Civic Video Pty Ltd v Paterson - [2013] WASCA 107

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: CIVIC VIDEO PTY LIMITED -v- PATERSON [2013] WASCA 107

CORAM: PULLIN JA
MURPHY JA

HEARD: 12 MARCH 2013

DELIVERED : 23 APRIL 2013

FILE NO/S: CACV 116 of 2012

BETWEEN: CIVIC VIDEO PTY LIMITED
Appellant
AND
ROBERT HENRY PATERSON
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :CIVIC VIDEO PTY LTD -v- PATERSON [2012] WASC 325
File No  :CIV 2144 of 2008

Catchwords:

Practice and procedure - Discovery - Inspection - Confidentiality - Appeal against decision of master permitting the principal of a trade rival an unrestricted right to inspect confidential and commercially sensitive documents - Whether inspection should be restricted to legal advisers and experts - Whether master's decision was unreasonable or plainly unjust - Turns on own facts

Legislation:

Nil

Result:

Leave to appeal granted
Appeal allowed in part

Category: B

Representation:

Counsel:

Appellant: Mr I R Pike SC
Respondent: Mr A Metaxas

Solicitors:

Appellant: Marque Lawyers
Respondent: Metaxas & Hager

Case(s) referred to in judgment(s):

Cadbury Pty Ltd v Amcor Limited (No 2) [2009] FCA 663
Cazaly Iron Pty Ltd v Minister for Resources [2007] WASCA 60
Civic Video Pty Ltd v Paterson [2012] WASC 325
Dodds v Kennedy [2011] WASCA 32
Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513
House v The King [1936] HCA 40; (1936) 55 CLR 499
Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 2] [2010] WASC 217
Lovell v Lovell [1950] HCA 52; (1950) 81 CLR 513
Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605, 614
Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34
Monteleone v The Owners of the Old Soap Factory [2007] WASCA 79
Wentworth v Rogers (No 3) (1986) 6 NSWLR 642

REASONS OF THE COURT: The appellant seeks leave to appeal against a decision by the master to allow the principal of a trade rival of the appellant to inspect certain confidential documents.
On 13 September 2012, Master Sanderson delivered reasons in the matter Civic Video Pty Ltd v Paterson [2012] WASC 325. The master dismissed an appeal against a decision of the registrar, and granted an application that the first respondent be permitted an unrestricted right to inspect the three documents in question.
On 18 October 2012, Newnes JA referred the application for leave to appeal to the hearing of the appeal.

Background

The appellant (Civic) is the franchisor of the Civic Video stores. The first respondent, Mr Paterson, with his wife, own 14 Video Ezy store franchises in Western Australia. His family own a total of 21 Video Ezy store franchises in Western Australia.
On 10 September 2008, Civic commenced proceedings in which it claimed that the first respondent (Mr Paterson) had wrongly interfered with Civic's contractual relationship with its franchisees, by purchasing the assets of two Civic franchises in Geraldton (the Geraldton stores). One store was closed and the other became a Video Ezy store.
On 7 December 2011, Civic served on Mr Paterson a report by an accountant (the 'Accountant's Report') which sought to quantify the loss suffered by Civic as a result of Mr Paterson's alleged conduct in respect of the Geraldton stores. The report quantified Civic's loss based on the estimated franchise and advertising fees that would have been payable to Civic if the alleged breach had not occurred. The report detailed Civic's methodology for calculating the franchise and advertising fees. In the report, the expert examined revenue for three Civic stores which, he was instructed, were stores which were 'comparable to' the Geraldton stores.
On 31 January 2012, Mr Paterson's solicitors wrote to Civic's solicitors seeking further and better discovery of the documents relevant to the Accountant's Report. The email concluded that Mr Paterson 'cannot take any sensible steps towards preparing any responsive expert evidence until the documents are provided'. In the schedule attached to the email, it was said that Mr Paterson sought the documents in order to assess the veracity of certain assumptions and conclusions that had been made in the report.
On 14 March 2012, Civic filed and served an affidavit of Mr Laycock, the General Manager of Civic, in which Civic discovered the following three documents:
•Document 112: copy of spreadsheets showing total advertising fees received and spent in respect of WA franchisees from January 2006 to June 2011;
•Document 113: copy of Civic's profit and loss statements for the period June 2006 to June 2011; and
•Document 114: copy of summary of total annual revenue figures of all Civic stores in Western Australia, including stores that are now closed, from 2006 to 2011.
These are the documents the subject of this appeal and will be referred to as 'the documents'. The documents were referred to in the affidavit as being confidential and the inspection of the documents was made expressly subject to Mr Paterson's legal representatives providing a confidentiality undertaking that the documents would not, for relevant purposes, be made available to Mr Paterson.
On 30 April 2012, Mr Paterson made an application to the case management registrar of the Supreme Court for an order that Mr Paterson be permitted to inspect the documents.

The evidence

In support of the application, Mr Paterson filed an affidavit of his solicitor, Mr Hager, sworn on 30 April 2012. In that affidavit, Mr Hager states that Mr Paterson seeks inspection because he 'desires to give evidence as to the content' of the Accountant's Report at trial and that his capacity to give such evidence will be prejudiced if he is not permitted to inspect the documents.
On 16 May 2012, Mr Laycock swore an affidavit in opposition to the application for inspection. In that affidavit, Mr Laycock outlined the nature of the documents and the reason for opposing the application for inspection in paragraphs 26, 27 and 28 in the following terms:
Document 112
26.This document discloses the advertising fees paid by Civic Video franchisees in the WA Regional Market to Civic Video and the amount of those fees spent by Civic Video and to whom. This information reveals the amount of money spent by Civic Video in its advertising and marketing campaigns and to which types of marketing and advertising that money is spent. It is an internal Civic Video record which is commercially sensitive and confidential in nature. It discloses information which would provide a competitor of Civic Video with a competitive advantage if the document was disclosed to the competitor.
Document 113
27.This document discloses the profit and loss statements of Civic Video Pty Ltd. Civic Video is a private company and is not required to publicly disclose its internal financial reports and information. These documents are prepared for Civic Video's internal records and for accounting purposes and accordingly are commercially sensitive and confidential in nature. They disclose information which would provide a competitor of Civic Video with a competitive advantage if the documents were disclosed to the competitor.
Document 114
28.This document discloses the annual revenue figures for each Civic Video franchisee in Western Australia for the period 2006 to 2011. These figures are reported by Civic Video franchisees to Civic Video as a requirement of the Franchise Agreement for the calculation of Franchise Fees and for Civic Video to assist franchisees by monitoring and assisting with the performance of their stores. It is obviously very commercially sensitive information as it reveals the financial performance of each particular store. Accordingly, this document is commercially sensitive and confidential in nature. The document discloses information which would provide a competitor of Civic Video with a competitive advantage if the document was disclosed to the competitor.
Mr Laycock also deposed to the effect that Civic and Video Ezy were direct competitors, that inspection of the documents by Mr Paterson may cause 'significant irreparable harm', and that Mr Paterson would not suffer any prejudice in not being permitted to inspect the documents.
On 7 June 2012, Mr Paterson applied, relevantly, to strike out paragraphs 26, 27 and 28 of Mr Laycock's affidavit dated 16 May 2012 on the basis that the concluding part of each paragraph was, in effect, argumentative, self-serving and conclusionary. The registrar refused the application. On 11 June 2012, Mr Paterson appealed against the registrar's decision refusing to strike out paragraphs 26, 27 and 28 pursuant to O 60A of the Rules of the Supreme Court 1971 (WA).
By the time the matter came before the master, Civic had filed a supplementary affidavit, sworn by Mr Laycock on 1 August 2012. In that affidavit, Mr Laycock provided evidence, albeit expressed in general terms, of the use to which a trade rival or competitor in the video rental industry could put the confidential information contained in each of the documents.

The decision of the master

The appeal against the registrar's decision was heard before Master Sanderson on 30 August 2012. At the hearing of the appeal, it became apparent that the application to strike out the paragraphs of Mr Laycock's affidavit would not determine the wider question of whether the order for inspection should be made. By consent, Mr Paterson made an application for leave to inspect the documents and the application, which had been adjourned before the registrar, was heard together with the appeal.
The master dealt first with the issue of whether any of the paragraphs of Mr Laycock’s affidavit that Mr Paterson objected to should be struck out. The master found that there was nothing offensive in the paragraphs sought to be struck out, and that Mr Laycock, who had long-standing experience in the franchise industry, was in a position to offer the opinion contained in those paragraphs. The master noted that the weight to be given to that opinion was a different question, and dismissed the appeal against the registrar's decision.
In relation to the application for inspection, the master found that the documents were confidential and commercially sensitive (reasons [12], [21]). However, he further found, in effect, that the degree of commercial sensitivity would not involve sufficient prejudice to warrant any restriction on inspection (reasons [13] ‑ [21]).

The grounds of appeal and notice of contention

On 27 September 2012, Civic commenced an appeal against the decision of the master that Mr Paterson be permitted an unrestricted right to inspect the documents.

Grounds of appeal

Civic's two grounds of appeal are in the following terms:
1.The Master erred in law and in fact in finding that the Respondent personally have unrestricted access to the documents, when there was no evidence to support such a finding, which was contrary to the only evidence before the Master.
2.The Master erred in law and in fact in finding that a decision had to be made now on the question of access when there was no basis for such a conclusion.
In relation to ground 1, at the hearing, senior counsel for Civic, in effect, formulated four bases upon which it was said that the master erred. First, the master erred in law in applying the wrong test in relation to whether Mr Paterson should be permitted to inspect documents 112 and 113, and as a result, the master did not perform the balancing exercise required. Secondly, the master erred in law by examining the documents himself and forming his own conclusions as to the use to which the information contained in the documents might be put by a competitor, in circumstances where there was uncontested evidence given by a relevantly qualified person (Mr Laycock) to the opposite effect of the conclusions reached by the master. Thirdly, the master erred in fact by fundamentally misunderstanding the facts relating to the basis on which it was said that access to document 114 was required. Fourthly, the master's decision was so unreasonable or plainly unjust that error is to be inferred.

Notice of contention

Mr Paterson seeks to uphold the decision of the master on the ground that paragraphs 26, 27 and 28 of the affidavit of Mr Laycock sworn on 16 May 2012 should have been struck out on two bases. One was that they were no more than a statement of the finding that Civic sought, namely, that the documents contained information which would provide a competitor with a competitive advantage if disclosed. The second was that they gave secondary evidence of the contents of documents.
It is convenient to dispose of this point now. As to Mr Paterson's first argument, this only applies, insofar as it has any potential validity, to the last sentence of each of the paragraphs under challenge, and not to the preceding sentences. It would not justify striking out the preceding sentences. Further, the last sentence of each of those paragraphs was the subject of further elaboration in Mr Laycock's supplementary affidavit - and no application was made before the master to strike out that affidavit on the grounds that it was inadmissible. Even if the last sentence of the paragraphs under challenge were ignored, that could not affect the disposition of the matter before the master or before this court.
In relation to Mr Paterson's second argument, the documents themselves were in evidence and were examined by the master. The secondary evidence of their contents, whilst inadmissible, could have no bearing on the ultimate outcome in these circumstances.
The notice of contention should be dismissed.

The legal principles

Confidentiality

Confidentiality is not ordinarily a sufficient reason to deny inspection by the opposite party as the implied undertaking that the documents be used only for the purpose of the litigation will provide sufficient protection to the party producing them. However, other considerations arise where the documents in question are commercially sensitive and the relevant parties are trade rivals: Cazaly Iron Pty Ltd v Minister for Resources [2007] WASCA 60 [7] - [10]. Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd[No 2] [2010] WASC 217 [55] - [59].
In this context, when it is said that the information is 'commercially sensitive', what is meant is that 'a rival in the market place who obtains access to it may turn the material to the advantage of that rival and to the disadvantage of the party who seeks to keep it secret': Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34, 38.
Where the relevant parties are trade rivals, and the documents in question contain confidential and commercially sensitive information, the court must strike a fair balance between the legitimate concerns of the party discovering the documents and the needs of the other party to the litigation: Mobil Oil, 39-40; Cadbury Pty Ltd v Amcor Limited (No 2) [2009] FCA 663 [6].
In relation to the court's duty to strike a fair balance, Hayne JA in Mobil Oil observed:
Where, as here, the problem is one of balancing the needs of a party to the litigation and the legitimate concern of a trade rival to retain secrecy of commercially sensitive information, it may well be necessary to mould orders that will distinguish between the plaintiff, its officers, its legal advisers and experts. Again it may be accepted that generally a party is entitled to inspect the documents of an opposite party by itself its servants or its agents. 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 the nature and the content of the disputed documents is a matter that will usually, if not invariably, be of great importance in forming a conclusion and, if that is so, it will be appropriate for the judge to inspect the documents concerned (39 ‑ 40).
Some of the relevant matters in assessing whether a document should attract additional protection beyond the protection of the implied undertaking include the age of the information, the identity of the persons who will inspect the documents, and the reason or reasons why the inspection of particular documents is necessary: Cadbury Pty Ltd v Amcor Limited (No 2) [7]. More generally, a relevant factor is the degree of commercial sensitivity involved and the extent of any prejudice to the party giving discovery: Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd[No 2] [58].
The striking of a fair balance may need to be revisited as the matter progresses to trial: Cadbury Pty Ltd v Amcor Limited (No 2) [6].

Discretionary decision - appellate review

Where the decision being appealed from involves the exercise of a discretion, an appellate court will only intervene where there has been an error in the decision-making process of the kind described in House v The King [1936] HCA 40; (1936) 55 CLR 499:
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred (504 ‑ 505).
An appellate court will not interfere with an exercise of judicial discretion on the basis of a failure to give adequate weight to relevant considerations unless it can be shown that the failure really amounts to a failure to exercise the discretion actually entrusted to the court: Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513, 534 - 535; Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605, 614; Lovell v Lovell [1950] HCA 52; (1950) 81 CLR 513, 519; Monteleone v The Owners of the Old Soap Factory [2007] WASCA 79 [36]; Dodds v Kennedy [2011] WASCA 32 [4].
Wherever a discretion is to be exercised, minds may differ on the result: Wentworth v Rogers (No 3) (1986) 6 NSWLR 642, 644.

The parties' arguments and disposition

First alleged error - the master applied the wrong test in relation to documents 112 and 113

The first error alleged by Civic is that the master applied the wrong test in relation to documents 112 and 113 in that he required Civic to demonstrate that the disclosure of those documents would be seriously prejudicial to Civic's commercial interests and competitiveness, without balancing the competing interests of the parties as discussed in the authorities.

We would reject this contention. Whilst the master looked at each of the disputed documents to determine whether the use of the confidential information by a trade rival would be seriously prejudicial to the appellant's commercial interests and competitiveness, the master did so in light of the principles discussed in Mobil Oil.It is apparent from the master's reasons as a whole that he was seeking, within an overall balancing exercise, to examine the nature and extent of any potential prejudice that would be suffered by Civic if Mr Paterson were granted access to the documents. In this respect the master said:
In the end, determination of the matters in issue in this case requires an assessment of what is in the interests of justice … It is a balancing exercise. In this case, particularly with respect to document 114, the position is finely balance [sic].
In the end, I am satisfied it is in the interests of justice that [Mr Paterson] have access to these documents [19]-[20]. (emphasis added)
Civic's contention that the master's findings on this point were limited to document 114 must be rejected. The master was adopting the test of balancing the competing interests of the parties, not just in relation to document 114, but also in respect of documents 112 and 113. He formed the view that it was in the interests of justice that Mr Paterson be permitted access to inspect the documents.
In our view, the master did not apply an erroneous test.

Second alleged error - the master erred in examining the documents himself

The second alleged error advanced by senior counsel for Civic was to the effect that there was no evidence to support the master's conclusion. The argument was that in circumstances where Mr Paterson had not put forward any evidence to refute the affidavit evidence adduced by Civic through Mr Laycock, Mr Laycock's evidence ought to have been treated, in effect, as conclusive. In this regard it is said that the master erred in inspecting the documents himself and forming his own conclusions based on that inspection.
This argument should be rejected.
The documents were part of the affidavit evidence before the master. At the hearing before the master, the documents were the subject of consideration and submissions. There is no suggestion that Civic objected at any point prior to the hearing, or at the hearing, to the admission of the documents into evidence, or objected to the master inspecting the documents for the purposes of resolving the dispute. That is sufficient to dispose of this argument.

Third alleged error - the master fundamentally misunderstood the facts relating to document 114

The third error alleged in relation to ground 1 is that the master erred in fundamentally misunderstanding the facts as to the basis upon which it was said by Mr Paterson that he sought access to document 114.
In Mr Hager's affidavit dated 30 April 2012 it was said that Mr Paterson desired to give evidence as to the 'content' of the Accountant's Report at trial, and that his capacity to give such evidence would be prejudiced if he was not permitted access to inspect the documents. In an email annexed to the affidavit, dated 31 January 2012, Mr Hager enclosed a schedule which set out the basis for the request for document 114. In the schedule it was said that Mr Paterson was entitled to the revenue figures of the WA Civic Video stores so that Mr Paterson could have his expert check that the three stores chosen by Civic for the purposes of preparing the Accountant's Report were comparable to the Geraldton stores.
The master's findings were, relevantly in these terms [20]:
[Mr Paterson], having extensive experience in the video business, should be in a position to ensure any expert report upon which he intends to rely conforms with his opinions. The position might be different if the documents were to go to an expert in a field where the party had no expertise. In that event it would be necessary to rely upon the opinion of the expert, with there being little or no need for the input of laypersons. But that is not the case here, and [Mr Paterson] should be entitled to run his case in the way he sees fit.
The master's language at [20] was no doubt infelicitous insofar as he said that Mr Paterson should have the documents to 'ensure' that any expert report 'conforms with [Mr Paterson's] opinions'.
However, on a proper construction of the master's reasons as a whole, it is to be taken that the master found that Mr Paterson sought access to document 114 in order to instruct an accounting expert and otherwise address in evidence as he saw fit, with the benefit of his experience in the video industry, any matters or assumptions of fact upon which Civic's accounting expert had relied. That finding was open to the master and there is no demonstrated error of fact as to the basis upon which it was said by Mr Paterson that he sought access to document 114.
It is another question as to whether and to what extent there was any real prejudice to Mr Paterson's conduct of the defence, including his ability properly to instruct an expert accountant, without him personally seeing document 114. That is the subject of the fourth alleged error.

Fourth alleged error - inferred error

The appellants say that in any event, error is to be inferred because the master's order is 'unreasonable or plainly unjust' in the House v The King sense (ts 32).
On one side of the balancing exercise, Civic contends that:
(a)its accounting expert did not rely, or at least did not in any significant way rely, upon the revenue from the three comparator stores; and
(b)Mr Paterson did not adduce any, or any cogent, evidence of any real prejudice to him if he could not deal with the Accountant's Report without personally seeing document 114 and all the revenue figures within it.
On the other side they refer to the master's finding of commercial sensitivity with respect to document 114:
It is not difficult to imagine the use which might be made of this information by a competitor. By looking at what is earned by a particular store, the competitor can ascertain what areas provide heavy turnover. That may attract a business rival to set up in that area. Doubtless any business setting up in a particular area would assess what income might be earned as part of its business plan. It is not difficult to see how the commercial position of [Civic] could be undermined.
It is appropriate at this point to record more precisely the forensic use to which Civic has put the three comparator stores in its damages claim. In this regard, the following aspects of the Accountant's Report may be noted.
First, Civic's accounting expert was instructed to prepare a report providing an opinion as to the loss, if any, suffered by Civic 'on the basis of the information and assumptions provided' (par 1.3.1). He had been instructed to consider certain assumptions relating to revenue including that 'the future turnover of … [each Geraldton] store would have followed the trend of the average actual revenue figures provided for three stores that were deemed by Civic … to be comparable to … [each Geraldton] store' (pars 1.4.1(c) and 1.4.2(c)). He discussed the assumptions together with the revenue information provided to him in s 4 of the report (par 1.4.3). He recorded that should there be any change in the assumptions or the information supplied to him, his opinions may alter (pars 1.4.5 and 1.5.4).
In pars 4.1 to 4.4.9 of his report, Civic's accounting expert referred to his instructions as to the three comparator stores. He analysed the revenue information from the three stores for the period 2006 to 2011 and concluded that the average growth for the three stores was 6%. He also charted the revenue for each of the Geraldton stores and the three comparator stores and found that whilst the annual revenue for one of the Geraldton stores did not broadly follow the trend of the average annual revenue of all the stores analysed (including the three comparator stores), the annual revenue of the other Geraldton store did (par 4.4.9).
In relation to the Geraldton store which did not broadly follow that trend line, the expert said that in his opinion a growth rate lower than 6% may be more appropriate, or an assumption of negative growth (par 4.6.8). He concluded that the appropriate growth rate to apply to that store was ‑4% (par 4.6.9). However, he also prepared alternative calculations assuming growth rates of 0% and 2% for that store (pars 2.4.2, 4.6.10 and 5.12.4).
In relation to the Geraldton store which did broadly follow the annual revenue trend line, the expert said that the store had experienced negative growth of -3% in 2006, however, it was possible that the store may have experienced a positive growth in revenue in the years subsequent to 2006, and that it may be 'appropriate' to cap the growth rate for that store at 6% (pars 4.6.14 ‑ 4.6.16). The expert considered that 2% was an appropriate growth rate to apply to that store, however, he also calculated the loss by reference to a growth rate of 6% (pars 2.4.3, 4.6.21(b) and 5.12.18). At par 4.6.21(b) he said:
6%. This is the growth rate for the average revenue of the Comparable Stores for 2007 to 2011. From 2002 to 2006, the annual revenue of [the second Geraldton] Store broadly followed the trend of the Comparable Stores. Taking this into consideration, it may be possible that the revenue of this store would have grown at a rate similar to the Comparable Stores subsequent to 2006.
It is evident that a not inconsiderable part of the Accounting Report contained an analysis and examination of the annual revenue trend which was observable from the three comparator stores. Although Civic's expert did not regard 6% as the appropriate growth rate to use for the purposes of calculating loss of revenue (and ultimately lost profit), he carried out an alternative calculation of damages based on the 6% growth rate figure in relation to the second Geraldton store. It may also be inferred that his overall conclusions could be vulnerable if it were shown that there were other, more appropriate 'comparator' stores with different, lower trend growths.
Accordingly, we do not accept Civic's contention that its expert has made no, or no significant, use of the revenue information from the three comparator stores.
The next question is whether and to what extent there would be any prejudice to Mr Paterson if he were required to provide a responsive report to the Accounting Report without personally seeing document 114. The master evidently considered that Mr Paterson, with his experience in the industry, could contribute to an assessment of the expert evidence relied upon by Civic in the Accounting Report and that his experience would be a 'resource' which he could bring to bear in responding to Civic's expert accounting evidence. The master said [10]:
On behalf of [Mr Paterson], the point was made [Mr Paterson] personally is involved in this litigation. It is he who gives instructions to his solicitors. It was submitted he could not do that effectively unless he saw the documents. It is no answer to say an expert could prepare a report without the involvement of [Mr Paterson]. [Mr Paterson] is experienced in the video franchise business and he would be at least as well placed as anyone else to assess the expert evidence. Moreover, as counsel for [Mr Paterson] forcefully explained, [Civic] wants damages from [Mr Paterson] - it is [Mr Paterson's] funds which are at risk. If he bears that risk, he should be entitled to defend the claim with every possible resource.
Nevertheless, Mr Paterson did not give any direct evidence as to why he would need to see document 114 in order properly to conduct his defence of the damages claim in general or to instruct an accounting expert in particular. Indeed, Mr Paterson's counsel said, in effect, that he could not give any, or any meaningful, evidence as to whether the stores which were chosen by Civic as comparable were, in fact, comparable without actually seeing the document himself (ts 36). In our view, that submission ought not be accepted.
Mr Paterson knew, from the description of document 114, what it contained and he also knew from the Accountant's Report the reasons why the chosen stores were deemed to be comparable to the Geraldton stores. Civic's accounting expert said in par 4.4.2 that he had been instructed that the reasons that the Albany, Carnarvon and Esperance stores were deemed comparable to the Geraldton stores were:
(a)each of the comparable stores are regional stores operated by a single unit franchisee (owner, operator stores);
(b)the turnovers of the comparable stores are similar to that of the Geraldton stores;
(c)while the population of these markets varies when compared to Geraldton, they are similar regional Western Australian towns; and
(d)each of the towns in which each of the comparable stores operates has other video store competitors operating.
There is no reason, in our view, as to why, in these circumstances, Mr Paterson could not have deposed to the basis upon which he would need to see the information in document 114 in order to address the question of whether the chosen stores were, in fact, comparable stores.
Moreover, it is difficult to see any basis upon which Mr Paterson would need to see the figures in document 114 in order to address and respond to the reasons given for the selection of the comparable stores referred to in par (a), (c) and (d) of paragraph [60] above. It would be expected that Mr Paterson could draw on his industry experience to address those matters without seeing Civic's turnover figures for every store in this State.
As to the reason advanced in par (b) of [60] above, any accounting expert retained by Mr Paterson could see for himself or herself whether document 114 contained turnover figures in other stores that were similar to the turnover figures for the Geraldton stores. It would be expected that instructions could be sought from Mr Paterson about the features and characteristics of any other such stores referred to in document 114, and the markets in which they operated, without the need to disclose to Mr Paterson the revenue figures in document 114.
Accordingly, we would accept Civic's contention that there was no cogent evidence adduced by Mr Paterson as to why he would need to see the revenue figures in document 114 in order to respond to or properly instruct an accounting expert in relation to the Accounting Report.
On the other side of the equation, the master found (reasons [18]) that it 'is not difficult to see how the commercial position of [Civic] could be undermined' if document 114 were made available to Mr Paterson in circumstances where, the master found, Mr Paterson was a trade rival of Civic in Western Australia.
Counsel for Mr Paterson emphasised that document 114 has information going back to 2006, and that it is difficult to see why information of that age would be commercially sensitive. The difficulty with that submission is that there is no notice of contention challenging the master's finding at [18] and, in any event, it does not address the fact that document 114 also covers more recent information up to 30 June 2011.
In our respectful view, there has been no real weighing of the degree of prejudice to Civic against Mr Paterson's interest in seeing the material. On the evidence, Mr Paterson sought inspection of document 114 for a specific and limited purpose, to respond to Civic's evidence in the Accountant's Report. Any real weighing of the respective interests of the parties would involve ascertaining by reference to the evidence, and taking into account, what contribution Mr Paterson's experience in the industry could add in responding to the Accounting Report. It appears to us, with respect, that the master did not address that question on the materials before him. As there has been no real exercise of the discretion, it is not simply a question of whether reasonable minds might differ on where a fair balance should be struck.
Senior counsel for Civic accepted, in effect, that the information in documents 112 and 113 could not be regarded as commercially sensitive to the same extent as the information in document 114. In our view no error can be inferred from the master's reasons in relation to documents 112 and 113.
Accordingly, this ground has been made out in relation to document 114.

Ground 2

Ground 2 alleges that the master erred in law and in fact in finding that a decision on the question of access should not be deferred to a later stage of the proceedings. In this regard, the master said:
During the course of his submissions, counsel for [Civic] did suggest any order denying [Mr Paterson] the right to inspect the discovered documents could be reviewed later in the proceedings. I have considered that as a possibility. It seems to me, in all the circumstances, to be impractical. This case has reached the point where an exchange of expert evidence ought take place. [Mr Paterson] will need to instruct an expert or to decide, based upon [his] personal view of the expert report, not to present any expert evidence. A decision now on [Mr Paterson's] right to inspect the documents is required. It cannot be delayed [22].
We would also allow this ground in relation to document 114. For the reasons given in relation to ground 1, there was no adequate basis upon which to find that Mr Paterson required access to document 114 personally in order to respond to the Accounting Report. If difficulties were to emerge in the course of instructions to his accounting expert, the prospect of which is not presently apparent on the face of the evidence, the question could be revisited under a liberty to apply. Similarly, if difficulties arose later in the litigation leading up to or in the course of the trial, Mr Paterson could renew his application.

Conclusions

There should be leave to appeal, and the appeal should be allowed in relation to document 114 only. In the re‑exercise of discretion, we would preclude Mr Paterson from inspecting document 114 (subject to a liberty to apply). The precise terms of the order should be formulated once the parties have had the opportunity to consider these reasons.