ICAP Australia Pty Ltd v Howell; GFI Australia Pty Ltd v Cotton

Judgment

1. ICAP Australia Pty Ltd and ICAP Brokers Pty Ltd provide interdealer and broking services in the wholesale financial market.
2. Mr Bradley Howell and Mr John Kalaf are former employees of ICAP.
3. ICAP alleges that Mr Howell and Mr Kalaf assisted a competitor, GFI Australia Pty Ltd, to recruit a number of ICAP employees then working under Mr Kalaf's supervision to work for GFI.
4. In proceedings 2018/148259 (the "ICAP Proceedings") ICAP seeks damages from Mr Howell, Mr Kalaf and GFI arising out of these events.
5. Six ICAP employees, including those allegedly recruited by Mr Howell and Mr Kalaf on behalf of GFI, entered contracts of employment with GFI but failed to commence employment with GFI. They remain employed by ICAP. I will call those six employees the "Six ICAP Employees".
6. In proceedings 2019/30257 (the "GFI Proceedings"), GFI sues the Six ICAP Employees and ICAP for damages arising out of their alleged failure to honour their employment contracts with GFI.
7. In the GFI Proceedings, the Six ICAP Employees bring a cross-claim against GFI, Mr Howell and Mr Kalaf alleging they were induced into entering into the alleged employment contracts with GFI by misleading or deceptive conduct, deceit, and breach of confidence by those parties. The Six ICAP Employees seek an order that their contracts of employment "are void or unenforceable".
8. The Court has ordered that the ICAP Proceedings and the GFI Proceedings be heard together and that evidence in one be evidence in the other.
9. In the ICAP Proceedings, ICAP has served its evidence in chief, including evidence from each of the Six ICAP Employees. No evidence has been served in the GFI Proceedings.

Directions as to evidence

1. In those circumstances, there is a dispute about the order in which evidence should now be adduced in each proceedings.
2. ICAP seeks orders that evidence be adduced in the following order: 1. First: 1. GFI serve its evidence in chief in the GFI Proceedings and in the ICAP Proceedings; and 2. Mr Howell and Mr Kalaf serve their evidence in chief in the ICAP Proceedings; 1. Second: 1. the Six ICAP Employees serve their evidence in chief in the GFI Proceedings (both in response to GFI's claim and on their cross-claim); and 2. ICAP serve its evidence in reply in the ICAP Proceedings; 1. Third: 1. GFI serve its evidence in reply in the GFI proceedings; and 2. GFI, Mr Howell and Mr Kalaf serve their evidence in chief on the cross-claim in the GFI proceedings; 1. Fourth, the Six ICAP Employees serve their evidence in reply on their cross-claim in the GFI Proceedings.
3. GFI seeks orders that evidence be adduced in the following order: 1. First, the Six ICAP Employees serve their evidence in chief in the GFI Proceedings, both in response to GFI's claim and on their cross-claim; 2. Second: 1. GFI serve its evidence in chief in the GFI Proceedings, on its claim and in the cross-claim, and in the ICAP Proceedings; and 2. Mr Howell and Mr Kalaf serve their evidence in chief in the ICAP Proceedings and in the cross-claim in the GFI Proceedings; 1. Third: 1. ICAP serve its evidence in reply on the ICAP Proceedings; and 2. the Six ICAP Employees serve their evidence in reply on their cross-claim in the GFI proceedings.
4. Mr Kalaf seeks orders that evidence be adduced in the following order: 1. First, GFI serve its evidence in chief in the GFI Proceedings; 2. Second: 1. ICAP serve its evidence in the GFI Proceedings; and 2. the Six ICAP Employees serve their evidence in the GFI Proceedings, both in response to GFI's claim and on their cross-claim; 1. Third: 1. GFI serve its evidence in reply on the GFI Proceedings; and 2. GFI, Mr Howell and Mr Kalaf serve their evidence in the ICAP Proceedings and on the cross-claim in the GFI Proceedings; 1. Fourth: 1. ICAP serve its evidence in reply in the ICAP Proceedings; and 2. the Six ICAP Employees serve their evidence in reply on their cross-claim in the GFI proceedings.
5. There is something to be said for each of these suggestions. Having given each of them careful consideration, my conclusion is that the suggestion made on behalf of Mr Kalaf is to be preferred.
6. Serious allegations are made against Mr Kalaf and Mr Howell and, in those circumstances, as Mr Barton submitted on behalf of Mr Kalaf, it would be preferable if they are not required to serve their evidence until such time as the bulk of the evidence to be adduced on behalf of the other parties is to hand.
7. To some extent, GFI's proposal would achieve the same result. However, the difficulty I see with that proposal is that it involves the Six ICAP Employees giving their evidence in the GFI Proceedings before knowing what evidence GFI proposes to adduce in those proceedings. That does not appear to me to be a fair way to proceed.
8. Accordingly, I propose to make directions in accordance with the timetable suggested on behalf of Mr Kalaf.
9. The parties should bring in short minutes to reflect that conclusion.
10. As I understand it, the parties agree that directions should also be made as to certain matters associated with the pleadings. Those matters should be included in the short minutes.

GFI's Notice to Produce

1. On 10 July 2019, GFI served a Notice to Produce on ICAP pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 21.10(1), which provides that: "Party A may, by notice served on party B, require party B to produce for inspection by party A: (a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and (b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue."
2. Two categories of documents are sought.
3. First, in relation to each of the Six ICAP Employees, the Notice to Produce, as amended in the course of argument on 9 August 2019, seeks: "The document setting out the terms on which [the relevant employee] 'extended the Initial Period of [his] Service Agreement with ICAP to 31 December 2021' (including without limitation the terms of any indemnity), as referred to at paragraph [X] of the Affidavit of [the relevant Six ICAP Employee]."
4. Each of the Six ICAP Employees has, in the affidavits sworn in the ICAP Proceedings stated: "On [a specified date], I extended the Initial Period of my Service Agreement with ICAP to 31 December 2021."
5. The second category of documents is documents "recording the payment of Extension Bonuses" referred to in particular paragraphs of ICAP's Commercial List Statement.
6. An example is par 192(iii) of ICAP's Commercial List Statement which states: "In relation to those brokers on the Treasury Desk who will not take up their employment with GFI Australia [i.e. the Six ICAP Employees], ICAP…will suffer a loss in the form of the increased Monthly Fee that it has paid and will be required to pay as a result of those brokers being paid Extension Bonuses by ICAP…in order to retain their services."
7. ICAP resists production of these documents on the basis that in neither the relevant paragraph of the Six ICAP Employees' affidavits, nor in the relevant passages in ICAP's Commercial List Statement is a document "referred to" for the purposes of UCPR r 21.10(1)(a) nor a document "clearly identified" for the purposes of UCPR r 21.10(1)(b).
8. The paragraphs of the affidavits contain the inadmissible assertion by each of the Six ICAP Employees that they "extended" the Initial Period of the Service Agreement with ICAP. The paragraphs do not reveal by what means the extension was achieved. It was common ground that the relevant Service Agreement required that any extension to it be in writing. In those circumstances, it seems highly likely that any extension was in writing: that is, by a document. Yet, the somewhat arid point that no document is actually "referred to" or "identified" as required by the authorities (summarised by Brereton J in Welker v Rinehart (No 8) [2012] NSWSC 588) remains.
9. Similarly, the paragraphs in the Commercial List Statement referring to the payment of "extension bonuses", which are also very likely to have been recorded in a document do not, in terms, "refer to" nor "clearly identify" any such document.
10. In those circumstances, my conclusion is that ICAP's objection to the Notice to Produce is well made.
11. ICAP also points to Practice Note SC Eq 11 which, as is well known, states that in this division the Court will not make an order for disclosure prior to closure of evidence "unless there are exceptional circumstances".
12. It is now well established that service of a notice to produce cannot be used to side step the Practice Note: for example, In the matter of Mempoll Pty Ltd, Anakin Pty Ltd and Gold Kings (Australia) Pty Ltd [2012] NSWSC 1057 at [12]-[13] (Black J).
13. In any event, I see no "exceptional circumstances" here. It may be that information as to the circumstances in which the Six ICAP Employees extended their Service Agreements and were paid Extension Bonuses is information known only to ICAP and the Six ICAP Employees. That is not, in the circumstances of this case, sufficient to render the circumstances relevantly "exceptional", particularly because GFI does not suggest that it needs these documents to prepare and serve its evidence.
14. In those circumstances, I am persuaded that I should set aside the Notice to Produce.
15. However, as I observed in argument on 9 August 2019, I find it difficult to see what motivated ICAP to draw the subtle, albeit technically available, distinctions inherent in its application. In other words, why did ICAP see that any real benefit could be achieved by the incurring of the costs necessary to make this application?
16. If, as seems likely, documents of the kind sought in the Notice to Produce exist, there cannot be many of them and they are doubtless readily to hand. It is inevitable that if any such documents exist, either ICAP or the Six ICAP Employees will make them available to GFI as evidence is adduced over the next few months. I find it hard to see what detriment could have been suffered by ICAP or the Six ICAP Employees in producing the documents now.
17. It is clear that this litigation will be hard fought, complicated, lengthy and expensive. The parties' best interests will not be served if unnecessary and over technical interlocutory skirmishes, of the kind currently before me, continue.
18. The Court, the parties and their legal representatives are expected to facilitate and not obstruct the overriding purpose of the Civil Procedure Act 2005 (NSW) to ensure the just, quick and cheap resolution of the real issues in the proceedings.
19. Section 59 of the Civil Procedure Act specifically contemplates that delay between the commencement and final determination of proceedings should be limited to interlocutory activities "necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial".
20. The Court of Appeal has recently emphasised that implementation of these objectives is just as much the obligation of legal practitioners, as officers of the Court, as of the court itself: see Moubarak by his tutor Coorey v Holt (No 2) [2019] NSWCA 188 at [18]-[20] (Bell P, Leeming JA and Emmett AJA agreeing). As the President said, in a similar context, practitioners should "eschew arid and obstructive debates" about procedural matters.
21. In those circumstances, my present inclination is to order that ICAP pay the costs of their successful application to set aside the Notice to Produce, which has the apparent result of simply delaying production of evidence which will in any event be adduced.
22. If ICAP wishes to make a submission that a different order should be made it should serve, and provide by email to my Associate, brief written submissions (by which I mean no more than 3 pages) by 5 pm on 15 August 2019.
23. GFI should circulate any brief written submissions in reply by 5 pm on 16 August 2019.
24. I will deal with any dispute on the papers. Otherwise, the parties should bring in short minutes to give effect to these reasons.

Amendments 13 August 2019 - Coversheet amendment 19 August 2019 - Coversheet amendment DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 August 2019