Sky Channel Pty Limited v Austar Entertainment Pty Limited & Thoroughvision Pty Limited

CATCHWORDS : Confidentiality regime - Trade rivals - Need to have access to document to obtain legal advice

CASES CITED : Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 63

Sky Channel Pty Limited (Plaintiff) PARTIES : Austar Entertainment Pty Limited (First Defendant) Thoroughvision Pty Limited (Second Defendant)

Mr J Sackar QC, Mr R Dick (Plaintiff) COUNSEL : Mr M White (First Defendant) Dr M Collins (Second Defendant)

Freehills (Plaintiff) SOLICITORS : Tress Cox (First Defendant) Clayton Utz (Second Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST OPEN JUDGMENT NOT AFFECTED BY CONFIDENTIALITY ORDERS OF 25 AUGUST 2005

50122/05 Sky Channel Pty Limited v Austar Entertainment Pty Limited & Thoroughvisions Pty Limited JUDGMENT The application 1 The judgment on the interlocutory hearing in these proceedings [2005] NSWSC 815 was delivered on 11 August 2005. It is unnecessary to repeat any portion of that judgment which informs the context in which Sky brings the present application. 2 The application seeks either:

· to have the confidentiality regime imposed during and following the interlocutory hearing in relation to an agreement dated 3 August 2005 May between the defendants ["the material agreement"] discharged altogether (so that there will be no restriction on the use which Sky can make of the document, other than any restrictions inherent in the use that can be made of documents obtained in the course of proceedings from an opposing party in those proceedings); or · to have that regime extended so as to permit disclosure to various officers or employees of Sky and Tabcorp Holdings Ltd ["Tabcorp"], Sky's ultimate parent, subject only, if anything, to redaction of any monetary amounts which Austar or TVN may satisfy the Court are commercially confidential and appropriate to receive continuing protection. 3 The Court order the subject of the application restricted access to the plaintiff's Counsel and solicitors, excluding in house corporate legal advisers. The principles 4 It is convenient to commence with a short review of the principles. It seems unnecessary to go beyond the outline of those principles to be found in Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 63 at [85]-[91]:

"85 The motions presently before the court acutely raise the fundamental tension between two important policy considerations to be balanced in the proper exercise of the administration of justice. The first is the concern of the court to promote and ensure open justice. In relation to the present issue, this concern is to permit discovery and inspection as a fundamental part of a court process designed to provide the parties with access to documents which are relevant to facts in issue prior to the hearing so as to enable them to properly prepare for the hearing. 86 The second policy consideration focuses upon the private right to keep one's documents to oneself. This consideration recognises the extent to which discovery and inspection constitute a serious and invasive incursion into the privacy of a party to proceedings: "Discovery constitutes a very serious invasion of the privacy and confidentiality of a litigant's affairs. It forms part of the English legal procedure because the public interest in securing that justice is done between parties is considered to outweigh the private and public interest in the maintenance of confidentiality. But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done".

[ Home Office v Harman [1983] 1 AC 280 at 308 per Lord Keith of Kinkel] 87 As Hayne JA [as his Honour then was] pointed out in Mobil Oil at 37-38, "It is because the 'compulsion [to disclose documents on discovery] is an invasion of a private right to keep one's documents to oneself and because 'the public interest in privacy and confidence demands that the compulsion should not be pressed further than the course of justice requires' that both of the litigant and the practitioner obtaining discovery are taken to undertake to the court that the documents so obtained on discovery will not be used for any purpose other than the action in which they are produced: Riddick v Thames Board Mills Ltd [1977] QB 881 at 896 per Lord Denning MR. 88 There is equally no doubt but that the prima facie right of a party to proceedings to have access to all documents properly discovered or produced before hearing may require appropriate qualification if, on balance, the interests of justice so require. The Court has a wide discretion in determining whether any, and if so, what appropriate qualification may be required, depending upon the circumstances before the court in each case.

89 The facts before the Victorian Court of Appeal in Mobil , concerned specific questions affecting trade rivals. Hayne JA's approach to the principles as which, with respect, I accept as entirely correct, included the following: "While it may readily be accepted that a party is ordinarily entitled to discovery and inspection of all discoverable documents in the possession or control of the opposite party (save those for which a valid claim for privilege from production is claimed) it is important to bear steadily in mind that discovery is but a tool to be used in the pursuit of justice and that the right to discovery and inspection is not without its limits. The first and most obvious limit is that a party does not have a right to inspect documents that are discovered if there is a valid claim to privilege from production (as for example on the grounds of legal professional privilege). Secondly, and because the law recognises that the assertion of compulsive power requiring production must be balanced against the needs of justice, a party inspecting the documents of the opposite party may not use them except for the purposes of the action in which discovery is made.

Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise.

Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed. Is that necessary for the attainment of justice in the particular case?" 90 In Telstra Corporation v Australis Media Holdings [unreported Supreme Court of New South Wales, 6 December 1996] McLelland CJ in Eq. having cited the last paragraph from the above excerpt in Mobil Oil , went on to say:

"This applies not only to any officers or employees of the respective plaintiffs but also to any solicitor or counsel who may have ongoing responsibilities in advising the plaintiffs or their commercial associates on matters other than the prosecution of the proceedings for which the confidential information in question may have relevance. For reasons of this kind in some classes of cases it may sometimes be appropriate to confine the disclosure of particular documents to nominated individuals associated with the parties to which disclosure is to be made who have given undertakings to the Court and to the disclosing party, not only restricting the use to which information in the documents may be put, but restricting the future activities of those individuals in representing or advising, or in participating in decision-making for, those parties, at least for some specified period of time. Such a procedure however, has its own disadvantages discussed in the cases including the quarantining of the individual to whom the poisoned chalice passes, from providing their services in particular areas and depriving the parties of the benefit of those services, and also creating a situation where agents of a principal are in that capacity put in possession of information, from access to which the principal is excluded".

91 Again it seems to me that McLelland CJ has correctly set out the relevant principles in this passage." Sky's contentions 5 The contentions put forward by Sky in support of the instant application are to be found set out in the confidential affidavit made by Mr Hoser a partner at Freehill's in the following terms: [Confidential section of judgment. Not to be disclosed - see Court Order

] 6 It will be apparent that paragraph 14 is the critical paragraph. The defendant's contentions 7 The contentions put forward by both Austar as well as TVN generally raise the same matters. The crucial matters are identified in the confidential affidavit made by Mr Fraser a partner of Clayton Utz in the following terms:

[Confidential section of judgment. Not to be disclosed - see Court Order

] Decision The monetary amount set out in clause 12 of the Agreement 8 It seems clear that the monetary amounts set out in clause 12 of the Agreement are commercially sensitive. I accept that if Sky became aware of the monetary amounts in the Agreement they would be at a significant advantage relative to TVN. They would know the amounts which TVN was prepared to accept and pay in return for having its channel transmitted via Austar (and, by analogy, other pay television providers). Sky would be able to take that knowledge into account when negotiating with Southern Cross and other pay television providers in order to make the Sky Channel relatively more attractive to those providers than the TVN Channel. TVN would be at a corresponding disadvantage. 9 For those reasons as was accepted, no variation in relation to the existing confidentiality regime is appropriate qua those monetary amounts. [ 10 .] The observations made by Hayne JA (as his Honour then was) in Mobil Oil emphasised the problem where a party obtaining access to confidential documents by discovery and inspection [here as part of the regular course leading up to a final hearing] is a trade rival. On the other hand the central focus of the Court concerns the administration of justice and the Court must be astute to weigh extremely closely the substance of a claim of a particular necessity for solicitors to take instructions in relation to ongoing litigation. Also the precise nature of the information sought to receive continued protection under the confidentiality regime must be carefully examined. A delicate balance is involved in the whole of the exercise of determining the proper exercise of the Court's discretion. 11 [ ] 12 Clauses 14.2-14.4 as well as clause 18 fall into an entirely different category which it seems to me go directly to issues which are to be litigated in these very proceedings. The question which arises for determination is as to whether the confidentiality regime with respect to these clauses should now be relaxed and if so how. 13 It is correct to say that Sky is entitled to be advised as to the assessment of the strength of its claim against TVN [ .] 14 I do not see that lies in the mouth of either Austar or TVN to deny Sky its entitlement to receive legal advice. Indeed during argument it appears to have been accepted by Austar that provided there was some realistic prospect of pleading some other cause of action, there was likely substance in Sky's application to lift the confidentiality regime for the purpose of obtaining instructions: cf [transcript 14.15-.25] 15 There appears to be some measure of accommodation likely to come forward in the event that Sky would be minded to pursue a security for costs application. The problem with the Austar/ TVN contention that the matter is presently preliminary is again that neither Austar nor TVN is entitled to dictate the occasion when Sky may legitimately seek and receive legal advice on an interlocutory matter. 16 To my mind a close consideration of the centrality of clauses 14.2-14.4 [as well as clause 18] to the issues in these proceedings means that the existing confidentiality regime qua these particular clauses should be in part discharged. The appropriate order is to vary the confidentiality regime [but only so as to permit disclosure of the content of these sub-clauses to Mr Caillard, the chief executive of Sky who is required to subject himself to an express undertaking to the Court to keep that information confidential to himself and to only to use that information for the purpose of giving instructions to Sky's external solicitors and counsel]. 17 The reality is that the complex of litigation and the tactical parameters essentially entitle Sky to a full awareness of these provisions. Apparently an important occasion is rapidly approaching in terms of the 2 September directions hearing where all parties will be required to indicate their instructions as to the future direction of these and other proceedings. It would be inappropriate that the court presently tie the hands of Sky in obtaining legal advice prior to 2 September: · for the purpose of investigating precisely which causes of action it proposes to proceed within these proceedings; · whether it intends to endeavour to have these proceedings heard together with the earlier commercial List proceedings which have been on foot for some time; · to investigate on an informed basis what its approach should be to the threatened application to have these proceedings crossed vested to the Federal Court. 18 It is appropriate to reiterate that [ ] subclauses in question fall entirely outside of confidential questions concerning monetary amounts treated with in negotiations between Austar and TVN. Whilst the existence of these clauses are capable of proving an embarrassment to both Austar as well as TVN, the moving finger has written and the exigencies of the current litigation simply entitle Sky to determine its way forward on an informed basis concerning the existence of these clauses. The law imposes a continued obligation both upon litigants as well as solicitors obtaining access to documents under compulsion who "are taken to undertake to the Court that [the documents so obtained] will not be used for any purpose other than the action in which they are produced": per Hayne JA in Mobil supra at [87]. That, especially in light of the express undertaking to be procured from Mr Caillard, provides a continuing protection apt to be acknowledged in the present circumstances.

Short Minutes of Order 19 The parties are to bring in Short Minutes of Order

I certify that paragraphs 1 - 19 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 25 August 2005

      Susan Piggott
      Associate

During the course of delivering the above judgment the parties addressed on the issue of whether or not the confidentiality regime could be also lifted so as to permit access to the unredacted form of judgment to the plaintiff's in-house counsel Ms Jo Madsen and Ms Eve McGregor. It seems to me appropriate to so permit and I so order. Likewise, the principled exercise of the Court's discretion is to permit access to the whole of the agreement excluding the monetary amounts referred to in clause 12 to Ms Jo Madsen and Ms Eve McGregor and also to permit access to those in-house counsel to clauses 14.2-14.4 (as well as clause 18), subject to their giving an express undertaking to the Court to keep all of the above information confidential to themselves and to only use that information for the purpose of giving instructions to Sky's external solicitors and counsel. The short minutes of order should make provision accordingly.

I certify that the above paragraph Is a true copy of the addendum to judgment herein of the Hon. Justice Einstein given on 25 August 2005

      Susan Piggott
      Associate

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.