Titan Support Systems Inc v Nguyen

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 504 of 2014

JUDGE: PERRY J DATE: 20 AUGUST 2014 PLACE: SYDNEY

1. INTRODUCTION 1 On 15 August 2014, I made orders sought by the applicant, Titan Support Systems Inc. (Titan), pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) that default judgment be entered in its favour. I set out below my reasons for making those orders. 2 Rule 5.23(2)(c) provides that: If a respondent is in default, an applicant may apply to the Court for: … (c) if the proceeding was started by an originating application supported by a statement of claim,… - an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled;… 3 Under r 5.22, a party is in default if the party relevantly fails to attend a hearing in the proceeding, or fails to prosecute or defend the proceeding with due diligence. 4 The requirement in r 5.23 that the Court be satisfied that the applicant is entitled to the relief claimed does not require proof by way of evidence. Rather, it is necessary to demonstrate that, on the face of the statement of claim there is a claim for the relief sought. Thus, the Court must be satisfied that it has jurisdiction to grant the relief and each element of the relevant civil wrong must be properly and discreetly pleaded. 5 The reason why in general it is not appropriate to lead evidence on a default judgment is that the allegations contained in the statement of claim are taken to be admitted. Therefore considerations of fairness require that the admission of evidence to supplement the statement of claim be, in general, refused: ACCC v Dataline (2006) 236 ALR 665 at 678 [48] Kiefel J. 6 This does not however, preclude any evidence being adduced. Evidence should be led, as here, of service of the originating application and statement of claim, and the amended originating application and amended statement of claim. Evidence was also led to prove service of the notice that the matter had been set down for hearing. There is also some support in the authorities for the view that evidence might be permitted concerning matters which would not ordinarily be the subject of pleading concerning the appropriateness of granting the relief sought where the grant of that relief is discretionary: Dataline at [49]. However, in no case would it be proper to allow reliance upon evidence that would alter the pleaded case or supplement it where the matters which are the subject of evidence ought properly to have been pleaded. 7 Due to the seriousness of the consequences of a judgment in default, the rules providing for judgment in default must be strictly construed and the discretion exercised cautiously.

2. SHOULD THE DISCRETION TO AWARD JUDGMENT IN DEFAULT BE EXERCISED?

2.1 Relevant defaults by the respondent 8 The primary reason for the orders sought is that the respondent, Mr Nguyen, has failed to defend the matter with any diligence or, indeed, at all. No contact has been made by Mr Nguyen with the Court following service of the proceedings. 9 The originating application, statement of claim and genuine steps statement were filed by Titan on 22 May 2014. Mr Nguyen was served with sealed copies of the original application and statement of claim, the genuine steps statement and affidavits in support of Titan's claims on 17 June 2014. A letter was also served advising that the first return date from the matter before the Court is 2 July 2014 and that, if Mr Nguyen did not appear on that date, Titan would seek the orders in his absence. The genuine steps statement stated that a number of attempts had been made to contact Mr Nguyen in February 2014 by letters, email and voicemail messages, all of which were unsuccessful and no response was received from him. 10 The matter was called on for directions on 2 July 2014 where there was no appearance by Mr Nguyen. 11 An amended originating summons and amended statement of claim was subsequently filed pursuant to leave granted on 2 July 2014 and was served on Mr Nguyen on 10 July 2014, together with a letter from Titan's solicitors advising that if the respondent did not appear on 30 July 2014, Titan would seek the Court to make the orders sought in his absence. 12 The matter came on again for directions before me on 30 July 2014 where there was again no appearance by Mr Nguyen. 13 There having been no response from Mr Nguyen to the application or indication that he intended to defend proceedings, the matter was listed for trial on 5 August 2014. The time within which a defence may be filed under r 16.32 of the Federal Court Rules to the amended application and statement of claim is 28 days and expired on 7 August 2014. As this was after the hearing, I indicated that I would defer making any orders until after that date. No defence has since been filed. 14 I am satisfied that Mr Nguyen has failed to defend the matter at all and also to attend any of the hearings. It follows that the discretion to grant judgment in default under r 5.23(2)(c) is enlivened.

2.2 The claim 15 Titan alleges breaches of ss 18 and 29, the Chapter 2 of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA). Injunctive relief is sought by Titan under s 232 of the ACL. 16 Section 18 of the ACL provides that: "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 17 As I am satisfied for the reasons below that relief should issue because of the alleged contraventions of s 18, it is unnecessary for me to consider the plea under s 29. 18 At the commencement of the hearing on 5 August 2014, Titan made it clear that it quite properly did not seek to rely upon its claim for an account of profits.

2.3 Jurisdiction 19 I am satisfied that the Court has jurisdiction with respect to the claims. First, the claims arise under the ACL. Jurisdiction is conferred on this Court in any civil matter arising under the ACL by s 86(1) of the CCA. Secondly, the conduct complained of concerned alleged misrepresentations made on a website maintained by Mr Nguyen who carries on his business exclusively via the internet. In this regard, s 6(3)(a) relevantly provides that Parts 2-1 and 3-1 of the ACL, which include ss 18 and 29 respectively, apply as if: "(a) those provisions … were …. confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services … and (b) a reference in those provisions ... to a corporation included a reference to a person not being a corporation." 20 Access to the internet involves the use of telephonic services: Seafolly Pty Ltd v Madden (2012) 297 ALR 337 at [76]-[79] (Tracey J); ACCC v Jutsen (No 3) (2011) 206 FCR 264 at 287 [100] (Nicholas J); ACCC v Jones (No 5) [2011] FCA 49 at [6] and [10] (Logan J).

2.4 Are the elements of the causes of action under s 18 of the ACL pleaded? 21 I am satisfied that the necessary elements of the cause of action under s 18 of the ACL have been pleaded and suffice to entitle the applicant to injunctive relief to restrain further and continuing contraventions of that provision. 22 First, s 18 requires that the respondent "engage in conduct". Conduct can include making a statement which is misleading or deceptive, as is alleged here: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88. 23 Secondly, the conduct engaged in must occur "in trade or commerce", being defined in s 4 of the CCA to mean "trade or commerce within Australia or between Australia and places outside Australia". The pleadings plainly allege that the misrepresentations were made in trade or commerce within Australia. 24 Thirdly, the representations must be misleading or deceptive. The question of whether conduct is misleading or deceptive is concerned with the effect or likely effect upon, relevantly here, the minds of members of the Australian public. 25 I consider that this element of the cause of action is also adequately pleaded. 26 In this regard, the complaint is made of representations on two websites. The first site holds out to the public that Mr Nguyen is Titan's exclusive dealer in Australia. However, Titan pleads that it terminated Mr Nguyen's Australian dealership on 24 October 2013. Notwithstanding Titan's termination of the agreement, Mr Nguyen continued to trade under Titan's name, to continue to hold out to the public that he had genuine Titan equipment to sell, and held himself out to be Titan's authorised dealer, using the website "titanaustralia.com.au" (First Website). 27 A second website was subsequently set up by Mr Nguyen after letters of demand for Titan were sent to him. The statement of claim alleges that the second website displayed Titan's logo, the certificate confirming former appointment as Titan's dealer in Australia, numerous photographs of equipment bearing Titan's logo including photographs uploaded from Titan's website without its permission. Similar allegations are made as to representations made by Mr Nguyen on the second website. No permission was given for Mr Nguyen to use the photographs. Furthermore the second website is said to have a link to the first which, when clicked on, displayed the first website in exactly the same form as it was on 11 February 2014. 28 The statement of claim also pleads that during the period that Mr Nguyen was Titan's authorised dealer, he registered the business name "Titan Support Australia" and the domain name "titanaustralia.com.au". 29 The statement of claim further pleads that Mr Nguyen's conduct was capable of creating confusion in the minds of members of the Australian public as to who Titan's dealer in Australia is, and as to whether or not: equipment being sold by Mr Nguyen is genuine "Titan" equipment; Mr Nguyen is the Titan's authorised distributor in Australia; Mr Nguyen has genuine Titan Equipment for sale; and, Mr Nguyen is in any way connected with Titan. 30 Furthermore, it is pleaded that on 6 November 2013 Mr Nguyen sold a new weights belt which purported to be a genuine "Titan" weight belt and carried the logo "Titan Australia" on it, but was not a genuine Titan product.

3. WHETHER THE RELIEF SOUGHT SHOULD BE GRANTED 31 Relief is sought under s 232 of the ACL which relevantly provides that: (1) A court may grant an injunction in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of a provision of Chapter 2, 3 or 4… (5) Without limiting subsection (1), the court may grant an injunction under that subsection restraining a person from carrying on a business or supplying goods or services (whether or not as part of, or incidental to, the carrying on of another business): (a) for a specified period; or (b) except on specified terms and conditions. 32 Sections 18 and 29 are located in Chapter 2. The Court may grant an injunction on the application of Titan: s 232(2). That power extends to orders requiring a person to transfer property as is sought here with respect to the registered business name and the registered domain name. s 232(6). 33 The power to grant an injunction restraining a person from engaging in conduct exists irrespective of whether or not it appears to the Court that: the person intends to engage again, or to continue to engage, in the conduct concerned; the person was previously engaged in that conduct; or there is imminent danger of substantial damage to any other person if the person engages in the conduct (s 232(4)). Similarly, the power to grant an injunction requiring a person to do an act or thing exists irrespective of whether or not it appears to the Court that: the person intends to refuse or fail to do the act or thing; has previously refused or failed again to undertake it; or there is an imminent danger of substantial damage to any other person if the person should refuse or fail to perform the act or thing (s 232(7). This does not mean, however, that such matters are not relevant to the exercise of discretion. 34 The Court must be satisfied that the orders sought are appropriate in law and in fact meaning, relevantly, in the context of an application for judgment in default, on the basis of the pleadings and any evidence on the question of discretion which would not ordinarily be pleaded. Injunctive relief should not be expressed in terms which are too broad, nor which do not identify the conduct the subject of the injunction with such clarity and precision as would enable the party to know what he or she must do or refrain from doing, and members of the public to whose notice it may come, and as to be enforceable by the Court. 35 The orders proposed in the amended originating application were expressed in terms that were, in my view, too broad and insufficiently clear. I do not consider that it would be appropriate to order injunctive relief in those terms. As a result of concerns expressed by me at the hearing in arguendo, Titan was given the opportunity to propose alternative orders seeking relief in narrower and more specific terms. 36 The alternative draft orders proposed by Titan serve these purposes only, as opposed to expanding the orders sought in the amended originating application. For this reason, I did not consider that it was necessary as a matter of fairness to require Titan formally to amend the prayer for relief and serve that on the respondent in order to give him a further opportunity to be heard. This would also have delayed the grant of relief in circumstances where the conduct complained of was alleged to be continuing to Titan's detriment. 37 Subject to certain caveats, in all of the circumstances I consider that it is appropriate to make the orders which are contained in the alternative draft orders proposed by the applicant. The conduct complained of is apparently continuing and is said to be causing the applicant economic loss and reputational damage. There have been repeated requests by Titan for Mr Nguyen to cease the conduct complained of and to transfer the registered business name. The only response to those requests to date has been the creation by Mr Nguyen of a second offending website. Nor in these proceedings has Mr Nguyen sought to defend his conduct in any way. 38 The first caveat is that I was concerned that there was no limitation as to the duration of the orders proposed, notwithstanding their onerous nature. It is not possible to predict at this stage what might occur in the future and potentially render the continued operation of those orders inappropriate, but the possibility that such change might occur cannot be ruled out. For this reason, having given Titan the opportunity to be heard on the point, I have made the orders which require ongoing compliance subject to further order of the Court. Secondly, I have also allowed Mr Nguyen time for compliance with the orders, which will also allow for service upon him in line with the submissions made by Titan, and avoid a situation in which he might find himself immediately in default of a court order upon being served with the orders. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.