Applicant v Respondent

"1. The Applicant's legal advisers are released from the undertaking given by them to the Respondent in respect of the documents over which the Respondent claims confidentiality.

2. The Applicant's legal advisers shall be permitted for the purpose of obtaining instructions from the Applicant and the Land Monitor and to enable the continued conduct of the proceeding to provide copies as thought appropriate and to disclose the content of the documents over which the Respondent claims confidentiality to officers of the Applicant's Property Services Department or persons having authority over that department and representatives of the Land Monitor

3. In the event that the Applicant wishes to disclose the content of the documents or provide copies of the documents over which the Respondent claims confidentiality to expert witnesses or external advisers being Fellows of the Institute of Quarrying for the purpose of continued conduct of the proceeding, before access to the documents is permitted the Applicant's legal advisers shall ensure that any such person will provide a signed undertaking to be held by the Applicant's legal advisers in the following terms for the benefit of the Respondent and Conundrum Holdings Pty Ltd.

'(a) They will keep the information in the documents confidential.

(b) They will not disclose the information in the documents to a person who is no involved in the proceedings.

(c) They will not copy the documents (other than to provide the documents to persons who have given the undertaking).

(d) They will use the documents and the information in the documents solely for the purposes of the proceeding.'

(e) They will return any copies of the documents to the Applicant's instructing solicitors as soon as reasonably practicable after the conclusion of the proceeding ('the confidentiality undertaking').

4. The Applicant's legal advisers shall:

a. not be required to disclose to the Respondent a list of the persons who have provided the confidentiality undertaking until the proceeding has been finalized either by judgment or by other resolution.

b. if required to do so by either the Respondent or by Conundrum Holdings after finalization of the proceeding provide in response to such request a list of each person who has signed the confidentiality undertaking and copies of each such signed undertaking."

2 The documents in issue relate to dealings between the respondent and Conundrum which is the lessee of land owned by the respondent adjacent to the acquired land. The documents are potentially relevant to the respondent's claim that the highest and best use of the acquired land was at the date of acquisition that of a quarry. They also bear upon the nature of the respondent's interest in the land acquired at the date of acquisition and the extent and nature of the rock reserve upon the acquired land. They are further relevant to the value of the acquired land to the respondent.

3 This relevance is demonstrated by the affidavits that have been filed on behalf of the respondent including that of Mr Hocking, a valuer, and Mr Natoli, a geologist. The valuation report expresses opinions as to the relevant rock reserve including:

(a) the volume of the estimated resource;

(b) the anticipated selling price of the resource;

(c) the identification of potential purchasers of the land (including Conundrum); and

(d) the estimation of the cost of production of quarry products.

4 The geologist's affidavit relates in part to the geology of the land currently the subject of a work authority and existing quarry works.

5 The respondent contends that the documents in issue are confidential and commercially sensitive because they contain information relating to the respondent's current business activity leasing part of the land to Conundrum. The terms of the lease provide for the respondent to be paid royalties for rock extracted by Conundrum. It is submitted the key categories of information contained in the documents are:

(a) royalty rates;

(b) volumes and grades of rock extracted by Conundrum; and

(c) the nature of the respondent's relationship with Conundrum which is said to be akin to a relationship with a customer.

6 The respondent deposes that the lease documentation in issue contains reference to royalty rates and a copy of the lease is exhibited before me. He further deposes that his income tax returns also set out the amount of royalty payments received by him in each year. A copy income tax return is also exhibited before me. The quarry operator's royalty returns are also said to include details of royalty rates and the volumes and grades of rock extracted by Conundrum. A copy of one of the royalty returns is exhibited before me.

7 The respondent further says that documents relating to negotiations between the respondent and Conundrum for a new lease date from 1998 are "central to the current confidential relationship I have with Conundrum." They may also be confidential to Conundrum itself in part.

8 The respondent further says that a draft aerial survey showing the leasehold as at 14 June 2002 contains confidential information received by him from Conundrum.

9 Despite the fact that it can be seen in large part the confidentiality which is asserted relates to the position of Conundrum, the position before me is that Conundrum consents to orders having the effect proposed by the applicant.

10 The respondent contends that access to the allegedly confidential documents should be permitted by an authorised person who has given a written undertaking in a form acceptable to the respondent which provides "inter alia" for the following matters:

"(1) they will keep the information in the Confidential Documents confidential;

(2) they will not disclose the information in the Confidential Documents to any person [who] is not an authorised person (as defined in (g) below).

(3) they will not copy the Confidential Documents or transcribe any information in the Confidential Documents onto any other document.

(4) they will use the Confidential Documents and the information in the Confidential Documents solely for the purposes of this proceeding.

(5) they will take all reasonable steps to ensure that an unauthorised person does not have an opportunity to inspect or otherwise have access to the Confidential Documents.

(6) they will return the Confidential Documents to the Respondent's Solicitors as soon as reasonably practicable after the conclusion of this proceeding.

(7) the undertaking operates from the time they give the undertaking until they are released from the undertaking.

(8) they will be released from the undertaking only upon the earliest of the following events:

(a) they are released from the undertaking in writing by both the Respondent and Conundrum Holdings Pty Ltd ('Conundrum');

(b) they are released from the undertaking by order of the Court;

(c) the Confidential Documents are released unconditionally to the Applicant by the Respondent, either voluntarily or pursuant to an order of the Court.

(9) for the purposes of the undertaking, 'authorised person' means the following persons:

(a) the Respondent;

(b) the legal representatives of the Respondent;

(c) the legal representatives of the Applicant;

(d) a member of the Court as constituted in this proceeding or a member of the staff of the Court in the course of the performance of his or her duties as a member of that staff; or

(e) the following employees of the Applicant or the Land Monitor:

[### names and position titles of persons necessary to assess the compensation claim to be supplied by Applicant, subject to agreement by the Respondent.]

(f) advisors retained by the Applicant in connection with the proceeding:

(i) including the following persons: Brian Dudakov of urbisJHD, Les Brown of m3property and Michael Cameron of Extractive Consulting;

(ii) excluding:

(A) any advisor who advises quarry operators on negotiations with landowners, or business or marketing strategies; or

(B) any employee or officer of, or advisor to, a material purchaser of material crushed rock in Victoria;

(C) Rex Atkins, Peter Bethune or any other employee of the Applicant working or associated with the Spraying Line or Road construction aspects of the Applicant's operations.

(g) and any other person who is authorised by the Respondent to have access to the Confidential Documents."

11 In my view the form of undertaking put forward by the applicant should be accepted and conversely the scheme put forward by the respondent should be rejected. Firstly, there is nothing in the scope of the matters covered by the documents which in itself would suggest that a confidentiality beyond that which is normally preserved by the implied undertaking applicable to discovered documents necessarily exists in this case. A party or a representative of a party who is permitted access to a document produced under compulsory process is subject to an obligation not to use, or permit to be used, any such document or the knowledge acquired from any such inspection other than for the purposes of the proceedings.[1]

12 A breach of the implied undertaking is a serious matter which may constitute contempt of court. The position at common law is reinforced, so far as expert witnesses are concerned, by the overriding duty of expert witnesses to the court. That is a duty which is recognised both by the common law[2] and is affirmed by Order 44 of the Supreme Court Rules and the code for expert witnesses.

13 Secondly, in my view the terms of the proposal put forward by the respondent are misconceived in that they propose members of this Court and of the Court staff should give undertakings. Thirdly, the proposal is impractical in that it precludes the copying and transcribing of information which is relevant. Fourthly, the proposal is unfairly onerous in that it requires the applicant to identify its expert advisers when the respondent is under no corresponding obligation. Fifthly, it goes far beyond what is necessary to protect such confidentiality as has been established.

14 It is necessary to elaborate the last matter.

(a) The relative lack of commercial sensitivity of the information in issue is demonstrated firstly, by the consent of Conundrum to the orders proposed and secondly, by the affidavit of Mr Cameron. He deposes:

"With a view to forming my opinions and as part of my investigations in respect of the Craigieburn by-pass I contacted Ron Kerr, director of Conundrum Holdings Pty Ltd. My discussions included three lengthy in depth telephone conversations with Mr Kerr. In those conversations I asked Mr Kerr a series of questions in relation to the rock resources on Mr Love's land, his existing quarrying operations and his views as to future operations and the potential for quarrying on the land within existing work authority areas. Mr Kerr was very helpful in the information and advice that he provided during those discussions.

The matters of which Mr Kerr informed me included his production techniques which he explained, his pricing scales and levels, his strategies in terms of customers, the projects he was targeting and where he saw the position or place of Conundrum Holdings in the industry. He provided estimates for the volume of materials which he was extracting and which he anticipated would be extracted going forward.

I discussed in detail the variability of the resource and the techniques which were being employed by Conundrum to seek to make the best of the available product in its approach to quarrying. Mr Kerr discussed the choice of plant and equipment he was using to crush and blend the material required to make a range of products which he thought would be suitable to the market.

In my discussions with Mr Kerr, we discussed how his quarrying operation was to move from the stony rises from which he had been extracting rock into the less favourable lower areas of the property, one such area being to proceed south towards Cooper Street and the other such area being to proceed to the east of the Miller property. I did not discuss with Mr Kerr in any significant detail the quality or otherwise of the resource to the east of the gas pipeline, an area in respect of which there has never been extractive industry zoning, licences or permission to extract stone."

(b) The respondent relied on the following statement of principle from the judgment of Hayne JA in Mobil Oil Australia Ltd v Guina Developments Pty Ltd[3]:

"Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise.

Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed. Is that necessary for the attainment of justice in the particular case?"

There is, however, no satisfactory evidence the applicant is in the position of a trade rival, or is otherwise in a position within the market for quarry product which makes disclosure of the documents to its officers sensitive. To the contrary the affidavits of Bethune and Atkins demonstrate that it is not. Nevertheless the order as ultimately formulated restricts access by the applicant's officers to a specified class of officers not directly involved in rock purchases and road construction.

(c) I do not accept that the information disclosed in the documents is or is equivalent to "trade secrets". It is in no way comparable to that of Décor Corporation Pty Ltd v Australian Homewares Pty Ltd[4] upon which the respondent sought to rely. That case concerned trade secrets concerning the manufacture of plastics and the Court was confronted with the real possibility of reverse engineering based upon the trade secrets in issue.

(d) Insofar as the respondent asserts a fear that experts retained by the applicant may also act for trade rivals of Conundrum (and hence have the capacity to harm the respondent by using information disclosed to them in this action) it is apparent that the respondent's own experts are no different from those retained by the applicant in this regard. Both sides have retained experts who have wide ranging retainers within the quarry industry. In my view, the appropriate safeguard is to stipulate that any further external advisers to whom the documents are disclosed should be Fellows of the relevant professional association. When the professional expectations which this requirement would involve are added to the duties of experts to which I have already referred, it is fair to allow the applicant to disclose the documents to persons having the same sort of industry relationships as those retained by the respondent himself.

(e) There is no reason to suppose that discovery of documentation which might be regarded as confidential to the respondent insofar as his relationship with Conundrum is concerned, will lead to its disclosure to Conundrum. Any such disclosure will breach the obligations to which I have referred.

15 The ultimate question which arises in cases such as the present is whether the discovery proposed is fair in terms of the balance between the competing interests of the party seeking inspection and the party claiming confidentiality.[5]

16 In my view the proposal put forward by the applicant is such as to strike a fair balance in the case. The restrictions accepted by the applicant are said to be accepted in deference to the position of Conundrum. Nevertheless, they provide significant and fair protection to the respondent. Accordingly, I propose to make orders in the terms to which I have referred.

[1] See Home Office v Harman [1983] 1 AC 280.

[2] Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705

[3] [1996] VicRp 54; [1996] 2 VR 34 at 38

[4] (1998) FCA 1479

[5] Mobil Oil v Guina [1996] VicRp 54; [1996] 2 VR 34 per Hayne JA at 40