Federal Court hands down decision in Greensill Saga on the Hearne v Street Obligation

Key learnings / Issues

The decision highlights the Federal Court’s expectation that parties strictly and proactively abide their Hearne v Street obligations.

We query whether there is a tension between the Federal Court’s strict approach in this decision with the approach taken by the NSW Supreme Court in Gavan v FSS Trustee Corporation [2019] NSWSC 667, in which that Court accepted that documents produced in litigated proceedings could be used in assessing the underlying life insurance claim.

Background / Facts

In proceedings commenced in the Federal Court relating to the collapse of the Greensill group, Insurance Australia Limited discovered documents to Marsh Ltd.
Marsh Ltd and Marsh Pty Ltd (collectively, Marsh) relied on the discovered documents in an ex-parte application in the High Court of Justice of England and Wales (the Application) seeking an injunction to restrain Greensill Bank AG (GBAG) from joining Marsh to the Greensill proceedings. Final orders have not yet been made in the Application.

GBAG alleged that Marsh breached their Hearne v Street obligations to the Federal Court by using the discovered documents in the Application. The Federal Court was asked to determine:

1. 1. Whether Marsh had breached their Hearne v Street obligations to the Federal Court; and
   2. Whether Marsh should be granted a retrospective release from their Hearne v Street obligations, or alternatively a prospective release (if they did breach their obligations).

 Decision

The Federal Court held that:

1. 1. Marsh’s use of the discovered documents in the Application was a breach of their Hearne v Street obligations; and
   2. It was not appropriate for Marsh to be granted a retrospective release from their Hearne v Street However, the Court was prepared to grant a prospective release.

The Hearne v Street obligation

Marsh’s contention was that their use of the discovered documents in the Application was consistent with their Hearne v Street obligations because:

1. 1. The Application was connected to the subject matter of the Greensill proceedings (and so the discovered documents were used for a collateral purpose); and
   2. Marsh was compelled to produce the discovered documents to the English Court because of their obligations to give full and frank disclosure of all material facts in its ex parte application.

The Court restated the established law regarding a party’s Hearne v Street obligation:

1. 1. ‘Where one party to litigation is compelled … to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given…’: Hearne v Street [2008] HCA 36 at [96];
   2. ‘No doubt the implied obligation must yield to inconsistent statutory provisions and to the requirements of curial process in other litigation…‘: Esso Australia Resources Ltd v Plowman [1995] HCA 19 at [42]; and
   3. The Court described the decision in Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd (No 4) [2009] QCA 345 as ‘… contain[ing] a helpful collection of cases on [the point] that the relevant obligation has been differently expressed in different cases‘: at [71].

The Court rejected Marsh’s arguments determining that:

1. 1. ‘[Marsh’s] contention takes too broad a view of what may constitute a permissible use … I do not accept Marsh’s characterisation of the purpose of production, which referred in general terms to the dispute between the parties, and was unmoored from any particular proceeding or process’: at [86] to [87]; and
   2. ‘I do not consider that the Hearne v Street obligation yields to requirements in relation to yet-to-be-commenced litigation. … [T]he [A]pplication did not need to be brought on a without notice basis. In these circumstances, the obligation of full and frank disclosure was self-imposed. … [Once] Marsh was faced with two potentially conflicting obligations, the appropriate course to have adopted was to seek a release from the Hearne v Street obligation‘: at [91] to [93] inclusive.

Releasing Marsh from their Hearne v Street obligations

The Court determined that it was inappropriate to release Marsh from their Hearne v Street obligations retrospectively, considering that: ‘… a release should have been sought by Marsh once it had made a decision to [file the Application] … the use made of the discovered documents was extensive. … The breaches of the Hearne v Street obligation were serious‘: at [99].

Conversely, the Court was willing to release Marsh prospectively, considering that ‘… such an order will facilitate the parties being able to make submissions to the English Court at the forthcoming hearing before that Court’: at [100].

This article was written by Nicholas Matkovich, Partner and Vignesh Iyer, Senior Associate.