Jarrama Pty Ltd v Caltex Australia Petroleum Pty Ltd

REASONS FOR JUDGMENT 1 The applicants are corporations that have brought proceedings as representative parties pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth). The group members to whom the application relates are franchisees of the first respondent in connection with petrol station sites. It is alleged that the respondents have announced and commenced the implementation of a joint venture scheme with Woolworths for the operation of what are styled "co-branded petrol station sites". These circumstances are said to give rise to claims for damages by the applicants that are framed by reference to various causes of action. 2 The applicants applied by motion, dated 23 February 2004, to have confidentiality undertakings approved by the Court and to have certain time limits in respect of an agreed mediation extended. They also sought to obtain an order permitting Mr Mitch Karafili to have access to confidential documents of the respondents on the basis that he was an expert retained by the applicants. 3 The parties have agreed to the form of confidentiality undertakings to be approved by the Court for the purposes of access to the confidential documents and have further agreed to extend time limits in respect of the meditation. Separate orders have been made in respect of those matters. The position has been reached that disclosure of the respondents' confidential documents will be able to be made to the applicants' legal advisers on the giving of the approved undertakings. As well, it is recognised that disclosure to independent experts, appointed on behalf of the applicants, is also within the contemplation of the respondents. 4 However, the respondents resist an order that would permit Mr Karafili being given access to the confidential documents. Both the applicants and the respondents have filed affidavit material in support of their respective positions on the question of Mr Karafili's access to their confidential documents. 5 In submissions made on behalf of the applicants, it was claimed that Mr Karafili is a qualified accountant and is the applicants' chosen expert in relation to analysing the economic aspects of the respondents' confidential documents. FGT Custodians Pty Ltd (formerly Feingold Partners Pty Ltd) v Fagenblat [2003] VSCA 33 was relied upon as authority for the proposition that in some circumstances a person can give expert evidence in a case, despite a pre‑existing relationship with the party retaining him or her as an expert. It was further submitted that by reason of Mr Karafili's pre‑existing relationship with the applicants, he had an understanding of the industry that made him a particularly suitable person as an expert for the applicants. Counsel for the applicants conceded that Mr Karafili would be a witness as to matters of fact. 6 As the undertakings to be approved had only been agreed between the parties the night before the hearing of the contested aspects of the motion, counsel for the applicants had not had an opportunity to read all, or even any, of the confidential documents, which affected his ability to identify with precision what tasks Mr Karafili would be expected to undertake. It was suggested Mr Karafili would be a person relied upon by the applicants on issues such as the profitability and viability of co‑branding. It was further conceded that it was not likely that Mr Karafili needed to have access to the confidential information prior to the mediation, although it was recognised that something may transpire at the mediation that would occasion some need for him to have access. It was accepted by the applicants that if Mr Karafili were permitted to have access to the confidential documents, on the giving of the undertakings, it would be appropriate for such access to occur at the premises of the solicitors retained by the respondents. 7 In resisting Mr Karafili's access to the confidential documents, it was submitted on behalf of the respondents that Mr Karafili's pre‑existing relationship with the applicants could be described as advocate and negotiator. It was asserted that he held hostile views towards the respondents, which had been communicated on many occasions as set out in the respondents' evidence. He admitted he was capable of using strong language. It was submitted he lacked both independence and appropriateness as a person to undertake the usual duties of an expert. 8 Counsel for the respondents relied on the identification of the duties and responsibilities of expert witnesses in civil cases in The "Ikarian Reefer" [1993] FSR 563 at 565. Also referred to were the "Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia", Supreme Court Form 44A, "Practice Note 42" of ASIC's Practice Notes and "Policy Statement 75" of ASIC's Policy Statements. It was also submitted that there was no proper evidence that Mr Karafili held qualifications as a "forensic accountant and business analyst" as claimed in certain correspondence and in an affidavit sworn by Mr Solomou, the applicants' solicitor. 9 I have not been asked to inspect the documents, and have not done so, but assume for present purposes that the documents are indeed confidential, as the applicants have not sought to argue the contrary. 10 The duties that an expert has in civil cases, especially as to independence, are well understood. During the course of the abovementioned submissions, the respondents' counsel referred to them correctly. There are, however occasions upon which an expert who has a pre‑existing relationship with a party can give expert evidence subject to the weight to be given to such evidence. So much is recognised in the Federal Court guidelines referred to above. Further, circumstances can arise where an applicant or a person connected with an applicant may be permitted to have access to confidential information intended to have been restricted to legal advisers and experts. Such circumstances occurred in Neurizon Pty Ltd v Jupiters Limited [2003] FCA 950. 11 Parties are generally entitled to know what has been disclosed to their legal advisers and technical experts, but this can be modified where confidence is to be protected and in appropriate circumstances courts can be justified in excluding a particular person from disclosure. See: Warner-Lambert Co. v Glaxo Laboratories Ltd. [1975] RPC 354. What the applicants are seeking in this case is a departure from a common practice in cases concerning confidential information, where a balance is struck between competing interests by restricting disclosure to legal advisers, independent experts or senior officers of an applicant. See: Ex parte Fielder Gillespie Limited [1984] 2 Qd R 339. 12 Acceptance of the proposition that an expert with a pre‑existing relationship with a party can give expert opinion evidence does not resolve the question of whether it is appropriate for such a person to have access to confidential information in a departure from the common practice referred to above. 13 In my view, in circumstances such as the present, there needs to be proper and full disclosure of the pre‑existing relationship between an expert and the party retaining him, evidence of the proposed expert's expertise and evidence of the retainer in respect of the confidential information. Further, there should be, if possible, evidence as to why it is not practicable to have an independent person, rather than one associated with the an applicant, undertake the necessary expert inspection and analysis of confidential information. 14 On an application such as the present, and given the respondents' attack, through affidavit material, on Mr Karafili's expertise it is not unreasonable to have expected Mr Karafili to have given direct sworn evidence of his professional and/or academic qualifications and relevant prior experience. This information might substantiate the claim that he was a "forensic accountant and qualified business analyst". Mr Solomou gave sworn evidence, on information and belief, that Mr Karafili told him he was a Certified Practising Accountant of some 20 years standing and that he specialised as a forensic accountant and business analyst. This evidence makes it all the more surprising that Mr Karafili gave no direct sworn evidence confirming the detail of what Mr Solomou said he had been told. 15 On the material before me I am satisfied that Mr Karafili has disclosed a pre‑existing relationship with Mr Kaucic and through him, his connections with the National Franchise Council. Mr Karafili appears to be a qualified accountant but I cannot form a view from his evidence before me of the precise accounting qualifications or experience he may have or their relevance to the confidential documents. 16 Mr Karafili's retainer in respect of the particular documents, and details of whether that retainer is held on behalf of some or all possible applicants, together with details as to any reason why he and only he was the appropriate person to undertake expert tasks in respect of the documents are the subject of scant evidence. Mr Solomou's evidence that the documents contained accounting data requiring accounting analysis did not resolve those issues. This aspect is particularly important given that these are representative proceedings. 17 It is not possible to be satisfied, on the evidence as it stands, that it is essential for the applicants' presentation of their case, that Mr Karafili and only Mr Karafili should have access as an expert to the confidential documents. Nor is it possible to form any view as to whether other alternatives, such as obtaining an independent expert, are not practicable for the applicants. Accordingly, it is not possible to balance such considerations in favour of the applicants against the risk to the respondents that disclosure to Mr Karafili may effectively be disclosure to the applicants, by reason of his close attachment to their interests. Particular care needs to be taken when widening a confidentiality regime in representative proceedings. This case may well turn out to be one where, on the provision of further material, it becomes clear that Mr Karafili has specialist academic or professional qualifications and is required by the applicants to undertake a specific retainer, which only he can undertake, in respect of the confidential documents. If that turns out to be so, it demonstrates no more than that this application was premature. 18 As to costs, the applicants cannot be criticised for seeking to obtain the Court's approval of undertakings when there were perceived ambiguities in the form of undertakings under discussion. The respondents recognised the concerns of the applicants in respect of the proposed undertakings which were dealt with by consent on the first day. This facilitates the proper management of the proceeding. In these circumstances, I propose to order that one-quarter of the costs of the motion be the costs of the successful parties in the cause and that the applicants pay three-quarters of the respondents' costs of the motion. 19 The application for a nominated person, Mr Karafili, to have access to confidential documents discovered by the respondents is dismissed. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Crennan. Associate: Dated: 27 February 2004 Counsel for the Applicants: Mr L M F Watts with J Graham Solicitor for the Applicants: Mr Nick Solomou Counsel for the Respondents: Mr T J Walker Solicitor for the Respondents: Mr Martin Garrett Date of Hearing: 24 and 25 February 2004 Date of Judgment: 27 February 2004