FEDERAL COURT OF AUSTRALIA

Specsavers Pty Ltd v Canstar Blue Pty Ltd [2010] FCA 1153

REASONS FOR JUDGMENT

Introduction

1                                             This is an application under O 15A r 6 of the Federal Court Rules (‘the Rules’) for preliminary discovery of various documents.  The documents are listed by category in the Schedule to the application.

Background

2                                             The applicant (‘Specsavers’) is a recent entrant in the Australian optical services market.  It operates stores through a company-owned and franchise structure. Specsavers commenced its Australian retail operations in 2008.  It now has 239 Specsavers-branded stores nationally.

3                                             The respondent (‘Canstar’) rates products or services based on consumer questionnaires.  A very broad outline of the methodology appears on its website and is in evidence.  It has recently (apparently between 19 August and 2 September 2010) conducted a survey of some kind relating to optometrists.  It engaged Colmar Brunton, a ‘professional market research company’, to conduct the survey.  In the present case it is said that 2,500 people were surveyed.

4                                             Canstar has placed the results of that survey on its website and, it can be inferred, promoted the results to print media, including Inside Retailing, and broadcast media, including Today Tonight.

5                                             The results are given a star rating (up to five stars) in six categories, Overall (which is not, as might be expected, a score based on the other categories, but is a stand-alone category), Price, Service, After sale service, Range and Accessibility of store.

6                                             Canstar seeks to trade in the results and in its endorsement.  According to Canstar:

‘Winners of the categories are able to licence [sic] the awards for use in their marketing.’

7                                             Specsavers’ Marketing Director, Stewart Roussel, saw the Canstar website and the Inside Retailing article on 23 September 2010, and the Today Tonight segment on 28 September 2010.

8                                             Correspondence from Specsavers’ solicitors, and between them and Canstar’s solicitors, ensued.  In it Specsavers set out its concerns about possible breaches by Canstar of s 52 of the Trade Practices Act 1974 (Cth) (‘the TPA’).  Specifically, Specsavers says it has concerns that there may be significant defects and inaccuracies in the methodology, approach and ratings by Canstar that may mean that the results reported were inaccurate or misleading.    Specsavers asked to be supplied with documents that would enable it to make a decision whether or not to proceed with an action.

9                                             Provision of the documents was refused pending clarification of the basis for Specsavers’ possible claim.  Clarification was allegedly given.  Production was refused again. 

10                                          Documents were also sought from Colmar Brunton and refused.

11                                           The application was filed on 5 October 2010.  It seeks orders under O 15A r 6 of the Rules for preliminary discovery of various documents.

12                                          Specsavers says it does not presently have sufficient information to determine whether to commence a proceeding to obtain relief against Canstar and it seeks orders under O 15A r 6 in the terms proposed in the application.  It further says that the information it requires is peculiarly within the possession of Canstar itself, being the documents and materials set out in the application.

Order 15A Rule 6: Applicable Principles

13                                          An applicant for relief under O 15A r 6 is required to satisfy each of the following conditions:

(a)                there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;           

(b)               after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)                there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision.

14                                          If each of these conditions is satisfied, the Court may order that that person shall make discovery to the applicant of any document of the kind described in para (c).

15                                          The Full Court in Echo Tasmania Pty Ltd v Imperial Chemical Industries Plc [2008] FCAFC 58 at [43], and again in Apache Northwest Pty Ltd v Newcrest Mining Ltd (2009) 182 FCR 124 at [2] and [26], has adopted the summary of the relevant principles provided by Hely J in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at [26].  In that paragraph, his Honour said

‘The following propositions emerge from the authorities in which the proper application of O 15A r 6 has been considered by judges of this court:

(a)        the rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the court, exercised in the particular circumstances of each case: Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733; 20 IPR 79 at 85; Minister for Health and Aged Care v Harrington Associates Ltd [1999] FCA 549; BC9902167 at [27];

(b)        each of the elements prescribed in subparas (a), (b) and (c) of the rule must be established: Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at 11 [38] ; 167 ALR 385 at 367; 47 IPR 21 at 30. Preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of the conditions themselves: Airservices Australia v Transfield Pty Ltd (1999) 92 FCR 200 at 202–3 [5]; 164 ALR 330 at 332;

(c)        the test for determining whether the applicant has “reasonable cause to believe”, as required by subpara (a), is an objective one: Hooper at FCR 11–12 [39]; ALR 367; IPR 30; Malouf v Malouf [1999] FCA 710; BC9902833 at [16]; Quanta Software International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536 at 541–2 [24]; 49 IPR 25 at 31; Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391; BC9602085 at 23. Further, the words “or may have” cannot be ignored. The applicant does not have to make out a prima facie case: Quanta Software at ALR 541–2 [24]; IPR 31; Paxus Services at ALR 733; IPR 85;

(d)        belief requires more than mere assertion and more than suspicion or conjecture. Belief is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679; BC200403021 at [13], [14], [17] and [73];

(e)        while uncertainty as to only one element of a cause of action might be compatible with the “reasonable cause to believe” required by subpara (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe: Glowatzky v Insultech Group Pty Ltd (1997) 39 IPR 215;

(f)        the question posed by subpara (b) of the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent. The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the court: Quanta Software at ALR 543 [33]–[34]; IPR 32–3, Alphapharm at 24‑6. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award: CGU Insurance Ltd v Malaysia International Shipping Corp Berhad (2001) 187 ALR 279 at 285 [21]; Quanta Software at ALR 543 [33]–[34]; IPR 32–3, Alphapharm at 24–6, Airservices Australia at FCR 202–3 [5]; ALR 332

(g)        whether an applicant has “sufficient information” for the purposes of subpara (b) also requires an objective assessment to be made: Minister for Health at [44]; Alphapharm at 23–4, Hooper at FCR 12 [40]; ALR 367; IPR 31. The subparagraph contemplates that the applicant is lacking a piece (or pieces) of information reasonably necessary to decide whether to commence proceedings;

(h)        it is no answer to an application under the rule to say that the proceeding is in the nature of a “fishing expedition”: Paxus Services at ALR 733; IPR 85. Indeed O 15A r 6 “expressly contemplates” what once might have been castigated as “fishing”: Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at 143 [27] ; 182 ALR 264 at 270–1 ; 20 IPR 79 at 85. As Burchett J commented in Paxus Services, the rule is (at ALR 733; IPR 85):

… designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent …’

(Emphasis in original.)

16                                          In Apache Northwest, Flick J observed at [30] – [31]:

‘[30]     [I]t must be recognised that the jurisdiction to which [Apache] was exposed is truly an “extraordinary jurisdiction”...

The safeguard that a third party has against its “private affairs” being intruded upon is the need for an applicant to satisfy the Court that the requirements of O 15A, r 6 have been met. That which will have to be advanced before this Court in order to satisfy those requirements will obviously vary from case to case. Albeit forever conscious of the intrusion that an order will inevitably have upon a non-party, O 15A, r 6 remains a rule which is to be “beneficially construed”.

[31]      Although there remains a tension between these two propositions, there is no necessary inconsistency. As has been recognised by Hely J and others, although r 6 is to be “beneficially construed”, the “proper brake on any excesses” rests in the discretion of the Court. A further “brake” upon possible excesses is the constraint that such discovery as is ordered must be that which “is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries”...’

17                                          In Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435 at [48], the Full Court observed:

‘It was not incumbent upon Optiver to establish every element of the relevant causes of action, but a reasonable cause to believe that it “has or may have” the right to relief alleged. Of course, this is not to say that it is not necessary to examine the various elements of the potential cause of action that is sought to be relied upon to determine whether there is a reasonable cause to believe that each of the necessary elements exist ... Nor can an application for preliminary discovery be sustained without evidence that must incline the mind towards the matter of fact in question ...’

18                                          An example of the application of this requirement is provided by the case of Stratford Sun Ltd v OM Holdings Ltd (2009) 74 ACSR 698 at [60] – [61] per Siopis J, where his Honour observed:

‘Thus, while it is the case that O 15A r 6 permits fishing, nevertheless, there must be an evidentiary foundation, which will permit a belief or tilting of the mind towards the existence of the factual premise upon which the potential cause of action being contemplated by the applicant, is found.

In my view, the case made by the applicant does not, on the evidence before the court, rise above the level of speculation or conjecture.’

19                                          Obviously, and consistently with the passage from Optiver set out above, any permissible uncertainty must be about factual matters, not about whether such facts if found to exist would give rise to a cause of action.

20                                          In Benchmark Certification Pty Ltd v Standards Australia International Ltd (2004) 212 ALR 464, at [88] Emmett J observed:

‘It is incumbent upon an applicant under O 15A in relation to a possible right to relief arising from contravention of s 46 of the Trade Practices Act to identify, with some precision, the elements that would go to make up the contravention.’

His Honour also concluded (at [128]) that the uncertainty involved in the relevant elements of the alleged cause of action was a basis for exercising the discretion against ordering production, even if there was some basis for conjecturing as to the possibility of a right to relief.

21                                          A claim based on mere speculation is an insufficient basis for a conclusion that there is reasonable cause to believe that the applicant has a right to obtain relief.  Examples of speculative claims for pre-trial discovery that have failed in the Federal Court include:

(a)                CTC Productions Pty Ltd v Royal NSW Canine Council Ltd [1999] FCA 1866 (Hill J);

(b)               Strang Aniokaka Ltd v Lihir Gold Ltd (No 2) [2010] FCA 1065 (Rares J);

(c)                Cape Australia Holdings Pty Ltd v Iannello [2009] FCA 709 (Siopis J); and

(d)               Cape Australia Holdings Pty Ld v Modern Industries Australia Pty Ltd [2009] FCA 976 (Siopis J).

Application of these Principles

22                                          Specsavers has identified four areas of concern, which it says give rise to a reasonable cause to believe it has a right to relief for contravention of s 52 of the TPA, and which it claims satisfy the other criteria of O 15A r 6.

Currency of results

23                                          As reported on the website up to overnight on 30 September/1 October, Canstar represented that the survey was of people who had ‘recently’ visited their optometrist.  However, from a discussion between Mr Roussel and a representative of Canstar, it appeared that the questionnaire itself had asked people had they visited an optometrist in the previous two years.

24                                          The source of Specsaver’s complaint appears to lie in the distinction sought to be drawn between ‘in the last two years’ and ‘recently’.

25                                          Canstar submitted that, in the context of optometrists, a period of two years prior to the survey is ‘recent’; that there is nothing misleading and deceptive about saying that survey respondents have visited the optometrist ‘recently’ if the visit was in the last two years.

26                                          Canstar pointed out that, in any event, the position has been clarified by a change to the website.  The website now details the survey as follows:

‘We commissioned professional market research company Colmar Brunton to survey 2,500 people and asked them to rate an optometrist they had recently visited (in the past two years) on a number of different criteria.’

27                                          Canstar submitted that there is, therefore, no basis for an injunction going forward and no reasonable cause to believe that Specsavers might obtain such relief.

28                                          Canstar observed that, in relation to the short period prior to the website being amended, Specsavers has not adduced any evidence to suggest that it has suffered any loss or damage in respect of this period.  For the reasons discussed by the Full Court in Apache Northwest at [4] – [7], this is fatal to Specsaver’s claim.

29                                          Specsavers also sought to rely upon evidence that not all of its current stores were open two years ago.  According to Canstar, this issue appears to be a ‘red herring’, as:

(1)               The evidence is the effect that there were approximately 115 stores of Specsavers open by August/September 2008 (the commencement of the two year period leading up to the survey).

(2)               What is said to be misleading and deceptive is not identified in the affidavit.  The survey is a survey of, inter alia, people who visited Specsavers’ stores.  Whether the person visited one of the 115 stores, or one of the 239 stores, is of no apparent relevance.

(3)               In any event, it cannot be the case that the fact that one of the companies surveyed has changed aspects of its business over the survey period makes the whole survey misleading.  That will be the case with every survey.  Publishing a survey does not involve making a representation that the businesses surveyed remained exactly the same over the survey period.  In the present case, the survey is simply stated to be a survey of the experience of 2,500 people who visited particular optometrists over the last two years.

30                                          I agree with Canstar’s submissions in [25] and [27] – [29] above.  In these circumstances, Specsavers has not established that it has reasonable cause to believe that it may have a right to obtain any relief in respect of the currency of results.  The evidence does not incline the mind to a belief that there has been a contravention of the TPA.  Specsavers does not satisfy the requirements of O 15A r 6(a).

31                                          Specsavers also does not satisfy the requirements of O 15A r 6(b).  It has not identified any information which it lacks and which it needs in order to make a decision as to whether to commence proceedings.  If Specsavers genuinely believes that it is misleading and deceptive conduct to:

(1)               say that visits over the last two years are ‘recent’; or

(2)               publish survey results in respect of a business which is building its store numbers;

then Specsavers has the relevant information now and can commence proceedings.

32                                          Finally, Specsavers does not satisfy the requirements of O 15A r 6(c).  Canstar has given evidence that:

(1)               the survey was conducted over the period 19 August 2010 to 2 September 2010;

(2)               it was a survey of customers who stated that they had visited an optometrist in the two years prior to the survey; and

(3)               the survey does not record, and Canstar has no other record of, the date that the respondents to the survey visited the optometrists.

There is, therefore, no reasonable cause to believe that Canstar has in its possession any document inspection of which would assist in making the decision whether to commence proceedings.

Accessibility of Stores

33                                          Specsavers submitted that one interpretation of ‘most accessible stores’ is that it is easy for the majority of the population to get to the store.  However, it observed, this category was ‘won’ by Just Spectacles, a chain almost entirely located in Western Australia, and not located outside Western Australia, South Australia and (one store) Queensland.

34                                          Canstar submitted that Specsavers’ case in relation to the ‘accessibility of stores’ issue proceeds on at least two misconceptions.

35                                          The first is that Canstar is making a representation about the accessibility of stores.  It is important to recognise that Canstar, like any person who conducts a survey, does not make any representation as to the correctness of the views expressed by the survey respondents.  Canstar is not representing that Just Spectacles has the most accessible stores.  Rather, the representation (if any) is much more limited: that survey respondents who visited Just Spectacles have given it a higher accessibility rating than survey respondents who visited other optometrists.

36                                          The second misconception is that the survey results convey some representation about the national reach of the brand.  It is clear from the Canstar website and the manner in which the results are reported that the responses are the views of people who have visited the relevant optometrist store.  Thus, for example, the fact that people who have visited Just Spectacles stores (i.e. people who are likely to live in Perth) find them quite ‘accessible’ does not purport to say anything about the national reach of Just Spectacles.

37                                          Canstar observed that ‘accessible’ is a broad term.  It could refer to a store that is close to where the person lives; a store that is proximate to a good car park; a store that is well-located in the shopping mall.

38                                          Canstar submitted that the evidence in subparas 21(e) and (f) of the affidavit of Ms Ng about whether the survey reflects the ‘representative views of the Australian public’ again confuses the issue of the accessibility of a store which the survey respondent has attended and the national reach of a network of stores.  It further submitted that the affidavit incorrectly asserts that Canstar has made a representation ‘that the Survey Results reflect the representative views of the Australian public’.  Canstar submitted that it has made no such representation.

39                                          Again I agree with Canstar’s submissions in [34] – [38] above.  There is, therefore, no basis for any allegation of contravention of s 52  of the TPA.  There is nothing to suggest misleading or deceptive conduct in the reporting of the survey results.  There is thus no reasonable cause to believe that Specsavers has or may have a right to obtain relief.

40                                          Further, because of the incoherence of the alleged misleading conduct, there is no basis for concluding that there is information which Specsavers needs to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief.

 Visits not purchases

41                                          Specsavers said that it apprehended that the survey may only have enquired after persons who visited the stores and did not further refine those eligible to rate the stores on the various criteria to people who made a purchase in the store.

42                                          Canstar submitted that this issue is one that requires the alleged representations to be identified with some precision; that, as noted earlier, it is incumbent upon an applicant to do this; and Specsavers has not done so.

43                                          It is apparent from the evidence filed in support of Specsavers’ application that its concern is that if there were respondents to the survey who only visited an optometrist, and did not purchase optometry products, that person could not make a meaningful response on the ‘after sales service’ and ‘price’ criteria.

44                                          Specsavers asserts that it is not in a position to assess the ‘veracity’ of the survey results and whether those results substantiate ‘the representations made’.  It is not clear what is meant by the ‘veracity’ of the results.  This appears to follow the misconception that Canstar is representing the correctness of the views expressed by survey respondents when this is not so.  Likewise, the ‘representations’ are not identified.

45                                          However, Canstar submitted that, at a broader level, the concern is misconceived.  Clearly, it says a person who visits a store can give a view on the price of the products (i.e. frames) viewed at the store.

46                                          More generally, it says, there is no evidence at all to suggest that survey respondents have indicated a view about something which they did not experience or knew nothing about.  Indeed, according to Canstar, that is highly unlikely.  It is much more likely that a respondent asked about something he or she does not know about would give an answer such as ‘don’t know’ or ‘not applicable’.  Therefore, it says, the s 52 case is complete speculation, and highly improbable speculation at that.

47                                          Again, I agree with those submissions.  One cannot obtain relief under O 15A on the basis that if an unlikely state of affairs had in fact occurred, that could possibly give rise to misleading conduct.  The available material does not incline the mind to a belief that this has occurred, such that there might be a cause of action. Indeed, the available material inclines the mind in the opposite direction.

Rating system

48                                          As articulated, Specsavers’ concern appears to be that if there is some defect in the methodology employed by Canstar in awarding its star ratings, then the publication of the survey results may be misleading in some way.

49                                          Specsavers did not advance any evidence at all to suggest that the methodology, and star rating approach, adopted by Canstar was defective in any way.

50                                          The most that Specsavers did was adduce evidence that Specsavers ‘is concerned’ that Canstar’s approach of ascribing four and five star rating ‘may not have involved proper statistical analysis and/or given due regard to issues such as sample size, standard deviation and levels of confidence’.  This does not amount to evidence that there is any problem, or even any likely problem, with Canstar’s approach.

51                                          According to Canstar, Specsavers is in no different position from any member of the public who comes to court to say that if there is a problem with a survey’s methodology, then the result could be misleading, and then seeks production of documents evidencing the methodology; the court would reject such an application on the basis that there was no reasonable cause to believe that the party had a right to obtain relief.

52                                          Likewise, here there is no evidence to suggest that the methodology is flawed or that there is anything wrong with the survey.  There is no reasonable cause to believe that Specsavers has a right to obtain relief.

Conclusion

53                                          Specsavers has not established that it has a reasonable cause to believe that it may have the right to obtain any relief: O 15A r 6(a).

54                                          As a result, and as a further consequence of the generality and incoherence of the allegations, Specsavers has not established that it has insufficient information to enable it to decide whether to commence a proceeding in the Court to obtain that relief; nor has it identified with any precision the information which it requires in order to make that decision: O 15A r 6(b).  Further, in relation to the currency of results issue, Specsavers has not established that Canstar is likely to have documents that reveal that information; in any event, it has all the information that it says is relevant: O15A r 6(c).

55                                          In the face of these conclusions, it is unnecessary to consider the discretion which the Court nevertheless has to decline granting preliminary discovery.  As Emmett J said in Benchmark Certification at [128]:

‘Even if there were some basis for conjecturing as to the possibility of a right to relief, I do not consider, in the exercise of discretion, that it is appropriate to make an order for discovery having regard to the uncertainty as to all of the relevant elements on the material presently before the court.’

I would be similarly disposed in the present case.

56                                          The application must be dismissed with costs.

Associate:

Dated:         28 October 2010