FEDERAL COURT OF AUSTRALIA Capital Webworks Pty Ltd v Adultshop.Com Ltd [2000] 492 TRADE PRACTICES – application for interim or interlocutory injunction – Internet domain names – whether misleading or deceptive promotion of domain name Trade Practices Act ss 52, 80, 82 CAPITAL WEBWORKS PTY LTD v ADULTSHOP.COM LTD & MALCOLM DAY W 49 OF 2000 R D NICHOLSON J 5 APRIL 2000 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 49 OF 2000 BETWEEN: CAPITAL WEBWORKS PTY LTD Applicant AND: ADULTSHOP.COM LTD First Respondent AND MALCOLM DAY Second Respondent JUDGE: R D Nicholson J DATE OF ORDER: 5 APRIL 2000 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The application for an interim or interlocutory injunction be dismissed. 2. The applicant pay the respondent's costs of the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 49 OF 2000 BETWEEN: CAPITAL WEBWORKS PTY LTD Applicant AND: ADULTSHOP.COM LTD First Respondent AND: MALCOLM DAY Second Respondent JUDGE: R D Nicholson J DATE: 5 APRIL 2000 PLACE: PERTH REASONS FOR JUDGMENT 1 This is an application for interim or interlocutory relief. It comes in an application which specifies a claim for damages at common law for passing off; damages pursuant to s 82 of the Trade Practices Act ("the Act") for breach of s 52 of the Act; aggravated and exemplary damages; an account or profits; injunctive relief pursuant to s 80 of the Act; further injunctive relief against the respondent; an order requiring assignment of title to what is described as a domain name and other appropriate orders. The domain name referred to is "Adultshop.com.au." ("the domain name"). 2 The claim for interlocutory relief is in the following terms: "1. Pursuant to Section 80 of the Trade Practices Act and otherwise an injunction to restrain the Respondents, their agents, servants and any other person for and on behalf of the Respondents 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 'ADULTSHOP.COM.AU' ("the domain name") or from directing internet inquiries from the domain name to the First Respondents' business. 2. An injunction requiring the Respondents to direct Melbourne Information Technologies Australia Pty Ltd CAN 073 716 793 to have the domain name re‑delegated to the Applicant's Domain Name Server (D.N.S.) name servers." 3 The application is not yet supported by a statement of claim. Although a claim appears on the court file, that statement of claim is in draft form only and was filed in error and no reliance is placed upon it on behalf of the applicant. 4 The application is supported by an affidavit of a director of the applicant company. 5 From that affidavit it is apparent that the applicant's business is the retailing through the medium of the Internet of adult leisure products. The applicant was registered as the holder of the domain name until 31 March 2000. The domain name was allocated to the applicant by Internet Names Australia, a division of Melbourne Information Technologies Australia Pty Ltd. Use in trading by the applicant pursuant to the domain name commenced on or about 6 July 1999. 6 In June 1999 the second respondent entered into discussions with a director of the applicant with a view to purchasing the domain name from the applicant. Subsequently the first respondent contended in proceedings issued in this court that the result of those discussions was that a binding agreement was concluded. Those proceedings were dismissed by consent on 9 December 1999. 7 Further discussions took place between the second respondent and the same director of the applicant concerning the possibility of the first respondent purchasing the domain name. 8 On or about 14 February 2000 the director of the applicant received an invoice from Melbourne Information Technologies Australia Pty Ltd requesting payment to reregister the domain name. At or about 16 February 2000, he sent an email to that company requesting it to debit an account for which he was the authorised contact and which account had previously been debited with charges requested by him on behalf of the applicant from time to time. He has used this account to pay renewal fees for domain names successfully on a number of occasions. His request for renewal by that means referred to the domain name and to three other domain names. The email requested confirmation by return email that the domain names had been renewed in the manner requested by him. There is no evidence of such confirmation having been received. 9 On 16 February 2000, the applicant, through its general office, received an email from Internet Names Worldwide, purporting also to be a division of Melbourne Information Technology, stating that as every attempt had been made to contact it regarding the renewal of the domain name, would it please contact the company within 24 hours "or the domain name will be removed from our database". That email did not come to the attention of the director until 5 April 2000. He is unable to explain why Melbourne Information Technology would have sent an email in those terms in view of his instructions for renewal and in light of the fact that the invoice for the renewal specified that payment was not due until 28 February 2000. 10 On 2 April 2000, the director of the applicant became aware of an article published in the Herald Sun which indicated that the domain name had been obtained by the respondent. He immediately checked the database records to confirm the article's assertion. Prior to reading that article, he had no knowledge of or reason to suspect that the domain name had been registered by the respondent or that Melbourne Information Technology had not renewed the applicant's registration of the domain name. 11 On 3 April 2000, the director telephoned Melbourne Information Technology's Internet Names Australia contact line stating that he wished to pay for several renewals of domain names, being those referred to in his email to the company (including the domain name). He was directed to an automated telephone processing system where on 3 April 2000 he received confirmation of payment for the names concerned. 12 However, as a consequence of the apparent lapse of the domain name from the applicant and its subsequent allocation to the first respondent, the applicant has been unable to transact business under the domain name since 31 March 2000. It claims to have suffered financially as a result. 13 On 4 April 2000, a newspaper article appeared in The West Australian newspaper indicating that the domain name had been allocated to the first respondent. 14 The affidavit of the director of the applicant exhibits terms and conditions for the domain name. From item 7 of those terms and conditions it appears that the initial licence period for the use of a domain name on the listing service is for two years from the date of the successful application for registration. The item continues by providing that thereafter the licence may be renewed indefinitely for periods of one or two years on payment of renewal fees applicable from time to time and subject to the then current domain name allocation policy and pricing structure. In item 11 it is provided that the domain name may not be sold, lent or used by any party other than the applicant and the domain name may not be transferred from the applicant to another party. The contract is to be governed by Australian law. 15 The relief sought by the applicant is said to be required on an urgent basis which is twofold. Firstly it is said that the first respondent should be restrained from using the domain name. Secondly it is said that there should be an order made causing Melbourne Information Technology to redelegate inquiries to the domain name to the applicant's Web site. This, it is said, would be to restore in practical terms the status quo to the position that existed before the respondent was allocated the domain name. 16 In oral argument counsel for the applicant pressed the claim for interlocutory relief in the following terms. It was said that the use of the domain name by the first respondent following allocation of that name to it will be found ultimately to be misleading and deceptive, contrary to s 52 of the Act, because of two circumstances in particular. The first such circumstance is that the first respondent was well aware the applicant had conducted its business through that domain name. Secondly it is said the first respondent had sought to acquire that name but had been unsuccessful in that quest. In those circumstances it is said that by promoting the domain name the first respondent is causing members of the public to believe they are dealing with the business of the applicant. The applicant, it is said, has goodwill arising from the use of the domain name and that the use of the domain name by the respondent promotes the notion that the first respondent has acquired the business of the applicant. 17 For conduct to be misleading or deceptive, it is necessary that the conduct must convey in all the circumstances of the case a misrepresentation. There can be no contravention unless error or misconception results from the conduct of the corporation sought to be brought to account and not from other circumstances for which the corporation is not responsible. Evidence that persons in the relevant class have been misled will not itself be determinative and there is no such evidence here. Section 52,furthermore, is not confined to conduct intended to mislead or deceive. A corporation which acts honestly and reasonably may nonetheless engage in conduct that is likely to mislead or deceive. 18 It is significant that on this application there is no evidence brought to the court which would enable the court to have before it the precise contents of the Web site under the domain name as it was prior to the reallocation to the first respondent and subsequent to the allocation to the first respondent. The court is therefore confined to inferences properly to be drawn from the affidavit of the director of the applicant company. 19 In my view it is open to inference from that affidavit and from the nature of the application that the reference to the Web site as it is presently operated by the first respondent would direct the person activating the Web site to the business of the first respondent. Therefore, in express terms the member of the public would be directed to the business of the entity to which the domain name had been allocated. There would be nothing misleading or deceptive in that. Furthermore, I do not consider that it is open to inference from the fact that the first respondent knew of the applicant's prior usage of the domain name and of the applicant's prior wish to acquire the name that it has engaged in any misrepresentation or misleading or deceptive conduct. True it is that a corporation acting honestly and reasonably may nonetheless engage in conduct likely to mislead or deceive. However, here the domain name expressly directs the members of the public to the correct business and the domain name does not in itself seek to refer to the business of the applicant save that the applicant previously was the allocated user of the domain name. 20 Furthermore, the applicant held the domain name on the terms and conditions of the contract to which I have referred. That contract would itself suggest that anyone holding a domain name would be unlikely to see it as the vehicle to ownership of long-term goodwill. 21 It may be that on some other application with different evidence before the court the case which the applicant seeks to make out for interim or interlocutory relief can be made good, but in my view it is not made good on the evidence presently before the court. I am unable to see that there is, on the present evidence, evidence from which it could be arguable that the first respondent has sought to create the impression that the business operated by it is the business of the applicant or that it is operating the business of the applicant. 22 Furthermore, there is no evidence that any goodwill has in fact arisen in the domain name. 23 In these circumstances, I do not consider that the applicant has made out a case for the granting of interim or interlocutory relief. To make the orders sought on behalf of the applicant would be to make an order in the first place directing the first respondent not to act upon any Internet inquiries directed to the domain name which is the domain name allocated to it. In the second place, relief in the terms claimed would have the effect of reallocating the domain name to the applicant when on the face of the present evidence a third party has, upon the failure of the applicant to renew its domain name, allocated it to another. 24 The precise circumstances in which the third party, namely Melbourne Information Technologies, came to allocate the domain name to another are not before the court. 25 For these reasons, I refuse the application for interim or interlocutory relief. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice R D NICHOLSON. Associate: Dated: 5 April 2000 Counsel for the Applicant: Mr P G McGowan Solicitor for the Applicant: Tottle Christensen Counsel for the Respondents: Mr G R Donaldson Date of Hearing: 5 April 2000 Date of Judgment: 5 April 2000