FEDERAL COURT OF AUSTRALIA

Tyco (Australia) Pty Ltd T/AS ADT Security v Signature Security Group Pty Ltd (No 4) [2010] FCA 758

THE COURT:

1.                  Varies the time in which the first respondent may bring a cross-claim against Security Select Pty Ltd and Mr Michael Califano to 21 July 2010 on condition that the cross-claim be in the form attached to the first respondent’s notice of motion of 18 June 2010.

AND THE COURT ORDERS THAT:

2.                  The applicant pay the first respondent’s costs of the notice of motion of 18 June 2010.

3.                  The notice of motion of 18 June 2010 otherwise be dismissed.  

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                     The first respondent, Signature Security Group Pty Ltd (“Signature”) seeks leave to file and serve a cross-claim against two non-parties Security Select Pty Ltd (“Security”) and Mr Michael Califano (“Mr Califano”).  That grant of leave is opposed by the applicant, Tyco, on the following bases:

(a)        the joinder of Security and Mr Califano to the proceeding at this juncture will inevitably delay the fixing of the matter for trial; and

(b)       the cross-claim could, and should, have been filed at a much earlier stage in the proceeding.

2                     Signature, on the other hand, contends that leave should be granted because:

(a)        the necessity for the cross-claim became clear following the filing of Tyco’s further amended statement of claim on 28 April 2010.  Since the Court had directed that Signature’s defence be filed by 7 July 2010 and since any cross-claim had to be filed within the time for the filing of a defence (O 5, r 5(1)) Signature was entitled to file its cross-claim until 7 July 2010 as of right and without leave.  Since the present application to file this cross-claim was made on 18 June 2010 – that is, inside that time frame – there could be no real suggestion of lateness.

(b)       if leave were not granted Signature would be entitled to file an application and statement of claim against Security and Mr Califano.  If that occurred there would be the unattractive result that this Court would hear the same case twice with the attended risk that different results might obtain.

3                     It is useful in the first instance to identify the power the exercise of which is sought by Signature.  Order 5 regulates the bringing of cross-claims and third party claims.  It directs two distinct regimes dealing respectively with the situation where a cross-claim is commenced in a case which is proceeding on pleadings (rs 4 and 5) or affidavits (rs 7-9).  In both cases a critical date is identified before which certain cross-claims may be brought without the leave of the Court.  Where a matter is proceeding on pleadings the relevant date is the date upon which the party filing the cross-claim is obliged to serve its defence against the principal claim: r 5(1).  In the case of a matter which is proceeding on affidavits the relevant date is the date of the first directions hearing: rs 7(a) and 8(1).  Prior to that time – and subject to the exceptions in sub-rules 8(2)-(4) – a respondent may cross-claim against persons who are already party to the proceeding without leave.  In the case of third party cross-claims and where the matter is proceeding by way of affidavit, leave is always required (r 8(1)), further, leave is also required in the case of cross-claims after the first directions hearing: r 9. 

4                     The same distinction between cases proceeding on pleadings and cases proceeding on affidavits may be observed in Pt 9, r 1(1) of the Uniform Civil Procedure Rules 2005 (NSW) which, as in the case of the Federal Court Rules, fixes the time for the filing of cross-claims either at the date at which the antecedent defence is due (for cases proceeding on pleadings) or on the return of the summons (for cases proceedings on a summons). 

5                     Signature submitted that the relevant date by which it had to file its cross-claim was 7 July 2010 which was a date by which it had been directed to file a defence in answer to Tyco’s further amended statement of claim.  Tyco submitted that the relevant date was the date upon which Signature had been required to file a defence to the original statement of claim.  By O 11 r 20(1) this would have been seven days after the first directions hearing.  The first directions hearing took place on 11 August 2009 at which time it was directed that amended pleadings be filed by the end of that day.  For various reasons that direction was not complied with.  The apparent urgency of the timetable arose from Tyco’s pursuit of an interlocutory injunction which it was ultimately successful in obtaining.  On 19 August 2009 there was a further grant of leave to file an amended statement of claim and that grant of leave was effectuated on that day.  Although the requirements of O 11 r 20(1) – that defences be filed within seven days of the first directions hearing – were not expressly suspended I consider that implicitly they were.  The indication that fresh pleadings were to be delivered rendered it pointless to file defences prior to their delivery.  Accordingly, the matter was governed by O 11 r 20(2) which provides:

Where at the directions hearing it is ordered that the applicant file and serve a statement of claim or points of claim, the defence or points of defence shall be filed and served within 14 days after service of the statement of claim or the points of claim.

6                     That being so, the defence was due on 2 September 2009.  Ordinarily cross-claims would therefore need to have been filed by that cut-off date.  This is because O 5 r 5(1) provides:

A respondent may file a pleading by way of cross-claim within the time fixed for filing his defence or any extension thereof.

(emphasis added)

7                     The question which arises is whether the time referred to in this rule is the date for the first filing of the defence (here most likely 2 September 2009) or the date of the filing of any defence required to be filed (here, for example, 7 July 2010 when Signature’s defence to the further amended statement of claim was due).  Signature contended for the latter reading; Tyco for the former.

8                     Tyco’s submission is to be preferred.  The question at hand is the proper construction of the expression “within the time fixed for filing his defence” and this immediately raises the question of whether this refers to the first filing of the defence or any subsequent filings caused by amendments either in the applicant’s statement of claim or possibly in the respondent’s defence.

9                     In my opinion the defence referred to is the first defence which a respondent is required to file and does not encompass later defences.  This is because taken together r 5 (which deals with cases proceeding on pleadings) and rs 7(a) and 8 (which deal with cases proceeding on affidavit) exhibit the same feature of having a cut-off date for the filing of cross-claims without leave – one the date of the defence, the other the date of the directions hearing.  It is obvious that in the case of proceedings on affidavit the cut-off date of the first directions hearing is non-changeable; that is, there can be no later delivery of a document which can affect the fact of the date having been passed. 

10                  If the date in O 5 r 5(1) is revived each time an amended pleading is delivered thereby calling for a fresh defence then it takes on an ambulatory effect which is inconsistent with the operation of r 8.  It is difficult to discern any reason for the two rules to operate differently.  Both rules should operate in the same way, fixing a date which is not ambulatory and providing certainty about when cross-claims without leave may be filed.  Part 9, rule 1(1) of the Uniform Civil Procedure Rules 2005 provides:

A party may make a cross-claim:

(a)       in proceedings commenced by statement of claim, within the time limited for the party to file a defence, or

(b)       in proceedings commenced by summons, before the return date specified in the summons,

or within such further time as the court may allow.

11                  It is plain that that rule operates in precisely that fashion.  I do not think that O 5 r 5(1) is to be construed as operating any differently.  It follows that the expression “the time fixed for filing his defence” should be construed to mean the time first fixed for filing his defence. 

12                  A corollary flowing from O 5 r 5(1) is that in a case which proceeds on pleadings there is no direct power to grant leave to file a cross-claim.  This stands in contradistinction to the power to grant leave in cases which are proceeding on affidavit for in that case rs 8 and 9 permit a grant of leave.  Instead, the relevant discretionary power enlivened in situations such as the present is the power to extend the time referred to in r 5(1) that is, the time in which the cross-claim is to be brought.  By reason of O 3 r 3(2)(a) that power may be exercised after the initial time limit has expired.

13                  The question then is whether the time for filing a cross-claim should be extended from September 2009 to the present.  Although this was not the precise order sought in Signature’s notice of motion it was one of the orders sought by Mr Gleeson SC, who appeared on Signature’s behalf, and I proceed on that basis.

14                  Tyco submits that Signature has unduly delayed in seeking to put on this cross-claim.  To understand this submission it is necessary to understand some of the issues in the case.  Tyco carries on the business of a security service provider and, inter alia, is involved in the installation and maintenance of residential security alarm systems such as “back to base burglar alarms”.  Signature is a competitor of Tyco.  Tyco has two broad complaints.  First, it says that Signature by itself and through its dealers, has informed Tyco’s customers, putting the matter very generally, that Signature was taking over Tyco’s business and that customers should now transfer their businesses to Signature.  Secondly, it alleges that Signature’s dealers impermissibly used a list of Tyco’s customers which was obtained in inappropriate circumstances.

15                  These two broad allegations then formed the basis of claims of misleading and deceptive conduct based on the statements made to customers and a miscellany of causes of action relating to the improper receipt of the list.  When the proceeding was commenced Security and Mr Califano (the proposed cross-respondents of Signature’s cross-claim) were in fact joined as the sixth and seventh respondents.  They were sued in the amended statement of claim served on 19 August 2009 on the two claims just referred to. Insofar as the misrepresentation case was concerned it was alleged in particular (f) of paragraph 9 of the amended statement of claim that:

To the extent that the Representations were made by the first respondent, those Representations were made by its dealers:

(i)        acting as servant or agent of Signature Security within the scope of its actual or apparent authority; or

(ii)        acting at the direction or with the consent or agreement of Signature Security,

within the meaning of s 84(2) of the TPA.

16                  No point was taken by Signature that such an allegation, being one of material fact, should not have been included in particulars although such a point, if made, would have been sound.  Particulars are not allegations – they are the means by which allegations are to be proved.   The inclusion of material allegation in particulars is apt to disrupt the pleading system since a respondent is not required to plead to particulars.

17                  Leaving that aside, the particular makes an allegation that Signature should be taken to have made representations because its dealers, as servants or agents, made them on its behalf.  The allegation thus disclosed is not one of vicarious liability where one party is said to be liable for the wrongful conduct of another.  It is instead an allegation of liability as a principal because the acts alleged are said to have been committed directly by the principal by reason of the agency.  The difference is one of significance.  An agent who acts outside the scope of his or her authority does not thereby cause his principal to commit those acts.  By contrast, vicarious liability arises not by reason of agency theory but by reason of the relationship which engenders it.  An employee who acts outside the scope of his authority still renders his employer vicariously liable for his actions even if they were forbidden: cf. Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 36-41 at [32]-[45] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; State of New South Wales v Lepore (2003) 212 CLR 511 at 535-546 [40]-[74] per Gleeson CJ, 553-561 [106]-[131] per Gaudron J, 580-594 [196]-[239] per Gummow and Hayne JJ, 610-622 [297]-[332] per Kirby J: Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161 at 166-173 [11]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.   

18                  My reading of particular (f) is, therefore, one that involves Signature being liable only if the dealers were acting within the scope of the agency.  So far as the claim arising from the misappropriated list is concerned, direct allegations were made against Mr Califano that he had received a list in inappropriate circumstances.  Paragraph 18A of the amended statement of claim alleged that Security was liable in various ways for Mr Califano’s actions.  My reading of the amended statement of claim is that Signature was not alleged to be liable in relation to the list.   Paragraph 18, for example, refers only to individual dealers as being in breach and paragraphs 18A to 18C allege liability in the second through to the seventh respondents but pointedly not in respect of the first respondent.

19                  Perhaps to outflank that observation Tyco pointed to paragraph 7.6 of the amended statement of claim which relevantly was as follows:

The sixth respondent … is and was at all material times:

…

7.6       acting as a servant or agent of Signature Security within the scope of its actual or apparent authority within the meaning of s 84(2)(a) of the TPA.

20                  This, however, is an introductory definition provision.  I do not read the amended statement of claim as alleging, or certainly as distinctly or sufficiently alleging, that Signature was liable for the actions of Mr Califano and/or Security in obtaining a copy of the list.  Nor in relation to the misrepresentation claim do I read the pleading as alleging at all that Signature was liable for Mr Califano’s or Security’s actions if they had acted outside the scope of their authority.  Instead what was pleaded was liability for activities which were within their authority. 

21                  In those circumstances, I cannot accept Tyco’s submission that Signature should have immediately cross-claimed against Mr Califano and Security upon receipt of the amended statement of claim.  Presumably it was not likely to be within the scope of his or its authority to receive a stolen list and one can well understand Signature’s decision not to sue those parties at that stage.  More is this so when Mr Califano and Security denied Tyco’s allegations. 

22                  Tyco then submitted that Signature should have cross-claimed shortly after the receipt of an affidavit of Mr Califano filed on 11 December 2009.  In that affidavit Mr Califano deposed to having received the customer list from a Mr Warner in return for a payment.  Previously, in his defence he had denied this.  Shortly before the receipt of that affidavit Mr Califano and Security reached an arrangement with Tyco as a result of which the proceedings against them were dismissed.

23                  Tyco submitted that Signature had therefore known that Mr Califano and his company had inappropriately received the list back in December 2009 and, therefore, should have sought to cross-claim at that time. 

24                  However, that submission has to be weighed against the proposition that Tyco was not alleging in the then amended statement of claim that Signature was liable in respect of the acquisition of the list.  Further, even if that allegation could be extracted from the amended statement of claim – and I do not think that it can – what was alleged was based on agency and not vicarious liability   So far as the misrepresentation case was concerned it was not submitted that Mr Califano’s affidavit changed matters.

25                  On 28 April 2010 a further amended statement of claim was filed.  It raised in paragraph 14AA the allegation that Signature was vicariously liable for the action of Mr Califano and Security in making the representations.  It was at that time, and not before, that Signature became substantively exposed to the possibility of liability for Mr Califano’s and Security’s actions even if those actions were not authorised.  Also now added for the first time was a claim in paragraph 25 that Signature was vicariously liable for Mr Califano’s and Security’s actions in receiving the customer list. 

26                  All of this was new and substantially so.  Until that time Signature was quite entitled to take the position that the claims against it based on agency had real problems – the evidence may ultimately show that Signature expressly or impliedly authorised its dealers to engage in unlawful behaviour but such claims can be hard to prove.  Rare are the circumstances in which an agency agreement states that the agent may commit unlawful conduct on the principal’s behalf.  The allegation of vicarious liability, on the other hand, radically altered the landscape and brought Signature face to face with a real potential for liability for Mr Califano’s and Security’s actions whether they were authorised or not. 

27                  In those circumstances I do not accept that there was any relevant delay on Signature’s part in bringing forth the cross-claim.  It flagged, on Tyco’s amendment application of 28 April 2010, that it would take this course if the amendment were permitted and it did so within 20 days of the vicarious liability claims first being filed. 

28                  It was not suggested that the claims against Mr Califano and Security were unmeritorious in a relevant pleading sense.  Effectively, in various guises, Signature seeks recovery from them for misleading and deceptive conduct towards Signature as to their dealings (or lack thereof) with the customer list and for breach of contract if the representations alleged to have been made by them ultimately are made good. 

29                  For completeness I should record that I reject the argument that the present application constitutes a species of tactical manoeuvring somehow designed to deter other dealers from assisting Tyco.   The evidence did not sustain such a proposition.

30                  In those circumstances a proper case for leave is shown.  Even if I had not been of the view that there was no relevant delay on Signature’s part I would still have granted it leave.  No trial date has yet been fixed and, if leave had been refused, the most likely outcome would have been the filing of a separate proceeding by Signature.  The prospect of the same case, albeit with partially different parties, being heard by the Court twice is one which is to be avoided if at all possible.  It involves duplication, wasted expense and the possibility of inconsistent judgments.  There may well be cases in which it is appropriate to force the filing of separate proceedings or the severing of cross-claims but the procedural difficulties thrown up by such a course require one to pause long before taking it.   This is not one of those cases.

31                  In those circumstances, I extend the time for Signature to file and serve a cross-claim against Mr Califano and Security to 21 July 2010, provided only that the cross-claim be in the form attached to the notice of motion filed by Signature on 18 June 2010.  I order Tyco to pay Signature’s costs of the motion.

Associate:

Dated:         20 July 2010