Macquarie Bank Limited (ACN 008 583 542) v Seagle [2008] FCA 1417 | Case summary

REASONS FOR JUDGMENT 1 By notice of motion filed on 11 July 2008 the applicants, Macquarie Bank Limited and Macquarie Group Limited, seek declarations and orders against the respondent, Mr David Seagle, under Order 35A r 3(2)(c) of the Federal Court Rules. Order 35A r 3(2)(c) provides as follows: If a respondent is in default, the Court may: … (c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings - give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the statement of claim; and (ii) the Court is satisfied it has power to grant; 2 The proceedings were commenced by an application on 9 April 2008. An amended application supported by a statement of claim was filed on 23 May 2008. The applicants claimed that the respondent engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987 (NSW) and in breach of certain settlement agreements with respect to past disputes between the applicants and the respondent about similar conduct. 3 The respondent did not appear when the matter was called for hearing on 12 September 2008. The evidence establishes that the respondent was served with copies of the amended application, statement of claim, notice of motion and affidavits in support and was aware of the hearing date. The applicants submitted that the respondent's failure to appear at the hearing, file any defence when the Court directed he do so, and file any notice of appearance as required by Order 9 r 2(1) of the Federal Court Rules established that the respondent "is in default" within the meaning of Order 35A r 3(2)(c). Hence, the applicants said the Court could grant the relief to which they appeared entitled on the statement of claim. The applicants also said that the evidence demonstrated their substantive entitlement to the relief sought. 4 The allegations of fact in the statement of claim arise from a lengthy history of dispute between the applicants and the respondent with respect to the respondent's registration of domain names. The evidence leads to the following findings of fact. 5 The first applicant conducts a banking business. The second applicant is the ultimate holding company of the first applicant. The second applicant owns all of the core trade marks for the Macquarie group of companies. The Macquarie group of companies are very well known in Australia. 6 The World Intellectual Property Organisation Arbitration and Mediation Centre resolved two disputes between the first applicant and the respondent in 2003 about the respondent's registration of domain names macquarie-bank.com and macquarie-bank.net (cases D2003-0374 and D2003-0890). Both matters resulted in an order for transfer of the domain name to the first applicant. 7 The first applicant also discovered that the respondent had registered another domain name, macquariebank.net. Following negotiations, the first applicant and respondent entered into an agreement signed by the respondent on 24 November 2003. Under this agreement, and in consideration of a payment to the respondent, the respondent agreed to transfer the domain name macquariebank.net to the first applicant and, relevantly to: (1) …; (2) not register any domains at any time in the future that contain the words "macquarie", "macquarie bank", or any other trade marks of the Bank or its products; (3) not register any domain at any time in the future that may confuse or mislead customers of the Bank into thinking that there is an association between that domain and the Bank; (4) …; (5) not to disclose any information, publish any statement (either electronically or otherwise), or do anything, either now or in the future, which may tend to harm or injure the reputation or good name of the Bank, its officers or employees. 8 The first applicant subsequently commenced proceedings against the respondent in the Local Court at Lismore alleging breach of the agreement of 24 November 2003 and claiming damages. These proceedings were concluded by judgment in favour of the first applicant in the sum of $16,431.04 and costs. The first applicant recovered a part of this amount by a garnishee order. On 16 December 2004 the first applicant and respondent entered into a deed reciting these matters and that the parties were "desirous of resolving all matters…in relation to the current and future use of domain names, and have reached agreement accordingly". 9 The substantive terms of this deed included the transfer to the first applicant of some 27 domain names the respondent had registered (such as mac-bank.com, macquariebankgroup.com, maquarie.com, maquaries.com, as well as domains incorporating the names of officers and staff of the first applicant such as alanmoss.com and toby-roberts.com), as well as provisions as follows: 2 Mr Seagle will not register, cause to be registered or be involved in the registration, either by himself, his servants or agents, of any domain names which relate to Macquarie Bank, its business, or its staff, or any such domain names as would suggest an association with the Bank. 3 Mr Seagle agrees to forthwith remove from all websites under his control all references to Macquarie Bank and staff, and henceforth refrain from publishing or disclosing any information concerning the Bank, its business or staff. 4 Mr Seagle agrees not to interfere with the business of the Bank either directly or indirectly. 5 Mr Seagle agrees not to do any act or thing which he knows or should reasonably suspect would harm the reputation of the Bank or its employees. 10 The applicants commenced proceedings against the respondent in 2005 relating to the respondent's registration of a domain name accesseconomics.com and obtaining, through that domain name, confidential information owned by the applicants (as the applicants were involved in a tender with the organisation Access Economics at the time). The Court made orders as sought by the applicants (Macquarie Bank Ltd v Seagle (2005) 146 FCR 400; [2005] FCA 1239). 11 The first applicant also found other cases involving the respondent's registration of domain names resolved by the World Intellectual Property Organisation Arbitration and Mediation Centre. The applicants in these matters were the University of Oxford, Harvey Norman Retailing Pty Ltd, Texas Instruments, Inc, Imperial Chemical Industries, PLC, Imperial College of Science, Technology and Medicine, and Westpac Banking Corporation. The applicants also found two matters resolved by the National Arbitration forum commenced by America Online, Inc against the respondent. Each matter resulted in the making of an order for transfer of the disputed domain name from the respondent to the applicant in the matter. 12 Searches for the owner of a domain name may be carried out using what is known as a "Whois" search. 13 Searches establish that, from about November 2007, the respondent registered further domain names (namely, www.macquarry.com, www.macuarie.info, www.macuarie.biz, www.macuarie.us, www.maquarie.info and www.maquarie.biz, referred to as the "Domain Names" in the applicants' proposed orders). The websites associated with these domain names contain what is described as "sponsored links" to other websites including, for example, to the applicants' websites. However, there is no sponsorship arrangement between the applicants and the respondent. 14 Searches also disclosed that, after the date of the agreement and deed, the respondent published material on websites in respect of which the respondent is the owner of the relevant domain name (namely, HonourMission.com, www.federal-court.net, MyPute.com, TerrorismSupport.com, Arrogantosa.com, BDWaldRon.com, I-C-A-C.com, may-day.biz, www.response.continues.biz and www.muckworry.com, referred to as the "Further Domain Names" in the applicants' proposed orders). The material published on these websites includes material that would tend to harm or injure the reputation or good name of the first applicant, its officers or employees. 15 The applicants submitted that the Domain Names are substantially identical or deceptively similar to the names of the applicants and involve a representation in trade and commerce that the applicants are the registrants of the domain names, which representation is false and likely to mislead and deceive in breach of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act. 16 The applicants referred to CSR Ltd v Resource Capital Australia Pty Ltd (2003) 128 FCR 408; [2003] FCA 279. In CSR the Court held that the registration of the domain names csrsugar.com and csrsugar.com.au represented either that CSR Ltd was the owner of the names or was affiliated with the owner in some way. As CSR Ltd was not the owner or affiliated with the owner the representations were likely to mislead and deceive in breach of s 52 of the Trade Practices Act. 17 In support of their submission that the respondent's conduct was in trade or commerce the applicants pointed to s 6(3) of the Trade Practices Act, the negotiations in 2003 about the disputed domain names, and a statement on one of the respondent's websites that some of his domain names were available for sale. Section 6(3) extends the application of the Trade Practices Act (other than excluded parts that are not presently relevant) to individuals who use postal, telegraphic or telephonic services (the latter encompassing access to the internet). 18 The applicants also submitted that the respondent's conduct of publishing material that would tend to harm or injure the reputation or good name of the first applicant, its officers or employees on the websites associated with the Further Domain Names breached the agreement dated 24 November 2003 and deed dated 16 December 2004. These were matters within the respondent Court's associated jurisdiction (s 32 of the Federal Court of Australia Act 1976 (Cth)). 19 I accept the applicants' submissions summarised above. By registering the Domain Names the respondent breached s 52 of the Trade Practices Act, s 42 of the Fair Trading Act, clause (3) of the agreement dated 24 November 2003, and clauses 2, 4 and 5 of the deed dated 16 December 2004. In publishing material that would tend to harm or injure the reputation or good name of the first applicant, its officers or employees on the websites associated with the Further Domain Names the respondent breached clause (5) of the agreement and clauses 3, 4 and 5 of the deed. 20 In Macquarie Bank (2005) 146 FCR 400; [2005] FCA 1239 at [24] the Court considered the meaning of the words "entitled to on the statement of claim" in Order 35A r 3(2)(c). The Court held as follows: Counsel for the Bank submitted that so long as each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim, the requirement of subr (2)(c)(i) will be satisfied in principle. In light of the evident objectives of the O 35A procedure in providing for a ready and expedient means to dispose of uncontested litigation, I consider that the Bank's submission duly reflects a correct description of the subr (2)(c)(i) requirement. 21 The requirements of Order 35A r 3(2)(c) are satisfied in this case. The respondent is in default. The relief to which the applicants appear entitled on the statement of claim (and which the Court has power to grant) is relief to remedy and restrain the respondent's breaches of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act and the terms of the agreement and deed. 22 The applicants' proposed orders 1 to 4 and 10 involve declarations relating to the respondent's breaches and injunctions to restrain them in relatively conventional terms. The extension of the injunction to restrain the respondent under his own name and various aliases is supported by the evidence. Orders should be made, but the declarations are unnecessary. 23 Proposed orders 5 and 6 involve transfer of the Domain Names (that is, the names deceptively similar to the names of the applicants) to either of the applicants. The applicants submitted that these orders were appropriate as: - (i) the Federal Court is a court of equity as regards matters within its jurisdiction (s 5(2) of the Federal Court of Australia Act, McIntyre v Perkes (1990) 22 FCR 260 and Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461), (ii) the websites are instruments of the respondent's misleading and deceptive conduct and the Court has inherent jurisdiction, in effect, to order delivery up and destruction of these instruments from the respondent's hands, (iii) these orders are necessary not to deny the respondent's title to the infringing articles, but rather to prevent their use in derogation of the applicants' rights, and will operate in aid of the injunctions, and (iv) by analogy, in a case for trade mark infringement the power to order delivery up and destruction covers not only infringing articles but also items used to manufacture infringing articles (Geodesic Constructions Pty Ltd v Gaston (1976) 16 SASR 453 at 471-2). I accept these submissions and will make orders accordingly. 24 Proposed orders 7, 8 and 9, as the applicants acknowledged, are less conventional. They involve cancellation of the Further Domain Names. The applicants submitted that the respondent used these domain names to publish material interfering with the applicants' business and causing harm to their reputation in breach of the agreement and deed, and with the consequence of clear but unquantifiable damage to the applicants. Section 87 of the Trade Practices Act authorises the making of orders if the Court considers that they will compensate for, prevent or reduce the loss or damage. In the alternative, the applicants sought orders for removal of material from the websites identified as being in breach of the provisions of the agreement and deed. 25 The difficulty with the applicants' primary position with respect to proposed orders 7, 8 and 9 is that the Further Domain Names are not deceptively similar to the applicants' names and trade marks. The breaches relied upon by the applicants in their statement of claim arise by reason of the material published on the websites, not the registration of the Further Domain Names. The material, as noted, contravenes clause (5) of the agreement and clauses 3, 4 and 5 of the deed. Accordingly, I consider that the applicants' alternative approach is appropriate and make orders accordingly. 26 Proposed order 11, in effect, would prevent the respondent from registering any domain name without the leave of the Court and the giving of notice to the applicants of the application for leave. The applicants acknowledge that there is no precedent for an order in these terms but submitted that it is supported by the evidence establishing that the respondent is a "vexatious domain name registrant" who has repeatedly registered misleading and deceptive domain names. The applicants described the order as an orthodox step along from the direction made in CSR (2003) 128 FCR 408; [2003] FCA 279 at [41]. In that case Hill J required the Registrar of the Court to forward a copy of the judgment to Melbourne IT Limited (a company that registers domain names) with the suggestion that when dealing with the respondent in that case or its principal or any company in which the principal was a director, a statutory declaration be required to the effect that the principal was not aware of any trade mark or business or company name identical with or substantially similar to the domain name sought to be registered. 27 Although the evidence establishes that the respondent has repeatedly engaged in the registration of misleading and deceptive domain names, the context is not the same as a vexatious litigant order. Vexatious litigant orders are specifically authorised by rules of courts (for example, Order 21 of the Federal Court Rules). Proposed order 11 goes further than I consider necessary to vindicate and protect the applicants' rights. I also consider that the presence of material about the Court on the websites in dispute is a separate matter and immaterial to the applicants' claims (despite the apparent cause of the respondent's publication of that material being the applicants' proceedings against the respondent). For these reasons I will not make proposed order 11. 28 I also consider a direction similar to that made in CSR (2003) 128 FCR 408; [2003] FCA 279 at [41] inappropriate in this case. The direction made by Hill J related to a single domain name registrar (Melbourne IT Limited). I infer that there was evidence before Hill J identifying that registrar as the one used by the respondent to register the offending domain names. In this case the evidence indicates the use of at least three registrars. Their location is unknown. The Whois searches also state that "domain names in the .com and .net domains can now be registered with many different competing registrars". In these circumstances the direction sought by the applicants as an alternative to proposed order 11 appears to have little utility. 29 As the applicants did not seek damages the only remaining issue in the proceedings is that of costs. The applicants sought a gross sum costs order fixed in the amount of $38,308.78 as provided for in Order 62 r 4(2)(c) of the Federal Court Rules. The purpose of this rule is to avoid the time, expense, and delay involved in taxing a bill of costs. 30 The evidence establishes that the applicants' costs are far higher than the sum of $38,308.78 (with actual costs incurred as at 11 July 2008 of $53,570.71 and estimated costs of a further $16,363.34). The respondent has not defended or participated in the proceedings. The evidence suggests that it is unlikely that the applicants will in fact be able to recover the costs they have incurred by reason of the respondent's breaches of the Trade Practices Act, Fair Trading Act, agreement and deed. In these circumstances I accept that a gross sum costs order should be made as sought. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

Macquarie Bank Limited (ACN 008 583 542) v Seagle

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