Sportsbet v ArcNames (No 2)
[2022] VSC 819
•22 December 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
INTELLECTUAL PROPERTY LIST
S ECI 2022 10879
BETWEEN:
| SPORTSBET PTY LIMITED | Plaintiff |
| and | |
| ARCNAMES LTD | First Defendant |
| and | |
| SPIRE MARKETING CONSULTANTS LTD | Second Defendant |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 December 2022 |
DATE OF JUDGMENT: | 22 December 2022 |
CASE MAY BE CITED AS: | Sportsbet v ArcNames (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 819 |
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INJUNCTIONS – Anti-suit injunction – Whether Foreign Proceeding has tendency to interfere with pending proceedings in Court – CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345.
COSTS – Whether costs should be ordered at this stage – Whether indemnity costs should be ordered – Whether costs should be ordered to be payable forthwith – Setka v Abbott MP (No 2) [2013] VSCA 376.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Smith SC | Corrs Chambers Westgarth |
| For the Defendants | Ms M Marcus | Mills Oakley |
HIS HONOUR:
Introduction
By summons filed 5 December 2022 (‘the summons’), the plaintiff (‘Sportsbet’) seeks an injunction on an interlocutory basis restraining the first defendant, ArcNames Ltd (‘ArcNames’) from prosecuting proceedings commenced by ArcNames against CSC Corporate Domains Inc (‘CSC Domains’) on 21 November 2022 in the United States District Court for the District of Delaware (‘the Delaware proceeding’) including any step to seek an interlocutory injunction and commencing any similar proceeding against CSC Domains in respect of the sportsbet.com domain name.
At the first return of the summons on 7 December 2022, ArcNames sought an adjournment of the hearing and related timetabling orders. It submitted that Sportsbet would not suffer any prejudice if the hearing was adjourned and that an adjournment would provide ArcNames with a fair opportunity to be heard on the summons represented by counsel familiar with the matter. The solicitor who appeared for ArcNames on that day submitted that no interim injunction should be granted as there was no imminent harm as the Court could take judicial notice of the fact that nothing material would happen in the Delaware proceeding until 20 December 2022 when CSC Domains was required to file a response to the proceeding commenced by ArcNames.
Sportsbet opposed the adjournment but accepted that it would not suffer any prejudice if the summons was adjourned provided an interim injunction was granted.
Including because there was no evidence that confirmed that nothing material could happen in the Delaware proceeding until 20 December 2022, on 7 December 2022 I granted an interim injunction (‘the anti-suit injunction’) on the following terms:
Until 4pm on 22 December 2022 or on such period as is provided by further order, the first defendant, by its servants, agents, employees, directors, officers or howsoever otherwise, is restrained from taking any step directly or indirectly:
(a)in the proceeding commenced by ArcNames, Ltd against CSC Corporate Domains, Inc on 21 November 2022 in the United States District Court for the District of Delaware (‘the Delaware proceeding’), including any step to seek an interlocutory injunction, preliminary or otherwise; and
(b)to commence any similar proceeding against CSC Corporate Domains Inc in respect of the sportsbet.com domain name.
I otherwise made directions for the filing and service of affidavits and outlines of argument. The endorsed form of order included a penal notice addressed to ArcNames which, among other things, stated that if ArcNames disobeyed the order by doing an act which the order requires it to abstain from doing, it would be liable to imprisonment, sequestration of property or other punishment and that any other person who knows of the order and does anything which helps or permits ArcNames to breach the order may be similarly punished.
In accordance with the timetable ordered, ArcNames filed and served an affidavit and outline of submissions in relation to Sportsbet’s application for a continuation of the anti-suit injunction.
In that outline, ArcNames stated that it neither consented to or opposed the continuation of the injunction save that it resisted any costs orders against it, submitting that costs of the application should be reserved.
ArcNames submitted that in the event that the anti-suit injunction was granted, the costs of the application ought be reserved.
It is appropriate to continue the interim injunction on an interlocutory basis such that it will apply until the hearing and determination of this proceeding (including any appeal therefrom) or further order. The proceeding is fixed for trial on 29 May 2023.
Notwithstanding that the continuation of the injunction is not opposed, it is appropriate that I provide brief reasons. The reasons also deal with the contested question of costs.
In order to understand the basis upon which the anti-suit injunction is granted, it is necessary to revisit some of the history of the proceeding.
Relevant factual background
Sportsbet offers betting services to Australian consumers and is the largest online bookmaker in Australia. Sportsbet is the owner of various Australian trademark registrations containing the word ‘Sportsbet’ (‘the Sportsbet trademarks’). Sportsbet began using the sportsbet.com.au domain name as an active website promoting Sportsbet and its betting services from September 1999 and commenced offering betting services on the sportsbet.com.au website from January 2001.
ArcNames is the owner of the sportsbet.com domain name. Registration details disclose that ArcNames’ registered address is a PO Box in the city of St Johns in Antigua Barbuda. A search of Antigua Barbuda’s online registry for companies does not reveal any registered company known as ArcNames. The contact email address for the sportsbet.com domain name is arcnames.com. When arcnames.com is entered into the address of a web browser, no website is displayed and instead the user is redirected to the address A search of the domain name arcnames.com does not reveal the domain name owner but instead shows that the domain name is registered with Jewella Privacy LLC (‘Jewella’) which is a company that enables domain name registrants to keep their identity private. An internet search for ArcNames Ltd disclosed via a Panama Papers leaks database shows that ArcNames was a company registered in Seychelles although a search of the Seychelles online company registry does not show a company registered by that name.
The sportsbet.com domain name is registered with CSC Domains. CSC Domains is part of a group of companies bearing similar names associated with Corporations Service Company (‘CSC’). CSC’s office locations include an office in Melbourne, and CSC Domains is registered for GST and has an Australian Business Number allowing it to trade in Australia. CSC Aust, which is an affiliated entity of CSC Domains, is an accredited registrar for domain names in the .au domain space.
From about 2008 until November 2018, Sportsbet engaged in an affiliate program in respect of the sportsbet.com domain name and website located at the URL (‘the sportsbet.com website’). In about April 2008 Sportsbet and the second defendant Spire Marketing Consultants Pty Ltd (‘Spire’)[1] entered into such an arrangement which ended on about 28 November 2018.
[1]Spire was added as a defendant to the proceeding by order made 2 August 2022.
In about June 2021, Sportsbet ascertained that the sportsbet.com website began to focus on sports and leagues popular with Australian consumers, such as the Australian Football League, National Rugby League and Australian horseracing. The sportsbet.com website displayed links that read ‘bet on Australian sports now’, and if clicked on, would redirect to the website (‘the Bet365 Australian website’). Bet365[2] is a competitor of Sportsbet.
[2]Bet365 is actually a trading name owned by Hillside (Australia News Media) Pty Limited (ABN 75 148 920 665). For convenience, the name ‘Bet365’ is used in these reasons.
In response to a letter of demand written by Sportsbet to Bet365 on 21 July 2021, Bet365 confirmed that it had ceased the conduct of concern and would not repeat it and advised Sportsbet that Bet365 would not continue to have any links with the operator of the domain in relation to its services in Australia. On the same day, Bet365 emailed ArcNames and Spire requesting that they remove all Bet365 ads from the website.
In about March 2022, Sportsbet became aware that the hyperlinks on the sportsbet.com website had been reactivated and were redirecting internet users once again to the Bet365 Australian website as well as to another website, The content of the sportsbet.com website was substantially the same as it was in around May and June 2021.
The commencement of the proceeding and the making of the freezing orders
Sportsbet commenced proceedings against ArcNames on 24 May 2022 alleging that by its conduct ArcNames had engaged in trademark infringement, misleading or deceptive conduct contrary to ss 18 and 29 of the Australian Consumer Law (‘the ACL’) and the tort of passing off. Amongst the relief sought by Sportsbet were prohibitory orders restraining conduct giving rise to trademark infringement and contrary to the ACL and a mandatory order requiring ArcNames to transfer the domain name sportsbet.com to Sportsbet.
Sportsbet was concerned that as domain names can be transferred relatively quickly and with ease, there was a real and substantial risk that once ArcNames was served with a writ and statement of claim in the proceeding it would transfer the domain name to either or both of a new entity and a new registrar.
Sportsbet was also concerned that ArcNames could take steps to hide the identity of the new registrant. Because ArcNames is unable to transfer the sportsbet.com domain name without the assistance of the registrar CSC Domains, the ex parte orders obtained by Sportsbet on 26 May 2022 (‘the 26 May 2022 orders’) included the following:
6.ArcNames Ltd must not transfer the domain name sportsbet.com to a third party, or transfer registration of that domain name to another registrar.
7.Each of CSC Corporate Domains Inc and Corporation Service Company (Aust) Pty Ltd must not assist or allow ArcNames Ltd to breach paragraph 6 above, insofar as it is within each company’s power to prevent such a breach from occurring including (without limitation) by placing the sportsbet.com domain name into “Lock” status (where “Lock” means a set of measures that a registrar applies to a domain name, which prevents at a minimum any modification to the registrant and registrar information by the first respondent, but does not affect the resolution of the domain name or the renewal of the domain name, as defined in rule 1 of the Rules for Uniform Domain Name Dispute Resolution Policy).
8. Each of CSC Corporate Domains, Inc and Corporation Service Company (Aust) Pty Ltd must provide written confirmation to the applicant’s solicitor … that the sportsbet.com domain name has been placed into “Lock” status and that the Registrar will not implement any transfer of the sportsbet.com domain name contrary to this order.
9.Each of CSC Corporate Domains, Inc and Corporation Service Company (Aust) Pty Ltd must not notify ArcNames Limited or any other person (other than a lawyer or other adviser to their company) of this application or court proceeding until they have complied with paragraphs 7 and 8 above.
Paragraph 2 of the 26 May 2022 orders specified that orders 6 and 7 had effect and continued until 4:00pm on the return date of 2 June 2022.
The practical effect of the ex parte 26 May 2022 Orders was that it permitted CSC Domains and CSC Aust to be served first, and they would place a lock on the domain name before such time as ArcNames was notified of the orders.
At the further return of the application on 2 June 2022, ArcNames was represented by counsel and requested until 15 June 2022 to file any affidavits in answer to the application but did not oppose the continuation of orders. In the result, the orders made on 2 June 2022 included the following (‘the freezing orders’):
7.Until further order, ArcNames Limited must not transfer the domain name sportsbet.com to a third party, or transfer registration of that domain name to another registrar.
8.Until further order, each of CSC Corporate Domains, Inc and Corporation Service Company (Aust) Pty Ltd must not assist or allow ArcNames Limited to breach paragraph 6 (sic)[3] above insofar as it is within each company’s power to prevent such a breach from occurring, including (without limitation) by placing the sportsbet.com domain name into “Lock” status (where “Lock” means a set of measures that a registrar applies to a domain name, which prevents at a minimum any modification to the registrant and registrar information by the first respondent, but does not affect the resolution of the domain name or the renewal of the domain name, as defined in rule 1 of the Rules for Uniform Domain Name Dispute Resolution Policy).
[3]Clearly, the reference to order 6 was an error.
In addition, on 2 June 2022 the Court made further orders requiring any opposing affidavit material to be filed by 15 June 2022 and for the application to return to Court on 16 June 2022.
At the further hearing of the matter on 16 June 2022, ArcNames did not oppose the maintenance of the freezing orders and the proceeding was listed for trial on 3 October 2022. As the freezing orders in place were expressed to remain ‘until further order’, the freezing orders were left untouched by the orders made that day.
Subsequently, for reasons that are no longer material, the trial date was vacated by orders made 15 July 2022.
The parties subsequently participated in a mediation which did not resolve the proceeding.
ArcNames’ application to set aside the freezing orders
Following the conclusion of the mediation, ArcNames and Spire issued an application by summons seeking to set aside the freezing orders.
I heard the application on 21 October 2022, and on 4 November 2022 made orders dismissing the application and publishing reasons for judgment.[4]
[4]Sportsbet Pty Ltd v ArcNames Ltd [2022] VSC 666.
In summary, the application to set aside the freezing orders failed for two main reasons. First, ArcNames and Spire had not identified any material change in circumstances such as to render the continued maintenance of the orders unjust and that the vacation of the 3 October 2022 trial date on its own did not warrant the setting aside of the orders. In so concluding, I noted that ArcNames has been the registrant of the sportsbet.com domain name since 11 April 1999 and the freezing orders did not prevent it from making use of the domain name in its business. The freezing orders simply prevented the domain name from being transferred by ArcNames to a third party or to another registrar who may assist in the transfer of the registration of the sportsbet.com domain name to another entity.
The second basis upon which I dismissed the application was based on a concern that if the freezing orders were discharged, ArcNames might seek to transfer the registration of the sportsbet.com domain name from CSC Domains, which has a presence in Australia and was observing the freezing orders, to a registrar which did not have an Australian presence or may not recognise and observe the jurisdiction of this Court. If that occurred, any final prohibitory injunctive relief obtained by Sportsbet against ArcNames and Spire restraining infringement of Sportsbet’s trademarks or conduct in breach of the ACL may be unenforceable because no officer of either of the defendants could be committed. The officers were in fact corporations, Doyen Advisory Ltd and NDS Limited, which were wholly outside the jurisdiction. Further, any transfer would deprive Sportsbet of the ability to seek a mandatory order at trial for the transfer of the domain name.
The evidence established a basis for the inference that unless the freezing orders remained in place, there was a realistic possibility that ArcNames would transfer the registration of the sportsbet.com domain name from CSC Domains to a registrar which had no association with Australia and which may not recognise and observe the orders made of this Court, and that if this occurred, ArcNames may transfer the domain name to some other related entity which is not a party to the proceeding and whose identity may be obscured. This in fact was how ArcNames had recently dealt with various other domain names which were not the subject of the freezing order, where the registrar had been changed from CSC Domains to another registrar and then transferred to Jewella, which as noted above operates in such a way as to keep the identity of registrants secret. I noted in the reasons that if the registration of the sportsbet.com domain name was transferred to another registrar or to some other related entity or some entity whose identity was concealed, the effective exercise of the power that the Court currently possessed to restrain use of the sportsbet.com domain name in a manner which contravenes or infringes Australian law would be lost.
No appeal was lodged against the dismissal of that application.
The commencement of the Delaware proceeding
Instead, on 21 November 2022, ArcNames commenced the Delaware proceeding. In the Delaware proceeding, ArcNames applied for an interlocutory injunction enjoining CSC Domains from maintaining or reimposing a registry lock on the sportsbet.com domain name, or otherwise maintaining any restrictions on ArcNames’ ability to change administrative information regarding or to transfer the domain name. The relief sought in the Delaware proceeding therefore required CSC Domains to do exactly that which order 8 of the freezing orders prevented it from doing and contemplated the obtaining of relief which would enable ArcNames to do exactly that which order 7 of the freezing orders prevented it from doing.
Sportsbet became aware of the Delaware proceeding on 2 December 2022 when it was notified by CSC Domains that it had been served with court documents filed in the Delaware proceeding.
It was against the background of those matters that I granted the interim anti-suit injunction on 7 December 2022.
Part of ArcNames’ application in the Delaware proceeding is an argument based on undertaking 6 to the June 2002 freezing order which reads:
The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.
This undertaking is sourced from Form 37AA. In Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd,[5] Foster J of the Federal Court of Australia considered the identical undertaking provided for as part of the standard form order in that court. His Honour noted that the Australian Council of Chief Justices had developed the form of order based on the example freezing order of the English High Court of Justice. Foster J observed that the stated purpose for that rule was to prevent harassment of a defendant in multiple actions around the world and summarised the position from English authority as follow:[6]
If an applicant seeks and obtains from an English court a Mareva injunction which has world-wide operation, it should not be permitted to commence other proceedings in other jurisdictions claiming relief which replicates the relief already granted by the English court.
[5](2014) 312 ALR 389.
[6]Ibid, 400 [51].
His Honour explained that the proposed undertaking was included as a guideline only and was not an undertaking that was required to be given in any case.
At the time of the grant of the interim anti-suit injunction, I acceded to Sportsbet’s application to be released from that undertaking. Given that Sportsbet obtained the freezing orders in support of its causes of action in Australia, there was no reasonable prospect of Sportsbet initiating a multiplicity of actions. Further, and notwithstanding the grant of an interim anti-suit injunction, Sportsbet was concerned that it may still need to advance relevant submissions in the Delaware proceeding which was initiated by ArcNames. As such, I determined that it was appropriate to release Sportsbet from that undertaking which I did by the orders of 7 December 2022.
Events after 7 December 2022
Sportsbet’s requested release from the undertaking in case it had to advance submissions in the Delaware proceeding, despite the interim anti-suit injunction, proved prescient.
Despite the submission in Court by the solicitor for ArcNames on that day to the effect that nothing could happen in the Delaware proceeding until 20 December 2022, the deadline for filing a response by CSC Domains to ArcNames’ application in the Delaware proceeding for a preliminary injunction was in fact 13 December 2022[7].
[7]I accept without reservation that the statement was made in good faith based on instructions.
On 10 December 2022, US counsel for CSC Domains sought consent from the US counsel for ArcNames for an extension of that deadline. The request for that extension was refused.
In the result, on 12 December 2022, US counsel for CSC Domains wrote to US counsel for ArcNames noting that ArcNames would be violating the 7 December 2022 orders if it insisted on a response to its application stating, inter alia:
Ok. In case you have not seen it, attached is a recent order from the Australian action. It is our view that this order prohibits ArcNames from currently proceeding in the Delaware action and by insisting on a response to the PI motion, ArcNames is violating the order of the Australian Court.
(underline added)
By way of response, US counsel for ArcNames sent an email refusing to extend the 13 December 2022 deadline and stated that:
ArcNames does not agree that the Australian Court has jurisdiction over the Delaware case. Therefore we believe that your response is required.
On 13 December 2022, CSC Domains filed an opposition to ArcNames’ motion for a preliminary injunction in the US proceeding and a cross-motion to stay the Delaware proceeding.
On 13 December 2022, US counsel for ArcNames informed counsel for Sportsbet that ArcNames will oppose Sportsbet’s motion to intervene in that proceeding.
On 13 December 2022, Sportsbet filed an opposition to ArcNames’ motion for a preliminary injunction in the US proceeding and a motion to intervene so that it can be heard in the US proceeding and a motion to dismiss or stay the US proceeding.
On 21 December 2022, ArcNames file a notice of voluntary withdrawal of the Delaware proceeding in the District Court of Delaware. The notice was however expressly without prejudice to the ability to re-file the proceeding ‘but not until further appropriate resolution of the situation in Australia’.
The continuation of the anti-suit injunction
It is appropriate to further continue the anti-suit injunction and to provide for its continuation until the hearing and determination of this proceeding.
The Court has power to grant an injunction in order to protect the Court’s processes. As the plurality explained in CSR Ltd v Signa Insurance Australia Ltd (‘CSR’):[8]
The counterpart of a court’s power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion. And in some cases, it is that counterpart power of protection that authorises the grant of anti-suit injunctions.
(citations omitted)
[8](1997) 189 CLR 345, 391 (Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ); see also Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237, [438]-[439] (Warren CJ, Osborn JA and Macaulay AJA).
The plurality explained that a court may in those circumstances grant an injunction to restrain a person from continuing foreign proceedings if they ‘interfere with or have a tendency to interfere with proceedings pending in that court’.[9] The jurisdiction operates in personam to protect the Court’s own processes, once they have been set in motion.[10]
[9]CSR (n 8), 392 (Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ).
[10]Jones v Treasury Wine Estates Ltd (2016) 241 FCR 111, [31], [52] (Gilmour, Foster and Beach JJ).
In the context of this category of anti-suit injunction ‘no question arises whether [the court granting the anti-suit injunction] is an appropriate forum for the resolution of that dispute: it is the only court with any interest in the matter’.[11]
[11]CSR (n 8), 398 (Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ).
Having failed in its application to set aside orders 7 and 8 of the freezing orders, and having determined not to appeal against the dismissal of that application, ArcNames’ commencement and prosecution of the Delaware proceeding constituted nothing less than an ‘end run’ around those orders. The Delaware proceeding seeks to interfere with this proceeding in the most stark fashion. The only rational purpose for the Delaware proceeding is to enable ArcNames to do what the freezing orders prevent it from doing. For the very reason that the freezing orders were made, any transfer of the sportsbet.com will in practical terms deprive Sportsbet of the opportunity to obtain a part of the relief that it seeks in this proceeding, namely the mandatory transfer order, and runs the risk of impeding the effective enforcement of any prohibitory orders.
Having regard to the above matters, including both ArcNames’ conduct in commencing the Delaware proceeding and its conduct in the period post the making of the 7 December 2022 orders, there is a clear risk that the integrity of the processes of this Court are at risk by any prosecution of the Delaware proceeding. The recent notice of voluntary dismissal is welcome but is not sufficient to remove the risk, given the express reservation of the right to refile.
Accordingly, orders shall be made that until the hearing and determination of this proceeding or further order, the first defendant, by its servants, agents, employees, directors, officers or howsoever otherwise, is restrained from taking any step, directly or indirectly:
(a) in the proceeding commenced by ArcNames Ltd against CSC Corporate Domains Inc on 21 November 2022 in the United States District Court for the District of Delaware (‘the Delaware proceeding’) including any step to seek an interlocutory injunction, preliminary or otherwise (save for the discontinuance or withdrawal of the Delaware proceeding and the making of any submissions as to costs in connection with such withdrawal or discontinuance); and
(b) to commence any similar proceeding against CSC Corporate Domains Inc in respect of the sportsbet.com domain name.
Costs
Sportsbet seeks its costs of the application on an indemnity basis. It submits that this is the basis that is ordinarily applied for cases involving contempt of court, as well as conduct that causes the loss of time to the Court and other parties. It otherwise submits that it is relevant to the exercise of the Court’s discretion to award indemnity costs that ArcNames’ conduct has been ‘unmeritorious’ or ‘improper’ such as to ‘warrant the Court expressing its disapproval and doing what it can to ensure the successful party is not out of pocket’.[12] Sportsbet further submits that the conduct engaged in by ArcNames was conduct which intended to procure a breach of this Court’s orders which was unmeritorious and which caused Sportsbet to have to bring the application.
[12]Australian Pharmaceutical Industries Ltd v O’Neale (Costs ruling) [2021] VSC 688, [19] (Sloss J).
It otherwise submits that Sportsbet’s costs should be taxed immediately and be payable forthwith.
As noted above, ArcNames submits that the costs of the application ought be reserved.
ArcNames submits that at its core, these proceedings constitute an attempt by Sportsbet to ‘reverse hijack’ the domain name. Reverse domain name hijacking occurs where a trademark owner attempts to secure a domain name by making allegations against a lawful domain name’s owner. In support of that submission, ArcNames relies upon Sportsbet’s rejection of an open offer of compromise made recently by ArcNames wherein ArcNames offered to consent to all orders sought by Sportsbet in the proceeding other than:
(a) an order for additional damages pursuant to s 126(2) of the Trademarks Act 1995 (Cth); and
(b) transfer of the domain name.
ArcNames submits that the ultimate relief requiring ArcNames to transfer the domain name to Sportsbet is not a realistic prospect and this is relevant to the costs orders currently being sought by Sportsbet.
Otherwise, ArcNames submits that the Delaware proceedings were commenced using US counsel and that the documentation filed in the Delaware proceeding was transparent about the existence of the freezing orders made in the proceeding and that the position taken by US counsel is that the Supreme Court of Victoria has no jurisdiction over CSC Domains which is bound by the Internet Corporation for Assigned Names and Numbers dispute resolution policies which mandate that registrars shall only take actions with respect to domain names including blocking those domain names if directed by a court of competent jurisdiction. It submits that US counsel considers that the Supreme Court of Victoria has no jurisdiction over CSC Domains, nor the domain name which is a dot com domain name with a US trademark registration.
In essence, ArcNames opposes any order for costs on two bases; that it is likely to beat its offer of compromise, and that its commencement of the Delaware proceeding was in good faith and based on the advice of US counsel.
The power to order costs and on what basis is of course discretionary.[13] The discretion must however be exercised judicially and by reference to established principle.
[13]Supreme Court Act 1986 (Vic) s 24(1).
Rule 63.19 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) provides that where the Court grants an interlocutory injunction and afterwards grants a further interlocutory injunction continuing the first injunction with or without modification an order as to the costs of the further injunction shall, unless the Court otherwise orders, include the costs of the first injunction.
Rule 63.20 of the Rules provides that where an interlocutory application is made in a proceeding and no order is made on the application or the order made is silent as to costs, the costs are the parties’ costs in the proceeding unless the Court otherwise orders.
It is common in cases involving the grant of interlocutory injunctions for costs of the application to be reserved.[14] The reason for that course is that the interlocutory injunction will most often be granted in aid of or ancillary to the final relief sought by the applicant in the proceeding. Thus, an applicant may obtain an interlocutory injunction because it has been able to establish that there is a serious question to be tried and the balance of convenience favours the grant of interlocutory relief and yet subsequently fail on the merits at trial. The present case is in a different category. Whilst the injunction has been granted in interlocutory form, it concerns a discrete matter which relates to the integrity of the Court’s processes.
[14]Artcraft Pty Ltd v Passingham [2022] VSC 20, [31] (John Dixon J).
Whilst the costs of the application for the freezing orders were reserved as is customary, the application for an interlocutory anti-suit injunction must be considered in a different light. The freezing orders having been made are required to be observed regardless of the ultimate fate of Sportsbet’s proceeding.
The costs application needs to be considered in a different light to the usual circumstance attending to the making of costs orders in interlocutory applications.
Further and relatedly, I do not consider that ArcNames’ offer is of any relevance. If the relief obtained by Sportsbet at trial is no more advantageous than the offer made by ArcNames, then ArcNames will be able to rely on the offer for such costs protection as it may be advised. Whether Sportsbet will be entitled to relief which exceeds the offer is not relevant to the discrete question as to whether ArcNames’ conduct in commencing the Delaware proceeding, the effect of which if granted would have circumvented the freezing orders and which has resulted in the grant of the anti-suit injunction, warrants a costs order.
Nor do I consider that the fact that the Delaware proceeding was commenced in good faith on the advice of US counsel stands as a bar to any costs order being made, although I accept that it may be relevant to the question of the basis on which such costs should be ordered. Further, whilst the Delaware proceeding did refer to the freezing orders, it made no reference to the recent failed application by ArcNames to set aside those orders.
In light of the above considerations, ArcNames should pay Sportsbet’s costs of the application.
Sportsbet also seeks that those costs be paid on an indemnity basis. Such an order is a departure from the ordinary course and requires special circumstances to justify such an order.[15] In particular, it submits that such an order is appropriate where the conduct of a party has been ‘unmeritorious’ or ‘improper’ such as to ‘warrant the Court expressing its disapproval and doing what it can to ensure the successful party is not out of pocket over it’.
[15]Australian Electoral Commission v Towney(No 2) (1994) 54 FCR 383, 388 (Foster J).
Regardless of Sportsbet’s agitation arising from the Delaware proceeding, costs orders are not intended to punish a party.[16] Costs ordered as part of the successful prosecution of a contempt proceeding arguably constitute an exception, and are customarily ordered on an indemnity basis. In some circumstances an order for payment of such costs on an indemnity basis will serve as a deterrent for any future breaches.
[16]Oshlack v Richmond River Council (1998) 193 CLR 72, 97 [67] (McHugh J).
The cases relied upon by Sportsbet which related to instances of costs orders being made on an indemnity basis are of some relevance but in the end are distinguishable. Whilst Sportsbet submitted that ArcNames’ conduct was to circumvent the freezing orders and sought to procure a breach of them it did not bring proceedings for contempt and nor did it frame its application for an injunction on the basis that it sought to restrain a pending contempt. In that context, I consider that some caution is required in applying the contempt cases by analogy, lest the award of costs be used to punish ArcNames.
The more evenly balanced argument arises from the fact that ArcNames acted on the faith of legal advice provided by its US counsel in commencing the Delaware proceeding. In that respect therefore, its conduct might be said to not be so unreasonable as to warrant an order for indemnity costs.
Ultimately, I consider that costs should be awarded on an indemnity basis. The fact that a party has acted on legal advice cannot operate as a bar to such an order. That is particularly the case here where the Delaware proceeding was commenced on the faith of advice from US counsel with separate representation provided in this proceeding by Australian lawyers. It is the interference with the processes of this Court in respect of which the Australian lawyers are acting which warrants the injunctive relief granted. The fact that ArcNames sought advice from lawyers in a separate jurisdiction and acted on that advice is immaterial.
Further, the critical question is whether the conduct was sufficiently unreasonable in light of existing facts or law such as to warrant an order which ensures that the wronged party is not out of pocket. In my view it was. It is plain that the relief sought in the Delaware proceeding was such as to circumvent the freezing orders. Even if I was to put the commencement of the Delaware proceeding to one side, as soon as ArcNames received notice of this application, when it was served on its Australian lawyers, that should have been enough to prompt the withdrawal of the Delaware proceeding in short order. That would have either obviated the need for this proceeding or at the very least reduced the costs and expenses that had to be borne by Sportsbet.
Even after the making of the interim anti-suit injunction on 7 December 2022, ArcNames sought to maintain and advance the Delaware proceeding until 21 December 2022. This conduct necessitated a further affidavit from Sportsbet’s solicitor made 19 December 2022. Sportsbet should not be left out of pocket for its costs of this discrete and unnecessary application. They will be ordered on an indemnity basis.
Sportsbet also seeks an order for immediate taxation of costs. This too represents a departure from the usual position where such costs are not to be taxed and hence re not to be paid until the conclusion of the proceeding.
In Setka v Abbott MP (No 2),[17] the Court of Appeal summarised the factors that may warrant an order for immediate taxation of costs as one or more of:
[17][2013] VSCA 376, [27] (Warren CJ, Ashley and Whelan JJA).
(a) there is a prospect of considerable delay in the completion of the proceeding;
(b) the issue the subject of the interlocutory order is discrete from what will eventually require determination;
(c) the party against whom the order was made has been guilty of unsatisfactory conduct, ie, conduct that was unreasonable, reprehensible or involving a want of competence or diligence.
The second factor is present here and arguably the third. The issue the subject of the interlocutory order is discrete from that which will eventually require determination and ArcNames’ conduct, particularly that since the 7 December 2022 order, has been unreasonable.
Notwithstanding those matters, I do not propose to depart from the usual course and make an order for immediate taxation. The proceeding will be tried in relatively short order given that the proceeding is fixed for trial in late-May 2023 and given the open offer is likely to be of somewhat confined duration.
Conclusion
Accordingly, the anti-suit injunction will be continued on an interlocutory basis and ArcNames will be ordered to pay Sportsbet’s costs of and incidental to the application to date on an indemnity basis.
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