Conrock Ltd v CSR Ltd

[1990] FCA 461

Re: CONROCK LIMITED
And: CSR LIMITED
No. G321 of 1988
FED No. 461
Practice and Procedure
96 ALR 690

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Practice and Procedure - interlocutory application for third party discovery - objection on the grounds of "highly confidential information" and oppressiveness - consideration of whether difficulties exaggerated - discretion of awarding costs of discovery considered.

HEARING

BRISBANE

#DATE 23:8:1990

Counsel for the applicant: Mr D.R.M. Murphy

Solicitors for the applicant: Morris Fletcher and Cross,

t/a for Wilson Ryan and Grose

Solicitors for the respondent: Mr B.D. Bartley of Chambers

McNab Tully and Wilson

Counsel for Boral Resources (Qld) Pty Ltd: Mr Gibson QC and

Mr D.B. Fraser

Solicitors for Boral Resources (Qld) Pty Ltd: Neil O'Sullivan and

Rowell

Counsel for Pioneer Concrete (Qld) Pty Ltd: Mr W. Sofronoff QC and

Mr P.D.T. Applegarth

Solicitors for Pioneer Concrete (Qld) Pty Ltd: Clarke and Kann

ORDER

1. Pioneer Concrete (Qld) Pty Ltd and Boral Resources (Qld) Pty Limited make discovery to the applicant of any documents in its possession in any of the following classes:

(i) Townsville Area Manager's

reports to State Office from October 1985 to June 1987;

(ii) Queensland State Manager's reports to Head

Office from October 1985 to June 1987;

(iii) Head Office responses to State Manager's

reports from October 1985 to June 1987;

(iv) Monthly summaries of sales, by product, in

the Townsville region from October 1985 to April 1987 inclusive.

2. Order No. 1 may be complied with by supplying to the applicant's solicitors, on the 28th day from the making of this order, such of the documents in the four classes as it is practicable to obtain by using reasonable diligence by that date.

2A. Order No. 1 (iv) may be complied with by supplying summaries of such sales confining them to sales of pre-mixed conrete.

3. Such documents as are supplied may, until further order, be inspected only by the applicant's solicitors and counsel who shall not, until further order, reveal their content to any other person.

4. There will be no order as to the costs of the application for discovery.

5. The question of provision for the expenses of giving discovery be reserved.

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

JUDGE1

The principal proceedings claim relief in respect of alleged breaches of s.46 of the Trade Practices Act 1974, and in this interlocutory application discovery is sought against third parties. The applicant (Conrock) pleads against the respondent (CSR) that between October 1985 and April 1987 CSR took advantage of its power in relation to certain markets centred on Townsville for the purpose of eliminating or substantially damaging Conrock in each of those markets. The particulars of the allegation are that CSR supplied pre-mixed concrete to builders at prices below the "average variable cost" to CSR, in consequence of which Conrock was forced to reduce its price for concrete and was "disabled from carrying on" its readymix concrete business at Townsville in North Queensland. As a further result, the statement of claim says Conrock was denied a viable outlet for its hard rock raw materials, the product of its quarrying operations, and was disabled from profitably carrying on that business as well.

1. The provision relied on (s.46 of the Trade Practices Act 1974) reads in part as follows:
   

"(1) A corporation that has a substantial degree of power in the market shall not take advantage of that power for the purpose of-

(a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market."

1. The case is one in which predatory pricing is alleged. It is evident from the statement of claim that the predatory pricing is not alleged to have taken place in a market in which CSR was absolutely dominant; Conrock says CSR effected 20-27% of sales in the market in which the predatory pricing occurred, namely that for the supply of pre-mixed concrete to builders in Townsville and within a radius of 100 kms from the centre of that city.

2. The interlocutory application with which I am concerned seeks discovery of certain documents against other major participants in the market, namely Boral Resources (Qld) Pty Ltd (Boral) and Pioneer Concrete (Qld) Pty Ltd (Pioneer). As to each of Boral and Pioneer, the notice of motion asks that the third party -
   

"... make and file a list of documents in their possession relative to the matters in dispute between the parties to this action."

1. The rule relied on, which came into effect on 26 April 1988, is O.15A r.8:
   

"On the application of any party to a proceeding, the Court may order that a person who is not a party and in respect of whom it appears that the person has or is likely to have or has had or is likely to have had in the person's possession any document which relates to any question in the proceeding shall make discovery to the applicant of any such document."

1. The expressions used in this rule might create the impression that a particular document must be identified, but that is not so, for O.15A r.9(3)(b) requires an affidavit in support of the application "specifying or describing the documents or any class of documents in respect of which an order is sought".

2. Mr R.D. Catelan was at relevant times the managing director of Conrock, which is in liquidation. He has made an affidavit providing some hearsay evidence in support of allegations in the pleading that CSR's price was below cost. The affidavit goes on to say that the only other major competitors in the concrete and quarry markets in the Townsville area, apart from Conrock and CSR, were Boral and Pioneer. The affidavit says, in effect, that CSR was the price leader and that Conrock, Pioneer and Boral were not. Mr Catelan's affidavit also deposes to conversations with Boral and Pioneer executives in support of the suggestion that CSR was the price leader. It asks for discovery of seven categories of documents, which it seems to me necessary to set out in full:-
   "(a) Financial reports (Townsville concrete and
   

quarry), October, 1985 to August, 1988;

(b) Townsville Area Manager's Reports to State Office for October, 1985 to August, 1988;

(c) Queensland State Manager's Reports to Head Office for October, 1985 to August, 1988;

(d) Head Office responses to State Manager's Reports, October, 1985 to August, 1988;

(e) Invoice Registers, October, 1985 to August, 1988;

(f) Annual/Monthly Sales Reports, October, 1985 to August, 1988;

(g) Any computer monthly reports summarising sales either by product or customer from October, 1985 to August, 1988."

1. Mr P.A. Casey, a Pioneer executive, has made an affidavit which is relied on as an answer to the application for discovery. He says that the relevant industry was fiercely competitive in the period 1985 to 1988 and that there was much price cutting. Mr Casey claims that Pioneer regards the volume of sales to particular customers and the prices paid as "highly confidential information". According to Mr Casey, although Conrock is in liquidation, its former controllers, Mr Raymond Catelan (the deponent referred to above) and his brother Dennis might re-enter the concrete business and damage Pioneer.

2. On behalf of Boral, an affidavit has been filed by Mr Kinsella making similar, but less strong, suggestions that the material sought is confidential.

3. It is my opinion that the confidentiality objection is not made out. As was pointed out in the House of Lords in O'Sullivan v. Herdmans Ltd (1987) 1 WLR 1047, in considering an application for third-party discovery:
   

"... counsel for the plaintiff clearly and fairly accepted that the documents in question were documents which the department could have been compelled to produce if they had been served with a writ of subpoena duces tecum to produce them at the trial. Although he suggested that they were confidential he agreed that such confidentiality as they had would not found a valid objection to their being produced at the trial ... Accordingly, there is no dispute between the parties that the documents should be produced; the only live question is when they should be produced." (1055)

1. It commonly occurs that people who are not parties to litigation resent the necessity of troubling themselves about others' disputes, when required to provide information or documents. Particularly is that so where the desire is to keep the information or documents completely private. I accept that Pioneer, in particular, is anxious not to give competitors any assistance as to its pricing methods, but I do not believe that the following exercise, sworn to by Mr Casey, is at all likely. He says, in effect, that if one knows the price charged by a competitor at a particular date and subtracts known historical costs of cement, cartage and the like-
   

"... it would be possible, by using current prices for cement and cartage and applying, where necessary, consumer price index variations to such things as overheads, to calculate the present day prices charged by that competitor."

That seems to me rather fanciful. It is, I think, common ground that there was strong price competition at the relevant time and place. The suggested sum outlined by Mr Casey would surely make no sense unless one included as a factor the competitive pressures which, it seems to be conceded all round, were a major factor in determining price. Further, Mr Casey says that knowledge of volumes awarded would be very valuable, as a competitor armed with that information could "target specific customers". But surely the volumes required vary from time to time and from place to place.

1. In short, I think the objection based on confidentiality is exaggerated and that the information likely to be obtained if discovery were granted is no more confidential than prices charged in a competitive market are ordinarily likely to be. I would not reject the application for discovery on this ground. I propose, however, to require strict confidentiality, in the first instance, as a means of avoiding the necessity of a "dealing-up" exercise.

2. Mr Casey's affidavit, like that of Mr Kinsella, then puts forward another basis for refusal. Mr Casey says that the documents requested are in the hundreds, if not thousands, and that to collect them, determine their relevance, mask any irrelevant but confidential matter and so forth would require a great deal of executive time. Mr Kinsella says that Boral has not enough manpower to collect the material desired and would need to engage "an outside person" under the supervision of a Boral executive. He estimates that the outside person would need to work for two or three months to retrieve and review the documents and that the executive would be "engaged full-time over that period of two to three months".

3. The suggestion that an executive would need to do full-time work for two or three months to supervise the outside person does not appeal to one's common sense. Neither of these deponents was cross-examined, but it must be said that it is easy to make, and difficult to disprove, these sorts of estimates.

4. Some assistance in assessing the veracity of what is said by Pioneer can be derived from evidence filed on behalf of Conrock that each of Boral and Pioneer used receive reports from their area managers and state managers as well as regular sales reports; one would, of course, expect that to be so in any substantial organisation. Mr Kinsella says, as to the request for these reports:
   

"The description of 'financial reports' appears to cover financial records, invoices, delivery dockets, operating reports etc. ..."

It is my view that Mr Kinsella does not in reality think that an invoice or a delivery docket is a "financial report" or what is sought under the relevant heading in Mr Catelan's affidavit. The passage in Mr Kinsella's affidavit which gives this interpretation of the term "financial reports" suggests a strategy of expanding the scope of the application beyond reasonable limits, in order to exaggerate the difficulty of acceding to it. In another affidavit, Mr Kinsella has given an estimate of the costs (excluding legal costs) of compliance with the request, the elements of which total $22,970. I do not believe that the cost would be so high.

1. Mr Catelan has made an affidavit saying that of the seven categories of documents sought, he has seen copies of those mentioned in paragraphs (a), (b), (c), (e) and (f) listed above, in relation to both Boral and Pioneer. He says he has also been told by a former Pioneer manager that reports of type (d) - i.e. head office responses to State manager's reports - were a regular part of Pioneer's management procedure. The general proposition that some reports of the kind sought were made received some support from Mr Kinsella's affidavit. He admits that there were monthly reports to the Chief General Manager of Boral head office in Sydney from the State General Manager.

2. Some other difficulties urged on behalf of Pioneer and Boral should be mentioned. It said that Conrock has not complied with an order made on 18 April 1990. In fact, the Court made no order on that day and I infer that it was intended to rely on an order of 18 April 1989. Each of paragraphs 3 and 4 of that order required the furnishing of further and better particulars of allegations in the statement of claim. These orders have no direct connection with the present problem; they are concerned principally with loss and damage said to have been caused to Conrock. Further, it is urged that there is an outstanding request for further discovery by the applicant; it does not appear to me that this is any obstacle to the orders presently sought.

3. It was also argued that the application is for discovery of a fishing kind, by which counsel meant, I think, that Conrock has no case against CSR but hopes to make one out of discovery. Mr Murphy, who appeared for Conrock, said the purpose of discovery was to "analyse and confirm" what Conrock already knows. It appears to me, on the evidence, that Mr Murphy is correct; there is uncontradicted material suggesting that there was a price war at relevant times initiated by CSR and that it had the effect of putting an end to competition from Conrock. This is not to say, of course, that when the matter is tried, findings will be made that CSR acted unlawfully to drive Conrock out of business, or did any other unlawful act. The presence of the evidence I have mentioned, however, makes it difficult for Boral and Pioneer to support the suggestion that the application for discovery is of a fishing kind.

4. Prima facie, it appears to me that an order should be made in favour of Conrock, but there are two substantial and related practical difficulties.

5. One is that, although there appears to have been exaggeration in the material filed on behalf of Boral in particular, I must accept that to dig out the documents which Conrock wants would perhaps require a deal of trouble. It is possible that the expense of doing so would be considerable. The other problem is that, as I have mentioned, Conrock is in liquidation and presumably in a poor position to pay the costs or expenses of Boral or Pioneer. Order 15A r.11 gives the Court a discretion as to the costs and expenses of the applicant Conrock and likewise those of Boral and Pioneer. Subject to what counsel may say, I am inclined not to allow Conrock any costs against Boral and Pioneer, although the application has succeeded and although it is, I think, true that much of the difficulty in dealing with this matter has been occasioned by the complete lack of co-operation of Boral and Pioneer. But I see no reason why Boral and Pioneer should perform the work of retrieving the material for nothing. An order made in favour of Boral and Pioneer against Conrock to cover those expenses would probably not achieve much. What I have in mind is to ask Mr R.D. Catelan to undertake to consent to an order, in due course, to pay sums the Court finds to be the reasonable costs and expenses of Boral and Pioneer in retrieving, listing and supplying the documents. If there is a dispute as to the quantum of that, it will be necessary to resolve that dispute by evidence, on the basis of which I will fix the sums to be paid by Mr Catelan.

6. On the basis that such an undertaking - i.e. to consent to an order that he pay such sums as may be fixed by the Court - is given by Mr Catelan, I propose to order that discovery be given. However, because it seems to be a case in which it is particularly undesirable to magnify expense, I will limit the order as follows.
   1. It is ordered that Pioneer Concrete (Qld) Pty Ltd and Boral
   

Resources (Qld) Pty Limited make discovery to the applicant of any documents in its possession in any of the following classes:

(i) Townsville Area Manager's reports to State Office from October 1985 to June 1987;

(ii) Queensland State Manager's reports to Head Office from October 1985 to June 1987;

(iii) Head Office responses to State Manager's reports from October 1985 to June 1987;

(iv) Monthly summaries of sales, by product, in the Townsville region from October 1985 to April 1987 inclusive.

2. Order No. 1 may be complied with by supplying to the applicant's

solicitors, on the 28th day from the making of this order, such of the documents in the four classes as it is practicable to obtain by using reasonable diligence by that date.

3. Such documents as are supplied may, until further

order, be inspected only by the applicant's solicitors and counsel who shall not, until further order, reveal their content to any other person.

4. There will be no order as to the costs of the

application for discovery.

5. The question of provision for the expenses of giving

discovery be reserved.

1. It is desirable to make some explanations. Some emphasis was laid upon the difficulty and expense which is likely to be incurred by deciding which parts of the documents are relevant to Conrock's claim against CSR and sealing up the parts thought to be irrelevant. This order contemplates that no such process will take place at this stage, and that is one of the reasons why an unusually strict confidentiality order is made. I appreciate that Conrock may later apply for partial relief from the requirements of that order.

2. Further, the method of giving what is sometimes called informal discovery has been adopted - simply supplying copies of the documents, again, to minimise expense.

3. The inclusion of the fourth category of documents, in lieu of others desired by Conrock, is based on a suggestion made by counsel.

4. It should be added that the question of the burden of costs was emphasised, quite properly, by counsel during the course of the argument and I have tried to mould the orders to minimize costs. It has seemed to me quite impractical to require such an exhaustive search for documents as promised (or should one say threatened?) in the material filed on behalf of Boral and Pioneer.