James v Royal Bank of Scotland Group plc; McKeith v Royal Bank of Scotland Group plc
[2013] NSWSC 402
•24 April 2013
Supreme Court
New South Wales
Medium Neutral Citation: James v Royal Bank of Scotland Group plc; McKeith v Royal Bank of Scotland Group plc [2013] NSWSC 402 Hearing dates: 19 April 2013 Decision date: 24 April 2013 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: Further disclosure ordered
Catchwords: PRACTICE & PROCEDURE - disclosure - whether necessary for resolution of real issues in dispute Legislation Cited: Practice Note SC Eq 11 Cases Cited: Leighton International v Hodges; Thiess v Reinforced Earth [2012] NSWSC 458 Category: Interlocutory applications Parties: 2011/320618:
Angus Gordon Charnock James (plaintiff)
Royal Bank of Scotland Group plc (first defendant)
RFS Holdings B.V. (second defendant)
RBS Services (Australia) Limited (third defendant)
2011/320637:
Colin McKeith (plaintiff)
Royal Bank of Scotland Group plc (first defendant)
RFS Holdings B.V. (second defendant)
RBS Services (Australia) Limited (third defendant)Representation: Counsel:
M J Steele (plaintiffs)
I M Jackman SC with T Saunders (second and third defendants)
Solicitors:
Harmers Workplace Lawyers (plaintiffs)
Allens (second and third defendants)
File Number(s): SC 2011/320618; 2011/320637 Publication restriction: Nil
Judgment
Introduction
This is an application by the plaintiffs for disclosure by the defendants of 64 categories of documents.
To a very large extent, the defendants agree to make disclosure. I am asked to deal with three disputed categories of documents.
The disputed categories are: -
(a) the restored email boxes of two individuals;
(b) certain hard copy human resources' files;
(c) particular issues in relation to five of the 64 categories.
Decision
The defendants should make the further disclosure sought by the plaintiffs.
Background
This summary of the background to the proceedings derives, in large part, from the plaintiffs' submissions.
These two proceedings, which are travelling together, involve claims by two former senior executives of ABN AMRO Australia, Mr Angus James and Mr Colin McKeith. Until late 2008, Mr James was the CEO of ABN AMRO Australia and Mr McKeith was the Head of Global Markets.
The proceedings arise out of the takeover of ABN AMRO in October 2007 by a consortium ("the Consortium") of financial institutions including the first defendant, the Royal Bank of Scotland Group plc ("RBS").
The plaintiffs claim that, during the takeover, certain "commitments" or "guarantees" of the Consortium were communicated to the employees of ABN AMRO worldwide, both orally and in writing.
First, there were commitments made in relation to the treatment of employees of ABN AMRO on redundancy. They included statements made in a "Communication Pack" of October 2007 as follows: -
"...in the case of redundancy, the Consortium has guaranteed to all staff that all existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional...".
Second, it is alleged that there were commitments made relating to the way in which appointments were to be made to positions in the merged entity including an alleged commitment that there would be a "fair appointment process based on merit and competencies".
The plaintiffs were retrenched in late 2008. The plaintiffs' case is that they acted on the alleged commitments and guarantees by remaining in their employment at ABN AMRO during and after the takeover. The plaintiffs claim that the commitments and guarantees gave rise to contractual obligations on the part of members of the Consortium, including RBS and that the defendants breached those obligations. The breaches alleged are that, contrary to the commitments and guarantees, when the plaintiffs were retrenched in late 2008 they were not given severance payments in accordance with the policies and practices of ABN AMRO as those policies and practices existed in October 2007. The plaintiffs also claim that the defendants' alleged obligations were breached because the process by which the plaintiffs were considered for positions in the merged entity was not a "fair appointment process based on merit and competencies".
Thus, important issues in the proceedings include: -
(a) the redundancy procedures, plans, policies and practices of ABN AMRO in late 2007; in particular, what the practice was at ABN AMRO at that time in relation to the implementation of a written redundancy policy which provided for the possibility of an "ex gratia" severance payment based on an average of the executive's bonuses in the preceding two years. That written policy provided that the making of ex gratia payments was at ABN AMRO's discretion, depending on all the circumstances; and
(b) the process followed by the defendants in considering the appointment of the plaintiffs to positions in the merged entity following the takeover; in particular, whether that process was "fair" and "based on merit and competencies".
The disclosure sought, and resisted, relates primarily to contemporaneous documentary evidence as to what "practices" were followed by ABN AMRO in relation to severance payments to senior executives and what "appointment process" was followed by the defendants in relation to the plaintiffs in 2008.
Disclosure
All evidence has been served.
Practice Note SC Eq 11 provides that there is to be no order for disclosure in proceedings in the Equity Division "unless it necessary for the resolution of the real issues in dispute in the proceedings".
The concept of "necessity" in the Practice Note has been interpreted to mean "reasonably necessary for disposing of the matter fairly or in the interests of a fair trial: Leighton International v Hodges; Thiess v Reinforced Earth [2012] NSWSC 458 at [22] per McDougall J.
In the context of this dispute, I would consider any disclosure which is likely to reveal what ABN AMRO's relevant practices were in 2007 to be "necessary" for the purposes of the Practice Note.
My conclusion is, with one qualification that appears below, all of the disclosure sought by the plaintiffs is so "necessary".
An issue does arise as to the likely cost of the disclosure sought. However, as emerges below, that cost, although not insignificant, must be considered in the context of the amounts claimed by the plaintiffs' (in excess of $10 million for severance payments alone) and the significant legal costs that both parties have incurred in the proceedings to date and are likely to incur in the future.
On 30 November 2012, I made orders, by consent, for the parties to communicate with each other concerning disclosure of documents. I am informed that that process has involved lengthy and detailed correspondence and has resulted in the parties largely agreeing on what disclosure is appropriate.
I am now dealing with the issues that remain for determination.
Restoration of email boxes
The first dispute relates to the plaintiffs' request that the defendants restore the email boxes of Mr Steven Daniels and Mr John McAlpine. In 2008, Mr Daniels was the Director of Global Markets Human Resources of RBS. Mr McAlpine was the Head of Human Resources at ABN AMRO Australia in the years prior to October 2007 and, from October 2007 to September 2008, was the Regional Head of Human Resources. The defendants have not served evidence from either Mr Daniels or Mr McAlpine.
The defendants, of their own motion, have restored from back-up tapes the email boxes of nine other individuals, for various periods.
The cost of restoring each mailbox is in the order of $5,500. Further costs will be incurred searching each mailbox for documents in one or more of the agreed categories. The total cost of restoring and searching each mailbox will be in the order of $25,000. The defendants have, or will incur that cost in relation to the email boxes that have been restored in relation to the nine individuals. The defendants would incur a further $50,000 to restore and search those of Mr Daniels and Mr McAlpine.
Mr Steele, who appears for the plaintiffs, has made detailed submissions as to the role played by Messrs Daniels and McAlpine in relevant events in 2007 and 2008. It is not necessary for me to repeat the detail of those submissions. I am satisfied that they played a role in events which makes it likely that they wrote, or received, email communications which will be relevant to the issues in these proceedings and which, in particular, are likely to reveal something of what ABN AMRO's relevant practices were.
Indeed Mr Jackman SC, who appeared with Mr Saunders for RBS, accepted that emails sent to or from Mr Daniels may well be relevant. I see no reason for coming to a different conclusion about Mr McAlpine.
Mr Jackman submitted, however, that it was unlikely that there would be any relevant email traffic to or from Messrs Daniels and McAlpine that would not be revealed in the email boxes of the nine individuals that the defendants have restored and will make available to the plaintiffs' team.
Mr Jackman also pointed to evidence the defendants have adduced to date, information the defendants have undertaken to provide and documents in a number of the categories sought by the plaintiffs that they have agreed to discover. Mr Jackman submitted that this material should be sufficient to provide the plaintiffs with all the documents they reasonably need to ascertain what the relevant practices and policies of ABN AMRO were at the relevant time.
Without conducting a detailed analysis of that material (not all of which is available to me), I am not in a position to make any final assessment as to the correctness of these contentions.
It seems likely, and indeed it was barely contested, that the email traffic of Messrs Daniels and McAlpine will contain relevant material. The defendants do not suggest that the cost of restoring and searching the email boxes is overly burdensome.
In those circumstances, I propose to order disclosure of material in Messrs Daniels and McAlpine's email boxes falling within the uncontested categories of disclosure.
Hard copy human resources files
The defendants propose to discover all ABN AMRO's electronic records concerning relevantly comparable (that is, retrenched senior executives) officers from July 2004 to March 2009. The defendants do not have electronic records prior to July 2004. Such electronic records will be disclosed in relation to 89 former ABN AMRO officers, of whom 14 were retrenched prior to October 2007.
Mr Jackman submitted that the revelation of this material would give the plaintiffs a "large enough conspectus" of the processes and policies at play leading to the retrenchment of individuals such as the plaintiffs.
The defendants will also discover the personnel files of those 89 individuals, and hard copies of documents relating to those 89 individuals answering the descriptions in a number of the disclosure categories sought by the plaintiffs.
The plaintiffs, nonetheless, seek disclosure of relevant material from the hardcopy human resources files in the possession of the defendants for a number of reasons. The first is that these files will predate July 2004 (the earliest date at which electronic information is available). Second, the plaintiffs submit that it is likely that the hard copy human resources files will contain information not contained in the electronic records and which will, in all probability, contain information as to the practices followed by ABN AMRO in determining, for example, when and to what extent "ex gratia" severance payments should be made; either generally or in specific cases.
I accept, and the defendants did not seriously contest, that it is likely that the hard copy files will contain information relevant to this question.
There are some 330 boxes of files. Searches of the files have not yet been undertaken. It is estimated that each box contains 10 to 20 files. There is an index of what the boxes are said to contain which in most, but not all, cases provides some information as to what is in the box.
If all boxes are searched, the defendants are likely to incur costs in the order of $80,000.
That is, of course, a significant amount, but again, must be seen in the context of the amounts claimed in these proceedings and the scale of the litigation.
The plaintiffs' legal team has reviewed the index and nominated 36 boxes in which (by reference to the description in the index) they contend it is likely that relevant documents appear. They have also nominated 169 boxes in which it seems unlikely relevant documents will appear and 120 boxes which "potentially" contain relevant documents. Documents have been placed in the latter category because of the obscure nature of the description given of those files in the index.
I propose to adopt the pragmatic course of requiring the defendants to search the 36 boxes in the plaintiffs' "yes" category but, for the moment, to not require the defendants to search the other boxes. The matter can be reviewed in light of what the search of the 36 boxes reveals.
Issues in relation to specific categories
Categories 3 and 4
Categories 3 and 4 are as follows: -
"3 All documents recording, outlining or summarising policies, practices, procedures or guidelines in relation to:
a. the treatment of;
b. requiring a deed of release from; or
c. the consideration or making of:
i. ex gratia payment; or
ii. payment calculated or determined by reference to prior years bonuses to,
employees of ABN AMRO Services Australia Limited (AAS) on retrenchment or redundancy in the period 1 January 2000 to 31 December 2009) (Relevant Policy).
4 All documents recording, outlining or summarising the creation, approval, implementation, amendment, application, circulation or publication of any Relevant Policy." (emphasis in original)
The only issue between the parties is to the words "outlining or summarising". The defendants are prepared to disclose documents "recording" the matters in categories 3 and 4.
It is not apparent to me why a search for documents which "outline" or "summarise" a relevant policy, practice, procedure or guideline will be any more onerous than a search for documents which "record" such a thing.
I propose to make the orders sought by the plaintiffs.
Category 37
By this category the plaintiffs seek disclosure of: -
"37 The business or appointment diaries for 2007 and 2008 of Mr McCormick, Mr Workman and Ms McArdle."
Each of Mr McCormick, Mr Workman and Ms McArdle has sworn affidavits for the defendants in the proceedings giving a detailed chronological account of their involvement in meetings and discussions over a period of more than 12 months. The plaintiffs submit that the diaries may be important so that "the meetings and discussions about which the witnesses have given evidence can be put in the context of what other potentially relevant meetings and discussions were occurring at around the same time" and "the witness's recollections of those meetings be able to be tested by reference to their contemporaneous diaries".
On the other hand, the defendants submit that there is no dispute between the parties as to when relevant discussions took place and that the plaintiffs' request for the diaries is a fishing expedition.
The diaries are in electronic format and will cost approximately $1,500 per person to restore.
In my opinion, the diaries of these individuals should be disclosed. The cost of doing so is minor. Each of the individuals give significant evidence on behalf of the defendants. Any contemporaneous record made by the individuals may well be relevant to an ascertainment of what occurred, and when.
I propose to order that the diaries be disclosed.
Categories 49 and 50
The categories are in the following terms: -
"49 All documents comprising or recording the commitments by the Consortium with respect to:
a. redundancy procedures referred to in press release of 30 July 2007 which is Exhibit AJ-1, Tab 53;
b. redundancy plans referred to in press release of 16 September 2007 which is Exhibit AJ-1, Tab 54; or
c. existing redundancy plans made by the Consortium that is referred to on slide 16 of the presentation slides which are Exhibit AJ-1, Tab 55.
50 All documents comprising or recording the guarantee made by the Consortium with respect to existing ABN AMRO policies and practices related to redundancies referred to in the document which is Exhibit AJ-1, Tab 56."
The defendants are prepared to disclose documents to the extent that they comprise or record the making of the relevant commitments or guarantees "to ABN AMRO employees".
The plaintiffs point to an announcement made by the European Staff Council of ABN AMRO in which it stated: -
"On July 19 [2007] the [European Staff Council] has made a global agreement with the Consortium. The Consortium has given the guarantee that for a minimum period of two years after their bid goes unconditional, terms and conditions including redundancy packages and support policies will at least be no worse than those under ABN AMRO."
The plaintiffs seek disclosure of documents recording the terms of the "guarantee" or commitment made by the Consortium referred to in the announcement. The plaintiffs submit that any such documents are relevant, particularly in relation to cases where the commitments or guarantees given to ABN AMRO employees were oral.
I am persuaded that the documents should be disclosed.
Conclusion
I invite the parties to bring in short minutes to give effect to these reasons.
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Decision last updated: 24 April 2013
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