Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi... [2014] FCA 376 | Case summary

introduction 1 The Prysmian group of companies is a world-wide group of companies which has two principal business units, one operating in the energy field and the other operating in the telecommunications field. Prysmian S.p.A is the head company and the first respondent to this proceeding is one of its subsidiaries. Another of Prysmian S.p.A.'s subsidiaries is Prysmian Powerlink S.r.l. ("PPL"). 2 On 5 April 2013, this Court ordered that the first respondent give standard discovery by 31 May 2013. Various alterations were made to the order on 23 May 2013, 4 July 2013 and 4 October 2013, but none of those alterations are relevant for present purposes. 3 On 31 May 2013, the first respondent served a list of documents verified by affidavit. The affidavit was sworn by Mr Fabio Ignazio Romeo on 29 May 2013. In his affidavit, Mr Romeo states that he is the managing director of the first respondent. He states that he is authorised by the first respondent to make the affidavit and that reasonable inquiries have been made as to the existence and location of "the documents specified in the orders". 4 The list of documents is divided into three Parts. Of present concern is Part 3, that is, documents which have been, but are no longer, in the control of the first respondent. The relevant statements in Part 3 are as follows: Description of document Any additional relevant document or documents of the high voltage and submarine energy cables business conducted by the First Respondent prior to 1 January 2008, which the First Respondent is unable to identify with any greater particularity. Date of document Unknown but prior to 1 January 2008 What became of document Any such documents were last in the control of the First Respondent on or about 31 December 2007. From on or about 1 January 2008, as far as the First Respondent is aware, any such documents have been in the control of Prysmian Powerlink S.r.l. 5 It may be noted that the first respondent does not identify documents that have been, but are no longer in its possession, or even whether such documents exist. The first respondent asserts that any such documents were in its control until 31 December 2007, but in PPL's control on and after 1 January 2008. 6 The applicant does not accept this assertion and has brought an application seeking the following orders: 1. A declaration that documents of the high voltage and submarine energy cables business conducted by the first respondent (Prysmian), and stated by Prysmian to be in the possession of Prysmian Powerlink S.r.l (PPL), are documents in the control of Prysmian for the purposes of Rule 20.14(1)(c) of the Federal Court Rules 2011 (Cth) (FCRs). 2. Further or in the alternative to Order 1, an order that Prysmian give further and better discovery of the documents referred to in Order 1. 3. Further or in the alternative to Orders 1 and 2, an order requiring Prysmian to write to PPL in terms of the attached letter, take all reasonable steps to obtain a response from PPL on or before [ ], and to file and serve an affidavit which: 3.1 attaches Prysmian's letter and any response received from PPL and any further correspondence between Prysmian and PPL; and 3.2 describes any further oral communications between Prysmian and PPL, in relation to the letter that is the subject of this Order, on or before [ ]. 4. Further or in the alternative to Orders 1, 2 and 3, an order the Prysmian describe the class of documents referred to in Part 3 of Prysmian's List of Documents verified by the affidavit of Fabio Romeo sworn 29 May 2013 with greater particularity, including by referring to each separate document rather than by a class or classes of documents. 5. Prysmian pay the applicant's costs of and incidental to this application. 6. Such further or other orders as the Court sees fit. 7 During the course of oral submissions before me, the applicant abandoned the claim in paragraph 1 for a declaration. 8 In terms of the evidence on the application, the applicant relied on an affidavit of a lawyer employed by the Australian Government Solicitor, which represents it in this proceeding. 9 The first respondent relied on an affidavit of a lawyer employed by Johnson Winter & Slattery, which represents it in this proceeding. It also relied on an affidavit of an Italian lawyer, Avvocato Professor Stefano Alberto Villata. Avvocato Professor Villata was asked by the first respondent to give his opinion on various aspects of Italian law, which the first respondent considered are, or may be, relevant to issues arising on the application. Avvocato Professor Villata's opinions were said to be relevant to the application for a declaration and to the exercise of the Court's discretion, should that become relevant. I did not understand the first respondent to contest the proposition that an application relating to discovery is a matter of practice and procedure which is governed by the law of the forum (Michael Wilson & Partners Ltd v Nicholls & Others [2008] NSWSC 1230; (2008) 74 NSWLR 218; Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 7) [2014] FCA 5). I received the affidavit of Avvocato Professor Villata subject to a number of objections made by the applicant. The applicant abandoned its claim for a declaration and I have not decided this case by reference to any discretion I may have. In the circumstances, I do not have to consider whether it is appropriate to rely on any of Avvocato Professor Villata's opinions. I would only add this observation in case the point arises in a future case: foreign law, showing the impossibility of compliance with an order of this Court based on a party's allegation of inadequate discovery, may well be relevant to whether this Court should make orders. 10 The order for standard discovery made by this Court required the first respondent to give discovery of documents that are, or have been, in its control. "Control" in relation to documents is defined in the Dictionary to the Federal Court Rules 2011 (Cth) (Schedule 1) to mean documents in the possession, custody or power of a party. The applicant submits that the documents said by the first respondent to be in the control of PPL are also in the possession, custody or power of the first respondent. Although the applicant submits that the documents are also in the possession or custody of the first respondent, the burden of its submission is that the documents have, since 1 January 2008, been within the power of the first respondent.

ISSUES ON THE APPLICATION AND THEIR DETERMINATION 14 Although, as I have said, the main thrust of the applicant's submissions was that the documents described in Part 3 of the list of documents, assuming there are such documents, are in the power of the first respondent, it also argued that they were within its possession or custody. It submits that possession means the physical or corporeal holding of a document pursuant to the right to its possession, as in the case of an agent or bailee, and that custody means the mere actual physical or corporeal holding of a document regardless of the right to its possession, as in the case of a servant or employee. The applicant submits that I should infer that the documents are stored electronically and that I should infer that anyone with authority within the group had and has access to the documents by way of a computer terminal at the business address, which the companies shared. Insofar as the documents are held in hard copy, I am asked to infer that they are stored at the common premises of the companies and I am asked to infer that all companies within the energy business unit have access to them. If this submission is correct, it means that a large number of companies have access to the documents and possession or custody of them. 15 I do not think that the submission is correct. There is no evidence that the documents are stored electronically. Even if I should draw that inference, there is no evidence to support the proposition that they are stored in such a way that there is common access to them. The same may be said insofar as the documents are kept in hard copy. In other words, there is no evidence that a company in the group has unrestricted access to the documents of another company in the group. The relevant business and the documents relating to that business were transferred by the first respondent to PPL on 1 January 2008 and there is no evidence to contradict the assertion that the first respondent did not have possession or custody of the documents after that time. 16 I turn now to consider whether the documents are within the power of the first respondent. 17 The parties are agreed that the relevant law as to the circumstances in which a document can be said to be in the "power" of a company was stated by Doyle CJ in Taylor v Santos Ltd (1998) 71 SASR 434 ("Taylor"). Two circumstances are relevant. The first was identified by Lord Diplock in Lonrho Ltd and Another v Shell Petroleum Co Ltd and Another [1980] 1 WLR 627 (635-636) and is where the person or company has "a presently enforceable legal right to obtain from whoever actually holds the documents inspection of them without the need to obtain the consent of anyone else". The second circumstance is where, as described by Doyle CJ in Taylor (at 438), a person or company has "actual and immediate ability to inspect, even though the document is the property of or is held by another person". A person or company does not have an actual and immediate ability to inspect if he or it is only able to do so if a third party who has control of the document agrees to permit inspection, or agrees to refrain from so exercising that person's control as to prevent inspection. 18 The question of whether a document is in the power of a person or company, albeit that another person has control of a document, may arise in the context of one-person companies or companies in a group where one of the parties is a controlling company and the other is a subsidiary. Doyle CJ said that documents of a subsidiary company are, prima facie, not in the power of the controlling company and that it will not usually be appropriate to engage in a lifting of the corporate veil. His Honour said (at 438): Proper recognition must be given to the distinct obligations of the directors of a subsidiary company. 19 His Honour also said (at 439) that there was a fundamental distinction between an actual immediate ability to inspect without the need to obtain the consent of another person, on the one hand, and the later acquisition or creation of such an ability, on the other. 20 In support of its submission that the documents described in Part 3 of the list of documents, assuming there are such documents, are in the power of the first respondent, the applicant relies on the following matters. First, the first respondent and PPL are part of the Prysmian group of companies and they are both subsidiaries of Prysmian S.p.A. Before 1 January 2008, the documents were in the control of the first respondent and they were then transferred to its subsidiary, PPL, as part of a business transfer. The first respondent remained the holding company of PPL until sometime in 2012. They were and are part of the Prysmian energy business, and that is one business. The group's annual report refers to the companies as being under common control. Secondly, I am asked to infer that the documents of PPL are kept electronically in the same system as the first respondent's documents and that they can be accessed, either at the principal business address or one of the secondary business addresses. Thirdly, Mr Romeo occupies a controlling position in both the first respondent and PPL. The applicant also relies on the fact that, although Doyle CJ in Taylor did not agree with all of the reasoning of Hedigan J in Linfa Pty Ltd v Citibank Ltd [1995] 1 VR 643, he did not suggest that the result was wrong. The applicant submits that the result in that case supports its submission. 21 For its part, the first respondent relies on the statements in Mr Romeo's affidavit and the separate legal identities of the first respondent and PPL. 22 In my opinion, the applicant's arguments must be rejected. They involve a substantial exception to the doctrine of the separate legal identity of a company because, not only do they seek to equate a holding company and its subsidiary, but they seek to equate all the companies in a particular business unit of a group of companies. This case does not involve a one-person company, nor on the potential application of the alter ego doctrine. In my opinion, the separate corporate personality of the two companies must be recognised and the obligations of the directors of PPL to act in the best interests of that company acknowledged (Walker v Wimborne (1976) 137 CLR 1 at 6-7 per Mason J (as his Honour then was); Industrial Equity Limited and Others v Blackburn and Others (1977) 137 CLR 567 at 577 per Mason J (as his Honour then was); Federal Commissioner of Taxation v BHP Billiton Limited (2011) 244 CLR 325 at [61]-[64] per French CJ, Heydon, Crennan and Bell JJ). The statement in the annual report does not advance the applicant's argument (Taylor, at 441, per Doyle CJ). Even if it is appropriate to infer that the documents of the two companies are stored electronically, it is not appropriate to infer that the first respondent has the right to inspect them regardless of the wishes of the directors of PPL. Again, the same may be said insofar as the documents are kept in hard copy. Mr Romeo's dual capacities do not affect the position because he is not the alter ego of either company. I do not think the statement of Doyle CJ in Taylor that the decision in Linfa Pty Ltd v Citibank Ltd is, on the facts, consistent with this approach advances the applicant's argument. The facts in this case are different from those in Linfa Pty Ltd v Citibank Ltd. 23 The documents referred to in Part 3 of the first respondent's list of documents, assuming there are such documents, are not within the first respondent's power. I refuse the order sought in paragraph 2 of the applicant's application. 24 In support of the order sought in paragraph 3 of its application, the applicant relies on the decision of Lockhart J in Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Company and Others (1993) 46 FCR 428. In that case, Lockhart J indicated that he would make an order requiring an Australian distributor of products manufactured by a United States corporation to request the manufacturer to provide it with certain documents. Critically, his Honour found on the facts, including a clause in a distributorship agreement, that there was a real likelihood that the United States corporation would provide the documents to the Australian distributor. Although the parties in this case are related, I am not able to find such a real likelihood on the facts of this case and I refuse to make the order sought in paragraph 3. 25 The applicant seeks an order that the first respondent describe the documents with greater particularity. The applicant submitted that the first respondent had not made a sufficient effort to disclose the documents in its control and, in support of that assertion, it tendered before me three emails, which it contended should have been, but were not, described in Parts 1 or 2 of the list of documents. The reason these emails were not disclosed was not explained. Nevertheless, the first respondent, through Mr Romeo, swears that it is unable to describe the documents with greater particularity and I do not think there is sufficient reason to go behind that assertion.

Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L.

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