FEDERAL COURT OF AUSTRALIA

Austal Ships Pty Ltd (ACN 079 160 679) v Incat Australia Pty Ltd
(ACN 051 556 855) [2009] FCA 368

PRACTICE AND PROCEDURE – application for further particular discovery – principles governing discovery – whether burden of discovery outweighs benefit – whether discovery relevant to pleaded issues – whether sufficient evidence to support order for further discovery – whether application constitutes ‘fishing expedition’ – whether respondents should be directed to respond to applicant’s notice to admit facts – whether leave should be granted to applicant to administer interrogatories – application for summary dismissal by respondents – whether reasonable prospect of success

EQUITY – applicant claims two reports on sea keeping of its vessels confidential – alleged misuse of confidential information – springboard doctrine 

Held:  The applicant’s applications for further particular discovery; an order to direct the respondents to respond to its notice to admit facts; and for leave to serve notices to produce is refused.  The respondents’ application for judgment is dismissed.

Federal Court of Australia Act 1976 (Cth) s 31A(2)

Trade Practices Act 1974 (Cth) s 52

Federal Court Rules O 1 r 4, O 15 r 2(3), O 15 r 8, O 15A r 3 and r 6

Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN(NSW) 250

Austal Ships Pty Ltd (ACN 079 160 679) v Thurlow (No 2) [2007] FCA 202

Austal Ships Pty Ltd (ACN 079 160 679) v Thurlow [2006] FCA 1219

Betts Group Pty Ltd v Paul’s Retail Pty Ltd [2007] FCA 1983

Caltex Refining Co Pty Ltd v The Amalgamated Metal Workers Union [1990] FCA 721

Carr v Baker (1936) 26 SR(NSW) 301

Coco v AN Clark (Engineers) Ltd [1969] RPC 41

Cranleigh Precision Engineering Ltd v Bryant [1964] 3 All ER 289

Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809

Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Gurnett v Macquarie Stevedoring Co Pty Ltd (1955) 75 WN(NSW) 261

Jones v Dunkel (1959) 101 CLR 298

KGL Health Pty Ltd v Mechtler [2008] FCA 273

LAC Minerals Ltd v International Corona Resources Ltd (1989) 16 IPR 27

Mediterranean Bakery Pty Ltd v Vardakis (1976) ACLD 649

Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979) 36 FLR 450

Molnlycke AB v Proctor & Gamble Limited (No 3) [1990] RPC 498

Mulley v Manifold (1959) 103 CLR 341

Polygram Records Inc v Raben Footwear Pty Limited (1996) 140 ALR 617

Printers and Finishers Ltd v Holloway [1964] 3 All ER 731

Slick v Westpac Banking Corporation [2006] FCA 1712

Trade Practices Commission v CC (New South Wales) Pty Limited (1995) 58 FCR 426

WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 

AUSTAL SHIPS PTY LTD (ACN079 160 679) v INCAT AUSTRALIA PTY LTD (ACN 051 556 855), INCAT TASMANIA PTY LTD (ACN 054 616 410), INCAT MARKETING PTY LTD (ACN 084 060 408), INCAT INVESTMENTS PTY LTD (ACN 009 570 325), INCAT EUROPE APS, INCAT EUROPE LIMITED, ROBERT FREDERICK CLIFFORD, JUSTIN PAUL MERRIGAN and STEVEN JAMES THURLOW

WAD 163 of 2007

MCKERRACHER J

20 APRIL 2009

PERTH

THE COURT ORDERS THAT:

1.                  Each of the respondents is to file and serve an affidavit of discovery which conforms to the Rules of the Court within 21 days. 

2.                  Each of the applicant’s applications for:

(a)        further particular discovery;

(b)        an order to direct the respondents to respond to its notice to admit facts; and

(c)        for leave to serve notices to produce

is refused. 

3.                  The respondents’ application for judgment is dismissed. 

4.                  Any written submissions on costs are not to exceed five pages and are to be filed and served within 21 days, failing which there will be no order as to costs. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

INTRODUCTION

1                     The applicant (Austal) contends that its competitor (the six companies being collectively described below as Incat) and a former employee have misused Austal’s confidential information.  Although the proceeding is still at an interlocutory stage, a considerable amount of evidence has been gathered already as a result of previous orders made by the Court. 

2                     A convenient starting point is the judgment of French J (as his Honour then was) on 7 September 2006 (Austal Ships Pty Ltd (ACN 079 160 679) v Thurlow [2006] FCA 1219).  As can be seen from that judgment, Austal manufactures high speed ferries including catamarans and trimarans.  It competes in an international market.  One of its major competitors is Incat.  Incat’s principal ship building facilities are located in Tasmania. 

3                     It is common ground that in May 2006, the ninth respondent (Mr Thurlow), who was a marketing consultant employed by Incat sent an email to Master Ferries.  Master Ferries is a Norwegian company.  Included with the email was a confidential report prepared within Austal.  Contained within the report was a mathematical modelling of the comparative sea keeping characteristics of Austal’s catamaran and trimaran ferries. 

4                     This case is somewhat unusual in that the internal communication of Austal was critical of one of Austal’s own vessels.  Subsequently, that criticism has been reviewed and withdrawn but the confidential yet mistaken criticism has been used, Austal says, to the advantage of Incat and detriment of Austal.  The suggestion in the report was that the sea keeping characteristics of the 126 metre Austal trimaran were inferior to those of the 101 metre catamaran.  Mr Thurlow then used the Austal report in the email to Master Ferries as a basis for making disparaging remarks about the Austal trimaran. 

5                     Mr Thurlow had come into the possession of the report as a result of it being passed on by a former employee of Austal, the eighth respondent, Mr Merrigan.  In January 2005, Mr Merrigan had left Austal’s employ and in June of that year commenced employment as a public relations and marketing officer for Incat. 

6                     Austal contends (amongst other things) that the report which Mr Thurlow emailed to Master Ferries was obtained as a result of a breach of obligations of confidentiality Mr Merrigan owed to Austal and that its reproduction involved an infringement of Austal’s copyright in the report. 

7                     In September 2006 in Austal Ships v Thurlow [2006] FCA 1219, French J granted preliminary discovery to Austal pursuant to O 15A rr 3 and 6 of the Federal Court Rules. 

8                     Austal then issued proceedings.  Subsequently additional orders were made by French J for the examination of various individuals. 

9                     In the proceedings before me, by an amended motion, Austal sought:

(a)        Further compliance with discovery orders;

(b)        Further and particular discovery;

(c)        An order directing a response to the applicant’s notice to admit facts and documents;

(d)        Leave to serve notices to produce on the respondents; and

(e)        An order for liberty to apply for leave to administer interrogatories. 

10                  In relation to item (c), I indicated that it was not open to the Court to direct a response to the applicant’s notice to admit facts and documents.  The two day hearing from Austal’s perspective was essentially concerned with obtaining additional discovery from Incat.  I did not understand (d) to be pressed.  As to (e), no order is presently necessary but if Austal prepares limited draft interrogatories and applies by reference to such a draft, due consideration can then be given to the application. 

11                  Incat strenuously resists further relief of any nature being granted to Austal and by its own amended notice of motion seeks summary judgment against Austal pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) in respect of the claim insofar as it refers to entities described below as Higashinihon, Spanish Acciona and PATT . 

BACKGROUND

12                  Austal was incorporated and commenced business in 1988.  It manufactures a range of lightweight, high speed vessels including monohulls, catamarans and trimarans.  Those vessels range in size from 20 to 130 metres and are used for commercial, military and naval applications.  Austal employs 1700 people at its ship building facilities located on the waterfront at Henderson, immediately south of Fremantle in Western Australia and at Mobile in Alabama in the United States.  It has designed and secured orders for the manufacture and delivery of over 160 vessels since it was formed.  A number of those vessels are fast passenger and vehicle passenger ferries. 

13                  In June 2003, Austal contracted for the design and construction of a 126 metre trimaran, vehicle passenger ferry for a European ferry operator Fred Olsen SA.  As was observed in Austal Ships v Thurlow [2006] FCA 1219, at that time the high speed vehicle passenger ferry market had been dominated by catamarans and the use of trimarans was a relatively new concept in that market.  Austal’s internal research was contained in a report entitled ‘Analysis of the Ship Motion Performance of an Austal 101 metre Catamaran and a Comparison with a 126 metre Trimaran in the Irish Sea’ (the first Report).  As indicated above, the first Report reached the conclusion that the trimaran was significantly inferior to the catamaran on the routes and conditions to which it referred.  The first Report and the follow up reports were stored in a computer archive within Austal.  The document was strictly an internal and confidential document of Austal.  In fact it transpired, according to Austal, that both the conclusion and the basis for it in the first Report were quite erroneous.  In a subsequent report, the error was explained and the conclusion in the first Report was corrected. 

14                  It is now common ground that Mr Merrigan had access to the first Report while he was employed with Austal.  He made that Report available to Mr Thurlow of Incat when Mr Merrigan was subsequently employed by Incat. 

15                  The text of the offending email attaching the first Report and sent by Mr Thurlow is set out in Austal Ships v Thurlow [2006] FCA 1219.  In particular, it observed that it was well known in the market that the Austal 101 is ‘far inferior to the Incat 98 metre in terms of sea keeping, yet in this Austal report the Austal 101 comes out significantly better than the trimaran which is around 26 metres longer on the waterline …’.  (emphasis added)

16                  The email also observed that a ‘move into the 98 metre’ (being the Incat vessel) is a timely, sound and logical step forward in order to be able to carry freight and to get good all round weather reliability.  It observed that the Incat vessel ‘costs a little over half the capital cost of a trimaran’, was proven in service and was available quickly. 

17                  As French J observed, however, other representations contained in the email concerning fuel usage, pricing, delivery and technical problems with the trimaran were not extracted from or reflected in the contents of the first Report. 

18                  Austal duly obtained preliminary discovery and aided with that discovery brought a further application (Austal Ships Pty Ltd (ACN 079 160 679) v Thurlow (No 2) [2007] FCA 202).  Discovery having been given for Incat and for each of Messrs Thurlow and Merrigan, Austal sought further discovery on 19 October 2006 seeking an order for forensic examination of the electronic databases held by Incat, preservation orders with respect to discovered documents and the examination of ten persons before a Deputy District Registrar of the Court.  It abandoned the orders for further discovery and forensic examination but persisted with the application for examination of certain named persons. 

19                  French J made orders for examination of Messrs Thurlow, Merrigan, Carter and Clifford, the latter two being officers of Incat.  Austal contended that it wished to have examination as to the identity discovery of any person who caused, procured or authorised the doing in Australia or outside of Australia of various acts including reproduction of the first Report; printing the Report; and distributing the Report.  His Honour was satisfied that what Messrs Clifford and Carter did with the first Report and a subsequent report after those reports came into their hands may be relevant to the question of whether Incat was a party to an infringing reproduction assuming copyright does subsist in favour of Austal.  Although neither was named as a respondent to the proceedings, the fact that they were officers of the respondent companies and had entered appearances in the proceedings was sufficient to satisfy his Honour that the orders should be made. 

20                  The examinations duly proceeded.  Several subsequent orders have been made by the Court since the examinations.  On 11 April 2008, French J ordered that the parties file and serve witness statements.  Additional supplementary orders in relation both to the filing of witness statements, discovery and a mediation were made on several occasions. 

The Current Motion

21                  The amended notice of motion now pursued by Austal is essentially for orders relating to discovery of the following documents and for the admission of certain facts:

Categories of Documents

A.        As referred to in sub-paragraph 2(a) of the applicant's notice of motion dated 27 August 2008 (Notice of Motion), the categories of documents sought to be produced as particular discovery, pursuant to Order 15 rule 8 of the Rules of the Federal Court, comprise all documents in the possession, custody or power of the first to ninth respondents, and each of them in the within proceedings, which documents came into existence between 1 June 2005 to 16 June 2006 (Relevant Period), as specified in the categories as referred to in paragraphs 1, 2 and 3 below, with the obligation on the respondents, and each of them, to give such particular discovery requiring the proposed deponent of the affidavit verifying the subject list of documents required to be discovered to:

(a)        be by list in accordance with Form 22; and

(b)        conform to the requirements as specified in sub-paragraphs 3(a) and (b) and 4(a) and (b) of the Notice of Motion.

B.        Further, should the Court deem it appropriate, the categories of documents as referred to below, by reference to the matters referred to in paragraphs 1, 2 and 3, and also by reference to Defined Matter, as referred to in paragraph D (sic E) below, are to apply to the order for discovery as sought in paragraph 1 of the Notice of Motion.

C.        …

Notice to Admit

D.        Reference herein to the Notice to Admit, including any of the annexures thereto, means the applicant's Notice to Admit Facts and Authenticity of Documents filed 25 July 2008 (Notice to Admit).

Defined Matter

E.         For purposes of the within specified categories of documents as sought to be discovered pursuant to the order sought in paragraph 2 of the Notice of Motion, and pursuant to Order 15 rule 8, and should the Court deem it appropriate, the order for discovery as sought in paragraph 1 of the Notice of Motion, "Defined Matter" means any of the following matters:

(a)        the marketing or promotion of any catamaran vessel designed, manufactured, sold or supplied, or offered for sale or supply, by the first, second, third and/or fourth respondents, during the period 1 June 2005 to 16 June 2006 (Relevant Period), as referred to below (Relevant Marketing Endeavours):

(i)         a 98 metre Incat wave-piercing catamaran (Hull 062 and/or Hull 060), as marketed or promoted to the Port Authority of Trinidad & Tobago (PATT), including as referred to in paragraph 295 of the Respondents' Notice Disputing Facts and Authenticity of Documents dated 24 October 2008 (Respondents' Notice of Admissions);

(ii)        the 91 metre Incat wave-piercing catamaran as sold and supplied to the Norwegian ferry operator, Master Ferries, through the Contract for Supply of Ship to Master Ferries dated 24 November 2005, as referred to in:

(A)       the news release of the Incat Group of Companies as published on the Incat Website, Mad Mols (renamed "Master Cat") dated 9 January 2006, and as annexed to the Notice to Admit and marked    "NTA-3"; and

(B)       paras 125 to 152 and sub-para 165(d) of the Notice to Admit;

(iii)       the Incat 98 metre vessel (Hull 062) as sold to the Spanish ferry operator, Acciona Transmediterránea, as referred to in paragraph 175 of the Respondent's Notice of Admissions, and referred to in:

(A)       the Incat news release as published on the Incat Website on 16 May 2006, a copy of which is annexed to the Notice to Admit and marked     "NTA-20", and admitted as authentic at page 95 of the Respondents' Notice of Admissions;

(B)       the media release by the Tasmanian Government dated 16 May 2006, a copy of which is annexed to the Notice to Admit and marked "NTA-21", and admitted as authentic at page 95 of the Respondents' Notice of Admissions; and

(C)       paras 175 to 178 and sub-para 165(c) of the Notice to Admit; and

(iv)       the 2 x 112 metre Incat Wave Piercing Catamarans (Hull 064 and Hull 065 and named as “Natchan Rera” and “Natchan World” respectively) as promoted under and by reference to the description "Evolution One", as sold to Toyo Shipping Line Co Ltd/Libera Corporation/ Higashinihon Ferry, Hakodate, Japan (Higashinihon), as referred to in paragraph 367(a) of the Respondents' Notice of Admissions, the contracts of purchase of which was or were signed on or about April 2006 and/or May 2006, and which event is:

(A)       reflected in the News Release of the Incat Group of Companies dated 30 May 2006, a copy of which is annexed to the Notice to Admit as "NTA-13", and admitted as authentic at page 95 of the Respondents' Notice of Admissions; and

(B)       further referred to in paras 76 to 124 and sub-para 165(e) of the Notice to Admit;

(b)        any sales and/or marketing proposal and/or presentation created during the Relevant Period in relation to any of the Relevant Marketing Endeavours, the content of which included or concerned, directly or indirectly, the characteristic known as sea-keeping or ship motion or operability;

(c)        any reference in any sales and/or marketing proposal and/or presentation created during the Relevant Period in relation to any of the Relevant Marketing Endeavours, the content of which included or concerned, directly or indirectly, a comparison and/or explanation of the differences between any Incat built vessels and the Austal 126 metre trimaran and/or Austal 101 metre catamaran, which latter two vessels are the subject of the First Austal Report dated 23 September 2003 [NTA-25(b)] and Second Austal Report dated 5 December 2003 [NTA-25(c)], respectively, of the Notice to Admit;

(d)        any arrangement or understanding entered into or which occurred during the Relevant Period in relation to any of the Relevant Marketing Endeavours, as between the first, second, third and/or fourth respondents, including through:

(i)         Robert Frederick Clifford (Robert Clifford), the seventh respondent and Chairman of the Incat Group of Companies, which includes the:

(A)       first, second, third and fourth respondents in the within proceedings;

(B)       Incat Chartering Pty Ltd (ACN 059 233 046);

(C)       Incat Finance Pty Ltd (ACN 056 869 946);

(D)       Incat Offshore Pty Ltd (ACN 071 054 058);

(E)       RF Clifford Pty Ltd (ACN 009 514 514); and

(F)       Inter Cats (Tasmania) Pty Ltd (ACN 009 539 842),

each of which companies are referred to in paragraph 1 of the affidavit of Simon Baird Carter sworn 30 November 2006 in Federal Court Proceedings No. WAD 165 of 2006;

(ii)        Leith Alexander Rex Thompson (Thompson), as a servant or agent of any and each of the entities comprising the Incat Group of Companies;

(iii)       Thompson as General Manager, or as holding any other statutory or informal office within and/or acting as an agent or representative, of Incat Europe ApS, the fifth respondent, and/or Incat Europe Limited, the sixth respondent; 

(iv)       Simon Baird Carter (Carter), Legal Manager of the Incat Group of Companies; and/or

(v)        John Harris (Harris), Managing Director of Incat Tasmania Pty Ltd (the second respondent),

with:

(1)        Incat Europe ApS, the fifth respondent; and/or

(2)        Incat Europe Limited, the sixth respondent,

through Steven James Thurlow (Thurlow), the ninth respondent, as a servant or agent of either of the said Incat Europe entities, in relation to the matters referred to in sub-paragraphs E(a)(i), (ii), (iii) and/or (iv) above;

(e)        any arrangement or understanding and/or payment or obligation to pay any commission or other consideration as payable by the:

(i)         first;

(ii)        second;

(iii)       third; and/or

(iv)       fourth respondent,

or any of them, to the fifth respondent and/or sixth respondent and/or Thurlow in relation to the matters referred to in (a) (b), (c) and/or (d) above, including, in particular, any sale or other form of commercial dealing concerning the Incat built vessels as referred to in sub-paragraphs E(a)(i), (ii), (iii) and/or (iv) above.

Categories of Documents

1.         All documents evidencing or recording a communication (whether paper or electronic), and whether written or oral, emanating from or received by the first to ninth respondents, and each of them, and any representative, including any party or person acting with actual, apparent or ostensible authority of:

(a)        PATT, concerning the Relevant Marketing Endeavours and, in particular, the matters referred to in sub-paragraph E(a)(i) above;

(b)        Master Ferries, concerning the Relevant Marketing Endeavours and, in particular, the matters referred to in sub-paragraph E(a)(ii) above;

(c)        Acciona Transmediterránea, concerning the Relevant Marketing Endeavours and, in particular, the matters referred to in sub-paragraph E(a)(iii) above; and

(d)        Higashinihon, concerning the Relevant Marketing Endeavours and, in particular, the matters referred to in sub-paragraph E(a)(iv) above,

during the Relevant Period, and which also relate to or concern any one or more of the Defined Matters, and as further referred to in the Notice to Admit in paragraph 165.

2.         All documents evidencing or recording a communication (whether paper or electronic), and whether written or oral, emanating from or received by:

(a)        Incat Europe ApS, the fifth respondent;

(b)        Incat Europe Limited, the sixth respondent; and/or

(c)        Thurlow,

during the Relevant Period, concerning the Relevant Marketing Endeavours and, in particular, the matters referred to in sub-paragraphs E(a)(i), (ii), (iii) and/or (iv) above, and which also relate to or concern any one or more of the Defined Matters, and as further referred to in the Notice to Admit in paragraph 165.

3.         All documents evidencing or recording an arrangement or understanding by written or oral communications (whether paper or electronic) between:

(a)        any one or more members of the Incat Group of Companies; and

(b)        (i)         Incat Europe ApS;

(ii)        Incat Europe Limited; and/or

(iii)       Thurlow,

during the Relevant Period, concerning a reference being included on the Incat Website in respect of:

(A)       Incat Europe ApS;

(B)       Incat Europe Limited; and/or

(C)       Thurlow,

and which also relate to or concern any one or more of the Defined Matters, and as further referred to in the Notice to Admit at sub-paragraphs 9(c)(i), (ii), (iii) and (iv).

4.         All documents evidencing or recording an arrangement or understanding by written or oral communications (whether paper or electronic) between:

(a)        any one or more members of the Incat Group of Companies; and

(b)        (i)         Incat Europe ApS;

(ii)        Incat Europe Limited; and/or

(iii)       Thurlow,

during the Relevant Period, concerning Thurlow being entitled or authorised, or otherwise permitted, to use, for the purposes of his duties and role as a "Marketing Consultant, Europe", the business card, a copy of which is annexed to the affidavit of Matthew Alexander Holgate sworn on 27 June 2006 in WAD 165, and being annexure MAH-2 thereto, and as referred to in paragraph 21 of the First Decision of French J as delivered on 7 September 2006 in WAD 162, 163 and 165, as a joint judgment, and which also relate to or concern any one or more of the Defined Matters, and as further referred to in the Notice to Admit at paragraphs 59 to 61.

22                  In the unusual circumstances arising in this litigation, the interlocutory relief sought by each party is supported by quite extensive evidence.  The evidence therefore needs to be considered in these reasons, not with a view to drawing any conclusions as to the ultimate issues at trial but in order to evaluate the strength of the current interlocutory arguments. 

EVIDENCE

23                  I have not referred to all of the evidence.  Some of the evidence is clearly more relevant to a trial than an interlocutory application.  That observation is no way intended to be deprecating because the witness statements were in fact intended to be those that would be relied upon at trial.  I have also not referred to much of the evidence as notwithstanding the fact that the application is interlocutory, a great deal of it is hearsay, speculation, argument and generally inadmissible.  Nevertheless, I have endeavoured to reflect the substance of the relevant issues for the purposes of the current applications. 

24                  As discussed, Austal has had the benefit of preliminary discovery, compulsory examination on oath of Incat officers and the provision of Incat witness statements and affidavits.  It has had all of these sources of information before seeking further discovery. 

25                  While there may have been some misunderstanding as to the topics that Austal was to cover in its witness statements, the statements collectively advert to all the pleaded transactions.  Austal has not pointed to any additional evidence it would have adduced to supplement that so far supplied.

26                  Austal’s affidavits and witness statements were subject to extensive objections raised by Incat.  I do not propose to deal with the objections in detail for reasons which will become evident in due course.  Nevertheless, while to some extent on an interlocutory application hearsay material may be admissible, in light of the extensive benefit which Austal has had already in having access to Incat’s information, I would be giving little weight to material which is no more than hearsay. 

27                  The witness statements and affidavits relied upon include the following: an affidavit of Mr Darren Frederick Thomas Edwards, sworn on 14 October 2006; witness statement of Mr James Bennett of 2 May 2008; witness statement of Mr Richard Regan of 2 May 2008; witness statement of Mr Kobayashi Toyohiko, undated but apparently signed on 16 May 2008; witness statement of Mr Christopher Gerrard dated 20 May 2008; witness statement of Mr Darren Edwards of 7 July 2008; witness statement of Mr Richard Regan dated 9 July 2008; witness statement of Mr James Bennett dated 9 July 2008; witness statement of Mr Christopher Gerrard dated 9 July 2008; witness statement of Mr Christopher Pemberton filed 20 October 2008; witness statement of Mr Richard Regan dated 24 October 2008; and a witness statement of Mr Michael Wake signed 27 October 2008. 

Mr Nicholas Timoney

28                  Mr Timoney is a solicitor acting for Austal.  In Mr Timoney’s affidavit sworn on 27 August 2008, he recounts the history of the matter and the history of communications between the parties and records his belief that further discovery is critical in relation to Austal’s ability to advance and prove its case against Incat.  As, by its very nature, Austal’s claim is for breach of confidence, infringement of copyright and contravention of s 52 of the Trade Practices Act 1974 (Cth),it raises matters solely within the knowledge of the respondents.  In that regard, Mr Timoney observes that the discovery given by Incat through solicitors so far effectively simply mirrors that which had been given in the preliminary discovery proceedings with some minor exceptions. 

29                  Mr Timoney also deposes to his belief that Incat’s position in relation to discovery is at odds with the range of documents which Mr Timoney would have expected to be produced on discovery given the obligations of a corporation to maintain documents recording the commercial activities of a company.  Statutory requirements arise under the Corporations Act 2001 (Cth) (Corporations Act).  It is suggested Incat would have included at least the files recording all evidence in matters relating to the sales or marketing efforts made in relation to Incat built vessels to Master Ferries through the Contract for Supply of Ship dated 24 November 2005; the Port Authority of Trinidad & Tobago in February 2006; correspondence with Acciona Transmediterránea in May 2006; and Libera Corporation Higashinihon Ferry in May 2006. 

30                  In a further affidavit of 17 October 2008, Mr Timoney explains the basis on which the witness statements deal exclusively with the Higashinihon dealings and the Master Ferries incident as distinct from other aspects concerning Acciona and the Port Authority of Trinidad and Tobago (PATT).  Shortly stated, the reason for confining the content of Austal’s witness statements to the first two incidents was an understanding that a direction to that effect had been given by French J in the course of a case management conference.  The reasons for that understanding were explained by Mr Timoney.  These issues go predominantly to the question of the strike out application or the application for partial dismissal advanced by Incat.  Mr Timoney describes the central issue as the Higashinihon issue which was the issue on which the primary focus was placed by the witnesses for Austal. 

31                  I need not focus a great deal of attention at this stage on this explanation as I have reached the conclusion, in any event, that no judgment for Incat should be given at this stage. 

32                  Reference is made to the witness statement of Mr Thurlow of Incat in which Mr Thurlow said at [7]:

At some time during that day Tom said to me words to the effect that Master Ferries was thinking of expanding its operations and that he was under pressure to look at Austal’s vessels.  In response, I said words to the effect that he should ensure he did his due diligence.  Tom asked me if there was any comparison.  I said yes there was and showed him a copy of an Austal report from my laptop.  Tom then asked if he could have a copy of the report.  To the best of my recollection I said words to the effect that I would send it to him. 

33                  Subsequently in the witness statement, Mr Thurlow refers to a presentation on or about 2 November 2005 in the offices of Higashinihon for some two hours in front of approximately 25 people from the company which was conducted by PowerPoint.  He said that the presentation covered topics like Incat’s history, product development, where Incat vessels were operating around the world, operating concepts and the availability of future tonnage.  Mr Thurlow says that at no time during that presentation did he refer to Austal or to the Austal Reports.  As will be seen below in these reasons, however, Austal contends that there is no denial of other ‘usage’ of the content of the reports. 

34                  Mr Timoney also annexed to his affidavit some reasonably extensive transcript of examinations by counsel for Austal of the nominated officers of Incat.  These for the record include Mr Clifford (pp 13-51), Mr Merrigan (pp 75-110), Mr Thurlow (pp 1-40 on 4 July 2007 and pp 1-27 on 5 July 2007) and Mr Carter (pp 52-74 on 26 July 2007).  Each of those officers was represented by senior counsel who also briefly questioned the officers.  I was taken to very little of that material in oral argument. 

35                  I now turn to the witness statements of the various Austal witnesses. 

Mr James Bennett

36                  On 9 April 2008, Mr James Bennett of Austal swore an affidavit.  He is the Commercial Sales Manager for Austal.  He has been employed by Austal for 20 years and is a qualified naval architect.  In 1998 he was appointed as Technical Manager with primary responsibility for technical aspects of sales proposals. 

37                  He observes that the international market for fast ferries is extremely competitive with a limited number of potential customers and a relatively large number of competing ship yards, other ship yards include Incat, Damen, Fjellstrand, Rodriquez, Fincantieri and Marinteknik.  He purports to describe the practice within the industry observing that customers usually seek quotations from or issue requests for tenders to several ship yards for new vessel orders.  While the inquiries or tenders vary in detail and complexity, they usually specify the particular requirement which the new vessel should meet.  In the case of Austal, when a new inquiry is made, Austal forms a sales team which includes a technical manager.  The customer’s requirements are addressed and a sales proposal or tender is prepared offering a vessel which is carefully designed to meet the specific requirements of the customer.  He proceeds to describe the technical processes in greater detail and says that a substantial quantity of written material is required to be submitted by a ship yard to a potential customer in response to any serious inquiry or request for a tender.  He says it is also very common in his experience that the sales team is invited or arranges to provide formal presentations to prospective customers outlining the details of a sales proposal.  Such presentations are often computer-based in the form of a PowerPoint or similar branded presentation with a series of slides containing condensed information in support of the bid.  He says that the practice of Austal is to persuade the customer as to the relative merits and advantages of an Austal vessel by comparison with other vessels offered by competing ship yards.  In some cases, customers invite such criticism and may actively encourage Austal to highlight weaknesses in opponents’ vessels. 

38                  He also says that at Austal it is the policy within the sales and marketing department that all documentation referred to in this process is saved and stored on a secure database or server to which access can be granted to approved persons when necessary.  He often travels overseas with the sales team in order to meet prospective customers.  He said that as part of the Austal sales team and as Technical Manager he was aware of and generally familiar with Austal’s marketing endeavours in relation to the tender for the sale of Austal’s 126 metre high speed trimaran ferry to Higashinihon in Japan.  He was also aware that Austal utilised the services of Mr Kobayashi whom he understood was a Japanese national based in Japan serving as an agent for Austal in relation to Austal’s endeavour to win the tender contract with that company. 

39                  As part of his work, Mr Bennett would regularly write reports of his activities and significant events and developments with respect to projects and sale prospects.  Those reports would include travel reports, meeting notes and minutes as well as copies of presentations and file notes of telephone discussions. 

40                  Mr Bennett also signed a witness statement on 2 May 2008.  The contents of the witness statement expand upon but are substantially similar to the content of his affidavit referred to above. 

41                  Generally, on the basis of this and other evidence, Austal asks the Court to infer that, notwithstanding Incat’s very limited discovery, it is very likely that Incat has kept many more potentially relevant documents that it has failed to discover.

Mr Richard Regan

42                  On 2 May 2008, Mr Regan signed a witness statement.  He is the Sales Manager for Austal.  He is responsible as a senior member of the sales team for the sales of new vessels to Austal’s local and international commercial customers.  He has been continuously employed in that capacity for eight years since 2000 and prior to that was employed by another Western Australian ship yard, Tenix Marine as sales manager.  Prior to that he was the general manager for a company involved with the purchase, charter and commercial management of high speed ferries. 

43                  In relation to the Higashinihon project, he says that in the second half of 2005 as Sales Manager he was responsible for the Higashinihon tender.  Throughout that six month period and during the first quarter of 2006, he led an ultimately unsuccessful effort by Austal to sell two vehicle passenger ferries to Higashinihon.  Ultimately that project was won by Incat.  He says that Mr Kobayashi assisted him in the sales and marketing efforts and was the source of most of his day to day information regarding the progress of the project. 

44                  Mr Regan said that Mr Kobayashi first informed him about the project in July or August 2005 and said that Higashinihon was seeking to purchase two or three high speed ferries to operate between Hakodate and Aomori.  The details at that stage were sketchy but he could identify the nature of the route and the weather conditions it would experience.  He believed that on that route the conditions could be very uncomfortable in a high speed catamaran.  He concluded that the route would be ideal for Austal’s 127 metre trimaran.  That vessel is said to have been designed specifically to improve the sea keeping and passenger comfort of high speed ferries operating in rough seas, especially when those seas were on the beam. 

45                  He arranged for Mr Bennett to assist him in preparing a market presentation.  They visited Japan in August 2005 and met with a number of managers from Higashinihon, including Mr Koga, Chief Executive Director of Higashinihon and members of his technical and operations team.  They made a presentation to Mr Koga and a larger team.  The presentation was delivered by Mr Bennett and translated by Mr Kobayashi.  Mr Regan was of a view that the project was at its preliminary stage then as the specifics of what was required were not clear.  They discussed the weather conditions with the Captain of the Higashinihon ferry who invited them to inspect the logbooks and weather observations.  Mr Kobayashi informed them that a delegation of Higashinihon managers planned to visit different vessels of various ship yards for inspection purposes.  Mr Kobayashi asked him to arrange a visit to Tenerife for a group of Higashinihon managers for the purpose of inspection of an Austal Hull 260 which was the Austal 126 metre trimaran ferry owned and operated by Fred Olsen SA.  He had been closely involved with a sale of that vessel to Fred Olsen SA and was very familiar with the managers of the company.  He has no written records of his visit to Tenerife. 

46                  The Higashinihon delegation, accompanied by Mr Kobayashi, were due to fly in on 30 September 2005.  The delegation comprised Mr Koga, the Chief Executive Director of Higashinihon; Captain Yuzo Kikuchi, one of Higashinihon’s captains; and a young marine engineer.  The flight was delayed and diverted due to bad weather.  They eventually arrived at the hotel in Santa Cruz at lunchtime. 

47                  Mr Juan Ramsden of Fred Olsen SA explained his experience with the Austal vessel.  Questions were asked about it by the delegation from Higashinihon.  They were given a detailed inspection of it.  They also travelled on it.  He was under the impression that they viewed the Austal vessel favourably.  After completion of this process, Mr Koga informed Mr Regan that they were very impressed with the Austal ship but they also had to make an inspection of the Rodriquez monohull.  Rodriquez is an Italian ship builder.  Mr Koga said they were also inspecting the Incat catamarans and during the same conversation, Captain Kikuchi expressed the view that he already thought the trimaran would be the best vessel for the route. 

48                  Mr Regan continued to say that it was almost inexplicable to him that despite what the Higashinihon delegation had seen and heard during the presentations and the visit to Tenerife and despite the various comments made by each of them and their positive reactions expressed of the trimaran during the visit, when the time came later on for Mr Koga to specify the exact requirements for the vessel, he did not do so.  He ignored the offer from Austal to undertake at Austal’s cost an operability study to determine the right size, capability and hull form for the proposed new vessels and simply sent a description of the performance and capacities of the Incat 112 metre catamaran.  Mr Regan pressed Mr Kobayashi subsequently to try and get some feedback from Mr Koga.  He was only informed that Mr Koga wanted Austal to requote on a smaller trimaran. 

49                  Mr Kobayashi informed Mr Regan that during Mr Koga’s visit to the United Kingdom to inspect Incat catamarans, the Incat representative hosting the visit was a ‘Mr Schlling’ who had joined Incat in February 2005 but had worked at Austal prior to that time.  Prior to joining Austal he had worked with Incat.  Mr Regan assumed from this information that Mr Schlling was in fact Mr Merrigan.  He took steps to warn Mr Kobayashi about this.

50                  Subsequently Mr Kobayashi reported that Mr Koga had dismissed the Italian monohull, that the Austal 127 metre trimaran was ‘number one’, that the indicative price of the trimaran was higher than that quoted by Mr Merrigan of Incat for an Incat 98 metre catamaran, that Mr Merrigan would also be quoting a larger Incat 112 metre catamaran.  Austal was asked to propose or quote a new design of a low cost trimaran for Higashinihon’s board meeting of 21 October 2005.

51                  Following that board meeting, Mr Kobayashi reported that Higashinihon were actively evaluating two Austal trimarans of 117 metre and 127 metre against Incat catamarans of 98 metres and 112 metres.  He understood that Mr Merrigan and Mr Thurlow were meeting with Higashinihon in the following week in Japan.  On 8 November 2005, Mr Kobayashi reported to Mr Regan that Mr Koga had then been requested by the Chairman of Higashinihon, Mr Yamamoto to ‘rush’ again to the Canary Islands to travel on the Austal 126 metre trimaran in rough sea conditions. 

52                  There was a further board meeting of Higashinihon on 10 November 2005.  Mr Regan started to get concerned.  He had explained to Higashinihon on a number of occasions that Austal could design virtually any vessel to meet almost any set of requirements.  The difficulty at that stage was that Higashinihon had not actually given any precise set of requirements.  Accordingly, the quotations to that period had been based on assumptions made by Austal as to Higashinihon’s needs. 

53                  There were ongoing emails.  Further requirements were expressed by Higashinihon.  Austal’s design staff worked on those requirements and proposals were emailed to Higashinihon. 

54                  There was a meeting of the Higashinihon board on 24 November 2005 and a meeting between Mr Kobayashi and Mr Koga on 29 November 2005.  Mr Kobayashi reported to Mr Regan that the Incat Chairman, Mr Bob Clifford and another Incat representative, Mr Nick Wells were scheduled to visit Higashinihon on 9 December 2005 to meet with Mr Koga and possibly the Chairman, Mr Yamamoto.  It was also reported that two Higashinihon engineers had recently visited Incat’s shipyard in Tasmania to travel aboard an Incat 98 metre catamaran and inspect its engines.  They had apparently found the vessel and its engines to be impressive.  Mr Regan understood that sea keeping was still a critical issue in the mind of Mr Yamamoto and he was confident that the trimaran would be superior to the catamaran in terms of sea keeping on the intended route. 

55                  On 2 December 2005, Mr Kobayashi and Mr Regan discussed the prospect of a visit by the Austal Chairman, Mr John Rothwell to Higashinihon during early December 2005 to meet with Mr Koga and Mr Yamamoto to support the Austal bid.  This was intended to pre-empt the visit from Incat on 9 December 2005.  By letter, Mr Rothwell offered to visit Japan for discussion with Mr Koga and Mr Yamamoto and suggested that an independent expert be retained to evaluate the sea keeping performance of the competing vessels for the route concerned and offered to provide confidential performance data to that expert for the purpose of the evaluation.  Mr Kobayashi discussed the correspondence with Mr Koga.  Mr Koga was not enthusiastic about the proposed visit.  Mr Koga told Mr Kobayashi that he would prefer to await receipt of the promised new proposal from Austal. 

56                  On 7 December 2005, the revised proposal for a larger Austal 130 metre trimaran and a 114 metre catamaran was emailed to Mr Kobayashi.  Mr Regan was again confident of success.  There was a board meeting of Higashinihon on 9 December 2005 but no response to the proposal emailed on 7 December 2005 had been forthcoming.  Mr Regan was conscious of the visit by Incat on 9 December 2005 which was confirmed by email from Mr Kobayashi of that day. 

57                  On 12 December 2005 an email was sent by Mr Kobayashi forwarding an email from Mr Koga in which Mr Koga advised that the board meetings had been held on 8 and 9 December 2005 and that the Incat 112 metre catamaran had been selected by Higashinihon for the new ferry route.  Mr Koga explained that the reasons for the decision were that the Incat 112 metre catamaran complied with Higashinihon’s requirements of deadweight service speed and price.  Mr Kobayashi provided a detailed report of a further meeting with Mr Koga where Mr Koga had now highlighted two entirely new technical issues in relation to Austal’s proposal.  In relation to the proposal,  Higashinihon had formed the view that the 130 metre trimaran, due to its slender monohull structure and limited buoyancy when compared with a catamaran would be unable to carry the specified deadweight and, therefore, not appropriate for a heavy truck route.  He also thought that the frame spacing of the Austal 101 catamaran which had been inspected by Higashinihon engineers sometime before was no longer than the frame spacing of Incat catamarans.  These were new issues which had never been raised.  Mr Regan was under the impression that these were not legitimate reasons for rejecting the proposal from Austal. 

58                  In a subsequent statement, Mr Regan stressed the commercial confidentiality of the Austal Report.  He expressed the view that misuse of the Austal Report in order to denigrate or disparage the sea keeping properties of an Austal vessel could be devastating to Austal in the market.  He gave evidence of negotiations with Acciona who had been operating a number of Incat catamarans.  Despite conducting a substantial presentation to Acciona and maintaining subsequent close contact with Acciona, orders were placed by Acciona with Incat rather than Austal. 

Mr Neville Anthony Armstrong

59                  Mr Armstrong signed a witness statement on 5 May 2008.  He was then employed as the Research and Development Manager for Austal.  In that capacity he was responsible for the concept and development of the world’s first high speed trimaran ferry, a unique three hulled solution for high speed and a high degree of passenger comfort.  He describes a four year program of research and development from 1999 to 2003 leading to the award of a contract for design and construction of Austal Hull 260, Benchijigua Express, a 126 metre long 40 knot trimaran ferry carrying over a thousand passengers and 400 cars.  That successful project also led to a joint bid by Austal USA with General Dynamics to design and build the next generation of United States warships, the Littoral Combat Ship using a similar trimaran concept with three hulls.  He was nominated as one of the top one hundred Australian influential engineers by ‘Engineers Australia’ in June 2007. 

60                  Mr Armstrong says that it is unusual amongst ship builders that one would have the capacity to design and manufacture an extensive range of customised aluminium vessels to suit specific operational requirements primarily featuring monohull catamaran and trimaran hull forms.  Austal has that capacity.  He said that as a general statement Austal strives to produce high quality, lightweight vessels and this goal has led to Austal carrying out considerable research and development as to various methods of optimising vessel strength for minimum weight including the use of advanced materials such as carbon fibre composite drive shafts, ceramic structural fire protection and composite outfit materials, many of which have been derived from aerospace technology. 

61                  Mr Armstrong described ‘sea keeping’ as a term often used to describe the motion of the vessel, that is, its roll, pitch, yaw, heave, sway and surge which are the six degrees of freedom of any body moving in space like a ship.  Minimising the effect of these forces, particularly vertical acceleration, is the key to maximising passenger comfort.  He says that in some context ‘sea keeping’ can be used to describe the general seaworthiness of a vessel, however, that is not the context in which sea keeping was being used in the two Austal Reports. 

62                  Mr Armstrong’s witness statement deals with technical information which may be more significant for the purposes of a trial rather than this interlocutory application.  In my view, much of the information goes to the generation of the content of the two Austal Reports.  In doing so, he explains the need to correct the errors which gave rise to conclusions reached in the first Austal report. 

Mr Darren Edwards

63                  Mr Edwards also signed a witness statement on 7 July 2008.  He is employed by Austal in a position of Service Manager Europe & Middle East.  He lives in Sweden.  In May 2006, he was contacted by a person from Master Ferries who explained that the Austal Report had been received from Incat, specifically Mr Thurlow.

64                  He reported this information to Mr Bennett in Austal.  He was also contacted by someone in Irish Ferries who informed him that he had seen the Austal Report. 

Mr Christopher Pemberton

65                  On 6 July 2008, Mr Pemberton signed a witness statement.  He is an Austal employee in the position of Sales Manager.  He has been employed by Austal for some 15 years.  He describes the process undertaken at Austal in preparing costing estimates for new vessel projects and the formal price quotations for customers.  He expresses views in relation to profit arising from the dealings with Higashinihon.  It is unnecessary to examine that aspect closely for present purposes. 

66                  In a subsequent witness statement, he refers to a visit in mid-March 2005 to Trinidad and Tobago in connection with a tender for a high speed ferry issued by PATT.  PATT had trialled a catamaran to test whether it would cope with reputedly rough seas between the islands.  That catamaran had been built by Incat some years before and had been leased from its owner, Bay Ferries in Canada.  It was reported to him by PATT that the experiment was popular and successful.  He submitted Austal’s tender for the permanent replacement or long-term replacement.  The tender did not succeed. 

67                  Mr Pemberton explained that he expected to have an opportunity to present details of the Austal tender in order to explain the sea keeping advantages of the Austal trimaran in person.  His usual experience was that customers considering purchasing a multimillion dollar vessel would seek a presentation from its builders because it was difficult to make a decision based only on documents.

68                  It was confirmed by PATT that they would appreciate a presentation.  The tender was lodged.  Despite what he says was a superior tender by Austal (the process being public), support for the Incat tender was publicly expressed.  Ultimately he was not invited to make any presentation.  As distinct from making a presentation, PATT requested Austal to extend its tender for 90 days and it requested a meeting with PATT to discuss the progress.  Mr Wake, a sales consultant at Austal initially replied to PATT’s request.  Mr Pemberton then sent a further reply to PATT and requested a meeting with PATT to review the status of the evaluation.  There was no response to that request but Austal was then asked to extend its tender for a longer period to 31 December 2005.  In the meantime, PATT issued a new invitation to tender for the supply of one or two high speed passenger/cargo roll-on, roll-off ferries on similar terms to the tender invitation of April that year.  This also took Mr Pemberton by surprise.  Nevertheless, a new tender was submitted by Austal.  Ultimately Austal was unsuccessful in any tender. 

69                  For Incat, statements have been given by several of its officers. 

Mr Justin Paul Merrigan

70                  Mr Merrigan signed a statement dated 20 August 2008.  In relation to the allegation by Austal of alleged misuse of the Austal Reports in dealing with Higashinihon Ferries, Master Ferries Holdings AS, PATT, Compania Trasmediterránea SA and Irish Ferries, he gave evidence as to his involvement. 

71                  He confirms that he came into possession of the Austal Reports at a date between August and November 2004.  A hard copy of the reports had been placed on his desk by Mr Regan with an invitation for him to familiarise himself with the content.  He did so.  At the time there were discussions with representatives of the Isle of Man Steam Packet Company.  Austal was bidding for the supply of a new vessel.  Mr Merrigan asked if it were possible to have the file in electronic form which was duly arranged. 

72                  On 7 June 2005, after joining Incat, Mr Merrigan wrote and sent an email attaching the first and second Austal Reports to Mr Carter, Legal Manager for Incat.  On the same date he also sent an email to Mr Clifford.  He did not, however, discuss the Austal Reports with Mr Clifford either before or after sending the email on 7 June 2005.

73                  Dealing first with Higashinihon, he confirms that Incat was commissioned in 2006 by Higashinihon to build two 112 metre ferries and that in relation to the sale of the two ferries, he was responsible for customer care.  This involved attending to the wellbeing of the clients and arranging facilities for clients when they travelled to Australia.  He was not involved in negotiations between Higashinihon and Incat leading to the contract for the sale of the two ferries.  That work was carried out or supervised to the best of his knowledge by Mr John Harris of Incat. 

74                  Mr Merrigan has never provided the Austal Reports or any part of them to any representative of Higashinihon.  Nor has he discussed their content with such people.

75                  As to the other negotiations with Master Ferries, PATT, Compania Trasmediterránea SA, and Irish Ferries, the position was the same.  He had not at any time provided the Austal Reports or discussed any aspect of them with any representatives of those entities. 

Mr Steven James Thurlow

76                  Mr Thurlow also signed a witness statement on 20 August 2008 and confirmed in relation to Master Ferries that in about October 2005 on behalf of Nordic Catamaran Ferries A/S, part of the broader Incat group, he entered into discussions with Master Ferries in relation to a 91 metre, second hand wave piercing catamaran.  As a result of those discussions a sale ensued.  On 26 April 2006, he attended the ceremony to mark the commencement of the operation of the vessel known as the Mad Mols in Norway.  Mr Clifford from Incat also attended. 

77                  At some time during that day, a representative of Master Ferries, Mr Tom Bringsvaerd told him that Master Ferries was thinking of expanding its operations and that he was under pressure to look at Austal’s vessels.  In response, Mr Thurlow said that he should ensure that he did his due diligence.  Mr Bringsvaerd asked him if there were any comparisons.  Mr Thurlow said there were and showed him a copy of an Austal report from his laptop.  Mr Bringsvaerd asked if he could have a copy of the report and Mr Thurlow thinks that he agreed that he would send it to him as he did so. 

78                  On 3 May 2006, he sent an email to Mr Bringsvaerd at Master Ferries attaching the Austal Report which he had shown him.  He says he cannot now recall how he received the Austal Report that was attached to his email nor why he copied the email to Mr Bernt Mykjaland of Master Ferries.  In February or March 2007, Mr Bringsvaerd told him that Master Ferries were not looking to acquire a fast ferry in the foreseeable future. 

79                  He says that he has not at any time provided the Austal Reports or any part of them to any other person at Master Ferries nor discussed the content with any other person at Master Ferries. 

80                  In relation to Higashinihon, he confirmed having conducted a general PowerPoint marketing presentation.  At no time did he make any reference to either Austal or the Austal Reports.  That was the position also on a subsequent visit by a delegation from Higashinihon to the United Kingdom at which Mr Thurlow was present.

81                  Mr Thurlow said that he has not at any time provided the Austal Reports or any part of them or referred to them in any sense to anyone from any of Higashinihon, PATT, Irish Ferries or Acciona Trasmediterránea.  In fact he has had no dealings at all with Irish Ferries or with Acciona Trasmediterránea in the last five years.  He did have negotiations with PATT.

Mr Simon Baird Carter

82                  Mr Carter also signed a witness statement on 20 August 2008.  He is a Legal Manager for Incat.  In June 2005, in that capacity he received Mr Merrigan’s email attaching the Austal Reports.  Prior to the commencement of pre-action discovery proceedings, no one within Incat had raised the content of the Austal Reports in any sense with him.  After Mr Carter received the Austal Reports by email, he deleted them from his computer in the course of regular document deletion.  He believes that deletion would have occurred within six months after receipt of the email attaching the reports on 7 June 2005.  He has not copied them or provided or discussed them with any person other than in relation to these proceedings as Legal Manager. 

83                  He says that he is not aware of and has no reason to believe that either the Austal Reports or the emails have been copied or reproduced by any of the respondents as alleged in the statement of claim except to the extent expressly admitted in connection with Master Ferries. 

84                  Mr Carter was involved as Legal Manager for Incat in settling the terms of the contract for the sale to Master Ferries.  Negotiations commenced in October 2005 and concluded in late November.  The vessel was delivered on 27 February 2006.  At no time in his negotiations did he use, provide copies of or refer to the Austal Reports or their content nor at any time did he do so subsequently with Master Ferries. 

85                  He is not aware of the Austal Reports or their contents being referred to at all in the dealings between Incat and Master Ferries other than by the one email from Mr Thurlow on 3 May 2006 which was some five months after the contract for sale was executed and two months after the vessel was actually delivered to Master Ferries.  That vessel was the one and only vessel that Incat has ever sold to Master Ferries.  It has subsequently been sold and Master Ferries, as he understands the position, has not subsequently purchased any other fast ferry vessels. 

86                  Mr Carter was also involved since about 2004 in negotiations with PATT in preparation of tenders and negotiation of contractual terms.  As with Master Ferries and, indeed, as with Compania Trasmediterránea SA and Higashinihon and with Irish Ferries there has never been any reference at all or usage in any way of the Austal Reports to the best of his knowledge and information. 

87                  Mr Carter also swore an affidavit on 12 September 2008.  Specifically in relation to the extensive further discovery sought by Austal, apart from the express admissions as to the usage of the Austal Report by emailing it to Master Ferries, he argues that the allegations in the statement of claim are vague and unsubstantiated especially given the fact that discovery has already been given and Austal sought and obtained orders permitting extensive oral examination of Mr Clifford, Mr Merrigan, Mr Thurlow and Mr Carter.  He observes that the discovery categories in the application as currently formulated are extraordinarily wide and would encompass an enormous number of documents which have no relevance whatsoever to the pleaded issues.  Compliance would require examination of documents which are highly confidential and commercially sensitive.  The discovery as sought would effectively encompass all of the documentation relating to all of Incat’s design, production and marketing activities in the relevant period. 

88                  Mr Carter says that it would be extremely difficult to locate, identify and quantify the number of communications relating to the sale and marketing of Incat vessels over the relevant period as it would encompass thousands of documents located in five offices and a great number of archival locations in three separate countries.  The number of sales and/or marketing presentations relating to the sale or marketing of vessels by Incat would encompass thousands of documents located in those five offices and a greater number of archival locations in three separate countries. 

89                  All of those materials are highly confidential, commercially sensitive and valuable to Incat.  The materials contain information relating to Incat’s clients and potential clients which is not in the public domain and is collected through extensive and costly research and other efforts of Incat.  The materials also contain and reveal extensive detail of Incat’s design, production, marketing and pricing strategies with respect to Incat vessels and would give a competitor a substantial and unwarranted competitive advantage if released.  Even if the application were limited to the Relevant Vessels as defined, he expresses the belief that the number of documents falling within the scope of the categories sought would still extend to hundreds of thousands in number and would be located in a number of offices and archive locations in three separate countries. 

90                  It follows that it would be extremely difficulty, costly and time consuming for Incat to comply with orders as sought and it would take many months to search for, locate, identify, collate and assemble documents within categories 1-4 as sought.  It would require a search and review of an extensive number of files located in the various offices or archives.  This would extend to many thousands.  Clerical staff would be needed to be diverted to that task or, alternatively, staff would need to be externally hired to carry it out.  The cost of engaging such staff in England and Denmark would be considerably greater than the cost in Australia.  Senior employees in the Incat group would be required to work with the clerical staff to review and identify the documents and they would also, therefore, be diverted from their normal duties causing interruption to the operation.  The documents would need to be scanned to or shipped to Austal’s solicitors at a cost which would be significant and the documents would need to be examined by Incat’s solicitors to ascertain whether or not they were to be protected by legal professional privilege. 

91                  Mr Carter was cross-examined on this evidence as to the burden of inquiry required.  His answers on cross-examination accorded with his affidavit evidence.

92                  He concludes his affidavit observing:

To the extent that [Austal] take issue with the different form of [Incat] witness statements relating to the use and disclosure of the Austal reports, [Incat] deny that any minor difference in the wording of the statements could reasonably be regarded as having this effect.  [Incat] is prepared to file amended or supplementary statements of Steven Thurlow, Robert Clifford and Justin Merrigan with wording consistent with [Incat’s] remaining witness statements so as to put the issue beyond doubt. 

93                  Senior counsel for Austal took umbrage at this paragraph which he suggested amounted to Incat offering to manufacture evidence.  I do not consider that to be a reasonable construction to be given to the contents of the paragraph.  The point arising is that some of the witnesses expressly refer to no ‘use’ being made of the reports; and to no copying or reproduction.  However, ‘use of’ does not appear in every witness statement which is what Mr Carter is offering to address.  It may reasonably be inferred and I do, in the absence of any evidence to the contrary that reference to no ‘use of’ the reports would be added only if such a statement were believed by Mr Carter, a solicitor, to be true in each instance. 

Mr Robert Frederick Clifford

94                  Mr Clifford also signed a witness statement on 20 August 2008.  He is Chairman of all the companies in the Incat group.  He lives in the United Kingdom as does Mr Thurlow.  He confirms that on 7 June 2005 he received an email from Mr Merrigan attaching the first and second Austal Reports.  This was the first time he had seen them.  He does not recall any subsequent discussion on the reports with Mr Merrigan. 

95                  On 7 June 2005, the same date that he received them, he emailed the reports to Mr John Adams who was a friend and retired naval architect.  Two days later Mr Adams replied.  Apart from that exchange, there was no discussion with Mr Adams in relation to the reports. 

96                  He expressly denies the allegation raised by Austal that the email was sent to Mr Adams in order to advance or secure a sale of Incat vessels.  He says that Mr Adams is not involved in the industry and has no financial or commercial association with any company operating a ferry service to the best of his knowledge.  Moreover, Mr Adams is retired and has been since 2001. 

97                  Sometime prior to April or May 2006, he also showed the images of the reports to Mr Thurlow on his office computer but apart from that has not printed, emailed or otherwise dealt with the reports in any way.  He accepts the possibility that he may have discussed becoming aware of the existence and contents of the reports with other people in the Incat groups but has no specific recollection of any such conversations. 

98                  He can recall the first report being discussed by Mr Thurlow at Norway.  This was at the commencement of commercial operations of an Incat constructed vessel which had been sold to Master Ferries in November 2005 and delivered in February 2006.  There has been no other discussion between Mr Clifford and Mr Thurlow since that occasion. 

99                  He has not at any time provided the Austal Reports or any copy or part of the Austal Reports or referred to them in any of the dealings referred to by Austal in the statement of claim and of those dealings was only involved in the Master Ferries and the Higashinihon dealings. 

Mr John Harris

100               Mr Harris, the Managing Director of Incat also signed a witness statement on 20 August 2008.  He was in charge of negotiating the terms of the supply or sale of all the vessels on behalf of the Incat group and in charge of overseeing and supervising the performance of those contracts. 

101               He was the primary point of contact between Incat and Higashinihon in relation to the negotiation and performance of the contracts.  Neither in that or at any other time did he ever have access, use, provide copies of or refer to the Austal Reports or their content. 

102               He is not aware of the Austal Reports or their content being referred to by Incat in any other dealings with Higashinihon.  He did not actually have dealings with PATT or with Irish Ferries. 

Mr Michael Craig Cotton

103               Finally, Mr Cotton swore an affidavit on 16 September 2008.  He is the Information Technology Manager for Incat.  Essentially he confirms the financial and time burden to which Incat would be exposed in compliance with the discovery as sought.  He gives a more detailed explanation in relation to that burden indicating that Incat currently has 95 personal computers with an average hard disc size of 80 GB.  This equates to a total of 7600 GB of memory or 7.6 TB.  It currently uses six servers containing a potential live storage of 2760 GB or 2.76 TB of information.  That includes an email server with 70 GB total storage, a Blackberry/proxy server with 70 GB total storage used for communication between the Blackberry mobile phone devices and the email server.  Incat have 24 Blackberry mobile phone devices.  There is a file and print server with 680 GB total storage; an application server with 70 GB total storage; a storage/backup server with 1.6 TB total storage and an enterprise resource planning system server with 270 GB total storage.  By way of clarification and expansion, he explains a one-page Microsoft word document is 40 KB.  (There are one million kilobytes in a gigabyte and there are one thousand gigabytes in a terabyte.)

104               He goes on to explain the enormous nature of the task which would be required to give discovery in accordance with the terms sought by Austal. 

105               Mr Cotton was also cross-examined on this evidence as to the burden of inquiry required.  As with Mr Carter, his answers on cross-examination accorded with his affidavit evidence.

THE ARGUMENTS

106               Pursuant to the Federal Court Rules under O 15 r 2(3), discovery is required of documents:

(a)        on which the party relies;

(b)        those that adversely affect the party’s case;

(c)        those that adversely affect another party’s case; and

(d)        those that support another party’s case.

107               Those are the documents in respect of which a party is required (by the Practice Note issued by the Chief Justice on 3 December 1999 (No 14)) to undertake a ‘reasonable search’. 

108               In Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809 at [1]-[2], Finkelstein J observed:

1          According to Lord Woolf the overriding objective of civil procedure is to enable the court to deal with cases justly.  This means the court must, so far as is practical, attempt to place the parties on an equal footing; save expense; deal with the case in ways which are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of the parties; ensure that the case is dealt with expeditiously and fairly; and allot to the case an appropriate share of the court’s resources while keeping in mind the necessity of allotting other resources to other cases. 

2          If an action is to be conducted with a minimum degree of fairness, and a modicum of efficiency, the parties must be allowed to go into court with some identification of the subject matter of their dispute.  There should be some process by which the subject matter is specified and the range of evidence at trial is kept within the limits of relevance.  Moreover, to ensure that the system operates fairly, each party must disclose the facts that are within his knowledge and on which the case of the other depends.  In our system an attempt is made to satisfy the need for efficiency and fairness by pleadings and discovery. 

109               Austal argues that the purported due and proper compliance by Incat with the fundamental discovery obligations is in a non-compliant form of an unsegregated, unspecified and impermissibly rolled up form under the hand of the solicitor for all of the Incat respondents.  The discovery for Incat has disclosed only seven documents, two of which comprise the first Austal report and the second Austal report.  They are the same documents that Incat produced during a preliminary discovery proceeding. 

110               Austal argue that the order made by French J was for general discovery and that his Honour did so mindful of the quite apparent difficulties faced by Austal which justified ordering preliminary discovery coupled with the uncommon step of ordering examination of witnesses. 

111               Austal complain that the corporate structure of the Incat group is irrelevant and that discovery should be given regardless of the complexities which may arise from the way the Incat group is structured.  There is no doubt (despite the fact that the companies are located in different countries) that they, nevertheless, have central control and are connected one to the other.  Against that background, it is said unsurprisingly, that the discovery of only seven documents, two of which are the Austal Reports, strains credulity. 

112               It is also said that the purported compliance with the obligations of discovery reveals a misunderstanding as to the nature of the claim made against them.  As an example of this submission, Austal contends that should it be the case that Incat are proceeding on the basis that Austal’s complaint is that Incat did not provide a copy of or disclose part of or all the content of any part of the Austal Reports to any prospective customer, particularly Higashinihon, this would be an erroneous apprehension of the relevant legal principles to be applied in relation to Austal’s claims.  

113               Austal emphasises that each of the reports was marked ‘Commercial in Confidence’ making it very clear to persons coming into possession of them that they should not be used or disclosed.  It is argued that the circumstances in which the Incat group came into possession of the reports needs to be examined.  For example, the 7 June 2005 email from Mr Merrigan formerly of Austal, now of Incat to Mr Carter with a copy to Mr Clifford and with a cryptic email saying ‘Simon will discuss this one with you Rgds’. 

114               In Mr Merrigan’s email to Mr Clifford of the same day with a copy automatically forwarded to Incat’s central file, the email includes the following:

We know the 101 is a dog, but here they actually say that the 101 is better than the tri on these given routes …

Of use to Steve?  Happy for him to use it as long as a copy does not leave his hand (sic hands). 

Justin Merrigan

Business Development Officer

Incat Australia Pty Ltd

115               Austal contends that the Chairman himself acted in disregard of the obvious confidential status of the reports.  Instead of making sure that no inappropriate usage was made of the confidential material he actually sent it on to Mr Adams with an email of the same date, 7 June 2005 including the following information:

The following data has come to my attention, please respond to me only, as it is sensitive.

What does it tell you, does it say the tri is as big a dog as the 101?

116               This question was followed by a response from Mr Adams two days later, the message included the following:

Robert, what can I say that you haven’t already said in your ‘tri is as big a dog as the 101’?

However I did read both reports (…)

117               It seems to me on the face of the matter at this preliminary stage, in terms of obtaining any benefit from the examination of the confidential sensitive Austal material by Mr Adams, Incat did not derive any particularly clear advantage. 

118               The next fact stressed by Austal is that Incat had commenced construction of the Incat 112 metre wave piercing catamaran early in 2006 in circumstances where it did not have a customer for that vessel but in mid-2006, Mr Clifford whilst at Incat’s office in Woking, in the United Kingdom, where Mr Thurlow also works, showed Mr Thurlow the first Austal report which was on Mr Clifford’s laptop computer.  Mr Thurlow began to laugh on being aware of the contents of the report.  Mr Clifford then requested Mr Thurlow to assist in the marketing of the Incat 112 metre vessel, then the subject of a tender process involving Higashinihon.  Austal was a direct competitor with its trimaran.  In compliance with Mr Clifford’s request, Mr Thurlow travelled to Japan on his way back to Europe and stayed for four days at the end of October 2005.  He travelled to Hakodate to meet representatives of Higashinihon.  He knew that they were interested in buying one or more vessels for their fleet.  He conducted the PowerPoint marketing presentation for some two hours on 2 November 2005 directed to promoting the Incat vessels.  On his laptop computer he had each of the Austal Reports.

119               At the same time, Mr Merrigan was also involved in the Incat endeavour to secure the contract under the Higashinihon tender.  He also visited Japan for that purpose.  He also had the Austal Reports on his laptop computer. 

120               Austal’s summary of the key facts as disclosed from the summary of the evidence breaks into an area at this point on which much criticism is raised by Incat.  Austal says that its participation in the Higashinihon tender changed abruptly in early November 2005 from what was regarded as being a well respected participant to a position where a marked change occurred.  The relationship was consistent, it is said, with an opposing party to the tender assuming a favoured status over Austal. 

121               What had changed, it is said, is the attendance of Mr Thurlow and Mr Merrigan in Japan with Higashinihon, each of whom had the Austal Reports on their laptop computers. 

122               Added to that as a significant factor, was the need for the successful tenderer to Higashinihon to have satisfactory, if not superior, sea keeping or ship motion characteristics catered for the proposed Japanese ferry route.  It was this important characteristic that was incorrectly described in the first Austal Report which incorrectly recorded a superior performance with regards to sea keeping by the Austal 101 catamaran as distinct from the Austal trimaran. 

123               Austal argues that it should be inferred that the whole purpose of Mr Merrigan’s email to Mr Carter was to enable Mr Thurlow to have knowledge of the criticisms of the Austal trimaran as set out in the first Austal Report so as to assist Mr Thurlow in his role of marketing the Incat vessels.  Mr Thurlow had been directly involved in the promotion, marketing and securing the sale of an Incat built vessel to Master Ferries by a Contract for Sale of Ship dated 24 November 2005.  In relation to that transaction, it is known that the Austal Reports were forwarded to Master Ferries.  Once again, the sea keeping capacities and quality was an important factor for Master Ferries. 

124               Austal relies on the fact that Mr Thurlow did use the first Austal Report at least once as disclosed to him by Mr Clifford in mid-2005 successfully in achieving the sale of the Incat vessel to Master Ferries.  This is evident from the content of the email attaching the Report in which Mr Thurlow says:

Attached is the report, please keep this confidential.

We have seen that it has taken years for the truth to emerge on various other HSC which at the time receiving glowing publicity (sic).  I believe this will be the case with the trimaran and having read the attached report I am absolutely convinced that this trimaran is a con.  It is well known in the market that the Austral 101 is far inferior to the Incat 98 in terms of sea keeping, yet in this Austal report the Austal 101 comes out significantly better than the trimaran which is around 26 metres longer on the waterline and offers a four metre wider beam. 

(…)

There is a huge gap between what the PR department are saying and what technocrats knows the truth …

125               Also to be taken into account, according to Austal, is the fact that Master Ferries had not previously owned or operated high speed vessels so would be likely to be influenced by this sort of information more than their own practical experience. 

126               Austal complains also that the certification by Incat’s solicitor in purported compliance with the discovery order of the Court is fundamentally deficient by failing to address the individual discovery obligations of each of the nine respondents.  For example, what has not been disclosed are documents which did exist but no longer exist and to which reference has been made, for example, by Mr Thurlow who says that the reports are no longer held on his laptop computer.  It is also suggested that the Court should infer that these were destroyed once Mr Thurlow became aware of the application for preliminary discovery by Austal. 

127               It is contended that with two exceptions, none of the witnesses for Incat have given any evidence in relation to the ‘use’ of the confidential information contained in the Austal Reports notwithstanding the fact that Austal’s claim clearly goes to the question of ‘use’ of the information by way, amongst other things, of a springboard benefit.  It is only Messrs Carter and Harris who expressly deny ‘usage’ in any way of the content of the reports. 

128               Finally, Austal stresses that the email from Mr Craig Clifford (Mr Bob Clifford’s son) of Incat to Mr Rothwell, Chairman of Austal of 21 June 2006, although stated to be ‘without prejudice’ has been waived in respect of privilege for the all the respondents.  That document has already been identified as being a document of key significance according to the decision of French J (Austal Ships v Thurlow [2006] FCA 1219) in relation to preliminary discovery. 

ANALYSIS

129               It must be recalled that discovery is an invasive procedure by which production of a party’s documents or other non-public records may be compelled.  That compulsion is one of the reasons that the extent to which discovery must be given is limited. 

Formality

130               It is quite unclear as to why each of the nine respondents has not individually sworn or affirmed or by an officer, sworn or affirmed, an affidavit of discovery in the conventional manner.  I can appreciate that this may disclose no more documents than those already discovered but I do not understand the relaxation of the conventional discovery requirements to have been implicit in any way in the orders made by French J. 

131               In circumstances where it is clear that deep suspicion attends the paucity of discovery, formal compliance with the Rules where pressed, is essential.  Equally, it needs to be said that Austal is seeking far more than simply the formalisation of the discovery and I note that as senior counsel for Incat has made clear that if formalisation of the discovery were all that were sought by Austal, it would have been provided. 

132               Regardless of the conclusion to be reached in relation to the scope of the discovery, I propose ordering that each of the respondents give general discovery on oath or affirmation in accordance with the Rules of the Court. 

Fishing in a Confidential Information Case

133               One of the fundamental questions arising in the extent of discovery which is sought by this application is whether or not it constitutes a fishing expedition.  In Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN(NSW) 250 at 254, Owen J described ‘fishing’ as arising when:

… a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not.

134               Similarly, if the attempt to gain information is speculative in nature it will be ‘fishing’:  Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979) 36 FLR 450; WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175.  The question is whether the applicant has shown a good case, proof of which is likely to be aided by discovery. 

135               In Trade Practices Commission v CC (New South Wales) Pty Limited (1995) 58 FCR 426, Lindgren J dealt with the balance between a fishing expedition and giving discovery by a party who has the only knowledge on which the claim is based.  In that case, the applicant had already supplied reasonably detailed particulars and had the benefit of transcripts from compulsory examinations.  His Honour said at 439:

4.         Apparently the Commission does not know what was said at either the Meeting or at the alleged prior meetings. I do not think, however, that this means that it does not know whether it has a case. The pleading and the particulars supplied are reasonably detailed. Moreover, there is some evidence in the transcripts of the evidence given by individuals to the Commission of the existence of a case of the kind pleaded. In my view, the Commission's application is not a "fishing expedition".

5.         The respondents submit that the Commission should be directed to "supply particulars by putting on its affidavit evidence" before the discovery issue is decided. I do not agree. A well accepted situation which the court often exercises its discretion by ordering discovery before particulars are supplied is that in which the party which seeks particulars and resists discovery is alone in possession of the relevant documents: Millar v Harper (1888) 38 Ch D 110 at 112; Egg & Egg Pulp Marketing Board v K H Korp Tocumal Trading Co Pty Ltd [1963] VR 378; L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81 at 90-91; Halsbury's Laws of England (4th ed, 1975), Vol 13, par 28; BC Cairns, Australian Civil Procedure (3rd ed, 1992), p 348. In my view, I should exercise my discretion accordingly in the present case.  (emphasis added)

136               Although the concepts of fishing and oppression are distinct, if the extent of discovery sought is so broad, the two concepts may converge.  However Burchett J (with whom Lockhart and Gummow JJ agreed) said in Caltex Refining Co Pty Ltd v The Amalgamated Metal Workers Union [1990] FCA 721:

This [fishing] objection to applications for discovery of documents does not now have the weight it was once thought to have. Perhaps it should be seen as a metaphor with more colour than substance. Modern procedures actually provide as something desirable for what might once have been criticised as fishing - see Order 15A of the Rules of this Court, particularly Rule 6. It would be ironic if the Court refused an applicant, on this basis, discovery after action, when discovery could have been obtained (at the expense of incurring extra costs) by an application before action.

Discovery should be controlled, and may be limited to documents relevant to particular issues, but it is a valuable weapon in the armoury of justice. The real objection which, in some cases, justifies discovery being limited to particular issues is the objection of oppression.

137               It is well established that generally a discovery affidavit is conclusive on the question of whether a party has or has had in its possession, custody or control of any relevant documents other than those discovered:  Betts Group Pty Ltd v Paul’s Retail Pty Ltd [2007] FCA 1983 at [15]; Mulley v Manifold (1959) 103 CLR 341. 

138               Under O 15 r 8, however, there is a procedure under which particular discovery may be sought where a party is dissatisfied with the extent of the discovery made by the opposing party.  The Court may exercise its discretion under O 15 r 8 where it is clear that there has been a defect in compliance with an earlier order for discovery if it appears, for example, that a party has excluded documents under a misconception of the case as Austal argues is the position here:  Mulley 103 CLR 341 at 343. 

139               However, in Slick v Westpac Banking Corporation (No 2) [2006] FCA 1712 at [43], particular discovery was refused on the basis that ‘the theoretical possibility that something might turn up [was] well and truly outweighed by the cost and burden to Westpac’ (see also Betts [2007] FCA 1983). 

140               There are special considerations which arise in the context of confidential information cases.  That circumstance has already been recognised in this litigation by the special orders that have been made, including preliminary discovery and, in particular, orders that have been sought, made and extensively acted upon, by Austal, for examination of officers of Incat.  Unless I draw the inferences which Austal press me to draw, it seems relatively clear from Austal’s own submissions, that the outcome of those processes has been to identify very little more than the admissions already contained in the defence.  

Usage and Onus

141               In that regard, Austal has emphasised that the liability which Incat has under Austal’s pleaded case is not only for reproduction of the Austal Reports but for use, including unconscious ‘use’, of any aspect of the confidential information contained in the reports.  It is argued that any manner in which that material was used so as to gain an advantage on the topic of sea keeping, would be actionable by Austal.  Austal stresses that even if there were no copying or discussion of the reports with Master Ferries, Higashinihon, PATT and/or Acciona Transmediterránea beyond any admission in the defence, unconscious or conscious use of the information would still be actionable. 

142               In relation to an action for breach of equitable obligation of confidence, the summary by Megarry J in Coco v AN Clark (Engineers) Ltd [1969] RPC 41 at 47 is the starting point.  The action itself:

(a)        must ‘have the necessary quality of confidence about it’;

(b)        the information must have been imparted in circumstances importing an obligation of confidence; and

(c)        there must be an unauthorised use of that information to the detriment of the party communicating it. 

143               For present purposes and in light of Incat’s pleaded (limited) admission, the only question that remains to be decided in the case is the nature and extent of the use by Incat.  Austal relies on the ‘springboard doctrine’ described in a number of cases such as in LAC Minerals Ltd v International Corona Resources Ltd (1989) 16 IPR 27.  The Supreme Court of Canada (following Cranleigh Precision Engineering Ltd v Bryant [1964] 3 All ER 289) there observed that where the duty of confidence is breached, the confidee will not be allowed to use the information as a springboard for the activities detrimental to the confider.  In LAC the court held that the evidence amply sustained the finding that the confidential information which LACreceived from Corona was of material importance in its decision to acquire the particular property.  But for the confidential information which LAChad received from Corona, it was not likely that it would have acquired the particular property.

144               Austal argues that the burden of proof has been shifted to Incat given Incat’s effective admission as to a breach of confidence in the possession (on an unauthorised basis) of the first Austal Report and in its use with Master Ferries.  The view expressed in LAC (1989) 16 IPR 27 was that the onus of proof was reversed.  It was said at 36/40-50 and at 37/5-10 by La Forest J that when information is provided in confidence, the obligation is on the confidee to show that the use to which he or she put the information is not a prohibited use (see Megarry J in Coco [1969] RPC 41) (emphasis added).  See also Printers and Finishers Ltd v Holloway [1964] 3 All ER 731 per Cross J and Mediterranean Bakery Pty Ltd v Vardakis (1976) ACLD 649 in the Supreme Court of New South Wales.  In Printers and Finishers v Holloway the following extracts appear in the judgments of Cross J at 735:

The mere fact that confidential information is not embodied in a document but is carried away by the employee in his head is not, of course, of itself a reason against the granting of an injunction to prevent its use or disclosure by him. 

145               However, the fundamental difficulty to which Incat repeatedly points is that there is not the slightest bit of evidence that there was any usage at all and in any way of the confidential information in any of the negotiations or transactions with the exception of Master Ferries as to which there is an admission.  (Two of the witnesses expressly deny any usage and the other witnesses expressly deny making any reference in any sense to the content of the Austal Reports). 

146               In this regard, I also observe that Austal has not even pointed to a hypothetical ‘use’ of the reports except to stress that it was surprising that interest in the Austal tenders suddenly ceased and in the case of Higashinihon that despite their denials as to usage of the Austal Reports, both Messrs Thurlow and Merrigan had access to them on their laptop computers when in Japan. 

147               It is important to look at the content of the confidential information to see what ‘use’ there could possibly be in those impugned negotiations or transactions if the substance of the Austal Report was not referred to in some way.  To merely refer to alleged superiority of a vessel without in turn identifying a basis on which the superiority was in effect admitted by a competitor would carry very little weight.  It would not be the slightest bit uncommon for any tenderer or presenter to advance the assertion that the product sought to be sold was superior.  The ‘usage’ must be identifiable in some sense whether it is conscious or unconscious.  Incat have been required to answer questions on oath or affirmation by way of compulsory examination and to produce witness statements and/or affidavits.  In these compulsory ways, Incat has given evidence on the topic. 

148               The fact that the onus may shift to the party who is identified as having misused confidential information, does not automatically mean that that party must turn over at great expense and delay a large portion of its business records in the mere possibility that in transactions in respect of which there is express denial of usage, such denial may be proven to be incorrect.  The enormity of providing the discovery sought weighs heavily against making the orders sought by Austal. 

149               As Incat stresses, it is not in issue that one of the Austal Reports was sent by Mr Thurlow to Master Ferries and that Mr Clifford sent both copies of the reports to Mr Adams.  Incat argues that in light of the very limited facts established through the process to date, the genuine extent of the dispute would be very narrow.  In contrast, the statement of claim runs to some 52 pages with allegations raised at a ‘high level of generality’.  There is no particularisation whatsoever in relation to the general allegations and they are speculative. 

Burden and Benefit

150               As observed by Tamberlin J in KGL Health Pty Ltd v Mechtler [2008] FCA 273 at [9], if classes of documents are sought, they should be framed so as not to be too wide and need to be stated with sufficient specificity. 

151               In the context of the discovery sought, ‘document’ has a wide definition.  In O 1 r 4 of the Federal Court Rules it is defined as:

Any record of information which is a document within the definition contained in the Dictionary of the Evidence Act 1995 and any other material data or information stored or recorded by mechanical or electronic means’. 

152               In my view, the enormity of the task and width of the documents listed and the lack of connection between those documents and the issues in the action is evident from the face of the list.  Austal did not advance any specific argument to each of the topics on which it sought discovery.  Rather it stressed the basis on which the inferences it asks the Court to draw are said to be reasonable. 

153               I consider the discovery sought by Austal would be a fishing expedition made in an effort to find some piece of information which could provide a basis for Austal’s claims.  But also it would be quite oppressive in that circumstance.

154               At this stage, there is no significant evidence at all in relation to the allegations concerning Higashinihon Ferries, Spanish Acciona and PATT.  The oppression involved in the proposed discovery, in my view, far outweighs the benefit that might be obtained from it.  As to the burden and benefit principle, see also O 15 r 8 and Molnlycke AB v Proctor & Gamble Limited (No 3) [1990] RPC 498 at 503 and Slick [2006] FCA 1712 at [43]. 

Notice to Admit Facts

155               As to the notice to admit facts, I indicated during the course of argument that I do not propose making any order directing Incat to answer a notice to admit facts.  There is no power in the Court to make such an order.  The notice issued by Austal contains 391 questions with a bundle of documents referred to in the notice running to several hundred pages.  Austal sought answers within 14 days of the notice being administered which was, in my view, quite unrealistic.  A failure to answer a notice to admit facts goes only to costs, albeit on an indemnity basis in a suitable case:  Polygram Records Inc v Raben Footwear Pty Limited (1996) 140 ALR 617.  I note in the correspondence exchanged, however, that Incat have indicated that the notice will be answered in due course.  Therefore, I decline to make any order to that effect.

Judgment under s 31A

156               I turn now to Incat’s argument in support of a notice of motion for dismissal of that portion of usage of Austal’s confidential information that was not admitted by Incat.  Incat relies on s 31A of the Federal Court of Australia Act 1976 (Cth).  The material relied upon in opposition to the further discovery is relevant to the same argument.  In my view, however, the considerations are different. 

157               Pursuant to s 31A, the Court may give judgment for one party against another in relation to the whole or any part of a proceeding if it is satisfied that the party prosecuting the claim has no reasonable prospect of successfully prosecuting it.  It is expressly emphasised that for the purposes of s 31A, a proceeding need not be hopeless or be bound to fail for it to have no reasonable prospect of success.  The section has been discussed in numerous cases including Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401.  It is clear that it is open to the Court to consider evidence in the context of such an application and it is clear that the language of the section imposes a different and less stringent test to the former test described in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130.

158               Austal has stressed that its case depends upon drawing inferences.  It is true that the existence of a fact may be inferred from other facts when those facts make it reasonably probable that it exists.  However, as Incat submits, if they go no further than to show that its possible that it may exist, then its existence does not go beyond mere conjecture and an inference is not open to be drawn:  Carr v Baker (1936) 26 SR(NSW) 301 at 306-307. 

159               In Jones v Dunkel (1959) 101 CLR 298 at 305-306, Kitto J said that:

One does not pass from the realm of conjecture into the realm of inference until some fact is found which positively suggests, that is to say provides a reason, special to the particular case under consideration, for thinking it likely that in that actual case a specific event happened or a specific state of affairs existed. 

160               Street CJ observed in Gurnett v Macquarie Stevedoring Co Pty Ltd (1955) 75 WN(NSW) 261 at 264:

… The plaintiff must prove his case; and although he may establish a state of facts which leads one to think that his version is quite a possible version of what took place, he must do something more than show a state of facts which is consistent with one view or with another view …  [a] guess is a mere opinion or a judgment formed at random and based on slight or uncertain grounds.  In contradistinction to such a conjectural opinion, an inference is a reasonable conclusion drawn as a matter of strict logical deduction from known or assumed facts.  It must be something which follows from given premises as certainly or probably true, and the mere possibility of truth is not sufficient to justify an inference to that effect. 

161               I would accept that there is no evidence in the witness statements of Mr Christopher Gerrard, Mr Christopher Pemberton, Mr Darren Edwards, Mr James Bennett, Mr Richard Regan, Mr Kobayashi Toyohiko and Mr Neville Anthony Armstrong which positively establishes usage of the Austal Reports in connection with Higashinihon, Spanish Acciona or PATT. 

162               I do not accept, however, that the claim as formulated is destined to failure as asserted by Incat.  In large measure the body of law drawing a distinction between an inference and conjecture is drawn from circumstances in which there has been a substantive hearing or trial.  In such a circumstance, there is the opportunity to hear the entirety of the evidence through oral testimony, conventionally tested by cross-examination.  At present, it is clear that Austal would have to establish more at trial in order that the inference it wishes the Court to draw may properly be drawn.  But there are ways in which that may occur, for example by use of a far more restrained collection of Incat discovered documents than the collection sought, by answers to interrogatories or by evidence from third parties or by demonstrating the unreliability of Incat’s evidence.

163               It is possible that the Court could draw an inference after hearing the evidence of the witnesses and the cross-examination of them that there has been a usage of the confidential information, not only in connection with the Master Ferries negotiations but also in connection with the other transactions.  There is not a proper basis for drawing such an inference at this stage but I would be reluctant to deny Austal the opportunity to pursue a very much more restrained discovery request and to have its assertions tested at trial.  This will be subject to the parties first having mediated which I propose ordering in due course. 

CONCLUSION

164               Each of the respondents must file and serve an affidavit of discovery which conforms to the Rules of the Court within 21 days.  Austal’s application for further discovery and to direct Incat to respond to the notice to admit facts will be refused.  Austal will be permitted to apply for leave to administer a limited number of interrogatories providing it does so within a narrow time frame.  These reasons do not preclude Austal seeking far more confined and specific discovery.  After interrogatories have been admitted and answered I will direct that the parties mediate. 

165               Incat’s application for judgment will be dismissed. 

166               I consider that there should be no order as to costs but I will consider any written submissions to the contrary from the parties.  Submissions, if any, should not exceed five pages and should be filed and served within 14 days.  Accordingly I make the following orders:

1.                  Each of the respondents is to file and serve an affidavit of discovery which conforms to the Rules of the Court within 21 days. 

2.                  Each of the applicant’s applications for:

(a)        further particular discovery;

(b)        an order to direct the respondents to respond to its notice to admit facts; and

(c)        for leave to serve notices to produce

is refused. 

3.                  The respondents’ application for judgment is dismissed. 

4.                  Any written submissions on costs are not to exceed five pages and are to be filed and served within 21 days, failing which there will be no order as to costs. 

Associate: 

Dated:         20 April 2009