Australian Competition & Consumer Commission v Baxter Healthcare Pty Ltd

REASONS FOR JUDGMENT 1 The parties to this proceeding are in dispute about the terms on which the respondent ('Baxter') may inspect certain documents in the list filed by the applicant ('the Commission') pursuant to an order for discovery. That order was made by consent on 6 February 2003. It provided for the Commission to give discovery of defined categories of documents. Inspection was to be 'subject to the agreed confidentiality regime' on the basis, amongst other things, that the Commission 'may, until further order, mask the identity' of complainants in relation to the contraventions alleged in the statement of claim. 2 The proceeding has been instituted by the Commission under ss 77 and 80 of the Trade Practices Act 1974 ('the Act') and alleges contraventions of ss 46 and 47 of the Act. Baxter has entered into contracts with each of the governments of, respectively, New South Wales in 1998, the Australian Capital Territory in 1999, South Australia in 2001, Western Australian in 2001, and Queensland in 2001, to supply certain sterile fluids and peritoneal dialysis products to health facilities funded by them. The contracts are for a period of five years, except in the case of Queensland where the contract is for a period of three years. They were all awarded after tender. The statement of claim alleges a number of different geographical markets for different permutations of the nominated products and names alleged competitors of Baxter in those markets. Baxter is alleged to have tendered for those contracts using a strategy of offering to bundle products. 3 It transpires that the 'agreed confidentiality regime' referred to in the order for discovery was anything but agreed. Baxter's solicitors ('BDW') had merely indicated in a letter dated 4 February 2003 that 'we would be prepared to give interim undertakings to maintain the confidentiality of all documents identified by the [Commission] as confidential, until further order'. On 28 February 2003 the Commission's solicitor ('the AGS') wrote to BDW enclosing two versions, 'A' and 'B', of draft confidentiality undertakings for their consideration. The AGS said: '… we enclose two versions ("A" and "B") of draft confidentiality undertakings for your consideration. You will see that version "A" restricts access to the documents in question to Baxter employees or representatives, legal representatives and expert witnesses who have executed acceptable undertakings whilst version "B" restricts access to the documents to legal representatives and expert witnesses only.' BDW replied on 5 March 2003 as follows: 'In relation to confidentiality we are content with the forms proposed on an interim basis as earlier agreed, subject to the addition of paragraph 7 to each form to reflect our agreement as follows: 7. This interim undertaking makes no admissions as to the confidential nature of the documents and information described in the Schedule, and in the event of any dispute as to confidentiality the Australian Competition and Consumer Comission [sic] will bear the onus of proving that confidentiality.' On 6 March 2003 the AGS wrote to BDW indicating that the Commission agreed to the addition of the proposed paragraph 7 to the confidentiality undertakings subject to the words 'and/or the relevant third party' being inserted after the word 'Commission' in that paragraph. BDW responded to the AGS the same day: 'In relation to confidentiality we are content with the additional proposal now made, provided of course it is clearly understood that it will be for the Commission and not Baxter to notify and deal with any such third party.' 4 On 16 April 2003 the AGS wrote to BDW enclosing the confidentiality undertakings for execution. The schedule to the version 'A' undertaking listed documents numbered 905 to 1322. The schedule to the version 'B' undertaking listed documents numbered 1333 to 1624. On 17 April 2003 BDW returned to the AGS version 'A' and version 'B' undertakings executed by the solicitors. On 17 April 2003 the Commission also filed its list of documents, paragraph 2 and 3 of which stated: '2. Each of the documents enumerated in Part 2 of Schedule I contain [sic] confidential information. Access to and use of these documents is subject to confidentiality undertakings (Version A) as agreed between the Applicant and the Respondent. 3. Each of the documents enumerated in Part 3 of Schedule I contain [sic] confidential information. Access to and use of these documents is subject to confidentiality undertakings (Version B) as agreed between the Applicant and the Respondent.' Parts 2 and 3 of Schedule I to that list are identical with the schedules to the version 'A' and version 'B' undertakings. The affidavit verifying the list was made by Tina Cross, a senior officer in the Commission's Sydney office. 5 On 14 May 2003 BDW wrote to the AGS about the documents covered by the confidentiality undertakings. They indicated that they had reviewed a 'sample' of those documents and formed the view that the documents reviewed by them were not confidential. BDW drew attention to various 'characteristics' of the particular documents upon which their view was based and said: 'We would prefer to avoid troubling the Court with these issues and hope that they may be resolved by agreement. However, the current restricted access to a substantial proportion of your client's discovery is prejudicing the preparation of our client's case. Accordingly if a sensible resolution cannot be achieved urgently by your reconsideration of all confidentiality claims we will be required to oblige you to establish those claims before the Court as contemplated in clause 7 of the undertakings, and seek otherwise to be released from the undertakings. In an attempt to avoid that necessity we would ask that you: (a) urgently review the examples summarised in the schedule to this letter and confirm to us that no confidentiality claims are maintained in relation to them by no later than 20 May 2003; (b) confirm that you will review the balance of your client's confidentiality claims urgently on a proper basis; and (c) will then limit your client's confidentiality claims and amend the undertakings as appropriate by no later than 30 May 2003. At the same time, we note that, particularly with the wide scope of confidentiality claims currently made, we are further impeded in preparing our client's case in that we are not in a position to disclose to third parties any of the "confidential" documents or their contents when that will be plainly be [sic] required to obtain appropriate instructions and statements from third parties (for example the senders and recipients of such documents). This problem may be manageable with appropriate amendment to and limitation of the confidentiality undertakings. If, however, you [sic] client's position remains as currently in relation to the scope of confidentiality claims we will of necessity have to challenge not only the basis of all confidentiality claims but also the current form of the undertakings to the extent that any undertakings are required by the Court.' 6 On the evening of 20 May 2003 the AGS replied to BDW: '3. As you are aware the claims for confidentiality are not made by our client but by third parties who have provided the Commission with documents in response to either informal requests for information or pursuant to notices issued under s.155 of the Trade Practices Act 1974. 4. In completing the Applicant's discovery it was necessary to write to these third parties to allow them the opportunity to claim confidentiality over potentially commercially sensitive documents. In doing so, we have previously advised all relevant third parties that we would advise them in the event that your client indicated that it intended to challenge the confidential status of any of the documents that they indicated are confidential. 5. As you will appreciate it is not therefore appropriate for the Commission to reconsider the confidential status of the documents over which third parties have claimed confidentiality. It is for the third parties who have made the claim to review the documents and determine whether they wish to maintain their claim in light of your client's observations. 6. Accordingly, we intend to forward a copy of your 14 May 2003 letter together with the attached Schedule to all of the relevant third parties drawing their attention to the matters you have raised in relation to their claims of confidentiality and seeking their advice as to whether they wish to maintain their claim over all of the documents which they have previously advised are confidential. We will advise you when we have received their responses.' 7 The next day there was an unfruitful exchange of correspondence between the solicitors and Baxter filed notice of a motion to have those persons who had signed confidentiality undertakings 'released' from them. (Version 'A' undertakings by representatives of Baxter were apparently signed on 24 April 2003.) 8 On 26 May 2003 the AGS wrote to BDW about the issue as to the form of the undertakings raised in the last paragraph of BDW's letter reproduced at [5] above. The AGS said that this was a matter 'we will need to raise with the third parties', but that a suitable amendment to the undertakings should be able to be agreed. 9 On 5 June 2003 the AGS wrote to BDW pointing out that confidentiality undertakings had not yet been received from Baxter's counsel. The AGS also pointed out that copies of documents in Parts 2 and 3 of Schedule I to the Commission's list would be annexed or exhibited to affidavits served on Baxter. The AGS asked that, in addition to such copies, parts of such affidavits and any other annexures or exhibits to them, which were marked confidential, would 'be treated in accordance with the terms of the agreed confidentiality regime'. BDW immediately forwarded version 'A' and version 'B' undertakings signed by counsel, and on 6 June 2003 BDW wrote to the AGS agreeing, until the date fixed for Baxter's motion, to receive copies of affidavits and exhibits in accordance with the AGS's request. 10 On 13 June 2003 the AGS wrote to BDW informing them that the Crown Solicitor of South Australia made no claims to confidentiality on behalf of that State. The AGS also sent BDW that day a copy of a letter dated 5 June 2003 from the Crown Solicitor of Queensland outlining his State's position on inspection of the documents produced by its agencies. Finally, on 23 June 2003 the AGS sent BDW copies of letters dated 18 and 19 June 2003 received from the NSW Crown Solicitor, setting out the basis on which the NSW Department of Health sought to restrict access to documents produced by it on 'commercial-in-confidence and public interest immunity grounds'. 11 Prior to the hearing of its motion Baxter agreed to an access protocol in respect of documents provided to the Commission by the Queensland authorities. No other agreement was reached between the parties. The Commission withdrew confidentiality claims in respect of some of the documents in Parts 2 and 3 of Schedule I of its list of documents. Its position was staked out in a letter dated 24 June 2003 from the AGS to BDW. The narrative in that letter provides the slight evidentiary foundation for the Commission's case. Counsel for the Commission accepts, correctly, that his client bears the onus of establishing that the documents it has discovered should not be made available for inspection in the normal way. 12 Upon the hearing of the motion an affidavit made that day by a solicitor at the AGS was read, which set out the AGS's current instructions about the confidentiality claims. Those instructions were varied in one respect, when counsel for the Commission informed the Court that a confidentiality claim was now made by South Australia in respect of a discrete part of a single document relating to the tender in that State. Copies of several documents in Parts 2 and 3 of Schedule I in the Commission's list of documents were also received in evidence. The Commission tendered a copy of one document in Part 2 and copies of four documents in Part 3 (including the South Australian tender document). Baxter tendered copies of all the documents referred to in the schedule attached to BDW's letter of 14 May 2003. These comprised 27 documents from Part 2 and 25 documents from Part 3. In addition, Baxter tendered copies of two documents from Part 2 and of six documents from Part 3 that were exhibited to an affidavit made by Bruce Kemp, which had been filed by the Commission as part of the evidence upon which it intended to rely at trial. I have read every page of this evidence. Having done so, I have the impression that it would be extremely unwise to form any view about the nature of other documents in Parts 2 and 3 that depended on the accuracy of the description of any such document in the Commission's list. 13 I shall begin with the Part 2 documents. Document 905 is in evidence as exhibit 5. It is a report prepared in 2000 by a team at Canberra Hospital evaluating a proposal for the provision of dialysis services to the ACT and surrounding region on a cost per treatment basis. The AGS said that this claim for confidentiality was maintained because the document was 'a confidential report setting out the evaluation process of the ACT purchasing authority'. The attachments to the report are not in evidence. No doubt, the report was confidential when it was prepared. However, it contains no information that would appear to be commercially sensitive now. Nor does it contain any secrets of Baxter's trade rivals. 14 Documents 921, 928, 932 and 944 are in evidence as part of exhibit RZ3. Document 921 is an email dated 30 May 2000 from the general manager of Fresenius Medical Care ('FMC') to the Queensland Department of Health about the tender for peritoneal dialysis fluids. Document 928 is a letter dated 13 September 1999 from a renal physician at the Gold Coast Hospital in Southport, Queensland to FMC about the supply of such fluids to Queensland hospitals. The AGS said that FMC maintained a claim to confidentiality over documents, which included documents 921 and 928, on the basis that they contain commercially sensitive information. That is certainly not true of these two documents. Document 932 is a letter dated 26 February 2001 from FMC's solicitors to the Commission about an alleged barrier to entry into the peritoneal dialysis market. Document 944 is a letter dated 17 September 2002 from the same solicitors to the Commission, enclosing a copy of a letter to FMC from the NSW State Contracts Control Board. The AGS said that FMC maintained a claim to confidentiality over documents, which included documents 932 and 944 on the basis they were privileged. Again, that is certainly not true of these two documents. 15 Document 1049 also forms part of exhibit RZ3. It is an undated, handwritten file note produced to the Commission by the NSW Department of Public Works and Services (where Mr Kemp was employed). It purports to deal with the 'disadvantages of the Gambro offer'. The AGS said that that NSW Department maintained its claim for confidentiality over documents, which included document 1049, on the basis that they contain commercial-in-confidence information relating to unsuccessful tenders made by Baxter's competitors. The absurdity of this position is revealed by an examination of document 1114, which is also part of exhibit RZ3 and which was also provided to the Commission by the same Department. The claim to confidentiality in respect of this document was withdrawn, yet all the information in document 1049 is recorded in clearly legible typewritten form in paragraphs 5, 9 and 10 of document 1114. 16 I turn now to the copies of the Part 3 documents. Document 1333 is in evidence as exhibit 4. It is a copy of an email dated 5 November 2001 from the managing director of Gambro Pty Ltd to the Commission. Counsel for Baxter concede that this document should be inspected only by legal advisers and experts on the basis of confidentiality undertakings. 17 Document 1334 is part of exhibit RZ3. It is a nineteen-page advertising brochure on FMC's peritoneal dialysis product range published in August 1997. Again, this is one of the documents that the AGS said was commercially sensitive. This is nonsense. It is obviously a sales tool. Customers are invited (at p 17) to make enquiries of 'your local Fresenius Medical Care Representative'. 18 Documents 1341 and 1364 are identical. They are in evidence as part of exhibit RZ3. It is a Commission file note dated 28 February 2001 of interviews with officers of Abbott Australasia. The AGS said that Abbot Australasia maintained a claim for confidentiality in respect of this document on the basis that it contains information relating to its current business affairs, including strategic planning. The AGS was unable to contact Abbott Australasia's managing director prior to the hearing to ascertain whether this claim was to be maintained. An examination of the note shows it relates to past events and contains no confidential information likely to be of any competitive advantage to Baxter or anyone else. 19 Documents 1342, 1344, 1345, 1352, 1354 and 1360 are in evidence as part of exhibit RZ3. Document 1359 is part of exhibit BRK5. These documents were given to the Commission by Dr Jeremy Chapman, the director of the renal unit at Westmead Hospital in Sydney. The AGS said that Dr Chapman claimed confidentiality over nineteen documents, which included these seven, on the basis that they contain confidential information which would provide insight into the evaluation process relating to the NSW tender and which, if disclosed to employees of Baxter, may provide an unfair advantage to them in future tender processes. The solicitor from the AGS said in her affidavit that, on the day prior to the hearing of the motion, instructions were received that Dr Chapman withdrew his claims to confidentiality in respect of thirteen of those documents. Counsel for the Commission was unable to indicate which thirteen documents they were. In any event, I have inspected the documents in evidence. Dr Chapman was a member of the Contract Management Committee formed for the purposes of the NSW contract for intravenous and irrigating solutions. (Mr Kemp was the representative of the NSW Department of Public Works and Services on that committee.) The documents in evidence comprise copies of calculations, announcements, the documents used in a continuous ambulatory peritoneal dialysis system trial, minutes of the committee and correspondence from nurses relating to contract administration problems. They relate to the period 1993 to 1998 and contain no proprietary or secret information. (Document 1361, which is also part of exhibit RZ3, is another copy of document 1360. It is dated 12 October 1993 and was evidently obtained by the Commission from a Trevor Garland.) 20 Documents 1362 and 1363 are in evidence as exhibit 2 and exhibit 1 respectively. They are Commission file notes dated 27 and 28 February 2001 of telephone interviews with a renal nurse and a renal physician at different Sydney hospitals. The topic is the NSW contract. The AGS wishes to mask parts of these documents in order to conceal the identities of the interviewees. This is done at the request of those persons 'who have a professional relationship with Baxter'. Counsel for the Commission advances this claim under the rubric of public interest immunity. 21 Documents 1366 and 1369 are identical. A copy of that document is in evidence as exhibit BRK38. Document 1368 is in evidence as exhibit BRK5, and document 1382 is in evidence as exhibit BRK12. All these documents are copies of minutes of the Contract Management Committee for the NSW contract. They are dated 10 April 1997, 5 August 1997 and 9 December 1997. The documents were produced to the Commission by the NSW Department of Health. The NSW Crown Solicitor wishes to have the names of the committee members masked. No reason is given. 22 Document 1414 is described in the Commission's list of documents as a submission for the NSW contract for intravenous and irrigating solutions. The front page of that document is in evidence as part of exhibit RZ3. It is dated 17 April 1998 and appears to be addressed to the State Contracts Control Board. The AGS maintains a claim for confidentiality in respect of the document but gives no reasons. 23 Document 1474 is in evidence as exhibit 3. It is the purchase recommendation dated 23 February 2001 of the South Australian Department of Human Services for the pharmaceutical products tender in that State. Confidentiality is claimed for the appendixes to that document. No evidence was adduced in support of that claim. I have, however, looked carefully at the whole of document 1474. The information in the appendixes may be of advantage to competitors of the pharmaceutical companies shown. Moreover, the appendixes are barely relevant to that part of the narrative with which this proceeding is concerned. It seems to me appropriate that access to the appendixes should be restricted to the legal advisers at this stage. 24 It will be seen from the tone of my comments above that the Commission has utterly failed to persuade me that anything other than the normal inspection regime should apply in respect of any of the contested claims with the sole exception mentioned in the last paragraph. That was, of course, a matter that Baxter did not have an opportunity to consider prior to its motion being heard. The obligation imposed on parties by discovery are well-known: Home Office v Harman [1983] 1 AC 280. A case for special arrangements in respect of inspection, whether by a party or a third party, must be made out by evidence: Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34. Here the Commission appears to have been content to act as a post office for the whims of persons who have given information and documents to it. (The NSW Department of Public Works and Services even wanted to switch from an version 'A' undertaking to a version 'B' undertaking for document 1049, and this request was solemnly conveyed by the AGS.) In particular, the claims to concerns over the integrity and probity of the tender process rang hollow. Contracts in the public sector for the supply of goods over a period of time are for good reason subject to laws such as the Public Sector Management (Goods and Services) Regulation 2000 (NSW). However, there is no entitlement to keep evaluation processes secret. Genuinely secret information about a trade rival's operations is, of course, another thing. 25 Nor is anonymity something to which anybody is automatically entitled on request. It is true that the Commission is an investigatory body with extensive powers of compulsion under s 155(1) of the Act. No doubt, too, it wishes to encourage information about prohibited practices from so-called 'whistle-blowers'. But the fact that someone may have a 'professional relationship' with a corporation being pursued by the Commission does not suggest that suppression of his or her identity is necessarily required in the public interest. 26 There is no evidence before me at all to establish that any annexures or exhibits to affidavits that were not included in the discovered documents are entitled to confidentiality. Whilst fresh undertakings dealing with the Queensland documents and documents 1333 and 1474 will have to be put in place, Baxter has succeeded on its motion and should be awarded its costs. I realize that the Commission came along prepared to contest other orders sought in Baxter's notice of motion, which were not pursued at the hearing, and that it wishes to be heard on the costs of that aspect of the notice. 27 One other matter debated at the end of the hearing of the motion was the next step in relation to affidavits. Baxter wishes to see the expert evidence that the Commission relies on before it files the affidavits of its 'lay witnesses'. Having regard to the possible complexities in this case, I think that is a good idea. Once the factual assumptions underlying the opinions of such experts are known, Baxter should be able to identify all the facts it needs to establish. 28 The parties should confer about the orders necessary to give effect to my reasons on the discovery and associated confidentiality issues and on the directions required for the future conduct of the proceeding. If necessary, I shall hear the parties on costs when I pronounce those orders and give such directions. The parties are directed to bring in short minutes of order on a convenient date to be arranged with my Associate. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam.