FEDERAL COURT OF AUSTRALIA

Bupa Australia Pty Ltd v iSelect (No 2) [2012] FCA 1277

THE COURT ORDERS THAT:

1.    Messrs Damien Michael Trevor Waller and Matthew Ross McCann (Messrs Waller & McCann) be joined as, respectively, the Third and Fourth Respondents to the proceeding.

2.    On or before 4pm on 1 November 2012, Bupa has leave to file and serve:

(a)    an Amended Fast Track Application in the same form as that which forms part of Confidential Exhibit DMG-8 to the Second Affidavit of Domenic Mathew Gatto affirmed on 2 October 2012; and

(b)    Further Amended Fast Track Statement in the same form as Confidential Annexure DMG-16 to the Third Affidavit of Domenic Mathew Gatto affirmed on 15 October 2012.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    On 25 October 2012, I gave the applicant, Bupa Australia Pty Ltd (“Bupa”) leave to join Damien Waller and Matthew McCann as respondents and leave to file and serve an amended Fast Track application and Further Amended Fast Track Statement substantially in the form of a confidential exhibit. Bupa sought that leave by an amended interlocutory application dated 15 October 2012.

2    Mr Waller is and at all material times was a director, executive chairman and founder of iSelect Limited and iSelect Health Pty Ltd (collectively, “iSelect”). Mr McCann was, until 7 February 2012, the Corporate Development Director and company secretary of iSelect, and since that date has been a director and chief executive officer.

3    The proceeding in which the interlocutory application was made is described in Bupa Australia Pty Ltd v iSelect Limited (No 1) [2012] FCA 587 (“Bupa (No 1)”). In essence, Bupa, a major provider of health insurance products, alleges that iSelect, a broker of health insurance products, has, in its advertising campaign from August 2011, made representations which are misleading or deceptive or likely to mislead or deceive. iSelect denies those allegations and, by cross-claim, alleges that Bupa and its chief executive officer, Mr Bowden, have, by their statements made about this proceeding, made representations that are misleading or deceptive or likely to mislead or deceive. Bupa and Mr Bowden deny those allegations.

4    Although the proceeding was commenced in Fast Track, its history has been complicated and includes a number of interlocutory applications, discovery disputes and successive amendment of “pleadings”.

5    The present interlocutory application was supported by:

1.    the affidavit of Domenic Gatto affirmed on 2 October 2012;

2.    the affidavit of Domenic Gatto affirmed on 15 October 2012; and

3.    written submissions dated 15 October 2012.

6    While the application to join Mr Waller was uncontroversial, the joinder of Mr McCann was opposed. Written submissions dated 22 October 2012 were filed in opposition.

7    Bupa’s proposed Further Amended Fast Track Statement alleges that Messrs Waller and McCann were knowingly involved in the misleading and deceptive conduct of iSelect, by their approval and/or authorisation of, the broadcast and publication of the Waiting Period Advertisements, which they knew or ought to have known were misleading or deceptive or likely to mislead or deceive.

8    As is clear from Mr Gatto’s affidavits, the proposed amended pleading was based on, and referred to, two key documents (documents 144 and 145 on iSelect’s list of discovered documents) which iSelect asserts to be confidential. Bupa has disputed the confidentiality of those and other documents.

9    The documents which gave rise to Bupa’s new allegations of accessorial liability were discovered by iSelect on 10 August 2012. Copies were provided to Bupa’s lawyers (subject to a confidentiality regime in place between the parties) on 14 August 2012 and came to Mr Gatto’s attention on 19 August 2012.

10    Following a mediation on 21 August 2012, the proposed Further Amended Fast Track Statement was prepared, and some minor revisions were subsequently made.

11    iSelect initially did not consent to the joinder of either Mr Waller or Mr McCann but on 9 October 2012, its solicitors advised that, while there was no general objection to Mr Waller’s joinder, that of Mr McCann was opposed.

The parties’ submissions

12    Bupa submitted that leave should be granted, as there was a serious question to be tried on the question of accessorial liability. As Mr McCann was an addressee of key emails relating to the Waiting Period Advertisements, Bupa was entitled to allege that he received them and subsequently attended an associated meeting prior to the making of the representations. In such circumstances, there was a strong inferential case that Mr McCann authorised or approved the impugned conduct, which should not be, in effect, struck out at this stage. Even if Bupa’s case were relatively weak, summary judgment would not be available.

13    Bupa also submitted that the joinder would avoid a multiplicity of proceedings, and would promote the most inexpensive, quick and efficient resolution of all issues arising from the same subject matter. Further, the new allegations’ connection with the existing claims was so close that the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 could constitute an obstacle to bringing the new claims subsequently. Bupa had not delayed in making the new allegations, but had acted promptly on obtaining access to the relevant documents.

14    Bupa acknowledged that it had, as yet, provided few particulars, but submitted that its failure to do so at this stage did not warrant a refusal of leave.

15    iSelect submitted that the allegations of accessorial liability were not sufficiently clear or particularised to allow Mr McCann to know the case against him, as procedural fairness required.

16    iSelect further contended that, on the basis of recent authority such as Comcare v John Holland Rail Pty Ltd [2009] FCA 660 (“Comcare”) and Brisbane Slipways Operations Pty Ltd v Pantaloni (2010) 270 ALR 13 (“Brisbane Slipways”), the joinder of Mr McCann required not merely an arguable case, but something in the nature of an “affirmative case” against him, which was not satisfied.

17    iSelect relied on the holding in Yorke v Lucas (1985) 158 CLR 661 that accessorial liability requires actual knowledge of the essential elements of the contravention (albeit not knowledge that participation therein was a breach) and that mere carelessness or recklessness would not suffice.

18    iSelect submitted that the only basis for joining Mr McCann as a person involved in the alleged misleading or deceptive conduct, was his position in iSelect (until 7 February 2012 as the Corporate Development Director and company secretary) and being an addressee of the confidential emails on 12 December 2011. There was, however, no specific allegation as to his work responsibilities in the various positions he occupied. iSelect submitted that in fact, Mr McCann worked in a directorate of seven directors and in an executive team of nine people. He was not the alter ego of the company. His role as Corporate Development Director related to group strategy, particular mergers and corporate finance.

19    iSelect submitted that nothing was alleged as to Mr McCann’s authority to authorise or prevent the advertisements, his awareness of facts, or what he discussed at the subsequent meeting.

20    Further, the email commentary in relation to the Waiting Period Advertisements was in the nature of speculative commentary, many of the advertisements were published before Mr McCann was appointed a director of iSelect and some, at least, differed from the form of the advertisement contained in the emails.

21    iSelect submitted that accordingly, there was, on the present state of the proposed pleading, no affirmative case and leave should be refused until the deficiencies were rectified. Nor was Mr McCann’s joinder necessary in order for Bupa to obtain relief.

Discussion

22    Rule 9.05 of the Federal Court Rules 2011 (Cth) (“the 2011 Rules”) states:

9.05    Joinder of parties by Court order

(1)    A party may apply to the Court for an order that a person be joined as a party to the proceeding if the person:

(a)    ought to have been joined as a party to the proceeding; or

(b)    is a person:

(i)    whose cooperation might be required to enforce a judgment; or

(ii)    whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or

(iii)    who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.

(2)    A person must not be added as an applicant without the person’s consent.

(3)    If a person is joined as a party under this rule, the start date of the proceeding for the person is the date on which the order is made.

(4)    An application under subrule (1) need not be served on any person who was not served with a copy of the originating application.

Note The Court may make an order for any of the following:

(a)    service of the order and any other document in the proceeding;

(b)    amendment of a document in the proceeding;

(c)    the filing of a notice of address for service by a party.

23    It was frequently stated that an applicant for joinder under the previous equivalent to r 9.05 of the 2011 Rules (O 6 r 8 of the Federal Court Rules (1979) (Cth) (“the 1979 Rules”)), must show an arguable case against the parties proposed for joinder, at least to the standard of being able to resist an application for summary judgment if the relevant persons had been sued in separate proceedings (see Review Australia Pty Ltd v Redberry Enterprise Pty Ltd (2003) 58 IPR 366 (“Review Australia”) at [5] and Tytel Pty Ltd v Australian Telecommunications Commission (1988) 11 IPR 223 at 225, applying the principles in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1965] ALR 636).

24    In Comcare, on which iSelect relied, Jessup J permitted joinder under O 6 r 8(1)(b) of the 1979 Rules despite opposition on grounds including that the making of alternative allegations against the proposed respondent would involve inconsistency.

25    His Honour referred, inter alia, to Warner Music Australia Ltd v Swiftel Communications Pty Ltd (2005) 67 IPR 27, in which Branson J refused joinder where the only common element in the allegations between the existing and proposed respondents was that the claims against the latter could be conveniently dealt with at the same time as the former, and could not be shown to be manifestly groundless.

26    In that context, Jessup J stated at [13]:

I agree, with respect, that O 6 r 8(1)(b) is not brought into operation merely by the circumstance that a cause of action may be legitimately prosecuted against the proposed respondent in the existing proceeding. I also agree that it will not be sufficient for an applicant seeking joinder merely to show that he or she has claims against the proposed respondent which could not be dismissed as unarguable in the General Steel sense. However, … neither do I accept that O 6 r 8 is concerned only with existing proceedings which are “improperly constituted by reason of the failure to join a person as a party”. I consider that such a view takes too narrow an approach to the concept of ensuring that all matters in dispute in the proceeding are effectually and completely determined and adjudicated upon. It is sufficient for present purposes to say that I consider that the expression “all matters in dispute in the proceeding” extends at least to matters which are placed in dispute by an existing party and which, if determined in a particular way, would result in a finding that another person, rather than the existing party, should be called to account for the transgression presently alleged by the applicant.

27    In Brisbane Slipways, the plaintiff sought to maintain the jurisdictional competency of its action in rem under the Admiralty Act 1988 (Cth) in relation to a general maritime claim for payment for work it had performed on a ship. The existing defendants were the individual who allegedly signed the documents commissioning the work, the ship and the corporation asserting ownership of the ship.

28    Greenwood J, refused the plaintiff leave to join, as a fourth defendant, a company of which the individual defendant was a director, and whose street address he had used, on the basis that the individual defendant might argue that he was acting on the company’s behalf.

29    The individual defendant deposed that he was not employed by, or agent of, the company. Greenwood J noted that the proposed joinder was simply to meet an apprehended defence. The applicant did not contend that it had an arguable cause of action against the company. The company was thus not a necessary party to ensure that all matters in dispute in the proceeding could be effectually determined.

30    Greenwood J referred to Comcare and stated at [152]-[154]:

Jessup J took the view that it would not be sufficient for an applicant seeking joinder to merely show that he or she satisfies the General Steel test. That test would at least require the applicant to show that it has a case against Arc en Ciel Voyages which is not so obviously untenable that it cannot possibly succeed; is not manifestly groundless; is not so manifestly faulty that it does not admit of argument. Other such considerations under the General Steel tests are whether the case upon which the applicant relies is a case which the court is satisfied cannot succeed; whether the claim is based on a cause of action which under no possibility could be good; and whether the case advanced on the current state of the pleadings would be manifestly useless.

With respect, I agree with Jessup J’s observation that it is not sufficient to simply demonstrate satisfaction of the kind of tests discussed in General Steel as those tests are no substitute for the language of the rule. The applicant seeking joinder must demonstrate that it seeks to place in dispute the factual question whether Mr Pantaloni was acting in a particular capacity or purporting to exercise authority howsoever arising on behalf of another person rather than simply on his own behalf and that Arc en Ciel Voyages should be called to account in the proceeding in respect of the conduct put in controversy so as to ensure that all matters then in dispute within the proceeding are completely determined and finally adjudicated upon.

The plaintiff does not assert any cause of action against Arc en Ciel Voyages let alone a cause of action which might satisfy the tests reflected in General Steel. The application for joinder is simply a defensive application on the assumption that Mr Pantaloni may 1 day seek to say that he has no liability on the contract because he was acting for and on behalf of Arc en Ciel Voyages. In short, no affirmative case is made against that corporation at all. If Mr Pantaloni suddenly changed position on that point, inferences might arise against him based upon a late change in position and to the extent that such a change resulted in a conclusion that Arc en Ciel Voyages should then be joined as a party, cost consequences would almost certainly arise. If an affirmative case is to be made, it ought to be formulated and the foundation material facts identified and properly advanced in support of a joinder application.

31    While on one view, the observations in Comcare and Brisbane Slipways may support a higher threshold for joinder than hitherto applied, when read in context, those in Comcare were not directed at the question of the strength of the case, but whether joinder met other requirements of the relevant rule. Brisbane Slipways involved a merely apprehended defence, which the opponent had effectively disavowed.

32    It was unnecessary to determine whether, and if so in what sense, a more stringent test for joinder now applied, as I considered that, on any view, the allegations in the proposed amendment raised “an affirmative case”, seeking to place in dispute the factual question whether Mr McCann had the requisite knowledge of, and authorised, the relevant advertisements. There was thus a sufficient case against Mr McCann for the purposes of joinder. While particulars of some allegations were scant, the role and authority Mr McCann exercised in his positions and his participation in the meeting appeared to be peculiarly within the knowledge of iSelect and/or Mr McCann. They were thus difficult to particularise prior to discovery and necessarily depended on inference to a considerable extent.

33    In Review Australia, Heerey J refused applications to join, as joint tortfeasors, a number of directors of corporate respondents, who allegedly infringed, and/or authorised the infringement of, copyright.

34    While his Honour observed that the position as a director was itself insufficient to support an arguable case of joint tortfeasance, the persons resisting joinder deposed to their roles in the respondent companies, and there was thus positive and credible evidence to explain how the infringements could have occurred without their knowledge.

35    In the present case, as Mr McCann’s role in the relevant positions was, at this stage, within the knowledge of the iSelect parties, the want of particulars was not a basis to refuse joinder.

Conclusion

36    At the hearing on 25 October 2012, I indicated that the documents on which the proposed amendments were based should, at this stage, remain confidential. Subject to a final determination of their status, the relevant amendments would be contained in a confidential annexure.

37    I concluded that Bupa should have leave to join Messrs Waller and McCann and to file and serve the Further Amended Fast Track Statement.

Associate:

Dated:    15 November 2012