FEDERAL COURT OF AUSTRALIA

Jones v Treasury Wine Estates Limited [2016] FCAFC 59

THE COURT ORDERS THAT:

1.    The applicant be restrained from taking any further step in furtherance of or in connection with the legal proceedings instigated by the applicant by his application to the United States District Court, Southern District of New York in Case No. 15 MISC 336, seeking orders that Stephen Brauer show cause why an order should not be issued permitting discovery pursuant to 28 USC § 1782 of the Federal Rules of Civil Procedure, save for the withdrawal or discontinuance of those proceedings.

2.    The applicant be restrained from taking or causing to be taken or participating in the taking of any oral deposition from Stephen Brauer pursuant to any order made by the United States District Court, Southern District of New York in Case No. 15 MISC 336 permitting discovery pursuant to 28 USC § 1782 of the Federal Rules of Civil Procedure.

3.    Utah Retirement Systems (URS) be restrained from taking or causing to be taken or participating in the taking of any oral deposition from Alejandro Escalante pursuant to the order dated 9 October 2015 made by the United States District Court, Northern District of California in Case No. 15-mc-80240-JCS permitting discovery pursuant to 28 USC § 1782 of the Federal Rules of Civil Procedure.

4.    URS be restrained from taking or causing to be taken or participating in the taking of any oral deposition from Sandra LeDrew pursuant to the order dated 9 October 2015 made by the United States District Court, Northern District of California in Case No. 15-mc-80240-JCS permitting discovery pursuant to 28 USC § 1782 of the Federal Rules of Civil Procedure.

5.    The applicant pay the respondent’s costs of and incidental to the respondent’s interlocutory application filed on 19 October 2015.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    Treasury Wine Estates Limited (TWE) is the respondent in this class action which is listed for trial in September 2016. Pre-trial orders for discovery and the exchange of evidence were made in March 2015.

2    The applicant (Jones) and a member of the relevant class, Utah Retirement Systems (URS), without notice to the docket judge, upon ex parte applications, obtained orders under 28 USC § 1782 of the Federal Rules of Civil Procedure (US) (US Code) from courts in the United States of America (US Proceedings) relating to the obtaining of oral discovery, commonly referred to as “depositions”, from current and former senior executives of TWE going to the issues raised in this proceeding.

3    TWE has filed an interlocutory application seeking orders in the nature of anti-suit injunctions in relation to the US Proceedings against each of Jones and URS.

4    This interlocutory application comes before the Full Court exercising original jurisdiction pursuant to a direction made by the Chief Justice under s 20(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA).

5    We would, for the reasons which follow, accede to TWE’s application.

The Action

6    The proceeding, which commenced in July 2014, involves allegations of misleading or deceptive conduct as well as contraventions of the continuous disclosure provisions of the Corporations Act 2001 (Cth).

7    The conduct in question, broadly, is TWE’s alleged failure to disclose to the market that inventory levels of wine held by its US distributors were materially excessive and which in turn affected TWE’s profitability.

The US Proceedings

8    28 USC § 1782 of the US Code entitled “Assistance to foreign and international tribunals and to litigants before such tribunals” provides a specific right for a person to apply to a US District Court to obtain orders in respect of gathering information from persons within the jurisdiction of the Court to which application is made that may assist in overseas proceedings. Section 1782(a) provides:

The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon the application of any interested person and may direct that the testimony or statement be given, or the document or other thing be produced, before a person appointed by the court … To the extent that the order does not prescribe otherwise, the testimony or statement shall be taken, and the document or thing produced, in accordance with the Federal Rules of Civil Procedure. A person may not be compelled to give his testimony or statement or to produce a document or other thing in violation of any legally applicable privilege. [Emphasis added]

9    The US Court may, but is not required to, provide such assistance and may condition the orders that it makes: Intel Corporation v Advanced Micro Devices Inc 542 US 241 (2004) at 247. The power, in one sense, is broad and is not limited by any foreign-discoverability requirement (at 260–262).

10    In September 2015, URS filed proceedings in the District Court for the Northern District of California seeking orders pursuant to 28 USC § 1782 for discovery by way of oral questions from Sandra LeDrew and Alejandro Escalante (California Proceeding). Ms LeDrew was the managing director of TWE’s Americas Division. Mr Escalante was Vice President of Financial Planning & Analysis, Sales Division of the Americas Division of TWE.

11    On 9 October 2015, the District Court for the Northern District of California made orders pursuant to 28 USC § 1782 permitting the issue of subpoenas to Ms LeDrew and Mr Escalante for the taking of a deposition. In each case, the deposition was to be limited to the deponent’s investigation of TWE’s US distributor inventory position prior to 15 July 2013.

12    Mr Escalante has been served with the relevant order and has contacted URS’s US lawyers to agree the location for the deposition. Despite attempts to do so, Ms LeDrew has not yet been served with the order.

13    In early October 2015, the applicant also filed a proceeding in the District Court for the Southern District of New York seeking an order pursuant to 28 USC § 1782 for discovery by way of oral questions from Stephen Brauer, a former Manager of the Americas Division of TWE (NY Proceeding). On 6 October 2015, the District Court for the Southern District of New York made an order for Mr Brauer to show cause why an order under § 1782 should not be made. The Court was initially scheduled to hear the show cause application for Mr Brauer on 19 November 2015. The hearing of that application has been adjourned pending the outcome of TWE’s application before us. Mr Brauer has been served with the relevant orders.

14    A central issue in the class action is the extent of TWE’s knowledge concerning the alleged excess inventory held by its US Distributors and when this came to TWE’s knowledge.

15    Jones and URS seek to obtain information going to these issues from the proposed deponents.

16    Although information obtained during the deposition process is described as evidence this has a tendency to mislead. Subject to limited exceptions, such as the obtaining of a relevant admission, such “evidence” is not admissible at the trial of the action. Properly understood it is a process of gathering information.

17    It was stated in the applications in the US Proceedings that the information obtained would be used for the purposes of the class action including providing a greater understanding of the documents produced by TWE on discovery, providing a basis for identifying the witnesses who could give evidence in this proceeding, potentially avoiding the need for an application being made for leave for the administration of interrogatories or for further discovery and, importantly, permitting an assessment to be made of the strengths and weaknesses of the case, including for the purposes of mediation, and the forming of a view as to a proper resolution of group member claims which is fair, reasonable and in the interests of group members.

18    No application by Jones has, to date, been made, or foreshadowed, for leave to administer interrogatories. There is a prospect that there will be further discovery sought by him but, as at the time of the hearing before us, no application had been made nor particular categories of further documents identified.

19    In the pre-hearing directions made by Foster J dated 22 October 2015 in relation to TWE’s application, it was noted that agreements had been reached between the parties to the following effect:

(a)    It was agreed between URS and TWE that URS would take all steps necessary to adjourn the depositions of Ms LeDrew and Mr Escalante to the earlier of 18 December 2015 or fourteen days after delivery of the judgment of the Full Court in relation to TWE’s application;

(b)    It was agreed between Jones and TWE that Jones would take all steps necessary to:

(i)    adjourn the show cause hearing in relation to Mr Stephen Brauer; and

(ii)    suspend the timetable for the filing of further written material in relation to the show cause hearing in relation to Mr Brauer;

to the earlier of 18 December 2015 or fourteen days after delivery of the judgment of the Full Court in relation to TWE’s application.

20    Senior Counsel for Jones and URS, at the conclusion of the hearing of this application, gave further undertakings on their behalf not to take further steps in or consequential upon the US Proceedings until the determination of this application.

Jurisdiction

21    Jurisdiction for the grant of an anti-suit injunction operates in personam to restrain a party from conducting proceedings in a foreign court. It rests upon the inherent power of the Court to protect its own processes once set in motion (as Jones did in initiating the class action) and upon its equitable jurisdiction: CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391–394. TWE relies upon both sources of power. As to the Court’s equitable jurisdiction, it asserts that the US Proceedings, variously, constitute vexatious or oppressive conduct which this Court should restrain.

22    It is sufficient, in our opinion, to dispose of this application upon the first ground of jurisdiction.

Protection of this Court’s Processes

23    Litigation, particularly in superior courts, in Australia has undergone a dramatic transformation in recent years. Judicial case management is at the heart of this sea-change. This is now embedded in this Court’s constituting Act as well as in its rules and Practice Notes. Section 37M(1) of the FCA provides that the overarching purpose of the civil practice and procedure regime is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Section 37M(2) elaborates on those objectives to include the efficient and timely disposal of cases before it; not only does this implicitly emphasise the importance of judge controlled litigation, but it suggests that satellite ancillary proceedings may not be conducive to such an objective except in a rare case. Section 37N(1) requires that parties to a civil proceeding before this Court must conduct such a proceeding in a way that is consistent with that overarching purpose. At the very least, this suggests parties co-operating with the Court, particularly in the invocation of discovery or like processes.

24    Perhaps the most significant reforms to the Court’s Rules have been in respect of discovery, both documentary and oral. Discovery of either kind is no longer a matter of course or of right (r 20.13 of the Federal Court Rules 2011 and Practice Note CM5). Moreover, subpoenas cannot be issued without the leave of the Court (r 24.10(1)).

25    Rule 20.11 provides that a party must not apply for an order for discovery unless it will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. This rule reflects the overarching purpose of the civil practice and procedure provisions found in s 37M: Alanco Australia Pty Ltd v Higgins (No 2) [2011] FCA 1063 at [7]; Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) [2011] FCA 1396 at [21]; BrisConnections Finance Pty Ltd v Arup Pty Ltd [2015] FCA 1077 at [12].

26    These observations are apt also to oral discovery. The incidence of applications in this Court for the administration of interrogatories is minimal.

27    Moreover, interrogatories are conceptually different from oral discovery of the kind permitted under US procedures. Oral discovery of the kind permitted in the US has been foreign to the procedures which have applied in civil litigation in Australia, at least outside the context of liquidations (s 596A and s 596B of the Corporations Act 2001 (Cth)). Heerey J in Martin v Tasmania Development Resources [1999] FCA 71 observed:

I have already indicated that I do not propose to make an order that certain persons identified by counsel for the applicant as potential witnesses attend before the applicant’s solicitors for the purposes of interviews and the making of statements. Such an order would be quite unprecedented in litigation in this country. It is accepted that persons are not compelled to confer with the solicitors to parties in litigation. If they do not wish to do so the solicitors may of course subpoena such persons, and the fact that the solicitor does not have the advantage of a previous conference is just one of the hazards of litigation.

28    The Australian Law Reform Commission’s Report, “Managing Discovery: Discovery of Documents in Federal Courts” (Report No 115, March 2011) considered the use of pre-trial oral examinations and recommended a very limited use, the context of which is not relevant here. The ALRC’s detailed consideration of pre-trial oral examinations is contained in Chapter 10 of its report. It contains a close analysis of the use of oral depositions in the United States and Canada. In respect of the United States, the ALRC states at p 253 (quoting from Moore’s Federal Practice (3rd ed 1997)) that oral depositions are seen as:

the factual battleground where the vast majority of litigation actually takes place. … The significance of depositions has grown geometrically over the years to a point where their pervasiveness now dwarfs both the time spent and the facts learned at the actual trial — assuming there is a trial, which there usually is not. The pre-trial tail now wags the trial dog.

29    We do not suggest that this Court does not theoretically have the power to order oral discovery of the US kind. Sections 23, 33ZF and 37P(2) and (3) of the FCA are sufficiently broad to provide such a power. We doubt that s 46 of the FCA could be used for that purpose notwithstanding its apparent width (see also r 29.11 of the Federal Court Rules). Further, s 7 of the Foreign Evidence Act 1994 (Cth) is dealing with a different context. But we do not need to elaborate further. Such a power was not sought to be invoked in the present case. Moreover, we doubt whether such a power would be exercised other than in a most exceptional case. But the present question does not directly involve this Court’s power to allow oral depositions, but rather the conduct of Jones and another group member seeking to invoke the powers of a foreign court to obtain compulsory oral discovery outside the docket judge’s case management control of this class action and without his knowledge or approval.

30    This Court has exclusive control over proceedings before it: National Mutual Holdings Pty Ltd v The Sentry Corporation (1989) 22 FCR 209 at 232 per Gummow J. This is all the more so in relation to class actions given the Court’s supervisory role under Part IVA of the FCA.

31    Anti-suit injunctions have been granted by this and other courts in Australia in order to protect their processes.

32    In Sentry Corporation v Peat Marwick Mitchell & Co (1990) 24 FCR 463, the Full Court of the Federal Court upheld a decision of the trial judge restraining the taking of oral depositions. The depositions were to be taken from present and former parties or employees of the respondent. At first instance Northrop J found that the proposed depositions could extend to questions relating to many of the issues in the suit pending in this Court, the taking of which posed a real risk of interference with those proceedings. We accept though that a differing feature of the case was that the Wisconsin Court had made an order for depositions to be taken in Australia which could interfere with the Australian proceeding. Nevertheless, the rationale for the restraint was not as limited as Jones would have it.

33    Lindgren J made orders to similar effect in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 4) (1996) 64 FCR 61. Heerey J in Martin referred with apparent approval to Lindgren J’s observation in Allstate that “compulsory oral discovery is not available against either parties or non-parties” and adopted as an accurate statement of the law of Australia what Lord Brandon had said in South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NV [1987] AC 24 at 36:

My Lords, the civil procedure of courts in the United States differs essentially from that in the High Court in England in that under it parties to an action can compel, as against persons who are not parties to it, a full measure of pre-trial discovery, including both the disclosure and production for inspection and copying of documents, and also the giving of oral or written testimony. This power of compulsion can be, and regularly is, used at an early stage of an action.

34    But as we have said earlier, we do consider that the Court now theoretically has the power to order oral depositions, albeit that it would only be exercised in an exceptional case: Indeed, there is much to be said for the observations of Jeune J in Armstrong v Armstrong [1892] P 98 at 100–101.

35    Anti-suit injunctive relief was also granted by Pagone J when a judge of the Supreme Court of Victoria in Pathway Investments Pty Ltd v National Australia Bank Ltd (No 2) [2012] VSC 495. When considering the inherent power of that Court to protect its processes, his Honour held that the plaintiff, in adopting the deposition procedure in New York, had bypassed the Court’s supervision. This case bears some similarity to the present proceeding. It had been the subject of case management conferences and detailed directions had been given for the specific, proper and efficient management of the case for a trial the date for commencement of which had been fixed.

36    Importantly His Honour emphasised at [7] that:

The use by the plaintiffs of a procedure otherwise available to them in New York, or in any other jurisdiction for that matter, had not been the subject of any direction by this Court in its management of the case.

Implicit in that observation was that it ought to have been.

37    His Honour then observed at [8]:

The process in the New York proceeding is unlike that ordinarily available in this jurisdiction. The taking of evidence by deposition in the New York proceeding is unlike discovery by oral examination under the rules of this Court where a party is permitted to serve interrogatories on another party with consent, and unlike an order to obtain evidence by witness examination in advance of trial. The deposition process sought to be used by the plaintiffs is, rather, in the nature of oral discovery. [footnotes omitted]

38    The rules of the Supreme Court of Victoria are not the same as those of this Court. Nonetheless the relevant rules in that Court are similar in that they have embraced modern judicial case management. This fact was of significance in his Honour’s reasoning supporting the grant of anti-suit injunctive relief.

39    The position here is the same. Moreover, the present case is a class action. Case management of such proceedings has a particular significance given the Court’s supervisory role. We also note that this Court’s Practice Note CM17, cl 4.1, concerning the need for parties’ lawyers to confer before making any application for an interlocutory order, provides:

4.1    Before making any application for an interlocutory order which is in dispute the parties’ lawyers must confer and attempt in good faith to resolve the dispute. If the parties are unable to resolve the dispute, any application must be accompanied by an affidavit of the applicant’s lawyer that the ‘meet and confer’ requirement was completed, though unsuccessful. Failure to file an affidavit in those terms may result in the application being immediately refused.

40    Just how far removed from the processes of this Court, indeed any Australian Court, the deposition process in the United States is may be seen from the declarations, made by Rebecca Gilsenan, the Australian lawyer with the conduct of the proceedings in this Court, filed in the US Proceedings in support of the applications for the deposition orders.

41    Her declaration adverted to processes in this Court where evidence of witnesses may be taken pre-trial such as Federal Court Rules 2011 r 29.11 and r 29.12. She informed the US Courts that it was not possible for Jones to compel the proposed deponents to provide oral discovery under Australian federal law.

42    Her declarations also acknowledged that even where lay witness statements were filed by TWE, it was under no compulsion to call any of those witnesses at trial and that such statements or affidavits would usually not contain information damaging to TWE’s case and accordingly could not be tested until trial. She also observed that US deposition transcripts could not be admitted at trial in Australia, as direct testimony of a witness.

43    She declared, nonetheless, that there was utility in obtaining the depositions as these could be shown to the witnesses at trial and those witnesses asked whether they stood by their trial evidence (Evidence Act 1995 (Cth) s 44) or by administering interrogatories regarding the truth and accuracy of the contents of the deposition transcripts, assuming this Court gave leave for their administration. Other forensic reasons were advanced including to assist in the cross-examination of witnesses and the assessment of the strength and weaknesses of the claims against TWE for use in any mediation of the claims.

44    In our view, the applications were patently made in order to obtain the benefit of processes not usually available in this Court.

45    Legal submissions were filed on behalf of each of Jones and URS to obtain the orders in the US Proceedings. One which deserves particular mention is the submission that the requirements of § 1782 had been met including, as a discretionary factor, that there was no evidence to suggest that Australian courts had not historically been receptive to § 1782 assistance from US federal courts.

46    The United States authority cited for the former proposition, which dated back to 2007, concerned arbitral proceedings in England and Australia. No mention was made of any of the cases cited in these reasons, including Pathway Investments, despite the fact that the solicitors for the plaintiffs in that case are also the solicitors for both Jones and URS in this case.

47    TWE does not submit, nor do we conclude, that the fact these proceedings are case managed provides a basis in itself for restraining the conduct of § 1782 depositions. There may be conditions where this Court would, in effect, endorse the making by a party of an application under 28 USC § 1782. So much was recognised in Pathway Investments at [6] but framed within the processes of case management of the Court. The vice in the present case is that the conduct of Jones and URS in invoking the US Proceedings without notice and without the imprimatur of this Court has undermined this Court’s case management and supervision of the class action.

48    What is vital is that this Court’s proceedings and its pre-trial processes are solely subject to supervision by this Court, particularly where one is dealing with a class action which invokes the Court’s supervisory role. If orders for § 1782 depositions are to be permitted in a case, they should not be obtained by a party to proceedings in this Court without notice to the other party and without the prior knowledge and endorsement of this Court by appropriate directions. It is neither necessary nor helpful to hypothesise upon the circumstances which might warrant such endorsement. We would expect them to be exceptional.

49    In summary, the recent reforms to discovery procedure in this Court, allied with the regime of judicial case management, will, in the circumstances of this case, be undermined by the US Proceedings unless injunctive relief is granted.

50    For completeness, we would make the following additional points.

51    First, we do not consider that any question of comity arises. The US Proceedings are not substantive in nature. 28 USC § 1782 has, as its objective, the giving of assistance to foreign and international tribunals and to litigants before such tribunals. The “tribunal” in this case is this Court. There is no question of forum competition. Indeed it is the existence of the proceeding in this Court which provided the necessary platform for the US Proceedings.

52    Second, it may be correct to say that the Court does not, in general, exercise any control over the manner in which a party lawfully obtains the evidence which he needs to support his case (see South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NV [1987] AC 24 at 41 per Lord Brandon of Oakbrook although that observation was made in the context of an application to restrain an application under 28 USC § 1782 for the production of documents). But that is no answer to the present case. Any such right cannot be exercised in a manner designed to circumvent this Court’s control and supervision of the proceedings before it.

53    Third, Jones has asserted that there are benefits to the class action and the parties from the US Proceedings which will “significantly reduce the scope” of further discovery and other advantages. Assuming for the sake of argument that such advantages existed, that merely suggests that Jones ought to have approached the docket judge and sought his imprimatur based upon such perceived benefits. But no such step was taken.

54    Fourth, we have not found it necessary to deal with the Court’s equitable jurisdiction to restrain on the basis of the US Proceedings being vexatious or oppressive to TWE. But if it had been necessary to do so, we would have held that to be so given the considerable expense and inconvenience to TWE consequent upon the US Proceedings and the orders there made.

55    Finally, Jones has asserted that many group members (particularly US residents) could opt out of the class action and then invoke § 1782 outside the jurisdictional reach of this Court. Whether such a hypothetical scenario is so is not to the point.

Conclusion

56    We would for the foregoing reasons make orders 1 to 4 in the terms sought in TWE’s application. The applicant should pay the respondent’s costs of that application.

Associate:

Dated:    13 April 2016