Larocca v Alvarez & Marsal Australia and New Zealand Pty Ltd

HIS HONOUR: Between 8 June 2023 and 8 August 2024, there was a mass departure of 36 personnel from the Australian professional services partnership conducted by the plaintiffs (EY), 6 of whom were partners including the second-sixth defendants (individual defendants), with all being employed by the first defendant (A&M), a global competitor of EY that had announced intention to operate in Australia from late October 2022.

The remaining partners of EY were, in the circumstances outlined below, not happy about the departure both in terms of loss of personnel and potential loss of clients. They contend that the individual defendants have breached partnership regulations and assert they may be entitled to make claims for relief against A&M and one or more of the individual defendants for engaging in wrongful conduct. [1]

Fairy tale analogies, much less fairy tale endings, are not generally the vernacular readily invoked in contested litigation involving international tax firms. Yet the “Goldilocks Zone” was parlance deployed [2] by EY’s senior counsel to explain a dilemma in the case. Put simply, he contends that EY knows enough to be concerned but not enough to make a sensible and informed decision about whether or not to commence substantive proceedings against the defendants. [3]

In Goldilocks [4] terms, he contends that EY’s knowledge (a word which I note rhymes with porridge) “is just right”, allowing for a fairly broad scope of “temperature”. [5] In Southey’s original story, the porridge of Wee Bear being “just right” was a close to ideal state, but did not satiate the old Woman as the little porridge-pot “did not hold enough for her”. [6] Unlike Goldilocks, but like the old woman, EY wants more information or knowledge. Pressing the literary porridge theme imperfectly further, essentially EY comes to the Court, a little like Oliver Twist [7] saying “Please sir, I want more [gruel]”, [8] i.e. here the request is for more knowledge.

Consequently, EY have sought to navigate out of the “zone” by making an application for preliminary discovery to address the lacuna in knowledge and to make an informed decision. Needless to say, EY’s application is opposed.

The plaintiffs are the partners of EY, a professional services partnership, governed by a partnership agreement with places of business in all Australian States and territories, other than Tasmania. [9] As at 3 July 2024, EY had 734 partners in Australia. [10]

For the purposes of the application before the Court, it was common ground that the partners of EY and relevantly the individual defendants were each bound by the terms of the Firm Partners’ Agreement Australia dated 1 July 2020 (PA) which (without attempting to be precise) imposed contractual obligations inter alia in relation to solicitation of the staff and clients of EY, non-compete clauses in relation to undertaking business the same or similar in nature to the work undertaken while a partner at EY, and prohibitions on use of confidential information belonging to EY. [11]

Pursuant to the PA, the first named plaintiff, David Larocca (Mr Larocca), as the Country Managing Partner, has all powers and responsibilities relating to EY, subject to limited carve-outs. He also has the ability to delegate his powers. [12]

EY is relevantly structured such that there are 5 service lines being relevantly (1) Assurance including Audit; (2) Consulting; (3) Strategy and Transactions; (4) Tax & Law (T&L); and (5) Core Business Services (CBS). The first four service lines are integrated client facing services and the fifth (CBS) performs internal functions. [13]

In addition to those service lines, EY has an Asia-Pacific Financial Services Organisation (FSO) market segment which provides services to clients in banking, capital markets, insurance, wealth and asset management only. [14] FSO operates across all 5 of the above-mentioned service lines. [15]

Within the T&L service line, there are (or were at the time of hearing) 6 sub-service lines [16] being relevantly (1) International Tax and Transactions Services (ITTS); (2) Global Compliance and Reporting (GCR); (3) Indirect Tax; (4) Business Tax services; (5) Law; and (6) People Advisory Services – Tax. [17]

In Australia, within the subservice line ITTS, there are 3 competencies, including one, “Transaction Tax Advisory Services”, which specialises in providing tax advice to clients considering and executing transactions. [18]

The individual defendants, respectively, Adam Woodward (Mr Woodward), Andrew Sharp (Mr Sharp), Edward Consett (Mr Consett), Sean Keegan (Mr Keegan) and Jagmohan Singh (Mr Singh), were partners within the ITTS competency of EY before they resigned and became employed by the first defendant, A&M. [19] Each of Mr Sharp, Mr Consett and Mr Keegan gave notice of their intention to retire from EY on 8 June 2023, Mr Woodward did so on 15 June 2023 and Mr Singh likewise on 3 November 2023. [20]

Overall, 36 individuals resigned and joined A&M. They had been located in T&L (31) and FSO (5). Within T&L, the numbers were 19 personnel from ITTS [21] (5 partners, 5 senior managers, 4 managers and 5 senior consultants), 10 personnel from GCR [22] (2 associate partners, 3 senior managers, 4 managers and 1 staff) and 2 personnel from Indirect Tax [23] (a senior manager and a manager). Within FSO, all from GCR, the 5 personnel were 1 partner, 2 senior managers, and 2 senior consultants. [24]

A&M is a global professional services firm, which according to its website, has offices in 39 countries. It announced the planned opening of offices in Sydney, Melbourne and Perth on 27 October 2022. It now has offices in those cities and in Brisbane. [25]

As at 8 August 2024, the individual defendants were represented on the A&M website by reference to their tax expertise. [26] For the purposes of the hearing, the relief sought against the individual defendants was the subject of some common submissions. However, certain facts attending the circumstances of Mr Singh were distinguished by all counsel and accordingly certain submissions related more particularly to Messrs Woodward, Sharp, Consett and Keegan (D 2-5).

It was not relevantly disputed that EY and A&M are competitors with respect to the provision of professional services broadly and, particularly for purposes of the present application, tax advice in relation to consideration and execution of transactions. [27]

On the hearing, Mr Pesman SC appeared for the plaintiff instructed by Baker McKenzie (BM) and in particular Mr Salgo, and Mr Mahendra with Ms Wallis appeared for the defendants instructed by Maurice Blackburn Lawyers (MBL).

The plaintiffs read and relied upon the affidavits of two EY partners, one affirmed by Scott Kenneth Grimley (Mr Grimley) on 8 August 2024 (with Exhibits SG-1, SG-2 and SG-3x) and the other affirmed by Ian Scott (Mr Scott) on 13 May 2024. The defendants read and relied upon an affidavit of Mia Pantechis, the solicitor for the individual defendants (Ms Pantechis) affirmed 2 October 2024. None of the deponents were required for cross-examination.

Exhibits SG1 and SG2 were incorporated into the Court Book. The Court Book was divided into two volumes. Pages 63-99 contained the body of the affidavit evidence from Mr Scott, Mr Grimley and Ms Pantechis. Pages 100-672 contained a chronological bundle of materials drawn from the annexures and exhibits to the deponents’ affidavits. However, within that bundle of material certain documents contained in the first Court Book (CB) (under Tab 6D) was nonconfidential material, [28] being marked as exhibit P2. The balance, being confidential material was contained within the second (Confidential) Court Book (CCB) and that was marked as Exhibit CP1. [29]

I will cite the evidence in the proceedings, as I already have, by reference to the CB, the CCB, transcript pages (T) and exhibit numbers, and cite the submissions by reference to the plaintiffs’ opening written submissions sent on [30] 27 February 2025 (POS), and the defendants’ opening written submissions dated and filed 27 February 2025 (DOS).

The relief claimed was in a common form in respect of each of the defendants, with the following being sought: [31]

For the purposes of the requested discovery, certain definitions were used. The definitions A&M, EY and Individual Defendant are self-explanatory. In addition, the following definitions were specified by EY: [32]

In respect of A&M, the categories of discovery sought were: [33]

In respect of the individual defendants, the categories of discovery sought were common with some exceptions. The common aspects were as follows:

Certain differences in the case of the individual defendants included the following:

In the case of Mr Singh: [39]

MBL in a letter dated 1 October 2024, offered, on behalf of the second-sixth defendants as a means of resolution of EY’s claims, to provide a revised form of discovery with relevant coloured changes. For the purposes of this judgment, the underlined [40] parts are the categories proffered subject to the qualifications in the bold [41] (there being more particular qualifications in the case of Mr Keegan and Mr Singh which I will note below). The proffered discovery was extracted by the representatives for the second-sixth defendants and marked as MFI-1.

In the case of Mr Keegan, MBL’s proffer of discovery did not extend to any discovery in categories 4-7.

In the case of Mr Singh, only categories 3 and 5 was proffered, limited in each case to the client set out at [128] of Mr Grimley’s affidavit.

Mr Mahendra submitted that the above-mentioned proffer of discovery provides what is reasonably necessary for EY to determine whether or not to commence proceedings, citing Globe Capital Administration Pty Ltd v Cecil Developments Pty Ltd atf the Cecil Developments Unit Trust (Receivers and Managers appointed) [2023] NSWSC 574 at [78]-[79] (Globe). [48]

Mr Pesman SC prepared an aide memoire document, marked as MFI-2, which contained four columns which addressed the plaintiffs’ claimed discovery, and the individual defendants’ proffered discovery by reference to the matters which had caused the plaintiffs to believe they were entitled to make a claim for relief and the potential claims. [49] To be clear, MFI-2 does not address the claims against A&M. [50]

On 8 June 2023, as noted, each of Mr Sharp, Mr Consett and Mr Keegan gave notice of their intention to retire from EY. On 13 June 2023, they were placed on “gardening leave”. [51]

On 15 June 2023, Mr Woodward gave notice of his intention to retire and was placed on gardening leave on 19 June 2023 with a retirement date of 15 December 2023. [52] Mr Woodward’s resignation email was in the following terms: [53]

On 3 November 2023, Mr Singh gave notice of his intention to retire and was immediately placed on gardening leave. [54]

The individual defendants were required to serve a notice period of 6 months [55] (thus Messrs Sharp, Consett and Keegan had retirement dates of 8 December 2023, Mr Woodward had a retirement date of 15 December 2023 and Mr Singh had a retirement date of 3 May 2024). [56]

In August 2023, EY became aware that a number of its employees had received offers of employment from A&M. On 29 August 2023, Mr Grimley spoke with Mr Woodward and inter alia reminded him of his ongoing obligations under the PA and indicated he would receive a deed in accordance with the terms of the PA which he was required to sign. [57]

On 29 September 2023, EY became aware of activity by employee Josephine Hong (Ms Hong) whereby between 4 August 2023 and 28 September 2023 she transferred 893 files belonging to EY and which contained confidential client information to her personal Google Drive. [58] Ms Hong subsequently resigned and signed an Undertaking in relation to the confidential information. At some later stage, she came to be employed by A&M. [59]

On 6 October 2023, EY became aware of activity by employee Eu Kin Lim [60] (Mr Lim) whereby between 1 April 2023 and 10 October 2023, he transferred 126 electronic files belonging to EY and which contained confidential client information to his personal Google Drive. [61] Mr Lim subsequently resigned and signed an Undertaking in relation to the confidential information. At some later stage, he became employed by A&M. [62]

On 12 October 2023, EY issued a letter to each of the individual defendants (other than Mr Singh) which each outlined its concerns that each may have solicited EY employees for employment at A&M in breach of their obligations under the EY PA and at law. [63]

The letter to Mr Woodward provided in part: [64]

The letter went on to remind them of their ongoing obligations to EY under the PA including (a) obligations relating to non-solicitation of EY personnel; and (b) their contractual obligations to keep confidential, and not to disclose to any future employer, any confidential information to which they have had access during their employment with EY. The letter advised that EY would take any inducement by them of an EY employee to breach this or any of their other obligations extremely seriously and requested each of them to sign a Deed of Transition and Release, pursuant to regulation 18.2 of the PA, confirming their ongoing obligations to EY.

The letters to Mr Sharp [66] and Mr Keegan [67] were in similar terms to the letter to Mr Woodward with the exception of the underlined part above.

The letter to Mr Consett was in similar terms to the letter to Mr Sharp with the exception that after the reference to regulation 22.1.3, instead of the single paragraph that followed in that letter to Mr Sharp, the following two paragraphs appeared: [68]

In the week of 16 October 2023, Mr Scott had a telephone conversation with Mr Singh in which he told Mr Scott that he had received and was considering an offer to Join A&M. Mr Scott had previously spoken to Mr Singh about the possibility of such a move and had been under the impression that he had decided to remain at EY. Mr Scott said to Mr Singh (during the telephone conversation) that he should only come to EY’s Annual International Tax Conference in New York, to be held during the week commencing 23 October 2023, if he planned on staying at EY. [69]

On 17 October 2023, Ms Hong signed a statutory declaration stating relevantly as follows: [70]

On or around 17 or 18 October 2023, Mr Scott had a telephone conversation with Jake Taylor, a director of EY who resigned to go to A&M (Mr Taylor), words to the same effect: [71]

On Sunday 22 October 2023, Mr Scott exchanged text messages with Mr Singh in which Mr Singh told him he was due to arrive in New York on 23 October 2023. [72]

On 23 October 2023, Mr Lim signed a statutory declaration in much more fulsome terms than that signed by Ms Hong. [73]

On 24 October 2023, when Mr Scott was in New York, he had a telephone conversation with Mr Singh. They discussed a number of matters including the passing of Mr Singh’s partner’s father in San Diego. Mr Scott encouraged Mr Singh to go to San Diego instead of attending the conference. Part of that conversation also included the following, or words to the same effect: [74]

On 3 November 2023, Mr Scott became aware that Mr Singh had on that day given 6 months’ notice of his intention to retire as a Partner of EY so as to commence employment with A&M. [75]

On 7 November 2023, EY’s then solicitors, Clayton Utz, sent a letter to Mr Woodward citing information regarding his roles in discussing prospective employment with A&M with Mr Taylor and enticing Mr Singh to move to A&M. [76]

The letter stated in part: [77]

It continued: [78]

The letter then made reference to “Your Obligations”, [79] (citing provisions under the partnership agreement, fiduciary duties of a partner in a firm, and the tort of contractual interference). It then made reference to remedies available to EY where its contractual and legal rights are infringed. [80] Finally under the heading “What is required of you now?”, it requested Mr Woodward to sign an undertaking. [81]

According to Mr Pesman SC, this was followed by email correspondence between Mr Woodward and a partner at Clayton Utz in which the Undertakings sought were not given. [82]

On 13 November 2023, Mr Woodward provided a signed undertaking not to solicit EY partners and employees to provide services in competition with EY. [83] Mr Pesman SC submits this undertaking did not fully reflect his obligations under the PA. None of the other individual defendants responded to the correspondence of 12 October 2023. [84]

On or around 1 December 2023, Clayton Utz issued a letter to each of the individual defendants (other than Mr Singh) referring to EY’s previous correspondence and outlining the following: [85]

On 18 December 2023, EY caused to be issued a letter to each of the individual defendants (other than Mr Singh) by their then-solicitors, Clayton Utz, regarding their failure to execute the Deed of Non-Competition and Non-Solicitation and the Deed of Transition and Release as per their obligations under the Partnership Agreement. [87]

On 26 March 2024, EY issued a letter to each of the individual defendants (excluding Mr Singh) which referred to the previous correspondence and outlined that since the last correspondence: [88]

No response was received to these letters. [89]

On 24 April 2024, EY wrote to Mr Singh which (summarised by the defendants’ counsel) asserted he had “breached his contractual and legal obligation inter alia when, while on gardening leave, he attended a meeting with representatives of A&M and a client of EY being [name redacted] for the purpose of providing a pitch to [name redacted] in relation to A&M carrying our compliance work for the company”. [90]

By a Deed of Delegation of Authority dated 18 June 2024, Mr Larocca delegated to a committee consisting of himself, Mr Grimley and Craig Robson (EY Oceania Chief Operating Officer), authority to: [91]

On 1 August 2024, the Committee met and determined that: (a) EY would commence a Court application for preliminary discovery against the defendants and cause lawyers to bring and prosecute that application; [92] and (b) it would make a further determination as to whether EY would commence any other legal proceedings against any one, some, or all of the defendants in light of the information available following the preliminary discovery application. [93]

On 1 October 2024, the individual defendants wrote to the plaintiffs (via their solicitors) and indicated, on a “without admissions” basis, that they would be prepared to produce documents in relation to certain specified categories as sought by way of this application for preliminary discovery (the Limited Categories), provided that the plaintiffs agreed to limit their request for discovery to those Limited Categories. [94]

By letter dated 8 October 2025, the plaintiffs (via their solicitors) rejected the invitation to limit the categories for production being sought. However, on 15 October 2025, the plaintiffs requested that that those documents falling within the Limited Categories be produced to the plaintiffs’ solicitors such that only the balance of the documents sought would remain in issue at the hearing of these proceedings. The individual defendants did not respond to this correspondence. [95]

Within the Australian legal system, there are provisions for preliminary discovery. Those provisions are not uniform as between all courts. Specifically, there are differences between the provisions which operate in the Federal Court of Australia (Federal Court) and those which relevantly apply in this Court.

The Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provide for three different types of “preliminary discovery”, being discovery: (a) to ascertain prospective defendants’ identity or whereabouts; [96] (b) to obtain documents from a prospective defendant; [97] and (c) to obtain discovery of documents from other persons. [98]

An applicant for an order for preliminary discovery to obtain documents from a prospective defendant is required to satisfy the elements in r 5.3(1) of the UCPR, which enliven a discretion to make an order.

Rule 5.3(1) of the UCPR provides:

Despite preliminary proceedings often being commenced by summons (which gives them the appearance of final orders), the preponderance of authorities is that applications for preliminary discovery are interlocutory in nature and any resulting orders have interlocutory legal effect. [99]

Consistent with that understanding, determination of an application for preliminary discovery under r 5.3 of the does not involve determination of the merits of any claim for relief an applicant might propound. [100]

It has also been described as being a form of summary procedure which does not involve a form of minitrial, [101] and generally (though without being prescriptive) are conducted without any (or any significant) cross-examination. [102]

Being interlocutory, subject to principles regarding abuse of process and repeated interlocutory applications, [103] ordinarily there is no bar to a further application, for example, if there is a material change of circumstances.

Perhaps to dispel any doubt about the applicability of ordinary Court procedures to applications for preliminary discovery, the UCPR expressly contains incidental or ancillary provisions which clarify that the same provisions regarding discovery in ordinary proceedings (specifically provision of a list, verification and certification, [104] security for costs [105] and privilege [106] ) apply to an order for preliminary discovery. Further, there is a specific provision which enables the Court to address costs and expenses associated with preliminary discovery proceedings and orders. [107]

As I observed above, the preliminary discovery provisions which apply in the Supreme Court differ to some degree to those that apply in the Federal Court.

The proper guide for application of the preliminary discovery provisions under r 5.3 of the UCPR is set out in the decision of the Court of Appeal in O’Connor v O’Connor [2018] NSWCA 214 (O’Connor). Simpson AJA stated that it can be seen from the terms of r 5.3(1) that an order may be made against a prospective defendant where certain things appear to the Court at [21] (McColl and Macfarlan JJA at [1] and [2] agreeing), namely:

Overarchingly, the provisions of the rule are “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”. [108]

Importantly, there is a material difference between the aspect of the provisions applicable in the Federal Court of a “reasonable cause to believe test” and the “appears to the court” chapeau to r 5.3(1) of the UCPR.

In considering an appeal of a decision to refuse the preliminary discovery orders sought, Simpson JA in O’Connor emphasised that important difference. [109]

Specifically, her Honour observed that:

Given the language of r 5.3 and the comments of Simpson JA extracted above, it is clear the relevant threshold is whether it “appears to the Court” that, among other things, the plaintiff “may” be entitled to make a claim for relief.

The parties’ outline of submissions addressed caselaw (principally but not exclusively being the Court of Appeal’s decisions in O’Connor and Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506; [2010] NSWCA 69 (Hatfield)) in seeking to explain certain of these elements and provisions under r 5.3 of the UCPR. I address these now.

Unfortunately, despite the emphasis in O’Connor that r 5.3 of the UCPR imposes no “reasonable cause to believe” test, both the parties’ written outline submissions in setting out the applicable principles consistently referred to that test rather than the “appears to the court” that a cause of action “may exist” test. [110]

Mr Pesman SC (who had not prepared EY’s submissions) did not readily fall into that error. However, Mr Mahendra during his oral submissions often deployed the (incorrect) “reasonable cause to believe” terminology. [111] Further, Mr Mahendra by reference to that test made submissions that such belief “requires more than mere assertion and more than suspicion or conjecture”, [112] it being “an inclination of the mind towards assenting to, rather than rejecting a proposition”. [113] Whilst that is terminology referred to in Hatfield, [114] it is linked to the “reasonable cause to believe” wording. Notably in O’Connor, in the passage Simpson JA cites from Hely J’s decision in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 (St George), her Honour expressly omitted reference to a number of the propositions stated by Hely J at [26] including relevantly that:

Her Honour stated that she omitted propositions in [26] (c), (d) and (e) of Hely J’s judgment as these deal with one of the differences between the then Federal Court Rule and Rule 5.3. [115] Further, Simpson JA in extracting McColl JA’s summary of the relevant principles in Hatfield again expressly “omitted references to authorities concerning those parts of the Federal Court Rule that impose a test of “reasonable cause to believe” as distinct from the presently applicable “it appears to the court” test. [116]

The Court of Appeal in O’Connor does not otherwise refer to the “appears to the court” test by reference to any requirement of a threshold exceeding suspicion or conjecture.

I have had regard to the parties’ submissions regarding “reasonable cause to believe” which I have referenced above, including submissions on the circumstances that would satisfy or fail that test. However, having regard to the binding authority of O’Connor, for the purposes of determining the matter, I will apply the rule under r 5.3, being whether it “appears to the Court” that, among other things, the plaintiff “may” be entitled to make a claim for relief and not the “reasonable cause to believe” test.

Regarding the first element, a “claim for relief” is to be understood by reference to that expression within the provisions of the Civil Procedure Act 2005 (NSW) (CPA). [117] The expression is broad, ranging in content including claims for the recovery of damages or other money, declarations of right and determinations of any question or matter that may be determined by the Court and any other claim (whether legal, equitable or otherwise) that is justiciable in the Court. [118]

In “order for it to ‘appear’ to the Court that the applicant ‘may be entitled’ to make a claim for relief, it is not necessary for the applicant to show a “prima facie or pleadable case”. [119] The “use of the word “may” indicates the court does not have to reach “a firm view that there is a right to relief”. [120] Simpson JA in O’Connor states:

Regarding the second element, “what amounts to ”reasonable inquiries” is a question of fact to be determined having regard to all the relevant circumstances of the particular case:

Regarding the third element, as to sufficiency of information, McGrath J stated in Muscat: [123]

Regarding the fifth element, “[t]he court is entitled to take into account the relationship (if any) between the applicant and the prospective defendant and whether there are other means of obtaining the information. The cost, delay and utility or uncertainty of resorting to those alternative means is also relevant”. [124]

Once those matters are established, the Court may order the prospective defendant to give discovery to the applicant of all documents that are or have been in the prospective defendant’s possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief. [125]

As mentioned above, the provisions of the UCPR which apply generally to discovery of documents in proceedings, [126] being relevantly preparation of a list of documents, [127] and verification of discovery, apply to an order for preliminary discovery. [128]

An order for preliminary discovery does not require the producing party to disclose any privileged document that could not otherwise be compelled in ordinary proceedings between the parties or by subpoena in proceedings involving the applicant. [129]

The verification obligations relevantly are:

Having set out the legal principles, I will now address the evidence said to bear upon the question of whether the elements explained above are met.

Various terms of the PA were referenced in the evidence, including regulations 18.12, 22 and 32. A copy of the PA effective 1 July 2020 is in evidence. [132] There is no dispute that the purportedly applicable above-mentioned regulations are accurately set out in that document. [133] Further, there is no dispute that the individual defendants had signed Joining Deeds relevantly confirming that they had been supplied with a copy of the PA and acknowledged (or were bound by) the terms therein. [134]

Mr Pesman SC referenced various provisions of the partnership agreement including:

Having regard to the emphasis on regulations 18.12, 22.1 and 32.1 it is appropriate to set them out.

Regulation 18.12 states: [141]

Regulation 22.1 of the PA relevantly states: [142]

Regulation 32.1 states: [143]

“Garden leave” (also called “gardening leave”) refers to arrangements where an employee is paid to stay away from work, typically during a notice period following termination or resignation. Employment contracts usually define the precise terms of garden leave. Like many contractual provisions, these terms are often defined negatively, leaving open what can be done but recording specifically what cannot be done. Such clauses are negotiated and included to benefit one or more parties to the contract.

The Oxford Dictionary (online ed) defines it as “Suspension from work on full pay for the duration of a notice period, typically to prevent an employee from having any further influence on the organization or from acting to benefit a competitor before leaving”.

Seemingly, the earliest known use of the noun gardening leave is in the 1980s. [144] The etymological basis for the label “garden” or “gardening” leave is not entirely clear. Perhaps gardening was considered as a suitably innocuous activity to portray any form of generic pastime in counterpoint to work. The basis need not be probed. However, one should understand that “gardening” leave is a type of misnomer as “gardening” per se is not generally contemplated by the parties, let alone mandated under the contract. That point was gently parodied or at least highlighted by the fictional character “Sir Harry Pearce” in “Spooks” who, upon his probationary return to work, having been stood down from his position head of “Section D” (the counter-terrorism department) in MI5, in response to Dimitri Levendis’ tentative query “How was your, um .. break,” (Sir Harry) dryly responded, [145] “At one particularly dark moment I actually considered gardening”. [146]

Unsurprisingly, here the restraints of conduct on the relevant partner under the expression “garden leave” is the subject of contractual provision. [147]

Regulation 19.2.1(iii) states:

Mr Pesman SC summarised certain of the material parts of the evidence relating to the individual defendants. Whilst inferences to be drawn from the evidence was disputed, the essential summary of facts was not relevantly disputed. Accordingly, without making any particular finding in respect of such facts, I set out below the gist of Mr Pesman SC’s summary, including his suggested inferences in respect of those individuals.

In the case of each of Mr Singh [148] and the other individual defendants, Mr Pesman SC referenced material indicating they had worked with the other defendant partners and many of the employees who had resigned from EY to move to A&M, including relevantly in the case of:

Mr Pesman SC contends that the evidence shows that, while remaining a partner of EY, and during his notice period, Mr Woodward had: (a) discussed prospective employment with A&M with Mr Taylor, a director of EY who resigned to go to A&M; [156] and (b) played a part in enticing Mr Singh to move to A&M, telling Mr Singh that he (Mr Woodward) needed Mr Singh at A&M. [157] Mr Scott gives an account of his conversation with Mr Singh on 24 October 2023. The attempted enticement of Mr Singh to move to A&M occurred very shortly prior to Mr Singh in fact giving notice of his intention to retire from EY, [158] by email dated 3 November 2023. [159]

Mr Woodward had either been the primary partner contact or had been working on tax structuring on behalf of 3 clients which had taken tax assignments to A&M and Mr Pesman SC submits that in one of these cases it is possible that work was performed by Mr Woodward prior to the termination of his partnership with EY. [160]

Mr Pesman SC submitted that Mr Sharp discussed prospective employment with A&M with Mr Taylor, [161] and had previously performed tax work for a client while a Partner of EY, which client had taken tax assignments to A&M. Mr Pesman SC submits it is possible that work was performed by Mr Sharp for this client on behalf of A&M prior to the termination of his partnership with EY. [162]

Mr Pesman SC referenced Graham How, one of the employees who had moved to A&M as having been counselled and supported by Mr Consett in his career development and performance. [163] In addition, Mr Pesman SC pointed to a client which had taken tax assignments to A&M, for which Mr Consett had performed tax work while a partner at EY. He referenced information to the effect that Mr Consett is now the lead partner for A&M for tax restructuring and tax vendor due diligence work. [164]

While remaining a partner of EY, and during his notice period, Mr Keegan had discussed prospective employment with A&M with Mr Taylor. [165]

Mr Pesman SC referenced 3 employees – Mr Taylor, Aaron Clarke and Rosanna Lau – as well as Mr Singh, for whom Mr Keegan had the role of counsellor and was responsible for these employees’ and Mr Singh’s career development and performance. [166]

In respect of Mr Singh, Mr Pesman SC referred to the discussions with Mr Woodward and Mr Scott. [167] Mr Pesman SC further referenced material: (a) indicating that some two weeks prior to the end of Mr Singh’s notice period, via email on 16 April 2024, he stated that there were no current or potential business opportunities he was pursuing; [168] and (b) setting out circumstances involving Mr Singh engaging with an EY client and a meeting between Mr Woodward, Mr Singh and representatives of an EY client, prior to 19 April 2024. [169]

Mr Grimley is the current Oceania T&L Leader. [170] He expresses an opinion that: [171]

The basis for the opinion and his concerns is said to be as follows: [172]

There was some debate regarding the admissibility of paragraphs [145]-[151]. I admitted that material essentially on the basis that it demonstrated the opinion and concerns of Mr Grimley. [173] Mr Mahendra expressed some concern that the evidence should be limited to Mr Grimley’s subjective opinion as opposed to the truth of what is asserted. [174] Mr Pesman SC, who initially indicated that I should read them as submissions and not evidence, [175] nonetheless submitted that the material was relevant to demonstrate that Mr Grimley had a reasonable basis for his concerns rather than to prove that the basis for his concerns would ultimately be found. [176]

Mr Grimley’s concerns had some factual foundation. For example, his evidence regarding the timing of resignation and the areas within EY in which the personnel worked is self-evidently fact. On the other hand, his expressed concern of the involvement of D 2-5 in solicitation conduct is not admissible to demonstrate the fact of solicitation but was nonetheless based upon certain facts and other matters from which he has essentially stated that an inference of solicitation is available. Indeed, Mr Pesman SC referenced these concerns in making submissions regarding the claims for relief.

In relation to regulation 18.12 (Documents to be executed in connection with a Termination), Mr Grimley states: [177]

In relation to A&M, Mr Grimley states: [178]

In relation to the Committee’s decision regarding institution of proceedings, Mr Grimley states: [179]

Having set out the relevant legal principles and the evidence said to bear upon the application of those principles, I will now address the five elements as articulated by Simpson JA in O’Connor required to enliven the Court’s power to make preliminary discovery orders under r 5.3 of the UCPR.

Mr Pesman SC contended it was not necessary for EY to demonstrate a fully formed cause of action, instead all that was required was a plausibility about its claims. [180] In this regard he referred to the claims described by Mr Grimley. [181]

The prospective (or potential) claims for relief identified by EY against the individual defendants are as follows. EY has concerns [182] that the individual defendants collectively agreed to (and did) resign from EY to take up opportunities at A&M and to solicit employees, partners and clients of EY to do the same, in breach of:

The potential cause of action against A&M identified by EY is that A&M induced, facilitated or were otherwise knowingly involved in such breaches. [183]

In support of the contention that EY ‘may be entitled’ to make the above-mentioned claims, EY submitted that:

A&M contend that no cause of action against it has been properly articulated. [204]

Despite what I have stated above regarding the correct test, A&M submits that, in any event, there is no proper evidentiary basis disclosed in EY’s evidence to ground a “reasonable belief” that they may have a right of action against A&M. Rather, it says the application was no more than mere assertion, suspicion or conjecture. [205] Mr Mahendra emphasised this was because none of the evidence inclined the mind towards the matter-of-fact in question. [206]

Specifically, A&M submits that, [207] by reference to Annexure A of the summons, the documents identified in categories 2 and 7 seemingly relate to A&M’s knowledge of the solicitation of EY employees by the individual defendants, [208] no cause of action against A&M has been properly articulated, [209] and, in any event, there is no proper evidentiary basis disclosed in EY’s evidence to ground a “reasonable belief” that it may have a right of action against A&M. [210]

In elaborating on the supposed lack of claim against A&M, Mr Mahendra contended that there is no plausible Barnes v Addy (1874) LR 9 Ch App 244 (Barnes v Addy) claim. Rather, the only action available was essentially a tortious claim of inducement of a breach of contract. [211] In that regard he intimated that Mr Pesman SC had effectively conceded that inducement of breach of contract was the only cause of action available to the plaintiff. [212] I will return to this below. However, it suffices for me to simply note that Mr Mahendra contended in relation to a tortious claim that it would be necessary to demonstrate that A&M knew of the contract as between the personnel and EY, knew of its terms and induced or procured the personnel to act so as to be in breach of the contract. [213]

The individual defendants apprehend by reference to Annexures B to F of the summons that: (a) categories 1, 2 and 3 appear to be directed to contractual and legal breaches regarding the solicitation of EY employees by the individual defendants; [214] (b) category 4 is directed to allegations of confidential information belonging to EY being shared by employees at EY with employees at A&M; [215] (c) categories 5 and 7 appear to be directed to issues of the solicitation of EY clients, breach of non-compete clauses and/or misuse of confidential information the property of EY; [216] and (d) category 6 is directed to the sending by the individual defendants of the PA to A&M. [217]

The individual defendants argue that EY cannot be said to have a reasonable belief of a “right of action” against the defendants regarding: (a) alleged breaches of confidential information (category 4); and (b) sending of the partnership agreement (category 6). They contend that, in the absence of any relevant evidence, the application is based on mere assertion, suspicion or conjecture. [218]

In relation to Mr Singh, and specifically in relation to category 1, Mr Mahendra submitted that there is no allegation of him having solicited employees and accordingly the claim rises no higher than mere speculation. [219]

Mr Pesman SC submitted that:

In relation to the distinction in respect of category [1] regarding Mr Singh, Mr Pesman SC responded that no documents are sought against him in respect of any allegation of solicitation. [222]

Occasionally in preliminary discovery cases there may be some doubt as to whether the suggested claim for relief is either known to law or a plausible claim. In O’Connor, a significant basis of the appellants’ claim against the respondents laid in the decision of this Court in Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWCA 199. [223]

The potential claims for relief identified by EY against the individual defendants are claims well known in law. They are based at least in contract and equity.

In those circumstances, consistent with authority, neither counsel saw need to: (a) provide any submissions regarding the law of the extent (and any relevant breaches) of fiduciary duties and duties to act honestly and reasonably; (b) provide analysis of post-termination obligations; or (c) address obligations of confidentiality arising out of PA obligations (or otherwise).

Under the general law, it will be a breach of the implied contractual obligation of fidelity if, during the course of employment, an employee approaches other staff to see whether they will join the employee in the event that the employee establishes a competing business. [224] A second limb of Barnes v Addy of knowing assistance in respect of such a breach may conceptually arise and even be advanced. Whether such a knowing assistance case is successful will depend upon the facts. In some cases, it has failed. [225]

In relation to A&M, I do not accept Mr Mahendra’s submission that Mr Pesman SC effectively conceded that no Barnes v Addy case could be advanced. Mr Pesman SC put the “knowing concern” claim against A&M more generally. I did not understand him to either confine EY’s claims merely to a tortious claim or indeed to contend that it was necessary at this preliminary stage to identify with precision the “multiple rules” in the law “in relation to getting involved in breaches” [226] (whether by accessorial or ancillary liability or some other appellation). Further, part of Mr Pesman SC’s response was that “it may be that Alvarez & Marsal didn’t have the relevant intention required for Barnes v Addy and so forth. That is a matter which we are entitled to investigate.” I do not view that as a concession that such a case could not be advanced but rather an articulation of why the preliminary discovery application is being made.

In interlocutory contests, the Court is usually reluctant to be overly prescriptive of what ultimately facilitates the administration of justice in proceedings at a point in time when issues may be identified by reference to pleadings or other documents but nonetheless real and precise issues may not be entirely clear or elucidated. [227]

I am satisfied that as against the individual defendants what is contemplated by EY as potential claims are sufficient to engage r 5.3(1)(a) of the UCPR and not be rejected on the basis that they cannot constitute “claims for relief”.

As explained above, the relevant test for the first element is whether it “appears to the Court” that the applicant “may” be entitled to make a claim for relief.

Mr Mahendra’s submission that the claims of EY were no more than mere assertion, suspicion or conjecture because none of the evidence inclined the mind towards the matter-of-fact in question [228] is rejected.

The ordinary English meaning of the noun “assertion” conveys a form of positive statement or declaration which is unsupported. [229] The noun “suspicion” relevantly connotes belief or imagination of the existence of a fact “on slight evidence or without evidence” [230] and the noun “conjecture” conveys “the formation or expression of an opinion without sufficient evidence for proof”. [231]

At this preliminary stage, EY contends that certain facts, including what I have termed the mass departure facts, suggest some form of collective action by A&M and the individual defendants. Principally, at this stage, EY contend that the mass departure facts give rise to inferences [232] that would make it appear to the Court that the conduct of the individual defendants was in concert or collective to some (so far) unknown extent [233] and that potentially A&M were knowingly concerned in or coordinated that conduct. [234]

Helpful (but by no means exclusive) observations were made by Mahoney JA in Jones v Sutherland Shire Council [1979] 2 NSWLR 206; (1979) 40 LGRA 323 (Jones). His Honour observed that whether a particular inference can and should be drawn is often difficult to answer, and the principles by reference to which it is to be answered are not clear and may vary according to the kind of inference to be drawn. [235] His Honour addressed a number of matters, including the question of whether an inference is one which is capable of being drawn. His Honour considered that process of inference, and the validity of it, is based ultimately upon what has been the human experience in respect of the particular matter and “the process of logic is normally employed to test, or to give a post hoc rationalization to, inferences otherwise derived”. [236]

The justification for drawing inferences by reason alone of previous experience can and will vary depending upon whether one is dealing with physical phenomena or between a given fact and a human act. [237]

There may be forms of cases in which questions arise as to whether a particular individual has, based on prior conduct, acted in a certain way (whether that is characterised as tendency evidence or not). However, the inferences regarding human nature are considered by reference to what humans generally do, not by reference to what a particular individual has been found to do. [238]

In the case under question, there are various fixed or given facts and human acts. At an interlocutory stage, it is not necessary or even appropriate to probe deeply the basis of EY’s claims.

The resignations of Mr Sharp, Mr Consett and Mr Keegan all happen within 101 minutes of each other on 8 June 2023. [239] Each of Mr Sharp, Mr Consett and Mr Keegan use the expression “… give notice of my retirement from the EY Partnership effective immediately”. [240] Whilst the balance of their resignation emails are in different wording, they are all relatively brief statements and each of them use the adjective “smooth” in describing transition arrangements. [241]

The mass departure facts, including the timing and volume of resignations within a relatively discrete service sub-line of EY, and the fact that all those that resigned joined A&M, is sufficient to satisfy the requirement that it appears to the Court that EY may be entitled to make a claim for relief against A&M and the individual defendants. There must have been some relevant discussions between one or more of the individual defendants and A&M. There must have been offers of employment by A&M. Generally, people do not become employed unilaterally without any involvement of an employer or without any degree of incentive to be employed by the employer and consideration of incentive by the prospective employee.

It may be that if the true facts are ultimately known (whether by curial proceedings or otherwise) it might be seen that the mass departure happened without any impermissible conduct on the part of any of the proposed defendants. However, that does not need to be determined at this stage.

As expressed by Simpson JA in O’Connor, whilst the applicant needs to provide some particularisation of the nature of the relief in contemplation, it does not need to specify with precision the cause of action proposed. [242] I find that EY has satisfied this element in relation to both the claims against A&M and the individual defendants, such that it appears they may have a claim for relief.

There has been correspondence between EY (and its lawyers) with the defendants and their lawyers.

There is suggestion, which Mr Pesman SC pre-emptively addressed (and I will record below), to the effect that EY had not made reasonable inquiries, in the sense that one avenue, namely, contact with their clients, was open to them but had not been availed of.

Otherwise, according to Mr Pesman SC, whilst the defendants have complained about the breadth of the categories, there is no suggestion, let alone evidence, that production of the requested categories would be oppressive. [243]

A&M submits, [244] by reference to Annexure A of the summons, that:

The individual defendants contend that EY has not established that it has made ‘reasonable inquiries’ given there is no evidence before the Court of EY having made attempts to obtain information from companies such as [names redacted], noting that the costs of EY making such inquiries, such as by sending a letter, would have been nominal. [247]

In respect of reasonableness of inquiries, as is evident from above, the main ground of contention on the part of the defendants focused upon the request for documents bearing upon solicitation of clients, noting that there is no evidence of such inquiries, beyond for example EY’s (or their lawyers’) correspondence with the individual defendants and A&M. Specifically, it was suggested that an avenue open to EY is to contact its clients. There was also some suggestion that EY should have made further inquiries to Ms Hong relating to her reasons for copying the confidential material.

The plaintiffs relied on BGC Securities (Australia) Pty Limited v Shillington [2022] NSWSC 611 (BGC) in which Henry J considered that it would not be reasonable to expect the plaintiff to make inquiries with its own clients (with whom it had an ongoing commercial relationship) about what dealings they were having with the defendant who worked for a competitor. [248] Nonetheless, Her Honour did observe that a potential line of enquiry may have been for the plaintiff to interrogate its own records to try to identify whether it had lost any business or income from any of the defendant’s allocated clients and counterparty with whom he had dealt with prior to his departure. The evidence on the part of the plaintiff did not address that but rather simply asserted that it did not know whether the defendant contacted any of its clients during his restraint period or caused loss and damage. Whilst her Honour considered that the relevant plaintiff’s officer’s evidence was not entirely satisfactory, she was not persuaded that the plaintiff’s failure to interrogate and give evidence about its own records was fatal to an application for preliminary discovery in relation to documents sought under a particular category. [249]

The situation in BCG was a bit different to the facts here. Overall, I accept Mr Pesman SC’s submission. [250] By analogous application of the reasoning of Henry J, I do not think on the facts here that it would be reasonable to expect EY to make inquiries with its clients (with whom it has an ongoing commercial relationships) about what dealings they were having with any of the defendants.

Further, whilst I understand Mr Mahendra’s submission that there is no evidence of EY making any further inquiries of Ms Hong, [251] in context that is not particularly remarkable. The fact is that Ms Hong resigned within days of the report from the EY investigatory meeting with Ms Hong in which the reporting officer Ingrid Fennessy recommended a first and final warning be issued to her. [252]

I am satisfied that EY’s claim for preliminary discovery should not be rejected on the basis that it has not made reasonable inquiries either in respect of A&M or the individual defendants.

The crux of EY’s dilemma is that the little bit of information it does know, which includes, for example, that the departing partners breached their obligations to sign a termination notice, is in the scheme of things de minimis [253] and they wish to know whether there are wider claims available which will demonstrate whether there is utility in litigating. [254] Those wider claims, Mr Pesman SC contends, are very much dependant on the degree of coordination between the individual defendants inter se and as between themselves and A&M. [255] One Goldilocks zone example he says is that A&M either had or did not have prior to the commencement of these proceedings a copy of the PA or information about it. The answer to the question he submits is a necessary component of any claim that EY might wish to make but of which they are presently ignorant. [256] Prior possession of the PA would according to Mr Pesman SC have given A&M important awareness of the extent of any constraints as it would affect their ability to conduct their business. [257]

Mr Pesman SC contended that “there is an odd aspect of the defendants’ approach to this litigation which is to say in relation to [A&M] you have got absolutely no case and in relation to the individual defendants you have everything you need to bring the case”. [258]

Mr Pesman SC submitted:

Lastly, Mr Pesman SC submitted that the Court would not lightly second guess the Committee’s resolutions, in circumstances where:

A&M submits that, [262] by reference to Annexure A of the summons and the documents identified in categories 4 and 6 in relation to the issue of potential employment during gardening leave, EY already possesses information relevant to its entitlement to make a claim and has sufficient information to decide whether to commence proceedings. [263]

The individual defendants resist the application on the basis that EY already has sufficient information to determine whether to commence proceedings in relation to contractual and legal breaches regarding the solicitation of EY employees by the individual defendants. [264]

Further, they contend that:

Mr Mahendra spoke to this in oral submissions, referring to the 12 October 2023 correspondence in which EY asserted in relation to Mr Woodward: [267]

He made similar submissions in relation to Mr Sharp, Mr Consett and Mr Keegan. [268] He contended in relation to those individual defendants that EY believe that they do have a cause of action which is not consistent with the criteria for a preliminary discovery application. [269]

Mr Mahendra elaborated on this by reference to the Clayton Utz letter to Mr Woodward dated 1 December 2023 contending that EY had by this time formed the view that Mr Woodward had solicited Mr Singh to join A&M and Mr Woodward with Mr Sharp, Mr Keegan and Mr Consett, solicited employees of EY. Mr Mahendra submitted that on any objective view, they had sufficient material available to them to commence proceedings in respect of a non-solicitation of personnel claim. [270]

Regarding a potential claim in respect of solicitation of clients, Mr Mahendra referred to [271] material bearing upon Mr Woodward’s [272] and Mr Sharp’s [273] alleged involvement. Mr Mahendra specifically referred to EY’s claim regarding solicitation of clients which made reference to 3 particular clients said to have taken their tax work from EY connected to Mr Woodward’s departure to A&M. [274] He contended that EY have sufficient information to make a determination about whether to commence proceedings in respect of those clients. [275] In any event, he says that the individual defendants or more particularly Mr Woodward has proffered documents in respect of this issue. [276]

In respect of Mr Singh, Mr Mahendra contended that there is nothing in the evidence suggesting that he was involved in solicitation of employees or partners from EY to A&M. The tenor of his submissions in this regard is that EY have not been sufficiently nuanced or meticulous in distinguishing his situation from the other defendants but rather been unrefined treating “all of the individual defendants as a job lot”. [277]

Mr Pesman SC submitted (in chief, but essentially in reply) that I should reject the defendant’s submissions that EY had (as in Contour) made an unequivocal decision to commence claims and further that in any event it had not exhausted avenues of enquiry. In this regard, he referred to the comments of Henry J in BGC.

In addressing the issue of the alleged fixed resolve of EY to commence proceedings, Mr Pesman SC submitted that it was not open to the defendants to (reasonably) submit that the application for preliminary discovery should be dismissed on the basis that the Committee had already made a decision to commence (substantive) proceedings against the defendants or any of them. [278] I noted that Mr Grimley had not been cross-examined regarding the resolution. [279] Mr Mahendra submitted I was not bound to accept what is put by Mr Grimley and that he was not bound (by the rule in Browne v Dunn (1893) 6 R 67) to cross-examine Mr Grimley, if there is (other) objective material demonstrating that there had been a previous decision to commence proceedings based on a certain state of affairs. [280]

It is not clear to me what other objective material Mr Mahendra was referring to. If he had in mind statements in correspondence from EY and Clayton Utz, I am not sure that such statements conclude the matter. It is relatively common for parties or solicitors to make assertions about litigation intentions in correspondence. The ultimate effect of such statements needs to be considered not merely within the immediate letter but in the broader context of other correspondence on the topic. If later material suggests no definitive decision has been made to commence litigation, or that an initially announced decision has been revised, such material should not be ignored.

Mr Grimley was not cross-examined regarding any earlier statements. Whether any earlier statements constitute forensic posturing or genuine intention at the time, the current position remains that EY, according to Mr Grimley, has not unconditionally decided to commence proceedings against A&M, but wishes to consider its position in light of information available following the preliminary discovery application. I am not satisfied that the EY partners have by any earlier decisions (reflected in correspondence with the defendants or their legal representatives or otherwise) acted in such a way as to preclude them from obtaining preliminary discovery relief.

In Contour, Barrett J dismissed an application for preliminary discovery on the basis that, on the plaintiff’s own evidence, the threshold condition created by the “unable to obtain sufficient information to decide” was not satisfied. His Honour’s reasoning was based on correspondence that the plaintiff’s solicitors had with each of the defendants indicating unequivocally that, on their assessment, the plaintiff “is entitled to commence” proceedings against them. His Honour considered that “one must infer that the plaintiff has (and has given to its solicitors) information which, upon a proper assessment by the solicitors, is sufficient to support a decision to commence proceedings”. [281]

In BCG, Henry J did not accept the defendant’s submission that the terms of the correspondence indicated that the plaintiff had, akin to the position in Contour, formed a clear and unequivocal view that it had sufficient information to commence substantive proceedings against the defendant for breach of the contract or other claims for relief (despite the assertion of repudiation). [282]

I reject the submission that the correspondence by EY or Clayton Utz decisively proves EY has determined that it has sufficient information to commence proceedings. It is not unusual for pre-proceeding correspondence to be written in relatively strong or apparently conclusive terms. Properly contextualised, in light of all the circumstances, it seems to me that EY and/or Clayton Utz were, in light of a paucity of information in respect of a very serious matter (departure of a significant number of staff), attempting by brinkmanship or tactical manoeuvre to draw some form of information or hopefully admission or at least concession from the defendants as a form of not merely damage control but to consider what it could do regarding the significant blow to its business.

Overall, I do not consider that the correspondence precludes EY from satisfying the threshold of being unable to obtain sufficient information or otherwise precludes it from obtaining some preliminary discovery relief.

The individual defendants submit that EY is not properly engaged with them in relation to their offer of limited discovery. [283] It is not entirely clear to me what the phrase “not properly engaged” is precisely intended to convey. However, at least for the reason that the offer attempted to preclude or forestall any other request for documentation, I reject the submission as being a basis to decline the making of an order for preliminary discovery.

For essentially the same reasons, I reject the submission that EY is using the preliminary discovery process to build a case that they have “already decided to pursue”.

A&M submits, [284] by reference to Annexure A of the summons, that the documents identified in categories:

During oral submissions, Mr Mahendra explained A&M’s resistance to the categories of documents sought by EY (which he submitted ought not to be the subject of any order for discovery). He contended in respect of the categories that they were “broad ranging categories” [288] and specifically:

Further, Mr Mahendra submits that if I were to decide against the submission that EY’s claim against A&M satisfied a threshold of “reasonable belief” then only category 5 of documentation should be made available to it. [294] However, he also contended that discovery in respect of category 1 against Mr Woodward would for example catch any copy of the PA or extracts of it provided by Mr Woodward during the course of his recruitment by A&M, and on that basis it would not be necessary to give discovery against A&M.

The individual defendants say that in any event they have proffered some information and that ought to be enough to sufficiently satisfy any legitimate request for information, [295] even if it does not entirely satiate EY’s thirst for knowledge.

To be clear, the categories of documents being MFI-1 was not merely utilised by the individual defendants as a pre-application offer. Mr Mahendra made reference to MFI-1 at least for the purpose of debating the application and the enlivening criteria for preliminary discovery.

Specifically, Mr Mahendra submits that, in relation to Mr Woodward, the bolded limitation in categories 1-3 is justifiable on the basis that the only reasonable basis upon which the Court would infer that he had some little involvement in recruiting or soliciting employees would be if there was evidence that he had some level of responsibility or influence over those employees. [296]

Mr Pesman SC took particular umbrage to the contention that the categories were broad-ranging. [297] He contended that the categories were precisely targeted to eliciting documents regarding what A&M knew and when A&M knew it. [298] In any event, he added that “broadness” and “suspicion” are meaningful only by reference to facts. Thus, if the defendants (as they have done) have chosen not to explain what occurred with the departure, leaving a void of facts, it lies ill in their mouth to complain that the category is “too broad”. [299]

Mr Pesman SC submitted regarding the A&M claim for discovery:

In relation to the copying of documents by Ms Hong, I understood the tenor of Mr Pesman SC’s submissions to mean that the evidence of EY’s investigatory meeting does not quell EY’s concerns regarding what information may have arrived at A&M via Ms Hong. [306] I note the email report dated 10 October 2023 which sets out a summary of Ms Hong’s responses to a meeting interview states in part: [307]

Mr Pesman SC stressed that the Relevant Period is “a period ending before while they still based on the last two years but before they go to A & M whether or not they were attending the offices of A & M for the particular purposes”. [308]

In respect of category 3, Mr Pesman SC submitted that the period sought (1 July 2023 to date) essentially covers the period in which the individual defendants were on “light duties” (I infer “garden leave”). He maintained that A&M are well capable of working out which clients or potential clients are covered by inquiring of the individual defendants. [309]

In relation to the categories sought against the individual defendants, Mr Pesman SC noted that:

Further he submitted that the bolded limitation of documents bearing upon the solicitation of EY personnel would destroy the utility of the offer [312] in the case of:

There is no suggestion that A&M have no documents potentially falling within any of the categories. Nor, even having regard to Mr Mahendra’s asserted broadness of categories 3, 4 and 6, is there any suggestion that production would be onerous.

I accept Mr Pesman SC’s submissions in relation to categories 1(a) and(c).

In relation to categories 1(b) and 2, the test is not whether there is any evidence before the court of individuals contravening their contractual obligations regarding use of confidential information belonging to EY. Nor is the test whether evidence of breach of obligations has been explained or whether the individuals who copied information are parties to the proceedings. The category for discovery is directed to A&M, not to the individuals. There is evidence of both Ms Hong and Mr Lim having copied information. Ms Hong made a statutory declaration in very limited terms regarding her use of the copied information, while Mr Lim’s declaration was in much more fulsome terms. I consider the request for documents under 1(b) to be reasonable.

In relation to categories 3, 4 & 6, I accept Mr Pesman SC’s reply regarding alleged broadness of the categories and I do not consider the categories to be too broad. Further, as to the objection regarding “which clients” are the subject of category 3, subject to one matter, I accept Mr Pesman SC’s submission that A&M are well capable of working out which clients are covered by inquiring of the individual defendants. The one matter is that the wording “potential client(s)” is not ideal. Accordingly, I invite the parties to discuss that wording and agree on greater precision to identify the class intended to be covered. That also applies to the use of “potential client(s)” in category 4.

Essentially for the reason articulated by Mr Pesman SC (prior possession of the PA would have given A&M important awareness of the extent of any constraints as it would affect their ability to conduct their business), [317] I reject the defendants’ bold assertion that the category 5 documents are not relevant to EY’s assessment of an entitlement to bring a possible claim.

I do not regard category 7 as being unnecessary. If for some reason there is a degree of crossover of material then A&M can indicate that.

Likewise with A&M, there is no assertion that the individual defendants have no documents that fall within each of the categories. Indeed, the proffer of some documents by the individual defendants appears premised on the basis that the defendants “may have” possession of documents that could assist in determining the above question.

There is no assertion by the individual defendants that production would be onerous.

I have considered carefully the submissions of counsel regarding the bolded limitations regarding the solicitation of personnel.

One of the difficulties with Mr Mahendra’s submissions is that the structure of line of authority within EY was not limited to an individual partner.

There are some crossover of personnel in categories. Thus, Messrs Woodward, Sharp and Keegan are listed as having had responsibility for Mr Singh and Roma Patel and Messrs Sharp, Consett and Keegan are listed as having responsibility for Mr Lim. That aside, numerically, the vast majority of those persons who had worked in the 2023 financial year on EY engagements with the individual defendants joined A&M. Specifically: (a) 8 of the 9 personnel in the case of Mr Woodward; (b) 4 of the 5 personnel in the case of Mr Sharp including Mr Lim; [318] (c) both of the personnel in the case of Mr Consett (again including Mr Lim); [319] and (d) all of the 6 personnel in the case of Mr Keegan. [320]

Further, the tenor of EY’s submissions is that there may have been co-ordinated action as between A&M and one or more of the individual defendants. That admits of the possibility of joint and several liability. [321]

In relation to the contention that soliciting or recruiting conduct could only plausibly occur by someone who had some level of responsibility or influence over other employees, I do not accept that that logically follows.

In the above circumstances, I do not consider it to be reasonable to limit the discovery as suggested by the bolded words in respect of solicitation of EY personnel.

I do not consider that it is appropriate to limit the discovery in categories 5 and 7 in respect of Mr Woodward, Mr Sharp and Mr Consett to the bolded limitation in respect of clients. However, as I have observed above the wording “potential clients” is not ideal. Accordingly, I invite the parties to discuss that wording and agree on greater precision to identify the class intended to be covered in respect of “potential client(s)” in category 5 and “prospective clients” in category 7.

EY’s claim was progressed on the basis that it would be assisted by inspection of documents. No specific submissions were made to the effect that inspection would be inutile or of no assistance to EY.

The defendants did not identify or advance any particular discretionary matter that would inform the decision of the Court in considering whether to make orders for preliminary discovery.

In any event, I am satisfied that it is a proper exercise of my discretion to make an order for preliminary discovery.

The upshot is that I propose to order that there be preliminary discovery substantially in respect of the categories as sought by EY, with the qualification I have made above regarding the wording “potential client(s)” and “prospective clients”.

The defendants seek a costs order against EY. [322] I assume that was premised on the basis that the defendants would be successful in their resistance of the application or substantially successful. In any event I should briefly say something at least provisionally regarding the question of costs.

Applications for preliminary discovery are part of the Court’s civil jurisdiction.

Decisions made by the Court about the costs of proceedings, like other aspects of the Court’s jurisdiction, are made in accordance with applicable legislation and rules of court having regard to the underlying purposes to be served by those provisions. [323]

The purpose and underlying rationale for an award of costs is essentially compensatory in the sense of being awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. Costs are not awarded by way of punishment of the unsuccessful party.

Notwithstanding the characterisation of the proceedings as interlocutory, judges of this Court have stated that the provisions of s 98 of the CPA, and rr 5.8, 42.1 UCPR are provisions to be considered in respect of the costs of applications for preliminary discovery. [324]

In Renton, Ward CJ in Eq proceeded on the basis that, regarding costs, “there is no conventional or usual rule applicable to preliminary discovery applications, which applications depend on the facts of the relevant case”. [325]

Differing views have been expressed regarding whether preliminary discovery applications are adversarial or not. [326] Sometimes, general observations may be able to be made regarding whether particular sorts of applications are aptly described as adversarial. However, ultimately, to the extent that that descriptor is relevant to costs, whether proceedings have been conducted in an adversarial way such that they might be appropriately described as being adversarial in nature or at least akin to adversarial litigation is a question of fact. [327]

The jurisdiction to grant preliminary discovery has in some caselaw been described as an extraordinary one. [328] On other occasions epithets such as “exceptional” and “indulgence” have been eschewed as informing cost determinations in favour of considerations of reasonableness of conduct and the possibility that there may or may not be further litigation between the parties depending to some degree on the outcome of the application. [329] There are some cases including Renton and The Printers Pty Limited v Hawk Media Group Pty Limited t/as Hawk Print [2025] NSWSC 194 (Printers), where other considerations come into play including agreement by the parties as to the provision of discovery leaving the only active issues being the question of costs.

My provisional view is that the contest over whether there ought to be an order for preliminary discovery was adversarial and that the costs of the litigation per se should ordinarily follow the event.

There is a clear distinction however between the cost of the litigation per se and the costs of actually providing discovery.

The particular terms of r 5.8(2) of the UCPR identify different types of costs that may occur in the context of an application for an order for preliminary discovery including, quite apart from the cost of the litigation, costs of making and serving in the list of documents and producing such documents.

Separately from the terms of r 5.8(2), there is a line of authority to the effect that the costs of the litigation do not include the costs and expenses associated with the location and production of the documents ordered. Those costs have been described as being “comparable with the position of a third party receiving and complying with a subpoena” [330] such that the party in whose favour preliminary discovery has been ordered ought to pay the reasonable costs of the producing party in respect of making and serving any list of documents and producing such documents for inspection. [331]

Sometimes some aspects of costs orders and expense orders in respect of preliminary discovery are conditioned or premised on whether, within the fullness of time or perhaps a certain period of time, the parties with the benefit of an order for costs commence the substantive proceedings against one or more of the defendants in which case certain costs are ordered to be dealt with as an expense necessarily incurred by the plaintiff in pursuit of what, by that stage, will have become the substantive proceedings. [332]

Provisionally, it seems to me that the costs of the making and serving of any list of documents and producing such documents for inspection would ordinarily be borne by the plaintiff.

I hasten to add that I am not inviting the parties to further disputation over the cost of the proceedings or the cost of providing discovery. Indeed, I have expressed the provisional views that I have with the hope of obviating any such dispute.

The orders of the Court are: