FEDERAL COURT OF AUSTRALIA

Tyco (Australia) Pty Ltd T/AS ADT Security v Signature Security Group Pty Ltd (No 2) [2010] FCA 395

THE COURT ORDERS THAT:

1.                  Prayer 1 of the notice of motion of 9 April 2010 be dismissed.

2.                  The applicant be granted leave to file and serve a notice of motion seeking leave to amend its application and statement of claim consistently with these reasons by Thursday 15 April at 4:15 pm, returnable at 9:30 am on 16 April 2010.

3.                  Standover prayer 2 of the notice of motion of 9 April 2010 to 9:30 am on 16 April 2010.

4.                  The first respondent inform the applicant of its objections to the applicant’s discovery categories by noon on Wednesday 14 April 2010.

5.                  Costs on the motion be reserved.

6.                  Costs reserved by the District Registrar on 24 February 2010 be costs in the cause.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     By a notice of motion dated 9 April 2010 (filed on 6 April 2010), the applicant seeks leave to amend its application, its statement of claim and for further discovery.  The application for further discovery is not presently material.  The proposed statement of claim is annexure B to the notice of motion.  Leave to amend the pleadings is opposed by the first respondent but is not opposed by the second through to the fourth respondents.  The first respondent, although it objects, does not do so on any of the premises which might be associated with the High Court’s decision in Aon Risk Services Ltd v Australian National University (2009) 239 CLR 175.  I now turn to the objections in turn. 

2                     The first objection taken was to paragraph 7B of the proposed pleading, which is in the following terms:

By reason of:

7B.1     the fact that Signature Security and Signature Security NZ were related companies as described in paragraph 2.5,

7B.2     the common chief executive officer and directors of Signature Security and Signature Security NZ described in paragraphs 2.6 and 2.7, and

Signature Security was at all material times aware that:

7B.3     conduct, by itself or its dealers, of the kind alleged in the New Zealand proceedings was likely to contravene the Trade Practices Act 1974 (Cth), and be conduct for which Signature Security was liable under that Act; and

7B.4     the misuse of confidential information, in particular, lists of ADT Security’s customers, was an unlawful method which may be used by Signature Security’s dealers to acquire customers for Signature Security.

3                      Paragraph 7B then connects to paragraphs 8D and 26 of the proposed pleading.  The objection submitted by the first respondent in relation to this paragraph was that the first respondent’s knowledge of the events which took place in New Zealand could only be relevant to the issues in the current proceeding if the management of the first respondent’s agents here was known to be the same.  That may well be a good argument to make at the hearing of the case, however, I do not think it reflects a pleading difficulty, and I do not think it presents an appropriate basis upon which to refuse to grant leave. 

4                     Objection is then taken to paragraph 8B, which is in the following terms:

At all material times, Signature Security knew or believed that dealers, or former dealers, of ADT Security (collectively referred to as “former ADT dealers”)owed ADT Security an obligationof confidence in respect of details of ADT Security’s customers both:

8B.1     under the dealer agreements between ADT Security and the former ADT Security dealers; and

8B.2     at general law,

the obligations of confidence being thought by Signature Security to be in similar terms to the obligations of confidence owed by Signature Security’s dealers to Signature Security.

5                     The point put shortly is that the knowledge and belief referred to in the paragraph are not sufficiently particularised.  There are, I suppose, two points which arise out of that.  First, it would be a relatively straightforward matter to seek such particulars.  Secondly, I was not taken to any material which suggested that such particulars had, at this stage, been sought.  That being so, it seems to me it would be inappropriate to refuse leave on the basis that there was an insufficient degree of particularity.

6                     The appropriate course is for the amendment to be permitted and for the ordinary course of requesting particulars to occur.  Of course, if a request for particulars had been made and had not been complied with there may well have been force to the suggestion that the Court would not permit an insufficiently particularised pleading to go forward.  However, I do not apprehend that to be the situation.  The same objection was taken to 8D, which is in these terms:

From mid 2006, Signature Security

8D.1    endeavoured to increase its customers by recruiting former ADT dealers and other dealers to target ADT customers with a view to transferring their custom to Signature Security, and

8D.2    referred to this strategy as its “churn strategy”.

7                     That objection is to be determined on the same basis. 

8                     There was then a series of objections taken at a global level to an aspect of the structure of the pleading.  These concerned the applicant’s claim of entitlement to remedies against the first respondent on account of its vicarious responsibility for the actions of various third parties whom the applicant has not joined to the proceedings.

9                     As this argument was eventually developed, there emerged two aspects: first, there was an argument that, effectively, the pleading was defective for that reason; secondly, it was put that even if the pleading was not defective for that reason, the risk that those third parties might, at the heel of the hunt, seek to be joined to the proceedings and thereby cause any trial to be aborted, was one which generated legitimate case management issues.  The resolution of those case management issues required, so the argument ran, the imposition at an early stage of conditions upon the applicant, such that, if it were to run arguments concerning vicarious liability for third party action, those third parties should now be joined.

10                  As to the first argument, it is not unusual for principals to be sued vicariously for liability of their agents without the agent’s joinder.  It is commonplace, for example in, personal injury litigation for an employer to be sued without the employee being joined.  And there is, at least at the level of principle, no particular reason why suits against principals need necessarily have the agents joined.  It seems to me there is no particular reason why such a different principle would apply in this proceeding.  Either party is obviously free to join the third parties if they wish, and indeed the third parties may join themselves, but the failure to join them is not to be put in to the same class as, for example, a suit involving a trust to which a trustee is party.

11                  As to the second argument, it seemed to me for a while that it had more substance.  There is – it should be accepted, I think – some possibility that the nominated third party agents may, upon discovering that they are named in an adverse way in proceedings, seek to be joined late in the day, and thereby create a real risk of an adjournment of the proceedings.  There is also a corresponding risk, however, that their joinder to the proceedings at this stage would also create its own difficulties, resulting both from their number as well as the distinct possibility that their addition would increase both the complexity and length of the interlocutory steps.  Ultimately, it seems appropriate to accept that case management principles might, in a particular case, require the imposition of the kind of condition for which the first respondent contends.

12                  The imposition of that kind of condition would involve the implementation of a risk management process which would necessarily devolve to a consideration of, on one hand, the apprehended risk of the ultimate hearing going off due to late joinder, as weighed against on the other hand, what the present risks are if matters are left to lie where they are.  One cannot be precise about these matters, but it seems to me that that balance favours the applicant rather than the respondent.  In particular, although it is possible that adversely named agents may wish to involve themselves in the proceedings in an effort to prevent adverse findings being made, a more realistic view may be that such parties would be well-advised, and more likely, to stay away from such proceedings.

13                  For those reasons, I reject the second argument based upon case management principles.  Objection was then taken to paragraph 17AC of the proposed pleading.  It provides as follows:

On dates not presently known to ADT Security, other Signature Security dealers wrongly came into possession of ADT Security’s Customer List (“Other Dealers”).

14                    The essence of the respondent’s complaint regarding this paragraph was that allegations are made that unknown people did something on an unknown date.  No doubt this would, in an ordinary case, be an objectionable pleading.  The applicant’s response to this objection was effectively threefold.  First, it was said that the case currently disclosed in the pleading was that the first respondent had effectively stood by, if not actively offering encouragement, whilst its agents used a stolen customer list.  Secondly, so the applicant said, it did not precisely know who those agents were, although the first respondent obviously did; and, thirdly, it would be unfair in those circumstances to require it to identify which agents were involved and what the manner of their defaults was.

15                  Whilst one can have considerable sympathy with the position in which the applicant finds itself, the more appropriate analysis is to consider how paragraph 17AC operates as a pleading, rather than as a device to cure procedural unfairness.  The regrettable fact is that paragraph 17AC could not succeed at trial.  The allegation that the first respondent is vicariously liable for the acts of persons who are not identified is one which would inevitably have to fail at trial in that form.  I do not foreclose the possibility that if more agents were identified they can be added to the pleadings, but it seems to me that it is really not possible to let an allegation in the form of paragraph 17AC proceed.

16                  The course I propose to take in relation to paragraph 17AC is to refuse the application seeking leave to amend in its current form, that is, dismiss prayer 1, but to grant the applicant leave to file another notice of motion seeking leave to file an amended pleading containing, effectively, what the pleading is at the moment, less paragraph 17AC and less those paragraphs which are connected to paragraph 17AC.  I will permit such a motion to be filed by next Thursday, returnable before me at 9:30 next Friday morning.  There were a couple of other complaints made about the pleading, but these related, effectively, to the third party issue and to paragraph 17AC.  I need not say any more about them.  In saying that, I accept in particular the adequacy of the pleading as contained in paragraphs 26, 27, 28, 29 and following.

17                  I turn then, briefly, to the issue of discovery, which is not before me.  I will stand prayer 2 of the notice of motion over to next Friday morning at 9:30.  I should say that my tentative view is that – and I say this not having heard Mr Hyde at all, so I am open to being persuaded to the contrary view – paragraphs 8D and 8E of the proposed pleadings make relevant the customer list in paragraph 14 of the proposed discovery categories, but I will hear substantive argument about that later. Thus, the actual directions I make concerning the notice of motion filed by the applicant and dated 9 April 2010 are as follows:

1.         I dismiss prayer 1 of the notice of motion of 9 April 2010.

2.         I direct the applicant, if it wishes, to file and serve a notice of motion seeking leave to amend its application and statement of claim consistently with these reasons by Thursday 15 April at 4:15 pm, returnable at 9:30 am on 16 April 2010.

3.         I standover prayer 2 of the notice of motion to 9:30 am on 16 April 2010.

4.         I direct the first respondent to inform the applicant of objections to its discovery categories by noon on Wednesday 14 April 2010.

5.         I reserve costs.

18                  I now turn to the reserved issue of costs arising from the two notices to produce issued by the applicant and dated 11 December 2009, which were set aside by the District Registrar on 24 February 2010: see Tyco Australia Pty Ltd T/AS ADT Security v Signature Security Group Pty Ltd (Unreported, Federal Court of Australia, District Registrar Wall, 24 February 2010).  The reason the learned District Registrar did so was because he found that the notices were not relevant to an issue raised in the pleadings.

19                  Immediately preceding the hearing on 18 February 2010 before the District Registrar, the solicitors for the applicant wrote to the solicitors for the first respondent and indicated an imminent amendment to the pleadings which would render the notices to produce squarely relevant.  They, therefore, took the course of suggesting to the first respondent that the question of whether the notices should be set aside should be postponed until the finalisation of the amended pleadings. 

The solicitors for the first respondent replied on 18 February 2010 in these terms:

The fact that your client proposes to further amend its statement of claim (and presumably to seek leave to file the further amended claim) can have no bearing on the appropriateness of the notices to produce it issued in December last year.  Accordingly, we see no reason to stand our client’s notice of motion over for a further week (or any period of time).

20                  Although the District Registrar concluded that the notices to produce should be set aside, he said this at paragraph 21 of his reasons:

It is my opinion that the case to set aside both notices to produce is made out and I order that both notices be set aside.  I may have reached a different conclusion had the applicants been in a position to show me a draft of the amended pleadings.  I do not see any reason why costs should not follow the event. However, as I have not heard from the parties on costs, I will reserve costs until they have had the opportunity to address me or, if they consider it more expedient, the case management/docket judge on it.

21                  It seems to me that in circumstances where the applicant was strongly indicating that there would be an amendment, its invitation to the first respondent to defer the hearing of whether the notices should be set aside is one that can properly be described as reasonable.  No doubt the first respondent succeeded in having the notices to produce set aside; however a more useful utilisation of people’s time could have been achieved by waiting for the amended pleadings, especially in circumstances where the applicant was not actually pressing for production on the notices to produce. In those circumstances the appropriate order is that costs be costs in the cause.

Associate:

Dated:         9 April 2010