Index Group of Companies Pty Ltd v Nolan

REASONS FOR JUDGMENT 1 Between 1991 and 2001 the first respondents mined for silica in north-western Tasmania. The applicant's case is that they supplied sand to it pursuant to an agreement made in December 1991 and that that agreement governed their business relations until about October 2000, when a further, oral, agreement for supply was made between Mr Maclean for the applicant and Mr Nolan for the respondents. Part of the applicant's case is that the respondents have acted unconscionably, within the meaning of s 51AC Trade Practices Act 1974 (Cth) in connexion with their refusal to supply pursuant to the agreement. What is now sought is specific performance of that agreement, or damages, in lieu and damages for breach of contract. Other relief is also sought. 2 The applicant beneficiates the sand (or "silica flour"). It produces products of different composition and according to its customers' requirements. A recent use of silica flour has been in the manufacture of glass for use in liquid crystal display products ("LCD"), and the demand for the product is regarded as of significance and likely to grow. 3 One of the applicant's major customers is Corning Inc.. It has been undertaking research and development into the glass referred to. The applicant has had a non-disclosure agreement with it for some time. The present agreement requires Index to protect confidential information from disclosure "to third parties with at least the same degree of care (but no less than a reasonable degree of care) as it uses to protect its own Confidential Information of like kind from unauthorised use or disclosure". 4 The applicant alleges that the respondents' refusal to supply as agreed, and to supply only on an uncertain basis, has prevented it from upgrading its plant as it needed to do to meet the production requirements of customers. Corning Inc. is identified as the major customer, but the method by which damages are to be established in that regard and the extent to which other customers will be referred to is not yet clear. The applicant's witness statements and reports had not been provided when the application was heard although they were due to be supplied shortly. 5 Discovery by list has taken place. The applicant objects to certain documents being made available for inspection by the respondents. It contends that no injustice will be occasioned to the respondents if orders are made limiting the disclosure of parts of the documents to their legal advisors and expert witnesses only. Its concern stems in large part from statements made by Mr Nolan as to his future plans, which are said to be to limit or prevent supply to the applicant and for the respondents to undertake the beneficiation process themselves and enter the market for the sale of such products. For the respondents it is contended that the information might be utilised in connexion with the applicant's claim for damages and that the respondents would be hampered if Mr Nolan's instructions could not be sought with respect to it. It is asserted that there is no other person with his expertise known to the respondents who might give evidence for them. 6 The respondents do not dispute the Court's power to make orders of the kind proposed. They contend that the starting point is their right to discovery. That would not seem to be a correct approach. If it be correct to speak of a party's right to access documents by this process, and that seems doubtful, it is only a right in a qualified sense. This is especially so under the rules of this Court. The Court has a discretion under O 15 r 3 to make an order for discovery and rr 2 and 15 of that order make plain that the Court is to avoid an unnecessary discovery: Cameron v Rural Press Limited (Full Court, 20 July 1990, unreported); also Practice Note 14. 7 What is spoken of as a "right" is the provision to a party of documents by use of a Court process, to ensure that litigation is, as far as possible, fair. That is a matter of public interest. In that context it may be understood that the Court's processes, in requiring discovery, will only be utilised as far as is necessary to ensure justice as between the parties and no more: see Home Office v Harman [1983] 1 AC 280, 308, applied Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34, 37, 38 and Trade Practices Commission v CC (NSW) Pty Ltd (1995) 58 FCR 426, 436. 8 A private right of confidentiality in documents may be taken into account in considering whether to order discovery and inspection, although it is right to say that the fact that documents have that character is not usually itself a sufficient reason to deny discovery: Mobil Oil v Guina Developments, 38. When a document is shown to be confidential the Courts must balance the effect of its disclosure and of it being withheld from a party to litigation. In that latter respect much may turn upon what it is necessary for that party to prove or disprove. 9 The information sought to be withheld from disclosure by the applicant is said to fall into two categories: information which is confidential to both the applicant and Corning Inc. concerning the material produced for Corning Inc. and its use in a new product; and disclosure of the names of some of the applicant's customers. 10 One of the areas where the Courts have accepted that protection by non-disclosure may be appropriate is where a secret process or its commercial exploitation is involved. The applicant's first category may be viewed in this light. The documents are mainly records of meetings and other communications between the applicant and representatives of Corning Inc. concerning its requirements for a particular refined product from the applicant for use in the creation of glasses in the expanding LCD glass market. They identify aspects of Corning Inc.'s specification, the results of some of its testings, and outcomes of some trials. They disclose its proposed production and the timing of production. Although there is evidence that Corning Inc. has recently put products from this process upon the market, it is elsewhere explained that it continues to undertake research and development and this information is relevant to those activities. It is information which would not be known by competitors. 11 The confidence identified is principally that of Corning Inc., although it may be said the applicant has an interest in maintaining it. The respondents submit that the Court should infer that it does not share the concerns expressed by the applicant because it has not provided evidence to that effect. The necessary evidence has been provided by Mr Jeffrey Maclean and I can discern no basis for declining to accept it. There may be other reasons why Corning Inc. has chosen not to give evidence, or has not been asked to by the applicant. It is not necessary to go into those possibilities. 12 An undertaking not to disclose this and the other information has been offered, in general terms, by the respondents. Would this suffice to protect what clearly appears to be Corning Inc.'s secret? It is not as if the respondents were in this respect a competitor of that corporation, but there is the possibility that it might in the future be dealing with its competitors and it would be armed with valuable information. Much may depend upon when the character of secrecy may be spent, but this has not been gone into. It may be a difficult matter to assess at this point. At this point it would seem to me that the nature of the information is not appropriate to be dealt with by an undertaking. 13 There remains the question of the respondents' need for this information. It is said by them that it is likely to be relevant to the applicant's claim for damages and in particular to its anticipated claim that Corning Inc. would have purchased more of its specified material if the applicant had been in a position to produce it. The respondents point to a number of sub-issues which might arise in this regard, namely the potential level of demand for the applicant's products (particularly from Corning Inc.); potential future customers; the potential future specifications required of the applicant's product and its capacity to meet those specifications. The information in question might have a connexion with the last two topics. The difficulty at this point is in discerning how tenuous that connexion may be and indeed whether those topics are likely to arise. 14 In these circumstances it seems to me that the preferable course is to limit discovery to the legal representatives and any independent expert, if one be engaged. The matter may be considered further, if necessary, when the applicant's case for damages is made known and its expert's reports provided. In the event that Mr Nolan remains the only expert witness for the respondents, it does not seem to me beyond the ability of the respondents' legal advisers to seek instructions as necessary, without disclosing the confidential information. If the respondents are later in a position to show they will be prejudiced, in light of the evidence which might be tendered in their defence, they may bring an application for variation of these orders. 15 The second category of documents contain references to brokers and other customers. In this respect the respondents may be trade rivals in the future. The applicant contends that the respondents do not presently know of them, although I apprehend them to say that the information is ascertainable. They do not wish the respondents to have the benefit of their investigations and dealings over the years, with attendant expense, in the event that they become competitors. 16 If the respondents succeed in the action it seems likely that the applicants may not remain in business as a competitor. Nevertheless, the respondents may gain the benefit of valuable information to which they would not otherwise be entitled. If the applicant succeeds, the respondents contend that they will not be able, in effect, to supply their sand to themselves, because of a term of the agreement requiring exclusive supply. I do not think the language of the term in question is that clear, and there remains an issue as to whether it is, in any event, enforceable. 17 The information in this category may be considered not to require the same level of protection as the former. Nevertheless, it is information confidential to the applicant and having value to it. Unless the respondents can be seen to require access to it in the conduct of their defence, it should not be divulged. I do not think that can presently be said to be the case. Much may depend upon how the applicant's claim for damages is to be made out, but it may not make any reference to these persons. In that event it is difficult to see why the respondents would need to know of their identity. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel .