PRACTICE & PROCEDURE – discovery of documents – production and inspection – where information contained in documents confidential – where party seeking inspection in trade – whether inspection permitted to consultant upon confidentiality undertaking being given – where consultant not independent expert – where counsel gave court assurance that they would be unable to provide meaningful advice to client unless consultant permitted to inspect confidential material.
MACQUARIE GENERATION v COAL & ALLIED INDUSTRIES LIMITED
NO. N 477 OF 2001
BEAUMONT J 20 SEPTEMBER 2001 SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 477 OF 2001
BETWEEN:
MACQUARIE GENERATION APPLICANT
AND:
COAL & ALLIED INDUSTRIES LIMITED RESPONDENT
JUDGE:
BEAUMONT J
DATE OF ORDER:
20 SEPTEMBER 2001
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1. Motion stood over generally, with liberty to restore.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 477 OF 2001
BETWEEN:
MACQUARIE GENERATION APPLICANT
AND:
COAL & ALLIED INDUSTRIES LIMITED RESPONDENT
JUDGE:
BEAUMONT J
DATE:
20 SEPTEMBER 2001
PLACE:
SYDNEY
REASONS FOR JUDGMENT (ON APPLICATION FOR PERMISSION TO INSPECT CONFIDENTIAL DOCUMENTS ON DISCOVERY)
BEAUMONT J:
INTRODUCTION
This interlocutory application by the respondent for permission to inspect confidential documents to be discovered by the applicant is made in the following context.
By its application filed in the principal proceedings, the applicant, which owns coal-fired power stations in the Hunter Valley, claims a declaration that by reason of the Acquisition specified in its Statement of Claim, the respondent has contravened s 50 of the Trade Practices Act 1974 (Cth), and consequential relief.
The Acquisition specified in the Statement of Claim is an agreement, completed on or about 29 January 2001, whereby the respondent agreed to purchase all the shares in the capital of each of Peabody Australia Limited and Darex Capital Inc.
The applicant claims, inter alia, in its Statement of Claim that by reason of the Acquisition –
·The respondent acquired, indirectly, shares in the capital of several bodies corporate, and the assets owned by them including rights in relation to the operation…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Macquarie Generation and Coal & Allied Industries Ltd were involved in a legal dispute which was before the court. Macquarie Generation, the applicant, claimed that certain pricing information documented in its Statement of Claim was confidential. Coal & Allied Industries Ltd, the respondent, accepted the confidentiality of this information but sought a direction to allow a nominated person, Phillip John Ward, to inspect the confidential documents, subject to certain conditions. The hearing of the principal proceedings was scheduled for February 2002. The court needed to decide whether Phillip John Ward should be permitted to inspect the confidential documents, and if so, under what conditions. The respondent argued that Ward, a consultant to the Rio Tinto Group, needed access to the confidential documents to manage the litigation effectively, given his expertise and knowledge of the coal industry. The applicant, however, contested the necessity of Ward's access, questioning his current role and the potential for prejudice if the confidential information was disclosed. The court examined the necessity of Ward's access to the confidential documents, considering the balance between the respondent's need for effective litigation management and the applicant's right to protect confidential information. The court also considered the precedent set in Warner-Lambert Co v Glaxo Laboratories Limited, which emphasised the importance of protecting trade secrets while allowing necessary disclosure to manage litigation effectively. The court determined that the motion should be stood over generally with liberty to restore, indicating a potential reconsideration of the matter under different circumstances or with additional evidence.
Orders
Orders of the court
1. Motion stood over generally, with liberty to restore.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
The particulars provided by the applicant with its Statement of Claim included certain documented pricing information which, the applicant claims, is confidential. The respondent accepts that the information is confidential, but now seeks a direction permitting a nominated person, on terms, to inspect this, and other, confidential material to be discovered by the applicant (“the confidential documents’). The hearing of the principal proceedings is fixed to commence in February 2002.THE RESPONDENT’S MOTION AND SUPPORTING EVIDENCE By its notice of motion, the respondent seeks an order that Phillip John Ward be permitted to inspect the confidential documents upon a “confidentiality undertaking” being given. (By that instrument, an undertaking is given that, without the applicant’s consent or the Court’s leave, the contents of the confidential documents will not be disclosed, except to a Judge of the Court, counsel and solicitors, and any independent expert retained by the respondent who has given a similar undertaking. The respondent accepts that Mr Ward is not an “independent expert”, and that for this purpose the respondent has retained Dr Jonker, whom the applicant accepts is an independent expert.) In support of the motion, the respondent relies, inter alia, upon the evidence given by Mr Ward in his affidavit, sworn 29 August 2001, relevantly as follows:·Mr Ward is a consultant to the Rio Tinto Group of companies (“the Group”). The respondent is a member of the Group.·He practised as a solicitor in a private practice in Sydney between 1973 and 1975, when he began employment with Rio Tinto Limited as a legal officer (Corporate Counsel). From 1983 until 1989, Mr Ward held several executive offices in the Group. In 1989, Mr Ward left the Group.·Since 1990, the Group has retained Mr Ward as a consultant to manage a number of cases of complex commercial litigation, but he has not occupied any management role in the Group since 1989. However, in cross-examination, Mr Ward agreed that he is a director of Rio Tinto Collieries Pty Ltd, which is another member of the Group. The cross-examination proceeded as follows:“Do you recall a company known as Rio Tinto Collieries Pty Ltd?---Yes.That is a company wholly owned by Rio Tinto Limited, isn’t it?---Yes.It is a financial corporation which ordinarily the Financial Corporations Act 1974 would have applied but it has been exempted from compliance with that Act, is that right?---I don’t know, Mr Jackman.Do you have any knowledge of the activities of Rio Tinto Collieries Pty Ltd?---I am aware that I am a director of it but my understanding is that it’s a dormant company … which doesn’t carry on any activities within the Rio Tinto Group.What is the basis of that understanding, Mr Ward?---Information that has been conveyed to me by Rio Tinto and I have signed a statutory document but it’s not an active company and I am assured of such.It has got issued capital of 3 million dollars, do you recall that?---I don’t recall it, Mr Jackman but it may well do. It could well have had past activities, it is not an active company in recent times when I have been a director.Well, when do you say it last had business activities, Mr Ward?---I don’t know, Mr Jackman. I have been a director for about – since about 1998 I suspect.In what circumstances did you become a director of Rio Tinto Collieries Pty Ltd?---I became a director in the course of some litigation that I was involved in and advice that I was involved in in relation to Arco and the issue became whether or not I could participate in seeing information relating to the Blair Athol Joint Venture and so, I was made a director of the company so that I could see such information and therefore, have the obligations as a director of [a] related corporation to view the information.Can I stress to you, Mr Ward, that you are one of three current directors, the others being Mr Cusach and Mr Falconer. Are you aware of that?---Yes.Mr Barry Cusach is the managing director of Rio Tinto Australia, is he not?---Yes, he is, Mr Jackman.Mr Ian Falconer is the company secretary of Rio Tinto Ltd, is he not?---Yes, he is, Mr Jackman.They are both in senior management of Rio Tinto Ltd aren’t they?---They both hold those positions and therefore, are in management of Rio Tinto Ltd, yes.Now, have you got your affidavit in front of you?---Yes.Will you turn to paragraph 16?---Yes.Is the last sentence of paragraph 16 true?---Yes, Mr Jackman.Don’t you recognise Mr Ward that you need to qualify the last sentence of paragraph 16 at least to recognise that you are a director of Rio Tinto Collieries Pty Ltd?---Mr Jackman, I just said that the Rio Tinto Collieries to the best of my knowledge has no active function it is certainly not a business unit of the group. A business unit of the group is a unit such as Rio Tinto’s coal division, Rio Tinto’s iron ore division, Rio Tinto’s aluminium division or whatever. Rio Tinto’s Collieries as far as I am aware, and I am given every assurance to this effect, is a dormant company sitting along side a number of dormant companies that may or may not have had a role in the past but has no[ ] role at the present and Mr Cusach, Mr Falconer, myself or other people in the Group may well be filling the position of its directors but there is no active business to be managing and no decisions to be made of a business nature.You don’t know as you have said in your evidence a few minutes ago when that company ceased having any operative business activity, is that so?---I know from when I joined that it didn’t have any such activity so from the time I’ve been a director I know that it hasn’t had any business activity.You don’t know what business activity it may have in the future, do you?---If it does in the future I will obviously, be called upon as a director to become part of it and I would then resign as a director because the intention was that I’d be a director of this dormant company and so I wouldn’t be remaining a director if it became in any way active.Can you do me the courtesy of answering my question. You don’t know what business activity it will have in the future?---I don’t Mr Jackman.”
Decision
Reasons for decision
BEAUMONT J
The respondent also relies upon the affidavit evidence of Stephen Ernest Nigel Cleese, sworn 29 August 2001, relevantly as follows:·Mr Cleese, a solicitor, is Rio Tinto Limited’s Vice-President – General Counsel.·The Group has been involved, from time to time, in significant commercial litigation. In such cases, it is necessary to assign a dedicated person to manage the litigation and provide the Group’s external legal advisers with information and instructions. This requires a knowledge of the Group’s corporate structure, an ability to micromanage the litigation so as to reduce the need for the involvement of senior executives, unless required for decisions, and a knowledge of the technical issues.·Mr Ward is able to provide these services, and the Group would be substantially prejudiced in the conduct of this litigation if Mr Ward were not to have access to the confidential documents, as it would be deprived of his litigation management capabilities, including his considerable knowledge of the coal industry.·Mr Ward is in a very different position from any of the Group’s executives, who have line responsibility for a business unit such as the coal business. Mr Ward is a consultant retained by the Group and he receives instructions on specific projects from time to time. He does not have the Group’s authority to make business decisions for it.CONCLUSIONS ON THE RESPONDENT’S MOTION Reference should be made to the authorities in this area, to which attention was drawn in argument. In Warner-Lambert Co v Glaxo Laboratories Limited (1975) RPC 354, the English Court of Appeal considered the extent and conditions of discovery relating to confidential information in patent proceedings. The defendants had given discovery of their process of manufacture to the plaintiffs’ counsel, solicitor, patent agent and an expert, on their undertaking not to divulge this information to any others (including the plaintiffs themselves) and further not to use such information except for the purposes of the action. The defendants were further willing to include, among those persons, another expert appointed by the plaintiffs in the U.K. However, the plaintiffs required disclosure to be given, in addition, to (1) their chief executive (2) their general counsel in the U.S.A., (3) their patent counsel in the U.S.A. and (4) an Italian scientist resident and employed by them in Italy. It was held (as the headnote indicates) – (1) the governing principle was that the court should resolve the conflict of interests of the parties by ordering a controlled measure of discovery to selected individuals upon terms ensuring that there should neither be use nor further disclosure of the confidential information to the prejudice of the defendants, and yet so that the plaintiffs would have a free full degree of disclosure as would be consistent with adequate protection of any trade secret of the alleged infringer; the authorities did not purport to lay down a form of universal order in such circumstances, nor did they indicate that the court might not in appropriate circumstances at a later stage in the action, direct disclosure to a wider class of persons or on a different basis; and that the court must in each case decide what measure of disclosure was appropriate, to whom it should be made and on what terms that disclosure should be given; (2) although parties to litigation were generally entitled fully to know what had been disclosed to their legal and technical advisers, so as to be able to make judgments of their own, this principle must be subject to modification if trade secrets are to be protected, and in appropriate circumstances the court may even be justified in wholly excluding disclosure of secret material from a particular party; (3) as the defendants’ process was such that it was impossible to ascertain from the end-product itself which of a number of possible chemical processes had been used in its manufacture, and having regard also to the fact that it was virtually impossible to police any terms imposed upon the disclosure asked for by the plaintiffs, further conditional disclosure should only be given to the plaintiffs’ chief executive.
