FEDERAL COURT OF AUSTRALIA

Guy Carpenter & Company Pty Ltd v Grove (No 2) [2011] FCA 1190

THE COURT ORDERS THAT:

1.    Save and except for paragraph 3, the interlocutory application filed on 19 August 2011 be dismissed.

2.    Costs be reserved.

Note:        Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BACKGROUND

1    This is an application for leave to cross-examine the first to fourth respondents in respect of their compliance with orders for preliminary discovery made on 23 June and 15 July 2011.

2    As explained in the principal judgment (Guy Carpenter & Company Pty Ltd v Grove [2011] FCA 708), the first to fourth respondents (referred to as the Executives) are former employees of the applicant (Guy Carpenter). On 4 March 2011, each of the Executives resigned from Guy Carpenter in order to take up employment with the fifth respondent (Aon Benfield). At [34] of the principal judgment I concluded that:

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 [Corporations Act 2001 (Cth)] 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.

3    Accordingly, I made orders for discovery by each of the respondents. Insofar as the present application is concerned, Guy Carpenter seeks leave to cross-examine each of the Executives on the basis that it appears from the evidence that there are “likely many more texts and emails that respond to paragraph 1(a) of the Court’s orders of 23 June 2011, and the Executives have provided no explanation for the whereabouts of these”. Paragraph 1(a) of the orders of 23 June 2011 required discovery of:

(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[.]

PRINCIPLES

4    The parties agreed that I should adopt the principles Besanko J identified in Procter v Kalivis [2009] FCA 1518 (Procter v Kalivis) (albeit on the basis that counsel for the Executives formally submitted that the approach to cross-examination on orders for preliminary discovery, in principle, should be more onerous than that for discovery generally).

5    In Procter v Kalivis at [29]-[40], Besanko J summarised the principles applicable to challenges to affidavits of discovery. Besanko J concluded that the relevant test, including for preliminary discovery, is whether there exist “reasonable grounds for being fairly certain that there are other relevant documents” (at [33]). If there are no such grounds, the affidavit of discovery is conclusive. His Honour also noted (at [35]) that, if such reasonable grounds exist, the usual order is to require further discovery verified by affidavit. To permit cross-examination has been described as “unusual” (citing Olympic Airways SA v Spiros Alysandratos & Consolidated Travel (Vic) Pty Ltd (Unreported, Supreme Court of Victoria, Harper J, 26 May 1997)), being a power available in limited circumstances and only as necessary “in order to do justice between the parties or to prevent an abuse of the Court’s processes” (citing Moore J in Finance Sector Union of Australia v Commonwealth Bank of Australia Limited [2000] FCA 1389 at [16]).

THE CASE FOR CROSS-EXAMINATION

6    The evidence in support of the application for cross-examination establishes that: – (i) the Executives each served a verified list of documents on or around 15 July 2011; (ii) other than Mr Carroll, the Executives each served a further verified list of documents on or around 15 August 2011, (iii) despite the communication of instructions via their solicitor that they had produced all relevant documents, the Executives each served a further verified list of documents on 11 October 2011, and (iv) the Executives have not acted in accordance with a request from Guy Carpenter that they each serve another affidavit explaining what steps they have taken to comply with their discovery obligations.

7    Guy Carpenter has also examined the text and telephone records of the Executives in the context of the sequence of events that preceded their simultaneous resignation from Guy Carpenter for the purpose of taking up employment with Aon Benfield. According to the submissions for Guy Carpenter: – (i) the Executives have discovered significantly fewer documents than Aon Benfield, (ii) despite the representations to the contrary made (on instructions) by their solicitor, three of the Executives have thrice conceded the need for further discovery (and one has done so twice), (iii) the Executives have not explained the steps they have taken to comply with their discovery obligations, (iv) the Executives have provided no adequate sworn explanation of the circumstances regarding documents which are no longer in their control, and (v) “there is an appearance that many more documents did or do exist, in light of what [Guy Carpenter] has been able to determine from [Aon Benfield’s] discovery and its own phone records”.

8    Guy Carpenter submitted that in the circumstances described above, particularly where discovery by the Executives has been by degrees and only in belated response to Guy Carpenter proving the deficiencies in their initial discovery, no purpose would be served by requiring yet a further affidavit of discovery. Accordingly, Guy Carpenter contended that the Executives’ explanation (through their solicitor) for the discrepancy between their discovery to date and the large number of communications in which the evidence shows they were involved in the period leading up to their resignation – namely, that the communications are not relevant as they involved either work for Guy Carpenter or social contact between friends – was inadequate. It was in the interests of justice to permit the limited cross-examination proposed in order to ensure compliance with the Court’s orders for preliminary discovery.

DISCUSSION

9    The submissions for the Executives disclose the difficulty this application confronts. Guy Carpenter accepted that, unless there exist “reasonable grounds for being fairly certain that there are other relevant documents” (Procter v Kalivis at [33]), the discovery affidavits are conclusive. None of the matters on which Guy Carpenter relied, whether considered cumulatively or in isolation, supports the conclusion that such reasonable grounds exist. For example, it may be acknowledged that (as Guy Carpenter submitted) the Executives have filed multiple affidavits of discovery. If anything, that fact supports an inference that the Executives have understood and done their best to comply with their discovery obligations. It may also be acknowledged that each of the Executives filed a further affidavit of discovery the night before the hearing of this application. However, and as explained in the affidavit sworn by the Executives’ solicitor on 6 September 2011, those affidavits concerned two aspects of the discovery. First, they concerned the fact that each of the Executives had failed to include in his initial verified list documents which he once had, but no longer has, in his possession or control. Second, the affidavits concerned the fact that the Executives had provided itemised claims for legal professional privilege as requested by Guy Carpenter. The omission of certain documents from the earlier verified lists of documents, by reason of the failings of human memory, raises no suspicion of the existence of still further documents, let alone a reasonable ground for being fairly certain that such other documents exist. The reason for the provision of itemised claims for privilege in the further affidavits is adequately explained by the Executives’ solicitor. Similarly, it may be acknowledged that Guy Carpenter’s solicitor has carried out a detailed analysis of the telephone and text records of the Executives, which disclose many more communications than those discovered. Again, however, there is a cogent explanation for this in the affidavit of the Executives’ solicitor. This affidavit, in respect of each occasion in relation to which a suspicion of the existence of additional documents might arise, provides not only an explanation of the relevant circumstances but also express confirmation of instructions from the Executives that there are no such documents.

10    In these circumstances it is apparent that the case for cross-examination is founded on circumstances giving rise to no more than a suspicion that further documents might exist. On analysis of the evidence, each of the circumstances by which it could have been said that there existed reasonable grounds for being fairly certain that there were other relevant documents has been addressed (and any such grounds removed) by the affidavit of the Executives’ solicitor containing the explanations identified above and noting the further verified list of documents which was to be (and in fact was) served by each of the Executives. Once that evidence is taken into account, there remains nothing but suspicion to support the application for cross-examination. This is insufficient. On the evidence, I am not persuaded that there exist any (let alone reasonable) grounds for being “fairly certain” that there exist other documents than those which have already been discovered.

11    For these reasons, the application for leave to cross-examine the Executives must be dismissed. The parties otherwise agreed that the application, insofar as it seeks orders relating to the claims for privilege, should be adjourned. I make orders accordingly, with costs reserved.

Associate:

Dated:    21 October 2011