FEDERAL COURT OF AUSTRALIA Plastec Australia Pty Ltd v Plumbing Solutions and Services Pty Ltd (No. 3) [2011] FCA 156 Citation: Plastec Australia Pty Ltd v Plumbing Solutions and Services Pty Ltd (No. 3) [2010] FCA 156 Parties: PLASTEC AUSTRALIA PTY LTD ACN 093 513 467 v PLUMBING SOLUTIONS AND SERVICES PTY LTD ACN 128 873 629, TONY GREGORY PURDON and RALPH T MARTIN File number(s): QUD 272 of 2009 Judge: GREENWOOD J Date of judgment: 1 March 2011 Catchwords: PRACTICE AND PROCEDURE – consideration of an application under Order 15A, rule 8 of the Federal Court Rules Legislation: Federal Court Rules, Order 15A, rule 8 Date of hearing: 25 February 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 38 Counsel for the Applicant: Mr C Johnstone Solicitor for the Applicant: Mr Kenneth Philp, Bennett & Philp Lawyers Solicitor for the First and Second Respondents: Mr Cameron McLeod, DLA Phillips Fox Counsel for the Third Respondent: Mr G Coppola Solicitor for the Third Respondent: D'Angelo Kavanagh IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 272 of 2009 BETWEEN: PLASTEC AUSTRALIA PTY LTD ACN 093 513 467 Applicant AND: PLUMBING SOLUTIONS AND SERVICES PTY LTD ACN 128 873 629 First Respondent TONY GREGORY PURDON Second Respondent RALPH T MARTIN Third Respondent JUDGE: GREENWOOD J DATE OF ORDER: 1 MARCH 2011 WHERE MADE: BRISBANE UPON KENNETH PHILP, SOLICITOR, UNDERTAKING (BOTH ON HIS OWN BEHALF AND ON BEHALF OF BENNETT & PHILP LAWYERS), THAT: 1. Mr Philp will keep confidential all information contained in any documents referred to in a list of documents made and served in accordance with this order produced pursuant to this order. 2. Mr Philp will not reveal either the documents or any information contained in them to Plastec Australia Pty Ltd or any related entity of Plastec Australia Pty Ltd or any of its officers or employees or the officers or employees of entities related to Plastec Australia Pty Ltd . 3. Mr Philp will disclose the documents and information in them to counsel retained on behalf of Plastec Australia Pty Ltd but solely for the purposes of these proceedings. 4. Mr Philp will disclose the documents and the information in them to an expert accounting witness retained on behalf of Plastec Australia Pty Ltd by Bennett & Philp Lawyers, namely, Mr Norbett Calabro and his assisting accountant, Ms Jenny Letts, only after first obtaining from Mr Calabro and Ms Letts a written undertaking to be filed in the Court and a copy provided to the solicitors for Storm Plastics (SA) Pty Ltd, D'Angelo Kavanagh in terms which recite that neither Mr Calabro nor Ms Letts will disclose the documents or information in the documents to Plastec Australia Pty Ltd or any entities related to that company or the officers or employees of that company or officers or employees of companies related to that company, and that the documents and information disclosed to Mr Calabro and Ms Letts shall be used by them solely for the purpose of preparing a report to the Court. 5. Mr Philp will not disclose to Plastec Australia Pty Ltd any report prepared by Mr Calabro or Ms Letts (or both of them) consequent upon these orders without first providing a copy of any such report to the solicitors for Storm Plastics (SA) Pty Ltd and securing the consent of those solicitors to the release of the report to Plastec Australia Pty Ltd and in the event that the solicitors for Storm Plastics (SA) Pty Ltd do not consent to the release of the report, Mr Philp shall make an application to the Court for the determination of the question of whether the report might properly be released to Plastec Australia Pty Ltd and if so the terms upon which the report might be released. 6. Mr Philp, consistent with his duty to the Court and obligations at law, shall use the documents obtained upon discovery from Storm Plastics (SA) Pty Ltd solely for the purposes of these proceedings. THE COURT ORDERS THAT: 1. Pursuant to Order 15A, rule 8 of the Federal Court Rules, Storm Plastics (SA) Pty Ltd ACN 008 075 661 shall make discovery to the applicant of documents described as: "Documents recording Sales Data (which means data showing either or both of the quantity of products sold and/or the value of products sold for the 'Storm Expansion Joint' and the 'Storm Swivel Joint' as those terms are described in this order) on a month by month and annual basis of sales by Storm Plastics (SA) Pty Ltd including such documents relating to sales by any of its wholly owned subsidiaries either in Queensland or South Australia or throughout Australia in the period from 1 September 2007 to 31 January 2011 for each of the Storm Expansion Joint (which means a product marketed by Storm Plastics (SA) Pty Ltd as the 'M&F DWV Expanda Joint (Code DW 100150)' and the Storm Swivel Joint (which means a product marketed by Storm Plastics (SA) Pty Ltd as the 'M&F DWV Swivel Expansion Joint (Code SJ10015)'". 2. Storm Plastics (SA) Pty Ltd shall provide the applicant's solicitors, Bennett & Philp, with a list of documents within 14 days of the making of this order. 3. Storm Plastics (SA) Pty Ltd shall provide the applicant's solicitors, Bennett & Philp, with copies of any documents in the list within 10 days of any request for such documents by the applicant's solicitors. 4. Pursuant to Order 15A, rule 11 of the Federal Court Rules, the applicant shall pay the reasonable costs of Storm Plastics (SA) Pty Ltd of and incidental to appearing on the hearing of the Notice of Motion filed 14 February 2011 and of and incidental to complying with this order. 5. The applicant's costs of and incidental to the Notice of Motion together with any costs required to be paid to Storm Plastics (SA) Pty Ltd pursuant to Order 4, shall be the applicant's costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 272 of 2009 BETWEEN: PLASTEC AUSTRALIA PTY LTD ACN 093 513 467 Applicant AND: PLUMBING SOLUTIONS AND SERVICES PTY LTD ACN 128 873 629 First Respondent TONY GREGORY PURDON Second Respondent RALPH T MARTIN Third Respondent JUDGE: GREENWOOD J DATE: 1 MARCH 2011 PLACE: BRISBANE REASONS FOR JUDGMENT 1 By this application, the applicant in the principal proceeding, Plastec Australia Pty Ltd ("Plastec Australia") seeks an order under Order 15A, rule 8 of the Federal Court Rules that Storm Plastics (SA) Pty Ltd ("Storm") provide discovery to Plastec Australia of documents falling within the following classes of documents: 1. Documents recording Sales Data on a month by month and annual basis of sales by Storm and/or its wholly owned subsidiaries in Queensland, South Australia and Nationally in the Relevant Period for each of the Storm Expansion Joint and the Storm Swivel Joint. 2. In the alternative to paragraph 1 … and if the documents described in paragraph 1 … do not exist, all primary source documents of Sales Data being invoices issued by Storm or its wholly owned subsidiaries in the Relevant Period which invoice contains a sale of any of the Storm Expansion Joint and the Storm Swivel Joint. 2 The above description of the classes of documents incorporates a number of defined terms and they are: "Relevant Period" means 1 September 2007 to 31 January 2011; "Sales Data" means data showing either or both of quantity of products sold and/or value of products sold; "Storm Expansion Joint" means the product marketed by Storm as the "M&F DWV Expanda Joint (Code DW 100150)"; "Storm Swivel Joint" means the product marketed by Storm as the "M&F DWV Swivel Expansion Joint (Code SJ 10015)". 3 The party against whom a discovery order is sought is the South Australian Storm entity. The field of documents sought by the proposed order is defined by reference to the particular documents in the possession of that entity and/or the wholly owned subsidiaries of that entity in Queensland, South Australia or nationally. Order 15A, rule 8 provides that the Court may order a person who is not a party to the proceeding and in respect of whom it appears that the person has or is likely to have or has had or is likely to have had in the person's possession any document which relates to any question in the proceeding, to make discovery to the applicant of any such document. 4 By the Further Amended Statement of Claim, Plastec Australia contends (para 5) that it makes and supplies in the course of its business, plumbing fittings known as "swivel and expansion joint fittings", manufactured from material described, apart from its compositional description, as "ABS" and "ASA". The plumbing fittings are designed and made for installation in domestic and commercial buildings in Australia. There are two versions of each product sold by reference to four model numbers. The fittings are designed for connection to pipes laid underground so as to provide drainage for sewerage and other waste water. They are designed to enable underground pipes which have been laid in unstable soil types, to move with the soil without causing a break in the fitting or the pipe (para 6, Further Amended Statement of Claim). 5 In the principal proceeding, Plastec Australia contends that each of the respondents have published statements or otherwise engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). The conduct is also said to constitute the tort of injurious falsehood. Plastec Australia contends that the respondents, by their conduct, have represented that neither of the applicant's products can be joined to plumbing fittings made of material commonly described as "PVC" material using solvent cement on the footing that the products are, put simply, unsafe and likely to break of fail. 6 Plastec Australia contends that by reason of the conduct of the respondents, various Councils have, in reliance upon the representations, taken a position preventing the installation of either of the applicant's products by plumbers where plumbers propose to join those products to PVC fittings using solvent cement. Plastec Australia says that Councils have either prohibited the installation of the applicant's products or have otherwise discouraged plumbers from installing the applicant's products having regard to the pleaded representations. Plastec Australia also contends that the respondents have made representations to Standards Australia Limited which constitute either contraventions of the Trade Practices Act or the publication of injurious falsehoods. 7 By para 3A of the Further Amended Statement of Claim, Plastec Australia says that Storm, Storm Plastics (Qld) Pty Ltd, Storm Plastics Admin Pty Ltd and Storm Plastics Drainage Division Pty Ltd (all of which are described in the pleading as "Storm Plastics") carry on the business of supplying PVC piping and associated items to the building and plumbing industries in Australia and those companies are a direct competitor of Plastec Australia in the supply of piping and associated items and accessories to the building and plumbing industries in Australia. 8 By para 4 of the Further Amended Statement of Claim, the applicant identifies some of the conduct giving rise to the representations said to give rise to the pleaded causes of action. In the context of that part of the pleading concerning the third respondent, Mr Martin, the applicant says that a letter dated 10 September 2007 was distributed containing particular representations. The date of 10 September 2007 seems to be the earliest point in the chronology concerning the publication of relevant matters. 9 By para 5 of the Further Amended Statement of Claim, the applicant says that Plastec Australia has been supplying its two plumbing fittings (by reference to four model numbers) for at least two years. Since that contention was also pleaded in the Statement of Claim filed 13 November 2009, it seems that the applicant is contending that Plastec Australia has been supplying its fittings since at least 13 November 2007 and perhaps a little earlier. Apparently Mr Sydney Hawthorne (a director of Plastec Australia) by one of his affidavits (presumably the affidavit filed on 13 November 2009), addresses the date when the applicant's products were first introduced to the market. In any event, that affidavit is not read on this application by the applicant. 10 It seems however, by reason of the pleading, that Plastec Australia's fittings in issue in the proceedings had not been offered to the market for any lengthy period before the conduct, said to be contravening conduct, commenced. 11 In the principal proceeding, Plastec Australia seeks a declaration and an injunction directed to particular matters together with damages under s 82 of the Trade Practices Act for the recovery of loss or damage caused by reason of the contended contraventions of s 52 of that Act and damages for injurious falsehood. 12 Plastec Australia has retained an expert, Mr Norbett Calabro, to provide an expert opinion on the question of the quantification of the applicant's loss and damage suffered by reason of the contravening conduct. Mr Calabro in a letter dated 10 February 2011 says that he has been instructed that the only two manufacturers of the products, which are the subject of the dispute, are Plastec Australia and the group of companies comprising those four companies pleaded as the "Storm Plastics" group described at [7] herein. Mr Calabro says that one of the major challenges for an expert accounting witness in providing an opinion to the Court in the assessment or calculation of a loss of profits claim is the difficulty of obtaining sufficient reliable data to ensure that any assessment of loss and damage is not rendered speculative. 13 Mr Calabro says that a very useful source of data for the assistance of the expert is information produced by the parties to the dispute. Mr Calabro says that he has been provided with information from Plastec Australia consisting of monthly sales data (both in terms of the number of sales and the monetary value of those sales concerning the "Expansion Joint Extended 100mm"); monthly sales data (both in terms of the number of sales and the monetary value of those sales concerning the "Swivel Joint Socket FF 100mm"); and, monthly sales data (both in terms of the number of sales and the monetary value of those sales concerning the "Swivel Joint Spigot MF 100mm"). 14 That information has been provided in relation to the geographic areas of Queensland and South Australia and then nationally for the period September 2007 to January 2011. 15 Mr Calabro also says that where alleged conduct is said to have caused an impact on a business, an analysis of whether an affected party has suffered loss and damage during the relevant period will involve a consideration of what Mr Calabro describes as important evidence of the market for the products before and during the relevant period. Mr Calabro also observes that: "Given my instructions that Storm Plastics is the only other major manufacturer of the type of products in question", it would be, in his professional opinion, beneficial to both the Court and Mr Calabro to have access to data concerning the market for the products in determining the extent of the applicant's claim to have suffered loss and damage (if any). 16 Having regard to the observations of Mr Calabro, Plastec Australia says that Storm has in its possession or is likely to have or has had or is likely to have had, for the purposes of Order 15A, rule 8, documents which record sales of its products and those documents "relate to" a question in the proceeding, namely, the assessment of whether Plastec Australia has suffered loss or damage by reason of the conduct of the respondents. Those documents relate to that question because, it is said, they tend to show, in the opinion of Mr Calabro, the extent of the market and sales into the market from the financial year in which the earliest conduct occurred. Thus, the applicant seeks an order that Storm, a nonparty, make discovery of any such documents. Ordinarily of course, an applicant would seek to demonstrate the loss and damage suffered by reason of contravening conduct by giving evidence of relevant sales and seeking to demonstrate a diminution in sales caused by the conduct. In this case, the applicant seeks access to the documents to determine the size of the market by reference to Storm's sales presumably with a view to inviting the Court to draw inferences about the impact upon the applicant's sales in the postconduct period having regard to sales of what is said to be the only competitor for the products. 17 Of course, an increase in sales by Storm in the postconduct period does not necessarily suggest that those sales would have been sales achieved by the applicant but for the conduct. 18 The application is resisted by Storm on this basis. 19 Storm contends by the affidavit of Mr Kavanagh (who is the solicitor for Storm and also the solicitor for the respondents in the principal proceeding) sworn 24 February 2011 that the process of discovery, interparties, has not been exhausted and therefore recourse to nonparty discovery is not appropriate in the exercise of the power conferred by Order 15A, rule 8. Mr Kavanagh observes that the applicant has disclosed in its list of documents, documents described as "a summary of Plastec sales for the financial year ending June 2008, 2009 and 2010" but no other documents have been disclosed going to sales and market data. The first of those financial years comprehends the period from 1 July 2007 to 30 June 2008 which seems to be the period concerning the commencement of sales of Plastec's products and includes the period from 10 September 2007 which is said to be the earliest representation made by the respondents. 20 The applicant says that Mr Calabro on 24 February 2011 filed his preliminary or first report and attached to that report is a confidential annexure containing documents setting out Plastec's sales for the relevant financial years. Those documents will be made available to the solicitors and advisers to the respondents upon an appropriate undertaking being agreed and given by the respondents. 21 Although it seems to be accepted that the underlying documents evidencing the sales relied upon in formulating the summary have not been disclosed, the document(s) described as a summary of sales has been disclosed subject to appropriate confidentiality arrangements. 22 The second objection made by the respondents is that production of the documents sought by the Notice of Motion is not confined to documents recording sales data but, in the alternative, extends to documents described as all primary source documents of sales data consisting of invoices issued by Storm or its wholly owned subsidiaries in the relevant period concerning sales of the Storm Expansion Joint and the Storm Swivel Joint. In effect, Storm says that the classes of documents reflected in the Notice of Motion are too widely drawn and seek documents Plastec Australia has not itself been willing to disclose by its list of documents. Further objections are made by Mr Elbe in his affidavit sworn 24 February 2011. 23 Mr Elbe is the Manager of Storm. 24 He says that it is common knowledge that Plastec Australia and Storm are directly in competition in relation to the sale of plumbing fittings and particularly the sale of expansion and swivel joints. Mr Elbe says that the documents sought by Plastec Australia would tell the applicant Storm's share in the marketplace for such products and would give Plastec Australia access to Storm's previous and existing customer base. Mr Elbe also says that producing documents broken down by geographical area would identify Storm's market share in those areas and identify Storm's production performance to a direct competitor. It would also identify areas where Plastec Australia could gain advantage by intensifying its market activities. Mr Elbe says that "the plumbing market for expansion and swivel joints is limited and information concerning the size of specific markets is commercially sensitive". Mr Elbe contends that he cannot see any way in which this class of information, if provided, could properly be protected by a Court. 25 Mr Elbe in his affidavit does not deny that Storm has information relating to sales of its products. It may be that Storm does not have documents which record sales data on a month by month or annual basis. However, I infer, having regard to Mr Elbe's concern about the disclosure of documents sought by the applicant as framed by the Notice of Motion (including such documents) that Storm does have documents which record sales on a month by month basis consistent with common industry practice of gathering sales data on a month by month, annual or financial year basis. 26 In answer to Mr Elbe's concern about confidentiality, Mr Philp has filed a further affidavit sworn 23 February 2011 in which Mr Philp says that if an order for nonparty discovery is made, the order ought to be made upon an undertaking, given to the Court, by Mr Philp that he and his law firm will keep all of the documentation produced under the order confidential. The particular content of the undertaking is set out at para 4 of Mr Philp's affidavit of 23 February 2011. 27 It seems to me, subject to other objections raised by the respondents, that the documents sought by the applicant properly relate to a question in the proceeding and the evidence sufficiently demonstrates that Storm has in its possession documents of the kind sought by para 1 of the description of the classes of documents. I am also satisfied that notwithstanding Mr Elbe's concerns, it is possible to fashion appropriate protective orders so as to preserve the confidentiality of the sales information. The Court is well familiar with such an approach. 28 The respondents also express concern that the publication of the report by Mr Calabro itself might be likely to convey information about market share, level of sales and other matters regarded as confidential. An appropriate protective mechanism is to extend the undertaking so as to constrain disclosure of the report to Plastec Australia or its officers until Storm has had an opportunity to examine the report and agitate any question about confidentiality. 29 The more substantial objection goes to the assumption reflected in Mr Calabro's letter of 10 February 2011. Mr Calabro has expressed the view that the documents relating to sales by Storm would be useful for the reasons already discussed on the footing that Storm's sales data represents data from the only other manufacturer suppling product into the market. That assumption is reflected in para 2 on page 1 of the letter and in the second last paragraph on page 2 of the letter. Mr Elbe in his affidavit takes up that assumption and says that either the instruction or the assumption is misplaced because there are at least two other companies, Iplex Pipelines Australia Pty Ltd ("Iplex") and Vinidex Pty Ltd ("Vinidex") that manufacture and sell products which compete with Storm's products described as M&F DWV Expanda Joint (Code DW100150) and M&F DWV Swivel Expansion Joint (Code SJ10015). 30 Mr Elbe says that Iplex manufactures a fabricated version of Storm's expanda joint which Iplex labels the "100mm Universal Double Expansion Coupling (Code D061100D)" and that product is a substitute for Plastec's expansion joint. Mr Elbe says that Vinidex also manufactures two expansion couplings each of 100mm in diameter (Codes 55780 and 55782) and those two products are substitutes for Plastec's expansion joints. 31 There is no suggestion that either of those companies manufacture and sell a swivel joint which is substitutable for either Storm's swivel expansion joint or Plastec Australia's Adjustable Swivel Pipe Joiner (Model No. 15132) or its Adjustable Swivel Pipe Joiner (Model No. 15199). 32 The central objection however is that Iplex and Vinidex are competitors of Storm and Plastec Australia at least as to the expansion joints and thus the assumption upon which Mr Calabro has acted is said to fall away. I accept for present purposes that Mr Elbe as Manager of one of the market participants, is properly in a position to identify, as a question of fact, other participants in the market in competition with Storm. That competition however relates to only one of the substitutable products. 33 It seems to me that the sales data concerning Storm (and its wholly owned subsidiaries) is data which is nevertheless likely to be of assistance to Mr Calabro in formulating an analysis and thus an opinion about sales in the market and the pattern of sales in the period from 10 September 2007 until trial. Those matters, and Mr Calabro's view, will assist him in formulating an expert opinion on the question of whether Plastec has suffered any loss. The question of the relationship between sales achieved by Storm in the postconduct period and a socalled impact upon Plastec Australia would however require careful examination for the reasons mentioned earlier. 34 As to the question of that relationship, the respondents say that in the preliminary report prepared by Mr Calabro (attached to his affidavit filed 24 February 2011), Mr Calabro has found (at 2.5) that sales of Plastec Australia's Expansion Pipe Joiner (Model 15130) to have been on a "growth path" and similarly the Swivel Pipe Joiner (Models 15132 and 15199) has shown a growth in sales from 2009 to the present. At 2.4, Mr Calabro notes that the company as a whole has been on a growth path in the year 2010. At 2.8, Mr Calabro says that the rate of growth in sales of the Expansion Pipe Joiner slowed down between 2010 and 2011 as did the rate of growth in sales of the Swivel Pipe Joiner. At 2.10, Mr Calabro says that he proposes to calculate any loss in sales of the products in question by analysing sales represented by market share before the alleged conduct; examining upward or downward trends; and adjusting for sales represented by market share after the alleged conduct. 35 Storm contends that Mr Calabro's initial report demonstrates a growth in sales for each of the products of the applicant in question in the proceeding and thus no loss arises in any event with the result that the Court ought to be reluctant to make a nonparty discovery order. However, even though there may have been growth in sales of the products, it may nevertheless be that the applicant has suffered loss or damage. But for the conduct, it might be said that the applicant would have achieved greater sales. In any event, Mr Calabro has observed that the rate of growth in sales in the period between 2010 and 2011 slowed. I do not regard these preliminary observations of Mr Calabro as demonstrating no loss and thus no basis for an order under Order 15A, rule 8. 36 Mr Calabro observes at 2.11 that at this stage he does not have sufficient information to undertake that methodological analysis. At 5.5, Mr Calabro says that he should satisfy himself that any assessment has been determined with reasonable certainty and that requires him to examine the best available proof of the relevant factors when attempting to calculate any loss alleged to have been suffered. That causes Mr Calabro to express in his report the views he expressed in his letter of 10 February 2011 that access to the sales data of Storm would assist him in forming a view. 37 The foundation upon which that view rests will no doubt be the subject of controversy and challenge. Nevertheless, it seems to me that the documents properly relate to a question in the proceeding and the interests of justice are served by enabling the most informed view to be reached by the expert whose primary role is to assist the Court. 38 Accordingly, an order will be made under Order 15A, rule 8 for nonparty discovery directed to Storm in respect of those documents described as Class 1 of the class of documents upon Mr Philp giving the undertaking set out at para 4 of his affidavit of 23 February 2011 adjusted to take account of Storm's concern in relation to the report itself. The amendment to the undertaking will provide Storm with an opportunity to object to aspects of the report which might be said to disclose confidential matters or enable the disclosure of confidential matters. I certify that the preceding thirtyeight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 1 March 2011