Nilsen Industrial Electronics Pty Ltd v National Semiconductor Corporation
[1994] FCA 90
•22 FEBRUARY 1994
NILSEN INDUSTRIAL ELECTRONICS PTY LTD v. NATIONAL SEMICONDUCTOR CORPORATION
and OTHERS
HARDIE TRADING LIMITED and OTHERS (Cross Claimants) v. NATIONAL SEMICONDUCTOR
CORPORATION and OTHERS (Cross Respondents)
No. VG507 of 1992
FED No. 90/94
Number of pages - 10
Practice And Procedure
(1994) 48 FCR 337
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
OLNEY J
CATCHWORDS
Practice And Procedure - discovery of documents - application for discovery of witness statements exchanged and filed in Supreme Court proceedings against a third party - Supreme Court proceedings settled - witness statements not tendered in evidence - claim of legal professional privilege - whether privilege waived by filing and exchange of statements.
Attorney General (NT) v Maurice 161 CLR 475
Fairfield-Mabey Ltd v Shell UK Ltd (1989) 1 All ER 576
Prudential Assurance Co v Fountain Page Ltd (1991) 1 WLR 756
HEARING
MELBOURNE, 9 December 1992
#DATE 22:2:1994
Mr W.J. Martin QC and Ms S. Lindsey (instructed by Best Hooper) appeared for the applicant.
Mr M. Connock (instructed by Baker and McKenzie) appeared for the first respondent.
JUDGE1
OLNEY J By notice of motion dated 19 August 1993 the first respondent (National Semiconductor Corporation) seeks an order pursuant to Order 15 rule 8 of the Federal Court Rules for discovery by the applicant of the documents or classes of documents set out in a schedule to the notice of motion which schedule is quoted in full at the end of these reasons.
Substantial affidavit evidence has been adduced both in support of and in opposition to the motion. The matter was argued by counsel on 9 December 1993 and in the course of argument it became clear that the parties had reached a degree of understanding as to a substantial number of the issues raised but not all. It was agreed that upon my decision on the remaining disputed matters being given the parties would confer to settle the precise terms of the order to be made. The categories of documents in respect of which no agreement has been reached are those numbered 1, 2 and 4 under the heading "A. General Documents" in the schedule.
The pleadings in this action are both extensive and complex. To the extent necessary, the issues relevant to the matters in dispute were canvassed in argument and are recorded in the transcript. I do not propose rehearsing what is thus recorded except to the extent necessary to resolve the remaining items of dispute.
A1 THE SIEMENS DOCUMENTS
4. In 1989 the applicant commenced proceedings in the Commercial List in the Supreme Court of Victoria against Siemens Aktiengesellschaft and Siemens Limited (proceeding CL 645 of 1989) (the Siemens proceedings). The first respondent's solicitors have searched the court file in the Siemens proceedings and have obtained copies, inter alia, of the pleadings, including particulars of defence and particulars of loss and damage, and the applicant's (plaintiff in the Supreme Court) amended list of documents. It is common cause that in the Siemen's proceedings, in accordance with the prevailing practice in the Commercial List, witness statements were exchanged and filed, but the proceedings were settled on the first day of the trial before any evidence was led. The witness statements were not put in evidence. Public access to them is not available.
The first respondent says that it is evident from a perusal of the statements of claim in the Siemens proceedings and in these proceedings that there is a substantial overlap in the allegations made by the applicants in the two proceedings. This assertion is supported by the following passages from the affidavit of Nicholas David Hopkins sworn 19 August 1993 (the Hopkins affidavit) and filed in these proceedings in support of the notice of motion:
The Siemens Proceedings
12. The Applicant alleges that:
(a) The Siemens companies manufactured and supplied to the Applicant electrolytic capacitors.
(b) Some time subsequent to 21 January, 1987 the Applicant incorporated these capacitors into its EMS electricity meters.
(c) The capacitors were defective and, as a result, the Applicant was forced to recall and repair the meters.
(d) As a result of the recall and repair of the meters, the Applicant suffered various types of loss including the cost of recalling and repairing the meters, loss of profit and loss of goodwill.
The Present Proceedings
13. The Applicant alleges that:
(a) NSC designed, manufactured and supplied to the Applicant time clocks (in the form of computer chips).
(b) Some time subsequent to November 19, 1987, the Applicant incorporated these time clocks into its EMS electricity meters.
(c) That, as a result of problems with the time clock the Applicant was forced to recall and repair the meters.
(d) As a result of the recall and repair of the meters the Applicant has suffered various types of loss including the cost of recalling and repairing the meters, loss of profit and loss of goodwill.
14. Whether the Applicant's problems with the EMS meter arose as a result of the alleged incorporation of the time clock is in issue in this proceeding. If the Applicant has issued proceedings against Siemens claiming that the capacitor it supplied in 1987 resulted in the meter being defective, there is reason to believe that the problems the Applicant alleges it encountered with its meters in 1989 arose as a result of the defective capacitor rather than the allegedly defective time clock.
So far as the Court documents in the Siemens proceedings are concerned, it appears that the first respondent already has copies of same and assuming (but without deciding) that they are relevant in these proceedings I decline as a matter of discretion to order the applicant to give discovery of them.
To the extent that any documents discovered in the Siemens proceedings are relevant in these proceedings, they should of course be discovered. Counsel for the applicant says all relevant documents have been discovered.
The first respondent has a list of the documents discovered in the Siemens proceedings but has not identified any document from that list which it says should be, but has not been, discovered in these proceedings. I decline to order that the applicant give discovery of the documents referred to in the applicant's list of documents in the Siemens proceedings.
The applicant says that the witness statements exchanged and filed in the Siemens proceedings attract legal professional privilege.
Counsel for the first respondent relied on the decision in Attorney-General (NT) v Maurice 161 CLR 475 to support his contention that the witness statements are not privileged. With respect, counsel has misconceived what was decided in Maurice. The claim book in Maurice cannot be equated with witness statements exchanged and filed in proceedings in the Commercial List of the Supreme Court. The claim book was in the nature of a statement of claim, as was asserted by counsel for the Central Land Council (at p 478) and supported by Gibbs CJ at p 476:
The claim book not only gives particulars of the claim but may also go into considerable detail (historical, anthropological and ethnological) in support of the claim.
Similarly, in the opening sentence of their reasons Mason and Brennan JJ (at p 484) referred to:
a "claim book" setting out the basis of an Aboriginal land claim,
and at p485, their Honours said:
The practice directions do not make clear what the claim book is to contain or its specific purpose, but the practice that has developed in these land claims seems to be that the claim book sets out the basis of the claim.
At p 492 Deane J said of the claim book:
Notwithstanding the anthropological detail and expertise which it exhibited, its essential function can be equated with that of a detailed pleading which the claimants were required to prepare and make available before their claim was heard.
Perhaps the most comprehensive statement of the nature and function of the claim book is that given by Dawson J at pp 495-6 where His Honour said:
I should say at the outset that I regard it as inappropriate to speak in terms of waiver of privilege in relation to the claim book. Whilst it may be difficult to describe with any precision its true nature, the purpose of the claim book was to give notice of the claim made by the claimants, not only in relation to the area of land over which the claim was made, but also in relation to the basis of the claim, that is to say, the basis upon which it was said that the claimants were the traditional owners of the land. The practice of lodging a claim book had developed previously and its function was recognized in the revised Practice Directions issued by the Commissioner in 1979. The Practice Directions also require those appearing on the hearing of an application, as far as is practicable, to prepare and exchange statements of the intended evidence and any material of a technical nature proposed to be used as evidence and to give a copy of those statements and that material to the Commissioner's Associate before the hearing: see Aboriginal Land Commissioner Report for year ended 30 June 1979 (1980), pp 9-13. The development and the nature of a claim book is described by a former Commissioner, Mr Justice Toohey, in an article entitled "Aboriginal Land", Federal Law Review, vol. 15 (1985), 159, at p 173, as follows:
"Claimants are required to lodge particulars of their claim, the primary purpose of which is to identify the land claimed and those said to be the traditional Aboriginal owners. The practice has developed of lodging a claim book some weeks before the hearing. Usually this book is prepared by one or more of the anthropologists whom the claimants propose to call in support of their claim. The claim book has become a substantial and sophisticated document which not only identifies the land and the traditional owners. It plots sites of significance on a map, formulates the principle of local traditional land holding and, with the use of genealogies, identifies the traditional owners, gives some history of the claim area since white contact, and generally canvasses the advantages to the claimants and the disadvantages to others if the claim is acceded to". No doubt a claim book ordinarily - and certainly in the case of the 1982 Claim Book - goes somewhat further than a statement of claim. But its initial purpose is to make known the case which the claimants seek to put. It may subsequently be accepted as evidence on the basis that the author or authors are available for cross-examination if required: Toohey, loc. cit., p 173. Until it is placed in evidence, which never occurred with the 1982 Claim Book, it remains no more than a statement of the claimants' case for use in the relevant proceedings by all parties. It is a document which is intended to be communicated to the Commissioner and other participants in the hearing. It is not in any sense a confidential communication nor is it intended to be. In those circumstances I am unable to see how it is a document to which legal professional privilege attaches.
Before it emerges in its final form, successive drafts of a claim book may be privileged but this is not because of any privilege attaching to the final product. Draft pleadings in an action may be privileged, but I have never heard it suggested that a statement of claim or a defence or a reply is privileged so that the privilege is waived when it is filed or delivered to the other side. The reason why the draft may be privileged before the document is completed was early explained in Walsham v Stainton (1863) 2 H and M 1 at p 4; 71 ER 357 at p 358) upon the basis that, although after a pleading has been filed it becomes publici juris, the drafts "might disclose the precise character of confidential communications with the solicitor, by showing the alterations made from time to time". In the same way a letter to the other side in litigation which is drafted in a solicitor's office may be privileged before it is sent because it may reveal confidential communications between the solicitor and his client. Once it is sent, however, it ceases to be confidential and there is no privilege in it, not because privilege in the document is waived, but because no privilege attaches to it.
When the claim book in this case reached final form or, at all events, when it was put to the use for which it was intended, it was not a confidential communication and not a privileged document. Legal professional privilege exists to secure confidentiality in communications between a legal adviser and his client but it can have no application in relation to a document the purpose of which is to communicate information to others. Of course, what is contained in such a document may reveal some confidential communication between a legal adviser and his client, but if it does do so and so waives privilege, the waiver is of the privilege in the anterior communication and not in the document itself.
In my opinion there is nothing in the decision in Maurice which supports the first respondent's contention that the witness statements in the Siemens proceedings do not attract legal professional privilege nor that privilege has been waived. The two cases are not analogous.
Indeed, the only authorities of which I am aware, both English, (which were not referred to by the parties in this application) support the view that until the witness statements become part of the evidence in the relevant proceeding they remain privileged. In Fairfield-Mabey Ltd v Shell UK Ltd (1989) 1 All ER 576 Judge Bowsher QC said (at p 577):
During the course of the trial of this action I have been asked to give a ruling as to the manner in which exchanged statements of witnesses of fact may be used during the trial so as to save time without causing any injustice and without breach of any rule of law.
In 1981 official referees began making orders for the cross-service of statements of witnesses of fact in cases where the parties gave their consent (in practice the majority of cases before the official referees). The success of that practice led to its official approval in 1986 by RSC Ord 38, r 2A as regards the official referees and certain other parts of the High Court. The practice has since been further extended. It is common for such statements to be ordered to stand as the evidence-in-chief of the witness and for no oral evidence-in-chief to be given except in relation to new matters which have arisen in the course of the trial. The extent of oral examination-in-chief is a matter to be determined by the trial judge in the circumstances of the particular case. There is however some division of opinion amongst practitioners as to the use which may be made of statements served under this practice in those parts of the trial falling outside evidence-in-chief. Statements which have been so exchanged are clearly not put in evidence by the fact of exchange. I take the view that such statements are served on a confidential basis and that they remain confidential until either the witness makes the statement public by verifying it on oath in the witness box or the party who served the statement waives the privilege. The confidence in the statement is the confidence of the party on whose behalf the statement was taken. This is not to say that there is any property in a witness. It may be that more than one party will take a statement from one particular witness but each statement will be confidential to the party taking it.
It follows that it would be quite wrong for counsel in opening to refer to any witness statement. It would also be wrong to cross-examine a witness called by an opposing party by reference to a statement of another witness who might (or might not) be called in the future by that opposing party or by some other party other than the party on whose behalf the cross-examination is being conducted. For example, counsel for the plaintiff can put to the defendant any evidence which has already been given whether orally or in writing, but it would be wrong to seek to put to the defendant the statement of a proposed witness for the defendant or a third party who had not yet given evidence. The decision might be taken not to call that further witness and meanwhile his evidence remains confidential.
In Prudential Assurance Co v Fountain Page Ltd (1991) 1 WLR 756 Hobhouse J (at p 769) referred to the decision in Fairfield-Mabey Ltd v Shell UK Ltd and applied the principle therein expressed. It seems to me that the case for maintaining the claim to privilege is even stronger in this case in that the party seeking disclosure of the witness statements was not a party to the proceedings in which they were exchanged.
I decline to order that the applicant give discovery of the documents referred to in paragraph A1 of the appendix.
A2 TENDER DOCUMENTS
15. Paragraphs 18 to 24 (inclusive) of the Hopkins affidavit state:
18. In its Particulars of Loss dated March 11, 1993, the Applicant has claimed for loss of anticipated profits as a result of "the problem associated with the 274B clock chip". In paragraph 23 of these Particulars it is alleged that sales of the EMS products "which had been increasing to May 1990, dropped and did not recover to the same level for about 20 months, which is the average tender period for its customers. The Applicant will never be able to recover the sales lost during that 20 month period ...".
19. Despite this specific reference to "the average tender period for its customers" the Applicant has failed to discover any documents which relate to tenders made (whether successful or otherwise) during the 20 month period (or shortly prior to it) in which it alleges it has suffered a loss of sales.
20. The documents now sought in paragraph A2 of Schedule A were requested in the July 5 letter. In the July 19 response, Best Hooper replied by saying:
"These documents are not relevant. The relevant documents are the annual accounts disclosing a fall in revenue and profits. These have been disclosed".
21. I am informed by NSC's accounting expert, Mr Nigel Morrison (of Ernst and Young) and verily believe, that the Applicant has made the following (paraphrased) Australian Stock Exchange Announcements over the past three years:
(a) On September 14, 1990 the Applicant announced that "Demand is increasing for the electronic kilowatt hour meter and results for this financial year (to 30 June 1990) should be significantly better than last year";
(b) On 2 September 1991 in relation to the 30 June 1991 financial year, the Applicant announced that "the electrical products group was materially affected by the low level of activity in the housing and construction industry and by reduced purchases by the various utilities". In addition, the Applicant also announced that it had "made a significant claim against a supplier to the electrical products group, although no allowance for any recovery from it has been included in the accounts".
(c) On 2 September 1992 the Applicant announced that "Sales of electrical products declined in line with the fall in construction activity in Australia".
22. The Applicant's announcements to the Australian Stock Exchange attribute the fall in revenue and profits on the decline in activity in the housing and construction industry.
23. Further, I note that in its July 19 response, Best Hooper stated that:
"(a) Correspondence with customers is stored in a way which would make location of relevant documents of the type you seek very difficult and time consuming;
(b) It is not Nilsen's usual practice to retain documents relating to tenders for which they did not apply, or for which they applied unsuccessfully; and
(c) the customers generally require that details of tenders remain confidential".
24. The above response makes it clear that correspondence of the type sought does exist.
In reply the applicant relies upon the following paragraphs of an affidavit sworn 8 November 1993 by James William Robinson (the Robinson affidavit):
12. The applicant denies that these tender documents are relevant, or that their discovery would be reasonable, in the circumstances. The only relevant documents are financial statements, and sales records. Many of these have been discovered to the respondents already. More have now been located, and copies made available to the first respondent's solicitors. These additional sales records include:-
(a) invoices recording all sales of EMS analysers; and
(b) monthly sales reports on EMS analysers from July 1987 to date.
13. The matters raised by paragraph 21 of Mr Hopkins' affidavit might be points for cross-examination of the applicant's witnesses, but do not make the tender documents relevant. Those who instruct me assume that the paraphrased quotations are intended to be from the applicant's holding company, Oliver J. Nilsen (Australia) Limited.
Counsel for the first respondent addressed brief submissions in support of the claim for disclosure of the documents referred to in item A2 of the schedule. Counsel for the applicant made no submissions other than to rely upon the affidavit material.
I am satisfied that there are documents which answer the description of those referred to in item A2 of the schedule and that they appear to be relevant to an issue raised on the pleadings. No evidence or submission has been put to suggest that it would be either unfair or unreasonable to require discovery of the documents. No claim for privilege has been advanced and no issue as to confidentiality has been raised. In my opinion the documents should be disclosed and I will so order.
A4 SOFTWARE DOCUMENTATION
19. Paragraph 26 of the Hopkins affidavit states:
26. As mentioned in paragraph 14, the cause of the Applicant's problems is in issue. NSC contends that the alleged problem with the meters is related to software in the meters. It has engaged experts to investigate this issue and those experts have advised me, and I verily believe, that the documents requested in paragraph 4 of Schedule A are relevant to this issue.
The applicant's response is set out in paragraph 15 of the Robinson affidavit:
15. The material in paragraph 26-28 of Mr Hopkins' affidavit does not indicate the relevance of the documents sought. The pleadings do not allege that the applicant's problems with its meters are related to software. I am instructed that documents of the description in item A4 in the Schedule to the first respondent's Notice of Motion exist, but that they are not relevant to any matter in issue in this proceeding.
In the course of his submissions counsel for the first respondent said "I have to confess to not fully understanding how Novram in software of these meters works" (T. p 84), however he relied upon the statement in paragraph 26 of the Hopkins affidavit. Further he agreed that the first respondent had not pleaded any particulars raising any issue relating to the software. He then said:
"... we are not in a position to add those particulars until we get the documents and can have our expert state exactly what the position is". (T. p 84)
It seems to me that this is a classic case of fishing. Nothing in the pleadings suggests that the documents sought in item A4 of the schedule are relevant to any issue. The opinion of the first respondent's experts that the documents are relevant carries no more persuasive weight than the applicant's assertion that they are not relevant. Nothing either by way of evidence or submission has been put to me which would suggest that the documents sought may fairly lead to a train of enquiry which might either directly or indirectly enable the first respondent either to advance its own case or damage that of the applicant. Indeed, counsel's frank admission (quoted above) that he did not understand the significance of the documents being sought demonstrates that the first respondent is unable to point to any relevant connection between the proceedings and the documents sought. Clearly, the first respondent's expert advisers have it in mind that the documents might have a bearing on the case but unless and until someone is able to explain to the Court how it is that the disclosure of the documents may fairly lead to a relevant train of enquiry, the request has all the trade marks of a fishing expedition.
I decline to order discovery of the documents referred to in item A4 of the schedule.
SUMMARY
23. An order for further and better discovery will be made on the first respondent's motion. The form of the order will be settled after the parties have conferred following the publication of these reasons. The order will not direct discovery of documents identified in items A1 and A4 of the schedule but will order discovery of those identified in item A2.
The motion will stand adjourned until 4 March 1994 to give the parties an opportunity to confer on the form of the order.
SCHEDULE
A. General Documents
1. (a) Court documents;
(b) the Applicant's discovered documents; and
(c) witness statements prepared on behalf of the Applicant relating to the Applicant's previous proceedings against Siemens Akiengesellschaft and Siemens Limited (Victorian Supreme Court proceeding No CL645 of 1989).
2. (a) Tenders, memorandum and file notes relating to the actual or proposed supply or marketing by the Applicant of electronic electricity metering devices to the SECV from January 1989 onwards;
(b) Tenders, memorandum and file notes relating to the actual or proposed supply or marketing by the Applicant of electronic electricity metering devices to any other utility or entity from January 1989 onwards.
3. Database computer files created by the Applicant which record repair work carried out to date on the allegedly defective EMS meters.
4. Documentation relating to the development and revision of the internal software of the EMS meter, namely:
(a) the documented assembly code; and
(b) code module associated with reading and writing to the Novram.
5. A facsimile from the Electricity Trust of South Australia ("ETSA") to the Applicant dated March 10, 1989, and a facsimile dated January 10, 1991 from the Applicant to the ETSA. B. Financial/Accounting Documents to Support Particulars of Loss
1. (a) Documents which evidence the number of EMS meters repaired during June and July 1990 or verification by affidavit that the documents in Volumes 5 and 6 represent the entirety of documents evidencing units repaired during that period.
(b) Documents which evidence the number of units returned by customers relevant to June and July 1900 or verification by affidavit that the documents contained in Volume 13 represent the entirety of documents evidencing meters returned.
2. Verification by affidavit that no monthly management accounts exist for May, June and July 1990.
3. (a) Repair reports for the period July 1990 to date, or verification by affidavit that the documents in Volumes 5 and 6 of the Applicant's discovered documents represent the entirety of documents evidencing units repaired subsequent to July 1990.
(b) Documents that evidence the number of meters returned or verification by affidavit that the Applicant has no specific documents recording unit returns from November 1987 to date.
4. Documents which evidence the components and the cost of components of the EMS meter yielding a unit cost of $190.36 referred to in the Applicant's Particulars of Loss and Damage.
5. Documents relating to the Applicant's lost finance costs referred to in its Particulars of Loss; including any documents which evidence interest bearing debt and/or interest for the calendar year 1990 (and beyond if relevant).
6. (a) Documents which evidence actual total sales of EMS meters for the years 1987 to date.
(b) Documents which evidence budgeted or forecast sales for EMS meters for the years 1987 to date.
(c) Profit and Loss Account for each month of the 20 month period referrable to the Applicant's claim for alleged loss of unit sales.
7. (a) Budgeted Profit and Loss Account by product type for the years ending 30 June 1990, 1991, 1992, 1993 and 1994.
(b) Budgeted Profit and Loss Account by product type for the years ending 30 June 1993, 1994 and 1995 which represent the most recent estimates.
(c) Copies of any business plans for the years 1988 to date.
8. All invoices subsequent to December 1988, March 1989 and May 1989 relating to purchases of clock chips and ceramic packaging and transport.
9. All invoices subsequent to March 1990 relating to purchase of packaging boxes and foam.
10. Invoices supporting the per unit material costs of property labels, serial number labels and swing tickets for both pre and post-June/July 1990.
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