In short
A foreign exclusive jurisdiction clause that gives another court jurisdiction to settle disputes did not stop the NSW Supreme Court ordering pre-action discovery in Sommerin. A promise not to start proceedings elsewhere might have. The decision applied NSW law, is first instance, and turns on the clause's words.
- A preliminary discovery application is not a dispute to be settled under such a clause.
- A new employer and recruiter outside the contract could not obtain a stay.
- Arguing the merits first waived the clause, even for the party to it.
What happened
A Hong Kong consulting company asked the NSW Supreme Court for documents to decide whether to sue a former senior employee, his new employer and a recruiter, and the Court ordered all three to produce them. The procedure is preliminary discovery under rule 5.3 of the Uniform Civil Procedure Rules 2005 (NSW): a court order to hand over documents before any claim is filed, so the applicant can decide whether it has one.
The Capital Markets Company Limited (Capco) is incorporated in Hong Kong and belongs to a group that advises financial institutions. Its former senior employee, Mr Sommerin, lives in Australia and has been employed by NTT Australia Pty Ltd since mid 2025. Capco's case is that he may have helped a recruiter, Mr Katsaros, draw Capco staff to the NTT Data group, in breach of a covenant not to assist anyone to employ or solicit its key employees.
Capco's evidence was that eleven other employees left it for the NTT Data group between June and August 2025. All three defendants denied wrongdoing. The Court did not decide whether anyone breached a contract or induced a breach: the conflicts in the evidence "cannot of course be resolved on the present application", and Mr Sommerin's denial "cannot be tested on this application". The order is about documents, not liability.
HeldScruby J. The preliminary discovery application fell outside the Hong Kong exclusive jurisdiction clause. The new employer and the recruiter, who were not parties to it, could not obtain a stay. In any event every defendant had waived reliance on the clause by contesting the merits. Each defendant must give discovery within 28 days.
The judgment is a first instance decision. Capco had accepted that it would pay the defendants' costs of complying, and the costs of the application itself are still to be decided on written submissions.
Law current at 13 October 2026. This article states the Uniform Civil Procedure Rules 2005 (NSW) in the version in force from 13 March 2026. It deals with the NSW Supreme Court only. The Federal Court and the ACT Supreme Court have their own preliminary discovery rules, which are not discussed here.
The jurisdiction clause
The clause gave the Hong Kong courts exclusive jurisdiction to settle disputes, and said nothing about where proceedings could be started. It sat in a Business Protection Agreement between Capco and Mr Sommerin, governed by Hong Kong law, alongside a 12-month covenant not to employ, solicit or assist anyone else to recruit Capco's key employees. Clause 7.14 read:
7.14 Subject to the Company’s right to obtain injunctive relief from the court or tribunal of competent jurisdiction, each party irrevocably agrees that the courts of Hong Kong shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this Business Protection Agreement or its subject matter or formation (including non-contractual disputes or claims).
[2026] NSWSC 1250 [12].
The agreement also said that no one other than the parties and Capco's group companies would have any rights under it or could enforce it. Mr Sommerin's separation agreement contained a jurisdiction clause to the same effect, and the defendants drew no distinction between the two. The injunction carve-out at the start of clause 7.14 played no part in the reasoning.
One qualification governs everything that follows. The clause was to be construed under Hong Kong law, but nobody proved what Hong Kong law says, so the Court and the parties approached it under NSW law. The judge observed that Hong Kong law could "potentially have made a difference" to the construction. The decision is a reading of English words under NSW principles, and a clause governed by another law may be read differently.
Why the clause did not reach pre-action discovery
A preliminary discovery application is not a "dispute or claim", and an order on it does not "settle" anything, so a clause about settling disputes does not cover it. Scruby J accepted that broad words in a jurisdiction clause are given ample effect, because they usually show an intention to keep all disputes in one forum. The question was whether a pre-action application is the kind of thing the clause is about.
The judge held that it is not. An application under rule 5.3 asserts no pre-existing right and determines none. The court only decides whether the rule's requirements are met and whether to exercise a discretion. The order is interlocutory: it binds nobody on the merits and can be revisited.
The second strand turned on the word "settle". To settle a dispute ordinarily means to bring it to an end with finality. A preliminary discovery order does not even settle whether the applicant may have a claim. The conclusion followed:
Accordingly, the “exclusive jurisdiction” for which cl 7.14 provides does not extend to the jurisdiction to determine whether to make an order under UCPR r 5.3
[2026] NSWSC 1250 [40].
The first reason is about what a preliminary discovery application is, and does not depend on the words of the clause. The second depends on the word "settle". A clause that names a forum without that word gives the second reason nothing to work on.
The decision follows two earlier NSW first instance decisions in which the dispute wording itself was held not to reach preliminary discovery, although in the second of them a separate covenant not to sue did, as the next section explains. In 2014 Bergin CJ in Eq held that a preliminary discovery application was not a dispute about the parties' rights or obligations under the agreement, while saying that whether a clause captures one "will all depend on the facts of the particular application". There is no general rule either way. The outcome turns on the words.
The words that would have caught it
A promise not to start proceedings anywhere else did catch preliminary discovery, and the difference between the two kinds of wording decided Sommerin. In the Illawarra Basketball litigation the clubs' licence agreements with the National Basketball League sent disputes to the Court of Arbitration for Sport, and then added a covenant not to sue:
It is further agreed that no party will institute or maintain proceedings regarding a Grievance or any other matter regarding this Agreement or their participation in the NBL in any court or tribunal other than CAS.
Illawarra Basketball Club Pty Ltd v National Basketball League Pty Ltd [2025] NSWSC 1111 [10].
Peden J held that the clubs' preliminary discovery application was a proceeding "regarding" those matters and stayed it, although the arbitral body could not order equivalent discovery. The Court of Appeal refused leave to appeal, agreeing that the application fitted within that sentence. Scruby J distinguished it: the Capco clause restrained no one from commencing proceedings. "That is an important distinction".
| Decision | The operative words | Pre-action discovery caught? |
|---|---|---|
| Sommerin (2026) | Exclusive jurisdiction "to settle any dispute or claim arising out of or in connection with" the agreement | No |
| nearmap v Spookfish (2014) | Arbitration of "any dispute between the parties as to" the agreement, its provisions, the parties' rights or obligations under it, or any other matter arising out of or relating to its contents | No |
| Illawarra Basketball (2025): the dispute definition | A staged process "to obtain a resolution to any Grievance or any other matter regarding this Agreement or their participation in the NBL" | No |
| Illawarra Basketball (2025, leave refused 2026): the covenant | "no party will institute or maintain proceedings regarding" any matter regarding the agreement in any other court | Yes |
| Amcor v Baulderstone (2013, Federal Court) | "must not start court proceedings (except proceedings seeking interlocutory relief)" in respect of a dispute | Yes, alongside a stay of the intended claim itself |
In Amcor, the exception for interlocutory relief was read with a companion clause as confined to urgent relief, so it did not preserve preliminary discovery. Scruby J did not find Amcor of assistance, because the stay there followed a stay of the substantive proceedings the discovery was meant to serve.
The new employer and the recruiter
The new employer and the recruiter were strangers to the clause, and on these facts they could not use it. A non-party can benefit from an exclusive jurisdiction clause in two ways. A party to the clause can enforce it for the non-party's benefit, which Mr Sommerin never attempted. Or the non-party can ask the court for a stay in its own right.
On the second route, Scruby J put the test under NSW law as whether, given how closely the claims against the non-party are connected with claims between the contracting parties, NSW is a clearly inappropriate forum. A defendant will ordinarily fail unless it identifies a foreign court that is appropriate and to which it is amenable. NTT Australia and Mr Katsaros did not try.
The agreement itself stood in their way. Clause 7.12 said no one other than the parties and Capco's group companies would have rights under it or could enforce it. The judge asked why non-parties who could not enforce the agreement should obtain the same result through the court's discretion, and no answer was given. He said he would have refused them a stay even if the application had been within the clause.
Non-parties do sometimes obtain relief. Eleven days earlier, in Robot X v Placer Robotics, Scruby J temporarily stayed claims against two non-party defendants pending Swedish proceedings between the contracting parties, where the contract had both an arbitration clause and a Stockholm jurisdiction clause and the non-parties undertook to consent to being joined to the arbitration. Their application for a permanent stay was adjourned.
Raising the clause too late
Even if the clause had applied, the defendants had given up the right to rely on it by fighting the application on its merits. None filed a motion to stay. Their correspondence, their affidavits and their submissions all argued that Capco could not meet rule 5.3. The argument that the application itself was caught by the clause first appeared in Mr Sommerin's written submissions, five days before the hearing.
The judge put the inconsistency in one sentence:
In other words, their defence of the application on the merits is inconsistent with their reliance on the exclusive jurisdiction clause to have the application stayed or dismissed.
[2026] NSWSC 1250 [76].
For Mr Sommerin, a party to the clause, this was a binding choice he could not take back. For the non-parties, asking the Court to decide the merits made it impossible to show that the Court was a clearly inappropriate forum to decide them. Capco did not need to prove prejudice, but the judge found it anyway: raised so late, the point left Capco no time to obtain evidence of Hong Kong law.
The judge considered it incumbent on the defendants to raise the point much earlier. Rule 6.43 requires a party contending that foreign law governs an issue to serve a foreign law notice, and gives the other side eight weeks to dispute it. The notice itself is due within six weeks of that party's own first filing, so a respondent's clock starts early. The judge read that period as recognising that proving foreign law takes time. A jurisdiction argument that depends on foreign law cannot be run in the final week.
Pre-action discovery serves a claim in the NSW court
Rule 5.3 is available only to an applicant who may be entitled to make a claim for relief in the NSW court, and that limits how a foreign company can use it. All parties accepted that "the court" in the rule means the NSW Supreme Court. The defendants argued that because Capco's intended claims belonged in Hong Kong, it could not meet that requirement.
The judge rejected the argument. An exclusive jurisdiction clause does not stop a party from invoking the Court's jurisdiction:
Instead, it affords the defendants (or at least Mr Sommerin) a basis on which to ask the Court not to exercise that jurisdiction.
[2026] NSWSC 1250 [85].
To succeed, the defendants would have had to show in advance, without a mini-trial, that a stay of any later claim was clear beyond demonstration. They could not: the answer would depend on who was sued, on Hong Kong law, and on whether any defendant would actually seek a stay, and none had sworn or undertaken that it would. The judge accepted that Capco's foreshadowed claims against Mr Sommerin fall within the clause. He did not accept that the claims against the other two do.
NTT Australia also argued that Capco, a Hong Kong company bound to sue Mr Sommerin in Hong Kong, had no genuine desire to litigate in NSW. That failed because all three defendants lived in NSW when the alleged conduct occurred and the non-parties were not bound by the clause. A foreign company whose real plan is to sue elsewhere, against defendants with weaker links to NSW, should expect the argument to be run again.
Arbitration clauses work differently
An arbitration clause raises a different question, because a stay under the International Arbitration Act is mandatory where it applies. A stay to enforce an exclusive jurisdiction clause is discretionary: the court leans firmly towards holding the parties to their bargain, but will refuse a stay where there are strong reasons. Under section 7(2) of the International Arbitration Act 1974 (Cth), the court must stay proceedings that involve a matter capable of settlement by arbitration.
The first instance view in NSW is that a preliminary discovery application is not such a matter, because there is not yet any claim for an arbitrator to decide. The Court of Appeal in Illawarra left that point open, noting "the potential merit of at least some of those contentions" raised against the clubs, without deciding them. The stay in Illawarra was granted on the covenant not to sue, not under section 7(2). Sommerin did not involve an arbitration clause and did not decide the point.
Waiver is also harder to establish against an arbitration clause. Only waiver in the stronger sense, a deliberate and unequivocal abandonment of the right, defeats a stay under the Act. Scruby J found waiver in that sense here as well, but a party resisting an arbitration clause should not assume it. Our note on defective arbitration clauses covers what happens when the clause itself is badly drafted.
What the decision does not decide
The decision settles who must hand over documents, not who breached what, where any claim must be brought, or what Hong Kong law says about the clause. It is a single first instance decision, delivered on 12 October 2026, and whether there will be an appeal is not known. No appellate court has ruled on an exclusive jurisdiction clause of this kind and preliminary discovery.
| Question | Position |
|---|---|
| Whether a preliminary discovery application falls within this clause | Decided: it does not, under NSW law, in the absence of evidence of Hong Kong law |
| Whether the new employer and recruiter could obtain a stay | Decided, as an alternative ground: no, on the clearly inappropriate forum test and in light of clause 7.12 |
| Waiver | Decided, as an alternative ground |
| Whether anyone breached the restraint or induced a breach | Not decided. The evidence was not tested |
| Whether the restraint is enforceable | Not in issue |
| Whether any later claim in NSW would be stayed in favour of Hong Kong | Not decided, and said to depend on who is sued, Hong Kong law and the defendants' choices |
| Whether the claims against the non-parties fall within the clause | Not accepted on the material, and not decided |
| Costs of the application | Reserved. Capco pays the costs of compliance, as it accepted |
The arbitration point flagged by the Court of Appeal is the most likely ground of challenge in a later case. Scruby J's answer to the "claim for relief from the court" argument rests on the stay being discretionary, which is what an exclusive jurisdiction clause produces and an arbitration clause does not.
If you are drafting the clause
Decide first whether your side is more likely to want pre-action discovery in Australia or to resist it, because the wording that keeps the other side out keeps you out too. A covenant not to commence proceedings elsewhere is mutual. In Illawarra it was the clubs, parties to the covenant, who lost access to NSW preliminary discovery. In Sommerin the applicant was the employer whose own agreement carried the clause.
A European group that uses one jurisdiction clause across its employment and supply contracts should test it against both scenarios. An employer relying on restraints may want Australian pre-action discovery against departing employees and their new employers where they are in Australia. A party whose priority is a single forum, kept out of public view, wants the opposite. A preliminary discovery application in the NSW Supreme Court is heard in public.
- Read the verbs. A clause that gives a court jurisdiction "to settle" disputes may not reach pre-action steps. A promise not to "institute or maintain proceedings" elsewhere may. Choose deliberately.
- Do not rely on a carve-out to preserve discovery. In Amcor an exception for "interlocutory relief" was read down to urgent relief, and in Sommerin the carve-out for injunctions played no part in the result.
- Decide who may rely on the clause. A no-third-party-rights clause worked against strangers to the contract in Sommerin. Whether a group company given rights could obtain a stay was not decided.
- Remember the governing law. The construction question belongs to the law that governs the clause. A clause governed by German, Hong Kong or Singapore law will not necessarily be read the way Scruby J read this one under NSW principles.
- Consider confidentiality separately. If keeping disputes out of public courts is the purpose, the clause must say so in terms that reach pre-action applications.
A German group that brings its standard contract templates to Australia unchanged should check the jurisdiction clause in its employment contracts as closely as the award coverage of a German employer's Australian staff, and our Germany desk page sets out the cross-border questions that usually come with it.
If you receive an application
If you intend to rely on a jurisdiction clause, say so first and by motion, before you argue anything else. The defendants in Sommerin lost the point by contesting the merits for a year and raising the clause in the week of the hearing. A court that has been asked to decide the merits will not readily be told that it should not.
Prove the clause's governing law early, and serve a foreign law notice if the argument depends on it. If you are a stranger to the clause, identify the foreign court you say is appropriate and confirm that you are amenable to it. Expect to bear the burden of showing that a stay of any later claim is clear, not merely likely.
If an order is made, read the categories and the definitions closely. In Sommerin "documents" extended to WhatsApp and Teams messages, calendar invitations and call logs, and the 28-day deadline ran from the orders. The steps after compliance are ordinary commercial litigation decisions. Where a foreign judgment rather than an Australian order is in play, our guide to enforcing foreign judgments in Australia sets out the different route.
