FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2011] FCA 562 Citation: Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2011] FCA 562 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v CEMENT AUSTRALIA PTY LTD ACN 104 053 474, CEMENT AUSTRALIA HOLDINGS PTY LTD ACN 001 085 561, CEMENT AUSTRALIA (QUEENSLAND) PTY LTD FORMERLY QUEENSLAND CEMENT LTD ACN 009 658 520, POZZOLANIC ENTERPRISES PTY LTD ACN 010 367 898, POZZOLANIC INDUSTRIES PTY LTD ACN 010 608 947, CHRISTOPHER GUY LEON and CHRISTOPHER STEPHEN WHITE File number(s): QUD 295 of 2008 Judge: GREENWOOD J Date of judgment: 26 May 2011 Catchwords: PRACTICE AND PROCEDURE – consideration of an application to admit into evidence representations contained in a document said to fall within the notion of a business record for the purposes of s 69 of the Evidence Act 1995 (Cth) – consideration of s 135 and s 136 of the Evidence Act 1995 (Cth) Legislation: Evidence Act 1995 (Cth), ss 69, 135 and 136 Cases cited: Rural Press Ltd v ACCC (2002) 118 FCR 236 - cited Rural Press Ltd v ACCC (2003) 216 CLR 53 - cited Timms v Commonwealth Bank [2003] NSWSC 576 – cited ASIC v Rich (2005) 216 ALR 320 – cited NT Power Generation Pty Ltd v Power & Water Authority [1999] FCA 1549 - cited Lym International Pty Limited v Chen; Marcolongo v Lym International Pty Ltd [2008] NSWSC 1156 - cited Date of hearing: 18 May 2011 Date of last submissions: 18 May 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 17 Counsel for the Applicant: Mr M Hodge Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents: Ms S Brown Solicitor for the Respondents: Gilbert and Tobin, Lawyers IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 295 of 2008 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: CEMENT AUSTRALIA PTY LTD ACN 104 053 474 First Respondent CEMENT AUSTRALIA HOLDINGS PTY LTD ACN 001 085 561 Second Respondent CEMENT AUSTRALIA (QUEENSLAND) PTY LTD FORMERLY QUEENSLAND CEMENT LTD ACN 009 658 520 Third Respondent POZZOLANIC ENTERPRISES PTY LTD ACN 010 367 898 Fourth Respondent POZZOLANIC INDUSTRIES PTY LTD ACN 010 608 947 Fifth Respondent CHRISTOPHER GUY LEON Sixth Respondent CHRISTOPHER STEPHEN WHITE Seventh Respondent JUDGE: GREENWOOD J DATE OF ORDER: 26 MAY 2011 WHERE MADE: SYDNEY THE COURT DIRECTS THAT: 1. The document described as the draft email of Mr Leon more fully described as an email from Sueki Tan to Ms Jenny R Stevenson sent on Wednesday, 23 March 2005 at 2:05pm is admitted into evidence together with pages 75 to 81 at line 15 of the transcript of Mr Leon's evidence arising out of the examination of Mr Leon under section 155(1)(c) of the Trade Practices Act 1974 (Cth) as reflected at page 3 of the transcript of 18 May 2011 in the present proceedings at lines 34 to 44. 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 295 of 2008 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: CEMENT AUSTRALIA PTY LTD ACN 104 053 474 First Respondent CEMENT AUSTRALIA HOLDINGS PTY LTD ACN 001 085 561 Second Respondent CEMENT AUSTRALIA (QUEENSLAND) PTY LTD FORMERLY QUEENSLAND CEMENT LTD ACN 009 658 520 Third Respondent POZZOLANIC ENTERPRISES PTY LTD ACN 010 367 898 Fourth Respondent POZZOLANIC INDUSTRIES PTY LTD ACN 010 608 947 Fifth Respondent CHRISTOPHER GUY LEON Sixth Respondent CHRISTOPHER STEPHEN WHITE Seventh Respondent JUDGE: GREENWOOD J DATE: 26 MAY 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The present question that arises for direction is whether a draft of an email dated 23 March 2005 written by Mr Leon, the sixth respondent, is to be admitted into evidence contextualised by the admission into evidence of pages 75 to 81, line 15 of the transcript of Mr Leon's examination under s 155(1)(c) of the Trade Practice Act 1974 (Cth) before Mr Ducret. The transcript is exhibited to Mr Ducret's affidavit. 2 Mr Leon at the relevant time was the Chief Executive Officer and Managing Director of Cement Australia Pty Ltd ("CA") the first respondent, and Cement Australia Holdings Pty Ltd ("Holdings") the second respondent. 3 Other evidence in the proceeding explains the sequence of events leading to Mr Leon's draft. Mr Maycock, the Chairman of Directors of CA and Holdings, gave evidence that Mr Clough was at the relevant time a Director of both CA and Holdings (together with Mr Cadzow, Ms De Hayes and, as an alternate Director, Mr O'Callaghan). On 18 March 2005, Mr Leon sent an email to the Directors of CA and Holdings attaching a capital expenditure proposal for the installation of a classifier at Millmerran Power Station ("Millmerran") making certain observations about contractual obligations to do so confronting the companies and related matters. 4 On 18 March 2005, Mr Clough sent an email to Mr Leon in reply and copied that email to Mr Maycock and the other Directors. Mr Maycock gave evidence that he understood that what Mr Clough was suggesting was that the companies should enter into negotiations with Millmerran to bring the contract to an end rather than deploy $2.52 m at Millmerran in performance of the contract (transcript, 1464, lns 14-15). On 21 March 2005, Mr Maycock sent an email to Mr Leon asking him to address "Tom's points" (that is, Mr Clough's points) and copy the response to the other Board members. Mr Maycock could not recall receiving a written response from Mr Leon. Mr Maycock could not recall how those points were addressed but that having regard to Mr Clough's seniority, Mr Maycock was sure that the points were addressed (transcript, 1374, lns 38-41). Mr Maycock speculated, presumably on the basis of his experience as Chairman of Directors, that Mr Leon would have discussed the matter by telephone with Mr Clough, Mr Cadzow and Ms De Hayes (transcript 1378, lns 15-18). 5 Mr Clough's points appear to have been addressed in the draft email now in issue. The email is addressed to "Dear Tom" and signed "Kindest regards, Chris". It is dated 23 March 2005 at 2:05pm. Above "Dear Tom" is the word "DRAFT" and the email simply consists of draft text addressed to Mr Clough sent from Ms Sueki Tan to Ms Jenny Stevenson. The contextualising transcript of Mr Leon's examination under s 155 of the Trade Practices Act reveals that Ms Tan was Mr Leon's Personal Assistant at the time and Ms Stevenson was a Receptionist at what is called the Railton Plant which Mr Leon was to be visiting. Mr Leon accepted that the email was written by him in the sense that he "scribed something in rough" and dropped the rough draft on Ms Tan's desk with the intention that she would type it up as a draft and then send it to him at Railton. 6 However, if attention is simply confined to the draft email itself, it represents a typewritten draft of an email addressed to Tom in which a person called Chris expresses views about Tom's response to the proposed Millmerran classifier expenditure commitment. The email contains statements about the expenditure proposal; the contractual obligations; the origin of the contractual obligations; the position since the merger resulting in the formation of CA; the considerable lengths "we" have gone to, to avoid the adverse financial consequences of the contractual obligations; the identification of at least three of those steps; whether some of those steps have been helpful; whether Millmerran's patience has been exhausted; whether the companies must meet their contractual obligations or face the consequences; reflections upon the strategy adopted by QCL prior to CA inheriting the "Fly Ash business"; Mr Leon's opinion that the inherited Fly Ash business was large, and very profitable; Mr Leon's opinion of the supply demand balance or imbalance in the market; perceived risks to the business of QCL upon the building of the Millmerran power station; the business need to make the proposed expenditure investment by installing a classifier at Millmerran; opinions about concrete companies and competitors increasing their interest in obtaining flyash directly from power stations and bypassing CA; the need for CA's defence of the flyash business to be decisive with care being taken not to transgress the Trade Practices Act; the utility of the preservation of the contract with Millmerran as a commercial negotiating tool with others; a summary that "we" are proposing to make the investment as other delaying tactics have been exhausted and "we" believe that the investment will provide a valuable defensive tool; and, the likely financial outcomes of the investments are likely consequences and not the driver for the investment. 7 Without descending in these reasons to the integers of the relevant provisions of the Trade Practices Act said by the applicant to give rise to contraventions of that Act by reason of the election to proceed to install the classifier at Millmerran, the matters the subject of the draft email are relevant to the case pleaded by the applicant. 8 The question for present purposes is not the ultimate probative value of the statements and opinions (representations) contained in the draft email or the weight to be attributed to any of the statements or opinions in the document but simply whether the draft of a proposed email is a document to which s 69 of the Evidence Act 1995 (Cth) applies and if so whether the integers of that section are satisfied with the result that the hearsay rule is displaced in relation to representations made or recorded in the document. 9 A document which has all the appearances of a document attributed to the Chief Executive Officer and Managing Director of CA and Holdings formulated, by reference to its date, as a response by Mr Leon arising out of a request by the Chairman of Directors, Mr Maycock, to answer a Director's enquiry by email on 18 March 2005 to Mr Leon, responding to Mr Leon's earlier email attaching the expenditure review proposal concerning Millmerran, in the context of a contract with Millmerran, could not be anything other than a "document" forming part of the records belonging to or kept by the companies for the purposes of the business of the companies and in this case, of course, the core business of the companies: s 69(1)(a). The document contains representations made in the course of and for the purposes of the business: s 69(1)(b). The document contains representations which comprise statements of fact and opinion. They appear to have been made by a person who had or might reasonably be supposed to have had personal knowledge of many of the asserted matters: s 69(2)(a). 10 Some of the representations concern what might be described as historical matters about the "QCL strategy" and "why they entered into this contract in the first place". Those representations are not matters of which Mr Leon might reasonably be supposed to have had personal knowledge. However, having regard to Mr Leon's position and the request by the Chairman of Directors to formulate a response to a person Mr Maycock describes as a man of Mr Clough's seniority, it is more likely than not that the representations contained in the document on those matters are based upon information directly or indirectly supplied by a person who had or might reasonably be supposed to have had personal knowledge of those representations: s 69(2). 11 The real point, however, is that the email is plainly a draft. 12 It is not a document sent by Mr Leon to Mr Clough. 13 The respondents contend, in effect, that because the document is a draft which is not demonstrated to be a document produced along the way to the completion of a final version of a document (in this case, a final email sent by Mr Leon to Mr Clough), the document loses its integrity as a document for the purposes of s 69(1). It simply remains a draft formulated for the consideration and reflection of the author and upon reduction or expansion to a final email, memorandum or other form it then matures into a document of record of the organisation kept in the course of or for the purposes of the relevant business. However, experience of commercial litigation demonstrates that there may be many documents brought into existence within a body or organisation generated by officers, line managers or senior executives that represent drafts of letters, emails or other documents that for one reason or another are not reduced to a final form and ultimately dispatched to the addressee which nevertheless are kept by the organisation as part of its record of particular commercial events or decisions in the course of its business. Care must be taken with such documents as the contextual circumstances in which they were produced but not progressed to final form may remain unknown. 14 A draft of a letter or an email formulated in the performance of the author's role in the business of the organisation not ultimately sent but kept by the author (in his or her role in the business of the organisation for the purposes of the organisation) is a document within s 69 and may reveal the state of mind of the author on the subject matter addressed in the document at the moment in time when the draft was formulated. A draft document along the way to an anticipated final document that, for one reason or another, does not mature into a final document, in fact, for dispatch to the addressee (perhaps because it was overtaken by a telephone call) is nevertheless a document for the purposes of s 69 and representations contained in it are admissible. See the discussion in Rural Press Ltd v ACCC (2002) 118 FCR 236 per the Court at [83]; Rural Press Ltd v ACCC (2003) 216 CLR 53 at [32] to [34]; Timms v Commonwealth Bank [2003] NSWSC 576 [17]; ASIC v Rich (2005) 216 ALR 320 [180] to [188]; NT Power Generation Pty Ltd v Power & Water Authority [1999] FCA 1549 [9]; Lym International Pty Limited v Chen; Marcolongo v Lym International Pty Ltd [2008] NSWSC 1156 [13]. 15 The respondents further contend that the Court ought not admit the draft into evidence on the footing that its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial (s 135 of the Evidence Act) or alternatively that if the draft is to be admitted into evidence its use ought to be limited as there is a danger that a particular use of the evidence might be unfairly prejudicial (s 136). The respondents say that the probative value of the representations contained in the draft is substantially outweighed by the danger of unfair prejudice. 16 The central notion of the respondents is that the document is a draft; its contents may have changed in reduction to final form not only in part but substantially; it may not fairly reflect Mr Leon's state of mind at the moment of authorship as it is only a draft for further reflection; and, Mr Leon is an individual respondent to the proceedings and the probative value of a document such as this must be carefully considered as its use in reaching findings about matters in issue might well be unfairly prejudicial as it rises no higher than simply one isolated point on a continuum in time and no more than that. 17 The question of whether the draft email is unfairly prejudicial is a matter to be determined in a deliberative sense in determining whether findings ought to be made concerning the conduct in controversy, in part, in reliance upon the document. It may or may not be found to reflect Mr Leon's state of mind. There is no jury. The primary judge of fact is capable in a reflective and deliberative way of determining what use might be made in a probative sense of the document and engage the protective balance necessary to ensure that any use of the document is not unfairly prejudicial to Mr Leon. For these reasons, it seems to me inappropriate to exercise the general discretion under s 135 of the Evidence Act to refuse to admit the document into evidence and nor do I propose to limit the use of the document under s 136 of the Act. Submissions can be addressed by the parties on the question of the extent to which the document is probative of any fact in issue. Submissions can also be addressed on behalf of Mr Leon and the respondents as to the burden or prejudice that might arise from reliance upon any representation in the document said by the applicant to be probative of a fact in issue. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 26 May 2011