. (9)

       Former clause 9 will remain. A similar condition was included in the undertaking adopted in Kirby;

    10. (10)

        Former clause 11 will be deleted. The undertaking is under the complete control of this Court (see [20]).

11. [40]

    The form of the undertaking that will be imposed as a condition for each defendant receiving material the subject of the order noted in [7] is set out in Annexure 2.

Disposition

1. [41]

   As noted, on 23 August 2016 I stayed the order noted in [7] to enable this issue to be determined. To allow the regime for disclosure to continue its course I will now set that order aside in its entirety and make a further order that requires service of that material within three days of this judgment. I will not make a costs order at this point but the parties can have liberty to apply for a discrete costs order in respect of this issue.

2. [42]

   Finally, because of its potential impact on the timetable for the preparation for the final hearing of the proceeding, it is necessary to record that responsibility for the delay since 8 August 2016 in service of the DSS-WISE system and supporting material rests with the plaintiff. At the eleventh hour the plaintiff insisted upon a form of undertaking which was unjustified in its scope. No authority was cited to the Court that could support it in either in its original or revised form. The undertaking that was sought was significantly different to that foreshadowed in the letter of 20 July 2016.

3. [43]

   Accordingly, the Court orders that:

   1. (1)

      Order 3 made on 26 June 2016 be set aside;

   2. (2)

      On or before 16 September 2016, the plaintiff is to provide to each defendant that supplies an executed written undertaking in the form of Annexure 2 to the judgment in Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 6) [2016] NSWSC 1279 copies of:

   3. (3)

      The parties have liberty to apply in respect of the costs of the application made to the Court on 23 August 2016.