Capital Webworks Pty Ltd v Adultshop.com Limited

REASONS FOR JUDGMENT 1 The first and second respondents bring a motion for orders that pursuant to O 20 r 2(b) and O 20 r 2(c) of the Federal Court Rules ('FCR') the proceeding be stayed or, in the alternative, be dismissed. 2 The relevant facts are set out in the affidavit of the second respondent sworn on 14 December 2004 (supplemented by an affidavit of Mr Brown sworn on 1 April 2005) and later affidavits of the second respondent sworn 19 January 2005 and 7 February 2005. 3 This action was commenced on 5 April 2000. The first and second respondents contend that the applicant has made no effort to have the matter advanced to trial. Therefore, it is said, the action is an abuse of process and should be stayed or dismissed. 4 Reliance is also placed on FCR O 35A r 3 and O 35A r 2(1)(f) to support stay or dismissal.

background circumstances 3.5 On 5 April 2000, the applicant commenced these proceedings following the removal (on 29 March 2000) of the applicant from the register of the third respondent disentitling the applicant from using the domain name adultshop.com.au ('the domain name'). 4.6 The first respondent became the registered owner of the domain name on 30 March 2000. 5.7 On the same day as it commenced these proceedings, the applicant sought urgent interlocutory relief, inter alia, to restrain the first respondent from carrying on in any manner or by any means whatsoever, the business of selling or offering for sale adult leisure products by or through the internet using the domain name or from directing internet inquiries from the domain name to the first respondent's business. 6.8 On 5 April 2000, I dismissed the application for injunctive relief. 7.9 On 6 July 2000, the applicant filed a notice of motion seeking, inter alia, a further interlocutory injunction against first and second respondents. 8.10 On 13 July 2000, and before the application for the further interlocutory injunction came on for hearing, the third respondent was joined as a party to the proceedings by the applicant. 9.11 On 23 August 2000, the applicant was ordered to provide security for the costs of each of the respondents. The proceedings were stayed pending the provision of security by the applicant. 10.12 The applicant failed to provide security within the timeframe stipulated by the Court's orders and took no further steps in the proceedings whatsoever for over 7 months. 13 At the instigation of the Court, this matter was brought back for directions on 3 April 2001. At that hearing the applicant was directed to provide security by no later than 10 April 2001, which it duly did. 14 At a subsequent directions hearing on 3 May 2001, the applicant indicated through its legal advisors that it was not proceeding with its motion for interlocutory injunction. 15 Consequently, on 29 May 2001, I ordered that the applicant's motion for an interlocutory injunction filed on 6 July 2000 be dismissed and awarded costs to the respondents' favour. 16 On 29 May 2001, the applicant filed and served an amended statement of claim. 17 On 17 October 2001, I made a series of programming orders by consent dealing with the provision of verified discovery ('Discovery Orders') from the parties to the proceedings. 18 On 26 November 2001, the applicant filed and served its verified list of documents. 19 On 9 January 2002, the solicitors for the first and second respondents wrote to the solicitor for the applicant with respect to the adequacy of their client's discovery. 20 On 31 January 2002, the first and second respondents' solicitors filed a notice of motion seeking further and better discovery against the applicant. 21 On 8 February 2002, solicitors for the applicant filed and served an affidavit on behalf of the applicant in opposition to the notice of motion for further and better discovery. 22 In the affidavit, it was deposed that Mr Edward Justin Sweeney, a former director of the applicant had stated that the applicant had no further documents in its possession, custody or power relating to categories of documents found at pars 1.2, 1.4, 1.5, 1.6 and 1.7 of the Discovery Orders. These categories included, inter alia, the applicant's end-of-year financial statements including profit and loss statements, balance sheet details, management reports, quarterly financial statements, trading ledgers and cash books for the financial years ending 30 June 1998, 1999 and 2000. 23 In support of the first application for interlocutory injunctive relief filed on 5 April 2000, the applicant filed an affidavit of Mr Edward Justin Sweeney sworn on 5 April 2000. In par 7 of that affidavit Mr Sweeney deposed that the applicant commenced trading adult products from its website at the domain name on or about 6 July 1999 and that the applicant continued to trade from this website until 31 March 2000. 24 On 25 February 2002, the solicitors for the first and second respondents filed a notice of motion seeking additional security for costs on behalf of the first and second respondents. As it happened, this motion was not heard by the Court until April of the following year as the proceedings were stayed in late February 2002 following an application for further security for costs by the third respondent on 4 February 2002. 25 Following the lifting of the stay of proceedings, on 3 April 2003, I ordered the applicant to provide additional security for both the first and second respondents' costs in the amount of $35 000. The applicant was ordered to pay the costs of that notice of motion including any reserved costs in any event. 26 On 20 June 2003, the applicant paid the additional security into the Court. The payment of the additional security was only made after the solicitors for the first and second respondents had filed a notice of motion seeking orders for judgment owing to the non‑compliance by the applicant of the Court's orders of 3 April 2003. On 23 June 2003, I dismissed that notice of motion, the costs of which were also awarded against the applicant. 27 On 1 October 2003, at a subsequent directions hearing a number of directions were made dealing with, inter alia, a foreshadowed application by the applicant for further and better discovery. Included amongst the directions were orders dealing with the hearing of the first and second respondents' notice of motion for further and better discovery that had been filed in January 2002. 28 The two motions for further and better discovery were heard in late November 2003. On 29 January 2004, I made orders relating to the provision of further and better discovery by the applicant and the first and second respondents. 29 On 7 September 2004, the Court wrote to all of the parties indicating that the matter was listed for directions on 23 September 2004. 30 By letter dated 17 September 2004, the applicant served on the first and second respondents' solicitors an affidavit from its sole director, Ms Geraldine Sweeney, in which she deposed that the applicant had no further documents in its possession the subject of the first and second respondents' notice of motion for further and better discovery. Ms Sweeney also deposed that she had no knowledge or information that the applicant had previously had any such documents in its possession. 31 On 21 March 2003, in an affidavit sworn on behalf of the applicant (in opposition to the first and second respondents' application for further security for costs), Mr Edward Sweeney deposed inter alia: (a) Neither he, nor his brother Charles, had any assets upon which they could raise funds; (b) Mr Sweeney was a full-time university student and his brother (at the time of swearing the affidavit) was looking for employment; (c) The applicant had no current assets other than the cause of action against the respondents; (d) The applicant had no debts other than the funds borrowed to pay the security into the Court; (e) The shareholders of the applicant are professional trustees (one an accountant and one a solicitor) who have no beneficial interest in the applicant or in the cause of action; and (f) The applicant was impecunious and financially embarrassed. 32 Despite these matters, the applicant has been able to pay $65 000 into this Court by way of security for the costs of both the first and second respondents. It is believed that the same sum has also been paid with respect to the third respondent's costs. 33 The identity of the party (or parties) from whom the funds have been obtained has never been disclosed. 34 It is not in dispute that the only director of the applicant is Mrs Geraldine Sweeney. Nor is it in dispute that the applicant has provided instructions in this matter through Mr Edward Charles Sweeney. 35 From an affidavit of his sworn on 21 March 2003, it appears that the shares in the applicant are held by the shareholders on trust for undisclosed beneficiaries. Furthermore, the applicant and the shareholders of the applicant have consistently refused to disclose the identity of the person or entity on whose behalf the action is being maintained.