Gram Engineering Pty Limited v BlueScope Steel Pty Limited

1. The matter be adjourned for further directions at 9.30am on 16 May 2016.
2. The respondent pay the applicant's costs of the application as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT 1 This is an interlocutory application by which the applicant seeks orders that three people - Ronald Mann, who is the managing director of the applicant, Wayne Bannon, who is the general manager of the applicant, and Peter Burrows, who is the external accountant of the applicant - be granted access to certain information which is contained in affidavits served by the respondent, BlueScope Steel, pursuant to orders made by Jacobson and Bennett JJ. The stage at which the present proceedings are at is critical to the resolution of the dispute between the parties. 2 As set out in the submissions for the applicant, Jacobson J has held that the respondent BlueScope Steel infringed the applicant's registered design and that, accordingly, the applicant was entitled to an inquiry as to damages or an account of profits (see Gram Engineering Pty Ltd v Bluescope Steel Ltd [2013] FCA 508; (2013) 106 IPR 1). An appeal from that decision was subsequently dismissed in BlueScope Steel Limited v Gram Engineering Pty Ltd [2014] FCAFC 107; (2014) 313 ALR 311. In order to facilitate the applicant determining whether there should be an inquiry as to damages or an account of profits Jacobson J made an order on 27 November 2014 as follows: 1. Without prejudice to the Applicant's right to seek discovery from the Respondent on the question of the quantum of pecuniary relief (including for the purpose of making an election as between damages and an account of profits) and without admission by the Respondent as to any entitlement of the Applicant to pecuniary relief in relation to the matters referred to below, the Respondent file and serve an affidavit by 20 March 2015 providing details of: 1.1 to the extent that it is reasonably able, the total quantity of Smartascreen Panel fencing panel sheets that were manufactured by the Respondent, or on its behalf, during the Period; 1.2 the date of sale, location of sale, price and quantity of product sold, in respect of all instances of the sale, supply or other disposal or installation by the Respondent, or on its behalf, during the Period, of: a) the Smartascreen Panel; b) gates for use together with the Smartascreen Panels; and c) posts, rails, gate kits, fasteners, lattice panels, ball post caps and any other items or accessories sold, supplied or installed by the Respondent, or on its behalf, together with the proportion of such products the Respondent would contend were sold for use together with the Smartascreen Panel and an explanation of the steps or reasoning by which the Respondent has arrived at the identified proportion. 1.3 the revenue received by the Respondent, or on its behalf, in respect of each instance of manufacture, sale, supply, disposal or installation referred to in sub-paragraphs 1.1 and 1.2 above; 1.4 such costs as the Respondent would contend were incurred by itself, or on its behalf, in respect of each instance of manufacture, sale, supply, disposal or installation referred to in sub-paragraphs 1.1 and 1.2; and 1.5 such overheads as the Respondent would contend should be taken into account in the calculation of its profits, should the Applicant elect for an account of profits, and annexing or exhibiting copies of all documents in its possession, custody or power that have been relied on by the Respondent for the purpose of preparing the affidavit recording or evidencing the above matters. 3 Subsequently, on 21 July 2015, Bennett J also made orders in the proceedings in these terms: 1. Without prejudice to the applicant's right to seek discovery from the respondent on the question of quantum of pecuniary relief (including for the purpose of making an election as between damages and an account of profits) and without admission by the respondent as to any entitlement of the applicant to pecuniary relief in relation to the matters referred to below, the respondent file and serve an affidavit by 1 September 2015 providing details of: a) The costs that the respondent contends were incurred by itself with respect to "steel that was supplied by CIPA to Lysaght" identified in paragraph 85 of the affidavit of Robert Todorcevski affirmed on 20 March 2015 (the Affidavit); b) Any additional costs and/or overheads the respondent would contend should be taken into account, should the applicant elect for an account of profits, if the material costs for the Smartasscreen Products and Posts and Rails are the costs referred to in sub-paragraph 1(a) above instead of the "net material costs" identified in paragraphs 95 to 96 of the Affidavit, and annexing and exhibiting copies of all documents in its possession, custody or power that have been relied on by the respondent for the purpose of preparing the affidavit recording or evidencing the above matters. 2. On or before 1 September 2015, the respondent provide the applicant with particulars of the facts, matters and/or circumstances it would rely on, should the applicant elect for an account of profits, to contend that it is entitled to deduct from its profits the "net material costs" that are identified in paragraphs 95 to 96 of the Affidavit. 4 Pursuant to these orders, various affidavits were served by the respondents. In the body of those affidavits information was set out to the effect that certain of the material was commercially sensitive and confidential to BlueScope Steel. As a result, the confidential material was made available by BlueScope Steel to the legal representatives of the applicant and an expert accountant retained by the applicant subject to the giving of confidentiality undertakings which, in substance, bound those persons not to disclose the alleged confidential information to any other person, including to officers of the applicant such as Mr Mann. In addition, BlueScope Steel made available a summary of the alleged confidential information disclosing a high level overview which was made available to Mr Mann, albeit again on the basis of an undertaking to maintain the confidentiality of the summary information. 5 According to the legal representatives of the applicant they are not in a position to provide advice to the applicant as required so that the applicant can make an election as between an account of profit and damages. Although that position has communicated from the bar table rather than by way of evidence, it is communicated by senior counsel for the applicant on his behalf and on behalf of junior counsel and the solicitors retained by the applicant. Information to this effect is not to be dismissed lightly. 6 Having seen the information alleged to be confidential and the summary information, and as I indicated during the course of the hearing today, it seems to me to be obvious that the information is of central relevance to any decision by the applicant whether to pursue an account of profits or damages, and would also be central to the substance of any claim for an account of profits if that is the election ultimately made. 7 Much has been made of the alleged inadequacy of the evidence adduced for the applicant in respect of any difficulty, or lack of difficulty, which has been confronted by reason of the controlling mind of the applicant, being Mr Mann, not being able to see the confidential information. In particular, emphasis is given to evidence of a conversation between the expert accountant, Mr Brendan Halligan, and the solicitor for the applicant in which the external accountant considered the question whether he needed help to understand the affidavits which BlueScope Steel served pursuant to the orders made by Jacobson and Bennett JJ. Mr Halligan said: The answer to that is that I can do some of the things myself but there is likely to be things that I would benefit from being able to ask someone like [Mr Mann]. Like, what does this mean or does this make sense in a particular context. That is always the case as some sort of industry expert is always useful and it ultimately depends on what questions I get asked as to the extent, if any, I need to have help. It is a bit hard to answer in the abstract but it is certainly the case in jobs generally. When it comes down to the operational aspects of the business I am likely to need instructions. 8 While it is true that this answer is vague it does disclose that the external accounting expert has no particular experience with the specific industry and will be likely to need instructions from a person such as Mr Mann in order to understand the affidavits and give relevant information to the legal representatives for the applicant so, in turn, they could give meaningful advice to the applicant. 9 This leads to another observation. It was emphasised in the submissions for BlueScope Steel that the evidence went no further than stating that instructions from someone like Mr Mann were required rather than from Mr Mann personally, a matter of significance where the applicant and BlueScope Steel are in direct competition, at least insofar as the market for steel fencing is concerned. 10 In one sense it is true that it may be possible for the applicant to retain yet another expert to perform the functions that they wish Mr Mann to perform. Ultimately, however, there needs to be a degree of realism involved in the assessment of what is reasonable in the circumstances. As noted, Mr Mann is the applicant's managing director and, I am informed, sole shareholder. It is not difficult to infer that Mr Mann is the controlling mind of the applicant. We are dealing with the applicant's claim for either an account of profits or damages from a party which has been found to have infringed the applicant's registered design. The applicant is not a large publicly listed company with a multiplicity of officers capable of dividing functions. In this context, ultimately, it is Mr Mann's instructions that are required. Mr Mann is not only the controlling mind of the applicant. He possesses the industry knowledge to enable critical and informed review of the information provided by BueScope Steel. Given the nature of the issue, it is necessary for the applicant, by Mr Mann, to determine whether to proceed to seek an account of profits or to claim damages from the respondent. It is difficult to see how Mr Mann could be expected to give meaningful instructions without having access to the material which is sought to be withheld from him. 11 In my view these circumstances place the present case in a different category from all of the decisions to which reference was made by BlueScope Steel. As far as I can ascertain, none of those decisions seemed to involve a case where the information in question was of such central relevance to the very matter which the applicant needs to resolve, namely, whether to proceed by way of an account of profits or by way of a claim for damages. At the least, none involved a circumstance where the party required to make the decision was in the same position as the applicant in the present case - where the sole controlling mind with the relevant experience and expertise to make an informed decision about the necessary issue is currently precluded from seeing information which the other party has adduced as relevant to that decision. 12 This brings me to the issue of the confidential nature of the information. It is not in dispute that in respect of the fencing market (but not the market for the acquisition of steel to which some of the information relates) the applicant and BlueScope Steel are competitors. Accordingly, the concerns which are raised by the respondent are that disclosure of the information would enable its competitor to obtain a commercial advantage as against it. This needs to be weighed having regard to the nature of the information in question. Leaving aside certain information in relation to freight and conversion costs, to which I will return, the information relates to the period 2005 to 2010. That is, the most recent information - leaving aside, as I have said, two aspects of it - is some six years old. 13 It is difficult to accept that information that is six years old could retain the degree of commercial sensitivity which BlueScope Steel seems to suggest. Indeed, the affidavits on which BlueScope Steel relies, in the main, seem to bear out this scepticism. What is put is that by a largely unexplained process of deduction a person in the position of Mr Mann would be able to put together the information from 2005 to 2010 and then speculate about the current commercial activities of BlueScope Steel. The suggestions of nothing much having changed between 2010 and today are not particularly persuasive. For example, in relation to rebate structures what is said is that they have not changed "considerably" since February 2010. As the applicant says, this indicates that there has been change to the rebate structures, and the nature and extent of that change remains unknown. This supports the view that the evidence which is put in support of the commercial sensitivity of information from 2005 to 2010 seems to be largely speculative. I do not find evidence of this character particularly persuasive. 14 There are aspects of the evidence, however, which fall within a different category. 15 BlueScope Steel does not have complete records for the period 2005 to 2010 in respect of what it describes as conversion costs and freight costs. Accordingly, in order to comply with the orders made by Jacobson J, BlueScope Steel has taken information from outside the period 2005 to 2010, that is, from 2010 through to 2015 and, in effect, has worked backwards from that information de-escalating the costs in order to come up with estimated conversion and freight costs for the relevant period 2005 to 2010. It is much easier to see that recent information, such as from the years 2013 and 2015, would have commercial sensitivity from the point of view of BlueScope Steel. To deal with this aspect of the dispute some further considerations need to be assessed. 16 First, there is an issue between the parties as to whether what is involved in this application is an exercise of power under s 37AF of the Federal Court of Australia Act 1976 (Cth), or something else. 17 It is not necessary to resolve this issue because even on the approach that BlueScope Steel takes, most succinctly summarised by Besanko J in AstraZeneca AB v Medis Pharma Pty Ltd [2014] FCA 549 (AstraZeneca) at [10], I am not satisfied that the onus has been discharged of establishing a claim for confidentiality over the disputed information to the extent at least as identified above (that is, the information from 2005 to 2010) or that the balancing exercise should be resolved in favour of BlueScope Steel (in respect of any of the information, including that from 2010 to 2015). 18 Second, dealing with the factors to which Besanko J referred, the difficulty I have is that the claims for confidentiality made by BlueScope Steel, unlike those in Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 (ACCC v Air New Zealand) other than in the limited respects I have mentioned, do not relate to what Perram J described at [34] as the "current practice" of BlueScope Steel. Consistently with my own view Perram J observed at [34] that: Ordinarily, it has not been my practice to accept that documents which are seven years old can have a commercial sensitivity of the kind which has been asserted on their behalf today. 19 The reason that Perram J made orders in ACCC v Air New Zealand was the evidence persuading him that what was disclosed continued to be current practice. Apart from the more recent information which I have identified I am not persuaded that is so in the present case. 20 Third, it cannot be said that the way in which BlueScope Steel has framed its claims for confidentiality are narrow. The claims are over all of the underlying material. For example, the claims do not focus on the more recent information from 2014 or 2015. 21 Fourth, in AstraZeneca it was said that the issue involves a balancing exercise in which the primary competing considerations are the risk of inadvertent or accidental disclosure on the one hand and the benefits of a party having access to relevant information so that appropriate advice can be given and informed instructions received. It should be apparent from what I have said that, given the nature of the issue which the applicant now must determine and the role of Mr Mann within the applicant, in my view it is essential that he have access to the relevant information so that that applicant can make an informed decision. Against this, there is no suggestion of any real risk of inadvertent or accidental disclosure by Mr Mann or either of the other two persons involved to any third party. The issue is the fact that officers of the applicant itself will have seen the information said to be confidential to BlueScope Steel. In this regard, BlueScope Steel relies particularly on the observations of Perram J in both Anchorage Capital Partners Pty Limited v ACPA Pty Limited (No 2) [2014] FCA 1165 (Anchorage) and Luxottica Retail Australia Pty Ltd v Specsavers Pty Ltd (No 3) [2011] FCA 793 (Luxottica). In both matters Perram J was concerned that the person to whom disclosure was sought owed fiduciary duties to the party, with the result that there would be a conflict of interest created between the obligation not to use the confidential information other than for the purpose of the proceedings and the fiduciary duty of the person to advance the interests of the party to which the fiduciary duties were owed. 22 There is no doubt that, to varying extents, each of the three persons to whom disclosure is sought owes fiduciary duties to the applicant. However, unlike the cases with which Perram J was dealing, the practical reality here is that it is Mr Mann alone who is the controlling mind of the applicant. It is not possible to envisage any circumstance in which someone other than Mr Mann could give final instructions to the applicant's legal representatives about the election which is required or, indeed, the conduct of the proceeding generally. Moreover, and as the applicant has submitted, it is the applicant itself, on instructions from Mr Mann, that seeks access to the information by each of the three named persons on the express basis that those persons will be able to use the information only for the purpose of the proceedings and for no other purpose. As such, the applicant has necessarily accepted that, at least insofar as the information is concerned, there can be no use other than for a proper purpose. 23 The only aspect of the current matter which causes me any real concern is the information which could reasonably be described as recent, that is, information, say, from 2013 to 2015 relating to freight costs and conversion costs. This might suggest that the balancing exercise should result in a different outcome for this information compared to the other information between 2005 and 2010. Ultimately, I have decided that the outcome should not be different for the reason that this information was provided by BlueScope Steel in order to comply with the orders of Jacobson and Bennett JJ. BlueScope Steel must have taken the view that it was not possible to comply with the orders of Jacobson and Bennett JJ other than by the method it adopted. I am in no doubt that this information, given this fact, will be of central importance to any decision the applicant makes whether to proceed by way of an account of profits or an election. In this regard, the critical nature of the information means that the balance must lie in favour of the disclosure sought notwithstanding what I accept to be the apparent commercial sensitivity of the information. 24 I also take into account in this regard the willingness of the applicant to consider any further form of confidentiality undertaking which should be given, including, for example, control over copying and control over the circumstances in which Mr Mann and the others may have access to the documents in question. 25 When I weigh up the willingness of the applicant to consider these further measures and having already dismissed the risk of inadvertent or accidental disclosure to a third party, all I am left with is the fact of competition in the fencing market, the commercial sensitivity of that part of the information which could reasonably be described as recent (say, 2013 onwards), and the fiduciary obligations owed by the three named persons, including Mr Mann, to the applicant. I have already indicated why I do not see the fiduciary obligations as a necessary disqualifying factor having regard to the circumstances in which the present application is made and the terms of the confidentiality undertakings which will be able to be, I trust, negotiated between the parties. 26 As such I am minded to make orders at an appropriate time once the parties have had the opportunity to discuss the precise terms of the confidentiality undertakings which should be given. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.