DEREK JOSEPH PARRY AND ANOTHER v. NICHOLAS BRYAN BENTLEY AND ANOTHER

HEADNOTE

    Practice and procedure - discovery - documents disclosed by Plaintiff in Defamation Proceedings upon which Defendant seeks to rely to base counterclaim in defamation - implied undertaking - whether it should be released - 0.24 r. 14A RSC.

1990, No. A3029

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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Introduction

1. Mr. Parry and Mr. Bentley, through their respective companies, are both engaged in the financial services field. On 10th July 1990, Mr. Parry and his company issued proceedings for defamation against Mr. Bentley and his company. In due course, both sides gave discovery. Mr. Parry disclosed some material which Mr. Bentley contends is defamatory of him. He wishes to use that material to found a counterclaim against Mr. Parry. He applied to the Master to be released from the implied undertaking so that he could use this material. The Master granted this application on the 1st September 1992. Mr. Parry now appeals against that decision. I have purposely not gone into the details of the allegations made by both sides.

The Law

2. One has to start with the principles clearly stated by Lord Diplock in Home Office v. Harman [1983] A.C. 280 at 300 that;

"The use of discovery involves an inroad, in the interests of achieving justice, upon the right of the individual to keep his own documents to himself: it is an inroad that calls for safeguards against abuse, and these the English Legal System provides, in its own distinctive fashion, through its rules about abuse of process and contempt of Court."

3. 6 years earlier, Lord Denning in Riddick v. Thames Board Mills Ltd. [1977] QB 881 at 896 had emphasized the invasion of privacy inherent in our discovery process when he said;

"Compulsion (to disclose) is an invasion of a private right to keep one's documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The Court should, therefore, not allow the other party - or anyone else - to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice."

4. This principle had been stated in 1885 by Bray J. in his book on Discovery, 1st Edition at page 238, where he said;

"A party who has obtained access to his adversary's documents under an order for production has no right to make their content public or communicate them to any stranger to the suit: ... nor to use them or copies of them for any collateral object ... if necessary an undertaking to that effect will be made as a condition of granting an order:..."

5. Lord Keith in Harman attempted to grapple with the limits to be imposed where at p. 308 he said;

"But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done. In so far as that must necessarily involve a certain degree of publicity being given to private documents, the result has to be accepted as part of the price of achieving justice. But the fact that a certain inevitable degree of publicity has been brought about, does not, in my opinion, warrant the conclusion that the door should therefore be opened to widespread dissemination of the material by the other party or his legal advisers, for any ulterior purpose whatsoever, whether altruistic or aimed at financial gain."

6. Jenkins J. in Alterskye v. Scott [1948] 1 AER 469 at 470 had emphasized that documents disclosed on discovery should not be used for "any collateral or ulterior purpose", a phrase which is repeated in most of the judgments in this area of the law. The law attempts to balance the competing interests by way of an undertaking.

7. Lord Scarman in Harman at page 313, although dissenting on the result, said this about the undertaking;

"Imposed by law the obligation is formulated as arising from an undertaking exacted by the court from the party and his solicitor to whom the documents are disclosed. It is the condition upon which discovery is ordered. The undertaking protects the confidentiality of the documents which the course of justice requires to be disclosed in the litigation. ...It limits the extent of the invasion of the privacy of the litigant who has to make the discovery. The private character and the confidentiality of his documents are maintained and safeguarded, save only that they may be used in the litigation."

8. Lord Roskill in Harman at p. 322 put the matter in this way;

"My Lords, a party to whom discovery has been made is in relation to his opponent's documents at a great advantage in comparison with the rest of the world. Their owner until the moment of discovery arrives is entitled, subject only to such exceptions as a subpoena duces tecum, to absolute protection and privacy for them against all who seek them out however meritorious the motives may be of those who seek them out in the search of truth. Regret it as some may, there is no freedom of information statute in force in this country. That absolute right is qualified once the moment for discovery in litigation has arrived. But it is only qualified as respects the other party to that litigation who thereupon acquires a privilege special to himself of seeing his opponent's documents but on terms that those documents may only be used by him or his advisers in furtherance of the litigation between them. This is a privilege or an advantage upon which our judicial process insists."

9. It seems therefore that it is clear that the undertaking is automatically given by a party receiving discovery and that the undertaking is the price for discovery. The undertaking protects the documents being used for purposes other than for the action in which they were given and must not be used for collateral or ulterior motives. The undertaking is given to the Court who can grant release from it. Mr. Merry for the Plaintiffs submits that the undertaking is the quid pro quo of full and frank discovery which is itself an invasion of privacy.

10. Mr. Merry submits that the undertaking is rarely released because to do so would or may:

(a) invade the privacy of the giver of discovery;

(b) lead to the violation of confidence;

(c) permit the receiver of discovery to renege on his bargain; and

(d) discourage full and frank disclosure.

11. Mr. Merry further extracts from the cases the following principles, namely, that release will only be given:

(a) in very special circumstances;

(b) if in the public interest,

(c) if it does not occasion injustice to the giver of discovery;

(d) if it does not act as a disincentive to the giving of full and frank disclosure; and

(e) if the applicant gives cogent and persuasive reasons for the release of the undertaking.

Is release from the undertaking required in this case?

12. Mr. Merry submits that it is because Mr. Bentley only learned of the existence of this allegedly defamatory material as a result of inspection on discovery. He submits that no reliance can be placed on this material unless the undertaking is lifted. He points out that this counterclaim is a separate action. The subject matter of the counterclaim relates to a matter which occurred in England in 1988 whereas the Plaintiffs' cause of action relates to an event occurring in Hong Kong some two years later. Clearly, the claim and counterclaim did not arise out of the identical set of circumstances although I believe that there is a loose nexus, namely, the general antipathy each side apparently feel towards the other.

13. Mr. Merry invites me to approach the matter on the basis that the Defendant wishes to commence a fresh and separate action which he cannot do without relying upon these disclosed documents. The Defendant would never have had access to this material had it not been for the obligation of disclosure protected by the undertaking.

14. Mr. Benjamin Yu for Mr. Bentley submits that leave is not required. He points out that it is a frequent occurrence for a party to find material on discovery and make use of it in the action in which it was disclosed. In the present case, he submits that the counterclaim is part of the action and that the use of the documents to found the counterclaim will not breach the undertaking.

15. Mr. Yu submits that there is no authority to suggest that a party cannot use documents disclosed by his opponent in formulating an additional cause of action or defence. Such use of documents he submits is not collateral or improper. He relies on authority to support the proposition that a party may use documents disclosed by another party to add a cause of action in the same proceedings.

16. He relies heavily on an obvservation of Stephenson L.J. in Riddick. Mr. Riddick was dismissed in circumstances which led him to claim damages against his employer for wrongful arrest and false imprisonment. During the course of discovery in that action, the company disclosed a memorandum which had been prepared at or around the time of his dismissal. The false imprisonment action was settled on terms endorsed on counsel's briefs, including a payment to the Plaintiffs' solicitors and the withdrawal of the allegations of wrongful arrest and false imprisonment.

17. In February 1972, Mr. Riddick claimed damages against the company for defamation "flowing from the wrongful manner" of his dismissal, but that action was struck out as being a further claim for damages in respect of the same matters as in the action which had been settled.

18. In 1974, Mr. Riddick instituted new proceedings claiming damages for defamation based on the memorandum above referred to. The jury awarded Mr. Riddick £5,000 damages and the company appealed. The appeal was allowed, as is apparent from my previous quotations of the case, on the basis that a party who discloses a document on discovery is entitled to the protection of the court against any use of it, otherwise than in the action in which it was disclosed. The court held that since this memorandum had been disclosed in the first action which had been settled, in the interests of public policy and justice to the company, Mr. Riddick was not entitled to use it as a basis of a subsequent defamation action.

19. At page 902, Stephenson L.J. in agreeing to allow the appeal added the following;

"There may be cases in which a plaintiff would be justified in bringing an action on a document disclosed in an earlier action. I do not say that it could never be done without abusing the process of the court. But generally speaking it would be an abuse of its process and in the circumstances of this case the plaintiff's use of this memorandum is an improper use which the court should not countenance. I see no reason why he could not have done justice to himself - and to the company - by amending his writ in the 1969 action to add the claim which he delayed making until he pleaded paragraph 10 of his statement of claim in the 1972 action and is making in this action. Perhaps he was then advised that it added so little to his existing claim as to be not worth making."

20. This observation is clearly made obiter as it was not necessary for the decision before the court and neither Lord Denning MR nor Waller LJ appears to have supported it. In the latest edition of Gatley on Libel at paragraph 1210 one finds the following, based on Riddick;

"A party to whom documents have been disclosed under the foregoing provisions may only use them for the purposes of the action in which they have been disclosed. He may be restrained from publishing them and even a subsequent action founded on them may be struck out. Thus, if documents disclosed to the plaintiff reveal a further cause of action he will be well advised to seek leave for amendment to include it in the current action."

21. Mr. Yu goes on to submit that justice dictates that the same principle should apply to both the Plaintiff and the Defendant. If a plaintiff can use documents disclosed by the defendant to add a new cause of action, the defendant must be able to do likewise. He goes on to submit that if, in the present case, the Defendant had disclosed a document defamatory of the Plaintiff, the Plaintiff could rely on the dictum of Stephenson LJ in Riddick and amend his claim to add a new cause of action. He submits that there is no reason in principle or logic why the Defendant should not have the same right.

22. There is no getting away from the fact that the counterclaim which Mr. Bentley wishes to raise could have been raised as an independent action. The counterclaim in this case is an independent action. The cause of action in the claim and the proposed counterclaim are not identical. Rules of Court permit the counterclaim to be made in this action, although it relies on a completely different event. I have no doubt that if Mr. Bentley wished to institute fresh proceedings based upon this material, he would have to obtain the leave of the court to use it. It does not seem to me to make any difference that by Rule of Court he is permitted to raise this cross-action in this action itself. It seems to me that the principle that I have outlined above must apply equally to this situation as it would to a fresh action.

23. I have given very careful consideration to the way in which Mr. Yu has attractively put his case, but I am quite satisfied that leave is required in this action. This is not one of those cases where the disclosed material assisted the party in relation to an action already commenced. Use of the disclosed material is the only way in which the Defendant can maintain his counterclaim which is, as I have said, an independent cross-claim. I now turn to consider whether leave should in fact be granted in this case.

Should leave be granted?

24. This question was considered by the House of Lords in Crest Homes v. Marks [1987] A.C. 829. The headnote accurately reflects the speech of Lord Oliver who gave the only speech with which the other members of The Judicial Committee agreed;

"...the implied undertaking on discovery in an action not to use the discovered material for any purpose other than the proper conduct of that action was given to the court and could, in appropriate circumstances, be released or modified by the court, though the importance as a matter of general policy of preserving its integrity was to be emphasized; that no injustice would be done to the defendants if the documents in question were made available for use in the 1984 action for the purposes of proceedings for contempt; and that, accordingly, in the very special circumstances of the case, including the circumstance that it was purely adventitious that there were two actions and that in substance they were a single set of proceedings, the plaintiffs should be released from their implied undertaking."

25. Lord Oliver pointed out that each case depended on its own facts. The very existence of 2 sets of proceedings was adventitious in that case, but the same cannot be said of the present case.

26. A similar situation arose in Sybron v. Barclays Bank [1985] 1 Ch. 299 where Scott J. (as he then was) granted leave on the basis that the cause of action in the 1981 and 1983 actions were the same.

27. Following the "friendly settlement" of the Harman case before the European Commission of Human Rights, 0. 24 r. 14A was added to the Rules of The Supreme Court in both England and Hong Kong. The rule reads:

"Use of documents.

Any undertaking, whether express or implied, not to use a document for any purposes other than those of the proceedings in which it is disclosed, shall cease to apply to such document after it has been read to or by the Court, or referred to, in open Court, unless the Court for special reasons has otherwise ordered on the application of a party or of the person to whom the document belongs."

28. In Bibby Bulk Carriers v. Cansulex (1989) 2 WLR 182, Hirst J. (as he then was) rejected the submission that this new rule fatally underminded the rationale of the majority in Harman. The learned judge recognized that the new rule enacted a new regime which had not by then been worked out in practice. I will have to return to this rule as Mr. Merry invites me to make an order under it if I were minded to allow this appeal.

29. In Bibby Plaintiff shipowner sued the Defendant shippers for damages of breach of bills of lading in shipping a dangerous cargo knowing it would pit and erode the vessels steelwork. During the proceedings the Plaintiff's counsel read out in open court a minute of a meeting disclosed by the Defendants which was highly relevant to the matter in issue. The action settled. In November 1987 arbitration proceedings were due to commence between other shipowners and shippers concerning damage to another ship alleged to have been caused in a similar manner. The claimants in the arbitration who belonged to the same defence association as the Plaintiffs in the action and who had instructed the same solicitors wanted to use the minutes of the meeting. The Plaintiffs applied to be released from their implied undertaking. The judge refused to accede to the application having considered all the matters relevant in that case to the exercise of his discretion.

30. There appears to be no considered Hong Kong judgment on this topic although I am personally aware of cases where leave has been given but in totally dissimilar situations to the present case.

Conclusion

31. I have considered very carefully all the arguments ably deployed by both Mr. Merry and Mr. Yu. I have given the matter very careful and anxious consideration. Having done so I have concluded that it would be wrong to release the Defendants from the implied undertaking and therefore I propose to exercise my discretion against the Defendants and allow the appeal.

32. The following factors have led me to this conclusion.

(1) If leave were to be granted, it would act as a disincentive to full and frank disclosure upon which our system so heavily depends.

(2) The Plaintiff would suffer substantial prejudice. Not only would his action be delayed but he would have to face a defamation action with the risk of damages and costs being awarded against him. For this situation to arise where he has, on advice, made disclosure of these documents in the light of the undertaking would amount to a serious prejudice to the Plaintiff.

(3) Although there is the nexus of animosity between these parties, nevertheless the 2 alleged libels are separated by 2 years and were published in different jurisdictions.

(4) The facts of the case before me are totally different to those in Crest and Sybron.

(5) There are no special circumstances here other than that the Defendant would like to counter attack on the basis of documents he would never have seen were it not for the Plaintiff's full and frank disclosure. The desire of the Defendant to obtain redress is not a sufficiently important fact to override the undertaking.

(6) To permit use of these documents to found an otherwise unsustainable cause of action would so undermine the effect of the undertaking that a most unfortunate precedent would be set.

33. I have, of course, given very careful consideration to the general argument that it could be said to be in the public interest for these two parties to clear the air in public and let the Court and jury decide where lie the rights and wrongs. However, to take that view would be to ignore the relevant principles which I have endeavoured to set out in this judgment and which have persuaded me to reach a contrary view.

34. I have no doubt that the exercise of my discretion calls for the refusal of leave and so the appeal is allowed.

35. I propose to make a costs order nisi both here and below in favour of the Plaintiffs. Unless the parties can agree on the effect of my having read the offending material in Chambers, I will hear Mr. Merry on his application for an order under O. 24 r. 14A of the Rules of The Supreme Court.