Skyscanner Limited v Hotels Combined Pty Ltd

Supreme Court of NSW|2016-03-23|Before: Slattery J, Ms P, Mr J

Judgment

This is the Court's second judgment in these proceedings. The Court's principal judgment reviewed the decision of the Registrar in Equity ordering the plaintiff/cross-defendant, Skyscanner, to provide discovery of five categories of documents to the defendant/cross-claimant, Hotels Combined. The Court decided in the principal judgment that the Registrar's decision should stand but the Registrar's decision should be varied by ordering Hotels Combined to file its lay evidence before Skyscanner is required to give discovery: Skyscanner Limited v Hotels Combined Pty Ltd [2016] NSWSC 183. The Court directed the parties to bring in short minutes of order to give effect to the Court's reasons.
The parties have been unable to agree upon the form of orders flowing from the principal judgment. They disagree about two issues: (1) which documents are confidential and what access regime should apply to the documents of which discovery has been ordered; and (2) what is the appropriate order for costs upon the outcome of the Review Motion ("the Motion").
The full background of the dispute between these two parties is set out in the principal judgment. These reasons should be read together with the principal judgment. Parties, events and things are referred to in this judgment in the same way as they are in the principal judgment.

(a) Which documents are confidential?

Hotels Combined disputes that all the five categories of documents that Skyscanner must discover have commercial sensitivity sufficient to warrant imposition of a special confidentiality regime. Hotels Combined accepts that the documents within category (c), being documents recording any contractual arrangements agreed between Skyscanner and booking providers are commercially sensitive such as would warrant the imposition of a confidentiality regime. Hotels Combined accepts that knowledge of such arrangements might give it a competitive advantage in its own negotiations with those booking providers. Hotels Combined accepts there should be some limitations on the disclosure of category (c) documents. So Hotels Combined submits that category (c) documents could be limited to external solicitors and counsel and Hotels Combined's independent expert Mr Potter. But Hotels Combined also seeks that category (c) documents be disclosed to a commercial manager of Hotels Combined, Mr Sunny Gupta so that he can give instructions to Hotels Combined's solicitors. The extent of appropriate disclosure is dealt with in section (b) below.
But Hotels Combined says the other categories of disclosure are not commercially sensitive, as it is not sufficient that information be merely confidential in the sense that it is not publicly available, as something more is required to justify non-disclosure in the face of the implied obligation on the opposing party not to use the documents other than for the purposes of the proceedings.
Even accepting that Hotels Combined and Skyscanner are commercial rivals, Hotels Combined submits that Skyscanner has not established that documents in categories (a), (b), (d) and (e) concern trade secrets and might be able to be used to the commercial prejudice of Skyscanner. In Hotels Combined's written submissions it pointed to a lack of evidence about such prejudice. Before the hearing that alleged deficiency was cured by the filing and service of a supplementary affidavit of Simone Mitchell of 22 March 2015, which Skyscanner read on the application. Skyscanner used Ms Mitchell's earlier evidence in the proceedings and her 22 March 2016 affidavit in support of its contention that the documents were commercially sensitive such that they could, if discovered, be used to Skyscanner's prejudice.
As to categories (a) and (b), Ms Mitchell's evidence is that there is a real risk that when material in these two categories is read together it will disclose the commercial terms that Skyscanner has negotiated with its booking providers. Taken together these two categories will disclose the revenue earned by Skyscanner and the number of referrals that Skyscanner generated in the same period, which may then allow a person to derive the referral fee that Skyscanner has negotiated with its booking providers.
What Ms Wass SC submits on this subject is compelling. If one has referral numbers and total revenue, it may be possible to calculate the commercial rate that Skyscanner has negotiated with its booking providers. Even though there is no specific breakdown of revenue per individual booking provider, so that the rate per booking provider can be isolated, an overall average rate per booking would nevertheless be derivable. The Court needs little persuasion that even the average referral fee that Skyscanner has negotiated with its booking providers is commercially sensitive information. It represents the benchmark figure that Hotels Combined would probably have to beat in negotiations with the very same booking providers to gain a commercial advantage over Skyscanner when dealing with these booking providers. The provision of the combined information has the potential, in my view, to do commercial damage to Skyscanner that is not answered by the mere provision of the implied undertaking on behalf of Hotels Combined. Particularly where commercial executives such as Mr Sunny Gupta at Hotels Combined might acquire the information, the potential damage to Skyscanner is likely, because as the authorities say, the information "cannot be forgotten" (Mobil, at p 40), and misuse of it is unlikely to be detected.
But the provision of category (a) information on its own in my view would not have this prejudicial effect. It is the combination of category (a) and category (b) information which would have the prejudicial effect. Without category (b) information the average referral fee, or any subsets of that average, could not be derived. Disclosure of category (a) information to a nominated person at Hotels Combined such as Mr Gupta will give someone at Hotels Combined a framework with which to give some instructions to the solicitors for Hotels Combined and the expert Mr Potter. And of course, it is always open to Hotels Combined, if more is required before trial, to seek to vary the access orders now being made.
Skyscanner must justify the restricted access it seeks. But the nature of the average referral fee in my view does this in itself. Hill J's observations in Lenfest remind the Court of the need for an applicant to show currency of this information. But of its very nature, a referral fee can be expected to have currency for some years as contracts continue and it may act as a benchmark for contract renewal. Skyscanner has advanced enough evidence to show that category (b) revenue information is sufficiently commercially sensitive that it should not now be disclosed to a trade rival.
Disclosure of the information in categories (d) and (e) could also cause prejudice to Skyscanner in the hands of a commercial rival. The information of its very nature, recording the number of users, visit sessions, and flight search queries would be likely in my view to show patterns of usage of Skyscanner's sites that in a combined form in the hands of a rival could be used to gain insight into the commercial effects of Skyscanner's own business decision making that could prejudice Skyscanner. Skyscanner's own evidence through Ms Mitchell is that even within Skyscanner's own operations only a limited number of teams of employees have access to all this information together and that they only do so for specific tasks and that the disclosure of such information to consultants is heavily restricted by contract. The Court is satisfied that category (d) and (e) information is sufficiently commercially sensitive that it could prejudice Skyscanner's business in the hands of a commercial rival.

(b) To Whom May Access be Granted?

Skyscanner contends that access to all categories of documents to be discovered in accordance with the Court's orders should be limited to external counsel and solicitors and Hotel Combined's expert. At one stage Hotels Combined suggested access should be extended to current and former employees of Hotels Combined. But request for access for former employees was abandoned in course of the hearing. As indicated above Hotels Combined sought access by Mr Sunny Gupta, upon the implied undertaking, even to category (c) documents.
The logical consequence of the Court's reasoning above is that Mr Gupta and only Mr Gupta within Hotels Combined, can be given access to category (a) information but access to category (a) and all other categories should otherwise be limited to Hotels Combined's and Skyscanner's own legal advisors and experts. The Court has fashioned orders below that should achieve this result. If the parties are not satisfied with their form and wish to vary them by consent then liberty to apply is granted for that purpose.

Issue 2: Costs

Skyscanner submits that the appropriate order on the outcome of the Review Motion is that the costs of the Motion be each party's costs in the proceedings. Skyscanner submits that the burden of costs in this dispute should only be allocated once the result of the proceedings is known. Skyscanner submits this is a typical interlocutory dispute in which costs should abide by the outcome of the proceedings.
Hotels Combined submits in answer that Skyscanner should pay Hotels Combined's costs of the Motion. Hotels Combined submits that it was successful in resisting the Review Motion and should have its costs.
Skyscanner developed its costs argument as follows. The general rule that costs follow the event is not of immediate application to interlocutory applications: O'Keeffe Nominees Pty Ltd v BP Australia Ltd (No 2)(1995) FCR 591; (1995) 128 ALR 718 ("O'Keeffe Nominees") at 598 - 599, per Spender J, applied in Annova Pty Ltd v Wholesale Brands Pty Ltd [2015] NSWSC 1391 at [52]. Skyscanner submitted that in O'Keeffe Nominees Justice Spender did not classify the outcome of an interlocutory application as an "event" because his Honour there reasoned that the general proposition that a successful party should have its costs is ordinarily directed to a consideration of the litigation as a whole and it is "going too far to say that it necessarily applies to every interlocutory step in the proceedings": O'Keeffe Nominees at [38].
Skyscanner's argument gains some support from the form of Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.7 which governs the costs of interlocutory applications. Which provides "unless the Court otherwise orders" the costs of interlocutory applications including reserve costs "are to be paid and otherwise dealt with in the same way as the general costs of the proceedings": UCPR, r 42.7(1).
Skyscanner submits that this general principle should be applied here; that there is no basis to order otherwise; and that the costs outcome of the Motion should be decided no earlier than when discovery has been given, expert evidence served, and proper consideration given to whether or not the documents sought in discovery were in fact necessary to be discovered.
Hotels Combined's answers to these submissions are persuasive. Hotels Combined says that it was successful on the only issue for determination on the Motion. Hotels Combined submits that the discovery issue was a discrete part of the proceedings concerning whether the Registrar's decision in relation to discovery should be set aside and it did not concern any other aspect of the proceedings, for example, any question of the timetabling of Hotels Combined's lay evidence. Moreover, Hotels Combined submits it was wholly successful in its opposition to the application brought by Skyscanner for review of the Registrar's decision as the Court upheld the entirety of the Registrar's decision and that Skyscanner's arguments in respect of each category of discovery and its overarching contentions as to why discovery should not have been ordered were all unsuccessful. Hotels Combined points out that the Registrar had already granted the Motion for discovery and made a costs order in Hotels Combined's favour. Hotels Combined submits therefore that after the determination of the review that Hotels Combined should be no worse off.
The relevant legal principles are clear. The question of whether costs should be dealt with, other than in the same way as the general costs of the proceedings, under UCPR, r 42.7(1) is often considered at the same time as whether or not costs should become payable other than at the conclusion of the proceedings, the discretion exercised under UCPR, r 42.7. Common considerations often arise in the exercise of both discretions. But it is only the former discretion which is in issue here. The Court will order that the costs of an interlocutory step in proceedings be dealt with other than in the same way as a general costs of the proceedings under UCPR, r 42.7, and its predecessors, where the decision relates to the determination of a discrete or self-contained question such as, for example, an unsuccessful attempt to strike out the proceedings or to apply for summary judgment: Richards v Kadian [2005] NSWCA 373 at [6] -[7] and Perpetual Trustee Company v McAndrew [2008] NSWSC 790. Where costs are unnecessarily incurred the Court can sometimes exercise its discretion to make a costs order other than one that follows the general costs of the proceedings: All Services Australia Pty Ltd v Telstra Corp Ltd (2000) 171 ALR 330; [2000] FCA 375.
Hotels Combined also relies on Hamod & Anor v State of New South Wales & Anor [2007] NSWSC 707 ("Hamod"), a decision of Simpson J in which her Honour was considering an appeal from the decision of an Associate Justice on a discovery motion; and where the appeal was unsuccessful. Her Honour ordered the unsuccessful appellant to pay the costs of the discovery application and she also awarded the payment to be made forthwith (not an order sought here). Her Honour described the exercise of her costs discretion in Hamod as "a classic instance of a discrete issue having arisen and being determined adversely to the first defendant": Hamod at [12]. Her Honour also exercised her discretion to make costs payable forthwith because "the substantive proceedings have some distance to go before they are likely to be resolved".
Uninstructed by authority I would have thought there was much to commend Ms Wass SC's argument that one does not really know who should bear the costs burden of all the various steps to achieve discovery in proceedings until one also knows whether that discovery resulted in a successful outcome for one party or the other.
But Hamod provides a useful guide here. Even if Skyscanner is entirely successful in these proceedings and the discovery that has been ordered proves futile in making out Hotels Combined's Cross-Claim, the overall burden of both Hotels Combined's and Skyscanner's costs has been unnecessarily added to by the prosecution of this Motion for review. Had the Motion not been pursued Skyscanner and Hotels Combined would each be in much the same position that they are now, two trade rivals having to fashion a discovery regime in anticipation of final hearing, discovery having been ordered, except neither of them would have incurred the costs of the Motion. In that sense the outcome of the Motion truly was a discrete issue which generated unnecessary costs and a costs order should now be made in Hotels Combined's favour. But Hotels Combined does not apply to have costs payable forthwith and so no such order is made.
But Hotels Combined should not have all its costs of the Motion. The Court did vary the Registrar's orders on review to require Hotels Combined to put on its lay evidence on the Cross Claim before expert evidence is filed: principal judgment at [77].
One important issue on the Motion was whether Hotels Combined's request for disclosure satisfied the exceptional circumstances requirement of Practice Note SC Eq 11, clause 4 requiring disclosure before evidence was closed. This issue was a discrete sub-argument in the proceedings as is evidenced by the Court's consideration of it: principal judgment at [62] - [77]. On this issue Skyscanner was successful in requiring Hotels Combined to serve some further evidence as a condition of disclosure taking place.
Because of this partial success, the appropriate result is one, in my view, which would deny Hotels Combined some of its costs of the Motion. Considering the relative significance of these issues the appropriate costs order is that Skyscanner pay two-thirds of Hotels Combined's costs of the Motion.

Other Issues

The parties disagreed about other minor aspects of the appropriate orders to be made. Skyscanner sought an order requiring Hotels Combined to notify it in writing whether it still pursued all five categories of documents, after it had served its lay evidence. But Mr Williams on behalf of Hotels Combined declared in submissions that although the lay evidence was not finalised Hotels Combined had anticipated it would need all of the five categories that had already been sought.
Skyscanner's claimed order is unnecessary. The relevance of the documents of which discovery is sought is determined by the pleadings, which are already closed. The Court's direction for the filing of lay evidence is more to assist the parties to efficiently file just one set of expert evidence as the principal judgment pointed out (at [77]).
There was also some debate about the time at which the lay evidence should be served. Because some of Hotels Combined's evidence may have to come from ex-employees the Court will give Hotels Combined the slightly longer period that it seeks for the filing of this lay evidence. There was also debate about vacating the order for costs the Registrar made on the motion against Skyscanner. But the result indicates no basis to disturb the Registrar's costs order.

Conclusions and Orders

On the first issue the Court has ordered a confidentiality regime in respect of each of the categories (a) to (e). The details of that regime are set out in the orders below. On the second issue the Court will order, for the reasons stated, that Skyscanner pay two-thirds of Hotels Combined's costs of the Motion. The Court orders: 1. On or before 26 April 2016, the Defendant/Cross-Claimant shall file and serve its lay evidence on the Cross-Claim (including all non-expert evidence necessary to provide the foundation of its damages claim on the Cross-Claim). 2. On or before 24 May 2016, the Plaintiff/Cross-Defendant shall provide discovery of the documents referred to in categories (a) to (e) referred to in prayer for relief 1 in the Defendant/Cross-Claimant's motion filed on 16 April 2016. 3. On or before 21 June 2016, the Defendant/Cross-Claimant shall file and serve its expert evidence in chief on the Cross-Claim. 4. For the purposes of these Orders, all documents discovered by the Plaintiff/Cross-Defendant pursuant to Order 2, including any copies hereof (in whole or part), are Confidential Documents. 5. Until further order, inspection of the Confidential Documents in categories (b), (c), (d) and (e) is restricted to: 1. the Plaintiff/Cross-Defendant; 2. external counsel and external solicitors retained by either party; 3. independent experts retained by either party provided they have signed and served on the Plaintiff/Cross-Defendant a confidentiality undertaking in the terms of the undertaking annexed to these orders and marked Annexure A (Confidentiality Undertaking); 4. other individuals as agreed in writing from time to time provided they have signed and served on the Plaintiff/Cross-Defendant a Confidentiality Undertaking; 1. Until further order, inspection of Confidential Documents in category (a) is restricted to the same persons as in Order 5 but the class of other individuals referred to in Order 5(d) may without agreement nevertheless include Mr Sunny Gupta, upon him signing and serving on the Plaintiff/Cross-Defendant a Confidentiality Undertaking. 2. The proceedings shall be listed for further directions before the Registrar on 6 July 2016. 3. The parties have liberty to apply on three days written notice. 4. The word "Document" in these orders has the meaning ascribed to that word by the Evidence Act 1995 (NSW) and includes without limitation, all correspondence, emails, minutes of meetings, memorandum, file notes, diary notes, emails, accounting records, financial statements and electronic records. 5. Order that Skyscanner pay two-thirds of Hotels Combined's costs of the Motion. 6. Grant liberty to apply on three working days' notice. ANNEXURE A IN THE SUPREME COURT OF NEW SOUTH WALES SYDNEY REGISTRY EQUITY DIVISION No: 2014/345793 SKYSCANNER LIMITED Plaintiff/Cross-Defendant HOTELS COMBINED PTY LTD (ACN 122 130 554) Defendant/Cross-Claimant Confidentiality Undertaking I, _________________________________ of ____________________________________________ undertake to the Court and the Plaintiff/Cross-Defendant that, subject to further order of the Court: 1. I will keep secure and confidential each and every document discovered by the Plaintiff/Cross-Claimant pursuant to order 3 of the orders of the Supreme Court of New South Wales on in relation to Supreme Court of NSW Proceeding No. 2014/345793 (the Proceeding) that is or has been designated as Confidential (the Confidential Documents). 2. I will not directly or indirectly disclose Confidential Documents, any copies of those documents or their contents to anyone except: (a) Employees of DLA Piper Australia; (b) Counsel retained to represent the Plaintiff/Cross-Defendant in this Proceeding; (c) External lawyers or counsel retained to represent the Defendant/Cross-Claimant in this Proceeding who have been instructed to comply with the confidentiality provisions of this undertaking; (d) Expert witnesses in this action who have signed a similar confidentiality undertaking; (e) Individuals whom the Plaintiff/Cross-Defendant has agreed in writing can access the Confidential Documents and who have signed a similar confidentiality undertaking; (f) Any member of the Supreme Court of NSW and its staff in connection with this Proceeding, provided the Confidential Documents, any copies of them or their contents are noted as confidential; or (g) As required by law. 3. I will not use the Confidential Documents, any copies of them or their contents for any purpose other than the conduct of this Proceeding. 4. Unless I am an external lawyer retained to represent the parties, I will destroy all copies of the Confidential Documents once this Proceeding has been discontinued, settled or finally determined and give the Plaintiff/Cross-Defendant's lawyers written confirmation of the destruction. For the purpose of this clause the action will not be treated as finally determined until all appeals have been determined, or the time in which any appeal may be brought has expired. 5. This undertaking does not prevent me from disclosing material which is in the public domain, comes into the public domain or is received by me outside the context of this Proceeding, unless the material comes into the public domain or is received by me because of a breach of this undertaking. 6. I may vary this undertaking with the written consent of the Plaintiff/Cross-Defendant, its lawyers or the Court. 7. Unless the context otherwise requires, without in any way limiting the generality of this undertaking, the reference to documents, records or copies shall include information stored electronically. 8. This undertaking is given on an interim basis until I am released from it in whole or part in writing by the Plaintiff/Cross-Defendant or the Supreme Court of NSW, without making any admission as to the confidentiality of the Documents or the contents thereof.

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. Decision last updated: 24 March 2016

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