Wood v Dancertext

[2008] FMCA 273

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WOOD v DANCERTEXT PTY LTD & ANOR [2008] FMCA 273

TRADE PRACTICES – COSTS – Indemnity basis.

Trade Practices Act 1974 (Cth), ss.51AB, 52, 75B

Wood v Dancertext & Anor [2007] FMCA 1410
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397
Colgate-Palmolive Company & Anor v Cussens Pty Ltd (1993) 46 FCR 225

Applicant: HOPE UMIT WOOD

First Respondent: DANCERTEXT PTY LTD

Second Respondent: SIMON OWEN

File Number: SYG 991 of 2007

Judgment of: Raphael FM

Hearing date: 26 February 2008

Date of Last Submission: 27 February 2008

Delivered at: Sydney

Delivered on: 10 March 2008

REPRESENTATION

Solicitors for the Applicant: Youth and Enterprise Legal Centre

First and Second Respondents: No appearance

ORDERS

1. The first and second respondents pay the costs of the proceedings on an indemnity basis.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 991 of 2007

HOPE UMIT WOOD

Applicant

And

DANCERTEXT PTY LTD

First Respondent

SIMON OWEN

Second Respondent

REASONS FOR JUDGMENT

1. On 21 August 2007 I gave judgment for the applicant Ms Wood against two respondents, Dancertext Pty Ltd and Simon Owen, who I found had breached ss.51AB, 52 and 75B of the Trade Practices Act 1974 (Cth): Wood v Dancertext & Anor [2007] FMCA 1410. The action for which the first respondent was found liable, and the second respondent found to have been knowingly involved, was the creation of an SMS ‘scam’ whereby the applicant was induced to spend several thousand dollars on sending and receiving SMS messages from a totally non-existent ‘secret admirer’. The respondents were, until a few days before the hearing, represented by a firm of solicitors. Those solicitors had filed in court responses on behalf of the respondents which denied liability on the basis that the provider of the SMS service was not Dancertext Pty Ltd but was another company, which the evidence revealed had as its sole shareholder, and had as its director and secretary, the second respondent. On 9 August 2007, a few days before the case was due to be tried on 13 August 2007 (a hearing date that had been set at a directions hearing on 31 May 2007), a notice of motion issued by the applicant came before me. That notice of motion required the respondents to comply with a notice to produce. On that day the solicitors for the respondents indicated that their retainer had been ended and that they wished to withdraw from the proceedings. After hearing from the solicitors I allowed them to withdraw, having made certain orders requiring their clients to be informed of this fact and of the fact that the hearing would proceed on 13 August 2007. I also ordered that the solicitors provide an address for service of the respondents. In that regard I am advised that only a PO Box address was given in respect of the second respondent.

2. It is fair to say that during the course of the interlocutory procedures the solicitor for the applicant made it plain that he had strong views about the conduct of the respondents.  At the end of the hearing he informed me that he wished to make two applications, the first being an order for indemnity costs against the respondents.  As the respondents were not present in court when the matter was heard, I indicated in my judgment that I would reserve the question of costs and require a notice of motion to issue for that matter to be heard.  These reasons reflect my decision upon that motion.

The application for indemnity costs

1. The applicant submits that the respondents acted without sufficient grounds for the purposes for causing trouble or annoyance as expressed in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397. It will be recalled that in that case Woodward J said at 401:

   “I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.  In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.  Such cases are, fortunately, rare.  But when they occur, the court will need to consider how it should exercise its unfettered discretion”.

2. The applicant argues that the litigation was conducted by the respondents with undue prolongation of groundless contentions: Colgate-Palmolive Company & Anor v Cussens Pty Ltd (1993) 46 FCR 225 per Sheppard J. The ‘groundless contention’ referred to by the applicant is the contention that the person responsible for the SMS communication was International Machinery Parts Pty Ltd and not Dancertext Pty Ltd. My reasons for coming to the conclusion that this statement was incorrect are found at [12] and [13] of my judgment:

   “The way in which these services work is somewhat complex.  There is a company formed in the United Kingdom called MBlox Limited.  MBlox provides a billed premium SMS service for Australian mobile networks.  It charges a fee to set up a system whereby communications can be made between the MBlox party and subscribers to the mobile phone services run by Vodafone, Telstra, Optus and in future other mobile phone companies.  A monthly service charge is paid as are some statutory fees.  When the arrangement is in existence any SMS issuing out of one of the numbers listed in the MBlox agreement or messages received by that number are charged at a premium rate to the normal carrier charge.  The individual mobile phone owner is charged at these premium rates for both incoming and outgoing messages.  The calls are shown on the mobile phone user’s phone bill as MBlox and MBlox is shown as a provider.  The premium rate for incoming messages to the subscriber’s telephone is approximately $1.11 and the rate for messages sent by the subscriber is $5.00.  By arrangement between the company contracting with MBlox and the carrier the charges paid by the subscriber are divided up.  It would appear that the contractor with MBlox ends up with anything between $3.29 and $1.91 of any $5.00 message and between 49¢ and 41¢ of a $1.10 message.

   The applicant tendered as part of Exhibit 1 copy contracts between a company described as Dancertext Australia and MBlox which gave the company number of the first respondent and the telephone numbers 19735555 and 19736666.  The number 19735555 was the main number used in communications between the applicant and the “secret admirer” I am not able to be sure that the number 19736666 mentioned in the service addendum to the agreement that I have referred to is a misprinting of the number 19733366 that was used by the applicant or the number referred to as 19733366 in the ACMA letter.  I am satisfied that the applicant was billed using the MBlox arrangements that I have discussed and I am therefore satisfied that the company responsible for those arrangements was not International Machinery Parts Pty Ltd but the first respondent Dancertext Pty Limited.  The evidence provided by the applicant is corroborated by certain correspondence between the applicant’s solicitor acting on behalf of another party relating to revenue from the use of the number 19735555 which was responded to by the then solicitors for the first respondent confirming that they acted for the first respondent.  The letter from the applicant’s solicitors did not identify the first respondent as the person to whom the letter of complaint was being sent, it was only the letter from the first respondent’s solicitors that indicated that that company accepted that it controlled the relevant telephone number”.

3. There is an additional matter of importance.  The second respondent, Mr Owen, was a director of International Machinery Parts Pty Ltd and so, even though that company was in liquidation, he may well have had the same accessorial liability as I found he had in respect of Dancertext Pty Ltd.  Mr Owen had signed the agreement with MBlox Limited on behalf of Dancertext Pty Ltd.  He knew perfectly well who controlled that telephone number.  He sought at first to utilise a letter received by International Machinery Parts Pty Ltd from ACMA, being an adverse finding against International Machinery Parts Pty Ltd.  The findings made in that letter appear to have been inaccurate, at least so far as the telephone number 1973 5555 is concerned.  A finding by a third party to which the applicant was not a party could not constitute a defence to this action.  The only real evidence of who was the MBlox Limited account holder for that particular number was the agreement with MBlox Limited itself.  That clearly stipulated that Dancertext Pty Ltd was the responsible party.

4. I am quite satisfied in the absence of any evidence from him that Mr Owen acted wrongfully in pursuing this form of defence at any time, and especially so after the MBlox Limited contract had been subpoenaed from MBlox Limited and had been made available to him through his solicitors.  This reprehensible conduct, coupled with the fact that the proceedings were constantly delayed by the actions of the respondents, who then did not appear at the hearing at all, allows me to exercise my discretion to make an order for indemnity costs against the first and second respondents. 

I certify that the preceding six (6) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate: 

Date:  10 March 2008