Trade Practices Commission v CSR Ltd

[1989] FCA 378

Re: TRADE PRACTICES COMMISSION
And: CSR LIMITED
No. WAG 195 of 1988
FED No. 378
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Practice and Procedure - subpoena for production - trade practices - abuse of market power and exclusive dealing - pecuniary penalty action by Commission - subpoena for production of documents of competitor and its supplier - general principles - width of classes of documents.

Federal Court of Australia Act 1976 s.23

The Commissioner for Railways v Small (1938) 38 SR(NSW) 564

Lucas Industries Ltd v Hewitt (1978) 18 ALR 555

Alliance Petroleum Australia (NL) v Australian Gas Light Co. (1982) 44 ALR 124

HEARING

PERTH

#DATE 12:7:1989

Counsel for the Applicant: Dr. C. Carr

Solicitors for the Applicant: Australian Government Solicitor

Counsel for the Respondent: Mr C.G. Colvin

Solicitors for the Respondent: Robinson Cox

Counsel for North Perth Plaster Pty Ltd: Mr R. Bower

Solicitors for North Perth Plaster Pty Ltd: Corser & Corser

Counsel for Boral Australian Gypsum Ltd: Mr B. Dharmananda

Solicitors for Boral Australian Gypsum Ltd: Mallesons Stephen Jaques

ORDER

A subpoena for production of documents issue to Boral Australian Gypsum Ltd in the form annexed to this order and that the subpoena be made returnable on 16 August 1989 at 10.15 am.

A subpoena for production of documents issue to North Perth Plaster Pty Ltd in the form annexed to this order subject to the amendments and deletions now specified:

Item 2

- "recording" substituted for "relating to". Item 4

- deleted

Item 7

- deleted

Item 9

- the word "recording" substituted for the words "relating to".

Item 10

- "the financial years 1987/88 and 1988/89" substituted for "the calendar years 1987, 1988 and 1989".

Item 11

- the words "showing sales" substituted for the word "relating"

Item 13

- deletion of the words "or any reference to the implementation of such marketing plan or strategy"; and the subpoena is made returnable on 16 August 1989 at 10.15 am.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The Trade Practices Commission claims pecuniary penalties and injunctions against CSR Limited in respect of alleged abuse of market power and exclusive dealing said to be constituted by a refusal to supply plaster products to a competitor in the market for ceiling materials in Western Australia. Pleadings have closed and the respondent asks the Court to issue subpoenas, returnable before trial for the production of various documents by two companies, North Perth Plaster Pty Ltd and Boral Australian Gypsum Ltd.

The Pleadings

1. By its amended statement of claim, the Commission alleges that CSR has, at all material times, carried on business in Australia as a manufacturer and supplier of plasterboard sheets, panels and cornices, plaster compounds and topping and joining cement, all of which materials are used for the construction of ceilings in residential and commercial premises (para.3). This much is admitted, as is the allegation that there is a market within Western Australia in which manufacturers of materials used for the construction of ceilings in residential and commercial premises sell those materials to wholesalers and ceiling fixers and in which wholesalers sell the materials to ceiling fixers and others (para.4). CSR Limited, it is said and it is admitted, had and still has a substantial degree of power as a supplier in the ceiling materials market (para.5). And it is also common ground that at all material times prior to May 1988, there was no competitor of CSR in the ceiling materials market which had any market share approaching the size of CSR's. CSR however, denies the allegation that there was at the relevant time no competitor with market power approaching its own.

2. North Perth Plaster Works Pty Ltd ("NPP"), which is a company incorporated in Western Australia, carries on and at all material times has carried on in Western Australia, the businesses of a wholesaler of plasterboard and related products and contractor for the supply and fixing of ceiling materials. This too, is admitted (para.7). According to the Commission, NPP at all material times prior to about 5 May 1988 obtained its requirements for plasterboard and related products from CSR. CSR admits that NPP obtained some products from it, but denies that NPP obtained all its requirements in this way. It is admitted however, that NPP was CSR's largest individual customer in Western Australia for plasterboard and related products. However, the allegation that NPP as a wholesaler of plasterboard and related products, was a competitor of CSR is denied. CSR goes on to say that save for occasional purchases of insignificant quantities of products from NPP by CSR customers, they did not have common customers. NPP, it is said, also obtained plasterboard and related products from suppliers other than CSR prior to 5 May.

3. Boral Australian Gypsum Ltd ("Boral") is said to have at all material times manufactured plasterboard and related products in Queensland, New South Wales, Victoria and South Australia and to have been a major competitor of CSR in those States. It has neither manufactured nor supplied those products in Western Australia save to a very limited extent. Issue is taken on the last aspect of the plea which CSR denies (para.9).

4. Early in 1988 NPP made arrangements with Boral to acquire from its Victorian factory quantities of plasterboard and related products for sale in Western Australia as from about April 1988 (para.10). On 18 February it is said that Mr Alan Simmonds, the General Manager of NPP, informed Garry Spencer the State Manager of CSR in Western Australia, that NPP would be marketing Boral's products in the future. Again, the allegation is admitted. But additional pleas raised in the defence assert that NPP had decided to change its business over to Boral and would stock a full range of that company's products. It would be marketing Boral's products to CSR's customers and would from July 1988, embark on an advertising campaign for Boral's products and conduct a series of trade nights promoting them.

5. On 30 March 1988, according to the statement of claim, CSR wrote to NPP giving notice that as from 1 May 1988 it would cease supplying NPP with any of its products where such supplies are either to:
   

(a) Supplement Boral's product line; or

(b) Top up shortfalls in supplies by Boral.

and this paragraph is also admitted. It is denied however, that as from 5 May 1988 CSR has refused to supply North Perth Plaster with plasterboard or related products (para.13). The purpose for CSR's refusal to supply is alleged in the amended statement of claim to have involved one or more of a number of anti-competitive purposes, including deterring or preventing Boral from engaging in competitive conduct in the ceiling materials market and preventing entry of Boral into that market. The conduct was also said to have the purpose of deterring or preventing NPP from engaging in competitive conduct in the ceiling materials market and eliminating or substantially damaging it as a competitor in that market. By engaging in this conduct the respondent is said to have taken advantage of its power in the ceiling materials market in contravention of s.46 of the Act.

1. The exclusive dealing plea is set up in para.16 of the amended statement of claim where it is alleged that CSR has refused and refuses to supply plasterboard and related products to NPP for the reasons that NPP has:
   

(a) acquired plasterboard and related products from Boral;

(b) not agreed to acquire plasterboard and related products from Boral;

(c) re-supplied plasterboard and related products acquired from Boral; and

(d) not agreed not to re-supply plasterboard and related products acquired from Boral.

1. CSR's conduct is said to be likely to have the effect in the ceiling materials market of substantially lessening or preventing or hindering competition.

2. In relation to the alleged refusal to supply NPP with plasterboard or related products, CSR says that at a meeting with Luis Toncich, a director of NPP, held on 5 May 1988, Mr Spencer confirmed both to Toncich and to NPP's financial controller, Peter Westlund, that the account of NPP would remain open. It says that it has kept the account open and that NPP has been advised accordingly. The only orders placed by NPP since May 1988 are said to have been products sought by that company to supplement Boral's product line or top-up shortfalls. Alternatively, they were entrapment orders which did not represent the genuine requirements of NPP. CSR is and at all material times has been to supply plasterboard and related products to NPP, provided that they are not required merely to supplement Boral's product line or top-up shortfalls.

3. On 12 November 1988 Simmonds of NPP told Spencer of CSR that the company did not intend to carry a full range of plasterboard and related products manufactured by CSR and was not in a position to carry stocks of such products in addition to its existing stocks or such products manufactured by Boral. He did not say, it is alleged, that NPP required supply from CSR for reasons other than to supplement Boral's product line or top-up shortfalls in suppy to NPP by Boral. It is said that at all material times after 18 February 1988, NPP intended and CSR believed that it would upon marketing Boral's products cease marketing CSR's and attempt to persuade customers who ordered CSR's products to accept Boral's in lieu thereof. It would only acquire CSR's products to supplement Boral's product line or top-up shortfalls in supply by Boral.
   General Principles

4. The power of the Court to issue a subpoena is not expressly set out in the Federal Court of Australia Act 1976 but is to be derived from the general power conferred by s.23:
   

"The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate."

1. The exercise of the power is regulated by O.27 and the relevant parts for present purposes are as follows:
   

"2. The Court may, in any proceeding, issue a subpoena to give evidence, or a subpoena for production, or a subpoena both to give evidence and for production in the prescribed form or in such other form as the Court may direct for the attendance of the person named before the Court or before any judge, officer, examiner or other person having authority to take evidence. .

.

.

4A(1) Where a person named in a subpoena is not a party to the proceeding and he incurs substantial expense or loss in complying with the subpoena the Court or a Judge may order that the party who requested the issue of the subpoena pay to that person, in addition to any amount which the person served with the subpoena is entitled to be paid pursuant to Order 27 rule 3 or the Second Schedule, an amount to compensate him for such expense or loss as is reasonably incurred or lost by that person in complying with the subpoena. .

.

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6(1) On request by a party, the Registrar shall, unless the Court otherwise orders, issue a subpoena to give evidence or a subpoena for production or a subpoena for both testimony and production. .

.

.

9(1) The Court may, on motion by the person named in a subpoena, set aside the subpoena wholly or in part.

(2) Notice of a motion under sub-rule(1) must be filed and must be served on the party on whose request the subpoena was issued."

1. The principles governing the descriptions of documents in subpoenas for their production are conveniently set out in the judgment of Jordan CJ. in the Full Court of the Supreme Court of New South Wales in The Commissioner for Railways v Small (1938) 38 SR(NSW) 564 at 573:
   

"A writ of subpoena duces tecum may be addressed to a party to the cause or to a party. If it be addressed to a stranger, it must specify with reasonable particularity the documents which are required to be produced. A subpoena duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery. A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant...."

Notwithstanding this, a degree of generality in the description of documents sought under a subpoena may, according to the circumstances, be compatible with reasonable particularity - Lucas Industries Ltd v Hewitt (1978) 18 ALR 555. As Bollen J. said in Alliance Petroleum Australia (NL) v Australian Gas Light Co. (1982) 44 ALR 124 at 133:

"Certainly a subpoena duces tecum must tell the proposed witness what documents he must produce. But it need tell him only with reasonably particularity. He must be told sufficient to enable him to identify the documents sought."

Thus mere width in the ambit of the documents sought will not necessarily lead to a subpoena being set aside. In the present case, counsel for the Commission submitted that the Court ought not to allow the issue of subpoenas which would impose too great a burden on Boral and NPP. To do so, it was submitted, might discourage future prospective complainants from bringing allegations of contraventions of the Act to the attention of the Commission for fear of subjection to onerous requirements to search and produce records and other documents. There was a public interest, it was said, to be considered in the exercise of the Court's discretion to allow or withhold the issue of the subpoenas. In my opinion, the Court must disregard considerations of the kind advanced by the Commission and must judge the relevance and oppressiveness or otherwise of the subpoenas proposed by reference to the pleadings and usual criteria that apply in civil litigation. To admit a public interest consideration of the kind proposed as a reason for a more restrictive approach to the exercise of the Court's discretion would be to put the respondent at a disadvantage that it would not suffer in ordinary civil proceedings.

The Proposed Subpoenas

1. The proposed subpoenas each requires production of an extensive range of documents, some of which will be the subject of claims for confidentiality orders. It was common ground that the question of confidentiality was best left to the return of the subpoenas. So far as Boral was concerned and subject to matters of confidentiality to be dealt with later, most of its objections to the categories of documents specified in the proposed subpoena have been met by amendment to the class description of those documents. A question was raised as to the relevance of documents going to Boral's sales figures in Western Australia in 1987, 1988 and 1989. I am satisfied however, that there is a reasonable probability that these matters will be shown to be relevant to the operation of the ceiling materials market and the effect of the alleged refusal to supply. In the absence of any other substantive objection, I propose to direct the issue of the subpoena in its amended form.

2. Much of the debate concerned the subpoena to be directed to NPP. I propose to deal shortly with each of the categories of document mentioned in relation to that subpoena.
   Item 1
   

"All documents recording orders placed by North Perth Plaster Pty. Ltd. ("NPP") for plasterboard sheets, plasterboard panels, plasterboard cornices, plaster compounds and topping and jointing cement ("plasterboard and related products") with CSR Limited ("CSR") during the period 1 January to 30 June, 1988."

1. The principle objection to this item was that CSR would already have the relevant records of orders placed with it during the specified period. I am satisfied however that there may be records of orders placed and not met that NPP would have and which CSR may not have retained. These may be relevant to the question of the extent of any refusal to supply. I would allow item 1.
   Item 2
   

"All documents relating to the contractual terms upon which Boral Australian Gypsum Ltd ("Boral") supplied, or agreed to supply, plasterboard and related products to NPP during the 1987 and 1988 calendar years."

1. There was a concern expressed about confidentiality in relation to this category. Further, it was said, that the figures set out in the documents would be ex Melbourne and misleading as not reflecting additional costs of freight and other expenses associated with getting material into storage in the company's Osborne Park warehouse.

2. In my opinion the request is expressed in objectionably wide terms. The expression "relating to" which is used frequently in the proposed subpoena, would cover a wide range of relevant and irrelevant materials. I would not allow item 2 in its present form, although a requirement for the production of documents "recording" the contractual terms would be acceptable.
   Item 3
   

"All documents showing individually or together with other documents the total value of sales of plasterboard and related products by NPP in Western Australia during the 1987, 1988 and 1989 calendar years (other than sales as part of a contract to supply plasterboard and related products together with all fixing services for such products)."

1. The terms of this item have been narrowed and in my opinion it does describe a relevant class of documents and should be allowed.
   Item 4
   

"All documents relating to the advertising and promotion by NPP in Western Australia of Boral plasterboard and related products during the 1988 calendar year."

1. The class description is, in my opinion, too wide and would encompass material of little or no relevance. At present it would extend to all invoices and receipts relating to advertising projections and forecasts and to draft and completed advertising copy. The item will not be allowed.
   Item 5
   

"All documents relating to any meetings between Mr. Garry Spencer of CSR and Mr. Alan Simmonds of NPP during the 1987 and 1988 calendar years in which the terms of sale by CSR to NPP of plasterboard and related products and/or the acquisition from Boral by NPP of plasterboard and related products was discussed."

1. No objection was taken to item 5 and it will be allowed.
   Item 6
   

"All documents recording orders, placed with NPP during the months of May, June and July, 1988 for any plasterboard and related products in which the order was placed by referring to such products as "Gyprock" or "Gyprock plasterboard" or some other name using the word "Gyprock"."

1. NPP objects that it would be extremely onerous, difficult and time consuming for the company to comply with this request. It would be necessary, so it is said, for every order received by the Interior Supplies Division, the WA Ceiling Industries Division and the Colonial Ceilings Division to be examined for the period May, June and July 1988. This would involve the location and examination of in excess of 2,000 invoices originating from the three interior supplies branches and orders placed with the two contracting divisions. It would be a great inconvenience and seriously disruptive of the company's operations for an order to be made requiring the company to comply with this item.

2. It appears that there are no global or secondary records which could facilitate the extraction of information relating to orders of the class mentioned. I was informed from the bar table that Gyprock is a registered trade mark of CSR's. In the defence the respondent denies that it has refused to supply NPP with plasterboard or related products and further says that it reasonably believed that NPP would upon commencing to market Boral's products cease marketing the respondent's products and attempt to persuade customers who ordered the respondent's products to accept Boral products in lieu thereof. In my opinion therefore, the class of documents specified in 6 is relevant and while there may be some administrative burdens imposed in extracting those documents, it will be open to NPP to make an application under O.27 r.4A for the recovery of its expenses or losses incurred in complying with the demand. Item 6 will therefore be allowed.
   Item 7
   

"All documents relating to any sale by NPP during the period 1 January, 1987 to 30 May, 1988 of plasterboard and related products to persons or corporations believed by Alan Simmonds or the Sales Manager of NPP to be trading account customers of CSR at the time of such supply by NPP."

1. This item is objected to as imposing an enormous task and inordinate burden upon the limited resources of the company. It would require, it is said, the company to examine every invoice from its entire operations for a period of 15 months. Further, because a wide range of items in addition to plasterboard and related products is sold by NPP, it would be necessary to examine every line of every invoice. CSR contends that the class of documents sought is relevant to the extent of competition in the market prior to the alleged refusal to supply and therefore to the questions of substantial lessening of competition and otherwise the market effect of its alleged conduct. In my opinion this item is oppressively wide. First of all it classifies the relevant documents as those "relating to" certain classes of sale. That is a matter which may be overcome by amending the class description to documents "recording" the relevant sales. However, it seems to me that to tie the class of documents to beliefs held by two officers of NPP at the time of supply over a period of 17 months concluding over 12 months ago, is oppressive and of limited utility. This item will not be allowed.
   Item 8
   

"All documents relating to any difficulties, delays, non-availability of particular products or insufficient quantities of products in relation to NPP obtaining supplies of plasterboard and related products from Boral during the period 1 April, 1988 to date."

1. No objection is taken to this item and it will be allowed.
   Item 9
   

"All documents relating to the appointment of agents or distributors in Western Australia to sell or distribute Boral products in particular areas of Western Australia."

1. NPP challenges the relevance of this request on the basis that Boral was the only source of plasterboard and related products available to the company after May 1988 and that in its dealings with agents or distributors in Western Australia the company used a standard type or style of document incorporating general terms and conditions of sale and a warehouse price list. Counsel for CSR on the other hand submits that it is a key issue in the case whether NPP was prepared to sell both Boral and CSR products. The agency arrangements are relevant to that question.

2. Subject to a narrowing of the class by substitution of the word "recording" for the words "relating to" in item 9, I am prepared to allow the item.
   Item 10
   

"All documents showing individually or together with other documents the total value of plasterboard and related products purchased by NPP from Boral during the calendar years 1987, 1988 and 1989."

1. CSR agreed in the course of argument that this document description could be amended by substitution of the words "the financial years 1987/88 and 1988/89" for the reference to the "calendar years 1987, 1988 and 1989". Subject to that amendment I am satisfied that this class of documents is relevant and it will be allowed.
   Item 11
   

"All documents relating to customers of NPP who acquired plasterboard and related products from NPP who were not customers of NPP prior to April, 1988 and showing individually or together with other documents the total value of plasterboard and related products sold by NPP to such customers since April, 1988."

1. Subject to the substitution of the words "showing sales" for the word "relating", I am satisfied that this item is relevant and should be allowed.
   Item 12
   

"All documents being sales budgets, forecasts, projections or calculations brought into existence during the period 1 January, 1987 to date in respect of proposed sales by NPP of Boral plasterboard and related products."

1. I accept that NPP's plans with respect to the marketing of Boral products to the date of the alleged discontinuance of supply may be relevant as may its market conduct since that time. Appreciating that there will need to be appropriate restrictions on the disclosure of such material to other than CSR's counsel and solicitors and independent experts, I am satisfied that the material may be relevant and that this item should be allowed.
   Item 13
   

"All documents containing any marketing plan or strategy for marketing Boral products in Western Australia, or any reference to the implementation of such marketing plan or strategy."

1. The inclusion in this class of documents containing any reference to the implementation of such marketing plan or strategy renders the class too wide, but subject to the deletion of that reference and ultimately appropriate restrictions on disclosure, I am prepared to allow item 13.
   Item 14
   

"A sample of NPP's various letterhead and order documents as used in the calendar years 1987 and 1988."

1. No objection is taken to this item and it will be allowed.
   Item 15
   

"All documents showing individually or together with other documents the range of Boral plasterboard and related products offered for sale by NPP in Western Australian (sic) since April, 1988."

1. No objection is taken to this item and it will be allowed.
   Item 16
   

"All documents relating to any payment received by NPP from Boral since 1 January, 1988 (excluding payments relating to the return of defective or damaged goods)."

1. No objection is taken to this item and it will be allowed.
   Item 17
   

"All documents relating to the terms or conditions upon which CSR offered to supply plasterboard and related products to NPP during, or for any part of the period 1 June, 1987 to 30 June, 1988."

1. Again, this class of documents is relevant and this item will be allowed.
   CONCLUSION

2. A subpoena may therefore issue to Boral in terms of the amended draft handed up in these proceedings. A subpoena may issue to NPP in relation to such of the items as I have allowed and subject to such amendments as have been specified in the preceding reasons. I will discuss with the parties a suitable return date at which time questions of confidentiality can be dealt with.