Idoport Pty Limited v Natonal Australia Bank - [2000] NSWSC 63 - NSWSC 2000 case summary — Zoe

NSWNSWSC

Idoport Pty Limited v Natonal Australia Bank

[2000] NSWSC 63

Supreme Court of NSW|2000-02-23|Before: Einstein J, Rolfe J, McLelland CJ

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2000-02-23

Before

Einstein J, Rolfe J, McLelland CJ

Source

Original judgment source is linked above.

Judgment (150 paragraphs)

[1]

CITATION : Idoport Pty Limited v Natonal Australia Bank [4] [2000] NSWSC 63 CURRENT JURISDICTION: Equity Division, Commercial List FILE NUMBER(S) : SC 50113/98 HEARING DATE(S) : 4, 14.2.00 JUDGMENT DATE : 23 February 2000

[2]

PARTIES : Idoport Pty Limited & Anor v National Australia Bank Limited & Ors JUDGMENT OF : Einstein J

[3]

COUNSEL : J.B. Whittle SC, T.J. Hancock (Plaintiffs) R.M. Smith SC, J.A. Halley (Defendants) SOLICITORS : Withnell Hetherington (Plaintiffs) Freehill Hollingdale & Page (Defendants) CATCHWORDS : Practice and Procedure - discovery- confidentiality - access to commercially sensitive documents by expert witnesses - forensic importance of access to documents to parties - need to protect commercially sensitive information from undue dissemination - extent of undertakings appropriate to protect commercially sensitive information. Idoport Pty Ltd v National Australia Bank [1999] NSWSC 686 (unreported, 8 July 1999, Rolfe J) Hassle v Commissioner of Patents (1987) 9 IPR 565 Home Office v Harman [1983] 1 AC 280 CASES CITED : Lyell v Kennedy (1884) 27 Ch D 1 Mobil Oil Australia Ltd v Guina [1996] 2 VR 34 Riddick v Thames Board Mills Ltd [1977] QB 881 Telstra Corporation v Australis Media Holdings (unreported, 6 December 1996, McLelland CJ in Eq) DECISION : Plaintiffs' application that identified documents discovered by defendants should be divulged to experts on conditions including signing of confidentiality undertakings acceded to, subject to the imposition of additional identified restrictions, including in the first instance, a restriction from disclosing critical documents to more than four additional experts of the plaintiffs; Defendants' competing application that the subject documents not be divulged to potential or retained expert advisers or witnesses, save those who have given to the Court undertakings of a non-compete nature, rejected.

[13]

3 The defendants seek a different form of relevant undertakings to be given to the court by experts to whom the so-called "critical documents" may be shown. That regime would require such experts to undertake that they will not for specified periods, advise, consult to, or accept or continue employment with named entities to the extent that such advice, consultation or employment is directly or indirectly concerned with particular matters. Hence paragraph 4(c) of the final form of short minutes of order sought to be propounded by the defendants, is in the following terms: "The court notes the undertakings of the plaintiffs only to provide copies of the documents … or to divulge the contents to any potential or retained expert adviser or expert witness who has signed a confidentiality undertaking addressed to each of the court and each of the defendants which has been delivered to [my associate] in which he or she undertakes: (a) … (b) … (c) not advise, consult to ,or accept or continue employment with the entities listed in Schedule A to these orders as follows: (1) if given access to the FX Auto Dealing project documents listed in Schedule B, for 6 or 12 months from the signing of the undertaking (as set out in Schedule B) in relation to the entities numbered 1-12 in Schedule A to the extent that such advice, consultation or employment was directly or indirectly concerned with any proposed automated foreign exchange dealing system or any enhancement to an existing automated foreign exchange dealing system; (2) if given access to the Maple Leaf documents, 2 years from the signing of the undertaking in relation to the entities referred to at 13 in Schedule A to the extent that such advice, consultation or employment was directly or indirectly concerned with any strategy for utilising emerging technology (such as the Internet) to distribute financial products and services; (3) if given access to the Gateway/All in One documents listed in Schedule B, 2 years from the signing of the undertaking in relation to the entities referred to at 14 in Schedule A to the extent that such advice, consultation or employment was directly or indirectly concerned with the manner in which any cash account operated, any mechanism by which a nil entry fee option operates or daily pricing of units in connection with managed funds; (d) return any copies of such documents to the defendants at the conclusion of these proceedings." [These undertakings are hereafter called the "non-compete" undertakings] [The Bank's final version of the proposed Short Minutes of Order including the Schedules are appended to this Judgment]

[23]

The plaintiffs' evidence in chief 15 The plaintiffs read in chief two affidavits of Mr Stuart Hetherington who is the plaintiffs' solicitor. These were the affidavits of 21 December 1999 and 14 January 2000. The first affidavit simply annexed the revised Judgment of Rolfe J of 9 July 1999 and correspondence passing between the respective solicitors stating their positions in relation to the so called critical documents. 16 In Mr Hetherington's second affidavit he gave evidence on information and belief from Mr Maconochie to the following effect: (a) that Mr Maconochie has inspected the defendants' discovered documents in relation to the FX Auto Dealing project and product, the Margin Lending Project and product, the Gateway/National All In One Investment Service and the Maple Leaf/Operation First Choice; (b) that as a result of his examination of those documents, Mr Maconochie considers that copies of a number of them will need to be supplied to expert witnesses, already involved in these proceedings and others; (c) that in view of the confidentiality regime which is imposed in the proceedings, Mr Maconochie does not wish to be disadvantaged as against the defendants "in having to disclose to the defendants or their legal advisers, the identities of the experts that he wishes to retain in order to advise (and if thought appropriate provide written statements in reply), except by way of sealed envelope to the Court in the same way as the defendants have been required to do in relation to confidential documents of the plaintiffs. 17 Mr Hetherington further gives evidence in this affidavit on information and belief from Professor Aitken, that Professor Aitken has read Mr Lovell's affidavit of 22 December 1999 and is of the opinion that there will be substantial material in the defendants' discovery that he will have to read if the plaintiffs wish him to express further opinions on the matter. 18 Mr Hetherington further deposes that in view of the hearing date now fixed, the plaintiffs wish to retain experts to comment on the subject documentation as soon as possible.

[46]

27 Paragraphs 31 through to 47 of the affidavit are in the following terms: 31. All in One has 3 unique product features, which involve the application of confidential processes, namely the manner in which the cash account operates, the mechanism by which the nil entry fee option operates, and daily pricing of units. Cash Accounts 32. All in One incorporates 5 cash accounts, namely: (a) Cash (liquidity) account (entry-fee accounts); (b) Entry-fee-paid cash investment (entry-fee accounts); (c) Entry-fee-not-paid cash investments (entry-fee accounts); (d) Cash (liquidity) account (nil-entry-fee accounts); (e) Nil-entry-fee cash investment (nil-entry-fee accounts). 33. All in One enables investors to maintain a cash account that is not subject to entry fees. Entry fees are only payable (if at all) when the cash holding is used to purchase units in the All in One Investment Trusts. 34. The value to clients of the existence of cash accounts that do not incur entry fees is that it enables reporting to, and receipt by, investors of details of the performance of both cash investments and other investments in one consolidated statement. This enables the investor to more easily review and manage the performance of his or her investment portfolio and simplifies calculations of earnings for taxation purposes. Other master funds charge entry fees on all monies invested in the master fund which causes investors to treat cash investments separately to avoid being charged an entry fee on cash investments. With clients separating cash investments and other investments because of fee structures they lose the benefit of consolidated reporting. The investor will receive 2 statements, one for cash investments which are likely to be held in a common fund type account and another account statement for other investments from the master fund. 35. The processes involved in maintaining a no entry fee cash account are complex. They are described on pages 7 and 8 of the National All in One Investment Service Procedure Manual. The definition of the processes needed to ensure that cash balances do not incur entry fees until converted into investments in unit trusts, took a team of 8 people (at least half of whom were occupied on a full time basis) approximately 9 months to complete as a part of the overall design process. Fee options 36 The second unique and confidential process of All in One concerns fee options. All in One is the only master trust that allows an investor to select a nil entry fee option that progressively increases the amount of the investment that does not incur exit fees. Accordingly, during the first year of investment 7.5% of the investment will not incur an exit fee; during the second year 25% of the investment will not incur an investment fee; during the third year 50% does not incur an exit fee; during the fourth year of investment 75% does not incur an investment fee and after 4 years no exit fee is payable on a particular investment parcel. 37. The value of such a feature is that it enables investors who need to access part of their investment to do so without incurring fees after a defined period. For example, where an investor knows that a liability will fall due in two years time, money can be invested and the units redeemed potentially without incurring an exit fee. 38. In practice, it is difficult to develop business rules to accommodate such a fee option as investors may add to their investment funds, switch between investments, receive distributions or withdraw part of their funds either on an ad hoc basis or as part of a defined income stream. Matters such as these must be taken into account when determining how much of an investor's funds are subject to an exit fee in any particular year. 39. The work done on this product feature extended from April 1998 to December 1998 at which time the specifications were completed. The specifications were then incorporated into the computer program which underpins the registry procedures. Daily pricing 40. The third unique feature of All in One is that it is the only master fund that prices and transacts units on a daily basis. Other funds transact every third day or on a weekly basis. The advantage of pricing on a daily basis is that it gives an investor greater flexibility in managing their investments, particularly in respect of switching investments. If a master fund only transacts weekly then the process of switching may take up to a month or more. This is because a switch is transacted as a redemption (pricing cycle one) after which the master fund must wait for the proceeds (cycle two) prior to re-applying the funds to the new investment option (cycle three). 41. The development of the daily pricing and transacting function was a complex task as to operate it requires daily reconciliations of unit registers by both the portfolio manager and the fund managers. It also entailed significant negotiation with each of the underlying fund managers to ensure that their processes would be aligned with the master fund. It was first proposed in December 1997 and was not completed until the end of June 1999. Prejudice caused by use of the information 42. Information concerning the way in which these unique product features have been built into All in One would be useful to competitors as it would enable them to include such capabilities in their master trusts with minimal cost and development time. Given the value of the three product features referred to paragraphs 31 to 41, their addition to a master trust would enhance its ability to attract investors and to compete with All in One. 43. The three unique product features provide All in One with points of differentiation when promoting the master trust to both advisers and investors. All in One in its advertising has referred to these unique propositions. Annexed and marked "B" is an example of such an advertisement. The incorporation of such features in other master trusts at a time when All in One is establishing and growing its market share would be damaging to its marketing strategy. 44. Two documents set out the way in which All in One's cash accounts, nil entry fees and daily unit pricing are built into the master trust. The business rules are set out in the document entitled "Master Trust Requirement Specification" as follows: (a) pages 6-8, 19-20, 94-101 (Cash Account); (b) pages 79-93 (Fee options); (c) pages 11-14, 21-34, 39-40, 44-51, 56-62, 65-69, 70-74, 115-125 (Daily pricing). Exhibited and marked "PW1" is a copy of this document. 45. The computer processes required are set out in the National All in One Investment Service Procedure Manual. Exhibited and marked "PW2" is a copy of this document. 46. Any competitor that obtained access to the information in these two documents would be in a position to substantially build these features into a master fund. 47. Based upon my knowledge and experience of the cost and time involved in developing cash accounts, nil entry fees and daily unit pricing in the All in One master fund and my knowledge of the competing products I believe that these product features will not be generally available in competing master funds for a period of 2 years. 28 Under cross-examination in relation to the All In One Fee options and the claimed confidentiality in that regard, Ms Willsford accepted that the confidentiality to which she was referring was "the process by which the fee structure is actually administered". In short, what was sought to be protected included the software used for the administration of the fund as well as the business rules used to define the process of administration . Those business rules are to be found in the administration specification and also in the system specification [transcript pages 43, 44].

[55]

34 Paragraphs 19 to 26 of Mr Liley's affidavit were in the following terms: 19. The competitors of each of the Banks are the financial services companies in the particular geographic regions in which those Banks operate. 20. In this context it should be noted that all Banks have a variety of associations or networks with Banks in other regions which involve the sharing of information. These include formal networks to enable settlement of inter-Bank financial transactions, and less formal networks by which, for example, information concerning Banking procedures and processes are shared. Information of value to competitors 21. Changes to the manner in which financial services companies including Banks are regulated by government, the increasing globalisation of clients' businesses and rapid advances in technology have all combined to increase competition in the financial services market. 22. Given these circumstances many commercial trading Banks are reviewing the way in which they do business, and in particular, the means by which they distribute financial products and services. Accordingly detailed information concerning another Bank's strategy for utilising emerging technology (such as the internet) to distribute products and services would be of general use to any commercial trading Bank. 23. The information contained in the documents relating to Project Maple Leaf and Operation First Choice are however of more than general interest to competitors of Banks. 24. The information contained in the four classes of Maple Leaf and Operation First Choice documents as referred to in paragraph 18 above would assist a competitor in the following respects. First the analysis undertaken by the Banks as set out in the Project Maple Leaf and Operation First Choice documents would enable a competitor to better evaluate alternative distribution strategies and their potential cost. Secondly a competitor would be able to more quickly determine and implement new distribution strategies by drawing upon the ideas considered in the Project Maple Leaf and Operation First Choice documents. Thirdly a competitor would be able to identify both those parts of the strategies of the Banks that were successful and those parts that were not successful and thereby benefit from the implementation of the Banks' strategies without having to themselves incur the cost or risk of implementing such strategies. Fourthly the detail as to the timing and implementation of the Banks' strategies set out in the documents would enable a competitor to plan and implement a response to the initiatives and strategies employed by the Banks. 25. If the information contained in the Project Maple Leaf and Operation First Choice documents were available to competitors the Banks would be correspondingly prejudiced by the advantages obtained by competitors as set out in paragraph 24 above. 26. Based upon my knowledge and experience, and the period in which the strategies to be implemented in Operation First Choice are to be implemented, I believe that the information contained in the documents relating to Project Maple Leaf and Operation First Choice will remain generally of value to competitors for a period of time, being two years or more. [emphasis added]

[66]

45 In paragraphs 19 - 32 of his affidavit Mr Field gave evidence as follows: 19. The primary competitors of the Bank in respect of an automated foreign exchange dealing system are those Banks engaged in wholesale trading and dealing in foreign exchange. 20. In Australia the primary competitors of the Bank in respect of a foreign exchange auto-dealing product are Commonwealth Banking Corporation, Westpac Banking Corporation, ANZ, Citicorp, Deutsche Bank, HSBC Bank Australia Limited, Standard Chartered Bank Australia Limited and Macquarie Bank and their respective subsidiaries. 21. In New Zealand the primary competitors of the Bank are the Commonwealth Banking Corporation, Westpac Banking Corporation and ANZ. 22. In respect of the United Kingdom the competitors included the major commercial trading Banks being Lloyds TSB Bank plc, Barclays plc, HSBC Holdings plc and National Westminster Bank plc. Information of assistance to competitors 23. The information contained in the documents relating to the FX Dealing System that would assist competitors falls into three categories, namely budgets and financial reports, business cases developed internally for approval by NAB management and specifications of enhancements to the NAB FX Dealing System. 24. Certain of these documents relate to Phase 1 of the Project namely: (a) Auto-Dealing Business Case (DEF: 147.0007A); (b) Auto-Dealing Business Case - Infrastructure Project (DEF: 145.0071); (c) HRR design Specifications (DEF: 179.0139); (d) System Enhancement: Value Today Cut Off Times (DEF: 147.0154); (e) FX Auto-Dealing Project: Phase 1 Process Changes (DEF: 148.0002); (f) Historic Rate Rolls: Functional Specification Version 1.7 (DEF: 179,0006); (g) Historic Rate Rolls: Functional Specification (DEF: 179.0149); (h) System Enhancement: Historical Rate Role: Business Specification (DEF: 147.0151). Exhibited and marked "PF1" is a copy of these documents. 25. Many of the competitors who have yet to launch an automated FX dealing system have announced their intention to launch an automated FX product in 2000. 26. The documents that comprise PF1 all relate to Phase 1 and if the information contained in these documents were available to competitors it would provide them with a number of benefits. First it would enable them to critically evaluate their own proposed system and ensure that it did not contain any errors identified in the NAB's documents. This would result in a saving of both time and money. Secondly the information in the documents would enable competitor to identify areas of competitive advantage or disadvantage and better refine its product prior to it being launched to make it more attractive to the market. Thirdly information in the documents would enable a competitor to determine whether its product was profitable by comparison to the NAB FX Dealing system, in terms of both pricing and cost. 27. From my knowledge of the timing of competitors' proposed releases and my experience as project director, and given the nature of the documents, I believe that the information contained in the documents comprising PF1 will remain confidential for a period of 6 months. 28. The remainder of the documents falling within the 3 categories set out above are: (a) FX Auto-Dealing Phase 2 Project: Global Implementation Business Case (DEF: 148,0069); (b) Internal Memo to Group Leadership Team (DEF. 147.0053); (c) FX Auto-Dealing Project: Benefits Realisation Plan - 20/8/1998 (DEF: 147.0174); (d) FX Auto-Dealing Project: Benefits Realisation Process - 11/9/1998 (DEF: 148.0001). 29. These documents include details of the strategy to be employed by the NAB for three years, the level of projected expenditure and the expected returns to be generated from the NAB FX Dealing project. 30. A competitor who obtained access to the information in these documents could use such information to develop a global strategy for automated FX dealing. Access to these documents would give a competitor information concerning the development of the product and enable the competitor to avoid any errors made by the NAB and thereby develop its own product more quickly, and more cheaply. A competitor could also use the information to develop defensive strategies to combat the NAB's marketing strategy. 31. The Bank would be prejudiced by competitors being able to use the information in these documents to target its customers (the Phase 2 Business Case identifies target markets) and their ability to use the information to engage in parasitic marketing - that is, marketing products related to foreign exchange, such as money market investment products. 32. From my knowledge of the timing of competitors' proposed releases and my experience as project director, and given the nature of the documents I believe that the information contained in the documents exhibited as "PF2" will remain of value to competitors for a period of 12 months.

[78]

insofar as dealing with the Gateway/All In One project, referred in paragraph 14 to " all entities offering or in process of developing a master fund ". In the defendants' final form of propounded undertaking, paragraph 14 now identified by reference to annexure "A2" to Schedule A, the entities described as " offering a non-superannuation master fund ". Schedule A2 sets out the named master funds - in all 16 such funds. 57 Professor Aitken in his affidavit of 25 January 2000 and in relation to the then proposed form of undertaking sought to be propounded by the defendants, deposed that he had been asked by the plaintiffs' solicitors to say whether if he was asked to give an expert opinion concerning the projects FX Auto-Dealing, Maple Leaf/Operation First Choice and Gateway/All In One, which necessitated his reading the statements which had been filed by the defendants' witnesses as well as the annexures thereto and documents discovered by the defendants, he would be prepared to give the undertakings. His response to the question was in the negative "because I considered that if I did so I would be depriving myself of any further consulting work in Australia for two years in each case". [Affidavit paragraph 4] [emphasis added] 58 Mr Joslin in his affidavit of 25 January 2000 likewise gave a negative response to the same essential question [save that the question was confined to his being asked to give an expert opinion concerning the FX Auto-Dealing Service], expressing his reasons in the following terms: "…because the nature of my consultancy and fund data business is such that I would reasonably expect to sell these services to a high proportion of the industry at any one time, including the organisations listed in 9-12 of Schedule A of annexure "A". Over the last 12 months two out of the four organisations listed in 9-12 of Schedule A to annexure "A" have been clients of mine ." [emphasis added] 59 Faced with an alternative set of proposed undertakings then propounded by the defendants by 10 February 2000 [which again is not in precisely the same form as that finally and on 14 February, propounded by the defendants, but is very close to the final form], Professor Aitken stated that he would not be prepared to sign an undertaking in the form then proposed and that the opinions which he had expressed in his earlier affidavit remained the same. He now gave the following reasons for his opinions: "5.1 My knowledge concerning the three projects described as Gateway/National All In One service, Maple Leaf/Operation First Choice and FX Auto-Dealing service is derived from my reading of the materials to which I referred in my statement dated 23 December 1998 and the affidavits of Damian Lovell sworn 22 December 1999 and 17 January 2000. 5.2 The undertaking required by annexure "A" would prevent me from advising the organisations referred to in Schedule A of the proposed short minutes. I already provide advice and consulting services to some of those entities, in relation to activities similar to the defendants' projects . 5.3 The Maple Leaf project, as described by Mr Lovell, concerns a wide variety of financial services and activities involving new technology. If I were to undertake not to advise or consult to persons engaged in similar projects, my professional activities would be very severely restricted . Accordingly, I would not give such an undertaking." [emphasis added] 60 Likewise, Mr Joslin in his affidavit of 8 February 2000 dealt with the set of undertakings then sought to be propounded by the defendants. 61 In Mr Joslin's latter affidavit he deposed that he would not be prepared to sign an undertaking in the form annexed to his affidavit and that the views which he had expressed in paragraph 3 of his earlier affidavit remained the same. 62 He gave the following reasons for giving those answers: "6.1 My principal concerns, if I were asked by the plaintiffs to give additional expert advice and evidence in these proceedings, and was required to give undertakings in accordance with paragraph 4 of annexure "A", would be in relation to what is described as the Maple Leaf and Gateway/All In One projects referred to in subparagraphs 4(c)(2) and (3). I do not give expert advice in foreign exchange matters. 6.2 My present knowledge of the Maple Leaf project is derived from paragraph 9 of Mr Lovell's affidavit of 22 December 1999, in which he describes this project as involving 'the concept of shifting the Bank's operating model from a traditional branch based regional Bank to a more integrated retailer of financial services with greater emphasis on direct channels of distribution such as telephone banking and internet banking'. 6.3 My present knowledge of the Gateway/All In One project also stems from Mr Lovell's affidavit in which he describes it as involving a 'master fund' which 'allows investors to invest in one or more underlying managed funds by investing in units in the master fund'. 6.4 Having read carefully the proposed undertakings in subparagraphs 4(c)(2), I am of the view that they would preclude me from providing my consulting services to all financial institutions in the United Kingdom for two years. For example, I have this week discussed supplying fund data to a major international Fund Manager who is seeking to develop a new distribution channel by way of a 'funds supermarket' . In the course of those discussions, I have also been asked to submit a proposal whereby my colleagues and I would develop on its behalf the underlying data base that would feed information into the website as well as assist them with the design and sequence of the various web pages. I consider that, if I signed the undertaking and was then given access to the defendants' Maple Leaf documents, I would be constrained by that undertaking from advising any fund manager in relation to such an assignment for two years. 6.5 I am not aware of any financial institution in the United Kingdom which is not giving consideration to utilising emerging technology (or which is not already using the internet) to distribute its products or services . 6.6 I would be prepared, if retained by the plaintiffs and asked to consider the Maple Leaf or Gateway/All In One documents, to sign a document in the form proposed by the plaintiffs. However, I would not be prepared to sign a document which would prohibit me from advising my usual clients for a period of two years. 6.7 The operation of the undertaking in relation to the Gateway/All In One project is restricted to Australia, and there is less likelihood of my UK clients seeking my advice in relation to such a project in Australia. However there are so many interlocking relationships between financial institutions worldwide that I consider it likely that I might inadvertently find myself advising a client who, without my knowledge, is involved in one way or another in such a project in Australia ." [emphasis added] 63 Mr Joslin further deposed that during his employment with Deloittes Touche Tohmatsu, he consulted to a large number of financial institutions. He referred in that respect to paragraph 1 of his statement of 19 April 1999 and to the curriculum vitae annexed to it. He deposed that in providing such services he was never asked or required to sign an undertaking such as that contained in annexure "A". He deposed that to the best of his knowledge, none of his colleagues was ever requested to do so, and never did sign such an undertaking, "notwithstanding the fact that we were often given access by such clients to large quantities of extremely confidential and sensitive material".

[106]

[That regime would, as the submissions elicited, require the plaintiffs to identify a proposed expert to the defendant's by way of furnishing his or her expertise and background; the Bank to undertake to the court not to comment upon the plaintiff's failure to call any person so identified to the Bank and to further undertake not to communicate with such person during the period of the proceedings and not to issue any subpoenas or notices to produce to such person or to the plaintiffs or to any other person seeking to procure by such process, any material or information as to what may have passed orally or in writing between the plaintiffs and such person. The regime would require, that following such identification of a proposed expert to the defendants, the defendants would be entitled to object to the critical documents being shown to such person. If such an objection came forward, this would have to be determined by the court [I interpolate that in the circumstance the regime would simply have moved down the track, in relation to such person, a repeat of the matters argued before the court on the motion]. In the event that the defendants did not have any objection to such nominated expert being shown the critical documents then, as with the current position as it obtains in relation to Professor Aitken and to Mr Joslin, such expert would be shown the critical documents subject only to the plaintiffs' regime as proposed in the plaintiffs' notice of motion. The defendants submission is that the plaintiffs' rejection, it is suggested, without justification, of this regime, in circumstances in which it is submitted that there was no prejudice in the plaintiffs agreeing to the regime, is a significant factor to take into account in determining what order should be made. (b) The fact that there is no dispute but that the documents sought to be made the subject of the non-compete undertakings are confidential to the Bank - this was clearly conceded by Mr Whittle SC during the application.

[120]

77 I do not see that this debate presently requires resolution. I do not see that the subject application presently before the court can or should turn on Rolfe J's reasoning on the different facts and circumstances being dealt with in his Honour's judgments. The present application falls to be considered on the evidence and applying the relevant principles in circumstances different to those earlier before Rolfe J. I do however readily grasp the pragmatic approach which his Honour saw fit to adopt in the final form of undertakings which his Honour accepted as appropriate. This attempt by his Honour to protect, insofar as possible, the prospect of misuse of information, seems to me to have been a common sense, practicable and reasonable endeavour to keep a level playing field, whilst recognising, as his Honour clearly did, the crucial significance of the right of litigants to access to evidentiary material sought to be deployed against them. Subject to the fuller exposition of the relevant principles set out below, I would certainly adopt as correct the following general statement of his Honour as to the principle: "The ability for those representing the defendants to exercise [the defendants' rights to answer the plaintiffs witness statements and to cross examine] depends on them and qualified experts obtaining full and proper instructions. Efficiency in the administration of the case demands that that occur with the minimum of delay and impediment. Prime facie, litigants are entitled to full access to evidentiary material sought to be deployed against them. In circumstances where that information is of a confidential, and hence commercially sensitive, nature the court can give directions, confining the extent to which and to whom may it be disseminated. However, in doing so the court must have regard not merely to the confidentiality or commercial sensitivity of the information, but also [to] the basic right [of] the party against whom it is tendered to have every reasonable opportunity to answer it fully." [Rolfe J Judgment 8 July 1999 at page 25] 78 The plaintiffs submit that the non-compete undertakings sought to be propounded by the defendants would impose an extraordinary requirement upon the plaintiffs and one which would severely inhibit and may well entirely prevent the plaintiffs from being in a position to retain appropriate experts. The plaintiffs submission is that such a requirement would be contrary to principle and would afford the defendants an undue advantage by severely inhibiting the plaintiffs capacity to prepare experts reports. The submission is that the extraordinary nature of the relief is such that the defendants cannot point to a single case in any jurisdiction where the orders which they seek have actually been made.

[137]

89 The facts before the Victorian Court of Appeal in Mobil, concerned specific questions affecting trade rivals. Hayne JA's approach to the principles as which, with respect, I accept as entirely correct, included the following: "While it may readily be accepted that a party is ordinarily entitled to discovery and inspection of all discoverable documents in the possession or control of the opposite party (save those for which a valid claim for privilege from production is claimed) it is important to bear steadily in mind that discovery is but a tool to be used in the pursuit of justice and that the right to discovery and inspection is not without its limits. The first and most obvious limit is that a party does not have a right to inspect documents that are discovered if there is a valid claim to privilege from production (as for example on the grounds of legal professional privilege). Secondly, and because the law recognises that the assertion of compulsive power requiring production must be balanced against the needs of justice, a party inspecting the documents of the opposite party may not use them except for the purposes of the action in which discovery is made. Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise. Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten. Confidentiality is destroyed once and for all (at least so far as the particular trade rival is concerned). To say that the trade rival is bound not to use the documents except for the purposes of the action concerned is, in a case such as this, to impose upon that trade rival an obligation that is impossible of performance by him and impossible of enforcement by the party whose secrets have been revealed. How is the trade rival to forget what internal rate of return the competitor seeks to achieve on a new investment of the kind in question? How is the party whose hurdle rate has been revealed to know whether the rival has used the information in framing a tender? Thus, if the trade rival may inspect the documents concerned, the confidentiality of the information in them is at once destroyed. Is that necessary for the attainment of justice in the particular case?"

[138]

90 In Telstra Corporation v Australis Media Holdings [unreported Supreme Court of New South Wales, 6 December 1996] McLelland CJ in Eq. having cited the last paragraph from the above excerpt in Mobil Oil, went on to say: "This applies not only to any officers or employees of the respective plaintiffs but also to any solicitor or counsel who may have ongoing responsibilities in advising the plaintiffs or their commercial associates on matters other than the prosecution of the proceedings for which the confidential information in question may have relevance. For reasons of this kind in some classes of cases it may sometimes be appropriate to confine the disclosure of particular documents to nominated individuals associated with the parties to which disclosure is to be made who have given undertakings to the Court and to the disclosing party, not only restricting the use to which information in the documents may be put, but restricting the future activities of those individuals in representing or advising, or in participating in decision-making for, those parties, at least for some specified period of time. Such a procedure however, has its own disadvantages discussed in the cases including the quarantining of the individual to whom the poisoned chalice passes, from providing their services in particular areas and depriving the parties of the benefit of those services, and also creating a situation where agents of a principal are in that capacity put in possession of information, from access to which the principal is excluded". 91 Again it seems to me that McLelland CJ has correctly set out the relevant principles in this passage. The court's decision 92 To my mind, the circumstances here proved are sufficiently close to the trade rival situation generally examined by Hayne JA in Mobil Oil to require the court to consider very closely indeed whether in carrying out the necessarily delicate balancing exercise, the present is a case in which it is indeed appropriate to limit in some fashion the otherwise unfettered [save by the Harman undertaking], entitlement of a party to make discovered documents available to experts whom the plaintiffs may be considering retaining for assistance in relation to the proceedings. I do not overlook the strength of the plaintiffs submissions that both sets of parties have a common interest in the AUSMAQ Service and in all similar and equivalent systems being successfully exploited to the greatest possible extent by the defendants and no one else. This is, of course, a factor to be weighed in balance, in the proper exercise of the discretion. The more significant focus is however squarely upon the possible activities of experts who may be approached by the plaintiffs at a time, and in circumstances where, the very nature of the expertise of such persons is calculated to make it likely that their professional services will be being utilised in a wide variety of financial services and activities involving new technology. Almost by definition, there is a reasonable likelihood that the experts whom the plaintiffs may seek to retain, may be asked to provide advice and consulting services to other entities either in relation to activities similar to the defendants subject projects, or in relation to activities which may be directly or indirectly similar to all or parts of such projects. And as Hayne JA pointed out in Mobil Oil, there are very clear difficulties in obliging a person to do what is in fact physically impossible; namely, to rid his or her mind of information which he or she has gained.

[139]

93 The Bank has not, as I understood the evidence and the submissions, sought to gainsay the plaintiffs proposition that the Bank has not required outside consultants retained to advise the Bank in relation to the FX Dealing and Maple Leaf projects, to enter into contracts containing non-compete clauses. Confidentiality clauses such as that to be found in the contract between the Bank and DMR Consulting Group (Australia) Pty Ltd [Exhibit A2 - Schedule B], are dimensionally different to non-compete clauses. I would, in the absence of evidence to the contrary, infer that the Bank is likely to have similar confidentiality provisions in other of its agreements with outside consultants retained to advise the Bank in relation to these projects. The Bank did not put any submissions to the contrary. To my mind the fact that the Bank appears, at least on the evidence before the court, to have been content not to require non-compete provisions in its contractual relationships with outside consultants, provides at least some support, for the proposition that confidentiality clauses have been seen and are seen by the Bank as providing sufficient protection to it in the circumstances . 94 Then there is the fact that the Bank, notwithstanding its claimed anxiety at the possibility of the confidential information coming into the possession of of one of its competitors, through the medium, witting or unwitting, of one of the plaintiffs experts, is content to permit the critical documents to be inspected by Mr Joslin and by Professor Aitken, without seeking the non-compete undertakings from those persons. This provides further context against which to adjudicate the Bank's concerns. It must be recalled that the Bank's decision not to seek the non-compete undertakings from these persons is a decision reached in a context in which: · Professor Aitken had deposed that were he to undertake not to advise or consult to persons engaged in similar projects, his professional activities would be very severely restricted; · Mr Joslin had deposed that he had in early February, discussed supplying fund data to a major international fund manager who is seeking to develop a new distribution channel by way of a "fund's supermarket". Also that in the course of those discussions he was asked to submit a proposal whereby his colleagues and he would develop on its behalf the underlying data base that would feed information into the website as well assist them with the design and sequence of the various web pages. 95 An important consideration is the apparently accepted fact - [see for example paragraph 6.7 of Mr Joslin's affidavit of 8 February 2000], that there are so many interlocking relationships between financial institutions worldwide, that it is virtually impossible for an expert to be certain that he or she would not inadvertently find himself or herself advising a client who, without his or her knowledge, would be involved in one way or another in a project which, in one way or another, may be or may be perceived to be, in competition with one of the Bank's subject projects. Mr Joslin is not aware of any financial institution in the United Kingdom which is not giving consideration to utilising the emerging technology (or which is not already using the Internet), to distribute its products or services. Professor Aitken in paragraph 5.2 of his affidavit of 10 February 2000 deposed that the undertaking then sought to be extracted from him would prevent him from advising organisations referred to in schedule "A"[see the annexure to his affidavit of 10 February 2000], some of which are entities to which Professor Aitken already provides advice and consulting services in relation to activities similar to the defendants' projects. 96 Professor Aitken has not been cross-examined on his evidence given in paragraph 5.3 of his affidavit of 10 February 2000 to the effect that the Maple Leaf project, as described by Mr Lovell, "concerns a wide variety of financial services and activities involving new technology". A very significant consideration in determining the subject motion is the effect of the ambit of the non-compete undertakings and the extent of the potential restriction upon professional activities of experts retained by the plaintiffs (from whom the defendants' proposed undertaking would have to be sought), understood in the context of the wide variety of financial services and activities to which the undertakings apply. The court may infer that as neither Professor Aitken nor Mr Joslin was prepared to offer to give undertakings to the court in generally similar terms to those the subject of the defendants' final set of proposed undertakings, it is likely that the plaintiffs would have real difficulty in being able to find other experts in the field who would be prepared to subject themselves to the non-compete undertakings. And of course all of this is taking place only months before the final hearing commences and during a period where time is of the essence in terms of both parties general preparation, and of more particular relevance to the present motion, in terms of the plaintiffs entitlement to approach experts to comment and express views on the now discovered critical documents and on documents now the subject of general discovery. 97 Notwithstanding the obviously scrupulous care with which the Bank has sought to frame the proposed undertakings: (a) the nature of the expertise likely to be sought by the plaintiffs; (b) the interlocking and interrelated nature of the banks and institutions likely to retain in one way or another many such experts to give advice in relation to a wide variety of financial services and activities; (c) the difficulties likely to be encountered by an expert from whom the undertakings may be sought, in not being in a position to know whether or not a client seeking his or her advice on a project seemingly unrelated to the Bank's subject projects, may in fact have an association with one of the Bank's relevant competitors [see in particular, the use in the proposed undertaking of the word "indirectly" - "… to the extent that such advice, consultation or employment was directly or indirectly concerned with …"]; (d) the fact that the projects, and in particular the Maple Leaf project, concern a wide variety of financial services and activities involving new technology, strongly suggest that there is a degree of real artificiality in the defendants' assertion that there remains a wide geographic area [including most of the United States] from which the plaintiffs can draw and being likely to contain experts who may be expected to be prepared to give the subject non-compete undertakings. 98 The defendants contend that the orders proposed by them in relation to the Maple Leaf documents would not prevent the plaintiffs from retaining experts in the subject field who operate in the United States, except the Sate of Michigan. To my mind the defendants' submission is based upon the assumptions:

[143]

(d) that experts without Michigan connections in the subject field would be prepared to give the non-compete undertakings. 99 Dealing first with assumption (d), on the evidence, such as it is, I do not accept that such assumption is made out. Both Mr Joslin and Professor Aitken expressed particular concern at having their professional activities restricted by giving undertakings of the type from time to time dealt with in their affidavits. What was stressed was that banking and financial institutions generally are now considering utilising the emerging technology to distribute their products or services. Also that Project Maple Leaf involves the concept of shifting the bank's operating model from a traditional branch based regional bank to an integrated retailer of financial services with greater emphasis on direct channels of distribution such as telephone banking and Internet banking. To my mind the court would not infer without specific evidence to this effect that experts in United States without Michigan connections would be prepared to give the proposed non-compete undertakings. 100 Nor would I accept that the factual assertions which underpin assumptions (a), (b) and (c) are made out on, or could be inferred from, the evidence. To the contrary, such evidence as was adduced tends to suggest that these assumptions are not soundly based. 101 I note that to my mind the defendants who seek to propound their draft form of non-compete undertakings bore the essential onus of calling evidence to establish and of persuading the court that the above assumptions could be made. 102 Finally in relation to the Maple Leaf non-compete undertaking, there also appears to be a real degree of artificiality in the defendants' endeavour to only prevent the plaintiffs retaining as an expert, a person who may himself or herself be giving or propose to give advice to a Michigan based bank which is competing with an NAB subsidiary in Michigan. This suggests that Michigan based banks do not have affiliates or relationships outside Michigan - a fact which was not established by the evidence and which, if correct, would seem surprising. 103 As to each of the Bank's subject projects, the proposed non-compete undertakings are likely it seems to me to have the result that local experts with the requisite high level of expertise are unlikely to be available to the plaintiffs. Yet such experts would presumably be important on at least the damages issues related to the Australasian region. They would also be likely to be important on the "functional equivalence" issues. The whole of the non-compete undertaking regime seems to me on the evidence and as a matter of common sense, to be very likely to inhibit the plaintiffs to a real extent from being in a position to retain such experts as they may perceive able to assist in their preparation and presentation of their case and importantly also, seems likely to inhibit the plaintiffs from having ready and immediate daily access to local experts. Yet the obvious prima facie entitlement of a litigant [subject of course when questions of confidentiality arise, to the important balancing exercise earlier referred to], is to be free to prepare his or her case in the manner he or she believes best. It is certainly an unusual circumstance to have his or her preferred choice of experts fenced in by complex conditions laid down by the opposing party. This is not to say that in an appropriate case such conditions may not be imposed. But in my view, subject to the undertakings to be ordered which are referred to below, this is not such a case. 104 Whilst the Bank has certainly made good the propositions outlined in detail in paragraph 66 above and in particular has made good its contentions as to the prejudice it will suffer in the event that its confidential information set out in the critical documents become available to one or more competitors, I am not satisfied that the interests of justice require that the undertakings sought by the Bank be given to the Court. The significance of the case to both parties is obvious from the interlocutory judgment delivered last year. I do not see as necessary to repeat matters set out in that judgment. The respective claims are of such moment to the respective parties that the court must be extremely careful that it not, unless clearly necessary [as to which see the above statement as to the principles to be applied], hamper or impede either party from exercising their undoubted forensic entitlement to properly prepare their case and to do so without alerting the other party in any way. As Justice Young recognised in Hassle v Commissioner of Patents (1987) 9 IPR 565 at 568: "… it is a rather unusual requirement to put upon a litigant that he discloses his witnesses or the course which the preparation of its case is taking". "… it is well recognised that the 'right' to keep witnesses' names confidential is a weighty matter and it is particularly weighty when it is coupled with the right to keep confidential the way in which a person's litigation is proceeding: see eg Lyell v Kennedy (1884) 27 Ch D 1".. 105 One of the matters upon which the Bank placed special emphasis was its anxiety lest the plaintiffs may circulate the critical documents to any number of experts worldwide, leading to an exponential increase in the suggested risk that the information may be imparted to a competitor. To my mind this concern may be addressed at least to an extent by the form of undertakings which I propose to require in the orders to be made. 106 In my view the balancing exercise referred to above, requires in the present case that the orders generally proposed by the plaintiffs be made subject only to the following matters: