Australian Competition & Consumer Commission v Dataline.net.au Pty Ltd [2005] FCA 153 (3 March 2005)

Last Updated: 6 April 2005

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Dataline.net.au Pty Ltd [2005] FCA 153

PROCEDURE – discovery – orders for discovery – compliance with orders – self-executing order made that in the event of continued non-compliance the respondents’ defence be struck out and matter proceed to trial on affidavit evidence or judgment be given – whether there has been continued non-compliance – whether self-executing order takes effect

STATUTES

Corporations Act 2001 (Cth) s 471B

Trade Practices Act 1974 (Cth)

CASES

Re Jokai Tea Holdings Ltd [1993] 1 All ER 630 followed

Sammy Russo Meat Supplies Pty Ltd v Australian Safeway Stores Pty Ltd [1999] FCA 1381 referred to





AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DATALINE.NET.AU PTY LTD, AUSTRALIS INTERNET PTY LTD, WORLD PUBLISHING SYSTEMS PTY LTD, JOHN LYNDEN RUSSELL, NEALE FRANCIS BANKS, JEFFERSON LITCHFIELD and SARA MARY MOORE
QUD 277 of 2001




KIEFEL J
BRISBANE
3 MARCH 2005

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 277 OF 2001

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DATALINE.NET.AU PTY LTD (ACN 075 400 529) FIRST RESPONDENT AUSTRALIS INTERNET PTY LTD (ACN 090 539 432) SECOND RESPONDENT WORLD PUBLISHING SYSTEMS PTY LTD (ACN 075 141 007) THIRD RESPONDENT JOHN LYNDEN RUSSELL FOURTH RESPONDENT NEALE FRANCIS BANKS FIFTH RESPONDENT JEFFERSON LITCHFIELD SIXTH RESPONDENT SARA MARY MOORE SEVENTH RESPONDENT
JUDGE:	KIEFEL J
DATE OF ORDER:	3 MARCH 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The applicant have leave to proceed against the second respondent on the amended notice of motion filed on 11 October 2004 pursuant to s 471B of the Corporations Act 2001 (Cth).
THE COURT DECLARES THAT:

2. The defence of the first, second, third, fourth and seventh respondents filed on 3 May 2002 be struck out in consequence of the failure of those respondents to comply with the orders of 25 September 2003.

THE COURT FURTHER ORDERS THAT:

3. The hearing of the application for judgment in accordance with O 35A r 3(2)(c) of the Federal Court Rules be adjourned to a date to be fixed.
4. The first, second, third, fourth and seventh respondents pay the applicant’s costs, including any reserved costs, of the motion.

















Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 277 OF 2001

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DATALINE.NET.AU PTY LTD (ACN 075 400 529) FIRST RESPONDENT AUSTRALIS INTERNET PTY LTD (ACN 090 539 432) SECOND RESPONDENT WORLD PUBLISHING SYSTEMS PTY LTD (ACN 075 141 007) THIRD RESPONDENT JOHN LYNDEN RUSSELL FOURTH RESPONDENT NEALE FRANCIS BANKS FIFTH RESPONDENT JEFFERSON LITCHFIELD SIXTH RESPONDENT SARA MARY MOORE SEVENTH RESPONDENT

JUDGE:	KIEFEL J
DATE:	3 MARCH 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 At issue at this point in the proceedings is whether the first to fourth respondents and the seventh respondent (‘the respondents’) have complied with particular orders for discovery and, if they have not, whether a self-executing order made on 25 September 2003 takes effect. If it does the respondents’ defence will be struck out and the matter will either proceed to trial on the affidavit evidence of the applicant (‘the ACCC’) or judgment may be given for it on the basis of the statement of claim.

2 In its statement of claim the ACCC alleges that the first respondent (‘Dataline’) carried on the business of selling Internet-related services in Australia which included:

(a) the sale by it of wholesale Internet provider services to virtual Internet service providers (‘VISPs’) for resale by the VISPs to their customers (‘the consumers’);
(b) the supply to VISPs of the right to use an on-line computer program (‘Pandora’) in the administration of the VISPs’ business of reselling the services to the consumers;
(c) the supply of technical support services to VISPs and their consumers to assist them in the use of the services and Pandora.

3 The ‘services’ were said to comprise:

(a) Internet access services;
(b) electronic mail services;
(c) electronic commerce services; and
(d) web site hosting services.

4 It was further alleged that Pandora was a program developed and owned by Dataline which incorporated a database, was hosted on Dataline’s server computers, and facilitated access by consumers to services and recorded details of that access, amongst other things.

5 The second respondent (‘Australis’) is alleged to have been at all relevant times a wholly owned subsidiary of WPS Pty Ltd. The third respondent (‘World Publishing Systems’) is a subsidiary of WPS. World Publishing Systems in turn holds all the issued share capital in Dataline. These respondents are therefore said to be related. The fourth respondent (‘Mr Russell’) was a director of and the manager of each of the companies. The seventh respondent (‘Ms Moore’) was the secretary of and a director of Australis and an employee of Dataline and Australis.

6 It is alleged that Dataline engaged in resale price maintenance, misleading and deceptive conduct, unconscionable conduct, undue harassment and coercion in connexion with the payment for goods and services, in contravention of provisions of the Trade Practices Act 1974 (Cth). The case against each of the other respondents is based upon their liability as accessories. Of particular relevance to this application are the allegations of misleading and deceptive conduct concerning the quality and extent of the services offered by Dataline and its response to consumer complaints concerning insufficiency of service and other problems. The statement of claim and following further and better particulars identified thirteen VISPs, who had contracts of service with Dataline since about July 1998, but the allegations extend beyond them and to other VISPs and consumers generally.

7 Proceedings were brought by the ACCC on 21 December 2001. On 25 January 2002, I made orders, on the ACCC’s application, which permitted it to seize certain personal computers utilised in Dataline’s business upon conditions. The respondents were restrained from altering in any way electronic information relevant to the action concerning VISPs and consumers. At the following hearing, on 26 January 2002, the respondents were represented. Orders were made that the original hard disk drives of computers at Dataline’s premises be delivered into the custody of the Registrar of the Court after copies and images were taken and provided to the respondents’ solicitors.

THE HISTORY OF THE RESPONDENTS’ DISCOVERY

8 The process of discovery has had a lengthy history. On 17 September 2002 Drummond J ordered, by consent, that the respondents discover, by way of list and within forty-two days, all documents within the possession, custody or control of the respondents falling within the categories in an annexure to the order which was marked ‘A’. On 10 December 2002 his Honour ordered, again by consent, that the respondents discover by way of list and by 10 February 2003 (Order 1):

‘(a) all documents within their possession, custody or control falling within the categories annexed hereto and marked "A"; and

(b) all documents falling within the categories annexed hereto and marked "A" which have previously been within their possession, custody or control but have subsequently been destroyed or otherwise removed from their possession, custody or control.’

9 The respondents were to give inspection of the documents referred to in order 1(a) by 21 February 2003.

10 The categories of documents referred to in the orders made in September and December 2002 differed. Although reference is made at some points in later orders to the order of 17 September 2002, the focus of this application is upon the documents referred to in Annexure A to the order of 10 December 2002.

11 On 12 March 2003 a list was provided by the respondents. They later conceded (in their submissions filed on 25 September 2003) that they had ‘inadvertently’ failed to comply with the orders. The ACCC at that later hearing identified the deficiencies in discovery as relating to the categories numbered 8(a)(iii), 16, 17(b), 17(c), 22(a) and 22(b). This does not appear to have been disputed. Those six categories in annexure A to the order of 10 December 2002 are in these terms:

8(a) All copies and versions of:

(iii) databases used, updated or modified by the Pandora program;

16 All documents recording any communication from a VISP or Consumers about the Services, or any response to those communications, including all correspondence and database records recording such matters.

17(b) Documents recording communications with VISPs since the Start Date concerning:

(i) charges for Consumers whom the VISP alleged were disconnected or whom the VISP had sought to have disconnected; and

(ii) the volume of data accessed by VISPs or their Consumers, or records and statements of Dataline in respect of such volumes.

17(c) Documents and logs recording the volume of data accessed by VISPs and their Consumers for periods since the Start date.

22(a) Any of the following documents created since 1 September 2000 which concern the 30 Minute Session Limit:

(i) documents recording communications with VISPs or Consumers;

(ii) documents recording complaints or expressions of dissatisfaction from Consumers or VISPs.

22(b) Documents and logs recording line disconnections made as a result of the enforcement of the 30 Minute Session Limit.

The ‘start date’ is referred to in the order as 1 June 1998.

12 The categories of documents ordered to be discovered had distinguished between VISPs particularised in the statement of claim and VISPs generally. The applicant’s best estimate, as at 10 September 2003, was that there were between 60 to 100 VISPs in addition to the body of consumers.

13 The list of documents provided by the respondents contained reference to only 13 VISPs, namely those identified in the statement of claim. The ACCC’s solicitors wrote to the respondents’ solicitors on 20 March 2003 pointing out that the order of 10 December 2002 required discovery in the categories of ‘all VISPs’ and not just ‘particular VISPs’. The respondents’ solicitors responded on 2 April 2003, acknowledging that the order was not confined to ‘particular VISPs’ but saying:

‘The documents listed in the 10 December 2002 List for these Categories merely represent all the documents in our Clients’ power, possession and custody. Our Clients contend that there are no other documents relating to these categories in our Clients’ power, possession and custody.’

14 The ACCC’s solicitors said, in their letter dated 11 April 2003, that ‘this simply cannot be true’ and went on:

‘The documents discovered by your clients are database records for each customer of the Particular VISPs. Do your clients contend they do not have such records for all other VISPs (which your clients have repeatedly estimated as numbering more than 100)? Are we to believe that your clients do not presently keep any database records with respect to current VISPs?’

15 The respondents’ solicitors replied with respect to the categories:

‘...our Clients confirm that the documents discovered are database records of each customer of the Particular VISPs.

The writer maintains that numerous conversations with [a solicitor for the ACCC] and submissions made by the writer during the previous directions hearing indicate that discovery was limited to the VISPs particularised in paragraph 20 of the Statement of Claim.

There were no agreements to widen the scope to include all VISPs other than those that are particularised in paragraph 20 of the Statement of Claim. We have repeatedly stated that all disclosure is for the VISPs particularised in paragraph 20 of the Statement of Claim, unless specifically stated to be otherwise.’

16 The ACCC’s solicitors disputed this. They said in following correspondence that they would resist any attempt by the respondents to vary the orders made and required compliance.

17 In addition to the allegation that there had been some agreement to limit discovery, the respondents’ solicitors in their letter dated 22 April 2003 expressed concern about media coverage obtained by the ACCC and suggested that it was engaged in a fishing expedition to justify the current litigation. It went on:

‘This is why our Client has limited disclosure as much as possible in this case to VISPs particularised in paragraph 20 of the Statement of Claim. Significant disclosure has been provided in any event. We have not checked whether any of the Orders are inconsistent with this, nor have we verified the submissions made at the relevant time on the transcript, however this is why our Client insists that the disclosure be limited to the VISPs particularised in paragraph 20 of the Statement of Claim. Given that 14 VISPs have been particularised, your Client has had more than ample opportunity to collate any evidence which it says will prove its case and any discovery beyond those 13 VISPs can only be regarded as yet another fishing expedition. If your Client has a case, then it should be particularised. Your Client has particularised its case to 14 VISPs and disclosure has been agreed to and carried out on that basis.’

18 There followed correspondence between the parties as to the grant of further time for the respondents’ compliance.

19 On 9 May 2003 I ordered, again by consent, that the respondents discover documents in the categories numbered 8(a), 16, 17 and 22 within twenty-eight days (order 2) and that copies be provided of those documents within the respondents’ possession, custody or control within seven days (order 3). These four numbered categories encompassed each of the six categories of the December 2002 order. In addition I ordered that the ACCC deliver a Schedule of Discovery Deficiencies upon receipt of those documents and that the respondents respond to each allegation. Thereafter the applicant was to be at liberty to apply with respect to the allegations made in its schedule.

20 Although the ACCC’s solicitors wrote in June and again in August 2003 regarding the respondents’ non-compliance with the orders, they received no response. On 10 September 2003 the ACCC filed a motion seeking orders that the respondents’ defence filed and served on 3 May 2002 be struck out in the event that the respondents continued to default.

21 At the hearing of that motion the respondents acknowledged in their written submissions that they had ‘inadvertently failed to comply with the consent orders’, as earlier mentioned, and said that there was ‘an extremely large amount of documents’. No further explanation for their non-compliance was provided. The respondents’ proposal put forward at this hearing, as an alternative to the self-executing orders sought by the ACCC, was for the ACCC to have access to the five hard drives held in the custody of the Court following the orders of 26 January 2002 if the respondents further defaulted. That suggestion was not acceded to.

22 On 25 September 2003 I ordered as follows (and provided reasons [2003] FCA 1027):

‘1. The first, second, third, fourth and seventh respondents (‘the respondents’) provide to the applicant within twenty-eight days:

(a) the list referred to in paragraph 2 of the orders made in these proceedings on 9 May 2003; and
(b) the documents referred to in paragraph 3 of the orders made in these proceedings on 9 May 2003;

failing which the respondents’ defence filed and served on 3 May 2002 be struck out.

2. Upon the applicant filing an affidavit in the registry deposing to any failure of the respondents to comply with paragraph 1, the matter be listed for trial on a date not less than three months thereafter and subject to leave of the Court:

(a) the trial proceed by way of affidavit evidence only;
(b) the applicant’s affidavit evidence for the trial be filed on or before a date seven days prior to the commencement of the trial;
(c) on or before 4.00 pm on the day before the commencement of the trial the applicant provide to the Court:
(i) a succinct summary of the relevant facts;
(ii) a chronology of relevant events;
(iii) an outline of submissions;
(iv) a draft order;

(v) a list of authorities and copies of the authorities with the relevant passages highlighted.

3. The respondents pay the applicant’s costs on the motion.’

23 On 17 October 2003 the respondents’ solicitors wrote to the ACCC’s solicitors, in reply to the ACCC’s solicitors’ letter which had specified the documents it expected to be discovered. They said that, in addition to documents already discovered, all documents relevant to the categories that were in the respondents’ power, possession or control had been copied in electronic format on 4 CD ROMs which recorded all relevant databases and documents and that there were no other documents.

24 On 22 October 2003 the first, second, third and fourth respondents served a list of documents and on the following day the seventh respondent served a list in identical terms. The lists described the documents that the respondents had in their possession, custody or power, as ‘Files on 4 CD ROMs and all the documents previously discovered and listed in the Respondents’ 10 December 2002 List of Documents’. It was said that there were no documents which came within Schedule 2. On 24 October 2003 the ACCC’s solicitors wrote advising that they had not received documents in accordance with par 1(b) of the orders and that accordingly the respondents’ defence was struck out. They had filed an affidavit to that effect and written to the Court.

25 On 27 October 2003 four CD ROMs were served on the ACCC’s solicitors under cover of a letter dated 23 October 2003 from the respondents’ solicitors. The ACCC’s solicitors wrote on 28 October 2003. In addition to complaints about delivery of the CD ROMs outside the time required by the order, it was said:

‘Order 15 rule 6(3) requires your clients’ list of documents to, "describe each document or, in the case of a group of documents of the same nature, ... describe the group, sufficiently to enable the document or group to be identified". The CDs contain 4,784 files and yet your clients’ lists describe them compendiously as "files on 4 CD ROMs". This is patently insufficient; a quick browse of the CDs shows that the files are not all of the same nature. They range from HTML files to Perl scripts and plain text files. What your clients have done is akin to saying, "the documents in these 4 boxes".’

26 It was also pointed out that the CD ROMs contained no system logs (as category 17(c) required) and did not contain e-mail correspondence evidencing communications with VISPs or consumers (as required by category 16). Mr Steensma, a solicitor in the firm acting for the ACCC, later gave evidence to this effect, following upon his examination of the CD ROMs. It was however accepted by the ACCC that the CD ROMs contained databases used, updated or modified by the Pandora program, as referred to in category 8(a). The letter of 28 October 2003 went on to say that it was untenable and contrary to the evidence obtained by the applicant that the respondents did not possess and had never possessed any system logs or e-mails regarding services.

27 The response of the respondents’ solicitors, in their letter of 30 October 2003, was that it was not possible, within the time permitted by the orders, to make a list describing in detail each and every document on each of the four CD ROMs. In any event, the solicitors went on, it was appropriate that the documents be provided in electronic format ‘as they consist of a number of interlocking databases and files which can produce as many documents as are requested depending on the type of request.’ The list of documents was endless and it would be oppressive and lacking utilitarian value to attempt to list all documents, it was said. In relation to system logs, it was said that they were summarised by, but not recorded by, the Pandora program. The assertion that system logs were kept by the respondents, ‘primarily by a program known as RADIUS’, was without foundation, they said.

28 In relation to e-mails, letters and facsimiles, it was said that there had been such documents but they were no longer in the respondents’ power, possession or control and there may be other parties who have copies of that material. A range of reasons as to why e-mails may no longer be in the respondents’ power, possession or control included deterioration of hard drives, destruction or corruption by viruses and voluntary deletion. The current e-mail volume of the fourth respondent was said to be in the order of 150 000 e-mails per year.

29 The matter was brought back before the Court by the ACCC. At the hearing, on 31 October 2003, Counsel for the ACCC identified categories 16 and 17(c) as the particular categories in relation to which there had been a complete failure to discover; that is to say, e-mails from a VISP or consumers about services or other communications, and documents and logs recording the volume of data accessed by VISPs and their consumers. This was in addition to the failure to list documents or to provide any information in Schedule 2. The solicitor for the respondents advised the Court that e-mails were not kept, for the reasons given in the letter of 30 October 2003. The question of the logs was not gone into.

30 At the conclusion of the hearing I ordered that, by 4 November 2003, the respondents file and serve an affidavit deposing as to whether there were in existence any records referred to in categories numbered 16 and 17(c) and if there were not now but have been such records, to depose as to what had become of them.

31 On 3 November 2003 the respondents’ solicitors delivered to the ACCC’s solicitors a hard disk drive under cover of a letter stating that the drive contained ‘records of all system logs referred to in [category] 17(c)’. The letter went on to say:

‘Please note that this is one of the hard drives which were copied during the execution of the Anton Pillar [sic] Orders last year and that our Client has understood these documents have already been provided.
...
Naturally we have clarified our Client’s misunderstanding with respect to the difference between providing copies to the Court (pursuant to the Anton Pillar [sic] Order) and providing a copy to you.’

32 On 4 November 2003 the fourth respondent, Mr Russell, filed an affidavit in which he stated that all documents relevant to categories 16 and 17(c) had been provided to the applicant and that there were no other documents in the power, possession or control of the respondents which fell within those categories. He said, in relation to the delivery of the further hard disk to the ACCC:

‘... there are logs which can be described as system logs for both Radius and non-radius contained on a Hard Drive marked "ISIS-copy" which was copied and placed with the Federal Court Registry following the execution of Anton Piller Orders on or about 25 January 2002. On 3 November 2003, I instructed Mr Bentley to provide that Hard Drive copy to the applicant by hand delivbery [sic] that day. I understand that that occurred. Further, summaries of these logs were indeed provided to the Applicant on the four (4) CD Roms sent by post on 23 October 2003.’

33 Paragraphs 9-11 of Mr Russell’s affidavit dealt with documents which were no longer in the respondents’ power, possession or control:

‘9. I confirm that to the best of my knowledge, the Respondents do not have any other e-mails, letters or facsimiles other than those which have already been disclosed to the Applicant. It is impossible for the Respondents to recall all e-mails, letters and facsimiles sent or received as literally hundreds of thousands of such communications are involved over the period covered which relates to (issues up to 5 years ago) 1998 onwards. There was no legal requirement at the time to keep specific documents, however if I had had the ability to see into the future, I would have been more diligent in keeping such documents.

10. I note that the Applicant states that they have a number of e-mails, letters and communications which have either been sent, or received by the Respondents. Obviously there are e-mails, letters and facsimiles which have existed, and which no longer are in our power, possession or control.

11. If I am provided with copies of such communications then I may be able to confirm whether or not I can recall such communications existing or having been received or sent by myself or the other Respondents ...’.

34 On 18 November 2003 the ACCC’s solicitors delivered a Schedule of Discovery Deficiencies. The categories listed extended beyond those the subject of the order of Drummond J of 10 December 2002. Of the six categories which became the subject of the following orders of 25 September 2003 and 31 October 2003 it was simply noted in the schedule that the documents were the subject of those orders.

35 On 28 November 2003 the applicant filed a motion seeking a declaration that the defence of the respondents be struck out by virtue of the orders made on 25 September 2003. Mr Starkoff is a solicitor employed by the firm acting for the ACCC. He is also qualified as a computer scientist. In his affidavit he said that he had examined the hard disk which had been provided by the respondents on 3 November 2003. It contained an enormous amount of information - some 37 gigabytes of data, which equates to some 50 CD ROMs. He identified some 378 300 files on the hard disk which were stored in some 18 690 directories with additional sub-directories.

36 Mr Starkoff found on the hard disk copies of e-mails sent or received, falling within category 16, and he produced some. He also identified two types of files which fell within category 17(c), namely files that recorded details of network connections including the length of the connection and volume of data (‘RADIUS logs’) and also files that recorded details of access to Web sites, including the volume of data accessed (‘Web Access logs’). The RADIUS logs appeared to record connections going back as far as April 1999 and there were a series of logs which appeared to record connections made each day for the period March 2001 through to 27 January 2002, but none were kept afterwards. He offered the opinion that it was likely that logs would have been maintained after that date.

37 Three former employees of Dataline also gave evidence as to system logs and the storage of e-mails by employees as part of Dataline’s practice. The purport of their evidence was that not all logs and stored e-mails had been discovered.

38 Mr Litchfield worked for the company between October 1998 and February 2002 and reported directly to Mr Russell. During this time system logs were kept and recorded details of every connection made by consumers including the username, time of contact and the amount of data accessed. Mr Litchfield had also developed his own archiving program, which stored e-mails and could be accessed from within the Pandora program. E-mails from VISPs and consumers were many and were held in a database on his personal computer. He deleted only trivial e-mails. On the last day of his employment the hard drive on his computer was replaced, as a result of a direction given by Mr Russell.

39 Mr Heidemann and Mr Bilbow also gave evidence of the practice of employees of storing e-mails on personal computers. They were not aware of any practice of deleting them. In addition Mr Heidemann kept paper files with respect to e-mails sent to or received from some Australis customers. There was no suggestion that the material stored or retained, of which these witnesses spoke, had at any time been discovered by the respondents.

40 The hearing of the applicant’s motion was adjourned whilst without prejudice discussions took place. These discussions continued through 2004. On 11 October 2004 an amended notice of motion was filed on behalf of the applicant seeking the declaration referred to above and leave to proceed against the second respondent, pursuant to s 471B of the Corporations Act 2001 (Cth) since it was now in liquidation. A further order was sought pursuant to O 35A r 3(2)(c) of the Federal Court Rules that judgment be given against the respondents. This order was sought in lieu of that made on 25 September 2003, for a trial on affidavit. Alternative orders were sought in the event that the Court determined that the proceeding should continue.

41 When the matter came back before the Court on 15 October 2004, the respondents were no longer legally represented. Mr Russell appeared but the seventh respondent did not. I declined leave to Mr Russell to appear for the corporate respondents or for the seventh respondent generally in the proceedings, but gave leave for him to appear for the corporate respondents on the ACCC’s motion to strike out the respondents’ defence with the consequential orders which I have mentioned. The question of representation for the seventh respondent was left open. The matter was adjourned for hearing and directions were made with respect to the filing of material and submissions.

42 On 1 December 2004, when the matter came on for hearing again, it was apparent that the fourth respondent had not addressed the specific matters raised in the affidavits of the former employees or of the solicitor for the applicant in relation to the hard drive. Additionally the ACCC in both their written and oral submissions continued to complain that no list had been provided with respect to the four CD ROMs nor with respect to the hard drive. No attempt had been made to comply with the orders in this regard nor with the requirement to list Schedule 2 documents. The hearing was adjourned to enable the fourth respondent in particular to file further affidavit material.

43 On 9 December 2004 the matter was heard. The respondents, including the seventh respondent, were again represented by their former solicitor who explained that the affidavits the subject of the order of 1 December 2004 had not been provided to the respondents and they had been unaware of them until after the hearing on 1 December 2004. It is not necessary to elaborate upon the explanation, which I accept. Mr Russell, in his affidavit filed on 6 December 2004, says that after being provided with the affidavits (at pars 4-5):

‘4. Armed with this fresh understanding, I conducted a thorough search of all electronic records and archives held by the Respondents, and I collected the electronic records which are listed in a schedule which is attached to this my affidavit and marked "JLR-A".

5. I have always had difficulty understanding what documents the Applicant was after. I believe that this difficulty has arisen due to a range of factors which include the Applicant’s inability to clearly specify what they are after.’

44 Mr Russell explained that he had thought the ACCC had taken copies of the hard drives when they were seized under order on 25 January 2002. How he came to that view, or maintained it in light of his solicitors’ former advices, was not gone into. He went on (at par 5):

‘Rather than have further debate over the issue, I wish to make all possible records available to the ACCC, including any records kept with the Registry. It is on this basis that I am making all documents listed in the exhibit marked "JLR-A" available to the Applicants. This should remove any further need to debate the correct way to define certain records, whether certain records fall within certain categories, whether certain records are relevant or not, etcetera.’

The annexure of which he spoke listed a number of hard drives, back-up tapes and a CD ROM. They included those hard drives held in the custody of the Court.

45 In relation to Mr Litchfield’s evidence he agreed that a program had been developed concerning logging of support calls and answers to customers or VISPs. Each staff member was requested to log the details of the call. He then said (at par 6):

‘(f) All available records of this program relevant to each of the particular VISPs for the relevant period were disclosed to the ACCC last year;’

(emphasis added)

46 He explained the need for the replacement of the hard drive on Mr Litchfield’s computer, which occurred in January 2002. He had now located that hard drive and said it was available for inspection. He said the information contained in it was also located on one of the five hard drives held in the Registry. He had located a CD ROM which was relevant to the hard drive and it was now also available for inspection.

47 In relation to the evidence of Mr Heidemann and Mr Bilbow, he said that any e-mails of the type referred to by Mr Heidemann would be contained on the copies of the hard drives the subject of production pursuant to the Anton Piller orders. He said (at par 7) that the copy e-mails kept on physical files, as referred to in Mr Heidemann’s affidavit, ‘insofar as they are relevant to each of the particularized VISPs for the relevant period, were disclosed last year.’ (emphasis added)

48 In relation to Mr Starkoff’s affidavit he said (at par 9):

‘9. I crave leave to refer to the Affidavit of David Starkoff sworn 2 December 2003, and reply as follows:

(a) I do not believe that post 27 January 2002 records are discoverable or relevant;
(b) All records relevant to the RADIUS Logs, or Web Access Logs have either already been discovered, or are now available for discovery given that the records listed in "JLR-A" are available for discovery;
(c) The Web Access Logs referred to in paragraph 19 of his affidavit are contained on the "proxy Cache Drive" listed on "JLR-A";
(d) I disagree with the opinions expressed by Mr Starkoff in paragraph 21, 22 and 23 of his affidavit. However, having fully absorbed the contents of same, I confirm that all documents in the control or custody of the Respondents relevant to categories 21(a), 21(b) and 23(a) have either already been discovered, or are now available for discovery given that the records listed in "JLR-A" are available for discovery. Indeed all possible records have either been discovered already or are now available for discovery given that the records listed in "JLR-A" are available for discovery.’

49 Mr Russell concluded by saying that there were no further records or documents which were relevant to discovery which were in the power, custody or control of the respondents.

50 Mr Russell’s affidavit did not allude to the failure to provide lists of documents and in particular of the relevant parts of the CD ROMS and the hard drive. The ACCC had continuously complained of this deficiency in late 2003 and had filed affidavit material (of Mr Steensma) specifying these breaches in some detail. It had again pointed them out on 1 December 2004 and on 9 December 2004. It was submitted that the respondents had not even attempted to comply with this aspect of the orders.

DETERMINATION OF THE APPLICATION

51 The position which prevailed at 25 September 2003, when the self-executing order was made, was one of continued and unexplained default. The explanations proffered could not be regarded as bona fide, so far as they went. It was obvious that the order of 10 December 2002 required discovery with respect to VISPs and consumers generally and not just ‘particular’ VISPs identified in the ACCC’s pleading. This was conceded by the respondents’ solicitors. The assertion of some agreement to limit discovery in this way was never sought to be established. It was contradicted by the reason given for the respondents’ disinclination to discover, namely that the ACCC was embarked upon a fishing expedition.

52 On 25 September 2003 it was made abundantly clear to the respondents that this was their last chance to comply. It would not appear, from what followed, that the respondents took that warning seriously.

53 The response to the order was to produce four CD ROMs containing files. I put aside the question of the lateness of the discovery since it was completely overshadowed by the respondents’ defaults with respect to the material to be discovered and the method of discovery. The files contained some summaries of logs but no system logs and no e-mails. The respondents went so far as to assert that there were none and specifically that no system logs were kept on RADIUS. This was later shown by their own evidence to be a falsehood.

54 The respondents’ defence might then have been regarded as struck out under the terms of the order of 25 September 2003. However the effect, implicitly, of the orders which followed was to suspend or stay the operation of that order in order to give the respondents further opportunities to comply. It is therefore necessary to consider their further action or inaction.

55 The giving of the one hard drive on 3 November 2003 was not compliance with the order. The assertions that it contained all system logs and that no e-mails were kept were false. The preparedness of the respondents then to acknowledge that the system logs were connected to a RADIUS program was in sharp contrast to their previous denial that this was so.

56 The effect of the evidence of the former employees and Mr Starkoff was to show, contrary to Mr Russell’s assertions, that e-mails were kept on a number of personal computers and logs were maintained on each of them. Some copies of e-mails were also kept. Mr Starkoff also raised the prospect that logs would have been maintained after 27 January 2002. There is nothing to suggest Dataline’s business came to an end that day. Mr Russell, in the course of proceedings, has asserted that the business did cease as a result of these proceedings, but it seems likely that there was a period after 27 January 2002 when it continued. In that period it is likely that logs and e-mails were kept in the way they had been.

57 Mr Russell’s response to this evidence was to allow the ACCC access to the other hard drives held in Court. It was disingenuous of him to suggest that he believed that they had already had access to them. It is contrary to the advices his solicitor is said to have provided to him in November 2003. Clearly he was obliged to discover to the ACCC any discoverable material on the copies he and the other respondents kept of the hard drives. At no time did he attempt to do so.

58 It would require a leap of faith to accept Mr Russell’s evidence that all employees’ logs and e-mails up to 27 January 2002 are to be found on the hard drives held in Court. Clearly Mr Litchfield’s records held on the hard drive of his computer are not amongst them. Mr Russell does not explain what has become of the hard copies Mr Litchfield kept. The problem is compounded by the respondents’ failure to list the various documents, by group or employee, or in some way in which their sufficiency could be tested.

59 If I was to accept Mr Russell’s assertion that all documents are now available the respondents have still not fulfilled their obligation under the orders to list documents. At various points in the history of this matter when the respondents have produced files or data piecemeal, there has never been an attempt to list the documents by group or otherwise. It is not sufficient to hand over a large amount of electronic information and require the other party to sort through it. It has always been a requirement of discovery that the party making discovery sift through their documents and identify those which are to be made available. That obligation has not changed with the advent of computers. Indeed one would have thought the task would have been made somewhat easier than in the past, although I acknowledge that perhaps more information is now stored. In any event the respondents were specifically ordered to discover by way of list. At no time did they suggest to the Court that the task was beyond their capacity or oppressive. Their tactic has been to consent to orders and then proceed to do as little as possible. They have never complied with this aspect of the order of 25 September 2003.

60 From the time when the matter came back to Court in October 2004 it might be said that the focus of the hearings was upon the deficiencies in what documents had been produced and the respondents’ failure to deal with the deficiencies identified by the ACCC. I have considered whether the respondents may, in that process, have become distracted from their other unfulfilled obligation, to provide a list. I am however satisfied that they and their legal representatives have always appreciated what was required of them but have not made any attempt since the order of 25 September 2003 to comply. The respondents were reminded of the requirement after the four CD ROMS were delivered. They said that they had had insufficient time, but at no time thereafter did they attempt to later comply. They took the same approach to the hard drives and again the ACCC pointed out that they had not complied. The ACCC has consistently pointed out the respondents’ continuing breach of the order and it was clear that it remained an issue at the December hearings. The respondents appear to have chosen to ignore it.

61 Lastly it may be added that the respondents have not explained what has become of the physical copies of e-mails kept by Mr Litchfield nor, even in a general way, what has become of all e-mails no longer kept. In either respect I would not be prepared to infer that they have been lost.

62 This is a most unusual case. I find the respondents’ approach to compliance with orders of the Court concerning discovery perplexing. It cannot be said that they were confused as to what was required of them and they had solicitors acting for them at all crucial times. It was made plain to them what the consequences would be.

63 It has been said that the relevant question when the Court is considering a failure to comply with an order which provides for consequences in the event of default, is to consider whether the failure is intentional and contumelious: Re Jokai Tea Holdings Ltd [1993] 1 All ER 630 at 637; and see Sammy Russo Meat Supplies Pty Ltd v Australian Safeway Stores Pty Ltd [1999] FCA 1381. In this case that is the only inference open. It follows that the order of 25 September 2003 should take effect. The respondents have not availed themselves of the opportunity of avoiding that outcome.

64 The seventh respondent has recently filed an affidavit deposing to the fact that she has no documents herself. It is said that she no longer has a connexion with the respondents. It is not however said that her position as director and officeholder of the corporate respondents was terminated when this litigation was commenced or that she was unable, effectively, to take steps in compliance with the orders. She has been represented by the same solicitors acting for the other respondents and it has not been suggested by them, in the course of proceedings, that her position was such that she should be excused from at least attempting compliance.

65 There remains the question as to what further consequences should follow upon the respondents’ defence being struck out. The ACCC now seeks the relief provided for in O 35A r 3(2)(c) of the Federal Court Rules which came into effect on 30 August 2004. Given that questions as to compliance, and what consequences should follow upon a failure to comply, were addressed and considered subsequent to the rule coming into effect, there seems to me no reason why the ACCC should not have judgment to which it is entitled having regard to the statement of claim and which the Court is able to grant. The respondents should pay the ACCC’s costs, including any reserved costs, of the motion.

I certify that the preceding sixty-six (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

Associate:

Dated: 3 March 2005

Counsel for the Applicant:	Mr P Freeburn SC and Mr QT Cregan
Solicitor for the Applicant:	Corrs Chambers Westgarth
Solicitors for the First, Second, Third, Fourth and Seventh Respondents:	Irish Bentley Lawyers
Date of Hearing:	1 December 2004, 9 December 2004, 3 February 2005, 11 February 2005
Date of Judgment:	3 March 2005