Alpine Area Contractors Pty Ltd v Vicroads

[1997] FCA 870

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 414  of   1997

BETWEEN:	ALPINE AREA CONTRACTORS PTY LTD (ACN 064 066 904) APPLICANT
AND:	VICROADS RESPONDENT
JUDGE:		MERKEL J
DATE OF ORDER:		3 SEPTEMBER 1997
WHERE MADE:		MELBOURNE

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. Pursuant to Order 15A rule 6 of the Federal Court Rules, the respondent, within 14 days, make discovery to the applicant of any documents which are or have been in its possession, custody or power relating to the tender of Spray Line Surfacing Services for VicRoads Contract Number 4235.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 414 of 1997

BETWEEN:	ALPINE AREA CONTRACTORS PTY LTD (ACN 064 066 904) APPLICANT
AND:	VICROADS RESPONDENT

JUDGE:	MERKEL J
DATE:	3 SEPTEMBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

The applicant (“Alpine”) has applied for an order for discovery against the respondent (“VicRoads”) pursuant to Order 15A rule 6 of the Federal Court Rules.  The rule is as follows:

“Where -

(a)there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief;  and

(c)there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision -

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).”

BACKGROUND FACTS

Alpine had previously tendered, successfully, for a contract with VicRoads which required routine maintenance and snow clearing of the Great Alpine Road between Harrietville and Omeo.

VicRoads put the new 1997 contract, being Contract Number 4235, out to tender in September 1996.  One of the tendering entities was Spray Line Surfacing Services (“Spray Line”) which was a business name registered by VicRoads on 23 October 1996.  After the completion of the tendering process three tenders were considered by VicRoads.  One was that of Alpine.  Another was that of Spray Line.  The third was one submitted by an outside entity.  Spray Line was the successful tenderer.  Its tender of $4.11 million was approximately $400,000 cheaper than Alpine’s tender.  On 11 March 1997 VicRoads informed Alpine that the contract had been let to itself trading as Spray Line for $4.11 million.  The evidence adduced on behalf of Alpine is that:

• it did not know that it was competing against an in-house tender until 11 March 1997;

• it believes that the only way Spray Line could undercut Alpine’s tender was to use VicRoads’ market power to obtain a cheaper equipment hiring rate from A H Plant Hire Pty Ltd which hires out the necessary snow clearing equipment.

In substance, Alpine’s case was that it believes it was significantly disadvantaged by VicRoads tendering to itself and by the failure of VicRoads to disclose that it was doing so.

The tender documentation states that the contractor for the works will be chosen by competitive tender.  Nothing in the documentation suggests that an in-house tender might be made.

Alpine seeks discovery of documentation in relation to Spray Line’s tender under O 15A r 6.  Its counsel submitted that the requirements set out in paragraphs (a), (b) and (c) of the rule have been satisfied and that Alpine requires the discovery it seeks to enable a decision to be made as to whether to commence a proceeding alleging that VicRoads engaged in anti-competitive conduct proscribed under Part IV of the Trade Practices Act 1974 (“the TPA”) or misleading and deceptive conduct in contravention of s 52 of the TPA.

VicRoads has adduced evidence to the effect that Spray Line was an autonomous commercial unit which did not enjoy any competitive advantage, was an arm’s length tenderer and believed it was receiving the same equipment hire quotation from A H Plant Hire Pty Ltd as was given to other tenderers.  VicRoads’ evidence also suggested that Alpine’s representatives were, or at the least ought to have been, aware that Spray Line was a business name of VicRoads.

THE TPA AND CONTRACTUAL CAUSES OF ACTION

I am not satisfied that the evidence establishes that there is any reasonable cause to believe that Alpine has or may have a right to obtain relief in the Court from VicRoads in respect of a contravention of Part IV of the TPA.

The issue of relief for a contravention of s 52 is more complex. It is correct, as counsel for VicRoads submitted, that Alpine currently has all the information it requires to establish misleading or deceptive conduct under s 52 in so far as the conduct relates to the non-disclosure of the in-house tender. However an essential element in relation to any such cause of action is whether the non-disclosure resulted in loss and damage or, put another way, disadvantage to Alpine: see ss 82 and 87 of the TPA. That matter can only be ascertained after Alpine has had access to the relevant VicRoads documentation in relation to Spray Line’s tender.

A further issue was raised by Alpine.  It submits that the in-house tender might have been unfair and in breach of the implied obligations of VicRoads to evaluate tenders fairly, ensure equal opportunity to all tenderers and deal fairly with all tenderers:  see Hughes Aircraft Systems International v Airservices Australia (unreported, Federal Court of Australia, Finn J, 30 June 1997) at 96. Whether such unfairness occurred can only be ascertained from VicRoads documentation in relation to the tender by Spray Line.

IS ALPINE ENTITLED TO DISCOVERY?

In my view Alpine has adduced evidence which satisfies me that it has met each of the thresholds in O 15 r 6 (a) (b) and (c). It has reasonable cause to believe that Alpine may have the right to obtain relief in the Court from VicRoads in relation to a breach of s 52 of the TPA and of an obligation of fairness in the tender process as explained in Hughes Aircraft Systems.

Alpine has made reasonable enquiries of A H Plant Hire Pty Ltd and VicRoads but has not obtained sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain the relief to which it believes it is, or may be, entitled.  In particular, information relating to whether any unfair or other advantage, arising from Spray Line’s in-house status, was enjoyed by Spray Line in the tender process can only be ascertained after discovery.  Such information is critical to an evaluation of whether disadvantage or other loss or damage, including loss of opportunity, was suffered by Alpine.  It will also be highly relevant to whether there was a breach, by VicRoads, of any obligation to act fairly.

Finally, there is reasonable cause to believe that VicRoads has in its possession documents relating to the question of whether Alpine has the right to obtain the relief to which I have referred and that inspection by the applicant would assist in making a decision to commence a proceeding in the Court to obtain the relief.

In the circumstances it is appropriate to exercise my discretion to order discovery.  Counsel for VicRoads submitted that acceding to the application will cause great difficulties for the tendering process and will breach confidentiality.  I do not accept either contention as a basis for refusing discovery.  The facts of the present case appear to me to be exceptional.  The notion of a company tendering to itself and then accepting its own tender without disclosure to other tenderers is, at the least, somewhat unusual.  As far as confidentiality is concerned that is a matter that can be the subject of an appropriate order if VicRoads can satisfy me that such an order is required given the limited use to which discovered documents, and the information obtained therefrom, may be put.

Accordingly, I propose to order discovery of documents relating to the tender of Spray Line.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:            3 September 1997

Counsel for the Applicant:	Mr B Gillies
Solicitor for the Applicant:	Bennett's
Counsel for the Respondent:	Mr C Scerri
Solicitor for the Respondent:	Phillips Fox
Date of Hearing:	20 August 1997
Date of Judgment:	3 September 1997