Custom Security Services Pty Ltd v C and S Systems Pty Ltd
[2006] FMCA 1411
•12 September 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CUSTOM SECURITY SERVICES PTY LTD v C & S SYSTEMS PTY LTD | [2006] FMCA 1411 |
| TRADE PRACTICES – Termination of agency agreement – misleading or deceptive conduct – interim injunction relief – statutory injunction – serious question to be tried – balance of convenience – effect of orders sought –hardship to the respondent – hardship to the applicant – effect on third parties – prospects of success – status quo – adequacy of damages – convenience favours the applicant – undertaking as to damages given – interim injunction granted. |
| Trade Practices Act 1974, ss.52, 80 |
| Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398 Evans Marshall & Co Ltd v Bertola SA [1973] All ER 992 |
| Applicant: | CUSTOM SECURITY SERVICES PTY LTD |
| Respondent: | C & S SYSTEMS PTY LTD |
| File number: | CAG 46 of 2006 |
| Judgment of: | Mowbray FM |
| Hearing date: | 11 September 2006 |
| Delivered at: | Canberra |
| Delivered on: | 12 September 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Salmon QC and Ms C Besemeres |
| Solicitors for the Applicant: | JS O’Connor Harris & Co |
| Counsel for the Respondent: | Mr R Arthur |
| Solicitors for the Respondent: | Bradley Allen Lawyers |
ORDERS
The applicant (“CSS”) having given the usual undertakings as to damages, THE COURT ORDERS THAT:
The respondent (C & S Systems Pty Limited trading as I.P.S. and Integrated Property Services), its servants, agents and employees be restrained from representing that:
(a)it is authorised to respond to call outs made to CSS by clients/customers of CSS
(b)it is authorised to carry out maintenance or other service work in relation to the security systems of clients/customers of CSS
(c)it is authorised to open the control panels of the security systems of clients/customers of CSS
(d)by retaining the keys to premises of clients/customers of CSS it is entitled to undertake the aforementioned tasks; and
(e)clients/customers of CSS can authorise the respondent to undertake the aforementioned tasks consistent with their agreements with the applicant.
The respondent, its servants, agents and employees be restrained from opening the security control panels or otherwise interfering with the security systems of clients/customers of CSS.
The respondent, by its servants, agents or employees, return all keys to clients/customers of CSS currently in its possession, custody or control to those clients/customers by 5pm on 19 September 2006.
In these orders, the expression “clients/customers of CSS” means all those who (or which) at 11th August 2006, were bound by an agreement between themselves and CSS in relation to security monitoring services and while ever they are so bound.
The respondent, its servants, employees and agents give to the applicant all materials held by it pursuant to or otherwise arising out of its agency agreement with the applicant, including files, printed material and all other records, whether kept on computer databases or memories or kept in the form of documents and including all client numbers and sector records.
The applicant file and serve an amended application incorporating all the bases on which the application is made by 25 September 2006.
The respondent file and serve an amended response by 9 October2006.
The applicant file and serve a reply, including a response to the cross-claim by 16 October 2006.
The respondent file and serve a reply on the cross-claim by 23 October 2006.
The matter be listed for mediation on 25 October 2006 at 10.15.
The matter be listed for final hearing on 4, 5, 6 and 7 December 2006 at 10.15am.
Costs be reserved.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAG 46 of 2006
| CUSTOM SECURITY SERVICES PTY LTD |
Applicant
And
| C & S SYSTEMS PTY LIMITED |
Respondent
REASONS FOR JUDGMENT
This is an ex tempore judgment which has been revised and edited from the transcript. The applicant is Custom Security Services Pty Limited (CSS). The respondent is C & S Systems Pty Limited which trades as IPS (IPS).
The applicant and the respondent had an agreement whereby the applicant installs burglar alarms and monitors them via the telephone network. The applicant appoints local agents – in this case IPS was a local agent – with responsibilities including responding to alarm calls and maintaining existing equipment. IPS was the agent in the Bega region. The agency was governed by an agreement which is annexed to the affidavit of Ms Klitogiannis filed on 23 August 2006. The agreement appears to be of 1 July 2003.
It is not in dispute that this agreement was terminated on about 11, or at the latest, 14 August 2006. The applicant says in its submissions at [3]:
3.The respondent was the applicant’s agent until 11 August 2006. On that date the respondent purported to terminate its agency agreement. On 14 August 2006 the termination was accepted by letter from the applicant’s solicitors.
4.Thereafter the respondent prepared a form for the signature of customers of the applicant. Several of the applicant’s customers completed and signed the forms and copies of the completed forms came into the hands of the applicant. The forms contained statements which indicated that the customer and the respondent had independent contractual obligations and that the customers could retain these arrangements and continue as customers of the applicant. Nowhere on the form was it disclosed that any arrangement between the respondent and the customer which existed in the past, had arisen because the respondent was the agent of the applicant.
The applicant seeks interim injunctions under s.80(2) of the Trade Practices Act 1974 (Cth) to restrain certain conduct.
The relevant law
Section 52 of the Act provides that:
(1)A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 80 of that Act provides for injunctive relief. Sub-section (1) is the substantive provision in relation to ongoing or permanent injunctive relief. Sub-section (2) is relied on in this case:
(2)Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).
I note that this is a statutory provision for an injunction. Some of the rules that apply in the equitable jurisdiction of the Court do not necessarily apply when injunctions are sought under s.80 of the Act.
The approach when dealing with applications for interim injunctions has been generally accepted as that enunciated by Gibbs CJ in Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398:
[The Court] is first to inquire whether there is a serious question to be tried, and then to determine the matter on the balance of convenience.
The conduct
It is not in dispute that a director of IPS, Mr Colin Healey, contacted clients around or after 13 August 2006 and before 18 August 2006, and provided them with a pro forma. Mr Healey’s affidavit filed on
6 September 2006 at [20] – [22] says:
Events subsequent to 14 August 2006
20. Immediately from 11 August 2006 I.P.S. stopped receiving any call outs from CSS for alarm responses. At that time our technicians were continuing to carry out servicing and maintenance work which had been scheduled previously. I have been told by those technicians, and I believe that from 14 August 2006 the CSS Central Monitoring Station refused to take calls from them when they rang to report their attendance at a job.
21. A day or two after receiving the letter dated 14 August 2006 from O’Connor Harris [that letter confirmed the termination of the agreement] our office began to receive calls from clients asking what was happening. Each of those clients said words to the effect “We have received a letter from CSS saying that you are no longer their agent and that you will not be doing our security work now. We want you to keep doing our work”. On 17 August 2006 we received about sixty calls which were taken by me, Bianca, Cameron and David.
The affidavit then refers to an annexure containing a copy of a letter which had been sent by CSS to its clients.
22.Together with Bianca, I prepared a letter for clients to sign and send to CSS, if they wished. I then gave the letter to each of the clients who had contacted us and asked what they could do and for whom we then had contact details.
A copy of that letter is Annexure 1 to Mr Healey’s affidavit.
The Pro Forma
The pro forma (Annexure 1) starts with a section for the date, name, business name, and client address. It then says:
Attn: Customer Security Services (CSS Pty Ltd)
To Whom It May Concern;
I,…………of………… have informed Integrated Property Services (I.P.S.), that under no circumstances are they to hand over keys/swipe cards/access codes or any other proprietary information relating to my premise to any third party or CSS Pty Ltd without my prior consent.
I wish for Integrated Property Services (I.P.S.) to respond to my alarm as per my previous instructions.
I further more instruct that Integrated Property Services (I.P.S.), the company that has sold and serviced my security system in the past, be advised immediately for all maintenance, service and technical issues relating to my security systems for them to complete.
I would also like to declare that in the time since I have had dealings with Integrated Property Service (I.P.S.) (C & S Systems Pty Ltd) and whilst an agent for CSS Pty Ltd, at no time has Col Healey or any of the companies staff ever advertised, mentioned or offered me any monitoring services of any other company other then the monitoring service offered by CSS Pty Ltd.
I do not wish to have any other dealings with CSS Pty Ltd other than to monitor my Security System. If these instructions are not followed, I may have to consider other monitoring arrangements.
Yours Sincerely…
There is then a space for the signature, the name, the date, phone number and then:
Please Fax To: CSS Pty Ltd – Fax (02) 6257 6588
&
Please Fax & Post Original copy to: I.P.S. Fax: (02) 6493 8309 Ph: 6493 8526
Integrated Property Services (I.P.S.)
P O Box 3
Bega NSW 2550
This pro forma in my view appears to make a number of representations to which the applicant objects:
·that IPS is authorised by CSS to respond to alarm call outs for persons who were clients of CSS at August 2006
·that IPS is authorised by CSS to maintain and service the security systems of these clients
·that IPS is authorised to open the security panels of the security systems of these clients
·that by retaining the keys to those security systems IPS will be able to undertake these tasks
·that these clients can authorise IPS to undertake these tasks.
Agreements between CSS and its clients
There are three forms of agreement between CSS and the customers or clients which are annexed to the affidavit material before me. The most recent is Annexure A to the affidavit of Mr Healey filed on
6 September 2006 which includes:
5.1We will perform Monitoring as specified in this Agreement. We will use all reasonable efforts to notify the nominated Client Contact/s, by telephone in accordance with your instructions, and once a Client Contact or CSS Approved Response contractor has been advised CSS’s responsibility will have been fulfilled.
5.2We or our Approved Response Contractor [emphasis added] will undertake an Alarm Response following an alarm signal when instructed by you or if no other course of action can be taken…
10.4Only CSS, or its Agent, may open the control panel, detectors, or detection equipment AND if you or any other person open such equipment it will be at your risk.
10.5 During any warranty period or period of monitoring only CSS or our Authorised Agents can undertake work or service to any part of the Security System. Any unauthorised work or services undertaken by you will be at your risk and may affect your warranties.
11.1 You will give us detailed written instructions as to contact persons in the circumstances of emergency prior to the Commencement Date. You may vary these instructions in writing provided that at our option we may accept oral variations, which should be immediately confirmed in writing by you. The database records kept by us will be conclusive evidence as to all oral variations. Details of the current Client’s instructions may be obtained from CSS.
15.4 The following acts will be considered an event of default:
…
15.4.7 Any unauthorised work or service to the security system or any unauthorised opening of the control panel detectors or detection equipment.
I note that according to Mr Healey’s affidavit this is the most recent form of agreement.
Annexure B provides a form of agreement, according to Mr Healey that was entered into after 2001 up to about June 2005 when Annexure A became the form of agreement. Relevant provisions in this earlier agreement between CSS and its clients are:
5.2 CSS or its nominated agent will undertake an Alarm Response following an alarm signal when instructed by the Client or if no other course of action can be taken. An attendance will be made at the Premises as soon as practicable considering the location and availability of security patrol services…
10.5 Only CSS, or its agent, may open the control panel, detectors, or detection equipment AND if the client or any other person opens such equipment it shall be at the Client’s risk.
10.6 During any warranty period or period of Monitoring only CSS or its agents shall undertake work or service to any part of the Security System. Any unauthorised work or services undertaken by the Client or any other person shall be at the Client’s risk.
11.1 The Client shall give CSS detailed written instructions as to alternative contact persons in the circumstances of an emergency prior to the Commencement date. The Client may vary these instructions in writing provided that at its option CSS may accept oral variations, which shall immediately be confirmed in writing by the Client. The database records kept by CSS will be conclusive evidence as to all oral variations. Details of the current Client’s instructions may be obtained from CSS.
15.4 The following acts shall constitute an event of default:
…
15.4.7 any unauthorised work or service to the Security System or any unauthorised opening of the control panel detectors or detection equipment.
The earliest of the three agreements which was the agreement prior to 2001 is Annexure O to Ms Klitogiannis’ affidavit filed on 23 August 2006. The relevant provisions of that agreement are:
3.1 Custom Security Services Pty Limited or its nominated agent will respond to an alarm when instructed by the client or if no other course of action can be taken…
5.4 Only Custom Security Services Pty Limited may open the control panel or detectors, provided that if any other party opens the control panel to undertake work it shall be at that party’s risk.
6.1 The Client shall give CUSTOM SECURITY SERVICES PTY LIMITED detailed written instructions (“Client’s Instructions”) prior to the commencement of monitoring.
These instructions may be varied with the agreement of CUSTOM SECURITY SERVICES PTY LIMITED. Variations shall be in writing provided that at its option CUSTOM SECURITY SERVICES PTY LIMITED may accept oral variation which shall immediately be confirmed in writing by the Client…
10.5 The following acts shall constitute Events of Default:
…
b. abuse or misuse of the system, leading to the inability of Custom Security Services Pty Limited to perform its obligations under the contract;
In my view it is important to have regard to these provisions as they govern the relationship between CSS and its clients on some of the critical issues before the Court.
I note also that the role of this Court in considering an application for interim injunctions is not to reach conclusive findings of fact.
What appears to flow from these agreements, at least on its face, is that:
·the role of contacted persons and approved response contractors/nominated agents/authorised agents are quite distinct. Contact persons have different roles from approved response contractors, nominated agents or authorised agents
·it is the role of the approved response contractor/nominated agent/authorised agent to respond to an alarm or to service or repair equipment
·this person is approved or authorised by CSS and not by the client.
It is agreed that IPS is no longer an agent or approved response contractor for CSS.
Serious issue to be tried
The first test to be applied under the approach adopted by Gibbs CJ in Australian Coarse Grain Pool is whether there is a serious issue to be tried. That is whether there is a case that can be seriously argued and which, on its face, has some substance. This threshold is not onerous.
It is clear to me that there are serious questions to be tried in this case. They involve whether IPS engaged, and continues to engage, in misleading and deceptive conduct in holding itself out to be able to provide the various services to which I have referred earlier in these reasons.
Balance of convenience
This is the second limb that I am required to consider as I have found that there are serious questions to be tried.
Hardship to the respondent
In Mr Healey’s affidavit filed on 6 September 2006 at [25] and [26] he says:
Effects of interim orders sought by the Applicant
25.If the interim orders sought by the applicant in these proceedings are made the effect on IP.S will be severe.
I have set out below what I believe will be the effect of those orders:
(a) I.P.S. will be unable to undertake any work by way of servicing or maintenance on a client’s system even if I.P.S. has been requested by the client to do the work. This would mean that the Company
will be prevented from fulfilling its warranty requirements.
26.The critical orders are the prohibitions on opening control panels and touching or interfering with security systems of CSS. This would prevent:
(a) Any servicing or upgrade work being carried out on those systems. The consequent loss of work would require the Company immediately to put off a technician and sell a vehicle and tools to avoid substantial losses. If the situation continued for a further 2-3 months it would be necessary to put off another technician and sell another vehicle and tools. At that point the Company would have to cease the sales, installation and maintenance side of the business completely unless substantial other work became available. We would be able to keep going for that long only because of existing large contracts which are nearly finished. Without those contracts we would have to close immediately. Although we would attempt, to find other work, I do not think there is any available.
(b) Undertaking patrol work effectively is dependant on having access to a client’s premises. In some instances this is achieved by means of a key, but in many cases if it is necessary to gain access via the security system to release external doors. If the Company’s patrolmen were unable to gain access in this way we would have to give up existing contracts. The effect would be to close the patrol side of the business immediately because there is not sufficient other work to keep any part of the patrol business viable. All employed staff would have to be put off, and there would be no income for the family members working on that side of the business.
Mr Arthur, the respondent’s counsel, said in written submissions at [24] that:
24.The evidence discloses that if the Respondent is prevented from being able to have access to control panels and touch the security systems it will be unable to perform a large part of the work that it currently undertakes, with the result that it will have to lay off staff and probably cease trading in the short term. The employees laid off will suffer particularly.
To my mind this is a very weighty consideration. However, as Mr Salmon for the applicant says, if the respondent is allowed to continue with its current conduct this would lead to a breach of the client’s obligations to the applicant. Arguably, this is correct. The respondent would be undertaking work which arguably it is not entitled to do.
Hardship to the applicant
If the respondent is allowed to continue with its conduct, especially not returning the keys to the clients, the applicant would not be able to meet its contractual obligations to its clients, including responding to alarms and providing maintenance, whether by itself or by authorised agents or contractors. In my mind this also must be given very significant weight.
Effect on third parties
The respondent has referred to the effect on the applicant’s clients and also on its own employees. But this works both ways. Continuation of the respondent’s conduct may place the clients in breach of their obligations to the applicant.
Prospects of success
Heydon in Trade Practices Law at [18.800] refers to the role of the Court in interlocutory proceedings. It is not an attempt to resolve the conflicts of evidence and not to attempt a preliminary trial.
Nevertheless from what I have seen from the material before me and to which I have already referred, which I accept has been untested, this matter must have some real prospects of success.
Status quo
It is not in dispute that the agreement between the applicant and the respondent has been terminated. In these circumstances it is not realistic to talk about the status quo.
Adequacy of damages
Heydon in Trade Practices Law says at [18.790]:
[18.790] Equity will not grant an injunction in an auxiliary jurisdiction – in aid of common law rights – where damages are an adequate remedy. The Act [the Trade Practices Act] is silent on the applicant that the proposition to s.80. It is highly unlikely that this restriction on granting an injunction applies as a strict rule, for several reasons. First, the right to see an injunction exists together with the right to sue for damages; they are not expressed as alternative remedies. Second, the equitable doctrine as to adequacy of damages strictly speaking applies only in the auxiliary jurisdiction; it does not apply in the exclusive jurisdiction, where no common law right is infringed, and there is no reason to extend it to purely statutory injunctions. Third, even in the auxiliary jurisdiction the strength of the rule is weakening.
The learned author then refers to Evans Marshall & Co Ltd v Bertola SA [1973] 1 All ER 992 at 1005 in the Court of Appeal in the UK before continuing:
However, the adequacy of damages remains a factor to be taken into account in the balance of convenience when determining whether or not an interlocutory injunction should be granted.
I note that damages may be available but I have doubts whether the applicant would be able to be adequately recompensed.
Conclusion on balance of convenience
Having regard to all of the above I am of the view that convenience is fairly and evenly balanced, but that it probably favours the applicant.
Conclusions
I conclude that:
·there are serious questions to be tried
·the balance of convenience favours the applicant.
Proceedings under the Trade Practices Act have a special character in that that Act deals with the protection of the public interest. Provided the applicant gives the usual undertaking s as to damages, I believe that it is desirable to grant appropriate confined injunctive relief under s.80(2).
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Mowbray FM
Associate: Natasha Werner
Date: 17 October 2006
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