FEDERAL COURT OF AUSTRALIA Schütz Australia Pty Ltd v VIP Plastic Packaging Pty Ltd (No 18) [2013] FCA 407 Citation: Schütz Australia Pty Ltd v VIP Plastic Packaging Pty Ltd (No 18) [2013] FCA 407 Parties: SCHÜTZ AUSTRALIA PTY LTD (ACN 009 069 907), SCHÜTZ GMBH & CO KGAA and PROTECHNA S.A. v VIP PLASTIC PACKAGING PTY LTD (ACN 095 313 705) and VIP STEEL PACKAGING PTY LTD (ACN 095 314 195) File number: WAD 136 of 2009 Judge: MCKERRACHER J Date of judgment: 3 May 2013 Catchwords: PRIVILEGE – litigation privilege – waiver Cases cited: Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 Bristol-Meyers Squibb Company v Apotex Pty Ltd (No 3) [2012] FCA 1310 Federal Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 60 ATR 466 Gray v Associated Book Publishers (Aust) Pty Ltd [2002] FCA 1045 Kwan v Kang [2003] NSWCA 336 Schütz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (No 17) [2012] FCA 1278 Date of hearing: 2 April 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 33 Counsel for the Applicants/Cross-Respondents: Mr ML Bennett Solicitor for the Applicants/Cross-Respondents: Bennett + Co Counsel for the Respondents/Cross-Claimants: Mr SCG Burley SC with Mr AR Lang Solicitor for the Respondents/Cross-Claimants: Gilbert + Tobin IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 136 of 2009 BETWEEN: SCHÜTZ AUSTRALIA PTY LTD (ACN 009 069 907) First Applicant/Cross-Respondent SCHÜTZ GMBH & CO KGAA Second Applicant/Cross-Respondent PROTECHNA S.A. Third Applicant/Cross-Respondent AND: VIP PLASTIC PACKAGING PTY LTD (ACN 095 313 705) First Respondent/Cross-Claimant VIP STEEL PACKAGING PTY LTD (ACN 095 314 195) Second Respondent/Cross-Claimant JUDGE: MCKERRACHER J DATE OF ORDER: 3 MAY 2013 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The applicants/cross-respondents serve unmasked copies of the following documents to the solicitors for the respondents/cross-claimants within 2 days of this order: (a) the 'Queensland Spreadsheet' referred to at paragraph 12 of the Affidavit of Dane Tyron May sworn 25 May 2012 and paragraph 8 of the Second Affidavit of David Rodney Bloomer sworn 25 May 2012; (b) the 'Victorian Spreadsheet' referred to at paragraph 13 of the Affidavit of David Drajoljub Jankovic sworn 25 May 2012; and (c) the 'WA Spreadsheet' referred to at paragraph 14 of the Second Affidavit of David Rodney Bloomer sworn 25 May 2012, paragraph 11 of the Affidavit of Paul Richard Ellis sworn 25 May 2012, paragraph 9 of the Affidavit of Warren George Turnbull sworn 25 May 2012. 1. The applicants/cross-respondents pay the respondents/cross-claimants' costs of the application to be taxed if not agreed. 2. There be liberty to apply in relation to any further confidentiality regime in relation to the unmasked material referred to in order 1, if it cannot be agreed between the parties. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 136 of 2009 BETWEEN: SCHÜTZ AUSTRALIA PTY LTD (ACN 009 069 907) First Applicant/Cross-Respondent SCHÜTZ GMBH & CO KGAA Second Applicant/Cross-Respondent PROTECHNA S.A. Third Applicant/Cross-Respondent AND: VIP PLASTIC PACKAGING PTY LTD (ACN 095 313 705) First Respondent/Cross-Claimant VIP STEEL PACKAGING PTY LTD (ACN 095 314 195) Second Respondent/Cross-Claimant JUDGE: MCKERRACHER J DATE: 3 MAY 2013 PLACE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 By interlocutory application dated 7 February 2013, the respondents/cross-claimants to whom I will refer collectively as VIP seek opposed interlocutory orders that: 1. The applicants/cross-respondents (collectively, Schütz) serve unmasked copies of the following documents to the solicitors for VIP within 2 days of this order: a. the 'Queensland Spreadsheet' referred to at paragraph 12 of the Affidavit of Dane Tyron May sworn 25 May 2012 and paragraph 8 of the Second Affidavit of David Rodney Bloomer sworn 25 May 2012; b. the 'Victorian Spreadsheet' referred to at paragraph 13 of the Affidavit of David Drajoljub Jankovic sworn 25 May 2012; and c. the 'WA Spreadsheet' referred to at paragraph 14 of the Second Affidavit of David Rodney Bloomer sworn 25 May 2012, paragraph 11 of the Affidavit of Paul Richard Ellis sworn 25 May 2012, paragraph 9 of the Affidavit of Sandy Gay Kalinowsky sworn 25 May 2012 and paragraph 10 of the Affidavit of Warren George Turnbull sworn 25 May 2012. 2. Schütz pay VIP's costs of the application. 3. Such further or other order as the Court deems fit. BACKGROUND TO THE APPLICATION 2 The application was supported by an affidavit sworn by VIP's solicitor, Mr Williams. He deposes that on 25 May 2012 VIP was served with a number of affidavits sworn by employees of Schütz. Those affidavits deposed to the existence of certain schedules maintained by Schütz recording details of cross-bottled intermediate bulk containers (IBCs) returned under the Schütz Ticket Service to its various Australian bottling plants. 3 The affidavits did not make a claim for confidentiality in respect of the schedules. None of the cross-bottled IBC schedules were annexed or exhibited to the affidavits, nor were the documents produced by way of discovery. 4 VIP served a Notice to Produce on Schütz on 18 June 2012 seeking production of the schedules referred to in the affidavits. 5 In response, on 27 June 2012, Schütz produced redacted copies of each of the cross-bottled IBC schedules from a file transfer protocol (FTP) website operated by the solicitors for Schütz. The website contains links to FTP files. 6 At the outset Schütz claimed to be entitled to redact the cross-bottle IBC schedules on the grounds of 'privilege'. No details were provided as to the nature of the privilege asserted. On 4 July 2012, VIP sought clarification as to the nature of the privilege as well as production of unmasked copies of the schedules. In response, Schütz confirmed its claim for 'litigation privilege'. No other information was provided to explain the nature of the information that was covered by litigation privilege or how it arose. Schütz declined to produce unredacted copies of the schedules. There was further correspondence on the issue in December 2012 and February 2013. 7 In the course of those exchanges the solicitors for Schütz advised of a new reason for redaction of the schedules. This was now on the grounds of 'relevance'. Solicitors for Schütz advised on 10 December 2012 that 'portions of the spreadsheets [the cross-bottled IBC schedules] were redacted to mask irrelevant material'. The letter went on to observe that '…the masking of irrelevant and confidential information from documents produced in the proceedings was specifically contemplated by the orders made on 11 October 2011'. VIP's ARGUMENTS IN SUPPORT 8 VIP through its solicitor makes the point that earlier versions of the Queensland and Western Australian cross-bottled IBC schedules were annexed to earlier affidavits without any claims for privilege of any kind. Further, no claim was made that parts of the earlier Queensland or Western Australian schedules were irrelevant to the issues in the proceedings. To the contrary, the earlier schedules were relied upon to support the description given in some detail by Ms Officer and Mr Bloomer to describe the process used by Schütz for capturing the information contained in the schedules. This involves recording the features observed from an inspection of IBCs received through the Schütz Ticket Service. 9 VIP's solicitor points to the fact that the order made on 11 October 2011 does not entitle redaction solely on grounds of relevance. Order 4A of those orders provided as follows: Where any party claims that a document produced by it for these proceedings contains confidential information irrelevant to the agreed categories for discovery (Claimant), the claimant may produce a redacted copy of the document, masking the irrelevant information from inspection by any other party or their representatives. 10 VIP contends that as Schütz has not made any claim for confidentiality over the redacted portion of the schedules it is not entitled to maintain such redactions. In addition, VIP notes that even if Schütz was to now make a claim for confidentiality over redacted portions, VIP seeks access to such information on the basis that Schütz was given access to information concerning VIP's dealings with its customers the subject of my judgment on 15 November 2012: Schütz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (No 17) [2012] FCA 1278 (Schütz No 17). For the same reasons relied on by Schütz in order to gather that information, VIP seeks access to details of the sources of the cross-bottled IBCs returned to Schütz through the Schütz Ticket Service. 11 VIP's solicitor anticipates and explains the basis of his belief that the masked portions of the spreadsheets are likely to contain material relevant to VIP's defence as the cross-bottled IBC schedules identify the makers of cages and bottles of cross-bottled IBCs from sources other than VIP. VIP contends that the practice of cross-bottling IBCs in Australia, the conditions under which cross-bottling occurs, the involvement of relevant businesses in the cross-bottling activities, supporting customers with cross-bottled IBCs, and the extent of cross-bottling across Australia are all relevant issues before the Court at trial in terms of both the Trade Practices Act 1974 (Cth) claims and the patent infringement claims. VIP argues that the redacted portions of the spreadsheets are likely to provide information relevant to each of these issues to enable VIP to test the assertions made by Schütz witnesses concerning cross-bottled IBCs available from sources other than VIP so as to permit VIP to pursue its contention that cross-bottling is an activity practiced extensively in Australia. 12 Additionally, VIP's solicitor deposes to a belief that the redacted portions of the documents may also identify cross-bottled IBCs that have entered the Australian market from overseas. This is relevant to matters in issue in circumstances where Schütz does not admit that cross-bottling is an accepted practice internationally. VIP's solicitor deposes to serious prejudice which VIP would suffer it is not accorded the same sort of access which Schütz received in Schütz No. 17. OPPOSITION BY SCHÜTZ 13 Schütz has provided unredacted copies of the documents sought by VIP for examination by the Court for the purposes of determining the application but it contends that the application should be dismissed for the following reasons: 1. Litigation privilege attaches to the redacted portions of the spreadsheets. They were created by Schütz for the dominant purpose of creating a record of VIP's cross- bottling practices for the purposes of identifying evidence in support of Schütz's case to enable Schütz so as to instruct its solicitors and counsel in the proceedings. To support this contention, Schütz relies upon an affidavit of sworn on 10 March 2011 and an affidavit sworn on 28 March 2013. 2. Schütz has waived privilege only in respect of those portions of the spreadsheets disclosed in affidavit evidence and in the unredacted portions of copies of the documents produced to VIP. 3. In any event, the redacted portions of the spreadsheets contain information that is irrelevant to the issues in dispute and the proceedings and is commercially sensitive. As such it should be protected from disclosure in accordance with the 11 October 2011 orders. 4. VIP would obtain an unfair commercial advantage over Schütz, which would suffer prejudice if VIP was permitted access to unredacted copies of the documents. 5. VIP has no legitimate forensic purpose for seeking production of the information redacted from the spreadsheets in dispute at this late stage of the proceedings, after the deadline for VIP to file evidence in answer to the infringement issues has passed and VIP's evidence has been filed. 6. Finally, in all of the circumstances, the spreadsheets were properly redacted and Schütz should be entitled to withhold from inspection the redacted portions of the spreadsheets. 14 Schütz points to the fact that the proceeding was commenced on 7 August 2009. Employees of Schütz commenced creating the documents now in dispute in September 2009 on the advice of their then solicitors for the purpose of recording VIP's conduct so as to identify potential evidence or sources of evidence upon which Schütz could rely at trial. Schütz has used the documents in the course of conducting the litigation to instruct their solicitors who have used and relied on the documents in undertaking legal work such as identifying discoverable documents, identifying relevant evidence, identifying relevant potential factual witnesses and proofing Schütz's own witnesses in those circumstances, Schütz maintains that it is clear the spreadsheets were brought into existence for the dominant purpose of use in judicial court proceedings. 15 As far as waiver is concerned, Schütz argues that disclosure of portions of the spreadsheets on previous occasions did not constitute an implied waiver of the redacted portions. The practice of redacting or masking portions of documents and communications for which privilege is claimed is commonplace and recognised by the Court subject to certain conditions being satisfied such as where: 1. the portion of the document for which privilege is claimed is severable from the balance of the document and the remaining portion is unambiguous; and 2. waiver in respect of the unredacted portion of the document is not inconsistent with the maintenance of confidentiality and the claim for privilege in respect of the portions which are redacted. 16 Citing Gray v Associated Book Publishers (Aust) Pty Ltd [2002] FCA 1045, Schütz argues that this is not a case where the redacted portions would give context or comprehensibility to enhance VIP's understanding of the unredacted portions. Accordingly, the portions of the documents disclosed in evidence are therefore severable from the redacted portions and are not ambiguous. 17 Schütz stresses the commercial sensitivity of the material. The redacted portions record the date of receipt by Schütz of the cross-bottled IBCs through the Schütz Ticket Service, the cage and bottle manufacturers, any UN certification marker affixed to the IBC, the fill product (i.e. chemical) manufacturer and the fill product, and details of Schütz's collection source and location. 18 Schütz stresses that the parties to the proceedings are trade rivals. The prejudice to Schütz would be that VIP would obtain an unfair commercial advantage in access to the unredacted copy as VIP would obtain the details of hundreds of Schütz's collection sources and locations around Australia. 19 Schütz contends that it should be inferred that VIP does not seek the production of the documents for any legitimate purpose as it has been on notice of the existence of the spreadsheets since March 2011 when earlier versions of them were disclosed in affidavits filed on behalf of Schütz. Despite this it failed to seek production until 18 June 2012 and failed to bring this application seeking production of unredacted versions of the documents until February 2012. 20 Schütz argues that it has always been open to VIP to identify, locate and interview potential witnesses of fact in relation to their allegations that their cross-bottling conduct is not misleading or deceptive and that cross-bottling is an established practice internationally. VIP has already filed affidavit evidence that goes to those allegations. Finally, Schütz argues that in the absence of unredacted copies of the documents, VIP may still test the evidence of the Schütz witnesses regarding the practice in Australia. ConSIDERATION 21 The schedules essentially constitute source evidence or summaries of source evidence from which conclusions have been expressed in other affidavits. In May 2012 Schütz filed and served six affidavits from its employees, each of which contained a paragraph or multiple paragraphs specifically referring to the cross-bottled IBC schedules. There is no proper basis in my view for declining access to those schedules when reliance is placed on the material said to be in them. In addition, references were made to versions of the cross-bottled IBC schedules in further affidavits of Ms Officer and Mr Bloomer to which I have referred above. 22 I am satisfied that VIP has justified the relevance of the material. Those grounds of relevance are set out in the supporting affidavit sworn by VIP's solicitor. More specifically, Schütz has pleaded that VIP's cross-bottling activity gives rise to a series of representations referred to as an 'Affiliation Representation' and certain 'Authorisation Representations' (See Fifth Further Amended Statement of Claim, paras [48] – [54]). In essence those allegations are that the act of cross-bottling a Schütz IBC gives rise to a representation that VIP is affiliated with Schütz or that the cross-bottled IBC is authorised by Schütz. I have discussed this in previous judgments. The persons to whom the representations are said to have been made include Schütz's customers and potential customers and VIP's customers and potential customers. VIP contends that no such representation is made. 23 VIP pleads in its Defence that cross-bottling is a well known practice in the Australian market and is not confined to VIP. This contention bears directly upon whether persons such as actual potential customers would consider that a cross-bottled IBC is affiliated with, or approved by, Schütz. The cross-bottled IBC schedules identify the sources of cages and bottles of cross-bottled IBCs from sources other than VIP. The redacted portions of the schedules may help VIP to test the evidence of Schütz witnesses concerning the practice of cross-bottling in Australia. It is material which is peculiarly within the possession of Schütz. 24 In addition, I accept VIP's submission that the cross-bottled IBC schedules may identify IBCs that have entered the Australian market from overseas which are relevant to matters in issue in the manner discussed above. VIP specifically alleges cross-bottling is prevalent and is an established practice internationally. Schütz does not admit this to be the position so the contention is directly in issue. 25 There is no general right to mask parts of documents on the grounds of alleged irrelevance as distinct from privilege. This was specifically discussed in Gray where Branson J said (at [14]-[15]): [14] There is an established practice whereby inspection is provided of discovered documents with parts of the documents masked (Grofam Pty Limited v Australia and New Zealand Banking Group Limited (1993) 43 FCR 408; Optus Communications Pty Ltd v Telstra Corporation Ltd [1995] FCA 254; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2000] FCA 593; Fort Dodge Australia Pty Limited v Nature Vet Pty Limited [2002] FCA 501; GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172 (CA)). Where there is a valid claim for privilege in respect of the portion of the document withheld from inspection, this practice is based on a positive right to withhold from inspection that part of the document. However, there is no such positive right in respect of portions of documents sought to be withheld from inspection on the grounds of confidentiality or irrelevance (Telstra Corporation v Australis Media Holdings (McLelland CJ in Eq, 10 February 1997, unreported)). [15] In my view, where in this Court categories of documents are required to be discovered and thereafter made available for inspection, the true obligation on the party giving discovery is the same as that identified by McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings by reference to Pt 23 of the New South Wales Supreme Court Rules. The Chief Judge there said: 'Under the new discovery rules, Pt 23 of the Supreme Court Rules, … classes of documents required to be discovered may be, and were in the present case, specified not by reference to relevance to a fact or facts in issue, but by description of the nature of the documents, rendering it unnecessary to consider questions of relevance to an issue, as such. If in such cases the party giving discovery desires to withhold, by making or otherwise, production of part of a discoverable document on the ground that that part does not contribute to the satisfaction of any of the criteria by reference to which the class of documents is described, then it may be that a case can be made for giving effect to that desire, but in my view, unless there is some relevant qualification in the order for discovery, the order requires that the whole document be produced unless there is an agreement to the contrary by the party to which discovery is being made, or unless relief from the requirement, for example by making certain portions is obtained from the Court.' 26 In the 11 October 2011 orders, the redaction on the ground of relevance alone was not contemplated. Redaction only on the grounds of confidentiality was addressed. Although Schütz makes the point that these documents were not discovered documents but produced in evidence or proposed to be produced in evidence, the fact remains that there is not an automatic entitlement absent consent or order to redact on the grounds of irrelevance. 27 It is difficult to see in this instance that Schütz has a strong claim for confidentiality over the redacted portions of the cross-bottled IBC schedules given that it has previously disclosed on an open basis an earlier version of the document in the Bloomer affidavit. Nevertheless I would certainly entertain, should it be necessary to resolve this matter, some regime for confidentiality to protect this material. Senior counsel for VIP has made it clear that VIP would be willing to negotiate on that topic. Privilege? 28 It appears to be common ground that privilege could arise only if the documents were brought into existence for the dominant purpose of preparing for or for use in judicial proceedings: Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 at 490. The dominant purpose test is to be assessed at the time the document in question was made or prepared. The relevant dominant purpose is that which existed at the time of creation of the document such that the subsequent use of the document is irrelevant (see Federal Commissioner of Taxation v Pratt Holdings Pty Ltd (2005) 60 ATR 466 and Kwan v Kang [2003] NSWCA 336). 29 The assertion by Schütz that the schedules were created for the purpose of monitoring VIP's and other companies' cross-bottling practices and to identify potential witnesses in contemplation of the proceedings does not support a claim for privilege where the schedules referred to record the non-confidential receipt by Schütz of cross-bottled IBCs from third parties. In any event, it would seem clear that even if privilege were to be established, Schütz has waived it by acting in a way which is inconsistent with confidentiality which privilege would protect. VIP appropriately relies upon the observations of Gibbs CJ in Maurice where his Honour cited with the approval of the following statement of Templeman LJ in Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 (at 538-539): … the rule that privilege relating to a document which deals with one subject matter cannot be waived as to part as asserted as to remainder is based on the possibility that any use of part of a document may be unfair or misleading, that the party who possesses the document is clearly not the person who can decide whether a partial disclosure is misleading or not, nor can the Judge decide without hearing argument, nor can he hear argument unless the document is disclosed as a whole to the other side. Once disclosure has taken place by introducing part of the document into evidence or using it in court it cannot be erased. 30 Similarly and more recently in Bristol-Myers Squibb Company v Apotex Pty Ltd (No 3) [2012] FCA 1310 Yates J noted (at [29]): The true principle in operation in the present case is that privilege relating to a document which deals with one subject matter cannot be waived as to part and asserted as to the remainder: Great Atlantic Insurance Co v Home Insurance Co [1981] 1 WLR 529 at 538-539; Attorney-General for the Northern Territory v Maurice (1986) 161 CLR 475 at 481-482, 488, 493, 497. CONCLUSION 31 Schütz has sought to rely on the cross-bottle IBC schedules insofar as they evidence cross-bottling activity by VIP but at the same time seeks to prevent VIP from testing the evidence or relying on the documents in whole. Schütz indeed has already disclosed a version of the cross-bottled IBC schedule on an open basis in the affidavit of Mr Bloomer sworn 20 March 2011. This is inconsistent with confidentiality which the privilege serves to protect. 32 VIP is entitled to access to the redacted materials. 33 The following orders are made: 1. The applicants/cross-respondents serve unmasked copies of the following documents to the solicitors for the respondents/cross-claimants within 2 days of this order: (a) the 'Queensland Spreadsheet' referred to at paragraph 12 of the Affidavit of Dane Tyron May sworn 25 May 2012 and paragraph 8 of the Second Affidavit of David Rodney Bloomer sworn 25 May 2012; (b) the 'Victorian Spreadsheet' referred to at paragraph 13 of the Affidavit of David Drajoljub Jankovic sworn 25 May 2012; and (c) the 'WA Spreadsheet' referred to at paragraph 14 of the Second Affidavit of David Rodney Bloomer sworn 25 May 2012, paragraph 11 of the Affidavit of Paul Richard Ellis sworn 25 May 2012, paragraph 9 of the Affidavit of Warren George Turnbull sworn 25 May 2012. 2. The applicants/cross-respondents pay the respondents/cross-claimants' costs of the application to be taxed if not agreed. 3. There be liberty to apply in relation to any further confidentiality regime in relation to the unmasked material referred to in order 1, if it cannot be agreed between the parties. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 3 May 2013