TULLETT PREBON (HONG KONG) LTD v. CHAN YEUNG FONG NICK AND OTHERS

HCA 2197/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2197 OF 2009

____________

BETWEEN

____________

_____________

D E C I S I O N

_____________

INTRODUCTION

Introduction

1.  There are four applications before the Court by summonses dated 15 December 2010:

(1)   the Plaintiff’s application for specific discovery against the Defendants under Order 24 rules 3 and 7 of the Rules of the High Court (“RHC”);

(2)   the Plaintiff’s application for non-party discovery against Harvey of BGC-Securities (Hong Kong) LLC (“BGC-Securities”) and BGC Capital Markets (Hong Kong) Limited (“BGC-Capital”) under section 42 of the High Court Ordinance (“HCO”) and Order 24 rule 7A(2) of the RHC;

(3)   the Defendants’ application for specific discovery against the Plaintiff under Order 24 rules 3 and 7 of the RHC; and

(4)   the Defendants’ application for directions for expert evidence under Order 38 rule 36 of   the RHC.

The Defendants’ application for directions for expert evidence was adjourned for disposal by paper in chambers.

2.  The Plaintiff (“TP-HK”) is the Hong Kong arm of the Tullett Prebon group of companies (“Tullett Prebon”), a financial services group and international inter-dealer broker, which introduces trades for execution between banks and other financial institutions.  Tullett Prebon has a trading arm in Singapore (“TP-SG”).  Kelly is the general counsel of Tullett Prebon for the Asia Pacific region.

3.  The 1^st to 7^th Defendants were former employees of TP-HK. They were members of the Non-Deliverable Forwards Desk (“NDF Desk”), a key part of TP-HK’s long term Asia business strategy to build market share in that sector.  The NDF Desk consisted of ten members.  The         1^st Defendant was the head of the NDF Desk, while the other Defendants were brokers holding positions of different seniority in the team. 

4.  BGC group of companies (“BGC”) is a direct competitor of Tullett Prebon in Hong Kong, the United Kingdom and internationally.   Its members include BGC-Securities and BGC-Capital.  Due to initial uncertainties as to the Defendants’ new employer, the pleadings were directed at BGC-Securities, BGC-Capital or BGC generally.  Upon the admission of its counsel, Ms Ismail, that BGC-Capital is the current employer of the Defendants, the application for non-party discovery under the second summons above is deemed to be directed at BGC-Capital.  Harvey is the executive managing director and general manager of BGC.

5.  At least since October 2008, TP-HK was aware of possible departure of the 1^st to 4^th Defendants and buy out of its NDF Desk team.  There were discussions within TP-HK management about compensation to be paid by the Defendants for the early termination of their employment contracts as well as proposed improvement in their terms of employment to attract them to stay.  On 17 March 2009, TP-HK’s management discussed about combined operation with the NDF Desk of TP-SG in case the Defendants resigned.

6.  On 20 March 2009, the 1^st to 7^th Defendants resigned.  They joined BGC-Capital and commenced working at its Singapore office       on 23 March 2009.  On 28 September 2009, they started working in   BGC- Capital’s Hong Kong office.

7.  As a result of the Defendants’ resignation, TP-HK’s NDF Desk was left with only two junior brokers and one trainee broker.  TP-HK alleged that its business was severely affected.  It appeared that it transferred the business of the NDF Desk to TP-SG and started a new product in New Taiwanese Dollar to cope with the Defendants’ resignation.

8.  On 30 October 2009, TP-HK commenced action against the Defendants.  The following causes of action are pleaded:

(a)   breach of contract;

(b)  breach of duty of fidelity;

(c)   breach of fiduciary duties;

(d)   statutory remedies under the Employment Ordinance;

(e)   procuring breach of contract and unlawful interference; and

(f) conspiracy.

The following relief is sought:

(a)   various sums representing pro-rata bonuses paid;

(b)   shortfall in payment in lieu of notice of termination pursuant to section 8A of the Employment Ordinance;

(c)   liquidated damages under their employment contracts;

(d)   damages for breach of contract;

(e)   damages for unlawful interference and conspiracy; and

(f)   exemplary and aggravated damages.

No action has been instituted against any member of BGC.  BGC-Capital remains a non-party.

9.  Pleadings were closed and witness statements were exchanged.  The parties were in disagreement about discovery and directions for expert evidence.  BGC-Capital refused to provide the documents requested by TP-HK.  Hence, the summonses were issued.

10.  The parties have already given substantial discovery.  Yet, a lot of documents are still being sought by both parties. The parties have filed very lengthy affidavits contesting each other’s application. It is not possible for the court to undergo a detailed analysis of the parties’ case at this stage.  In an application for discovery, the court will only take an overall view of the case and adopt a broad brush approach.  The court shall have regard to the applicable legal principles and make such order as is appropriate bearing in mind the underlying objectives under the Civil Justice Reform to increase the cost effectiveness of any practice and procedure and to promote a sense of reasonable proportionality and procedural economy in the conduct of proceedings.  I adopt the approach of Burrell J in Mariner International Hotels Limited And Atlas Limited and Hang Lung Group Limited, HCA 10714, 10752 and 10821 of 1998.  I do not consider it necessary or appropriate to give a full and balanced explanation for the discovery or otherwise of each and every document.  Each order for discovery is as a result of the application of one or more of the general principles discussed herein.

THE PLAINTIFF’S APPLICATION FOR DISCOVERY AGAINST THE DEFENDANTS

Legal principles applicable to inter-parties discovery

11.  Counsel have no dispute about the legal principles applicable to inter-parties discovery which are well established.  It is trite that a party seeking an order for discovery must make out a prima facie case that: (1) a specified document or class of documents exists; (2) the party against whom the order is sought has or had the documents in his possession, custody or power; (3) the documents relate to a matter in question in the action; and (4) discovery is necessary either for disposing fairly of the cause or matter or for saving costs.

12.  For the purpose of discovery, a prima facie case may be based on the probability arising from the surrounding circumstances, or in part on the specific facts deposed to.  The burden is on the party seeking discovery to prove existence of the document, the other party’s possession, custody or power over the document and relevance.  Once a prima facie case is made out, the court has discretion to order disclosure: Berkeley Administration Inc v McClelland [1990] FSR 381 (CA) at 382 per Mustill LJ, as he then was.  It is for the party resisting discovery to satisfy the court that discovery is not necessary for disposing fairly of the cause or matter or for saving costs: Hong Kong Civil Procedure 2011 §24/8/1.

13.  Usually, the most hotly contested issue in discovery is relevancy.  In The Compagnie Financiere Du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 (CA), Brett LJ held that a document is relevant if:

“… it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary … if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences.”

The Peruvian Guano test remains the test of relevance today.  In considering the issue of relevance, the general approach is to look at the documents sought against the causes of action pleaded and issues to be litigated.

14.  Mr Chua SC, counsel for TP-HK, referred to Mariner International Hotels Limited in which Burrell J said that while fishing expeditions are not permissible in discovery, but “if doing justice is an onerous task then so be it”.  His Lordship then held that it was “unrealistically narrow” to restrict relevance in relation to any matter in question between the parties to the questions in the action rather than the subject matter of the action.  Mr Chua SC also drew support for that proposition from Cheeroll Limited And Philip Leigh Tose & Others, unreported, HCA 15993/1998, 19 February 2003 in which Deputy High Court Judge Fung, as he then was, rejected as “too narrow” the argument that relevance be judged as to the question in issue between the parties rather than generally by the subject matter alone.  Counsel had no dispute that the court should adopt a realistic view in deciding the extent of discovery. 

15.  Mr Chua SC then drew support from paragraph 37 of Cheeroll Limited to advance his argument that discovery ought to be allowed if the document sought is relevant and of litigious advantage.  In that paragraph, Deputy High Court Judge Fung said:

“The enquiry documents are highly relevant, and it is admitted to be of litigious advantage, then prima facie, it should be available on production unless I form the view that they are of little probative value, which at this stage I cannot see they are. The otherwise not available point would be a wholly unnecessary roundabout, which is not necessary for the fair disposal of the case, nor is it for saving costs.”

The word “and” used by Mr Chua SC was correctly understood by counsel to be read disjunctively.  Insofar as Mr Chua SC was attempting to introduce a more relaxed “litigious advantage” test in place of the Peruvian Guano test, Mr Coleman SC, counsel for the Defendants, took strong issue and invited me to reject that test.  Counsel’s dispute was whether Deputy High Court Judge Fung was introducing a new test of relevance in Cheeroll Limited.

16.  The issue in Cheeroll Limited was whether documents obtained by a witness in circumstances which were confidential and under compulsion may be discovered.  Deputy High Court Judge Fung referred to British and Commonwealth Holdings plc (in administration) v Barclays de Zoete Wedd Ltd and others [1999] 1 ECLC 86, in which Neuberger J, faced with a similar issue, was of the opinion that the court should not, save in exceptional circumstances, order disclosure of the document even where the requirements of various provisions under Order 24 of the Rules of Supreme Court (“RSC”) in the United Kingdom (which was equivalent to Order 24 of RHC) were satisfied.  Then, his Lordship apparently adopted the test to be applied in determining disclosure submitted by counsel and said at paragraph 34:

“ Mr Harris submitted that the test to follow is in Wallace Smith Trust Co. Ltd (in liq) v. Deloitte Haskins & Sells (a firm) and anor [1996] 4 All ER 403, per Simon Brown LJ, at p. 418b:

“(5) Disclosure will be necessary if: (a) it will give ‘litigious advantage’ to the party seeking inspection; (b) the information sought is not otherwise available to the party by, for example, admissions, or some other form of proceeding (e.g. interrogatories) or from some other source; and (c) such order for disclosure would not be oppressive, perhaps because of the sheer volume of the documents.” ”

It was in that context that Deputy High Court Judge Fung said that the document, which was highly relevant and was admitted to be of litigious advantage, should prima facie be produced.

17.  Reading the decision as a whole, I am quite unable to form the view that Deputy High Court Judge Fung was introducing a different test of relevance in paragraph 37.  His Lordship was considering the question of discovery of documents obtained by a witness in circumstances which were confidential and under compulsion, not merely a document of a confidential nature, in the sense of its commercial sensitivity which is involved in the application now before me.  The three-point test in Wallace Smith Trust is to be applied to discovery of such a document and not merely confidential document.  It is a test for determining the question of necessity and not relevance.  It is to be applied to assist the court in determining whether to exercise its discretion to order discovery after having first satisfied itself that the document is relevant.  From Neuberger J’s dictum, it is also clear that such a document must first meet the requirement of Order 24 before the court would consider exercising discretion to order disclosure.  That must also be what was in the mind of Deputy High Court Judge Fung when his Lordship used the phrase  “and it is admitted” to qualify “litigious advantage”.  The word “and” must be read disjunctively and “litigious advantage” must be an additional element to be considered in the exercise of the court’s discretion. It must be in that context that Deputy High Court Judge Fung applied the three point test for necessity: litigious advantage, otherwise unavailability and non-oppressiveness.  In my opinion, litigious advantage is one of the elements of the test of necessity and not a substitution for the Peruvian Guano test.  Counsel were arguing on false premises. 

18.  Confidentiality has often been raised as an objection to disclosure of documents.  It is trite that confidentiality as such is no bar to disclosure unless the information sought is privileged.  It is of course a factor to be considered in the exercise of the court’s discretion.  As submitted by Mr Chua SC, a party who obtains discovery may only use the documents disclosed for the purpose of conducting the legal proceedings.  There is an implied undertaking by the disclosee not to use the documents for any collateral or ulterior purpose.

TP-HK’s causes of action and issues to be litigated

19.  Whether the documents sought are relevant, has to be determined against the causes of action pleaded and the issues to be litigated.  TP-HK pleaded a number of causes of action, including breach of contractual and fiduciary duties; procurement of breach of contract and unlawful interference and conspiracy. Particularly against the 1^st to 3^rd Defendants, TP-HK alleged that they acted as recruitment sergeants in enticing, inducing and encouraging the majority of the TP-HK’s employees of the NDF Desk to terminate their employment with TP-HK en masse to join BGC-Capital.  TP-HK’s case has been clearly pleaded.

20.  Mr Chua SC submitted that the major issues to be litigated are whether the 1^st to 3^rd Defendants induced, procured, or encouraged the other Defendants to terminate their employment contracts with TP-HK unlawfully; whether they intended to interfere with the performance of their employment contracts with TP-HK and to cause damage to TP-HK; and whether the Defendants and BGC-Capital combined together to take actions which were unlawful.  The major issues to be determined at trial include issues pertaining to the conduct of the Defendants and     BGC-Capital and those pertaining to the subjective state of mind of the Defendants.  The former includes issues such as whether there were acts of unlawful procurement or interference and whether there was a combination and collusion between the Defendants and BGC-Capital.   The latter includes issues such as whether the Defendants were enticed, induced, procured, or encouraged by the 1^st to 3^rd Defendants or BGC-Capital to terminate their employment contracts with TP-HK; and whether they intended to cause damage to TP-HK and/or to interfere with its contractual relations with the Defendants.

The documents sought by TP-HK

21.  The documents sought by TP-HK against the Defendants are:

(A)   documents relating to the “revenue deal” referred to in Harvey’s SMS message to the 1^st Defendant dated 23 March 2009;

(B)   documents relating to the offer of employment, indemnities and forgivable loans by BGC-Capital; 

(C)   documents relating to the “gross revenue numbers” referred to in the 1^st Defendant’s SMS message to Harvey dated 17 March 2009;

(D)   documents relating to BGC-Capital’s share option scheme offered to the Defendants;

(E)   documents relating to business plans and revenue figures submitted by the Defendants to BGC;

(F)   documents relating to records of payments made by BGC-Capital and/or BGC to the bank accounts of the Defendants; and

(G)   all documents and records relating to the tax filings submitted by any of the Defendants in relation to the remuneration and employee benefits paid by BGC-Capital and/or BGC to each of the Defendants (whether in Hong Kong or elsewhere).

22.  Mr Chua SC submitted that the documents sought to be disclosed are relevant to the various causes of action for procurement of breach of contract, unlawful interference and conspiracy.  They are all related to the dealings between the Defendants and BGC-Capital leading up to the Defendants’ en masse resignation to join BGC-Capital.

23.  Mr Coleman SC submitted that there was nothing too unusual in employees leaving together for greener pasture and to describe that as leaving en masse gave the incident the colour which it did not deserve especially as TP-HK was aware of that possibility in advance.  Seven out of ten members of TP-HK’s NDF Desk terminated their employment with TP-HK at the same time and joined BGC-Capital as a group and worked there as a group. They worked in its Singapore office at the same time and returned to work in its Hong Kong office at the same time.  They also engaged the same firm of solicitors, Messrs Pinsent Masons (“PM”) to represent them.  Such conduct, to say the least, was extremely unusual and too much of a coincident.  It is some evidence on which the inference that the Defendants acted together with a common intention pursuant to some plan or agreement among themselves and with their new employer may reasonably be drawn.  The relevance of the documents sought must be viewed against this background.

24.  Mr Chua SC submitted that items (A), (B), (D), (F) and (G) are documents relevant to show what BGC-Capital offered to procure the Defendants’ en masse resignation and are important and necessary to  show: (1) the incentives received by the 1^st to 3^rd Defendants to act as  BGC-Capital’s recruitment sergeants; (2) the degree of collusion among the Defendants and with BGC-Capital; (3) the intention to interfere with contractual relations and to cause damage to TP-HK; and (4) the motive and unlawfulness of the Defendants’ conduct.  In his affirmation, the 1^st Defendant said that the Defendants were not satisfied with the terms of their employment contracts and denied conspiracy and procurement.  He attacked TP-HK’s allegation of recruitment sergeant and collusion etc as nebulous.

25.  Apart from item (A), all those documents are clearly related to the terms of employment offered by BGC-Capital to induce the Defendants to leave TP-HK.  The forgivable loans, sign on bonus, share options etc  are not unusual for employments of this nature.  Nor is the indemnity.  It is the necessary assurance to make an employee feel safe and free to quit    his present employment.  It is part of the price to be paid for the right   head to be hunted.  Water finds its own level.  If TP-HK cannot provide sufficiently attractive terms to keep its employees, it cannot complain if they leave for greener pasture.  But as I have mentioned earlier, the Defendants’ conduct must be viewed against the particular background of this case.  It almost never happens that parties to a conspiracy, particularly one of the nature alleged in here, would enter into a written contract to spell out the nature and scope of the conspiracy and damage to be caused to another.  It is more often the case that conspirators would conceal than disclose their intention.  Invariably, such intention has to be inferred from what the parties said or did and all the surrounding circumstances.  Up to a point, the inducement, in terms of a more attractive compensation package offered to attract an employee from his current employer may be regarded as legitimate commercial activity.  But when the inducement is so out of proportion with commercial reality and the circumstances are so unusual  as with the present case when almost the entire team was bought out, one may infer from the inducement offered an intention to cause damage to  the innocent party.  In my view, the documents sought under items (B), (D), (F) and (G) may, not must, enable the inference of intention to cause   harm to TP-HK, to procure breach of contract, unlawful interference and conspiracy to be drawn.  They are clearly relevant.  There is no issue of confidentiality.  I note that item (G) refers only to documents submitted by the Defendants.  That does not cover employer’s returns received from BGC-Capital which are most useful documents in that category of documents.  I shall amend item (G) to include employer’s returns and order disclosure of the above items in the Schedule as amended.

26.  Item (A) are documents relating to the “revenue deal” mentioned in Harvey’s SMS message to the 1^st Defendant dated 23 March 2009.  In that message, Harvey wrote to the 1^st Defendant:

“Do not let your team discuss the [revenue] deal for your desk with anyone in [Singapore or Hong Kong]. Please call me to discuss.”

TP-HK argued that it is apparent from this SMS message that some or all of the Defendants have or had documents relating to this revenue deal in their possession, custody or power to which TP-HK is entitled disclosure.  It also argued that the documents relating to the revenue deal are relevant to the recruitment sergeant claim as they may show the inducement offered by BGC-Capital to the 1^st to 3^rd Defendants to leave TP-HK and to procure the other Defendants to leave.  They are also relevant to the conspiracy claim as they may show the inducement offered by BGC-Capital to the Defendants to entice them join to BGC, by providing them with the motivation to conspire to resign from TP-HK en masse and show the extent to which the move by the Defendants was contemplated by them on a team basis.

27.  The 1^st Defendant’s response was that every desk at every brokerage had a revenue deal or something similar.  It was related to the method, generally by way of percentages, that the revenue generated by the desk was split between the brokerage on the one hand and the desk on the other so as to create a bonus pool out of the revenue retained by the desk.  He did not consider the revenue deal relevant to the alleged recruit sergeant claim and conspiracy claim.  He argued that the information was highly confidential and when balanced against relevance should not be disclosed.

28.  From the tone of Harvey’s SMS message, I have no doubt  that he intended the information to be highly confidential.  However, as averred by the 1^st Defendant, it is information relating to the bonus retained by the desk which must be for distribution among members of the desk. It is part of the remuneration package.  I also note from the documents   that TP-HK had a similar bonus pool.  The documents relating to the revenue deal are therefore disclosable just as the documents under items (B), (D), (F) and (G).  As for the Defendants’ concern of confidentiality,    I think it is adequately protected by the implied undertaking by TP-HK.  The information is not privileged.  I order disclosure.

29.  Item (C) are documents relating to the “gross revenue numbers” referred to by the 1^st Defendant in his SMS message to Harvey dated 17 March 2009 in which he wrote:

“Reminder GROSSED [revenue numbers] to [be] sent to Jo [please]. Chat signing time [later].”

30.  TP-HK believed that the Defendants had those documents in their possession, custody or power but did not disclosed them.  TP-HK argued that those documents are relevant to the issues in the proceedings including the recruitment sergeant claim and the conspiracy claim as they may show the flow of financial information, including confidential and proprietary information of TP-HK, between BGC-Capital and the Defendants, which is relevant to the degree of coordination between   BGC-Capital and the Defendants, and between the Defendants themselves in respect of their decision to resign en masse and join BGC-Capital. I agree and order their disclosure. 

31.  Item (E) are documents relating to business plans and revenue figures submitted by the Defendants to BGC.  Kelly argued that TP-HK expected those documents to be available and in the possession, custody and power of the Defendants because in view of the extraordinarily large incentives offered by BGC-Capital to the Defendants it was highly unlikely that BGC-Capital would have hired seven employees from the same desk of TP-HK without some indication regarding the profitability of that desk and the business plans those employees had for BGC-Capital. TP-HK argued that such business plans and revenue figures are relevant to the issues in the proceedings, including both the recruitment sergeant claim and conspiracy claim.

32.  The 1^st Defendant’s response was that neither he nor any of the Defendants had submitted business plans or revenue figures to BGC-Capital in advance of their departure from TP-HK on 20 March 2009.  Mr Chua SC submitted that this half-hearted answer suggested that such plans had been submitted after the Defendants’ joining BGC-Capital. 

33.  It was not entirely clear from the request or from Kelly’s affidavit whose business plans and revenue figures were being sought by TP-HK.  The 1^st Defendant assumed that TP-HK was seeking discovery of the business plan the Defendants proposed to BGC-Capital in the course of negotiating their remuneration package.  In view of the ambiguity, the misunderstanding was not unreasonable and the 1^st Defendant’s reply was not half-hearted.  It is now confirmed by counsel that what were being sought were documents relating to TP-HK’s business plans and revenue figures submitted to BGC-Capital at any time and not business proposals prepared by the Defendants for BGC-Capital.  TP-HK knew that such documents existed.  They are clearly relevant and should be discovered.   If the Defendants had not supplied them to BGC-Capital, they shall file   an affidavit to verify the same.

Conclusion

34.  In summary, in respect of the Plaintiff’s summons for discovery against the Defendants, I order discovery of all the items in the Schedule as amended by including employer’s returns under item (G).  If the Defendants do not have possession, custody or power over any of the documents under item (E), they shall file a verifying affidavit.  Costs of this application be in the cause. 

THE DEFENDANTS’ APPLICATION FOR DISCOVERY AGAINST THE PLAINTIFF

The Defendants’ defence and issues to be litigated

35.  The same legal principles apply to the Defendants’ application for discovery as to the Plaintiff’s.  The Defendants’ discovery is focussed at the quantum of damages claimed by TP-HK.  In essence, TP-HK assessed its loss by using figures extracted from its management accounts for the years ending December 2008 and December 2009 which have received an unqualified opinion from TP-HK’s auditors.  It calculated the difference in the gross brokerage revenues for the twelve months to March 2010 after the Defendants’ resignation compared to the twelve months to February 2009, excluding the month of March 2009 which TP-HK considered as non-topical as that was the month of the Defendants’ resignation.  From the gross brokerage revenues, TP-HK assessed the NDF Desk’s profit contribution to TP-HK’s profit by deducting various items     of costs such as staff costs, bonus, travel and entertainment costs, communications and information systems costs and other direct costs.   TP-HK claimed a reduction of gross brokerage revenues and contribution of GBP4,017,500 and GBP2,157,500 respectively.  Alternatively, from the same figures, TP-HK assessed its loss in net revenue in the twelve months following the Defendants’ resignation as GBP1,944,900.  

36.  The Defendants disputed the methodology and the appropriateness of using management accounts as the basis for assessments.  In addition, they disputed the simple approach adopted by TP-HK for two reasons.  Firstly, the 1^st Defendant argued that the NDF Desk was differently constituted shortly after their resignation.  Part of the business was transferred to TP-SG and a new product in New Taiwanese Dollar was introduced. Secondly, he argued that there was a downturn in 2009 which contributed to the reduction in the revenues of TP-HK’s NDF Desk.  The discovery sought is to enable the reduction in TP-HK’s revenues caused by the extraneous factors unrelated to the Defendants’ breach and the transfer of trades to TP-SG to be properly discounted.

37.  Mr Coleman SC quoted Lonmar Global Risks Limited and Barrie West and Others [2010] EWHC 2878 (QB) and submitted that quantum should be calculated “bottom up” instead of “top down” basis.  For the present purpose, I do not think it necessary to consider the methodology which I shall leave to the quantum experts.  I shall focus on the relevant data to be used for the assessment.  

Documents sought by the Defendants

38.  The following documents are sought by the Defendants under Part A of the Schedule annexed to their summons:

1.   Documentation for the period of twelve months before and six months after 20 March 2009 showing:

1.1   average daily trade count, calculated monthly per broker, and on a bank by bank basis for TP-HK’s and TP-SG’s NDF Desks;

1.2   average revenue per trade, calculated monthly per broker, and on a bank by bank basis for TP-HK’s and TP-SG’s NDF Desks; and

1.3   average notional amount per trade, calculated monthly per broker, and on a bank by bank basis for TP-HK’s and   TP-SG’s NDF Desks.

2.   Documents evidencing the remuneration (including bonuses and commissions) received by staff of TP-HK’s and TP-SG’s NDF Desks for the period of six months following 20 March 2009.

3.   Documents evidencing any costs associated with the hire of staff as replacements for the Defendants.

4.   Documents evidencing TP-HK’s overheads including but not limited to the staff costs and also office overhead costs and support staff provided per broker, including:

·   staff costs including any forgivable loans or sign-on bonuses;

·   allowances;

·   social security, taxes and MPF contributions;

·   travel and entertainment expenses, communications costs and other allocated costs;

·   any other overheads which TP-HK takes into account in determining its net profit.

5.   Unredacted version of email from Buchan to Dennahy at 4:55 pm on 9 February 2009.

6.   Unredacted version of all other redacted material where obscured material relates to the  TP-HK’s revenue or profit (actual or projected).

7.   All documents relating to the “combined SG desk scenario” referred to in the email from Buchan to Dennahy at 5:39 pm on 17 March 2009.

8.   All internally and externally directed advisory material and guidance (including filings with Listing Authorities) produced by TP-HK between January 2008 and September 2009 (inclusive) relating to or reflective of market conditions for NDF or Emerging Markets Foreign Exchange business.  

39.  I begin with item 7.  The Defendants’ case is that soon after their resignation, the trades with Singaporean banks which were formerly handled by the NDF Desk of TP-HK were transferred to the NDF Desk     of TP-SG.  Hence, the quantum presented by a straight comparison of     the gross brokerage revenues of TP-HK’s NDF Desk before and after their resignation will be distorted.  They referred to Buchan’s email to Dennahy dated 17 March 2009 in which Buchan suggested a model which would generate higher operational profit over both the original TP-HK’s NDF Desk and the “combined SG desk scenario”.  In Kelly’s 3^rd affidavit filed in opposition to this discovery, Kelly did not deny there was a combined scenario with the NDF Desk of TP-SG but disputed relevance and necessity.  Neither did he explain what the combined SG desk scenario was.  Having regard to the Defendants’ case, I find the documents sought existed and relevant and that TP-HK failed to show they are unnecessary. Item 7 should be discovered. 

40.  I next consider item 8.  Another aspect of the Defendants’ defence on quantum is that the year 2008 was an uncharacteristically busy year, whereas the year 2009 was uncharacteristically flat.  Hence, they argued that the straight comparison suggested by TP-HK would yield a distorted result and that the reduction in business of TP-HK’s NDF Desk was at least in part caused by extraneous factors for which the Defendants should not be liable. They referred to Dennahy’s commentary about the market condition in 2009 in Asia Risk magazine in support of their request for discovery.  TP-HK objected to this discovery as being too wide and vague.  Documents such as articles, commentaries would fall within this category.  Besides, much of what was said in those documents is likely to be opinion than facts.  As submitted by Mr Chua SC, TP-HK’s advice as to market trends was often highly speculative and in any event was an assessment of hypothetical future scenarios, often with multiple scenarios.  More importantly is that such speculation may turn out to be untrue.  Such documents requested are too wide, too vague, irrelevant and unnecessary.  This request must be refused.  There is nothing to prevent the Defendants from obtaining data from independent and credible source in support of a decline in foreign exchange trade in 2009 to justify an adjustment in the quantum suggested by TP-HK. 

41.  Under item 1, the Defendants sought documents containing transaction records of TP-HK’s NDF Desk for a period of eighteen months.  TP-HK objected on the basis that some of the documents sought do        not exist; are not relevant or necessary; and that some categories are       too wide and confidential.  TP-HK’s concern and objection could well     be understood. 

42.  According to the 1^st Defendant, during his time as head of the NDF Desk in TP-HK he had received performance reports containing break down by currency and broker of the desk’s performance. He was also aware that the information about client’s trade was available in respect of his bank clients and that the information was recorded in a pivot table on Excel spreadsheet.  In my view, it would be extraordinary if a broking company does not keep such record for the purpose of monitoring the performance of any of its brokers or the entire team.  I also have no reason to doubt the 1^st Defendant’s evidence.  TP-HK did not positively assert that such information did not exist.  TP-HK asserted that such documents were not prepared in the ordinary course of its business and therefore do not exist.  That may well be so.  However, I have no doubt, at least, that      TP-HK had the information stored as electronic data, though not necessarily in the form of hard copies.  It is trite that documents include data capable of being disclosed in electronic or hard copy form.  What is said above does not apply to information on average revenue per trade which the 1^st Defendant had not mentioned. 

43.  Premised on the existence of a slump in 2009, the Defendants requested documents relating to the average daily trade count, average revenue per trade and average notional amount per trade from TP-HK and TP-SG for a period of eighteen months.  The 1^st Defendant asserted that the monthly trend for trade count and monthly trend for notional amount alongside one another but not on its own will enable an analysis of whether, over time, the principal amount of currency in issue on individual trades and the notional amount of individual trades increased or decreased.  This is relevant to demonstrating the existence or otherwise of the 2009 slump.  He also asserted that in a difficult or new market the commission rate    will generally be reduced.  Hence the average revenue per trade is also reflective if there was a slump in 2009.  To the above extent, I have no difficulties in accepting relevance of the information sought in respect of TP-HK and TP-SG.

44.  However, I fail to see the purpose and utility in breaking down the information as required by the Defendants on a per broker and bank   by bank basis.  Such an exercise would clearly result in significant costs being incurred by all the parties.  Such information would only give the Defendants further and unnecessary insight into TP-HK’s and TP-SG’s business.  The 1^st Defendant argued that comparison of the bank by bank breakdown before and after their resignation will show how much of     TP-HK’s trades derived from trades involving Singaporean banks had been lost as a result of the Defendants’ employment with BGC-Capital.  That is very speculative because there may be other contributing factors for the difference, including as what the Defendants alleged, the 2009 slump.  If the Defendants feel that the loss of business as shown by the information provided by TP-HK is excessive, they may produce their own information as to the amount of trades they had brought with them to BGC-Capital     or cause BGC-Capital to produce the same.  Then, it will be up to TP-HK to adduce, if it sees fit, the bank by bank breakdown.  Indeed, as an alternative means of assessing quantum, TP-HK has sought non-party discovery against BGC-Capital’s management accounts and profit and loss accounts in respect of the trades conducted by the Defendants.  At this stage, I consider the breakdown sought by the Defendants is unnecessary and even vexatious.  Accordingly, I order discovery of the documents in item 1, save that all reference therein to “per broker, and on a bank by bank basis” shall be deleted.  If the information, not documents, mentioned in item 1.2 do not exist, TP-HK shall file an affidavit verifying the same.

45.  Under item 2, the Defendants sought documents evidencing the remuneration received by staff of TP-HK’s NDF Desk and TP-SG’s NDF Desk for the six months following 20 March 2009.  TP-HK objected on the basis that such costs had been disclosed in the summary management account already discovered by TP-HK with break down on a month-by-month basis and that such information was not challenged by the Defendants.  Under item 4, the Defendants sought documents evidencing TP-HK’s overheads including but not limited to staff costs and office overhead costs.  Staff costs include forgivable loans or sign-on bonuses and various other allowances.  It is immediately apparent that the meaning of the term “staff costs” and “overhead costs” as used by TP-HK and the Defendants overlapped.  “Staff costs” as disclosed in TP-HK’s summary management account did not cover some of the items of what the Defendants called “overhead costs”.  I consider item 2 and item 4 together. 

46.  TP-HK complained that discovery sought was too wide and vague.  TP-HK required discovery of documents relating to the Defendants’ terms of employment including forgivable loans and to be verified by tax filings.  It is only fair that TP-HK should discover the same in respect of its replacement staff if that form part of the costs of those staff.  I do not think the Defendants’ lack of challenge to the correctness of the summary management account is a bar to discovery.

47.  The Defendants also sought discovery of similar documents in respect of the staff of TP-SG’s NDF Desk.  TP-HK considered the trades by TP-SG irrelevant and made no claim for the costs of the staff of        TP-SG’s NDF Desk.  If the Defendants are right in that TP-HK transferred its Singaporean trades to TP-SG under the combined SG scenario, then   the profits and staff costs of TP-SG’s NDF Desk are also relevant.  That would necessitate a new line of inquiry into the affairs of possibly another non-party.  Such discovery would be out of all proportion with the issues in this case.  Such inquiry could easily be avoided by simply assessing the amount of Singaporean trades transferred to TP-SG’s and discounting that from TP-HK’s loss of gross revenue.

48.  The remaining documents sought under item 4 are documents relating to office overhead costs.  The office overhead costs of TP-HK’s NDF Desk was a predetermined fixed figure which the 1^st Defendant had agreed to when he was the desk head with TP-HK.  The overhead costs have no effect and are irrelevant to the assessment of TP-HK’s loss.

49.  Thus, in respect of items 2 and 4, I order disclosure of documents relating to the terms of employment of the staff of TP-HK’s NDF Desk for six months following 20 March 2009, including where relevant, documents relating to any forgivable loans and sign-on bonuses and documents and records relating to the tax filings submitted by TP-HK in respect of those replacement employees for the Defendants. 

50.  Under item 3, the Defendants sought discovery of documents evidencing any costs associated with the hire of replacement staff for the Defendants.  TP-HK’s reply was that the information was disclosed in exhibit PCEB-1 to Bullock’s affidavit.  I have viewed the affidavit.  What was disclosed was the salary and not the recruitment costs of those staff.  The Defendants’ concern was that TP-HK was trying to pass onto them as damages the start up costs of its New Taiwanese Dollar product.  I would have considered the cost of and revenue from this new product irrelevant to TP-HK’s claim for damages. This is a new operation.  The Defendants should not have the benefit of this new operation as if it were part of       TP-HK’s mitigation efforts. Likewise, they should not be liable for       any additional loss caused by TP-HK’s new misadventure.  Thus, unless      TP-HK is not going to include the cost of and revenue from this new product in its claim for damages, the documents have to be discovered.

51.  Under items 5 and 6, the Defendants sought unredacted version of an email from Buchan to Dennahy at 4:55 pm on 9 February 2009 and unredacted version of all other redacted material relating to     TP-HK’s revenue or profit, actual or projected.  The redacted material contained TP-HK’s projections of what the 1^st Defendant would earn for TP-HK under a new package offered to him.  The basis for discovery was that the 1^st Defendant questioned the correctness of the revenue generated by TP-HK’s new replacement business and omitted the business transferred to TP-SG.  TP-HK’s objection was that any projected profit figures bore no relevance to the quantum of damages where actual profit data were available.  I agree.  The materials disclosed as well as those to be disclosed would provide sufficient data for TP-HK’s actual loss of profit to be assessed.  Projections were but opinions and not facts.  They are speculative and irrelevant.  The discovery sought is not necessary for fairly disposing of the action.  Discovery sought under items 5 and 6 are refused.

“Confidentiality Club”

52.  Under the terms of the Defendants’ employment contracts with BGC-Capital, BGC-Capital will indemnify the Defendants against TP-HK’s claim for breach of contract and costs of the legal proceedings. Hence, the Defendants sought TP-HK’s agreement to distribute TP-HK’s discovered documents to members of a “Confidentiality Club” comprising of members of the top management of BGC to enable their decisions to be made as to the conduct of these proceedings.

53.  TP-HK strongly objected to the proposal. Mr Chua SC submitted that the Defendants and BGC have provided no compelling basis to support any entitlement by BGC as a non-party to see the documents sought. Secondly, he submitted that the arrangement would amount to    an outright breach of the implied undertaking by a disclosee not to use    the disclosed documents for any purpose other than for this action.   Thirdly, he argued that BGC is a notorious competitor of Tullett Prebon   in Hong Kong and internationally. 

54.  I am in total agreement with Mr Chua SC’s submissions.  The fact that BGC-Capital had given the Defendants an indemnity does not entitle it to have access the confidential information disclosed in a litigation to which it is not a party.  When it engaged in such conduct as mass recruitment of employees from its trade competitor, whether lawfully or otherwise, it must be within its contemplation that TP-HK will take legal action against the Defendants.  That must be the reason why       BGC-Capital and the Defendants made the indemnity a term of their contract.  When BGC gave the indemnity, it must have anticipated that     in the event of a litigation being brought against the Defendants, it may  not necessarily be made a party, may not have access to confidential information disclosed in the action and thus may not actively participate in the litigation.  It will have to leave the litigation in the hands of the Defendants and their legal team.  Its role is to finance the litigation and to pay damages should the Defendants lose.

55.  Even if it were a term of the indemnity or their contracts of employment that the Defendants shall give BGC-Capital access to the documents disclosed, it may not be binding on the Defendants and such terms will not be enforced by the court.  Litigants have an implied obligation not to disclose documents obtained in discovery or pursuant to other coercive power of the court: QPSX Ltd v Ericsson Australia Pty Ltd (No. 3) (2005) ALR 1. If this obligation conflicts with express term of the indemnity or their contracts of employment, their duty owe to court as litigants prevails.  In order that justice may be done, litigants must be free to present their case as fully as possible and without fear that confidential information produced by them will be used outside the courtroom by their competitors against them.  This interest must be protected.  Such express term of contract which jeopardises this interest must be struck out as   being void for illegality or contrary to public policy.  There can be no room for any similar term to be implied.  It is unnecessary and any such term implied would be void.

56.  BGC is a known and obvious competitor of TP-HK. The discovered documents may contain commercially sensitive information.  As BGC-Capital is not a party to the proceedings, there is absolutely no basis for it to be given access to the documents discovered in the course of this litigation, particularly those containing confidential information.  The Defendants’ suggestion of “Confidentiality Club” is simply ridiculous. Furthermore, I agree with Mr Chua SC’s submission that I should adopt the confidential access regime adopted by the Federal Court of Australia in ICAP Australia Pty Limited v BGC Partners (Australia) Pty Limited [2007] FCA 467.  The disclose I order shall be on those terms.

57.  In Part B of the Schedule, the Defendants sought an affidavit from TP-HK:

1.   verifying TP-HK’s further and better list of documents;

2.   explaining the confusion inherent in Dennahy’s witness statement referring to “text messages between Dennahy and the 1^st Defendant sent on 20 March 2009 at 16:10 and 16:32;

3.   explaining the steps taken by TP-HK to gather in all SMS messages initiated or received specified members of its staff; and

4.   confirming that all remaining redacted parts of TP-HK’s discovery are irrelevant to the facts and matters in these proceedings.

58.  The Defendants’ application for verifying affidavit is made under Order 24 rule 7 of RHC.  There is no jurisdiction to make such an order unless: (a) there is sufficient evidence that the documents exist which the other party has not disclosed; (b) the documents relate to matters in issue in the action; and (c) there is sufficient evidence that the documents are in the possession, custody or power of the other party.  The Defendants have not established the legal basis for the exercise of such jurisdiction.

59.  Specifically, the explanation sought under item (B)(2) is at the highest a matter for submission and cross examination at trial; and the explanation and confirmation sought under items (B)(3) and (B)(4) are outside Order 24 rule 7 of RHC.

Conclusion

60.  Discovery of the following items under Part A of the Schedule is ordered: item (1) as amended by deleting all references to “per broker, and on a bank by bank basis”; items (2) and (3); item (4) only as regards staff costs; and item (7).  TP-HK shall file a verifying affidavit in respect of documents ordered to be discovered which it does not have.  The Defendants’ application for a verifying affidavit by TP-HK under Part B  of the Schedule is refused.  Costs of the Defendants’ application be in the cause.

THE PLAINTIFF’S APPLICATION FOR NON-PARTY DISCOVERY AGAINST BGC

61.  On its face, TP-HK’s summons did not actually seek disclosure of documents but merely information as to which documents BGC-Capital has.  That was an obvious oversight on the part of its solicitors.  Ms Ismail did not take issue with that and very properly agreed to deal with the summons as if it were seeking discovery of documents without requiring amendments to be made.  The application proceeded on that basis.

Legal principles on non-party discovery

62.  Counsel differed on the legal principles applicable to discovery against non-party.  Mr Chua SC submitted that the principles  are similar to those on specific discovery against parties to an action.  He referred to Order 24 rule 7A(3)(b) of RHC and argued that the court’s power to order a non-party to produce relevant documents is unfettered.    If the documents meet the criteria of relevance and necessity and are sufficiently identified, discovery ought to be ordered.    

63.  Ms Ismail submitted that the principles are more restrictive for non-party discovery than for parties to the proceedings.  Her submission was that section 42(1) of HCO gives the court power to order disclosure and production of documents “in such circumstances as may be specified in the rules”.  The relevant rule is Order 24 rule 7A of RHC.  This approach could not be faulted. 

64.  Ms Ismail placed special emphasis on rule 7A(6)(b) of RHC.  She submitted that if the following threshold requirements are met, the court has discretion under section 42 of the HCO to make an order under Order 24 rule 7A of RHC:

(1)   the non-party must be likely to have the documents in his possession, custody or power: section 42(1) and Order 24 rule 7A(3)(b);

(2)   the documents sought must be relevant to an issue arising or likely to arise in the proceedings: section 42(1) and Order 24 rule 7A(3)(b);

(3)   the order must be necessary either for disposing fairly of the matter or saving costs: Order 24 rule 8(2); and

(4)   the non-party would be compelled to produce the documents under a subpoena duces tecum: Order 24 rule 7A(6).

65.  Counsel had no disagreement as to the first three requirements.  Ms Ismail agreed, subject to her submission in respect of the fourth requirement, that the initial test of relevance is the Peruvian Guano test.  The principle that disclosure must be necessary for disposing fairly of the matter or saving costs was not in dispute.  Counsel’s dispute was whether on the fact discovery was necessary. 

66.  The focal point of dispute between Mr Chua SC and Ms Ismail is the fourth requirement: whether the document to be discovered has to be one which a witness would be compelled to produce at trial  under a subpoena duces tecum.  In general, except for special cases such  as Norwich Pharmacal Co v Customs and Excise Commissioners [1974]    AC 133, discovery is obtainable only from parties to the action.  In the normal way, parties are compelled to produce for inspection all their documents relating to matters in issue in the action.  The test of relevance is the reasonably wide Peruvian Guano test.  Non-parties are not subject to such a wide and far-reaching obligation.  But they may be compelled by a subpoena duces tecum to attend court at trial to produce documents.  However, the non-party’s obligation to produce documents is not as onerous as that of parties to the litigation.  The purpose of a subpoena duces tecum is not to require the non-party to produce documents just because they may be useful for the purpose of corroborating or challenging a witness, or because they may lead to a train of inquiry which may result in the discovery of evidence or may, in some other way, advance one party’s case or damage the other’s.  Nor is the witness required to undertake an unfairly burdensome search through his records to find documents or to see if he has any documents relating to a particular subject matter: Panayiotou and Others v Sony Music Entertainment (UK) Ltd [1994] Ch 142.  Thus, the subpoena duces tecum requirement is a stricter test than the Peruvian Guano test.

67.  The thrust of Ms Ismail’s argument was that the subpoena duces tecum requirement is expressly required under Order 24 rule 7A(6)(b). She compared section 42(1) of HCO and Order 24 rule 7A of RHC with section 34(2) of the Supreme Court Act 1981 and Order 24   rule 7A of RSC in the UK applicable to non-party discovery in personal injury actions, before the introduction of the Civil Procedure Rules (“CPR”).  She submitted that those provisions are substantially similar.  My immediate observation is that under RSC in the UK there was no provision equivalent to Order 24 rule 7A(3A) of our RHC.  I mention this distinction here as it is an important springboard in Mr Chua SC’s argument.

68.  Ms Ismail then submitted that Hong Kong adopted the pre-CPR position in the UK.  She also referred to the current UK position.  The post-CPR position in the UK is governed by section 34 of the Supreme Court Act 1981 and CPR 31.17.  Under CPR 31.17, there is no mention of the subpoena duces tecum requirement.  That, Ms Ismail submitted, explained the dicotomy between Hong Kong and the UK position.  She submitted that the pre-CPR authorities in the UK are apposite and that the court would only order discovery of a document against a non-party if satisfied that the document is one which the         non-party would be compelled to produce at trial, if served with a writ of subpoena duces tecum. 

69.  Ms Ismail relied heavily on the House of Lords decision in O’Sullivan and Herdmans Ltd [1987] 1 WLR 1047.  That was an appeal from the Court of Appeal in Northern Ireland in respect of a non-party discovery application based on the equivalent of the pre-CPR legislations in the UK.  So, Ms Ismail argued, the rationale of the House of Lords in that case is applicable to the present case.  In that case, the defendant in a personal injury action sought discovery against the  Southern Health and Social Services Board for certain medical records of the plaintiff.  After quoting section 32 of the Administration of Justice Act and Order 24 of the Rules of Supreme Court (Northern Ireland) which were equivalent to section 42(1) of our HCO and Order 24 of our RHC, Lord Mackay of Clashfern said at 1053:

“From these provisions applying in Northern Ireland it is clear that the documents which may be ordered to be produced under section 32 are restricted to those relevant to an issue arising out of a claim in respect of personal injuries or death and which the holder could be compelled to produce if he had been served with a writ of subpoena duces tecum to produce them at the trial. The provision of rule 6(6) on this point was obviously not brought to the attention of the Court of Appeal in the present case since they were a little less certain than Lord Diplock had been in McIvor v. Southern Health and Social Services Board [1978] 1 W.L.R. 757, 761; [1978] N.I. 1, 11 that discovery is confined under section 32 to "those documents of which production could ultimately be obtained at the trial on subpoena duces tecum."

(Counsel’s emphasis underlined)

From the dictum underlined above, Ms Ismail argued that this is a categoric statement from the House of Lords that only documents meeting the subpoena duces tecum requirement have to be disclosed in a non-party discovery. 

70.  I think, for completeness, I should also refer to Lord Diplock’s dictum in McIvor v. Southern Health and Social Services Board [1978] 1 WLR 757 mentioned by Lord Mackay of Clashfern.  Lord Diplock said at 76:

“I must confess that I do not find these arguments to be of general applicability or convincing. The disclosure called for by the section is narrower than that provided for by the ordinary discovery of documents as between the parties to an action, which includes disclosure of all documents which may fairly lead to a train of inquiry which may have the consequences of advancing a party's case or damaging that of his adversary. Discovery under section 32 of the Act of 1970 is limited to documents relevant to “an issue arising out of the claim in the action” and thus is confined to those documents of which production could ultimately be obtained at the trial on subpoena duces tecum.”

(My emphasis underlined)

71.  Mr Chua SC disagreed with Ms Ismail’s argument. He submitted that the subpoena duces tecum requirement is only relevant to the non-party’s claim for privilege and is inapplicable to the issue of relevance.  He argued that the test for relevance is the Peruvian Guano test and that test remained good law, quoting Burrell J’s dictum in Mariner International Hotels Limited And Atlas Limited & Another.  He said that Ms Ismail could not ride two horses at the same time.  He emphasised the significance of the absence in the RSC of the equivalent of our Order 24 rule 7A(3A) of RHC.

72.  I think Order 24 rule 7A of RHC must be read as a whole and the discovery regime must also be viewed as a whole.  Under the Hong Kong non-party discovery regime, section 41 and section 42 of HCO   draw a distinction between pre-action discovery and discovery after commencement of action.  Section 41(1) gives the Court of First Instance jurisdiction, upon the application of a person who appears to be likely to be a party to some future proceedings, to order another likely party to those future proceedings to produce documents which are directly relevant to an issue arising or likely to arise out of that claim.  Section 41(2) provides that a document is directly relevant if it would be likely to be relied on in evidence by any party in the proceedings or supports or adversely affects any party’s case.  Once proceedings commenced, a likely party becomes a party and the court’s power to order discovery is enlarged.  Section 42 gives the Court of First Instance power to order production by a non-party of documents which are relevant, not just directly relevant, to an issue arising out of that claim.

73.  This is where Mr Chua SC’s argument based on paragraph (3A) of Order 24 rule 7A of RHC is apposite.  It would be convenient to quote rule 7A in full here:

“7A. Application under section 41 or 42(1) of the Ordinance

(1)   An application for an order under section 41 of the Ordinance for the disclosure of documents before the commencement of proceedings shall be made by originating summons (in Form No. 10 in Appendix A) and the person against whom the order is sought shall be made defendant to the summons.

(2)   An application after the commencement of proceedings for an order under section 42(1) of the Ordinance for the disclosure of documents by a person who is not a party to the proceedings shall be made by summons, which must be served on that person personally and on every party to the proceedings other than the applicant.

(3)   A summons under paragraph (1) or (2) shall be supported by an affidavit which must—

(a)   in the case of a summons under paragraph (1), state the grounds on which it is alleged that the applicant and the person against whom the order is sought are likely to be parties to subsequent proceedings in the Court of First Instance;

(b)   in any case, specify or describe the documents in respect of which the order is sought and show, if practicable by reference to any pleading served or intended to be served in the proceedings, that the documents are relevant to an issue arising or likely to arise in the proceedings and that the person against whom the order is sought is likely to have or have had them in his possession, custody or power.

(3A)   In the case of a summons under paragraph (1), paragraph (3)(b) shall be construed as if for the word "relevant", there were substituted the words "directly relevant (within the meaning of section 41 of the Ordinance)".

(4)   A copy of the supporting affidavit shall be served with the summons on every person on whom the summons is required to be served.

(5)   An order under section 41 or 42(1) for the disclosure of documents may be made conditional on the applicant's giving security for the costs of the person against whom it is made or on such other terms, if any, as the Court thinks just, and shall require the person against whom the order is made to make an affidavit stating whether any documents specified or described in the order are, or at any time have been, in his possession, custody or power and, if not then in his possession, custody or power, when he parted with them and what has become of them.

(6)   No person shall be compelled by virtue of such an order to produce any documents which he could not be compelled to produce—

(a)   in the case of a summons under paragraph (1),  if the subsequent proceedings had already been begun; or

(b)   in the case of a summons under paragraph (2),  if he had been served with a writ of subpoena duces tecum to produce the documents at the trial.”

74.  Order 24 rule 7A(3A) provides that in the case of an application under paragraph (1) of the rule, i.e. pre-action discovery, the word “relevant” in paragraph (3)(b) of the rule applicable to the affidavit in support of the application shall be construed as “directly relevant” within the meaning of section 41 of HCO.  This paragraph therefore limits the scope of documents of which pre-action discovery against a non-party may be sought to those which are directly relevant within the meaning     of section 41(2) of HCO.  As section 42 which governs discovery after commencement of action is not subject to paragraph (3A), post-commencement discovery remains subject to the Peruvian Guano test.  The distinction lies in pre-action and post-commencement discovery rather than inter-party and non-party discovery.

75.  Order 24 of RSC of Northern Ireland did not contain any provision which was equivalent to our Order 24 rule 7A(3A) of RHC.  The discovery regime in Northern Ireland then was not the same as ours.  The House of Lords decision in O’Sullivan and Herdmans Ltd can readily be explained and distinguished on that basis.

76.  In the light of the above analysis and with O’Sullivan and Herdmans Ltd out of the way, paragraph (6) of rule 7A could only be construed as preserving the document holder’s right to privilege.  As the learned authors of Hong Kong Civil Procedure 2011 said in paragraph 24/7A/7:

“The object of paragraph (6) is to enable a claim for privilege from production to be made in the same way and to the same extent in relation to discovery of documents before action as after action and in relation to discovery of documents by a person not a party to pending proceedings as on a subpoena duces tecum served on him to attend to produce the documents at the trial.”

Paragraph (6) could not be construed as Ms Ismail attempted to persuade me as imposing an additional requirement for non-party discovery.  Her suggested approach is inconsistent with the more released approach to discovery generally after the CJR.  The test of relevance for inter-party and non-party discovery is the same Peruvian Guano test.  In my view, it is only in the case of pre-action discovery that the more stringent direct relevance test or subpoena duces tecum requirement is applicable.

77.  I now move onto Ms Ismail’s argument about identification of documents or class of documents to be disclosed and that all documents in the class must be relevant.  In her argument premised on the subpoena duces tecum requirement, Ms Ismail referred to the Court of Appeal decision in To Kan Chi & Ors v Pui Man Yau & Ors [1998] 3 HKC 371   as authority for the following propositions:

(1)   disclosure orders against third parties are exceptional;

(2)   a subpoena should not be used as a fishing exercise for documents nor speculative;

(3)   a subpoena should not be oppressive to the witness, e.g. by the terms being too wide; and

(4)   a subpoena must identify the documents required by means of a particular description, not a general description.

Mr Chua SC had no dispute with the first three of these propositions but disagreed with the fourth proposition. 

78.  Ms Ismail argued, quoting Panayiotou and Others v Sony Music Entertainment (UK) Limited that although documents requested by  a subpoena may be described compendiously, the request must be confined to particular documents so that if one document of the class is not relevant, the court has no jurisdiction to order production of the class of documents.  Mr Coleman SC supported Ms Ismail’s argument.  They were of the opinion that a party seeking discovery of a class of documents must show not only that some, but each and every, documents within that class are relevant. On the other hand, Mr Chua SC submitted that there are decisions both ways, quoting Three Rivers District Council and others v Bank of England (No. 4) [2003] 1 WLR 210.  Mr Chua SC and Ms Ismail referred to different passages of Three Rivers District Council in support of their different propositions.

79.  To Kan Chi was a case about subpoena duces tecum.  Three Rivers District Council was about non-party discovery under the CPR.  But this is not the reason for reconciling or distinguishing the two cases.  It is common ground and there are plenty of authorities in support of the      first three propositions being applicable to both subpoena duces tecum   and non-party discovery procedures.  The fourth proposition is about identification of the document or class of documents to be produced by a witness under a subpoena duces tecum.  It is just common sense that a party summonsing a witness to attend court to produce documents must clearly identify the documents required to be produced.  There are similar requirements under Order 24 rule 7A(3)(b) of RHC in respect of inter-party as well as non-party disclosure.  Sub-paragraph (3)(b) refers to two requirements: firstly, specification or description of the documents and secondly, showing relevance.  The first requirement is clearly about identification.  That raises the question whether it is permissible in an affidavit in support of discovery to describe the documents required with a class description.  In my view, it clearly is permissible, at least insofar as discovery under Order 7A is concerned.  There are plenty of authorities in support of this proposition, including Three Rivers District Council. The second requirement is relevance.  Relevance is relevance.  The test is Peruvian Guano test.  It is out of these two propositions that Ms Ismail  and with her Mr Coleman SC advanced a third proposition that the court has no power to make an order in respect of a class of documents where some of the documents in the class were not relevant to any issue in the proceedings.  Mr Chua SC’s reply was that there were authorities going   in either direction. 

80.  In Three Rivers District Council, objection was raised on appeal that Tomlinson J erred in failing to appreciate that the test under CPR 31.17 that “likely to support … or adversely affect” had to be applied to each individual document or (if the documents were to be described     as a class) to each document in the class.  This is precisely the same proposition as raised by Ms Ismail.  Mr Chua SC relied on the following dicta of Chadwick LJ at 220, paragraphs 17 and 18:

“17. It is plain that an application for an order for disclosure under rule 31.17 must be supported by evidence—paragraph (2) so provides. And it is plain that there was, at the least, formal compliance with that requirement—see paragraph 3(a) of the witness statement (his fourth) made by Mr Christopher Grierson, a partner in Lovells (the claimants' solicitors), on 8 March 2002. It is plain, also, from paragraphs 6, 13 and 14, and 48 of that witness statement, that the claimants were relying on the Bingham report and its appendices. The judge appreciated that. He said at paragraph 64 of his judgment:

“The claimants accept that they could go away and devise long and detailed targeted requests for documents and passages in transcripts of evidence based upon references thereto in the report or based on references to meetings likely to have generated memoranda or references to the evidence of those who are identified as having given it to the inquiry.  They submit however that that exercise would be extremely time-consuming and costly and it is, they submit, unnecessary.”

The judge accepted that submission when he said, in the passage which we have set out earlier in this judgment that, in the very unusual circumstances of this case, the claimants were not required to demonstrate precisely how each and every document or class of documents of which they sought disclosure would support their case or damage that of the Bank.

18. In our view, the judge was entitled to approach the matter on that basis.  …”

With respect, I do not think the above passage supports Mr Chua SC’s argument.  I think Chadwick LJ was dealing with the formal requirement under CPR 31.17, i.e. the adequacy of the supporting affidavit in demonstrating how each document sought would support the claimants’ case or damage the opponent’s.  Chadwick LJ agreed that under the very unusual circumstances of that case the formal requirement may be relaxed.  The very unusual circumstances were that the documents or class of documents of which the claimants sought disclosure from the archive  were so numerous and given the nature of the archive to require the claimants to eliminate the possibility that the documents of which they sought disclosure might include some which on inspection had no probative value would render the entire exercise pointless, time-consuming and expensive.  It was under those very unusual circumstances that the claimants were relieved of the burden of demonstrating in their affidavit precisely how each and every document or class of documents of which they sought disclosure would support their case or damage that of their opponent.  The passage does not support the proposition that a non-party may be ordered to produce a class of documents some of which are relevant and some not. However, this case is a clear example that the court has power to order disclosure of documents under a class description.

81.  The proposition raised by Ms Ismail was considered by Chadwick LJ at pages 227 to 229, paragraphs 34 to 38.  His Lordship analysed at some depth an earlier decision of the Court of Appeal in American Home Products Corporation v Novartis Pharmaceuticals [2001] EWCA Civ 165 (unreported, 9 February 2001) in which that issue was addressed.  Chadwick LJ said: 

“Documents or classes of document

34. The second limb of the submission that the judge failed to direct himself correctly in relation to the threshold condition in rule 31.17(3)(a) is found in the criticism that he failed to appreciate that the test “likely to support ... or adversely affect” had to be applied to each individual document or, if the documents were to be described as a class, to each document in the class. It would be surprising if that criticism could be made good in the circumstances that the judge considered, at some length, the decision of this court in American Home Products Corpn v Novartis Pharmaceuticals UK Ltd [2001] FSR 784, in which the point was addressed, and directed himself in the light of that decision.

35. The application in the Novartis case was for an order under rule 31.17 that Fisons Ltd (who were not party to the proceedings) make disclosure of documents … [which were certain documents contained in a box]

The application was refused by Laddie J on the ground (amongst others) that it appeared from that evidence—and, in particular, from paragraph (3)—that it was clear that some of the documents in the box of which disclosure was sought were not relevant. He held, following the observations of Pumfrey J in In re Howglen Ltd [2001] 1 All ER 376, 382-383, that:

“If the order covers disclosure which, on any basis, includes material which is accepted to be irrelevant, then I do not think the court has power to make the order.”

36. Aldous LJ, with whose judgment Robert Walker LJ and Sir Anthony Evans agreed, accepted that the court had no power to make an order under rule 31.17 in respect of a class of documents if it were established that there were documents within the class that were not relevant to any issue in the proceedings—in the sense that they did not satisfy the threshold condition of “documents ... likely to support the case for the applicant or adversely affect the case of one of the other parties”. That, if we may say so, must be right. The rule gives no power to order a non-party to disclose documents which do not meet the threshold condition in sub-paragraph (a) of paragraph (3); and that cannot be circumvented by including documents which do not meet that threshold condition in a class which also includes documents which do meet that condition. In particular, the threshold condition cannot be circumvented by an order which puts upon the non-party the task of identifying those documents within a composite class which do, and those which do not, meet the condition: see Wakefield v Outhwaite [1990] 2 Lloyd’s Rep 157, 163-164 and Panayiotou v Sony Music Entertainment (UK) Ltd [1994] Ch 142, 151f.

37. Aldous LJ then turned to consider whether the documents sought by the applicant were relevant “in the sense that they meet the criteria laid down by rule 31.17”: see [2001] FSR 784, 794, para 32. He concluded, at p 794, para 33, that the evidence established that “the box contains relevant documents which the court has power to require to be disclosed”. He then addressed, and rejected, the submission that the box also contained documents that were not relevant. … [followed by Chadwick LJ’s analysis of Aldous LJ’s finding).

38. The judgments of this court in the Novartis case may be taken as authority for the following propositions. First, as we have said, (i) rule 31.17 gives no power to order a non-party to disclose documents which do not meet the threshold condition in sub-paragraph (a) of paragraph (3); and (ii) that cannot be circumvented by including documents which do not meet that threshold condition in a class which also includes documents which do meet that condition. Second, the test under the threshold condition is whether the document is likely to support the case for the applicant or adversely affect the case of one of the other parties. Third, when applying that test it has to be accepted, and is not material, that some documents which may then appear likely to support the case of the applicant or adversely affect the case of one of the other parties will turn out, in the event, not do so. Fourth, in applying the test to individual documents, it is necessary to have in mind that each document has to be read in context; so that a document which, considered in isolation, might appear not to satisfy the test, may do so if viewed as one of a class. Fifth, there is no objection to an order for disclosure of a class of documents provided that the court is satisfied that all the documents in the class do meet the threshold condition. In particular, if the court is satisfied that all the documents in the class, viewed individually and as members of the class, do meet that condition—in the sense that there are no documents within the class which cannot be said to be “likely to support ... or adversely affect”—then it is immaterial that some of the documents in the class will turn out, in the event, not to support the case of the applicant or adversely affect the case of one of the other parties.”

(My emphasis added)

82.  The principles applicable to discovery under CPR 31.17 were summarised by Chadwick LJ in paragraph 38 of Three Rivers District Council.  I read the word “and” in Chadwick LJ’s dicta in paragraph 38 disjunctively which, in its proper context, must be what his Lordship     had in mind.  Those principles are equally applicable to discovery under   Order 24 rule 7A of RHC subject to substituting the test under CPR 31.17 by the Peruvian Guano test.  To start with, the court has power to order a non-party to disclose relevant documents which meet the Peruvian Guano test but has no power to order disclosure of documents which do not.  That principle cannot be circumvented by including the relevant documents in    a class which also includes documents which do not meet the Peruvian Guano test.  Where disclosure of a class of documents is sought and if some documents of that class are shown to be irrelevant, it must necessarily follow that the class of documents sought to be disclosed    may not be relevant and ought not be disclosed.  The Court of Appeal in Novartis Pharmaceuticals clearly said that the court had no power to make an order under CPR 31.17 in respect of a class of documents if there were documents within the class that were not relevant.  This principle was emphatically affirmed by the Court of Appeal in Three Rivers District Council.  In my view, that principle is also applicable to non-party discovery under Order 24 rule 7A of RHC.

83.  That said, the test of relevance is, in a way, slightly relaxed if documents are sought to be discovered as a class.  In determining relevance of a document in a class of documents, each document must be read in the context as a member of the class of documents and not just in isolation.  A document considered as irrelevant when viewed individually may nevertheless be regarded as relevant if viewed as a member of the class of documents.  So long as each document thus read, individually      or as a member of the class, meet the Peruvian Guano test, then it is immaterial that some of the documents in the event do not support the case of the party seeking discovery or adversely affect the case of his opponent.  This is just the “may not must” point stressed by Brett LJ in the Peruvian Guano test.

84.  Thus, the principles distilled from Novartis Pharmaceuticals and Three Rivers District Council as applicable to non-party discovery under Order 24 rule 7A of RHC are: firstly, basically each document of     a class of documents sought to be discovered must be relevant in the Peruvian Guano sense; secondly, relevance is to be determined by viewing the documents individually or as a member of the class of documents;    and thirdly, provided that all the documents in the class of documents     are relevant, it is immaterial that some turn out in the event not to support the case of the applicant or adversely affect the case of his opponent.

85.  Another legal principle which should be borne in mind is that the power of the court in ordering disclosure is a discretionary one.  In SMSE v KL (No 2) HCMC 2 of 2006 Hartmann JA, sitting as an additional judge of the Court of First Instance, considered following factors when dismissing an application to set aside a subpoena duces tecum:

“63. … First, how important is the information to the issues? Second, has the applicant taken appropriate steps to obtain the information within the proceedings before seeking disclosure from the third party? Third, would it be sufficient for the court simply to draw adverse inferences on the basis that the party from whom the information was sought within the proceedings has failed to supply their information? Fourth, what is the nature of the relationship, if any, between the parties to the proceedings and the third party? Fifth, if disclosure is necessary and proportionate wheel [sic] the editing of documents protect private information?”

On appeal, Hartmann JA’s approach was approved by the Court of Appeal in [2009] 5 HKLRD 770 at 781.  I respectfully adopt the approach of Hartmann JA when considering the exercise of my discretion whether to order disclosure. 

86.  With the above principles in mind, I turn to consider the documents sought to be discovered by BGC-Capital.

The documents sought by TP-HK

87.  The documents sought by TP-HK against BGC-Capital are:

(A)   All communications passing between the Defendants and BGC-Capital or its agents/employees and documents relating to:

(i)   meetings and other discussions between the Defendants (or any of them) and/or BGC-Capital’s representatives regarding the proposed terms of the Defendants’ employment up to and including 20 March 2009;

(ii)   any offers of employment extended by BGC-Capital to the Defendants (or any of them) and any documents evidencing forgivable loans or indemnities given by BGC-Capital to the Defendants;

(iii)   the supply of the employment contracts between any of the Defendants with  TP-HK (or extracts thereof) to BGC-Capital or its representatives;

(iv)  any business plans prepared by the Defendants (or any of them) for TP-HK and submitted to BGC-Capital or its representatives; and

(v)   documentations relating to invoicing and fee payment arrangements including any letter of engagement issued by PM to BGC-Capital in respect of the Defendants’ resignation (or potential resignation) and/or subsequent employment with (or potential employment with) BGC-Capital.

(B)   BGC-Capital’s management accounts and profit and loss accounts in respect of the Defendants for the period from their commencement of employment with BGC-Capital until 31 May 2011.

88.  The circumstances leading to TP-HK’s application for non-party discovery are as follows.  On 15 April 2010, TP-HK informed the Defendants the discovery expected from them.  The Defendants served their list of documents on 13 May 2010 with documents apparently provided on 24 May 2010. On 21 June 2010, TP-HK informed the Defendants of its belief that their discovery was deficient, highlighting areas where further discovery was sought.  On the same date, TP-HK wrote to BGC stating its intention to seek non-party discovery and attaching a schedule of documents seeking most of the items initially sought from the Defendants.  The Defendants disputed their obligation to disclose what effectively was sought by TP-HK under item (A) of the Schedule.  Then TP-HK issued the summons for discovery against BGC.

89.  Broadly speaking, given the circumstances in which this action arose and the subject matter of TP-HK’s complaint, it is reasonable to expect that the classes of documents sought exist.  Except for a few specific documents, BGC-Capital did not expressly deny that the various classes of documents exist or are within their possession, custody or power.  Clearly, the documents sought relate to a matter in question in the action and discovery is necessary for disposing fairly of the cause or matter or  for saving costs.

90.  BGC-Capital’s general objections to discovery were that item (A) of the Schedule was clearly drafted in the manner of a general discovery request, without any specificity or identification of individual documents or specific groups of identified documents and failed to demonstrate how they are likely to materially assist in respect of a pleaded issue in the action.  The discovery is a fishing exercise which effectively stated that the non-party discovery was sought as the inter-parties discovery was inadequate. Specifically, as against the individual requests, the requests were too wide and oppressive and may cover documents which do not bear on TP-HK’s allegations.  I first deal with the general objections before turning to the specific objections in respect of the particular classes of documents.

91.  On the facts of the present case, the relationship of the parties to the proceedings with one another and with BGC-Capital is of particular importance.  TP-HK was the former employer of the Defendants who allegedly defected to BGC-Capital in a conspiracy to cause harm to       TP-HK. BGC-Capital admitted indemnifying the Defendants of all costs and damages if sued by TP-HK.  For all intents and purposes, BGC-Capital and the Defendants are on the same front.  Though neither BGC-Capital nor any member of BGC was made a defendant in the proceedings, on TP-HK’s pleaded case, BGC-Capital was a party to the conspiracy and was actively involved in procuring the Defendants’ breach of contract, etc.  The Defendants’ relationship with TP-HK and with BGC-Capital is the most important of the five factors identified by Hartmann JA in SMSE v KL   (No 2), which I shall take into consideration in the exercise of my discretion.  Hence, the fact that TP-HK made this application without first exhausting its efforts against the Defendants is not anything which weighs heavily against discovery.

92.  Ms Ismail complained that the discovery was of the nature of a general discovery requesting “all communication passing between the Defendants and BGC-Capital” and there was no attempt to identify individual documents.  Nevertheless, it is permissible to seek discovery of a class of documents.  In my view, the classes of documents have been adequately identified by reference to the subject matter referred to in the documents.  The time span within which the documents were created was short.  The discovery was not burdensome.

93.  Ms Ismail complained that the discovery was a fishing expedition and TP-HK failed to set out the basis how the documents sought would assist TP-HK’s case and damage the Defendants’. BGC-Capital was closely involved in the Defendants’ alleged breaches.  TP-HK’s case has been adequately pleaded.  Together with the supporting affidavits filed on behalf of TP-HK, I think TP-HK had adequately set out the basis how the documents sought would assist its case.  Ms Ismail also referred to the numerous instances when Kelly only said that the documents “may” be relevant. In my view, this case revolved within a very narrow compass.  TP-HK’s case has been clearly pleaded.  Though Kelly only used the word “may” in his affidavit in support of the application, “may” is all that is required under the Peruvian Guano test.  So long as the documents within the class meet this threshold requirement, the fact that some will not turn out to support TP-HK’s case or damage the Defendants’ is immaterial.  Taking a broad brush approach, I do not find any substance in this complaint, but I shall take a more critical look when considering the classes of documents individually.

94.  In respect of item (A)(i), Ms Ismail submitted that TP-HK failed to establish relevance and necessity.  She argued that TP-HK is no longer pursuing discovery of that class of documents from the Defendants except for those relating to the “revenue deal” which the Defendants contested as irrelevant.  That suggested that the Defendants had disclosed all the documents under item (A)(i).  Hence, the discovery sought against BGC-Capital is unnecessary and in any event TP-HK should have exhausted all steps against the Defendants before resorting to non-party discovery.

95.  I accept Kelly’s argument that the documents sought were relevant as discussions between the Defendants and BGC-Capital and within BGC-Capital itself may shed light on the conspiracy claim and recruitment sergeant claim.  Defendants’ SMS messages disclosed were incomplete and the Defendants admitted having deleted some of the messages.  Besides, there is no complete overlap with the discovery  sought from the Defendants as it is only to be expected that while the Defendants might not have kept record of all meetings and discussions with BGC-Capital, BGC-Capital being a large international financial services group might have kept record of such meetings and discussions.  As the Defendants’ discovery was incomplete, discovery against BGC-Capital is necessary.  As for the “revenue deal”, I have found it relevant and ordered discovery against the Defendants.  In view of the relationship between the Defendants and BGC-Capital, it would be convenient and cost saving to order BGC-Capital to produce the entire class than to order discovery of the class subject to certain exceptions as it is highly likely  that there is no complete overlap. 

96.  In respect of item (A)(ii), Ms Ismail argued that the Defendants are disputing relevance of those documents and TP-HK’s application for discovery of those documents is still pending.  She further argued that the indemnities were admitted and there was no need to   obtain documents to show whether such indemnities existed.  Hence, she submitted that the non-party discovery is unnecessary. 

97.  Though the indemnities were admitted, the terms and conditions of the indemnities are also relevant as they may shed light on the real purpose of the indemnities.  I have found the documents relevant and ordered their discovery against the Defendants.  The documents sought against the Defendants would be the same as those sought against       BGC-Capital.  Disclosure by BGC-Capital is unnecessary.

98.  Item (A)(iii) are documents relating to the supply of the Defendants’ employment contracts with TP-HK to BGC-Capital. TP-HK did not seek discovery of those documents from the Defendants.  Kelly asserted that the means by which the Defendants provided their employment contracts with TP-HK to BGC-Capital was relevant to the issue whether the Defendants left TP-HK as a team and, I should add, relevant to the recruitment sergeant claim as well.  However, there is just no basis for any belief that some of the Defendants forwarded their employment contracts to BGC-Capital through any of the Defendants.   The discovery sought is obviously fishing and must be disallowed.

99.  There was some misunderstanding as to what documents were sought under item (A)(iv).  That misunderstanding has now been cleared: see paragraphs 31 to 33 above.  The Defendants are ordered to provide documents relating to business plans and revenue figures of TP-HK submitted to BGC-Capital.  The discovery sought against BGC-Capital overlaps with that sought against the Defendants and is therefore unnecessary.

100.  Under item (A)(v), TP-HK sought documents relating to payment of the Defendants’ legal costs to PM by BGC-Capital in respect of the Defendants’ resignation and subsequent or potential employment with BGC-Capital, including PM’s letter of engagement.  The basis of   TP-HK’s application is that those documents are relevant to show the extent to which BGC-Capital was involved in sponsoring and coordinating the Defendants’ en masse resignation and hence the conspiracy claim and the recruitment sergeant claim.  In view of the indemnity arrangement between BGC-Capital and the Defendants, it is likely that BGC-Capital would have those documents and the Defendants would not.  Harvey      did not deny the existence of such documents but said obliquely that to his understanding there was no engagement letter entered into         between BGC-Capital and PM.  Usually, such documents would contain undertaking to pay legal costs.  That has been admitted by BGC-Capital and is not in issue.  It is not expected that such documents would reveal any evidence from which the inference of conspiracy may be drawn.      TP-HK has not demonstrated how those documents would be relevant.  The discovery sought is too wide and might even trespass into area of privilege.  Such discovery must be disallowed.

101.  Under item (B), TP-HK sought BGC-Capital’s management account and profit and loss accounts in respect of the trades conducted by the Defendants since the commencement of their employment with BGC-Capital until 31 May 2011.  Those documents are relevant to TP-HK’s claim for damages. TP-HK suggested two ways of assessing such damages: (a) the difference between the profit TP-HK’s NDF Desk earned for an equivalent period before and since the Defendants’ resignation until the time that their employment contracts with TP-HK would have expired if they had run their full course (which was 31 May 2011 in the case of the 1^st Defendant); or (b) the amount of profit TP-HK’s NDF Desk would have made in the same period.  Kelly argued that the profit the Defendants made for BGC-Capital for the same period would be a fair reflection of TP-HK’s loss assessed under method (b) above.

102.  BGC-Capital objected to the discovery on the basis that the information was sensitive and not currently necessary prior to establishing the Defendants’ liability.  I dismiss such arguments.  There is no dispute that such documents do not exist.  The information is clearly relevant.   The information sought was less extensive than what the Defendants were seeking against TP-HK.  BGC-Capital’s concern for confidentiality is   well protected by TP-HK’s implied undertaking.  The Defendants may not  have those documents in their possession, custody or power, at least, not without BGC-Capital’s permission.  The discovery sought is well within established legal principles.

103.  Harvey argued that the period for which the information was sought was excessive and covered a future period.  It is arguable that whether under the terms of the contracts of employment TP-HK is entitled to claim profit loss up to 31 May 2011.  That should be left for argument at trial.  TP-HK was only seeking information from the management account, which is by no means burdensome.  As a matter of practical convenience, I order disclosure up to 31 December 2010.  If the financial year of    BGC-Capital ends on a date after 31 December 2010, BGC-Capital may disclose information up to such date after 31 December 2010 as is convenient.

Conclusion

104.  Accordingly, I order discovery under item (A)(i) and item (B) for the period up to and including 31 December 2010. 

105.  As is usual with non-party discovery, BGC-Capital is entitled to the costs of the application and of production of the documents, which TP-HK would be entitled to recover against the Defendants if its action against the Defendants is successful.