Optiver Australia Pty Ltd v Tibra Trading Pty Ltd

Optiver's software 5 Optiver is a proprietary arbitrage business. It buys or sells on its own account securities in different markets in order to capture a profit on the price differences between those markets. Its modus operandi is to identify securities on Australian and foreign markets which appear to be mispriced, and then buy or sell those securities for a profit. Optiver has conducted this business in Australia since 1997. 6 Tibra also conducts a proprietary arbitrage business. The first to fourth respondents, all companies in the Tibra Group, were incorporated in 2006 or 2007, and their directors and employees are drawn variously from the fifth to ninth respondents, all of whom were previously employees of Optiver. 7 Arbitrage firms rely on speed. Due to the speed with which trades take place, any hesitation or delay by the trader or the trader's computer software can result in lost trades. Arbitrage computer software is designed to identify price anomalies, to place trades which will yield a profit, and to do so at a speed which will beat other traders to those trades. 8 Optiver's computer software has gone through several stages of development. When it began trading in 1997, Optiver used an off-the-shelf software product known as "Orc". This program was capable of responding to market data in about 80 milliseconds. Over time, Orc was superseded by other software. In response to improving off-the-shelf software, Optiver sought to program its software so that it would be faster than any other program. 9 In early 2004, employees of Optiver wrote a source code for a piece of software which would operate in conjunction with Orc. It was known within Optiver as "CATS". This program dramatically reduced Orc's response time to between 0.5 and 1.5 milliseconds. 10 Despite the success of CATS, Optiver continued to develop faster software. In late 2004, several of Optiver's employees produced an enhancement of CATS. The product was called "F1". It was regarded by Optiver as crucial to the success of its arbitrage business. F1 is extremely fast, utilises complex algorithms which allow it to "think like a trader", and contains in-built mechanisms to minimise losses resulting from market or human errors.

Optiver employees set up rival business 11 In late 2005 and early 2006 there were major changes in Optiver's staff structure. Optiver terminated the employment of the fifth respondent, Mr Dinesh Bhandari, in November 2005. By June 2006, six further employees of Optiver, including each of the sixth to ninth respondents, tendered notices of resignation. Soon after their respective resignations, each of the fifth, sixth, seventh and ninth respondents either incorporated, or were appointed as director of, at least one of the Tibra companies. Mr Andrew King, the eighth respondent, was employed by a Tibra company. 12 In July 2006 the first respondent was registered with the Australian Stock Exchange as a "market maker", which allows it to conduct an arbitrage business like that of Optiver's. 13 Optiver's evidence as to the circumstances surrounding the resignations - adduced in two affidavits of Mr Robert Keldoulis, Optiver's Managing Director, and one affidavit of Mr Charles Shale, a Software Developer at Optiver - details the way in which Mr Keldoulis formed suspicions that the fifth to ninth respondents were leaving to establish a company in competition with Optiver. 14 Mr Keldoulis became suspicious at the speed with which Tibra had moved from a newly incorporated company to a successful competitor. Mr Keldoulis discovered emails sent from some of the fifth to ninth respondents' email addresses at Optiver to their personal email addresses. One of these emails, sent by Mr King, itemised ways in which Optiver's F1 system could be improved. The other, sent by Mr Kinsey Cotton, the ninth respondent, contained key codes for Orc, for which Optiver had acquired licences and on which Optiver had built its F1 automated trading system. The information contained in these emails, says Optiver, is not only information crucial to a successful arbitrage business, but also information which the fifth to ninth respondents, who were traders and not software developers, could not have easily recreated. 15 His Honour recorded that at times in cross-examination Mr Keldoulis appeared evasive, and the correctness of some of the details of his affidavits was undermined. However, his Honour did not consider that the substance of his evidence had been materially shaken. 16 Optiver also adduced evidence from Mr Shale concerning the performance of Tibra as an arbitrage business and the speed with which a software developer could develop a program competitive with F1. 17 In relation to the performance of Tibra, Mr Shale's evidence was that Tibra began beating Optiver to an increasing number of trades in late 2006. Although the evidence deposed to in his affidavit addressed only the period between September 2006 and December 2006, a graph annexed to his affidavit asserted that Tibra's rate of success over Optiver continued to increase into early 2007. Based on his experience as a software developer, Mr Shale concluded that Tibra would need to have deployed an automated trading system at least as fast, if not faster, than Optiver's F1. 18 Furthermore, Mr Shale deposed that, for a skilled software developer to generate a source code with functionalities equivalent to F1, the developer would need, even taking into account several assumptions in favour of the developer, at least 110 weeks of development time. Having concluded that Tibra began using a software program equivalent to F1 in November 2006, Mr Shale concluded that it was highly unlikely that Tibra could have developed such software by that time. Although his evidence was challenged in cross-examination because it did not clearly set out the time necessary to develop CATS as distinct from F1, his Honour considered that the substance of Mr Shale's evidence was not significantly shaken. 19 Although Tibra had obtained a generous timetable for the preparation of evidence, including foreshadowed expert evidence, in the event they filed no evidence. They tendered a letter sent from their solicitors to Optiver's solicitors setting out substantive arguments, but in the absence of evidence explaining the material in the letter it was of no use to his Honour.

Decision of the primary judge 20 His Honour held at [20]-[23] that the circumstances, in particular the first to the ninth respondents' terminations or resignations, the subsequent establishment of a new and successful arbitrage business and the discovery of the two "worrying" emails, showed that Optiver had reasonable cause to believe that it may have a right to obtain relief. This belief, in his Honour's view, went "beyond mere conjecture or supposition". His Honour stressed that this view did not mean that Optiver's belief was correctly held, in the sense that it was likely to be vindicated in the proceedings. Its evidence at this stage need only establish a tenable objective basis for its belief. 21 His Honour however proceeded to find that the requirements of par (b) of O 15A r 6 were not satisfied. His Honour said (emphasis added): 27 It is settled law that the purpose of preliminary discovery is not to procure documents that will strengthen an applicant's decision to commence proceedings, but rather to furnish it with information which is reasonably necessary to enable that decision to be made: see Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591 at [19]. In other words, once a prospective applicant has enough information to meet the threshold of "a bare pleadable case" (C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 at [44]), an order under O 15A r 6 is no longer appropriate. Simply because it may be difficult to ascertain the finer detail of those pleadings and assess with accuracy the likelihood of success does not mean the prospects of success in the litigation should be amplified for the prospective applicant through the effects of an invasive order for preliminary discovery. An applicant which is unsuccessful in its preliminary discovery application can always plead its case as best it can, acquire further information and documentation through the ordinary processes of discovery and issue of subpoenas, and then, if necessary, amend its pleadings to assert further or different breaches of its rights or abandon any grounds or causes of action no longer considered tenable. 28 It follows that an applicant, upon obtaining enough information to plead its case, is no longer entitled to preliminary discovery. Delay may also be important: see Western Bulk Carriers (Aust) Pty Ltd v Cosco Bulk Carrier Co Ltd [2002] FCA 1520 at [25]. Once an applicant has obtained information sufficient to plead its case, or has unnecessarily delayed that acquisition, preliminary discovery will not be ordered, and the proceedings must commence. The threshold, once crossed, arrests the preliminary discovery process: see Ricegrowers Co-Operative Ltd & Seatide Pty Ltd v ABC Containerline NV & MED Containerline Antwerp NV (1996) 138 ALR 480 at 484. 29 Orders of preliminary discovery are not intended to convey a forensic or tactical advantage, but rather to clarify whether litigation is warranted. While preliminary discovery will be beneficial to an applicant to the extent it crystallises their cause of action, or in some cases the availability of a defence to an anticipated claim, it should not be oppressive to a prospective defendant. Preliminary discovery is a one-way transaction, in the sense that there is no reciprocal obligation to produce documents. Only the applicant receives documents, which is markedly different to ordinary discovery in the course of a legal proceeding. In practical terms, the handing over of information which may be highly sensitive can be commercially damaging to a business. It is appropriate to exercise caution not to unnecessarily burden a prospective defendant to the point where its unilateral disclosure of information in preliminary discovery injures its commercial position vis-à-vis a competitor, or confers an unfair advantage on that competitor. 30 Two conclusions can be drawn from application of the above principles to the present facts. The first is that Optiver has crossed the threshold of "a bare pleadable case", and therefore does not satisfy O 15A r 6(b). 31 The information which Optiver has at present - in particular, the termination or resignation of the fifth to ninth respondents, their subsequent establishment of Tibra, the discovery of two emails by Mr Keldoulis, and Mr Shale's calculations - sufficiently equips it to decide whether to commence proceedings. This information is a basis for substantially more than what is required to institute "a bare pleadable case". Although Optiver's initial pleadings may not be as comprehensive as they would be after preliminary discovery, this is not a reason to grant the application. It often occurs that pleadings, as initially drafted, are amended in light of extra information gleaned from discovery. 22 His Honour then went on to hold that even if Optiver's case, as it currently stood, was not a "bare pleadable case", an order for preliminary discovery would be "unfairly prejudicial to Tibra, in a commercial and litigious sense" this inclining his Honour to an exercise of the Court's discretion to deny preliminary discovery. 23 First, his Honour noted that the source code to an arbitrager's computer software program was "extremely sensitive". An arbitrager's trading business was very competitive and depended heavily on the speed of its computer trading systems. To reveal a successful arbitrager's source code could be to "reveal a roadmap to its success, and undermine its competitive advantage". His Honour acknowledged that a strict confidentiality regime could be instituted, but this would almost certainly "introduce an undesirable degree of complexity, delay and cost which the evidence… before (his Honour) did not warrant". 24 A second consideration was substantial delay. Optiver's suspicions were aroused in July 2006 but it did not commence this proceeding until almost a year later, preferring instead to monitor Tibra's performance and engage private investigators. This substantial delay had "not been satisfactorily explained". The nature of the information sought meant that Tibra would have to disclose its current source code. 25 A third consideration was that Tibra could suffer "undue prejudice". His Honour said at [39]: A second consideration in relation to the Court's discretion is that Tibra could suffer undue prejudice in respect of the conduct of the anticipated proceedings. Preliminary discovery is an invasive process, and can be granted only where the three limbs of O 15A r 6 are made out. One reason for this is that the grant of preliminary discovery, particularly if the application is as broadly drawn as it is in this case, can place the prospective defendant in a position of disadvantage in respect of the conduct of future negotiations and proceedings: see C7 Pty Ltd v Foxtel Management Pty Ltd [2002] FCA 1266 at [7]. Unlike full discovery, where both parties can ascertain and test the strength of the case put against them, preliminary discovery is unilateral, and the Court should be wary of creating an imbalance between the parties, since the purpose of preliminary discovery is not to furnish an applicant with information of such breadth or significance as to prejudice or unnecessarily curtail the respondent's prospects in the proceedings, but rather to ensure an applicant is able to identify and consider the documents and information necessary to commence proceedings. 26 His Honour's conclusion (at [40]) was as follows: I am of the view that the disclosure at this early stage of Tibra's source code, particularly in circumstances where Optiver already has sufficient information to decide whether to start litigation, would not be consistent with the purposes of O 15A r 6 and would create an inappropriate imbalance between Optiver and Tibra in respect of any litigation.

Grant of leave 27 A test frequently adopted is whether the decision is attended with sufficient doubt to warrant it being reconsidered by the Full Court and whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399. 28 As is currently a common practice in the Court, there was not a separate hearing of the application for leave. Accordingly, the merits of the proposed appeal were argued no less fully than would have been the case were leave not an issue. For the reasons that subsequently follow, we think his Honour's decision involved error. It is somewhat artificial to consider the anterior issue of "sufficient doubt" when the ultimate merits of the proposed appeal have in fact been fully argued. 29 We think there would be substantial injustice, supposing the decision below to be wrong. As senior counsel for Optiver put it, his Honour's order puts his client in a dilemma: whether to not proceed and suffer commercial disadvantage or proceed and incur the costs of substantial litigation without a proper foundation for doing so. Any interlocutory order which is wrong imposes an injustice, in the sense that justice should ensure that litigants obtain the correct decision. However, as a matter of practicality some interlocutory decisions are more important, or have greater adverse effect on the loser, than others. The order presently under consideration imposes real disadvantage on Optiver, beyond the usual give and take of interlocutory contests. The effect of refusal of the order is final in the practical sense. Indeed, there has been controversy as to whether the decision is to be classed as interlocutory or final. 30 In any case, there are some questions of general principle as to the operation of O 15A r 6 which in themselves warrant consideration by a Full Court.

A "bare pleadable case" 31 As has been noted, his Honour ostensibly sourced this requirement from the decision of Gyles J in C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 at [44]. However the application of the term is directly the opposite to what the judge in that case said. Gyles J said (emphasis added): …a party is entitled to have more than a bare pleadable case before embarking upon the kind of litigation which would be involved here. 32 More importantly, the criterion of a "bare pleadable case" substitutes a quite different test from that which O 15A r 6(b) prescribes and elides the difference between O 15A r 6(a) and O 15A r 6(b), each of which must be satisfied. As the Full Court said in Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at [40]: Fifthly, an order may be made in favour of an applicant who already has available evidence establishing a prima facie case for the granting of relief: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (unreported, Federal Court, Lindgren J, No 391 of 1996, 24 May 1996), at p 33. But the applicant, after having made all reasonable inquiries, must not have sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain relief against the prospective respondent: see par (b). The absence of sufficient information is to be assessed objectively: Alphapharm at p 31. 33 True it is that the combined effect of O 11 r 1B and Form 15B in the Federal Court Rules, inserted in 2004, is that a legal practitioner filing a statement of claim must certify that the "factual and legal material available to (the practitioner) at present provides a proper basis for each allegation in the pleading". Nevertheless, even with this new obligation, a practitioner is not required to make some qualitative assessment of the prospects of success. Providing there is some evidence, and the gist of that evidence is properly pleaded and particularised, the pleading will be not merely "bare", but proper and adequate. 34 As the classic text on the subject, Bullen and Leake and Jacob's Precedents of Pleading (12th ed), states at the outset (p 3): Pleadings are the written statements of the parties in actions begun by writ which are served by each party in turn on the other, setting forth in a summary form the material facts on which each relies in support of his claim or defence, as the case may be. They are the means by which the parties are enabled to state and frame the issues which are in dispute between them, without embarking at that stage on the evidence which each party may adduce at the trial. The system of pleadings operates to define and delimit with clarity and precision the real matters in controversy between the parties upon which they can prepare and present their respective cases and upon which the court will be called upon to adjudicate between them. It thus serves the two-fold purpose of informing each party what is the case of the opposite party which he will have to meet before and at trial, and at the same time informing the court what are the issues between the parties which will govern the interlocutory proceedings before the trial and which the court will have to determine at the trial. 35 A case may be pleadable, and not merely barely so, even if the evidence supporting the pleaded case is dubious, or vulnerable to contradiction. Section 165 of the Evidence Act 1995 (Cth), although concerned with jury trials, provides some examples of categories of evidence which experience has shown to be likely to be unreliable: hearsay, identification evidence, evidence of witnesses affected by age, ill health or injury, evidence of prison informers, etc etc. Quite apart from these categories, the pleader may have evidence of a reputable person which sufficiently supports the pleaded cause of action but, to the pleader's knowledge, there may be equally reputable witnesses who will swear to the contrary. Or there may be a perfectly good plaintiff's pleadable case but potential defences, such as under a contractual provision or problematic or unpredictable issues such as waiver, estoppel or unconscionable conduct. Or there may be real uncertainty as to the quantum of provable damage, such as to throw doubt on the practical wisdom of issuing proceedings. (See, for example, Hughes Aircraft Systems International v Civil Aviation Authority (1995) 217 ALR 303 at 307-308; Western Bulk Carriers (Australia) Pty Ltd v Cosco Bulk Carrier Co Ltd [2002] FCA 1520 at [15]-[22]; Minister for Health and Aged Care v Harrington Associates Ltd [1999] FCA 549.) 36 The concept of a "bare pleadable case" is not only a gloss on the text of the rule but is fundamentally inconsistent with its purpose. The policy behind the rule is that even where there is a reasonable cause to believe that a person may have a right to relief, nevertheless that person may need information to know whether the cost and risk of litigation is worthwhile. As Hely J pointed out in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at [26], the question does not concern the right to relief but rather "whether to commence proceedings". Inspection of documents in the possession of the proposed defendant may enable a properly informed decision to be made whether to commence a proceeding to obtain the relief. The "bare pleadable case" approach diverts attention from the true purpose of the rule. A person may have a pleadable case, but still not sufficient information upon which to decide whether to embark upon litigation. We are satisfied that his Honour asked himself the wrong question on this ground and that his conclusion cannot stand. There is ample material upon which this Court can consider the ground for itself.

Not sufficient information 37 At present, as his Honour observed, the case that Optiver has is a purely circumstantial one relying upon inference. For all it knows, there may be facts and circumstances which make it equally likely, or more probable than not, that Tibra obtained its software in ways that did not infringe any of Optiver' rights. In our opinion, Optiver has not sufficient information to enable a decision to be made whether to commence a proceeding.

Discretion 38 Tibra contends that, even if the primary judge was wrong about the application of O 15A r 6(b), the refusal of relief was independently based upon the exercise of a general discretion. Such an exercise of discretion can only be set aside within the well known limitations referred to in House v R (1936) 55 CLR 499. 39 In our opinion, it follows from the way in which the primary judge's conclusion was expressed that the decision was cumulative upon his conclusion concerning the application of O 15A r 6(b). If that be so, we need to consider whether to exercise a general discretion to refuse relief. If that is not so, then we need to consider the reasons advanced by his Honour for the exercise of the discretion.

Sensitive information 40 The disclosure of highly sensitive confidential material to a trade rival is a routine exercise in this Court. Commercial confidentiality is protected by appropriate directions such as, typically, limiting disclosure to external lawyers and independent experts upon their giving undertakings to the Court. Without such regimes, most intellectual property litigation would be unworkable. We do not see anything in the present case to take it outside the ordinary practice. Confidentiality regimes have been seen as an answer to such concerns in preliminary discovery applications: Griffin Energy Pty Ltd v Western Power Corporation [2006] FCA 1241 at [110]; Electricity Retail Corporation v Griffin Energy Pty Ltd [2006] FCA 1810 at [51].

Delay 41 The relevance of delay, in the absence of actual prejudice, is not easy to discern. In any event, the delay is not unexplained. The evidence was that in June 2006 Optiver's then solicitors gave advice that the evidence at that stage "wasn't strong enough to commence any sort of action". On its solicitors' advice Optiver retained private investigators, but that did not advance matters. Between September 2006 and March 2007 Mr Shale was engaged in monitoring Tibra's trades. Shortly thereafter, in April 2007, Optiver instructed its present solicitors. The present application was filed on 19 June 2007. Overall this shows that Optiver was taking proper steps to establish whether it had a claim. Tibra did not argue that Optiver had not made "all reasonable enquiries" for the purposes of par (b) of the rule. 42 The only specific prejudice to Tibra alleged to arise from such lapse of time as has occurred is that Optiver's experts will have access to Tibra's current source code. However the current source code may well be relevant. For example, it is possible that Tibra's current version may bear the hallmark of copying from Optiver's program, even if by way of indirect copying and adaptation from intermediate versions. If confidentiality is an issue, it can be protected in the way already suggested.

Unfairness 43 We do not see how Tibra would be placed in a position of unfair disadvantage by the making of the order sought. Order 15A r 6 necessarily operates asymmetrically. One party gets discovery and the other party does not. Nevertheless, it is to be regarded as a beneficial procedure. As Burchett J said in Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733 (citations omitted): It is no answer to the applicant's application under r 6 to say that the proceeding is in the nature of a fishing expedition… Rule 6 is designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent -­­ that is, to "fish" in the old sense… It would be unfortunate if a rule designed to amplify the court's power to penetrate obscurities and uncertainties in the interests of justice were to be weakened by restrictive and unnecessary glosses. I think the rule is of a beneficial kind within the meaning of the well known principle of interpretation, and should be given the fullest scope its language will reasonably allow. The proper brake on any excesses in its use is the discretion of the court, which is required to be exercised in the particular circumstances of each case. This passage was cited with evident approval (and described as "well-known") by a Full Court in Malouf v Malouf [1999] FCA 710 at [9]. 44 The unfairness argument assumes that there will be litigation, and that Tibra will be disadvantaged in that litigation. That is not an assumption that can be made. Order 15A r 6 can be beneficial, or at least not unfairly harmful, to a defendant. If an order is made and, after inspection of the discovered documents, proceedings are commenced, those proceedings will be determined on their merits. Presumably there will be no need to repeat discovery of the documents already discovered under O 15A r 6. If the action does not proceed the defendant will no doubt get its costs of making discovery and will have the benefit of not being exposed to litigation and irrecoverable costs even if it were to succeed. Litigation that is doomed to failure is in nobody's interests, including the interests of the ultimately successful defendant. An order for preliminary discovery may avoid trouble and expense for all concerned.

Conclusion as to discretion 45 There normally will be little scope for refusal of relief where the requirements of O 15A r 6 have been met. The remedy is beneficial and should not be refused, save for good cause. In our opinion, it would have been, and would be, wrong in principle to decline relief in the circumstances of the present case, if it be concluded that the requirements of O 15A r 6 were met.

Admission of evidence 46 Tibra's amended notice of contention alleged wrongful admission of certain evidence. At the hearing, counsel for Tibra did not press that contention, rather putting it that the evidence, having been admitted, did not prove the relevant matter.

47 Optiver's amended notice of contention claims that his Honour erred in finding that Optiver had established under par (a) of O 15A r 6 that there was a reasonable cause to believe that Optiver had or may have had a right to obtain relief from Tibra. Senior counsel for Tibra relied upon the objective nature of the test to be satisfied. However, the requirement to be established is a reasonable cause to believe that the applicant has or may havea right to relief, not a conclusion that a prima facie case in fact exists (see Hely J in St George Bank Ltd at [26]; George v Rockett (1990) 170 CLR 104).

48 It was not incumbent upon Optiver to establish every element of the relevant causes of action, but a reasonable cause to believe that it "has or may have" the right to relief alleged. Of course, this is not to say that it is not necessary to examine the various elements of the potential cause of action that is sought to be relied upon to determine whether there is a reasonable cause to believe that each of the necessary elements exist (see Austrac Operations Pty Ltd v State of New South Wales (2003) ATPR 41-960 at [11]; Leighton Contractors Pty Limited (ABN 98 000 893 667) v Page Kirkland Management Pty Limited (ABN 46 097 111 245) [2006] FCA 288 at [5]; Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450 at [44]). Nor can an application for preliminary discovery be sustained without evidence that must incline the mind towards the matter of fact in question (see Austrac at [37]; John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13]-[14], [17], [73]; Dartberg at [44]).

49 Before his Honour Tibra argued that there were significant shortcomings in the evidence in this regard. On the appeal, senior counsel for Tibra elaborated on these alleged shortcomings at some length. We do not think it necessary in the circumstances to review these arguments, which in essence go to the ultimate merits of Optiver's case. Optiver of course accepts that it does not have the evidence to support a case - that is the raison d'être for the present application. However, there is sufficient evidence, irrespective of the shortcomings relied upon by Tibra, to conclude that there is reasonable cause to believe Optiver may have a right to obtain relief. Five employees leave a business which depends on highly sophisticated software skills and set up a rival which achieves swift success in the circumstances set out previously. One of the emails which excited Optiver's suspicions was sent by Mr King to a private address on the day of his resignation. It was in the following terms (the format has been varied to assist readability): External influences that could cause an error trade: (things we need to check) general things · make sure we don't lose information from feeds, or keep wrong information due to other factors o eg. instrument leg being wrong in combo, not sending flags on. o we should send on as much information that we can verify, or turn the instrument off. · are there other places where this could occur? · how do we handle zombie tcp connections to market links? need heartbeats badly, otherwise we could be trading off incorrect base prices. instrument feeds - · various parameters being wrong · base instrument change not handled properly · dividend contract change not handled (this isn't handled at present is it??) · underlying change not handled properly · feedcode change not handled properly · do we handle instrument changed feeds etc. properly during start up? · race conditions with volatility changes in different instruments causing trades where one instrument uses old vol, other uses new vol. · is there any way we can know a trader just selected a bunch of instruments and changed their offsets all at the same time (can't do anything about it in orc, but should think about it in tiger) eg. atomic operations. theoretical data · incorrect theos for some reason (eg. 0% wind down) - check delta and gamma etc. are reasonable, and that the base price specified is within a certain percentage of our current base. · different instruments within an underlying having different theos due to race conditions o (fix with grouped messages etc.) · dividend changes / rates changes etc. will lead to error trades. we need to be able to detect these correctly. o can't we just listen to feeds from orc? actions · stupid trade deltas etc. with crazy amounts o should have limits in front end, or possibly in back end. o that will mean we need to add action replies · cancel all orders - probably need to add an "Are you sure?" in CubClient once we have quoting and stuff in place. mlp feeds · is there any way we can better handle lost trade feeds? should match up trades to orders and check they correlate or something. could cause our position to be exceeded or something without realising · busted market links o check if we get an order insert reply without an error that we get an order status feed within x seconds or something? o tearing, but would have shown up the om problem earlier. 50 If there is an innocent explanation for that email, neither Mr King nor anybody else on behalf of Tibra was produced to give it. A Jones v Dunkel (1959) 101 CLR 298 inference can be drawn. In itself, in association with the timing and circumstances of the departure of Mr King and his colleagues and the setting up of the Tibra business, that email was sufficient to ground a reasonable belief that Optiver has or may have the right to obtain relief from Tibra.

Orders 51 Optiver accepts that the precise scope of the orders and the terms of a confidentiality regime should be remitted to the primary judge. Optiver submits that the costs of the primary proceeding should be left to the primary judge. We agree. There will be orders as follows: 1. The applicant have leave to appeal. 2. The appeal is allowed. 3. The order of the primary judge made on 21 December 2007 is set aside. 4. The matter be remitted to the primary judge for orders to be made in accordance with these reasons. 5. The costs of and incidental to the hearings on 3 October and 30 November 2007 be dealt with by the primary judge on remitter. 6. The respondents pay the applicants costs of the application for leave to appeal and the appeal. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Gyles and Middleton.

Associate: Dated: 21 July 2008 Counsel for the Applicant: R Cobden SC and P W Flynn

Solicitors for the Applicant: Mallesons Stephen Jaques

Counsel for the Respondents: A J L Bannon SC and A D B Fox

Solicitor for the Respondents: McCabe Terrill Lawyers