FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v McMahon Services Pty Ltd [2004] FCA 353

PRACTICE AND PROCEDURE - Statement of Claim - Material facts - Particulars - Discovery - Parts of documents masked because irrelevant - Trade Practices Act - Section 157 - Document "prepared by an officer"

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v McMAHON SERVICES PTY LIMITED

S 10 of 2003

SELWAY J

30 MARCH 2004 

ADELAIDE

THE COURT ORDERS THAT:

1.         Pursuant to Order 15 Rule 11 of the Federal Court Rules the applicant shall, within seven days of today's date produce to the solicitors for the first and second respondents for inspection all of the typed and handwritten notes referred to in par 2.1 of the Notice of Motion (including any parts that have previously been masked).

2.         Pursuant to Order 15 Rule 11 of the Federal Court Rules the applicant shall within seven days of today's date produce to the solicitors for the first and second respondents for inspection all of the typed and handwritten notes referred to in par 2.2 of the Notice of Motion (including any parts that have previously been masked).

3.         Pursuant to the Trade Practices Act, 1974 (Cth) s 157(2) the applicant shall within seven days of today's date furnish to the solicitors for the first and second respondents copies of the documents referred to in par 3.1 and 3.2 of the Notice of Motion.

4.         Leave is given to the applicant to amend its Statement of Claim such amendment to be made within seven days of today's date.

5.         Leave is given to the respondent to amend its Defence such amendment to be made within fourteen days of today's date.

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

REASONS FOR JUDGMENT

1                     The first and second respondents (the respondents) have applied by Notice of Motion for orders under the Trade Practices Act, 1974 (Cth) (TPA) s 157 that the applicant (ACCC) furnish them with copies of various documents, including the portions of those documents that the ACCC has masked on the basis that the unmasked portions are not relevant to these proceedings.  In the alternative they seek the discovery and inspection of those documents.  The first and second respondents also seek further particulars of various paragraphs of the Statement of Claim.  For the reasons given below I am of the view that the respondents are entitled to have access to the relevant documents including the unmasked portion of them.  For the reasons given below I am of the view that the Statement of Claim by the ACCC needs to be amended.

2                     The applicant's case is that the first and second respondents reached an arrangement or understanding with the other respondents as to the prices at which the first respondent and the third respondent would tender for a particular contract being let by the Department of Defence and (on the understanding that the first respondent would be successful in the tender) as to what arrangements would then be made between the first, third and fifth respondents in relation to that contract.  The ACCC says that there were other tenderers for the relevant contract.  It is not alleged that those tenderers were parties to the arrangement or understanding.  The ACCC says that the first, third and fifth respondents are each in competition in the relevant market and that the arrangement that they made was that of fixing, controlling or maintaining the relevant price for the tender: see TPA s 45A.  The ACCC seeks pecuniary and injunctive remedies pursuant to TPA ss 76 and 80. 

3                     The ACCC's case would appear to rely in large part upon the evidence of the witness Mr Feleppa.  The ACCC has filed an affidavit sworn by Mr Feleppa with the intention of relying upon that affidavit at the trial.  His affidavit reveals that he was present at various meetings where various things were discussed. 

4                     The respondents admit that they are in competition with the third and fifth respondents, although not necessarily with the fifth respondent in relation to this particular contract.  Otherwise they deny that they were party to the arrangement or understanding as claimed by the ACCC.

5                     In the course of investigating the various allegations, the ACCC exercised its powers under TPA s 155 to require various persons to produce information, to produce documents and to appear before the Commission to give evidence.  In relation to this material TPA s 157 provides:

‘(1) Where:

(a)       …

(b)       …

(c)        a proceeding is instituted against a corporation or other person under section 77, 80 or 81; or

(d)       …

the Commission shall, at the request of the corporation or other person and upon payment of the prescribed fee (if any), furnish to the corporation or other person:

(e)        a copy of every document that has been furnished to, or obtained by, the Commission in connexion with the matter to which the application, notice or proceeding relates and tends to establish the case of the corporation or other person; and

(f)        a copy of any other document in the possession of the Commission that comes to the attention of the Commission in connexion with the matter to which the application, notice or proceeding relates and tends to establish the case of the corporation or other person;

not being a document obtained from the corporation or other person or prepared by an officer or professional adviser of the Commission.

(2)       If the Commission does not comply with a request under subsection (1), the Court shall, subject to subsection (3), upon application by the corporation which, or other person who, made the request, make an order directing the Commission to comply with the request.

(3)       The Court may refuse to make an order under subsection (2) in respect of a document or part of a document if the Court considers it inappropriate to make the order by reason that the disclosure of the contents of the document or part of the document would prejudice any person, or for any other reason.

(4)       Before the Court gives a decision on an application under subsection (2), the Court may require any documents to be produced to it for inspection.

(5)       An order under this section may be expressed to be subject to conditions specified in the order.’

6                     There are three documents or groups of documents that the applicant seeks pursuant to s 157.  The ACCC has provided the documents to me for inspection.  I have inspected them.

NOTES OF CONVERSATIONS WITH SAM

7                     The first group of documents comprises a typed file note and associated handwritten notes.  These are notes which were physically typed or hand written by staff of the ACCC and record what the staff member was told by a person called "Sam".  The respondents assume that "Sam" is Mr Feleppa.  Whether or not he is, both the typed and handwritten notes deal with various allegations made by "Sam" of various improprieties by the first respondent.  Some of these appear to be mere rumour and to also involve third persons not involved in these proceedings.  Some (even if they were true) do not appear to involve breaches of the TPA.  Some do not appear to involve the relevant "market" as alleged in this action.  The ACCC has provided to the respondents a copy of the typed and handwritten notes, but the parts of the notes dealing with any matters other than the particular matter that is the subject of these proceedings have been masked.  The respondents have sought to have furnished to them unmasked copies of the notes.  The ACCC has refused.

8                     In my view the relevant notes were "prepared by an officer of the Commission" and cannot be ordered to be furnished: see ACCC v Rural Press Ltd (1999) 169 ALR 201 (Rural Press), 207-210 [15]-[22] per Mansfield J.  I return to that decision below.

9                     This is not the end of the matter.  Even if the documents do not need to be produced pursuant to TPA s 157, the question still remains whether the unmasked documents should be discovered and made available for inspection pursuant to Order 15 of the Federal Court Rules.  I note that the Court should not make an order for the discovery or production of a document under that Rule "unless satisfied that the order is necessary".  For this purpose that which is "necessary" is that which is reasonably necessary in the interests of a fair trial and of the fair disposition of the case (Trade Practices Commission v CC (New South Wales) Pty Limited (1995) 58 FCR 426 at 436-437 per Lindgren J).  I also note that in the absence of such an order, discovery is only available in the circumstances outlined in O 15 r 2 of the Rules.  These circumstances are narrower than the usual grounds for discovery of a "document relating to any matter in question in the proceeding": see Kent v SS ‘Maria Luisa’ [2002] FCA 629 at [7] contrast Order 15 Rule 8.  Finally, I note that discovery is not normally available when the document is only relevant in relation to issues of credit: see Beecham Group Ltd v Bristol-Myers Co [1979] VR 273 at 277-278, although that broad statement may need to be qualified where the primary issue at trial is likely to be the creditability of a particular witness or witnesses.  In such a case that which is "reasonably necessary in the interests of a fair trial and of the fair disposition of the case" may well include documents derived or relating to a potential witness and which could only be used at trial in relation to creditability, but which are nevertheless directly relevant to the issues.

10                  In this case it is not disputed that most of the documents were required to be discovered.  That would seem to be a proper concession.  Statements made by prospective witnesses during an interview with a regulatory authority which statements are relevant to the matters in issue are properly discoverable, subject to any applicable privilege: see Wallace Smith Trust Co Ltd (In Liq) v Deloitte Haskins & Sells [1997] 1 WLR 257.  Once part of a document must be discovered, then in my view all of it should be produced for inspection, unless part of it is privileged, or unless the Court has ordered that part not be produced: see Gray v Associated Book Publishers (Aust) Pty Ltd [2002] FCA 1045 at [14]-[17] per Branson J:

‘However, there is no such positive right in respect of portions of documents sought to be withheld from inspection on the grounds of confidentiality or irrelevance ( Telstra Corporation v Australis Media Holdings (McLelland CJ in Eq, 10 February 1997, unreported)).

In my view, where in this Court categories of documents are required to be discovered and thereafter made available for inspection, the true obligation on the party giving discovery is the same as that identified by McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings by reference to Pt 23 of the New South Wales Supreme Court Rules. The Chief Judge there said:

“Under the new discovery rules, Pt 23 of the Supreme Court Rules, classes of documents required to be discovered may be, and were in the present case, specified not by reference to relevance to a fact or facts in issue, but by description of the nature of the documents, rendering it unnecessary to consider questions of relevance to an issue, as such. If in such cases the party giving discovery desires to withhold, by making or otherwise, production of part of a discoverable document on the ground that that part does not contribute to the satisfaction of any of the criteria by reference to which the class of documents is described, then it may be that a case can be made for giving effect to that desire, but in my view, unless there is some relevant qualification in the order for discovery, the order requires that the whole document be produced unless there is an agreement to the contrary by the party to which discovery is being made, or unless relief from the requirement, for example by making certain portions is obtained from the Court.”

The respondents did not obtain the agreement of the applicant to the masking of portions of their discovered documents, nor did they seek relief from the Court from their prima facie obligations to allow full inspection of their discovered documents. Nonetheless, having regard to the course of argument on the applicant´s notice of motion, it seems appropriate now to give consideration to the claim of the respondents that the masking undertaken by them is appropriate in the circumstances and ought to be authorised by the Court.’

I also note the reasons of Tamberlin J in Sony Music Entertainment (Australia) Ltd v University of Tasmania (2003) 57 IPR 77 (Sony Music) at 89 [52]-[54] which seem to be to the same effect.

11                  Although one of the reasons for masking some of this material was initially related to a claim for legal professional privilege, it is now accepted that the relevant information was collected by investigating officers for the purposes of an investigation and that legal professional privilege cannot be claimed.  No other privilege has been claimed. 

12                  It may be that there is a practice in England that parts of a document can be masked simply because those parts of the document are not thought to be relevant: see GE Capital Corporate Finance Group Ltd v Bankers Trust Co & Ors [1995] 1 WLR 172.  I note that that case would seem to have been followed by Olsson J of the South Australian Supreme Court: see Peat Marwick Hungerfords v Executor Trustee & Ors (unreported decision delivered 25 October, 1995).  However, in this Court the Rules and the practice would seem to be quite clear that what must be discovered and produced (save for any question of privilege) is the whole of the document if any part of it is discoverable.  Indeed, the fact that part of the document is relevant may well mean that all of it is relevant if only to provide the context for that part of it which is directly relevant. 

13                  There remains a discretion not to order that the masked part of the documents be produced: see, in the somewhat different context of Order 15A, Sony Music at 89-92.  There is no obvious reason in this case why the whole of the documents should not be discovered and produced.  True it is that some parts of them seem to have very little evidentiary value and some parts of them make allegations against third parties which may well be quite unfair.  However, all of the allegations seem to concern the first respondent and at least one of the allegations is directly related to the matters which are the subject of these proceedings.  The third parties are protected by the inherent powers of the Court to prevent the publication or use of discovered material for purposes not connected with the litigation.

14                  In my view all of the relevant typed and handwritten notes referred to in par 2.1 of the Notice of Motion should be produced.

STATEMENT OF MR FELEPPA

15                  The next document which the respondents seek to have furnished to them is an unmasked copy of a statement signed by Mr Feleppa.  Apparently Mr Feleppa's statement was drafted by an officer of the ACCC and typed at the ACCC.  Mr Feleppa made some minor amendments to it and signed it.  The document deals not only with the particular tender that is the subject of these proceedings, but also with two other contracts, one of them also involving the Department of Defence.  In relation to each of the three contracts an allegation is made (or at least inferred) that the first respondent entered into an arrangement or understanding with a competitor so that the competitor either did not submit a bid or did so at a pre-agreed price being higher than the bid offered by the first respondent. 

16                  The ACCC discovered and produced a copy of the statement, but with those parts of the statement which deal specifically with the other two bids, masked.  The ACCC has objected to furnishing the unmasked document.  It says that the masked parts of it are not relevant.

17                   Mr Wells QC, who appeared for the respondents, accepted that the decision of Mansfield J in Rural Press was against his argument.  He submitted that I should not follow it.  In that case Mansfield J held that the word "prepared" in TPA s 157 should be given its normal and natural meaning.  On that approach the question was simply whether, as a matter of fact, the relevant document had been physically "prepared" by an officer of the Commission.  It did not matter if the intellectual source of the information within the document was that officer or someone else.  Consequently a signed statement which had been drafted and typed by an officer of the Commission did not need to be furnished under s 157 even if the person who signed it was not an officer.  Obviously this interpretation could have some strange results.  Presumably a transcript of an interview with a person would not have to be furnished if it was prepared by an officer of the ACCC, but would be if it was prepared by a private company.  It is not obvious what legislative purpose such distinctions might be intended to serve.  Nevertheless, the Parliament has chosen to use the word "prepared" in the qualification to the duty imposed by s 157(1) of the TPA.  The meaning adopted by Mansfield J is certainly reasonably open.  It is certainly not a plainly wrong interpretation.  It follows that I am not prepared to take up the suggestion by Mr Wells QC.  As the document was "prepared" by an officer of the ACCC it does not need to be furnished under TPA s 157.

18                  This still leaves the question of whether the unmasked document should be discovered and produced under Order 15 of the Federal Court Rules.  For the reasons given above in relation to the notes of the conversations with "Sam", in my view an unmasked version of the document should be discovered and produced.

TRANSRIPTS OF INTERVIEWS

19                  The initial allegations seem to have extended not merely to an arrangement or understanding involving the first, third and fifth respondents, but also to other competitors who also tendered for the same contract.  Officers of those competitors were interviewed by the ACCC acting under its powers in TPA s 155.  The respondents seek to have furnished to them copies of the transcripts of the interviews of those officers.  The ACCC has refused on the basis that the interviews are not relevant.

20                  The interviews relate directly to the issue of whether the competitors had any contact with the first and/or second respondents in relation to this particular contract and more generally in their commercial dealings.  At least two of the interviews also deal with another contract where the first respondent was also a party.  The transcripts purport to be recorded by Auscript Pty Ltd.  They were not recorded or transcribed by an officer of the ACCC. 

21                  I note that there are comments by Bowen CJ in Trade Practices Commission v TNT Management Pty Ltd (1981) 39 ALR 665 at 670 which suggests that the obligations imposed upon the ACCC by TPA s 157 are comparable to the obligations imposed upon a prosecutor in criminal proceedings.  However, there have been considerable developments in the understanding of the duty of a prosecutor to produce information to the defence in criminal proceedings over the last 20 years: see, for example, the comments of Martin J (as he then was) in R v Bunting & Ors [2002] SASC 412 at [46], [50] and [56].  Given the terms of s 157 and, in particular, the exceptions and qualifications within it, I do not think that it can now be said that the duty imposed by that section is comparable to the obligations upon a prosecutor.  In my view the preferable course is simply to apply the words of s 157 without relying upon any analogy whether based upon the obligations of prosecutors or otherwise.

22                  The allegation made by the ACCC is that the arrangement or understanding between the first, third and fifth respondents was for the purpose or had the effect of fixing, controlling or maintaining the price in the relevant market.  Apparently the ACCC intends to argue that it is sufficient if the arrangement had the purpose or effect of fixing the amount of the offer to be submitted by the third respondent to the Department of Defence.  Whether or not this is sufficient depends upon the meaning of the word "price" in TPA s 45A.  If, on the other hand, "price" means the price actually available to the Department of Defence in the market place (see ACCC v CC (NSW) (1999) 165 ALR 468 at 497-498 [130]-[133]) then an agreement only as to the amount of an offer made by one party may not have the relevant purpose or effect. The question whether it had that purpose or effect will necessarily involve consideration of what the effect of the arrangement or understanding between these three alleged competitors was in the context of this particular tender process and this particular competitive market.  The transcript of the interview of the other competitors involved in that tender is necessarily relevant to that issue.  For example, if those companies were not involved in any arrangement or understanding then the task of the ACCC in establishing that the arrangement between the first, third and fifth respondents had the effect of fixing, controlling or maintaining "the price" may be more difficult than it would have been if those other bidders had also been parties to the arrangement or understanding.  The evidence would also be relevant as to the purpose of those involved in the arrangement or understanding.  In my view the documentary information held by the ACCC relevant to the question of whether or not the other bidders were also involved in the arrangement or understanding "tends to establish the case of the corporation or other person" for the purposes of TPA s 157(1)(e).

23                  In my view the transcripts should be furnished pursuant to TPA s 157(1).  Pursuant to TPA 157(2) I order that the documents referred to in par 3.1 and 3.2 of the Notice of Motion be furnished to the respondents.

24                  In par 3.3 of the Notice of Motion the respondents also seek to be furnished with all documents provided by the relevant competitors to the ACCC.  Given my reasons in relation to the transcript it may well be that the respondents are also entitled to have all of that material furnished to them.  However, I have not seen that material and there have been no submissions concerning it.  On the assumption that the parties will now be able to sort out whether or not this further material should also be furnished to the respondents I do not propose to make any ruling in relation to that material at this time.  However, I will give both parties liberty to apply if it is necessary to have that issue resolved.

PARTICULARS - PARS 14 & 15 OF THE STATEMENT OF CLAIM

25                  The respondents seek further particulars of pars 14 and 15 of the Third Amended Statement of Claim (the Statement of Claim).  Par 14 of the Statement of Claim alleges that there is a market "for the provision of demolition and asbestos removal services in the greater metropolitan area of Adelaide, including Salisbury".  That is admitted in the defences of each of the respondents.  Par 15 of the Statement of Claim alleges that the first, third and fifth respondents "were in competition with each other" in that market.  This is denied in the defences of each of the respondents, but it is accepted that the first, third and fifth respondents were in competition in the market for "demolition services in the greater metropolitan area of Adelaide" and that the first and third respondents were in competition in the market for demolition and asbestos removal services, but on some occasions they worked together.

26                  The obligation to provide particulars arises under Order 12 of the Federal Court Rules.  The purpose of particulars is to ensure that the other parties to the proceedings have sufficient notice of the case that is to be put against them so that they can properly prepare to answer that case: see Goldsmith v Sandilands & Ors (2002) 190 ALR 370 at 371[2]. 

27                  The ACCC relies upon the deeming provision in TPA s 45A(1).  That relates to agreements or understandings reached between parties "in competition with each other".  "Competition" is relevantly defined in TPA s 45(3) to mean "competition in any market in which a [relevant] corporation is a party."  "Market" is relevantly defined in TPA s 4E.  Plainly enough it is material to the case that the ACCC seeks to establish that the relevant parties to the agreement or understanding are in "competition" with each other.  It is also a material fact that they are operating in the same market.  At the very least it is a necessary particular of that material fact to identify what that market is.

28                  The respondents seek from the ACCC further particulars of the relevant market: the source or sources of business or businesses, the nature of the client or clients and details of the business or businesses in competition.  In some contexts these particulars might well be necessary.  For example, if the allegation related to the effect of an agreement or understanding on the overall operation of the market then it may be necessary for the ACCC to provide quite detailed particulars of that market in order to identify the relevant effect: see Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177, 195-196.  However, in this case the relevant anti-competitive purpose or effect is strictly limited in scope.  It relates only to the price of a particular contract let by the Department of Defence and particularised in the Statement of Claim.  The competitors involved in that tender process are specified by name in the Statement of Claim.  So too are those said to be parties to the arrangement or understanding.  The price said to be fixed has not been particularised, but is either the "price" contained in the offer by the fifth respondent (which seems to be the case that the ACCC intends to put) or the "price" obtained by the Department of Defence.  Plainly enough it is not the price of services generally available in the market place.  In any event, the broader market is identified and particularised. 

29                  In my view the current pleadings and particulars as to the relevant market give to the respondents sufficient notice of the ACCC's case so that they can properly prepare to meet it.  In my view further particulars of pars 14 and 15 of the Statement of Claim are not required.

PARTICULARS - PAR 32 OF THE STATEMENT OF CLAIM

30                  The respondents also seek particulars of par 32 of the Statement of Claim. 

31                  In pars 25-30 of the Statement of Claim the ACCC sets out what is the effect of the evidence that it proposes to call at trial.  So, for example, in par 25 it is alleged that the second respondent met with the seventh respondent to discuss the Request for Tender.  It is not alleged that any agreement or understanding was reached or, if it was, what the terms of it may have been.  In par 26-29 it is alleged that various persons (none of them being related to the respondents) met to finalise the tender to be submitted by the third respondent.  At that meeting it is alleged that the sixth respondent said that the second respondent had told him that the first respondent would enter into an agreement or understanding on particular terms.  In par 32 of the Statement of Claim it is alleged that "by engaging in the conduct referred to in paragraphs 25 to 30" the first, third and fifth respondents made an arrangement or understanding with the express or implied terms that are detailed in subpars (a) and (b) of that paragraph.

32                  In my view the current pleading is deficient.  There is nothing whatsoever in pars 25 to 30 that identifies what the first and second respondents did that gives rise to the conclusion pleaded in pars 32.  It is pleaded that the second respondent had a discussion and wrote down some numbers.  It is also pleaded that someone apparently unrelated to the respondents made a statement as to their role and position.  But no material facts are pleaded in relation to the agreement or understanding involving the respondents.  There is no pleading of when the respondents entered into the arrangement or understanding and there is no pleading of how it was done.  In my view the Statement of Claim needs to be further amended in order to make clear what material facts the ACCC alleges against the respondents.

33                  This is not to suggest that the respondents are prejudiced in the preparation of their case.  The ACCC has filed affidavits of the witnesses it proposes to call at trial and has filed an Outline of Issues that it says arises in this case.  There is not much doubt as to what case the ACCC intends to put.  Nevertheless, the respondents are entitled to have the material facts relating to that case properly pleaded in the Statement of Claim.  For this purpose the appropriate order is to grant the ACCC leave to amend its Statement of Claim.

34                  I will make the appropriate orders.  I will hear the parties as to costs.

Associate:

Dated:              29 March 2004