Chaina & Ors v The Presbyterian Church (NSW) Property Trust & Ors (No 2)

[2008] NSWSC 1056

CITATION:	Chaina & Ors v The Presbyterian Church (NSW) Property Trust & Ors (No 2) [2008] NSWSC 1056
HEARING DATE(S):	17/04/2008, 16/05/2008, 10/09/2008
JUDGMENT DATE :	13 October 2008
JUDGMENT OF:	Hoeben J
DECISION:	Second, fourth and fifth plaintiffs disclose the confidential information in accordance with the order proposed in this judgment. Second, fourth and fifth plaintiffs pay the defendants’ costs of the motion, including the costs associated with the form of the orders to be made.
CATCHWORDS:	PRACTICE AND PROCEDURE - confidential information - objection to expert witness having access to confidential information - whether expert witness prevented from access by likelihood of working for trade rival in future - whether justifiable concern that confidentiality be lost - availability of alternative expert - whether contractual undertaking as to confidentiality sufficient to protect confidential information - whether substantial injustice - form of confidentiality regime - costs.
CASES CITED:	Bayer Bioscience NV v Deltapine Australia Pty Limited [2006] FCA 68 Chaina & Ors v The Presbyterian Church (NSW) Property Trust & Ors [2008] NSWSC 290 Gebauer Nominees Pty Limited v Cole [2008] WASSCA 38 Hotrox Charcoal Co v Gebauer Nominees Pty Limited [2002] WASCA 293 Mobil Oil Australia Limited and Anor v Guina Developments Pty Limited [1996] 2 VR 34 at 38
PARTIES:	George Chaina - Second Plaintiff Rita Chaina - Third Plaintiff Proton Technology Pty Limited - Fourth Plaintiff Deluxe Chemicals Pty Limited - Fifth Plaintiff The Presbyterian Church (New SouthWales) Property Trust - First Defendant Robert Iles - Second Defendant Christine Alexander - Third Defendant Gordon Black - Fourth Defendant Ewen Brown - Fifth Defendant Richard Bull - Sixth Defendant Bruce Christian - Seventh Defendant Simon Fraser - Eighth Defendant Roy Johnston - Ninth Defendant William McLaren - Eleventh Defendant Philip Mitchell - Twelfth Defendant Tony Pfeiffer - Thirteenth Defendant Robert Richards - Fourteenth Defendant Harry Taylor - Fifteenth Defendant Peter Wolnizer - Sixteenth Defendant
FILE NUMBER(S):	SC 20472/2002
COUNSEL:	Dr A Bell SC/Mr J Stephenson - Second, Third Fourth and Fifth Plaintiffs Mr R Stitt QC/Mr GL Turner - Defendants
SOLICITORS:	Sarvaas Ciappara - Second, Third, Fourth and Fifth Plaintiffs Curwoods Lawyers - First - Sixteenth Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOEBEN J

Monday, 13 October 2008

20472/2002 – Mathew CHAINA & Ors v THE PRESBYTERIAN CHURCH (NSW) PROPERTY TRUST & Ors

JUDGMENT

1 HIS HONOUR:

Nature of proceedings
On 7 April 2008 I handed down reasons and made indicative findings in relation to a Notice of Motion brought by the defendants. The motion sought production by the company plaintiffs of confidential information in the nature of formulae and methods of manufacture of certain cleaning products (the confidential information). The defendants succeeded in their motion. I refrained from making final orders to allow the parties to discuss and agree if possible, the form of those orders. This as it turns out was a somewhat naïve expectation on my part.

2 No agreement has been reached. On the contrary, as has been typical of this litigation, there has been no co-operation whatsoever and the parties disagree on almost every issue.

3 There is an issue as to the costs of the notice of motion. There is an issue as to whether the defendant’s expert, Dr Wynn-Hatton, should have access to the confidential information. There is an issue as to the confidentiality regime, with each side putting forward proposals with almost no common ground. The purpose of this judgment is to address those matters. It should be read with the judgment of 7 April 2008 ([2008] NSWSC 290).

Further Appearances and Evidence

4 When judgment was given on 7 April 2008, the matter was adjourned to 17 April to allow the parties time to agree on orders. On 11 April the defendants’ solicitors forwarded to the company plaintiffs’ solicitors draft short minutes of order and a draft undertaking. On 16 April the Court received from the company plaintiffs’ solicitors their proposed short minutes of order and submissions supporting their position on the disputed issues to which I have referred. The objection to Dr Wynn-Hatton having access to the confidential information had not previously been raised. On the same day copies of those documents were faxed to the solicitors for the defendants. On 17 April it was obvious that the matter could not proceed because the defendants were entitled to an opportunity to meet the matters raised by the company plaintiffs. It was adjourned to 16 May for the hearing of those issues.

5 On 16 May most of the oral argument concerned whether or not Dr Wynn-Hatton should be given access to the confidential information. Among the issues raised was whether there were other similarly qualified experts available in Australia or overseas and the extent to which the defendants had made inquiries to that effect. At the conclusion of the submissions on behalf of the company plaintiffs, senior counsel for the defendants sought an adjournment to consider whether evidence of that kind should be adduced on behalf of the defendants.

6 In due course the matter was fixed for further hearing on 10 September. On that occasion, the two solicitors who had sworn affidavits, Mr Mitchell on behalf of the defendants and Mr Ciappara on behalf of the company plaintiffs were briefly cross-examined. Further written submissions were received and final oral submissions were made by each side.

7 In objecting to Dr Wynn-Hatton having access to the confidential information, reliance was placed upon his evidence on 20 November 2007 when the notice of motion was heard. The evidence particularly relied upon was as follows:

“Q. You recently oversaw the development of a powerful cleaning formula designed to wash clothes, didn’t you?
A. I did.
Q. It is a product called Sparkle Ultra, is that right?
A. Yes that’s correct.
Q. And the company that produced it is called Lloyd Brooks?
A. That’s correct.
…
Q. You were, however, the formulation expert and independent consultant scientist retained by that company to advise it with respect to that product?
A. Yes I was.
Q. That product would be in direct competition with the products described in this case or with some of them, wouldn’t it?
A. Yes.
Q. Do you have an ongoing role in advising Lloyds Brooks Australia about that product?
A. No.
Q. You have no continuing retainer?
A. No.
…
Q. In reviewing the products in this case, insofar as they cross over with that product, you won’t be able to undertake a review of the products in this case, I suggest, without having in your mind the formula and method of manufacture of Sparkle Ultra will you?
A. Certainly that is knowledge that I have, it is knowledge that I have picked up in every single – yeah.
Q. It is not knowledge that you can put out of your mind is it?
A. No.
…
Q. I don’t want any trade secrets but are there more products on the horizon about which you have been asked to advise them about formulation and being a consultant scientist?
A. No. Not directly there isn’t.
Q. Indirectly?
A. Indirectly Lloyd Brooks have suggested that further down the track there may be other interests that they may want to pick up and would I be interested and I have said to them maybe or maybe not.
Q. Depending on what happens down the track?
A. Absolutely yeah.
Q. Assuming that hypothetical possibility comes to fruition, whether it be next year or the year after or whenever and assuming you are provided the formulae and method of manufacture and the like of the products in this case …
A. Yes.
Q. … It will, when you are doing that work, assuming the hypothesis comes to fruition, be as impossible for you to put out of your mind the material you get in this case when doing that work as it is for you to put out of your mind when testing these products the formula you already know from your past experience won’t it?
A. Yes, yeah.” (T.42-43).

8 The defendants relied upon an affidavit of Michael Mitchell, the solicitor with the day-to-day conduct of the matter on their behalf, sworn 3 June 2008. Mr Mitchell deposed to contacting a number of organisations, which were in the business of providing expert witnesses for legal firms. This contact took place in September – November 2006. As a result of that process, Mr Mitchell was provided with the curriculum vitae of four possible experts. Mr Mitchell said that they were rejected because although each was an experienced chemist, they did not have recent experience working with a competitor or potential competitor to the company plaintiffs’ products. He said that the defendants required an expert with such experience so that he or she could give an opinion on all ways in which the chemical characteristics of the product would affect its performance in the market.

9 Mr Mitchell deposed that on 3 March 2007 he received the curriculum vitae of Dr Wynn-Hatton. The defendants’ legal team decided to retain Dr Wynn-Hatton, not only because of his qualifications, but because of his industry experience. This would enable him to give an opinion on the extent to which the formulae of each of the company plaintiffs’ products was capable of supporting the claims made for each product, the way in which the chemical characteristics of a product would affect its performance in the market place, the way in which competitors, consumers and regulators would react to such claims and on the prospects of the company plaintiffs’ products succeeding in the market place during the periods in issue in these proceedings.

10 These were the only matters covered in Mr Mitchell’s affidavit. There was nothing said about any recent inquiries as to the availability of expert witnesses with similar qualifications to those of Dr Wynn-Hatton, either in Australia or overseas.

11 The defendants also relied upon an affidavit of Mr Ciappara sworn 10 July. The effect of that affidavit and his evidence was that after 16 May 2008 he had made contact with a Mr Fong and had retained him on behalf of the company plaintiffs. Mr Fong was not only an experienced chemist but he had been employed by Colgate Palmolive as a technical and product manager with expertise in new product development and commercialisation. He had subsequently retired from Colgate Palmolive.

Submissions and consideration
Preliminary matter

12 A preliminary issue arose as to what products were covered by the orders sought in the motion, the subject of my judgment of 7 April. The defendants submitted that the disclosure of formulae and methods of manufacture should apply to all products which would have been manufactured by the company plaintiffs had the deceased not died.

13 I reject that submission. That was not my intention, nor was it the effect of the judgment. The submissions which I received on the motion related solely to the “new and reformulated products” and the orders which I make will be restricted to those products. The “confidential information” is restricted to those products.

Position of Dr Wynn-Hatton

14 The company plaintiffs do not object to Dr Wynn-Hatton providing expert evidence as to market performance of the cleaning products but they object to him being given access to the confidential information. The basis for the objection is his evidence that he recently did work for a competitor and that there is a reasonable likelihood that he would do so again in the future. This would compromise the confidentiality of the formulae and methods of manufacture.

15 When considering the position of Dr Wynn-Hatton, it is necessary to have regard to the confidentiality regime which the company plaintiffs submit should be put in place to govern the selection by the defendants of an alternative expert who will have access to the confidential information.

16 In summary the requirements are these. The defendants should provide the company plaintiffs’ legal advisors with the name of any proposed expert. With that name the defendants should also provide a curriculum vitae and an affidavit of the proposed expert deposing to the following matters:

(a) The names of any person or entity that the proposed expert had advised, consulted to or been employed by in the preceding five years.

(b) The nature of the activities undertaken by each such person or entity.

(c) The nature of each such advice, consultation or employment; and

(d) The country of residence of the proposed expert.

17 When that information is provided the company plaintiffs submitted that they should have the right to object to the expert. If that expert were objected to, then the defendants should be required to choose another expert who would go through the same process. This process would continue until an expert was identified which the company plaintiffs agreed to.

18 When an expert was agreed to by the company plaintiffs, that expert would be required to provide a written undertaking to the Court in the following form:

(a) Not to disclose the confidential information or any other information contained in or derived from the Documents to any person other than Mr Peter Ford (the solicitor for the defendants) without the written consent of the second, fourth and fifth plaintiffs or order of the Court.

(b) Not to use the confidential information or any other information contained in or derived from the Documents for any purpose other than for the purposes of these proceedings.

(c) (If the expert is to be supplied with a copy of the Documents), not to make any further copies of the Documents or to otherwise record the confidential information.

(d) (If the expert is only permitted to inspect the Documents), only to make a single copy of such information as is contained in the Documents as is necessary for the purposes of the preparation of an expert’s report and not to otherwise record the Confidential Information.

(e) To store the Documents and any information derived from the Documents in a safe and secure location with one key, that key to be kept in the possession of the person providing the undertaking.

(f) To return the Documents and any information derived from the Documents to the second, fourth and fifth plaintiffs within seven days of the conclusion of the hearing of the proceedings.

19 The company plaintiffs submitted that the expert should be required, once identified, to provide a further undertaking in writing to the Court that he or she had provided the solicitor for the defendants with a true and complete statement of:

(a) The names of any person or entity that he or she has advised, consulted to or been employed by in the preceding five years.

(b) The nature of the activities undertaken by each such person or entity.

(c) The nature of each such advice, consultation or employments; and

(d) His or her country of residence.

20 The company plaintiffs submitted that the expert should be required to provide an undertaking in writing to the Court by a specified date to pay the second, fourth and fifth plaintiffs and each of them damages for any loss or damage suffered by them which was caused by any breach by the expert of the undertaking referred to.

21 In support of their submissions, the company plaintiffs relied upon the often quoted judgment of Hayne J in Mobil Oil Australia Limited and Anor v Guina Developments Pty Limited [1996] 2 VR 34 at 38 where his Honour said:

“Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise.
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. Is that necessary for the attainment of justice in the particular case?”

22 By reference to that statement of principle, the company plaintiffs relied upon two decisions of the Court of Appeal of Western Australia being Hotrox Charcoal Co v Gebauer Nominees Pty Limited [2002] WASCA 293 and Gebauer Nominees Pty Limited v Cole [2008] WASSCA 38 and the Federal Court decision in Bayer Bioscience NV v Deltapine Australia Pty Limited [2006] FCA 68. Those cases extended the principle stated by Hayne J to the situation where disclosure of confidential information was to be made not to a trade rival but to an expert who may provide advice and expertise to a trade rival in the future. In the Hotrox cases and in Bayer the Court held that the nominated experts should not be given access to the confidential information.

23 The company plaintiffs submitted that the facts of this case were stronger than those in the Hotrox litigation and were more strongly supportive of Dr Wynn-Hatton being denied access to the confidential information. The particular matters relied upon were that Dr Wynn-Hatton’s involvement with a trade rival was recent. The level of involvement was a primary one in that he was the formula expert. The particular products with which he was concerned would be in direct competition with the products referred to in this case. Dr Wynn-Hatton had agreed that it was not possible to put a formula out of one’s mind. Finally, Dr Wynn-Hatton had not excluded the potential for his future involvement with a trade rival of the company plaintiffs. It was not suggested that Dr Wynn-Hatton would deliberately disclose confidential information but that such disclosure would be inadvertent due to his inability to put the formula out of his mind.

24 The company plaintiffs submitted that the only evidence before the Court was that an expert with similar qualifications to Dr Wynn-Hatton had been relatively easy to find, as was demonstrated by their retainer of Mr Fong, at short notice after 16 May. In the absence of any evidence from the defendants as to inquiries by them in respect of alternative experts to Dr Wynn-Hatton, the company plaintiffs should not be exposed to the risk of confidential information being communicated to rivals which would arise if Dr Wynn-Hatton gained access to that information. It was submitted that the Court should find that an appropriate alternative expert could be retained by the defendants if they looked.

25 The company plaintiffs submitted that there was no reason why the defendants should be entirely deprived of the expertise of Dr Wynn-Hatton. They had no objection to him giving evidence in relation to the performance of their cleaning products in the market and matters of that kind. Their objection was only to him being provided with the confidential information. They submitted that this information could be provided to a chemist who need not have expertise in the market place such as is possessed by Dr Wynn-Hatton. In other words the defendants would be required to use two experts rather than one but, it was submitted, this would address the concerns of the company plaintiffs while still enabling the defendants to have the benefit of the expert evidence which they desired.

26 It is clear from other parts of the judgment of Hayne J in Mobil Oil that a significant factor in his reasoning was that the proposed disclosure was to be to a trade rival and not to an intermediary. At page 40 of the judgment his Honour said:

“But in the present kind of case, is it necessary to destroy the legitimate claim to confidentiality from trade rivals by permitting the principal of that rival to look at the documents? Is it sufficient to permit counsel and solicitors (and nominated experts) to do so? It is now commonplace in the courts for material to be made available only to the legal advisers of the parties and nominated experts. Of course such arrangements bring with them their own difficulties and are arrangements that should be adopted only where there is a need to do so; of course they are arrangements that may need to be reviewed as the matter progresses towards trial or as the trial itself proceeds. But they are arrangements that are made and should be made when doing so would strike a fair balance between the competing interests of the party seeking inspection and the party claiming confidentiality. No more specific rule can be laid down – each case will fall for determination according to its own facts. … In particular it is not self evident that the plaintiff can properly consider the course which it will follow in relation to the litigation only if its principal has access to the material that is confidential.”

27 It seems to me that the decision in Hotrox involves a significant extension of the statement of principle in Mobil Oil. No such extension occurred in Bayer since it is clear from its facts that not only was Professor Adang closely associated with Dow Chemicals, a direct competitor of Bayer, but he was the author of numerous patents and was himself a direct commercial competitor in the field of the patent with Bayer.

28 I accept for the purpose of this judgment that the formulae and methods of manufacture of the new and reformulated cleaning products constitute confidential information. Since the company plaintiffs object to Dr Wynn-Hatton having access to that confidential information, they bear the burden of persuading the Court that such disclosure should not be made. In reaching my decision I have to carry out a balancing process to determine whether and if so, to what extent, the company plaintiffs will be disadvantaged or suffer injustice if access to the confidential material is granted to Dr Wynn-Hatton.

29 As a start point, I do not accept that the facts of this case are more favourable to restricting access by Dr Wynn-Hatton to the confidential information than were the facts in the Hotrox litigation. When one analyses the facts of those cases, the basis for the extension of the principle outlined by Hayne J becomes clear. They are significantly different to the facts of this matter.

30 There was extensive evidence in the Hotrox litigation about the unique nature of the confidential information. There was an affidavit from a Mr Cole who deposed that he had invented a world unique technology that enabled the successful creation of sawdust wood and charcoal briquettes without the use of a synthetic binder. Dr Franklin, who was the expert whose access to the confidential information was challenged, was the principal of a consultancy firm which had provided services to trade rivals of Hotrox over a number of years in the specific field of trying to develop wooden charcoal briquettes, which did not require the use of synthetic binder. It seems that Dr Franklin, as of the date of the litigation, had been unsuccessful in developing such a product.

31 It was clear that Dr Franklin had undertaken a significant amount of work in the specific briquette area for a diverse range of clients over a number of years, all of whom were direct trade rivals of Hotrox. At the time of the litigation, however, he was not undertaking any work for those clients and had not for a number of years.

32 A matter of significance was that in 1991 Dr Franklin had made an application for a patent in relation to charcoal briquettes. That patent was directed at producing a briquette of suitable hardness without the use of binding agents. Even though that patent application had lapsed in 1993, there was ample evidence to justify an inference that although at the time of the litigation Dr Franklin was not a trade rival of Hotrox, if its manufacturing techniques were disclosed to him there was a real prospect that at some stage in the future he might become such a trade rival or assist such a trade rival.

33 In the 2002 decision, the Western Australian Court of Appeal accepted that Dr Franklin was not at the time a trade rival of Hotrox. The fact that he had at one time applied for a patent in that very area, however, was something which was given considerable weight. This was because it provided a real basis for the concern of Hotrox that in the future either Dr Franklin might become a direct trade rival, or act as a consultant for such trade rivals. The Court formed the opinion that the risk of disclosure of such confidential information by Dr Franklin in those circumstances was real.

34 There was evidence before the Court that there were other appropriate experts available. Dr Franklin himself identified another expert and Hotrox had identified a number of experts. There was no evidence that Gebauer had consulted any of those experts or had looked for other experts.

35 In summarising the conclusions of the Court in the 2002 decision, the Western Australian Court of Appeal in 2008 said:

“16 The Full Court concluded that the risk should have been assessed as significantly more substantial than slight. It noted that, on the evidence, Dr Franklin had been interested for some time from a professional point of view in the process of manufacturing briquettes without a binder. Although the project in which he was involved when the application for the provisional patent was lodged came to nothing, the Full Court observed that Dr Franklin would be less than human if he did not wish to take advantage of an opportunity to inspect a process which might show him a way of doing something that he was unable to do. Because of his professional interests, Dr Franklin would be most unlikely ever to forget or put aside what he learnt. It would remain forever as part of his professional know how.
17 The Full Court made it clear that there was no attribution of any dishonest motive or intention to Dr Franklin. But he was now a professional consultant in the field and it could well be imagined that in the future Dr Franklin may be asked about the possibility of doing something along the lines which Hotrox claimed to be able to do. He would then be put in a quandary as to whether directly or indirectly to make use of that information in advising his clients.
18 There would also be a danger that he may subconsciously disclose something learned on the inspection which he was obliged to keep confidential. The Full Court considered that unless in the future Dr Franklin declined to advise any client interested in pursuing a process similar to Hotrox’s there would be a danger that he would, however unwittingly, make a disclosure which would imperil the confidentiality which he had agreed to preserve.”

36 As indicated, there are a number of important differences between that scenario and the facts of this case.

37 There is no evidence that Dr Wynn-Hatton had anything like the intellectual and personal commitment to the product Sparkle Ultra which Dr Franklin had in manufacturing briquettes without a synthetic binder. Sparkle Ultra was in competition with only one of the number of new and reformulated products which the plaintiff companies were going to launch in the retail market. The evidence suggests the number of products to be well in excess of 25. In the case of Hotrox the manufacture of the briquette was fundamental to its whole business.

38 It is also of significance that while it is accepted that the formulae and methods of manufacture constitute confidential information, the plaintiff companies had at no time manufactured or sold the new and reformulated cleaning products in the retail market. Accordingly it is not correct to talk in terms of companies such as Lloyd Brooks being a trade rival of the plaintiff companies since those companies had never sold cleaning products in that market.

39 There is a certain unreality in the stance adopted by the plaintiff companies in this matter. Fundamental to their objection to Dr Wynn-Hatton having access to the confidential information is that he might convey this information in the future, albeit subconsciously, to a trade rival. On the other hand, the basis of this litigation is that the plaintiff companies claim to have forever lost the opportunity of developing and selling these new and reformulated products and seek damages accordingly. This is how the claim is pleaded. It is nowhere suggested that at the conclusion of these proceedings some use will be made by the plaintiff companies of these new and reformulated cleaning products.

40 Against that background, the contrast with the Hotrox case is stark. The concerns of Hotrox were with the possible use of confidential information by existing trade rivals. In this case there are no existing trade rivals nor will there ever be, because on their case the ability of the plaintiff companies to develop and market these products has been forever lost.

41 Put at its highest on behalf of the company plaintiffs, their concern about access by Dr Wynn-Hatton to the confidential information could only be on the basis that at the conclusion of this litigation, they might seek to utilise the confidential information and that their ability to do so would be impeded if inadvertently Dr Wynn-Hatton had conveyed some of it to entities which would be trade rivals if those circumstances eventuated. Moreover the evidence of 20 November 2007 on which the plaintiff companies rely, goes no further than to indicate the possibility not the likelihood that Dr Wynn-Hatton might work for a potential trade rival in the future.

42 That factual scenario is considerably different to that which the Western Australian Court of Appeal had before it in Hotrox. The Hotrox litigation was concerned with a real prospect of disclosure. This case is concerned with the possibility of disclosure in a hypothetical situation which on the company plaintiffs’ case is unlikely to arise.

43 The fact that Dr Wynn-Hatton would not be able to put entirely out of his mind any formula, to which he had access, is not a decisive consideration. That risk would arise with any expert who has access to confidential information. If the courts are to effectively operate in this field and balance competing interests, that is a risk which will often arise and which has to be accepted. It would only be in rare cases that an expert would be expected to give an undertaking that he or she would not operate in a particular field in the future if access were given to confidential information. This is not one of those cases.

44 If Dr Wynn-Hatton, who already has considerable familiarity with this matter, were not to be given access to the confidential information, one can confidently anticipate further rounds of litigation identical to this. The defendants would put forward experts and the company plaintiffs would object to those experts on the basis that either at some time in the past they may have worked for a potential trade rival or at some time in the future they might do so. As was indicated in the affidavit of Mr Mitchell, it is this very experience with trade rivals and therefore with competition within the market, which makes the expertise of persons such as Dr Wynn-Hatton and Mr Fong so valuable, both to the plaintiff companies and the defendants.

45 When one looks at the regime which the plaintiff companies have suggested be put in place for the selection of alternative experts who can be used by the defendants, the inevitability of a further round of litigation such as this, is clear. That prospect should be eliminated if it can be done without causing serious disadvantage or injustice to the plaintiff companies.

46 I do not find particularly persuasive the submission that the defendants could use two experts instead of one, thereby having the benefit of Dr Wynn-Hatton’s knowledge of the market without giving him access to the confidential information. The implementation of such a procedure would give rise to serious practical difficulties.

47 As indicated, it is by no means clear that the plaintiff companies would ever agree to any chemist with experience in the field of cleaning products having access to the confidential information. As the evidence of Professor Pailthorpe on the hearing of the motion made clear, experts such as he and Dr Wynn-Hatton who are active in this field are regularly retained by companies which would have been potential trade rivals of the plaintiff companies.

48 Even if an appropriately qualified chemist acceptable to the plaintiff companies could be identified, it is difficult to see how that person could communicate in any meaningful way with Dr Wynn-Hatton so as to enable him to usefully provide expert reports concerning the performance of these products in the market without that chemist being in breach of the confidentiality regime. Apart from the undoubted inconvenience and additional expense involved in having two experts rather than one, the practical difficulties associated with the sharing of information between the two experts are such as to make the proposal largely unworkable.

49 The retaining of Mr Fong, on behalf of the company plaintiffs, cuts both ways. It does indicate as was submitted, that there may well be other appropriate experts available who could be retained by the defendants instead of Dr Wynn-Hatton. On the other hand there is force in the defendants’ submission that Mr Fong is in the same position as Dr Wynn-Hatton in that he is able to give expert evidence, not only about the formulae and methods of manufacture, but about the ways in which the chemical characteristics of the cleaning products would affect their performance in the retail market. The defendants submit that if the plaintiffs have a single expert who can provide evidence to that effect, they should not be deprived of access to the same expertise which they have in Dr Wynn-Hatton.

50 When giving evidence on the motion, Dr Wynn-Hatton impressed me as an honest person who was genuinely expressing an opinion without adopting a partisan stance. He made appropriate concessions and when he lacked knowledge on a subject he said so. I am satisfied that he would not consciously misuse confidential information of which he became aware in the course of this litigation. I am satisfied that he would conscientiously observe any undertakings which he gave to the Court. The contrary was not suggested.

51 In carrying out the balancing exercise which I must, I have not been persuaded by the company plaintiffs that Dr Wynn-Hatton ought be excluded from having access to the confidential information. I see his position being quite different to that of Dr Franklin in the Hotrox litigation. In particular, he lacks that personal involvement with the content of the formulae which Dr Franklin had. Unlike the Hotrox litigation, there is not one formula involved but a considerable number.

52 On the case as pleaded by the plaintiff companies, there will be no trade rivals in the future since they will never be able to develop and promote their new and reformulated cleaning products in the retail market. For the reasons indicated, I do not think it is practical or realistic to require the defendants to retain two experts when Dr Wynn-Hatton has all the qualifications and experience to provide the expert assistance which the defendants wish.

53 It is of concern that the defendants have made no attempt to inform the Court of the availability within Australia of other persons with the same qualifications and experience as Dr Wynn-Hatton and Mr Fong. While that is a matter of concern, it is not sufficient to tip the balance in favour of the company plaintiffs on this issue. The position of the company plaintiffs is sufficiently protected by the confidentiality regime which I have proposed.

54 For the above reasons I consider that the risk of the confidential information to which Dr Wynn-Hatton will have access being communicated to a trade rival of the company plaintiffs in the future is low. On balance I have not been persuaded that disclosure of the confidential information should not be made to Dr Wynn-Hatton.

Confidentiality regime

55 I decline to make orders in accordance with the regime submitted by the company plaintiffs because it is largely predicated on Dr Wynn-Hatton not having access to the confidential information. It also seems to unduly restrict the right of the defendants to use another expert in addition to Dr Wynn-Hatton if necessary.

56 In the regime proposed by the company plaintiffs the only legal adviser of the defendants entitled to see the confidential information is the solicitor, Mr Ford. He is not permitted without their consent or that of the Court to make disclosure of any part of that confidential information to counsel. This is unreasonably restrictive and no basis has been put forward which would justify it.

57 Similarly, there is no evidence to justify the company plaintiffs at their option being able to allow inspection of the confidential information or provide a copy. It is difficult to see how an expert would be able to prepare an appropriate opinion without having a copy of the confidential information available. It is also difficult to envisage how the defendants could present their case at trial without having a copy of the confidential information available to them.

58 I do not consider it is appropriate to require specific undertakings from the defendants, their solicitors and their experts as to the payment of damages. The confidentiality regime is one imposed by the Court. The undertaking is to be given to the Court. Any breach by the defendants, their legal advisers or the experts would have very serious consequences including, where appropriate, the payment of damages or penal sanctions. That is sufficient to protect the company plaintiffs.

59 I do not propose to analyse in detail the other proposals put forward by the company plaintiffs for inclusion in the confidentiality regime. They are similar to those to which I have already referred. I am of the opinion that they are excessively restrictive and would prevent the defendants from properly preparing and presenting their case. No evidence is before the Court which would justify a regime of such strictness.

60 The confidentiality regime which I propose is set out below. I am prepared to take submissions as the detail of the proposed regime and will make changes if I am persuaded that such changes are justified and are necessary to allow its practical implementation. I will not allow argument or submissions as to the underlying structure and effect of the regime.

PROPOSED ORDER

(1) The second, fourth and fifth plaintiffs are to provide to the defendants by their solicitors Messrs Curwoods Lawyers a copy of the following documents by 2008.

(a) Any document in their possession referring to the chemical formulae and the method of manufacture of each new and reformulated product as at October 1999 which is the subject of the fourth and fifth plaintiffs’ claim (“the products”);

and

(b) A document setting out the chemical formulae and the method of manufacture of each of the products, including the weight and volume of each component or ingredient and the order of addition of each. If trade names are used, their chemical name is to be provided to enable correct identification.

(The above documents and information constitute “the confidential information”).


(2) Each of the documents comprising the confidential information and all information and documents derived from them shall be kept confidential and:

(a) shall only be disclosed to:

(i) Counsel for the defendants and those solicitors from Messrs Curwoods directly involved in the preparation of the case on behalf of the defendants.
(ii) Dr Paul Meredith Wynn-Hatton.
Each of whom shall be bound by this order and such documents and information shall not be open to public inspection while filed or used in these proceedings; and


(b) shall be used only for the purposes of these proceedings.

(3) None of the documents comprising the confidential information, or any information or documents derived from them, shall be disclosed to or inspected by any independent expert nominated by the defendants unless the solicitors for the defendants have supplied the solicitors for the plaintiffs with:

(a) The name, qualifications and experience of the independent expert including whether that expert has provided any services to trade rivals or potential trade rivals of the company plaintiffs; and
(b) A copy of an undertaking duly executed by the independent expert in the form of the undertaking set out in the schedule to this order
and have given those solicitors 14 days within which to indicate whether they object to such disclosure and if so the basis of that objection.


(4) Dr Paul Meredith Wynn-Hatton and any other expert retained by the defendants and each of them will give an undertaking in writing to the Court in the form of the undertaking in the schedule to this order.

(5) The solicitors for the defendants are to make only so many copies of the documents comprising the confidential information and any information derived therefrom as are necessary for the purposes of the preparation of expert reports and for the conduct of the case on behalf of the defendants. Any such copies are to be numbered and specifically identified.

(6) None of the documents comprising the confidential information or information derived therefrom shall be disclosed by way of tender or quoted in any affidavit in these proceedings, except by way of an exhibit marked “Special Confidential”.

(7) (a) Within 28 days of the final determination of these
proceedings (including any appeal and determination of any issue as to costs) and after the expiration of any applicable appeal period, the solicitors for the defendants shall take all necessary steps to retrieve from the respective experts and their counsel all documents or copies of documents comprising the confidential information and all documents or computer files containing information therefrom and shall destroy the same or delete the information from them so that no part of the confidential information or information derived therefrom is capable of being retrieved or can be derived therefrom.
(b) Within ten days of such destruction, the solicitors for the defendants shall provide to the solicitors for the plaintiffs an affidavit identifying the documents destroyed and the manner and date of their destruction.


SCHEDULE UNDERTAKING

I, [name] of [address], [qualifications] DO HEREBY ACKNOWLEDGE THAT I have read the Order dated [insert date of the Order to which this undertaking is scheduled] (“the Order”), made in respect of the confidential information in matter No 20472/2002 in the Supreme Court of New South Wales (“these proceedings”) and I hereby undertake to the Court with respect to the confidential information, that:

(i) I have provided the solicitors acting for the defendants with a true and complete statement in writing of my qualifications as an expert and my affiliations both past and present and I have no affiliation and no other connection with:

(a) any party to this proceeding

(b) any person or company involved in the manufacture and sale of cleaning products for use in the retail market
(c) any of the solicitors for the defendants other than as stated in my statement


(ii) I have received none of the documents comprising the confidential information prior to my execution of this Undertaking.

(iii) As to each of the documents comprising the confidential information, as come into my possession, the same shall be used by me only for the purposes of these proceedings, shall be kept confidential by me at all times, and shall not be used by me or disclosed by me except as provided under the following paragraph:

(iv) As to each of the documents comprising the confidential information or documents enclosing information derived therefrom, as come into my possession, the same shall be used, handled, kept and stored by me in such manner as will keep the same at all times safe from use or disclosure except as may be required for me to advise counsel, solicitors and other independent experts acting on behalf of the defendants herein or as may be required in my giving evidence in these proceedings, subject to any order for protection of the confidentiality of the same.

(v) Within seven days of receiving notice of the final determination of these proceedings, I shall deliver up to the solicitors for the defendants on whose behalf I am engaged in these proceedings all of the documents comprising the confidential information or documents containing information derived therefrom in my possession, custody or control and shall delete from the hard drive of any computer owned or used by me any part of such documents so that no part of the information contained in the those documents is capable of being retrieved or can be derived therefrom.

[End of schedule]
Costs

61 The competing positions are as follows. The company plaintiffs submit that the costs of the motion should be costs in the cause or alternatively the defendants’ costs in the cause. Since the defendants have admitted breach of duty, it is clear why that submission has little attraction for them. The defendants submit that since they succeeded on the motion which was fully contested, costs should follow the event.

62 In support of their submission the company plaintiffs point out that the defendants filed the motion on 27 June 2007. It was supported by an affidavit of the defendants’ solicitor, Ms Hamilton. On 12 July 2007 the parties approached the List Clerk and the matter was fixed for hearing on 31 August 2007 with an estimate of 1 day.

63 The company plaintiffs submit that contrary to the order of Kirby J that the defendants’ evidence be filed by 28 June 2007, a report of Dr Wynn-Hatton was served on 13 August 2007. They submit that this 27-page report raised a number of new issues. As a result of that report the parties approached the Court on 29 August and had the hearing date of 31 August vacated. The company plaintiffs submit that at the very least they should have the costs of the mention on 29 August and the costs thrown away by the vacation of the hearing date of 31 August.

64 The defendants respond that following the allocation of the hearing date, the company plaintiffs served reports of Dr Crank and Professor Pailthorpe on 13 July 2007. They submit that it would have been obvious to the company plaintiffs when they served those reports that it would be necessary for the defendants to respond to them. They submit that the company plaintiffs would have been well aware of this fact when the hearing date was allocated, whereas the defendants were not, since those reports were served after the allocation of the hearing date. In those circumstances the company plaintiffs, they submit, would have been well aware that the hearing date was at risk.

65 It seems to me that there is some force in both submissions. Part of the problem was that the orders initially made by the Court (at the invitation of the parties) made no provision for evidence in reply. Nevertheless it must have been clear to the plaintiffs, given the hearsay nature of Ms Hamilton’s initial affidavit, that once they served the reports of Dr Crank and Professor Pailthorpe, a response from the defendants’ expert was not only required but inevitable.

66 I do not think that there is much to be gained by a close analysis of the rights and wrongs of the allocation of this hearing date and whether reports raised new issues or not. There are points to be made on both sides. In any event, given the nature of the issue, it was always somewhat optimistic that the matter would be concluded in one day.

67 The better approach is to take a broad view of the matter. This has been hard fought litigation. There have been few concessions on either side. It is clear that the company plaintiffs were always going to oppose the production to the defendants’ expert of the confidential information. On that issue, the company plaintiffs failed and the defendants succeeded. In those circumstances, I do not believe that a departure from the normal rule is warranted. Accordingly the company plaintiffs should pay the defendants’ costs of the motion.

68 There remains outstanding the question of the costs of this present dispute. In this dispute the defendants have been generally successful. That having been said, the way in which the matter has been conducted is also relevant to costs.

69 The company plaintiffs should pay the costs of 17 April 2008. It is clear that following the judgment of 7 April 2008, they had no intention of negotiating the form of the orders, nor did they attempt to do so. Their approach was entirely combative. In the circumstances, the Court should have been advised of that stance. If it had been, appropriate directions could have been given for the further conduct of the matter and the waste of costs on 17 April 2008 avoided.

70 The defendants filed and served their submissions in reply to those of the company plaintiffs at the end of April 2008. The company plaintiffs served further submissions in response by facsimile on the afternoon of 15 May 2008, the day before the hearing. For the first time those submissions focused on the Hotrox litigation and in particular, the question of whether other experts were available either within or outside the jurisdiction. Clearly that was an issue which the defendants could not respond to in the time available and as their senior counsel pointed out, for greater safety, he wished to consider his position on that issue and sought an adjournment.

71 It seems to me that the late service of the submissions and the particular focus on alternative experts in those submissions, both written and oral, meant that the matter could not complete on 16 May and that a further hearing date would be needed. No reason was proffered for why written submissions could not have been served earlier so as to put the defendants on notice that this was an argument which they had to meet. The decision which the defendants had to make in that regard could not be made within 24 hours. It matters not that they ultimately declined to call evidence on that issue. The Court will never know what steps were taken or what inquiries were made which led to that decision being taken. At the very least, they needed time to consider it.

72 Accordingly on the question of the costs of the present dispute, I am of the opinion that the defendants should have their costs, not only because they have generally succeeded, but because the conduct of the company plaintiffs on this issue could not be characterised as facilitating its just, quick and cheap resolution.

Orders

(1) That the second, fourth and fifth plaintiffs disclose the confidential information in accordance with the order proposed in this judgment.

(2) That the second, fourth and fifth plaintiffs pay the defendants’ costs of the motion, including the costs associated with the form of the orders to be made.
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