FEDERAL COURT OF AUSTRALIA United Salvage Pty Ltd v Louis Dreyfus Armateurs SAS [2005] FCA 1549 PRACTICE AND PROCEDURE – subpoena to produce documents – application to set aside subpoena – whether documents sought are relevant to an issue in the proceedings –whether documents sought are reasonably necessary for a legitimate purpose of the litigation – witness will only be precluded from seeing commercially confidential documents in exceptional circumstances Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 cited Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1996) 34 IPR 350 cited SmithKline Beecham (Australia) Pty Ltd v Chipman (2003) 131 FCR 500 cited Hotrox Charcoal Co v Gebauer Nominees Pty Ltd [2002] WASCA 293 distinguished Mobil Oil Australia Ltd & McDonalds Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 distinguished W R Kennedy, Law of Salvage (5th ed, 1985) UNITED SALVAGE PTY LTD, GLADSTONE TUG SERVICES PTY LTD & QUEENSLAND TUG AND SALVAGE CO PTY LIMITED v LOUIS DREYFUS ARMATEURS SNC, LOUIS DREYFUS ARMATEURS SAS, SOCIETE ANONYME LOUIS DREYFUS ET COMPAGNIE & OTRAMARE SHIPPING CO S A NSD 246 OF 2002 TAMBERLIN J SYDNEY 2 NOVEMBER 2005 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 246 OF 2002 IN ADMIRALTY BETWEEN: UNITED SALVAGE PTY LTD FIRST PLAINTIFF GLADSTONE TUG SERVICES PTY LTD SECOND PLAINTIFF QUEENSLAND TUG AND SALVAGE CO PTY LIMITED THIRD PLAINTIFF AND: LOUIS DREYFUS ARMATEURS SNC FIRST DEFENDANT LOUIS DREYFUS ARMATEURS SAS SECOND DEFENDANT SOCIETE ANONYME LOUIS DREYFUS ET COMPAGNIE THIRD DEFENDANT OLTRAMARE SHIPPING CO S A FOURTH DEFENDANT JUDGE: TAMBERLIN J DATE OF ORDER: 2 NOVEMBER 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The subpoena issued on 19 September 2005 to Mr Dale Cole be set aside. 2. The plaintiffs pay the defendants' costs on the application to set aside the subpoena. 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 NSD 246 OF 2002 IN ADMIRALTY BETWEEN: UNITED SALVAGE PTY LTD FIRST PLAINTIFF GLADSTONE TUG SERVICES PTY LTD SECOND PLAINTIFF QUEENSLAND TUG AND SALVAGE CO PTY LIMITED THIRD PLAINTIFF AND: LOUIS DREYFUS ARMATEURS SNC FIRST DEFENDANT LOUIS DREYFUS ARMATEURS SAS SECOND DEFENDANT SOCIETE ANONYME LOUIS DREYFUS ET COMPAGNIE THIRD DEFENDANT OLTRAMARE SHIPPING CO S A FOURTH DEFENDANT JUDGE: TAMBERLIN J DATE: 2 NOVEMBER 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This application arises out of a claim by the plaintiffs for salvage reward equivalent to 8-10% of the value of the salved ship, freight, stores and other appurtenances, excluding cargo and bunkers, which equates to a figure of between $3.538 million and $4.423 million, together with expenses of $137,679.00 and, in addition, special compensation and interest. 2 The present application by the defendants is to set aside a subpoena addressed by the plaintiffs to Mr Cole, a witness proposed to be called on the hearing by the defendants. 3 The subpoena is said to be for the purpose of supporting a claim by the plaintiffs that Mr Cole should not be shown what is said to be confidential commercially sensitive material discovered by the plaintiffs. The basis for the objection is that part of the information discovered either identifies or permits the identification of the cost base of the plaintiffs and that it would be detrimental to the plaintiffs if that material or information were made available to trade rivals either directly or indirectly. 4 It is not suggested that Mr Cole might deliberately or intentionally breach the confidentiality undertaking which it is foreshadowed will be proffered by him to the Court but rather that, having regard to Mr Cole's clientele and the role he plays in providing advice to bodies and persons engaged in maritime activities, the confidential material might be used or disclosed inadvertently or accidentally to trade rivals of the plaintiffs. The information includes complex financial spreadsheets and summarised financial data specifically addressing the plaintiffs' cost base, which is relevant for the purpose of making good the salvage claim. 5 Mr Cole, on the evidence as it presently stands, has provided advice as a consultant and financial models over the last six years to various Australian port authorities and port corporations and overseas port companies. The plaintiffs contend that these entities are potential competitors in an area which can involve highly competitive tendering processes for towage and salvage services throughout Australia. By way of illustration, in the curriculum vitae of Mr Cole furnished to the plaintiffs by the defendants, there is a reference to Mr Harvey, the General Manager of Port Services for Ports of Auckland Ltd, as being a referee for Mr Cole. Ports of Auckland Ltd provides towage and salvage services in New Zealand and is claimed to be a real potential competitor in the Australian market. The plaintiffs submit that they are entitled at this stage to seek information relevant to identifying the nature of the risk in the provision of confidential commercially sensitive financial material to Mr Cole with a view to preventing Mr Cole having access and that the subpoena should not be set aside because it is relevant to an assessment of the degree of risk in making the documents available to Mr Cole. 6 The subpoena seeks the production of communications and records from Mr Cole offering to provide consulting services to various companies and bodies in Australia, New Zealand and Singapore over a five year period, together with any agreements, letters of engagement, fee notes, invoices and other records relating to tug, towage or salvage services. In addition, the subpoena seeks the production of communications and records of Mr Cole relating to a House of Representatives Standing Committee. 7 The defendants seek to set aside the subpoena on the ground that the material sought is not relevant to any issue in the proceedings but is rather for the purpose of evaluating the appropriateness of Mr Cole as an expert by reference to the extent of the risk of inadvertent disclosure by him. The defendants submit that the documents sought under the subpoena are not reasonably necessary for any legitimate purpose of the litigation. Further, as a matter of discretion and the balance of the competing interests of justice, it is said that the confidential commercial interests of Mr Cole should take precedence to the confidential interests of the plaintiffs, who have brought the proceedings and who must rely on the claimed confidential material to prove their case. The plaintiffs must lead the confidential material as an essential part of their case on damages and, therefore, it is not appropriate to prevent Mr Cole having access to those documents where a comprehensive undertaking as to confidentiality will be given. In addition, there is the principle that discovered documents must not be used by persons having access, without the leave of the Court, for any purpose other than the litigation in which the documents are discovered. 8 As a further alternative submission, the defendants submit that if the whole subpoena is not set aside, pars 3 and 4 are deficient because the plaintiffs have not identified with precision why invoices issued by Mr Cole or documents relating to the government inquiry are relevant to their inquiry as to whether Mr Cole should be permitted to be called and given access to the documents. 9 In support of the subpoena, the plaintiffs refer to several authorities: Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 ("Warner-Lambert"); Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1996) 34 IPR 350 ("Wimmera"); SmithKline Beecham (Australia) Pty Ltd v Chipman (2003) 131 FCR 500 ("SmithKline"); Hotrox Charcoal Co v Gebauer Nominees Pty Ltd [2002] WASCA 293 at paras 48, 52 and 56 ("Hotrox"). 10 In Warner-Lambert, the plaintiffs refer to the following statement by Buckley LJ at 358: "… the court must in each case decide what measure of disclosure should be made, and to whom, and upon what terms, having regard to the particular circumstances of the case, bearing in mind that, if a case for disclosure is made out, the applicant should have as full a degree of appropriate disclosure as will be consistent with adequate protection of any trade secret of the respondent." (Emphasis added) 11 Hotrox is a decision of the West Australian Court of Appeal in which the leading judgment was given by Sheppard AUJ. That was an appeal from a decision of the Master of the Court. At [25], the Court in that case referred to the decision ofHayne JA in Mobil Oil Australia Ltd & McDonalds Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 ("Mobil Oil") at 38, where his Honour said: "Once the documents are inspected by the principals of the trade rivals 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." 12 The Mobil Oil case is distinguishable because, in that case, the issue concerned disclosure to a trade rival, whereas, in the present case, the disclosure is to a consultant expert witness who is not a trade rival. Unlike the case of disclosure to a trade rival, disclosure to a consultant expert witness who has given an undertaking does not mean that, for practical purposes, confidentiality is destroyed. 13 In Hotrox, Sheppard AUJ pointed out that the expert witness, Dr Franklin, was not presently a trade rival but his Honour nevertheless considered that, in the particular facts and circumstances of the case, there would be a danger that the expert may "subconsciously disclose something" which was covered by his agreement to keep matters learnt on the inspection confidential. His Honour considered that, unless Dr Franklin declined to advise any client interested in pursuing a process similar to that of the respondent, there would always be a danger that he would, however unwittingly, make a disclosure which would imperil the confidentiality which he had agreed to preserve. At [55], his Honour considered that a desirable outcome was to refuse an order permitting Dr Franklin to inspect the premises and see the answers to interrogatories, and to require Hotrox to substitute another expert who did not have an "interest". In his Honour's view, a factor that should be given very substantial weight was that Dr Franklin was, at one time, an applicant for a patent in the same area of expertise and dispute as that involved in the Hotrox case. Hotrox is distinguishable from the present case because there is no indication that Mr Cole has or has had any personal involvement or interest in the outcome of the present litigation. 14 Moreover, as Sheppard AUJ points out in Hotrox at [51],each case depends on its particular facts. In Hotrox,the Court remitted the matter to the Master for further consideration as to whether there were any alternative experts who could be used in place of Dr Franklin. His Honour also pointed out at [59] that the giving of an undertaking to the Court might give more confidence in the protection of the information because a breach of the undertaking would constitute a contempt of the Court with the attendant possibility of imprisonment. The undertaking given by Dr Franklin in Hotrox was merely contractual, however, his Honour doubted whether an undertaking to the Court could be required or was appropriate where the proceedings were by way of arbitration and not in the Court itself. It is worth noting that Hayne JA observed in Mobil Oil that, in most cases, the fact that the documents may not be used except for the purpose of the particular litigation will provide sufficient protection to the party producing them but his Honour did not consider that, where the party obtaining discovery was a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, this was a controlling consideration. 15 In the present case, the plaintiffs further submit that it is not appropriate for Mr Cole to be granted access to the commercially sensitive financial material because he lacks any identified specialist knowledge based on training, study or experience in respect of the analysis of financial data. In my view, the qualifications and capacity of Mr Cole are not relevant to the present question but may be relevant for determination on the hearing. I am not persuaded that, on the present state of the evidence, this submission has been made good. 16 The plaintiffs contend that, at this stage, the Court should decline to grant access by Mr Cole to the confidential material and require the defendants to take steps to obtain another expert and make a further application to the Court if they are unable to do so. The present case 17 In this case, in my view, sufficient information has been given by way of particulars from the defendants to enable a determination of the question whether an order ought to be made refusing access by Mr Cole to the confidential material. The material relied on by the plaintiffs does not persuade me that further probing of the services provided by Mr Cole or the documents relating to such services will serve any useful purpose. The position as to his activities is sufficiently clear to enable a determination to be made. 18 In the present circumstances, where it is proposed that a comprehensive confidentiality undertaking will be given to the Court by Mr Cole and, by law, the information cannot be used for any purpose, other than the present litigation, the speculation that Mr Cole might inadvertently or accidentally disclose or use such material in breach of the undertaking has not been made out. 19 In an adversarial system, it is for the parties to decide what documents are to be tendered and whether witnesses are to be called to prove their case and who those witnesses are to be. This approach is exemplified in the expression that there is no property in a witness. Evidence can be heard by the Court from all witnesses the parties choose to call who may throw light on the matter. Subject to limited exceptions, an opponent has no right to prevent a party from relying on particular documents being tendered for reasons of confidentiality in the absence of circumstances which warrant that course. A ruling that a witness proposed by a party cannot have access to documents which bear directly on that party's case may prevent that party from the comprehensive and proper presentation of its case through expert and other witnesses in whom the party has confidence and on whom it is prepared to rely. Interference by the Court in the process of the selection of witnesses or the grant of access to documents necessary to meet evidence of an opponent calls for adequate justification. Assertions as to indirect possibilities of unintentional disclosure of material to trade rivals should not generally be regarded as sufficient, in themselves, to warrant a refusal to hear that witness or to grant that witness access to documents which may assist in the determination of the issues. Acceptance of the plaintiffs' submission that there may be a possibility of inadvertent disclosure, in circumstances where there is a comprehensive confidentiality undertaking given to the Court, should be granted only where there is some real foundation to warrant the adoption of such a position. The danger with the general application of a criterion such as the possibility of inadvertent or subconscious disclosure or the use of material adverse to the interests of a party is that it will often be difficult to apply and, to some extent, it is a touchstone which lacks transparency. 20 The unintentional or accidental disclosure of confidential information is a possibility in almost any instance where access is permitted by an expert to confidential material. In the circumstances of the Hotrox case, where the expert had been involved in an application for a patent in the same area as that in respect of which he is intended to be able to access documents, the position is quite different. The fact that Mr Cole consults and advises other bodies is not, of itself, a sufficient basis to foreclose the defendants from calling him as a witness nor to prevent him having access to any relevant material on which it is necessary for the plaintiffs to rely to make out their case as on the issue of damages as pleaded in the Statement of Claim. In my view, there is a significant distinction between disclosure to a person who has a history relating to the litigation, as in Hotrox, or who is a trade rival, as in Mobil Oil, and the situation here where a person is a consultant is prepared to give a comprehensive undertaking as to confidentiality to the Court and there is no reason to doubt he will adhere to that undertaking. Of course, each case depends on its facts and circumstances but, in the present case, the circumstances do not support the suggestion that there is any real danger of disclosure of the material by Mr Cole. As counsel for the defendants points out, the relevant evidence of Mr Cole is intended to be directed to a matter which is not at the core of the claim, namely, it is evidence from the plaintiffs which relates to only one or some of the matters required to be taken into account in estimating the salvage reward under Article 13.1 of the International Convention on Salvage 1989, which enumerates ten factors to be taken into account in the estimation of the salvage reward: see also W R Kennedy, Law of Salvage (5th ed, 1985). 21 In relation to the defendants' alternative submission that pars 3 and 4 of the subpoena are deficient, in my view, there is force in the defendants' arguments that, in the absence of any indication demonstrating the relevance of the documents, Mr Cole should not be faced with the burden of searching for and producing the documents. I consider that the subpoena in this case involves fishing. The plaintiffs' submissions do not persuade me that the documents are relevant. This is an additional ground for setting aside the subpoena in respect of pars 3 and 4. 22 The plaintiffs have suggested that, as an alternative, an undertaking might be given by Mr Cole to the effect that he will not provide any consulting services in respect of the Australian tug industry relating to the entry of any local or foreign entities into contracts or the making of tenders or bids which relate to the pricing or costing of harbour tug and salvage services until 2008. In my view, for the reasons given above, there is no necessity for any such draconian undertaking in this case. 23 There is nothing before me to indicate that Mr Cole has any conflict of interest in relation to the confidential information nor is there any indication that he may use or inadvertently disclose any confidential information obtained by him to commercial rivals of the plaintiffs. The mere fact that he acts as an independent consultant in the maritime industry and that some of his clients are potential trade rivals of the plaintiffs in relation to future contracts does not, of itself, warrant a conclusion that there is a real danger of inadvertent disclosure or the misuse of confidential information. The interests of justice do not require that Mr Cole should be prevented from having access to the documents in question to enable him to give evidence on behalf of the defendants. Nor do the interests of justice require that he should not be available to give evidence in relation to the documents. The evidence does not provide any basis for further detailed examination of documents relating to the commercial activities of Mr Cole. 24 For the above reasons, I consider that the subpoena should be set aside. 25 The plaintiffs should pay the defendants' costs on the application to set aside the subpoena. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. Associate: Dated: 2 November 2005 Counsel for the Plaintiffs: A W Street SC and E G H Cox Solicitor for the Plaintiffs: Norton White Counsel for the Defendants: J E Sexton SC and G J Nell Solicitor for the Defendants: Thynne & Macartney Date of Hearing: 29 September 2005 Date of Judgment: 2 November 2005