.Au Domain Administration Limited v Domain Names Australia Pty Ltd [2003] FCA 1106

FEDERAL COURT OF AUSTRALIA

.Au Domain Administration Limited v Domain Names Australia Pty Ltd [2003] FCA 1106

REPRESENTATIVE PROCEEDINGS – conditions to be satisfied – group comprising seven or more persons – how to be established Federal Court of Australia Act 1976 (Cth) s33C(1)

Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 cited

.AU DOMAIN ADMINISTRATION LIMITED v DOMAIN NAMES AUSTRALIA PTY LTD and PAUL CHESLEY RAFFERTY

V 656 of 2003

FINKELSTEIN J

10 OCTOBER 2003

MELBOURNE (via telephone link to Perth)

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 656 of 2003

BETWEEN: .AU DOMAIN ADMINISTRATION LIMITED

Applicant

AND: DOMAIN NAMES AUSTRALIA PTY LTD

and PAUL CHESLEY RAFFERTY

Respondents

JUDGE: FINKELSTEIN J

DATE: 10 OCTOBER 2003

PLACE: MELBOURNE (via telephone link to Perth)

REASONS FOR JUDGMENT 1 In its statement of claim the applicant claims to be the "industry self regulator of the internet domain names system in Australia". Apparently, it has assumed this status as a result of a sponsorship agreement made with Internet Corporation for Assigned Names and Numbers, which is said to be a Californian non-profit corporation. The applicant asserts that pursuant to the sponsorship agreement it is the "delegated authority" for the administration of the two letter country code top level domain name ".au". An ".au" suffix to an internet domain name indicates that the website in question is Australian in origin. 2 The applicant brings this proceeding to obtain orders restraining the respondents (a company and its director) from sending what are alleged to be misleading notices to persons who have been issued a domain name. It is said that the notices are misleading principally because: (1) they falsely purport to be invoices for the renewal of existing registered domain names; (2) they falsely represent that the relevant domain name is due for renewal or is available for registration; and (3) they falsely represent that if the amount mentioned in the notice is not paid, the recipient risks losing its existing domain name. 3 The proceeding has been commenced as a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth). That is, the applicant brings the proceeding on its own account as well as on behalf of a group. The group on whose behalf the proceeding is brought is defined (at least in a proposed amended statement of claim) as the persons: (1) to whom the first respondent sent the impugned notices; (2) who have paid the amount referred to in the notices in consequence of one or other of the representations said to have been conveyed by the notices; and (3) who have suffered, or are likely to suffer, loss or damage. The applicant seeks damages and other relief on behalf of the group members. 4 Presently two issues arise for determination. The first is whether the applicant has satisfied the conditions contained in the Federal Court Act which must be met before a group proceeding can be commenced. The second concerns the sufficiency of the proposed amended statement of claim, aspects of which are challenged by the respondents. 5 Section 33C(1) of the Federal Court Act sets out the conditions which must be satisfied before a group proceeding can be instituted. Those conditions are that: "(a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or of fact". Here the respondents contend that the applicant has not satisfied the criteria in s 33C(1)(a), namely that there be seven or more persons who have claims against them. In the alternative the respondents say that even if there were a sufficient number of claimants at the outset of the proceeding, by reason of the compromise of some of those claims, the number has fallen below the statutory minimum and, accordingly, the action should not be allowed to continue as a group proceeding. In this regard the respondents rely upon s 33L which provides that if "it appears likely to the Court that there are fewer than 7 group members, the Court may…. (b) order that the proceeding no longer continue under [Pt IVA]". 6 It is by no means clear precisely how and when an applicant must satisfy the court that the conditions in s 33C(1) have been met. Section 33H(1) provides some assistance on this question. That subsection provides that an application commencing a representative proceeding, or a document filed in support of such an application, must: (a) describe or otherwise identify the group members; (b) specify the nature of the claims made on behalf of the group members and the relief claimed; and (c) specify the questions of law or fact common to the claims of the group members. Section 33H(2) provides, however, that it is not necessary to name or specify the number of group members. 7 Provided s 33H has been complied with, it should not be necessary to go behind the form of the application or the document filed in support of the application (the document will be either a statement of claim or an affidavit) to determine whether the claims of the group members arise out of the same, similar or related circumstances (s 33C(1)(b)) or whether the claims give rise to a substantial common issue of law or fact (s 33C(1)(c)). The information which is required to be given pursuant to s 33H will show whether these criteria have been met. 8 As regards s 33C(1)(a), it may be accepted that it will not always be possible to determine with precision the size of the group. There will be some cases where it may be inferred that the number exceeds seven simply from the type of action which is being prosecuted. Take for example what are sometimes referred to as "mass tort" actions. The very nature of the asserted facts giving rise to the alleged cause of action should indicate whether or not more than seven people have, or are likely to have, suffered loss and damage as a result of the alleged wrongdoing. In other cases the number of persons who have potential claims against the respondent may not be apparent. In those cases the applicant should provide sufficient information (either in the application or the document filed in support of the application) to demonstrate that there are at least seven group members. Unless this is done neither the court nor the respondent will know whether the application was properly commenced. It seems, however, that if the information is not provided at the outset of a proceeding the applicant is able to provide the information later, presumably when it is challenged on the issue. At least that is what was decided in Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457. 9 That is precisely what has occurred here. In response to an allegation that the group members do not exceed seven, the applicant filed affidavits to show that when the proceeding was commenced at least eight individuals asserted that they were mislead by one or other notice and had suffered loss and damage accordingly. The applicant does not know whether the claims of any of these individuals have been compromised so as to bring the identified number below seven. If the number has fallen below seven, the respondents may obtain an order under s 33L. 10 Although the applicant has made an attempt to identify seven members of the group, it need not do so to satisfy s 33C(1)(a). Here, the nature of the action makes it likely that the number exceeds seven. The proposed amended statement of claim does not mention the number of persons to whom the notices were sent, but I have been told that many thousands were dispatched. I have evidence that some recipients claim they were misled by the notice. That is sufficient to enable an inference to be drawn that others may also have been misled in the same way. Indeed, it is likely that the total number will significantly exceed seven. Accordingly, the challenge to the constitution of the application is not made out. 11 I now turn to the alleged deficiencies in the applicant's proposed amended statement of claim. The relevant principles upon which the objections are founded are not in dispute. The respondents correctly say that the following rules should be applied: (a) a pleading must be in a summary form; (b) only the material facts of the claim should be pleaded; (c) the material facts are those facts which are relied on as establishing all the essential elements of the cause of action; (d) the evidence by which the facts will be proved should not be pleaded; (e) conclusions of fact should not be pleaded; and (f) it is inappropriate for particulars to perform the function of pleading a material fact. 12 The first challenge is to par 16. Here the applicant sets out the representations which it alleges are contained in the notices. The first complaint arises from the fact that in the original statement of claim the applicant only made complaint about a single notice. Now two additional notices have been added. However, not all paragraphs in the amended statement of claim (including par 16) reflect this change. For example, one element of the definition of the group in par 3B is that the members have received "the [single] notice" referred to in the pleading. Paragraph 16 refers both to a single notice and to multiple notices, as does par 18 where further allegations of misleading and deceptive conduct are found. (Because "notice" and "notices" have been used somewhat interchangeably by the applicant in its proposed amended statement of claim, for the sake of consistency my use of those terms will mirror the applicant's use of the terms in its pleading). In my view, it will be necessary for the group to be differently defined; perhaps there should be three separate groups. As regards par 16 in particular, it should be made clear that three notices were sent that give rise to the alleged representations and it will be necessary to identify precisely which representation is said to arise from each notice. 13 There is in addition a separate complaint about par 16(b). In this subparagraph representations are pleaded in the alternative. It is asserted that the notices represent that "the domain names to which the notices related was [sic] due for renewal, alternatively available for registration by the recipient and would be renewed, alternatively registered only if the recipient complied with the provisions of the notice by the 'closing date' referred to [in the notice]". In fact, four separate representations are contained in this subparagraph, aside from the possibility of combinations of representations. This is unsatisfactory and, in its present form, the pleading cannot stand. 14 There is also a further general complaint about the particulars to par 16. The particulars provide that: "The representations were partly in writing and partly implied. Insofar as they were in writing, they are constituted by the notice and the provisions thereof. Insofar as they were implied such implication arises from the context of the words used in, and the general impression obtained from a reading of, the notice." This is not a sufficient particularisation of the allegation. In the first place, the applicant should specify which particular words in the notice give rise to the representations. It is not good enough to refer to the notice as a whole. Secondly, insofar as reliance is placed on "the general impression obtained from … the notice", the applicant must specify in which respect, or for what reason, the notices give rise to the "general impression" alleged. 15 The next objection concerns par 17(b), but to understand the objection it is necessary to have regard to paragraph 16(b). I have already mentioned that one of the alleged representations is that the domain name to which each individual notice relates was available for registration. That is one effect of the allegation in par 16(b). However, paragraph 17(b) alleges that that representation was misleading because the domain names to which notices related "was [sic] not or may not have been due for renewal, alternatively available for registration". Having regard to the form of the alleged representation, it will only relevantly be misleading if the domain name was not due for renewal or available for registration. The possibility that it was not due or available is surplusage. 16 Turning now to par 18, it is submitted that the form and content of the notice is misleading because of the following features (which I summarise): (a) the general impression given by the notice; (b) the non-disclosure of certain facts; and (c) parts of the notice were confusing, meaningless or incorrect for certain reasons. I have already discussed the problem associated with a complaint being made about the "general impression of the notice" absent the identification of those parts of the notice which are said to give rise to the "general impression". As regards the alleged non-disclosure, the applicant has not set out the circumstances (if they exist) which give the non-disclosure the character of misleading conduct. For example, it is alleged that there was no disclosure that the first respondent did not have the ability itself to register the domain names referred to in the notices. This allegation presumes that the recipient proceeded upon the assumption that the first respondent did in fact have the ability to register the domain names. If that is how the applicant proposes to put its case, it should be pleaded. There must also be a statement of the material facts which would support such a proposition. Each of pars 18(b) to (f) inclusive suffer from this deficiency. Paragraph 18(g), where it is asserted that the notice was confusing, meaningless or incorrect, is itself confusing in that it does not make clear in what respects this results in a misleading notice. 17 Paragraph 18A is dependent upon par 18. Unless the deficiencies in par 18 are made good, par 18A falls away. A similar observation may be made about par 20, at least to the extent that it is dependent upon pars 18 and 18A. 18 Paragraph 22 asserts that the respondents have in connection with the supply or possible supply of services represented that the services have a sponsorship, approval, performance characteristic, use or benefit they do not have, which results in a contravention of s 53(c) of the Trade Practices Act 1974 (Cth). This is an unsatisfactory pleading. As the respondents contend, the proposed plea does not make clear in precisely what respect or respects the services (which themselves have not been identified) do not have the sponsorship, approval, performance characteristics, use or benefit they are allegedly represented to have. The alleged sponsorship, approval, performance characteristic, use or benefit must be identified if this part of the case is to go ahead. 19 Turning now to the allegations made against the second respondent (the director), it is alleged that he aided, abetted, counselled or procured contraventions of the Trade Practices Act by the first respondent. Here the complaint is that it has not been pleaded that the second respondent had knowledge of the essential matters that go to make up the alleged contraventions. As a strict pleading point the criticism is fair. In the realities of this case, however, it is disingenuous. The first respondent is a one-man company and the man who controls it is the second respondent. I take this to be common ground. In that circumstance, the manner in which the case is to be put against the second respondent is clear enough. I will not require particulars of this claim to be given. 20 The final point concerns the particulars of loss and damage which it is alleged the group members have suffered or are likely to suffer. The particulars which have been provided are inadequate. But in virtue of the fact that a hearing on liability is to be deferred, this matter can best be addressed at a later stage in the litigation. 21 The orders to be made depend upon whether the applicant wishes to re-formulate amendments to its existing statement of claim. For that reason, it should bring in minutes of proposed orders by 4:00pm next Monday.