Australian Competition and Consumer Commission v Internic Technology Pty Ltd & Anor
[1998] FCA 818
•14 JULY 1998
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v. INTERNIC TECHNOLOGY PTY LTD and PETER MAREK ZMIJEWSKI
No. NG 395 of 1998
FED No. 818/98
Number of pages - 22
Practice and Procedure
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
LINDGREN J
Practice and Procedure - Transfer of proceedings as between Registries of the Court - exercise of discretion - representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("FCA Act") - proceeding commenced by Australian Competition and Consumer Commission ("ACCC") as representative party on behalf of itself and other group members - ACCC's "claim" is for injunctive and corrective advertising orders under ss 80 and 80A of Trade Practices Act 1974 (Cth) ("TP Act") - other group members' "claims" are for compensation for loss suffered - whether ACCC entitled to commence proceeding as representative party under Part IVA based on its statutory standing to seek orders in public interest under ss 80 and 80A of TP Act - whether that standing to apply for relief is a "claim" - exercise of discretion to order under s 33N of FCA Act that proceeding no longer continue under Part IVA - factors relevant to exercise of discretion - application to strike out parts of statement of claim - embarrassment
Federal Court of Australia Act 1976 Part IVA
Trade Practices Act 1974 ss 80, 80A, 87
National Mutual Holdings Pty Ltd v Sentry Corporation (1988) 19 FCR 155 applied
Friends of Hinchinbrook Society Inc v Minister for Environment (No 1) (1996) 69 FCR 1 referred to
Cycles & Wheelman Pty Ltd v Beltech Corporation Ltd (1988) 80 ALR 279 referred to
Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 followed
Australian Competition and Consumer Commission v Golden Sphere International Inc, unreported, 1 June 1998, QG 153 of 1996 followed
Bank of Western Australia v Commissioner of Taxation (1994) 55 FCR 233 referred to
Gould v Vaggelas (1985) 157 CLR 215 referred to
Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 referred to
Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 referred to
Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259 referred to
Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR [partialdiff]41-550 (FCA/FC)
Vasquez v Superior Court of San Joaquin County (1971) 94 Cal Rptr 796 (484 P 2d 964) referred to
SYDNEY, 26 May 1998 (hearing), 14 July 1998 (decision)
#DATE 14:7:1998
Counsel for the applicant (respondent to the motion):
Mr J S Hilton QC with Mr T Renehan of Counsel Solicitor for the applicant (respondent to the motion): The Australian Government Solicitor Counsel for the respondents (applicant on the motion): Mr JWK Burnside QC with Mr JP Carney of Counsel Solicitors for the respondents : White SW Computer Law
THE COURT ORDERS THAT:
Paragraph 28 of the statement of claim filed on 30 April 1998 be struck out.
The words "members of the general public, including" in paragraph 29 of the statement of claim filed on 30 April 1998 be struck out.
The proceeding no longer continue under Part IVA of the Federal Court of Australia Act 1976.
The proceeding be listed for directions on 20 July 1998 at 9.30 am.
THE COURT NOTES THAT
There is no order as to costs on the respondents' motion brought by notice of motion filed on 12 May 1998.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
LINDGREN J
INTRODUCTION
The applicant ("the ACCC") brings the present proceeding under Part IVA of the Federal Court of Australia Act 1976 ("Part IVA" and "the Act" respectively). Pursuant to notice of motion filed on 12 May 1998, the respondents seek three orders:
1. That the proceeding be transferred to the Victoria District Registry of the Court;
2. That the proceeding no longer continue pursuant to Part IVA;
3. That pursuant to O 11 r 16 of the Federal Court Rules, pars 28 and 29 of the statement of claim which accompanied the application be struck out.
BACKGROUND
The ACCC filed its application and an accompanying statement of claim on 30 April 1998. According to par 1 of the application, the ACCC brings the application both on its own behalf and as a representative party under Part IVA. Sections 33C, 33D and 33E of the Act provide as follows:
"33C (1) Subject to this Part, where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them. (2) A representative proceeding may be commenced: (a) whether or not the relief sought: (i) is, or includes, equitable relief; or (ii) consists of, or includes, damages; or (iii) includes claims for damages that would require individual assessment; or (iv) is the same for each person represented; and (b) whether or not the proceeding: (i) is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or (ii) involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members. 33D (1) A person referred to in paragraph 33C (1) (a) who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that other person on behalf of other persons referred to in that paragraph. (2) Where a person has commenced a representative proceeding, the person retains a sufficient interest: (a) to continue that proceeding; and (b) to bring an appeal from a judgment in that proceeding; even though the person ceases to have a claim against the respondent. 33E (1) The consent of a person to be a group member in a representative proceeding is not required unless subsection (2) applies to the person. (2) None of the following persons is a group member in a representative proceeding unless the person gives written consent to being so: (a) the Commonwealth, a State or a Territory; (b) a Minister or a Minister of a State or Territory; (c) a body corporate established for a public purpose by a law of the Commonwealth, of a State or of a Territory, other than an incorporated company or association; or (d) an officer of the Commonwealth, of a State or of a Territory, in his or her capacity as such an officer."
The application purports to comply with s 33H of the Act by describing or otherwise identifying the "group members" to whom the proceeding relates; by specifying the nature of the claims made on their behalf and the relief claimed; and by specifying the questions of law or fact common to their claims. In relation to the first of these matters, par 2 of the application states:
"2. The Group Members to whom this proceeding relates are the Applicant together with all persons worldwide who, in reliance on one or more of the representations referred to in the Statement of Claim filed herein, have paid monies to the First Respondent for the provision by it of Internet domain name registration services, or associated services, at or through the Internet website located at The claims made on behalf of the Group Members are set out in par 3 of the application, as follows:(i) that the Respondents have, by operating the website with the address made false or misleading or deceptive representations to the Group Members as to the nature of Internet domain name registration services and associated services provided by the First Respondent through or at that website, or as to affiliations or approvals held by the Respondents, contrary to sections 52, 53(c), 53(d) and 55A of the Trade Practices Act 1974 ("the Act"); (ii) that the Group Members have, in reliance upon the representations referred to in (i) above, paid monies to the First Respondent, including monies paid for the provision of the services; and (iii) that, as a result of the matters in (i) and (ii) above, the Group Members have suffered loss and damage.The following account of the basis of the claims made is taken from the statement of claim and does not represent any finding of fact. The second respondent ("Mr Zmijewski") is the sole director of the first respondent ("IT"). IT carries on business as a supplier of brokerage services for the registration of second level Internet domain names and as a supplier of computer software goods. Since at least 11 July 1997, it has been carrying on business as "Internic Software".
The Internet Network Information Centre ("the InterNIC"), is an unincorporated body established pursuant to a co-operative agreement between the United States National Science Foundation in conjunction with other United States federal government instrumentalities and Network Solutions Inc ("Network Solutions"), a private corporation incorporated in the State of Delaware. Pursuant to that agreement Network Solutions operates the domain name registration services provided by the InterNIC. Those domain name registration services include maintenance of a global register of second level domain names within one of the five generic top level Internet domains of .com, .org, .net, .edu and .gov; providing advice to persons and bodies seeking to register second level domain names as to whether the names sought to be registered can be registered, or whether they are unavailable by reason of having already been registered (ascertained through an automated search facility); and the entering of new domain names onto the register upon payment of a registration fee.
The InterNIC is, and is known to be, the sole body authorised by the United States Government to operate within the United States a register of global second level domain names and to be the only body in the world currently operating such a register. As a result, the word "internic" and the web site operated by the InterNIC have acquired, and continue to enjoy, a worldwide reputation as the point of access for persons or bodies wishing to register a second level domain name within one of the five generic top level Internet domains mentioned above, and to avail themselves of the domain name registration services provided through the InterNIC by Network Solutions. In connection with the provision of those domain name registration services, Network Solutions operates, and is known by users and potential users of the Internet to operate, an Internet web site located at ("the internic.net site"). A person can visit the internic.net site and request registration of a domain name by entering information conveying the request and by authorising payment of the registration fee to Network Solutions by credit card. The fee charged by Network Solutions for registration of generic second level domain names through the InterNIC for a period of two years has at all material times been between US$70 and US$100 per domain name.
Since at least 11 July 1997, IT has operated or caused to be operated an Internet web site at the address known as ("the internic.com site"). The internic.com site is available to be accessed or visited, and the services available through that site used, by any person world wide having access to the Internet. IT provides services through its internic.com site, which include advising persons seeking to register second level domain names within one of the five generic top level Internet domains mentioned earlier, whether those names can be registered or are unavailable because they have already been registered (ascertained through an automated search facility), and requesting or procuring the entering of new domain names onto the register maintained by Network Solutions/InterNIC, upon payment of a fee to IT. The fee charged by IT for procuring registration of new domain names is between US$220 and US$250 per name for a two year registration. That fee includes the fee payable to Network Solutions/InterNIC in respect of the actual registration carried out by it and a balance which is retained by IT for its services, including the procuring of the registration.
The allegation is that by operating the internic.com web site in the circumstances, and, in particular, by the use of the word "internic" as part of the address of that web site, IT has made to the public, including the Group Members, the following seven representations ("the Representations"), which are pleaded in subpars 19(i)-(vii) of the statement of claim:
"(i) that the internic.com web site is the web site operated by the InterNIC; (ii) that by visiting or otherwise communicating with the internic.com web site, a person is visiting or dealing with the internic.net site or with the InterNIC; (iii) that the domain name registration services provided through the internic.com web site are the registration services offered directly by the InterNIC; (iv) that the fees payable to the First Respondent in respect of registration through the internic.com web site comprise the fees charged by and payable to the InterNIC in respect of such registration and not any fees for additional services; (v) further or in the alternative, that the internic.com web site is in some way affiliated or associated with, or has a sponsorship or approval from, the InterNIC; (vi) further or in the alternative, that the services offered through the internic.com web site have in some way a sponsorship or approval from the InterNIC; (vii) further or in the alternative, that the First Respondent is in some way affiliated or associated with, or has a sponsorship or approval from, the InterNIC."All the Representations are said to be false or misleading or deceptive in certain respects. Mr Zmijewski is said to have arranged, procured or caused the operation of the internic.com web site by IT. The Group Members are said to have paid monies to IT in reliance on the Representations.
Because the motion seeks to have pars 28 and 29 of the statement of claim struck out, I now set out those paragraphs in full, as follows:
The questions of fact and questions of law common to the claims of the Group Members (defined to include, it will be recalled, the ACCC) are set out in schedules 1 and 2 to the application respectively. Those two schedules are as follows:
"SCHEDULE '1' Common Questions of Fact 1. Whether the First Respondent was at all material times a body to whom the provisions of the Act apply and engaging in trade or commerce. 2. Whether the Second Respondent: (i) arranged or procured or caused the operation of the website which it is alleged constituted the making of the representations set out in the Statement of Claim, offering and promoting the services offered by the First Respondent; and (ii) arranged or procured the provision of such services, including the receipt of payments for such services. 3. Whether the Respondents made the representations set out in subparagraphs 19(i) to (vii) of the Statement of Claim. 4. Whether those representations were false or misleading or deceptive, or likely to mislead or deceive, as set out in paragraph 20 of the Statement of Claim. 5. Whether the Respondents' purpose in making the representations was as set out in paragraph 28 of the Statement of Claim. "SCHEDULE '2' Common Questions of Law 1. Whether the conduct referred to in paragraphs 14 to 20 of the Statement of Claim amounts to conduct in trade or commerce which is misleading or deceptive, or likely to mislead or deceive in contravention of section 52 of the Act. 2. Whether the representation referred to in subparagraph 19(vi) was a false statement, in trade or commerce and in connection with the supply or promotion of goods or services, that goods or services have sponsorship or approval they do not have, in contravention of section 53(c) of the Act. 3. Whether the representation referred to in sub-paragraph 19(vii) of the Statement of Claim was a full statement in trade or commerce and in connection with the supply or promotion of goods or services, that a company has a sponsorship, approval or affiliation it does not have, in contravention of section 53(d) of the Act. 4. Whether the conduct set out in paragraphs 14 to 18, 19(iii) and 20(iii) of the Statement of Claim amounts to conduct in trade or commerce that is liable to mislead the public as to the nature or characteristics of services, in contravention of section 55A of the Act. 5. Whether the conduct set out in paragraphs 21 to 22 of the Statement of Claim amounts to direct or indirect knowing concern or participation in the contraventions set out in paragraphs 23 to 26 of the Statement of Claim, and thereby amounts to involvement in those contraventions for the purposes of Part VI of the Act."The ACCC claims various forms of injunctive and declaratory relief against the respondents. Of particular significance for present purposes, however, are the following claims which are made in pars 22 and 23 of the application:
"22. On its own behalf and on behalf of the Group Members, an order, pursuant to section 87 of the Act, and/or section 33ZH of the Federal Court of Australia Act 1976, that each Respondent pay to any person who has requested domain name registration services ("registration") through the web site located at < and has paid monies to the First or Second Respondent in connection with such request, a refund in the amount of the difference between the fee paid by that person to the First or Second Respondent for each registration and any part of that fee paid by the First or Second Respondent to Network Solutions Inc. or the Internet Network Information Center ("InterNIC") in respect of the relevant registration. 23. On behalf of the Group Members, an order that each Respondent pay damages and/or compensation to Group Members for loss and damage suffered by the Group Members as a result of its and his conduct in contravention of the Act." (emphasis supplied)The respondents suggested, and the ACCC seemed to accept, that par 22 would require amendment so as to be limited at least by reference to "any Group Member" rather than "any person", since reliance on the Representations is an essential ingredient of the cause of action.
REASONING (INCLUDING OUTLINE OF PARTIES' SUBMISSIONS)
1. Transfer of the proceeding to the Victoria District Registry of the Court
Section 48 of the Act provides:
"The Court or a Judge may, at any stage of a proceeding in the Court, direct that the proceeding or a part of the proceeding be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Court or Judge imposes."
Order 10, r 1 (2) (f) of the Federal Court Rules provides:
"(2) ... the Court may: .... (f) direct that [a] proceeding be transferred to a place at which there is a Registry other than the then proper place. Where the proceeding is so transferred, the Registrar at the proper place from which the proceeding is transferred shall transmit all documents in his charge relating to the proceeding to the Registrar at the proper place to which the proceeding is transferred; ..." (emphasis supplied)
Order 1 r 4 provides that unless a contrary intention appears, the expression "proper place" in relation to any proceeding means (a) where there has been no transfer, the place at which the proceeding was commenced, and (b) where there has been a transfer, the place to which the proceeding was transferred.
It is common ground that the leading authority which should govern my approach to the present application is National Mutual Holdings Pty Ltd v Sentry Corporation (1988) 19 FCR 155 (FCA/FC) ("Sentry"). In that case, the proceeding was commenced in the Victorian District Registry of the Court, where, over a period of some months, directions hearings had taken place and pleadings and affidavits had been filed. The second respondent moved for orders that the trial be fixed at Sydney and that Sydney be the "proper place" for the purpose of O 30 r 6. That rule deals with the venue for the trial of proceedings in the Court and is as follows:
"6 (1) Subject to subrule (2), the place of trial of a proceeding is to be the proper place. (2) On the application of a party or of its own motion, the Court may direct that the trial, or part of the trial, of a proceeding be held at a place other than the proper place."
The Full Court considered several first instance decisions on both applications for change of place of trial and applications for change of place of proceeding. Without distinguishing between the two classes of case, it rejected in general terms a test that there must be a "manifest preponderance of convenience" in favour of a change, and said, in an important passage on which both parties to the present motion rely:
"The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably, bearing in mind the interest of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the court? It cannot and should not, in our opinion, be defined more closely or precisely." (at 162)
This passage has been frequently treated as authoritative.
The respondents rely on the fact that they and their legal advisers reside in Victoria. Their legal representatives had to fly from Melbourne and stay in Sydney overnight for the hearing of the present motion. If the proceeding remains in the New South Wales District Registry, this may happen again, and, in any event, the respondents will be put to the expense of retaining Sydney solicitors as agents of their present Victorian solicitors. They submit that the ACCC and its legal advisers have, or should be treated as having, just as much presence in Victoria as in New South Wales, and that, as a national regulatory body, it should be seen as being equally able to conduct proceedings in one city as in another. They submit that in so far as the case has any connection with Australia, that connection is with Victoria.
The respondents further refer to correspondence between the ACCC and themselves prior to the commencement of the proceeding. The ACCC first wrote to Mr Zmijewski in relation to the activity of IT on 14 August 1997. The letter emanated from the ACCC's office in Canberra and was sent to Mr Zmijewski at his address in a suburb of Melbourne. There followed a course of correspondence ending with a letter dated 29 April 1998 from the respondents' solicitors, White SW Computer Law, to the Australian Government Solicitor's Sydney office. The letter of 29 April included the following:
"We confirm that we have instructions to accept service on behalf of Internic Technology Pty Ltd and Peter Zmijewski. We confirm that you are not proposing to seek ex parte relief in this matter. We understand that you propose to issue proceedings in the Sydney Registry of the Federal Court. On our instructions it is clear that the Sydney Registry of the Federal Court is clearly an inappropriate Registry. We note that Mr Zmijewski is only twenty years old and resident of Sunbury an outer suburb of Melbourne. Further, Internic Technology Pty Ltd has no presence whatsoever in New South Wales. The alleged acts occurred in Victoria. There is no connection whatsoever between the claim and the Sydney Registry. Should the proceedings be heard in Sydney then our client will be at a substantial disadvantage and put to unnecessary expense. There would be no disadvantage to the ACCC, a national authority, in having the matter determined by the Federal Court in Melbourne. Should proceedings be issued in Sydney we are instructed to make an application to transfer the proceedings to the Melbourne Registry and seek costs orders against your client."
On 30 April 1998, the Australian Government Solicitor replied, enclosing, by way of service, sealed copies of the application and statement of claim which had been filed in the Sydney Registry that day. The letter asked that if, as foreshadowed, the respondents were to apply for a transfer to the Victorian Registry, the appropriate documentation be served by 14 May 1998 so that the issue might be dealt with at the first directions hearing on 21 May.
The respondents submit that the ACCC failed to consider their request prior to the commencement of the proceeding in the New South Wales District Registry of the Court, and that, in these circumstances, no weight should be attached to the ACCC's choice of Registry.
Like the respondents, the ACCC also submits that I should recognise the national character of the Court, but it seeks to emphasise the Court's capacity "to sit, take evidence and hear witnesses in any place in Australia" (it refers to Sentry and Friends of HinchinbrookSociety Inc v Minister for Environment (No 1) (1996) 69 FCR 1 (Branson J) at 23-25). The ACCC submits that the issue raised is not simply one of balance of convenience as between Melbourne and Sydney (it refers to Sentry and Cycles & Wheelman Pty Ltd v Beltech Corporation Ltd (1988) 80 ALR 279 (FCA/Gummow J) at 281).
The ACCC relies on an affidavit of David Michael Wright, a project officer employed by the ACCC in its Canberra office, who has had the day to day carriage of the matter on behalf of the ACCC, subject to the direction of the Director, Enforcement Unit. Mr Wright's affidavit refers to the history of the ACCC's investigation and shows that on 6 August 1997 the United States Federal Trade Commission wrote to the ACCC expressing concern over Mr Zmijewski's activities and requesting the co-operation of the ACCC in investigating them. On or about 25 August 1997 the ACCC instructed the New South Wales office of the Australian Government Solicitor to advise and provide assistance to it. Since that time, Ms Jan O'Neill, a solicitor employed in that office, has had principal day to day carriage of the matter. Mr Wright's affidavit includes the following:
"3. The Commission's Canberra office is its central office, and the enforcement functions of the Commission are carried out of both this office and out of the regional offices in the State capital cities and in Darwin and Townsville. The Commission's enforcement activities are coordinated out of its Canberra Office and staff in the Canberra Office frequently instruct solicitors in matters, including matters involving court proceedings, where the conduct in question and the court proceedings take place in another city. In particular, as part of the Commission's Internet Competition and Commerce project, all Internet-related matters are currently dealt with out of its Canberra office. Much of the instructions in such cases can be conveyed from a distance, although it is necessary to engage in some travel. In such cases, Sydney, being the closest business centre to Canberra, is generally the preferred location in terms of economies of travel and communications, for the purpose of attending on witnesses and at Court hearings."
The affidavit gives an account of Ms O'Neill's "acting and advising" in relation to the matter over the preceding nine months. He says that she has been briefed by the ACCC, to a large extent verbally, with a substantial amount of information, including information arising out of the ACCC's investigation of the conduct in question and background technical matters regarding the Internet and the electronic commerce industry. He says:
"The Commission is of the view that, if it were necessary to now instruct a new solicitor, a substantial amount of the acquired knowledge held by Ms O'Neill would be wasted, with resultant inefficiency and possible delay in its preparation of the case for hearing."
Another matter dealt with in Mr Wright's affidavit is the experience of the Sydney office of the AGS in representing the ACCC in proceedings under Part IVA in recent times. He deposes:
"AGS Sydney has been instructed by the Commission in the great majority of these cases and is familiar with the issues in question, with the various opinions that have been obtained on the subject and with the Commission's position. The Commission wishes to maintain continuity in its position and avoid duplication of costs, by continuing to instruct AGS Sydney in these proceedings. It considers that for it to now instruct new solicitors, including AGS Melbourne, would be an inefficient manner in which to carry out its statutory functions."
Mr Wright says that senior and junior counsel for the ACCC have been retained to represent it in other representative proceedings under Part IVA of the Act "in which issues arising from the Commission's unique position have been considered and argued". He states:
"The alternative to instructing new solicitors and/or Counsel, should the proceedings be transferred to Melbourne, would be for the Commission to incur substantial additional costs of retaining AGS Sydney and/or Senior and Junior Counsel to act in the proceedings from a distance, including travel costs."
Mr Wright states that because of the "global" nature of the Internet, it is unrealistic to associate the respondents' activity with a particular place and that the relevant websites can be viewed just as easily in Sydney as in Melbourne.
He says that as from about 5 June 1998 he was to cease employment with the ACCC and to commence employment as a solicitor in a private legal firm in Sydney. He states that the ACCC's representatives have advised him he may be required to provide further assistance and that it would be much more convenient for him to provide that assistance in Sydney than in Melbourne.
Mr Wright states that in the course of the ACCC's investigation, he has been in contact with staff of Network Solutions who have given him information regarding the registration of domain names carried out by the InterNIC at the request of IT and Mr Zmijewski. In particular, he says that he has been provided with an electronic version of a data base setting out the details of each registration, including the names and addresses (including E-mail addresses) of bodies who sought the registration by means of IT's relevant web site. Mr Wright's affidavit concludes as follows:
"From my examination of the database I believe that almost half of Group Members in Australia are located in Sydney or its surrounding areas, and that there are more than twice the number of Group Members in Sydney than in Melbourne. Given the nature of the Applicant's allegations in these proceedings, I consider it unlikely that the Applicant would seek to call evidence from Group Members who are located in a different State to that in which the proceedings are heard."
In response to the respondents' submission that the costs of travel and accommodation for Mr Zmijewski and the respondents' legal representatives will be incurred if the proceeding continues in the New South Wales District Registry, the ACCC refers to Mr Zmijewski's affidavit evidence that, as at May 1998, IT had received approximately 18,000 orders from customers in the United States of America and approximately 250 orders from customers in Australia. The ACCC makes the point that the 18,250 orders, assuming that they were all filled, would have yielded a profit for IT, at the rate of US$150 per order, of US$2,737,500. In the light of this figure, the ACCC submits that little weight should be given to the respondents' submission with reference to the additional cost of travel to and accommodation in Sydney.
I find the present issue finely balanced. It is relevant, as the respondents submit, that the ACCC is a national regulatory body with offices in Sydney and Melbourne. But I do not accept that because it is, and is known to be, a national regulatory body, it should be treated for present purposes, as being "equally able" to conduct proceedings anywhere in the Commonwealth. I do not see why all considerations of cost, convenience and expertise sought to be relied on by the ACCC should be deemed irrelevant merely because it is, and is known to be, a national regulatory body. The fact that its resources and personnel are not unlimited is as well known as the fact that it is such a body with offices in Melbourne and Sydney.
Expertise in relation to representative proceedings under Part IVA generally has been built up in the Sydney office of the Australian Government Solicitor ("AGS") in recent years. In the ordinary course, this factor would be of some but not great weight in my view. Because I later decide that the proceeding should not continue under Part IVA, it transpires that it is of no weight. I find more persuasive the facts that Ms Jan O'Neill of the AGS's Sydney office has, under instructions from the ACCC's Canberra office, developed over a period for some nine months an understanding of "the Internet and the electronic commerce industry", and that a newly instructed solicitor in the AGS's Melbourne office would need to develop that understanding afresh. Similarly, David Michael Wright, now a former member of the ACCC's staff in its Canberra office, is employed by a private legal firm in Sydney and, to some extent, his ongoing assistance will apparently be required by the ACCC.
Of a different order is the consideration that there are twice as many Group Members in Sydney as there are in Melbourne, and that statements have been taken from six of them in Sydney and one in Melbourne. This work would need to be replicated if the proceeding were to be transferred to the Victoria District Registry. No doubt this could be done: I assume that six replacement Group Members in Melbourne could be located without great difficulty. But the fact that the statements already taken from Group Members in Sydney would have to be put to one side remains a factor to be taken into account against a transfer. Moreover, apparently evidence from further Group Members will need to be led (see below). That consideration favours, to some extent, retention of the proceeding in the New South Wales District Registry because, as already noted, there are twice as many Group Members in Sydney as in Melbourne.
The respondents and their legal advisers are in Melbourne. If there is no change in the "proper place" of the proceeding, they will incur some additional costs in defending the proceeding beyond those they would incur if it were to be conducted in the Victoria District Registry. An example is the fees of a Sydney agent for White S W Computer Law, the respondents' solicitors. This additional cost may be able to be reduced by the holding of directions hearings, or some of them, by telephone, if appropriate.
As I said earlier, I have found the present issue finely balanced, but weighing up all the considerations to which my attention has been drawn in submissions, I am of the view that the proceeding should remain in the New South Wales District Registry.
2. Application for an Order that the proceeding no longer continue pursuant to
PART IVA OF THE ACT
The respondents submit that the ACCC was not entitled to be the representative party in the present proceeding under Part IVA, and, in the alternative, that if it was so entitled, I should exercise the discretionary power given by s 33N to order that the proceeding no longer continue under that Part.
Standing of the ACCC as representative party
The first submission challenges the correctness of the decision of Branson J in Australian Competition and Consumer Commission v Chats House Investments Pty Limited (1996) 71 FCR 250 ("Chats House"). Her Honour held that the terms of subs 33C(1) were satisfied even though the ACCC stood in a position different from that of the other group members in that case. In the present case, the ACCC does not claim to be a person:
"who, in reliance on one or more of the representations referred to in the Statement of Claim Ö paid moneys to [IT] for the provision by it of Internet domain name registration services or associated services, at or through the Internet website located at Since the conclusion of the hearing before me, O'Loughlin J has followed Chats House in the present respect in Australian Competition and Consumer Commission v Golden Sphere International Inc, unreported, 1 June 1998, QG153 of 1996 ("Golden Sphere"). I have drawn the parties' attention to this decision and afforded them the opportunity of making submissions in relation to it. I should follow Branson J and O'Loughlin J unless I thought they were clearly wrong: see the authorities referred to in Bank of Western Australia v Commissioner of Taxation (1994) 55 FCR 233 at 255.In Reasons for Decision which I have published today just before these present Reasons, I have addressed submissions made in relation to the standing of the ACCC to commence a representative proceeding under Part IVA in circumstances relevantly similar to those of the present case: Australian Competition and Consumer Commission v Giraffe World Australia Pty Limited, unreported, 14 July 1998, NG421 of 1998 ("Giraffe World"). In those Reasons, I concluded that the decisions of Branson J and O'Loughlin J on the present issue in Chats House and Golden Sphere respectively were not clearly wrong and therefore I followed them.
I incorporate here, by reference, the reasons which I gave on the present issue in Giraffe World. I think that their Honours were not clearly wrong in holding that the terms of Part IVA are, upon their proper construction, wide enough to encompass the commencement of a representative proceeding under Part IVA by the ACCC as representative party on behalf of itself and on behalf of other persons whose suffering of loss or damage is an essential element in their causes of action.
The discretion under s 33N
The respondents submit that I should exercise the discretion given by s 33N in their favour. That section is as follows:
"33N (1) The Court may, on application by the respondent or of its own motion, order that a proceeding no longer continue under this Part where it is satisfied that it is in the interests of justice to do so because: (a) the costs that would be incurred if the proceeding were to continue as a representative proceeding are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding; or (b) all the relief sought can be obtained by means of a proceeding other than a representative proceeding under this Part; or (c) the representative proceeding will not provide an efficient and effective means of dealing with the claims of group members; or (d) it is otherwise inappropriate that the claims be pursued by means of a representative proceeding. (2) If the Court dismisses an application under this section, the Court may order that no further application under this section be made by the respondent except with the leave of the Court. (3) Leave for the purposes of subsection (2) may be granted subject to such conditions as to costs as the Court considers just."
The respondents submit that the measure of the loss or damage suffered by any Group Member is, at most, the amount paid by the Group Member to IT (US$220 - US$250) less the amount which the group member would have had to pay to InterNIC directly (US$70 - US$100) to procure registration of the domain name. For convenience, I will refer to this maximum amount as US$150. According to the respondents' submission, in order to arrive at the amount recoverable, it would be necessary to deduct from this amount of US$150 the value of the services provided by IT.
Against the smallness of the maximum amount of loss of damage suffered, the respondents seek to drawn attention to the cost of proving the suffering of the loss and damage. According their submission:
"To prove damage, the group members must prove that they acted on a misapprehension created by the conduct alleged: that is - they must establish that they were misled. Each group member must give evidence to that effect, and be cross-examined on that evidence. The prospect of witnesses coming from all over the world to make good a claim which cannot exceed $US150 is absurd. It should not be permitted."
The respondents submit that the same considerations show that even the Group Members other than the ACCC do not have a common interest in the proceeding in so far as it represents a claim for damages, since the nature of each claim will depend upon facts peculiar to the individual Group Member.
The respondents also rely on a proceeding against "Internic Software" in the 191st Judicial District Court of Dallas County, Dallas, Texas, in support of the grounds referred to in s 33N (1) (b) and (d). The proceeding is Cause No 97-9082 ("the Texas proceeding"). In the Texas proceeding the plaintiff is Peter C Salaverry and the defendant is "Internic Software". According to his first amended petition filed on 5 December 1997 in the Texas proceeding:
"Plaintiff, Peter C. Salaverry, pursuant to Rule 42 of the Texas Rules of Civil Procedure, individually and in [sic] behalf of all persons similarly situated and who also comprise the class of persons who, through fraudulent misrepresentation registered a domain name with Internic Software, Inc. ( brings this action as a class action against the defendant Internic Software, Inc. ( and for cause of action respectfully shows: Ö "
The "causes of action" turn, in substance, on the Representations. The first amended petition alleges that Internic Software's representations induced Mr Salaverry to believe the value of the registration service offered was US $250, whereas in fact its value was only US $100.
The "class action allegation" contained in the first amended petition in the Texas proceeding is as follows:
"CLASS ACTION ALLEGATION The persons in the class are so numerous, the total amount is in excess of 2,000 persons, so that joinder of all members is impracticable. There are common questions of law or fact affecting the class and these questions include the fraudulent misrepresentation perpetrated by the defendant by the (1) taking of the Internic name, (2) operating a service under the Internic name and (3) not adequately informing the consumer of the deceiving nature of the actions. The common tort by the defendant is clear-cut and the damages to the class are identical. This being done with the knowledge and intention of making the consumer believe that they are dealing with the Internic (Network Solutions, Inc.) company. The claims of the movant are typical of the claims of the rest of the class in that he utilized the World Wide Web (www), and subsequently the defendant's 'web page' ( where he registered his domain name ( Movant latter [sic] discovered that the defendant's 'web page' ( was not the true registration company2 but instead was a company that acquired the Internic domain name and held themselves out to be an internic registration service charging $250.00 per domain name, supra, a toll charge. Peter C. Salaverry will fairly and adequately represent the interests of the class. In support of this proposition, movant shows: 1. Movant is a member of the proposed class. 2. Movant has expressed interest in representing the class. 3. Movant has hired John R. Jarvis as attorney who is a licensed Texas attorney and a practicing Certified Public Accountant. 4. Movant has no interests adverse to other members of the class. Common questions of law or fact predominate over any questions affecting only individual members. The following questions are common to the class: (1) whether the consumers were defrauded by the defendant taking the Internic name, and, (2) whether the Defendant knowingly and maliciously engaged in these actions. In addition, a class action in this case is superior to other available methods for the fair and efficient adjudication of the controversy because of the large number of plaintiffs with the identical claim for damages. Plaintiff requests that service upon the class members be authorized by publication that utilizes the Internet. Ö ____________________________ 2 The true registration company, Network Solutions, Inc., can be located at Internic Software filed a "special appearance" in the Texas proceeding on 15 December 1997, by which it asserted that it lacked "minimum contacts with the State of Texas to justify a Texas court's assumption of jurisdiction over it" and that an assumption of jurisdiction would "offend traditional notions of fair play and substantial justice". Internic Software asked the Court to "set its special appearance for hearing" and after the hearing sustain the special appearance and enter final judgment dismissing Mr Salaverry's cause of action.On 20 February 1998 a hearing was held by Judge David Brooks of the 191st Judicial District Court regarding the special appearance. An affidavit dated 15 May 1998 of Franklin Blackstone III, of the Texas attorneys representing Internic Software in the Texas proceeding, states:
At the hearing, which was opposed, the Texas court took the matter under advisement. At this time, the Texas court has not issued any order regarding First Respondent's Special Appearance. I am of the view that Judge Brooks is likely to find that the Texas court has jurisdiction."Mr Blackstone's affidavit further states that if the challenge to personal jurisdiction is overruled, Internic Software will be required to file responsive pleadings which could include additional defences such as a forum non conveniens challenge and a plea in abatement. The affidavit explains:
"If a forum non conveniens challenge is raised and successful, the matter could be dismissed. If such a venue challenge is not successful, but a plea in abatement is successful, the matter could be stayed for some period of time, typically 2 to 3 months. If both the venue challenge and the plea in abatement are unsuccessful, the proceedings could proceed to the class Certification stage. At this time, First Respondent has not filed either a plea in abatement or a venue challenge, as it awaiting a ruling from the Texas court before doing so."Mr Blackstone's affidavit continues by stating that at the hearing for certification, which has been requested, the Texas court will be asked to consider whether the Plaintiff may bring and maintain a class action under Texas procedural rules. He states that if the case is permitted to be maintained as a class action, it is possible that the class could include foreign nationals and that if the class action were successful, a possible outcome is an order that Internic Software make refunds to the class members.
Senior counsel for the respondents relies on the currency of the Texas proceeding, not to seek a stay of the present proceeding, but as:
"another demonstration of the inappropriateness of using the representative proceedings here when there is an alternative course available which will give effective relief to those who want effective relief."In response to the respondents' submissions, the ACCC submits that the large number of potential victims, the relatively small amount of the loss or damage suffered by each and the similarity of the factual circumstances of the claims of the Group Members, combine to demonstrate that the case is "the very type of matter amenable to disposal by way of representative proceedings." It also submits that it will not be necessary for it to lead testimonial evidence of inducement from all loss-suffering group members because the Court will infer inducement from the making of the Representations followed by the making of the contracts with, and payment of money to, IT.
In considering the parties' competing submissions, I find it desirable to refer to the facts in more detail. An affidavit of Mr Zmijewski shows that in about April 1997 he entered into discussions with Matt Midhoe, then a resident of Alabama and "the operator of the internic.com site". On 30 April, Mr Zmijewski registered the business name "Internic Software" at the Office of Fair Trading and Business Affairs in Melbourne. By an agreement dated 1 May 1997, Mr Midhoe agreed to sell and Mr Zmijewski agreed to buy "the Internic Commercial Domain Name" for US$750. Mr Zmijewski then applied to Network Solutions to have the registration of the name in Mr Midhoe's name cancelled and to have the name re-registered in Mr Zmijewski's name. That procedure was completed on 6 June 1997.
At first Mr Zmijewski sold "Hot Chilli" software through the site using the business name "Internic Software". Later in June, he noticed what appeared to him to be, according to his description, "considerable growth in the business of domain name brokerages". Mr Zmijewski states that the demand for this kind of service arose because people found it difficult to register domain names directly through Network Solutions. Mr Zmijewski's affidavit describes the difficulties and states that he decided to provide such a brokerage service for a fee using the existing domain name.
In early July 1997, his accountant caused IT to be incorporated with Mr Zmijewski as its sole director. On 11 July, IT became the registered proprietor of the business name "Internic Software". IT then commenced trading in the new domain name registration business.
Annexed to Zmijewski's affidavit are copies of the web pages that, he says, the customer would have seen after typing and clicking on the hyperlinks appearing on the computer thereafter. It suffices to set out the first page as follows:
"Internic Software
Creators of Premier Hot Chilli Software
Domain Names
Search for your Domain Name
Domain Name:
COM
Check Name
Internic.com Internic.com
Register your Domain Name
What is a Domain Name?
What is the Procedure? About Internic Software
Our Software Products! Internic.com Internic.com
Internic Software provides domain name registration services.
Internic Software is not affiliated with, or part of Network
Solutions, Inc.., or its InterNIC operation which can be found at
The following email address should only be used by customers of Internic
Software. Please quote your Internic Software reference number which is
stated on your order acknowledgment email.
Email: Contact Us
Copyright (c) 1997-98 Internic Software"
The disclaimer "Internic Software is not affiliated Ö internic.net" appeared throughout the web pages - thirteen times in fact.
The following two extracts from the web pages are also important:
"Costs of
Domain Names
Registering a domain name with Internic Software will cost US$220. This cost covers NIC fees for two years and our service fees. After two years, you will be billed US$35 by the relevant registry authority (called the InterNIC operated by Network Solutions, Inc..) to renew your registration."
and
"NOTE: Internic Software will register a domain name on the clients [sic] behalf. The domain name is owned by the client and NOT Internic Software. Internic Software does not accept any liability or damages if it fails to register a domain name for a client.
Internic Software provides domain name registration services for its clients. Internic Software is not affiliated with, or part of Network Solutions, Inc.., or its InterNIC operation."
The web pages concluded with order forms and forms enabling payment by credit card.
Mr Zmijewski's affidavit also annexes communications between IT and Network Solutions relating to the establishment of IT's account with Network Solutions and the making of payments on that account. This evidence is designed to support Mr Zmijewski's assertion in his affidavit that Network Solutions "was aware of [IT's] business and has assisted it in its operations both on a technical and commercial level."
Senior counsel for the respondents emphasises that apparently there will be no issue as to his clients' responsibility for what appeared in the web pages and that the controversial issues will be whether the Representations or some of them arise; whether the Group Members were induced by those or some of those Representations that arose to contract with, and pay money to, IT; and the amount of loss of damage suffered by those who did so. He submits that it follows that most of the hearing time will be occupied with issues that differ as between Group Members.
It appears that the quantification of loss and damage suffered will be common to all cases. Some hearing time will be occupied in determining the value of the brokerage services provided by IT. But the related issues of identification of the representations that were made and inducement pose a special problem.
It is well established that it may sometimes be appropriate to infer reliance in the absence of testimonial evidence from the relier: cf Gould v Vaggelas (1985) 157 CLR 215 at 236 (Wilson J); Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 (FC) at 481-483; Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 (CA) at 266-269 (Rolfe AJA, with whom Kirby P and Mahoney JA agreed); Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259 at 282 (Stuart-Smith J, with whom Farquharson and Evans LJJ agreed); Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR [partialdiff]41-550 (FCA/FC) at 43,619-43,620; and cf Vasquez v Superior Court of San Joaquin County (1971) 94 Cal Rptr 796 (484 P 2d 964) at 804 (972). It may well be appropriate to infer reliance where the representation in question is of a kind obviously calculated to induce action. This consideration requires me to attend to the terms of the Representations and the content of the web pages. A difficulty immediately arises: I am not to make final findings on this interlocutory application. But I must reach preliminary views on some matters.
My preliminary view is that the passages set out above will create difficulty for the arising of Representations (i) to (iv) and proof of reliance on them. Those four Repesentations may be conceived of as the "stronger Representations", because they are representations which, on their face, are of a kind obviously calculated to induce persons wishing to register a domain name to do business with IT. Argument and perhaps evidence may persuade me to a different view finally, but that is my present impression.
The position in regard to Representations (v) to (vii) is less clear. Against the arising of those Representations is, for example, the statement in the third and final passage set out earlier, "Internic Software is not affiliated with, or part of, Network Solutions, Inc .., or its InterNIC operation."
Representations (v) to (vii) may be conceived of as the "weaker Representations". The important consideration for present purposes is: the weaker (less obviously calculated to induce action) a representation found to arise, the more difficult it is to infer reliance.
It is also necessary to distinguish from the Representations a representation that IT had a domain name registered by Network Solutions. Such a representation was true.
Any Representation found to have been made will need to accommodate the terms of the web pages, the registration of IT's own domain name with Network Solutions and IT's capacity to procure registration of domain names for its clients with Network Solutions. Any Representation consistent with these matters will necessarily be of a comparatively weak kind and unlikely to give rise to an inference of reliance by all Group Members.
My preliminary view is that it will be necessary for the ACCC to call all Group Members to prove inducement. The position may, however, prove to be otherwise. Assume that the ACCC led evidence from a substantial number of persons that they were induced to deal with IT by a Representation found to have been made. Assume further that the respondents led no evidence that other clients of IT's had not been so induced. In such circumstances it might be appropriate to infer that all IT's clients had been so induced. But in my opinion, the scenario just described is unlikely to eventuate.
I think it inappropriate, in the circumstances, that the claims be pursued by means of a representative proceeding. An order will be made under s 33N accordingly. This will leave it open for the proceeding to be continued as a proceeding by the ACCC on its own behalf. As well, if there is a finding of contravention, the ACCC will be able to apply under subs 87 (1A) by motion for compensatory orders on behalf of persons identified in the motion who have suffered loss or damage by the contravening conduct, and who have given prior written consent to the ACCC's applying for the compensatory orders on their behalf.
Before turning to the next aspect of the respondents' motion, I should, for the sake of completeness, add that I have not found the pendency of the Texas proceeding persuasive one way or the other in relation to exercise of the discretionary power under s 33N.
3. Striking out of pars 28 and 29 of the statement of claim
Paragraphs 28 and 29 of the statement of claim were set out earlier. The respondents' objection to par 28 is the pleading of the "intention" of IT and Mr Zmijewski. Intention to induce is not an element of any cause of action pleaded. The ACCC submits that it serves a useful purpose to retain the pleading of intention because it puts IT and Mr Zmijewski on notice that the ACCC will seek to establish an intention to induce and to rely on the proposition that where such an intention is proved, it should ordinarily be inferred, where the act sought to be induced in fact follows, that causation was present. Senior counsel for the ACCC accepts that intention to induce is not an element of any cause of action on which his client relies.
I do not think that the respondents should be required to plead to par 28 in these circumstances. The paragraph should be struck out pursuant to O 11 r 16 as embarrassing. There are ways, other than by pleading, that one party's intention to rely on a certain form of evidence and on a particular inference can be signalled to the other party.
The respondents' objection to par 29 concerns the reference to "members of the general public". Again, the respondents submit that it is only reliance by the Group Members that constitutes an element of any cause of action pleaded. In response, the ACCC points out that it is seeking an injunction under s 80 and an order for corrective advertising under s 80A of the TP Act as well as compensation for the other group members. It submits that the inducement of any person, whether a group member or not, is relevant to the granting of such relief.
The issue which divides the parties requires attention to be given to the ACCC's definition of "Group Members". It will be recalled that the Group Members are the ACCC:
"together with all persons worldwide who, in reliance on one or more of the representations referred to in the Statement of Claim ... , have paid moneys to [IT] for the provision by it of Internet domain name registration services, or associated services, at or through the Internet website located at I do not understand how there could be a member of the general public who, in reliance on one or more of the representations, did the things referred to in subpars (i), (ii) and (iii) of par 29 set out earlier in these Reasons who would not necessarily be a Group Member. The only representations referred to in the statement of claim are those referred to in subpars 19 (i) to (vii). Accordingly, a member of the public who, in reliance on one or more of those representations paid moneys to IT in respect of the services which it offered at its website including services associated with domain name registration, is necessarily a Group Member.
The words "members of the general public, including" in par 29 should also be struck out pursuant to O 11 r 16 as embarrassing.
CONCLUSION
I decline to order the the proceeding be transferred to the Victoria District Registry of the Court. I will make an order under s 33N of the Act that the proceeding no longer continue under Part IVA. I will order that par 28 and the words "members of the general public, including" in par 29 of the statement of claim be struck out.
Both parties have had some success. The first and second issues are discretionary ones going to the question of the most appropriate manner in which the proceeding should continue. There will be no order as to costs.
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