Smack on Time v Chubb Security

[2001] NSWSC 505

CITATION:	Smack on Time -v- Chubb Security [2001] NSWSC 505
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50064/01
HEARING DATE(S):	8 June 2001
JUDGMENT DATE:	20 June 2001
PARTIES :	Smack on Time Pty Ltd -v- Chubb Security Australia Pty Limited & Peripheral Computer Industries Pty Limited
JUDGMENT OF:	Hunter J

COUNSEL :	Applicant/First Defendant: W G Muddle Respondent/ Plaintiff: P Graham QC
SOLICITORS:	Applicant/ First Defendant: Hunt & Hunt Respondent/Plaintiff: Edward T Davis & Co
CATCHWORDS:	Practice & Procedure - application to strike out - embarrassing pleadings - want of particularity - statements of evidence in lieu of particulars.
LEGISLATION CITED:	Trade Practices Act
DECISION:	Plaintiff to supply further particulars in form of statements of evidence. Otherwise application is dismissed. Costs of the application are costs in the proceedings.

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

COMMERCIAL LIST

HUNTER J

WEDNESDAY 20 JUNE 2001

50064/01 SMACK ON TIME PTY LTD -v- CHUBB SECURITY AUSTRALIA PTY LIMITED & ANOR

REASONS FOR JUDGMENT

1    These proceedings were instituted by summons filed 7 May 2001. There was an inconsequential amendment to the relief sought in the form of the amended summons filed 18 May 2001. No defence has been filed. Instead, when the matter came before me for directions on 18 May 2001, the defendants foreshadowed an application to strike out the amended summons. To avoid that course I invited the plaintiff to reconsider its position, at the same time giving directions for the bringing and hearing of any application to strike out.

2    As a consequence, on 24 May 2001, the plaintiff filed a Further Amended Summons and on 1 June 2001 the defendants moved by notice of motion for the following relief:

“1. That the Further Amended Summons be dismissed.
2. In the alternative, that Section C of the Further Amended Summons be struck out.
3. In the alternative, that each of paragraphs 25, 24, 23, 22, 18 and 14 of Section C of the Further Amended
Summons be struck out.
4. In the alternative that within seven (7) days the Plaintiff serve on the First Defendant a schedule of particulars of the Further Amended Summons including:
(a) precise particulars of the states of mind of Chubb alleged in paragraphs 14 and 25(g) including identification of the persons said to have comprised Chubb’s state of mind for this purpose;
(b) a precise identification of the information alleged in paragraph 18 to have been provided and of the facts matters and circumstances rendering it of a confidential nature as alleged in paragraphs 18 and 22;
(c) a precise statement of the use or exploitation alleged in paragraphs 21 and 24; and
(d) particulars of the facts, matters and circumstances alleged in paragraph 23 to give rise to an obligation of confidence.”

3    The principal change effected by the Further Amended Summons related to par 25 of the contentions. In its original form par 25 read as follows:

“25. The first defendant, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceived within the meaning of section 52 of the Trade Practices Act 1974 (Cth).
PARTICULARS
Without revealing its true purpose in soliciting information about the plaintiff and its business from the plaintiff prior to late June 1999 the first defendant induced the plaintiff to believe that the first defendant wished to retain the plaintiff as a provider of technical courier services to the first defendant in respect of the first defendant’s business in consequence whereof the plaintiff revealed information to the first defendant concerning the development of the plaintiff’s business as a provider of technical courier services, of the plaintiff’s association with the Bank, of the plaintiff’s association with Commonwealth Bank of Australia, of the manner in which the plaintiff provided technical courier services to banks in respect of their EFTPOS machines, of the development throughout Australia of the plaintiff’s agency network and of the training by the plaintiff of technical couriers within that network which otherwise it would not have revealed to the first defendant.”

4    The “Bank” referred to is the Australia and New Zealand Banking Group Limited. In the Further Amended Summons par 25 is in the following terms:

“ 25 (a) In or about early June 1999 the first defendant represented to the plaintiff that it wished to establish a
business relationship with the plaintiff .
Particulars
The representation was express and oral. It was made in a conversation on or about 3 June 1999 between Mr Deegan on behalf of the first defendant and Mr Hawes on behalf of the plaintiff. The substance of the representation was as alleged.
(b) At no time prior to late June 1999 did the first defendant inform the plaintiff either that the first defendant was exploring the possibility of purchasing the plaintiff or its business or that the possibility of purchasing the plaintiff or the plaintiff’s business was within the first defendant’s contemplation .
(c) The conduct of the first defendant referred to in the two preceding sub-paragraphs induced in the plaintiff an assumption that the first defendant’s interest in the plaintiff did not extend beyond exploring the possibility of the first defendant engaging the plaintiff as provider of technical courier services .
(d) The plaintiff’s assumption was a reasonable one in the circumstances .
(e) Acting upon the assumption referred to in sub-paragraph (c) above, the plaintiff provided to the first defendant information concerning its business which it would not have provided had it been informed either that the first defendant was exploring the possibility of purchasing the plaintiff or its business or that the possibility of purchasing the plaintiff or the plaintiff’s business was within the first defendant’s contemplation .
Particulars

The plaintiff repeats the first two paragraphs of the particulars under paragraph 18 above .

(f) By its representation referred to in sub-paragraph (a) above and its silence referred to in paragraph (b) the first defendant engaged in conduct in trade or commerce within the meaning of s 52 of the Trade Practices Act 1974 (C’th ).
(g) The conduct of the plaintiff referred to in the sub-paragraph (f) was conduct which was misleading, or likely to mislead, in contravention of s 52 of the Trade Practices Act 1974 (C’th) to the extent that prior to late June 1999 the first defendant was either exploring the possibility of purchasing the plaintiff or its business or the possibility of purchasing the plaintiff or the plaintiff’s business was within the contemplation of the first defendant’s contemplation.
(h) The plaintiff has suffered loss or damage by the contravention referred to in the preceding paragraph in that the first defendant exploited the information provided to it by the plaintiff and referred to in sub-paragraph (e) above without the knowledge or consent of the plaintiff.
Particulars
The plaintiff repeats the particulars under paragraph 21 above.”

5    The background to the proceedings is provided by an agreement that the plaintiff, in conjunction with the second defendant, is alleged to have made with the Bank to provide services to electronic machines, commonly known as EFTPOS machines, operated by the Bank.

6    It is alleged that:

(a) the term of the agreement was extended and was due to expire on 30 September 2001;

(b) on 12 February 2001 the Bank gave notice terminating the agreement at the expiration of thirty days;

(c) at about the same time as its termination notice, the Bank entered into an agreement with the defendants for the services previously provided by the plaintiff and the second defendant under their agreement with the Bank.

7    During the currency of the plaintiff’s agreement, the plaintiff alleged that it entered into confidentiality agreements with the first defendant, the first on 29 June 1999, and the second on 3 September 1999. The “Purpose” of the agreements was expressed in the following terms:

“Development of a potential expression of interest in terms of acquiring the [plaintiff’s] business.”

The terms of the confidentiality agreements are not in dispute.

8    In particular, information provided by the plaintiff to the first defendant under the agreement was acknowledged to be confidential and was only to be used for the stated “Purpose”. It is also alleged that the first defendant was provided with confidential information by the plaintiff prior to the 29 June confidentiality agreements (the pre-29 June information). That information is particularised in par 18 of the contentions as follows:

“ On about 8 June 1999 Mr Alan Hawes of the plaintiff informed Mr John Deegan of the first defendant of the history of the development of the plaintiff’s business as a provider of technical courier services, of the plaintiff’s association with the Bank and the plaintiff’s association with Commonwealth Bank of Australia, of the manner in which the plaintiff provided technical services to the banks in respect of their EFTPOS machines, of the development throughout Australia of the plaintiff’s agency network and of the training by the plaintiff of the technical couriers within the network.
Thereafter Mr Alan Hawes of the plaintiff provided similar information to Mr John Deegan, Mr Tony Philpot, Mr Jim Panincic and Mr John Cochrane.”
…

9    The information provided under the confidentiality agreements is particularised in par 18 of the contentions as follows:

“… On about 13 September 1999 Mr Hawes of the plaintiff provided the first defendant with Revenue Projections for Technical Courier Business, a Technical Courier Overview, a Market Analysis and extracts from the plaintiff’s agreement with the Bank and its agreement with the Commonwealth Bank of Australia.
Mr Hawes informed Mr Deegan, Mr Philpot, Mr Panincic and Mr Cochrane of the second defendant and of the nature of the relationship between the plaintiff and the second defendant, of the revenue sharing as between the plaintiff and the second defendant under the agreement with the Bank, of the gross margin of profit of the plaintiff’s business and of the relative profitability of the agreement with the Bank and the plaintiff’s agreement with Commonwealth Bank of Australia.
On about 18 May 2001 Mr Hawes of the plaintiff informed Mr Deegan of the first defendant of the current state of the agreement with the Bank and the current state of the plaintiff’s agreement with Commonwealth Bank of Australia.”

10    The gravamen of the plaintiff’s contentions is that the first defendant used the confidential information to acquire the plaintiff’s business with the Bank and that the second defendant’s participation in that conduct was in breach of its contractual and fiduciary duties to the plaintiff.

11    The main thrust of the defendants’ application is directed at pars 18 and 25 of the contentions. In brief, it is submitted on behalf of the defendants that the s 52 case is futile and that the absence of particularity of the confidential information said to have been provided to the first defendant is embarrassing to the point that it precludes any attempt to address, by way of defence, the allegation of misuse of confidential information.

12    It is also submitted that the plaintiff’s case raises a case of fraud without expressly pleading fraud on the part of the first defendant.

13    The particular criticisms of the pleading by the first defendant are as follows:

1. There is no allegation that the first defendant was able to acquire the plaintiff’s business as a consequence of possession of any confidential information.

2. Apart from the five documents particularised under par 18 of the contentions, the information said to have been conveyed is not particularised and that which gives it confidentiality is not pleaded.

3. Other than the general allegation that the first defendant acquired the plaintiff’s business, the plaintiff does not particularise how the information was so used.

4. The s 52 claim is futile as it relied upon the first defendant’s withholding of the intention to acquire the plaintiff’s business, a purpose which is expressly disclosed in the confidentiality agreements. Further, it depends upon an allegedly misleading representation that the first defendant “wished to establish a business relationship” with the plaintiff - a representation which was consistent with the alleged contrary intention to acquire the plaintiff’s business.

5. It is also submitted that the claim suffers from the absence of allegation of reliance and further suggests fraud without pleading such a serious allegation.

14    Clearly, the contentions in the summons as originally framed were deficient. While the contentions in the Further Amended Summons, in my view, suffer from a lack of clarity and of sufficient particulars, those shortcomings do not justify a striking out of the subject contentions.

15    A major portion of the difficulty presented in the form of the contentions lies in an apparent contradiction between the plaintiff’s cause of action based on the pre-29 June 1999 conduct of the defendants and that based on the post-29 June 1999 conduct: the apparent contradiction being the pre-29 June complaint that confidential information was imparted to the first defendant at a time when it had an undisclosed intention to acquire the plaintiff’s business and the post-29 June complaint, that the first defendant used confidential information provided to it by the plaintiff under the confidentiality agreements that had the express purpose of development “a potential expression of interest in … acquiring the [plaintiff’s] business.”

16    That apparent conflict is not assisted by a lack of clarity in par 14 of the contentions and the absence of an explanation of the precise mischief complained of in providing information to the first defendant at a time when it allegedly had the undisclosed intention of acquiring the plaintiff’s business.

17    Par 14 of the contentions is in the following terms:

“14. In or about June 1999 and subsequently thereto the first defendant was anxious to engage in discussions with the plaintiff with a view to the first defendant acquiring the plaintiff’s business.”

18    It is not immediately clear from par 14 that the subject alleged intention of the first defendant was not disclosed to the plaintiff prior to the confidentiality agreements: that has to be extracted from par 25 (b) of the contentions. Further, the terms of par 25(e) of the contentions do not make it clear the plaintiff’s complaint in relation to the pre-29 June information is that it would only have supplied that information, in the knowledge that the first defendant had the intention of acquiring the plaintiff’s business, if its use of that information was protected by confidentiality agreements. That much has now become clarified during the course of the hearing.

19    The submission that “the pleading retains a hint of [unpleaded] fraud” has been met by an unqualified disclaimer by the plaintiff of any allegation of fraud.

20    The submission that the plaintiff fails to plead reliance in its representation case does not accord with the terms of pars 25(c) and (d) of the contentions.

21    There is some force in the submission on behalf of the first defendant that there is no inconsistency between the alleged representation that “it wished to establish a business relationship with the plaintiff” and an intention on its part to acquire the plaintiff’s business. The difference is to say the least, a subtle one. However, the nature and significance of the difference may gain colour from the plaintiff’s evidence in the proceedings and does not invite any action by the Court in relation to that aspect of the pleadings.

22    While I am satisfied that there is no justification for striking out the contentions, there remains the lack of particularity in the matters pleaded. As to the confidential nature of the information allegedly supplied to the first defendant, a distinction is to be drawn between the pre-29 June and the post-29 June information.

23    In the case of the latter, the confidentiality agreements contain a definition of confidentiality in the following terms:

“ 1.1 The Recipient acknowledges that the expression “Confidential Information ” means all information passing from the Owner to the Recipient, its divisions and any associated companies relating to the business of the Owner including but not limited to customer lists, costings, customer information and customer information proprietary to customers, trade secrets, intellectual and industrial property, source and object codes, business and marketing plans and arrangements and agreements with third parties.”

24    As to the pre-29 June information the plaintiff should be required to particularise the confidential nature of the subject information. Further, in my view, par 18 lacks sufficient particularity of the information allegedly supplied to the first defendant especially in relation to the pre-29 June period.

25    I think those deficiencies should be addressed in the form of statements of evidence of the plaintiff on those subjects rather than by the provision of better particulars of par 18 of the contentions.

26    Accordingly, I direct the plaintiff to file and serve by 3 July 2001 statements of evidence upon which it relies of the subject matter of pars 18 and 25 of the contentions, in the form of :

(a) its case based upon pre-29 June 1999 information, and

(b) its case based upon post-29 June 1999 information.

I direct the defendants to file and serve their defences by 17 July 2001. Parties are to exchange categories of documents for discovery by 24 July 2001 and carry out inspection by 31 July 2001. Proceedings are relisted for further directions on 31 July 2001.

27    The application is otherwise dismissed. The costs of the application are to be costs in the proceedings.

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Last Modified: 06/28/2001