Summary
The recent Federal Court of Australia decision in C.T Sheet Metal Works Pty Ltd v Hutchison1 has highlighted the need for principal solicitors to ensure those assisting them understand and comply fully with any undertakings given to the court, lest all involved be found in contempt of court.
The case also serves as a useful reminder to corporate counsel that "Anton Piller" search orders may place them in the unenviable position of having uncovered the smoking gun but being unable to pass on that information within their organisation.
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Introduction - search orders
Although parties to litigation have an obligation to preserve and disclose all relevant evidence during the process of discovery, there will occasionally be times - especially when allegations of fraud are involved – that the prospective plaintiff may fear the defendant will destroy evidence once they become aware of the claim. In such cases, a civil search order may provide the answer, allowing the plaintiff to search for and copy evidence prior to the claim being served, thus preventing attempts by the defendant to cover their tracks.
Due to the intrusive nature of search orders, various undertakings from the party seeking the order and its agents must be given. The undertakings extend beyond damages and go to the manner and conditions in which the search is to be executed and the extent to which any material obtained can be used. For example, the principal solicitor for the party seeking the search order must undertake not to disclose to their client any information acquired during or as a result of the execution of the search, without prior leave of the court.
Background - C.T. Sheet Metal Works v Hutchison
In C.T. Sheet Metal Works, which involved a claim by a company against its former general manager, the Federal Court found that the execution of the search order revealed a chain of emails suggesting that the defendant had helped defraud the plaintiff and was continuing to conspire to do so.
In the course of a telephone conversation with the plaintiff, a junior solicitor working on the file mentioned the significance (though not the precise content) of the emails and noted to his client that it may be a matter warranting police involvement.
Upon learning many months later that his employed solicitor had made this disclosure, the partner working on the file concluded that his undertaking to the Court had potentially been breached. He informed the defendant who responded they did not wish to take the matter any further. Notwithstanding this fact, the principal solicitor felt compelled to advise the Court of the potential breach and did so at the next directions hearing.
The principal solicitor and the junior responsible for the breach filed significant affidavit material and retained senior counsel to make submissions to the Court in relation to the breach.
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Breach of undertaking
After receiving that material, the Court ruled that it was “quite wrong” for the junior solicitor to disclose anything about the emails to his client, including their existence, effect and contents.
Justice Reeves held that disclosure in the circumstances was “the antithesis of the strict confidentiality that applied to a search order of this kind” and that the resultant breach of undertaking will in most instances likely result in both the solicitor responsible and the principal solicitor being prosecuted for contempt of court.
His Honour went on to state that if the emails obtained during the search did not come out during the course of discovery, "the appropriate, and indeed only course available" was for the plaintiff's solicitor to make application to the Court for leave to disclose the existence of the emails to his client to the extent necessary to allow them to bring an application against the defendant for proper discovery.
Bottom line for in-house counsel
Although in this instance the Court declined to refer the matter to the Registrar to prosecute the alleged contempt, that decision was primarily made as a result of the principal solicitor's full and frank disclosure to the Court upon becoming aware of the breach and the seriousness with which he had treated the matter.
Justice Reeves concluded his reasons with a notice to the profession at large of the importance of complying strictly with undertakings given to the Court and of ensuring that junior employees are made aware of the seriousness and consequences of such matters.
In addition to demonstrating the significance of what it means to have ultimate legal responsibility for a file, the decision is a useful reminder for in house counsel of the importance of ensuring those they report to are fully aware of the restrictions on use of Anton Piller evidence before the search is undertaken.
Author
Scott Traeger | Senior Associate
Further information
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1 [2012] FCA 17
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