The implied obligation – case update

The case of Johnston v Allen [2024] NSWSC 187 is a reminder to parties receiving documents in court proceedings of the scope of the Hearne v Street obligation (also commonly referred to as the Harman undertaking or implied obligation) and how to avoid or remedy a breach.

Practitioners and their clients have an obligation to the court to maintain the confidentiality of documents compulsorily produced in proceedings and to not use them for any purpose other than in connection with the proceedings in which they were produced.

This obligation of confidentiality was referred to as an implied undertaking by the House of Lords in Harman v Secretary of State for the Home Department [1983] 1 AC 280 and applied by the High Court of Australia in Hearne v Street (2008) 235 CLR 125. The obligation arises without the need to imply an undertaking and applies to material including: “documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits” (Hearne v Street at [96]).

In Johnston v Allen, a complaint was made against a practitioner (the Respondent) to the Office of the NSW Legal Services Commissioner arising out of the sale of a property and a subsequent [settled] court proceeding (the proceeding).

The complaint was made by a non-party to the proceeding and was based on the contents of a purportedly confidential affidavit filed by the Respondent and three transaction documents produced under subpoena. The solicitor and counsel that prepared the complaint had access to the affidavit and documents because of their involvement in the proceeding. The draft complaint was then completed and filed by the non-party.

The Respondent applied for an injunction restraining the use of that material on the basis that it was covered by the implied obligation.

The solicitor, counsel and non-party that prepared the complaint argued that the implied obligation did not prevent the use of the documents for the purpose of the complaint. However, if that contention was unsuccessful, they applied to be released from the obligation retrospectively.

The parties agreed that the three transaction documents were covered by the implied obligation as they were compulsorily produced under subpoena and, in any event, they were the subject of an express confidentiality order.

It was also agreed that the Respondent’s affidavit was covered by the implied obligation. But for this agreement, the court considered there was a live question as to whether the affidavit was covered because it was not filed compulsorily and seemingly was prepared without the client's authority.

Further, the complaint was found to have no relevant connection to advancing the non-party’s interests in the proceeding to justify the use of the documents. Accordingly, the court held that the implied obligation was breached.

The implied obligation ceases to apply to documents or information once read or referred to in open court or received into evidence. Otherwise, the only way a party can relieve themselves of their implied obligation is by seeking a release from the court. The release should be sought in advance of using the documents or information.

“Special circumstances” must be demonstrated to be released from the obligation. Relevant factors include the nature of the document, when and how it came into existence, the nature of the information in the document (particularly if it contains personal or commercially sensitive information) and whether the document will contribute to achieving justice in the separate proceeding.

In Johnston v Allen, the court granted leave, releasing the parties from their implied obligations to maintain the public interest in facilitating genuine complaints about the conduct of practitioners and because there was no objection from the parties on whose behalf the documents were originally produced.

If a party has already breached their implied obligation or considers that they may have done so, they should immediately focus on remedying the breach. An apology to the court should be proffered, together with a comprehensive explanation for the breach. In an appropriate case, the breaching party may apply for an order to be released from their implied obligation retrospectively.

Do not assume such an order will readily be made. Any breach of the implied obligation is a serious matter, potentially resulting in civil contempt proceedings, adverse costs orders, claims and regulatory complaints. The reasonableness of the breaching person's conduct will be considered. Knowledge and disregard of the implied obligation with a view to gaining a forensic advantage is an example of a “special consideration” that would weigh against the granting of a retrospective “release” order.

In Johnston v Allen, the court was critical of the incomplete explanations provided by the breaching parties and observed that the Respondent was entitled to pursue contempt proceedings. As the Respondent indicated he would not pursue this further, Parker J stated that his decision to make the release order “was essentially a matter of expediency. I would not have made that order if there had been any possibility of it retrospectively heading off a contempt application: J1 [132]-[133])”; (Johnston v Allen (No 2) [2024] NSWSC 476 [at 41]).

If the breach was reasonably unanticipated or there was a reasonable view that the implied obligation did not apply to the document(s) in question, with no forensic advantage sought or obtained from the breach, the prospects of obtaining a retrospective order are improved (see eg, Treasury Wine Estates Ltd v Maurice Blackburn Pty Ltd (2020) 282 FCR 95).

Christien Corns is a partner and Sam Rappensberg is a senior associate at K&L Gates.