Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd

Federal Court of Australia|2012-07-24|Before: McKerracher J

INTRODUCTION 1 The applicants/cross-respondents (Schutz) seek further discovery from the respondents/cross-claimants (VIP) pursuant to r 20.15 of the Federal Court Rules 2011 (FCR). In discussing this motion, abbreviations in these reasons are adopted from earlier reasons in Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (2009) 82 IPR 477 (Schutz 1) to Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (No 14) [2011] FCA 1159 (Schutz 14). 2 The Schutz application was originally sought in respect of three categories but in light of the VIP response indicating no documents are available in categories 2 and 3, the application is confined to a request for further discovery in the following category: Categories of Further Discovery by VIP 1 All documents recording the sale of Cross-Bottled IBCs; CB1 IBCs or CB2 IBCs by VIP; their agents; Related Bodies Corporate and/or licensees since January 2008. [Schutz] appreciate there may be a large number of documents in this category and are prepared to accept a summary document , verified by [VIP], containing the following information about each sale of Cross-Bottled IBCs; CB1 IBCs or CB2 IBCs by VIP; their agents; Related Bodies Corporate and/or licensees since January 2008: (a) date; (b) quantity; (c) customer; (d) specifications or description of IBCs; and (e) description of UN certification labelling affixed to label plate, if any.

COUNTERVAILING CONSIDERATIONS 9 Issues of both oppression and confidentiality arise. VIP argues that the further discovery in category 1 should be refused having regard to: 1. the cost and time of giving the discovery being oppressive and the cost and time associated with creating a summary document being even more so; 2. the Court has previously refused to order discovery of substantially the same category; 3. issues of quantum and liability have been split; 4. there is no basis or reason for the discovery as a matter of liability; and 5. the discovery would include VIP's highly confidential customer information in circumstances where the Schutz have previously sought to obtain the information for the purpose of writing to those customers and the Court has refused to make such an order.

Oppression 10 The evidence to support the VIP response is contained in affidavits of Mr Andrew Robert Smith of 17 August 2009, 18 June 2010 and 31 May 2012. As to the question of oppression, evidence from VIP indicates that the documents would number in the thousands and would be located across multiple VIP sites including the Sunshine Plant in Victoria, the Penrith Plant in New South Wales and the Eagle Farm Plant in Queensland. They would exist in multiple formats including electronic and hard copy format. The evidence shows that if an order to discover the documents were made, employees of each relevant site would be required to search for, identify and collate documents falling within the category and to view them to determine whether they do. It is anticipated that this step would take multiple weeks and would divert those employees from their usual duties at substantial cost to VIP. 11 The provision of the summary document does not alleviate the situation. It is said that the creation of a summary document would require even further work. Schutz has sought information as to the date, quantity, customer, specification or description of the IBCs and the description of the UN certification labelling affixed to the label plate. The provision of that information requires, as a first step, the same search for and review of the documents set out above. It would then involve the further task of preparing an analysis of those documents so as to produce the summary Schutz it requires. This would involve substantial further cost and time.

Previous refusal 12 VIP contends that Schutz has previously sought discovery of all documents comprising or recording the sale, supply and/or distribution in the course of trade of cross-bottled IBCs by VIP, its agents, related bodies corporate and all licensees since January 2008 which discovery was refused in Schutz 14. VIP suggests that the category incorporates the same documents as are presently sought on which I ruled (at [45]) that 'discovery of documents such as sales records, purchase orders and invoices is clearly unnecessary and oppressive' (emphasis added). VIP submits that the present category suffers the same difficulties and Schutz has not attempted to demonstrate or even identify any change in circumstances. It is necessary, VIP contends, for Schutz to demonstrate with cogency and precision why the discovery is now necessary, yet it has failed to do so.

Issue of quantum and liability split 13 VIP points out that the documents (or summary document) which Schutz seeks can only go to the question of quantum of VIP's cross-bottling and thus the extent of the breach and the extent of damage. For present purposes, however, VIP submits that access to such information is unnecessary in light of the bifurcation order having been made and the undertaking VIP has given to keep accounts. There is evidence from the last affidavit of Mr Smith that VIP is continuing to maintain proper accounts. As there are no issues going to quantum, VIP argues there is no apparent relevance of the documents to any issue presently falling for consideration.

No liability basis 14 It is also contended for VIP that there is no liability basis for providing discovery. The point made by VIP is that Schutz has already particularised and filed evidence in support of para 66 for liability purposes of all particulars it can give, including particulars as to certain cross-bottled IBCs in its possession which Schutz has obtained from the marketplace. 15 Schutz has referred to photographs of cross-bottled IBCs annexed to the affidavits of particular Schutz witnesses in the proceeding. In addition, the parties have recently attended an inspection of the IBCs in question in Victoria as deposed to in the affidavit of Mr Christopher Williams, solicitor for VIP. 16 The evidence discloses that Schutz already has over 200 cross-bottled IBCs in its possession. No explanation has been given by Schutz how a summary document setting the quantum of IBCs cross-bottled by VIP is necessary or, indeed, of any assistance in order to resolve any matter in dispute in relation to para 66.

Commercial sensitivity 17 It is common ground that the documentation is commercially sensitive as the discovery seeks information identifying customers of VIP. The disclosure of that highly commercially sensitive and confidential information ought not be lightly compelled in proceedings between direct competitors. 18 VIP relies on my observations in Schutz DSL (Australia) Pty Ltd (ACN 009 069 907) v VIP Plastic Packaging Pty Ltd (ACN 095 313 705) (No 4) [2009] FCA 1541 (Schutz 4) (at [16]) where I said: As against that, there is a real risk that if the orders which Schutz seeks are made, it will be given the significant advantage of opening its direct competitor's books and writing in unnecessarily alarming and implicitly critical terms directly to VIP's customers with the imprimatur of the Court. This is an advantage which would certainly not be lightly given. 19 VIP also points to the lengthy history of discovery applications in this proceeding set out in the chronology which is annexure A to these reasons.

CONSIDERATION 20 I have difficulty seeing that provision of this information is necessary in relation to liability. Although the outstanding request by VIP for full particularisation of each instance of cross-bottling upon which Schutz rely remains standing, it does not follow that the case for Schutz would fail simply for failure to provide such particularisation in circumstances where primarily for grounds of oppression, VIP has declined to provide that information. 21 Of course if the case on liability succeeds, it is a different question altogether in relation to whether the discovery could be resisted in the context of a dispute about the quantum flowing from pleaded breaches of, in this case, patent infringement. 22 There may be a difficulty if Schutz had access to only a handful of the relevant IBCs but the uncontested evidence is that it has access to in excess of 200 IBCs which, it contends, support the breach. It is improbable, in any event, for the purposes of a liability hearing that it would be necessary to examine detailed evidence pertaining to each one of those IBCs, let alone literally thousands more which would need to be identified by discovery and, in turn, particularised by way of further particulars from Schutz. It seems to me that provision of such material is a totally arid exercise in which the burden would greatly outweigh any potential benefit. 23 There is a real and reasonable sensitivity about provision of the identity of customers in my view but Schutz argue that the identity of the customers is directly relevant to the controversial issue of who falls within the class of relevant consumers for the purposes of the Schutz claims pursuant to the Trade Practices Act 1974 (Cth). In that regard, para 54 of the FFASOC provides: 54 The General Representations are and were at all material times made by VIP to the following classes of persons: 54.1 viewers of VIP's website located at the URL www.vippackaging.com.au; 54.2 [Schutz'] customers and potential customers; 54.3 VIP's customers and potential customers; 54.4 reconditioners of IBCs; 54.5 consignors; 54.6 packers; 54.7 loaders; 54.8 prime contractors and rail operators; 54.9 drivers; and 54.10 purchasers and users of goods stored and transported in Cross-Bottled IBCs, further or alternatively CB1 IBCs, further or alternatively CB2 IBCs. 24 Schutz makes clear that the customers disclosed in the VIP records may themselves possess evidence of their dealings with VIP directly relevant to the issues in dispute. Schutz argues that the manner in which VIP conducted its cross-bottling business and the representations VIP made to its customers and prospective customers will be pertinent to the claims by Schutz. Schutz contends that those customers should be identified to Schutz to enable them to issue subpoenas to collect relevant evidence if necessary. 25 I am not satisfied that this is a proper justification for identifying customers. This justification for access to the customer records is a fishing exercise. No cogent basis is made out on the materials as to the likelihood of such customers being misled as a consequence of conduct of VIP. In circumstances where the investigations by Schutz have been very thorough, there would need to be clearer evidence that it is likely that the identity of all customers was of importance to this or any other aspect of the Schutz claim. As against that, the potential damage to VIP's reputation and goodwill is a greater risk which I do not consider is justified on the basis of the evidence as it stands. 26 I accept as clarified by Schutz that category 1 in express terms has not previously been refused. The finding made in Schutz 14 related to a broader category than category 1 sought in the current application. Category 1 was reframed and now requires only documents recording the sale of cross-bottled IBCs, CB1 IBCs or CB2 IBCs instead of 'comprising, recording or evidencing the sale, supply and/or distribution in the course of trade of those IBCs'. While category 1 incorporates documents that would have fallen within the category previously rejected it is confined in its scope and makes provision for discovery of summary document rather than all the documents falling within category 1. 27 Schutz argues that if the further discovery enables it to establish that VIP cannot distinguish between conforming IBCs, that is, those conforming to WorkSafe approval on the one hand and non-conforming on the other, that would assist Schutz in establishing its case in para 39F of the FFASOC. Schutz argues that VIP should not be sensitive about revealing its customers because Schutz has disclosed all details of its customers confident in the effectiveness of the confidentiality regime limiting the information to solicitors, counsel and experts who have signed appropriate undertakings. 28 I am not persuaded that Schutz needs this information in order to establish its case nor am I persuaded that the fact that Schutz has chosen to reveal its customer base necessarily means that VIP should be required to do so. Schutz has been the protagonist in this proceeding. It is by no means apparent to me at this stage what the outcome of the proceeding will be. Unless it were clearer that the only way Schutz could prove that some VIP customers were actually misled was by access to all of them, I do not consider that degree of information or documentary disclosure by VIP would be necessary or desirable. 29 As outlined above, given that Schutz already has access to over 200 of the units (and I am told by counsel for VIP without contradiction by counsel from Schutz that Schutz would be enabled to identify most or many of the VIP customers from those 200 units), this appears to me to be ample for the purpose of Schutz presenting its case on liability. 30 I am not persuaded that the equivocal position taken by VIP concerning whether it presses for full particulars is determinative of the issue. Ultimately, r 34.42(3) FCR makes it clear that it is not necessary to provide more than at least one instance of each type of infringement alleged. 31 Further, it is not apparent to me that the further discovery sought, in any event, by way of a summary list would illustrate how a member of VIP staff was able or unable to identify conformance or non-conformance as the case may be, regulatory compliance or non-compliance.

CONCLUSION 32 I have taken some time to consider these matters. It is clear that Schutz is very anxious to access these materials and I have not wished to hamper its ability to present its case but I am satisfied that the arguments advanced by VIP in opposition to the unusual request for further discovery (given previous orders and previous discovery) must be preferred to the arguments of Schutz on this occasion. 33 For those reasons I must dismiss the application with costs. The orders will be:

The applicants/cross-respondents' interlocutory application for further discovery filed 22 May 2012 be dismissed.
The applicants/cross-respondents do pay the respondents/cross-claimants' costs of the application to be taxed if not agreed. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

ANNEXURE A Schutz DSL (Australia) Pty Ltd and Others v VIP Plastic Packaging Pty Ltd and Anor WAD 136 of 2009 Procedural Chronology - Discovery Date Event 30 November 2009 Discovery orders made by consent for discovery of documents by categories 18 December 2009 Categories for discovery served by VIP 8 January 2010 Categories for discovery served by Schutz 3 June 2010 Schutz files 'Application' for non-party discovery 14 June 2010 Schutz files notice of motion for non-party discovery 15 June 2010 Date for agreement of further discovery categories, additional categories received from Schutz 17 June 2010 Orders made to program hearing on disputed categories for discovery for 6 August 2010 9 July 2010 Schutz files further notice of motion for non-party discovery 23 July 2010 VIP files submissions in opposition to Schutz' motions for non-party discovery 6 August 2010 Hearing of four motions. Orders made for discovery in agreed categories by 8 October 2010 13 October 2010 Four judgments of McKerracher J on notices of motion, including refusing non-party discovery: Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (No 8) [2010] FCA 1108 1 November 2010 Discovery provided by VIP 30 November 2010 Discovery provided by Schutz 9 December 2010 Discovery provided by Schutz 14 December 2010 Hearing to determine comprehensive confidentiality regime. Orders made for immediate discovery prior to mediation before a Registrar by 28 February 2011 15 December 2010 Discovery provided by Schutz 13 May 2011 Orders for further discovery, including exchange of categories by 18 May 2011 and exchange of verified further lists of documents by 16 June 2011 7 June 2011 VIP files categories of documents sought for further discovery 7 June 2011 Schutz files categories of documents sought for further discovery 8 June 2011 VIP files submissions in support of notice of motion (3 June 2011) seeking orders that Schutz re-serve electronic discovery and provide further discovery 9 June 2011 Schutz files submissions in support of proposed minute of order for further discovery 16 June 2011 Schutz files submissions in opposition to VIP's application for further discovery 17 June 2011 VIP files submissions in opposition to the Schutz application for further discovery 20 June 2011 Hearing of both parties' motions for further discovery 11 October 2011 Judgment of McKerracher J (Schutz 14): (a) ordering Schutz to re-serve electronic discovery; (b) amending 14 December 2010 orders regarding redaction; and (c) otherwise declining orders for further discovery 2 December 2011 Consent orders regarding confidentiality application, particulars, discovery and exchange of evidence 6 February 2012 Schutz DSL, serves supplementary discovery in accordance with 2 December 2011 orders (partial) 17 May 2012 The Court extends the deadline for Schutz to provide further discovery 22 May 2012 Schutz serves an interlocutory application that VIP give further discovery by verified list of documents pursuant to r 20.21 FCR 25 May 2012 Schutz serves unverified supplementary discovery in accordance with 2 December 2011 orders as varied (partial)

Trade Practices Act 1974(Cth)

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