Naskam Security Services Pty Ltd v Adarm Security Pty Ltd

[2000] QDC 441

DISTRICT COURT OF QUEENSLAND

[2000] QDC 441

PARTIES:	NASKAM SECURITY SERVICES PTY LTD (Plaintiff/Applicant) and ADARM SECURITY PTY LTD (First Defendant) and ALAN DAVID HOLDER and ROBYN HOLDER (Second Defendant) and ADAR (HOLDINGS) PTY LTD (Respondent)
FILE NO/S:	Plaint No. 167 of 1999
PROCEEDING:	Chamber application
DELIVERED ON:	12 September 2000
DELIVERED AT:	Maroochydore
HEARING DATE:	21 August 2000
JUDGE:	K S Dodds DCJ
ORDER:	Order as per draft initialled by His Honour and placed with the papers.
COUNSEL:	D A Quayle for the plaintiff applicant G Barr (solicitor) for the respondent
SOLICITORS:	Kimball Wood for the plaintiff Butler McDermott and Egan for the respondent

1. This is an application by the plaintiff pursuant to Rule 247 of the Uniform Civil Procedure Rules 1999 (UCPR), for a stay to a notice of non-party disclosure operating pursuant to Rule 246 to be lifted.

1. There was a related application by the present respondent on 29 November 1999. That application sought leave to object to the plaintiff’s notice of non-party disclosure because the seven day time limit under Rule 245 UCPR had expired. On 2 December 1999, leave was granted and it was indicated the objection must be upheld. The proceeding was adjourned for the plaintiff to consider whether to seek an order pursuant to Rule 247(2)(b) UCPR.

1. Since, the plaintiff has amended its statement of claim (the second amended statement of claim) and issued a fresh notice requiring non-party disclosure which is the subject of the present proceeding.

1. The plaintiff in the action is a company providing security systems and services. It sued the first defendant which is also a company providing security services and the second defendant who are the directors and shareholders of the first defendant for breach of two agreements whereby it alleged it licensed the first defendant to use the plaintiff’s alarm systems and licensed the first defendant to use the plaintiff’s protective services systems both within a designated territory (the Caboolture Shire). It alleged the type of business conducted under the alarm system licensing agreement was the provision and installation of burglar alarm systems within the territory. It alleged the type of business conducted under the protective services licensing agreement was the provision of patrol and response security services to premises within the territory. It alleged that pursuant to the alarm system licensing agreement as varied, the first defendant could purchase alarm equipment from sources other than the plaintiff and pay a commission being 20 per cent of the sale price of alarms installed by the first defendant in the event the plaintiff was not to monitor the alarm. It alleged that pursuant to the protective services licensing agreement, the first defendant had the sole right to operate the protective services system within the territory and would pay a continuing license fee to the plaintiff from the date on which the first defendant achieved a designated minimum performance criteria, being $1500 per week. It alleged it was a term of both agreements that the first defendant “would ensure that none of its officers as defined in section 9 of the Corporations Law were concerned or interested directly or indirectly in any business which was similar to the type of business conducted pursuant to (the particular agreement) except as a shareholder in a public listed corporation. It alleged that the second defendants were directors of both the first defendant and the respondent to this application, Adar (Holdings) Pty Ltd (Adar), and that Adar engaged in the business of the provision and installation of burglar alarm systems within the territory and the provision of patrol and response security services to premises within the territory, both such businesses being similar to the business undertaken by the first defendant under the agreements. It alleged that the first defendant breached the alarm system licensing agreement by failing to pay to the plaintiff commission payable on the purchase of equipment from sources other than the plaintiff; breached the protective services licensing agreement by failing to pay to the plaintiff the continuing licence fee; breached both agreements by failing to ensure that none of its officers as defined in section 9 of the Corporations Law were concerned or interested directly or indirectly in any business which was similar to the type of business conducted pursuant to the (respective agreement) except as a shareholder in a public listed corporation. It alleged that the second defendant guaranteed the first defendant’s obligations under the respective agreements. It alleged it terminated both agreements by notice in writing on or about 8 December 1998.

1. Exhibits to an affidavit of the plaintiff’s solicitor, read on the hearing of the application, include a letter from Caboolture Sports Club Inc which is located within the designated territory dated 2 December 1998 and addressed to ‘Adar Holdings’.  It reads: “Attention Alan.  As per our discussion last week please find listed below the standard hours per week we require static security (days and periods of time are then set out)…At your convenience if you like to submit a quote I will refer it to the board for consideration.”  Also included is a letter headed “Adar (Holdings) Pty Ltd” of an address within the designated territory, dated 17 June 1998 which appears to be a quotation by that company for providing cash escorts for money movement.  Company search results included, show the same company officers for the first defendant and Adar at all material times.

1. The licensed business in the alarm systems agreement is set out in the agreement.  It is described as “the business of providing services in accordance with the system to customers to be conducted by the licensee in accordance with this agreement”.  The “system” is described as “the system developed by (the plaintiff) for the provision of alarm system equipment and installation including the integrated operation of Naskam’s industrial property and the business of Naskam but excluding the provision of patrol and response security services”.

1. The licensed business in the protective services licensing agreement is set out in that agreement.  It is described as “the business of providing services in accordance with the system to customers to be conducted by the licensee in accordance with this agreement”.  The “system” is described as “the system developed by Naskam for the provision of patrol and response security services including the integrated operation and control of Naskam’s industrial property and the business of Naskam but excluding the provision of (1) alarm installation and monitoring services, (2) patrol and response security services for money movement”.  Patrol and response security services are not defined in any further detail in the agreement except that the “continuing licence fee”, to be paid according to the terms of the agreement, is defined in the agreement to mean 20 per cent of gross receipts for patrols, 5 per cent of gross receipts for static guards and 0 per cent of gross receipts for alarm response thus including static guards.

1. The two letters I have referred to appear to indicate that Adar, during the currency of the two agreements, has been interested in providing static security and cash escorts for the movement of money.  Static security may be the provision of static guards.  Cash escorts for the movement of money may be the subject of the second exclusion in the description of the system under the protective services licensing agreement.  Both activities may be work of a type a business providing security type services may undertake.  The plaintiff also alleged in its statement of claim that Adar has engaged in the type of work which is the subject of the alarm system licensing agreement.

1. UCPR Rule 242 provides for the issue of a notice by a party to a proceeding to a person not a party to produce to the issuer “a document –

(a)directly relevant to an allegation in issue on the pleadings; and

(b)         in the possession and under the control of the person; and

(c) that is a document the person could be required to produce at the trial of the matter.”

1. Whilst the description of the documents discloseable under UCPR both party and non-party appears narrower than under the superseded rules the limitations surrounding the duty as existed under the superseded rules, do not appear to have been enlarged.

1. The procedure is not available when its only purpose is a fishing expedition for documents which may have been in the possession of a person not a party to the action.  Documents sought must be shown to probably be directly relevant to an allegation in issue on the pleadings.  The discovery process is limited to the production of specific documents which would be the subject of a subpeona duces tecum at a trial and which are shown to be probably in the possession or control of the non-party.  The onus of showing these things is that of the party seeking discovery: Lebon v. Lake Placid Resort Pty Ltd (1995) 1 QdR 24 and Uthmann v. Ipswich City Council (1998) 1 QdR 435.

1. In the notice seeking disclosure the subject of the present application the plaintiff sought documents in the possession, power or control of the respondent;

(a)relating to the purchase of any burglar alarm equipment which was installed within the territory from any source other than Naskam;

(b)relating to gross income earned by the provision of security patrol or patrols within the territory;

(c)relating to gross income earned by the provision of a static guard or guards within the territory;

(d)relating to gross income earned by the provision of an alarm response within the territory;

for the period from 14 April 1997 until the date of the notice.

1. The first defendant was registered on 5 March 1997.  Adar was registered on 28 May 1998.

1. Objections to the notice included, lack of particularity in describing the documents, lack of relevance of the documents to the proceedings, expense and inconvenience, that the time frame was too wide, and disclosure of confidential business information .

1. The objection that the time frame was too wide was based upon the date of registration of Adar and the allegation in the plaintiff’s pleading that the alarm system licensing agreement and the protective services licensing agreement were terminated by the plaintiff by notice in writing on or about 8 December 1998.

1. The term of each of the agreements was five years.  Each agreement provided for termination.  The plaintiff could terminate for a breach by the licensee, lack of satisfactory performance and various other reasons.  The licensee could terminate the agreement but only if the licensee was in substantial compliance with the agreement, the plaintiff had breached a material term of the agreement, the licensee gave notice in writing to the plaintiff to remedy the breach referred to in the notice and the plaintiff failed to do that within 21 days of receipt of the notice.  Each agreement also provided that termination of the agreement by the licensee except as provided was to be deemed to be termination without proper cause and a breach of the agreement by the licensee.  Both agreements provided in the event the agreement was terminated by the plaintiff for any of the reasons set out in the agreement that: “The rights of termination conferred are without prejudice to any right of action or remedy which Naskam has in respect of any prior breach by the licensee of the terms and conditions of the agreement.”  In addition, the agreement provided the licensee must immediately pay to Naskam all fees payable under the agreement for the period up to the date of termination and any other monies owed by the licensee to Naskam.

1. The breaches alleged by failure to pay commission payable on the purchase of equipment from sources other than the plaintiff and from failure to pay the continuing licence fee would not justify the time frame in the notice of disclosure.  The end date would be the date of termination of the agreements.  However the breach of the agreements by officers of the first defendant being concerned in a similar type of business to that to which the agreements related raises other questions.  Such a clause was intended to safe guard the plaintiff’s economic interests.  Although the prohibition provided by the clause was expressed in the agreements to operate during the term of the agreements so that once the agreement was terminated the clause was no longer binding, if the clause was breached during the term of the agreements the consequences or damage flowing from the breach may extend beyond the date of termination.

1. Each agreement also contained a restraint clause in the event of termination which restricted the licensee and the guarantor from being concerned or interested directly or indirectly in a business similar to the licensed business within the territory for a period of three years post termination. 

1. The start date must be the date of registration of the respondent.  I do not think it unreasonable for the discovery to extend to the date of the notice which is not quite 18 months post termination.

1. I consider the present notice contains sufficient particularity about the documents to enable the respondent to identify what is sought.  Documents of the nature of those sought will be relevant to the proceeding.  As to the question of expense and inconvenience, the extent of the process will depend upon whether and to what extent the respondent has engaged in the activities the subject of the request for disclosure during the period.  I do not consider the request for disclosure over the period I have referred to oppressive.

1. As to the matter of confidential information, the plaintiff offers to provide an undertaking in terms of that discussed by McPherson J in Exparte Fielder Gillespie Limited(1984) 2 QdR 339. I consider that sufficient.

1. Order per the draft initialled by me and placed with the papers.