“A party who seeks discovery of documents gets it on condition that he will make use of them only for the purpose of that action, and no other purpose.
…
Compulsion [to disclose on discovery] 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 courts 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.”
Hearne v Street summarised that the implied undertaking rule applied to all documents and information that one party to litigation is compelled, whether by reason of a rule of court, a specific order of the court or otherwise, to disclose, including:
(i) documents inspected after discovery;
(ii) answers to interrogatories;
(iii) documents produced on subpoena;
(iv) documents produced for the purposes of taxation of costs;
(v) documents produced under a direction from an arbitrator;
(vi) documents seized under an Anton Pillar order;
(vii) witness statements served under a judicial direction;
(viii) affidavits; and
(ix) expert reports.
The implied undertaking is usually released once the relevant material is tendered or read in open court. A breach of this implied undertaking (which is given to the Court) would mean that a party is in contempt of Court.
Application of Implied Undertaking Rule
Let me just highlight some issues and the application of this rule in the context of a shareholder dispute.
A shareholder who is not a director, or a director-shareholder who has been denied access to company documents, will not have access to crucial documents to help evidence any of his complaints. A shareholder may wish to bring an oppression petition under section 181 of the Companies Act 1965 to seek for a share buy-out or other reliefs. One of the drawbacks of a petition is that there is no automatic right to discovery. In fact, in See Hua Realty Bhd v See Hua News Holding Sdn Bhd [2007] 7 CLJ 152, discovery of documents in the oppression petition was disallowed.
Would the new statutory derivative action provisions assist such a shareholder? The new provisions allow for wide ranging powers for inspection and to effectively order discovery of documents at the leave stage. At a talk I attended, it was suggested by a senior corporate litigator, that he did not see the inconsistency in bringing a section 181A statutory derivative action for the specific purpose of discovery, and to have an oppression petition run in parallel. This was to get over the hurdle and difficulty of obtaining discovery in the oppression petition.
However, I would think the implied undertaking rule should strictly apply in preventing the use of any documents obtained under the section 181A proceedings for use in the oppression petition proceedings.
Similarly, if the shareholder agreement contains an arbitration clause, any order for discovery by the arbitrator (or even interim order for discovery to be granted by the Courts under section 11 of the Arbitration Act 2005) should mean that the documents or evidence can only be used within the arbitration proceedings and not be used for other litigation proceedings.
That means a shareholder may have to continue to grope in the dark and not be able to have access to documents to evidence at least some of the complaints the shareholder may have.
Of Counsel 