Is it appropriate to make oral discovery orders?
106 If there is any particular limit suggested by authority to the exercise of power to order oral discovery (other than acting judicially) the only limits on the Court's discretion is that there be some exceptional circumstance (see Treasury Wine Estates at 116 [29], 117 [34]) and that the order be in accordance with the dictates of s 37M(3) of the Act.
107 I do not consider it is necessary for there to exist some exceptional circumstance before the Court may make an order for oral discovery. It is unwise to limit the exercise of a court's discretion in matters of practice and procedure other than to insist the discretion be exercised judicially. The question is whether it is appropriate in all the circumstances to order oral discovery. In other words, it will depend on the individual judge's assessment of what is fair and just to do in a particular case.
108 In any event, if exceptional circumstances need to be shown, I do not consider there to be exceptional circumstances that would support the exercise of the Court's discretion in favour of ordering oral discovery, as will be clear from the approach I have taken in my reasons.
109 As indicated already, the proposed examinees were at relevant times a District Manager for 7-Eleven (Mr Dewan), a former employee (Ms McKenna), 7-Eleven's former Chief Operating Officer (Mr Radbone) and a 7-Eleven former Victorian Portfolio Manager and former 7-Eleven Victorian Regional Manager (Mr Rodrigues). The proposed examination topics are set out in Schedule 1 to these reasons ('Examination Topics').
110 Subject to my earlier preliminary comments, I will proceed on the basis that each of the proposed examinees either remain willing, or recently expressed a willingness, to speak to the solicitors for the applicants in relation to matters relevant to these proceedings.
111 I also accept that while all proposed examinees either remain willing or were recently willing to speak to the applicants' solicitors, they are likely to only do so if it would not cause them to be (actually or potentially) in breach of the confidential obligations owed to 7-Eleven.
112 One of the proposed examinees, Mr Dewan, is subject to a broadly expressed contractual obligation as to "Confidential Information", which is defined to mean "any information about the business of 7-Eleven which is not in the public domain and includes, but is not limited to, any document, record, computer file, customer information, product or service information, know how, process, trade secret, marketing and sales and financial information" ('Confidentiality Clause'). The clause provides:
13 CONFIDENTIAL INFORMATION
The Employee must at all time during, and after, employment with 7Eleven keep all Confidential Information secret and confidential and must not use or disclose any Confidential Information except:
a) as reasonably required in the ordinary and proper course of the Employee's Employment with 7-Eleven;
b) if the Employee is required by law to disclose the Confidential Information; or
c) if the Employee has obtained the prior written consent of an authorised representative of 7-Eleven.
The Employee must take all reasonable and necessary precautions to maintain the confidentiality, and prevent the use and disclosure, of any Confidential Information.
The Employees obligations under this clause survive the termination of the Employee's employment with 7-Eleven.
113 I will assume that each of the proposed examinees are subject to a similarly expressed Confidentiality Clause.
114 In Zantran, the relevant confidentiality clauses were set out by Lee J as follows:
[72] Although the terms of any legal obligations of confidence were not then known, the evident caution of Mr Donnelly was sensible and commendable. As the primary judge later found, the contractual position between Crown and the employees differed, but relevantly contracts of employment (Employment Contracts) were entered into with 17 of the 19 employees and contained confidentiality provisions, although the contract of Mr Chen was on relevantly different terms. There was evidence, albeit partly secondary in form, as to the terms of these Employment Contracts. There was also evidence that all employees (other than Ms Jiang) entered into some form of further agreement with Crown (Finalisation Deeds). The confidentiality provisions in the common Employment Contracts (including Ms Jiang) relevantly provided:
12 Confidential information
You must not, without the prior written consent of [Crown], either during your employment with [Crown] or at any time after the termination of it:
(a) divulge to any person other than any member of the Crown Limited group of companies (Group), or their respective officers and employees; or
(b) use for your own benefit or the benefit of any person other than any member of the Group,
any confidential information about [Crown] or any Group Company or their respective businesses or affairs acquired during your employment….
For the purposes of this clause, confidential information shall not include any information:
(a) which has become publicly known through no wrongful act by you or any third party;
(b) which you have developed independently, as evidenced by appropriate documentation; and/or
(c) which you are required to disclose by law or judicial process, provided that you shall notify [Crown] immediately of the same so as to provide or afford [Crown] the opportunity to obtain such protecting orders or other relief as the compelling court or other entity may grant and shall use your best efforts to assist [Crown] in seeking such protecting orders or other relief.
(emphasis added)
[73] Similarly, to the extent they were revealed in the evidence, the confidentiality provisions of the Finalisation Deeds executed by the employees (but not Ms Jiang) provided:
4 Obligations of confidentiality
(a) Each party must keep absolutely confidential the terms of this Deed and the discussions and negotiation of the terms of this Deed, except:
(i) as required by law;
(ii) with the express consent of the other party;
(iii) for the purpose of obtaining confidential accounting or legal advice;
(iv) for the purpose of enforcing this Deed; or
(v) in the case of Crown, for Group reporting or disclosure purposes (including reporting within the Group or disclosure to a regulator of gaming or other operations of any member of the Group).
(emphasis added)
(Emphasis in original.)
115 It may be noted that the confidentiality provisions in the common Employment Contracts set out by Lee J which refer to "disclosure by law or judicial process" include that 'exemption' as part of the definition of confidential information. In the Finalisation Deeds the 'exemption' was "as required by law", and is to be found in the operative part of the agreement, which is similar to the Confidentiality Clause in these proceedings. I have taken "required by law" to include where a person is directed by a judge in the course of a proceeding to answer a question that may disclose confidential information (as defined in the contract).
116 The applicants relied upon nine matters militating in favour of exercising the discretion for oral discovery of the proposed examinees, being:
(a) there is doubt as to whether the Confidentiality Clause is enforceable by injunction at the suit of 7-Eleven to restrain the proposed examinees from speaking to the applicants in relation to issues in dispute in the proceedings;
(b) 7-Eleven would not suffer any unfair commercial prejudice if the proposed examinees give oral discovery on the Examination Topics conducted under the regime proposed by the applicants;
(c) the information sought to be obtained from the proposed examinees concerns matters which, by their nature, are unlikely to be (and to the applicants' best understanding, are not) recorded directly or methodically in documentary form;
(d) this is a case where the Court would have ordered third party discovery and the burden of third party discovery is met in part by the applicants' willingness to meet the proposed examinees' reasonable costs of the examination;
(e) the proposed examinees either remain willing or were until very recently willing to speak with the applicants about matters relevant to these proceedings;
(f) there is a public interest in obtaining the information sought by the Examination Topics;
(g) the proposed examination will not have any material adverse impact on the timetable to hearing and would instead save hearing time;
(h) 7-Eleven's consent has been sought and has not been forthcoming; and
(i) 7-Eleven will not suffer any relevant forensic disadvantage by reason of the oral discovery being ordered.
117 By reference to the nine matters raised by the applicants I make the following comments in addition to the observations I have already made.
(a) The fact there are doubts as to the enforceability of the Confidentiality Clause suggests it is better to deal with this issue at trial (if it is still relevant), when the validity and enforceability of the Confidentiality Clause can be properly assessed. The applicants maintain that the Confidentiality Clause is likely unenforceable because, if nothing else, it would constitute an unlawful restraint of trade in respect of potential utilisation of knowledge acquired by the proposed examinees in the course of their employment with 7-Eleven which they would seek to use for the purposes of subsequent employment. At trial, the Confidentiality Clause may in itself be valid, but the interests of justice may be such that the Court may direct the proposed examinees (if they give evidence) to answer questions despite the Confidentiality Clause or the existence of confidential information. In AG Australia Holdings Limited v Burton & Anor [2002] NSWSC 170, Campbell J made the following comments (at [129]):
There are well established limitations on obligations of confidentiality, being limitations which are established for the purpose of enabling the system of administration of justice to operate. Thus, at common law, a witness who is called to give evidence in court is not entitled, on the ground of owing an obligation of confidence alone, to decline to answer any relevant question which is permitted to be put (D v National Society for the Prevention to Children [1978] AC 171, at 218, 230, 237). If the confidential information also is the subject of a privilege recognised in the law of evidence which applies in the court before whom the person is called, it is that privilege, not the confidentiality, which provides a ground on which that person need not give the evidence.
It may be that when the proper time comes to consider the issue, to the extent that the Confidentiality Clause has the effect of concealing or obscuring unconscionable conduct on the part of 7-Eleven, the Court would not prevent a witness from disclosing information that might reveal the unconscionable conduct. In a 'discovery' exercise (not in the giving of evidence) to determine the validity of the Confidentiality Clause would be time consuming, and I think without any great utility. I cannot prevent 'satellite litigation' if 7-Eleven or the applicants want to raise the issue of invalidity: but I do not want to encourage such a process. If I am right that the oral discovery exercise would have little utility in reality (when considering all the information now available to the applicants) and at trial the potential witnesses will be able to give evidence despite the Confidentiality Clause, then no unfairness will arise, nor any interference with the administration of justice.
(b) I agree that there would be no unfair commercial prejudice to 7-Eleven if the oral discovery took place as proposed by the applicants. The examination is proposed to take place before a Registrar of this Court (or a judge) and could take a form not dissimilar to that of examinations under s 596B of the Corporations Act 2001 (Cth) ('CA') (although this would need to be carefully considered as the process is not investigatory but is one confined, like all discovery, by relevance to the pleadings). 7-Eleven would have the opportunity to attend and object to any improper questions in line with practice and procedure that has developed around s 596B of the CA. Any commercially sensitive information disclosed in the course of the examination would be expected to be subject to the usual implied undertaking (if not express orders) as to the usage of that information. Part 29 of the Rules already provides for a procedure by which oral examinations of interested persons and depositions of their testimony might be taken on commission. The rules in Pt 29 could be adopted to the giving of oral discovery. For example, r 29.16 provides for the participation of both the applicants and 7-Eleven in the course of examination and r 29.18 provides for the making of objections by the examinee. There are, however, other considerations impacting on 7-Eleven, such as costs, resources and delay in the preparation for trial.
(c) I agree that the topics sought to be canvassed with the proposed examinees concern matters that are unlikely to have been recorded in 7-Eleven's documents because the matters sought to be canvassed may well reflect a series of largely unwritten practices acknowledged, implemented and enforced, by 7-Eleven's District Managers and Regional Business Managers.
(d) Even if third party discovery of documents would have been available, I do not regard this as a weighty consideration. The Examination Topics could possibly involve lengthy examination that will impose on the proposed examinees, who are third parties to the litigation, the obligation to answer questions as directed by the Court (even if they are merely allowed to come to Court and not coerced).
(e) It is relevant that the proposed examinees appear to be willing to speak with the applicants about matters relevant to the proceedings. I have taken this into account. However, it is quite another thing to direct a person (even if they come voluntarily to Court) to answer specific questions in a discovery process. It is to be remembered the proposed examinees are not parties to the proceedings and are no longer in the employ of 7-Eleven. I mention one proposed examinee, Mr Dewan. He has only very recently stated he is anxious to protect his family and his current business interests, but would nonetheless speak truthfully about 7-Eleven if ordered to attend by court order. It was suggested by the applicants that, to the extent Mr Dewan's withdrawal is motivated by fear of reprisal, a court order requiring him to give oral discovery would serve to exorcise those fears, and free his stated willingness to speak the truth if compelled to attend for examination. This can occur in a more orderly and efficient way at trial.
(f) I agree there is a public interest in obtaining the information sought by the Examination Topics. As to wider public policy considerations, these proceedings concern the alleged breach by 7-Eleven of statutory obligations under the ACL, the ASIC Act, and the codes in Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth), Sch 1 and Trade Practices (Industry Codes - Franchising) Regulations 1998 (Cth), Sch, the Competition and Consumer (Industry Codes - Oilcode) Regulation 2006 (Cth), Sch 1 and the Competition and Consumer (Industry Codes - Oil) Regulations 2017 (Cth), Sch 1. Even if an order for oral discovery in itself would serve the public interest in potentially unmasking conduct proscribed by statute (which may or may not occur depending on how the process is conducted (in private or in public) and the extent of the ability to respond to the Examination Topics by the proposed examinees), this can be done in a proper and orderly manner by way of all the evidence at a public hearing. All persons who are likely to be able to give valuable evidence in relation to critical issues in dispute and are willing to do so (or even those who need to be subpoenaed), are not inhibited from doing so at trial.
(g) I do not agree that the proposed examination will not have any material adverse impact on the timetable. There is no way the examination of each proposed examinee is unlikely to exceed two hours. The proposed Examination Topics could potentially give rise to lengthy questions, the issue of the Confidentiality Clause will arise, and the proposed examinees are lay persons unfamiliar with court processes. Even if the proposed examination will reduce the parties' trial burden, it will increase the burden at the interlocutory stage and in my view will lead to lack of efficiency in the case management of these proceedings. It will divert attention from preparation for trial and will in all probability lead to unnecessary interlocutory appeals. I have already indicated that extra hearing time has been made available to deal with the issues that could possibly be raised in the oral discovery process.
(h) The fact that 7-Eleven has not consented to the process and its obvious intention to rely upon the Confidentiality Clause is a factor that I take into account in determining that the oral discovery process is not appropriate and the trial is the appropriate time to consider the evidence and any objections to that evidence in context. I note that 7-Eleven so far has not pursued its foreshadowed application to bring proceedings to enforce the Confidentiality Clause against Mr Dewan by injunction. However, if oral discovery was ordered, the debate on this issue and whether to order, for instance, Mr Dewan to answer any particular question in the interests of justice would then arise in that process, leading to the inevitable disputation on that issue.
(i) I do not agree that 7-Eleven will not suffer any relevant forensic disadvantage if oral discovery is ordered to be undertaken at this stage. I agree that answers given during the course of the proposed oral examination would not become evidence in the proceedings in which the examination has been ordered: see Pharm-a-Care Laboratories Pty Ltd v Commonwealth (No 2) [2010] FCA 187 at [4] (Flick J). 7-Eleven remains at liberty to object to information obtained from the examination that would otherwise be inadmissible at trial. However, as with the applicants, it diverts attention from preparing for a trial in August, it will inevitably lead to further disputation and will involve extra costs.
118 Finally, I draw attention to some of the comments made by Allsop CJ and Lee J in Zantran in speaking of a similar issue of case management and oral discovery.
119 In Zantran, Lee J suggested a number of options available for obtaining confidential information, but also indicated (as is clearly the case) that whether or not to order preliminary discovery is a matter for the docket judge to be considered in the context of the dictates of s 37M(3) of the Act. His Honour said (at [82]):
As is evident from both fundamental principle and the emphasised words of the relevant confidentiality provisions (see [72] and [73] above), nothing about the express obligations could prevent the Court, on application, invoking its compulsory power to compel disclosure by Crown or the employees of information relevant to Crown's China Operations if it was otherwise thought to be necessary or appropriate. For example, Zantran may have been entitled to an order that Crown be required to provide written and verified answers to interrogatories under Pt 21 of the Federal Court Rules 2011 (Cth) relevant to Crown's China Operations. Moreover, there was nothing preventing Zantran seeking an order under ss 33ZF or 37P(2) of the Act on the basis that it was appropriate in the interests of justice that an order be made requiring (or, perhaps more appropriately in the circumstances, allowing) some or all of the employees to attend the Court for the purposes of being examined in advance of the initial trial by adopting a form of deposition procedure before a Registrar or the docket judge. The possibility that such an order for pre-trial oral discovery directed to a third party could be made was adverted to by the Full Court (Gilmour, Foster and Beach JJ) in Jones v Treasury Wine Estates Limited [2016] FCAFC 59; (2016) 241 FCR 111 at 115 [24] after the Court referred to the "dramatic transformation" wrought by the introduction of Pt VB into the Act. This is not surprising, and the prospect of oral discovery is not new nor wholly unprecedented. It was discussed favourably in Chapter 10 of the Australian Law Reform Commission's Report, Managing Discovery: Discovery of Documents in Federal Courts (Report No 115, March 2011). It might also be thought to have historical antecedents in the interrogating part of the equity bill for relief or bill of discovery developed by the Court of Chancery: see Pomeroy, N J, Equity Jurisprudence (3rd ed, 1905) at [83], [193] and [209]. If any such application had been made, it would be determined in accordance with the dictates of s 37M(3) of the Act which requires practice and procedure discretions to be exercised in a way which best promotes the overarching purpose: for a recent example see Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2019] FCA 1284 (Allsop CJ), where oral examination or oral discovery under the control of the Court was regarded as potentially appropriate.
120 Chief Justice Allsop in Zantran also referred to various options for obtaining confidential information (at [7]):
Where, as here, a third party to litigation is subject to apparent contractual restraint in communicating with one party to the litigation (Z), the benefit of which restraint is enjoyed by the other party to the litigation (Cr), Z may approach the matter in a number of ways. It may seek to have the Court exercise procedural powers to require the third party to divulge the information, notwithstanding, or even assuming, the validity or enforceability otherwise of the apparent contractual restraint. Or, it may, by some appropriately framed procedural vehicle seek to contest the validity or enforceability of the apparent contractual restraint. Such a course would require the holder of the benefit of the apparent contractual right (Cr) to seek to enforce it, or the party seeking access to the information (Z) to seek to have the apparent contractual right declared void or unenforceable. To the extent that Z was concerned as to the availability of sufficient material or evidence for the successful prosecution of such declaratory proceedings, the remedy of preliminary discovery may be available.
121 However, whilst oral discovery may be appropriate in other circumstances, I have come to the clear view that this is not the occasion to exercise the power to order the proposed examinees to be now examined in the manner and on the Examination Topics sought by the applicants in these proceedings.