Citadel Securities (Europe) Ltd v GSA Capital Partners LLP
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Linden,Mr Justice Linden |
| Judgment Date | 12 November 2020 |
| Neutral Citation | [2020] EWHC 3079 (QB) |
| Date | 12 November 2020 |
| Docket Number | Case No: QB-2019-004486 |
| Court | Queen's Bench Division |
[2020] EWHC 3079 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand
London
WC2A 2LL
Mr. Justice Linden
Case No: QB-2019-004486
Mr. David Craig QC, Ms. Amy Rogers and Ms. Katherine Taunton (instructed by Lewis Silkin LLP) for the Claimant
Mr. Simon Devonshire QC and Mr. Simon Forshaw (instructed by DechertLLP) for the Defendants
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The issues which I have been asked to decide in this costs and case management hearing are:
i) whether a sampling approach should be adopted to the litigation;
ii) whether there should a split trial;
iii) the defendants' application for orders for the provision of further information;
iv) issues related to the terms of a confidentiality protocol which will apply to certain evidence and information in the proceedings;
v) costs budgeting;
vi) timetabling and directions for the trial.
Mr. David Craig QC appeared for the claimant with Ms. Rogers and Ms. Taunton and Mr. Simon Devonshire QC appeared with Mr. Forshaw for the defendants. I am grateful to both legal teams, including the instructing solicitors, for the thoughtful, thorough and helpful way in which their respective positions on the issues were presented. I am also grateful for the constructive way in which they approached the resolution of those issues at this hearing.
Summary of the litigation
The claimant is a global financial services group of which GSA is a global competitor. Defendants 3 to 6 are senior officers of GSA and the seventh defendant is an in-house recruiter. The part of the claimant's business with which the Claim is concerned is algorithmic trading, that is, the use of computer algorithms and statistical models to trade in the financial markets. Algorithmic trading businesses develop trading strategies and then translate those strategies into computer commands through a combination of C++ Code, related configuration files and other relevant computer systems and programmes. The key aim is to devise combinations of signals which identify price dislocations in the market which have not been identified by competitors, and to exploit them by trading profitably without undue risk. The trading strategies and the principles and logic on which they are based are therefore highly confidential and, where the strategies are successful, highly commercially valuable. They are also complex and expensive to develop.
These proceedings concern one of the claimant's trading strategies, known as the “ABC Strategy”, which is highly profitable. Mr. Cologlu is the claimant's former Head Trader for ABC Strategy in Europe and was at the material time a London-based Quantitative Researcher employed by the claimant. It appears that between the fourth quarter of 2018 and June 2019 he was involved in discussions with GSA with a view to his recruitment, and that the plan was that he would establish an algorithmic trading business for GSA.
The claimant's case is that in the course of those discussions Mr. Cologlu copied and disclosed its trade secrets and confidential information to the defendants in three key documents which were created by Mr. Cologlu and provided to the defendants in hard copy. These were:
i) A three-page “High Frequency Trading-Business Launch” document provided to GSA on 19 November 2018;
ii) A seven-page “Business Plan” provided to GSA on 27th March 2019; and
iii) A document entitled “New Trading Team Due Diligence Questionnaire — High Frequency Trading” which ran to 20 pages and was provided by Mr. Cologlu on or about 6 June 2019. I will call this document “the DDQ”.
The DDQ was prepared in answer to a set of 96 questions which were asked of Mr. Cologlu by the defendants under ten headings including, for example, “Strategy overview”, “Signal research” and “Risk considerations”. The DDQ has 10 corresponding headings and it answers each of the 96 questions in turn. It appears to contain information about an existing strategy as well as setting out what would be required for GSA to establish such a strategy. The claimant says that it contains highly confidential information as to the “core portfolio logic used in the ABC Strategy and its related strategies”.
The claimant also relies on three emails which were sent to GSA by Mr. Cologlu. However, it is clear that the DDQ is its primary concern.
I will refer to these six documents the “disputed documents”.
Mr. Cologlu's activities were discovered on Friday, 7 June 2019 and on the following Tuesday, that is 11 June 2019, injunctive relief was ordered against Mr. Cologlu by Butcher J under section 44 of the Arbitration Act 1996. The claimant has also brought proceedings against Mr. Cologlu in the London Court of International Arbitration in accordance with arbitration provisions in his contract of employment. A liability hearing is listed in those proceedings in February 2021.
The defendants have also delivered up the documents which they say they have received from Mr. Cologlu. By letter dated 14th June 2019, they gave undertakings confirming that no copies of the disputed documents had been retained and that no use had been or would be made of their contents. The fourth to seventh defendants have also sworn affidavits which explain what they say is the limited use which they accept they made of the documents and information provided to them by Mr. Cologlu, and they have given further undertakings confirming that they will not make use of the information contained in them in the future. GSA and the fourth to seventh defendants, as well as the recruitment consultant who assisted them in the recruitment process — that is the external recruitment consultant — also provided pre action disclosure on 23rd August 2019, they say, of all relevant documents
The proceedings in the Queen's Bench Division, with which I am concerned, were issued on 16th December 2019. The claimant alleges that information which Mr. Cologlu provided in the disputed documents was copied or derived from its ABC Strategy and related strategies, that this information was highly confidential and that the defendants were aware of this and solicited the provision of such information by Mr Cologlu. The claimant, therefore, brings claims which include breach of confidence and procuring breach of confidence, procuring breaches by Mr. Cologlu of his contract of employment, dishonest assistance of breaches of fiduciary duty by Mr. Cologlu and unlawful means conspiracy.
In relation to remedy, the claimant claims declarations, final injunctive relief “negotiating damages” and “moral damages” as well as damages for losses such as wasted management time and forensic IT costs, equitable compensation and/or an account of profits. Its financial claims are set out in a Provisional Schedule of Loss dated 7th August 2020, which values its claim for negotiating damages at not less than US$30 million and its claim for moral damages at not less than an additional $10 million. These figures, the claimant says, are on the basis of the defendants' admitted use of the information in the disputed documents. The claimant does not accept that the use was limited to what has been admitted by the defendants and it says that it is to be inferred that there was greater use than was admitted. Indeed, at paragraph 55 of the particulars of claim, it specifically pleads as follows:
“55. Further, and for the avoidance of doubt, the particulars in these Particulars of Claim reflect the limited information available to Citadel prior to disclosure and/or cross-examination herein. It is specifically inferred that, in addition to those facts and matters admitted by the Defendants and/or Mr. Cologlu to date, and/or discovered by Citadel to date as particularised above, the Defendants and Mr. Cologlu:
(1) took further steps to plan and/or develop competing algorithmic trading strategies at GSA, unknown to Citadel to date;
(2) misused Citadel's confidential information in further and additional respects, unknown to Citadel to date; and
(3) concealed and/or sought to conceal such maters from Citadel.”
On this basis, the claimant pleads that the true value of the Claim is likely to be “very substantially higher” than the figures I have mentioned.
The defendants' position is that they were involved in routine recruitment discussions with Mr. Cologlu in which they considered a pitch by him to set up a new high frequency trading strategy trading in European equities. They say that the discussions were at a high level of generality. Mr. Cologlu did not disclose any trade secrets or confidential information, nor any information which would enable GSA to reverse engineer Mr. Cologlu's proposed business strategy. Nor did they induce him to do so, or think that he was doing so. They say that the sort of information which he disclosed is widely known in the sector and/or is in the public domain. As a matter of common sense, they say, Mr. Cologlu would not disclose information which was confidential or of significant value as this would undermine his own negotiating position.
The defendants put the claimant to proof that any information which Mr. Cologlu...
To continue reading
Request your trial