Brightstar Logistics Pty Limited v Australian Securities and Investments Commission
[2010] FCA 245
FEDERAL COURT OF AUSTRALIA
Brightstar Logistics Pty Limited v Australian Securities and Investments Commission [2010] FCA 245
Citation: Brightstar Logistics Pty Limited v Australian Securities and Investments Commission [2010] FCA 245 Parties: BRIGHTSTAR LOGISTICS PTY LIMITED v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION File number: NSD 565 of 2009 Judge: EMMETT J Date of judgment: 4 May 2010 Date of hearing: 19, 20, 22 April 2010, 4 May 2010 Place: Sydney Division: GENERAL Category: No catchwords Number of paragraphs: 21 Counsel for the Appellant: J Simpkins SC with T Baw Solicitor for the Appellant: Sydun & Co Solicitors Counsel for the Respondent: P Singleton Solicitor for the Respondent: Australian Securities and Investments Commission
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 565 of 2009
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: BRIGHTSTAR LOGISTICS PTY LIMITED
AppellantAND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Respondent
JUDGE:
EMMETT J
DATE:
4 MAY 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This proceeding is an appeal from a decision of the Administrative Appeals Tribunal (the Tribunal) affirming a decision of the respondent, Australian Securities and Investments Commission (the Commission), declining to make an order under Part 2M.6 of the Corporations Act 2001 (Cth) (the Corporations Act). On 23 March 2010, I ordered that the appeal be dismissed with costs, but did not publish my reasons for making those orders. However, I provided reasons to the parties on the basis that the reasons would remain confidential to the parties until the appellant, Brightstar Logistics Pty Ltd (Brightstar), had had an opportunity of making submissions concerning non-publication of the reasons either in whole or part.
I subsequently heard argument from both Brightstar and the Commission on Brightstar’s application for orders that the reasons not be published pending the hearing of an appeal or, alternatively, that the reasons be published only in a redacted form, pending the hearing of an appeal. In the course of that argument, submissions were made on behalf of the Commission that no factual basis had been established by Brightstar for the making of the orders sought. Accordingly, I adjourned the hearing of the application to enable Brightstar to adduce evidence in support of its application.
When the hearing resumed today, Brightstar tendered a report by Ms Jennifer Exner, a partner in the forensic practice of Deloitte Touche Tohmatsu. The report was tendered as evidence of Ms Exner’s opinion as to matters to which I shall refer directly. Brightstar also referred to a number of documents that were in evidence before the Tribunal.
Counsel for the Commission objected to Ms Exner’s report. The Commission accepted that Ms Exner had specialised knowledge based on her training, study and experience as a member of the Institute of Chartered Accountants in Australia and a Bachelor of Economics from Macquarie University. Her experience includes the management and delivery of a range of investigation and evaluation assignments across Australia. However, the Commission contended that the report did not disclose how the opinions expressed in the report were based on Ms Exner’s specialised knowledge. The Commission contended that Ms Exner’s report did not disclose her reasoning process with the requisite particularity. Unless it is demonstrated that the opinion evidence of a witness is based on the specialised knowledge of the witness, s 79 of the Evidence Act 1995 (Cth) does not constitute an exception to s 76, which provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion is expressed.
In the course of argument as to the admissibility of Ms Exner’s report, I suggested some amendments to the reasons that I had furnished to the parties that may alleviate Brightstar’s concerns, but at the same time satisfy the Commission’s insistence that principles of open justice required that the Court’s reasons for its decision be published in full. For reasons that I shall now give, I have concluded that no order should be made restricting publication of my reasons, amended in the circumstances to which I have just referred. It is appropriate that I give my reasons for that conclusion.
The circumstances of this present application are somewhat paradoxical. The basic issue in the proceeding before the Tribunal was whether Brightstar should be exempted from complying with the requirements of Part 2M.6 of the Corporations Act to lodge financial reports with the Commission. The basis upon which it sought that relief is that its suppliers or competitors would have access to information that is presently confidential, which they could use to approach Brightstar’s principal customer, Telstra Corporation Limited (Telstra). Brightstar asserted that that could lead to the loss of its contractual relationship with Telstra.
A theme that pervaded Brightstar’s case before the Tribunal and its contentions on appeal concerned the question of what was described as the reverse engineering argument. Brightstar asserted before the Tribunal that its suppliers and competitors could deduce profit share information from the information contained in the reports that it would be required to lodge with the Commission. Armed with that knowledge, suppliers or competitors could act so as to squeeze Brightstar’s existing profit levels in negotiations with Brightstar. Accordingly, the suppliers or competitors could attempt to negotiate for the sale of products direct to Telstra, thus substantially interfering with Brightstar’s existing contractual arrangements.
Brightstar says that there is nothing presently in the public domain that sets out the reverse engineering technique and that disclosure of the reverse engineering technique might permit suppliers and others to engage in the very process that the Tribunal determined it would not be engaged in. The basis upon which Brightstar now seeks orders that the whole or part of the reasons not be published pending the outcome of an appeal is that publication of the reasons could provide suppliers with a “How to Manual” of the very process that Brightstar said would cause it severe economic detriment.
Thus, Brightstar says, it would be put in a position where:
·in order to advance its case before the Tribunal, it had sought to demonstrate how the information in the reports might be used to its disadvantage;
·that case was rejected by the Tribunal;
·in consequence of that rejection, the financial information in the accounts would be published;
·publication of the reasons would make public the reverse engineering technique that Brightstar had advanced to the Tribunal on a confidential basis; and
·suppliers and competitors would be placed in an advantageous position to analyse the information in the accounts by use of the reverse engineering technique.
Brightstar says that it will, as a result of the review and appeal process, be in a worse position than it would have been but for the application to the Tribunal and appeal to the Federal Court. It asserts that, without an order along the lines now sought, it would be in a worse position than it would have been if it had not sought the exemption and the financial reports had been disclosed without information as to the reverse engineering technique also being disclosed.
Brightstar also says that part of the confidentiality orders in respect of material before the Tribunal, which were made by consent, would be rendered nugatory if the material that is the subject of those orders were disclosed in the reasons. It points specifically to a document entitled “Reverse Engineering Steps” explaining the operation of the reverse engineering argument, which was provided to the Court by way of submission.
Brightstar’s claim is that disclosure of the reverse engineering technique might cause it detriment if the relevant financial accounts are required to be lodged with the Commission and made public. If they are not lodged and made public, the reverse engineering technique would be of no significance. That is to say, the orders presently sought would be required only if an appeal to the Full Court were to be dismissed. If an appeal were upheld and the Tribunal ultimately determined that Brightstar should not be required to lodge its accounts, there would be no detriment arising from the publication in the reasons for judgment of the material relating to the reverse engineering technique.
It is essentially the material contained in the reasons relating to the steps involved in the reverse engineering technique that is the subject of Brightstar’s present application. It is essential, in order to comprehend the Tribunal’s decision, to have an understanding of those steps. I consider that inclusion of that material in my reasons is necessary in order to explain my reasons for concluding that there was no error of law on the part of the Tribunal. It is therefore necessary to consider whether the interests of justice require that any of the material not be disclosed at this stage.
I accept that the administration of justice requires that an entity such as Brightstar, engaged in a proceeding such as this, should be afforded every incentive to provide full and frank evidence related to its case without the risk of confidential material and the very processes upon which its fears are based being put into the public domain. However, that raises the question of whether or not the material that Brightstar now wishes to have suppressed is in truth confidential.
There is no doubt that the Court has power to make the orders now sought by Brightstar. One begins with the proposition, however, that there is a public interest in open justice, such that it must be possible for the public to understand what has happened in Court and the reasons for the making of particular orders by the Court. Nevertheless, legitimate expectations of confidentiality should not be disregarded. In particular, it would be contrary to the interests of the administration of justice to deprive an entity of the opportunity of presenting a case if to do so would, of itself, bring harm onto the entity.
My reasons recount the contentions advanced to the Tribunal by Brightstar as to how information disclosed by lodging accounts with the Commission could, by the reverse engineering argument, lead to harm. That process of reasoning is of a generic nature that any astute businessman could formulate. The case presented to the Tribunal by Brightstar was that its suppliers and prospective competitors could themselves apply the reverse engineering technique in order to draw inferences or make deductions from the information that would be disclosed by lodgement of the financial accounts.
Evidence was given to the Tribunal as to the information that would be the subject of financial reports lodged with the Commission. My reasons contain none of that information and there is no suggestion that that information would be disclosed by publication of my reasons. Rather, it is the reasoning that Brightstar asserted to the Tribunal that its suppliers and competitors would adopt, by use of the reverse engineering technique, to draw inferences and make deductions from that information, that it is said should not be disclosed.
Brightstar claimed that specific parts of the reasons in relation to the following matters should be redacted:
·The description and rejection of assumptions that Brightstar claimed would or might be made: paragraphs 31, 72, 73, 74, 78, 79, 99 and 100.
·The description and rejection of the process of reverse engineering that Brightstar claimed would or might be undertaken: paragraphs 72 and 74.
·Confidential terms of Brightstar’s arrangements with Telstra: paragraphs 31, 72, 73, 99, 100 and 120.
The essence of the opinion evidence that Brightstar sought to adduce from Ms Exner was that, without those parts of the reasons, it would not be possible to deduce what proportion of Brightstar’s profits was attributable to its product sourcing business. Ms Exner was of the opinion that with further information disclosed in the original form of my reasons, it would be possible to calculate Brightstar’s profit attributable to its product sourcing business.
Brightstar contends that, since the Tribunal concluded that the assumptions would not be made and that the reverse engineering would not occur, the effect of publication of the assumptions and the process would be to render likely the very thing that the Tribunal concluded would be unlikely, which formed the substantial reason for the rejection of Brightstar’s claim before the Tribunal. While the Tribunal considered that there was a measure of justification for Brightstar’s general apprehension of increased commercial scrutiny, if it were to lodge the relevant reports, it was not satisfied that lodgement would in fact materially increase either the real incentives for critical evaluation of Brightstar’s dealings or materially influence commercial and competitive behaviour in response to them.
The Tribunal concluded that the information that would be available from lodgement of the relevant reports was unlikely to differ materially from the existing reasonable expectations that Telstra and Brightstar’s suppliers and competitors are capable of drawing from the existing information and knowledge available to them. The Tribunal considered that the nature of the market in which Brightstar operates must already contain very significant incentives to scrutiny and assessment of Brightstar’s performance and that that scrutiny would almost inevitably be conducted against a background of very well educated estimates of Brightstar’s level of revenue and profitability. That, however, is nothing like a finding that the reverse engineering technique is in any way confidential to Brightstar.
While the evidence adduced by Brightstar before the Tribunal concerning the reverse engineering technique was confidential, the confidentiality related to the specific information derived from Brightstar’s financial accounts, not the technique of reverse engineering itself. The Tribunal made no finding that the technique was confidential. Further, there has been no evidence before me concerning the confidentiality of the technique as such. Indeed, as I have said, the evidence before the Tribunal adduced by Brightstar was to the effect that any supplier or competitor would be able to apply the technique in order to draw inferences or make deductions from the material in the accounts. I do not consider that publication of my reasons for dismissing Brightstar’s appeal from the Tribunal’s decision, in their amended form, would disclose information or material that is confidential, such that the administration of justice requires any limit on the publication of my reasons as amended. Accordingly, I propose to publish my reasons amended as I have indicated.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 6 May 2010
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