Tibra Trading Pty Ltd & Ors v Optiver Australia Pty Ltd [2008] HCATrans 399 (5 December 2008)

Last Updated: 8 December 2008

[2008] HCATrans 399

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S354 of 2008

B e t w e e n -

TIBRA TRADING PTY LTD

First Applicant

TIBRA CAPITAL PTY LTD

Second Applicant

TIBRA CAPITAL MANAGEMENT PTY LTD

Third Applicant

TIBRA GLOBAL SERVICES PTY LTD

Fourth Applicant

DINESH BHANDARI

Fifth Applicant

GLENN WILLIAMSON

Sixth Applicant

TIMOTHY BERRY

Seventh Applicant

ANDREW KING

Eighth Applicant

KINSEY COTTON

Ninth Applicant

and

OPTIVER AUSTRALIA PTY LTD

Respondent

Application for special leave to appeal

FRENCH CJ
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 5 DECEMBER 2008, AT 9.31 AM

Copyright in the High Court of Australia

__________________

MR A.J.L. BANNON, SC: I appear with my learned friend, MR A.D.B. FOX, for the applicants. (instructed by McCabe Terrill Lawyers)

MR R. COBDEN, SC: May it please the Court, I appear with my learned friend, MR P.W. FLYNN, for the respondent. (instructed by Mallesons Stephen Jaques)

FRENCH CJ: Yes, Mr Bannon.

MR BANNON: Your Honours, in my submission, this case represents an Act vehicle to resolve an issue which has vexed the courts and the profession as to whether or not section 79 of the Evidence Act imports a requirement that for expert evidence to be admissible and hence probative - - -

KIRBY J: We are a de-vexation institution, are we?

MR BANNON: Yes - a requirement of a basis rule. The starting point for the debate, or at least one of the linchpins, is Justice Heydon’s judgment in Makita v Sprowles, to which we have referred, and in particular paragraph 85 of that judgment which sets out a number of requirements, one of which has been described as the basis requirement – namely, that an expert opinion to be admissible and probative, even if it is admitted, must identify the assumptions on which the specialised knowledge is said to be based in order to determine how it is that that specialised knowledge is applied to the assumptions for the purpose of supporting the opinion. In this particular case what we submit is the key to any reasonable cause to believe being shown in this case was an opinion expressed by Mr Shale, which appears in the application book.

KIRBY J: I was going to ask about the affidavits. Are we proceeding with this application on the basis of the affidavits which are in the application book, that there is no objection to them and no desire to cross-examine the deponents?

MR BANNON: They were affidavits which were before the court below.

KIRBY J: I see. So they are not specially filed in this proceeding.

MR BANNON: No.

FRENCH CJ: The question raised by the Makita section 79 controversy, if one could call it that, which was, I think, reflected in judgments in relation to section 79 in some native title cases – Justice Sundberg, I think, in Neowarra and I think subsequently Justice Selway – arose there in the more clear-cut context of a substantive hearing, whereas here we have a proceeding for preliminary discovery which has a different character and there is an overlying debate about its interlocutory characterisation and what impact that has on the nature of the rule, so that does not make it a particularly clear vehicle for resolving this question, does it, Mr Bannon?

MR BANNON: I accept that that is an issue which I have to confront, in terms of vehicle, but the way we confront it is this, that there is no doubt on any view which has been expressed in relation to the elements of the preliminary discovery rule that the reasonable cause to believe element has to be satisfied and it is not satisfied by mere belief, that it has an objective element imported by the use of the word “reasonable”.

FRENCH CJ: That is so. That is a familiar formula.

MR BANNON: Yes. So that is the first starting point. The second starting point is that one asks in this case what was the basis for the reasonable cause to believe. The objective facts were, or the undisputed facts and purposes of this application are the five employees leave the respondent’s business over a period from November 2005 to May 2006. The competing business is up and running by September 2006. They identify an email in June 2006 which they assert has nefarious inferences to be drawn from it.

FRENCH CJ: Lots of smoke with an implicit gun.

MR BANNON: Yes, and it is fair to say that the Full Court was enthused by the terms of that email. But nothing is done until not only do we start trading but an analysis is undertaken by Mr Shale of our trading performance and he says two things.

FRENCH CJ: “You are going too fast”.

MR BANNON: That is right. He says two things: “I’ve done an analysis”, firstly, and secondly, “In my opinion that’s running at the same speed as ours or faster”. Perhaps I should add a third thing, “And they couldn’t, in my opinion, have done that, developed that, independently in that time”. So we are not here to contest or debate about the opinion as to the amount of time and we do not contest that what he did shows that we had certain trades, but the critical opinion was that we had achieved a level of success which made relevant his opinion as to the estimate of time.

Now, that opinion is set out in the application book at page 162, in paragraph 22, when he says at the foot of 162, that between those dates he:

monitored the First Respondent’s trades by examining the public option trade data originating from Optiver Australia’s ASX ITS market connection . . . By reviewing this data, I am able to see how quickly a particular buyer or seller in the market responds to a change in market data. In this way, I am able to monitor the speed with which particular traders react to changes in market data.

Annexed to this affidavit and marked “A” is a copy of a graph which records the number of times that Optiver Australia was beaten to profitable option trades by the First Respondent during the period September 2006 to December 2006 -

and this is the key sentence:

In order to beat Optiver Australia to these trades, the First Respondent would need to have deployed on its computer systems an automated trading system at least as fast or faster than Optiver –

And then, having said that, he goes on to say it would take X period of time to develop. So that is the sentence in which we say is the source of the reasonable cause to believe. That sentence does not expose at all why that is true or why that conclusion is available or what assumptions are made.

FRENCH CJ: But it seems to have been argued in the Full Court on the probative value rather than the admissibility ground, does it not?

MR BANNON: No. We had a notice of contention.

FRENCH CJ: Yes, I know.

MR BANNON: I was asked, and we have set out the transcript in our reply, “What basis do you argue it on?” and I said, “Well, it doesn’t make any difference whether it’s done on probative value or admissibility because it’s in and the same reasons which affect the probative value would determine the admissibility”. I think it is set out in - - -

FRENCH CJ: Page 170, I think.

MR BANNON: Yes, 170, line 30, and in a characteristically convoluted, somewhat garbled way, I eventually get to the - - -

FRENCH CJ: What the Full Court read out of that, maybe with deconstructionist flexibility, was “did not press that contention, rather putting it that the evidence, having been admitted, did not prove the relevant matter”. That is the basis upon which they dealt with it.

MR BANNON: Yes.

FRENCH CJ: At paragraph 46 on page 55.

MR BANNON: I accept that, your Honour, but I think what I actually said is set out there, so that if one agrees with the submission one would also accept that it should not have been admitted. Makita proceeds on the basis - - -

FRENCH CJ: The Full Court has not really dealt with the Makita point because it says it was not argued.

MR BANNON: No, I did argue; I argued - - -

FRENCH CJ: No, I am just saying the way the Full Court dealt with it was to take your other option.

MR BANNON: Quite. But Makita was a case where the evidence was in fact admitted.

FRENCH CJ: Yes.

MR BANNON: And without objection.

FRENCH CJ: But you are relying on the basis rule, are you not?

MR BANNON: That is right, but the basis rule informs whether it has any probative value, and if it has no probative value it should not be admitted, but even if it is admitted but has no probative value, because it does not satisfy section 79 it is not persuasive evidence.

FRENCH CJ: The point I am making to you is that the Full Court does not get into section 79 territory because it deals with it solely on the question of whether it has probative value. It does not go back to that antecedent point which you have in your notice of contention. In other words, what I am saying is that we do not have a decision about the interaction between section 79 and the basis rule, do we?

MR BANNON: Quite. No, I agree; I accept that, your Honour. But we have it at the Justice Tamberlin level. Justice Tamberlin addressed the matter.

FRENCH CJ: Yes, sure.

MR BANNON: But that should not deter this Court, we respectfully submit, the fact that the Full Court did not address it that way, because the Full Court, rather, took a more – if I may say so, sidestepped the issue by saying, “It doesn’t really matter”, depend on admissibility or even one seeing the probative value à la Makita, because we fully argued that, but simply said, “Well, it’s there, it says what it says and we take account of that”.

KIRBY J: Yes, but you know as well as we do that if the Full Court has not addressed the issue – and we do not have the benefit of the Full Court analysis of the issue – and you are asking us to take it on and sort it all out for ourselves and in a case where what is involved is a matter of practice of the Federal Court of Australia.

MR BANNON: Quite, but dealing with each of those matters, your Honour, although it is a matter of practice, preliminary discovery is – and there have been some suggestions – although it is interlocutory, it is a substantive procedure.

KIRBY J: Do not worry too much about the interlocutory because that is sometimes an artificial category but, nonetheless, if you are looking at it from the point of view of this Court, first of all it is a matter of the developing decisions of the Federal Court of Australia in the way in which it handles this area of its practice.

MR BANNON: Quite.

KIRBY J: Secondly, we do not have the concluded opinion of the Full Court on the issue you want to argue before this Court.

MR BANNON: No, that is - - -

KIRBY J: That is a very hard case for you to get up. I know you often take on the hard cases, Mr Bannon. It seems to be your unfortunate fate.

MR BANNON: I am behaving uncharacteristically today, your Honour; it is an easy one. But, your Honour, can I just address that. We are not seeking to challenge the jurisprudence of the Federal Court in the way it has dealt with preliminary discovery applications – in other words, reasonable cause to believe and the like – and I accept that that would fall squarely into the category which your Honour has described. But what we do say is at the heart of this case – and, yes, the Full Court did not deal with it, but we say that is part of the error of the Full Court approach. The failure to deal with our question is an error and this Court on many occasions has taken up matters where it has not had the benefit of an intermediate Court of Appeal decision because of the error in the court failing to address it. The matter was squarely raised and existed at the Justice Tamberlin level, and in terms of a vehicle, it is a very narrow compass.

I have pointed out the sentence which is at the heart of it. In our submissions in-chief I have pointed out that, having gone in, I did ask some questions to ask what was the assumed basis. We had on a notice to produce an email which said in terms the exercise – it was only terms but it said, and Mr Shale agreed – the exercise he was involved in was that which was informed by that email, in effect to see whether or not the respondent’s success rate of 85 to 90 per cent was being affected by our performance. If it was, then you could arguably argue we were as fast or faster.

But he did not set that out. He did not set out the assumptions. There was no evidence of their own performance so you could never test whether the 85 to 90 per cent was affected. In the substantive hearing you say the inference is it did not help, but in other words, not only do we have the benefit of a single sentence which is in a very narrow compass, which we say plainly does not satisfy a basis rule, but, secondly, it is not a mere theoretical point because, had he had the opportunity to ask some questions about it, we respectfully submit we completely expose the fact that the opinion does not have any basis.

Now, I accept it is an interlocutory procedure, but once one analyses and realises, as we submit one should, that it is integral to the decision, and although the Full Court places a lot of emphasis on the email, it is plain, as we have identified in our written outline, that it is the email in the circumstances of the swift success which was earlier described by reference to Mr Shale’s opinion that we were as fast or faster, we are in the position of being subjected to what is undoubtedly an invasive procedure in relation to the opportunity for them to have access to our copyright work, or our computer program, for the purposes of an examination.

We were employees. There was no allegation that we breached the employment contract. Although there is an allegation of breach of confidential information, as we have set out, they did nothing on that since June 2006. Employees have a right to leave businesses. They have a right to set up their own businesses in competition.

FRENCH CJ: These go to the discretionary considerations. I know you are using them, I suppose, to emphasise the importance of the matter to your client, but these were discretionary considerations considered by the Full Court in relation to whether preliminary discovery ought to be ordered.

MR BANNON: Yes, quite, and I do not address them on a discretionary basis, but really to say that it is not a mere matter of practice and procedure; it is a matter of significance not only to my clients, but also the nature of the beast is such that it is where the linchpin, as we say, is what is a bare opinion. That is of significance to us, sufficient significance for the Court to entertain our application, firstly, and, secondly, because if we are right in our analysis of it, it has a wider import which is, we respectfully submit, of great significance in relation to section 79, which transcends not only these proceedings but also the preliminary discovery proceedings. I should add, although we have not addressed this in our outline, this question of section 79 and basis came up in HG v The Queen.

Justice Heydon in Makita referred to Chief Justice Gleeson’s decision as to the fact that an opinion, which was sought to be tendered in a criminal trial, was not admissible anyway because it did not satisfy the basis rule. An examination of the other judgments in that case indicates Justice Hayne agreed with that. Justices Gummow and Gaudron did not agree with that and Justice McHugh said nothing about it. So in one sense it is an issue which this Court has had a look at, but not in a clear way and not in a way which is determinative. Here, we submit, it rises squarely and notwithstanding the interlocutory aspect, is a matter which, both in terms of vehicle and in terms of ability to understand and digest the issue and deliver an opinion on it, it is clear – the appeal book will not be much thicker than this application book, firstly - - -

FRENCH CJ: That is the reverse of the in terrorem argument we often get.

MR BANNON: Absolutely and, as I say, it is that one sentence and the debate is a significant one and we say it is not distracted or impeded by the way in which the Full Court dealt with it – on the contrary, we submit; we rely on the fact that the way the Full Court addressed it and, quite frankly, sidestepped the issue. For those reasons we submit your Honours should grant special leave.

FRENCH CJ: We will not need to call on you, Mr Cobden.

In this case special leave is sought to appeal against a decision of the Full Court of the Federal Court allowing an appeal against a decision dismissing an application for preliminary discovery. The appeal was allowed on the basis, inter alia, that the primary judge had applied a wrong test. The applicant for special leave had, by notice of contention, challenged the admission of certain opinion evidence by the primary judge.

The Court is of the opinion in this case that no question of principle is exposed. The point was dealt with in the Full Court on the basis that the evidence did not prove what it set out to prove. It arose in the context of an application of an interlocutory character which is not the most appropriate vehicle for determining the kind of question which it is sought to raise on the application.

Special leave will be refused with costs.

Thank you. The Court will adjourn to reconstitute for the next matter.

AT 9.49 AM THE MATTER WAS CONCLUDED