Supreme Court New South Wales Medium Neutral Citation: Doulle Pty Limited v Clarins S.A. (A company incorporated in France) [2014] NSWSC 1450 Hearing dates: 20 October 2014 Decision date: 20 October 2014 Jurisdiction: Equity Division - Commercial List Before: Bergin CJ in Eq Decision: 1. The Motion is dismissed. 2. The defendants/applicants are to pay the respondents' costs of the Motion. Catchwords: PRACTICE AND PROCEDURE - application for the Court to appoint a commissioner for discovery of information in France and request that the French Ministry of Justice approve that appointment - application of the Hague Convention on the Taking of Evidence in Civil or Commercial Matters and the French Blocking Statute - where consensual timetable for imminent expedited hearing - where defendants had already produced affidavits - where the description of the documents to be disclosed did not comply with French disclosure requirements Legislation Cited: Loi n° 68-678 du 26 juillet 1968 relative à la communication de documents et renseignements d'ordre économique, commercial, industriel, financier ou technique à des personnes physiques ou morales étrangères The Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters Cases Cited: Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia SRL (No 7) [2014] FCA 5 Christopher Morris v Banque Arabe et Internationale d'Investissement S.A [2001] I.L. Pr 37 Category: Interlocutory applications Parties: Doulle Pty Ltd (1st Plaintiff) Pradin Pty Ltd (2nd Plaintiff) Michel-Henri Carriol (3rd Plaintiff) Julie-Anne Carriol (4th Plaintiff) Clarins S.A (1st Defendant) Clarins B.V (2nd Defendant) Home Services Limited (3rd Defendant) Trimex Pty Ltd (4th Defendant) Representation: Counsel: AS Bell SC/DFC Thomas (Plaintiffs) O Fagir (1st and 2nd Defendants) Solicitors: Atanaskovic Hartnell (Plaintiffs) McCullough Robertson Lawyers (1st and 2nd Defendants) File Number(s): 2014/181663 Publication restriction: Nil Judgment - EX TEMPORE 1This is an application brought by way of Notice of Motion filed in Court today by the first and second defendants, Clarins S.A, a company incorporated in France, and Clarins B.V, a company established in the Netherlands. The third defendant in the proceedings, Home Services Limited, is a company incorporated in Hong Kong. Although it appears today it is not a party to this Motion. The fourth defendant is Trimex Pty Ltd. 2The respondents to the Motion, are Doulle Pty Ltd, the first plaintiff, Pradin Pty Ltd, the second plaintiff, Michel-Henri Carriol, the third plaintiff, and Julie-Anne Carriol, the fourth plaintiff. The Motion is supported by the affidavit of the applicants' solicitor, Mr Ritchie. The respondents rely upon their solicitor's affidavit, that of Michael John Sophocles. 3I should say something shortly about the nature of the proceedings. The first defendant, Clarins S.A, has distributed Clarins makeup and cosmetic products in Australia to the fourth defendant, Trimex, which was a company founded by the third and fourth plaintiffs, Mr and Mrs Carriol. Initially, Clarins S.A supplied the products to Trimex pursuant to written contracts. It appears that it is not in issue that those written contracts expired in 1994. By that time, although this may be subject to some debate, nominees of Clarins had acquired fifty-one per cent of the shares in Trimex and Mr and Mrs Carriol retained forty-nine per cent through their companies Doulle and Pradin. 4It would appear that since the beginning of their relationship, the parties have achieved quite a deal of success in the distribution of the Clarins products, and it was only in recent years that a decision was made (of which background the Court is unaware) for the purchasing of the plaintiffs' interests in Trimex. This apparently occurred in about July 2010 with various communications occurring between the operatives of the various companies for a buyout figure to be put to the board of the holding company of the defendants for approval. 5Those negotiations were unsuccessful. The plaintiffs were given notice of the termination of their relationship with Clarins in October 2013. Further negotiations apparently occurred in relation to a buyout which have not been successful. 6On 19 May 2014, the plaintiffs' solicitors Atanaskovic Hartnell wrote to a French law firm indicating that they were instructed to commence proceedings in Australia based on the conduct of the affairs of Trimex. That communication included the indication that there was a question of an oppression suit and other allegations to be made against the defendants. Atanaskovic Hartnell advised that they understood that the French firm of lawyers acted for Clarins, and sought confirmation that they could accept service of the process once it was filed in Australia. Apparently there was no response to that communication and the plaintiffs went about the service of the process in the usual way on overseas corporations. 7Finally on 10 July 2014, McCullough Robertson wrote to Atanaskovic Hartnell indicating that they were instructed to represent the first and second defendants in the proceedings with a denial that the plaintiffs were entitled to any of the relief sought in the proceedings. 8The defendants' solicitors proposed that the parties should agree on some directions including that the plaintiffs provide to the defendants a copy of all the documents referred to in the Commercial List Statement. There was a schedule to that letter setting out the documents sought. On the same day, Atanaskovic Hartnell advised that the documents would be provided to the defendants' solicitors electronically, and there would be no need for any direction or the intervention of the Court to assist with the production of those documents. On the same day, the first and second defendants filed an unconditional appearance in this Court. 9The parties then proceeded to prepare the matter, and appeared before the Commercial List Judge with the prospect of having the matter heard promptly. A tentative trial date in the new term was fixed. In the meantime, the plaintiffs made application for an interlocutory injunction to restrain the defendants from implementing the notice which was due to expire in January 2015. That interlocutory application was listed for hearing on 25 September 2014. On that day, the parties were advised that it was possible to obtain an earlier final hearing and they adopted that course. On 2 October 2014 Consent Orders were made which included the following: 2. The defendants shall serve their lay evidence in chief by 17 October 2014. 3. The defendants shall serve their expert evidence by 24 October 2014. 4. The plaintiffs shall serve any lay evidence in reply by 28 October 2014. ... 6. The parties shall exchange categories of documents for discovery by 8 October 2014. 7. The parties shall file and serve verified lists of documents in accordance with those categories, if agreed, by 24 October 2014. 8. Inspection of documents shall be completed by 28 October 2014. 10It is apparent that evidence has been served by the plaintiff on the defendants. The defendants have served some of their evidence on the plaintiffs and it is anticipated that the balance of their evidence will be served either today or tomorrow. 11Mr Ritchie's affidavit included the claim that it was on about 11 October 2014 that the representatives of the first and second defendants became aware of certain provisions of Loi n° 68-678 du 26 juillet 1968 relative à la communication de documents et renseignements d'ordre économique, commercial, industriel, financier ou technique à des personnes physiques ou morales étrangères (referred to by the parties as the "French Blocking Statute"). Mr Ritchie wrote to Mr Sophocles setting out the relevant provisions of the Statute and seeking the plaintiffs' consent to some proposed orders to overcome what has been referred to as a prohibition within the Blocking Statute. 12The relevant provisions of the Blocking Statute referred to today are as follows: Article 1 Without prejudice to international treaties or agreements, it is forbidden to any French natural person or any natural person with habitual residence on the French territory, and to any representative, officer, agent or employee of a legal entity having its seat or any business tenancy in France, to communicate in writing, orally or in any other form, in any place whatsoever, to foreign public authorities, documents or information of an economic, commercial, industrial, financial or technical nature, the disclosure of which is likely to prejudice the sovereignty, security, essential economic interests of France or public order, eventually specified, whenever necessary, by the administrative authorities. Article 1bis Without prejudice to international treaties or agreements and laws and regulations in force, it is prohibited for any person to request, search for or communicate, in writing, orally or in any other form, documents or information of an economic, commercial, industrial, financial or technical nature for the purposes of establishing evidence in view of foreign judicial or administrative proceedings or in relation thereto. 13The letter from McCullough Robertson to Atanaskovic Hartnell of 13 October 2014 included the following: 1. A large number of our clients' documents are located in France. In addition, a number of our witnesses who will be giving evidence at the trial of this matter are also currently residing in France. 2. We have recently been made aware of a provision of a French statute which complicates the provision of documents, and the taking of statements, in France, for the purposes of them being used in an Australian judicial proceeding. 3. Specifically, Article 1A of the Law of July 16, 1980 (law no. 80-538) provides that: 'Subject to treaties or international agreements and applicable laws and regulations, it is prohibited for any party to request, seek or disclose, in writing, orally or otherwise, economic, commercial, industrial, financial or technical documents or information leading to the constitution of evidence with a view to foreign judicial or administrative proceedings or in connection therewith'. 4. In order to overcome this prohibition, and provide our clients' disclosure to your clients, we propose to bring an application in the Supreme Court (pursuant to Chapter II of the Hague Convention of 18 March 1970 on the Taking of Evidence in Civil or Commercial Matters) for an order that the Court issue a request to the Ministere de la Justice in France, to appoint a Commissioner to oversee the taking of evidence by the First and Second Defendants' legal representatives in France. 5. Given the time constraints of this proceeding, we propose to bring this application before the Court forthwith. We seek your clients' views (and the views of Ms Reid's client) as to whether they would oppose such an application. We understand that your clients' consent would, of course, be subject to their view of the terms of our clients' proposed order, which we hope to be able to provide within the next day. 6. If all parties consent, we would propose that her Honour Bergin CJ make the necessary orders in chambers without the need for a hearing. 14In response, Atanaskovic Hartnell referred the defendants' solicitors to the recent authorities including Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L (No 7) [2014] FCA 5 and referred to the practical consideration that the course proposed by the defendants was highly unlikely to permit the provision of discovery and inspection of documents in the very limited time which remained available before the trial commenced. 15The Notice of Motion filed in Court today seeks relevantly the following orders: 1. That this honourable Court: a. appoint Alexander Blumrosen as a Commissioner for discovery of information located in France pursuant to Article 17 of the Hague Convention of 18 March 1970 on the Taking of Evidence in Civil or Commercial matters (Hague Convention); and b. request that Ministere de la Justice of France approve the Commission. 2. That the Request for International Judicial Assistance pursuant to the Hague Convention (Request) attached to this Notice be issued at the Court's Request and is incorporated herein. 3. The First and Second Defendants shall provide this Order and its attachment, along with French translations, to the French Ministere de la Justice, Direction des Affaires Civiles et du Sceau, Bureau de l'entraide civile et commercial international (D3), 13, Place Vendome, 75042 Paris Cedex 01, France. 4. Upon approval of the Commission by the French Ministere de la Justice, a party who receives document requests shall provide written responses and objections to the document requests within 10 days and shall subsequently begin production of documents, for which no objections apply, within 10 days of the document requests. 5. Except as expressly stated in this Order, the production of documents to the Commissioner pursuant to the Hague Convention, and the terms of the Request, shall not constitute or operate as a waiver of any argument, position, allegation, or defence of any party in this proceeding, or any legal professional privilege, or any other privileges, rights or protections that may apply to that evidence under the laws of France, Australia or New South Wales. 16The Request for Assistance (the Request) attached to the Notice of Motion records that it is made pursuant to Chapter II of the Hague Convention for the appointment of Alexander Blumrosen as the Commissioner pursuant to Article 17 of the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters. The Request then refers to the parties to the proceedings and what appears to be a reasonably benign outline of some of the issues in the proceedings. 17I should say that the nature of the proceedings and the issues to be decided include the relationship between the plaintiffs and the defendants, the obligations between them, whether those obligations have been breached and whether there is unconscionable conduct. There is also the aspect of the oppression suit to which I referred a little earlier. The competing positions seem to be that the plaintiffs allege a partnership and/or a joint venture, whereas the defendants seem to suggest that there was no partnership, that the plaintiffs were distributors and agents and there was no fiduciary obligations of the kind as claimed by the plaintiffs. The Request includes the following: 9. On 9 October 2014, the Plaintiffs provided their categories for discovery, seeking the discovery of the following categories of documents by the Defendants: ... (e) documents constituting, recording or evidencing communications in reply to, arising out of or connected to an email from Isabelle Madec to Philip Shearer dared (sic) 12 January 2011 and the attachment to that email; (f) documents constituting, recording or evidencing communications between the First and Second Defendants and any of the Fourth Defendant's clients in the period 1 July 2012 to 9 October 2014 concerning an alleged partnership business; ... (j) documents in the period 1 January 2010 to 18 June 2014 concerning, recording or evidencing any intention, decision or attempt by the First and Second Defendants to: i. acquire control of the Fourth Defendant; or ii. take control of the management of the distribution of Clarins products in Australia and New Zealand. 18The Request also includes the following: 12. Accordingly, it is hereby requested that, in the interests of justice, you cause by your usual and proper process, such orders to be entered as French law permits: (a) authorizing Mr Blumrosen to act as a Commissioner of this Court; and (b) allowing Mr Blumrosen, pursuant to Article 17 of the Hague Convention, to receive from producing parties documents located in France, and to simultaneously transmit the documents to the Requesting Parties' legal representatives. 19Mr Blumrosen was apparently contacted by the defendants' solicitors on 15 October 2014. Mr Ritchie sent an email to Mr Blumrosen requesting that he provide a letter to be placed before the Court today in support of an application for orders to facilitate the provision of documents from France, including the appointment of a commissioner. The email advised that the letter should include the nature of Mr Blumrosen's expertise, when he was admitted to practice law in France and his experience acting as a commissioner in such matters in the past. The email also requested him to give the full name of the Blocking Statute and to state its effect on French companies who were required to undertake discovery for foreign proceedings. The email also requested Mr Blumrosen to explain in brief terms how the process works once the New South Wales Court has issued a request to the French Ministry of Justice. Finally, a request was made for Mr Blumrosen to explain how long he estimated it would take to obtain the approval of the Ministry of Justice once the request had been issued as well as the basis for his estimation. 20Mr Blumrosen responded promptly by providing the letter as requested, dated 17 October 2014, under cover of an email to Mr Ritchie with a copy to Mr Stokes and others. Mr Blumrosen advised that he had avoided much reference to the review done by the Ministry of the foreign Court's order. He said this would require some discussion of the Article 23 reservation of France and the practice of the Ministry to review incoming discovery to make sure the request was sufficiently particular and detailed so as to avoid "fishing expeditions". 21The content of the letter that was attached to the email referred to Mr Blumrosen's awareness that the letter was to be submitted to the Court today. It included an outline of his background and experience, a reference to Article 1bis of the Blocking Statute and a reference to the Hague Convention process, in particular Chapter II, which provided what he described as a very different procedure founded on the voluntary compliance by the witness with the discovery requests. He explained that in this situation there was no participation by a French judge in the process and once approval is obtained from the French Ministry, discovery is carried out by the parties under the supervision of a commissioner in France appointed by the foreign judge. Mr Blumrosen also advised that the commissioner could be anyone located in France who was independent of the parties in the present litigation. He also advised that he understood from the exchanges he had had with the defendants' solicitors that Clarins would proceed under Chapter II and would arrange for Mr Blumrosen's appointment as commissioner to oversee the discovery in France. The letter continued: The procedure for obtaining the required discovery order from the foreign jurisdiction is simple and quick. Upon stipulation of the parties, the foreign court would sign a Commission that is an official request from the foreign court to the French government for international civil judicial assistance under the Hague Evidence Convention. The Commission and Order would describe briefly the facts and legal issues raised in the in the foreign litigation, and would detail the discovery sought in France. The French Ministry of Justice does review disclosure requests to ensure that the requests are relevant to the dispute, and are not overbroad "fishing expeditions". Of course, the foreign court's order will include the details of the Commissioner to be appointed and any other requirements (such as deadlines) the foreign court wishes to include. Once signed, the Order and Commission are translated by my office into French, and filed for authorization with the French Ministry of Justice, which is the Central Authority designated under the Hague Convention for incoming discovery requests. In my experience, authorization from the Ministry typically takes one to two weeks. Once authorized, the discovery may take place immediately: documents can be produced and witnesses deposed. In urgent matters, I have obtained authorization for Chapter II discovery in as little as one week from the date of filing the foreign court's Order and Commission with the Ministry. Please let me know if you have further questions about the operation of the Blocking Statute or the Hague Evidence Convention. 22The covering email referred to the French Article 23 reservation and the modification in 1987 by France to simply limit the scope of permissible discovery in the following way: The declaration made by the French Republic in accordance with Article 23 relating to Letters of Request issued for the purposes of obtaining pre-trial discovery of documents does not apply when the requested documents are enumerated limitatively in the Letter of Request and have a direct and precise link with the object of the procedure. 23Mr Blumrosen advised the solicitors for the defendants that the French Ministry "typically reviews incoming disclosure requests with this standard in mind". He then said that he was glad to develop this point further but that: foreign courts typically don't appreciate having a French court review their approved disclosure, and so often the less said about this scope of review the better, but I leave it to you. 24The letter (Ex A) does not detail the nature of the review, but as can be seen from the extract above, Mr Blumrosen referred to the Ministry reviewing disclosure to ensure that they were not fishing expeditions. 25During the course of the previous directions hearings the parties have indicated a consensual approach to having this matter heard as promptly as possible so that the Court could assist the parties at least with a decision in respect of the liability aspect of the dispute. However, it appears that the defendants wish to ensure that they do not breach what they regard as an applicable aspect of the Blocking Statute. 26The plaintiffs have submitted that the application must fail at the outset by reason of the lack of appropriate evidence. It would appear that if applicable, Article 1bis captures the affidavits or statements that have already been served by the defendants. If it is applicable, then any person is forbidden to produce in writing commercial information with a view to the constitution of evidence in the foreign proceeding. There has been no objection by the defendants to producing the affidavits. They have done so consensually pursuant to the Consent Orders made on 2 October 2014. 27There is also the question of the context of the Article. Article 1 seems to have the purpose of ensuring that there is no prejudice to the sovereignty, security and essential economic interests of France or the public order of France. Article 1bis (which on one view of it may be analogous to a subsection) read in the context of Article 1 may also have the same purpose. 28These observations are made in the absence of any expert evidence in respect of the applicability of the Blocking Statute to the circumstances of this case. In Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia SRL Besanko J reviewed both the Blocking Statute and the processes under the Hague Convention for the purposes of deciding whether a discovery order should be set aside. That was a case brought by the regulator where there were serious allegations of misconduct. His Honour said it was far from clear that the Hague Convention could be used to achieve what was sought to be achieved by the Australian discovery order. On the evidence available to Besanko J, including expert evidence, the risk of prosecution under the French law was said to be most unlikely. His Honour concluded that the use of the Hague Convention, if it could be used at all, was likely to be less effective and would involve further delay. 29There is evidence before me from Mr Sophocles of the only prosecution of which that solicitor is aware in respect of a breach of the French Blocking Statute. Other cases have dealt with the Blocking Statute and similar circumstances, in particular the decision of the now President of the Supreme Court of the United Kingdom, Neuberger J, when sitting at first instance in 1999 in Christopher Morris v Banque Arabe et Internationale d'Investissement S.A [2001] I.L. Pr 37. In that case, which is a little closer to the circumstances of the case before Besanko J because there was alleged knowing participation in fraudulent over-statement of assets and earnings, reference was made to the likelihood or otherwise of a prosecution under the Blocking Statute as purely theoretical, or a very low prospect of a prosecution. In that case the Court had the assistance of expert evidence. As I have said, in this application there has been no expert evidence, albeit that it may have been intended that the proposed commissioner might have been qualified as an expert at some stage but did not descend into the evidence that one would expect to assist the Court in reaching a decision as to whether such a process as sought should be adopted. 30The plaintiffs, also complained about the timing of the Motion. I do not put any weight on that at the moment. The parties have been working very hard to get this case ready. However it is odd that this has only come up at this stage, having regard to the French lawyers acting for the defendants and also the fact that it must have been contemplated as early as July 2014 when the defendants sought the documents from the plaintiffs that there would be a reciprocal request from the plaintiffs. 31I do not understand how it could be possible for the French authorities to authorise Mr Blumrosen to act as a commissioner of the Supreme Court of New South Wales. That is what appears to be sought in paragraph 12(a) of the Request. There may be processes of which I am not aware because there is no evidence of them but that does seem to be a flaw in the application. 32Another problematic aspect of the Request is the description of the documents in paragraph 9. It does not comply with what has been referred to by Mr Blumrosen in his communication with the defendants' solicitors. Besanko J described what he understood was meant by "limitatively" listed documents (see paragraph 10). If that be the touchstone by which such applications are reviewed by the Ministry of Justice then it seems to me that the Request would be of little utility because it does not list the documents in such a manner. 33The hearing of this matter is in two weeks. The process that is proposed in paragraph 4 of the Notice of Motion envisages responses to document requests within ten days and then consequential conduct where no objections have been made within a ten day period. First of all such a process would take time to get across to the Ministry. Secondly, one can not envisage that the Ministry of Justice in Paris will have the capacity to deal with this matter immediately and whenever it is dealt with such a ten day process is going to impact on the parties preparation of the case. On the evidence before me it seems to be quite unrealistic. 34There is another aspect to which I should refer and that is the status of the first and second defendants, the applicants on the Motion. There is no real evidence of what documents are with either of the defendants. There is a reference in McCullough Robertson's letter of 13 October 2014 to a large number of the defendants' documents being located in France. It is not clear to me what that means. The second defendant, at least prima facie in the absence of expert evidence, could not be affected by the Blocking Statute. In any event it would seem to me that any documents held by the second defendant, the company established in the Netherlands, must be produced in accordance with the order. I should also say that there is no application to vary or to set aside the order that was made by consent on 2 October 2014 in relation to the production of the documents by the parties. 35The differing approaches adopted by the defendants, on the one hand, producing without objection and consensually their affidavits and then seeking a letter of request in respect of other documents is in my view not reconcilable. 36I am satisfied that there is not enough evidence to establish an entitlement to the orders sought by the defendants. The Motion is dismissed. 37The defendants/applicants are to pay the respondents' costs of the Motion. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 October 2014