Hoath v Connect Internet Services Pty Ltd - [2006] NSWSC 158

Reported Decision:
69 IPR 62

New South Wales

Supreme Court

CITATION: Hoath & 1 Or v Connect Internet Services & 5 Ors [2006] NSWSC 158

HEARING DATE(S): 06-08/06/05, 08/07/05

JUDGMENT DATE :
22 March 2006

JURISDICTION: Equity Division

JUDGMENT OF: White J

DECISION: Short minutes to be brought in to give effect to reasons.

CATCHWORDS: TORTS – passing off – second, third and sixth defendants used plaintiffs’ business name and domain name – plaintiffs’ consent expired or withdrawn – whether plaintiffs entitled to sue in passing off – whether plaintiffs entitled to damages or an account of profits – whether fourth and fifth defendants liable as joint tortfeasors or accessaries – whether plaintiffs entitled to injunctions restraining further use of plaintiffs’ business name and domain name – whether plaintiffs entitled to order of re-transfer in relation to plaintiffs’ domain name - CONTRACTS – Interpretation – Implication of terms – Whether third defendant purchased domain name, internet protocol addresses and autonomous system number - TRADE & COMMERCE – misleading or deceptive conduct – defendants contended they purchased plaintiffs’ domain name, internet protocol range and autonomous system number – representations to this effect made to internet registrar – whether representations in breach of s 52 of the Trade Practices Act 1974 (Cth) – whether plaintiffs entitled to damages under s 82 or orders under s 87 of the Trade Practices Act - EQUITY – equitable remedies – second, third and sixth defendants used plaintiffs’ internet protocol range and autonomous system number – whether plaintiffs entitled to injunctions restraining further use of plaintiffs’ internet protocol range and autonomous system number – whether plaintiffs entitled to order for re-transfer - TORTS – conversion – detinue – defendants used plaintiffs’ domain name, internet protocol range and autonomous system number – whether rights to domain name, internet protocol range and autonomous system number are intangible property rights – whether plaintiffs entitled to sue in conversion for interference with intangible property rights - TORTS – conversion – detinue – second to fifth defendants used plaintiffs’ computer equipment – plaintiffs’ consent expired or withdrawn – whether second plaintiff entitled to sue in conversion where no proof of ownership – whether second defendant entitled to plead res judicata following dismissal of appeal from deed administrator’s rejection of proof of debt - CORPORATIONS – deeds of company arrangement – second defendant entered into deed of company arrangement – whether deed a defence to relief sought against second defendant – construction of s 444D of the Corporations Act 2001 (Cth) – effect of Part 5.3A of the Corporations Act - CONTRACTS –first plaintiff and fourth and fifth defendants made “in principle” agreement as to first plaintiff’s equity in proposed new company – whether parties negotiated binding contract – whether first plaintiff entitled to equitable relief notwithstanding the parties’ failure to negotiate valid contract – principles of equitable estoppel - DAMAGES – exemplary and aggravated damages – whether plaintiffs entitled to exemplary or aggravated damages against any defendant.

LEGISLATION CITED: Trade Practices Act 1974 (Cth)
Corporations Act 2001 (Cth)

CASES CITED: J. Prendergast, ‘Kremen v Cohen: The “Knotty” Saga of sex.com’ (2004-2005) 45 Jurimetrics 75
Mark Hoath & Anor v Comcen Pty Ltd & Ors [2004] NSWSC 682
Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196
Nicholas v Borg (1986) 7 IPR 1
Orange Crush (Australia) Ltd v Gartrell (1928) 41 CLR 282
Star Industrial Co Ltd v Yap Kwee Kor t/as Newstar Industrial Co [1976] 2 FSR 256
Pink v JA Sharwood & Co (1913) 30 RPC 725
Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289
Federal Commissioner of Taxation v Murry (1998) 193 CLR 605
Powell v Birmingham Vinegar Brewery Co. Ltd (1897) 14 RPC 720
J H Coles Pty Ltd v Need (1933) 49 CLR 499 Premetis v 260 Oxford Street Pty Ltd [2005] NSWSC 904
C Evans & Sons Ltd v Sprite Brand Ltd [1985] 1 WLR 317
Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd (2003) 9 VR 171
King v Milpurrurru (1996) 66 FCR 474
Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231
M. Pearce SC, ‘Accessorial Liability for Misleading or Deceptive Conduct’ (2006) 80 ALJ 104
Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 65 IPR 289
Allen Manufacturing Co. Pty Ltd v McCallum Pty Ltd (2001) 53 IPR 400
Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25
Island Records v Tring International plc [1995] 3 All ER 444
Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002) 10 BPR 19,565
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Yorke v Lucas (1985) 158 CLR 661
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526
Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522
Penfold Wines Ltd v Elliott (1946) 74 CLR 204
Ferguson v Eakin (Court of Appeal, 27 August 1997, unreported; BC9703869)
Doodeward v Spence (1908) 6 CLR 406OBG Ltd v Allan [2005] QB 762
Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2005] NSWSC 951
V.D. Ricks, ‘The Conversion of Intangible Property; Bursting the Ancient Trover Bottle with New Wine’ (1991) BYU L Rev. 1681
Balkin & Davis, Law of Torts, 3 ed
Lloyds Bank Ltd v The Chartered Bank of India, Australia & China [1929] 1 KB 40
Bavins & Sims v London & South Western Bank Ltd [1900] 1 QB 270
Smith v Lloyds TSB Group plc [2001] QB 541
Koster’s Premier Pottery Pty Ltd v Bank of Adelaide (1981) 28 SASR 355
Clegg v Baretta (1887) 56 LT 775
Watson v McLean (1858) E B & E 78; 120 ER 435
Solloway v McLaughlin [1938] AC 247
BBMB Finance (Hong Kong) Ltd v Eda Holdings Limited [1991] 2 All ER 129
Hiort v Bott (1847) LR 9 Ex 86 M’Combie v Davies 7 East 5; (1805) 6 East 538 at 540; 102 ER 1393
Kremen v Cohen 337 F 3d 1024 (2003)
Betteley v Reed (1843) 4 QB 511; 114 ER 991
Biddle v Bond (1865) 6 B & S 225; 122 ER 1179 Edwards v Amos (1945) 62 WN (NSW) 204
Standard Electric Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447
Perpetual Trustees & National Executors of Tasmania Ltd v Perkins (1989) Aust Torts Reports 80-295
Gatward v Alley (1940) 40 SR (NSW) 174
Flack v Chairman, National Crime Authority (1997) 80 FCR 137
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
Ogilvy-Grant v East (1983) 7 ACLR 669
Re Galaxy Media Pty Ltd [2001] NSWSC 917
Hollins v Fowler (1875) LR 7 HL 757
Brash Holdings Ltd (Administrator Appointed) & Ors v Katile Pty Ltd & Anor [1996] 1 VR 24
Josia Pty Ltd v Horvat Construction Pty Ltd [2004] NSWSC 1252
Easey v Grosvenor Constructions (NSW) Pty Ltd (2005) 54 ACSR 820
Ramsden v Dyson (1866) LR 1 HL 129
Plimmer v Mayor of Wellington (1884) LR 9 App Cas 699
Walton’s Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387
Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466
Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582
XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448
Zhu v Sydney Organising Committee for the Olympic Games [2001] NSWSC 989
Adams v Kennedy (2000) 49 NSWLR 78
State of NSW v Ibbett [2005] NSWCA 445; BC200510884
Vignoli v Sydney Harbour Casino (2000) Aust Torts Reports 81-541
Gray v Motor Accident Commission (1998) 196 CLR 1

PARTIES: Mark Hoath & 1 Or
v
Connect Internet Services Pty Ltd & 5 Ors

FILE NUMBER(S): SC 1599/02

COUNSEL: Plaintiffs: In Person
2nd - 6th Defendants: A Blank

SOLICITORS: Plaintiff: N/A
2nd - 6th Defendants: EH Tebbutt & Sons

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Wednesday, 22 March 2006

1599/02 Mark Hoath & 1 Or v Connect Internet Services Pty Ltd & 5 Ors

JUDGMENT

1 HIS HONOUR: These proceedings principally concern the defendants’ dealing with certain computer hardware, a business name, Dragon Net, a domain name, dragon.net.au, a range of internet protocol addresses and an autonomous system number AS 7592. Internet protocol addresses are numbers identifying a computer’s location on the internet. The function of domain names, the domain name system, and internet protocol addresses has been described as follows:

Each computer ‘more-or-less permanently connected to the Internet is assigned its own Internet Protocol (IP) number or address, which specifies [its] location’ much like a street address or telephone number. Each IP address is composed of a string of four sets of numbers separated by periods. Because such a string of numbers is difficult for users to remember, a system was developed to ‘locate a particular computer on the Internet by using an alphanumeric “domain name,” in lieu of the computer’s IP address.’

The Domain Name System (DNS), much like the white pages, is an electronic directory containing all domain names and their associated IP addresses. This directory, in database form, is ‘distributed across the Internet, on a multitude of name servers, each responsible for correlating the IP addresses and domain names … within its [control] … The DNS is the means of searching that distributed database.’

Jurimetrics

2 That description is consistent with the admitted facts in this case. The plaintiff pleaded the following matters, all of which were admitted:

18. Control of a domain name confers the right to determine which services are available to the domain name and to direct customers of the domain name to the Internet Server that runs this service through a direct mapping of the service to an IP Address. This is typically in the form:

IN A 203.56.188.29

mail.dragon.net.au IN A 203.56.188.27

Services for domain names are configured by an Internet Service Provider (“ISP”) in their Domain Name Service (“DNS”) configuration files. For each domain name that is delegated to an ISP, the ISP will have a file in its DNS configuration that will determine the services available such as www, ftp or mail and mapping these services to IP Addresses.

Connect, through its .net.au Internet Registry provides a ‘whitepages’ for .net.au domain names. Through a process known as ‘Domain Name Resolution’. An internet device enquires of a Domain Name Server the IP Address for a service belonging to a domain name, if the domain name can not be resolved to an IP Address the internet device can not contact the internet device by the use of the domain name.

As Connect is the sole ‘whitepages’ for .net.au domain names in the world, in the simplified (yet accurate and correct) form, all internet devices making a request of domain name of type x.y.net.au will ask the .net.au Internet Registry for the IP address of the DNS server that contains the services information of the domain name ‘y’. This is the services

that Connect offers and there is no replacement for this service.

Having been told the IP address of the Delegant DNS server, the device contacts the DNS at this IP Address and seeks to find out the IP Address of the service ‘x’.

The ISP listed as providing DNS services for a domain name in the Connect.net.au Internet Registry an ISP is in actual possession of a Domain Name and can:

1) specify which services are available to a domain name; and

2) determine which internet servers provide these services.

Both of these factors are determined through the configuration of the Domain Name configuration file on the ISP’s DNS server.

…

19. …

All computers and/or devices on the Internet are required to be allocated at least 1 IP Address for the purposes of uniquely identifying that device.

When Australia formed part of the Internet, a US based organisation allocated a large ‘block’ of IP Addresses to Australia for division and distribution by AUNIC. AUNIC would distribute smaller blocks of IP Addresses (in multiples of 256 IP addresses called Class ‘C’ addresses) to applicants who could demonstrate existing need and/or short-term future need.

All Internet Service Providers have a ‘border router’, a router which connects them to the Internet. These border routers advertise to the rest of the Internet all of the IP Addresses that the ISP has allocated. To simply

the advertisement of this information a single AS number tell other routers of all of the IP Addresses controlled by an ISP.

AS numbers are issued on the basis of 1 AS number per organization. The organization must have at least 2 connections to the Internet and be performing BGP routing on these connections.

20. In or about March 1998, AUNIC ceased allocating IP Addresses from the IP Address range AUNIC was issued for Australia.

Overview

3 In 1995, Mr Mark Hoath registered the business name Dragon Net and the domain name dragon.net.au. From 1998 to 2000, mortgage.com.au Pty Ltd (“Mortgage”) carried on business as an internet service provider using the name Dragon Net and the domain name dragon.net.au. Mr Hoath was a director and shareholder of Mortgage. Another of his companies, ITFirst.com.au Pty Ltd, was a virtual internet service provider. A virtual internet service provider does not have its own network. Its subscribers use the networks of other companies. ITFirst shared Mortgage’s network, but had its own subscribers. ITFirst and Mortgage both used the domain name dragon.net.au. Their customers’ email addresses were in the form [email protected].

4 ITFirst was placed into voluntary administration on 5 September 2000. On 7 September 2000, ITFirst sold its customer base outside Sydney to Spin Internet Services Pty Ltd. Spin’s director was Mr Peter Stevens. Spin was another virtual internet service provider. It used the network of Com-Cen Pty Ltd, a company controlled by a Mr Liam Bal. Spin and Com-Cen had a close relationship. Mr Bal negotiated and signed the agreement with ITFirst for Spin.

5 Mr Hoath believed he had “done a deal” with Mr Bal and Mr Stevens. The agreement, as he believed it to be, was for the businesses of Com-Cen, Spin and “Dragon” to be merged. It was not clear of what precisely the business of “Dragon” consisted. It appears to have been the assets acquired from the administrator of ITFirst and its subscribers, and other subscribers and assets of Mortgage. Mr Hoath believed he would have at least a 15% equity in the company which owned the merged businesses. The details of the deal were never finalised.

6 To facilitate the transfer of ITFirst’s customers to Spin, and because of the proposed merger, Mr Hoath allowed Com-Cen and Spin to take control of the domain name dragon.net.au. He lent them computer equipment Mortgage had used in its business. Mortgage stopped carrying on its business. After taking possession of the computers, Com-Cen transferred the registration of the IP addresses and AS number from Mr Hoath to itself.

7 Mr Hoath started working for Spin and Com-Cen. He claims that Mr Bal agreed that the companies would meet the mobile phone bills of him, his wife and his mother-in-law. Messrs Bal, Stevens and Hoath started a new broadband internet business through a company called E-Talk.com.au Pty Ltd. Com-Cen was to provide funding for this business. Mr Bal and Mr Stevens were the directors of E-Talk.com.au. Mr Hoath was a minority shareholder.

8 After 6 months, relations between Mr Hoath and Mr Bal and Mr Stevens soured. E-Talk.com.au was not successful.

9 From the beginning of June 2001, there was a tussle between Mr Hoath on the one hand, and Com-Cen, Mr Bal and Mr Stevens on the other, about control of the domain name dragon.net.au. Mr Hoath had the name re-delegated to him by the responsible internet registrar, Connect Pty Ltd. Com-Cen had it registered back. Com-Cen asserted to Connect that Spin had purchased the right to use the domain name when it bought ITFirst’s customer base.

10 On 7 June 2001, Mr Bal and Mr Stevens incorporated a new company called E-Talk Communications Pty Ltd. Mr Hoath had no involvement with E-Talk Communications. Six weeks later, Messrs Bal and Stevens appointed an administrator to E-Talk.com.au. E-Talk Communications purchased E-Talk.com.au’s business from the administrator for $10,000.

11 In August 2001, the shareholdings of Com-Cen and Spin became approximately the same. This had substantially the same effect, from the point of view of a shareholder, as if the businesses of providing internet services to subscribers had been merged in a single company.

12 Mr Hoath obtained the “registry key” to have the IP range and AS number transferred back to himself. However, on 21 August 2001, Mr Stevens sent a facsimile to APNIC, which, as successor to AUNIC, controlled the registration of IP addresses and AS numbers. Mr Stevens said that Spin had purchased the IP range and AS number from ITFirst. At Spin’s request, APNIC re-delegated the IP range and AS number to Com-Cen.

13 By an agreement dated 1 April 2002, E-Talk Communications purchased 3,000 of Com-Cen’s customers. These customers generated revenue of $70,000 to $85,000 per month. E-Talk Communications paid a fraction of this value.

14 Mr Hoath and Mortgage commenced these proceedings on 11 April 2002, against Connect, Com-Cen, Spin, Mr Bal and Mr Stevens. E-Talk Communications was later joined as a defendant. The plaintiffs did not have legal representation, and their claims were pleaded diffusely. Mr Hoath and Mortgage seek to take back control of the name Dragon Net, the domain name dragon.net.au, the IP addresses, and the AS number. They claim damages for the defendants’ use of this property in conversion and passing off. They claim damages for breach of s 52 of the Trade Practices Act 1974 (Cth) for Spin’s and Com-Cen’s allegedly misleading Connect and APNIC as to their right to use the domain name, IP addresses and AS number. They also complain that Mortgage’s computer equipment was not returned, and claim damages in conversion and detinue. Mr Hoath claims unpaid salary, payment of phone bills and vehicle finance costs. He seeks an order that he be issued with 15% of the shares in Spin and Com-Cen.

15 On 31 October 2002, Mr Bal appointed an administrator to Com-Cen. On 6 December 2002, Com-Cen became subject to a deed of company arrangement.

16 On 28 April 2003, Mr Hoath and Mortgage lodged proofs of debt with the deed administrator of Com-Cen. Mr Hoath sought to prove for a debt of $6,417 for work done in April 2001, and $12,834 for payment of salary in lieu of notice. Mortgage sought to prove for damages of Com-Cen’s use of the domain name, IP Addresses and AS number, and the detention of its computer hardware. On 16 May 2003, the deed administrator rejected the proofs of debt.

17 Notwithstanding the lodgement of proofs of debt, on 26 May 2003 Austin J gave leave to the plaintiffs to proceed with these proceedings pursuant to s 444E(3)(c) of the Corporations Act 2001 (Cth).

18 Notwithstanding the grant of leave to proceed in these proceedings, the plaintiffs appealed from the deed administrator’s rejection of their proofs of debt. I infer that Mr Hoath wanted to obtain standing as a creditor to challenge the deed of company arrangement, and to compel the deed administrator to challenge the agreement dated 1 April 2002 between Com-Cen and E-Talk Communications.

19 On 5 August 2004, Nicholas J confirmed the decision of the deed administrator to reject the proofs of debt. In substance, his Honour found that Mr Hoath was not a creditor of Com-Cen for work done for it. Mr Hoath’s services were supplied by other companies he controlled. For the month of April 2001, for which he claimed unpaid “salary” from Com-Cen, another of his companies, Pacific Web Ltd, had invoiced E-Talk.com.au for his services.

20 His Honour found that Mortgage did not own the domain name dragon.net.au, nor the business name Dragon Net, nor the IP addresses, nor the AS number. These had been acquired by Mr Hoath as trustee for the Hoath Family Trust. Mortgage claimed to have bought this property in 1998 by an unsigned and undated agreement with a company called dragon.net.au Pty Ltd. This company, Mr Hoath said, had replaced him as trustee of the Hoath Family Trust and therefore succeeded to these assets, before transferring them to Mortgage. Nicholas J held that there was no evidence before him that the requirements for the appointment of a new trustee had been met. Accordingly, dragon.net.au Pty Ltd did not acquire title to the assets held by Mr Hoath for the Hoath Family Trust, and did not transfer title to those assets to Mortgage. (Mark Hoath & Anor v Comcen Pty Ltd & Ors [2004] NSWSC 682 at [26], [32], [37], [39]-[44]).

21 Nicholas J rejected Mortgage’s claim to be allowed to prove on the basis that it was entitled to damages in conversion or detinue for Com-Cen’s use and failure to return the computer equipment. His Honour held, at [57]-[59], that Mortgage had not proved that it was the owner of the computer equipment, or the terms of the bailment, or that Com-Cen used the computer hardware in such a way as to make it liable to Mortgage.

22 This brief outline does not deal with all relevant facts. It should suffice to explain the issues which arise in the case. Those issues are as follows.

The Issues

23 First, whether Mortgage or Mr Hoath is entitled to damages or an account of profits for the use by Com-Cen, Spin or E-Talk Communications of the domain name dragon.net.au and the business name Dragon Net, after Mr Hoath’s consent to their use of those names expired or was withdrawn, and an injunction against the continued use of those names. In relation to this, the following questions arise, amongst others:

(a) whether Spin and/or Com-Cen acquired the right to use the names under the agreement of 7 September 2000 with ITFirst or from discussions with Mr Hoath when that agreement was negotiated;

(b) whether Mr Hoath or Mortgage have a cause of action against Com-Cen, Spin or E-Talk Communications in passing off in relation to their use of the names;

(c) which of Mr Hoath or Mortgage is entitled to sue, given that it is not now in issue that Mortgage did not purchase the right to use those names from dragon.net.au Pty Ltd; and

24 Secondly, whether Mortgage or Mr Hoath is entitled to damages under s 82 of the Trade Practices Act, or to orders under s 87 of that Act, on the basis that the defendants, in trade or commerce, engaged in conduct that was misleading or deceptive, or liable to mislead or deceive, by representing to Connect and APNIC that they had acquired the domain name, IP range and AS number from ITFirst.

25 Thirdly, whether Mr Hoath or Mortgage is entitled to require the defendants to do what is necessary to transfer the business name, the domain name, the IP addresses and AS number, back to Mr Hoath, and an injunction to restrain their continued use.

26 Fourthly, whether any of the defendants are liable in the torts of conversion or detinue for their use of the domain names, the IP addresses and the AS number.

27 Fifthly, whether Mortgage is entitled to damages for the tort of conversion or detinue in relation to the defendants’ use of, or failure to return, computer equipment. In relation to this issue, the following questions arise:

(a) whether it matters that Mortgage has not adduced proof of purchase of the equipment;

(b) whether the defendants dealt with the goods in a way which evinced an intention to deprive Mortgage of its immediate right to possession of them, or impair that right;

(c) when the cause of action arises;

(d) which defendant or defendants committed the tort; and

res judicata

28 Sixthly, whether Mr Hoath is entitled to claim salary, and damages in lieu of notice, from Com-Cen or Spin.

29 Seventhly, whether Mr Hoath is entitled to claim a debt or damages against any defendant for any amount to reimburse him for motor vehicle financing costs, or mobile phone expenses.

30 Eighthly, what is the effect of the deed of company arrangement on the claims against Com-Cen?

31 Ninthly, whether Mr Hoath is entitled to be issued shares in Spin and Com-Cen, or is entitled to damages from Mr Bal, Mr Stevens, Com-Cen or Spin, for breach of the alleged agreement that the businesses of Com-Cen, Spin and “Dragon”, would be merged and Mr Hoath would be issued shares in the company which owned the merged business. In relation to this issue, two questions arise:

(a) whether an agreement was concluded, and if so, what were its terms; and

32 Tenthly, whether Mr Hoath or Mortgage is entitled to exemplary or aggravated damages against any defendant.

33 No relief was claimed against the first defendant, Connect. At relevant times, it was responsible for the registration and maintenance of domain names containing the ".net.au" suffix. It took no part in the hearing.

34 The proceedings raise difficult questions. Their resolution is more difficult because the plaintiffs were not legally represented, their evidence was not led with the clarity which would otherwise have been expected, and, understandably, Mr Hoath’s submissions did not grapple with all of the issues. Nor did the defendants’ submissions do so.

1. Passing Off

1.1 The Domain Name and Business Name

35 The business name Dragon Net was registered by Mr Hoath in NSW on or prior to 16 July 1997. The same business name was registered in Victoria by Mr Hoath from 2 September 1997 to 9 September 1998, and by Mortgage from 9 September 1998 to 2 September 2000. Prior to September 2000, Mortgage had established a business with a substantial reputation under the name Dragon Net. From 1998, Mortgage carried on its business as an internet service provider under the name Dragon Net. It did so until 7 September 2000. It operated a dial-up internet network and also onsold access to its network to other companies associated with Mr Hoath. On 11 May 1998, Mortgage became registered in NSW as the owner of the business name “Virtual Internet Service Providers of Australia”. Mortgage advertised the services of Dragon Net as an internet service provider in the 1999 Sydney Yellow Pages. Its advertisement provided Dragon Net’s website address of

36 In the 2000 Sydney Yellow Pages, Mortgage again advertised under the name Dragon Net. It advertised a range of internet services. It also ran specific advertising campaigns in Newcastle and Brisbane. It spent in excess of $2,600 in 2000 in advertising the name Dragon Net in Newcastle newspapers, and in excess of $700 on advertising in Brisbane. Its advertisements directed potential subscribers to a telephone number 1300 300 324. There were many calls made to that telephone number. In the month from 13 September to 12 October 2000, Mortgage incurred charges of $1,033.45 in respect of calls made to that number.

37 In the May 1999 edition of a magazine called Internet.au, Dragon Net was compared with 31 other internet service providers and was ranked equal seventh. Mr Hoath said, without contradiction or objection, that this was Australia’s top-selling internet magazine.

38 Mortgage also maintained a website under the name Dragon Net. I accept that as at September 2000 it had obtained a substantial reputation as an internet service provider under that name.

39 The brand Dragon Net had also been advertised prior to 1998. Mr Hoath, as trustee of the Hoath Family Trust, spent $3,587 in promoting that name in 1995. In 1996, he spent $10,917 in promoting the name in Sydney and Melbourne.

40 There is no dispute that after September 2000, Com-Cen and Spin have used the name Dragon Net in connection with their own businesses. In September 2000, Mr Hoath provided passwords to the service and network routers, to assist in the migration of subscribers from ITFirst to Spin. In September 2000, he agreed to Dragon Net’s website being configured so that visitors to the website were automatically directed to the Com-Cen website. This was done so that any customers looking to reconfigure their internet connection could get new dial-up numbers and configuration details. A message on the Dragon Net website stated “Com-Cen Internet Providers are now providing access to Dragon Net’s customers”.

41 On 26 September 2000, employees of Com-Cen modified the internet registry for the domain name dragon.net.au and removed Mr Hoath as the administrative and technical contact for that domain name. Mr Hoath says that although he did not object to Com-Cen using the domain name to assist in the migration of customers to Com-Cen, he did not agree to the modification of the details on the internet registry. I accept his evidence in this respect.

1.2 Names not Purchased from ITFirst or Mr Hoath

42 Spin claimed that it acquired the right to use the name Dragon Net and the domain name dragon.net.au pursuant to its agreement of 7 September 2000 with ITFirst. That agreement was made between ITFirst as vendor and Spin as purchaser. Relevantly, it provided:

The vendor wishes to sell or assign and purchaser purchase or have assigned all of the intellectual property and hardware of the vendor that the vendor is entitled to sell for $30,000.

Hardware is defined as 4 x PAPL Modems, 1 x Cisco 2514 located at Melbourne.

Intellectual Property is defined as:

1. the vendors [sic] customer base for all areas in Australia except for Sydney.
2. Connect.com.au Pty Ltd ISP+ service.
3. The following Telstra Services:
251453 - DDS
168977200 - PAPL
0488980800 – Newcastle (ONRAMP 30’s)
7263409500 – Gosford (ONRAMP 30’s)

The Purchaser acknowledges that the vendor has made no representations as to the ownership or existence of any of the Hardware or Intellectual Property.”

43 The agreement was signed by Mr Bal on behalf of Spin and by Mr Sutherland as administrator of ITFirst. Although Mr Bal was not a director of Spin, there is no issue about his ability to make the agreement on behalf of Spin.

44 ITFirst did not transfer any rights to the domain name dragon.net.au to Spin. ITFirst had no right to effect any such transfer. Mr Hoath and Mortgage had allowed it to use the name Dragon Net in connection with its business, but it had no right to authorise anybody else to use the name. Nor did it purport to do so. The “intellectual property” sold was defined in the agreement. It did not include the domain name, or the business name Dragon Net. Nor did it include the right to use the IP addresses or the AS number which are the subject of these proceedings.

45 The defendants contended that Spin acquired the domain name dragon.net.au either because it acquired ITFirst’s customer base, which included the domain name, or because the agreement was subject to an implied term that the domain name would be included. This implication was said to arise in order to give business efficacy to the agreement as it would not be possible to acquire the customer base without the domain name. Alternatively, it was said that Mr Hoath had orally agreed with Mr Bal to include the transfer of the domain name and that he and Mortgage are estopped from contending that the domain name was not transferred pursuant to the purchase by Spin of the subscribers to ITFirst.

46 I disagree with these contentions. The customer base did not include the domain name. No doubt it included a customer list together with so much information as was necessary to contact the customers and assist them to transfer their business to Spin. The transfer of the customer base might also include details of the customer’s credit card and other billing details. Such a purchase would authorise Spin to contact the customers and represent that they were authorised by the current provider to offer internet services to the customers. I accept that it would be desirable for a purchaser to acquire the domain name and that the subscriber base would be more valuable if the domain name were acquired in conjunction with it. For the customers to be able to retain their current email addresses would also weigh in favour of a decision by them to switch to Spin rather than to find a new internet service provider. However, it does not follow that because the transfer of the customer base would be more valuable if the domain name were included in the sale, that it was included. The absence of the domain name was reflected in the price paid.

47 For the same reasons, even if ITFirst were able to give Spin a licence to use the domain name, no term would be implied into the agreement that the purchaser was entitled to use the domain name except to the extent necessary to transfer willing subscribers to the purchaser. The implied term alleged is not necessary to give business efficacy to the contract. Nor is it so obvious that it goes without saying.

48 The question then is whether Mr Hoath for his own part, or on behalf of Mortgage, agreed with Mr Bal that the domain name would be transferred to Spin or Com-Cen, or that they would have a perpetual licence to use it if Spin purchased the subscribers of ITFirst. Mr Bal deposed that in negotiations with Mr Hoath, Mr Hoath told him:

The customer base is available for purchase for $50,000. I also own various infrastructure which I can lend to you to allow the migration of the current subscribers of my company on to your system.

In order for this to work, we will need to have Dragon’s domain name.

That’s OK, you can have it as part of the deal.

49 Mr Hoath denied this evidence. He said that in the discussions with Mr Bal, after discussing the making available of DNS, WWW and mail servers to allow the migration of customers, Mr Bal said:

OK to be on the safe side you can get back all the hardware within 6 months. We’ll let you know when it can be collected.

What about the domain name, will six months be long enough for that?

Yes, once the mail is moved to our servers we will let the customers know they can get the mail with their Com-Cen domain, after six months you can have it back.

50 Although I have reservations about the reliability of parts of Mr Hoath’s evidence, he was a more satisfactory witness than Mr Bal. I am not satisfied that a particular time frame was placed upon the period for which the domain name would be made available to the defendants to assist in the migration of customers to Spin. Nonetheless, I do not accept Mr Bal’s evidence that Mr Hoath said that Spin or Com-Cen could have the dragon.net.au domain name “as part of the deal”. I find that Mr Hoath agreed to Com-Cen and Spin using the dragon.net.au domain name whilst customers were transferred to Spin. He also had no objection to the defendants using the domain name whilst arrangements were negotiated for the merger of the parties’ businesses and the acquisition by Mr Hoath of “equity” in the company having the merged businesses. So much appears from an email sent by Mr Hoath to Mr Bal and Mr Stevens on 30 November 2000. He wrote:

Dear Liam and Peter,

I am just looking to clarify the shareholding situation for the Comcen Merger and e-Talk.

Spin paid $30K and my other companies provided the Hardware and Intellectual Property to allow for the merger of Dragon and Spin on the basis that I would get 15% of the Spin, Comcen, Dragon combined entity.

After discussing the Telco options it was decided that e-Talk would be formed as a separate company that would be 20% owned by me and 80% owned by the Comcen Merger. In consideration of the 80% of Comcen they would provide the funding required.

Subsequently as it is hard to value the 80% e-talk shareholding this was subsequently divided amongst the three partners along the lines of the Comcen splits making something like

Mark 32%, Liam 51% and Peter 17%.

So I have the following questions.

Are the above percentages correct?

Is Peters [sic] other silent partner a shareholder in e-talk?

Is it still agreed that I am getting 15% of the merged Com-Cen?’

Hi Mark

The only share holders in E-Talk is Peter me and you.

The percent? I’ll need to check with the account.

The 15% is still on but still needs reviewing once all the Dragon users are finished.

51 Mr Bal did not take issue with Mr Hoath’s statement that Mr Hoath’s other companies provided the hardware and intellectual property to allow for the merger of Dragon and Spin on the basis that he would get 15% of the Spin, Com-Cen, Dragon combined entity. In my view, Mr Hoath gave the defendants a licence to use the domain name whilst arrangements were put in place for the proposed venture. However, that venture did not proceed.

52 It follows that although I consider Mr Hoath gave the defendants a wider licence to use the domain name than he contended he gave, I do not accept that the defendants acquired the right to use the domain name perpetually when Spin entered into the sale agreement with ITFirst. By June 2001, relations between Mr Bal and Mr Stevens on the one hand and Mr Hoath on the other hand, for the merger of the businesses had broken down.

Com-Cen Retains Control of Domain Name, IP Range and AS number

53 The question of the control of the domain name arose at about the beginning of June 2001. On 1 June 2001, Com-Cen wrote to a Mr Luke Key at Connect and sent to him a copy of an invoice from Mr Sutherland, the administrator of ITFirst, and the copy of the sale agreement of 7 September 2000 between Spin and ITFirst. Com-Cen sent these documents to Connect as “proof of purchase of assets and technology of dragon.net.au”.

54 On or about 7 June 2001, Mr Hoath located a previously stored copy of the registry key and re-delegated the domain name away from Com-Cen and changed the registry key.

55 On 8 June 2001, Connect wrote to Com-Cen and advised that the dragon.net.au domain name had been delegated to Mr Hoath, that the delegation application had been submitted remotely using the appropriate registry key, that the key had not been provided to Mr Hoath by Connect, and that Connect had acted in accordance with its .net.au domain names policy in delegating the domain name to Mr Hoath.

56 On 8 June 2001, Mr Stevens, writing under the letterhead of Spin, wrote to the office of the administrator of ITFirst, Mr Sutherland. He said:

As discussed we thought we had bought the domain name ‘dragon.net.au’ from yourselves last September when we bought the customers as is usual practice. At the time, Hoath helped delegate the domain name to us. Today he has managed to get it delegated away from us which will harm us financially when customers cancel their accounts being unable to use email. As you can see the Name Status Report says that the domain is named by ACN 082-644 773, which is ItFirst.com.au p/l.

FYI in case Connect.Com.au (Registrar) contact you.

57 Mr Stevens wrote to the office of Mr Sutherland because he had been told by an employee of Com-Cen that the internet registrar required evidence that Spin or Com-Cen were entitled to the domain name. He obtained the Name Status Report referred to in his facsimile from the website of the internet registrar. That report contained the following information:

Domain: dragon.net.au

Descr:

Dragon Net (ACN: 082 644 773)

1/21 Chester Street

Camperdown NSW 2050

58 The ACN 082 644 773 is the Australian Company Number of ItFirst. It remains unclear how that ACN came to be communicated to the internet registrar in reference to the name dragon.net.au. Mr Hoath did not provide it. Other details on the same report were changed by officers of Spin or Com-Cen. This included the address 1/21 Chester Street, Camperdown, the names of contact persons, phone numbers and server details. Mr Stevens gave evidence that he did not believe that officers of Spin or Com-Cen could change, or had changed, the reference to the owner of the domain name. However, I think it likely that employees of Com-Cen, at Spin’s request, did do so. The name was changed to include a reference to ITFirst’s Australian Company Number to support Com-Cen’s and Spin’s claim, advanced at that time through Mr Stevens, that Spin had acquired the right to use the domain name under its agreement with the administrator of ITFirst.

59 On or about 8 June 2001, a manager of Connect re-delegated the dragon.net.au domain name back to Com-Cen. I infer that Connect accepted Mr Stevens’ and Com-Cen’s assertion that Com-Cen or Spin had acquired the domain name pursuant to the agreement with ITFirst.

60 However, Mr Bal was well aware that Spin did not acquire the domain name from ITFirst. He gave oral evidence that: “I knew that I was acquiring it from Mark Hoath personally”. Notwithstanding this knowledge, he instructed Com-Cen’s employees to send a copy of the sale agreement with the administrator of ITFirst to Connect. He deposed that his purpose in doing so was to demonstrate that “we” (meaning Com-Cen and Spin) were servicing Dragon customers. However, the facsimile of 1 June 2001 and Mr Stevens’ dealings with the administrator’s office and Connect, show that his purpose was to convince Connect that it had acquired the domain name from ITFirst. It had not. Mr Bal did not believe that it had.

61 By the beginning of June 2001, Mr Hoath had revoked his consent to the defendants using the domain name.

62 Com-Cen had also gained control of the IP addresses in the range 203.56.188.0–203.56.191-22 and the AS number 7592. To do this, it was necessary to obtain the password or “registry keys”. The registry keys were only available through Mr Hoath’s email account. I infer that Com-Cen obtained access to the registry keys to change the control of the IP addresses and AS number using Mr Hoath’s email account. In August, 2001, Mr Hoath managed to procure APNIC to transfer the control of the IP range and AS number to himself.

63 By facsimile transmission dated 21 August 2001, written on the letterhead of Spin to APNIC, then the network administrator responsible for IP addresses and AS numbers, Mr Stevens stated that “it was our understanding that we purchased all assets (including IPs and AS) that were needed to service the former Dragon Net customers”.

64 The agreement between ITFirst and Spin did not provide for the transfer of those IP addresses or the AS number, although it did provide for the transfer of other IP addresses. Mr Stevens’ assertion to APNIC was without foundation. He knew that Spin had not purchased the IP addresses or the AS number. APNIC returned these numbers to the control of Com-Cen.

65 Mr Hoath did not consent to Com-Cen or Spin transferring the registration of the IP addresses and AS number to Com-Cen. By at least the beginning of June 2001 he had expressed his opposition to Com-Cen and Spin continuing to use those numbers.

1.3 Passing Off: The Use of the Name Dragon Net and the Domain Name dragon.net.au

66 Mr Hoath, in his capacity as trustee of the Hoath Family Trust, registered the business name Dragon Net. As noted in paragraph [20] above, Mr Hoath and Mortgage maintained that a new trustee of that trust, dragon.net.au Pty Limited, sold the business name Dragon Net and the domain name dragon.net.au to Mortgage. Nicholas J held that as dragon.net.au Pty Ltd was not validly appointed as trustee, it had no authority to sell the domain name, which was the property of the trust, and Mortgage acquired no ownership or interest in it under the alleged sale agreement. Mr Hoath and Mortgage did not argue the contrary before me.

67 Before me, they contended that the right to sue for passing off depended not on who had “title” to a name, but on whether either Mortgage or Mr Hoath had developed a goodwill or reputation such that the defendants’ use of the name, if done without the plaintiffs’ licence, misrepresented to that section of the public with whom the defendants dealt, that their business was the plaintiffs’ business, or that there was a trade connection between them. (Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196 at 204; Nicholas v Borg (1986) 7 IPR 1). I agree with that submission.

68 As at September 2000, Mortgage held goodwill and had acquired a reputation in the business of providing internet services under the name Dragon Net. I do not think that by that time Mr Hoath personally had such a reputation or goodwill. Since 1998, the business had been carried on by Mortgage. From September 2000, Com-Cen and Spin represented that a connection existed between their services or business and the business carried on under the name Dragon Net. From the beginning of June 2001, there was no such connection. From that point, the continued use by Spin and Com-Cen of the name Dragon Net and the domain name dragon.net.au was likely to deceive persons within the market for internet services. As Isaacs J said in Orange Crush (Australia) Ltd v Gartrell (1928) 41 CLR 282 (at 292):

“the right protected by the tort of passing off is not a property in the mark, name or get-up, but in the business or goodwill likely to be injured by the misrepresentation conveyed by the defendant’s use of the mark, name or get-up with which goods or services of another are associated in the minds of a particular class of the public. The plaintiff’s property in the goodwill is in its nature transitory and exists only so long as the name is distinctive of the plaintiff’s services in the eyes of the class of the public.”

69 It appears from Mr Hoath’s affidavit that Mortgage, as well as ITFirst, had subscribers. He deposed that Mortgage operated as an internet provider from May 1998 and operated a dial-up internet network that progressively grew in size over the next two years to cover twenty-two points of presence around Australia. He deposed that all of Mortgage’s customers had email addresses of the form [email protected] and were billed with the name “Virtual Internet” on the credit card statements and invoices. ITFirst was licensed to use the dragon.net.au domain name and had its own subscribers. This evidence was not challenged and I accept it. However, it also appears from his affidavit that Mortgage ceased to operate as an internet provider on the appointment of a voluntary administrator to ITFirst on 5 September 2000. The agreement between Spin and ITFirst did not include ITFirst’s subscribers in Sydney. Although the evidence is not very clear, it appears that Spin not only acquired the subscribers of ITFirst outside Sydney. Spin also acquired other subscribers, including 354 subscribers in Sydney. I infer it acquired the subscribers of Mortgage who were billed with the name “Virtual Internet”.

70 This is consistent with Mr Hoath’s commencing work for Com-Cen and Spin in September 2000, with the Dragon Net website being changed to automatically direct all customers to Com-Cen. It also follows from the fact that Mortgage used the IP addresses in the range 203.56.188/22 and the AS Number 7592 for its customers, as well as those of ITFirst. Those IP addresses and AS number were redirected to Com-Cen in October 2000. It is admitted on the pleadings that control of the domain name confers the right to determine which services are available to the domain name and to direct customers of the domain name to the internet server that runs the service through a direct mapping of the service to the IP address. No specific complaint was made by the plaintiff that Spin or Com-Cen acquired Mortgage’s customers as well as those of ITFirst. Be that as it may, it appears that Mortgage ceased to carry on business as an internet service provider in September 2000. The explanation for this appears to be Mr Hoath’s expectation, arising from his conversations with Mr Bal, that he would receive 15% equity in the combined Com-Cen, Spin and “Dragon” business.

71 The question then is whether, eight months after it stopped carrying on business as an internet service provider, Mortgage still had any goodwill to be protected. The defendants did not make any submissions about this. Such goodwill is incapable of subsisting independently of the business to which it is attached. However, it is a question of fact and degree at what point of time a person who ceases to carry on a business should be treated as no longer having the benefit of the goodwill which accrued from it. (Star Industrial Co Ltd v Yap Kwee Kor t/as Newstar Industrial Co [1976] 2 FSR 256 at 269; Pink v JA Sharwood & Co (1913) 30 RPC 725 at 739-740; Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302; Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 at 613-615). Having regard to its advertising from 1998, the level of telephone enquiries, and its favourable publicity in the Internet.au magazine’s annual performance comparison in May 1999, I think it likely that Mortgage would have had residual goodwill in the name Dragon Net as at June 2001. I am fortified in that view by the fact that the defendants did not submit to the contrary.

72 Spin and Com-Cen have used the name Dragon Net and the domain name dragon.net.au in their businesses. They have modified the Dragon Net website to direct customers to that website to Com-Cen. Although Mr Hoath consented to that course in September 2000, his consent did not give the defendants a perpetual licence to deal with the website in that way. Spin and Com-Cen have used the domain name dragon.net.au in their business, by supplying to customers the service of transmission of emails using that name.

73 Mortgage did not resume its business as an internet service provider. It was not in a position to do so under its name Dragon Net, because the defendants had taken control of that name.

74 On 8 June 2001, Com-Cen advised its “ex-Dragon customers” by email that the domain name dragon.net.au had been delegated away from its servers by the former owner of Dragon Net without its knowledge or permission. They were informed that they could use the email address [email protected]. The defendants did not suggest that this email meant that there was no misrepresentation of a continuing connection with the former dragon net ISP business. In any event, the continued use by Com-Cen and Spin of the dragon.net.au domain name would suggest that they did have the former owner’s permission to use it. The domain was kept available to customers. As at 22 May 2002, over 6,000 emails were sent or received with an email address in the form of [email protected].

75 Nicholas J rejected Mortgage’s claim for passing off on the ground that it had failed to prove that at the relevant time it was the “owner” of the domain name. (At [39], [42], [43], [44], [46], [53], [54]). I prefer the view that the question is not whether Mortgage was the owner of the domain name, but whether Com-Cen’s and Spin’s use of the domain name without the licence of the true owner, whether it be Mortgage or Mr Hoath, was misleading conduct which injured the goodwill and reputation which Mortgage had obtained from its use of the name. (Orange Crush (Australia) Ltd v Gartrell (1928) 41 CLR 282 at 292).

76 The defendants submitted that the plaintiffs’ claim in passing off depended on the plaintiffs’ showing that the defendants represented their business to be that of Mortgage: that is, that the public associated the name Dragon Net with Mortgage, and would therefore assume a continuing connection between Com-Cen, or Spin, and Mortgage.

77 However, in order to sue in passing off, it is not necessary that the public associate the business being passed off with a known individual. It does not matter that members of the public would not have associated the provider of Dragon Net internet services with Mortgage (Powell v Birmingham Vinegar Brewery Co. Ltd (1897) 14 RPC 720 at 729). It is sufficient that customers or potential customers were misled into believing that the internet services offered by Com-Cen, Spin or E-Talk Communications were from the same source as, or were connected with, the internet services which Mortgage had offered. In Powell v Birmingham Vinegar Brewing Co. Ltd [1897], Lord Halsbury LC said (at 713-714):

I am satisfied that a person who puts forward this ‘Yorkshire Relish,’ made as it is by the present defendants, is representing it as being a particular manufacture. It may be true that the customer does not know or care who the manufacturer is, but it is a particular manufacture that he desires. He wants Yorkshire Relish to which he has been accustomed, and which it is not denied has been made exclusively by the plaintiff for a great number of years. This thing which is put into the hands of the intended customer is not Yorkshire Relish in that sense. It is not the original manufacture. It is not made by the person who invented it. Under these circumstances it is a fraud upon the person who purchases to give him the one thing in place of the other.

I think that the fallacy of the appellants’ argument rests on this: that it is assumed that one trader cannot be passing off his goods as the manufacture of another unless it be shewn that the persons purchasing the goods know of the manufacturer by name, and have in their mind when they purchase the goods that they are made by a particular individual. It seems to me that one man may quite well pass off his goods as the goods of another if he passes them off to people who will accept them as the manufacture of another, though they do not know that other by name at all.

78 Spin and Com-Cen had a licence to use the name Dragon Net for a period, but Mortgage retained a residual reputation in, and goodwill associated with, the name. The applicable principle is that described by Lord Wright delivering the advice of the Privy Council in J H Coles Pty Ltd v Need (1933) 49 CLR 499 at 503:

It may be noted that both the Chief Justice and the Full Court of Victoria proceeded on the basis that the appellant’s trade names had not lost their distinctive character and this also was the conclusion of the dissentient Judges of the High Court. Their Lordships, after considering the evidence, agree with that opinion, and also with the further opinion of all these Judges that all the right that the respondent ever had in regard to the user of the appellant’s trade names was a revocable licence to use these names so long as the business arrangement continued between the appellant and respondent. From these conclusions it follows that prima facie the appellant is entitled on well-recognized principles to an order restraining the respondent from the unauthorized use of the appellant’s trade names after the licence was revoked, since the continuance thereafter of such user necessarily involves a passing off by the respondent of his business as being a business for the sale of the appellant’s goods and as being a business in which the appellant has at least an interest, and in this way there would be practised a deception of the public to the prejudice of the appellant’s business reputation and goodwill.

Premetis v 260 Oxford Street Pty Ltd

79 In summary, I conclude that neither Spin nor Com-Cen had the right to use the name Dragon Net or the domain name dragon.net.au after June 2001. They both committed the tort of passing off by carrying on business using that name after their licence to do so was withdrawn. Mortgage, which possessed the goodwill of the business using that name, is entitled to sue for passing off. It is entitled to an inquiry as to damages or an account of profits.

80 No separate claim was made for breach of s 52 of the Trade Practices Act in relation to the defendants’ trading under the name Dragon Net. Com-Cen did not plead a defence of res judicata to the passing off claim.

1.4 E-Talk Communications

81 The position of E-Talk Communications is more difficult. E-Talk Communications purchased 3,000 of Com-Cen’s subscribers on 1 April 2002. Mr Stevens gave evidence that, after the sale, Com-Cen provided sales, support and account services, to E-Talk Communications, plus the data to service the customers acquired by E-Talk Communications. As I understood Mr Stevens’ evidence, Com-Cen retained customers that paid by invoice rather than by credit card, and by inference, E-Talk Communications took those customers who paid by credit card. This would probably have included customers who were still using the email address of [email protected].

82 Mr Bal gave evidence that all of the subscribers transferred to E-Talk Communications used the domain comcen.com.au. However, this evidence was not corroborated, even by Mr Stevens. Earlier, in his evidence, Mr Bal said that he could not say whether E-Talk Communications customers used an email address with “dragon net” in the name. As Com-Cen took the position that the domain name passed with the transfer of subscribers, and as there is nothing in the agreement between E-Talk Communications and Com-Cen which confines the subscribers transferred to E-Talk Communications to those using the Com-Cen domain name, I think it likely that E-Talk Communications may also have used the domain name dragon.net.au in connection with its business. There are features of that agreement which create a suspicion that its purpose was to transfer the substantial part of Com-Cen’s business to E-Talk Communications free of any claims that might be made against Com-Cen, including claims by the plaintiffs.

83 The features of the agreement between E-Talk Communications and Com-Cen which ground that suspicion are the price paid, the fact that E-Talk Communications undertook to provide services to Com-Cen but had no staff or facilities to do so, and hence paid Com-Cen for the provision of services purportedly provided by Com-Cen to itself, and wide-ranging exclusions of any liability of E-Talk Communications to Com-Cen in respect of the services provided, or any failure to provide such services. E-Talk Communications acquired 3,000 customers from Com-Cen. They generated revenue in the order of $70,000 to $85,000 per month. E-Talk Communications agreed to pay Com-Cen $20,000 per month. This was reduced by $8,250 per month for the use by E-Talk Communications of Com-Cen’s staff to provide services to Com-Cen that E-Talk Communications had agreed to provide but could not provide. When cross-examined about this agreement, Mr Bal asserted that the document produced was not a complete copy of the agreement. However, the document produced was one which he annexed to his affidavit and which he deposed was a copy of the agreement. When a call was made on the defendants for the full agreement which Mr Bal contended existed, no document was produced. Both E-Talk Communications and Com-Cen were defendants, and therefore would have had a copy of the “full agreement” if such an agreement existed. E-Talk Communications traded as Com-Cen Internet Services. I infer that it carried on business in the same way as Com-Cen did.

84 There was no direct evidence that E-Talk Communications has used the name Dragon Net or the domain name dragon.net.au in its business, except Mr Stevens’ evidence that E-Talk Communications acquired customers who paid by credit card. This was a matter lying wholly within the knowledge of the defendants. I find on the balance of probabilities that E-Talk Communications did so. In these circumstances, the inquiry as to damages or an account of profits against Com-Cen and Spin should be extended to an inquiry as to the extent to which E-Talk Communications has used the name Dragon Net or the domain name dragon.net.au in connection with its business, and the damages payable by it or the amount for which it should account for profits derived by it from the use of the names.

1.5 Liability of Messrs Bal and Stevens as Joint Tortfeasors or Accessaries for Passing Off

85 The plaintiffs allege that Messrs Bal and Stevens are personally liable for any amounts which Com-Cen, Spin or E-Talk Communications are liable to pay either as damages or an account of profits. Messrs Bal and Stevens controlled the corporate entities. I will consider first whether Messrs Bal and Stevens are personally liable as joint tortfeasors for the tort of passing off, and then whether are liable as accessaries of the companies in the companies’ commission of that tort. This was not a matter on which I was favoured with submissions from the defendants.

86 Although it is hard to follow the plaintiffs’ statement of claim, I do not think that they pleaded a claim against Messrs Bal and Stevens that they were joint or primary tortfeasors with Com-Cen or Spin or E-Talk Communications. Nor did the evidence focus on the extent to which Messrs Bal and Stevens personally performed the acts which constituted the tort of passing off. If a company commits a tort through the acts of its director, the director will be personally liable, as well as the company, for his acts. (C Evans & Sons Ltd v Sprite Brand Ltd [1985] 1 WLR 317 at 323; Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd (2003) 9 VR 171 at 196-197, [85]-[90]). However, Messrs Bal and Stevens were not sought to be made liable as primary tortfeasors.

87 Instead, the plaintiffs pleaded that Messrs Bal and Stevens procured the actions of Spin, Com-Cen and E-Talk Communications, and were directly or indirectly knowingly concerned in those companies’ contraventions of the plaintiffs’ rights, and were personally liable as accessaries. The principles upon which directors are liable as accessaries for torts committed by their companies were exhaustively considered by Redlich J in Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd at 201-227. His Honour concluded (at 227):

“ [198] Both in Australia and in England a director is in no different position to an agent who, whilst binding their principal may also be liable for their tortious acts. The defendants’ submission that [the directors] Mr and Mrs Secchi cannot be held liable for their conduct as directors because their acts are those of the corporation, expressed in such absolute terms, must be rejected. This does not mean that directors become personally liable merely because they are directors. Unless they procure or direct the tortious conduct the law does not impose upon them liability for the acts of other agents or employees, whether they are directors of large corporations or what is described as ‘one man’ companies.

[199] There is an obvious jurisprudential distinction to be drawn between those who by choice enter into contractual arrangements with a corporate entity and should thus be taken to have accepted limited liability and those who have had no dealings with a company and whose only interest is not to be harmed by the conduct of anyone. The utilisation of limited liability as a shield against those who choose to deal with a company can be more readily accepted than in the case of strangers who are harmed by corporate activity and who naturally turn for liability to those who caused the harm. Those who are victims of a tortious act such as trespass, conversion or negligence will probably have played no role in the selection of the tortfeasor who inflicts the harm. (Citations omitted).

[200] I am not persuaded that there is any soundly-principled basis for the imposition of a requirement that a director who, by virtue of their level of involvement and control is found to have procured or directed the commission of the acts should not be liable unless the director knew or was indifferent as to whether the acts were unlawful or likely to cause loss or damage to the true owner of the goods. Despite the absence of direct binding authority, and the differing views expressed in various Federal Court decisions, the preponderance of authority provides no support for a principle which would so limit a director’s liability at the expense of a victim who may not have chosen to deal with the corporation tortfeasor.

[201]

Notwithstanding those recent decisions which invite a different conclusion the ‘direct and procure’ test has not been shown to be unsound and it remains the standard for determination of a director’s liability. For a tort such as conversion that does not require a particular intention, a director is liable for the tortious acts of the corporation which he or she directed or procured regardless of the director’s state of mind. The level of involvement and the degree of control which a director exercises will determine whether it can be said that the acts have been directed or procured by the director.”

88 The more stringent approach to which his Honour referred was adopted by Beazley J (as her Honour then was) in King v Milpurrurru (1996) 66 FCR 474 at 494-501 and by Finkelstein J in Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 at 258-268. (See M. Pearce SC, ‘Accessorial Liability for Misleading or Deceptive Conduct’ (2006) 80 ALJ 104 at 105). The stricter approach requires for a director to be liable as an accessary that he or she not only procure the commission of the tort, but act deliberately, knowing that the conduct infringed the plaintiff’s rights, or with reckless indifference as to whether it did. On this view, the question is whether the director was so personally involved in the commission of the tort that it is just to render him or her liable. (Root Quality Pty Ltd v Root Control Technologies Pty Ltd at [146]; Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 65 IPR 289 at [434]). However, as the Full Court of the Federal Court observed in Allen Manufacturing Co. Pty Ltd v McCallum Pty Ltd (2001) 53 IPR 400 at [43]:

“The difference between the two tests may be more apparent than real. We are not aware of any case in which it has been held that a director or officer of a company directed or procured the company’s infringing act, yet that person escaped liability because he or she did not deliberately, wilfully or knowingly pursue a course of conduct that was likely to constitute infringement or that reflected indifference to the risk of infringement.”

89 In the present case, whichever approach is taken, Messrs Bal and Stevens are liable as accessaries. Both Messrs Bal and Stevens were intimately involved in the decisions as to how the domain name and the business name Dragon Net and the subscribers acquired from ITFirst should be dealt with. They both knew that Spin had not acquired the domain name, the IP addresses or the AS number from ITFirst or Mr Hoath. They both deliberately procured Spin and Com-Cen to continue to use the name Dragon Net in their businesses. To the extent E-Talk Communications also used the name in its business, it did so through their direction. They both knew that continuing to use the domain name after the licence to do so was withdrawn in June 2001 was likely to injure Mortgage. Whichever test is applied, both Messrs Bal and Stevens are liable as accessaries with Spin, Com-Cen, and E-Talk Communications, in their passing off of the name Dragon Net.

1.6 Election Between an Account of Profits and Damages: Orders to be Made

90 Mortgage cannot have both damages for what it has lost by the defendants’ use of the name Dragon Net and an account of the profits which the defendants have made. The defendants did not submit that if the plaintiffs established that they had committed the tort of passing off, no account of profits should be ordered. It is necessary for a plaintiff seeking an account of profits to establish that profits were made by the defendant knowing that he was transgressing the plaintiffs’ rights. (Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 34-35). This requirement is amply satisfied.

91 Nor were submissions made as to the basis upon which an account of profits should be taken. (See generally Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25). That is a matter upon which the parties can make submissions when orders are made for the conduct of the inquiry, or to an Associate Judge to whom the inquiry as to damages or an account of profits will be referred.

92 Mortgage cannot be required to make its election between an inquiry as to damages and an account of profits when it is ignorant of what sales have been made by the defendants through the use of the Dragon Net name. (Island Records v Tring International plc [1995] 3 All ER 444; Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002) 10 BPR 19,565). I do not know whether Mortgage will require information in order to make its choice. In Island Records v Tring International plc, Lightman J ordered discovery of an audited schedule to contain details regarding the sales of infringing copies, including their cost of manufacture and distribution, with a view to furnishing the plaintiff with sufficient information to enable it to calculate roughly what the profit from the illegal scheme had been. Whilst the defendant should not be put to the expense of two inquiries, it may be that Mortgage will require some such information in order to make its election. On the other hand, it may not. Any application in this regard can be made to the Associate Judge who will conduct the inquiry. Having regard to my conclusions in the next section of this judgment, in relation to Mortgage’s right to damages under s 82 of the Trade Practices Act against Com-Cen, Spin, Mr Stevens and Mr Bal, the point may be moot.

93 In Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd, Campbell J said (at [163]), that it was probably desirable to make a self-executing order so that the results of an inquiry into an account could be translated into a judgment for a particular sum of money. That is to say, the orders should provide for an Associate Judge to certify what amount is due by the defendants either as damages or an account of profits and that there be an order for payment of the amount so certified with provision for interest. No submissions were made about this, and I will allow the parties the opportunity to make submissions as to the precise form of order to be made.

94 There should be an injunction to restrain the second, third, fourth, fifth and sixth defendants, by themselves, their servants or agents, from advertising, promoting, selling, offering to sell, supplying or offering to supply their services or those of others under or by reference to the name Dragon Net or any other name substantially identical with, or deceptively similar thereto, including the name dragon.net.au. There should be an order that the defendants do all such things as may be necessary to transfer registration of the domain name dragon.net.au to the first plaintiff. Subject to the consideration of particular defences available to Com-Cen, Mortgage is entitled, at its election, to an inquiry as to damages or an account of profits in relation to the use by the second, third or sixth defendants from 1 June 2001 of the name Dragon Net or the domain name dragon.net.au.

2. Misleading and Deceptive Conduct

2.1 Representations to Connect and APNIC

95 Mr Hoath and Mortgage contend that the representations made by Spin, Com-Cen and Mr Stevens to Connect and APNIC were misleading and deceptive. They contend that it was by reason of these misleading and deceptive representations that Connect and APNIC were induced to re-delegate the domain name dragon.net.au, the IP range and AS number to Com-Cen, after Mr Hoath had temporarily had the domain name, IP range and AS number re-delegated to himself. Both Mortgage and Mr Hoath claim damages. They also seek an order pursuant to s 87 of the Trade Practices Act that Com-Cen provide to Mr Hoath the registry keys to the domain name, the IP range and AS number.

96 I was not favoured with any submissions by the defendants in relation to this claim. Nor was it addressed in detail by the plaintiffs.

97 There are three acts which may constitute the engaging by one or more of the defendants in misleading or deceptive conduct in trade or commerce. The first was the facsimile sent by an employee of Com-Cen on 1 June 2001 to Connect, enclosing a copy of the invoice from the administrator of ITFirst in the amount of $30,000 for the “sale of business Assets as Going Concern per sale agreement of 7 September 2000”, and a copy of the sale agreement of 7 September 2000. These were sent under cover of a fax which read:

“Receivership dragon.net.au

Proof of purchase of assets and technology of dragon.net.au”

98 Secondly, I have found that an employee of Com-Cen modified the Name Status Report, which was a record kept by the internet registrar, to state that the organisation details of the registrant for the domain name dragon.net.au was a company called Dragon Net having the Australian company number 082 644 773. This was the ACN of ITFirst. This change was made to represent to Connect that ITFirst was the registrant of the domain name.

99 The third matter relied upon as misleading and deceptive conduct was Spin’s facsimile to APNIC on 21 August 2001 in the following terms:

Please find attached Sale Agreement from Liquidator for I.T.First.com.au Pty Ltd which was trading as Dragon.Net.

It was our understanding that we purchased all assets (including IPs and AS) that were needed to service the former Dragon Net customers. If you have any questions to the liquidator please ring …

100 This facsimile represented that Spin understood it had purchased the IP range and AS number from the administrator of ITFirst. Not only did it not do so, but Mr Bal did not believe that it had. Mr Bal said he told Mr Stevens he had bought the domain name from Mr Hoath. The sale agreement did not provide for the transfer of the domain name, IP range of AS number from ITFirst. I do not accept Mr Stevens’ evidence that he believed that Spin had purchased the domain name, IP range and AS number from the administrator of ITFirst.

101 The representations made by Com-Cen, Spin and Mr Stevens to Connect and APNIC, and the changing by Com-Cen of the Name Status Report, was conduct in which Com-Cen and Spin engaged which was misleading or deceptive.

102 As I have said, no submissions were made by the defendants in relation to this claim. Thus, it was not submitted by the defendants that such conduct was not “in trade or commerce”, that is, was not itself an aspect or element of activities or transactions which, of their nature, bore a trading or commercial character. (Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603, 604). I think the representations made to Connect and APNIC had a commercial character. As no contrary submission was made, I can readily find that that was so.

2.2 Which Parties are Liable?

103 Com-Cen dealt with Connect in relation to the domain name. Spin, through Mr Stevens, dealt with APNIC in relation to the IP range and AS number.

104 In paragraph 74 of the amended statement of claim, the plaintiffs alleged, amongst other things, that Com-Cen had denied re-delegation of the domain name back to Mortgage and had claimed ownership of the domain name. It was also pleaded that Com-Cen had intentionally changed the records of the domain name in order to deny Mortgage possession of it. The defendants denied the whole of paragraph 74 of the statement of claim. In response to a request for particulars as to whether the defendants denied that Com-Cen had claimed ownership of the domain name, the defendants stated that Spin and Com-Cen “have claimed ownership of the domain name as they effectively act in this circumstance as agent for each other”. In my view, the admission that Com-Cen and Spin acted for each other in relation to their dealings with the domain name, was well founded. Spin claimed to have acquired the name and numbers, but Com-Cen had itself registered as their owner. They both used the name and numbers. Both Spin and Com-Cen are liable for the misleading and deceptive conduct engaged in by each of them in relation to their alleged right to ownership of the domain name, IP range and AS number.

105 The plaintiffs contend that Messrs Stevens and Bal are also personally liable as accessaries in respect of the misleading and deceptive conduct of Spin and Com-Cen. Section 75B of the Trade Practices Act provides that a reference in Part VI to a person involved in a contravention of a provision of Part V shall be read as a reference to, amongst other people, a person who:-

“ (a) has aided, abetted, counselled or procured the contravention;

(b) has induced, whether by threats or promises or otherwise, the contravention; or

(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention.

106 Mr Bal and Mr Stevens were both knowingly concerned in and party to the conduct of Com-Cen and Spin referred to above. Mr Bal directed Com-Cen’s employees to forward the sale agreement to the internet registrar. He said that his purpose in doing so was to demonstrate that “we were servicing the Dragon customers”. However, his real purpose, in my view, was the purpose expressed in Com-Cen’s fax of 1 June 2001, namely, to rely on the agreement as proof of the purchase of the domain name. Mr Stevens was aware of the sending of the sale agreement to Connect and of the assertion made to Connect that it was proof of purchase of the domain name. He sent to someone called Shabnam at the administrator’s office, a copy of the Name Status Report, which I have found Com-Cen modified, noting that it showed that the domain was owned by ACN 082 644 773 which was ITFirst.com.au Pty Ltd. I have found that he did not believe that Spin had acquired the right to the domain name under that agreement. In my view, both Mr Bal and Mr Stevens not only knew of the facts which made the conduct misleading or deceptive, but knew that the conduct was misleading or deceptive. Therefore, on any view of Yorke v Lucas (1985) 158 CLR 661, they are liable as accessaries. (See M. Pearce SC, ‘Accessorial Liability for Misleading or Deceptive Conduct’ (2006) 80 ALJ 104 at 108-110).

2.3 Inquiry as to Damages and s 87 Orders

107 Subsection 82(1) of the Trade Practices Act provides:

“

(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part …V … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”

108 Mr Hoath did not rely upon the representations made by Spin and Com-Cen. Although no evidence was called from Connect or APNIC, it is reasonably clear that they accepted Spin and Com-Cen’s statements that the domain name, IP range and AS number had been purchased from the administrator of ITFirst.

109 Section 82 of the Act requires that before a person can recover the amount of loss or damage, he or she must have suffered loss or damage “by” conduct of another person done in contravention of a provision of Part IV or V. That is, the conduct must be a cause of the loss or damage. Where the conduct is the making of misrepresentations, reliance upon the misrepresentations will be a necessary element in establishing causation of loss by the conduct complained of. However, it is not always necessary that reliance be by the party suffering loss. In this case, Mr Hoath and Mortgage suffered loss, being the loss of their ability to use or sell the domain name, IP range and AS number, because Connect and APNIC relied upon the representations made by Spin and Com-Cen. That is sufficient to satisfy the causal requirement of s 82. (Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 at [115]-[116], [123]).

160 The computer hardware was delivered into Spin and Com-Cen’s possession for the purposes of their businesses. Although Mr Bal, and in one case, Mr Stevens, gave instructions to employees of Com-Cen as to how the equipment was to be dealt with, the claims in conversion and detinue arise from the failure of Com-Cen and Spin to return the equipment after demand.

161 It is established that Mr Bal, but not Mr Stevens, directed and procured employees of Com-Cen not to deliver the equipment to Mr Hoath unless he tendered proof of ownership. He had no right to do that. Mr Bal is liable as an accessary with Com-Cen and Spin for damages arising from their refusal to return the equipment after demand was made for it.

5.4 Conversion or Detinue: When did the Cause of Action Arise?

162 There was no clear evidence of how Com-Cen and Spin used the computer hardware after the migration of Dragon Net subscribers was completed.

163 In Penfolds Wines Ltd v Elliott (1946) 74 CLR 204 at 229, Dixon J said:

The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. It may take the form of a disposal of the goods by way of sale, or pledge or other intended transfer of an interest followed by delivery, of the destruction or change of the nature or character of the thing, as for example, pouring water into wine or cutting the seals from a deed, or of an appropriation evidenced by refusal to deliver or other denial of title. But damage to the chattel is not conversion, nor is use, nor is a transfer of possession otherwise than for the purpose of affecting the immediate right to possession, nor is it always conversion to lose the goods beyond hope of recovery. An intent to do that which would deprive ‘the true owner’ of his immediate right to possession or impair it may be said to form the essential ground of the tort.

164 The defendants’ evidence went some way to establishing that some of the hardware was simply lost. For example, in respect of two items, Mr Bal said that he did not know where they were located. For most items, he said that he gave instructions for them to be returned to Com-Cen’s premises, but there was no further evidence as to what became of them. Com-Cen refused to return a Cisco 2500 router without Mr Hoath or Mortgage proving they owned it.

165 I do not consider that the evidence established that Com-Cen and Spin dealt with the hardware so as to show an intention of depriving Mortgage of its immediate right to possession of the equipment, prior to their failure, amounting to a refusal, to return the equipment after demand was made for it.

166 An action may lie in conversion as well as detinue for the refusal to surrender goods upon lawful and reasonable demand (Hollins v Fowler (1875) LR 7 HL 757 at 766). Com-Cen lawfully came into possession of the goods. No acts have been proved in relation to Com-Cen’s and Spin’s dealings with the goods which amount to a conversion of them, prior to their failure to return the goods after demand was made for their return. In the case of one Cisco 2500 router, that was in May 2001. For the balance of the equipment, it was on 19 April 2002. It is unnecessary to decide whether the demands were sufficiently detailed to support a claim in detinue. Mortgage is entitled to damages from Spin for the tort of conversion, and, but for the deed of company arrangement, from Com-Cen, for the defendants’ refusal to return the goods after demand in May 2001 and April 2002. Damages are therefore to be assessed as the market value of the Cisco 2500 router in May 2001 and the balance of the equipment in April 2002.

5.5 Measure of Damages

167 The defendants say that the plaintiff has failed to establish the value of the computer equipment at any time. The onus is on Mortgage to establish the market value of the equipment at the time of conversion. In assessing damages, the Court may draw inferences in favour of Mortgage where the defendants’ conduct has made the quantification of damages more difficult. The defendants have kept the equipment and have provided no explanation for their failure to return it. There is no evidence as to the age of the equipment. Beyond the fact that it is second hand, I would not draw inferences adverse to the plaintiff about the condition of the equipment. Further, it is clear that the equipment had more than nominal value. It was open to both parties to adduce evidence as to the price at which equipment of the same description was sold in May 2001 and April 2002.

168 The proof of loss was made more difficult for the plaintiffs because of a theft which occurred at the premises at 70 William Lane, Redfern on 2 November 2000 in which invoices, chequebooks and purchase orders, as well as other accounting records, were stolen.

169 The only evidence adduced to establish the value of the hardware was some advertisements for prices for computer hardware published shortly before May 2005, and offers to sell second-hand equipment on the “Connect Trading Post” in April 2004.

170 Those documents showed that second-hand Cisco 2500 series routers (including a Cisco 2503 router) were advertised for sale in 2004 at prices between $800 and $1,650. The statement of claim pleads that each of those routers had a value of $3,000.

171 The statement of claim alleged that the two Cisco 2514 routers each had a value of $5,000. In April 2004, a “Cisco 2611 Jewel Ethanet Router with 2 x 1 BRI” was advertised for sale for $5,200. Mr Hoath submitted that this indicated that a Cisco 2514 router with Jewel Ethanet was available for purchase at that price. There is no evidence of the differences between the two. On the other hand, the defendant made no submission to the effect that the two items were not comparable.

172 The plaintiffs in their statement of claim allege that the value of the Ascend Max 6060 router was $18,000. Mr Hoath submitted that the Connect Trading Post for 15 April 2004 showed that Ascend Max 6060 routers, or their equivalent, were available for purchase at prices of $16,000, $8,500, $10,000, $14,500, $22,500, $15,500, $14,000 and $24,000. None of the equipment advertised for these prices was described as “Ascend Max 6060 routers”. There was no evidence as to why the equipment advertised at these prices was the equivalent of an Ascend Max 6060 router. Again, however, the defendants made no submission that the routers identified by Mr Hoath as comparable were not comparable. The defendants would be familiar with the kinds of equipment in question.

173 There was no clear evidence as to the value of the servers which were each claimed to have a value of $3,000, save for the radius authentication server valued by the plaintiff at $1,000. The particulars of the equipment contained in the second further amended statement of claim identified the type and configuration and features of these computers. Mr Hoath submitted that the computers as described would have a purchase price as new equivalents in 2005 of approximately $2,336. This figure was obtained by taking up each of the components of the computers, namely their case, their adaptec controller, the SCSI hard drive, memory, graphics card, motherboard, and CPU, and adding them together. The defendants did not dispute that the servers had the features particularised. On the other hand, there was no evidence to support Mr Hoath’s contentions. There was no evidence by either party as to the cost of such computers in 2002.

174 The evidence establishes that Mortgage suffered substantial damages from the conversion of the computers, but does not permit a conclusion of what those damages were. There will, in any event, be an inquiry as to damages or an account of profits on the passing off claim and an inquiry as to damages on the s 52 claim to the extent to which it is not subsumed by the first inquiry. I will also refer the assessment of damages for conversion of the computer equipment to an Associate Judge.

6. Payment for Services

175 Mr Hoath says that during his discussion with Mr Bal on 6 September 2000 at which they negotiated the purchase of ITFirst’s subscribers, Mr Bal and he discussed a proposed merger of the businesses of the three companies. In the course of that discussion, according to Mr Hoath, Mr Bal offered him 15% of the merged business and, if the revenues from the customers from Mr Hoath’s companies exceeded $30,000 per month, that would be topped up to a maximum of 25%. Mr Hoath says that a conversation to the following effect then took place:

“I said ‘that sounds fair to me. Will I be working for the company?’

Mr Bal said ‘yes we’ll all earn $70K per year and Peter gets a car.’

I said ‘I won’t be able to live on that. My car is expensive. I have tax losses in my other trading companies. Can I invoice you through those?’

Mr Bal said ‘yes that’s fine’.

I said ‘currently my companies are paying for my wife’s and my mobile phones and also my mother-in-laws.’

Mr Bal said ‘all of our phones are through the company. What do yours cost?’

I said ‘Not much. All the phones are with Optus, so when we call each other it is on free time.’

Mr Bal said ‘that will be fine. We’ll port them.’

I said ‘which company will I invoice?’

Mr Bal said ‘just send me the invoice. Either Spin or Com-Cen will pay it depending on which company has cash at the time.’”

176 Mr Hoath said that at the conclusion of the conversation Mr Bal confirmed, amongst other things, that he would be paid $70,000 per year with the invoices to be payable by either Com-Cen or Spin until the new company was formed or the form the merger was to take was settled.

177 Mr Hoath started working for Com-Cen and Spin. His services were provided as a consultant. The invoices were rendered by companies which Mr Hoath controlled. On 19 October 2000, E-Talk.com.au was incorporated. Messrs Bal and Stevens were its directors. Mr Hoath was a shareholder. This company was to operate a broadband internet venture. It did not involve the merger of the businesses of Com-Cen, Spin, and the businesses formerly carried on by ITFirst or Mortgage. It was agreed that Com-Cen would fund E-Talk.com.au to the extent of $20,000 per month and that Spin would provide internet band width from Singapore Telecom. Mr Hoath was given the job of managing the business of E-Talk.com.au. He did this from late November 2000 to April 2001. In January, February, and I infer March, Mr Hoath arranged for a company he controlled called ITJobs.com.au Pty Ltd to invoice Spin for his services. The invoices were for “contracting service from Mark Hoath”. The invoices were paid by Com-Cen. Prior to April 2001, Mr Bal requested him to invoice E-Talk.com.au. Mr Bal nominated the company to which the invoice should be sent according to which company had funds available to pay. On 26 April 2001, another company controlled by Mr Hoath, Pacific Web Ltd, billed E-Talk.com.au $6,417 for services supplied by Mr Hoath.

178 Mr Hoath was not an employee of Com-Cen or Spin. It may well be that he provided services to Com-Cen and Spin, but most of his work was done for E-Talk.com.au. In any event, he agreed that his services would be supplied as a consultant by other companies which he controlled. By causing Pacific Web to issue the invoice for his services to E-Talk.com.au, he agreed that it should be that company that would be liable to Pacific Web for the services he provided during April 2001. E-Talk.com.au was wound up. Pacific Web was listed in the Report as to Affairs as an unsecured creditor for $6,417. There is no suggestion that the liquidator of E-Talk.com.au has disputed liability for the debt.

179 Mr Hoath proposed in his discussions with Mr Bal that one of his other companies charge for the provision of his services. He perceived there were tax advantages in doing so. He cannot now be heard to say that the “substance” of the arrangements was that he, and not the company which rendered the invoice, was entitled to recover for the provision of his services because the company whom he agreed to invoice did not pay.

180 Nor is there any basis upon which Mr Hoath is entitled to receive two months’ payment for his services in lieu of notice. He was not an employee. Other companies which he controlled charged for the provision of his services as they were required. It was not a term of any arrangement that his services could only be terminated on reasonable notice. Accordingly, this claim fails.

7. Claim for Motor Vehicle Expenses and Mobile Phone Bills

181 Mr Hoath claims that the defendants were liable to pay his finance or lease costs on his Mercedes Benz motor vehicle. However, on his own evidence there was no promise by Mr Bal or Mr Stevens that they or Com-Cen or Spin would pay the finance or leasing costs of the car. The highest his evidence goes is that Mr Bal said that Mr Stevens “gets a car”. Mr Hoath said that his car was expensive and that he would not be able to live on $70,000 per year. It was apparently for that reason he asked whether he could invoice for his services through his other companies. He does not say that Mr Bal agreed to pay the leasing costs of the car. There is no evidence that he told Mr Bal or Mr Stevens what those costs were, let alone that there was an agreement as to how they should be met.

182 There is evidence that Mr Bal agreed to “port” the mobile phones of Mr Hoath, his wife and his mother-in-law. Mr Hoath arranged for his phone to be “ported” to the account of E-Talk.com.au. He says that he did that because “I was authoritative for E-Talk bills and not for Com-Cen bills”. When Mr Bal found out that Mr Hoath’s wife’s and mother-in-law’s phone bills had been charged to E-Talk.com.au he objected, and said that Com-Cen would only pay for the phones up to $35. Com-Cen was providing the funds for E-Talk.com.au. Mr Hoath explained the position to Mr Bal on 31 January 2001. There is no evidence that any contract was made between Com-Cen, Spin, Mr Bal or Mr Stevens to pay the mobile phone bills. The mobile phone bills were paid by E-Talk.com for some time prior to an administrator being appointed to it. That does not mean that Com-Cen or Spin or Mr Bal or Mr Stevens were liable to pay those bills. Accordingly, this claim fails.

8. Deed of Company Arrangement

183 Com-Cen relies upon the terms of the deed of company arrangement as a defence to any relief sought against it in the proceedings. The deed of company arrangement was made on 6 December 2002 between Com-Cen, the deed administrator and Mr Bal. It was entered into pursuant to a resolution made at a meeting of creditors of Com-Cen convened under s 439A of the Corporations Act on 27 November 2002. Under the deed, Com-Cen agreed to pay a sum of $80,000 by instalments into the “Deed Fund”, to assign motor vehicle leases the company held to a third party, and to use its best endeavours to recover a debt of $46,770 owed to the company at 31 October 2002 by E-Talk Communications. Mr Bal agreed to procure the payment of the debt owed by E-Talk Communications to the company, to procure the assignment of the two motor vehicle leases to a third party, and to pay to the Deed Fund upon demand by the administrator any shortfall in the instalments payable by the company making up the sum of $80,000, to a maximum of $3,553 in respect of each instalment. The deed provided that Mr Bal should have no liability to the company, the administrator or the creditors if he failed to procure the payment of the debt owed by E-Talk Communications to the company or failed to procure the assignment of the motor vehicle leases. Clause 20 provided:

This deed may be pleaded by the Company against any Deed Creditor in bar of any debt whether the Deed Creditor’s debt is or is not admitted or established under this Deed.

184 A “Deed Creditor” was defined to mean:

Any person who is or claims to be owed a debt by the Company on the appointed date other than the Secured Creditor, the Related Creditors and the Continuing Employees.

185 The deed defined “debt” to mean:

… any debt owing by the Company or claim or right of action whatsoever against the Company arising out of or having its origin in any act, omission, transaction, situation, relationship or other occurrence on or prior to the appointed date, and

(a) whether secured or unsecured;

(b) whether arising at law or in equity;

(c) whether arising out of contract, statute or tort;

(d) whether present or future, contingent, liquidated or unliquidated; and

(e) includes all assigned rights and rights of indemnity and subrogation.

186 Clause 15.1 imposed a moratorium on any deed creditor prosecuting any legal proceedings in relation to a debt. Clause 15.2 provided that nothing in the deed prevented or limited the right of any creditor in relation to any debt incurred by or claim against the company which may arise after 31 October 2002. Accordingly, the deed is not an answer to the plaintiffs’ claim for injunctive relief, or for an inquiry as to damages, or an account of profits, in respect of Com-Cen’s use of the name or the domain name after 31 October 2002. However, the deed is a bar to Mortgage’s and Mr Hoath’s claim against Com-Cen for damages for misleading and deceptive conduct between June and September 2001, and to Mortgage’s claim for damages or an account of profits for passing off up to 30 October 2002. It is also an answer to Mortgage’s claim for damages for conversion of the computer equipment.

187 Clause 17 provided that upon payment by the deed administrator to the Deed Creditors of their Creditor Entitlements all the Deed Creditors’ debts were extinguished. A “Creditor Entitlement” was defined to mean the amount to be paid to each deed creditor pursuant to clause 7. After paying the administrator’s remuneration and disbursements, the balance of the deed fund was to be paid pari passu in payment of the amounts owing to all Deed Creditors whose debts are “proven and admitted by the administrator in accordance with the terms of the deed”.

188 Section 444D(1) and (3) of the Corporations Act provides:

“ 444D. Effect of deed on creditors

(1) A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i).

…

(3) Subsection (1) does not affect a right that an owner or lessor of property has in relation to that property, except so far as:

(a) the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or

(b) the Court orders under subsection 444F(4).”

189 The word “creditors” in s 444D(1), or the expression “all creditors of the company” in that subsection, are not defined. However, as the Appeal Division of the Supreme Court of Victoria said in Brash Holdings Ltd (Administrator Appointed) & Ors v Katile Pty Ltd & Anor [1996] 1 VR 24 (at 33):

…the expression ‘all creditors’ in s444D(1) should not be confined to those having claims for money sums due and payable on or before the day specified in the deed,

we see no alternative but to treat the creditors of the company for the purposes of Pt5.3A as those who would have been creditors had the company gone into liquidation and the relevant date for the purposes of s553 been the day specified in the deed.

190 Hence the deed can bind not only creditors whose debts are due and payable, but also contingent and prospective creditors who have claims for unliquidated damages.

191 The extent to which the deed of company arrangement bars Mortgage’s claim depends upon the effect of Division 10 of Part 5.3A of the Corporations Act and upon the terms of the deed, in so far as the Act makes the effect of the deed binding upon creditors. Section 444D(1) quoted in para [187] above provides that the deed binds all creditors of the company so far as concerns claims arising on or before the day specified in the deed under s 444A(4)(i). Under s 444E(3), a person bound by the deed cannot begin or proceed with a proceeding against the company except with the leave of the court and in accordance with such terms, if any, as the court imposes. Such leave has been given. Section 444H provides that a deed of company arrangement releases the company from a debt only in so far as the deed provides for the release and the creditor concerned is bound by the deed. The extent to which the deed provides for the release is that the deed may be pleaded against a deed creditor “in bar of any debt”, whether the deed creditor’s debt is or is not admitted or established under the deed, the deed creditor will accept the “creditor entitlement” in full satisfaction and complete discharge of all debts, and upon payment by the administrator to the Deed Creditors of the Creditor Entitlements, all the deed creditors’ debts are extinguished. Clause 15 provides that during the continuance of the deed, no deed creditor will, except for the purpose and to the extent provided in the deed, institute or prosecute any legal proceedings in relation to a debt. However, leave was given to the plaintiffs pursuant to s 444E(3) to proceed against Com-Cen and no application was made to revoke that leave.

192 Normally, proceeding by action with the leave of the court to establish a debt or claim against a company in liquidation or subject to a deed of company arrangement is an alternative procedure to the determination of the claim by submission of a proof of debt and by appeal to the court if the proof is rejected. The deed has to be construed in accordance with Part 5.3A Division 10, which provides for the procedure of a creditor proceeding by action against the company with leave. If in such a case, the amount of the creditors’ debt is established by judgment, the cause of action will merge in the judgment and, subject to any appeal, the deed administrator would be bound to admit the debt for the amount payable under the judgment. The deed could not bar a creditor from establishing his right to prove in this way if leave to proceed is given under s 444E(3), as that would be inconsistent with the scheme of the legislation. (Josia Pty Ltd v Horvat Construction Pty Ltd [2004] NSWSC 1252 at [6]-[8]; Easey v Grosvenor Constructions (NSW) Pty Ltd (2005) 54 ACSR 820 at 824, [16]). However, the fact that leave was given pursuant to s 444E(3) does not preclude Com-Cen from contending that the deed bars the claim, and that upon payment by the administrator to the Deed Creditors of the Creditor Entitlements all of the deed creditors’ debts are extinguished, including those of Mortgage.

193 Accordingly, I conclude that so far as the claim against Com-Cen is concerned, the deed of company arrangement is binding on Mortgage in relation to its claim for damages or an account of profits arising from Com-Cen’s use of the names up to 31 October 2002, and its claim for damages for conversion of the computer equipment. It is binding on Mr Hoath and Mortgage in relation to their claim for damages under s 82 of the Trade Practices Act for Com-Cen’s misleading and deceptive conduct in 2001. If the Deed Fund has been fully applied in paying all amounts owing to Deed Creditors whose debts have been proven and admitted by the administrator, then those claims of the plaintiffs would have been extinguished pursuant to clause 17 of the Deed. If not, Mortgage would be entitled to prove for such debt as may be established following an inquiry as to damages or an account of profits. I say nothing as to whether Mr Hoath has any right against the deed administrator if the deed fund has been fully distributed.

194 The present case is unusual in that notwithstanding that the plaintiffs have been given leave to proceed under s 444E(3)(c) of the Corporations Act, they have also lodged proofs of debt and unsuccessfully appealed from the liquidator’s rejection of the proofs. It is undesirable that substantially the same issues should be determined successively by two judges at first instance, albeit, I assume, on different evidence. However, Com-Cen did not apply for the leave to be revoked. This might have been because the same issues arose in the case against Spin, Mr Bal and Mr Stevens. Whatever be the reason, I have had to determine the issues on the defences raised before me. For the reasons I have given, I do not consider that the determination of the appeal from the liquidator’s rejection of the proofs of debt results in the causes of action having been merged in the judgment. In my view, pursuant to the leave given, the plaintiffs are entitled to establish by action the amount for which Com-Cen is liable to them such that, subject to any appeal, the judgment will determine conclusively the amount for which the company is liable to them. The administrator is bound to admit that debt and, unless the deed fund has already been distributed, the plaintiffs would be entitled to participate in the distribution of the deed fund along with other deed creditors. However, to the extent the claims are barred by the deed of company arrangement, Mortgage is not entitled to execute the judgment against Com-Cen’s assets.

9. Agreement to give Mr Hoath 15% Equity

195 It was proposed between Mr Hoath and Mr Bal that Mr Hoath would receive 15% equity following the merger of Dragon, Spin and Com-Cen. The concepts discussed were imprecise. I accept Mr Hoath’s evidence that Mr Bal said to him that he would like to treat the deal involving the purchase of subscribers from ITFirst as a merger of the three companies and that their goal was to sell once they had acquired 10,000 customers. I accept that Mr Bal said to Mr Hoath that as Com-Cen was the biggest, they would be keeping Com-Cen’s name and all of the subscribers would use the Com-Cen domain. I accept that Mr Bal said to Mr Hoath that they would base the shareholdings on the revenue each company was bringing in. I also accept that Mr Bal told Mr Hoath that based upon Mr Hoath’s estimates of revenue from the subscribers of ITFirst, Mr Hoath would be entitled to 15% of the business.

196 I also find that it was because Mr Hoath expected to receive a 15% shareholding in a company which would own the subscribers to Com-Cen and Spin, including the subscribers purchased by Spin from ITFirst, that he allowed Com-Cen to take possession of the computer hardware used by Mortgage in its business, and allowed Com-Cen or Spin to take over all of the customers who subscribed to “Dragon Net”. These were not only the customers who were purchased from ITFirst, although they included those customers. Nonetheless, the arrangement was a loose one. No concluded agreement was made on the terms upon which Mr Hoath would be entitled to receive a shareholding in Com-Cen or any other company that acquired the business of Com-Cen or Spin. There was at best an agreement “in principle” that Mr Hoath would receive a 15% equity on the basis of the parties’ estimates as to the revenues generated by Dragon Net customers. They did not agree on what those revenues were, or how they compared with Com-Cen’s or Spin’s revenues, or what the final percentage should be. Mr Hoath said that the arrangement was that he should receive a minimum 15% equity, with the final figure to depend on an assessment of revenues. However, I do not accept that there was a concluded agreement that he should receive 15% equity as a minimum. Rather, that was his expected equity, with the final agreement to depend upon the parties’ assessment of the revenues of each of the businesses which would form the combined group.

197 Whilst arrangements for the “merger” were proceeding, the parties had established E-Talk.com.au which carried on business as a broadband internet venture. It was agreed that Mr Hoath would have a 32% shareholding in that company. Mr Bal said that in about February 2001, he ascertained that the revenue received from the “Dragon customers”, that is, the customers acquired from ITFirst, was in the order of $10,000 per month, whereas he had expected to receive revenue of $50,000 per month. He said that he told Mr Hoath that as a result of those revenue figures, there was no way in which Mr Hoath could be given 15% of Com-Cen and it was likely to be in the order of 3% based on those revenue amounts. According to Mr Bal, he said “also, because it is such a low figure, we will need to adjust down your shareholding in E-Talk.” According to him, Mr Hoath said that he wasn’t happy but that “rather than having such a small holding in Com-Cen, I would prefer to maintain my 32% shareholding in E-Talk.” Mr Bal said he agreed to this.

198 Mr Hoath denied this evidence. I do not accept it. I do not accept that Mr Hoath compromised his claim to be entitled to a 15% equity in the proposed venture involving the merger of the businesses of Com-Cen, Spin and “Dragon” in order to obtain or maintain his shareholding in E-Talk.com.au.

199 Nonetheless, there was no concluded agreement that Mr Hoath would receive 15% of the shares. The proportion of shares to be received was to be based on the revenues of each of “Dragon”, Spin and Com-Cen and was a matter for further negotiation. Nor was there any agreement on how a new company would be funded to acquire the businesses of Com-Cen and Spin, or what consideration it would pay, or whether shares would be issued in Com-Cen and Spin without these businesses being transferred.

200 In some cases, equity will intervene where a plaintiff has been encouraged to assume that an interest will be given to him, or a promise will be performed, and he has acted to his detriment in reliance upon that assumption, and it would be unconscionable to allow the defendant to depart from the assumption which he has induced the plaintiff to adopt. (Ramsden v Dyson (1866) LR 1 HL 129; Plimmer v Mayor of Wellington (1884) LR 9 App Cas 699; Walton’s Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387; Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472; Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582). In such cases, the plaintiff may be entitled to equitable relief to make good the assumption which he has been induced to adopt, or to avoid the detriment which he has suffered, even though no binding agreement was made and the parties did not precisely identify the interest to which the plaintiff would be entitled.

201 However, this is not such a case. Mr Hoath is not entitled to the protection of a court of conscience, where, notwithstanding he was a director of ITFirst, he seeks a personal advantage from the sale of the assets and business of ITFirst which should enure to its creditors.

202 I do not doubt that Mr Hoath was taken advantage of by Mr Bal and Mr Stevens. To the extent to which he or Mortgage have rights at law in contract, or in tort, or under statute, they are entitled to appropriate relief. However, no contract was concluded between Mr Hoath, Mr Bal and Mr Stevens as to the terms upon which Mr Hoath would be entitled to shares in the “Com-Cen-Spin-Dragon merger”.

203 The essence of this case is that Mr Bal negotiated the terms upon which Spin would buy the assets and customer base of ITFirst. In the expectation of receiving a share in a company which would own the Com-Cen and Spin businesses, and the businesses owned by Mortgage and ITFirst, Mr Hoath allowed Com-Cen to take control of more assets than were bought from the administrator of ITFirst. He also negotiated a deal for the administrator of ITFirst in the expectation of obtaining a personal advantage. It is not to the point that, so far as appears, he negotiated the best deal he could for ITFirst’s creditors. He was bound not to put himself in a position where his personal interest and his duty to ITFirst conflicted. Mr Bal and Mr Stevens took control of property which they had not acquired from ITFirst, and Mr Hoath allowed them to do so in the expectation of receiving shares in the new venture. In that he was disappointed. He and Mortgage are entitled to their rights at law arising from the retention by Spin and Com-Cen of property which they did not purchase, after Mr Hoath withdrew his consent to their retention of that property. Mr Hoath did not conclude a contract with them for taking equity in a company controlling a new merged business. As he could have not have taken such an equity without breaching his duty as a director of ITFirst, he has no claims to any equitable relief.

204 Indeed, no claim based on principles of equitable estoppel was pleaded or argued. As the plaintiffs were not legally represented, the absence of a pleading would not necessarily be fatal if the defendants were given an opportunity to address such a claim. For the reasons given, it is not necessary to do so.

10. Exemplary and Aggravated Damages

205 Exemplary and aggravated damages may be available in tort, but are not available under the Trade Practices Act. Mortgage is entitled to damages from Spin and Com-Cen for passing off, and in conversion for the detention of its computer equipment. Mr Hoath is not entitled to damages for passing off, nor in conversion because he neither had any goodwill in the Dragon Net business as at June 2001, nor did he claim to be the owner of the computer equipment or the person entitled to possession of it. As a corporate entity, Mortgage cannot be entitled to aggravated damages. Even if Mr Hoath had been entitled to damages in tort, there was no evidence to justify a claim for aggravated damages.

206 Exemplary damages are available only where the conduct of the defendant merits punishment because the defendant has acted in contumelious disregard of the plaintiff’s rights, and usually has been guilty of conscious wrongdoing. Exemplary damages are awarded as a deterrent, and as a mark of the Court’s condemnation of the defendant’s behaviour.

207 Spin and Com-Cen did not retain the computer equipment in contumelious disregard of Mortgage’s rights, even though they retained it contrary to Mortgage’s rights. They said Mortgage should prove its ownership. This was an incorrect view of the law, but not contumelious.

208 The defendants sought to justify their use of the domain name on the basis that the right to use it had been purchased from ITFirst, or on the basis that Mr Hoath had agreed to their using the name. Although I have not accepted those claims, I do not consider that the defendants continued to use the domain name in contumelious disregard of Mortgage’s rights. For a time, Mr Hoath acquiesced in their use of the name, although it had not been transferred pursuant to the contract made with the administrator of ITFirst. He later withdrew that consent. Although I have been critical of the defendants’ conduct, it is not remarkably egregious. It is not of a piece with the kinds of behaviour which have attracted awards of exemplary damages, such as invading the plaintiff’s land and destroying its property (XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448), or arranging for the plaintiff’s arrest on spurious grounds (Zhu v Sydney Organising Committee for the Olympic Games [2001] NSWSC 989), or physical assault (eg Adams v Kennedy (2000) 49 NSWLR 78; State of NSW v Ibbett [2005] NSWCA 445; BC200510884), or false imprisonment (Vignoli v Sydney Harbour Casino (2000) Aust Torts Reports 81-541). The remedy is exceptional (Gray v Motor Accident Commission (1998) 196 CLR 1 at [20]). Here, even if the defendants’ conduct could be characterised as conscious wrongdoing in contumelious disregard of the plaintiff’s rights, an award of exemplary damages would not be required as a deterrent. The award of compensatory damages or an account of profits adequately marks the Court’s condemnation of the defendants’ conduct.

Summary

209 I conclude that:

1. The second to sixth defendants should be restrained from using the name Dragon Net and the domain name dragon.net.au and should be ordered to re-delegate the domain name to Mr Hoath;

2. The plaintiffs are entitled to an order that the second to sixth defendants transfer to Mr Hoath the IP addresses and AS number;

3. Mortgage is entitled to damages or an account of profits, at its election, against Spin, Com-Cen, and E-Talk Communications for passing off in relation to their use of the name Dragon Net and the domain name dragon.net.au;

4. Messrs Bal and Stevens are liable for the amounts for which Spin, Com-Cen, or E-Talk Communications are liable for the tort of passing off;

5. There should be an inquiry before an Associate Judge as to the quantum of such damages or an account of profits;

6. In relation to the claim against Com-Cen, the judgment will determine the liability of Com-Cen to Mortgage, but because of the deed of company arrangement, Mortgage will only be entitled to enforce that judgment against the assets of Com-Cen to the extent, if at all, Mortgage is entitled to damages or an account of profits arising from Com-Cen’s use of the name Dragon Net or the domain name dragon.net.au after 31 October 2002;

7. Mortgage and Mr Hoath are entitled to damages under s 82 of the Trade Practices Act against Spin, Com-Cen, Mr Bal and Mr Stevens for damages suffered by them as a result of misrepresentations made by Com-Cen to Connect in June 2001, and by Spin and Mr Stevens to APNIC in August 2001, as a result of which Spin and Com-Cen retained control of the domain name, IP range and AS number;

8. Although Mortgage is not required to make an election before it recovers damages under s 82, any damages under s 82 would not exceed damages to which it may be entitled in passing off, and will be reduced or extinguished if it elects to pursue an account of profits for passing off, to the extent it is entitled to receive money on such an account;

9. There should be an inquiry before an Associate Judge as to the quantum of damages to which Mortgage and Mr Hoath are entitled;

10. Mortgage is entitled to damages in conversion against Spin and Com-Cen for their detention of the computer hardware, but is not entitled to enforce the judgment against the assets of Com-Cen because of the deed of company arrangement;

11. Mr Bal is liable as an accessary with Com-Cen and Spin for damages payable by them for their conversion of the computer equipment;

12. There should be an inquiry before an Associate Judge as to the damages to which Mortgage is entitled for the conversion of the computer equipment;

13. The Associate Judge should determine what interest is payable;

210 The plaintiffs have succeeded on their principal claims, although they have not been wholly successful. They are entitled to their costs against the second to sixth defendants.

211 The defendants are entitled to a reasonable period to notify their customers who use the email address [email protected] that they cannot continue to provide services to them using that name. It appears from the email of 8 June 2001 that the subscribers acquired from ITFirst were given a default email address, so that no extended period should be necessary before the injunctions and orders take effect. In any event, there will be a short period before orders are made to give effect to these reasons. If a further extension of time is sought, the defendants may adduce evidence and make submissions about that when final orders are made.

212 I direct that by 5.00 pm on Friday 31 March 2006, the plaintiffs and defendants exchange and deliver to my associate short minutes of order to give effect to these reasons. If any party wishes to make submissions on matters upon which I have indicated I would receive submissions, then such submissions, and any affidavits to be relied on in support of them, should be exchanged and delivered to my associate by that date. I shall stand the proceedings over to 9.30am on a convenient day, for the purpose of making orders to give effect to these reasons.

******

CITATION:	Hoath & 1 Or v Connect Internet Services & 5 Ors [2006] NSWSC 158
HEARING DATE(S):	06-08/06/05, 08/07/05
JUDGMENT DATE :	22 March 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	White J
DECISION:	Short minutes to be brought in to give effect to reasons.
CATCHWORDS:	TORTS – passing off – second, third and sixth defendants used plaintiffs’ business name and domain name – plaintiffs’ consent expired or withdrawn – whether plaintiffs entitled to sue in passing off – whether plaintiffs entitled to damages or an account of profits – whether fourth and fifth defendants liable as joint tortfeasors or accessaries – whether plaintiffs entitled to injunctions restraining further use of plaintiffs’ business name and domain name – whether plaintiffs entitled to order of re-transfer in relation to plaintiffs’ domain name - CONTRACTS – Interpretation – Implication of terms – Whether third defendant purchased domain name, internet protocol addresses and autonomous system number - TRADE & COMMERCE – misleading or deceptive conduct – defendants contended they purchased plaintiffs’ domain name, internet protocol range and autonomous system number – representations to this effect made to internet registrar – whether representations in breach of s 52 of the Trade Practices Act 1974 (Cth) – whether plaintiffs entitled to damages under s 82 or orders under s 87 of the Trade Practices Act - EQUITY – equitable remedies – second, third and sixth defendants used plaintiffs’ internet protocol range and autonomous system number – whether plaintiffs entitled to injunctions restraining further use of plaintiffs’ internet protocol range and autonomous system number – whether plaintiffs entitled to order for re-transfer - TORTS – conversion – detinue – defendants used plaintiffs’ domain name, internet protocol range and autonomous system number – whether rights to domain name, internet protocol range and autonomous system number are intangible property rights – whether plaintiffs entitled to sue in conversion for interference with intangible property rights - TORTS – conversion – detinue – second to fifth defendants used plaintiffs’ computer equipment – plaintiffs’ consent expired or withdrawn – whether second plaintiff entitled to sue in conversion where no proof of ownership – whether second defendant entitled to plead res judicata following dismissal of appeal from deed administrator’s rejection of proof of debt - CORPORATIONS – deeds of company arrangement – second defendant entered into deed of company arrangement – whether deed a defence to relief sought against second defendant – construction of s 444D of the Corporations Act 2001 (Cth) – effect of Part 5.3A of the Corporations Act - CONTRACTS –first plaintiff and fourth and fifth defendants made “in principle” agreement as to first plaintiff’s equity in proposed new company – whether parties negotiated binding contract – whether first plaintiff entitled to equitable relief notwithstanding the parties’ failure to negotiate valid contract – principles of equitable estoppel - DAMAGES – exemplary and aggravated damages – whether plaintiffs entitled to exemplary or aggravated damages against any defendant.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) Corporations Act 2001 (Cth)
CASES CITED:	J. Prendergast, ‘Kremen v Cohen: The “Knotty” Saga of sex.com’ (2004-2005) 45 Jurimetrics 75 Mark Hoath & Anor v Comcen Pty Ltd & Ors [2004] NSWSC 682 Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196 Nicholas v Borg (1986) 7 IPR 1 Orange Crush (Australia) Ltd v Gartrell (1928) 41 CLR 282 Star Industrial Co Ltd v Yap Kwee Kor t/as Newstar Industrial Co [1976] 2 FSR 256 Pink v JA Sharwood & Co (1913) 30 RPC 725 Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 Powell v Birmingham Vinegar Brewery Co. Ltd (1897) 14 RPC 720 J H Coles Pty Ltd v Need (1933) 49 CLR 499 Premetis v 260 Oxford Street Pty Ltd [2005] NSWSC 904 C Evans & Sons Ltd v Sprite Brand Ltd [1985] 1 WLR 317 Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd (2003) 9 VR 171 King v Milpurrurru (1996) 66 FCR 474 Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 177 ALR 231 M. Pearce SC, ‘Accessorial Liability for Misleading or Deceptive Conduct’ (2006) 80 ALJ 104 Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 65 IPR 289 Allen Manufacturing Co. Pty Ltd v McCallum Pty Ltd (2001) 53 IPR 400 Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 Island Records v Tring International plc [1995] 3 All ER 444 Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002) 10 BPR 19,565 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Yorke v Lucas (1985) 158 CLR 661 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 Ford Motor Co of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 Penfold Wines Ltd v Elliott (1946) 74 CLR 204 Ferguson v Eakin (Court of Appeal, 27 August 1997, unreported; BC9703869) Doodeward v Spence (1908) 6 CLR 406OBG Ltd v Allan [2005] QB 762 Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2005] NSWSC 951 V.D. Ricks, ‘The Conversion of Intangible Property; Bursting the Ancient Trover Bottle with New Wine’ (1991) BYU L Rev. 1681 Balkin & Davis, Law of Torts, 3 ed Lloyds Bank Ltd v The Chartered Bank of India, Australia & China [1929] 1 KB 40 Bavins & Sims v London & South Western Bank Ltd [1900] 1 QB 270 Smith v Lloyds TSB Group plc [2001] QB 541 Koster’s Premier Pottery Pty Ltd v Bank of Adelaide (1981) 28 SASR 355 Clegg v Baretta (1887) 56 LT 775 Watson v McLean (1858) E B & E 78; 120 ER 435 Solloway v McLaughlin [1938] AC 247 BBMB Finance (Hong Kong) Ltd v Eda Holdings Limited [1991] 2 All ER 129 Hiort v Bott (1847) LR 9 Ex 86 M’Combie v Davies 7 East 5; (1805) 6 East 538 at 540; 102 ER 1393 Kremen v Cohen 337 F 3d 1024 (2003) Betteley v Reed (1843) 4 QB 511; 114 ER 991 Biddle v Bond (1865) 6 B & S 225; 122 ER 1179 Edwards v Amos (1945) 62 WN (NSW) 204 Standard Electric Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447 Perpetual Trustees & National Executors of Tasmania Ltd v Perkins (1989) Aust Torts Reports 80-295 Gatward v Alley (1940) 40 SR (NSW) 174 Flack v Chairman, National Crime Authority (1997) 80 FCR 137 Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 Ogilvy-Grant v East (1983) 7 ACLR 669 Re Galaxy Media Pty Ltd [2001] NSWSC 917 Hollins v Fowler (1875) LR 7 HL 757 Brash Holdings Ltd (Administrator Appointed) & Ors v Katile Pty Ltd & Anor [1996] 1 VR 24 Josia Pty Ltd v Horvat Construction Pty Ltd [2004] NSWSC 1252 Easey v Grosvenor Constructions (NSW) Pty Ltd (2005) 54 ACSR 820 Ramsden v Dyson (1866) LR 1 HL 129 Plimmer v Mayor of Wellington (1884) LR 9 App Cas 699 Walton’s Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 Zhu v Sydney Organising Committee for the Olympic Games [2001] NSWSC 989 Adams v Kennedy (2000) 49 NSWLR 78 State of NSW v Ibbett [2005] NSWCA 445; BC200510884 Vignoli v Sydney Harbour Casino (2000) Aust Torts Reports 81-541 Gray v Motor Accident Commission (1998) 196 CLR 1
PARTIES:	Mark Hoath & 1 Or v Connect Internet Services Pty Ltd & 5 Ors
FILE NUMBER(S):	SC 1599/02
COUNSEL:	Plaintiffs: In Person 2nd - 6th Defendants: A Blank
SOLICITORS:	Plaintiff: N/A 2nd - 6th Defendants: EH Tebbutt & Sons