In the recent cases of La Mancha Africa S.A.R.L v Commissioner of Taxation,1 the Federal Court of Australia determined whether the ‘Harman undertaking’ restricted the respondent’s use of subpoenaed documents.
The Harman undertaking imposes an obligation on parties to a proceeding that documents received from the other side, or third parties, are not to be used for purposes other than in the litigation.2
Background
In the initial proceeding,3 Ernest Henry Mining Pty Ltd (Ernest) produced documents to the court pursuant to a subpoena issued by the applicant. However, Ernest submitted that the Harman undertaking by the respondent meant that its use of such documents was limited for the purposes of the proceedings only.
However, the respondent (the commissioner) submitted that the Harman undertaking did not operate to constrain its lawful exercise of statutory functions and powers. The court decided in favour of the commissioner.
Issues considered
Ernest emphasised the difference in position of the commissioner and argued that, as a party to the proceedings, it was subject to the Harman undertaking as a litigant and not as a regulator.4 Ernest argued that the commissioner needed to obtain a release from the Harman obligation to exercise its powers.5
The court turned to the decision in Deputy Commissioner of Taxation v Rennie Produce (Aust) Pty Ltd (in liq)6 and noted the court in that case concluded the Harman obligation did not constrain the Commissioner from using documents to exercise its statutory powers and functions.7 In Rennie, the court decided in favour of the commissioner because the court recognised the Harman obligation was referenced by the inconsistent legal duties to which the commissioner was subject to.8 The court in this proceeding ordered in favour of the commissioner.
Ernest then sought further orders from the court to protect its interests in a separate proceeding.9 The proposed orders by Ernest included undertakings to be given by; employees of the commissioner, external solicitors and barristers, and independent experts and its staff retained by the commissioner for the purposes of the proceedings.10 While the court considered it was appropriate to make orders to protect Ernest’s interests, it found that such orders were excessive11 and there was no warrant for the court to impose a more rigid confidentiality regime where Ernest was adequately protected by the obligations that existed by operation of law.12
The court turned to the commissioner’s proposed orders instead and was of the view that it struck the right balance.13
The proposed orders included:14
- the commissioner to inform any independent expert (to whom it provided copies of the subpoenaed documents) that the information in the documents were not to be used or disclosed by that person, except for the purpose of the proceeding or otherwise authorised by law
- the commissioner was to provide 14 days’ notice to Ernest if it intended to rely on any of the documents or its contents, or
- if the commissioner intended to file any pleadings or particulars in the proceeding, it should disclose the content of those documents.
The court found these orders were sufficient to protect all parties’ interests and ordered that leave be granted to the commissioner to inspect the documents subject to these orders.
As for costs, the plaintiff and Ernest both submitted that the commissioner should bear the costs of the proceeding, as it was the party that challenged Ernest to establish the confidential nature of the documents. The court rejected this reasoning and found the commissioner was entitled to challenge the confidential nature of the documents, as Ernest sought to have imposed a more stringent confidentiality regime in relation to the documents.15
Ernest further submitted that the commissioner should pay the costs or alternatively no order as to costs, on the basis the Harman undertaking was ‘a benefit of the administration of taxation laws by the commissioner’.16 The court found the question here did not arise in the context of ‘public interest’, rather it was Ernest seeking to have the commissioner precluded from using the documents it produced for other purposes.
The court found no warrant to depart from usual practices and noted the commissioner should be awarded costs incurred in relation to the determination of the issue.17 The court ordered Ernest to pay the commissioner’s costs as agreed and for the applicant to pay its own costs.
Janelle Linato is a law student in the Queensland Law Society Ethics and Practice Centre. This article has been approved by Grace van Baarle, Manager, Ethics Solicitor, QLS Ethics and Practice Centre.
Footnotes
1 [2021] FCA 1564; (No2) [2022] FCA 131.
2 La Mancha Africa S.A.R.L v Commissioner of Taxation [2021] FCA 1564, 2 (La Mancha).
3 Ibid.
4 Ibid 6.
5 Ibid.
6 [2018] FCAFC 38 (Rennie).
7 La Mancha (n2) 9.
8 Ibid.
9 La Mancha Africa S.A.R.L v Commissioner of Taxation (No 2) [2021] FCA131 (La Mancha).
10 La Mancha (n8) 2.
11 Ibid.
12 Ibid 3.
13 Ibid 4.
14 Ibid.
15 Ibid 6.
16 Ibid 8.
17 Ibid.
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