B2C2 Ltd v Quoine Pte Ltd [2018] SGHC(I) 04

Introduction

On 27 December 2017, a judgment was handed down in this action dismissing an application by the Plaintiff for summary judgment pursuant to O 14 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“Rules of Court”): see B2C2 Ltd v Quoine Pte Ltd [2017] SGHC(I) 11 (“the Judgment”). The present judgment arose out of consequential disputed applications by the parties: by the Defendant for production of documents under O 110 r 17 of the Rules of Court and by the Plaintiff for the appointment of a single court expert pursuant to O 40.

The underlying facts are set out in paragraphs 1–4, 10 and 15–22 of the Judgment which, for convenience, I repeat below:

By the Judgment, two issues were held to raise appropriately arguable defences. The first, an argument based upon a document known as “the Risk Disclosure Statement”, is not relevant to the matters currently before me. The second relates to a defence of unilateral mistake at common law which was ruled upon in paragraphs 44–61 of that judgment. Paragraphs 56–57 and 60–61, which address the question of knowledge in relation to unilateral mistake, read as follows:

At a further Case Management Conference (“CMC”) on 11 January 2018, the Defendant indicated that although it had sought certain aspects of disclosure from the Plaintiff in relation to the issue of unilateral mistake, the Plaintiff had declined to comply voluntarily. The Defendant also expressed its intention to issue a summons pursuant to O 110 r 17. This it has now done. In Summons No 4 of 2018 (“the Production Application”), the Defendant seeks:

For its part, the Plaintiff has now issued Summons No 8 of 2018 (“the Expert Application”) under O 40 r 1 seeking an order for the appointment of a court expert to inquire and report upon certain questions relevant to the workings of the Plaintiff’s automated trading program.

These two summonses were heard by me at a CMC on 20 February 2018. For the reasons given orally at the hearing, I declined to order any discovery in relation to categories 5–11 of the Defendant’s Schedule and ordered limited discovery in relation to category 4. Nothing further turns on category 4 for present purposes.

So far as categories 1–3 were concerned, I held that documents falling within these categories were relevant and material to the issue of unilateral mistake. The categories are as follows:

As can be seen, these documents all relate to the workings of the Plaintiff’s automated trading system which, for the reasons set out in Mr Maxime Boonen’s fourth affidavit (which was in draft form before me but has since been affirmed), are contended by the Plaintiff to embody highly confidential information. The Defendant requested an adjournment to respond to this draft affidavit which I refused but indicated to Mr Paul Ong, counsel for the Defendant, that if at any time during the hearing he felt that his client’s interests were being prejudiced by the absence of a reply affidavit, he should seek an adjournment. In the event, he did not see the need to do this.

For the purposes of these applications, I assumed and worked on the basis that documents falling within categories 1–3 do indeed contain highly confidential information. It was this factor which lay at the heart of the Plaintiff’s reluctance to allow production of the documents in the normal way and which the Plaintiff contended made an order for the appointment of a single court expert desirable.

At the end of the hearing I informed the parties that I proposed to order:

(a) On the Production Application, that the Plaintiff should prepare a supplementary list of documents enumerating the documents in its possession custody or power falling with the description of documents in categories 1–3. This list was to indicate the documents which the Plaintiff contends contain confidential information and that these documents should not be inspected by or on behalf of the Defendant without an order of the Court.

(b) On the Expert Application, that an independent court expert should not be appointed and that, in the first instance the Plaintiff should be at liberty to adduce evidence from a single expert in relation to specified issues in the manner set out in more detail below.

I indicated that I would give my reasons for reaching these conclusions in writing.

The Production Application: the appropriate approach to confidentiality

Order 110 r 15 of the Rules of Court provides for a party to serve a request for the production of documents which must describe the documents and state how the documents are relevant and material to the party’s case. This the Defendant has done and I have held that the documents within categories 1–3 are relevant and material. Rule 16 provides that the requested person can object to producing the documents and give the reasons therefore. This the Plaintiff has done, citing confidentiality as the reason for the objection.

Order 110 r 17 provides:

Order 110 r 21 provides that O 24 (discovery and inspection of documents) does not apply to proceedings in the Singapore International Commercial Court (“SICC”).

There are material differences in language and approach between the discovery provisions in O 110 and O 24 and, although the Defendant framed its application in the form indicated in [4] above for a supplementary list of documents followed by inspection which would be the norm under O 24, this application fell to be decided under O 110 r 17. In particular, due regard needed to be had to r 17(2)(b)(v) highlighted above.

The difficulties faced by courts when dealing with questions of confidentiality in the course of legal proceedings are well known. There is a public interest in open justice and there is an equivalent public interest in ensuring a fair trial in which both parties have unfettered access to all relevant material. Yet there is a competing public interest in ensuring that confidential information – particularly, trade secrets – of one party does not come into the public domain or become exposed to the possibility of misuse by the other party as a result of legal proceedings. This is particularly so when the parties are competitors.

There are numerous well-known cases in many common law jurisdictions having discovery rules equivalent to those in O 24 which throw light upon the principles involved and the approaches adopted in seeking to balance these competing public interests (see, eg, Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 (England and Wales), Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 (“Mobil Oil”) (Australia); Diagcor Bioscience Incorporated Ltd v Chan Wai Hon Billy [2015] HKCU 1853 (“Diagcor Bioscience”) (Hong Kong) and Koger Inc v O’Donnell [2009] IEHC 385 (“Koger”) (Ireland)).

These were considered by Au-Yeung J in Diagcor Bioscience at [13]–[16]:

The position was also considered by the Court of Appeal in Victoria in Mobil Oil where Hayne JA observed as follows (at 38):

The relevant authorities were reviewed in detail by Kelly J in the High Court of Ireland in Koger. In particular, he drew attention to the decision of Mr Anthony Mann QC sitting as a deputy judge in the High Court of England and Wales in Sport Universal SA v ProZone Holdings Ltd [2003] EWHC 204 (Ch) where disclosure of a particular source code was disclosed to the plaintiffs’ expert and lawyers but not to a representative of the plaintiffs. The Judge concluded:

He ordered a measure of disclosure subject to certain conditions:

There is thus no hard and fast rule either requiring disclosure or denying inspection. Each case has been decided on its own facts weighing up the competing public interests referred to in [16] above. Depending upon the degree of confidentiality the approach of the courts has differed, ranging from full disclosure on the one hand to no inspection by anyone whose knowledge of the contents of the documents in question raises a serious risk that the confidentiality in the documents would be jeopardised on the other.

Mr Danny Ong, counsel for the Plaintiff, accepted that this was the approach developed in the common law world in relation to discovery applications made in relation to provisions equivalent to O 24 of the Rules of Court. However he contended that O 110 r 17 establishes a different regime that has its origin in the rules and practice of arbitration tribunals rather than the rules of court referred to in the authorities cited above, so different principles apply.

The wording of the exception in O 110 r 17(2)(b)(v) has its origin in Art 9(2)(e) of the International Bar Association Rules on the Taking of Evidence in International Arbitration (“the IBA Rules”). Mr Danny Ong referred me to some commentaries on those Rules and submitted that if the Court determines that the confidentiality objections are compelling, the Defendant has no basis to ask the Plaintiff to produce the confidential document to any extent, including under a controlled disclosure regime.

He relied particularly on passages in Reto Marghitola, Documentary Production in International Arbitration (Kluwer Law International, 2015) at pp 90–91:

Mr Danny Ong accepted that under Article 9(4) of the IBA Rules, it is possible for an arbitrator to permit disclosure on specific terms such as redaction of confidential information, production of documents for counsel and experts only or the use of a confidentiality expert. However, he said that once it is determined that the evidence as to confidentiality was compelling, the arbitrator (and by extension, this Court) has no option but to refuse production.

The problem with this contention is that the word “compelling” is, as Marghitola accepts, not defined. The word immediately poses the question, “How compelling?”

In para 11.7.8 of Jeffrey Waincymer’s Procedure and Evidence in International Arbitration (Kluwer Law International, 2012), the author states:

In Nathan D O’Malley’s Rules of Evidence in International Arbitration: An Annotated Guide (Informa, 2012), at para 9.88, it is stated:

Neither of these authors seeks to identify how the line should be drawn as a matter of generality and I doubt it can be done. Each case must turn on its own facts. To my mind, crucial to determining where the line should be drawn in each case is a balancing of the degree of prejudice to one party of risking disclosure of its confidential information and the degree of prejudice to the other of being denied access to documents which are relevant and material to the resolution of the dispute in question.

Whilst therefore I accept Mr Danny Ong’s submission that the IBA Rules do permit arbitrators to exclude inspection where the evidence of confidentiality is sufficiently compelling, I do not accept that this is a binary question such that “sufficiently compelling” means no inspection and “insufficiently compelling” means full inspection. The IBA Rules expressly permit a middle course of limited inspection with a presumption in favour of permitting a degree of inspection.

Turning to O 110 r 17(2)(b)(v), which has been set out above at [13], it is plain that once the Court concludes that the grounds of commercial or technical confidentiality are compelling, it has no power to order production. But again there is no definition of “compelling”. Neither is there the equivalent of Article 9(4) of the IBA Rules expressly permitting protection measures short of refusing any form of inspection.

The discovery process under O 110 is intended to institute a simplified process compared to O 24. Disclosure is only required of documents that are relevant and material and there is no general discovery. Undoubtedly, the Court can, in an appropriate case, pursuant to O 110 r 17(2)(b)(v), refuse production where there are suitably compelling grounds. But “compelling” does not, in my judgment, require regard to be had only to the concerns and needs of the party whose confidential information is relevant and material. “Compelling grounds” means grounds which lead the Court to the conclusion that in the circumstances of the case there is no solution which commends itself to the Court other than refusal.

The circumstances of the case will always require some weight to be attached to the interests of a fair trial. Hence the importance of considering the possibility of limiting access to the documents, redactions and provisions of the nature imposed in Koger (see [20] above).

Accordingly, in my judgment, whilst O 110 r 17(2)(b)(v) empowers the Court to refuse disclosure in such a case, it does not fetter the power of the Court in other cases to take such measures short of refusing disclosure as are calculated on the facts of the case to ensure the best balance between the interest of confidentiality on the one hand and the interest of a fair trial on the other.

I thus cannot accept Mr Danny Ong’s submission set out in [22] above that the effect of O 110 r 17 mandates a different approach to dealing with discovery of confidential documents to that which exists under O 24. To my mind, the guidance obtained from the authorities under discovery provisions in the other common law jurisdictions referred to above are equally applicable to proceedings before the SICC.

A single court expert?

By O 110 r 3, the order relating to the appointment of a court expert, O 40, applies to actions in the SICC. Order 40 allows the Court to appoint an expert, preferably a person agreed by the parties, to inquire into and report upon questions of fact or opinion (not involving questions of law or of construction).

Order 40 r 2(1) provides:

Rule 4 permits any party thereafter to apply to the Court for leave to cross-examine the expert on his report and r 6 specifies that on giving reasonable notice, any party may call one expert witness to give evidence on the question reported by the court expert.

Both parties provided a schedule setting out the issues which it considered the experts (whether appointed by the Court or by the parties) should address. At the end of the hearing I ruled out certain questions which involved the experts giving opinion evidence on market practice and market manipulation. I directed the parties to seek to agree on the wording on certain factual issues which in simple terms would serve to answer the question as to how the Plaintiff’s trading system came to place the limit orders the subject of this action at the unusual exchange rate, some 250 times the previous market rate.

The Plaintiff contended that the fact that these were purely factual questions further supported its request for a court expert. Mr Danny Ong drew my attention to the case of Abbey National Mortgages PLC v Key Surveyors Nationwide Ltd [1996] 1 WLR 1534 and the observations of Jacob LJ in Dyson Ltd v Qualtex (UK) Ltd [2006] EWCA Civ 166 to support his assertion that the Courts should be more willing to order a single court expert where purely factual questions arise. I am far from sure that these authorities lay down such a proposition but, as a matter of principle, he might be right. While the opinions of reasonable men can differ, the evidence of an expert on an issue of fact within his field of expertise is less likely to be controversial. This is particularly so when both parties are themselves working in the field and will therefore themselves have inhouse expertise which will enable the validity of the court expert’s report readily to be assessed.

But therein lies the problem where confidential information is involved. If a court expert is instructed to report on an issue which requires him or her to have access to confidential information, how is the opposing party to assess the validity of the report without having access to that material?

The Plaintiff proposed a detailed order relating to the appointment of and reporting by the court expert. This required time for the parties to agree upon the expert or, in default, for him or her to be appointed by the Court. It required time for the expert to provide the necessary undertakings as to confidentiality, for him or her to be provided with the documents and to ask for such further documents as might be required and thereafter further time to produce the report.

It was proposed that the report be adduced in evidence in a confidential manner. There were no provisions which addressed the possibility of cross-examination of the expert under O 40 r 4 or for the giving of expert evidence on behalf of the parties under r 6.

I consider that there is, on the facts of this case, substance in those submissions. At present, we do not know what information the notional report of the single court expert will rely upon, to what extent the Plaintiff will contend that that information (taken by itself) constitutes confidential information or how compelling will be its reasons for either refusing inspection at all or for imposing stringent conditions on inspection. We do not know whether the Defendant will seek to cross-examine the expert or whether it will seek to adduce evidence from its own expert.

These are matters which can best be considered once an initial report has been prepared. To my mind, the balance has to be drawn between ordering a single court expert to report and requiring the Plaintiff to instruct an independent expert to produce a report on behalf of the Plaintiff. In my judgment, it will be far quicker and cheaper for the Plaintiff to instruct an independent expert. Time will be saved in identifying the expert and the Plaintiff’s in-house experts can assist the independent expert in getting up to speed on the precise technology involved. They can also answer the expert’s questions and provide any further documents rapidly. A single court expert will thus not be appointed.

The appropriate way forward

The Plaintiff’s independent expert will have to have access to all relevant and material documents which the Plaintiff accepts are those described in categories 1–3. It is therefore appropriate that those documents should be identified and listed in a list of documents. In that list, the Plaintiff should highlight all documents for which a claim to confidentiality is made. The list of documents (but not the documents themselves) should be filed at court and served on the Defendant.

The Plaintiff’s independent expert should be supplied with the documents on the list (and any other documents requested by him which should be the subject of a supplemental list) and then prepare a report dealing with the specified issues of fact. Once the report is prepared, the Plaintiff should identify which parts of the report and which documents referred to are said to be confidential. A redacted version of the report should also be prepared in which parts containing information which the Plaintiff contends is confidential are obscured.

The redacted version shall be filed at court and served on the Defendant and shall be free for inspection in the normal way. In addition, one copy of the unredacted report and supporting documents shall be filed at court (and be the subject of a protective order) and one copy supplied to the Defendant’s solicitors. These copies may, if the Plaintiff wishes, be numbered copies.

Prior to supply to the Defendant’s solicitors, the solicitors instructed in this action must each give an undertaking that the unredacted parts of the report and any documents said to be confidential will at all times remain within their custody and will not be inspected otherwise than by them, that they will not part company with such material or allow it to be photocopied, scanned or otherwise reproduced in any other way and that they will not disclose the contents of the material or discuss them with the Defendant or any third party, without the Plaintiff’s consent or leave of the court. They must also undertake that the material will not be used for any purpose other than the conduct of this action.

In the meantime, the Defendant should identify the independent expert it would propose to consult and name one officer in the company capable of understanding the report when explained to him or her but whose future career will not be undermined by being possessed of any confidential information which (s)he receives subject, in both cases, to an appropriate personal confidentiality undertaking. This should be done at an early stage so that any challenges by the Plaintiff to the suitability or integrity of either person can be reduced to writing and ruled upon, if necessary. In requiring this, I should make it clear that at this stage I am not deciding whether or not the provisions of O 110 r 17(2)(b)(v) will serve to prevent disclosure of the report or part of it to either person.

Time limits for carrying out these steps should be proposed by the parties for approval by the Court or, in the event of disagreement, will be ordered by the Court.

A further CMC should then be held to decide whether the Defendant needs to instruct an expert, what material (if any) that expert should have access to and on what terms and to consider whether, at that stage, any officer of the Defendant should have access to any and, if so, what material or information and on what terms. I appreciate that this will necessitate the Defendant’s advisors initially making decisions without access to an expert and without the ability to consult their client but this seems to me to be the appropriate way to move forward. I anticipate that it will be possible merely by looking at the report to conclude whether further expert input is needed.

Mr Danny Ong very fairly impressed upon me the seriousness of his client’s concerns of providing the Defendant with access to the Plaintiff’s confidential information. In this area of technology, the parties are competitors and hence he said that it was of paramount importance to the Plaintiff that the Defendant should not be placed in a better competitive position than it would have been if this litigation had not been commenced. He indicated that, as a last resort, once the Plaintiff knew what information was to be supplied to the Defendant’s expert or to the Defendant itself and on what terms, it might wish to seek leave to discontinue the action. In these circumstances, I accept that it would be appropriate to defer any order for production or inspection of confidential documents for a short period of time for the Plaintiff to assess its position.

Matters in dispute on the Order

A draft order has been drawn up following the hearing and two matters arising have not been agreed upon between the parties. First, there was a limited dispute on the the list of issues to be considered by the Plaintiff’s expert witness. This has now been settled by the Court on the basis of written submissions. Secondly, the precise background and experience of the Defendant’s officer referred to in [52] could not be agreed upon and, again, I have received written submissions.

The dispute centres on the degree of expertise that the officer should have in computer programs, systems and software, more specifically in those for algorithmic trading. The Plaintiff contends that (s)he should not possess any expertise in those fields whereas the Defendant contends that it is sufficient if the person has not been involved in the writing of such material. The difficulty as I see it in the Plaintiff’s contention lies in the lack of clarity surrounding the ambit of the word “expertise” The Defendant’s business involves running a computer operated trading platform. Any executive is likely to have some knowledge about how the system works. When such knowledge becomes “expertise” must be a grey area.

The important considerations are that the person in question must, on the one hand, be able to understand the relevance of the Plaintiff’s expert report to the action yet, on the other hand, his or her possession of the confidential information should not jeopardise that confidentiality or restrict his or her future career. The person should be a person of probity who has not been involved in writing computer programs and is prepared to undertake not to be so involved in the future.

Accordingly the Defendant’s proposed representative:

(a) shall possess sufficient seniority to understand the relevance of the Plaintiff’s expert report to the action when explained to him by the Defendant’s lawyers or independent expert (if any); but

(b) shall not have been or be involved in the writing of computer programs, systems and/or software, in particular for algorithmic trading, and

(c) shall be prepared to undertake not to be so involved in the future.