Hadid, Albert v Lenfest Communications Inc & Ors [1996] FCA 945

CATCHWORDS

PRACTICE AND PROCEDURE - documents produced by respondents in response to notice to produce - documents subject to consent orders restricting access to legal representatives and experts of applicant on undertakings being given as to confidentiality - whether orders should be varied to allow applicant access - whether s50 of the Federal Court Act authorises the making of such an order or whether s23 of tht Act applies - whether documents confidential as claimed - whether applicant a competitor or likely competitor of respondents as claimed.

Federal Court of Australia Act 1976; ss23 and 50.

Australian Broadcasting Commission v Parish (1980) 29 ALR 228; discussed.

Russell v Russell (1976) 134 CLR 495; referred to.

MacKay Sugar Co-operative Association Limited v CSR Limited (unreported, Spender J, 23 February 1996); referred to.

Harman v Home Office [1983] 2 AC 280; referred to.

Mulley v Manifold (1950) 103 CLR 341; referred to.

Independent Cement & Lime Pty Ltd v Australian Cement Ltd (unreported, Gray J, 27 October 1988); discussed and applied.

SRD v Australian Securities Commission (1994) 123 ALR 730; referred to.

Mobil Oil Australia v Guina Developments Pty Ltd (1995) 33 IPR 82; discussed and applied.

E. V. Australian Red Cross Society (1991) 27 FCR 310; referred to.

VX96A v Insurance and Superannuation Commissioner (unreported, Merkel J, 30 September 1996); referred to.

ALBERT HADID v LENFEST COMMUNICATIONS INC & ORS

No NG 36 of 1995

HILL J

SYDNEY

4 NOVEMBER 1996

IN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) No NG 36 of 1995

)

GENERAL DIVISION )

BETWEEN: ALBERT HADID

Applicant

AND: LENFEST COMMUNICATIONS INC

First Respondent

H.F. LENFEST also known as GERRY LENFEST

Second Respondent

BAIN CAPITAL MARKETS LIMITED

Third Respondent

WAYNE BURT

Fourth Respondent

AUSTRALIS MEDIA LIMITED

Fifth Respondent

RODNEY PRICE

Sixth Respondent

AND: LENFEST COMMUNICATIONS INC

Cross-Claimant

ALBERT HADID

Cross-Respondent

CORAM: HILL J

PLACE: SYDNEY

DATED: 4 NOVEMBER 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The motion of 31 May 1996 be allowed.

2. The application for an order under s50 Federal Court Act is refused.

3. The costs of the applicant of 7, 12 and 13 June 1996 be paid by the respondents.

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

IN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) No NG 36 of 1995

)

GENERAL DIVISION )

BETWEEN: ALBERT HADID

Applicant

AND: LENFEST COMMUNICATIONS INC

First Respondent

H.F. LENFEST also known as GERRY LENFEST

Second Respondent

BAIN CAPITAL MARKETS LIMITED

Third Respondent

WAYNE BURT

Fourth Respondent

AUSTRALIS MEDIA LIMITED

Fifth Respondent

RODNEY PRICE

Sixth Respondent

AND: LENFEST COMMUNICATIONS INC

Cross-Claimant

ALBERT HADID

Cross-Respondent

CORAM: HILL J

PLACE: SYDNEY

DATED: 4 NOVEMBER 1996

REASONS FOR JUDGMENT

The applicant, Mr Hadid, moves the Court for an order that he and a Mr Noah be permitted access to certain documents presently the subject of confidentiality orders (made by consent) which restrict access to lawyers and experts. There is no evidence as to who Mr Noah is, but it may be assumed that he is an associate of Mr Hadid.

The documents in respect of which access is sought are documents of the first and second respondents, Lenfest Communications and H F Lenfest ("Lenfest"); the fifth respondent, Australis Media Limited ("Australis"); East Coast Pay TV Pty Ltd ("ECT"), XYZ Programming Pty Ltd and XYZ Entertainment Pty Ltd (both of which companies are referred to as "XYZ"). ECT and XYZ are not parties to the proceedings. They are the recipients of subpoenas served upon them and, as such, seek to deny to Mr Hadid access to some of the documents produced by them on subpoena. For convenience, ECT and XYZ are referred to in these reasons as included among the parties who are respondents to the motion.

The respondents to the motion resist access being granted and seek an order under s50 of the Federal Court of Australia Act 1976 ("the Act") or, if that section be inapplicable any other source of power, that access be denied. In the alternative, they submit that if access is to be granted, it should be subject to undertakings being given to the Court by Mr Hadid and Mr Noah to keep the material confidential and not to use it other than for the purposes of the present proceedings. The giving of such undertakings is not opposed by Mr Hadid or, presumably, by Mr Noah.

An issue in the proceedings involves the calculation of damages which Mr Hadid has suffered, assuming that he is successful in the proceedings. On that issue expert evidence
has been adduced by the respondents to the proceedings which, it is said, is based upon some, at least, of the material which the respondents to the motion say should be denied to Mr Hadid and Mr Noah. Mr Hadid desires to respond to that evidence by obtaining his own expert testimony. However, to do so he needs, so he says, to instruct experts. He says that his own knowledge and experience peculiarly qualify him to comment on the evidence sought to be adduced by the respondents' witnesses. Mr Sherman who, together with Mr Ferrier, a partner of Mr Sherman, has been retained by Mr Hadid to give expert evidence, says that he would like Mr Hadid's assistance in preparing responses to the expert evidence of the respondents to the proceedings.

It is necessary first to say something of the substantive proceedings in order to place the application for access in context. What follows is but a brief outline and somewhat oversimplifies the issues between the parties.

In his further amended statement of claim Mr Hadid alleges that the six named respondents have engaged in misleading and deceptive conduct in breach of s52 of the Trade Practices Act 1974 (Cth). He also alleges fraud on behalf of the respondents. The conduct complained of centres around the sale of what is known as the satellite B licence to Australis by Lenfest. Mr Hadid's company, New World Communications ("New World"), had successfully tendered for the B licence (and in fact the A licence which, however, is not relevant to these proceedings) and entered into an agreement with Lenfest which paid a $7.3 million deposit for both the A and B licences, to work together to find a buyer for the two licences. Lenfest, according to Mr Hadid, represented that there was no buyer for the B licence, but that Lenfest itself was interested. Indeed, Mr Hadid had had unsuccessful discussions with executives of Australis, that company having been identified by Mr Hadid as a prospective purchaser. As a result of the advice from Lenfest, Mr Hadid claims, he sold his controlling shareholding in New World to Lenfest for the sum of $13 million, delivering the licences to Lenfest. That sale took place on 17 November 1993. The next day, Lenfest sold the shares it had purchased from Mr Hadid to Australis for $138 million. Mr Hadid claims that had he known that Australis was prepared to purchase the shares, he would have sold them for a higher price.

It is not in dispute that the calculation of the damages to which Mr Hadid says he is entitled is a significant issue in the proceedings.

Mr Hadid has also commenced proceedings in the Supreme Court of New South Wales seeking specific performance of an agreement which he alleges was made subsequently between himself and Australis. Success in those proceedings could deliver to Mr Hadid control of two narrowcast channels, which Australis says would make Mr Hadid a possible competitor of Australis.

The substantive reasons why it is said that access to the documents should be denied to Mr Hadid is that he is claimed to be both a potential "competitor" and potential "commercial counterparty" of Australis and also ECT and XYZ. ECT is a franchisee of Australis and holds the A satellite license, giving it an entitlement to four pay television channels. XYZ is a producer and supplier of programs for distribution, inter alia, through the satellite pay television system. It is said that, if Mr Hadid be given access to the material in dispute, he would be in a position to use the information contained in the documents in the future in a way which would be disadvantageous to the respondents to the motion. (Hereafter, when reference is made to the "respondents", that reference will be to the respondents to the motion.)

The reference to "commercial counterparty" refers to the possibility that, if Mr Hadid were to become a producer and supplier of programs as he has expressed a desire to do in the future, he would be in a market of offering for license programs he produced, inter alia, to Australis.

Also at issue is whether the documents in question are of a confidential nature at all, whether they have already been published to other competitors and to the public, and whether, if sensitive now, they will be later, if and when Mr Hadid does become a competitor.

THE COURT'S POWER TO DENY ACCESS TO DOCUMENTS

Whatever the source of power to deny access to documents otherwise relevant to the proceedings, two policy considerations govern the exercise of that power. First, is the concern of the Court to promote and ensure open justice. As Gibbs J (as he then was) said in Russell v Russell (1976) 134 CLR 495 at 520, albeit in the context of the holding of proceedings in camera:

"It is the ordinary rule of the Supreme Court, as of the other courts of the nation, that their proceedings shall be conducted `publicly and in open view'... This rule has the virtue that the proceedings of every court are fully exposed to public and professional scrutiny and criticism, without which abuses may flourish undetected. Further, the public administration of justice tends to maintain confidence in the integrity and independence of the courts. The fact that courts of law are held openly and not in secret is an essential aspect of their character. It distinguishes their activities from those of administrative officials, for `publicity is the authentic hall-mark of judicial as opposed to administrative procedure'...".

Secondly, is the requirement, as a matter of procedural fairness, that a party to proceedings has prima facie a right to access all documents properly discovered or produced before trial and all material in evidence at trial. That right may be qualified in a number of ways, for example it may be defeated by a valid claim of legal professional privilege or public interest immunity. Relevant to the present case it may be qualified if, on balance, the interests of justice require such a qualification. However, generally speaking it may be said that it is fundamental that a party to a proceeding know the case sought to be made against him or have access to material which would enable him to respond to that case.

However, as Lord Keith observed in Harman v Home Office [1983] 1 AC 280 at 308, in a passage cited with approval by Spender J in MacKay Sugar Co-operative Association Limited v CSR Limited (unreported, 23 February 1996, at 10):

"Discovery constitutes a very serious invasion of the privacy and confidentiality of a litigant's affairs. It forms part of ... legal procedure because the public interest in securing that justice be done between the parties is considered to outweigh the private and public interest in the maintenance of confidentiality."

Thus, where an application for confidentiality is made, consideration must be given both to the public interest in open litigation and the private interests of those affected by the litigation, be they parties or persons subpoenaed.

Those seeking to deny access to Mr Hadid relied upon s50 of the Federal Court Act which provides:

"The Court may, at any time during or after the hearing of a proceeding in the Court, make such order forbidding or restricting the publication of particular evidence, or the name of a party or witness, as appears to the Court to be necessary in order to prevent prejudice to the administration of justice or the security of the Commonwealth."

Australis submits that in applying s50 the Court must undertake a balancing task when considering the extent of disclosure of documents on discovery between trade rivals. It is said that the needs of a party to the litigation must be fairly balanced against the legitimate concern of a trade rival to retain the secrecy of commercially sensitive information. The need for some such balance is not really in dispute. Its applicability depends upon the claim that Mr Hadid is a trade rival of Australis, or for that matter any other of the respondents, a question which is considered below.

ECT and XYZ adopt the submissions of Australis but also raise their own submissions. As a threshold matter, it is said on their behalf that it is clear from the terms of the section that s50 has no application to the present motion. It is then submitted that because s50 refers to "the hearing of a proceeding" (ECT's and XYZ's emphasis) and, as this matter has not yet come to trial but is only at an interlocutory stage, s50 can not apply. It must be noted that the submission does not challenge the power of the court to deny access, for it is accepted that if s50 has no application the Court has power under s23 of the Federal Court Act to make such an order. The source of power could only have significance if different criteria apply depending upon which section has application, a matter discussed later in the judgment.

Section 23 provides:

"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."

The narrow interpretation sought to be given to the word "hearing" in s50 is, in my view, not warranted. The word "hearing" is equally apt to refer to a "directions hearing" or an "interlocutory hearing" (emphasis added), as it is to a hearing on the merits: cf Melbourne & Metropolitan Board of Works v Bevelon Investments Pty Limited [1977] VR 473 at 477. Indeed, the Federal Court Rules refer, for example, in O 10 r 1 to "Directions Hearing". Order 4 r 9 of the same rules refers to a "hearing" in the context of a claim for interlocutory relief. Had the word "hearing" been used in s50, together with the words "on the merits" or some such expression, the submission might have had more force. The word "hearing" in s50, in my view, is not limited to the trial of a proceeding. It will include the hearing of any motion or application before a judge or registrar from the first directions hearing to the final determination of the application to the Court. The power to suppress the name or names of parties and witnesses conferred by s50 would be somewhat hollow if restricted to the period during and after the trial and not capable of exercise at the earliest possible time. An example where the power has been exercised before the hearing of the merits is E v Australian Red Cross Society (1991) 27 FCR 310.

Perhaps s23 of the Act could, if the submission were correct, operate as a source of power authorising the making of such orders before a trial on the merits took place, but it would be somewhat cumbersome to apply different sections, and at least arguably different tests, to the same issue merely because the issue arose at a different stage of the hearing of the case. There would also be the argument that s50 covered the field to the exclusion of s23 as a source of power for orders, forbidding or restricting the publication of particular evidence or the name of a party or witness.

ECT and XYZ also make the more substantial submission that the use of the words "publication of particular evidence, or the name of a party or witness", only authorise the making of orders restricting the public from gaining access to material and do not authorise the making of orders restricting the access of a party to material. The submission places emphasis on the word "publication" which it is claimed refers to disclosure to members of the public rather than to a party.

The word "publish", as its etymology suggest, has, among the range of meanings normally attributed to it, the idea of making publicly or generally known. In the area of defamation it involves merely communication to a person or persons other than the person defamed. In this latter sense the emphasis on publication to the general public is weaker than suggested by the ordinary meaning of the word. Nevertheless it demonstrates, I suppose, that the prohibition of publication to which s50 refers could be limited to a particular person or group of persons rather than to the public at large. On the other hand, care must be taken not to emasculate the power conferred by the section by giving too narrow a construction to it, so long as the construction is one which is fairly open.

But the argument that s50 has no application to the restriction of the access of a party to material produced on discovery or on subpoena is given force by the use in the section of the word "evidence". Documents do not become evidence merely by being discovered or produced to the Court on subpoena. Gray J, in Independent Cement & Lime Pty Ltd v Australian Cement Ltd (unreported, 27 October 1988), found that s50 had no application to a discovered document on the ground that such a document was not "evidence". His Honour commented (at 3):

"It should be noted that the section in its terms, so far as relevant to this application, deals with the restriction on the publication of particular evidence. A document which is the subject of the process of discovery of documents before trial is not evidence."

I share His Honour's view.

It might be argued that the word "evidence" could be given an ambulatory meaning so as to extend to material which might at a later time be admitted into evidence. But such a construction would, to say the least, be a strained one. In Australian Broadcasting Commission v Parish (1980) 29 ALR 228 there are some passages which might suggest that s50 could authorise the making of confidentiality orders preventing access by a party to material which had been discovered but not tendered in evidence. Parish, in fact, concerned the making of a s50 order to preserve confidentiality in a document which had been tendered in the course of the hearing. The evidence concerning the document was given in camera and the issue of confidentiality was argued subsequently. A source of possible confusion in the case is that the trial judge apparently suggested that the issue of confidentiality should be determined as if it were a contested application for inspection of a discovered document (see at 240). However, on any view of the matter, the case was one where the source of power of an order lay in s50 and the only issue between the parties consisted of the proper principles to be applied where s50 was relevant.

It is my view that s50 has no application to the present case. It is unnecessary to consider whether the section has any application to restrict specifically the publication of evidence or names to a party, as against the public at large. However, it would be hard to imagine a court making an order restricting publication of the name of a witness or the content of evidence specifically to a party when otherwise that evidence could be published to the world at large.

The question then arises whether s23 supplies the authority for an order preventing access to materials discovered or produced on subpoena where those materials are not yet "evidence". In SRD v Australian Securities Commission (1994) 123 ALR 730 at 733, I said:

"There has been little discussion of the construction of s50 or, for that matter, its relationship to s23 of the Act which empowers the court, in which it has jurisdiction, inter alia, to make such orders as may be appropriate. On one view
of the matter, by expressly dealing in s50 with orders restraining the publication of evidence or the name of a party or witness, the legislature may be taken to have excluded from the ambit of s23 those matters, imposing, where such orders are to be made, the test of prejudice to the administration of justice or the security of the Commonwealth contained in s50."

But once it is found that the matter falls outside s50, then there is no reason to restrict the broad generality of s23. In my view, that section provides the source of power for the order presently sought.

The significance of finding that s50 has no application is said to be that the test to be applied is less onerous for the party seeking to prevent access being granted. Section 50 requires there to be shown, in the case where there is no suggestion that the security of the Commonwealth is threatened, "prejudice to the administration of justice", whereas under s23 it is only necessary that the order be "appropriate".

It may here be remarked that the cases where s50 has been discussed, such as Parish, have given a very broad construction to the words "prejudice to the interests of justice", although it is clear, as Bowen CJ observed, that s50 was not concerned with "trivialities". It is without question that, in exercising a discretion to make an order under s50, the Court would take into account the public interest in doing justice between the parties (per Bowen CJ at 236). Further, the "prejudice" of which s50 speaks is overall prejudice and the "administration of justice" refers to the administration of justice generally. Thus where s50 applies, the interest of the parties, the effect disclosure of confidential material may have, and the advantages or disadvantages which an order under the section may bring with it, are weighed against the public interest in open justice to determine whether on balance an order should be made. The task is not greatly different from that involved in determining appropriateness where the power is enlivened by s23. All of the matters which s50 makes relevant will, of necessity, be required to be considered in defining appropriateness.

To the extent that the tests under ss50 and 23 differ, s23 might impose a lower threshold test than s50. Certainly the public interest in open justice will usually be more affected by suppression of the names of parties or evidence adduced in a trial where there is a reasonable expectation that trials will proceed in open court and the names of the parties will be in the public domain. Most of the reported cases which have applied s50 have been applications to prevent the "public" publication of names; cf E v Australian Red Cross Society; and more recently VX96A v Insurance and Superannuation Commissioner (unreported, Merkel J, 30 September 1996).

Whether the present matter be considered under s23 or s50, certain common considerations are relevant.

Discovery and inspection are today a fundamental part of a court's process designed to provide the parties with access to all relevant documents prior to the trial to enable them to prepare for the trial and of course also appraise their case and that of their opponent so as to promote the settlement of the proceedings: see Simpson, Bailey and Evans, Discovery and Interrogatories 2d ed, 1990 at 2. Thus, Menzies J in Mulley v Manifold (1959) 103 CLR 341 at 345 said:

"... discovery is a procedure directed towards obtaining a proper examination and determination of these issues - not towards assisting a party upon a fishing expedition. Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party's own case or damage that of his adversary."

The inspection of documents discovered is an inseverable part of the process of discovery. Frequently, perhaps indeed almost always, the party to the litigation will be the person best placed to form an assessment of the real significance of documents produced, whether that assessment is made for the purposes of preparing an ultimate trial or for the purpose of prospective settlement negotiations. Thus there is a clear prima facie right in a party to litigation personally to inspect discovered documents. It is a far from a satisfactory answer to the abrogation of this prima facie right, that the legal adviser to the party may be permitted to inspect the document, for that adviser is, if the client is restricted from inspecting the material, placed in the difficult and indeed sometimes impossible position where he or she can not obtain instructions.

This prima facie right of a party to litigation to inspect documents discovered by another party is related to the obvious right of a party to litigation to be apprised of the case which is put against him. It is part of the principles of procedural fairness which are applied daily in our courts.

Where confidentiality in documents is made out the prima facie right to inspect discovered material and the prejudice to the party against whom an order denying access is sought, have to be weighed against the degree of confidentiality made out and the prejudice to the person seeking confidentiality, if that confidentiality should be breached.

It is submitted for the applicant that if s50 applies "serious prejudice" must be shown and that the respondents have failed to do that. It is clear from the judgment of Bowen CJ in Parish, to which reference has already been made, that the ground for an order under s50 could not be "trivial". What is at issue is prejudice to the administration of justice. As Bowen CJ said (at 235):

"... the very proceedings before the court should not be permitted to destroy or seriously depreciate the value of such confidential information."

Likewise under s23, even if the degree of prejudice may be less than that required under s50, that prejudice must be such as to make it appropriate to deprive a party to the litigation to the prima facie right, to which reference has been made, and which is an important ingredient in giving to that party procedural fairness.

On behalf of Australis it is submitted that it is sufficient to attract an exercise of discretion that there be shown a risk of prejudice, a risk that the confidential information will be, in the language of the learned Chief Judge, "destroyed" or "the value seriously depreciated". Whether mere risk is sufficient to found an application under s50 need not be here decided. However, it must be remarked that since prejudice can not eventuate unless the confidentiality is breached by disclosure, and since the information which is confidential could not be destroyed or its value seriously depreciated unless access were granted, it is hard to see how it could be otherwise than that mere risk would suffice. What is relevant, both under s23 and s50, is the extent of that risk. In turn, the extent of that risk will depend in the present case upon whether Mr Hadid is or is a potential competitor of the respondents and the degree of sensitivity of the information sought to be protected.

Some assistance to the approach to be taken is to be found in the decision of the Court of Appeal of the Supreme Court of Victoria in Mobil Oil Australia v Guina Developments Pty Ltd (1995) 33 IPR 82 at 87. Hayne JA in that case said at 87:

"While it may readily be accepted that a party is ordinarily entitled to discovery and inspection of all discoverable documents in the possession or control of the opposite party ... it is important to bear steadily in mind that discovery is but a tool to be used in the pursuit of justice and that the right to discovery and inspection is not without its limits. ...

Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. 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 ... the party obtaining discovery is a trade rival ... 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 ... To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is ... 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."

The concern that once information comes into the hands of a trade rival the confidentiality in it will be destroyed may, perhaps, be overstated: (cf Mackay Sugar Co-operative Association Limited v CSR Limited (unreported, Spender J, 23 February 1996) at 13).

Two questions presently arise for decision in determining the appropriateness of an order denying access to Mr Hadid. The first is whether the documents in respect of which access is sought are such as to contain commercially sensitive or confidential information. The second is whether Mr Hadid is, or is likely to be as submitted by the respondents, a competitor so that access by him to the information constitutes a real risk to the respondents.

THE LENFEST DOCUMENTS

Lenfest sought to prevent access to what are known as the "Envelope C" documents. Contained within Envelope C were documents provided to Lenfest, subject to a contractual obligation to keep the information confidential. It is the contractual obligation to keep this material confidential which prompts Lenfest to apply to the Court in response to Mr Hadid's motion. While the existence of a contractual obligation to keep material confidential will be a relevant consideration, at least in some cases, it can hardly stand in the way of the making by the court of an order if the needs of justice so require.

Although in his affidavit in support of Mr Hadid's access to the documents Mr Sherman asserted that Mr Lonergan had used the information in Envelope C in preparation of his expert report, counsel for Lenfest in cross-examination of Mr Sherman elicited the admission that this was merely an assumption on the part of Mr Sherman. Mr Lonergan did not give evidence in the motion, but an affidavit sworn by a solicitor acting for Lenfest deposed that the documents had not been provided to Mr Lonergan or his staff. But the fact that Mr Lonergan had made no use at all of the information in the documents is no reason to deny to Mr Hadid access to material, if that material has potential relevance to an issue in the proceedings. Even if the documents were not considered by Mr Lonergan, they might assist Mr Sherman in any comment or reply he may wish to make in reply to Mr Lonergan's report. In making that reply, Mr Hadid's comments on the material, in the light of his knowledge of the industry, would obviously be of assistance.

Envelope C contained, inter alia, details supplied by Home Box Office Corporation concerning the terms of supply of particular programs to Australis. A memorandum to Mr Lenfest shows comparative rates proposed by three program suppliers. The information was current as at April 1994. Subject to the age of the material, it is clear that the material in the envelope could have commercial sensitivity. It is difficult to determine the effect of age on the material. Mr Sherman agreed both that he had had access to the actual supply agreements into which Australis had entered and that Australis had not entered into any programming agreement with Home Box Office. Counsel for Lenfest in his cross-examination sought to demonstrate that the material was not relevant, or at least was of little relevance to Mr Sherman's expert testimony. Mr Sherman disagreed that the material could have no relevance. He said that the information which had already been made available to him related to criticism by Mr Lonergan concerning programming expenses and in essence provided information as to costing of potential programs. The fact that no supply contract was entered into with Home Box Office did not according to to Mr Sherman require the conclusion that the material was irrelevant.

THE XYZ AND ECT DOCUMENTS

The documents which XYZ and ECT claimed to be confidential were those referred to in the affidavit of 11 June 1996 of their solicitor, Derek Raymond Hilliard. Mr Hilliard says that the documents contain commercially sensitive and confidential information which only the directors of ECT have seen in its entirety, excluding legal representatives in these proceedings. Mr Hilliard also says that were Mr Hadid to have access to them, he would be placed in the "unique situation of having access to most of the relevant information relating to both satellite and franchise businesses as well as programming". Mr Hilliard then says:

"In 1997 the pay television industry will be deregulated and Mr Hadid will be in a position to compete with ECT, and others, if he is able to obtain a satellite licence or licences and able to find a transponder. After deregulation the restriction on the number of satellite channels will be lifted and there will be a real market. Mr Hadid will be able to compete with XYZ, and programme producers such as XYZ on an unequal basis because he will know XYZ's programming costs, programming sources and programming margins."

The ECT documents fall into three categories according to Mr Hilliard: documents relevant to the franchise agreement with Australis; financial information relating to ECT; and the ECT draft business plan. The XYZ documents consist of programming agreements; financial information regarding XYZ; and costing analyses and projections.

The submission was that the combined effect of this material was to provide a "blueprint" for the creation of an operating channel.

There is little doubt that the material is confidential, even if one may doubt the usefulness in the present context of affidavit evidence sworn by a solicitor as to its significance. No evidence was given directly by any officer of XYZ or ECT as to the risk of prejudice to the respective companies. However, I am prepared to assume in favour of XYZ and ECT that the material is of significant commercial value and that its value could be destroyed if made available to a trade rival. Thus the decisive question will be whether Mr Hadid is to be seen actually or realistically in the future as a trade rival.

THE AUSTRALIS DOCUMENTS

As the hearing of the matter proceeded, the number of documents in respect of which confidentiality was claimed on behalf of Australis diminished as concessions were made or as it was revealed that some of the material sought to be protected had in fact been published to the public at large in some form. Publication occurred principally through filing with the Securities and Exchange Commission in the United States of America in accordance with that Commission's requirements. Part way through the hearing, in an effort to confine the argument between the applicant and Australis to a small number of documents, I asked the parties to nominate representative documents in respect of which the issue of confidentiality could be determined. This was to prevent the Court being required to analyse a large number of documents to see whether the claim that they contained confidential information could be sustained.

In response to this request, three categories of documents were tendered:

(i) The Australis business plans of June and November 1995 (Exhibit 7);

(ii) A program agreement (Exhibit 5) and a program distribution agreement (Exhibit 6); and

(iii) Two technology supply agreements (Exhibits 8 and 9).

The comments appearing hereunder are confined to the documents so tendered.

THE AUSTRALIS BUSINESS PLANS OF JUNE AND NOVEMBER 1995 (EXHIBIT 7)

The respondents contend that the business plans are the most sensitive documents before the Court, disclosure of which to Mr Hadid, as a competitor, would harm them. It is said by Mr Blamires, the Company Treasurer of Australis, that they contain judgments made by higher management of Australis about the future performance of that company. Mr Blamires says that, as a program supplier, Mr Hadid would present a threat to Australis as he would be in a position to know the discounts and other sensitive informationwhich are agreed to by Australis with incumbent program suppliers to it. He would thus, as a commercial counterparty, be in an unusually informed bargaining position for the purpose of any negotiations with Australis to supply programming. In addition, Australis fears that Mr Hadid would be able to tailor any offer of programming so as to take advantage of financial strength or weakness, in particular "tiered services".

Mr Blamires also makes reference to other information about "additional tiers of service" such as "advertising splits" which reveal advertising costing broken down for particular programs, channels and packages; about restrictions on transmission of Australis material on free-to-air television; and about who pays for satisfying Australian content requirements on Australis channels.

Mr Hadid contends that the sensitivity of this and the other information in the business plans is now negligible, as there are new business plans and projections and much of the information is therefore out of date. Mr Blamires, under cross-examination, conceded that "certain aspects" of the June 1995 expectations were rendered redundant when that business plan was replaced by the November 1995 business plan. It was also conceded that much detailed information about the extent to which Australis had achieved market penetration had been published to the market place.

It is obvious that the usefulness of information in a business plan, even to a competitor, would decrease as time passes. Although in evidence Mr Blamires was at pains to point out that the information would still be of some use, he did concede that its usefulness in the future would depend upon a number of considerations, for example whether the data in the projections was then current. Mr Blamires said that some of the information contained in the projections was, in effect, a summary of agreements that might have been entered into between Australis and other parties. To make meaningful use of the information disclosed by that summary at some later time, it would, Mr Blamires agreed, be necessary to know whether agreements referred to were still on foot, whether they had been amended and so on. Even at the general level of what kind of structure of agreement Australis might enter into, he agreed one would need to know whether policy behind certain agreements reflected in the projections had changed. So even if Mr Hadid were to be considered a commercial counter-party of Australis by virtue of being in the business of selling programming to pay TV operators, one of whom may be Australis, it is difficult to see that any real advantage would accrue to him through access to these documents.

It might here be mentioned that the business plans appear to have been published in unredacted form to News Corporation ("News") and Publishing and Broadcasting Limited ("PBL"), two acknowledged competitors of Australis, during the course of negotiations, subject of course to a contractual obligation to keep the material confidential. It is hard to see that this has any relevance to the present issue. That disclosure was in confidence and does not destroy, as such, the confidential nature of the material. Nor can any inference be drawn from that disclosure that access by Mr Hadid to the same information could thus not prejudice the respondents.

THE PROGRAMMING AGREEMENTS

The programming agreements are, like the business plans, likely to be significantly out of date by the time such information could be useful to Mr Hadid, if at all. There are other problems with the claim for confidentiality over these agreements.

First, they deal with an entirely different kind of programming to that which Mr Hadid might offer should he become a commercial counter party to Australis. According to his evidence, Mr Hadid wishes to be involved in the production and presumably supply of Australian films. This would involve particular program supply, as opposed to the supply of entire programming streams, to deliver a whole channel's worth of programming. The information in these documents concerns programming for a whole channel and thus relates to a potential transaction, very different from that contemplated by Mr Hadid.

Further, the information contained in the agreements is readily available in many respects. As the applicant submits, costing information is rendered irrelevant if he succeeds in the Supreme Court as that agreement which would be specifically enforced allows Mr Hadid to provide his channels through Australis at the incremental cost to Australis of running that service. In other words, that agreement is alleged by Mr Hadid already to provide for costing and the like. Any charges to subscribers are publicly available. As far as the internal costs to Australis are concerned, Australis submits that this information will place it at a commercial disadvantage in future dealings with Mr Hadid in relation to the supply of programming. However, as counsel for Mr Hadid persuasively points out, Australis' programming costs are irrelevant to Mr Hadid while Australis has the right to use a program because, while that program is licensed to Australis, it is not available to Mr Hadid. Should a program cease to be licensed to Australis so that it could be offered for license to Mr Hadid among other potential bidders, the owner of that program would seek to extract the highest price for it.

TECHNOLOGY SUPPLY AGREEMENTS

The applicant submits that the claim in relation to these documents is even harder to maintain.

Mr Blamires in his evidence maintained that, if a prospective program supplier had knowledge as to what the cost of equipment was then that supplier would be in a position to determine how much of Australis' funds were available for programming. He said:

"... The equipment cost is the second highest expense the company incurs after programming. In the time of the establishment of the organisation it's the most significant cash outflow after the main infrastructural costs such as licences, et cetera, have been established so it is the most significant cash expense in the early development phase.

However, Mr Blamires had earlier conceded the minimal value the information had:

So it would not be a lot of use to you, would it, if you were trying to work out how much to offer a program to you? --- Well, it could be of use. It would not be a lot of use, no.

It is clear that the claim for confidentiality to the technology agreements is weak.

I turn now to consider whether the respondents have established that Mr Hadid is, or is likely to be, a competitor of the respondents or any of them.

MR HADID AS A COMPETITOR

In his affidavit of 31 May 1996 Mr Hadid says:

"I am not a competitor in the Australian Pay TV Industry nor at the time of swearing this affidavit have I any reason to become a competitor in the foreseeable future."

Counsel for Australis sought to attack this assertion on the basis that Mr Hadid, in giving his evidence, repeated words like "at the time of swearing", "at the moment" and "no immediate plans", which, it was submitted, indicated an intention to become a competitor. In support of this submission reference was made to the proceedings Mr Hadid has brought in the Supreme Court of New South Wales, which have already been mentioned. These proceedings have been set down for hearing on 21 October 1996.

As already indicated, Mr Hadid seeks specific performance of a contract between himself and Australis which, he says, entitles him to control of two narrow casting channels licensed to Australis. He seeks damages in the alternative. He said that control of the two channels was "the most favourable outcome" he could achieve. Mr Hadid agreed under cross-examination that, should he achieve this favourable outcome, he would have control over the programming to be supplied through those narrow casting channels. Counsel for Australis submits that the proceedings, when viewed in the context of the history of his extensive involvement in the industry (a matter not in dispute), are a basis for inferring that Mr Hadid will in future not only continue to be involved in the industry but be competing directly with Australis.

It must be said that it is by no means certain that Mr Hadid will win his case in the Supreme Court, let alone achieve an order for specific performance. Mr Hadid himself predicted that he would receive damages, given that his potential to exploit the licences would be minimal as a result of the market "moving". I am certainly in no position to speculate one way or the other as to the outcome of those proceedings. I thus do not find that it is more probable than not that Mr Hadid will achieve the most favourable outcome and am inclined to the view that little weight can be placed by the respondents upon the proceedings. From the point of view of the respondents, the best that can be said is that they have shown that there is some risk that in the future Mr Hadid might become a competitor.

It is not suggested that Mr Hadid is presently a competitor of Australis. In his evidence Mr Hadid said, under cross-examination:

"... my intentions have changed completely now. I have replanned my future at the moment, so that at the moment there are no intentions at all to get into broadcasting in Australia at the moment, because I don't know what opportunity will come up
in two, three years but I have no immediate plans ...".

It is not unreasonable for Mr Hadid to assert that he has no present intentions to be a competitor of Australis as he has no means of being one. The criticism of his evidence is his reluctance in the witness box to be pinned down to what his intentions would be in the event that he did have the means to be a competitor. Mr Hadid was asked:

"Would you agree with this proposition that if you were successful in these [Supreme Court] proceedings and thereby obtained access to the two channels you would be putting yourself in the position where you could possibly compete with pay TV operators in the Australian pay TV industry? --- There is that possibility, yes, sir."

The fact that Mr Hadid attempted to focus his answers on the present and would not rule out any future competitive role, does not prompt the conclusion that Mr Hadid necessarily will be, or even is likely to be, a competitor. He said that it was his dream to be involved in the making of films and that should that come to pass he would to that extent remain involved in the industry. Once the pay-television industry is deregulated in 1997, the way would then be open for Mr Hadid to become a direct competitor of Australis, should he so desire. He expressed no desire to do so.

On Mr Hadid's evidence it is simply not possible to say with any certainty what, if any, his specific future role in the pay television industry is likely to be. Such attack as there was on Mr Hadid's credit did not cause me to disbelieve him. I would find that the "risk" of his competing directly with Australis is not great. However, the respondents have not shown that there is a substantial risk that Mr Hadid will become a competitor. Nor has it been shown that he has any intention to become a competitor, even if he were successful in the Supreme Court proceedings in obtaining specific performance. He said:

"... we will not be competing with them [Australis] because we intended to run the channels through them, with them. We wanted to be friends, we still want to be friends. My whole life depends on this 5 year exclusive agreement. I am trying to help Australis even today in everything I can. So I don't see Australis as a competitor."

In my view, the respondents have thus not shown on the balance of probabilities that Mr Hadid is a competitor actual or prospective of the respondents. Nor have they shown in consequence such a real risk of damage to them in giving access to the information (subject to confidentiality undertakings) as to make an order prohibiting access to the material by Mr Hadid appropriate.

CONCLUSION

Counsel for Lenfest did not in submissions press a claim for complete denial of access, but was content to establish the confidentiality obligation his clients owed to the source of the material. In light of the findings made above, an undertaking from Mr Hadid, as described below, would suffice to preserve the confidentiality of the documents Lenfest wish to protect.

The applicant submits that there is no competition at all between XYZ and ECT and Mr Hadid. I am of the view that it has not been shown that Mr Hadid is or is likely to be a competitor of these companies and accordingly I would not make an order restricting access of the documents to Mr Hadid. Such risk as there may be to these companies is outweighed to the undoubted prejudice to Mr Hadid of being denied access to the documents. The documents referred to in Mr Hilliard's affidavit will be adequately protected by Mr Hadid's undertaking.

Likewise the application of Australis must fail for the same reason.

No evidence has been advanced by the respondents to demonstrate why access by Mr Noah should be denied. On this basis I would not make any order denying access to him,
provided that he gives an undertaking to the same effect as that offered by Mr Hadid.

I would accordingly grant access to Mr Noah and Mr Hadid in respect of all documents the subject of the present motion, subject to undertakings from Mr Hadid and Mr Noah not to use the information for any other purpose than for the purpose of these proceedings, and not to disclose the information to any person other than legal representatives and engaged experts in these proceedings. The costs of the motion are to be paid by the respondents.

I certify that this and the

preceding thirty-five (35) pages

are a true copy of the Reasons

for Judgment herein of his Honour

Justice Hill.

Associate:

Date: 4 November 1996

Counsel and Solicitors Ms A Bennett SC with Mr N Cotman

for Applicant: instructed by Corrs Chambers Westgarth

Counsel and Solicitors Mr R Smith instructed by

for First and Second Clayton Utz

Respondents:

Counsel and Solicitors Mr J Nicholas instructed by

for Third and Fourth Phillips Fox

Respondents:

Counsel and Solicitors Mr M Slattery QC instructed by

for Fifth and Sixth Atanaskovic Hartnell

Respondents:

Counsel and Solicitors for: Mr W Haffenden instructed by

East Coast Pay TV Pty Ltd Tress Cocks & Maddox

XYZ Programming Pty Ltd

XYZ Entertainment Pty Ltd

Dates of Hearing: 7, 12 and 13 June 1996

Date Judgment Delivered: 4 November 1996

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