The implications of undertakings entered into by legal advisors to protect confidential information

An overriding principle in litigation is that there is an implied undertaking against the use of documents and information obtained during the course of litigation for a collateral purpose.

Increasingly, protection of confidential information in litigation may be obtained by way of confidentiality undertakings entered into by legal counsel, solicitors, experts and administrative staff dealing with confidential documents.  Anecdotally it is becoming a more commonplace feature in the litigation landscape. As Murray J held recently, undertakings to the court by counsel and legal advisors ought not to be undertaken lightly.

A recent interlocutory decision by Murray J in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 10) [2010] WASC 16, deals with the subject of undertakings and the prospective difficulties faced by legal advisors entering into undertakings and the effect of any subsequent albeit related litigation.

To understand the interlocutory decision by Murray J, the subject of this commentary, an appreciation of the previous litigation between Wright Prospecting and Hancock Prospecting is needed.  Briefly, Wright Prospecting successfully obtained an order for specific performance of a contract against Hancock Prospecting in respect of mining tenements collectively known as Rhodes Ridge (Primary Action), now on appeal.

Documents relating to the Hope Downs tenements, which was subject to a joint venture agreement between Hancock Prospecting and Rio Tinto became relevant.  Rio Tinto and Hancock Prospecting sought to protect the confidential information in the documents.

Accordingly prior to inspection of documents counsel and experts for Wright Prospecting entered into a confidentiality undertaking in the Primary Action.  Simply put, this allowed counsel and experts for Wright Prospecting to review the documents, but not Wright Prospecting itself.

A material part of the undertaking entered into by counsel and experts for Wright Prospecting was at paragraph 10 which provided that:

‘I will not advise or represent the Plaintiff or any ‘related entity’ or ‘related body corporate’ of the Plaintiff, within the meaning given to those terms in the Corporations Act 2001 (Cth), the Defendant or any related entity or related body corporate of the Defendant (as defined above) or any other third party in regard to any matter, (other than these proceedings, any appeals or other litigation between the Plaintiff and the Defendant which may arise from these proceedings or otherwise from the partnership between the Plaintiff and the Defendant (in the latter case, provided that Rio Tinto or related entities are not a party thereto))’ (paragraph 8 – judgment).

Murray J held that the contents of the documents were to be used only for the purpose of the Primary Action and that ultimately the documents were to be destroyed or delivered to Rio Tinto subsequent to any appeal process.

Subsequent to the successful result in the Primary Action Wright Prospecting brought an application for pre-action discovery to be given by Hancock Prospecting in relation to the terms of the joint venture agreement between Rio Tinto and Hancock Prospecting in relation to the Hope Downs tenements.  Murray J made orders for pre-action discovery but in relation to inspection of documents this was subject to confidentiality undertakings.

Wright Prospecting wished to brief the same counsel used in the Primary Action in relation to inspection of the documents and advise upon and conduct any subsequent litigation.  However, the question arose that counsel for Wright Prospecting might breach the undertakings given in the Primary Action.

A declaration as to the true construction of clause 10 of the confidentiality undertaking was sought by Wright Prospecting in an application in the Primary Action and further a release from the undertakings to enable counsel to act on the information obtained from the Hope Down documents produced in the pre-action discovery application.  

Murray J dismissed the applications for release from the confidential undertakings.  In dismissing the applications by counsel for Wright Prospecting, Murray J reviewed the undertakings made in the Primary Action and the law surrounding this area.

Murray J equated an express undertaking to keep information confidential to the implied undertaking against collateral use of documents discovered or otherwise for inspection in litigation. 

Subject to the interests of justice the very nature of undertakings is to protect commercially sensitive information that ought to be kept private.  Murray J goes on to say that it is only some particular or exceptional reasons in the interests of justice which would provide a basis to override the interests of the parties to keep the information confidential.  It is important in the interests of justice that the court is fully informed of all relevant considerations but maintains the privacy of the commercially sensitive information.

Murray J held there was no indication that the interests of the plaintiff could not be perfectly well served by having access to the advice of counsel who are not potentially in a position of conflict in relation to their use of the discovered information.  Suggestively, the convenience of a party is not of some particular or exceptional reason.

Although this decision turns on its own facts it nevertheless has relevance in a litigation environment where confidentiality undertakings have an increased presence.

For further information please contact Iain Freeman on (08) 9288 6759 / or Christine Arthur on (08) 9288 6706 /  For further information in respect to the litigation please contact Wayne Zappia on (08) 9288 6931 / or Stacey Fuller on (08) 9288 6759 /