FEDERAL COURT OF AUSTRALIA

Centurion Roller Shutters Pty Ltd v Automatic Technology (Australia)  Pty Ltd[1999] FCA 792

PRACTICE AND PROCEDURE – confidential commercial information – particulars – discovery – client list – balancing of interest – undue prejudice to respondents if access to applicant’s particulars and discovered documents restricted – confidentiality orders in relation to third parties – restrictions on access to applicant’s customers.

Trade Practices Act 1975 (Cth) s 52

Fair Trading Act 1987 (Cth) s 10

Telstra Corporation Ltd v First Netcom Ltd (1997) 38 IPR 531

Ex parte Fielder Gillespie Ltd (1984) 2 Qld R 339

Telstra Corp v Australis Media Holdings and Others (Supreme Court of New South Wales, Unrep, McLelland CJ in Eq, 6 December 1996)

Mobil Oil Australia and McDonalds Australia v Guina Developments (1995) 33 IPR 82

CENTURION ROLLER SHUTTERS PTY LTD (ACN 009 203 910) v AUTOMATIC TECHNOLOGY (AUSTRALIA) PTY LTD (ACN 007 125 368), RAE LEIVENZON, SIMON LEIVENZON AND JACK LEIVENZON

AUTOMATIC TECHNOLOGY (AUSTRALIA) PTY LTD (ACN 007 125 368)v CENTURION ROLLER SHUTTERS PTY LTD (ACN 009 203 910)

WG 179 of 1998

FRENCH J

11 JUNE 1999

PERTH

THE COURT ORDERS THAT:

Upon the Respondents’ Motion filed 13 May 1999:

1.         The parties to provide a minute of orders in accordance with these reasons, including orders in the terms of the orders which follow.

2.         Particulars provided pursuant to requests 4(f), 5(c), 5(d), 5(e) and 8 of the Respondent’s Request for Particulars will be restricted to the Respondents and their advisors and experts whose identity will be disclosed to the Applicant.   The content of those particulars will not be disclosed to any third party or used for any purpose other than the purposes of these proceedings without the prior leave of the Court or the agreement of the Applicant.

3.         The Respondents shall not communicate with or approach any of the clients of the Applicant unless at least seven (7) days prior to any such communication or approach being made the Applicant has been advised in writing of the proposed communication or approach.

4.         The Applicant will not itself by any communication, advise or discourage any of its clients from speaking to representatives of the respondents.

5.         Any discovered documents which contain information about the identities of any of the customers of the Applicant shall be subject to confidentiality in the same terms as the orders relating to the particulars.

6.         Liberty to the parties to apply to vary these orders by agreement.

7.         The directions hearing is adjourned to 18 June 1999 at 9.30am.

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

REASONS FOR RULING ON MOTION AND PROPOSED

DIRECTIONS AS TO CONFIDENTIALITY

1                     Centurion Roller Shutters Pty Ltd  (Centurion) is a manufacturer and retailer of mechanised garage doors.  On 9 December 1998 it commenced proceedings in this Court against Automatic Technology (Australia) Pty Ltd (ATA) and three of its directors, Rae, Simon and Jack Leivenzon.  ATA carries on the business of supplying, inter alia, radio remote controlled mechanised garage door opener systems, including hand held FM radio transmitters and mechanised tilt/sectional door openers.  In November 1996, according to Centurion, it entered into a contract with ATA for the wholesale purchase of various of these goods and ordered goods from ATA thereafter.  The total purchase price paid by Centurion to ATA for the goods which it ordered was said to be $849,955.70 at the time of issue of these proceedings. 

2                     Centurion says it was induced to purchase the goods from ATA on the strength of various representations made to it about the reliability and quality of the goods and ATA’s ability to supply spare parts and provide repair services.  In par 9 of the statement of claim Centurion alleged, inter alia, that it:

“9.1     used its goodwill to promote the Goods as reliable, high quality products;

9.2       used its goodwill to promote the Goods as supported by sufficient facilities for the repairs of the Goods and of spare parts for the Goods;

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9.3       entered into contracts for the retail sale of the Ordered Goods to various retail customers for valuable consideration.”

Particulars of the promotion of the goods were provided.  The statement of claim made reference to particulars of contracts with retail customers but in substance promised provision of the particulars prior to trial.  Paragraph 11 of the statement of claim asserted:

“11      By on or before 26 October 1998 the Applicant became aware:

            11.1     by its directors’ and employees’ observations of the Ordered Goods, full particulars of which will be provided prior to trial;

            11.2     by the receipt of complaints from various retail customers of the Applicant, full particulars of which will be provided prior to trial;

            of defects in the Ordered Goods.”

Particulars of the allegations of the defects were then set out.  They included  allegations that Motorola computer chips necessary for the receipt of signals from transmitters to the Securalift Units could only receive one instead of a promised sixty codes.  Full particulars of the identification of each of the defective Motorola chips was promised by way of expert evidence prior to trial.

3                     A similar promise was made in respect of defects in the circuit board necessary for the receipt of signals from the transmitters, the alleged defects causing a frequency drift in ambient temperatures of 35° C and over so that the pre-programmed band of FM transmitted frequencies from the transmitter did not activate the circuit board.  Other defects related to the alleged substandard construction of chopper wheels and chain indexes connected with the operation of the garage doors, inconsistently pre-programmed components in the circuit board of the lifting mechanisms and substandard construction of sprocketts and shuttle mechanisms.

4                     Centurion says that on 5 November 1998 it requested from ATA about fifty circuit boards to replace malfunctioning circuit boards but ATA did not have the spare parts or the facilities to adequately supply circuit boards in response to this request. 

5                     By reason of the alleged defects and the failure of ATA to supply spare parts, it was said that the various representations as to quality and the availability of repair services and spare parts were false.  Thus ATA was said to have engaged in conduct which was misleading or deceptive or likely to mislead or deceive contrary to s 52 of the Trade Practices Act 1975 (Cth) and s 10 of the Fair Trading Act 1987 (WA).  The directors were alleged to have been involved in the contraventions of the Trade Practices Act and the Fair Trading Act.

6                     Centurion claims to have suffered loss and damage as a result of ATA’s conduct.  The particulars of the loss and damage were expressed thus in par 18 of the statement of claim:

“1.       The Applicant has suffered a diminution of its goodwill and reputation referred to in paragraph 1.3 herein, exacerbated by reason of the matters pleaded in paragraph 9.1 and 9.2 herein.

 2.        The Applicant has been required to service the Ordered Goods after sale of the Ordered Goods to various retail customers at a labour cost to the Applicant of approximately $45.00 per service, and in doing so has endeavoured to mitigate its loss and damage to its goodwill and reputation.  Full particulars of each date of service, the particular Ordered Goods serviced, and the particular defect of each Ordered Goods serviced will be provided prior to trial.”

7                     ATA and its directors have delivered to Centurion a request for further and better particulars of the statement of claim.  Answers to the request were delivered ultimately in an amended form on 12 May 1999.  An issue has arisen between the parties as to the sufficiency of some of the answers and whether confidentiality orders ought to be made in respect of particulars relating to clients of Centurion and contracts entered into with them such that the information so provided is limited to ATA’s legal advisors and expert witnesses. 

8                     ATA has moved for orders for the provision of particulars and for discovery in accordance with a list of proposed categories of documents filed on 13 May 1999.  On the question of discovery, Centurion makes the point that the categories proposed by ATA are so broad that there might as well be an order for general discovery, a point upon which ATA and its directors agree.  Centurion has also filed a minute of proposed orders which embody its suggested confidentiality provisions.  Following the directions hearing, at which Centurion’s minute of proposed orders and ATA’s motion were debated, the parties have endeavoured to reduce the area of dispute in relation to the provision of particulars and have sent copies of their correspondence in that respect to the Court.

9                     The principal issue between the parties was on the question of confidentiality so I shall deal with that first.  The confidentiality issue is raised in respect of requests for particulars of pars 9, 11 and 18 of the statement of claim.  By request 4(f) Centurion was asked to provide particulars of the alleged contracts including details sufficient to identify each of the alleged retail customers.   By request 5(c), it was asked to identify each of the alleged retail customers referred to in par 11 and by request 5(d) to provide full particulars of their alleged complaints. In respect of par 4(f) Centurion refused to answer the request as oppressive and embarrassing, but now is willing to provide the particulars subject to a confidentiality order.  In the case of requests 5(c) and 5(d) Centurion responded by saying that full particulars would be provided only “upon an appropriate undertaking of confidentiality from the respondents or the making of an appropriate confidentiality order of this Honourable Court”.  Request 8 sought particulars of the servicing by Centurion of Ordered Goods asserted in par 18 including full particulars of each date of service, the particular goods serviced and the particular defect serviced.  Centurion responded in terms similar to its response to questions 5(c) and 5(d). 

10                  In its minute of proposed order the form of confidentiality order sought by Centurion would have required that the answers to questions 5(c), 5(d) and 8 be limited to the respondents’ solicitors and counsel and such of the respondents’ expert witnesses as were approved by the Court or agreed to by Centurion’s solicitors.  It was proposed that the answers would be regarded as confidential for the purposes of the proceedings and not without the written authority of Centurion’s solicitors or leave of the Court be able to be used by the persons mentioned otherwise than for the purpose of the preparation of any expert witness statement to be used in the proceeding.  Similar directions were sought in respect of discovered documents.  Ancillary directions relating to the execution of written undertakings were also sought.  The confidentiality orders proposed were also to extend to documents which were discovered. 

11                  Although ATA contested the suggestion advanced by Centurion that it was in competition in the market place with Centurion, it does provide products to some end users and there is some potential for it to enter into direct competition with Centurion.  To the extent that the particulars of discovered documents would disclose Centurion’s current clients, which include builders and home owners, there is obviously some potential for disadvantage to Centurion with that information being made known to a potential trade rival and more particularly if the information were to become generally available in the market place to current trade rivals of Centurion.

12                  Mr Bennett for Centurion made reference to authorities adverting to the confidential sensitivity of customer lists.  So in Telstra Corporation Ltd v First Netcom Ltd (1997) 38 IPR 531, the Full Court observed at 537 that:

“…a customer list is the most obvious example of information the confidentiality of which the court will secure by injunctive relief.”

That was a case which was quite different from the present on its facts.  It involved injunctive relief against use of a customer list supplied on a limited basis for another purpose. 

13                  Where proceedings are commenced not themselves concerned with restraining or gaining access to confidential information, issues may nevertheless arise in interlocutory processes about access to documents or information sought as part of pre-trial preparation.  There the Court, in cases such as the present, may be faced with a need to balance the right to discovery or particulars or answers to interrogatories for the purpose of the litigation against the interests of the holder of that information in maintaining its confidentiality.  This question arose in relation to discovery of documents concerning a secret process in Ex parte Fielder Gillespie Ltd (1984) 2 Qld R 339 – see at 341 per McPherson J.  In that case a confidentiality order was made.  It is to be noted that that was a case in which the information sought was sought from the respondent to proceedings for revocation of a patent.

14                  The general principles were discussed by McLelland CJ in Eq in Telstra Corp v Australis Media Holdings and Others (Supreme Court of New South Wales, Unrep, McLelland CJ in Eq 6 December 1996).  There his Honour said:

“The general principle is that the compulsive processes of discovery should not be permitted to invade the privacy and confidentiality of a litigant’s affairs except to the extent that the interests of justice require such a course in the circumstances of the particular case.  The relevant circumstances will vary from case to case and a variety of different methods have been adopted in the reported decisions for the purpose of avoiding injustice…”

His Honour referred to the practical difficulties of fulfilling requirements imposed by way of conditional undertaking to refrain from using information disclosed to litigants who are commercial rivals of the party from whom the information is obtained.  In particular, his Honour referred to the remarks of Hayne JA in Mobil Oil Australia and McDonalds Australia Ltd v Guina Developments (1995) 33 IPR 82 at 87:

“Once the documents are inspected by the principals of the trade rivals 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.”

15                  The present case is one in which Centurion, as applicant, seeks relief against ATA and its directors the entitlement to which it seeks to establish in part by demonstrating alleged defects in the components supplied to various of Centurion’s customers.  The number and nature of the defects and when and how they manifested lies at the heart of the Centurion case.  The incidence and nature of the servicing activities pleaded in par 18 goes to the question of the loss and damage which it claims.  These matters underpin the liability it seeks to establish and the damages it seeks to claim against the respondents.  In my opinion it is unacceptable that the respondents not have access to the particulars of allegations, including the particulars sought in pars 4(f), 5(c), 5(d) and 8 of the request for particulars, as well as the documents upon which the case made against them may depend.  Centurion has entered the arena asserting misleading and deceptive conduct based in part upon the incidence of defects in the goods supplied to it.  It cannot expect ATA and its directors who have been brought into that arena to fight with partial blindfolds.  Limitation of the particulars and discoverable documents to their advisors and experts would present a real risk that the instructions that they may be able to give to their advisors and experts in relation to the matters particularised and discovered, based upon their own market place and technical knowledge, would be compromised.  I am therefore not prepared to make confidentiality orders in the terms sought.  Recognising the importance of this information to Centurion, however, I am prepared to require that the particulars provided and relevant categories of discovered documents be restricted to the respondents and their advisors and experts and not disclosed to any third party or used for any purpose other than the purposes of these proceedings.

16                  The question then arises whether ATA’s access to end users of Centurion products which have proved defective should be regulated in any way. 

17                  I had anticipated making an order requiring that any approach by ATA to customers of Centurion for the purpose of obtaining evidence relevant to the proceedings should be done on the basis that an officer or representative of Centurion was present at the time.  I consider that this would be a prudent course to avoid later debate about what might have been put to the particular customer.  Upon reflection however, that proposal seems to me too restrictive.  I will require that ATA inform Centurion of any of its customers which ATA proposes to communicate with or approach, at least seven days prior to any such approach being made provided that Centurion will not itself by any communication advise or discourage that customer from speaking to representatives of ATA.  I would also discourage the parties from using any approach to customers to reflect adversely upon the other party.  In some circumstances that might constitute a misuse of the information provided for a purpose other than the purposes of these proceedings.

18                  On the other particulars sought by ATA and its directors the parties have reached a measure of agreement evidenced in letters exchanged between their solicitors on 10 June 1999.  I will summarise the position with respect to that agreement as it appears from that exchange of correspondent:

1.         As to request 4(e) – provide full particulars of the alleged promotional activities by the applicant’s sales staff.

            The nature and extent of alleged promotion activities will be provided in fairly broad terms.  Centurion will not be required to provide evidence of every occasion that one of its sales staff promoted ATA’s product to a potential or existing customer.  Provision of particulars under this head is to be limited to details concerning the publication of catalogues, participation in trade fairs, the commission of television advertisements and the like.

2.         Request 4(f) – provide the usual particulars of the alleged contracts including details sufficient to identify each of the alleged retail customers.

            Centurion has agreed to provide this information subject to the orders I make in respect of confidentiality.

3.         Request 5(b) – provide full particulars of the directors’ and employees’ alleged observations under par 11.

            Centurion will provide particulars of:

            (1)        the first time the alleged defects were noted;

            (2)        the frequency with which the alleged defects were noted by its directors and employees.

            There will be liberty to ATA and its directors to require further particulars at a later time.

4.         Requests 5(c), (d) and (e).

            There is an issue of confidentiality in respect of each of these matters which has already been covered in these reasons save for request 5(e). That request requires particulars of the identification of each of the alleged defective Motorola chips.  To the extent that that identification would involve identification of Centurion’s customers the same confidentiality order will apply to it.

5.         Requests 5(e), (f), (h), (j), (l), (n), (o), (p) and 6(b)

            No order will be made for the provision of these particulars at the present time on the basis that they will be provided at a future, but early date, subject to ATA having a reasonable time thereafter in which to prepare and serve its expert evidence.

            The proposed timetable for the provision of these particulars will be submitted to ATA by Centurion and there will be liberty to apply in that regard.

6.         Request 9 – this refers to par 19 of the statement of claim in which it is asserted that at all material times ATA and its directors and alternatively, ATA,  knew of the defects of the Ordered Goods.  Particulars of knowledge were promised in the statement of claim following the administration of interrogatories.  Request 9 sought full particulars of ATA’s alleged knowledge.

            Centurion has agreed to provide particulars reserving the right to supplement them when it administers interrogatories.

19                  The list of discoverable documents which ATA seeks from the applicant, it is suggested, would amount to an order for general discovery.  I am concerned that the range of documents set out in the various categories can be narrowed subject to liberty to apply for additional discovery if that should be necessary.  I do not think it appropriate at this stage to make an order for general discovery.  An effort should be made to limit the discovered documents to those which are necessary for the proper preparation for the case.  In that respect I would agree to discovery in the categories 1, 2, 3, 5, 7, 8 and 9 set out in ATA’s list.  The remaining categories would be amended as follows:

4.         any and all documents evidencing the total value of Ordered Goods referred to in paragraph 8 of the Statement of Claim.

6.         any and all documents evidencing the diminution of the Applicant’s goodwill.

10.       any and all documents recording or evidencing alleged servicing by the Applicant of the Ordered Goods after sale, including documents recording the cost to the Applicant of the services, and all contracts between the Applicant and the customers who have requested the Applicant to service the Ordered Goods or who have complained as to the performance of the Ordered Goods provided that this does not extend to require the production of all invoices and receipts and provided that records exist.  Samples of invoices and receipts should be provided under this category.

11.       any and all documents evidencing the Applicant’s inventory of stock of the Ordered Goods from 22 November 1996 to the present; and

12.       any and all documents evidencing the sale by the Applicant of the Ordered Goods or other goods supplied under the Agreement referred to in paragraph 7 of the Amended Defence and Cross Claim, including but not limited to contracts with customers of the Applicant and documents evidencing the identify of the customers and the dates on which the goods were sold by the Applicants.

20                  I will allow the parties to bring in a minute setting out the proposed and agreed orders.

Associate:

Dated:              11 June 1999