FEDERAL COURT OF AUSTRALIA Pacific Boating Group Pty Ltd v Freedom Boating Club Pty Ltd [2012] FCA 72 Citation: Pacific Boating Group Pty Ltd v Freedom Boating Club Pty Ltd [2012] FCA 72 Parties: PACIFIC BOATING GROUP PTY LTD (ACN 117 497 364) v FREEDOM BOATING CLUB PTY LTD (ACN 141 873 547) and DELWYN CLARK File number: NSD 1158 of 2011 Judge: FOSTER J Date of judgment: 8 February 2012 Catchwords: PRACTICE AND PROCEDURE – whether judgment in default of compliance with orders of the Court should be ordered pursuant to the Federal Court Rules 2011 – relevant principles discussed – whether costs should be paid on an indemnity or party/party basis in light of a Calderbank offer made by the applicant Legislation: Australian Consumer Law, ss 18, 20 and 29 Federal Court Rules 2011, r 1.32 and r 5.23(2) Cases cited: ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 followed Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 followed Date of hearing: 8 February 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant: Mr MJ Heath Solicitor for the Applicant: MWA Lawyers Pty Limited Counsel for the Respondents: The Respondents did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1158 of 2011 BETWEEN: PACIFIC BOATING GROUP PTY LTD (ACN 117 497 364) Applicant AND: FREEDOM BOATING CLUB PTY LTD (ACN 141 873 547) First Respondent DELWYN CLARK Second Respondent JUDGE: FOSTER J DATE OF ORDER: 8 FEBRUARY 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The hearing fixed to commence on 13 February 2012 be vacated. 2. Pursuant to r 1.32 and r 5.23(2) of the Federal Court Rules 2011: (a) the first respondent (Freedom Boating Club Pty Ltd (ACN 141 873 547)) by itself, its directors, officers and agents be permanently restrained from directly or indirectly: (i) using or referring to the name or words "Pacific Boating", "Pacific Boating Sydney" or "Pacific Boating Club" in or in relation to any business conducted by it or in relation to any activity associated with such business; (ii) diverting internet inquiries made by consumers to the applicant's website (www.pacificboating.com.au) from that website to a website associated with or controlled by the first respondent; (iii) aiding, abetting, counselling, procuring, inducing or permitting any person to engage in any of the conduct described in subparagraphs (i) and (ii) above; and (iv) being knowingly concerned in conduct by other persons described in subparagraphs (i) and (ii) above. (b) the second respondent (Delwyn Clark) by himself, his employees or agents or any other entity be permanently restrained from directly or indirectly: (i) using or referring to the name or words "Pacific Boating", "Pacific Boating Sydney" or "Pacific Boating Club" in or in relation to any business conducted by him or in relation to any activity associated with such business; (ii) diverting internet inquiries made by consumers to the applicant's website (www.pacificboating.com.au) from that website to a website associated with or controlled by the second respondent; (iii) aiding, abetting, counselling, procuring, inducing or permitting any person to engage in any of the conduct described in subparagraphs (i) and (ii) above; and (iv) being knowingly concerned in conduct by other persons described in subparagraphs (i) and (ii) above. 3. Judgment be entered in favour of the applicant against the respondents for damages to be assessed or, at its election, for an account of profits. 4. The balance of the proceedings be referred to a Registrar of the Court for the purpose of that Registrar conducting an inquiry into the damages suffered by the applicant or, at the election of the applicant, the profits made by the respondents as a result of the contravening conduct described in paragraph 16 of the Statement of Claim filed herein. 5. The respondents pay the applicant's costs of these proceedings to date. 6. The applicant may tax such costs forthwith. 7. The applicant have leave to approach the New South Wales District Registrar for the purpose of obtaining a listing of the inquiry referred to at paragraph 4 above. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1158 of 2011 BETWEEN: PACIFIC BOATING GROUP PTY LTD (ACN 117 497 364) Applicant AND: FREEDOM BOATING CLUB PTY LTD (ACN 141 873 547) First Respondent DELWYN CLARK Second Respondent JUDGE: FOSTER J DATE: 8 FEBRUARY 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 There is before the Court an Interlocutory Application filed on 4 January 2012 by which the applicant seeks default judgment against both respondents, together with other consequential relief. The basis upon which that judgment is sought is that the respondents have failed to comply with a self-executing order of the Court which, by its terms, has resulted in the Defence filed by the respondents on 4 October 2011 being struck out leaving unanswered the allegations in the Statement of Claim filed by the applicant. The Allegations in the Statement of Claim 2 In the Statement of Claim, the applicant alleges that for some time now it has been a provider of leisure boating club services to consumers in Australia and is one of the largest enterprises in New South Wales providing such services. It also alleges that it has carried out extensive promotion of the name "Pacific Boating" which has resulted in it acquiring a substantial reputation in that name throughout Australia and, in particular, in New South Wales. The applicant also alleges that the applicant is the owner of the domain name styled "www.pacificboating.com.au". 3 The first respondent is a competitor of the applicant operating from a marina in Rushcutters Bay in Sydney. An associate of the first respondent (Sydney Boating Club Pty Limited) also operates from the same marina. 4 In the Statement of Claim, the applicant alleges that, in the period from at least early April 2011 to 21 June 2011, the first respondent established a process by which searches for the applicant's website by reference to the words "Pacific Boating" on the internet using the Google search engine were diverted to websites controlled by or associated with the first respondent. According to the allegations in the Statement of Claim, the solicitors for the applicant complained to the respondents about these alleged internet diversions. The conduct about which the applicant complained apparently ceased on or about 21 June 2011, shortly after the applicant's solicitors complained to the respondents. 5 The applicant contends that the conduct of the first respondent in effecting the diversions to which I have referred constituted misleading or deceptive conduct or conduct likely to mislead or deceive and false or misleading representations in breach of s 18 and s 29 of the Australian Consumer Law and cognate State legislation. The applicant also pleads that the conduct of the respondents constituted unconscionable conduct within the meaning of s 20 of the Australian Consumer Law. 6 In addition, the applicant pleads a claim in tort for passing off. 7 The applicant also alleges that the second respondent, Mr Clark, is the controller of the first respondent and the person who caused the first respondent to divert business from the applicant. The applicant contends that the second respondent is the individual who must bear responsibility for the contraventions committed by the first respondent. 8 In its originating Application the applicant seeks injunctive relief expressed in very general terms and damages or an account of profits at its election. It also seeks other ancillary relief. Relevant Procedural History 9 The proceeding has been before the Court for directions on six occasions, the first of these being 10 August 2011. When the matter first came before me I suggested to the parties that, given that the conduct about which the applicant was complaining had apparently ceased on 21 June 2011, the real question that should exercise the parties' minds concerned what, if any, compensation ought to be awarded in favour of the applicant, assuming that liability could be established. I also counselled the parties to seek to resolve the matter as between themselves by means of mediation. 10 In the four months or so that followed that first listing, very little progress was made in the matter. 11 On 24 August 2011, I ordered the respondents to file their Defences by 15 September 2011. They did not comply with that order. 12 On 28 September 2011, I extended the time by which the respondents were to file their Defences to 12 noon on 4 October 2011. As at 28 September 2011, the respondents had also failed to comply with a previous direction made by me which had been designed to accelerate the production of documents by the respondents relevant to the applicant's claims for pecuniary relief. 13 On 5 October 2011, I made orders that: 1. By 12 October 2011, the applicant serve on the respondents any further categories of discovery arising from their Defence. 2. By 19 October 2011, the respondents advise the solicitors for the applicant those categories of discovery to which they object. 3. The matter be listed for further directions at 9.30 am on 27 October 2011 before Foster J. 14 On 27 October 2011, I ordered that: 1. By 26 November 2011, the respondents provide the applicant with a verified List of Documents for those categories of discovery set out in the email of 10 October 2011 from the Solicitors for the applicant to the Solicitor for the respondents. 2. Inspection of discovered documents take place by no later than 2 December 2011. 3. The proceeding be listed for further directions at 9.30 am on 14 December 2011 before Foster J. 15 When the matter came before me on 14 December 2011, I was informed that the respondents had failed to comply with the orders for discovery which I had made on 27 October 2011. In addition, the respondents had changed solicitors on 13 December 2011. 16 On 14 December 2011, in an endeavour to bring the matter to finality, I fixed the matter for final hearing, such hearing to take place for two days commencing next Monday 13 February 2012. I made other detailed orders on that day designed to ready the matter for that hearing. Included within those orders were the following orders: THE COURT: 1. EXTENDS to 3 January 2012 the time within which the respondents are to file and serve their Verified Lists of Documents in accordance with the requirements of r 20.17 of the Federal Court Rules 2011 in respect of those categories of discovery set out in the email of 10 October 2011 from the solicitors for the applicant to the solicitors for the respondent. 2. ORDERS that inspection of discovered documents take place by no later than 10 January 2012. 3. ORDERS the applicant to file and serve by 16 January 2012 all evidence-in-chief upon which it intends to rely at the final hearing. 4. ORDERS the respondents to file and serve by 23 January 2012 all evidence upon which they intend to rely at the final hearing. 5. ORDERS the applicant to file any evidence in reply by 30 January 2012. 6. ORDERS that, in the event that Verified Lists of Documents are not filed and served strictly in accordance with Order 1 above, the Defence of the respondents be struck out and the applicant have leave to approach the Court to enter judgment. 17 The remaining orders made on that day concerned the provision of further evidence and submissions and the taking of other pre-trial steps. None of those orders has been complied with by either party. However, the applicant should be excused from compliance with those orders given that the respondents failed to comply with the orders which I made concerning discovery. 18 In the last day or two, the solicitor on the record for the respondents has ceased to act. 19 Neither of the respondents has filed any List of Documents. Neither respondent has appeared at Court today. Consideration 20 Order 6 made on 14 December 2011 was a self-executing order. It has not been complied with. The respondents remain in default of that order. In the circumstances, the automatic consequences of the respondents' default flow and the Defence filed by the respondents has now been struck out. This leaves the applicant's case as pleaded in an uncontested state. 21 Rule 5.23(2) of the Federal Court Rules 2011 is in the following terms: (2) If a respondent is in default, an applicant may apply to the Court for: (a) an order that a step in the proceeding be taken within a specified time; or (b) if the claim against the respondent is for a debt or liquidated damages—an order giving judgment against the respondent for: (i) the debt or liquidated damages; and (ii) if appropriate, interest and costs in a sum fixed by the Court or to be taxed; or (c) if the proceeding was started by an originating application supported by a statement of claim, or if the Court has ordered that the proceeding continue on pleadings—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; or (d) an order giving judgment against the respondent for damages to be assessed, or any other order; or (e) an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order. 22 In addition, the Court has the power under r 1.32 to make any order it considers appropriate in the interests of justice. 23 The applicant relies upon r 1.32, r 5.23(2)(c) and r 5.23(2)(d). 24 In Speedo Holdings BV v Evans (No 2) [2011] FCA 1227, Flick J considered the relevant principles that govern the exercise of the Court's discretion in circumstances such as those with which I am currently dealing. Having referred to r 5.22 and r 5.23, his Honour explained the relevant principles at [17]–[26]. His Honour's explanation may be summarised as follows: (1) The power invoked by an applicant seeking judgment pursuant to r 5.23(2) and r 1.32 is discretionary. (2) The exercise of the power is conditioned on one circumstance only: The failure of a party to comply with an order of the Court directing that party to take a step in the proceeding. (3) The discretion conferred is unconfined except for the condition of non-compliance with a direction. (4) If there is a history of non-compliance with Court orders by a party, that non-compliance may indicate an unwillingness or incapacity to comply with Court orders. Those are circumstances which would justify the making of an order for judgment pursuant to the rules (see the passages from ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577 extracted by Flick J at [21] in Speedo Holdings BV). (5) The discretionary power to enter judgment by default is enlivened when an applicant applies to the Court for an order for judgment. (6) The Court needs to be satisfied on the face of the Statement of Claim that the applicant is entitled to the relief claimed. This does not mean that the applicant must prove its case by evidence, but rather that the case, as pleaded, on the assumption that the allegations are correct, gives rise to an entitlement to the relief claimed. In this regard, the Court may permit recourse to limited further evidence but it may not admit evidence which would alter the case as pleaded. 25 In addition to the matters to which I have already referred, the applicant must establish that both the Application and Statement of Claim were served upon the respondents and that the Interlocutory Application upon which the applicant now moves, together with the supporting affidavits relevant to that Application, were also served upon the respondents. 26 In the present case, the respondents failed to comply with an order requiring that their Defence be filed by 15 September 2011 and sought an extension of time for the filing of that pleading to 4 October 2011. In addition, as I have already mentioned, the respondents ignored the Court's orders in respect of the production of documents and discovery on four occasions and have failed to attend Court today. 27 I am satisfied that the originating process and the Interlocutory Application with which I am currently dealing have been validly served upon the respondents. 28 It seems to me that the respondents have abandoned their Defence and have no intention to exercise their right to a trial of the allegations made against them by the applicant in the originating process. In those circumstances, there is no point in allowing these proceedings to remain on foot. I propose to accede to the applicant's Interlocutory Application and to make final orders of an injunctive nature and an order for judgment for pecuniary relief as sought by the applicant. Conclusion 29 Accordingly, for the above reasons I make the following orders, namely that: (1) The hearing fixed to commence on 13 February 2012 be vacated. (2) Pursuant to r 1.32 and r 5.23(2) of the Federal Court Rules 2011: (a) the first respondent (Freedom Boating Club Pty Ltd (ACN 141 873 547)) by itself, its directors, officers and agents be permanently restrained from directly or indirectly: (i) using or referring to the name or words "Pacific Boating", "Pacific Boating Sydney" or "Pacific Boating Club" in or in relation to any business conducted by it or in relation to any activity associated with such business; (ii) diverting internet inquiries made by consumers to the applicant's website (www.pacificboating.com.au) from that website to a website associated with or controlled by the first respondent; (iii) aiding, abetting, counselling, procuring, inducing or permitting any person to engage in any of the conduct described in subparagraphs (i) and (ii) above; and (iv) being knowingly concerned in conduct by other persons described in subparagraphs (i) and (ii) above. (b) the second respondent (Delwyn Clark) by himself, his employees or agents or any other entity be permanently restrained from directly or indirectly: (i) using or referring to the name or words "Pacific Boating", "Pacific Boating Sydney" or "Pacific Boating Club" in or in relation to any business conducted by him or in relation to any activity associated with such business; (ii) diverting internet inquiries made by consumers to the applicant's website (www.pacificboating.com.au) from that website to a website associated with or controlled by the second respondent; (iii) aiding, abetting, counselling, procuring, inducing or permitting any person to engage in any of the conduct described in subparagraphs (i) and (ii) above; and (iv) being knowingly concerned in conduct by other persons described in subparagraphs (i) and (ii) above. (3) Judgment be entered in favour of the applicant against the respondents for damages to be assessed or, at its election, for an account of profits. (4) The balance of the proceedings be referred to a Registrar of the Court for the purpose of that Registrar conducting an inquiry into the damages suffered by the applicant or, at the election of the applicant, profits made by the respondents as a result of the contravening conduct described in paragraph 16 of the Statement of Claim filed herein. (5) The respondents pay the applicant's costs of these proceedings to date. (6) The applicant may tax such costs forthwith. (7) The applicant have leave to approach the New South Wales District Registrar for the purpose of obtaining a listing of the inquiry referred to at subparagraph (4) above. 30 After I delivered my Reasons for Judgment and pronounced the orders which I proposed to make in this proceeding, the solicitor for the applicant applied for a variation of the costs order which I had already announced. She sought an order that the respondents be required to pay the applicant's costs incurred on and after 25 October 2011 on an indemnity basis. The submission was based upon the fact that the solicitors for the applicant, MWA Lawyers, had made an offer to settle these proceedings by way of a Calderbank letter dated 11 October 2011 sent to Logical Legal, who were then representing the respondents. That letter is in the following terms: RE: PACIFIC BOATING GROUP PTY LIMITED V FREEDOM BOATING CLUB PTY LIMITED FEDERAL COURT OF AUSTRALIA NSD 1158 OF 2011 WITHOUT PREJUDICE SAVE AS TO COSTS Calderbank offer This letter is written on a without prejudice, and non admissions basis, in an attempt to resolve the dispute between our respective clients. It is intended to be a Calderbank Offer. This offer is made on the basis that the Applicant is subject to the Deed Poll set out below, compromising its claim for damages to Nil, and if accepted, it will reduce for both parties, the not inconsiderable time, effort and expense associated with these proceedings continuing via the imposition of discovery obligations, affidavit preparation and the conduct of a trial. Offer: 1. The Respondents consent to a permanent injunction in terms as set out in the orders in the form annexed hereto – or if the court varies those orders on submission of those orders to the court, as varied by the Court (the Orders); 2. The Respondents pay the Applicant's costs of these proceedings; 3. The Proceedings otherwise be discontinued; 4. As an inducement for the Applicant to consent to the Orders, the Respondents to sign and provide to the Applicant, a Deed Poll, in the form as annexed hereto. This offer remains open for 14 days from the date of this letter, whereupon it will expire. Acceptance Acceptance of this Offer, must be in writing and at the time of acceptance must be accompanied with: 1. The Orders duly signed by the Respondents or the Solicitors for the Respondents; 2. The Deed Poll signed by the Respondents and witnessed. Our client will rely on this letter on any application for costs, including indemnity costs. 31 The essence of the offer was that the applicant was, as at 11 October 2011, prepared to settle the entire proceedings upon the basis that appropriate permanent injunctions be granted and the respondents pay the applicant's costs. The compromise element of this proposal was that the respondents would be relieved from any obligation to pay compensation either by way of damages or an account of profits. The offer was made upon terms that the respondents consent to orders giving effect to the proposed settlement as well as execute a deed, copies of both of which were attached to the settlement offer. 32 The terms of the deed required the respondents to give certain warranties to the applicant as a condition of the applicant proceeding with its settlement offer. It seems to me that the imposition of the requirement that the respondents execute a deed in the terms of the proposed deed attached to the settlement offer of 11 October 2011 went beyond the relief which the applicant was seeking or could obtain in the proceeding. The attempted imposition of such a term seems to me to have been unreasonable. For this reason I am not prepared to conclude that the conduct of the respondents in declining to accept the proposal contained in the letter of 11 October 2011 was unreasonable. 33 Accordingly, I refuse the application for indemnity costs and the order for costs which I have already made will stand. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 10 February 2012