Drivetime Radio Australia Pty Ltd v Pivotal Creative Solutions Pty Ltd

[2010] NSWSC 1103

CITATION:	Drivetime Radio Australia Pty Ltd v Pivotal Creative Solutions Pty Ltd & Anor [2010] NSWSC 1103 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	12 & 18 August 2010
JUDGMENT DATE :	24 September 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Contemnor’s solicitor personally ordered to pay indemnity costs.
CATCHWORDS:	CONTEMPT OF COURT – use of document produced on discovery and on subpoena for purpose unconnected with proceedings, without leave of Court – document used in attempt to gain commercial advantage – contempt found – apologies accepted.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) – s 52, s 75B Uniform Civil Procedure Rules 2005 (NSW) – 15.10(2), 21.7
CATEGORY:	Separate question
CASES CITED:	- Harman v Secretary of State for the Home Department [1983] 1 AC 280 ([1982] 1 All ER 532) - Hearne v Street (2008) 235 CLR 125
PARTIES:	Drivetime Radio Australia Pty Ltd (Plaintiff) Pivotal Creative Solutions Pty Ltd t/as Broadcast GP (First Defendant/1st Applicant) Helen Ann Whelan (Second Defendant/2nd Applicant) Somerville & Co (1st Respondent) Benjamin Hemsworth (2nd Respondent)
FILE NUMBER(S):	SC 2009/290257
COUNSEL:	M. Sneddon, C.E. Alexander (Plaintiff) R.J. Webb SC, M.R. Hall (Defendants/Applicants) G.A. Sirtes SC (Respondents)
SOLICITORS:	Somerville & Co (Plaintiff) Kenny & Co (Defendants/Applicants)

2009/290257 Drivetime Radio Australia Pty Ltd v
Pivotal Creative Solutions Pty Ltd

t/as Broadcast GP & Anor

JUDGMENT

Introduction

1 On 12 August 2010 I heard an application by the Defendant, Pivotal, that the Plaintiff, Drivetime, and its solicitor, Mr Hemsworth, be held in contempt of Court. Pivotal alleged that Drivetime and Mr Hemsworth had, without the Court’s leave, used a document produced in these proceedings by Pivotal on discovery and by a third party on subpoena for a purpose unconnected with the proper conduct of the proceedings.

2 At the conclusion of evidence and submissions, I was satisfied beyond reasonable doubt that the charge of contempt had been proved. I announced my decision with very brief reasons and said that I would give fuller reasons later. These are those reasons.

The facts

3 Drivetime sues Pivotal and its director, Ms Whelan, for damages for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth).

4 In interlocutory proceedings concerning subpoenas and orders, Brereton J succinctly summarised Drivetime’s case as follows:

“[Drivetime]’s case as articulated in its amended statement of claim, can be summarised for present purposes as:

(1) both [Drivetime] and [Pivotal] are engaged in the business of distributing material recorded on compact discs to members of the health profession – in particular, general practitioners and pharma-cists;

(2) the distribution of that material is funded by sponsorships, particularly from pharmaceutical companies;

(3) [Pivotal] has published various reports to sponsors and prospective sponsors which are said to be misleading and deceptive, essentially in describing the extent of market penetration and scale of distribution and reception of the second defendant’s products;

(4) as a result, [Pivotal] is attracting or may attract business which would otherwise come [Drivetime]’s way, and thus [Drivetime] has suffered and is suffering loss and damage.”

5 Drivetime issued a subpoena to Footprints Market Research Pty Ltd to produce documents evidencing market research or surveys carried out by Footprints for Pivotal. In answer to the subpoena, Footprints produced a document dated 15 September 2009 entitled “Usage of Broadcast GP Market Research Findings – prepared for Dr Michael Whelan, Broadcast Health” (the September Report). “Broadcast Health” and “Broadcast GP” are names used by Pivotal in carrying out its business.

6 The September Report was also produced by Pivotal to Drivetime in the course of discovery in January 2010.

7 There was no evidence that Footprints had provided a copy of the September Report to anyone except Pivotal, which had commissioned it. On the contrary, a director of Footprints, Ms McLaren, said on affidavit that, in accordance with Footprints’ privacy policy, Footprints had not provided a copy of the September Report to anyone except Pivotal. Ms McLaren was not required for cross examination.

8 On 26 May 2010, Drivetime’s solicitor, Mr Hemsworth, wrote to Ms McLaren as follows:

“We refer to a document Footprints Market Research Pty Limited (‘Footprints’) prepared for Dr Michael Whelan and Broadcast Health dated 15 September 2009 entitled ‘Usage of Broadcast GP Market Research Findings’ (‘Research Report’). Within the said document we note the following claims:


1. ‘Footprints market research was commissioned to conduct a research study to determine usage of the broadcast GP program amongst subscribers over time. This document details finds from the research.’

2. ‘The nature of the research objectives call for a quantitative approach. A self completion survey card was distributed to a sample of 3001 Broadcast GP subscribers.’


We refer you to the Subpoena to Produce served on Footprints on 11 March 2010. From the documents provided by Footprints it is apparent that all aspects of the market research you refer to in your Research Report was carried out by Pivotal and not Footprints. Footprints merely collated the data that was supplied to it by Pivotal.

…

Accordingly, our client is entitled to take proceedings against Footprints to recover the loss it has been and is suffering as a result of the deceptive conduct referred to above. It is also entitled to take proceedings against you for aiding and abetting Footprints’ deceptive conduct.

Our client already has proceedings on foot against Pivotal and we have instructions to join Footprints and you as defendants.

In the circumstances, we are instructed to demand that you provide us with a signed copy of the attached letter on Footprints letterhead within seven (7) days from the date of this letter.

If we do not receive such letter within the said period then our client will join you to the proceedings already on foot in the NSW Supreme Court without further notice to you.”

The attached letter stated:

“To whom it may concern,

Re: Usage of Broadcast GP Market Research Findings dated 15 September 2009 (Research Survey)

I am the Director of Footprints Market Research Pty Ltd (‘Footprints’).

On or about August 2009 Footprints was engaged by Pivotal Creative Solutions Pty Ltd to prepare a report entitled ‘Usage of Broadcast GP Market Research Findings – 15 September 2009’. I wish to clarify that Footprints was not involved in any aspect of the market research. All aspects of the market research were carried out by Pivotal Creative Solutions Pty Ltd. This included:

1. Design of the survey forms;
2. Printing of the survey forms;
3. Formulation of the 2 questions asked on the survey forms;
4. Selection of who the survey forms were mailed to;
5. The physical mailing of the survey forms;
6. The receipt of the survey forms;

Footprints had no involvement in any of these tasks.

Footprints received completed survey forms from Pivotal Creative Solutions Pty Ltd. Each of the survey forms contained two questions only:
1. One question on 2008 usage; and
2. One question on 2009 usage.

Footprints then performed the following functions:
3. Data entry of all completed survey responses;
4. Analysis and reporting of completed survey responses;
5. Cross analysis to compare findings by state.

I acknowledge that the research document could give the impression that Footprints carried out market research however this was not intended nor was it the case.

………………
Rhonda McLaren
(Director)”

I will refer to this document as “the Acknowledgement”.

9 On 1 June 2010, Pivotal’s solicitors wrote to Mr Hemsworth as follows:

“We have been provided with a copy of your letter dated 26 May 2010 addressed to Ms Rhonda McLaren of Footprints Market Research Pty Ltd (‘Footprints’). For the avoidance of doubt, this letter is written in our capacity as solicitors for Pivotal Creative Solutions Pty Ltd and Ms Helen Whelan, the defendants in these proceedings.

Your office is well aware that Footprints and/or Ms McLaren are potential witnesses in the proceedings, having:-

been the addressee of a subpoena issued by your client; and

conducted research and prepared material for our clients, copies of which documents were discovered by the defendants pursuant to the discovery process.

Accordingly, in our view it is inappropriate for your office or your client to make direct threats of litigation to Ms McLaren and Footprints regarding documents which are potential evidence in the proceedings or to demand that Footprints provide an open letter containing assertions of fact in a form dictated by your office under such threats. We can only presume that the intent of your letter is to somehow intimidate Footprints and/or Ms McLaren into compromis-ing or altering their evidence in the proceedings.

We also note UCPR Rule 21.7 which prohibits the use of documents obtained by way of discovery for purposes other than the conduct of the proceedings.

In any event, our clients deny the assertions of fact outlined in the open letter.

In the circumstances, we are instructed to require that you withdraw your letter and demand by not later than 4:00pm on Thursday 3 June 2010 . In the event that you fail to do so, we are instructed to bring your letter to the attention of the Court and seek interlocutory orders restraining your office an your client from continuing to make such threats.”

10 Neither Drivetime nor Mr Hemsworth agreed to withdraw the demand to Footprints and Ms McLaren. On the contrary, on 4 June 2010, Mr Hemsworth wrote to Ms McLaren:

“We refer to our letter dated 24 May 2010 [sic].

We note that you have forwarded a copy of our letter to the solicitors of Pivotal and we now enclose their response.

We advise that Pivotal’s solicitors’ advice is misguided. Witnesses are not owned by litigants and there is no legal basis preventing us from joining you and Footprints as defendants. The purpose of our letter is not to intimidate you but rather to protect our client from losing market share due to misleading and deceptive conduct.

For this reason, we urge you to obtain urgent independent legal advice. To allow you time to obtain this advice we agree to extend the time within which we require you to sign the letter which clarifies your involvement in the market research process to 12 June 2010.”

11 On 11 June 2010, Pivotal filed a Notice of Motion seeking orders that the Court hold Drivetime and Mr Hemsworth in contempt of Court. The contempt alleged in the Statement of Charge is as follows:

“When it or he wrote the letter of 26 May 2010 each of the Plaintiff and Benjamin Hemsworth was aware that:-

(a) Ms McLaren was likely to be called as a witness for the Defendants in these proceedings;

(b) Footprints Market Research Pty Ltd had produced documents, including the 15 September Report, in answer to a subpoena issued by the Plaintiff in these proceedings; and

(c) the Defendants had given discovery of the 15 September Report in these proceedings.

The Plaintiff and Benjamin Hemsworth wrote the 26 May letter intending that it would intimidate, or with reckless indifference to the likelihood that it would intimidate, Rhonda McLaren into refusing to give evidence in these proceedings, or alternatively into limiting or altering the evidence she would give.

In writing the 26 May letter the plaintiff and Benjamin Hemsworth each breached its or his undertaking given to this court that it would use documents produced by Footprints Market Research Pty Ltd in answer to subpoena and documents produced by the Defendants on discovery for the purposes of this proceeding only.

In writing and sending the 26 May letter each of the Plaintiff and Benjamin Hemsworth is guilty of contempt.”

12 There is no dispute as to the law. It is enunciated in Harman v Secretary of State for the Home Department [1983] 1 AC 280 ([1982] 1 All ER 532), and in later cases which elaborate on the principle. The principle is also embodied in UCPR 21.7(1). It applies alike to documents produced by one party in proceedings to another party in the course of discovery, and to documents produced to a party in proceedings upon subpoena issued to a non-party: see e.g. Hearne v Street (2008) 235 CLR 125 at [96].

13 The principle is that a party to proceedings obtains documents upon discovery or by subpoena upon the basis of what was conventionally called an implied undertaking to the Court, given both by the party and its solicitors, that the documents will not, without the leave of the Court, be either disclosed to a third party or used for a collateral or ulterior purpose, i.e. a purpose unconnected with the proper conduct of the proceedings. What was once regarded as an implied undertaking to the Court is now recognised as a substantive legal principle.

14 UCPR 21.7(1) provides:

“No copy of a document, or information from a document, obtained by party A as a result of discovery by party B is to be disclosed or used otherwise than for the purposes of the conduct of the proceedings, except by leave of the court, unless the document has been received into evidence in open court.”

15 While that Rule embodies the principle in relation to discovered documents, the common law principle, which is to the same effect, applies to subpoenaed documents as well.

The parties’ submissions

16 Neither Drivetime nor Mr Hemsworth gave evidence directed to the purpose for which the September Report had been used in their communications with Footprints. Neither sought to explain the reason that Drivetime sought the Acknowledgement from Footprints or what Drivetime had intended to do with the Acknowledgement if it had been signed and returned by Footprints.

17 Mr Webb SC, who appeared with Mr M.R. Hall of Counsel for Pivotal, submitted that:

– there was no arguable cause of action against Footprints and Ms McLaren which would justify them being joined as defendants;

– even if there was a properly arguable cause of action against Footprints and Ms McLaren, the September Report was nevertheless used for a collateral purpose, namely, in an attempt to extract from Footprints the Acknowledgement which Drivetime would then “deploy in the marketplace” , i.e. use to its commercial advantage by discrediting Pivotal as a competitor of Drivetime.

The first submission was not independent of, but was in support of, the second submission.

18 The Statement of Charge had alleged that Drivetime had improperly used the September Report to intimidate Ms McLaren as a witness. That charge was abandoned at the hearing. The improper use alleged by Mr Webb in the course of opening his case and amplified by him later in his submissions did not form part of the Statement of Charges. However, neither Mr Sneddon of Counsel, who appeared with Mr C. Alexander for Drivetime, nor Mr Sirtes SC, who appeared for Mr Hemsworth, took objection and I proceeded on the basis that they, as very able and experienced Counsel, were prepared to meet the Charge on this new ground.

19 Mr Sneddon’s first submission was that Drivetime, in fact, had an arguable cause of action against Footprints under s 52 Trade Practices Act and against Ms McLaren under s 75B Trade Practices Act so that the letter of 26 May 2010 was to be seen as in aid of prosecuting or compromising a claim against Footprints and Ms McLaren which Drivetime could have incorporated in these proceedings by joining them as Defendants.

20 I asked Mr Sneddon whether an Amended Statement of Claim pleading causes of action against Footprints and Ms McLaren had yet been drafted. He said no. I allowed him an adjournment until he could produce a draft so that I could see how the claims were formulated.

21 Mr Sneddon returned to Court with a draft Further Amended Statement of Claim joining Footprints and Ms McLaren. The essential allegations against Footprints were:

– Pivotal engaged Footprints to prepare the September Report;

– the September Report contained four representations which were misleading and deceptive, namely:

Footprints was commissioned to conduct a research study and the Report detailed findings from that research;

the nature of the research objectives called for a quantitative approach;

“the Report represented that it was independent and that the information contained therein was accurate and compiled by Footprints” ;

Pivotal currently had a subscriber base of a certain approximate number;
(“the Misrepresentations”)

– Footprints “knew or ought to have known that Pivotal would or may provide the Report (or information contained in the Report)” to Drivetime’s customers

– Pivotal “in fact has provided information contained in the Report to” third parties;

– Drivetime has thereby suffered loss and damage.

22 The pleading against Ms McLaren repeated the facts alleged against Footprints and asserted accessory liability under s 75B Trade Practices Act.

23 It will be noted that:

– the Further Amended Statement of Claim does not allege that Footprints or Ms McLaren communicated any of the Misrepresentations to anyone other than Pivotal itself;

– the September Report, in fact, does not contain a statement that it was independent and contained information that was accurate and compiled by Footprints, so that the third alleged Misrepresentation was never made;

– the Further Amended Statement of Claim does not allege that Footprints knew or ought to have known that the Misrepresentations – as distinct from unspecified “information” contained in the Report – would be provided to third parties;

– the Further Amended Statement of Claim does not particularise facts upon the basis of which Footprints knew or ought to have known about dissemination of the Report: I would have expected such particulars, if known, to have been given at this stage of the proceedings in the Further Amended Statement of Claim – such particulars would certainly have been ordered under UCPR 15.10(2)(a) as a condition of allowing the Further Amended Statement of Claim to be filed;

– the Further Amended Statement of Claim alleges that Pivotal provided “information contained in the Report” to third parties but it does not allege that that “information” contained any of the Misrepresentations.

24 Mr Sneddon relied on the evidence of Mr Lappan, a director of Drivetime, as to what he had been told about the contents of the September Report being disseminated to customers. The gist of the evidence was that some customers had been told or led to believe that the Report was “independent”. If such a statement had in fact been made to the customers, then it appears to be Pivotal’s own oral representation about the character of the Report rather than a repetition by Pivotal of a statement about the Report made by Footprints in the Report itself.

25 When I pointed out these deficiencies to Mr Sneddon, he frankly and fairly conceded that the draft Further Amended Statement of Claim was the best that he could do on his instructions – that is, that he had no instructions which could justify him in pleading facts to fill the holes in the causes of action against Footprints and Ms McLaren.

26 In those circumstances, I declined to grant leave to file the Further Amended Statement of Claim.

Consideration

27 In determining the primary question – i.e. was Drivetime’s use of the September Report unconnected to the proper conduct of these proceedings – I regarded as significant, although ancillary, that almost three months after the 26 May letter was sent threatening Footprints and Ms McLaren with joinder in the proceedings and two months after the Notice of Motion for contempt was filed, Drivetime and Mr Hemsworth could not formulate a cause of action against Footprints and Ms McLaren which could withstand even cursory scrutiny. If Drivetime and Mr Hemsworth, faced with a Motion for contempt, could not formulate a proper cause of action when they must have appreciated that they would now be challenged to do so, how much thought could they have given to such a cause of action when the letters of 26 May and 4 June were sent?

28 Whether Drivetime and Mr Hemsworth could now formulate a proper cause of action against Footprints and Ms McLaren was not, in itself, determinative of the ultimate question. The use of the Report was primarily to be gathered from the terms of the 26 May letter and the Acknowledgement, as both Mr Sneddon and Mr Sirtes submitted. They said that the terms of those documents did not permit the Court to be satisfied beyond reasonable doubt that a contempt had been committed.

29 I was unable to accept that submission, for the following reasons.

30 First, the 26 May letter does not even attempt to set out the elements of a cause of action against Footprints and Ms McLaren under s 52 and s 75B Trade Practices Act. It quotes two paragraphs of the report and says that they give a certain “impression”. It is not even said that that “impression” is inaccurate.

31 After setting out s 52 and s 75B Trade Practices Act, the letter simply says “accordingly, our client is entitled to take proceedings against Footprints to recover the loss suffered” as a result of the “deceptive conduct referred to above”. No “deceptive conduct” by Footprints had been referred to at all.

32 The letter then demanded signature and return of the Acknowledgement as the price of Drivetime forbearing to sue. The letter does not seek, by way of compromise of claims against Footprints and Ms McLaren, a remedy it could have obtained against them in the proceedings, such as an undertaking not to repeat the deceptive conduct (whatever it was supposed to be) or to pay a sum of money to compensate the loss allegedly suffered by Drivetime as a result of the deceptive conduct.

33 The Acknowledgement is obviously intended for an audience wider than Drivetime itself or its solicitors or even the Court, in the form of evidence in these proceedings. “To whom it may concern” signifies that the document addresses the world at large. Unmistakeably the Acknowledgement is framed thus so that it cannot later be said by Pivotal that Drivetime had taken a private letter or document out of context and published it to an audience for which it was not intended.

34 Drivetime’s intention to use the Acknowledgement in the marketplace is, I think, indicated by the statement in Mr Hemsworth’s letter of 4 June: “the purpose of our letter is … to protect our client from losing market share due to misleading and deceptive conduct”.

Conclusion

35 In the absence of any evidence as to purpose given by Drivetime and Mr Hemsworth, I inferred from the term of the letter of 26 May 2010, the Acknowledgement, the letter of 4 June 2010 and, to a lesser extent, from the present inability of Drivetime to formulate a sustainable cause of action against Footprints and Ms McLaren, that the September Report was used by Drivetime and Mr Hemsworth in an endeavour to procure a written retraction of the Report from Footprints, in a document which Drivetime could, and would, then publish to its customers and others within the market in order to discredit Pivotal as a competitor, to cast doubt on the information which Pivotal had supplied to its customers, and to enhance the commercial prospects of Drivetime in gaining new custom or regaining custom lost to Pivotal. Those purposes were not connected to the proper conduct of these proceeding; they were collateral purposes, directed to gaining a commercial advantage in the market place.

36 I therefore found the contempt alleged against Drivetime and Mr Hemsworth to be proved. In making that finding, I had regard to the criminal nature of a charge of contempt of Court and to the criminal standard of proof.

Orders

37 On 18 August 2010, having heard both Mr Lappan and Mr Hemsworth in the witness box, I accepted as genuine the apologies which they offered to the Court. I accepted that the 26 May letter was sent without proper reflection by Mr Hemsworth as to its consequences and that Mr Lappan had relied upon Mr Hemsworth as his solicitor for legal advice and did not think that there was anything wrong in sending the letter.

38 In those circumstances, the only order which I made was:

“Order that Benjamin Hemsworth pay the Defendants’ costs of and incidental to the Notice of Motion filed on 11.06.10, such costs to be paid forthwith and to be taxed, if not agreed, on the indemnity basis, and that such costs not be recoverable as solicitor/client costs by Mr Hemsworth from the Plaintiff.”

– oOo –

28/09/2010 - "Pivotal's" substituted for "Drivetime's". - Paragraph(s) 9