FEDERAL COURT OF AUSTRALIA Checked-Out Pty Ltd v Eagle Eye Inspections Pty Ltd [2001] FCA 1855 CHECKED-OUT PTY LTD v EAGLE EYE INSPECTIONS PTY LTD N169 OF 1999 EMMETT J 14 DECEMBER 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 169 OF 1999 BETWEEN: CHECKED-OUT PTY LTD (ACN 071 965 798) FIRST APPLICANT PHILIP JULIAN HARDCASTLE SECOND APPLICANT AND: EAGLE EYE INSPECTIONS PTY LTD (ACN 084 722 234) FIRST RESPONDENT JOSEPH WILLIAMS SECOND RESPONDENT WAYNE COOK THIRD RESPONDENT TIMOTHY BOLLINS FOURTH RESPONDENT DEBORAH JEAN WILLIAMS FIFTH RESPONDENT PETER ADAMS T/A PETER ADAMS, SOLICITORS & ATTORNEYS SIXTH RESPONDENT KATARINA MUC T/A G.H. HEALEY & CO. BLACKTOWN AND BRUCE McCANN T/A B.E. McCANN & CO., SOLICITORS SEVENTH RESPONDENT MARK KELADA T/A MARK KELADA SOLICITORS EIGHTH RESPONDENT MICHAEL QUINN T/A QUINNS SOLICITORS NINTH RESPONDENT JOHN MICHAEL NOYCE & GREGORY LAURENCE MARTIN T/A NOYCE LAWYERS TENTH RESPONDENT HENRY GRECH T/A GRECH PARTNERS SOLICITORS ELEVENTH RESPONDENT GREGORY PETER GUY T/A GUY & ASSOCIATES SOLICITORS TWELTH RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 14 DECEMBER 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The time for provision of security be extended to 5 April 2002. 2. Should security be provided, the time for completion of discovery by the sixth to twelfth respondents ("the solicitor respondents") be 26 April 2002. 3. The second applicant be removed as a party. 4. The applicant furnish particulars to each of the solicitor respondents of the knowledge of wrongful conduct of such solicitor respondent by 7 June 2002. 5. The costs of today be reserved. 6. The notices of motion filed: · by the first to fifth respondents on 5 December 2001, · by the sixth to eleventh respondents on 7 December 2001, and · by the twelfth respondent on 21 November 2001 be stood over for further hearing on Friday 19 July 2002 at 9.30am. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 169 OF 1999 BETWEEN: CHECKED-OUT PTY LTD APPLICANT AND: EAGLE EYE INSPECTIONS PTY LTD (ACN 084 722 234) FIRST RESPONDENT JOSEPH WILLIAMS SECOND RESPONDENT WAYNE COOK THIRD RESPONDENT TIMOTHY BOLLINS FOURTH RESPONDENT DEBORAH JEAN WILLIAMS FIFTH RESPONDENT PETER ADAMS T/A PETER ADAMS, SOLICITORS & ATTORNEYS SIXTH RESPONDENT KATARINA MUC T/A G.H. HEALEY & CO. BLACKTOWN AND BRUCE McCANN T/A B.E. McCANN & CO., SOLICITORS SEVENTH RESPONDENT MARK KELADA T/A MARK KELADA SOLICITORS EIGHTH RESPONDENT MICHAEL QUINN T/A QUINNS SOLICITORS NINTH RESPONDENT JOHN MICHAEL NOYCE & GREGORY LAURENCE MARTIN T/A NOYCE LAWYERS TENTH RESPONDENT HENRY GRECH T/A GRECH PARTNERS SOLICITORS ELEVENTH RESPONDENT GREGORY PETER GUY T/A GUY & ASSOCIATES SOLICITORS TWELTH RESPONDENT JUDGE: EMMETT J DATE: 14 DECEMBER 2001 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me several notices of motion returnable today. The second applicant's motion seeks variation of orders for security that I made on 21 September 2001. The basis for the variation is that circumstances have changed since I made the previous orders because the applicants are no longer represented by legal advisers. The second applicant appears in person and the first applicant is represented by its director, Ms Wilczak. I have no evidence as to the applicants' legal representation, although I have no reason to doubt the assertions made from the bar table today. The motions brought by the respondents seek summary dismissal. 2 The notice of motion by the first to the fifth respondents also seeks removal of the second applicant as a party, on the basis that no claim for relief is made by the second applicant. In an affidavit sworn by the second applicant on 24 August 2001, he says that he makes no personal claim in respect of the "system" and the software described in the pleadings but says the rights pertaining to the system properly belong to the first applicant. 3 It may well be that it was appropriate for the second applicant to be joined as a party against the possibility that an assertion might be made by the respondents that any intellectual property found to exist is vested in the second applicant rather than the first applicant. However, all of the respondents have now indicated that no such assertion will be made. That is to say, if any intellectual property exists, it will not be asserted that the first applicant is not the owner of that intellectual property. Accordingly, the second applicant should be removed as a party. The first to the fifth respondents are content for their motion, in so far as it seeks orders for summary dismissal, should be adjourned to next year. 4 The complaints by the sixth to twelfth respondents ("the solicitor respondents") differ from those made on behalf of the first to fifth respondent, so far as they concern summary dismissal. The complaint made by the solicitor respondents is that the material so far relied upon by the applicants as implicating the solicitor respondents is inadequate in so far as it does not establish an arguable case that the solicitor respondents had any relevant knowledge of wrongdoing on the part of the first to fifth respondents. 5 The allegations against the solicitor respondents may be summarised as follows: 1. They aided, abetted and participated in breaches of fiduciary duty and of contractual duties arising from employment by the second, third and fourth respondents. 2. They participated in breach of confidence by the second, third and fourth respondents in that they at all material times were aware that the second to fourth respondents had unlawfully made use of confidential information otherwise than for the purpose for which it was supplied. 3. They aided, abetted, counselled, procured, induced, were concerned in or conspired with the first to fifth respondents to effect contraventions of s 52 of the Trade Practices Act 1974 (Cth) and section 42 of the Fair Trading Act 1987 (NSW). 4. They infringed the copyright of the applicants in relation to various documents relating to applicants' inspection report system. 5. They engaged in contraventions of Part V of the Trade Practices Act 1974 by representing and warranting to persons to whom copies of reports were furnished, that they had the right to reproduce, publish, sell or hire the copies of certain building inspection reports. 6 The first three allegations ("the secondary allegations") are dependent upon wrongful conduct of the first to fifth respondents. The fourth and fifth allegations ("the primary allegations") are not dependent upon wrongful conduct of the first to fifth respondents. Even if I were disposed to dismiss the secondary allegations, the primary allegations would remain. 7 The secondary allegations all depend upon knowledge by the solicitor respondents of wrongful conduct of the first to fifth respondents. The particulars of knowledge alleged can be summarised as follows: (i) At various times during 1996, 1997 and 1998 representatives of the first applicant had meetings and discussions with representatives of the solicitor respondents at which it was explained to the solicitor respondents the uniqueness of the applicants' inspection report system, the use of proprietary software in the system. In addition, samples of the standard format building reports were provided and the name of building inspectors used by the first applicant were identified. (ii) From shortly after those meetings the solicitor respondents began using the services of the first applicant and continued to use those services until October or November 1998. (iii) Each of the solicitor respondents came into frequent contact with the second to fourth respondents and saw their names on building reports and was aware that they were employees of the first applicant. (iv) From October and November 1998 each of the solicitor respondents suddenly stopped using the services of the first applicant and began using the services of the first respondent. (v) From that time all building reports supplied to the solicitor respondents were in the first applicants standard format which was instantly and readily recognisable as such, notwithstanding that were provided by the first respondent. 8 As a result, it is argued, each of the solicitor respondents was aware that such building reports were substantially identical in format to the format of the first applicant's reports. Each of the solicitor respondents was aware that the first respondent's reports must have been a reproduction of the first applicant's format. The same particulars of knowledge are relied on in relation to the allegations of breach of confidence and misleading and deceptive conduct by the first to fifth respondents. 9 If the only material relied upon by the applicants to establish knowledge on the part of the solicitor respondents of wrongdoing by the first to fifth respondents were as alleged in the statement of claim, I would almost certainly conclude that they had failed to establish material from which an inference of knowledge should be drawn. However, the particulars furnished are sufficient, in my view, to justify the continuation of the proceedings at least to the stage of discovery. Orders for discovery have already been made against the solicitor respondents. The discovery process has come to a halt because of the absence of security. 10 At present I am not prepared to dismiss the proceedings summarily on the basis that the solicitor respondents are bound to succeed. However, at this stage, I will not dismiss the motions for summary dismissal. The appropriate course, it seems to me, is to give the applicant a further opportunity to provide the security that I have directed and to stay the proceeding in the meantime. 11 If, after an appropriate period, the security has not been given, then it may well be appropriate to entertain an application for permanent stay of the proceeding. Assuming however, that security is given by the appointed time, it would then be appropriate for the solicitor respondents to complete the discovery that is still outstanding. The applicant would then be required to furnish to the solicitor respondents particulars of all the material on which it intends to rely in order to establish knowledge on the part of the solicitor respondents of wrongdoing by the first to fifth respondents. 12 When those particulars have been furnished, I will continue with the hearing of the solicitor respondents' motions for summary dismissal and, at the same time, continue with the hearing of the motion for summary dismissal brought by the first to fifth respondent, if that is still to be pursued. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 14 January 2002 Counsel for the 1st Applicant: Ms A Wilczak Counsel for the 2nd Applicant: In person Counsel for the 1st – 5th Respondents: Mr E G H Cox Solicitor for the 1st – 5th Respondents: Bateman Battersby Counsel for the 6th – 11th Respondents: Mr A F Fernon Solicitor for the 6th – 11th Respondents: Noyce Lawyers Counsel for the 12th Respondent: Mr B Morris Solicitor for the 12th Respondent: Benjamin & Khoury Solicitors Date of Hearing: 14 December 2001 Date of Judgment: 14 December 2001