Optus Networks Pty Ltd v Telstra Corporation Limited [2008] FCA 1149 (6 August 2008)

Last Updated: 7 August 2008

FEDERAL COURT OF AUSTRALIA

Optus Networks Pty Ltd v Telstra Corporation Limited [2008] FCA 1149

OPTUS NETWORKS PTY LIMITED (ACN 008 570 330) v TELSTRA CORPORATION LIMITED (ACN 051 775 556)
NSD1087 OF 1997


EDMONDS J
6 AUGUST 2008
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD1087 OF 1997

BETWEEN:

OPTUS NETWORKS PTY LIMITED (ACN 008 570 330) Applicant

AND:	TELSTRA CORPORATION LIMITED (ACN 051 775 556) Respondent

JUDGE:	EDMONDS J
DATE OF ORDER:	6 AUGUST 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Paragraphs 4(f) and 4(g) of the notice to produce dated 10 June 2008 issued by the applicant to the respondent be set aside.

2. The respondent need not comply with paragraphs 4(f) and 4(g) of the notice in para [1] above.

3. The respondent pay 70% of the applicant’s costs of opposing the motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD1087 OF 1997

BETWEEN:

OPTUS NETWORKS PTY LIMITED (ACN 008 570 330) Applicant

AND:	TELSTRA CORPORATION LIMITED (ACN 051 775 556) Respondent

JUDGE:	EDMONDS J
DATE:	6 AUGUST 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

1 On 30 July 2008, I heard a motion for a notice to produce dated 10 June 2008 issued by the applicant (‘Optus’) to the respondent (‘Telstra’) (‘the notice’) be set aside.

2 The notice sought the production of documents, or representative samples of such documents, which are or which record or evidence documents, information used in or in compiling or otherwise referrable to documents or systems referred to in various paragraphs of:

(i) the affidavit of Noel Ian Eldridge (‘Mr Eldridge’) sworn and filed on 11 April 2008; and

(ii) the affidavit of Stuart Alan Newton Lee (‘Mr Lee’) sworn 15 April 2008 and filed on 16 April 2008.

The notice also sought the production of documents which are or which record or evidence other information referrable to documents referred to in various paragraphs of Mr Lee’s affidavit.

3 The substantive hearing of this matter on the issue of liability has been set down to commence on Tuesday 7 October 2008.

4 Telstra filed a number of affidavits in support of the motion but none were read. I was informed that the reason for this was because, by agreement between the parties, the scope of the documents of which the notice seeks production has been narrowed. Specifically, through their respective solicitors, Optus advised Telstra that it did not wish Telstra to engage in the process of retrieving and reviewing documents from its disaster recovery tapes in order to respond to the notice. That concession, Telstra conceded, alleviated much of the practical difficulty faced by it in complying with the notice. Nevertheless, Telstra maintains that some aspects of the notice remain oppressive. Some parts call for documents of marginal probative value. In addition, Telstra regards the issue of the notice (and any call made under it) as an abuse of process.

TELSTRA’S CASE IN SUPPORT OF THE MOTION

5 I summarise below the general grounds upon which Telstra relies for seeking to have the notice set aside.

Abuse of process

6 The breadth of the notice is such as to amount to a notice for discovery. The service of a notice to produce is an impermissible attempt to gain further discovery. That aside, given that an extensive and substantial discovery process has been undertaken – both as part of the Court process and as part of the consensual process under the Access Agreement – and given that Telstra has answered detailed interrogatories which traverse the very matters with which the notice is concerned, Telstra submits that the issue of the notice is an abuse of process.

7 In the words of Telstra’s senior counsel ‘[Optus has had] too many bites at the cherry, it’s only two months till [sic] the liability hearing, they’re seeking to reopen discovery that was closed eight years ago’.

Oppression

8 Telstra acknowledges that there is an intersection between the complaint of abuse of process and oppression. However, there are, it submits, distinct parts of the notice which, by their very nature, are oppressive whether or not they also constitute an abuse. These are raised below in respect of specific paragraphs of the notice.

Relevance and lack of probative value

9 According to Telstra, several categories of documents lack probative value, or at least would have minimal probative value, compared to the effort to which it would have to go to produce documents of marginal utility. These are also raised below in respect of specific paragraphs of the notice.

Prejudice

10 It should also be recognised that whatever documents Telstra might be able to discover in its search for documents ranging from over 11 years ago to over 8 years ago, the likelihood is that many documents will be missing. Some of the documents may have the capacity to assist Telstra’s case.

11 After so long a lapse of time since the creation of those documents and the completion of discovery in 2000, Telstra submits that it is likely to suffer some prejudice by reason of the fact that a complete, or at least substantially complete, picture of events is not available and Optus may choose to focus on select documents which, by happenstance, have survived to be discovered. That fact has the capacity to amount to an oppression and should rightly be weighed in the balance.

OPTUS’ CASE IN SUPPORT OF THE NOTICE

Background

12 The notice was served after Telstra filed the affidavits upon which it proposes to rely in these proceedings, including the affidavits of Mr Eldridge and Mr Lee respectively.

13 Optus’ essential complaint is set out in its written outline of submissions and is reproduced in [14]-[21] below.

14 First, Optus customers’ calls were transmitted over the Telstra network. This transmission was undertaken pursuant to a statutory regime which included an agreement in writing, which is not in dispute, dated 14 August 1992 (‘the Access Agreement’).

15 Clause 15 of the Access Agreement required confidential information provided by each party to the agreement to be kept confidential by the other, subject to presently irrelevant exceptions. Additionally, the clause required each party to establish and observe procedures adequately to protect the confidential information.

16 Optus’ complaint is that, without its consent and without notice to it, Telstra, in the years after entry into the Access Agreement, was recording data relating to calls by Optus customers using the Telstra network in a database known as NUMIS 100. That database recorded what were known as ‘call charge records’ of the Optus and Telstra customer calls. The period over which this was occurring is not entirely clear. But it is clear that this conduct was occurring in the years 1997 to early 2000, at least.

17 The Optus traffic information (which was kept in a call charge record, recording information relating to each call) (see Eldridge para 9) was sent to NUMIS 100. A purpose of having that information available on the NUMIS 100 database was so that Optus’ information could be accessed and used by Telstra officers in the marketing area to assess, amongst other purposes, the extent to which Optus was obtaining, or acquiring, market share at Telstra’s expense.

18 Optus contends that the establishment of NUMIS 100 for purposes which included that purpose, and the use to which the Optus traffic information accessed from that database was put to produce reports called Market Share Reports were breaches of the confidentiality provisions of clause 15 of the Access Agreement.

19 Telstra accepts that in the years 1997 to early 2000, it prepared what are called Market Share Reports. Those reports (see Eldridge paras 13 and 14) were prepared using traffic information relating to Optus, stored on the NUMIS 100 system or the marketing executive information system (‘MEIS’).

20 In broad terms, the Market Share Reports took all of the traffic information from NUMIS 100 (the aggregate of the Telstra traffic information and the Optus information) and then recorded various analyses, including a comparison of the combined Telstra and Optus traffic as a total and then comparing Telstra’s share of that total and Optus’ share.

21 It is Optus’ case that this use was for impermissible marketing purposes.

The current dispute

22 The Market Share Reports were first discovered in March 2000 and are referred to in a list of documents dated 28 March 2000, called the Fifth Supplementary List.

23 At that time, the dispute between the parties was before the Expert Committee.

24 In April 2008, Telstra filed its evidence in these proceedings (the Eldridge and Lee Affidavits).

25 A number of propositions which were sought to be relied upon by Telstra in its defence emerge from those affidavits. Important amongst those propositions are the following:

(a) First, that because the Market Share Report was based on what is described as ‘aggregate information’ (presumably the totality of the Telstra and Optus call information from the NUMIS 100 database), that aggregation renders what was done, as not in breach of clause 15. In that context, Mr Eldridge and Mr Lee give evidence as to the manner in which the Market Share Reports were prepared (Eldridge paras 7 – 12; Lee paras 15 – 21). The evidence given by each establishes that Telstra had established within its marketing group a ‘Competitive Intelligence Group’, the purpose of which was to monitor specials being run by Optus and other competitors (Eldridge para 7). Mr Eldridge gives evidence that initially, information from NUMIS was provided to him by emails provided by Messrs Neil Lambert or John Pilkington. These gentlemen were members of the Competitive Intelligence Group (Eldridge para 13). Later, in 1997, the email procedure changed. The NUMIS 100 database could be interrogated electronically by computer programs called, MEIS and Samurai. Mr Eldridge’s evidence is that it was only Lambert or Pilkington who could use these programs to interrogate NUMIS (Eldridge paras 15, 16). Mr Eldridge at paras 18 – 20 records the procedure adopted for preparing the MSRs. In paragraphs 20 and 21 he gives evidence of two relevant aspects. First, the MSRs ‘contained a lot of assumptions’ (para 20). Second, the MSRs contained information from other publicly available sources (para 21).

(b) The second proposition raised by Telstra is that the MSRs were provided to a very limited category of persons under conditions of confidentiality (Eldridge para 32) and were provided to what he described as ‘group managing directors’ (see also Lee para 15).

(c) Third, notwithstanding that the MSRs were provided to persons in Telstra’s marketing group, they were not used for marketing purposes. Mr. Lee asserts this at para 22. The accuracy of what Mr. Lee asserts may be compared with his earlier evidence in an outline of evidence of Mr. Lee in proceedings in this Court in 1995 (see paragraphs 90 – 93, 174 and 177). It was that statement which led to this litigation.

(d) Fourth, the MSRs were deficient and had limitations. They were of little assistance to Telstra’s marketers.

26 Notwithstanding the extensive discovery given in the proceedings to date, with one possible exception, the information sought in the notice has not been discovered by Telstra. Notwithstanding its solicitor’s lengthy statement of its client’s position, to the extent that it relies on duplication which Optus accepts, that is to say duplication between production under the notice and earlier discovery categories, Optus has withdrawn the area of duplication. There is a small issue as to whether a further area said by Telstra to involve duplication, which is denied by Optus, did involve such duplication.

27 The documents called for in the notice all relate to paragraphs of the affidavits of Messrs Eldridge and Lee. The various paragraphs call for the production of documents which conceptually deal with five separate topics. They are:

(a) First, what source, or sources of information was used to prepare the Market Share Reports. This topic includes, who prepared them and how? (see paras l(a), (b), (d), (f), 4(b) and (c) of the notice).

(b) Second, to what persons were these reports provided? (see paras l(g) and (h)).

(c) Third, for what purposes were the MSRs used? (see paras l(h), 3(b), 4(a), (e), (f) and (g)).

(d) Fourth, were the MSRs of any value in connection with Telstra’s business and did the information suffer from any deficiencies or limitations as Telstra claims? (see paras l(f), (i), 2, 3(b)).

(e) Fifth, could the information relating to Optus’ traffic which was obtained from NUMIS 100 and formed part of the aggregated information (as Telstra characterises it) analysed in the MSRs, have been obtained from any other source, apart from the Optus traffic information? (see paras l(h), (i) and (j)).

THE PARTIES’ AGREEMENT ON CHANGES TO THE NOTICE

28 As noted in [4] above, the parties have agreed on changes to the terms of certain paragraphs of the notice. The parties have agreed that Optus will not press certain other paragraphs of the notice and have agreed that Telstra will produce the documents referred to in certain paragraphs of the notice. The result is that I am not required to deal with subparagraphs (c), (e) and (i) of paragraph 1; paragraph 2; subparagraphs (a) and (b) of paragraph 3 and subparagraph (d) of paragraph 4 of the notice.

29 I was also informed by senior counsel for Optus that the Market Share Reports to which the notice is directed are those brought into existence for the period January 1997 to February 2000. In its written outline (Annexure ‘D’), Telstra indicated that it was content with that period, by which I understand it to mean that it accepts that the period in question is both reasonable and relevant.

SPECIFIC PARAGRAPHS OF THE NOTICE

30 Paragraph 1 calls for the production of:

All documents, or representative samples of such documents, which are or which record or evidence:

Paragraph 4 does likewise. Telstra submits that the ‘or representative samples’ concept is actually more oppressive than the ‘All documents’ requirement. It would require a discovery of all the documents and then selecting a subset which is ‘representative’ of the whole. The ‘representative sample’ concept is defined in the notice to mean ‘a document or selection of documents which [Telstra] reasonably believes (without having to review all documents in the class of documents) are representative of the class of documents sought’. Telstra submits that even so defined, the breadth of categories make it very difficult as a practical matter to be confident, on reasonable grounds, that a subset produced out of the entire population of documents within scope are representative without recovering and reviewing a significant portion, or all, of the documents in question. Telstra further submits that the difficulty is amplified by the passage of time since the documents in question came into existence and the fact that many of the staff who may have been able to form a view as to their representative quality are no longer employed by Telstra.

31 Clearly, the concept of ‘representative sample’ as defined imposes a value judgment on Telstra which the ‘All documents’ requirement does not. However, Optus’ answer to that is that in those circumstances, the ‘All documents’ requirement should be complied with. In other words, the ‘representative sample’ concept is only to be availed of where it would otherwise reduce the task and burden of production. I agree.

32 Paragraphs 1(a) and (b) calls for the production of:

(a) the information used to compile the Market Share Reports referred to in paragraph 7 of Mr Eldridge’s affidavit;

(b) the emails and excel spreadsheets containing aggregated traffic information sent to Mr Eldridge from members of the Competitive Intelligence Group referred to in paragraph 13 of Mr Eldridge’s affidavit;

Paragraph 7 of Mr Eldridge’s affidavit reads:

The MSRs were compiled from a range of information, including publicly available information like newspaper advertisements, direct mail drops and television commercials. Some of this information was obtained from the Competitive Intelligence Group within Telstra’s Corporate Marketing group, which monitored specials being run by Optus and other competitors. I collected other information from what I saw in the media or what colleagues brought to my attention. The MSRs also incorporated an analysis of certain aggregated traffic information compiled by an application known as NUMIS 100. The following is a brief summary of my understanding of how the NUMIS 100 system worked.

Paragraph 13 of Mr Eldridge’s affidavit reads:

Initially, I would receive very simple excel spreadsheets of output data containing the aggregated traffic information from NUMIS 100 on a weekly basis via email from the Competitive Intelligence Group in the Corporate Marketing business unit. The output data was split into ‘Telstra’ traffic and ‘Total Market’ traffic and was broken into various categories such as cities (origin or destination of call), IDD and STD traffic per capital city, and duration of call. I received these emails from either Neil Lambert or John Pilkington, who are members of the Competitive Intelligence Group responsible for management of the NUMIS 100 system. I did not, and could not, access this system.

These paragraphs are objected to on the grounds of oppression, lack of utility, relevance and probative value. There was no evidence of oppression. On their face, any such documents would be relevant. It is impossible to assess their utility or their probative value, at this stage, but that does not matter for present purposes. The paragraphs should be allowed to stand.

33 Paragraph 1(d) calls for the production of:

drafts of the Market Share Reports, and any communications or correspondence relating to drafts, as referred to in paragraphs 18 to 19 of Mr Eldridge’s affidavit.

Paragraphs 18 and 19 of Mr Eldridge’s affidavit read:

I did not personally prepare drafts of the MSRs in the exhibit. This was carried out by staff reporting to me. One of those persons was Ms Anne-Maree Donoghue, who later became responsible for preparing the MSR. Prior to that, and on occasion after Ms Donoghue’s commencement, the MSRs were also prepared by Mr John Nijdam. Mr Nijdam left Telstra in early 1997. The person preparing the report would usually prepare a first draft on a Friday, and then discuss it with me. I would almost always make some changes, and then have the person preparing the report attend to the amendments and then distribute the MSRs. This process of preparation of the MSRs was started and completed on the Friday or each week, and would usually take in the order of 4 to 5 hours. I would not routinely have discussed the MSR with Mr Lee prior to dispatch.

This paragraph is objected to on the grounds of lack of utility, relevance and probative value. On their face, the drafts are relevant and that is sufficient to support the paragraph. Their utility and their probative value cannot be assessed at this stage. The paragraph should be allowed to stand.

34 Paragraph 1(f) calls for the production of:

the number, or any estimate of the number, of the ‘non-Telstra’ not captured by the data used to prepare the Market Share Reports or any discussion, commentary or notation regarding the impact or effect of the data not including the ‘non-Telstra calls’ referred to in paragraph 25 of Mr Eldridge’s affidavit.

Paragraph 25 of Mr Eldridge’s affidavit reads:

That estimate utilised volume data in the MSR to work out how many calls were made. This data was considered as inaccurate to begin with. It did not capture the total non-Telstra calls made. For example, it did not contain data for calls made on Optus’ own fixed line network that did not have to be interconnected with Telstra’s network, nor those calls which traversed part of Telstra’s network. It also did not capture calls made in telephone exchanges not equipped with CLI. Periodically, other omissions were found which showed the inaccuracy of the data set used.

This paragraph is objected to on the grounds of oppression. However, no evidence of oppression was adduced as such. The paragraph should stand.

35 Paragraphs 1(g) and (h) calls for the production of:

(g) the delivery or circulation of the Market Share Reports as referred to in paragraphs 32 and 36 of Mr Eldridge’s affidavit.

(h) any agenda(s) for matters discussed and what was said at, and the persons present at the Senior Leadership Team meetings referred to in paragraphs 32 and 38 of Mr Eldridge’s affidavit.

Paragraphs 32, 36 and 38 of Mr Eldridge’s affidavit read:

The MSRs were always delivered in a secure manner. They had to be delivered on a Friday afternoon. This was important as MSRs would need to be received by a Group Managing Directors (GMDs) on the Friday of the given week so that they were received before the Senior Leadership Team meeting at 8.00am on the Monday morning of the following week. ... As a result of the limitations and shortcomings outlined above, I regarded the information contained in the MSRs as of limited use. This was a perception shared with me by those I worked with who had knowledge of the MSRs. My view was that they were simply prepared out of a desire to have a very general view of the extent of erosion of Telstra’s market share as the degree of competition gradually increased. However the MSRs were sufficiently informal and of low circulation that these deficiencies were not sufficient to eliminate the desire for their production. ... However, to the best of my knowledge, including that derived from working closely with Mr Lee, the information in the MSRs was not used for marketing purposes. The only actual purpose that it served, as far as I was aware, was for discussion at the Monday morning meetings that I discussed earlier.

These paragraphs are objected to on the grounds of lack of utility, relevance and probative value. Again, on their face, they are relevant but again their utility and probative value cannot be assessed at this stage. Nevertheless, on the ground of relevance alone, the paragraph should stand.

36 Paragraph 1(j) calls for the production of:

information that could be obtained during the period in which the Market Share Reports were produced (January 1997 to February 2000) from:

(i) Telstra’s own call data as referred to in paragraph 41 of Mr Eldridge’s affidavit, including a representative sample of that call data; or

(ii) Market intelligence publications in the marketplace referred to in paragraph 44 of Mr Eldridge’s affidavit, including copies of a representative sample of those publications.

Paragraphs 41 and 44 of Mr Eldridge’s affidavit read:

I disagree with Mr Smith’s comment at paragraph 11 of his affidavit that the information set out in paragraph 10, insofar as it relates to a competitor’s telecommunication traffic, is commercially valuable for the purposes summarised in subparagraphs 11(a) to (d). Because of Telstra’s very large customer base, about 10 million customers, information relevant to the matters listed at subparagraphs 11(a) to (c) could be adequately gathered from Telstra’s own call data. The same could be said for subparagraph 11(d) by monitoring the effect on Telstra’s own results when a competing offer was made. ... Telstra would look at other publications in the marketplace for market intelligence, such as periodic reports on market share by regulators or analysts such as AUSTEL, Paul Budde (a well known Australian telecommunications commentator/analyst) and Ovum (a telecommunications consultancy).

These paragraphs are objected to on the grounds of oppression, lack of utility, relevance and probative value. Again, no evidence was adduced of oppression. Again, in my view, the documents are relevant on their face and again if only for that reason the paragraph should stand.

37 Paragraph 3(c) calls for the production of:

all documents which are or which record or evidence the discussions within Telstra referred to in paragraphs 39 and 42 of Mr Lee’s affidavit about Telstra’s $3 offer.

Paragraphs 39 and 42 of Mr Lee’s affidavit read:

After Optus announced its $2 offer, there was a great deal of discussion within Telstra about whether Telstra should change its $3 offer from what I and other Telstra executives had planned, to more closely match the Optus offer, in particular whether Telstra should reduce its proposed price from $3 to $2. It was my strong view, based on the principles listed above, that Telstra should not. I believed Telstra should continue with the $3 weeknight offer: the offer would be available 3 days, not one; and it would be available when customers wanted to call (Saturday was typically a very low calling day). Despite being available more of the time, Telstra’s offer was still targeted at a low traffic time in its network so Telstra did not need to add capacity to support it. Telstra decided to continue with its original $3 weeknight strategy around mid-January 1997. I was involved in making that decision. ... For some time after the launch there were still discussions between Telstra management, in which I participated, about the impact the $3 offer would have on our business. It was clearly popular, with Telstra volumes and profits growing steadily in response to the persistent advertising campaign. The primary concern was what would happen to revenue. By mid-year in 1997 our revenue decline had ceased, then started to grow again, with revenue and profit growth continuing through 1998.

These paragraphs are objected to on the grounds of oppression, lack of utility, relevance and probative value. The same observations that were made in relation to the immediately preceding paragraph (paragraph 1(j)) are apposite. The paragraph should stand.

38 Paragraph 4(a) calls for the production of:

the purpose for which any person received a copy of the Market Share Report, or the use to which the persons who receive the Market Share Reports put the Market Share Reports or the information contained within one or more of them.

Again this paragraph is objected to on the grounds of oppression, lack of utility, relevance and probative value. Again, in my view, the documents sought are relevant. No evidence is adduced of oppression and at this stage it is not possible to make any assessment of their utility or their probative value. The paragraph should stand.

39 Paragraph 4(b) and (c) calls for the production of:

(b) the information used to compile the Market Share Reports referred to in paragraph 17 of Mr Lee’s affidavit including but not limited to documents which show what ‘aggregated telecommunications traffic information’ was used to compile the market share reports.

(c) any drafts, or review or comment, or communication or correspondence relating to the Market Share Reports referred to in paragraph 18 of Mr Lee’s affidavit, including but not limited to documents which record any changes made by Mr Lee to the reports.

Paragraphs 17 and 18 of Mr Lee’s affidavit read:

The MSRs were compiled from a range of information, including information gathered from media (such as newspapers and television advertising), as well as certain aggregated telecommunications traffic information recorded as passing over Telstra’s fixed network. This data was compiled on a software application known as NUMIS 100. As part of my responsibilities, I reviewed the MSRs. They were provided to me in draft by members of my team, primarily Mr Nijdam, Mr Eldridge and then, after him, by Ms Donoghue. I usually made some changes to each report in discussion with, for example, Mr Eldridge, and then had him arrange the necessary amendments and subsequent circulation of the report. The reports were for weeks ending on a Saturday, and were usually delivered around six days later, ie the following Friday. This means that the data in the MSRs could be up to almost 2 weeks old by the time the recipients reviewed a particular MSR.

These paragraphs are objected to on the grounds of lack of utility, relevance and probative value. Paragraph 4(b) is said to be duplicative of what has been called for in paragraphs 1(a) and (b), while paragraph 4(c) is said to be duplicative of paragraph 1(d). To the extent that that is so, the documents produced in response to paragraphs 1(a), (b) and (d) will also be produced in response to paragraphs 4(b) and (c). Nevertheless, for the reasons stated in relation to paragraphs 1(a), (b) and (d), paragraphs 4(b) and (c) should stand.

40 Paragraph 4(e) calls for the production of:

any consideration of, decision regarding, or discussion of a market plan or strategy, sales campaign or promotion which referred to, or had regard to, any information contained within one of the Market Share Reports in the period January 1997 to February 2000 (cf paragraph 22 of Mr Lee’s affidavit).

Paragraph 22 of Mr Lee’s affidavit reads:

I did not use, nor to the best of my knowledge did any one in my team use, the MSRs for the purposes of making a decision to run, or not to run, a particular marketing or sales campaign or promotion, or devising any particular strategies for STD and IDD products. Nor was I involved in any marketing decision or process which relied on the MSRs as a motivation for a particular decision or promotion. At best the MSR results, when aggregated over time, acted as a kind of ‘scorecard’ when looking at trends over time. Notably, the MSRs display a rolling 13 week average market share. The 13 week rolling average suppresses short term fluctuations and ‘lags’ the short-term results. It was that kind of trend information which when compared to long-term goals allowed me to get a feel for how Telstra was faring in the market. Table 1 in the STD reports and Table 1 and Table 3 of the IDD reports show 4 weekly, quarterly and annual results; Table 2 of the STD and IDD reports show 4 weekly and quarterly results. I did not consider the weekly events or statistics reported in the MSRs were nearly as useful as that kind of trend information. In many instances in the MSRs it showed volumes returning to previous levels after a special had been run. Again, this illustrated that a longer term focus was required. I recall I proposed to discontinue inclusion of short term data in the MSRs, however the senior management team were keen that the MSRs stay as they were. Some Business Units were keen for the then current format to continue so that they had a weekly opportunity to suggest that they could do better. Market share per se was not Telstra’s focus. To explain the reason for this, I provide some detail regarding the competitive and regulatory environment in Australian telecommunications in the mid to late 1990s and describe Telstra’s general marketing strategy during that period.

Again the grounds of objection to this paragraph are oppression, lack of utility, relevance and probative value. Again I am of the view that the documents are relevant. There is no evidence of oppression and again it is not possible at this stage to assess utility and probative value. Telstra submitted that this paragraph went to quantum rather than breach, however, in my view, it could go to both. The paragraph should stand.

41 Paragraph 4(f) calls for the production of:

any other discussion within Telstra about Optus’ STD or IDD offers, or Telstra’s offers, during January 1997 to February 2000 which refer to, or have regard to, any information contained within one or more of the Market Share Reports.

This paragraph, like the next, has no express connection with Mr Lee’s evidence nor Mr Eldridge’s evidence. The words used in the paragraph ‘any other discussions within Telstra about’ are, in my view, too wide to be relevant and the paragraph should be set aside.

42 Paragraph 4(g) calls for the production of:

internal communications or correspondence referring to the Market Share Reports within Telstra during January 1997 to February 2000.

The same observations apply to this paragraph as were made to the immediately preceding paragraph (paragraph 4(f)). The words ‘internal communications or correspondence referring to’ are too wide to be relevant and the paragraph should be set aside.

43 Paragraph 4(h) calls for the production of:

the information received from overseas interconnect providers referred in paragraph 53 and 61(d) of Mr Lee’s affidavit.

Paragraphs 53 and 61(d) of Mr Lee’s affidavit read:

The MSRs provided an estimate of market share on a weekly basis on particular IDD streams. However, an estimate of market share could also have been calculated by Telstra and other carriers from information received from their corresponding overseas interconnect providers. The practice which prevailed in international connection relationships throughout that time was that an Australian carrier received the same proportion of return traffic from overseas interconnect providers as the proportion of calls which were routed to that interconnect provider out of the whole of all international calls routed to that international provider by all Australian carriers. ...

(d) Information obtained through liaising with several overseas providers. This includes, most significantly, Telecom New Zealand, which had been subject to the introduction and expansion of competition in a similar way to that which affected Telstra. Of particular relevance here is the early deployment of capped calling in New Zealand of which I, and others in Telstra, was aware, and triggered Telstra’s development of a similar capability. I assumed at the time that Optus was also aware of the New Zealand experience and that it formed the basis of their own development of capped call offers at about the same time as ourselves.

These paragraphs are objected to on the grounds of oppression however no evidence was adduced in respect of that ground. The paragraph should stand.

44 Paragraph 4(i) calls for the production of:

the monthly product reports referred in paragraph 56 of Mr Lee’s affidavit.

Paragraph 56 of Mr Lee’s affidavit reads:

Monthly Product Reports were produced by the Products and Marketing Business Unit. These reports summarised the revenue that Telstra had generated by product in each Business Unit. They also presented product costs and earning before interest and tax (‘EBIT’), although this was not available by Business Unit for some or all of this period. The monthly results included the aggregate impact of all activities (not just one special) and were the primary reports which, so far as I was concerned, determined the assessment of the success of any given overall strategy and which were utilised most by me, and of other senior Telstra executives I dealt with, in assessing Telstra’s long-term strategy and direction.

Again this paragraph is objected to on the grounds of oppression, lack of utility, relevance and probative value. No evidence was adduced of oppression and, in my view, the document sought are relevant on their face.

45 Paragraph 4(j) calls for the production of:

the research reports and other reports referred in paragraph 57 and 61(b), (c), (e) and (f) of Mr Lee’s affidavit.

Paragraphs 57 and 61(b), (c), (e) and (f) of Mr Lee’s affidavit read:

I have referred already to research reports on advertising (for example, Wallis Research). Telstra also received regular reports it commissioned or produced on price perceptions, ‘churn’ out and in, and product performance (for example, the Nett Effect Pty Ltd Call Quality Monitor report). ‘Churn out’ refers to the circumstances of, in this case, a Telstra customer leaving Telstra to become a, say, Optus customer whereas ‘churn in’ represents a customer leaving a competitor and returning to Telstra. These ‘churn’ reports were valuable to Telstra as they showed, for any particular time period, how many customers Telstra was gaining or losing. I regarded them as a useful tool. ...

(b) Results from surveys. Results from surveys carried out by or on behalf of Telstra in the marketplace were available to be, and were, consulted;

(c) Published surveys and statistics. Statistics and surveys carried out by independent bodies and analysts – for example, surveys carried out by Nett Effect Pty Ltd and data published by AUSTEL were also available and were frequently used;

...

(e) Overseas industry seminars. I attended overseas industry seminars hosted or attended by various telecommunication providers or their representatives for the purpose of sharing market data and trends.

(f) Optus and broker published information. This includes information such as annual reports, media and ASX releases and analyst reports published by stock brokers.

The same observations are applicable to this paragraph as were made in relation to the immediately preceding paragraph (paragraph 4(i)). The paragraph should stand.

46 Optus has been largely successful in opposing the motion and Telstra should pay 70% of its costs in doing so.

I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.

Associate:
Dated: 6 August 2008

Counsel for the Applicant:	Mr R M Smith SC and Mr C Dimitriadis
Solicitor for the Applicant:	Baker & McKenzie
Counsel for the Applicant:	Mr C R C Newlinds SC
Solicitor for the Applicant:	Mallesons Stephen Jaques

Date of Hearing:	30 July 2008
Date of Judgment:	6 August 2008