New South Wales Supreme Court CITATION : ICAP Australia v Forrest Moebes [2010] NSWSC 738 HEARING DATE(S) : 2 July 2010 JUDGMENT DATE : 13 July 2010 JUDGMENT OF : Ball J DECISION : Order that costs of the motion be costs in the cause. CATCHWORDS : COSTS - costs of a motion where parties came to a compromise over subject matter of motion - whether filing of motion was reasonable. CONFIDENTIALITY - applications where a party seeks to gain greater protection than the implied undertaking as to confidentiality - whether party has to demonstrate that each document is worthy of greater protection LEGISLATION CITED : Civil Procedure Act 2005, ss 56 & 57 Uniform Civil Procedure Rules, r. 42.1 CATEGORY : Consequential orders Betfair Pty Ltd v Racing New South Wales (No. 5) [2009] FCA 1011 Cadbury Pty Ltd v Amcor Limited (No. 2) [2009] FCA 663 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fordyce v Fordham [2006] NSWCA 274 CASES CITED : Foukkare v Angreb Pty Ltd [2006] NSWCA 335 Idaport Pty Limited v National Australia Bank Limited [2001] NSWSC 1024 Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129 Re The Minister for Immigration & Ethnic Affairs of the Commonwealth of Australia, Ex Parte Lai Qin (1997) 186 CLR 622 Sky Channel Pty Ltd v Austar Entertainment Pty Ltd [2005] NSWSC 853 Telstra Corporation v Australis Media Holdings (NSWSC, McLelland CJ in Eq, 6 December 1996, unreported) ICAP Australia Pty Limited ACN 002 216 944 (First Plaintiff) ICAP Futures (Australia) Pty Limited ACN 003 316 569 (Second Plaintiff) PARTIES : ICAP Brokers Pty Limited ACN 002 103 068 (Third Plaintiff) Forrest Moebes (First Defendant) Kellee Campbell (Second Defendant) FILE NUMBER(S) : SC 2007/258061 COUNSEL : C Cochrane (Applicant/Defendants) P S Braham (Respondent/Plaintiffs) SOLICITORS : Harmers Workplace Lawyers (Applicant/Defendants) Minter Ellison (Respondent/Plaintiffs) - 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BALL J 13 JULY 2010 2007/258061 ICAP AUSTRALIA PTY LTD v FORREST MOEBES & ANOR JUDGMENT 1 This is an application for costs in relation to a motion filed on 30 April 2010 by the defendants seeking orders releasing them (and a number of others) from confidentiality undertakings given to the court in respect of documents discovered in the proceedings, produced in response to a notice to produce served on the plaintiffs or exhibited to affidavits filed on behalf of the plaintiffs. 2 The first plaintiff (ICAP) is an international wholesale inter-dealer broker that trades in over the counter specialised financial instruments. It sues the defendants for breach of contract, breach of fiduciary duty and conspiracy arising from the termination of their employment with ICAP and their commencement of employment with BGC Partners (Australia) Pty Ltd (BGC), ICAP's principal competitor. BCG has indemnified the defendants in respect of ICAP's claim and, it appears, has taken a significant role in the defence of the plaintiffs' claim. 3 ICAP originally sought interlocutory relief against the defendants. In connection with that claim, the defendants issued a notice to produce dated 22 January 2008 seeking, among other things, ICAP energy desk management accounts for the period 1 July 2002 to 31 December 2007. The confidentiality regime put in place in relation to the documents produced in answer to the notice to produce restricted access to those documents to the court and solicitors and counsel representing the defendants who are not employed by BGC or any of its related body corporates and who sign a confidentiality undertaking. The regime was extended to cover a large number of documents produced on discovery by the plaintiffs and also to a number of other documents. I have been informed that, in all, approximately 5,500 pages are the subject of undertakings that have been signed pursuant to that regime. From the time the undertakings were given, the defendants' solicitors made it clear that they reserved their clients' rights to challenge the confidentiality of the documents the subject of the undertakings. 4 During March 2010, there was extensive correspondence between the parties concerning the undertakings. The defendants asserted – not surprisingly – that the scope of the documents that were the subject of the undertakings and the strictness of the undertakings made it difficult to conduct the litigation. The plaintiffs' solicitors invited the defendants' solicitors to indicate the material that the defendants' solicitors wished to show to their clients and to explain the reasons why they needed to do so. For a time, the defendants' solicitors were happy to proceed on that basis. However, in a letter dated 16 April 2010, the defendants' solicitors adopted a different approach. In that letter they said: "Through further discussions with our clients and with our clients' experts, it is apparent that there are a very substantial number of documents that are the subject of the confidentiality regime that we would wish to discuss with our clients … Having seen the documents produced by your client it does not appear to us that they are commercially sensitive such as to require any form of confidentiality regime … We request that your clients agree to that regime terminating. Thereafter your clients' position will, of course, be protected by the implied undertaking. If your clients consider the position to be otherwise in relation to any particular document, we invite them to identify that particular document and explain their position in relation to it. Absent an agreement, we will be seeking appropriate orders form the Court and reserve the right to rely on this letter on all questions of costs." 5 The plaintiffs' solicitors responded on 29 April 2010. In that response, they reiterated that it was their view that a practical way forward was "for you to specifically identify the documents you wish to show to the defendants and the reasons why you need to do so". The defendants responded to that letter on 30 April 2010 by serving the current motion. 6 On 12 May 2010, the plaintiffs' solicitors wrote to the defendants' solicitors proposing an alternative confidentiality regime. That regime drew a distinction between documents brought into existence before 1 March 2009 and those brought into existence after that date. In relation to the former, they proposed that a nominated lawyer employed by BGC be permitted to inspect the documents. In relation to that latter, the old regime was to continue to apply. The defendants' solicitors proposed that regime be modified by adding the names of a number of identified employees of BGC who were entitled to inspect the documents. That modified proposal was accepted by the plaintiffs' solicitors. That disposed of the substantive issue raised by the motion. However, the plaintiffs maintain that they should have their costs of the motion. 7 Before dealing with the question of costs itself, I should say something about confidentiality regimes. 8 Generally, a party who seeks protection additional to that given by the implied undertaking in relation to documents bears the onus of establishing that the character of each document in relation to which additional protection is sought is such as to warrant that protection: Betfair Pty Ltd v Racing New South Wales (No. 5) [2009] FCA 1011; Idaport Pty Limited v National Australia Bank Limited [2001] NSWSC 1024; Cadbury Pty Ltd v Amcor Limited (No. 2) [2009] FCA 663. 9 There is, however, in my opinion, one important qualification to that principle. That qualification arises from ss 56 and 57 of the Civil Procedure Act 2005. Section 56 relevantly provides: "(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule." Section 57 provides: "(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1)." 10 It is not uncommon in proceedings involving a substantial number of documents in respect of which a special claim of confidentiality is made for the parties, or in some cases the court, to develop regimes to avoid the necessity and expense of having to deal with claims of confidentiality on a document by document basis. The regime may take various forms. For example, there may be a blanket restriction on access to documents falling within particular classes. That blanket restriction may be subject to a procedure permitting a party subject to the restriction to notify the party claiming confidentiality of particular documents sought to be removed from the restriction and providing a mechanism for resolving disputes. Some classes of document may be subject to more onerous restrictions than others. In some cases, the parties may have put in place reciprocal arrangements in relation to documents in respect of which a claim for confidentiality is made. In yet others, restrictions may be placed on the activities of those who have inspected the documents and, in particular, their ability to advise a trade rival of the producing party for a period of time: see Telstra Corporation v Australis Media Holdings (unreported, Supreme Court of NSW, 6 December 1996, McLelland CJ in Eq); Sky Channel Pty Ltd v Austar Entertainment Pty Ltd [2005] NSWSC 853. 11 In my opinion, in many cases such as these, ss 56 and 57 of the Civil Procedure Act may require the court to consider the reasonableness of the regime rather than a claim on a document by document basis. That is so even when one party or the other seeks to resile from a regime that has been put in place, or seeks to oppose a regime proposed by another. Whether a court should depart from the document by document approach and, if it does, the nature of the regime that it should accept depends on all the circumstances of the case. One relevant factor is the number of documents involved. Another is the nature of the relationship between the parties – and, in particular, the extent to which they are trade rivals. A third is the nature of the documents sought to be protected – and, in particular the likelihood that they contain information that could properly be regarded as confidential and as requiring some special protection beyond that provided by the implied undertaking. A fourth is the nature of the case and the urgency in making the documents available for inspection. Each case will depend on its own facts. However, in my opinion, it will rarely be the case that a regime that limits access to external solicitors and counsel will meet the requirement of reasonableness. That is because those solicitors and counsel must act on the instructions of someone; and normally the person or persons giving those instructions should be entitled to see all the documents available to their advisors so that they can understand the basis of any advice given to them. 12 Returning, then, to the question of costs, the plaintiffs (the respondents to the motion) say that the defendants should pay the costs of the motion filed by them. The general principle is that costs normally follow the event: UCPR r 42.1. That principle, however, has no application where there has been no "event" because there has been no final determination by the court of the issues between the parties. In those cases, the court cannot try a hypothetical action between the parties to determine who the successful party would have been. However, it is appropriate for the court to determine whether the plaintiff (or applicant) acted reasonably in commencing the proceedings (or filing the relevant motion) and whether the defendant (or respondent) acted reasonably in defending the proceedings or motion and to award costs having regard to those matters: Foukkare v Angreb Pty Ltd [2006] NSWCA 335; Fordyce v Fordham [2006] NSWCA 274; Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129; Re The Minister for Immigration & Ethnic Affairs of the Commonwealth of Australia, Ex Parte Lai Qin (1997) 186 CLR 622 per McHugh J at 624-5. In addition, the settlement itself may demonstrate that one party or the other was substantially successful: see Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5] per Davies AJA (with whom Mason P and Meagher JA agreed). That is particularly so in interlocutory applications where the respondent to a motion does or refrains from doing something which in substance reflects the orders sought in the motion. 13 In my opinion, this is not a case where the agreement reached by the parties could be described as a victory by one or the other. I accept Mr Braham's submission that what was agreed was a genuine compromise between what each party sought. The defendants sought a dismantling of the confidentiality regime completely, leaving it open to the plaintiffs to identify particular documents in respect of which special rules were to operate. The plaintiffs, on the other hand, sought to retain the confidentiality regime completely, but indicated that they were prepared to make exceptions in respect of particular documents identified by the defendants if the defendants could give in relation to those documents a reasonable explanation for doing so. It follows that I do not think that a costs order can be made in the plaintiffs' favour on the basis that they were substantially successful. 14 The question, then, is whether the conduct of the defendants was unreasonable so as to justify a costs order in favour of the plaintiffs. 15 The defendants say that their conduct in filing the motion was reasonable. They point to the fact that, over a period of time, they had been complaining about the effect that the confidentiality undertakings were having on their ability to prepare for the hearing. They were entitled to demand that the plaintiffs justify their claims for confidentiality on a document by document basis. It was reasonable of them to give the plaintiffs two weeks in which to accept that proposal particularly in circumstances where the case was subject to a tight timetable which the plaintiffs were insisting the defendants meet. 16 On the other hand, the plaintiffs say that the defendants acted unreasonably in filing the motion. For a period of six weeks the parties had proceeded on the basis that the defendants' solicitors would identify the documents that they wished to show to the defendants and BGC in particular. They say that it was reasonable for them to pursue the proposal that had initially been acceptable in principle to the defendants and that, having regard to all the circumstances, the defendants should have put forward a compromise if they did not want to pursue that proposal. 17 In my opinion, the defendants did not act unreasonably in filing the motion when they did. For the reasons I have given, I think that they were entitled to take the view that the confidentiality regime that they had agreed to initially was too restrictive. Although they may not have been entitled to insist in the circumstances of this case that the plaintiffs establish their claim for special orders in relation to confidentiality on a document by document basis, they were entitled to insist on a substantially less restrictive regime than the one that was in place. The fact that they took some time to do that does not seem to me to alter the position. It was clear that the plaintiffs were resisting any substantial change to the regime that had been agreed at the time the plaintiffs had sought interlocutory relief. Moreover, I do not think that it was necessarily up to the defendants to come up with an alternative regime. In those circumstances, I do not think that it was unreasonable for the defendants to take the view that the best way of bringing the issue to a head was to file a motion. Not long after they did so, the parties were able to reach a compromise. 18 In those circumstances, I think that the appropriate order is that the costs of the motion be costs in the cause. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.