Davaria Pty Limited v 7-Eleven Stores Pty Ltd (No 3)
[2019] FCA 1304
•19 August 2019
FEDERAL COURT OF AUSTRALIA
Davaria Pty Limited v 7-Eleven Stores Pty Ltd (No 3) [2019] FCA 1304
File numbers: VID 180 of 2018
VID 182 of 2018Judge: MIDDLETON J Date of judgment: 19 August 2019 Catchwords: PRACTICE AND PROCEDURE – representative actions – whether the identity of a witness should be suppressed pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) – evidence to be adduced in interlocutory application concerning integrity of opt-out process – where witness has fear of commercial reprisal if witness’s identity is disclosed to respondents – where ongoing commercial relationship between witness and respondents Legislation: Federal Court of Australia Act 1976 (Cth) ss 37AE, 37AF, 37AG Cases cited: Attorney-General v Butterworth [1963] 1 QB 696
Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 1) [2015] FCA 607; (2015) 331 ALR 68
Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082
Australian Competition and Consumer Commission v Oakmoore Pty Ltd (No 2) [2018] FCA 1170
Betfair Pty Ltd v Racing New South Wales (No 5) [2009] FCA 1011
Hogan v Australian Crime Commission (2010) 240 CLR 651
Motorola Solutions, Inc. v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17
Northern Territory v Griffiths (No 2) [2019] HCA 19; (2019) 368 ALR 77
Steelforce Trading Pty Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science (No 2) [2018] FCAFC 47
Date of hearing: 12 August 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant in VID180/2018 and Applicants in VID182/2018: Dr K Hanscombe QC and Mr G E S Ng Solicitor for the Applicant in VID180/2018 and Applicants in VID182/2018: Levitt Robinson Solicitors Counsel for the First Respondent in VID180/2018 and First Respondent in VID182/2018: Mr R G Craig Solicitor for the First Respondent in VID180/2018 and First Respondent in VID182/2018: Norton Rose Fulbright Counsel for the Third Respondent in VID180/2018 and Second Respondent in VID182/2018: No appearance Solicitor for the Third Respondent in VID180/2018 and Second Respondent in VID182/2018: No appearance ORDERS
VID 180 of 2018 BETWEEN: DAVARIA PTY LIMITED
Applicant
AND: 7-ELEVEN STORES PTY LTD
First Respondent
7-ELEVEN INC (A TEXAS CORPORATION)
Second RespondentANZ BANKING GROUP LIMITED
Third Respondent
JUDGE:
MIDDLETON J
DATE OF ORDER:
19 AUGUST 2019
THE COURT ORDERS THAT:
1.Paragraphs 1.5 to 1.7 of the Amended Interlocutory Application dated 16 July 2019 are dismissed.
2.The costs of and incidental to paragraphs 1.5 to 1.7 of the Amended Interlocutory Application dated 16 July 2019 be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
VID 182 of 2018 BETWEEN: PARESHKUMAR DAVARIA
First Applicant
KHUSHBU DAVARIA
Second Applicant
AND: 7-ELEVEN STORES PTY LIMITED
First Respondent
ANZ BANKING GROUP LIMITED
Second Respondent
JUDGE:
MIDDLETON J
DATE OF ORDER:
19 AUGUST 2019
THE COURT ORDERS THAT:
1.Paragraphs 1.5 to 1.7 of the Amended Interlocutory Application dated 16 July 2019 are dismissed.
2.The costs of and incidental to paragraphs 1.5 to 1.7 of the Amended Interlocutory Application dated 16 July 2019 be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MIDDLETON J:
By paragraphs 1.5 to 1.7 of their respective amended interlocutory applications dated 16 July 2019, the applicants in VID180/2018 and VID182/2018 seek orders pursuant to ss 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) (the ‘FCAA’) restricting disclosure of the evidence and identity of a deponent (the ‘confidential deponent’) to the Court, the applicants and the parties’ solicitors and counsel.
Paragraphs 1.5 to 1.7 are as follows:
1.5. The Applicants have leave to rely upon the affidavit (the Confidential Affidavit) sworn 4 July 2019 referred to in paragraph 4 of the affidavit of Brett Richard Imlay sworn 9 July 2019 [being the applicants’ solicitor], in support of this amended interlocutory application.
1.6. Subject to paragraph 1.7 below, pursuant to s 37AF of the Federal Court Act 1976 (Cth), the publication or disclosure of the Confidential Affidavit, its contents and the identity of the maker of the Affidavit (the Deponent) be prohibited on the ground that it is necessary to prevent prejudice to the proper administration of justice.
1.7.Despite order 1.6 above, the Confidential Affidavit may be made available, or its contents or the identity of the Deponent disclosed, to the 7-Eleven’s external legal representatives, limited to Nigel David Jones, Nicole Tyson and Kerri Lambrianidis of Norton Rose Fulbright and Neil Young QC, Nick Hopkins QC, Robert Craig and Fleur Shand, being Counsel briefed in this proceeding, upon the provision of an undertaking to the Court by each of them, in a form satisfactory to the Applicants, not to disclose to any other person, either directly or indirectly:
(a)any part of the contents of the Confidential Affidavit that might disclose the identity of the Deponent; or
(b)any information that might disclose, or cause any person to conclude, that the Deponent is providing assistance to the Applicants, or otherwise actively participating, in this proceeding.
The applicants submit that ‘the order is necessary to prevent prejudice to the proper administration of justice’ (s 37AG(1)(a) of the FCAA) on the basis that the proposed witness has a genuine and reasonable fear of commercial reprisal if their identity is disclosed to either of the first respondents in the two proceedings.
The confidential deponent is the director of a 7-Eleven franchisee and swore an affidavit on 4 July 2019 regarding the 7-Eleven Wage Repayment Program and the wage claims against the franchisee. The confidential deponent’s evidence is that by a combination of commercial pressure and misleading statements, 7-Eleven attempted to obtain a release of the franchisee's claims in the class action.
On 4 July 2019, as is recorded in the affidavit of the applicants’ solicitor, Brett Richard Imlay, sworn 9 July 2019 (‘Imlay affidavit’) at [5], a conversation took place on 4 July 2019 between Mr Imlay (‘BI’) and the confidential deponent (referred to as the Franchisee) to the following effect:
BI: I understand that you have some concerns about the affidavit you have signed.
Franchisee: Yes. When will 7-Eleven know about this affidavit?
BI: We were hoping to serve it on their solicitors today.
Franchisee: Then they will find out I am in the class action, will they?
BI: You are already in the class action without signing any affidavit, but they will know that you are supporting the class action.
Franchisee: Do you think they will renew my franchise if they see my affidavit.
BI: I can’t really say, but I can give you no guarantee they would. There would have to be a doubt I think.
Franchisee: I am very worried about this. I want to help, but I want to renew my franchise.
In addition, Mr Imlay deposed:
7.I have read the affidavit sworn by the Franchisee.
8.Based on that affidavit I am informed by the Franchisee and verily believe that:
(a)the Franchisee received correspondence from 7-Eleven concerning one or more WCP claims made in respect of the Franchisee;
(b)the Franchisee was contacted by Mark Nance, 7-Eleven's Victorian State Manager and was requested to attend one or more meetings in person at 7-Eleven's office;
(c)at the meeting(s), Mr Nance presented a deed of release to the Franchisee;
(d)the Franchisee was told by Mr Nance that if the Franchisee signed the deed of release, then 7-Eleven would not seek to recover from the Franchisee payments made by 7-Eleven under the WCP and WRP programs;
(e)Mr Nance could not inform the Franchisee what the WRP claims were, because they were confidential, or whether there might be further claims against the Franchisee under the WCP;
(f)notwithstanding, Mr Nance said at the meeting(s) that the Franchisee must make a decision now, or very quickly, to sign the deed of release, because otherwise 7 Eleven would withdraw its offer made in the deed of release;
(g)the Franchisee felt pressured and intimidated at the meeting(s) to sign the deed of release;
(h)the Franchisee also felt frustrated because Mr Nance would not or could not tell the Franchisee what was the amount that 7-Eleven had paid under the WCP and WRP programs, so that the Franchisee could know what sum of money 7-Eleven might pursue from the Franchisee.
9.I am informed by the Franchisee and verily believe that the Franchisee caused a recording of the meeting(s) to be made because the Franchisee found Mr Nance very intimidating and wanted an accurate record of the meeting so that if anyone ever asserted that the Franchisee had said something which they didn't, then the Franchisee wanted to be able to provide proof of what was said.
10.A copy of the recording has been provided to Levitt Robinson. I have listened to the recording and can state that the summary in paragraph 8 above of what was said at the meeting (s) is an accurate summary of the substance of the conversation, although the summary excludes reference to some matters in order to try to preserve the anonymity of the Franchisee.
The confidential deponent later informed Mr Jem Punthakey (who is also part of the applicants’ team of legal representatives) that the confidential deponent did not want the affidavit to be served unless 7-Eleven’s legal representatives agreed not to reveal the confidential deponent’s identity to 7-Eleven.
Exhibited to the affidavit of Mr Punthakey sworn 9 July 2019 is a transcript of an earlier recorded conversation between Mr Kailas Pujar (a 7-Eleven franchisee) and Mr Mark Nance (State Operations Manager (Vic) at 7-Eleven) that is recorded to have taken place on 21 May 2019. In that conversation, Mr Nance is said to have commented ‘if you want a future with 7-Eleven going forward, we want to work with people who are prepared to draw a line in the sand’. Mr Nance then clarified that ‘if we’ve got people in the Class Action that don’t want to work with us, um; that’s fine, but we’ll let them go’.
It was submitted by the applicants that the evidence of this earlier recorded conversation is all the more significant because the confidential deponent had interactions with Mr Nance which left that person feeling pressured and intimidated: see Imlay affidavit at [8]. It was also submitted that given Mr Nance’s position within 7-Eleven and the fact that he has dealt with the confidential deponent, his remarks referred to above cannot simply be dismissed as the excessively belligerent comments of an isolated 7-Eleven employee whose attitudes will have no bearing upon the confidential deponent’s business and livelihood.
Sections 37AE, 37AF and 37AG of the FCAA provide:
37AE Safeguarding public interest in open justice
In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.
37AF Power to make orders
(1)The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:
(a)information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or
(b)information that relates to a proceeding before the Court and is:
(i)information that comprises evidence or information about evidence; or
(ii)information obtained by the process of discovery; or
(iii)information produced under a subpoena; or
(iv)information lodged with or filed in the Court.
(2)The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).
37AG Grounds for making an order
(1)The Court may make a suppression order or non-publication order on one or more of the following grounds:
(a)the order is necessary to prevent prejudice to the proper administration of justice;
(b)the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security;
(c)the order is necessary to protect the safety of any person;
(d)the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in a criminal proceeding involving an offence of a sexual nature (including an act of indecency).
(2)A suppression order or non-publication order must specify the ground or grounds on which the order is made.
In Hogan v Australian Crime Commission (2010) 240 CLR 651 at 664 [30], the High Court said, in respect of the use of the word ‘necessary’ in s 50 of the FCAA, the predecessor to Pt VAA that it is ‘a strong word’. The Court observed that the collocation of necessity to prevent prejudice to the administration of justice and the necessity to prevent prejudice to the security of the Commonwealth suggests that the Parliament is not dealing with trivialities. The Court went on to hold (also at 664 [30]) that:
“the administration of justice” spoken of in s 50 is that involved in the exercise by the Federal Court of the judicial power of the Commonwealth; this is a more specific discipline than broader notions of the public interest.
The Court continued (at 664 [31]-[33]) as follows:
31It is insufficient that the making or continuation of an order under s 50 appears to the Federal Court to be convenient, reasonable or sensible, or to serve some notion of the public interest, still less that, as the result of some “balancing exercise”, the order appears to have one or more of those characteristics (A statement by Fullerton J to like effect, with respect to the powers of the Supreme Court of New South Wales, was approved by Hodgson JA (Hislop and Latham JJ concurring) in Attorney-General (NSW) v Nationwide News Pty Ltd (2007) 73 NSWLR 635 at 641).
32If it appears to the Federal Court, on the one hand, to be necessary to make a particular order forbidding or restricting the publication of particular evidence or the name of a party or witness, in order to prevent either species of prejudice identified in s 50, or, on the other hand, that that necessity no longer supports the continuation of such an order, then the power of the Federal Court under s 50 is enlivened. The appearance of the requisite necessity (or supervening cessation of it) having been demonstrated, the Court is to implement its conclusion by making or vacating the order. The expression in s 50 “may … make such order” is to be understood in this sense.
33It may tend to distract attention from the particular terms of s 50 to describe the Federal Court as embarking upon the exercise of a “discretion” when entertaining an application under s 50 (Dwyer v Calco Timbers Pty Ltd (2008) 234 CLR 124 at 138-139 [40]). Once the Court has reached the requisite stage of satisfaction, it would be a misreading of s 50 to treat it as empowering the Court nevertheless to refuse to make the order, or to leave in operation the now impugned order. It would, for example, be an odd construction of s 50 which supported the refusal of an order under s 50 notwithstanding that it appeared to the Court to be necessary to make an order to prevent prejudice to the security of the Commonwealth.
The threshold which a suppression order applicant must satisfy is high. ‘Mere embarrassment, inconvenience, annoyance or unreasonable or groundless fears will not suffice’: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 1) [2015] FCA 607; (2015) 331 ALR 68 at [30] per Foster J.
There is no doubt that, commercial sensitivity can meet the test of necessity and can be an appropriate basis for making a suppression or non-publication order: see eg Steelforce Trading Pty Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science (No 2) [2018] FCAFC 47 at [4]; Motorola Solutions, Inc. v Hytera Communications Corporation Ltd (No 2) [2018] FCA 17 at [8]-[9]. There must be a real risk of commercial harm flowing from disclosure: Betfair Pty Ltd v Racing New South Wales (No 5) [2009] FCA 1011 (‘Betfair’) at [9]; Australian Competition and Consumer Commission v Oakmoore Pty Ltd (No 2) [2018] FCA 1170 at [23].
The applicants submit that a genuine and reasonable fear of commercial reprisals can ground an application under s 37AG(1)(a) of the FCAA. They say that if it is ‘necessary’ within the meaning of the rule to suppress pricing formulas (see Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 at [18]) or documents relating to commercial decision making and strategies (see eg Betfair), then it is equally necessary in the present proceedings to suppress the identity and evidence of a witness for fear that their franchise agreement will not be renewed if they give evidence.
I accept that a witness should not be subject to reprisal or retribution for giving evidence in curial proceedings. This is reflected in the circumstance that interference with witnesses is an accepted category of criminal contempt. As was remarked by Lord Denning MR in Attorney-General v Butterworth [1963] 1 QB 696 at 719, ‘the victimisation of a witness is a contempt of court, whether done whilst the proceedings are still pending or after they have finished’. In addition, I accept that the Court’s power to make a suppression or non-publication order could be called in aid to address a real risk that such victimisation may occur.
Although the evidence before the Court has not been tested at this stage, the evidence indicates that the confidential deponent fears that his company’s franchise agreement will not be renewed if the confidential deponent gives evidence. The applicants submit that, on the evidence, that fear is reasonable. Mr Nance’s comments, as extracted at [8] above, show that franchisees involved in the class action face a real risk of commercial reprisal in the form of 7-Eleven refusing to renew the franchise agreements of franchisees seen to be supporting the class action. The harm that would flow from the non-renewal of a franchise agreement would likely involve, not merely the loss of a revenue-generating business, but also harm to the confidential deponent’s prospects of avoiding a significant capital loss in their attempts to, for example, sell the franchise business.
The applicants rely on evidence to the effect that 7-Eleven has taken steps to frustrate the attempts by various franchisees to sell their businesses as part of a strategy to procure releases of franchisees’ claims. The conduct in question has included the unexplained rejection of prospective buyers or a refusal to list the businesses at the goodwill prices sought by the outgoing franchisees. As with the above, at the moment this evidence has not been tested.
On the applicants’ submissions, the evidence is to be adduced, not in aid of a final hearing in these proceedings, but instead in support of an interlocutory application brought to protect the integrity of the Court’s opt-out processes (which the Court will hear and determine later). The applicants submit that it is in the interest of the proper administration of justice for the Court to have before it all necessary evidence that may be relevant to such an application, and that without the suppression order sought the confidential deponent will be, in effect, precluded from voluntarily giving evidence.
The applicants further submit that any balancing of interests of the parties is tipped in favour of making the orders sought in light of the facts that:
(1)7-Eleven’s solicitors and counsel can access the information, which reduces any prejudice;
(2)the application is interlocutory and so cross-examination would only be allowed in limited circumstances in any case; and
(3)the application will not affect the substantive rights of 7-Eleven.
I have come to the conclusion that the suppression orders sought should not be made. I have reached this conclusion for the following reasons.
First, there is no doubt that such orders would prejudice 7-Eleven in its ability to test the evidence of the confidential deponent and consider whether an affidavit from Mr Nance is necessary to adduce into evidence. One cannot evaluate, for instance, the context of the conversation without speaking to Mr Nance. I am satisfied that disclosure of the identity of the confidential deponent will be of substantial assistance to 7-Eleven and Mr Nance in answering the allegations made and they are entitled to that opportunity. In fact, whilst a fair trial is not to be equated with a perfect trial, it would be unfair to 7-Eleven and Mr Nance, and would impose unwarranted detriment or disadvantage to them, if the identity of the confidential deponent was not made known to them.
In my view, giving access to the lawyers would not assist because inevitably, one way or another, the legal representatives would either need to expressly disclose to Mr Nance the identity of the confidential deponent, or would need to explain to Mr Nance the circumstances surrounding the relevant conversation, which may lead to Mr Nance recalling the identity of the confidential deponent, thus frustrating the objects of the orders sought. I cannot envisage the lawyers being able to properly obtain instructions without breaching the undertaking sought of them, namely not to disclose directly or indirectly any information that might disclose the identity of the confidential deponent so as to indicate the confidential deponent is assisting the applicants. For instance, just telling Mr Nance the date of the conversation would in all probability lead to him ascertaining the identity of the confidential deponent.
Second, whilst the affidavit of the confidential deponent is going to be used in an interlocutory application, the matters alleged are serious and involve the reputation of Mr Nance. In these circumstances I would likely allow cross-examination of the confidential deponent. This would in part depend on whether Mr Nance himself gave evidence, but 7-Eleven, as I have said, should be given the opportunity to consider this option.
Third, whilst the interlocutory application to be heard later does not affect the substantive rights of 7-Eleven, it does concern the integrity of the opt-out process. This may indicate that the Court should have all the relevant evidence before it (including of the confidential deponent); but it also means the Court should have reliable and tested evidence to properly determine the interlocutory application. If the confidential deponent’s evidence is not made available to 7-Eleven, such testing cannot usefully take place.
Fourthly, there is other evidence that can be relied upon by the applicants, including the Imlay affidavit which summarises the alleged conversation between the confidential deponent and Mr Nance. I appreciate the Imlay affidavit may be argued by 7-Eleven to be of little weight, but it would be admissible. It remains to see what weight should be given to that affidavit, and what evidence Mr Nance himself gives in response to the allegations involving him.
Fifthly, I am not persuaded that with the evidence that is otherwise available to the applicants, they are prevented from pursuing their interlocutory application later. It has not been suggested by the applicants that they will not be able to proceed with their interlocutory application. If the evidence is so important, the confidential deponent could be coerced into giving evidence before the Court by way of subpoena.
Sixthly, this is not a case concerning the physical safety of a potential witness, nor is it suggested that all or a sufficient number of other franchisees are in a similar position to the confidential deponent in seeking to protect their identity. This is not a situation where it is being put that there is the potential to inhibit all or a sufficient number of franchisees in giving evidence at the trial in this proceeding or future proceedings – see eg Northern Territory v Griffiths (No 2) [2019] HCA 19; (2019) 368 ALR 77 at [7] per Nettle J.
Seventhly, the importance of all evidence being made public is always a significant factor.
Eighthly, whilst I accept at this stage the evidence that the confidential deponent has a real concern of reprisal, I am not presently satisfied that it is properly based. In concluding so, I have had the opportunity to consider the affidavits of various deponents referred to by the applicants relating to the unexplained rejection of prospective buyers and refusal to list the businesses at the goodwill prices sought by the outgoing franchisees. In any event, if there is victimisation or interference with the Court process, this can be subject of appropriate sanction.
On the basis of these considerations, I am not satisfied that the orders sought are necessary to prevent prejudice to the proper administration of justice.
I do not propose to deal with the question of costs at this stage, and I will reserve costs for later consideration.
I will order in each proceeding that:
(1)paragraphs 1.5 to 1.7 of the applicant’s amended interlocutory application dated 16 July 2019 are dismissed; and
(2)the costs of and incidental to paragraphs 1.5 to 1.7 of the applicant’s amended interlocutory application dated 16 July 2019 be reserved.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate:
Dated: 19 August 2019
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