Bidvest Australia Ltd v Auzcorp Pty Ltd (No 2)
[2017] WASCA 23
•9 FEBRUARY 2017
BIDVEST AUSTRALIA LIMITED -v- AUZCORP PTY LTD [No 2] [2017] WASCA 23
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WASCA 23 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:41/2016 | 8 NOVEMBER 2016 | |
| Coram: | MARTIN CJ NEWNES JA MURPHY JA | 9/02/17 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | BIDVEST AUSTRALIA LIMITED BIDVEST (WA) PTY LIMITED AUZCORP PTY LTD |
Catchwords: | Practice and procedure Order for inspection of documents made by registrar Subsequent application by appellant to vary order to add confidentiality regime on grounds that parties are trade rivals Master erred in finding that O 26 r 16 did not permit registrar's order to be varied Operation of O 26 r 16 Master's finding that parties not trade rivals upheld |
Legislation: | Rules of the Supreme Court 1971 (WA), O 26 r 16 |
Case References: | Greenpark Pty Ltd v Odin Inns Pty Ltd [1989] WAR 322 John Walker & Sons Ltd v Henry Ost & Co Ltd [1970] 1 WLR 917; [1970] 2 All ER 106 The Queen v The Commissioners of Inland Revenue; Ex parte Taylor [1989] 1 All ER 906 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : BIDVEST AUSTRALIA LIMITED -v- AUZCORP PTY LTD [No 2] [2017] WASCA 23 CORAM : MARTIN CJ
- NEWNES JA
MURPHY JA
- First Appellant
BIDVEST (WA) PTY LIMITED
Second Appellant
AND
AUZCORP PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : AUZCORP PTY LTD -v- BIDVEST AUSTRALIA LTD [2016] WASC 143
File No : CIV 2736 of 2013
Catchwords:
Practice and procedure - Order for inspection of documents made by registrar - Subsequent application by appellant to vary order to add confidentiality regime on grounds that parties are trade rivals - Master erred in finding that O 26 r 16 did not permit registrar's order to be varied - Operation of O 26 r 16 - Master's finding that parties not trade rivals upheld
Legislation:
Rules of the Supreme Court 1971 (WA), O 26 r 16
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
First Appellant : Mr P Mendelow & Mr D K Zusman
Second Appellant : Mr P Mendelow & Mr D K Zusman
Respondent : Mr M L Bennett
Solicitors:
First Appellant : Bowen Buchbinder Vilensky
Second Appellant : Bowen Buchbinder Vilensky
Respondent : Bennett + Co
Case(s) referred to in judgment(s):
Greenpark Pty Ltd v Odin Inns Pty Ltd [1989] WAR 322
John Walker & Sons Ltd v Henry Ost & Co Ltd [1970] 1 WLR 917; [1970] 2 All ER 106
The Queen v The Commissioners of Inland Revenue; Ex parte Taylor [1989] 1 All ER 906
1 JUDGMENT OF THE COURT: This is an appeal from a decision of Master Sanderson, who dismissed an application by the appellants to vary orders of Registrar C Boyle so as to limit the respondent's right to inspect certain commercially sensitive documents.
2 The master found that he did not have jurisdiction to vary the orders of the registrar, and, in any event, that orders limiting inspection should not be made because the parties are not trade rivals. The appellants contend that the master was in error in respect of both findings.
3 As this is an appeal from an interlocutory order, leave to appeal is required: Supreme Court Act 1935 (WA), s 60(1)(f). The appellants' application for leave to appeal was referred to the hearing of the appeal.
Background
4 The appeal arises out of proceedings brought by the respondent against the appellants claiming damages for misleading or deceptive conduct in breach of the Trade Practices Act 1974 (Cth)and the Competition and Consumer Act 2010 (Cth).
5 In its statement of claim, the respondent pleads that is a company engaged in the business of providing accommodation services for tourism, mining and other hospitality industries in the north-west of Western Australia and, in connection with that business, is a substantial purchaser of foodstuffs and other produce.
6 It pleads that the appellants carried on the business of supplying wholesale volumes of foodstuffs and other produce to a variety of businesses, including businesses servicing and supplying accommodation, hospitality and tourism demand in Western Australia.
7 The respondent pleads that, until August 2003, it acquired foodstuffs and other wholesale products necessary for the conduct of its business from a supplier known as Foodlink Food Service.
8 It alleges that, in or about July or August 2003, it was induced to make all of its future purchases from the appellants by certain representations made by the appellants as to the benefits the respondent would receive if it did so, including that the appellants would (a) provide more competitive rates than other suppliers; (b) share the bonuses and rebates received from their suppliers with the respondent in a loyalty programme; and (c) allow the value of the relevant rebates to accumulate and the respondent to take the benefit of them at a time of its choosing. It alleges that those representations were subsequently repeated by the appellants.
9 The respondent alleges that the representations were false and that at the time they were made the appellants had no reasonable basis for making them; alternatively, the appellants had no honest belief in their truth; or, subsequent to making them, ceased to hold an honest belief that they were true. It is alleged that the appellants' conduct was misleading or deceptive or likely to mislead or deceive.
10 The respondent claims that it has suffered loss and damage, including incurring higher costs and the loss of the benefit of taking immediately its share of the bonuses or rebates received by the appellants from manufacturers. It says that full particulars will be supplied prior to trial and after discovery has been given by the appellants, but in the meantime the respondent calculates its loss and damage at not less than 15% of its total purchases from the appellants, being the sum of $2,248,641.
11 In their defence, the appellants, in substance, admit that the respondent was invited to open an account with the appellants and that it subsequently did so, but deny that the representations alleged by the respondent were made and deny that the respondent has suffered loss or damage. The appellants have counterclaimed in an amount of $661,373.76, said to be owing for goods supplied to the respondent.
12 On 11 December 2015, Registrar C Boyle made orders that, by 29 January 2016, the appellants give informal discovery by list of all documents within the following categories:
(a) Any monetary, rebates, other benefit(s) and/or discounts offered to or received by the appellants between August 2003 and 31 December 2013 from their suppliers in relation to the products purchased by the respondent from the appellants during that period;
(b) Any monetary, rebates or other benefit(s) and/or discounts offered or provided to the respondent by the appellants between August 2003 and 31 December 2013; and
(c) The client loyalty program and its application to purchases made by the respondent between August 2003 and 31 December 2013.
13 The appellants were ordered to make the discovered documents available for inspection by the respondent by no later than 10 February 2016. The appellant did not seek any confidentiality orders.
14 It is evident that the discovery was directed to enabling the respondent to calculate the loss and damage it allegedly suffered.
15 The appellants provided an informal list of documents to the respondent on 5 February 2016. However, the appellants objected to producing 1,847 documents, identified as BAL.002.001.0001 to BAL.002.001.1847 (the disputed documents), for inspection on the ground that those documents were confidential and commercially sensitive.
16 On 11 March 2016, the respondent applied to the master for an order for inspection of the disputed documents. On 22 March 2016, the appellants applied to the master to vary the registrar's orders so as to make inspection of the disputed documents subject to a confidentiality regime. The appellants' application was supported by an affidavit of Mr Plit, the appellants' chief financial officer.
17 On 15 April 2016, the master dismissed the appellants' application to vary the registrar's order and, on 11 May 2016, ordered the appellants to provide inspection of the disputed documents.
The master's reasons
The master's jurisdiction to vary the orders
18 The master found that he did not have power to vary the registrar's order. He considered that while, in its terms, O 26 r 16 of the Rules of the Supreme Court 1971 (WA) appeared to give a judge or master the power to vary or revoke any order for discovery for 'sufficient cause', to construe it so widely would undermine the case management regime and the appeal procedure contained in the Rules [13] - [14].
19 The master considered that the extensive powers given to case management registrars and the importance of the procedural orders they make meant that if those orders were to be varied it should be done by an appeal process. He concluded that to avoid undermining the case management regime, O 26 r 16 'should be read down … to the extent necessary to have it operate much as the so-called slip rule operates' [14]. When so construed, the master found that he did not have jurisdiction to vary the orders of the registrar in the manner sought by the appellants.
The merits of the application
20 Although that finding was sufficient to deal with the application, the master nevertheless went on to consider the merits of the appellants' application.
21 The master accepted that the documents in question were commercially sensitive. He identified the critical question to be whether the parties are trade rivals. He found they are not. The master observed that the respondent is a retailer of food and other goods, and the appellants are wholesalers of food and other goods, so that while there may be some overlap in their trading activities, they operate in separate and distinct markets and are not in competition with each other. The master also referred to the difference in size between the parties, the first appellant being a global company which employs 141,015 people worldwide and 4,098 in Australia, while the respondent was incorporated in Western Australia and operates only in the Pilbara region. The master concluded that as the parties are not trade rivals, there were no grounds for the imposition of a confidentiality regime [16].
22 The master found that the application should also be refused on the ground of delay. The appellant had not applied for a confidentiality regime when the orders for discovery and inspection were made on 11 December 2015 and had not done so until after the respondents had sought an order for inspection. The appellants had failed to provide any real explanation for the delay. The master considered that the explanation offered by Mr Plit, that it was not until the appellants' staff began collating the documents that they realised they were commercially sensitive, appeared to be inconsistent with Mr Plit's subsequent statement that access to the documents was tightly controlled within the appellant companies [17].
The grounds of appeal
23 There are five grounds of appeal, which in substance are as follows:
1. The master erred in law in concluding that O 26 r 16 did not give him power to vary the registrar's order;
2. The master erred in fact and law in concluding that the appellants and the respondent are not trade rivals;
3. The master erred in fact and law in concluding that the disparity in size between the appellants and the respondent is relevant to whether the appellants and the respondent are trade rivals;
4. The master erred in fact in concluding that the appellants failed to explain any delay in bringing the application to vary the orders of the registrar;
5. The master erred in fact in concluding that the evidence of Mr Plit was contradictory.
The disposition of the appeal
Ground 1
24 In our respectful view, the master erred in finding that he did not have power under O 26 r 16 to vary the orders of the registrar. It is appropriate at the outset to put that provision in its context.
25 Order 26 deals with discovery and inspection of documents. Relevantly, under O 26 r 7, the court has wide powers, either on an application by a party or of its own motion, to order any party to give discovery either generally or of limited documents, or categories of documents, and whether at a specified time or in stages. In exercising that power, the court is expressly required to have regard to O 1 r 4B, which requires that cases be managed so as to maximise the efficient use of judicial resources and ensure that cases are disposed of efficiently and by procedures that are proportionate to the value, importance and complexity of the subject matter.
26 A party who gives discovery, either pursuant to a request or to an order under r 7, must give notice to the other party stating when and where the documents may be inspected and must allow the other party to inspect the discovered documents, other than documents which the discovering party objects to produce: r 8(1). Where a party fails to give that notice or objects to produce any documents for inspection, the court may order production of the documents for inspection: r 9(1). But an order for production of any document for inspection is not to be made unless the court considers it is necessary for fairly disposing of the proceeding or for saving costs: r 11.
27 O 26 r 16 is in the following terms:
Revocation and variation of orders
Any order which has been made under this Order, including an order made on appeal, may, on sufficient cause being shown, be revoked or varied by a subsequent order or direction of the Court made or given at or before the trial of the cause or matter in relation to which the original order was made.
28 A provision identical to O 26 r 16 is contained in O 27 r 10, which deals with interrogatories - the 'counterpart of discovery of documents': Cairns BC, The Law of Discovery in Australia, The Law Book Company Ltd, 1984, p 75; albeit interrogatories have now virtually fallen into desuetude. Order 27 provides that interrogatories may be served on another party with leave of the court: r 1. Where a party upon whom interrogatories have been served fails to answer them or answers any of them insufficiently, the court may order the party to answer them or answer them sufficiently, as the case requires: r 7. Where a party fails to comply with such an order, the court may make such further order it considers just including an order staying or dismissing the action or striking out the defence and entering judgment: r 8. Rule 10 is, as we have said, in identical terms to O 26 r 16.
29 Order 27 r 10 was considered in Greenpark Pty Ltd v Odin Inns Pty Ltd [1989] WAR 322, where a consent order had been made requiring the defendant to make and file answers to interrogatories administered by the plaintiff. The defendant subsequently objected to answering certain of the interrogatories but was met with the consent order requiring that they be answered. On the application of the defendant, the master varied the consent order to enable the defendant to file objections to the interrogatories. An appeal by the plaintiff from that decision was dismissed. Brinsden J, with whom Burt CJ agreed, rejected a contention that O 27 r 10 did not apply to a consent order and considered there was no justification for reading down the rule, referring to the decision of the English Court of Appeal in John Walker & Sons Ltd v Henry Ost & Co Ltd [1970] 1 WLR 917; [1970] 2 All ER 106 [sic, [1969] FSR 450, 454]. His Honour concluded there was sufficient cause to vary the order as the defendant had consented to the original order by mistake and probably had good cause to object to answering the interrogatories in issue. Kennedy J, who too found that the appeal should be dismissed, also rejected an argument that the rule should be read down. His Honour considered that it should be given its natural meaning.
30 In John Walker & Sons Ltd, the second defendants' defence had been struck out for failure to comply with an order for discovery. The second defendants subsequently filed a list of documents, and took out a summons to have their defence restored. The primary judge found that the list of documents was inadequate, and the application to have the defence restored was adjourned on the basis that the second defendants were at liberty to file a further list of documents. The second defendants appealed from that decision. On the appeal, the court made a slight variation to the primary judge's order in order to clarify what the second defendants were required to include in their list of documents. Relevantly for present purposes, Harman LJ (with whom Fenton Atkinson and Megaw LJJ agreed) said in relation to O 24 r 17 of the Rules of the Supreme Court 1965 (UK), which was in the same terms as O 26 r 16 of the rules of this court:
So that right up to the very trial itself any order, particularly an order of the Court striking out a Defence, may be revoked if cause be shown; and the question in this case, and I think the only question really, is: Has cause been shown? (454)
31 The same rule was also referred to in The Queen v The Commissioners of Inland Revenue; Ex parte Taylor [1989] 1 All ER 906, where an appeal against a refusal to order inspection of certain documents was dismissed. O'Connor LJ (with whom Nicholls and Taylor LJJ agreed) found that at the stage the proceedings had reached it could not be said that production of the documents was necessary for the fair disposal of the issues in the proceedings. His Honour noted that O 24 r 17 allowed an order relating to discovery or inspection to be varied on good grounds at a later stage and considered that the question of inspection should be left to trial where the trial judge could exercise his discretion to require production if it then appeared necessary.
32 The master did not refer to the English authorities but sought to distinguish Greenpark on two bases: first, that it dealt with a consent order which had been consented to by mistake and, secondly, the decision long preceded the system of case management by registrars. In our respectful opinion, however, the case is not distinguishable on either basis. What was said in Greenpark in respect of O 27 r 10 was, and continues to be, applicable to O 26 r 16.
33 It is not material that Greenpark concerned a consent order. As the reasons make clear, the point taken by the appellants in that case was that a consent order fell outside the rule, a point rejected by the court which found that a consent order stood in no different position to any other order for the purposes of the rule. In other words, the court found that the rule applied to any order, including a consent order.
34 Nor do we consider that the subsequent enactment of rules introducing a system of case management has rendered O 26 r 16, in effect, anachronistic. Discovery is frequently a very expensive and time-consuming part of litigation. It is not an unusual experience that as a case develops it is found that orders for discovery and inspection made at an earlier stage are not apt, or are no longer apt, in the circumstances of the case. It is therefore entirely consistent with case management principles and the objectives set out in O 1 r 4B that there should be the greatest degree of flexibility in the court to revoke or vary orders for discovery if sufficient cause is shown. The requirement to show 'sufficient cause' imposes the necessary restraint upon the application of the rule.
35 In our respectful view, the master erred in finding that O 26 r 16 should be read down. It should be given its natural and ordinary meaning. When that is done it is clear that it is wide enough to have permitted the order of the registrar to be varied in the manner sought by the appellant, if sufficient cause was shown. Whether sufficient cause had been shown is a matter raised by grounds 2 and 3 of the grounds of appeal, which can conveniently be considered together.
Grounds 2 and 3
36 The substantive question raised by these grounds of appeal is whether the master erred in concluding that the appellants and the respondent are not trade rivals.
37 The disputed documents are said to consist of documents relating to the appellants' loyalty program, trading terms, and supplier terms, the documents in each category containing the percentage rebates and trading terms negotiated between the appellants and various manufacturers.
38 According to Mr Plit's affidavit, the appellants earn 75% of their profit through rebates that are negotiated between the appellants and manufacturers. It is apparently contended that that level of profit would be put at risk if the documents were disclosed to officers of the respondent. How that might come about is described in the affidavit in terms that are opaque almost to the point of incomprehensibility.
39 So far as anything in this respect can be gleaned from the affidavit, it seems the appellants contend that as the respondent is a large purchaser of certain goods it has the capacity to approach manufacturers direct to obtain those goods. Mr Plit says that based on his 'experience and the nature of the industry', he believes that if the respondent became aware of the amount of the rebate the appellants obtains from a manufacturer, the respondent would be able to use that information to negotiate better trading terms with its current wholesaler or to negotiate with the manufacturer to obtain the goods, with a rebate, direct from the manufacturer.
40 It was in the light of that evidence that the appellants sought to have the respondent's inspection of the disputed documents subject to a confidentiality regime to be agreed between the parties.
41 Ordinarily, the fact that discovered documents are confidential will not be a sufficient reason to deny inspection, as the implied undertaking that the documents will be used only for the purpose of the litigation will provide sufficient protection.
42 However, it is recognised that there may be exceptional circumstances where the implied undertaking may be insufficient protection and in such circumstances the court may impose conditions on an order for inspection in order to protect the efficacy of the implied undertaking: Alcoa of Australia Ltd v Apache Energy Ltd[2014] WASCA 148 [57].One of those circumstances is where the parties are trade rivals and the documents discovered by one party contain confidential information of use to the other party in that trade rivalry: Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34. In Mobil Oil, Hayne JA (with whom Winneke P and Phillips JA agreed) said:
Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed. (38)
…
The question at issue is whether this is an exceptional case because the persons whose secrets are to be revealed are trade rivals of the party seeking inspection of documents containing secrets of use to that party. (41)
43 In this context, information is 'commercially sensitive' if a rival in the marketplace who obtains access to it may use it to the advantage of that rival and to the disadvantage of the party who seeks to keep it secret: Mobil Oil, 38.
44 It was submitted by the appellants that although the parties operate at different levels within the relevant supply chain, the respondent being a 'retailer' (in fact, a purchaser of foodstuffs and goods for use in its business) and the appellants being a wholesaler, they are nevertheless trade rivals in the market for the sale of foods and other goods. Their roles are not separate and distinct: large customers such as the respondent are capable of having a dual relationship in that while they purchase goods from a wholesaler they also have the ability to approach manufacturers direct to negotiate supply terms, usually in the form of additional rebates. That is, the trade rivalry operates at the manufacturer level where they are in direct competition in negotiating supply terms with manufacturers.
45 The appellant also argued that there was no evidence which could justify the master's findings as to the large disparity in size between the respondent and the first-named appellant and, in any event, any disparity in size was irrelevant.
46 We do not accept that the parties are trade rivals in any relevant sense. On the evidence, the commercial activities they carry on are quite distinct. The respondent's business is primarily that of a provider of accommodation for tourism, mining and other hospitality industries in the north-west, for the purposes of which it purchases foodstuffs and other goods. It does not operate a wholesale business. The appellants' business, on the other hand, is that of a wholesaler of foodstuffs and other goods and it does not operate in any other relevant capacity. The mere fact that the respondent and the appellants might both obtain goods from the same manufacturer, the respondent for its accommodation business and the appellants for their wholesale business, does not mean that they are trade rivals, in the same way that a restauranteur which deals direct with a vegetable grower to obtain vegetables to use in its restaurant business is not a trade rival of a wholesaler which deals with the same vegetable grower to obtain vegetables to resell to greengrocers and other customers.
47 Moreover, contrary to the appellants' submission, it is not apparent, first, how the confidential information, if disclosed to the respondent, would be relevant to or could be used by the respondent in its business, having regard to the vast disparity in size between the appellants' and the respondent's respective business operations. It appears from the appellants' 'Annual Integrated Report' for 2015, which is annexed to an affidavit filed by the respondent, that, in 2014 and 2015, the appellants' annual turnover in Australia and New Zealand in its food services division was in excess of $2.5 billion. On the other hand, it appears from the respondent's statement of claim that it purchased the whole of its requirements of foodstuffs and other produce from the appellants for the period August 2003 to April 2014 for the total sum of $14,920,944. That is, for an average annual expenditure of approximately $1.4 million. On the face of it, the amount of any rebate granted by a manufacturer to a wholesaler the size of the appellants would be of little, if any, relevance to the amount of the rebate that the manufacturer would be likely to grant to a customer the size of the respondent. There is, perhaps unsurprisingly, no evidence that the respondent might buy goods from a manufacturer in anything like the quantities the appellants might buy, or that the quantities are irrelevant to the trading terms a manufacturer would offer.
48 Secondly, it is not apparent how the appellants might be disadvantaged if the confidential information was able to be used by the respondent in negotiating trading terms direct with a manufacturer or its current wholesaler. The trading relationship between the appellants and the respondent is now at an end and it is not suggested that it is likely to resume. Given the current litigation it may reasonably be inferred that it is most unlikely to resume, at least for the foreseeable future. We should add that it is also not clear how the use by the respondent of the information in such a way could come about except by a deliberate breach of the implied undertaking.
49 In our opinion, the master correctly found that the appellants had not established that they were trade rivals of the respondent and that no basis had been made out for limitations to be imposed on the respondent's right of inspection of the disputed documents. In the circumstances of the case, the disparity in size between their respective business operations was a relevant consideration.
Grounds 4 - 5
50 These grounds seek to impugn the master's finding that the appellant had failed to provide a satisfactory explanation for the delay in bringing the application to vary the registrar's order. In light of our finding on grounds 2 and 3, it is unnecessary to determine these grounds.
Conclusion
51 We would grant leave to appeal but dismiss the appeal.
7
2
1