and Anor v Capital Networks Pty Ltd (No.2)
[2004] FMCA 989
•17 December 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CONTACT INTERNET SOLUTIONS PTY LTD & ANOR v CAPITAL NETWORKS PTY LTD (No.2) | [2004] FMCA 989 |
| TRADE PRACTICES – Domain name – default judgment – whether summary or default judgment – whether owner of domain register has right to retain name at end of contract term. PRACTICE AND PROCEDURE – Whether judgment entered irregularly – consequences – whether satisfactory evidence – application to set aside judgment dismissed. |
Trade Practices Act 1974, s.51AC, 51AAA, 52
Federal Magistrates Court Rules 2001, r10.01(2), 13.03, 13.07
Contact Internet Solutions Pty Ltd & Anor v Capital Networks Pty Ltd t/as Totalnic [2004] FMCA 746
Kostokanellis v Allen [1974] VR 596
| Applicants: | CONTACT INTERNET SOLUTIONS PTY LTD (ACN 104 750 665) and K-MAC POWERHEADS PTY LTD (ACN 078 225 555) |
| Respondent: | CAPITAL NETWORKS PTY LTD (ACN 080 342 301) trading as TOTALNIC |
| File No: | MLG 234 of 2004 |
| Delivered on: | 17 December 2004 |
| Delivered at: | Melbourne |
| Hearing Date: | 22 November 2004 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicants: | Ms M Sharpe |
| Solicitors for the Applicants: | Coadys |
| Counsel for the Respondent: | Mr G Pauline |
| Solicitors for the Respondent: | Robert James Lawyers |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 234 of 2004
| CONTACT INTERNET SOLUTIONS PTY LTD (ACN 104 750 665) and K-MAC POWERHEADS PTY LTD (ACN 078 225 555) |
Applicants
and
| CAPITAL NETWORKS PTY LTD (ACN 080 342 301) trading as TOTALNIC |
Respondent
REASONS FOR JUDGMENT
In this matter the applicants commenced proceedings by an application filed 1 March 2004 and relied upon a statement of claim filed the same day. The respondent is an accredited register of domain names. It is common ground that it operates a web site at >
The original statement of claim appeared to be deficient in that it relied upon a breach of contract and did not raise any pleading which would attract the jurisdiction of this court. The matter came before the court on 16 April 2004. Leave was granted to the applicants to file and serve an amended statement of claim on or before 30 April 2004 with the matter being otherwise adjourned for directions to 14 May 2004. There was no appearance for the respondent at the first hearing date, though it is noted that an affidavit of service sworn by Jacki Brauer on 15 April 2004 deposes to service being effected upon the respondent by post to its registered office. A further affidavit sworn by Cherie Pearson on 13 May 2004 deposes that on 23 April 2004 at 5.50 pm the deponent posted a copy of the order of the court dated 16 April 2004 and an amended statement of claim to the registered office of the respondent.
The amended statement of claim filed 26 April 2004 relied upon breach of contract and further alleged contravention of s.52 of the Trade Practices Act 1974 (the TPA) and in the alternative a claim that the respondent engaged in unconscionable conduct in contravention of s.51AAA and 51AC of the TPA.
By way of brief background, it is alleged by the first applicant that it had entered into contracts with the respondent either on its own behalf or on behalf of the second applicant in relation to the registration of domain names with the respondent. It is alleged that at all material times the respondent was an accredited register of domain names and had for that purpose conducted a web site located at The respondent trades as "Totalnic". The contracts which form the basis of the claim were allegedly entered into between the first applicant and respondent may briefly be summarised as following:
·On 26 March 2001 the first applicant and respondent entered into a contract ("the first contract") whereby the first applicant agreed to pay the respondent an annual fee in return for the registration and housing of the domain name "hitech-express.com"
·On 2 February 2002 the first applicant and the respondent entered into a contract ("the second contract") whereby the first applicant agreed to pay the respondent an annual fee in return for the housing of the domain name "sa-caravan-park-association.com"
·On 15 May 2002 the first applicant and respondent entered into a contract ("the third contract") whereby the first applicant agreed to pay the respondent an annual fee in return for the housing of the domain name "caravanaustralia.com"
·On 20 May 2002 the first applicant and respondent entered into a contract ("the fourth contract") whereby the first applicant agreed to pay the respondent an annual fee in return for the registration and housing of the domain name "goseeaustralia.net"
·On 5 December 2002 the first applicant on behalf of the second applicant entered into a contract with the respondent ("the fifth contract") whereby the second applicant agreed to pay the respondent an annual fee in return for the registration and housing of the domain name "kmac-powerheads.com".
It is noted that the second contract and the third contract claim to only relate to payment of the annual fee for the "housing of the domain name" and not "registration and housing of the domain name". When the application was first filed with the original statement of claim there was no affidavit material filed in support.
Orders were made on 16 April 2004 granting leave to the applicants to file and serve an amended statement of claim and the matter was then further adjourned "for directions on 14 May 2004 at 9.45 am". It was presumed that the service of the amended statement of claim would have generated a response and attendance by the respondent. As it happened, when the matter was then before the court on 14 May 2004 there was again no appearance for or on behalf of the respondent. It is clear that upon there being no appearance for the respondent and the court being satisfied as to service and in the absence of any further material the court was prepared to entertain an application to enter judgment.
However, at the time in the absence of affidavit material it was impossible for the court to draw any conclusions or consider making orders without at least some factual basis asserted on oath by an appropriate deponent. Whilst the claim may have appeared to the applicant's representative as being a straightforward one, it was clear in the circumstances that the court required evidence. This court has power under rule 13 of the Federal Magistrates Court Rules 2001 (the FMC Rules) to dispose of a matter by summary judgment. Rule 13.07 provides as follows:
“13.07 Disposal by summary judgment
(1) This rule applies if, in a proceeding:
(a) in relation to the whole or part of a party's claim there is evidence of the facts on which the claim or part is based; and
(b)either:
(i) there is evidence given by a party or by some responsible person that the opposing party has no answer to the claim or part; or
(ii) the defence or reply to the claim discloses no answer to the claim or part.
(2) The Court may give judgment on that claim or part and make any orders or directions that the Court considers appropriate.
(3) If the Court gives judgment against a party who claims relief against the party obtaining the judgment, the Court may stay execution on, or other enforcement of, the judgment until determination of that claim.”
The court further has power in default of appearance of a party, in this case the respondent, to proceed with the hearing generally or in relation to any claim for relief in the proceedings pursuant to rule 13.03A of the FMC Rules which provides as follows:
“13.03A Default of appearance of a party
If a party to a proceeding is absent from a hearing (other than the first court date), the Court may do any of the following:
(a) adjourn the hearing to a specific date or generally;
(b)order that there is not to be any hearing unless:
(i)the proceeding is again set down for hearing; or
(ii) any other steps that the Court directs are taken;
(c) if the party absent is an applicant or a respondent who has made a cross-claim — dismiss the application or the cross-claim;
(d)proceed with the hearing generally or in relation to any claim for relief in the proceeding.”
The court further has power pursuant to rule 10.01(2) to hear and determine all or part of the proceeding on the first court date. In this case I am satisfied the first court date occurred on 16 April 2004 and the matter was then adjourned to 14 May 2004 which effectively became the first court date even though the initial order referred to the adjourned date as being a "directions hearing". In any event, rule 10.01(2) provides as follows:
“10.01 Directions and orders
(1) …
(2) Without limiting the generality of subrule (1), the Court or a Registrar may do any of the following:
(a) hear and determine all or part of the proceedings;
(b) if no applicant appears, strike out or dismiss the application or make any other order that the Court or Registrar thinks fit;
(c)if no respondent appears, make the order sought by the applicant or make any other order, or give any direction, the Court or Registrar thinks fit.”
Hence, in my view, having regard to the FMC Rules, the court clearly has power to proceed with the hearing generally in default of appearance or make orders sought by the applicant where the respondent has not appeared. The disposal of a matter by summary judgment power appears to be a power which contemplates a defence disclosing no answer to the claim and then evidence being provided of the facts on which the claim is based. It is clear from a proper reading of the transcript that the court referred to "summary judgment" though in essence, in my view, whilst there is clearly a degree of confusion as to terminology, it had been made clear by the court that it was prepared to deal with the matter "in a summary way" (see transcript line 27, page 4). That, in my view, does no more than indicate that I was prepared to deal with the matter in default of appearance either as a first court date or otherwise as a result of default of appearance by the respondent.
Hence, in my view, the proper authorities and arguments to consider in this matter will be based upon the conclusion I have drawn that effectively the court proceeded to make orders in default of appearance of the respondent and did so arising out of its general powers in rule 13.03A(d) or rule 10.01(2)(c). Hence, orders were made on 14 May 2004 as follows:
“1.The contracts referred to in the Amended Statement of Claim are declared to be terminated.
2.The Respondent do all things necessary to effect the transfer of the registers of the following domain names to a register nominated by the Applicants by pre-paid post to the Respondent on or before 21 May 2004;
a.hitech-express.com;
b.sa-caravan-parks-association.com;
c.caravanaustralia.com;
d.goseeaustralia.net; and
e.kmac-powerheads.com.
3.The Respondent shall pay the Applicants costs of and incidental to the application fixed in the sum of $3,000.
4.A sealed copy of this order be served upon the Respondent by pre-paid post on or before 19 May 2004 with service to be effected at the address as shown in the affidavit of Cherie Pearson sworn 13 May 2004.”
Before those orders were made it was clear that the court required some evidence. That evidence was provided not by an authorised officer of the applicants but rather by an affidavit of Andrew Kenneth Ball sworn 14 May 2004. Mr Ball is a solicitor for the applicants and otherwise deposed to basic details which formed the foundation facts for the claim. He exhibited a copy of the respondent's web site (exhibit AKB-1), a copy of the "pro forma contract displayed by the respondent on its web site" (exhibit AKB-2) and what he claims to be a true copy of the details of the domain names printed from the respondent's web site (exhibit AKB-3).
Brief ex tempore reasons were given for the judgment entered against the respondent (see Contact Internet Solutions Pty Ltd & Anor v Capital Networks Pty Ltd t/as Totalnic (2004) FMCA 746).
By an application filed 12 July 2004 the respondent seeks to set aside the orders made by the court on 14 May 2004 and seeks other directions.
In support of the application to set aside the orders made by the court on 14 May 2004 the respondent relies upon an affidavit of Dylan Christopher McKimmie sworn 9 July 2004.
In his affidavit Mr McKimmie, who is the solicitor for the respondent, refers to the respondent as being "CapNet" and in part states the following:
“3.I was initially instructed by the Respondent in relation to this matter on Monday 5 July 2004. I am instructed by Mr Edward Sweeney, director and company secretary of the Respondent. Mr Sweeney is currently in the United States of America. Given the time difference between Australia and the United States I have been unable to obtain instructions in relation to the matters set out herein as expeditiously as I would have ordinarily desired.
4.I am instructed that the Respondent first became aware of the Order of McInnis FM made 14 May 2004 on 25 May 2004 when a facsimile copy of the Order was sent to the respondent at 5.36 pm from ‘Contact Internet Sol’.
5.Immediately upon receiving the abovementioned facsimile the Respondent instructed solicitors to apply to set aside the Orders. I am instructed that subsequently a message was left for a representative of the Respondent by these solicitors to the effect that they were unable to represent the Respondent in the matter. This message did not come to the attention of a representative of the Respondent until the last few days.
6.I am instructed by Edward Sweeney and verily believe that the respondent had no knowledge of the existence of the matter until the arrival by facsimile of the Order on 25 May 2004. The Order was immediately forwarded to the Respondent's previous solicitors with instructions to apply to this Honourable court to set aside the Order.
7.The Respondent's registered address was until recently Level 8, 55 Hunter Street, Sydney in the State of New South Wales. I am instructed by the Respondent and verily believe that this is the address of its now former accountants. I am informed by the Respondent and I verily believe any documents received by the former company accountant were not received by a director or officer of the respondent at any time prior to the receipt of the faxed copy of the order on 25 May 2004. The Respondent's current registered office is Level 1, The Promenade, Emu Bank, Belconnen, ACT, 2617. Exhibited to my affidavit marked "DCM1" is a true copy of a current ASIC search of the Respondent.”
Mr McKimmie otherwise deposes that in any event the respondent was not served with the affidavit of Andrew Kenneth Ball sworn 14 May 2004 and acknowledges the respondent was not represented at the hearing before the court on 14 May 2004. Exhibit DCM1, which is the copy of the ASIC search of the respondent, reveals that the new registered office at Belconnen started on 12 July 2004. Hence, I find that service has been appropriately effected upon the respondent at its then registered office, both in relation to the original application and statement of claim and a copy of the orders made by the court on 16 April 2004 together with the amended statement of claim according to the relevant affidavits of service referred to earlier in this judgment.
In my view, the evidence concerning lack of knowledge of the proceedings is deficient. The only suggestion about instructions being given by the respondent to a solicitor would appear to be those given to Mr McKimmie on 5 July 2004. Even at the date of the hearing of the application to set aside the judgment, that is, 28 October 2004, there was no further updated material provided as to the whereabouts of Mr Sweeney, a director and company secretary of the respondent. This somewhat cavalier approach to litigation and absence of any affidavit sworn by Mr Sweeney, which in my view, could easily have been arranged, demonstrates a clear disregard for the court process and procedures. At best it provides inadequate material to explain why on two occasions proceedings were not brought to the attention of Mr Sweeney by persons receiving mail at the registered office of the respondent at the relevant time.
In support of its application to set aside judgment the respondent asserts that the judgment obtained was a summary judgment and not a default judgment. I have already dealt with this issue. In my view, the judgment was effectively a default judgment, albeit referred to by the court as being dealt with in a summary manner. In any event, verification of the matters in the pleadings in my view are required and it would not be possible for the court to simply enter a judgment in a matter of this kind without some affidavit material. I should add the affidavit material supplied by the solicitors for the applicant was not in the most preferred form but was sufficient at the time for the purposes of a default judgment.
Both parties referred the court to the decision of Kostokanellis v Allen [1974] VR 596 relating to the principles which apply when judgment is entered in default. Applying that decision, I accept that the party seeking to have a default judgment set aside must raise a "serious defence to the action" and have some "satisfactory explanation" for the failure to enter an appearance or file a defence. In the present case I am satisfied that there is no satisfactory explanation for the failure of the respondent to file and serve a response in these proceedings. Any suggestion of a defence set out in the affidavit material by the respondent seems to arise from the respondent's solicitors rather than challenging the factual basis relied upon by the applicant. On the material before me it seems clear that the parties may terminate the agreement in accordance with the standard terms and conditions of the contract (exhibit AKB2 annexed to the affidavit of Andrew Kenneth Ball sworn 14 May 2004) and that the contract is for an initial term of 12 months and provides for a domain name registration process.
When terminated I cannot see any basis upon which the contract would provide a right to the respondent to retain the domain names and/or deal with them as if they were the property of the respondent. Indeed, exhibit AKB1 to the affidavit of Mr Ball sworn 14 May 2004 appears to contain a system whereby it is contemplated that the domain name will be transferred and hence for current purposes I am satisfied that there is at least a facility in place for transfer of domain names. That being so, once there is sufficient evidence of termination of the contract, the domain names, which on the material currently before me are the property of the applicants, should be removed from the respondent's site and/or transferred at the direction of the applicants. Hence, I do not accept that prima facie a strong case is made out for and on behalf of the respondent and hence another requirement in seeking to set aside a default judgment has not been established.
It was submitted by the respondent that close examination of the transcript and reasons for decision would suggest that the judgment entered on 14 May 2004 was irregularly entered and on that basis, it being a default judgment, not regularly entered. In the alternative, it was entered as a summary judgment and did not comply with the FMC Rules which means that it should be set aside without the normal requirements being met of the respondent in relation to the setting aside of a default judgment. As I have indicated, I am satisfied there was a default judgment entered on the basis of evidence then reasonably required by the court. In the absence of a satisfactory explanation as to the non-appearance of the respondent, combined with what I have found to be the absence of a serious defence to the action, it is my view that the application to set aside the judgment should be dismissed.
The outstanding matter relates to a notice of motion which purports to be seeking a declaration for contempt of court pursuant to rule 19.02 of the FMC Rules. I shall consider that matter further upon hearing submissions for and on behalf of the parties.
For the reasons given it follows that the application of the respondent filed 12 July 2004 be dismissed and the respondent pay the applicant's costs of and incidental to this application.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 17 December 2004
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