Bryer Merchandisers Pty Limited v Nike Australia Pty Limited [2002] FCA 880

FEDERAL COURT OF AUSTRALIA

Bryer Merchandisers Pty Limited v Nike Australia Pty Limited [2002] FCA 880

BRYER MERCHANDISERS PTY LIMITED & ORS v NIKE AUSTRALIA PTY LIMITED N 1402 of 1999

WHITLAM J 17 JULY 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 1402 of 1999

BETWEEN: BRYER MERCHANDISERS PTY LIMITED

FIRST APPLICANT

COBRA HOLDINGS PTY LIMITED

SECOND APPLICANT

ST GEORGE WHOLESALERS PTY LIMITED

THIRD APPLICANT

MHP PTY LIMITED

FOURTH APPLICANT

AND: NIKE AUSTRALIA PTY LIMITED

RESPONDENT

JUDGE: WHITLAM J

DATE OF ORDER: 17 JULY 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The applicants bring in short minutes of a proposed order to give effect to these reasons for judgment. 2. The costs of the applicants' motion (including any reserved costs) be part of the parties' costs of the proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 1402 of 1999

BETWEEN: BRYER MERCHANDISERS PTY LIMITED

FIRST APPLICANT

COBRA HOLDINGS PTY LIMITED

SECOND APPLICANT

ST GEORGE WHOLESALERS PTY LIMITED

THIRD APPLICANT

MHP PTY LIMITED

FOURTH APPLICANT

AND: NIKE AUSTRALIA PTY LIMITED

RESPONDENT

JUDGE: WHITLAM J

DATE: 17 JULY 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The applicants have moved the Court for orders with respect to discovery given, and to be given, by the respondent. 2 Discovery to date has been given in consequence of consent orders made on 27 April 2001 directing (inter alia) the parties to "endeavour by 29 June 2001 to reach agreement on categories of documents for discovery". On 29 June 2001 the applicants proposed 66 categories for the respondent's discovery. A vigorous correspondence about the proposed categories then ensued between the parties' solicitors. By 24 August 2001 the respondent's solicitors were able to forward to the applicants' solicitors a list of 40 "agreed" categories for the respondent's discovery. On 17 September 2001 the respondent filed its list of documents. There was further correspondence about the sufficiency of the respondent's discovery. 3 On 13 November 2001 consent orders were made providing (inter alia) that: "In the event that discovery is not complete, liberty to apply for a return date for a motion and directions within 7 days". On 11 December 2001 the applicants filed notice of a motion for orders under O 15 r 5 and r 8 of the Federal Court Rules. That is the motion presently before the Court. 4 The respondent's solicitors wrote to the applicants' solicitors on 17 December 2001: "In order for us to understand what further discovery is sought by the Applicants and to respond in a meaningful way to the Notice of Motion, please provide us with a list of those documents, or categories of documents, that have not already been discovered by the Respondent and that the Applicants seek discovery of in their Notice of Motion. It is unclear to us exactly what additional documents are sought." The applicants' solicitors replied on 21 December 2001. They requested discovery of documents by reference not to the "agreed" categories, but by reference to different categories. These categories were evidently devised after inspection of the respondent's documents. The applicants' solicitors also requested other documents on several topics suggested by the employee of an economic consultant whom the applicants propose to qualify as an expert in the proceeding. In addition, there was a quibble about the respondent's compliance with subrr 6(4), (5) and (6) of O 15. On 17 January 2002 the respondent served a supplementary list of documents, and on 30 January 2002 the respondent's solicitor faxed the applicants' solicitors, insisting that their client had given discovery in accordance with the "agreed" categories. 5 This proceeding involves multiple claims by each of the applicants, who are retailers of sports shoes, sports clothes and sports merchandise at various locations in the Sydney metropolitan area. The respondent is the sole distributor to retailers within Australia of such goods which bear the name or mark "Nike" or feature the so-called "swoosh" logo. It also retails such Nike merchandise from two of its own stores in the Sydney metropolitan area. Each of the applicants claim damages from the respondent in respect of causes of action in contract, in negligence and under the Trade Practices Act 1974. The statutory causes of action are based on alleged contraventions of ss 46, 48 and 51AC of that Act. So far as the alleged misuse of market power is concerned, the product market pleaded by the applicants is confined to Nike merchandise. 6 On 22 February 2002 the respondent was given leave to file in Court an amended defence pleading a market for products described more generally as sports shoes, sports clothes and sports merchandise in respect of the alleged s 46 contravention. The respondent undertook to give discovery in respect of the case so pleaded. 7 The applicants' challenge to the sufficiency of the discovery given to date by the respondent depends in part on the hearsay evidence of one Graeme Dudley. He was the respondent's sales manager for New South Wales up until March 1994. Mr Dudley described catalogues and other marketing documents used by the respondent during his employment. This case is largely concerned with events after Mr Dudley left the respondent. However, the applicants also rely on the contents of five specific documents that were discovered (three of which are dated respectively 8 June 1995, April 1997 and 12 January 1998, one of which is described as "notes from … w/c 17th November", and the remaining one of which is undated). The submission is made, in effect, that it can be inferred from this evidence that other documents within the "agreed" categories are, or were, in the respondent's possession, custody or power. The weight of this evidence is so slight that I am quite unwilling to draw such an inference. Moreover, evidence was given by Lucy McKernan, who is the employed solicitor with the carriage of this matter at the respondent's solicitors. Although she acknowledged that she did not notice certain references in one of the five discovered documents mentioned above, I am confident that she has most competently discharged her professional responsibility in obtaining instructions in respect of the "agreed" categories. 8 There is a slight question mark over the respondent's discovery of emails. The applicants' solicitors raised this subject in correspondence with the respondent's solicitors after notice of the present motion was filed. The respondent then filed an affidavit by Darren Haysom, the manager responsible for its information technology and computer network infrastructure. Three weeks later and after the hearing of the motion had been adjourned, the applicants' solicitors requested information about the respondent's "back-up" systems and recovery procedures. The applicants read Mr Haysom's affidavit at the hearing. Counsel for the applicants sought to explore this topic in cross-examination of Ms McKernan. After objection, I disallowed such questions, but enough was said beforehand to indicate that this area of discovery may require a little more attention as part of the respondent's continuing obligation under O 15 r 7A. In any event, in my opinion, the applicants have not made out a case on any basis for an order under O 15 r 8. 9 That leaves for consideration the application for an order under O 15 r 5. The general principles and the current practice governing discovery in the Court have been explained recently in Reading Entertainment Australia Pty Ltd v Birch Carroll & Coyle Pty Ltd [2002] FCAFC 109 by Beaumont J at [63] –[71]. 10 The applicants seek an order that the respondent give discovery by reference to further categories, some of which modify those already "agreed" and nine of which were suggested by the employee of the economic consultant mentioned. As to the suggested modification of certain "agreed" categories, the applicants have not established that such refinements are necessary save in one minor respect. The "agreed" category 40 was the subject of debate in the O 15 r 8 application by reference to document no. 31 in the respondent's supplementary list. Based on the contents of that document, the applicants seek discovery of policies relating to "product segmentation and selective distribution or timing of delivery of new ranges". I think it likely that such documents are already covered by the agreed categories, but so there is no doubt it is desirable to specify such a category. So far as the categories suggested by the economic consultancy are concerned, it is obvious that there is a great deal of overlapping in subject matter with the categories already "agreed". Nonetheless counsel for the respondent concedes that those topics may pick up some documents not already covered. It is not submitted that such discovery would be oppressive. Accordingly I propose to order that the respondent give discovery in respect of the ten categories I have identified. 11 This discovery dispute has been exacerbated by the manifest mistrust of the respondent exhibited by the applicants' solicitors. This sentiment is reflected in the mildly hysterical tone of their correspondence. I should say, therefore, that any such suspicion so far as it attaches to what I have seen of the conduct of the present litigation is entirely baseless. I do not find it surprising that the respondent's solicitors should react in the way they did to any hint that their client had not given, and would not continue to give, the agreed discovery. The orders I am proposing to make could, and should, have been sought in a less fevered fashion. The filing of the motion was certainly premature. Nonetheless, the applicants have