Federal Court of Australia

THE COURT ORDERS THAT:

1. The second respondent's application for discovery of the documents as specified in the revised par 6 of Schedule One to its Notice of Motion dated 2 April 1998, be dismissed.

Note: Settlement and entry of orders is dealt with in order 36 of the federal court rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 572 OF 1995

	BETWEEN: BT AUSTRALASIA PTY LTD APPLICANT AND STATE OF NEW SOUTH WALES FIRST RESPONDENT TELSTRA CORPORATION LIMITED SECOND RESPONDENT
BETWEEN: AND: BETWEEN:	STATE OF NEW SOUTH WALES CROSS CLAIMANT TO FIRST CROSS CLAIM BT AUSTRALASIA PTY LIMITED FIRST CROSS RESPONDENT TO FIRST CROSS CLAIM BRITISH TELECOMMUNICATIONS PLC SECOND CROSS RESPONDENT TO FIRST CROSS CLAIM BT AUSTRALASIA PTY LIMITED CROSS CLAIMANT TO SECOND CROSS CLAIM
AND:	TELSTRA CORPORATION LIMITED CROSS RESPONDENT TO SECOND CROSS CLAIM
BETWEEN:	BRITISH TELECOMMUNICATIONS PLC CROSS CLAIMANT TO THIRD CROSS CLAIM
AND:	TELSTRA CORPORATION LIMITED CROSS RESPONDENT TO THIRD CROSS CLAIM
BETWEEN:	BRITISH TELECOMMUNICATIONS PLC CROSS CLAIMANT TO FOURTH CROSS CLAIM
AND:	STATE OF NEW SOUTH WALES CROSS RESPONDENT TO FOURTH CROSS CLAIM
BETWEEN:	STATE OF NEW SOUTH WALES CROSS CLAIMANT TO FIFTH CROSS CLAIM
AND:	TELSTRA CORPORATION LIMITED CROSS RESPONDENT TO FIFTH CROSS CLAIM
BETWEEN:	TELSTRA CORPORATION LIMITED CROSS CLAIMANT TO SIXTH CROSS CLAIM
AND:	BT AUSTRALASIA PTY LIMITED CROSS RESPONDENT TO SIXTH CROSS CLAIM
BETWEEN:	TELSTRA CORPORATION LIMITED CROSS CLAIMANT TO SEVENTH CROSS CLAIM
AND:	BRITISH TELECOMMUNICATIONS PLC CROSS RESPONDENT TO SEVENTH CROSS CLAIM
BETWEEN:	TELSTRA CORPORATION LIMITED CROSS CLAIMANT TO EIGHTH CROSS CLAIM
AND:	STATE OF NEW SOUTH WALES CROSS RESPONDENT TO EIGHTH CROSS CLAIM
JUDGE:	SACKVILLE J
PLACE:	SYDNEY
DATE:	7 MAY, 1998

REASONS FOR JUDGMENT - NO. 10

Telstra seeks an order requiring BTA and BT plc to give discovery of the following documents:

"6. Documents being reports, summaries or other documents which aggregate information for use by management/technical monitoring during the period:

(a) evidencing or referring to the features available to FeatureNet 1000 or VPN products/services connected to the customer through a local exchange and how they were used at sites with different kinds of CPE, e.g. PABX, key system, individual lines;

(b) evidencing or referring to the availability, performance, necessity or commercial value of the following features of FeatureNet 1000 or VPN products/services connected to the customer through a local exchange:

(i) call barring to long-distance and/or international telephone numbers;

(ii) the special calling features of the Telstra `Easycall' product;

(iii) compatibility with lines connected to or forming part of a rotary dial group; and

(iv) compatibility with metre pulses from the PSTN for TIMS reconciliation or billing purposes;

(c) evidencing or referring to the compatibility of enhanced facsimile services equivalent or similar to Telstra Faxstream with other PN or VPN products or services;

(d) evidencing or referring to the procedures and/or information used or required to connect FeatureNet 1000 or VPN products/services connected to the customer through a local exchange, including procedures or information from on-site inspection of equipment and services to be connected to FeatureNet 1000 or VPN products/services connected to the customer through a local exchange;

(e) evidencing or referring to the information required, the process by which it was connected, and the way such information was used to develop service arrangements for specific customer sites for FeatureNet 1000 or VPN products/services connected to the customer through a local exchange;

(f) evidencing or referring to the difficulties experienced in the UK with respect to the roll-out of FeatureNet 1000 or VPN products/services connected to the customer through a local exchange;

(g) the Project Management Plans and other documents associated with the roll-out of the large customer networks referred to in Mr Rutledge's statement;

(h) evidencing or referring to the problems relating to data capture and infrastructure deployment in the implementation of those large customer networks referred to in Mr Rutledge's statement;

(i) evidencing or referring to available pricing of FeatureNet 1000 or VPN products/services connected to the customer through a local exchange;

(j) evidencing or referring to the availability for use or the use by resellers of FeatureNet 1000 or VPN products/services connected to the customer through a local exchange;

(k) evidencing or referring to BTA and/or BT plc's knowledge of the commercial and/or technical viability of FeatureNet 1000 or VPN products/services connected to the customer through a local exchange, CNH or other VPN products and services compared to:

(i) services or products provided through a Private Network; or

(ii) non-VPN products or services provided through a Public Switched Telephone Network."

These categories of documents are said to be discoverable by reason of the case pleaded by BTA, specifically in relation to representations made by Telstra concerning its product, known as CustomNet Horizon ("CNH"). As I explained in my judgment of 24 December 1997 (Judgment No 5), the Telephone Data Network ("TDN") to be provided to the State by BTA included a virtual private network ("VPN"), which was to be set up incorporating use of facilities provided by Telstra. In order for the TDN to be established, lines had to be connected to Telstra's CNH. Because of difficulties with CNH, Telstra developed another service, known as Corporate Virtual Private Network ("CVPN"), which ultimately replaced CNH.

BTA pleads (par 29) that Telstra made representations to it concerning the capacity of CNH and Telstra's ability to connect Agencies of the State to CNH through exchanges owned by Telstra. It is alleged (par 34A) that Telstra represented to BTA that CNH was a good or service of a particular standard or quality and that it had certain performance characteristics. The characteristics pleaded (par 34A(b)) are that CNH was reasonably fit for the purpose of the design, implementation and operation of the TDN by BTA and that it was of merchantable quality. BTA further alleges that the representations were false (pars 34C, 34D). The particulars to these paragraphs allege, inter alia, that CNH, to the knowledge of Telstra, was a defective product; that CNH did not permit call barring to STD and IDD numbers, that CNH access lines could not be connected to Telstra's exchanges without lengthy delays; that CNH was incompatible with lines connected to fax numbers; and that billing information provided in respect of CNH did not accurately record all calls. BTA pleads that, by reason of these matters, Telstra contravened subss 53(a) and 53(aa) of the Trade Practices Act 1974 (Cth) (par 34E).

Mr Street SC puts the argument that Telstra is entitled to discovery of the documents specified in par 6, on two bases. First, he submits that the documents are discoverable because they are relevant to the issues raised by BTA's pleadings. Secondly, he contends that the documents are relevant to the question of BTA's reliance on any representations that may have been made by Telstra.

Telstra relies on evidence from Professor Ergas, an expert in telecommunications economics. Professor Ergas expresses the opinion that, in order to evaluate allegations that CNH was not reasonably fit for the intended purpose or was unmerchantable, a telecommunications expert would take account of other VPN products available during the relevant period and the performance of those products. In particular, the hypothetical expert would take account of products made available to or used by BT plc for comparison of the performance characteristics of CNH claimed to be substandard.

Mr Street also relies on the evidence of Mr Weber, a telecommunications consultant who is familiar with FeatureNet 1000, a system used by BT plc (but never used in Australia). Mr Weber says that, in order to evaluate "the merits of BTA's allegations", he would need to consider the features available to FeatureNet 1000 and how they were used at different sites. He also says he needs to consider "all documents" relating to the difficulties experienced in the UK "with respect to the rollout of FeatureNet 1000 service".

Mr Weber in turn refers to a statement of Mr Rutledge filed on behalf of BT in the principal proceedings. In that statement Mr Rutledge, who held a senior position with BT plc until August 1992 when he joined BTA, refers to his experience in the UK with FeatureNet 1000, which he says is similar to CNH. Mr Rutledge says that FeatureNet was generally successful, but that he was aware of certain problems, such as "data capture and infrastructure deployment" and was keen that they should not be experienced in the implementation of CNH for the State's purposes. Mr Rutledge says that he was satisfied from information given to him by other members of the BTA's team that Telstra had advised that BTA's plans for "CNH rollout" were feasible. He also says that, as a result of his experience with VPN in the UK, he had formed the opinion that there were a number of preconditions to the successful CNH roll-out, including Telstra's infrastructure capability and adequate "implementation resourcing" being made available.

Mr Rutledge says that, given his experience with the implementation of FeatureNet in the UK, he considered Telstra's time frame for implementation of the CNH rollout to be realistic. He also says that, based on his UK experience, he expected Telstra to establish liaison with local offices prior to connections being made.

In my opinion, Mr Street's first argument does not support an order for discovery in the terms sought. I do not think that the experience of BT plc in the UK with FeatureNet 1000 is relevant to the issue of whether CNH was reasonably fit for its intended purpose, or was of merchantable quality. On that issue, it is not to the point that FeatureNet 1000 or, for that matter, any other product similar to CNH, did or did not experience problems of the kind pleaded by BTA in relation to CNH. The relevant questions are whether the alleged representations were made by Telstra and, if so, whether the evidence shows that they were false, whether by reason of deficiencies in CNH or otherwise. None of the alleged representations relates to FeatureNet 1000 or to BT plc's experience with VPN products. Nor do the alleged representations involve comparisons with FeatureNet 1000 or similar products. Even if BT plc did experience difficulties with FeatureNet 1000 or similar networks, that fact of itself would not assist in determining whether the representations had been made by Telstra or were misleading and deceptive when made.

I should add that there is nothing in Telstra's defence that raises any issue concerning the characteristics or performance of FeatureNet 1000 or similar products. Telstra in essence denies that it made the representations alleged and otherwise denies or does not admit the allegations in the paragraphs to which I have referred.

Mr Weber says in his second affidavit, presumably by way of submission, that both reasonable fitness for the purpose of the design, implementation and operation of the TDN and merchantable quality are relative concepts. Mr Weber says that he needs to have the information sought to understand the "basis of comparison which leads to these assertions". But the pleadings concern CNH's fitness for the design, implementation and operation of the TDN by BTA. With respect to Mr Weber, his assertion does not make the experience of FeatureNet 1000 or similar systems in the UK material to the issues raised by the pleadings.

Even if some of the categories of documents identified by Telstra were to contain material relevant to the issues pleaded, I would not be prepared to permit discovery of the breadth sought by Telstra. I have repeatedly said that all parties to this litigation have given insufficient attention to the need to control their own requests for discovery in the interests of keeping the discovery process within manageable bounds. One consequence of the approach taken by the parties is that discovery in this case has assumed mammoth proportions. A second is that the parties are in continuous disputation as fresh discovery issues are raised, each said to require the time of the Court to resolve. Not only is this extraordinarily costly and, in my opinion, wasteful, but it diverts attention from the need, in a case that has now been going for three years, to prepare for trial. It also imposes disproportionate burdens on the Court.

It is clear that the material sought by Telstra would impose very heavy burdens on BTA and BT plc. Despite the opening words of par 6, which qualify the eleven categories of documents sought by Telstra, BT plc, in particular, would have to make very extensive inquiries and produce a large volume of documents. This point is well illustrated by subpar (f), which identifies an extremely broad category of documents, few of which, even on the view most favourable to Telstra, are likely to have any bearing on the case.

I should mention that Mr Quai, a consultant engineer who has signed a statement filed on behalf of BT in the principal proceedings, says that there are substantial differences between FeatureNet 1000 and CNH which render comparisons between them for the purposes suggested by Professor Ergas and Mr Weber "of no utility". The conclusions I have expressed do not depend on Mr Quai's evidence.

As far as Mr Street's second submission is concerned, it is clearly correct, as he submits, that Telstra is entitled to explore whether BTA, through its officers and representatives relied on any representations made by Telstra. But it does not follow that Telstra is entitled to documents relating to the features, pricing or performance of FeatureNet 1000 or other VPN products used by BTA or BT plc. Nor does it follow that Telstra is entitled to documents evidencing or referring to BTA's or BT plc's knowledge of the commercial or technical viability of FeatureNet 1000 or other VPN products.

In my opinion, documents relating to the features, pricing or performance of FeatureNet 1000 or other VPN products are not of themselves relevant to whether BTA relied on Telstra's representations. Similarly, documents evidencing the knowledge of officers of BT plc or BTA, for example, about the commercial viability of FeatureNet 1000, compared to services provided through a private network, are not of themselves relevant to whether BTA relied on the representations made by Telstra as to the technical qualities of CNH in relation to the TDN. In any event, for much the reasons I have already given, even if some of the documents sought in par 6(k) were relevant to the issues in dispute, the burden that would be placed on BT plc, in particular, is in my view disproportionate to any benefit that Telstra might receive from the discovered documents.

It may be that documents evidencing the knowledge of particular witnesses, such as Mr Rutledge, might be relevant to their claims that they believed Telstra's representations that CNH had certain performance characteristics or capabilities. In the case of a witness such as Mr Rutledge, it seems to me Telstra might be entitled to obtain documents recording or evidencing his knowledge of performance characteristics of FeatureNet 1000, or similar products used by BT plc, of the kind that are the subject of the alleged representations by Telstra. Mr Rutledge has, after all, drawn on his experience in the UK to support his claim that he believed and relied on Telstra's representations. But this is a far cry from requiring BTA and BT plc to produce all documents within subpar (k) of the proposed orders.

In my opinion, Telstra's application for discovery by BTA and BT plc of the documents identified earlier in this judgment should be dismissed.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.

Associate:

Dated: 7 May, 1998

Counsel for the Applicant:	Mr G C Lindsay SC and Mr S L Einstein
Solicitor for the Applicant:	Middletons Moore & Bevins.
Counsel for the First Respondent	Mr J M Stowe QC and Mr D R Stack
Solicitor for the First Respondent	Crown Solicitors Office
Counsel for the Second Respondent:	Mr A W Street SC and Mr J R J Lockhart
Solicitor for the Second Respondent:	Blake Dawson Waldron.
Date of Hearing:	27 April, 1998
Date of Judgment:	7 May, 1998