FEDERAL COURT OF AUSTRALIA

Guy Carpenter & Company Pty Ltd v Grove [2011] FCA 708

THE COURT ORDERS THAT:

1.    Each respondent provide discovery to the applicant, pursuant to O 15A r 6 of the Federal Court Rules, of each of the following documents in the respondent’s possession, custody or control:

(a)    all documents recording, referring or relating to:

(i)    any employment agreement (including any ancillary agreement) between any of the first, second, third or fourth respondents and the fifth respondent or a related body corporate of the fifth respondent;

(ii)    any negotiations between any of the first, second, third or fourth respondents and the fifth respondent or a related body corporate of the fifth respondent (or any agent of any of them) regarding any proposal for employment of the first, second, third or fourth respondents by the fifth respondent or a related body corporate of the fifth respondent;

(iii)    any communications after 1 June 2010 between or among any of the first, second, third or fourth respondents regarding proposed employment by the fifth respondent or a related body corporate of the fifth respondent and/or their consideration of the possibility of resigning their employment with the applicant;

(iv)    any communications between any officer, employee or agent of the fifth respondent and any other officer, employee or agent of the fifth respondent or a related body corporate of the fifth respondent regarding the proposed employment of the first, second, third or fourth respondents;

(v)    all documents recording any telephone calls made to any of the first, second, third or fourth respondents by any officer, employee or agent of the fifth respondent or a related body corporate of the fifth respondent on or after 1 September 2010;

(b)    all confidential documents which are the property of the applicant or which came into the possession or control of any of the first, second, third or fourth respondents as a result of their employment with the applicant;

(c)    all documents which are the property of the applicant or which came into the possession or control of the first, second, third or fourth respondent as a result of their employment with the applicant which, on or after 1 September 2010, were:

(i)    sent by any of the first, second, third or fourth respondents to a personal email address used by any of the first, second, third or fourth respondents;

(ii)    copied, transferred and/or exported by any of the first, second, third or fourth respondents to a digital storage device including without limitation to a computer, disc, CD, DVD, USB, ipod or smartphone; or

(iii)    printed, photocopied or scanned and which were subsequently retained by any of the first, second, third or fourth respondents;

(d)    all documents created on or after 1 September 2010 which record, refer or relate to:

(i)    any payment received by the first, second, third or fourth respondents from the fifth respondent or a related body corporate of the fifth respondent;

(ii)    any payment made by the fifth respondent or a related body corporate of the fifth respondent to another party for the benefit of any of the first, second, third or fourth respondents, including without limitation legal fees; or

(iii)    any indemnity or “hold harmless” agreement between the fifth respondent or a related body corporate of the fifth respondent and one or more of the first, second, third or fourth respondents; and

(e)    all documents which record, refer or relate to communications made by any of the first, second, third, fourth or fifth respondents with any client or potential client of Guy Carpenter on or after 4 March 2011 (with the exception of MS & AD Insurance Group and ANZ Lenders Mortgage Insurance Pty Ltd insofar as this order applies to the fourth respondent) but only insofar as such communications were either initiated by the first to fourth respondents or any of them or the substance of those communications provided by the first to fourth respondents or any of them to the fifth respondent.

Note:    For the purpose of these orders:

    A document means any record of information, and includes:

    anything on which there is writing; or

    anything on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them; or

    anything from which sounds, images or writings can be reproduced with or without the aid of anything else whether digitally, electronically or otherwise; or

    a map, plan, drawing or photograph.

Related body corporate has the meaning ascribed to that term in s 50 of the Corporations Act 2001 (Cth).

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

THE APPLICATION

1    These reasons concern an application for preliminary discovery brought by the applicant, Guy Carpenter & Company Pty Ltd (Guy Carpenter), against four of its employees (the first to fourth respondents, Messrs Grove, Cheeseman, Carroll and Hollyman, together the Executives) and their future employer, the fifth respondent, Aon Benfield Australia Limited (Aon Benfield).

2    The application is made under O 15A r 6 of the Federal Court Rules, which is in these terms:

Where:

(a)    there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)    after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)    there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision;

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).

RELEVANT PRINCIPLES

3    The dispute between the parties was confined to the characterisation of the evidence, and specifically to whether it was sufficient to enable each of the requirements of O 15A r 6 to be satisfied. The applicable principles, accordingly, were not in dispute. They were summarised in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147; [2004] FCA 1360 at [26] as follows:

(a)    the rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the court, exercised in the particular circumstances of each case: Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733; Minister for Health and Aged Care v Harrington Associates Ltd [1999] FCA 549 at [27];

(b)    each of the elements prescribed in subparas (a), (b) and (c) of the rule must be established: Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at [38]. Preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of the conditions themselves: Airservices Australia v Transfield Pty Ltd (1999) 92 FCR 200; [1999] FCA 886 at [5];

(c)    the test for determining whether the applicant has “reasonable cause to believe”, as required by subpara (a), is an objective one: Hooper at [39]; Malouf v Malouf [1999] FCA 710 at [16]; Quanta Software International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536 at [24]; Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391 at 23. Further, the words “or may have” cannot be ignored. The applicant does not have to make out a prima facie case: Quanta Software at [24]; Paxus Services at 733;

(d)    belief requires more than mere assertion and more than suspicion or conjecture. Belief is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13], [14], [17] and [73];

(e)     while uncertainty as to only one element of a cause of action might be compatible with the “reasonable cause to believe” required by subpara (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe: Glowatzky v Insultech Group Pty Ltd (1997) 39 IPR 215;

(f)    the question posed by subpara (b) of the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent. The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the court: Quanta Software at [33]-[34], Alphapharm at 24-26. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award: CGU Insurance Ltd v Malaysia International Shipping Corp Berhad (2001) 187 ALR 279 at [21]; Quanta Software at [33]-[34], Alphapharm at 24-26, Airservices Australia at [5];

(g)    whether an applicant has “sufficient information” for the purposes of subpara (b) also requires an objective assessment to be made: Minister for Health at [44]; Alphapharm at 23-24, Hooper at [40]. The subparagraph contemplates that the applicant is lacking a piece (or pieces) of information reasonably necessary to decide whether to commence proceedings;

(h)    it is no answer to an application under the rule to say that the proceeding is in the nature of a “fishing expedition”: Paxus Services at 733. Indeed O 15A r 6 “expressly contemplates” what once might have been castigated as “fishing”: Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at [27]. As Burchett J commented in Paxus Services, the rule is (at 733):

… designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent …

4    Guy Carpenter emphasised the propositions in (a) concerning the beneficial construction of the rule permitting preliminary discovery orders to be made, and in (h) to the effect that complaints about “fishing expeditions” usually heard in applications to set aside a subpoena or to require further discovery after the commencement of proceedings are beside the point. The respondents emphasised the propositions in (a) concerning the existence of the judicial discretion as a “proper brake” on the availability of preliminary discovery, and in (c) and (d) concerning the requirements that an applicant’s “cause to believe” that it “has or may have the right to obtain relief in the Court” be objectively reasonable, and that this “belief” be in the nature of a positive inclination of the mind rather than mere assertion, suspicion or conjecture. Emmett J explained this distinction in John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 (John Holland) at [14]:

The facts that can reasonably ground a suspicion may be quite insufficient to reasonably ground a belief. Objective circumstances that will be sufficient to demonstrate a reason to believe something, point more clearly to the subject matter of the belief than circumstances that will give rise to a mere suspicion. That is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition. The grounds that can reasonably induce that inclination of the mind may nevertheless, depending on the circumstances, leave something to surmise or conjecture (George v Rockett (1990) 170 CLR 104 at paras [115.6–116.4]).

THE EVIDENCE AVAILABLE

5    The evidence establishes the facts set out below.

6    Guy Carpenter operates as a reinsurance broker in Australia. There are two other major players in that market, one of which is Aon Benfield.

7    The Executives are senior employees of Guy Carpenter. Mr Grove is Guy Carpenter’s Senior Vice President and Director Business Development and, as such, is the head of Guy Carpenter in Australia and is responsible for Guy Carpenter’s Australian and New Zealand reinsurance broking operations. Mr Grove is also a director of Guy Carpenter. Mr Caroll is Guy Carpenter’s Head of Broking and Senior Vice President. Mr Hollyman is Guy Carpenter’s Senior Vice President – Casualty Specialist. Mr Cheeseman is Guy Carpenter’s Senior Vice President – Instrat® group (which is Guy Carpenter’s actuarial and modelling unit).

8    In their capacity as senior employees of Guy Carpenter, the Executives each participated in an incentive scheme by which they were bound by an agreement known as the Non-United States Restrictive Covenants Agreement (the Non-US RCA). The Non-US RCA contains a provision (cl 16) in these terms:

Both during the Employee’s employment with the Company and after the termination thereof for any reason, the Employee agrees to provide the Company with such information relating to his or her work for the Company or others, as the Company may from time to time reasonably request in order to determine his or her compliance with this Non-US RCA.

9    In their capacity as senior employees of Guy Carpenter, each of the Executives came into possession of information confidential to Guy Carpenter, including confidential information in respect of Guy Carpenter’s clients.

10    In August 2010, Mr Grove stayed at the house of Geoff Bromley in France. Mr Bromley is the Vice Chairman of Aon Re Global, a related entity of Aon Benfield, and is a former director of Guy Carpenter.

11    Between 25 December 2010 and 17 January 2011, Mr Hollyman communicated with Matt Barnes of Aon Benfield in the UK by telephone and text message on eight occasions. From 29 December 2010 onwards, Mr Hollyman and Mr Cheeseman between them made or sent 22 telephone calls or text messages to Ian Long of Aon Benfield in Australia. From 7 January 2011 onwards, Mr Hollyman and Mr Carroll between them sent 11 text messages to Robert De Souza, the CEO of Aon Benfield in Australia. On 19 January 2011, Mr Grove called Mr Bromley, the Vice Chairman of Aon Re Global. On 2 March 2011, Mr Hollyman sent a text message to Robert De Souza, the CEO of Aon Benfield in Australia. Between 5 December 2010 and 4 March 2011, the Executives made or sent over 200 calls and text messages between themselves.

12    Kyung Won, a Vice President of Guy Carpenter who worked under the direct supervision of Mr Cheeseman, observed that the frequency of closed-door meetings between Mr Cheeseman and Mr Grove increased significantly after October 2010. Before October 2010, he observed such meetings about once per fortnight. After October 2010, he observed such meetings about four times per fortnight. Mr Won is not aware of any business reason for this significant increase.

13    Mr Won also had lunch with a colleague on 28 February 2011. This colleague worked in the industry but was not employed at the time of the lunch. The colleague told Mr Won that he had heard rumours in the market that a few people were about to leave Guy Carpenter. The colleague said, “I’ve heard that Scott Grove is leaving this Friday with a few others.” Mr Won asked Mr Cheeseman about these rumours on his return from lunch. Mr Cheeseman said he had not heard the rumours. Mr Won then saw Mr Cheeseman walk to Mr Grove’s office and shut the door. After Mr Cheeseman left Mr Grove’s office, Mr Cheeseman said to Mr Won, “Don’t worry about Scott [Grove], they’re just rumours. I spoke to him and he thought it was funny, he said he won’t be leaving until they get the price right.” Later in the same week, but before 4 March 2011, Mr Won met Mr Grove in the lift and Mr Grove said, “I’m still trying to get the price up.” On 4 March 2011, when Mr Won attended Mr Cheeseman’s office at about 11.00 a.m., Mr Cheeseman said to Mr Won, “I am leaving Guy Carpenter and going to Aon Benfield. I let David Lightfoot know this morning by telephone and am handing in this letter shortly.” The next day, 5 March 2011, Mr Won called Mr Cheeseman about returning his personal items left in the office and Mr Cheeseman said, “I’m sorry for having misled you earlier in the week about me leaving. You probably worked it out anyway.”

14    Jamie Cook is employed as a Senior Vice President and reinsurance broker by Guy Carpenter. Mr Cook observed that between October 2010 and March 2011 the number of closed-door meetings between Messrs Grove, Carroll, Hollyman and Cheeseman, or combinations thereof, significantly increased. Before October 2010, such meetings were held about once per week and Mr Cook attended them. After October 2010, the meetings increased to about two to five per week and Mr Cook was not invited to participate in them. Furthermore, in October 2010 Mr Grove directed Mr Cook to work almost exclusively on one account, when previously he had been involved in other accounts and in locating new clients. From October 2010, his exclusive focus on one client meant that he had no involvement with other clients or new potential clients.

15    On 4 March 2011, each of the Executives gave notice of his resignation from Guy Carpenter. The notice period for each is six months. Guy Carpenter placed each on “gardening leave”. Each continues to receive his regular salary and benefits during the period of leave, which expires in September 2011. Each intends to take up employment with Aon Benfield on expiry of the notice period. On 4 March 2011, Mr Hollyman and Mr Cheeseman sent text messages to Ian Long of Aon Benfield in the UK. On 5 March 2011, Mr Carroll sent a text message to Robert De Souza, the CEO of Aon Benfield in Australia. On the same day, Mr Cheeseman called Ian Long.

16    On 8 March 2011, Guy Carpenter wrote to each of the Executives. These letters (together the 8 March letters) referred to cl 16 of the Non-US RCA, the relevant Executive’s letter of resignation and each Executive’s intention to take up employment with a competitor, and asked a series of questions including the following:

2.    […]

(k)    Is any of the compensation terms offered by your New Employer conditioned on any Guy Carpenter client (or placements for that client) becoming a client of (or placements on its behalf by) the New Employer? If so, which client(s) or placement(s)?

[…]

3.     Did you have any conversations or any other dealings about proposed employment by the New Employer with any other employees of Guy Carpenter & Company Pty Ltd (including any related body corporate of Guy Carpenter) prior to Friday 4 March 2011?

[…]

7.    In the course of your discussions with your New Employer to date, have you at any time discussed with the New Employer any of the following subjects:

(a)    the client(s) you think may move their reinsurance brokerage business to the New Employer from Guy Carpenter during your garden leave period or after you joined the New Employer? If so, please identify each such client.

(b)    The client(s) of Guy Carpenter and/or the amounts of revenue received by Guy Carpenter from such client(s).

17    On 15 March 2011, the solicitors for Mr Grove responded to the 8 March letter sent to Mr Grove, expressing the view that the questions it posed were unreasonable and requesting a copy of the Non-US RCA. This letter also said Mr Grove had complied with his obligations to Guy Carpenter to date. On 21 March 2011, the same solicitors wrote to Guy Carpenter about the 8 March letter sent to Mr Hollyman. This letter said that the questions posed were “onerous, unreasonable [and] a fishing expedition”. It also said that Mr Hollyman had at all times complied with and intended to comply with the Non-US RCA, and was willing to provide an undertaking to this effect. Finally it said that if Guy Carpenter provided a “reasonable request” (in reference to the terms of cl 16 of the Non-US RCA), or provided reasonable evidence of non-compliance with the Non-US RCA, they would respond further as instructed. On 22 March 2011, the same solicitors sent equivalent responses on behalf of Mr Cheeseman and Mr Carroll, with a response to the same effect on behalf of Mr Grove being sent on 23 March 2011. On 25 March 2011, the solicitors for Guy Carpenter wrote to the solicitors for the Executives noting, amongst other things, that the Executives were bound by cl 16 of the Non-US RCA to answer the questions posed in the 8 March letters, and that it was “wholly unacceptable for [the Executives] merely to offer to consider responding to a different request, particularly when this proposal is expressed to be subject to Guy Carpenter providing to [the Executives] evidence that a breach has occurred.” The solicitors for the Executives responded on 29 and 30 March 2011 stating, amongst other things, that as each had resigned and sought alternative employment and “continue[d] and intend[ed] to comply with his legal obligations”, Guy Carpenter’s actions were unfounded. On 11 April 2011, after sending a further letter to the Executives through its solicitors, Guy Carpenter filed the present application for preliminary discovery.

18    Subsequently, on 18 May 2011, the solicitors for Guy Carpenter wrote to Aon Benfield asking, amongst other things, the following questions:

(k)    Has Aon Benfield… had discussions with any of the Executives regarding the client(s) that they think may move their reinsurance brokerage business from Guy Carpenter to Aon Benfield… ? […]

(l)    Has Aon Benfield… had discussions with any of the Executives regarding Guy Carpenter’s client(s) or the revenue received by Guy Carpenter from any of its clients? […]

(m)    Has Aon Benfield… had discussions with any of the Executives regarding the potential employment of any employee of Guy Carpenter[?]

19    By letter dated 25 May 2011, the solicitors for Aon Benfield responded that their client “decline[d] [Guy Carpenter’s] request for information and documents.”

20    The resignations of the Executives had a significant and immediate impact on Guy Carpenter’s business which is likely to continue for up to three years.

GUY CARPENTER’S CASE

21    Guy Carpenter’s case is that it:

…seeks production by the respondents of documents to assist it to make a decision whether to commence proceedings against the Executives, potentially for: contravention of statutory directors[’] and officers[’] duties pursuant to s 181 to 183 of the Corporations Act 2001 (Cth) (the Act); breach of the express and implied terms of the Executives’ employment contracts; breach of fiduciary duties owed to Guy Carpenter; and against the fifth respondent for being involved in the contraventions of the Act by the Executives.

22    Sections 181 to 183 of the Corporations Act 2001 (Cth) (the Act) provide as follows:

181.

(1)    A director or other officer of a corporation must exercise their powers and discharge their duties:

(a)    in good faith in the best interests of the corporation; and

(b)    for a proper purpose.

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

182.

(1)    A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)    gain an advantage for themselves or someone else; or

(b)    cause detriment to the corporation.

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

183.

(1)    A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)    gain an advantage for themselves or someone else; or

(b)    cause detriment to the corporation.

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

23    According to Guy Carpenter, the evidence provides an objective basis for its genuine concern that:

(a)    the Executives worked in concert… to negotiate the offers of employment that were made to each of them by Aon Benfield and accepted by them. In particular, it seems a matter of logical inference on the evidence that each was aware that Aon Benfield was seeking to secure their services, and that they discussed with each other the fact and substance of their negotiations so as to secure the best offer of employment from Aon Benfield for their collective services, knowledge and expertise;

(b)     in the course of negotiations, the Executives disclosed to each other and to Aon Benfield confidential information owned by Guy Carpenter, particularly in relation to:

(i)    their then[-]current terms and conditions of employment with Guy Carpenter;

(ii)    information about the business of Guy Carpenter including, in particular, commercially sensitive information about the relationship of Guy Carpenter with some or all of its clients; the nature of officers or employees of Guy Carpenter clients with whom Guy Carpenter dealt; the basis on which Guy Carpenter’s fees were determined for specific clients; and the factors which might persuade an existing Guy Carpenter client to move its business to Aon Benfield.

24    Further, Guy Carpenter submitted that the evidence founded a concern that Aon Benfield may have been “involved” (within the meaning of s 79 of the Act) in the conduct constituting contraventions of the Executives’ obligations to Guy Carpenter.

25    According to Guy Carpenter, the totality of the evidence would reasonably incline the mind towards the proposition that the identified claims against the respondents exist. That evidence was summarised by Guy Carpenter as follows:

(a)    the four most senior executives at the time of Guy Carpenter resigned on the same day within four hours of each other;

(b)    all resigned to take up employment with Aon Benfield;

(c)    leading up to this occurring, the contact between the Executives increased (both in person and in phone and text communications);

(d)    Mr Cheeseman’s curious denial of the rumours put to him by Mr Won about the potential departure of the Executives (on 28 February 2011) only to days later (and after having resigned) acknowledge he had not been candid about those plans;

(e)    the frequent communications between certain of the Executives and Aon Benfield in the months preceding the resignations;

(f)    [t]he exclusion of one of the employees (Mr Cook) from meetings involving the Executives;

(g)    [o]bservations colleagues made about their conduct leading up to their resignations (including one employee (Mr Cook) being asked to confine his work to a specific client);

(h)    [s]trikingly in relation to the Executives, the fact that on three separate occasions they have refused to answer standard questions about the end of their time at Guy Carpenter, notwithstanding [that] they executed the Non-US RCA which expressly provided that they would answer such enquiries; and

(i)    [t]hat Aon Benfield has taken steps to employ all four [E]xecutives, yet has not provided any response to the questions posed by Guy Carpenter.

26    Guy Carpenter also submitted that, as required by O 15A r 6(b), it had made all reasonable enquiries but did not have sufficient information to decide whether to commence proceedings. Guy Carpenter had made enquiries of the Executives and Aon Benfield, and had retained a computer forensics expert to analyse the information held on the Executives’ computers through a keyword search. It had also analysed the telephone records of the Executives. Contrary to the respondents’ claim, Guy Carpenter submitted that it could not reasonably be expected to interrogate its own clients about what the Executives might have said to them in relation to the move to Aon Benfield. Despite these enquiries, Guy Carpenter did not have sufficient information to ascertain whether or not the respondents were in breach of the relevant contracts, duties and legal obligations, or to evaluate the strength of any claim for breach or the likely extent of damages.

27    Finally, Guy Carpenter contended that, as required by O 15A r 6(c), it was likely the respondents would possess documents which would assist it in deciding whether to commence proceedings, including documents concerning the negotiations between Aon Benfield and the Executives, their new employment agreements, any inducements to accept employment with Aon Benfield, any communications with Guy Carpenter’s clients, and confidential documents the property of Guy Carpenter.

THE RESPONDENTS’ CASE

28    The respondents’ basic proposition is that the putative causes of action against them are wholly speculative. When analysed, the causes of action for breach of ss 181 to 183 of the Act are said to be based on the possibility that: – (i) one or more of the Executives induced one or more of them to resign from Guy Carpenter with the intention of injuring Guy Carpenter, (ii) one or more of the Executives worked in concert to secure employment with Aon Benfield on favourable terms as part of the one transaction, and (iii) one or more of the Executives provided Aon Benfield with confidential information. However, the respondents maintained that there is no objective material which would incline the mind to the view that the respondents acted as alleged. Guy Carpenter’s theories about what might have happened are no more likely than other theories involving no breach of the Executives’ obligations, as the objective evidence (such as it is) is entirely consistent with conduct not constituting any such breach. As such, the evidence cannot be said to give reasonable cause to believe that Guy Carpenter has a right to obtain relief against the respondents. To the contrary, the respondents submitted that the theorised case is based wholly on suspicion and conjecture, which are insufficient to found an order for preliminary discovery.

29    Insofar as Guy Carpenter relied on the alleged refusal by the Executives to answer the questions put to them in the 8 March letters, the respondents submitted that the facts are to the contrary. According to the respondents, the questions extended far beyond what might be described as “such information relating to [the Executives’] work for the Company or others, as the Company may from time to time reasonably request in order to determine [their] compliance with this Non-US RCA.” In any event, each of the Executives had confirmed in writing to Guy Carpenter that he at all times had complied with and intended to comply with the Non-US RCA and was willing to provide an undertaking to this effect. Insofar as Guy Carpenter relied on Aon Benfield’s refusal to answer questions, the respondents submitted that Aon Benfield had no obligation to do so. As a result, the respondents said the requirement in O 15A r 6(a) had not been met.

30    Otherwise, in relation to O 15A r 6(b), the respondents noted that: – (i) the evidence did not prove an increase in contact between the Executives, (ii) Guy Carpenter had not contacted any clients or others involved in the reinsurance industry to ascertain the nature of any communications between the Executives and its clients, (iii) Guy Carpenter had not contacted any of the recruiters it identified as potentially involved in the recruitment of the Executives by Aon Benfield, despite knowing the identity of these recruiters from the telephone records, and (iv) accordingly, it could not be said that Guy Carpenter had made all reasonable enquiries before making this application.

DISCUSSION

31    The requirement grounded in O 15A r 6(a) is the existence of a belief in the applicant that the applicant has or may have a right to obtain relief in this Court from an identified person. “Belief” is to be understood in terms of an inclination of the mind toward acceptance of a particular proposition, and is to be contrasted with mere suspicion. To have “reasonable cause” to believe as required, there must be available sufficient material to make the applicant’s belief objectively reasonable. Thus, in sum, the requirement of r 6(a) is that it be objectively reasonable for the applicant’s mind to be inclined toward acceptance of the proposition that it has or may have a right to the relief identified. In this context, the distinction between belief and suspicion inevitably involves matters of impression and degree. As Emmett J put it in John Holland at [14], objective circumstances sufficient to support a belief must “point more clearly to the subject matter of the belief than circumstances that will give rise to a mere suspicion.”

32    I accept Guy Carpenter’s submission that the question whether it has reasonable cause to believe that it may have the right to obtain relief from the respondents is to be determined on the whole of the evidence. A mere suspicion by reference to one or more facts may become a reasonably based belief once the totality of the evidence is considered. In the present case, the evidence provides an objectively reasonable basis for believing that the Executives acted in concert with each other and that Aon Benfield was knowingly involved in their concerted action. Such a belief is plainly supported by the mere fact that the Executives, the four most senior executives at Guy Carpenter, resigned at the same time in order to take up employment with Aon Benfield. If the evidence went no further than this, however, I would accept that Guy Carpenter could have nothing more than a suspicion (albeit a not unreasonable suspicion in all of the circumstances) that the circumstances of the resignation of the Executives in order to take up employment with Aon Benfield may have involved breaches of the obligations imposed in ss 181 to 183 of the Act.

33    The evidence, however, is not so limited. It includes other facts. The relevant events occurred after the most senior of the Executives, Mr Grove, stayed with a senior Aon Benfield executive in France. Despite the respondents’ submissions to the contrary, there is evidence that communications between the Executives increased markedly after October 2010. While the evidence relating to telephone calls may be ambiguous, the evidence relating to meetings is clear. The number of closed-door meetings between the Executives appears to have increased between two and fivefold after October 2010. At the same time, Mr Cook was excluded from all of these meetings when he had previously been involved in them. He was also excluded from all work other than for one client at the direction of Mr Grove. During the same period the telephone communications between the Executives, whatever their usual regularity, can only be described as frequent. During the same period each of the Executives was also communicating with representatives of Aon Benfield. Other than in respect of Mr Grove, these communications were not infrequent. But the evidence goes further. The Executives continue to be employees of Guy Carpenter. They continue to receive their salary and all other related benefits. They have been asked by Guy Carpenter to answer specific questions. While some of those questions may extend beyond any obligation under cl 16 of the Non-USA RCA or at common law, others (as indicated by Guy Carpenter in its submissions and set out above) appear to fall squarely within the employees’ disclosure obligations. Yet, other than a generalised assertion of compliance with all obligations and willingness to undertake to continue to comply, each of the Executives has declined to provide any answer to Guy Carpenter. This fact, when considered with the balance of the evidence, is entitled to significant weight in assessing the reasonableness of Guy Carpenter’s belief that it may have rights to relief for breach of ss 181 to 183 of the Act as identified. It is difficult to place the same weight on Aon Benfield’s refusal to answer Guy Carpenter’s questions in the context of the lack of any obligation on Aon Benfield’s part to do so. Nevertheless, Aon Benfield’s blanket refusal, having regard to the nature of at least some of the questions put to it (specifically, those quoted above), is not irrelevant. It is another material circumstance.

34    When the whole of the evidence is weighed together, I am satisfied that it provides an objectively reasonable basis for a positive inclination of the mind toward the proposition – that is, a belief – that the circumstances of the Executives’ resignations from Guy Carpenter, and their subsequent employment by Aon Benfield, may have involved breaches of ss 181 to 183 of the Act such as to found a right to relief on the part of Guy Carpenter against each respondent (that is, including against Aon Benfield as a person who may have been involved in the breaches of ss 181 to 183 by the Executives). It is true that on the available material Guy Carpenter cannot know or reasonably believe that it in fact has a right to relief for breaches of those sections. But it can believe, and has a reasonable basis to do so, that it may have a right to such relief. And that is sufficient.

35    I am also satisfied that Guy Carpenter has made all enquires which, in the circumstances, it was reasonable for it to make. It was common ground between the parties that the reinsurance market in Australia is very small and highly competitive. It is not reasonable to expect that Guy Carpenter would subject clients it wishes to retain to any form of interrogation about the activities of the Executives. Nor do I consider that Guy Carpenter was required to make enquires of the recruitment firms in order for the enquiries it has made to be characterised as “all reasonable enquiries”. It is also obvious that the enquiries made have not yielded sufficient information for Guy Carpenter to decide whether to commence a proceeding for the relief it has identified. Finally, there is reasonable cause to believe the respondents, and each of them, has or is likely to have in their possession documents relating to the question whether the applicant has such a right to relief. In other words, each of the requirements of O 15A r 6 is satisfied and Guy Carpenter has established a proper basis for the making of an order for preliminary discovery. Moreover, there is no discretionary reason weighing against the making of such an order.

36    As to the terms of the order, Aon Benfield raised one issue about the categories of documents sought, and put forward a compromise position which Guy Carpenter accepted. The first to fourth respondents, in contrast, sought to reserve their right to debate the terms of the categories for discovery after publication of these reasons for judgment. However, consistent with Guy Carpenter’s position, I can see no proper basis for the first to fourth respondents to be given that further opportunity. The terms of the orders sought were set out in the application as filed on 11 April 2011. Aon Benfield took the opportunity in its written submissions to deal with not only the general question (whether preliminary discovery should be ordered), but also the specific terms of the orders proposed by Guy Carpenter. Nothing prevented the first to fourth respondents from making any submission they saw fit about the terms of the preliminary discovery sought, but they chose to make no submissions in that regard. I have reviewed the terms of the orders sought by Guy Carpenter and consider them appropriate in terms of O 15A r 6(c), subject to the amendment proposed by Aon Benfield. The parties may address on costs and any consequential orders needed, including as to any appropriate confidentiality regime for the documents required to be discovered.

Associate:

Dated:    23 June 2011