FEDERAL COURT OF AUSTRALIA

Practice and Procedure - subpoena - issue of subpoena to a third party to the principal proceedings - whether documents subject to the subpoena contain confidential and commercially sensitive information - legitimate forensic purpose - terms upon which access to subpoenaed material should be granted - application of case management principles - deferral of call on subpoena until completion of discovery and exchange of evidence.

Federal Court of Australia Act 1976- s 23

Mobil Oil Australia Limited v Guina Developments (1995) 33 IPR 82 - considered

Telstra Corp v Australis Media Holdings, Supreme Court of New South Wales, McLelland CJ in Eq., 6 December 1996, unreported - considered

Hadid v Lenfest Communications Inc, Hill J, 4 November 1996, unreported - considered

reading australia pty limited v australian mutual provident society AND AMP INVESTMENTS LIMITED

NG 326 of 1997

judge:          beaumont j

place:          sydney

date:            28 august 1997

ORDERS:

1.         The motion to set aside the subpoena refused.

2.         The call upon the subpoena deferred until further order.

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

REASONS FOR JUDGMENT

Before the Court is a notice of motion moved by Village Roadshow Limited (“Village Roadshow”), which is a third party to the principal proceedings.  Village Roadshow seeks to set aside a subpoena issued to it, at the request of Reading Australia Pty Limited (“Reading”), the applicant in the principal proceedings, seeking the production of documents relating to a shopping centre development.  The notice of motion also seeks a costs order and such further or other orders as may be appropriate.  

Reading is a subsidiary of a United States corporation, which is engaged in the construction and operation of cinema complexes.  Reading and Village Roadshow compete directly against each other, particularly in relation to the acquisition of new sites.  There is evidence from John Gregory Anderson, an officer of Village Roadshow, that the documents ordered to be produced by the subpoena include internal memoranda which contain confidential and commercially sensitive information.  The documents detail the methods and procedures employed by Village Roadshow in the operation of its business, the basis upon which it acquires new sites, and the method by which they are developed.  These documents are relevant to Village Roadshow's current operations.

As I followed the course of the argument before me, it appears that Reading is prepared to accept that, if the documents ordered to be produced under the subpoena are of the kind suggested by Mr Anderson, then it would be appropriate, at least in the first instance, that some restriction be placed upon access to the documents by way of inspection.  The solicitors for Reading have indicated in correspondence that they will treat the information in the documents, if produced, as confidential and will agree, at least temporarily, to a restriction of access to any "sensitive" documents to Reading's legal representatives.

I proceed, therefore, upon the assumption, which I think should be made in any event from the material before me, that the documents in question are confidential and that, if they were made available to a trade rival such as Reading, it is possible that irreparable damage to Village Roadshow could follow.

The general approach to be taken by the Court in permitting access to confidential material of this kind is now well established.  It arises frequently in industrial property litigation.  The more recent authorities, in particular, Mobil Oil Australia Limited v Guina Developments (1995) 33 IPR 82 and Telstra Corp v Australis Media Holdings, Supreme Court of New South Wales, McLelland CJ in Eq., 6 December 1996, were considered by Hill J in Hadid v Lenfest Communications Inc, 4 November 1996, unreported.

In Mobil Oil, above, Hayne JA said (at 87):

"Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten.  Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned).  To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed.  How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question?  How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender?  Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed.  Is that necessary for the attainment of justice in the particular case?"

In Telstra Corp, above, McLelland CJ in Eq., having cited a passage from the reasons of Hayne JA in Mobil Oil, went on to say:

“This applies  not only to any officers or employees of the respective plaintiffs but also to any solicitor or counsel who may have ongoing responsibilities in advising the plaintiffs or their commercial associates on matters other than the prosecution of the proceedings for which the confidential information in question may have relevance.  For reasons of this kind in some classes of cases it may sometimes be appropriate to confine disclosure of particular documents to nominated individuals associated with the parties to which disclosure is to be made who have given undertakings to the Court and to the disclosing party, not only restricting the use to which information in the documents may be put, but restricting the future activities of those individuals in representing or advising, or in participating in decision making for, those parties, at least for some specified period of time.  Such a procedure, however, has its own disadvantages discussed in the cases including the quarantining of the individual to whom the poisoned chalice passes, from providing their services in particular areas and depriving the parties of the benefit of those services, and also creating a situation where agents of a principal are in that capacity put in possession of information, from access to which the principal is excluded."

I respectfully agree with the observations of both Hayne JA and McLelland CJ in Eq. and would adopt their approach in the present case.

However, as has been noted, the present application seeks, primarily, to set aside the subpoena.  It was suggested in argument that the general power to make orders, conferred upon the Court by the provisions of s 23 of the Federal Court of Australia Act 1976, is available for this purpose.  The scope of s 23 in the present type of context was considered by Hill J in Hadid, above, but, in my opinion, there can be no doubt that, in a proper case, the Court has the power to set aside a subpoena.  The question is not the existence of that power, but whether it is appropriate that it be exercised.  The settled course of authority, which it is unnecessary to cite, establishes that a subpoena may be set aside if it is sought for a purpose other than a legitimate forensic purpose.  In other words, the Court's inherent power to ensure that its process is not abused is available in an appropriate case.

In my opinion, the mere fact that material sought to be made available is confidential or commercially sensitive, is not, on its own, a reasonable basis for the setting aside of a subpoena seeking the production of, and access to, such material.  Rather, in my view, the matter should be viewed in conventional terms as proceeding in the two well-known stages.  First, the order seeks production to the Court.  Then, it is a matter for the Court to decide, in the exercise of its judicial discretion, what access, if any, should be granted to the party.  But, in the exercise of that judicial discretion, and assuming, for the purposes of the argument, the existence of a legitimate forensic purpose in the application for the issue of the subpoena, no basis would normally exist for setting aside the subpoena.

In the exercise of the judicial discretion directed to the terms upon which access should be made available, a matter which was addressed, as was noted, in the Mobil Oil and in the Telstra Corp cases, the Court is to make a judgment and achieve that which is necessary for the attainment of justice in the particular case.  This is not a ground for setting aside the subpoena.  Therefore, I refuse the motion so far as it seeks to set aside the subpoena.  However, as I have said, the notice of motion also seeks such further or other order as may be appropriate.

I have raised with counsel the necessity, in the present connection, to consider the application of proper case management principles, but again, to do so with the object of attaining the interests of justice in the particular case.  When the matter is looked at from a case management perspective, it appears that the principal proceedings have not, to this point, progressed very far.  The proceedings were commenced by an application and a statement of claim, both of which were filed on 30 April 1997.  Lists of documents have been filed but evidence has not yet been filed, although it is contemplated that, in due course, this will occur either in the form of affidavits or written statements.

It seems to me, as a matter of case management that, given the anticipation and expectation that the parties to the principal proceedings will exchange evidence and will have the benefit of inspection of their respective documents on discovery, the call on the present subpoena should be deferred until those processes are completed.  That is to say, even if I am prepared to accept, as I do, that there appears to be a legitimate forensic purpose on the part of Reading in applying for the issue of the subpoena, it does not follow that it is necessary that a call be made on that subpoena at this stage.

Given the confidential and commercially sensitive character of the information which, as it now appears, is sought to be inspected, it seems to me that the appropriate course to be adopted is to defer, at this stage, the imposition of any requirement upon Village Roadshow to produce such material, even if that production were to be limited, in terms of access, to the legal representatives of Reading.  I have in mind, in particular, the possibility that once discovery and the exchange of evidence between the parties to the principal proceedings is completed, the call upon the subpoena may, in whole or in part, become unnecessary.  However, even if that possibility were not to eventuate, it seems to me that the appropriate course would, in any event, be to defer the call upon the subpoena.

Since the inspection of discovered documents and the exchange of evidence must necessarily have the effect that the parties to the principal proceedings will be much better informed as to the real issues in those proceedings, then in my opinion, this is a decisive consideration in favour of deferring the call at this point.  Once discovery and the exchange of evidence is undertaken, the Court will be in a much better position not only to rule upon the necessity to produce any of the documents now sought on the subpoena, but also to deal with the potentially complex questions in the handling of access to commercially sensitive material that commonly occur.  An example of the procedures, including the masking of parts of documents, may be found in the reasons of McLelland CJ in Eq. in Telstra Corp.  It is commonplace for procedures of that kind to be ordered in dealing with confidential material.

As a last resort, the Court must be in control of this aspect of the matter and this requires the Court to not only inspect the documents, but to have an informed understanding of what appear to be the real issues to be litigated in the principal proceedings.  In short, it is premature, at this stage of those proceedings, to form a proper judgment on those questions.  It seems to me then, that in the exercise of my discretion, I should direct that the call upon the subpoena be deferred until further order.  The orders of the Court, therefore, are:

1.         The motion to set aside the subpoena refused.

2.         The call upon the subpoena deferred until further order.

Since each party has had some measure of success in the present notice of motion, I think that it is appropriate that there be no order as to costs.

Associate:

Dated:              28 August 1997