FEDERAL COURT OF AUSTRALIA

Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 3) [2014] FCA 1289

THE COURT ORDERS THAT:

1.    The first respondent’s oral application supported by the affidavit of Mr Glenn Michael Scott affirmed on 1 August 2014 is dismissed.

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

REASONS FOR JUDGMENT

AN APPLICATION FOR ‘CONFIDENTIALITY ORDERS’, on behalf of the first respondent (coretell)

1    At the completion of the hearing of this matter, senior counsel for the respondents sought confidentiality orders (presumably pursuant to s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth)) in respect of certain evidence. Counsel had previously alluded to the need for such orders in the course of the hearing. I made it clear that it would be necessary for such an application to be supported by proper grounds and that orders for confidentiality would not be made lightly having regard to the importance of the principle of open justice.

2    The first respondent has now pursued the application supported by an affidavit sworn by Mr Scott, solicitor for the respondents, who contends that an order is ‘necessary to prevent prejudice to the proper administration of justice’.

3    Mr Scott relies on the fact that:

In the course of the trial of this action … a number of sensitive documents relating to the operational and financial position of the Respondents have been disclosed to the Applicants’ legal advisors and expert witnesses, subject to confidentiality undertakings. These documents have included ledgers, financial statements, customer contacts and invoices.

4    Mr Scott contends that if the respondents’ sensitive operational and financial documents were freely available to be accessed by the applicants themselves (as distinct from the limited category of legal advisers to whom the documents were disclosed for the conduct of the proceeding), then the applicants as direct competitors of the respondents, would obtain an unfair advantage over the respondents in their market. This would be not only for ‘core orientation products’, the main topic of the substantive proceeding, but for ‘survey equipment’ generally. Mr Scott puts it on this basis:

The relevant “market” extends more generally beyond core orientation products to survey equipment because the documents discovered by the Respondents or otherwise produced or disclosed during the course of this proceeding contain information about the Respondents’ commercial dealings in respect of core orientation equipment and other survey equipment such as down-hole cameras which are not the subject of the patent infringement claims. Review of the Respondents’ sensitive operational and financial documents would enable the Applicants to become informed of various matters about the Respondents’ businesses, such as:-

a.    the corporate Respondents’ costs of goods sold, including pricing arrangements with suppliers;

b.    the identity and nature of the corporate Respondents’ suppliers;

c.    the profitability of the corporate Respondents and their profit margins;

d.    the corporate Respondents’ customer lists and pricing arrangements with customers (due to the extensive tender of invoices required to rebut the joint tortfeasorship claims);

e.    the corporate Respondents’ salary expenses (including for the possible purpose of poaching employees); and

f.    financial position with respect to the Respondents’ ability to pay further legal costs in these proceedings as well as in further proceedings (noting that the Applicants have already commenced one additional set of proceedings, comprising the third proceeding in respect of the same core orientation equipment).

5    Mr Scott argues that if the applicants now oppose confidentiality orders for the first time (there having been a previously agreed confidentiality regime), the only reasonable inference is that they wish to have those documents publicly available for a purpose beyond seeking advice or advancing their case in this proceeding. He also adverts to the fact that the respondents are concerned that the applicants might attempt to gain access to the respondents’ commercially sensitive and confidential documents as part of a fishing expedition to advance further proceedings or in an effort to determine the financial strength of their opponents. The speculation on these points appears to overlook fundamental obligations which preclude misuse of documents obtained through litigation. This is especially so considering the very broad range of documents as discussed below under ‘Consideration’.

6    Coretell seeks orders that until 31 December 2021 (over seven years from now) a very substantial body of the exhibits in the trial listed in Mr Scott’s affidavit, and the information therein:

… not be disclosed to any person other than the Respondents and the external legal representatives of the Applicants who have signed confidentiality undertakings in accordance with the confidentiality regime agreed by the parties in July 2012.

CONSIDERATION

7    It is not clear to whom this order is directed. It will be almost impossible for anyone without access to the documents to ascertain whether or not the vast array of information referred to in Mr Scott’s affidavit is information which is within the documents.

8    Significantly, orders are sought by Coretell indiscriminately in respect of some 1500 pages of documents listed in [16] of Mr Scott’s affidavit.

9    There is no explanation for why this application has been pursued so late at the completion of the proceeding, even though it was adverted to in passing at earlier stages of the trial.

10    I am and have previously been mindful of the special position of competitors in relation to discovery of confidential commercial information, particularly pre-trial discovery in intellectual property litigation. See for example: Alanco Australia Pty Ltd v Higgins (2010) ACSR 234; Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (No 15) [2012] FCA 781; and Austal Ships Pty Ltd (ACN 079 160 679) v Incat Australia Pty Ltd (ACN 051 556 855) [2009] FCA 368.

11    In the present situation, however, there is no clear indication of why such orders are ‘necessary to prevent prejudice to the proper administration of justice’ as that expression is understood. As noted by Perram J in consideration of s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) (Act) in Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430, it must be ‘necessary’ for the Court to make the order, a standard which is higher than simply being ‘convenient, reasonable or sensible’ (at [19]). As his Honour said (at [21]):

Thirdly, what is involved in assessing whether the order should be made is not a balancing exercise: Hogan at [31]-[32]. It is not a question, on the one hand, of seeking to serve, as best one can, the interests of open justice and, on the other hand, considering the prejudice which may occur if the information is released. The test to be applied is the posing of the question as to whether it is necessary to make the order to prevent prejudice to the proper administration of justice. No balancing exercise is required or permitted.

(emphasis added)

12    A similar approach was taken by Robertson J in Stanford v DePuy International Ltd [2013] FCA 1304 where his Honour said (at [18]), after dealing with the statute:

The predecessor to these provisions was s 50 of the Federal Court of Australia Act. It provided that the Federal Court at any time during or after the hearing of a proceeding in the Court may make “such order forbidding or restricting the publication of particular evidence, or the name of a party or witness, as appeared to the Court to be necessary in order to prevent prejudice to the administration of justice or the security of the Commonwealth”. Section 17(1) required the jurisdiction of the Federal Court to be exercised in open court.

13    After referring to Hogan v Australian Crime Commission (2009) 177 FCR 205, his Honour continued (at [89] and [96]-[98]):

89    A related factor is that it seems to me to be unlikely that the entirety of the transcripts of and exhibits to the depositions would constitute trade secrets. That has certainly not been established by evidence. If a suppression order was being sought in relation to information that the moving party had seen or could give cogent evidence about, a consideration of parts of the information in a document could found such an order. I refer specifically to trade secrets because that was the emphasis of the first applicant’s submissions.

…

96    I do not accept the submission at [25] of the first applicant’s submissions in reply that the requirement of necessity has been met by reason of the confidential nature of the documents now sought to be protected. In my opinion, the mere fact that a party has contended that certain documents are “PROTECTED DOCUMENTS” or that they are confidential does not establish that a suppression order is necessary to prevent prejudice to the proper administration of justice within s 37AG(1)(a). It is to be recalled that the language of cl 3 is that the disclosure of the information “… is believed in good faith by the Supplying Party to have the potential, if disclosed, for causing competitive harm to it or giving a competitive advantage to others.” Such a claim does not establish that an order is necessary or that an order is necessary to prevent prejudice to the proper administration of justice.

97    The first applicant referred to Ritz Hotel v Charles of the Ritz (1988) 15 NSWLR 158 at 173C-D as to the drawing of an inference, in the present case from the claim for confidentiality by the respondents. However, it is not that I would not draw an inference that in the ordinary course of human affairs people do not in good faith claim to be confidential material that they do not consider to be confidential but that a mere claim, even in good faith, that a document is confidential is not sufficient to found an order under s 37AG(1)(a).

98    Nothing I have said means or should be taken to mean that with appropriate evidence and in appropriate circumstances trade secrets or personal records or commercial confidential information could not be or would not be the subject of an order under s 37AG(1)(a).

(emphasis added)

14    As with a previous interlocutory hearing before Justice Nicholas on 26 June 2013, as indicated in the transcript, Coretell has failed to descend to particularity about the precise material which it seeks to protect by way of suppression orders. As a consequence his Honour was not satisfied that the extensive orders which were then sought should be made. However, his Honour granted some relief in respect of parts of the affidavits of Mr Kleyn sworn 27 March 2013 and Mr Kenny sworn 28 March 2013, but only to the extent that they disclosed specific financial information concerning the current operations of the respondents and the names of any suppliers to any of the respondents or the names of any customers of any of the respondents. His Honour was unpersuaded, as am I, that there should be any restriction of a more extraordinary kind imposed in relation to access to the material.

15    Although general remarks have been made about sensitive operational and financial documents, there were very little indications of this at trial. Financial statements for 2009 were produced in respect of the second respondent, Mincrest Holdings Pty Ltd. That company, however, is said by the respondents to be no longer trading and, in any event, those financial statements are now five years old.

16    Similarly, although there is some pricing information, it is not evident in the context of the very substantial evidence which was adduced at trial that such pricing information, as is revealed by the documentation sought to be protected, is of a sensitive nature. As observed by Mr Christopher Williams, who swore an affidavit on 15 August 2014 in response on behalf of the applicants, none of the supply agreements contain confidentiality obligations in relation to pricing.

17    For those reasons, the justification for the relief sought by Coretell falls short of establishing that confidentiality orders are ‘necessary to prevent prejudice to the proper administration of justice’.

conclusion

18    Coretell’s oral application supported by the affidavit of Mr Scott affirmed on 1 August 2014 is dismissed.

Associate:

Dated:    27 November 2014