Siemon Co v Warren & Brown Technologies Pty Ltd

[2002] VSC 318

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 6209 of 2002

SIEMON CO.	Plaintiff
v
WARREN & BROWN TECHNOLOGIES PTY LTD	Defendant

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JUDGE:	Nettle J
WHERE HELD:	Melbourne
DATE OF HEARING:	5 August 2002
DATE OF JUDGMENT:	5 August 2002
CASE MAY BE CITED AS:	Siemon Co v Warren & Brown Technologies Pty Ltd
MEDIUM NEUTRAL CITATION:	[2002] VSC 318

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Practice and procedure – leave to discontinue – Rule 25.03 – obtaining evidence for external tribunal – letter rogatory – specification of particular documents – Evidence Act 1958, S Division 1C, s. 9N; Order 81.

Costs – indemnity costs – innocent third party – Rules 63.15, 63.30.1.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G.S. Clarke	Corrs Chambers Westgarth
For the Defendant	Mr P.R. Hayes QC	Mallesons Stephen Jaques

HIS HONOUR:

1. This proceeding was instituted by originating motion dated 1 July 2002, pursuant to Order 81 of the Rules of Court, for orders for the production of documents to the court, and for the examination of employees of Warren & Brown Technologies Pty Ltd (“Warren & Brown”), pursuant to Division 1C of the Evidence Act 1958.

1. The application was supported by affidavits sworn by Luke Andrew Merrick dated 1 July 2002 and by Daniel Ernest Bruso on 25 July 2002 and filed in court on 30 July 2002. 

1. In the affidavit sworn by Mr Merrick it was deposed that the orders were sought better to enable the prosecution by the plaintiff of proceedings against Louis J. Maiolo in the United States District Court for the District of Connecticut, relating to the termination of an agreement or arrangement between Maiolo and the plaintiff and actions taken thereafter by Maiolo.  It was alleged that Maiolo had exploited for himself the benefit of trade secrets and other confidential information the property of the plaintiff.  Exhibited to Mr Merrick's affidavit in accordance with the Rules was a request for international judicial assistance (letter rogatory) issued by the United States District Court for the District of Connecticut.  It was requested in the letter rogatory that a range of documents be produced to the court and that, after production of those documents, there occur an oral examination of Warren & Brown Staff Pty Ltd[1], by and through one or more officers, directors, managing agents or other persons.

   [1]Apparently an affiliate of Warren & Brown.

1. A proceeding instituted under Order 81 is not required to name a defendant and ordinarily an application for orders of the kind which were sought is made ex parte.  In this case, however, the originating motion and supporting affidavits were served in order to avoid the necessity of two hearings, it being anticipated that application would be made to set the orders aside if granted on an ex parte basis.

1. The matter first came on for hearing before Master Wheeler on 31 July but because the affidavit sworn by Mr Bruso had only just been served, orders were then made by consent that the further hearing of the matter be adjourned to today, and that it was appropriate that it be heard in the Practice Court rather than by the Master.

1. That, however, is as far as the consensus went.  On the day before the matter came before Master Wheeler the solicitors for Brown & Warren had written two letters to the solicitors for the plaintiff, opposing the orders which were sought, and, in the first of the two letters, setting forth in some detail submissions as to why the orders which were sought were inapt.  But there was no response to either letter and so, when the matter was adjourned by the Master for hearing, it appears that the plaintiff was still actively prosecuting its claim for the orders sought. 

1. Since then, however, the proceeding in the District Court in Connecticut has settled, and thus there is no longer any need or basis to make the orders. As the matter now comes before me this morning, orders are sought for leave to discontinue the proceeding, pursuant to Rule 25.03.

1. A proceeding of this kind may be discontinued only by consent or with the leave of the court, and Brown & Warren do not consent to the discontinuance.  If they had consented they would have been entitled to an order for costs pursuant to Rule 63.15, to be taxed on a party-party basis or solicitor-client basis.  But they want more.

1. Mr Hayes QC, who appeared for Brown & Warren, submitted that it was within my discretion to grant leave to the plaintiff to discontinue the proceedings on terms that the plaintiff pay Brown & Warren's costs to be taxed on an indemnity basis pursuant to Rule 63.30; and he advanced three contentions in support of his submission that I should make an order of that kind. His first contention was that when one looks at the orders which were sought in the originating motion they were plainly so wide and otherwise lacking in compliance with the requirements of Division 1C of the Evidence Act that the application was bound to fail.  He also submits that so much should have been apparent to the legal advisers of the plaintiff;  especially after the letters of 30 July had been written. 

1. Mr Hayes’ argument is that the description of the documents which were sought is not a description of specific documents or particular documents within the meaning of s. 9N(6)(b) and that, in effect if not in terms, what is sought is an order in the nature of discovery, which will not be ordered.  Mr Hayes accepts that it might be open to the court to make an order for the examination of the persons specified in the letter rogatory, because it appears from the affidavits in support of the application that the matters upon which it was proposed that they be examined relate to the matters in issue in the Connecticut proceeding.  But Mr Hayes points out that, as the order for examination of those persons is framed in the letter rogatory, it is conditional upon there first being production of the documents which are sought in the earlier orders.  He argues accordingly that, inasmuch as the court would not be prepared to make orders for the production of documents in the terms which are sought, it would not be prepared to make an order for the examination which is conditional upon the production of the documents.  There is more to it, he says too than a mere matter of form, because he says it may be seen that the apparent purpose of the exercise is to examine the persons upon the documents, rather than simply upon the matters which appear to be in issue in the Connecticut proceedings.

1. Mr Hayes' second contention was really a development of the first.  It related to the two letters of 30 July to which I have already referred, and was that the persistence of the plaintiff with the application after it had been pointed out in the letters that the application was flawed, was a further basis upon which this Court ought be prepared to order indemnity costs.  In Mr Hayes’ submission it was not just a matter of the application being hopeless, but rather of a wilful persistence in an application which must have been known to be hopeless.

1. Mr Hayes' third contention was that quite apart from other considerations his client is to be treated as if it were a non-party in a non-party discovery application.  He points out that there is no allegation made that his client is in any way guilty of wrongdoing or knowing participation, or of providing knowing assistance to those who are alleged to have infringed the rights of the plaintiff.  He argues therefore that, because what was being sought was in effect an order for documentary and oral discovery, there is every reason to treat his client as being entitled to the same sorts of costs orders as would be made in favour of a disinterested third party in a third party discovery proceeding.

1. Mr Clarke, who appears for the plaintiff, accepts that it is appropriate that there be an order for costs in favour of Warren & Brown, but he opposes the making of an order other than on a party-party basis. Mr Clarke disputes Mr Hayes' contention that the application for production of documents and examination was bound to fail. He submits that in the circumstances which obtain, which include the fact that documents in the possession of Maiolo relevant to the matters in issue were shown by deposition taken in the United States to have been destroyed, it is not feasible or fair to expect his client to specify the documents sought with any more particularity than has been used. He submits further that Order 81 and the provisions of Division 1C of the Evidence Act to which it is designed to give effect, should be construed broadly in accordance with the convention to which they were intended to give effect.  Mr Clarke disputes the second of Mr Hayes' contentions on very much the same basis.  He contends that when one reads the authorities applicable to subpoenas to produce documents it should be concluded that the application had substance, both as to the documents and as to oral examination. 

1. Mr Clarke also disputes Mr Hayes' third contention.  Mr Clarke submits that although a disinterested third party is ordinarily entitled to solicitor and client costs on a third party discovery application, in this case Warren & Brown should not be regarded as being a disinterested third party, but rather as a party who was to some extent involved in the facts of the matter.

1. In my opinion, Mr Hayes' first contention is substantially correct.  The documents which it is asked be ordered to be produced to the court are described in the originating motion in the following terms: 

“(a)any and all documents regarding any and all communications between Louis J. Maiolo and Warren & Brown from 15 February 2001 to the present that in any way relate to The Siemon Company and Warren & Brown, particularly including contracts, agreements correspondence, electronic messages (email), business plans, financial plans, invoices, orders and shipping documents;  and

(b)any and all documents regarding any and all communications between Louis J. Maiolo and Warren & Brown that in any way relate to The Siemon Company or any of its customers, particularly including contracts, agreements, correspondence, electronic messages (email), business plans, financial plans, invoices, orders and shipping documents.”

I regard that as far too broad a description of documents for the purposes of examination under Division 1C of the Evidence Act.  Despite Mr Clarke's careful and helpful submissions to the contrary, I do not regard that description as a specification of particular documents:  see s. 9N(6)(b) and Rio Tinto Zinc Corporation v Westinghouse Electric Corporation[2].  The legislation which was considered in Rio Tinto was in relevant respects identical to the provisions of Division 1C of the Evidence Act with which I am concerned and I see no reason to construe Division 1C any differently. It has not been suggested by counsel that there is any Australian authority to the contrary.

[2][1978] AC 547, esp. at 635 in the speech of Lord Diplock and at 644 in the speech of Lord Fraser.

1. I need not reach a final view on the second aspect of Mr Hayes’ first contention, but in case it matters I should say that I am disinclined to accept that the application for oral examination was incompetent.  I accept the force of Mr Hayes' submission that the order which was sought was in terms predicated on there first being made an order for the production of documents, but I consider that it would have been open to order examination without first making an order for production of documents.

1. Turning to Mr Hayes' second contention, I consider that Mr Hayes is correct that if it had not been apparent before 30 July it should then have been clear that an application in terms as broad as that propounded would not succeed.  It is true that the criticism of the application which is made in the letters of 30 July is not as specific or as developed as the submissions which Mr Hayes presented to me.  I accept, therefore, that it would perhaps have taken some time to understand the gravity of the deficiencies.  Nonetheless, it should have been clear enough that the orders were too wide.

1. I turn then to Mr Hayes' third contention and to two decisions to which reference was made in argument.  The first, Australian Competition and Consumer Commission v Boral Ltd[3], was a decision of Heerey J in the Federal Court in the course of one of the many applications made in the Boral litigation.  At paragraph [2] of his Honour's reasons for judgment he expressed the view that it was only basic fairness that a non-party, who has neither instigated litigation nor engaged in conduct which has provoked another to litigate, should not be out of pocket.  As his Honour put it, it does not seem reasonable that a non-party should effectively be compelled by court order to subsidise litigation in which it has no interest. 

   [3](1999) FCA 663.

1. The other decision was of Sundberg J of the Federal Court in Waiviata Pty Ltd v New Millenium Publications Pty Ltd[4].  At paragraph [5] of his Honour's reasons for judgment, his Honour said that:

"In an analogous context, where discovery is sought from a non-party, the party seeking discovery is ordered to pay the reasonable costs of the non-party:  see Conrock Ltd v. CSR Ltd (1990) 96 ALR 690. An order that reasonable costs be paid is substantially equivalent to an order for indemnity costs, qualified in the usual way by verbiage such as 'except in so far as they are of an unreasonable amount, or were unreasonably incurred'."

[4]No. V1177 of 2001, judgment delivered 18 April 2002.

1. On the material before me, it is plain that Warren & Brown are not in the position of a party who is interested in the Connecticut litigation.  There is no allegation made in the Connecticut proceeding, and there is no suggestion in the material filed in support of this application, that Warren & Brown have acted unlawfully or been complicit in what are alleged to be the unlawful acts of Mr Maiolo.  On the contrary, the material which is filed in support of the application suggests that if and insofar as Warren & Brown were involved in any of the facts their involvement was innocent.  In those circumstances, I consider it is appropriate that they be treated in the same way as a disinterested third party in a third party discovery application.  Subject to one remaining matter, I am disposed to make an order that there be leave to discontinue the proceeding on terms that the plaintiff pay Warren & Brown's costs on an indemnity basis. 

1. The remaining matter concerns the question of how much of the costs incurred by reason of Mr Hayes' appearance before Master Wheeler and before me this morning ought be allowed.  Because an application under Order 81 is one to which there is no defendant and is ordinarily in the nature of an ex parte application, I was for a while inclined to think it would be inappropriate to allow all, if any, of those costs.  On reflection, however, I think that concern is misplaced.  What has occurred is that by reason of the submissions which have been made on behalf of Warren & Brown to me, I have been made to be satisfied that there is an entitlement in Warren & Brown to costs on an indemnity basis.  The consequence is that Mr Hayes' appearance before the Master and then before me has produced for his client a result to which it was entitled.  I think that Warren & Brown’s costs should include the costs of Mr Hayes’ appearance.

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