Lenark Pty Limited v TheChairmen1 Pty Limited & Ors

Judgment The first Interlocutory Process 1Two Interlocutory Processes were returnable in this matter before me today. 2By the first Interlocutory Process filed 13 December 2011 on behalf of the Plaintiff ("Lenark"), James Chisholm, Kimberley Chisholm and Left Brain Strategies Pty Limited, those parties sought orders that certain documents subject to confidentiality claims in the Plaintiffs' discovery list and produced on subpoena were subject to restrictions of access and confidentiality undertakings. That Interlocutory Process was not pressed and I will make an order, by consent, dismissing it. The second Interlocutory Process 3By a second Interlocutory Process filed 16 February 2012, "Lenark" seeks orders that certain confidentiality undertakings given by counsel, solicitors and other persons acting for Lenark be released from 2pm on 9 March 2012; and that the Defendants may apply for orders restricting access to specified discovered documents, by an Interlocutory Process filed on or before 8 March 2012, but only on the basis that they have first served a list identifying the documents for which a restriction on access is sought and particularising the basis of claims for confidentiality or other restrictions on access. The Defendants have proposed an alternate regime for addressing issues of confidentiality and restrictions on access to which I will refer below. 4It appears that a dispute as to confidentiality claims and restrictions on access in this matter has subsisted for a considerable time. By letter dated 5 August 2011, Lenark's solicitors had identified the possibility that confidentiality may be claimed by the Defendants in respect of documents which they would discover and invited the Defendants' solicitors to propose a confidentiality regime. Correspondence followed and, by letter dated 24 November 2011, the Defendants' solicitors proposed a confidentiality regime to apply to all documents discovered by the Defendants (except those which had previously been provided to a principal of Lenark) and also that one of Lenark's legal advisers not be permitted access on the basis of the Defendants' claim that he advised the principal of Lenark as to commercial matters. 5By letter dated 25 November 2011 the Defendants' solicitors advised Lenark's solicitors that: "In order to facilitate inspection, we have suggested a general confidentiality agreement be entered into, with access limited to the litigation team working on the file. This is not unusual." I should note that, having regard to the authorities to which I refer below, I would not regard general claims to confidentiality over the entirety of a party's discovered documents to be either usual or preferable practice. 6In correspondence that followed into December 2011, Lenark's solicitors proposed a narrower confidentiality regime and the Defendants' solicitors pressed for the wider regime to which I have referred above. By letter dated 6 December 2011, Lenark's solicitors accepted a confidentiality regime applying to all of the relevant Defendants' discovered documents, on the express basis that they did so to avoid delay and reserving the right to apply to the Court to modify or lift the current restrictions. 7By letter dated 22 December 2011, Lenark's solicitors sought a restriction of the confidentiality regime. The Defendants' solicitors replied on the same date indicating that the Defendants had commenced their summer vacation and that they could not respond until the new year. 8By letter dated 6 February 2012, Lenark's solicitors again wrote to the Defendants' solicitors requesting that the confidentiality regime be lifted; drawing attention to the existence of the implied undertaking and identifying various matters that they contended made the confidentiality regime unnecessary. The Defendants' solicitors responded by inviting Lenark's solicitors to identify documents which were not confidential because they were in the public domain or which Lenark's solicitors would need to provide to their principal to obtain instructions. 9I should note that throughout that correspondence, which continued for over three months, the Defendants did not specifically identify any documents as confidential, either by reference to specific documents or even by reference to classes of documents. I recognise, however, that the Defendants contend that Lenark is in competition with the First Defendant, The Chairmen1 Pty Ltd ("C1"), although the extent of that competition may be in issue in the substantive proceedings and Lenark contends that C1's activities have been restricted by resolution of its shareholders in a manner which may reduce the scope for competition. It follows that particular documents which have not yet been identified may well be subject to a proper claim for confidentiality. Both parties appear to accept the proposition that the onus is on the Defendants to identify documents that are subject to such a claim for confidentiality. The parties differ as to how that matter should be approached as a matter of practice. Lenark contends that that matter should be approached by the Defendants identifying the basis on which confidentiality is claimed by reference to particular documents. The Defendants take the position that Lenark should first identify the documents as to which its solicitors need instructions, so as to narrow the scope of any dispute. 10I pause to summarise the present position as it emerges from an affidavit sworn 21 February 2012 by Mr Wenk, the solicitor who acts for the Defendants in the proceedings. It appears that 14 of the 19 Defendants have been required to give discovery and 2,492 documents have been discovered. Access has been permitted to the principal of Lenark to documents which have previously been provided to him, for example emails to which he had access at the relevant times, being 560 documents. The remaining 1,931 documents are still all subject to the existing confidentiality regime and restrictions of access. Mr Wenk estimates that it will take four weeks to review those documents and seek instructions from multiple Defendants as to which documents were confidential. He contends that it would be more efficient for Lenark's lawyers to identify which of the remaining documents they wish to show to Lenark, so that the Defendants' lawyers should seek instructions as to those documents. I will return to that matter below. 11There appears to be little debate between the parties as to the applicable principles, but I should briefly refer to those principles since they should inform the approach which I should adopt to the practical issue which is before me. In Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 the Court of Appeal of the Supreme Court of Victoria noted that confidentiality issues may require inspection of documents to be limited where discovery is to be made to a trade rival and that question may need to be determined by reference to the particular documents in issue and may require inspection of those documents by the Judge dealing with the matter. Those principles were applied by this Court in Reebok International Ltd v Sydney Organising Committee for the Olympic Games [2000] NSWSC 295, affirmed Sydney Organising Committee for the Olympic Games v Reebok International Ltd [2000] NSWCA 185. The principles have also been considered in this Court in Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 at [41]-[42] and Drivetime Radio Australia Pty Ltd v Pivotal Creative Solutions Pty Ltd [2010] NSWSC 763 where Brereton J emphasised that the Courts are reluctant to exclude the parties to the litigation from knowledge of relevant material by limiting access to their advisers, although the Court may sometimes need to take that approach. 12The principles in Mobil Oil were summarised and applied in Cadbury Pty Ltd v Amcor Ltd (No 2 ) [2009] FCA 663 at [6] and [7], where Gordon J pointed to the need, in litigation between trade rivals, to strike a fair balance between the needs of the party seeking discovery and the legitimate concern of the trade rival to retain the secrecy of its commercially sensitive information; pointed to the importance of inspection of the nature and contents of the documents in issue to resolve such a dispute; and noted that it was for the party seeking an order limiting inspection of discoverable documents to establish the character of each such document that warranted protection additional to that granted by the implied undertaking. I note that I do not understand the Defendants to contest these principles although they suggest, in practice, that it would be more effective and more efficient if they were only required to undertake that task as to those documents as to which Lenark's solicitors required instructions. 13I do not consider that I should adopt the course for which the Defendants contend. In principle, confidentiality claims should only be asserted over documents which are genuinely confidential and it is a matter for the Defendants to identify which documents are confidential and why: Betfair Pty Ltd v Racing New South Wales (No 5) [2009] FCA 1011. In some circumstances, it may be appropriate first to require the other party to identify the documents to which it seeks access, the approach for which the Defendants contend, particularly where the documents in issue are very voluminous: ICAP Australia Pty Ltd v Forrest Moebes [2010] NSWSC 738 at [10]. However, I do not consider that approach is appropriate here, for several reasons. 14First the documents that remain in issue are not voluminous by the standards of commercial litigation. Second, on the face of it, it seems unlikely that all documents over which the confidentiality regime has been imposed are in fact properly confidential, since this would require that every document which has not previously been shown to Lenark's principal is confidential in its character. Third, the Defendants have not sought to narrow their claims for confidentiality over the three or more months in which this dispute has continued. 15Fourth, I do not find the evidence of practical difficulties that the Defendants say they will suffer in taking instructions to be particularly compelling. Mr Wenk was, entirely appropriately in an interlocutory application of this kind, not cross-examined as to his affidavit. However, that affidavit leaves several matters unclear. The proposition that four weeks would be required to review the relevant documents and seek instructions from multiple Defendants was not elaborated by indicating for example, how many documents were discovered by any particular Defendant. The difficulty in taking instructions would, one might have thought, be relatively limited if the documents were discovered by only a small number of Defendants. No evidence is before the Court to indicate whether or not that is the case. Mr Wenk's evidence also does not make clear the extent to which he has already taken instructions as to confidentiality, which would impact on the time needed to seek further instructions. I would not readily infer that a dispute as to confidentiality has continued with this vigour over this lengthy period without Mr Wenk having already obtained such instructions. The likelihood that such instructions would have been obtained, in the ordinary course and having regard to the requirements of s 56 of the Civil Procedure Act 2005 (NSW), should reduce the time which is required for further instructions. 16The Defendants also point to a particular difficulty with the form of the second order proposed by Lenark, which seeks to confine the manner in which the Defendants should bring any application to establish confidentiality. The Defendants contend that it is a matter for them to bring such application as they wish. I consider that an order in that form can properly be made having regard to the Court's and the parties' obligations in respect of the just, quick and cheap resolution of the matters in dispute under s 56 of the Civil Procedure Act . 17In these circumstances I propose to make orders in substantially the form sought by Lenark with some modification to allow further time for the Defendants to seek further instructions, to accommodate the concerns as to timing that they have indicated. I will make Order 1 in the form set out in the Interlocutory Process dated 16 February 2012, but changing the date 9 March 2012 on the 4th last line of the order to 20 March 2012. I will make Order 2 in the Interlocutory Process filed 16 February 2012, but changing the date 8 March 2012 in line 3 to 19 March 2012; changing the date 29 February 2012 in the second line of paragraph (a) to 7 March, 2012 and changing the date 7 March 2012 in the first line of paragraph (b) to 14 March 2012. 18I do not consider that I should make the third order sought by Lenark in precisely that form since I think it would be unfair to the Defendants to require them to seek to identify what information the Plaintiff needs to decide whether or not to oppose the claim for confidentiality and for restricted access. However, I will make that order replacing the words in the second and third lines "to enable the Plaintiff ... for restricted access" with the words "sufficient to identify the basis for any claim for confidentiality or restricted access on which the Defendants will rely in an application filed in accordance with Order 2". The intention of that order is that the particulars to be provided by the Defendants will confine the matters on which they may rely in any contested application before the Court to seek to maintain confidentiality orders or restrictions on access. 19I make Orders 1, 2 and 3 in the Interlocutory Process filed 16 February 2012 with the modifications that I have indicated. By consent I order that the Interlocutory Process filed 13 December 2011 on behalf of the Plaintiff, James Chisholm, Kimberley Chisholm and Left Brain Strategies Pty Limited be dismissed. Costs 20The Defendants seek orders in respect of the costs of the first Interlocutory Process that was filed on 13 December 2011. That Interlocutory Process, as I have noted, was not pressed before me and I have made orders by consent dismissing that Interlocutory Process. 21The Defendants contend that, in the ordinary course, costs should follow the event in respect of the dismissal of the motion, in circumstances where the dismissal of the motion means that the Defendants have been substantially or entirely successful as to the position for which they contended. The Plaintiff relies on a "without prejudice except as to costs" letter dated 20 February 2012 which put, in summary, a proposal that the Plaintiffs would not seek to assert confidentiality over their discovered documents if the Defendants did not seek to assert confidentiality over their discovered documents, so that each party's discovery would then be protected only by the implied undertaking. 22The first part of that proposal was implemented to the extent that the Plaintiff subsequently did not press its Interlocutory Process dated 13 December 2011. The second part was not and the question whether the Defendants will establish the need for restriction on access in particular discovered documents remains to be determined. 23I do not consider that the letter dated 20 February 2012 has any impact on the order I should make as to costs of the Interlocutory Process dated 13 December 2011 or requires that I defer such order to a future time. First, it could not presently be said that the Defendants have achieved a worse result than the result that had been offered by the letter dated 20 February 2012, since the question of their claims to confidentiality remains to be determined. Second, the letter dated 20 February 2012 was sent only shortly before this hearing very close to the date of these proceedings. The Defendants rightly point out that there are a number of persons nominated as respondents to the 13 December application and I do not think that it would practically have been possible for their solicitors to seek instructions in respect of the offer made in that letter, given the time when it was made. 24Accordingly I order that Lenark, James Chisholm, Kimberley Chisholm and Left Brain Strategies Pty Limited are to pay the Defendants' costs of the first Interlocutory Process. 25Lenark presses for its costs of the second Interlocutory Process. The Defendants contend that such costs should not be awarded on the basis that the times set out in the second Interlocutory Process were varied by my judgment to allow additional time for the Defendants to undertake the step of identification of documents claimed to be confidential and the grounds of such claims. I note, however, that nothing in the evidence before me suggests that the time specified in that order led to the need for argument before me, which turned on a much more fundamental difference between the parties as to the manner in which claims for confidentiality should be established. 26In these circumstances I see no reason to depart from the usual order for costs in respect of the second Interlocutory Process where, it seems to me, Lenark has been substantially successful in seeking the relief that it sought in the second Interlocutory Process. Accordingly I order that the Defendants pay Lenark's costs of and incidental to the second Interlocutory Process.