Nicholas Arthur Stokes v Molly Harriss Toyne

1. [1]

   The Court has before it a Notice of Motion filed on 11 August 2021, by which the Plaintiff, Mr Stokes, seeks to be able to use evidence served in these proceedings in proceedings in the Federal Circuit Court of Australia and the District Court of New South Wales. Mr Stokes recognises that there may be a restriction by reason of the implied undertaking recognised in Harman v Secretary of State for the Home Department [1983] 1 AC 280 (“Harman”). I shall refer to the implied undertaking as the “Harman Undertaking”. Mr Stokes contends that the evidence is not subject to the Harman Undertaking but against the possibility that it is, seeks to be released from it to the extent necessary to put that evidence forward in the other proceedings. Mr Stokes seeks an order for the release from the Harman Undertaking be made nunc pro tunc. The matter was placed in the Duty List by Lindsay J and is urgent because a hearing in the Federal Circuit Court has been fixed for next week.

2. [2]

   The factual background to these proceedings can be found in the judgment of Rees J, to which I shall refer as the “First Judgment”: see Nicholas Arthur Stokes v Molly Harris Toyne [2019] NSWSC 274. The First Judgment concerned an application under section 55(2A) of the Conveyancing Act 1919 (NSW) (“Conveyancing Act”) by Mr Stokes, who was a purchaser under two contracts for the sale of land and was seeking the return of deposits from Ms Toyne, the vendor. The relevant factual background of these proceedings, for the purpose of the present application, was conveniently summarised by her Honour at [2] of the First Judgment:

3. [3]

   Of the several matters in dispute before her Honour included:

   1. (1)

      whether Mr Stokes had, without the consent or agreement of Ms Toyne, demolished a shed situated on one of the two properties the subject of the dispute, which contained asbestos, thereby contaminating Ms Toyne’s land and causing her loss; and

   2. (2)

      whether Mr Stokes had, without the consent or agreement of Ms Toyne, removed fences on her land.

4. [4]

   Not unimportantly, Ms Toyne did not give evidence in the hearing before her Honour, nor were the following affidavits and expert reports, which were served on behalf of Ms Toyne, read and/or tendered by Ms Toyne’s Counsel:

   1. (1)

      Affidavit of Molly Harriss Toyne dated 7 December 2017;

   2. (2)

      Affidavit of David Davies dated 10 May 2018;

   3. (3)

      Affidavit of Phillip Langworthy dated 11 May 2018;

   4. (4)

      Affidavit of Natasha Pearson dated 11 May 2018;

   5. (5)

      expert witness report of Quantity Surveyor Fiona Doherty dated 16 November 2017;

   6. (6)

      fibre identification certificate of analysis by Robson Environmental dated 24 November 2017; and

   7. (7)

      an asbestos assessment report by Safe Work & Environments dated 20 August 2018.

5. [5]

   I shall refer to these documents as “the Evidence”.

6. [6]

   On 18 March 2019, her Honour gave judgment for Mr Stokes and ordered, pursuant to section 55(2A) of the Conveyancing Act, that Ms Toyne repay to Mr Stokes the deposits of $110,000 together with interest (“the Judgment Debt”). Ms Toyne was also ordered to pay Mr Stokes’ costs: see [167] of the First Judgment.

7. [7]

   On 25 January 2021, an order was made that Ms Toyne pay Mr Stokes’ costs in the amount of $123,046.34 (“the Costs Debt”).

8. [8]

   On 3 March 2021, on an application by Mr Stokes, a bankruptcy notice identified as BN251979 (“the Bankruptcy Notice”) was issued by the Official Receiver against Ms Toyne. By the Bankruptcy Notice, Mr Stokes claimed that the Judgment Debt and the Costs Debt remained unpaid, the sum total of which was $247,268.97.

9. [9]

   On 1 April 2021, Ms Toyne commenced proceedings in the Federal Circuit Court of Australia seeking various orders under the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”), including that the Bankruptcy Notice be set aside (“the Set Aside Application”). Ms Toyne seeks to set aside the Bankruptcy Notice on the following bases:

   1. (1)

      that “behind the Costs Judgment there is not in truth and reality a debt owed” (see paragraph 6(a) of the Affidavit of Lorraine Susan White affirmed on 11 August 2021); and

   2. (2)

      Ms Toyne has a counter-claim, set-off or cross-demand against Mr Stokes equal to or exceeding the Judgment Debt and Costs Debt that could not have been set up in these proceedings.

10. [10]

    Mr Stokes opposes the Set Aside Application on various bases, including that Ms Toyne could have agitated the issues raised by her counter-claim, set-off or cross-demand in these proceedings by way of a Cross-Claim.

11. [11]

    In support of Mr Stokes’ opposition to the Set Aside Application, his solicitors served an Affidavit deposed to by Lorraine Susan White on 1 July 2021, to which the Evidence was exhibited.

12. [12]

    The Set Aside Application has been fixed for hearing on 27 August 2021.

13. [13]

    Ms Toyne has also commenced proceedings in the District Court of New South Wales seeking damages for breach of the contracts for sale of land which were the subject of the First Judgment, and also for trespass (“the District Court Proceedings”). By his Defence, Mr Stokes denies any liability to Ms Toyne. Mr Stokes asserts, inter alia, that Ms Toyne is estopped from bring her claims in the District Court Proceedings on the basis of the principles espoused in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (“Anshun”) and further, that the continuance of the District Court Proceedings are an abuse of process. Mr Stokes wishes to rely on the Evidence in the District Court as well as the Federal Circuit Court.

14. [14]

    On 23 July 2021, Mr Stokes’ solicitors wrote to Ms Toyne’s solicitors seeking Ms Toyne’s consent to orders being made in these proceedings for Mr Stokes to be released from the Harman Undertaking, and hence be able to put forward the Evidence in both the Federal Circuit Court and District Court.

15. [15]

    On both 30 July and 5 August 2021, Mr Stokes’ solicitors wrote to Ms Toyne’s solicitors seeking a response to their letter of 23 July 2021.

16. [16]

    On 9 August 2021, Ms Toyne’s solicitors responded to the correspondence of 23 and 30 July, and 5 August 2021. The position adopted by Ms Toyne’s solicitors in that correspondence can be summarised as follows:

    1. (1)

       the Evidence is subject to the Harman Undertaking;

    2. (2)

       accordingly, Mr Stokes’ use of the Evidence in the Bankruptcy Proceedings was in breach of the Harman Undertaking and Mr Stokes is, thereby, in prima facie contempt of Court; and

    3. (3)

       insofar as Mr Stokes seeks to be released from the Harman Undertaking retrospectively, he has not proffered an explanation as to the circumstances in which he saw fit to use the Evidence in the Bankruptcy Proceedings, nor why these matters were not raised by Mr Stokes prior to his use of those documents.

17. [17]

    The matter was first listed in the Duty List on 13 August 2021. Ms Toyne through her solicitors, sought an adjournment of the hearing of the application on that occasion to put on material in response. On the morning 18 August 2021, Ms Toyne’s solicitor wrote to the Court and indicated that Ms Toyne neither consents to, nor opposes, the relief sought by Mr Stokes save for the question of costs, on which issue the Court was directed to the letter of 9 August 2021. No appearance was filed by Ms Toyne’s current solicitor, Mr James Penman of Logie-Smith Lanyon Lawyers. The solicitors on the record in these proceedings, King Wood & Mallesons, have written to the Court advising that they have no instructions in the matter. Mr N Oram of Counsel appeared for Mr Stokes and he has provided the Court with detailed and helpful submissions.

18. [18]

    The Harman “Undertaking”, as it has become known, is not really an “undertaking”, but rather, a substantive obligation “which arises as a result of the circumstances in which documents are generated and received and regardless of the intentions of the parties”: see Frigger v Trenfield (No 5) [2020] FCA 827 at [19] per Jackson J (“Frigger”), citing Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 at [3], [46], [102], [105]-[108] (“Hearne”). The fundamental principle the High Court said in Hearne is (at [96] at Hayne, Heydon and Crennan JJ, with whom Gleeson CJ and Kirby J agreed):

19. [19]

    In Harman, the Secretary of State for the Home Department disclosed in the course of proceedings brought by Mr Harman’s client a large number of documents including six confidential documents for which public interest immunity had been claimed but not upheld. Mr Harman, a solicitor, permitted a journalist access to the documents that had been read out in court including the confidential documents for the purpose of a newspaper article. Mr Harman was found guilty of contempt and his appeals to the Court of Appeal and House of Lords were unsuccessful. Lord Scarman, albeit in dissent, put the principle (at 312):

20. [20]

    Lord Roskill, one of the majority, cited Lord Denning’s words in Riddick v Thames Board Mills Ltd [1977] QB 881 that (at 896):

21. [21]

    There is no question that documents produced under compulsion cannot be used by the other party without the consent of the producing party or leave of the Court. Although it is expressed as an undertaking to the Court, when consent is clearly given, it appears that the consent of the producing party is sufficient to release the party in receipt of the documents from the obligations owed: see Dagi v Broken Hill Proprietary Co Ltd [1996] 2 VR 567 at 572 per Byrne J; see also Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316 at 338 per Anderson J, with whom Pidgeon and Ipp JJ agreed. More pertinently for present purposes, there has been generated controversy as to what is caught by “under compulsion”. There is a line of authority best represented by McPherson J in Central Queensland Cement Pty Ltd v Hardy [1989] 2 Qd R 509 which holds that witness statements and affidavits that are required to be filed and served before hearing are properly characterised as documents produced under compulsion. There can be no doubt that when the Court orders a defendant in a Mareva order case to file and serve an affidavit as to his or her financial circumstances, or a defendant in an Anton Pillar case to provide an affidavit detailing the whereabouts of, for example, cassettes, they are documents produced under compulsion, but there are a number of cases in which the courts have doubted the notion that all affidavits filed in proceedings are the subject of the Harman Undertaking: see Helicopter Aerial Surveys Pty Ltd v Robertson [2015] NSWSC 2104 (“Helicopter”); see also Frigger at [62] per Jackson J and Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 7) [2020] NSWLEC 140 per Pepper J (“Verde”).

22. [22]

    In Helicopter, Brereton J (as his Honour then was) was considering whether the Harman Undertaking applied to affidavits that had been filed in the ordinary course and said (at [39]):

23. [23]

    His Honour, at [41], said however:

24. [24]

    In R, On The Application of John Patrick Davey v Ronald David Silverstein [2020] VSCA 233 per Kyrou, Kaye and McLeish JJA (“Silverstein”), the Victorian Court of Appeal reviewed the authorities and held that affidavits filed by a party in support of a summary judgment application and an affidavit in support of an application for preliminary discovery are not to be treated as subject to an implied undertaking because although the rules of court required such an affidavit to be filed in support of the application, it did not compel the application to be made: see [26] and see [78] noting at [78]:

25. [25]

    If affidavits required to be filed in support of a summary judgment application are not the subject of a Harman Undertaking, then a fortiori, affidavits and expert reports filed in the usual course of litigation will not be the subject of the Harman Undertaking.

26. [26]

    The decision in Silverstein, being a unanimous decision of an intermediate court of appeal, is one which I believe I should follow, particularly in light of the views expressed by Brereton J in Helicopter, Jackson J in Frigger and Pepper J in Verde: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 at [135] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ. I recognise that there may well be a question about the extent to which a party who has received affidavits from his or her opponent is able to utilise those affidavits for extraneous purposes, but I proceed on the basis that use of affidavits obtained in one set of proceedings can, without any requirement of leave, be utilised in other proceedings involving the same parties. It follows that Mr Stokes was not required to seek the consent of Ms Toyne to use the material and was not in breach of the Harman Undertaking in using the material.

27. [27]

    If, contrary to my conclusion, the material in question was the subject of a Harman Undertaking, in my view, this is a case in which Mr Stokes ought to be released from the undertaking, as there exists “a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present”: Springfield Nominees Pry Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 at 225 per Wilcox J. I will express my view briefly as follows:

    1. (1)

       Ms Toyne seeks, in the Bankruptcy Proceedings, to challenge the judgment in this Court. Whilst the basis of that challenge is unclear, it seems obvious that Mr Stokes must be entitled to put before the Federal Circuit Court all matters relevant to the obtaining of that judgment.

    2. (2)

       The Federal Circuit Court is empowered to investigate various matters in connection with the judgment which Ms Toyne seeks to impugn: see ss 30, 40(1)(g) and 41 of the Bankruptcy Act.

    3. (3)

       The documents filed in this Court, whether read or not, can have a bearing on matters upon which the Federal Circuit Court is called on (by Ms Toyne’s application) to decide.

    4. (4)

       Ms Toyne having sought to impugn the First Judgment cannot preclude the Plaintiff from advancing all matters relevant to the procedural history of the matter in this Court which might have a bearing on the validity of the judgment obtained.

    5. (5)

       The underlying logic of why it is that Mr Stokes ought to be relieved of the undertaking can be framed in different ways:

28. [28]

    This situation has some parallel with that which pertains in relation to legal professional privilege. A party cannot normally be compelled to produce details of advice or communications with his lawyers but if he advances a case that asserts that he was told (or not told) certain things, he cannot resist production of material relevant to that topic. In Benecke v National Australia Bank (1993) 35 NSWLR 110, Gleeson CJ said (at 111E-112A) (“Benecke”):

29. [29]

    The passage cited from Benecke seems to me to have a resonance here. Here, Ms Toyne has lifted or waived any protection that she might have had by seeking to impugn the First Judgment in the Federal Circuit Court and assert that she could not bring a cross-claim in these proceedings.

30. [30]

    In relation to the use of the Evidence in the District Court, the result is the same. This is because Mr Stokes asserts that Ms Toyne is precluded by the principles in Anshun and Ms Toyne contends that she was not able to maintain the case that she now advances in these proceedings. By asserting that she was not able to advance the case now ventilated, Ms Toyne has opened up the issue of what material was filed and served in these proceedings – to preclude Mr Stokes from tendering that material to establish that not only could she advance the case that she now advances in the District Court, but that she did up to some point in these proceedings do so, would work a monumental unfairness to Mr Stokes.

31. [31]

    I am therefore of the view that were leave of the Court required for Mr Stokes to be able to use the Evidence in the Federal Circuit Court and the District Court, leave should be granted.

32. [32]

    It follows that Mr Stokes is entitled to the orders sought in paragraphs 4 and 5 of the Notice of Motion, namely:

Costs

1. [33]

   Mr Stokes seeks an order that Ms Toyne pay his costs of the application and to do so on an indemnity basis. Mr Stokes has acted entirely reasonably – seeking the consent of Ms Toyne and following up that unanswered request on two occasions. The response of Ms Toyne through her solicitors (by letter of 9 August 2021) was to refuse consent and accuse Mr Stokes of being in contempt of court. Further, Ms Toyne sought time within which to file evidence in opposition to Mr Stokes’ application which was granted but Ms Toyne did not put on any material. In the course of submissions, Mr Oram accepted that his client could not obtain an order for all of the costs of the application.

2. [34]

   Whilst I am of the view that Ms Toyne’s refusal to agree to release Mr Stokes from the Harman Undertaking was unreasonable and would preclude any costs being ordered in her favour as her solicitors contended in their letter, there are several reasons why I am not persuaded that I should order Ms Toyne to pay Mr Stokes’ costs of this application:

   1. (1)

      Ms Toyne did not, as matters transpired, come to Court to contest Mr Stokes’ motion, but rather, took the position that she neither opposed nor consented;

   2. (2)

      Mr Stokes was always intending to approach the Court in connection with the use of the Evidence in the other proceedings;

   3. (3)

      Ms Toyne was entitled to contend that leave of the Court was required;

   4. (4)

      whilst I think it is probable that the Court would not have required much persuasion to grant permission if consent had been forthcoming from Ms Toyne (and in my view, consent would have been sufficient to permit use had the Harman Undertaking applied to the Evidence), it would have been prudent of Mr Stokes to provide detailed submissions against the possibility that the Court might require assistance even with such consent. This prospect increased once the application was also founded on the threshold issue of whether consent or leave of the Court was required; and

   5. (5)

      in my view, if Mr Stokes is successful in either the Federal Circuit Court or the District Court, a very strong case can be mounted that all of Mr Stokes’ costs incurred on this application should be treated as costs of defending those proceedings, for which he should be reimbursed.

3. [35]

   I shall therefore make an order that there be no order as to costs.