Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong

BETWEEN: AUSTRALIAN COMMUNICATIONS AND MEDIA AUTHORITY

AND: MOBILEGATE LTD A COMPANY INCORPORATED IN HONG KONG

REASONS FOR JUDGMENT 1 On 22 May 2009, for reasons which I then gave, I granted certain interlocutory injunctive relief on the application of the Australian Communications and Media Authority (ACMA) - Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong [2009] FCA 539. These reasons should be read in conjunction with those of 22 May 2009. 2 The interlocutory relief granted on 22 May 2009 was not as extensive as the ACMA had sought, but that was because of comprehensive undertakings which were then proffered to the Court. On that day, I also made directions for the further conduct of the proceedings. Those directions included the following: 1. The first respondent provide a response to the applicant's request for particulars dated 15 May 2009 on or before 11 June 2009. 2. The first respondent provide to the applicant a full electronic copy of that database referred to in paragraph 5 of the first respondent's discovery list filed 31 March 2009, or alternatively access to that database for the purposes of the applicant creating an electronic copy, on and from not later than 11 June 2009. 3. The first respondent file and serve an amended discovery list by 11 June 2009, which list: (1) identifies, as fully and accurately as possible, the documents previously held by the first respondent, which it no longer holds, and what became of them; (2) identifies whether each such document is in its power or control and the steps it has taken to obtain documents that are within its power or control; (3) lists, to the extent they are within the discovery categories required of the first respondent, documents in relation to the employment of Ms Teresa Posella; (4) incorporates in the response to item 5 of the said discovery categories, production of any database in relation to the premium telephone number 19910007. 4. The first respondent file and serve a verified supplementary discovery list by 11 June 2009, which list is to incorporate the following further categories of discovery: (1) In relation to the agency agreement between Winning Bid and Mobilegate referred to at paragraph 6 of the defences of Winning Bid and Mobilegate: (i) all documents recording or evidencing that agreement; (ii) all documents recording or evidencing payments between Winning Bid and Mobilegate pursuant to that agreement. (2) All documents recording the change of directorship of Mobilegate referred to in paragraph 8 of the defence of Mobilegate. (3) All documents within the possession, custody or control of Mobilegate, comprising or recording communications between IMP, Jobspy, Winning Bid or Mobilegate and mobile telephone account holders and/or persons using mobile telephone accounts and/or persons acting on behalf of mobile telephone account holders as referred to in paragraphs 57(d) and (e) of the defence of Mobilegate, by which: (i) the mobile telephone numbers referred to in paragraphs 57(d) and (e) were provided to IMP, Jobspy, Winning Bid or Mobilegate by the persons referred to therein; (ii) the consent referred to in paragraphs 57(d) and (e) was sought from the persons referred to therein; (iii) the consent referred to in paragraphs 57(d) and (e) was provided or otherwise communicated to IMP, Jobspy, Winning Bid or Mobilegate by the persons referred to therein. (4) All documents comprising records maintained by any of IMP, Jobspy, Winning Bid or Mobilegate as to the existence of the consent referred to in paragraph 57(e). (5) All documents comprising or recording the authorisation provided by Mobilegate referred to in: (i) paragraph 35 of Mobilegate's defence and paragraph 44 of the statement of claim; (ii) paragraph 51 of Mobilegate's defence and paragraph 61 of the statement of claim. (6) In relation to the SMS messages Mobilegate authorised to be sent as referred to in paragraph 35 of Mobilegate's defence, and paragraph 44 of the statement of claim, copies of all documents recording any income received by Mobilegate from any persons in respect of the sending of those messages. (7) In relation to the SMS message Mobilegate authorised to be sent as referred to in paragraph 51 of Mobilegate's defence and paragraph 61 of the statement of claim, copies of all documents recording any income received by Mobilegate from any persons in respect of the sending of those messages. 3 On 31 July 2009, the First, Second, Fourth, Fifth and Seventh Respondents failed to appear at a directions hearing appointed for that day. Upon the ACMA thereupon signifying an intention to move under O 35A for orders in default of appearance by these Respondents, I made directions for the service of such an application upon them returnable on 11 August 2009. On that date also, the First, Second, Fourth, Fifth and Seventh Respondents failed to appear. 4 I am satisfied on the evidence that the First, Second, Fourth, Fifth and Seventh Respondents were given notice both of the appointment of a directions hearing on 31 July 2009 and, further, that an application for default judgment was to be heard on 11 August 2009. 5 The basis for the ACMA's application is that, in terms of O 35A r 2(2)(c) of the Federal Court Rules, each of the First, Second, Fourth, Fifth and Seventh Respondents has failed to attend a directions hearing. The ACMA points to the directions hearing of 31 July 2009 in this regard. 6 There are other bases upon which the First, Second, Fourth, Fifth and Seventh Respondents are said to have rendered themselves liable to default judgment. These, as put by the ACMA in submissions, may be summarised as follows: 9. The first respondent: 9.1 has failed to comply with an order of the Court in the proceeding, namely paragraphs 1 to 4 of the Court's orders of 22 May 2009, being a circumstance of default on the part of a respondent described in FCR O35A r2(2)(d); 9.2 has failed to produce a document for inspection in accordance with paragraph 2 of the Court's orders of 22 May 2009 (see affidavit of Katrina Close sworn 4 August, filed 5 August 2009), being a circumstance of default on the part of a respondent described in FCR O35A r2(2)(f); 9.3 has failed to serve its further list of documents in accordance with paragraphs 3 and 4 of the Court's orders of 22 May 2009 (see affidavit of Katrina Close sworn 4 August, filed 5 August 2009), being a circumstance of default on the part of a respondent described in FCR O35A r2(2)(f); 9.4 … [refers to a non-appearance on 31 July 2009] 9.5 has failed to defend the proceeding with due diligence, by reason of the above matters, and by its failure to file a current appearance in the proceedings, being a circumstance of default on the part of a respondent described in FCR O35A r2(2)(a) and (h). 10. Each of the second, fourth, fifth and seventh respondents: 10.1 … [refers to a non-appearance on 31 July 2009] 10.2 has failed to defend the proceeding with due diligence, by reason of the above matters, and by the respondents' failure to file a current appearance in the proceedings, being a circumstance of default on the part of a respondent described in FCR O35A r2(2)(a) and (h). 7 The affidavit evidence cited does bear out the further default allegations made by the ACMA. Though it is relevant to note these other events of default in relation to the disposition of the ACMA's present application, it is sufficient to enliven the jurisdiction that the Respondents concerned have failed to attend a directions hearing. As to a failure to defend the proceeding with due diligence, the absence of any appearance on 11 August 2009 is also pertinent. 8 Though there was no appearance by any of the First, Second, Fourth, Fifth and Seventh Respondents on 11 August 2009, a letter dated 6 August 2009, apparently signed by Mr Salcedo, the Fifth Respondent, was received by the District Registrar that day but after the time when I had reserved judgment. It was drawn to my attention later that day. By my direction, it was copied to the solicitor for the ACMA, the Australian Government Solicitor (AGS) with a request that any submissions concerning the letter, including its being marked as an exhibit, be filed and served by 13 August 2009. It was not apparent on the face of the letter that Mr Salcedo had seen fit to copy his letter to the AGS. 9 Mr Salcedo states in his letter that it is also being sent on behalf of Messrs Owen and Maughan, respectively the Fourth and Seventh Respondents. It is obvious from the letter that he was well aware of the hearing dates appointed for 31 July 2009 and for 11 August 2009. He concludes, "We do not wish to waste the court's time in these proceedings and respectfully await your judgment on 11th August 2009". 10 In the letter, Mr Salcedo ascribes his non-appearance and that of his colleagues on 31 July 2009 and 11 August 2009 to the financial position in which they find themselves as a result of the First and Second Respondents ceasing to trade and an inability to access the corporate bank account of the First Respondent. The latter circumstance he ascribes to actions of the Sixth Respondent, Mr Moles. It is not possible to judge the veracity of Mr Salcedo's allegations concerning Mr Moles. 11 Mr Salcedo states that he and his colleagues did not wish to appear without the services of a lawyer but could not afford that. Like any other individual party, each of the Fourth, Fifth and Seventh Respondents is entitled to represent himself if he chooses. None of them have indicated an active interest in so doing or even that they are actively seeking alternative legal representation. The preference voiced by Mr Salcedo is not a basis for the ignoring of the progression of a case in the Court in accordance with the Court's directions. That case management considerations are relevant to the exercise of discretions in respect of matters of practice and procedure arising under the rules of court was recently emphasised by the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 at [30]. 12 Mr Salcedo also makes reference to negotiations having occurred with the ACMA in relation to the proceedings and attaches, without the permission of the AGS, a copy of a "without prejudice" letter written by the AGS in that regard. That attachment should not have occurred. 13 The ACMA, by the AGS, does not object to the marking of the letter as an exhibit but with the proviso that the attachment should not be available for general searching. That seems to me the appropriate course to take in respect of it. I shall give directions accordingly. 14 Whether or not to grant declaratory relief and final injunctive relief either in the terms sought or as varied requires the exercise of a discretion. It does not follow axiomatically from the non-appearance of the respondents concerned that the ACMA is entitled to injunctive and declaratory relief. 15 Having regard to the letter itself and on the whole of the evidence read on the application, I am prepared to infer that there is some informal agreement whereby Mr Salcedo has corresponded on behalf of Messrs Owen and Maughan. The case is not therefore one where these respondents have completely ignored court process and proceedings such that there is an unexplained non-appearance. Nonetheless, there has been no appearance and no disposition to continue to prosecute a defence personally. That to me tells in favour of proceeding to default judgment rather than to appoint yet a further directions hearing by way of affording these individual respondents a final chance to prosecute a defence. 16 The non-appearance of the corporate respondents is not explained, save for the suggestion that they have ceased to trade. Whether that is true or not, they have now demonstrated a disposition not to prosecute a defence of the proceedings. The First Respondent is also in default in relation to a number of interlocutory directions. These factors to me tell in favour of proceeding to default judgement in respect of the corporate respondents. 17 The relief sought by the ACMA comprises declaratory relief, injunctive relief and the making of penalty and financial compensation orders. Only the first two of these were sought in the first instance by the ACMA on 11 August 2009. As to penalty and financial compensation orders, the ACMA then sought that a separate hearing date be appointed for consideration of the making of such orders with directions as to the filing before then of related affidavit material. 18 Order 35A r 3(2)(c) is clear in its provision that, in the case of a proceeding commenced by an application supported by a statement of claim, the Court may give judgment against a respondent for the relief that the Applicant appears entitled to on the statement of claim and that the Court is satisfied that it has power to grant. 19 Further, the Court is alternatively empowered to give judgment or make any other order against the respondent concerned. In other words, there is no requirement that evidence be adduced by the parties seeking default judgment in respect of the matters pleaded in the statement of claim. Instead, the statement of claim must be scrutinised to see whether it discloses a cause of action in law in respect of the relief sought. In Humphreys v Halifax Vogel Group Pty Ltd (ACN 104 808 853) (2008) IPR 144 at 146, [6] to [9], I concluded that this was the effect of the rule. I shall not repeat what is there stated. 20 That is not to say that the receipt of evidence is precluded on an application for default judgment under O 35A. Prior authority establishes that additional evidence consistent with a party's case as pleaded in the statement of claim may be considered with respect to the relief sought: Australian Competition and Consumer Commission v Dataline Net AU Pty Ltd (2006) 236 ALR 665 (Kiefel J (affirmed Australian Competition and Consumer Commission v Dataline.Net.AU Pty Ltd (2007) 161 FCR 513) (Dataline). 21 In Dataline, Kiefel J also noted of O 35A that: (a) it did not deny the possibility of either additional or different relief open on the allegations in the statement of claim being granted; and (b) declaratory relief may be granted under O 35A. 22 The statement of claim alleges numerous contraventions of s 16(1) and s 16(9) of the Spam Act 2003 (Cth) (Spam Act). It further alleges contraventions by the First and Second Respondents of s 52 of the Trade Practices Act 1974 (Cth) with the Fourth, Fifth and Seventh Respondents being alleged to be parties to these corporate contraventions. Albeit at the risk of over-generalisation, the conduct alleged may be summarised as the deceptive use of fabricated profiles on dating websites in order to obtain mobile telephone numbers for the purpose of sending or causing to be sent unsolicited commercial electronic messages to the unsuspecting telephone account holders. Yet, further conduct alleged involves the sending of unsolicited commercial electronic messages which purport to supply a "single club" or "fantasy chat" service to unsuspecting telephone account holders. 23 So far as the First, Second, Fourth, Fifth and Seventh Respondents are concerned, I am satisfied that the statement of claim alleges contraventions known to law of the Spam Act and the Trade Practices Act and which enliven the Court's jurisdiction to grant declaratory and injunctive relief. I am further satisfied that the injunctive relief sought is not merely a bland recitation of statutory prohibitions but rather has been framed with sufficient precision to enable the Respondents concerned to identify the conduct which is the subject of restraint and so as to permit ready identification of an event of default. The declarations sought are in these terms: Declarations concerning contraventions of the Spam Act 2003 (Cth) 1. A declaration that the first respondent, whose central management and control was in Australia, by sending short message service ("SMS") messages or causing SMS messages to be sent via 19773366 and 19910006 to Australian mobile telephone numbers, which it had obtained by deception using fabricated dating website profiles, for the purpose of dishonestly obtaining the account holders' acceptance of its Safe Divert service, has engaged in conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 2. A declaration that the second respondent, whose central management and control was in Australia, by sending SMS messages or causing SMS messages to be sent via 19773366 to Australian mobile telephone numbers, which it had obtained by deception using fabricated dating website profiles, for the purpose of dishonestly obtaining the account holders' acceptance of its Safe Divert service, has engaged in conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 3. A declaration that the first respondent, whose central management and control was in Australia, by sending SMS messages or causing SMS messages to be sent via 19724253 to Australian mobile telephone numbers, which it had obtained by deception using fabricated dating website profiles, for the purpose of dishonestly obtaining the account holders' acceptance of its Maybemeet service, has engaged in conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 4. A declaration that the first respondent, whose central management and control was in Australia, by sending further SMS messages or causing further SMS messages to be sent via 19773366 and 19910006 to Australian mobile telephone account holders who had replied "yes" in circumstances where the first respondent knew that their acceptance of its Safe Divert service had been obtained by deception, has engaged in further conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 5. A declaration that the second respondent, whose central management and control was in Australia, by sending further SMS messages or causing further SMS messages to be sent via 19773366 to Australian mobile telephone account holders who had replied "yes" in circumstances where the second respondent knew that their acceptance of its Safe Divert service had been obtained by deception, has engaged in further conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 6. A declaration that the first respondent, whose central management and control was in Australia, by sending further SMS messages or causing to be sent further SMS messages via 19724253 to Australian mobile telephone account holders who had replied "yes" in circumstances where the first respondent knew that their acceptance of its Maybemeet service had been obtained by deception, has engaged in further conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 7. A declaration that each of the first and second respondents, whose central management and control was in Australia, by sending SMS messages or causing SMS messages to be sent via 19773377 to Australian mobile telephone numbers for the purpose of offering to supply a fantasy chat service without obtaining the consent of the mobile telephone account holders, has engaged in conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 8. A declaration that the first respondent, whose central management and control was in Australia, by sending SMS messages or causing SMS messages to be sent via 19910007 to Australian mobile telephone numbers for the purpose of offering to supply a fantasy chat service without obtaining the consent of the mobile telephone account holders, has engaged in conduct in contravention of s.16(1) of the Spam Act 2003 (Cth). 9. A declaration that each of the fourth, fifth, and seventh respondents: 9.1 aided and abetted; and 9.2 was knowingly concerned in and party to; each of the first and second respondents' contraventions of s.16(1) of the Spam Act 2003 (Cth) pleaded in paragraphs 1, 2, 3, 4, 5, 6, 7 and 8and thereby engaged in conduct in contravention of s.16(9) of the Spam Act 2003 (Cth). 10. A declaration that each of the fourth and seventh respondents: 10.1 aided and abetted IMP, whose central management and control was in Australia, to send SMS messages or cause SMS messages to be sent via 19773366; and 10.2 was knowingly concerned in and party to IMP, whose central management and control was in Australia, sending SMS messages or causing SMS messages to be sent via 19773366: to: 10.3 Australian mobile telephone numbers, which its servants or agents had obtained by deception using fabricated dating website profiles, for the purpose of dishonestly obtaining the account holders' acceptance of its Safe Divert service; 10.4 to Australian mobile telephone account holders who had replied "yes" in circumstances where the company knew that their acceptance of its Safe Divert service had been obtained by deception; 10.5 in contravention of s.16(1) of the Spam Act 2003 (Cth), and thereby engaged in conduct in contravention of s.16(9) of the Spam Act 2003 (Cth). Declarations concerning contraventions of the Trade Practices Act 1974 (Cth) 11 A declaration that each of the first and second respondents, in trade or commerce: 11.1 by the use of dating website profiles created and registered on dating websites, represented to dating website members that the individuals described in those profiles were members of the respective dating website; and further, 11.2 by communicating with dating websites as those profiles, represented to dating website members that the communication was with the individuals described in those profiles; when in fact: 11.3 the individuals described in the profiles did not exist; 11.4 it did not inform the dating website members that it had created the profiles; 11.5 it did not inform the dating website members that their mobile telephone numbers were being obtained for the purpose of collecting mobile telephone numbers of Australian mobile telephone account holders to be recipients of commercial electronic messages via 19773366, 19910006 and/or 19724253; and 11.6 any communication between dating website members and the profiles was between it and those members; engaged in conduct that was misleading or deceptive or likely to mislead or deceive contrary to s.52 of the Trade Practices Act 1974 (Cth). 12. A declaration that each of the first and second respondents, in trade or commerce, by sending SMS messages or causing SMS messages to be sent to Australian mobile telephone numbers which represented that a dating website member wanted to communicate with the mobile telephone account holder using its advertised Safe Divert service when in fact the SMS messages were generated by its agent, has engaged in conduct that is misleading or deceptive or likely to mislead or deceive, in contravention to s.52 of the Trade Practices Act 1974 (Cth). 13. A declaration that the first respondent, in trade or commerce, by sending SMS messages or causing SMS messages to be sent to Australian mobile telephone numbers which represented that a dating website member wanted to communicate with the mobile telephone account holder using its advertised Maybemeet service when in fact the SMS messages were generated by its agent, has engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to s.52 of the Trade Practices Act 1974 (Cth). 14. A declaration that each of the first and second respondents, in trade or commerce, by sending further SMS messages or causing further SMS messages to be sent to Australian mobile telephone numbers which represented that they were written by a dating website member when in fact the SMS messages were written by individuals engaged by its agent, has engaged in conduct that is misleading or deceptive or likely to mislead or deceive, contrary to s.52 of the Trade Practices Act 1974 (Cth). 15. A declaration that each of the fourth, fifth and seventh respondents: 15.1 aided and abetted; and 15.2 was knowingly concerned in and party to; each of the first and second respondents' contraventions of the s.52 of the Trade Practices Act 1974 (Cth) pleaded in paragraphs 11, 12, 13 and 14. 16. A declaration that each of the fourth, fifth, and seventh respondents: 16.1 aided and abetted; and 16.2 was knowingly concerned in and party to; IMP, through its agent, in trade or commerce: 16.3 by the use of dating website profiles created and registered on dating websites, representing to dating website members that the individuals described in those profiles were members of the respective dating website; and further, 16.4 by communicating with dating websites as those profiles, representing to dating website members that the communication was with the individuals described in those profiles; when in fact: 16.5 the individuals described in the profiles did not exist; 16.6 it did not inform the dating website members that it had created the profiles; 16.7 it did not inform the dating website members that their mobile telephone numbers were being obtained for the purpose of collecting mobile telephone numbers of Australian mobile telephone account holders to be recipients of commercial electronic messages via 19773366; and 16.8 any communication between dating website members and the profiles was between it and those members; in contravention of s.52 of the Trade Practices Act 1974 (Cth). 24 The ACMA also seeks the grant of injunctive relief in the following terms: 3. An order that each of the first, second, fourth, fifth and seventh respondents be restrained, for a period of 7 years, from: 3.1. creating, submitting or registering, or causing to be created, submitted, or registered, profiles on dating websites or social networking websites; 3.2. posting, or otherwise publishing, or causing to be posted or published, photographs or other images of individuals on any dating websites or social networking websites without first obtaining the written permission of those individuals to do so; 3.3. communicating, or causing communications to occur, with users of dating websites or social networking websites on those websites through any fictitious profiles; or 3.4. being directly or indirectly knowingly concerned in or party to any corporation, person or other entity engaging in any of the conduct set out in subparagraphs 3.1 to 3.3 above, in circumstances where: 3.4.1. that corporation, person or other entity is incorporated in or resides in or carries on business in Australia; or 3.4.2. the said conduct of the corporation, person or other entity involves communications directed to persons in Australia, or websites accessible by persons in Australia. 4. An order that each of the first, second, fourth, fifth and seventh respondents be restrained, for a period of 7 years, from: 4.1. sending or causing to be sent any electronic message from Australia to a mobile telephone number, or to any Australian mobile telephone number, which: 4.1.1. falsely represents that an individual who is a member or user of a dating website or other social networking website wishes to communicate with the account holder of that mobile telephone number ("the account holder"); or 4.1.2. falsely purports to be sent from or on behalf of an individual who wishes to communicate with the account holder; or 4.1.3. promotes, advertises or offers to supply a good or service unless the account holder gave prior written consent to receive the message, or messages of that nature, and the respondent has been provided with and is in possession of a copy of that consent; 4.2. being directly or indirectly knowingly concerned in or party to a corporation, person or other entity engaging in the conduct set out in subparagraph 4.1 above. 5. An order that each of the first, second, fourth, fifth and seventh respondents be restrained, for a period of 7 years, in relation to the operation by any person of a fantasy chat service (being a SMS text service between two parties, with one party paying for the service, and the other party sending messages portraying a fictional relationship between them of a sexual or companionship nature), from: 5.1 sending or causing to be sent any commercial electronic message from Australia or to any Australian mobile telephone number in relation to that fantasy chat service; or 5.2 being directly or indirectly knowingly concerned in or party to any corporation, person or other entity sending or causing to be sent any commercial electronic message from Australia or to any Australian mobile telephone number in relation to that fantasy chat service; unless the account holder gave prior written consent to receive the message, or messages of that nature, and the respondent has been provided with and is in possession of a copy of that consent. 25 A concern which I have is that it be made clear on the face of the injunctions that they do not exceed, in terms of their territorial reach or connection with Australia, the jurisdiction possessed by the Court. Subject to the making of some modifications so as to reflect these considerations, I propose to grant declaratory and injunctive relief in the terms sought. A considerable public interest element attends the granting of such relief. And that remains the case even if the First and Second Respondents have ceased trading. Further, the period of restraint seems to me to be appropriate having regard to the nature and extent of the pleaded contraventions. This discloses sustained and systemic violation of statutory prohibitions rather than a mere isolated aberration. 26 The First, Second, Fourth, Fifth and Seventh Respondents should pay the Applicant's costs of and incidental to the proceedings, including reserved costs. For the avoidance of doubt those reserved costs include the costs of and incidental to the directions hearing on 31 July 2009 and the costs of and incidental to the notice of motion for default judgement. The costs concerned are to be taxed if not agreed.

27 I shall make separate directions in respect of the penalty and financial compensation order aspects of the case against these Respondents. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Associate: Dated: 14 August 2009 Counsel for the Applicant: Ms M Brennan

Solicitor for the Applicant: Australian Government Solicitor

Solicitor for the First, Second, Fourth, Fifth and Seventh Respondents: No appearance by these Respondents