Ariix LLC v Mahilall

JUDGE: RARES J DATE OF ORDER: 4 APRIL 2014 WHERE MADE: SYDNEY

1. The applicant file and serve an amended draft set of final orders on or before 8 April 2014. 2. The respondent file and serve any submissions he wishes to make in response to the amendments on or before 14 April 2014. 3. The matter be returned for final orders on 16 April 2014 at 9:30 am. THE COURT NOTES THAT: 4. The respondent did not appear today. 5. The respondent emailed the applicant and the associate of Rares J last night indicating that he would not appear today, but made submissions on the orders proposed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1370 of 2013

JUDGE: RARES J DATE: 4 APRIL 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 On 27 March 2014, I gave ex tempore reasons for granting Ariix final relief in the nature of what it had claimed, together with damages assessed at $20,000: Ariix LLC v Mahilall [2014] FCA 429. I directed Ariix to file and serve, on or before 1 April 2014, its proposed final orders consistent with my reasons and the respondent to file and serve, on or before noon on 3 April 2014, his submissions and his draft orders he said ought be made. 2 Ariix complied with those orders. Ariix' draft orders included an order that, within seven days, the respondent assign to Ariix all legal and equitable rights he held in the domain name, ariixcorporate.com, and email addresses using it, and take all necessary steps to allow Ariix to become the registered owner, proprietor or registrant of that domain name. It also applied for indemnity costs fixed at $140,000 based on the affidavit of Mr Neilson, sworn 2 April 2014. 3 In the event, the respondent sent an email early this morning late last night with an apology that he would not be able to be at Court today because he feared his employment would be terminated if he was absent for another day following the four-day hearing last week. The respondent has not appeared today, as he foreshadowed. However, he made detailed submissions in response to the two matters above in the draft orders proposed by Ariix.

Background 4 Ariix' amended originating application, filed on 30 August 2013, made a claim that the respondent pay its costs of its earlier urgent application before the start of proceedings and of these proceedings on an indemnity basis. That claim has been persisted in throughout. Mr Neilson's evidence on costs was that Ariix had incurred counsel's fees of approximately $48,000, court fees of approximately $18,000, and transcript fees of approximately $6,000, as well as its solicitors' professional fees of approximately $170,000 together with miscellaneous disbursements of about $3,000 totalling, without including today's hearing, about $245,000. These sums are GST free because Ariix is located in the United States. The basis of that calculation of indemnity costs assessed at $140,000 is that Ariix seeks full recoupment of its disbursements for counsel's fees, court fees, and transcript fees without discount, and does not seek to recover any of the other disbursements. It seeks only 40% of the professional solicitor/client fees of its solicitors.

The respondent's submissions 5 First, the respondent contended that the time for compliance with Ariix' draft order for the transfer of the domain name should be extended to 28 days. He said that there were difficulties with having Crazy Domains, the operator of the domain name site, deal with such matters timeously. 6 Secondly, he also opposed the application for indemnity costs fixed at $140,000. The respondent argued that, because he was self-represented, he was unfamiliar with the procedures of the Court and had no legal advice in how to approach the matter. He contended that Ariix' commencement and continuation of the proceedings in this Court was not warranted, and that it should have brought them in a lower court, particularly having regard to my award of $20,000 damages. He argued that Ariix' application for indemnity costs fixed at $140,000 was not appropriate on the bases that, first, the amount sought was too large, and secondly, Mr Neilson's evidence of his discussion with a cost consultant that it would cost approximately $10,000 for her to prepare a bill of costs in taxable form was unreasonable, and that other quotes should have been obtained. He argued that, even though he did not think that his case was weak, mere weakness of a case was not sufficient to ground indemnity costs, and referred to Wentworth v Rogers (No 5) (1986) 6 NSWLR 534. He asserted that Ariix had not made any appropriate offers of compromise and that "[a]ll offers came with the farcical request to 'apologise'". He also contended that that was no offer of compromise, but only "a trap to admit guilt". He asserted that Ariix had only itself to blame and should not be blaming him. He claimed that he was not aware that Ariix would apply for indemnity costs if its offers were not accepted and that Ariix had not offered any reasonable compromise.

Consideration 7 I accept the respondent's submission that there may be difficulties with the form of the draft order provided in Ariix' suggested orders for the assignment of the domain name. I consider that the way in which such an assignment should be progressed is by Ariix providing to the respondent whatever relevant document or documents are necessary to bring about the assignment it seeks within seven days and that he have a further seven days to execute and return those documents to Ariix, or to take what other appropriate step is necessary. That mechanism will need to be specified in the final form of the order to be proposed by Ariix to give effect to these reasons. If the time for compliance with such an order has expired, and the respondent has not taken all steps necessary to allow Ariix to become registered as owner, proprietor, or registrant of the domain name, there will then be a clear basis on which the registrar will be able to execute whatever document is necessary and take whatever other steps are necessary in the respondent's name to bring about that result. 8 In my opinion, the other draft orders proposed by Ariix are appropriate. In brief, they are that the respondent be restrained from, first, using the word "Ariix", including in any domain name or email address, secondly, attempting to intimidate or extort Ariix, thirdly, causing to be made public, including via the internet, any false or misleading statement, commentary, or video concerning Ariix or concerning any person so far as that refers to or associates the person with Ariix, fourthly, emailing, messaging, or telephoning any false or misleading statement concerning Ariix to any person, excluding a lawyer advising or representing him. 9 The principles on which the Court will make an order for the payment of indemnity costs were discussed authoritatively by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225, at in particular, 233-234. He noted factors that would warrant the exercise of the discretion to make an indemnity order. Those factors include the making of allegations which ought never to have been made and the undue prolongation of the case by groundless contentions. His Honour said that the party who commenced proceedings in wilful disregard of known facts or clearly established law could also be exposed to such an order. In my opinion, a similar consequence will also apply to a party who defends proceedings in such a way. This is such a case. 10 The making of a lump sum costs order will be appropriate in cases where the assessment of costs will be protracted and expensive, and in particular, where it appears that a party obliged to pay the costs will not be able to meet a liability of the order likely to result from the assessment. However, before that is done, the Court must consider that it can fix a sum fairly between the parties with sufficient confidence that it is an appropriate amount on the materials available: see Hamod v The State of New South Wales [2011] NSWCA 375 at [813] per Beazley JA, with whom Giles and Whealy JJA agreed. Her Honour continued that the power may also be exercised where a party's conduct had unreasonably contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings. She said that the assessment of any lump sum to be awarded must represent a review of the successful party's costs by reference to the pleadings, the complexity of the issues raised on the pleadings, including interlocutory processes, the preparation for final hearing, and the final hearing. However, the Court is not required to undertake a detailed examination of the kind appropriate in a formal taxation or costs assessment: Hamod [2011] NSWCA 375 at [818]-[819]; see also the discussion by Jacobson J in Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 at 812-813 [188]-[200]. 11 I am satisfied that this is a case in which it is appropriate to make a fixed sum costs order that determines the amount payable to Ariix. Having regard to Mr Neilson's evidence, the sum of $140,000 that Ariix seeks falls well short of what would be recoverable on a taxation of an indemnity costs order for costs incurred in the range of $245,000. I am also satisfied that it is appropriate to make a lump sum order in the amount sought by Ariix. The evidence of Mr Nielsen demonstrates that Ariix incurred disbursements of approximately $72,000 for court fees, transcript fees and counsel's fees. That will allow it to recoup only approximately $68,000 in respect of its solicitors' fees, exclusive of any other disbursements in circumstances where Ariix has had to pay solicitor-client costs of $170,000. 12 The proceedings had a difficult history. Initially, Ariix had to begin proceedings to discover whom it should serve, so as to meet the exigencies imposed on it by the conduct of the respondent. As soon as the respondent was served with orders made by Yates J on 16 July 2013, all of the offending conduct appears to have stopped, and has never been repeated. The respondent wrote to Ariix' solicitors on 23 July 2013 that he was hoping everything could be wrapped up before the first return date before me of 25 July 2013. Despite that, not only were the proceedings not wrapped up, but the respondent raised for the first time in his very lengthy affidavit of 1 November 2013 the suggestion that he had been impersonated by some malicious person. I found that suggestion to have been false in substance. The falsity of that suggestion was the occasion for the whole of the four-day hearing, and all of the activities that I have found the respondent to have undertaken beforehand that caused Ariix to come to Court. 13 I found that the respondent's case was, in effect, fantastic. I rejected his claims that an imposter had conducted all of the activities in his name, using the email addresses and Facebook account that actually were his. His defence protracted the proceedings substantially. He was resourceful and persistent in seeking to raise doubts about his being the perpetrator. 14 I am satisfied that the facts of the case warrant the making of a limited indemnity order to the extent of providing for recovery by Ariix of the $140,000. I am also satisfied from Mr Mahilall's own evidence that he is a person of very limited financial substance. Indeed, his submission sent last night stated that if he was dismissed for not being at work to attend today's hearing, he would not be eligible for Centrelink payments for at least a few weeks, that would put him behind on his rent, and he would have no money for food or to buy medication for his parents. There is no doubt that it would be a waste of time and money to have a substantive taxation undertaken of all of the expenses that Ariix has incurred for the purposes of preparing a bill of costs and then proceeding to taxation. 15 I am of opinion that the amount $140,000 probably reflects an overall outcome that would be less than would be recoverable on a party-party taxation, let alone on an indemnity costs order. For these reasons, I consider that it is appropriate to make a fixed sum indemnity costs order in the sum sought by Ariix. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.