FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Trading Post Australia Pty Limited [2008] FCA 1298

PRACTICE AND PROCEDURE – production of documents under s 157 of the Trade Practices Act 1974 (Cth) – relationship with principles of legal professional privilege – whether Court should exercise discretion under s 157(3) to refuse to order production.

Held: it should – application for production dismissed.

PRACTICE AND PROCEDURE – leave to amend pleadings and file Second Further Amended Statement of Claim – whether amendments are necessary to identify real questions in dispute, avoid multiplicity of proceedings, and reflect ongoing developments in respondent’s conduct.

Held: they are – leave to amend granted.

Federal Court of Australia Act 1976 (Cth) s 22

Trade Practices Act 1974 (Cth) ss 52, 53(d), 85(3), 157

Federal Court Rules O 13 r 2, O 13 r 9  

Arnotts Limited v Trade Practices Commission (No 1) (1989) 21 FCR 297 considered

Australian Competition & Consumer Commission v FFE Building Services Limited (2003) ATPR 41-967 considered

Queensland v J L Holdings Pty Limited (1997) 189 CLR 146 considered

Rush & Tompkins Ltd v Greater London County Council [1989] 1 AC 1280 considered

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TRADING POST AUSTRALIA PTY LIMITED (ACN 001 821 156) and GOOGLE INC.

NSD1323 OF 2007

TAMBERLIN J

21 AUGUST 2008

SYDNEY

THE COURT ORDERS THAT:

1.                  The application by the second respondent for further discovery of documents by the applicant is dismissed with costs.

2.                  The application by the applicant for leave to amend and file a Second Further Amended Statement of Claim is granted.

3.                  The applicant is to pay any costs thrown away as a consequence of the proposed amendments referred to in Order 2 above.

4.                  The costs of the application to amend are reserved.

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

REASONS FOR JUDGMENT

1                     These reasons are in respect of two interlocutory applications.

2                     On the first application, the second respondent (“Google”) seeks production by the applicant (“the ACCC”) under s 157 of the Trade Practices Act 1974 (Cth) (“the TPA”), of five letters written to the solicitors for the ACCC by the solicitors for the first respondent (“Trading Post”).  Trading Post has reached a settlement with the ACCC and the proceeding is no longer continued against it.

3                     The second application, which is made by the ACCC, seeks leave to amend and file a Second Further Amended Statement of Claim which will contain what it argues is a more detailed elaboration and extension of its earlier pleadings. 

BACKGROUND

4                     Google operates an internet search engine which is accessible via the website www.google.com.au.   It also has websites with other top level domain names, including www.google.com.  The service provided by Google is partly financed through the sale to promoters of “sponsored links”, whereby individuals and organisations can promote their products and services by having their own websites displayed prominently in response to a search conducted by an internet user through Google’s search engine.  The sponsored links are displayed prominently and are sometimes highlighted in a coloured box, and in some cases are separated (either above or to the right) from the other websites which the internet user’s search has identified.

5                     The ACCC has commenced proceedings seeking declaratory, injunctive and other relief.  It alleges that Google has contravened ss 52 and 53(d) of the TPA by the way in which it presents and uses sponsored links and lays out its website.  These allegations are denied by Google and it says, inter alia, that it is not responsible for any misleading representations.  It denies that there has been any misleading conduct by it or its agents. 

6                     After reconsidering its case, the ACCC filed in Court an Amended Statement of Claim on 10 September 2007.  On that date, the ACCC was ordered to file a brief outline of its case against each respondent.  On 4 October 2007, orders were made by consent that the ACCC file and serve an Amended Application and a Further Amended Statement of Claim.

7                     The ACCC filed its Further Amended Statement of Claim on 25 October 2007.  In January 2008, Google sought discovery in relation to claims about certain representations allegedly made by Google.  A Further Amended Application was filed on 10 April 2008 to take account of a settlement reached between the ACCC and Trading Post, and on 22 May 2008 the ACCC served drafts of a proposed Second Further Amended Application and a Second Further Amended Statement of Claim in the form on which it now seeks to rely. 

8                     I turn now to the application by Google for production under s 157 of the TPA.

GOOGLE'S APPLICATION FOR PRODUCTION OF CORRESPONDENCE

9                     Under s 157(1) of the TPA, where the ACCC institutes proceedings for an order against a respondent, the ACCC shall at the request of the respondent furnish to it a copy of any document in the possession of the ACCC which comes to its attention in connection with the matter to which the request relates and which tends to establish the case of the respondent, unless it is a document obtained from the respondent or the ACCC or its advisors.  If the ACCC does not comply with the request, the Court must, on an application by the respondent, make an order directing the ACCC to comply: s 157(2).  However, there is an exception to this requirement, namely, that the Court may refuse to make such an order in respect of a document or part of a document if it considers such an order inappropriate by reason that the disclosure of the document or part of the document would prejudice any person, or for any other reason: s 157(3).

10                  One matter to note from this summary of s 157 of the TPA is that documents prepared by a professional advisor or officer of the ACCC are not subject to the section.  Another is that the Court has a broad discretion in s 157(3) not to make an order if it is considered inappropriate by reason of prejudice or any other reason.

11                  The request by Google for production in this case is resisted by the ACCC on the basis that the documents sought were brought into existence for the purpose and in the course of negotiating a settlement between Trading Post and the ACCC.  The settlement is embodied in an undertaking to the ACCC, given pursuant to s 87B of the TPA on 21 April 2008.  In that undertaking, Trading Post admitted that its conduct was misleading and deceptive and in breach of ss 52 and 53(d) of the TPA.  Conditionally upon the Court being satisfied of the existence of these breaches, Trading Post provided an enforceable undertaking to the ACCC that it would consent to suitable orders being made by the Court in respect of its conduct.  The five letters sought by Google in its current interlocutory application were correspondence between the advisors to Trading Post and the ACCC. 

12                  The relationship between s 157 of the TPA and the principles concerning legal professional privilege were considered by the Full Federal Court in Arnotts Limited v Trade Practices Commission (No 1) (1989) 21 FCR 297.  In that case, the Full Court held that it could refuse to make an order under s 157(2) of the TPA in respect of a document where it considered that the conditions giving rise to legal professional privilege were satisfied in respect of the document or part of it, and privilege was not waived.  The Full Court held that it had power to refuse to order disclosure in exercise of the statutory discretion conferred by s 157(3).  It also held that the intention disclosed by s 157 is that a respondent is to be given fair treatment in the sense that it is to be given documents which the ACCC has in its possession and which would tend to establish or support the respondent’s case.  The Full Court considered that where a document tends to impeach the ACCC’s case, it also tends to establish the case of the respondent.  Such documents would therefore fall within the ambit of the section.  The Full Court further observed that a document which might merely suggest some line of enquiry which could be of assistance to the respondent in conducting its case, was not a document which “tends to establish” that case.  The Full Court observed that it could require the documents to be produced for inspection and, having inspected them, make an order for disclosure subject to conditions.  The Full Court considered that, by on the one hand qualifying the scope of the ACCC’s common law privilege, but on the other hand affording the ACCC an opportunity to demonstrate prejudice (or some other reason for non-disclosure) in a particular case, the legislative scheme contained in s 157 of the TPA achieved an appropriate balance of the respective interests involved.

13                  In Australian Competition & Consumer Commission v FFE Building Services Limited (2003) ATPR 41-967 at [59], Wilcox J summarised, in a manner accepted by the parties, the position in relation to s 157 of the TPA and legal professional privilege, in these terms:

It follows that I should be guided by the following principles:

(a)       the Court has a discretionary power, under s 157(2) of the [TPA], to order production of documents notwithstanding that they ordinarily would be protected by legal professional privilege;

(b)       nonetheless, legal professional privilege is not abrogated by s 157; the existence of the privilege is a factor to be taken into account in considering the proper exercise of the Court’s discretion;

(c)       in exercising its discretion, the Court should take into account the ‘general intention disclosed by s 157’; that is, ‘that a corporation is to be given fair treatment in the sense that it is to be given documents which Commission has and which would support the corporation’s case’, including by tending to impeach ACCC’s case.

(Emphasis added.)

14                  In FFE Building Services (2003) ATPR 41-967 at [50], Wilcox J referred to the decision in the House of Lords in Rush & Tompkins Ltd v Greater London County Council [1989] 1 AC 1280, where the House of Lords considered the principles relating to the privilege attaching to documents which came into existence for the purpose of negotiating settlement.  Lord Griffiths, with whom the other members agreed, said at 1301:

It seems to me that if those admissions made to achieve settlement of a piece of minor litigation could be held against [a litigant] in a subsequent major litigation it would actively discourage settlement of the minor litigation and run counter to the whole underlying purpose of the “without prejudice” rule.  I would therefore hold that as a general rule the “without prejudice” rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement.  It of course goes without saying that admissions made to reach settlement with a different party within the same litigation are also inadmissible whether or not settlement was achieved with that party.

(Emphasis added.)

In the present case it is not disputed that the relevant correspondence was in the cause of a genuine attempt to reach settlement.  At 1305, his Lordship continued:

If the party who obtains discovery of the “without prejudice” correspondence can make use of it at the trial … [i]t may give some insight into his opponent’s general approach to the issues in the case but in most cases this is likely to be of marginal significance and will probably be revealed to him in direct negotiations in any event.  In my view this advantage does not outweigh the damage that would be done to the conduct of settlement negotiations if solicitors thought that what was said and written between them would become common currency available to all other parties to the litigation.  In my view the general public policy that applies to protect genuine negotiations from being admissible in evidence should also be extended to protect those negotiations from being discoverable to third parties.

15                  The present case is not one in which a party has simply inscribed the heading “without prejudice” on a communication; rather, there is evidence in the form of a sworn verification of a List of Documents that the documents sought by Google were made for the dominant purpose of negotiating a settlement with Trading Post.  There is no evidence to the contrary.  Moreover, in my view, it would be inherently unlikely that documents written by the solicitors for Trading Post to the ACCC would contain evidence or admissions by the ACCC which might reasonably assist the case for Google.

16                  Counsel for Google suggests that there could be something in the correspondence which may possibly assist Google’s case, such as information demonstrating the extent of Trading Post’s involvement in activities in contravention of the TPA, or some other information which might counter an assertion that the conduct was carried out by an agent in an unauthorised way.  Google speculates that there may be some other material to support the proposition that Google could not be expected to be responsible for the actions of Trading Post because those actions were beyond Google’s control.  Google submits that that correspondence may contain something in the nature of an admission by the ACCC, which could be relied on by Google in the present case.

17                  In my view these submissions should not be accepted.  They are, at best, speculative.  The five letters in question have not been shown on the material presently before me to tend to establish the case of Google.  In making this finding, I had regard to the fact that the undertaking given by Trading Post itself contains admissions, and it is unlikely that the documents sought could carry the matter much further.  To test my initial view, after hearing submissions from the parties, I inspected the contents and had regard to the form of the documents in question.  They cover the period from August 2007 to February 2008, and the contents and form of the documents reinforce the conclusion that the documents were prepared for the purposes of negotiating a settlement between the ACCC and Trading Post.  In my view, the documents do not tend to establish the case of Google.  They are rather directed to putting forward Trading Post’s own substantive case, and are designed to obtain the best outcome for Trading Post.  Accordingly, so far as the position of Google is concerned, the documents do not carry the matter further than what is disclosed in Trading Post’s undertaking.

18                  In any event, I consider that in this case there are cogent underlying reasons of principle, similar to those set out in Rush & Tompkins Ltd [1989] 1 AC 1280, to weigh the balance in favour of non-disclosure.  This approach protects the important interests in encouraging negotiated settlements of disputes, ensuring that parties in such negotiations are frank and open with each other, and ensuring that parties communicate without apprehension that confidential (and potentially prejudicial) material may later be made public at the behest of a third party.

19                  Accordingly, because inspection of the documents in question leads me to conclude that nothing contained therein “tends to establish” Google’s case, and having regard to the above authorities, the application by Google is refused with costs. 

20                  I now turn to the next issue, namely, whether the ACCC should be given leave to file and serve a Second Further Amended Statement of Claim and a Second Further Amended Application.

THE ACCC'S APPLICATION FOR LEAVE TO AMEND

21                  The basis on which the ACCC seeks leave to file a Second Further Amended Statement of Claim is that the new pleadings will spell out in greater detail what was alleged in earlier pleadings.  Any such grant of leave is made pursuant to O 13 r 2 and O 13 r 9 of the Federal Court Rules.  Google opposes the grant of such leave.

22                  In essence, the ACCC’s claim in this proceeding is that the publication by Google of advertisements in which the headlines feature the business or product name of an advertiser’s competitor constitutes the making of representations which are misleading or deceptive, and therefore in contravention of s 52 of the TPA.

23                  In its original Statement of Claim, the ACCC identified two advertisements published in August 2005 which it said were misleading or deceptive.  These were described as the Kloster Ford Advertisement and Charlestown Toyota Advertisement, and were particularised in part by way of screen shots from Google’s website.

24                  Google defended the claims by denying the advertisements contravened s 52 of TPA, and relying on statutory defences in relation to the Kloster Ford Advertisement and Charlestown Toyota Advertisement.  One such defence was s 85(3) of the TPA, which provides that “it is a defence if the defendant establishes that he or she is a person whose business it is to publish or arrange for the publication of advertisements and that he or she received the advertisement for publication in the ordinary course of business and did not know had no reason to suspect that its publication would amount to a contravention of [certain] provision[s] of [the TPA].”

25                  Later in the proceeding, on 8 April 2008, a submission was made by Google that the ACCC should plead its particularised claims in greater detail.  The ACCC says that the Amended Statement of Claim resulted from and is responsive to this submission.  The ACCC says that the amendments which are now proposed represent only minor amendments to the pleadings.  It also submits that, since Google has continued to publish some of the impugned advertisements, the proposed amendments simply detail these continuing publications.  In addition, the ACCC says that some of the proposed amendments relate to certain advertisements which contravene s 52 of the TPA and which were published by Google after the filing of the Further Amended Statement of Claim on 25 October 2007, meaning that it is reasonably necessary for the pleadings to be amended to take account of these ongoing developments.  The ACCC submits that amending its pleadings in these ways is appropriate and necessary to establish the ongoing entitlement to injunctive relief and to rebut the defence under s 85(3) of the TPA.

26                  The ACCC says that the proposed amendments are also necessary to raise the real questions in issue between the parties, and avoid a multiplicity of proceedings by focussing on the pattern of conduct of Google rather than pursuing each alleged breach separately.  By s 22 of the Federal Court of Australia Act 1976 (Cth) the Court is required to resolve all matters, as far as possible, in a way that avoids multiplicity of proceedings.  Here, the matter in issue, which will be more fully and effectively raised by the proposed amendments, is whether Google engages in misleading or deceptive conduct when it publishes advertisements which contain the name or business product of businesses in competition with the advertiser, and whether there is an available defence under s 85 of the TPA.  Counsel for the ACCC says that Google would not be prejudiced by the proposed amendments because it has neither completed discovery nor served its evidence in support of its defences or in reply, and it has had ample time to deal with the primary issues which have been raised by the discovery, the evidence filed and correspondence between the parties to date.

27                  The ACCC accepts that it must pay any costs thrown away by the amendments now sought.  It says, however, that the costs of this motion should be paid by Google because of its unreasonable refusal to consent to the proposed amendments in the light of the ACCC’s concession as to payment of costs thrown away.

28                  In opposition to the proposed amendments, Google says that they introduce a number of significant changes into the ACCC’s original case, and that they fundamentally depart from the position which it the ACCC has taken since the proceedings were commenced.  Google argues that, as a consequence of the extensive additional case now sought to be made and the burden which imposes on Google, the amendments should not be permitted.

29                  Counsel for Google refers to difficulties which it says will arise if the amendments to the pleadings are made.  Many of these objections revolve around considerations going to the merits of Google’s case and the alleged problems with the ACCC’s case, rather than considerations going to the difficulties arising from the amendments to the pleadings.  It is said that some representations are pleaded in very general terms; that there is inconsistencies between representations; and that the pleadings lack any allegations concerning reputation.  Additionally, it is said by Google that no evidence has been filed by the ACCC in relation to any complaint by an internet user that Google’s website led to actual or specific confusion or that he or she had been positively misled.  Google also says that no complaint has been made by any organisation whose name or website address is said to have been used in a misleading way, and that some organisations were only aware of or troubled by the sponsored links when informed by the ACCC.  Google characterises these deficiencies as demonstrating the speculative, inconsistent and “scatter-gun” case which the ACCC advances.  In my view, these criticisms, if valid, go to resolution of the merits of the dispute rather than to basic pleading principles.

30                  Google also opposes the amendments on the basis that they are not necessary to determine the real questions raised and will only result in additional costs and delay.  This means that there would be a need for further discovery, amendments to defences, filing of evidence and expense.  Google submits that there is little or no public benefit in allowing the ACCC to amend its pleadings so as, in effect, to add new claims.  Google criticises the pleadings of the ACCC on the basis that it has not sought to join any party who purchased the impugned sponsored links.  Therefore, it is said, there is potential for procedural unfairness and prejudice to Google.  I do not accept this.  In my view, it does not follow that Google will be significantly disadvantaged by the non-joinder by other parties, especially in circumstances where evidence can be led from those parties if Google sees fit.

31                  Counsel for Google sought to distinguish the principles underlying the decision in Queensland v J L Holdings Pty Limited (1997) 189 CLR 146.  In that case, the High Court at 155 referred to the injustice of shutting an applicant out from raising an arguable case and thereby precluding the determination of a live issue between the parties.  The Court indicated that considerations of case management should not be allowed to outweigh the primary aim of allowing full and proper ventilation of an arguable case.  I do not consider that the principle expressed by the High Court in that case should be displaced in the present case.  A hearing date has not yet been fixed in this proceeding, and the matter is still at a relatively incomplete stage.  I have taken into account the factors mentioned by Kirby J in J L Holdings 189 CLR at 171, and the fact that the ACCC has conceded that it will be responsible for any costs thrown away as a result of the amendments.  I also see force in the consideration that the ACCC wishes, through the proposed amendments, to have a comprehensive determination in relation to Google’s continuing method of operation and activity, and to meet the defence advanced by Google pursuant to s 85(3) of the TPA.

32                  Taking all these matters into account, I am of the opinion that leave should be granted to the ACCC to make the proposed amendments.  Although there may be some difficulties for Google as a consequence of the proposed changes, I am not persuaded that leave to amend should be refused on that basis.  I therefore grant leave to amend and file the Second Further Amended Statement of Claim.  Any costs thrown away as a result of the amendments shall be paid by the ACCC.  The costs of this application to amend and file the Second Further Amended Statement of Claim will be reserved, because I think it is appropriate, given Google’s opposition to the application, to revisit the question of costs after the matter has been more fully ventilated.

Associate:

Dated:         21 August 2008