Svitzer Australia Pty Ltd
[2022] FWC 1438
•8 JUNE 2022
| [2022] FWC 1438 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Svitzer Australia Pty Ltd
(AG2022/123)
| DEPUTY PRESIDENT EASTON | SYDNEY, 8 JUNE 2022 |
Application for termination of the Svitzer Australia Pty Limited National Towage Enterprise Agreement 2016 – application for Orders for Production – general principles – apparent relevance – commercially sensitive documents – parties’ entitlement to test and contest the case advance against them – due administration of justice – invasion of private rights – trade rivals – confidentiality – evidence in interlocutory proceedings – confidentiality regimes.
In January 2022 Svitzer Australia Pty Ltd applied to the Fair Work Commission to terminate the Svitzer Australia Pty Limited National Towage Enterprise Agreement 2016 pursuant to s.225 of the Fair Work Act 2009 (Cth). Svitzer’s application is resisted by the three unions including The Australian Maritime Officers’ Union. On 9 March 2022 Svitzer filed its evidence in chief and submissions claiming amongst other things that because of inefficiencies and restrictions in the enterprise agreement, Svitzer was operating at a competitive disadvantage, had lost tenders for new work and would be more competitive again if the agreement were terminated.
The Australian Maritime Officers’ Union (AMOU) seeks orders for production of documents that, it claims, directly relate to the case advanced by Svitzer. Svitzer objects to many of the categories of documents sought by the AMOU, arguing that documents sought are irrelevant, or confidential and commercially sensitive.
The matters at stake in this interlocutory contest have significant consequences for the parties: as a matter of the due administration of justice the AMOU is entitled to press for all relevant material be available to enable it to advance its case. Svitzer is entitled to keep its commercially sensitive material confidential and away from the hands of its rivals.
In this decision I will review relevant authorities in some detail, identify the relevant matters put in issue by Svitzer in the formulation of its case, and provide reasons for accepting, rejecting or amending the categories of documents sought by the AMOU.
Background
In March 2022 Svitzer filed evidence about the effect of the Svitzer Australia Pty Limited National Towage Enterprise Agreement 2016 (“the 2016 Agreement”) on its financial performance, its capacity to meet its contractual/performance obligations, and its competitiveness in tendering for new work amongst other things.
Some of the propositions advanced in Svitzer’s case are put in general terms, such as asserting that Svitzer’s operation will be “more efficient” if the 2016 Agreement is terminated. However some of the propositions advanced in Svitzer’s case are put in very specific terms. For example Svitzer argues that because of the terms of the 2016 Agreement it is less competitive, perhaps even uncompetitive, compared to a particular new industry player. Further, Svitzer argues that it has lost tenders and has withdrawn from some ports because of the terms of the 2016 Agreement.
The AMOU properly submits that it is entitled to both interrogate and rebut the assertions made by Svitzer and the evidence upon which the assertions are founded.
The AMOU has engaged an economist, Mr Jason Ockerby, to provide an expert report in support of its case. Mr Ockerby is an economist who has applied his expertise and prepared reports for various industries, including transport, ports and network industries (being industries in which there are multiple providers in different locations).
In early April 2022 the AMOU wrote to Svitzer seeking informal production of documents in 11 categories. Each category was described by reference to specific paragraphs of the witness statements filed by Svitzer.
On 8 April 2022 the AMOU sought a further 16 categories of documents and provided specific reasons for seeking each additional category, by reference again to specific paragraphs of witness statements filed by Svitzer. The second group of categories, and the supporting reasons for those categories, were drafted by Mr Ockerby. Mr Ockerby says he needs access to these documents “to answer the questions in the brief.”
On 12 April 2022 Svitzer responded, indicating that it was agreeable to production of some categories and opposed production of other categories.
Nothing appears to have happened between the parties in relation to the provision of documents from 12 April 2022 until the AMOU sought an Order for Production from the Commission on 23 May 2022. Svitzer has maintained its objection to some categories but has not yet provided any documents at all to the AMOU.
The matter was listed for an interlocutory hearing on 2 June 2022 and the hearing carried over to 3 June 2022.
No directions were made but seven days prior to the hearing the AMOU helpfully filed a written submission supporting its application for orders. Seventy minutes prior to the hearing Svitzer provided a document identifying for the first time the specific basis of its objection to each contested paragraph.
The AMOU’s expert, Mr Ockerby, was called to give evidence at the interlocutory hearing. Mr Ockerby explained and expanded upon the categories of documents required. Mr Ockerby candidly conceded that some documents sought were not strictly necessary for him to finalise his report, but helpfully said that without access to the documents sought, his report will have to be longer and carry many more [unverified] assumptions.
In giving evidence at the interlocutory hearing, Mr Ockerby was careful to stay in his lane and refer only to why, in his expert view, certain categories of documents were required so that he could properly have the opportunity to prepare a report that would be relied on as evidence at the final hearing. Mr Ockerby gave evidence for several hours over two days and fielded many questions from AMOU’s counsel as well as Svitzer’s counsel. Mr Ockerby’s evidence was significant in determining the current interlocutory dispute between the parties and I am grateful for his assistance.
Principles
In CEPU v South32 Ltd[1] Deputy President Beaumont provided the following helpful summary:
a)the power conferred by s 590(2)(c) is a broad discretionary one to be exercised for the purpose of the Commission informing itself as to a matter before it;[2]
b)the power should be exercised in accordance with the principles applied by the courts in civil proceedings when issuing subpoenas;[3]
c)the documents sought must have apparent relevance to the issues in dispute in the proceedings;[4]
d)access to the documents sought must be for the purpose of supporting a case which is intended to be advanced, not to explore if there is a supportable basis for a case that might potentially be advanced;[5]
e)the documents required to be produced must be described with sufficient particularity, and the burden of producing them must not be oppressive, in the sense ‘of placing an unreasonable burden on the person required to comply’,[6] and the request for production must not be a fishing expedition;
f)the Commission may also take into account the proper administration of justice, in the sense that material that is relevant to an issue or issues that fall for determination is available to parties to enable the parties to advance their respective cases;[7] and
g)generally speaking, the Commission will exercise its discretion in favour of an applicant unless it appears that it would be vexatious or frivolous or otherwise an abuse of process.[8]
The following passage from the Full Court’s decision in Wong v Sklavos[9] is often cited in relation to apparent relevance:
“Although the parties referred to several authorities concerning the requirement for subpoenaed documents to have apparent relevance to an issue in a proceeding, in our opinion, the applicable principles are well established. The party issuing a subpoena bears the onus of demonstrating that the subpoena has a legitimate forensic purpose in relation to the issues in the proceedings: Santos Ltd v Pipelines Authority of South Australia [1996] SASC 5578; (1996) 66 SASR 38 at 52.A subpoena may be set aside if it requires the production of documents which do not have apparent relevance to the issues arising on the pleadings: Trade Practice Commission v Arnotts Ltd (No 2) [1989] FCA 248; (1989) 88 ALR 90; Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 4) [2010] FCA 398; (2010) 269 ALR 76 at [39]-[40]; McHugh v Australian Jockey Club Limited[No 2] [2011] FCA 724 at [13]; McIlwain v Ramsey Food Packaging Pty Ltd [2005] FCA 1233; (2005) 221 ALR 785 at [35]; Dorajay Pty Ltd v Aristocrat Leisure Ltd [2005] FCA 558 at [17]. Other cases have used different terminology, but with essentially the same effect, for example, by requiring that, viewed realistically, the documents sought have a bearing on an issue which is not unreal, fanciful or speculative (R v Barton (1981) 2 NSWLR 414 at 420), or that the material sought is reasonably likely to add in some way to the relevant evidence in the case (Spencer Motors Pty Ltd v LNC Industries Ltd (1982) 2 NSWLR 921 at 927), or that it be “on the cards” that the documents sought will materially assist the party at whose request the subpoena has been issued: Allister v The Queen (1984) 154 CLR 404 at 414; Tamawood Ltd v Habitare Developments Pty Ltd [2009] FCA 364 at [13], [35]-[38].”
Justice Abrahams in Roberts-Smith v Fairfax Media Publications Pty Limited (No 15) further observed:[10]
“… The test for apparent relevance has been described as having a low threshold. A document or class of documents may satisfy that threshold if it gives rise to a line of enquiry relevant to the issues before the trier of fact: Hooke v Bux Global Limited (No 2) [2018] FCA 836 at [38], citing Boase v Axis International Management Pty Ltd(No 3) [2012] WASC 498 at [11]. What is involved then is a question about reasonable likelihood, not possibility: Chief Executive Officer of Australian Transactions Reports and Analysis Centre v TAB Ltd [2016] FCA 122 at [40] citing Seven Network Ltd v News Ltd (No 11) [2006] FCA 174 at [6].”
In Re Clerks' (Alcoa of Australia - Mining and Refining) Consolidated Award 1985[11] Munro J made this observation:
“Where the proper use of legal compulsion to produce documents is in issue, the tribunal will need to carry out an exercise of judgement upon the particular facts in each case. That judgement requires a balance on the one hand of the reasonableness of the burden imposed upon the recipient, and of the invasion of private rights, with on the other hand, the public interest in the due administration of justice and in ensuring that all material relevant to the issues be available to the parties to enable them to advance their respective cases.”
The background to the Full Court’s decision in Wong v Sklavos warrants some further consideration. Dr Sklavos was a medical practitioner who wished to be admitted as a Fellow of the Australasian College of Dermatologists. Dr Sklavos alleged unlawful conduct by the College in refusing to admit him as a Fellow. He claimed damages including the difference between his earning capacity as a Fellow and specialist dermatologist and his earning capacity as a trainee and/or general practitioner”. In his Federal Court proceedings he sought to adduce evidence from an accountant about his loss. Subpoenas were issued to several dermatologists who were otherwise unconnected to Dr Sklavos’ case. Each subpoena sought production of income tax returns, documents disclosing income directly and indirectly earned by the recipients over several financial years, and other documents. Unsurprisingly, the recipients applied to have the subpoenas set aside on the basis that the documents sought were highly confidential and because they disclosed private and personal financial matters.
At first instance Justice Jagot[12] refused to set aside the subpoenas, finding that:
a)a subpoena may only be issued for the purpose of litigation and not for any ulterior purpose, and the documents sought to be produced must have apparent relevance to the litigation (at [5]);
b)if potential relevance is dependent upon “an unreal, fanciful or speculative” view, the principle will not be satisfied and the subpoena may be set aside (at [6]);
c)although the concerns of the recipients about the private nature of the documents and confidentiality are understandable, confidentiality is not of itself a reason to set aside a subpoena (at [7]); [13]
d)concerns regarding confidentiality may necessitate the agreement or the imposition of an appropriate regime for confidentiality (at [7]); [14]
e)whilst the probative value of the document sought could not be tested at the issuing stage, the test of apparent relevant was met (at [8]);
f)if a suitable confidentiality regime is not agreed, it can and will be imposed by order of the court (at [9]); and
g)the interest of Dr Sklavos in production of the documents must prevail over the competing interests of the 11 dermatologists to keep their private financial affairs free from any intrusion (at [9]).
Her Honour also observed at [17]:
“Given the nature of the documents sought I should indicate that if a suitable confidentiality regime cannot be agreed, then I would impose such a regime. Despite the submissions for Dr Sklavos to the contrary, I consider that the regime should permit the subpoena recipients to provide a redacted version of their tax return and other financial information so that what is disclosed is information relating to their income and expenditure derived from the provision of dermatological services. A tax return, for example, will contain many matters irrelevant to that income and expenditure. The recipient should not be subjected to exposure of that irrelevant information even to a lawyer for Dr Sklavos. Further, if any recipient wishes, they should be able to retain anonymity in the sense that their name may be redacted from any document provided that, through the method of production, the source of the documents can be ascertained. There should be a limit on the persons who may access the documents, in the first instance at least access being limited to the solicitor and counsel for Dr Sklavos and the accountant giving evidence. While application may be made in the future for Dr Sklavos to inspect one or more of the documents, I see no reason why he should have an unfettered right to do so. If Dr Sklavos wishes to see any of the documents, specific application explaining why that is necessary should be made. A regime should be put in place to limit the number of copies which may be made of any document, to record the number of copies made, and for all copies to be returned to the relevant recipient at the conclusion of the proceeding. I expect the parties to be able to work out a confidentiality regime to this general effect.”
On appeal the Full Court[15] found no error in her Honour’s identification and application of the relevant principles (at [15]), endorsed her Honour’s finding that the documents sought had apparent relevance (at [29]) and rejected the appellants’ argument that her Honour had not properly engaged in the balancing exercise between the interest of Dr Sklavos in having the documents produced against the invasion of their privacy and confidentiality (at [32]-[38]).
Commercial Sensitivity and Confidentiality
The Full Court[16] further reinforced that confidentiality is not of itself a reason to set aside a subpoena:
“The documents sought by Dr Sklavos are undoubtedly of a confidential kind and it is very understandable that the appellants wish to protect that confidentiality. However, as is well established, confidentiality is not of itself a reason to set aside a subpoena: Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) FCA 1040; (2001) 110 FCR 157 at [80]-[83]. King CJ observed in Alliance Petroleum Australia NL v The Australian Gaslight Company (1983) 34 SASR 215 at 239 that it is commonly the case that “the risk to the confidentiality of the information must be tolerated in the interests of the administration of justice”.”
The Full Court accepted that the confidentiality of the documents sought is nonetheless one of many factors to be considered. The Full Court cited the following passage from Apache Northwest Pty Ltd v Western Power Corporation[17] with approval:
“The next issue is that relating to confidentiality. There is, no doubt, some need in this matter to balance competing interests. In the end, however, the public interest in the administration of justice should prevail ...
Her Honour, rightly in our view, found herself unable to ascribe any public interest to the confidentiality of the documents in question in the present case, however much it may be in the appellants’ individual interests. She did, however, accept that, although, standing alone, confidentiality is not a ground for refusing to issue, or for setting aside, a subpoena, it is a factor which is to be taken into account, together with those tests for oppression which are determined by reference to the breadth of the subpoena, the definition of the documents involved and the type and degree of burden placed upon those to whom the subpoena is addressed. She also accepted that the relevance of the confidential documents being sought to the issues in the arbitration is a further factor”. [18]
Svitzer led no substantive evidence at all of the confidential or commercially sensitive nature of documents captured by the proposed orders for production.
The only evidence led by Svitzer was a statement of Ms Bernasconi, Partner at Seyfarth Shaw Australia, which was filed and served at 7:00pm the night before the hearing. Ms Bernasconi’s statement records what she describes as “concern[s]” held by Svitzer about matters of confidentiality and commercial sensitivity. Mr Bernasconi’s statement also contains direct assertions about specific documents and arrangements, stating some matters to be “strictly confidential, with its terms only known to a handful of Svitzer personnel”, some documents to be “not publicly available” or “commercially sensitive”, and describing the consequences of certain matters being disclosed in terms such as bringing “adverse consequential impacts on competition in the market” and in terms of a “commercial risk to Svitzer in the event that these documents ended up in the hands of a competitor”.
Whilst interlocutory matters are often determined on the basis of statements or affidavits from solicitors rather than litigants themselves, I cannot place material weight on any of the assertions in Ms Bernasconi’s statement in this matter. I regard her statement to be no more than a submission on behalf of Svitzer. Some parts of Ms Bernasconi statement include qualifying terms such as “I have been advised by Svitzer ..” and paragraph 5 of her statement is as follows:
“I make this statement on the basis of my direct knowledge or information and instructions provided to me by Svitzer personnel.”
There is no established basis within Ms Bernasconi statement for her having any “direct knowledge or information” other than the fact that she is authorised to make the statement on behalf of Svitzer. If Ms Bernasconi has direct knowledge of Svitzer’s tendering processes, of commercial contracts in the towage industry, of competition in the towage industry and the like, it is not revealed in her statement. For this reason, I have regarded the direct statements about such matters to be submissions rather than evidence.
Ms Bernasconi’s indirect knowledge and her instructions recorded in her statement are more obviously understood to be submissions rather than evidence.
Counsel for the AMOU chose not to cross-examine Ms Bernasconi, which is quite understandable, and the forensic value of her statement is not improved as a result.
Therefore I am left to apply only a generalised notion (and no more) that Svitzer, like other businesses generally, has competitors and rivals and has documents that are confidential and/or commercially sensitive.
Trade Rivals
Ms Bernasconi’s statement referred to deleterious effects on Svitzer if documents or information produced under order of the Commission were disclosed to Svitzer’s trade rivals, Svitzer’s customers or port authorities with which Svitzer negotiates contracts. No such party will have access to any documents produced to the Commission.
Nonetheless it should be noted that evidence of such concerns, if proper evidence had been led by Svitzer, would raise considerations about the adequacy of the implied undertaking that a party may not use documents produced under an order except for the purpose of the action in which the discovery was made.
Although it was not put by Svitzer, I regard the AMOU to be a party akin to a trade rival to Svitzer. It is not controversial that for a long time the AMOU has negotiated enterprise agreements with Svitzer and has had many industrial disputes with Svitzer. More importantly, and according to Svitzer’s filed evidence, the AMOU has been bargaining with Svitzer for a new enterprise agreement since 2019.
The observations in Mobil Oil Australia Ltd v Guina Developments Pty Ltd[19] are apposite:
“ … In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise.
Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed. Is that necessary for the attainment of justice in the particular case?”
Justice Gordon’s summary in Cadbury Pty Ltd v Amcor Limited (No 2)[20] is also helpful to consider:
“… it is appropriate to restate the legal principles to be applied in resolving this dispute. They may be summarised as follows (see e.g. Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 38-40):
1. A party is ordinarily entitled to discovery and inspection of all discoverable documents in the possession or control of the opposite party, subject to a number of important limits including:
(a) valid claims for privilege from production; and
(b) the principle that a party may not use discovered documents except for the purpose of the action in which the discovery was made (“the implied undertaking”);
2. If the discoverable documents in the possession or control of a party are confidential, that fact will not ordinarily be a sufficient reason to deny inspection by the opposite party. The limit identified in 1(b) usually will provide sufficient protection to the party producing the documents;
3. However, if the relevant parties are trade rivals whose secrets would be revealed by discovery and inspection, other considerations apply:
(a) a fair balance must be struck between the needs of the party wishing to litigate (here, Cadbury) and the legitimate concern of a trade rival to retain the secrecy of its commercially sensitive information (here, Amcor). That balance may need to be reviewed as the matter progresses to trial or at the trial itself;
(b) as each case falls for determination according to its own facts, it is only upon consideration, by inspection of the nature and content, of the documents that a decision can be made about what orders should be granted for inspection by or on behalf of a party (here, Cadbury).
For the Court to perform the evaluation as outlined in [6(3)], the party seeking an order that limits the inspection of discoverable documents must establish that the character of each document is such that it should attract protection additional to that granted by the implied undertaking: see Mobil [1996] 2 VR 34 at 38-40; Mackay Sugar Co-Operative Association Ltd v CSR Ltd (1996) 63 FCR 408 at 415; BT Australia Pty Ltd v New South Wales (No 6) [1998] FCA 293 at 7-11; Index Group of Companies Pty Ltd v Nolan [2002] FCA 608 at [8]; ACCC v Baxter Healthcare Pty Ltd [2003] FCA 994 at [24]. As was accepted by the parties, in assessing whether any document should attract the additional protection, there are a number of matters which may be relevant including, without limitation, the age of the information, the identity of the persons who will inspect the documents and the reason or reasons why the inspection of particular documents is necessary. As I have said earlier, the circumstances may change as preparation for trial progresses.”
I note that the parties will have a further opportunity to argue for the making of orders under either s.593(3) or s.594 of the Fair Work Act 2009 (Cth) (FW Act) and that Svitzer can, at that time, lead evidence about the character of particular documents over which orders might be sought.
Orders are not confined to the terms sought
The descriptors for many of the categories were cast in very broad terms. Svitzer justifiably protested that many, if not most, of the category sought were so broadly described that Svitzer would be placed in the untenable position of not knowing what is required of them to comply with the order of the Commission, should such orders be made.
Svitzer argued that where such categories have been too broadly cast, no orders can be made. In my view, however, the Commission is not confined to only making orders in the terms sought by a party. There is considerable scope for the Commission to act quickly, and to avoid unnecessary technicalities, but to make orders that facilitate the fair and just progression of matters before it (per s.577). To do so would include, if required, narrowing the scope of production orders sought by parties in order efficiently deal with procedural matters at hand. Concerns about procedural fairness may arise if the Commission materially departs from a term originally sought without reference to the interests of the parties and their general right, in the ordinary course of proceedings, to object to the making of orders against them or against their interests.
Matters in issue in the proceedings
Svitzer’s application is under s.225 of the FW Act. In determining the application the Commission is required to take into account matters of public interest (s.226(a)), and “the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them” (s.226(b)(ii)).
The AMOU’s written submissions in the interlocutory proceedings include the following summary, which I accept to be a correct summary:
“Svitzer’s own summary of its contentions in support of its application is set out at AS[1.6]-[1.7]. The primary ground of Svitzer’s application to terminate the Agreement arises out of assertions that Svitzer has seen a decline in port share and profit which can be sheeted home to what are said to be restrictive clauses of the Agreement that add to Svitzer’s operating costs and leave Svitzer at a competitive disadvantage in the industry. Assertions about Svitzer’s profitability and competitiveness under the Agreement are relied upon both under the public interest criterion in s 226(a) and the appropriateness criterion in s 226(b).
The AMOU is entitled to both interrogate and rebut the assertions made by Svitzer as to its profitability and competitiveness and the causal relationship of the terms of the Agreement to those matters, as well as to advance its own case as to why termination would be inappropriate and/or contrary to the public interest.”
Svitzer’s filed submissions in the substantive proceedings include the following:
“… After more than two years of bargaining and much industrial action, the parties have not been able to reach any agreement and have reached an impasse… A principal source of disagreement is over provisions in the Expired Agreement that are restrictive and inhibit productivity. In turn the Expired Agreement is compromising Svitzer’s capacity to compete in an increasingly competitive market. Svitzer seeks their removal or alteration while the Unions wish to retain them.
… In all of the circumstances, the Commission should be satisfied that the termination of the Expired Agreement would not be contrary to the public interest for reasons including that:
… Svitzer operates in an increasingly competitive market and it is operating at a competitive disadvantage as a result of inefficiencies, constraints and restrictions imposed on it under the Expired Agreement. As a consequence of Svitzer’s inability to compete in various ports, it has had to wholly withdraw from three ports and reduce employee numbers in other ports, thereby resulting in significant job losses of 134 jobs lost in less than 12 months…
…
the termination of the Expired Agreement will have the effect, over time, of making Svitzer more competitive and reducing its operating costs and also therefore the costs incurred by the customers who utilise Svitzer’s towage services. This will in turn contribute to the competitive nature of the marine towage industry. The termination of the Expired Agreement will thus have a positive impact on the wider economy…
It would also be appropriate to terminate the Expired Agreement because:
… the Expired Agreement is the cause of current productivity and cost constraints, and Svitzer needs to improve its productivity and reduce costs if it is to more effectively compete and maintain its current port share …
… The Expired Agreement imposes significant restrictions on the efficiency and productivity of Svitzer’s operations in a context where the biggest component of Svitzer’s operating costs are the labour costs associated with employees employed under the Enterprise Agreement amounting to 65% of total operating costs.
… The above terms of the Expired Agreement, including the POPs, are causing Svitzer operational issues due to their impact on flexibility, productivity and utilisation and/or which impose unsustainable costs on Svitzer’s business. These in turn are significantly limiting Svitzer’s ability to be competitive and responsive in the market.
… The likely impact of termination of the Expired Agreement on Svitzer is that:
… Svitzer will be able to conduct its operations and utilise its workforce more flexibly and cost-effectively to better meet the requirements of its customers and compete with other competitors which will, in turn, assist to improve revenue and Svitzer’s financial position;
it will allow Svitzer, over time, to reduce its operating costs which will allow it to be competitive in a very competitive environment;
… The above likely effects for Svitzer are in a context where, Svitzer recently ceased to provide services in three ports (Geelong, Bowen and Whyalla) and lost substantial market share in a fourth port (Port Jackson) due to its inability to effectively compete with the Engage entities including through loss of competitive tender. Since April 2019, Engage Towage has also started competing in the Port of Botany and Svitzer is currently considering its position in this Port including reduction in employee numbers. Svitzer ought to have the ability to reasonably identify and implement productivity improvements to ensure it operates in a commercially viable manner.”
It is not possible to assess the probative value of Svitzer’s filed material at this preliminary stage but as the above extract makes clear: Svitzer’s cost-effectiveness, efficiency and competitiveness in its “increasingly competitive market” are not matters peripheral to its case.
In the broad the AMOU is entitled to test and contest Svitzer’s assertions about its commercial efficiency and competitiveness generally, as well as Svitzer’s competitiveness in the particular instances of lost tenders and abandoned ports.
The contested categories
The AMOU sought documents in two groups, referred to in the proceedings as the Attachment A group and the Attachment B group, which draw their name from the different attachments to different letters sent by the AMOU in early April.
Of the 27 categories of documents sought, 3 were not pressed at hearing, 1 was not pressed after the hearing concluded, 14 were agreed between the AMOU and Svitzer, and 9 categories remain contested.
I have applied the above principles to each contested category. To perform my functions and exercise powers in a matter that are fair and just, yet quick, informal and avoiding unnecessary technicalities (per s.577) I shall be as brief as permitted[21].
Contested Category 1 – parental expectations
The first contested category pressed by the AMOU is the following:
“All documents recording or evidencing the margins required by the Applicant’s “parent shareholder” referred to in sub-paragraph 5(a) of the Witness Statement of Ivan Spanjic.”
In his filed statement Mr Spanjic says at paragraph 5(a):
“In my Current Role I am responsible for:
(a) Securing new business in harbour and terminal towage, including through tenders, on margins required by our parent shareholder;
(b) Maintaining existing business in harbour and terminal towage...”
The first contested category focuses on Mr Spanjic’s words “margins required by our parent shareholder” to seek production of documents that have a connection to the existence of some requirement by the parent shareholder to achieve a particular profit margin.
The AMOU argue that because a requirement or expectation of the parent shareholder is referred to, and inferentially thought relevant by Svitzer, it is entitled to seek production of documents going to the expectations of the parent shareholder.
The terms used to describe the category are so broad that they would capture documents “evidencing” the fact that there are certain expectations from the parent shareholder, which could potentially include far-reaching documents made and retained by Svitzer across its operation.
More importantly, the existence of expectations or requirements from the parent shareholder about returns on investment do not seem to me to be particularly relevant to Svitzer’s application under s.225. That is, I do think that Svitzer is pursuing a claim, or making an assertion within its claim, that the Commission should terminate the 2016 Agreement because it will allow Svitzer to provide a better return on investment to its parent shareholder. If such a case were to be mounted then the reasonableness or otherwise of the parent shareholder’s expected return on investment could possibly become quite relevant, but to the extent that Svitzer only relies on the expectations of its parent shareholder as part of the background information to the circumstances at hand, then there does not seem to me to be a reasonable likelihood that documents captured by this category will have a bearing on an issue ‘which is not unreal, fanciful or speculative’ nor will give rise to a line of enquiry relevant an issue before me.
In the circumstances I am not prepared to make an order in the terms sought, nor make an order in modified terms.
Contested Category 2 – internal compliance rules
The second contested category pressed by the AMOU is the following:
“All documents recording or evidencing the Applicant’s Internal Compliance Rules referred to in sub-paragraph of 14(b) in the statement of Ivan Spanjic.”
Paragraph 14 of Mr Spanjic’s statement includes the following:
“Harbour towage operators compete for:
…
(b) Contracts with customers (vessel operators, container ships, bulk ships and rail). These contracts are generally in the form of preferred supplier agreement, rather than exclusive, where a towage provider provides discount off its public tariff for a period ranging from 1 to 5 years. Due to Svitzer’s size in the market and its internal compliance rules, it is very rare for it to be able to enter into exclusive contracts with its harbour towage customers…”
In much the same way that the AMOU presses for production of contested category 1, the AMOU argues that it is entitled to see and consider the “internal compliance rules” referred to in paragraph 14(b) because they are specifically mentioned in Svitzer’s evidence.
The formulation of the order sought is very broad. It captures every document created or kept in accordance with Svitzer’s internal compliance rules, and every document that might reference the existence of such rules.
At the hearing the AMOU clarified that it was only seeking a document or documents that state the compliance rules relating to tenders, rather than a potentially large volume of documents generated in compliance with those rules.
Svitzer’s argument and evidence, as discussed above, includes many references to the impact of the 2016 Agreement on Svitzer’s capacity to tender/compete for new work. If there is a particular set of compliance rules relating to tendering processes, that are documented and in Svitzer’s custody, possession or control, then I am satisfied that there is an apparent relevance attached to such documents.
The proposed terms sought by the AMOU are too broad. I will make an order for production for the following category of documents:
“To the extent that the applicant maintains a document or documents that state or record its internal compliance rules in relation to competitive tenders, a copy of the current version of such rules, document or documents.”
I recognise that it may be necessary to consider orders under s.593 or s.594 in relation to this category.
Contested Category 3 – captive tugs
The third contested category pressed by the AMOU is the following:
“All documents recording or evidencing the occasions when the Applicant has been unable to meet a Port Authority’s demand in circumstances described in paragraph 25 of the affidavit of Ivan Spanjic.”
Paragraph 25 of Mr Spanjic’s statement is in the following terms:
“Despite the terms of an existing licence, the Harbour Master of a Port Authority has the power to demand that a towage provider provide emergency response (also known as captive tugs) for safety reasons. Based on my general experience and knowledge, I am aware that, on occasions, Svitzer has been unable to meet a Port Authority’s demand due to the restrictions in the applicable POPs without initiating a protracted process for changes to the PoPs or roster.”
At the interlocutory hearing the AMOU argued that one issue in contest is the minimum number of captive crew/boats that Svitzer is required to retain at particular times, and the alleged impact of the 2016 Agreement on Svitzer’s capacity to provide captive tugs for emergency response.
Once again the category are expressed in terms so broad that it would potentially capture many irrelevant documents and records, but perhaps some relevant documents as well. It would be unreasonable to require Svitzer to review every staffing availability over a long period of time in order to identify for itself any instances where it had not met minimum requirements. For the avoidance of doubt I am not satisfied that there is an apparent relevance to documents that would identify any particular period where crew or boats were not properly available.
However if documents exist that record a concern raised by a Port Authority about crew/boat availability for emergency response in a port where Svitzer is required to maintain captive tugs for safety reason, I am satisfied that there is an apparent relevance attached to such documents.
Mr Spanjic has been the Chief Commercial Officer for Svitzer Australia since July 2017 and appears to have been overseas in a different role prior to this time. To the extent that Mr Spanjic’s observation in paragraph 25 is based on his “general experience and knowledge” about the effect of the 2016 Agreement, the period from July 2017 until the present seems the logical period over which he could have gained the awareness to which he refers.
I will make an order for production of documents that fall within the following category:
“Any correspondence received by the Applicant since July 2017 from a Port Authority alleging that the applicant has failed to provide adequate minimum coverage for emergency response (also known as captive tugs).”
Contested Category 4 – emergency response and service levels
The fourth contested category pressed by the AMOU is the following:
“Documents setting out requirement of each port for emergency response and service levels”
This category of documents is similar to contested category 3. Contested Category 4 appeared in the Attachment B list drafted by Mr Ockerby. Mr Ockerby gave evidence that these documents are relevant to Svitzer’s capacity to compete in its market because, he says, they are likely to be relevant to his consideration of the barriers to entry to the market and the cost of exit from the market. As a matter of logic, if there are requirements for captive tugs in a particular port, then there is a higher barrier to entry into that port/market. Mr Ockerby referred in his evidence to the minimum efficient scale of operation for each port and that he would like to know how many boats are at each port and the kinds of boats at each port. Mr Ockerby also indicated he wished to consider matters of public interest in Svitzer’s decision to exit certain ports.
The requirement for a certain number of tugs to be captive in any port does not appear to be a secret. Whilst the impact of the terms of the 2016 Agreement upon Svitzer’s capacity to meet requirements for captive tugs in certain ports is potentially an issue in contest in the proceedings, the actual requirements for captive tugs in those ports does not appear to be an issue in dispute. I would expect that requirements in relation to captive tugs would already be incorporated into rosters.
Although there is no evidence provided from Svitzer, I accept the likelihood that documents that set out emergency response and service levels are likely to be commercially sensitive. To the extent that the proposed category cast a net wider than the requirements to make available a particular number of captive tugs, the terms sought are fishing.
If no order is made in relation to this category, the AMOU can still fairly test and refute Svitzer’s case because Mr Ockerby has access to the same relevant information (i.e. the requirement for certain captive tugs) because it is already known to the AMOU.
I am not prepared to make an order in the terms sought, or in modified terms.
Contested Categories 5 – Pricing documents
The fifth contested category pressed by the AMOU is as follows:
“Documents disclosing prices/fees charged by Svitzer across each port in Australia (i.e. discount off public tariffs for top 5 contracts at each port).
Period 2015-2022.”
The first thing to note is that this category seeks production of documents recording prices/fees since 2015. Mr Ockerby indicated that he included this period to cover the time since Engage, a relatively new competitor to Svitzer, entered the market.
Mr Ockerby expressed the view that documents in this category are relevant to determining, or at least considering, market prices in particular ports in order to assess Svitzer’s claims about its competitiveness. The AMOU has established the apparent relevance of Svitzer’s pricing arrangements.
However the AMOU has not established the apparent relevance of Svitzer’s pricing since 2015. Mr Ockerby’s evidence emphasised his objective of assessing Svitzer’s competitiveness across different ports by reference to how Svitzer has set prices in each port. I do not see that Svitzer’s pricing arrangements seven years ago is reasonably likely to add in some way to the relevant evidence in the case.
I am prepared to make orders that are broadly consistent with the orders sought by the AMOU. I will, however, modify the proposed orders to limit production to current pricing for the top 5 contracts for each port, measured by volume of tug jobs since 1 January 2021, and further limited to only documents that contain stated prices such as price list, rather than individual contracts or documents that might “disclose” a price.
Accordingly, I will make orders in the following terms:
“Documents listing the current prices/fees charged by Svitzer in each port in Australia for each of the top 5 contracts in each port (measured by volume of tug jobs since 1 January 2021).”
I am content for the parties to confer and agree on alternative wording if these words do not adequately capture the above intention.
As above, I recognise that the pricing arrangements, to the extent that they are documented, are likely to be highly sensitive and subject to a confidentiality regime of the kind considered in cases dealing with trade rivals.
Contested Category 6 – Employees per port
The next contested category pressed by the AMOU is the following:
“Documents disclosing number of employees at each port, by role (Master, Engineer, Rating, Other)
Period 2015-2022”
I do not propose to make an order in relation to the number of employees at each port since 2015. For similar reasons to those canvassed above, I do not understand the present staffing levels to be a secret or a mystery, or more precisely to be information that the AMOU can only obtain through an order for production. Taken literally, the terms of the proposed order would capture every roster for every port for every roster period since 2015 - which would be oppressive and the documents produced would be irrelevant.
Understood more sensibly, but still taking the words literally, it would require Svitzer to identify the staffing levels at each port since 2015, and also identify when the staffing level at each port changed and produce, to the extent that such documents might exist, updated documents over the course of seven years at each port.
Mr Ockerby said he wants access to employee numbers to pair this information with tugboat movements to understand and assess productivity in each port. The AMOU have not established the apparent relevance of documents that would disclose this information. There is no suggestion that there has been a change in minimum crew levels since 2015 and so the only information captured by putting Svitzer to such a significant task would be how many supernumerary employees (i.e. how many employees engaged in a port over and above the minimum crew levels) have been engaged at each point in time since 2015.
I decline to make an order in the terms sought.
Contested Category 7 and 8 – Tender documents and “total cost pictures”
The next two contested categories pressed by the AMOU can be dealt with together:
“Tender documents for port of Bowen (April 2021) and Whyalla (August 2021), including request for tender (RFT) and Svitzer response to the RFT (including any subsequent amendments) setting out proposed fees for services at the ports.
Documents to support costing analysis or "total cost picture" (Mr Spanjic at [35]) to support pricing for target customers at each port, including volumes, cost to serve, costs of operation, tariffs and day rates
a. Top 3 customers at each port
b. For the following tenders: TMA Bulk Operations and Vitol at Geelong and Jackson; SKS Tanker at Botany; Carnival at Jackson, port of Bowen tender, CSL Whyalla tender”
The first category is squarely aimed at Svitzer’s assertion that the terms of the 2016 Agreement contributed to it losing particular tenders. I am prepared to make an order in the terms sought.
The second category was the subject of attention at the interlocutory hearing because of what was said to be confusion about the meaning of the term “total cost picture”. Svitzer led no evidence about the existence of any costing analysis process or total cost picture but submitted that the order sought was too ambiguous to be made.
There are some uncertain elements to this category. Paragraph [35] of Mr Spanjic’s statement is in the following terms:
“When pricing for a tender the commercial team must first build the total cost picture comprising both asset, crew and support line items. Crewing being Svitzer’s single biggest annual spend requires particular focus to address the key concerns for the safe and reliable crewing of the towage volumes predicted in the port. That is, ensuring that Svitzer has applied at least the minimum number of crew to the expected task that meets our requirements under statute around fatigue management and minimum manning onboard a vessel. Svitzer also needs to ensure that the coverage of this crew is an appropriate balance between the volume of expected towage jobs in the port against what Svitzer believes the market will afford. In this exercise, Svitzer looks for the maximum flexibility and scalability of crewing to address peaks and troughs in the port traffic as well as ebbing and flowing of volume.”
I understand this paragraph to be referring to how Svitzer goes about preparing its pricing for target customer at each port, which obviously has relevance to Svitzer’s competitiveness. The paragraph seems to suggest that Svitzer compiles a “total cost picture” as part of its preparation for tendering. There is no indication of how often this process is undertaken. Assuming that Svitzer included paragraph [35] in Mr Spanjic’s evidence because Svitzer considers it relevant, it seems to me that part of Svitzer’s case is that when it compiles a total cost picture in the process of preparing a tender, the terms of the 2016 Agreement impact adversely.
I am prepared to make an order consistent with the terms sought by the AMOU but confined only to documents that record the actual “total cost picture” for specific tenders (to the extent such documents exist), limited in time and more clearly defining what is a “top 3 customer”.
In relation to the second contested category above I will make an order in the following terms:
“Copies of the “total cost picture” document or documents created by the Applicant (referred to in Spanjic at [35]) to support pricing for target customers at each port, including volumes, cost to serve, cost of operation, tariffs and day rates for the following customers or tenders:
- any tender to any of the top 3 customers in each port (measured by volume of tug jobs since 1 January 2021) compiled since 1 January 2021; and
- TMA Bulk Operations and Vitol and Geelong and Jackson; SKS Tanker at Botany; Carnival at Jackson, port of Bowen tender, CSL Whyalla tender.”
As above, I recognise that documents captured by these categories are likely to be the subject of confidentiality regime.
Contested Category 9
The final contested category pressed by the AMOU is the following:
“Documents disclosing volume of Carnival ships serviced by Svitzer at each port.”
This category relates to the following paragraphs from Mr Spanjic’s statement:
“Carnival Cruises was a major cruise line customer of Svitzer. Svitzer was advised by Carnival in early January 2022, that it was unsuccessful in its bid for provision of their towage services in all capital city ports plus Eden and Cairns. Svitzer lost out in a competitive tender. Whilst Carnival has not expressly advised us of the successful tenderer, I believe this to be a consortia of Engage, Smit and Pacific Towage. Previously Svitzer had 100% of this work in all ports except Port Jackson where we had 50%. I had a debrief with Paul Misfud (Director Port Operations – Asia Pacific) from Carnival after the outcome and was advised that Svitzer lost out on price. This was the case even though there is no other provider with a presence in some of the ports. This means that the discount Svitzer was offering across all ports in the network including contested and non-contested ports was insufficient to outweigh the competitor’s pricing. Choosing a competitor’s tender will involve Carnival paying Svitzer’s public tariff in locations where Svitzer is are the only operator in the port. Svitzer had provided a discount of in excess of 60% in some ports.
In the past, it has been a competitive advantage to Svitzer that it operates in multiple ports as vessel operators call to many ports and have been open to discounts where they use Svitzer’s services across multiple ports (for example, if Svitzer gives them a discount along the whole east coast of Australia they might prefer Svitzer to another provider who can give them a discount in only one port). Based on Carnival’s response to our bid, this is no longer an advantage and presents a commercial risk to Svitzer which it needs to be able to manage by managing its cost.”
Mr Ockerby indicated that documents that fall within this category are likely to allow him to quantify the value of the discount foregone by Carnival and thereby consider the competitiveness of Svitzer’s pricing. The AMOU has established the requisite apparent relevance.
The terms sought have no time limitation and are therefore too broad. The term “volume” is out of place. I will make an order in an amended form to only capture the number of Carnival ships serviced by Svitzer at each port since 1 January 2019. I have chosen this date to take into account the effect of Covid 19 on cruising. I will make an order in the following terms:
“Documents disclosing the number of Carnival ships serviced by Svitzer at each port since 1 January 2019.”
DEPUTY PRESIDENT
Appearances:
Mr B Rauf of Counsel for the Applicant instructed by Ms R Bernasconi of Seyfarth Shaw Australia
Mr E White of Counsel with Mr A White of Counsel instructed by Mr L Tiley of Hall Payne Lawyers for The Australian Maritime Officers’ Union
Mr A Neal of Counsel instructed by Mr P Garrett and Ms W Carr for the Construction, Forestry, Maritime, Mining and Energy Union
Mr D Quinn for The Australian Institute of Marine and Power Engineers
Hearing details:
2022.
Sydney (By Video using Microsoft Teams)
June 2, 3.
[1] [2021] FWC 3043 at [44].
[2] Citing Re Penelope Vickers[2017] FWCFB 3131 at [8] (‘Vickers’); Esso Australia Pty Ltd v Australian Workers’ Union, Australian Manufacturing Workers’ Union and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia[2017] FWCFB 2200 at [6] (‘Esso’)
[3] Citing the above cases and in addition Australian Nursing Federation v Victorian Hospitals’ Industrial Association[2011] FWA 8756 at [10].
[4] Citing Clermont Coal Operations Pty Ltd v Brown & Dews and Others[2015] FWCFB 2460.
[5] Citing Vickers at [8]; Kirkman v DP World Melbourne Limited[2015] FWCFB 3995 at [19].
[6] Citing Esso at [6] and [18].
[7] Citing Esso at [6].
[8] Citing R v Marks; Ex parte Australian Building Construction Employees’ and Builders Labourers’ Federation [1981] HCA 33; (1981) 147 CLR 471 at 483.
[9] (2014) 319 ALR 378, [2014] FCAFC 120 at [12].
[10] [2021] FCA 582 at [9].
[11] [1988] AIRC 391; Print H2892 at 2.
[12] Sklavos v Australasian College of Dermatologists [2014] FCA 476.
[13] Citing Hospitality Group Pty Ltd v Australian Rugby Union Pty Ltd (2001) 110 FCR 157; [2001] FCA 1040 at [80]- [83].
[14] Citing Mandic v Phillis [2005] FCA 1279 at [54]) and Apache Northwest Pty Ltd v Western Power Corporation (1998) 19 WAR 350 at 380-381.
[15] (2014) 319 ALR 378, [2014] FCAFC 120.
[16] Wong v Sklavos (2014) 319 ALR 378, [2014] FCAFC 120 at [30].
[17] (1998) 19 WAR 350 at 379-81.
[18] Wong v Sklavos (2014) 319 ALR 378, [2014] FCAFC 120 at [31].
[19] [1996] 2 VR 34 at 38-40, [1996] VicRp 54.
[20] [2009] FCA 663 at [6]-[7], see also ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2007] FCA 467 at [13]- [17] and Media Ocean Ltd v Optus Mobile Pty Ltd (No. 1) [2009] FCA 421 at [2]-[9].
[21] Tenterfield Care Centre Ltd v Wait[2018] FWCFB 3844 at [26] citing Barach v University of New South Wales (2010) 194 IR 259. [2010] FWAFB 3307 at [16], Construction, Forestry, Mining and Energy Union v Collinsville Coal Operations Pty Ltd (2014) 246 IR 21 at [84] and Construction, Forestry, Mining and Energy Union v Ron Southon Pty Ltd (2014) 261 IR 194 at [30]-[31].
Printed by authority of the Commonwealth Government Printer
<PR742421>
17
0