Fair Trading Tribunal New South Wales CITATION: Austin Customs Agents Pty Ltd v Breakfast Bytes Pty Ltd [2000] NSWFTT 8 DIVISION: Consumer Claims Division PARTIES: APPLICANT: Austin Customs Agents Pty Ltd RESPONDENT: Breakfast Bytes Pty Ltd FILE NUMBER: CO 1999/5599 HEARING DATES: 14 February 2000 SUBMISSIONS CLOSED: DATE OF DECISION: 02/05/2000 BEFORE: PH Molony Senior Member Electronic Commerce Act 1999 (Cth) LEGISLATION CITED : Fair Trading Act 1987 - ss58 59 Freeman and Lockyer v Buckwurst Park Properties Ltd Crabtree Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd (1975) 133 CLR 72 CASES CITED: Pavey and Mathews Pty Ltd v Paul Deane J Christian and Nielsen Pty Ltd v Goliath Portland Cement Company Ltd (Full Court - SCT of Tasmania) CATCHWORDS: Consumer claim - provision of a domain name hosting service - description of Internet - description of domain names - definition and use of a server - authority to act as an agent - ACCC and principles of Consumer Protection principles in electronic commerce - Internet industry draft code of practice - OECD guidelines for consumer protection in the context of the Internet - unsolicited goods and services MATTER FOR DECISION: Consumer claim REPRESENTATION: APPLICANT: Edmund Smith, director of Applicant RESPONDENT: Adam Todd, director of Respondent I declare that the Applicant Austin Customs Brokers Pty Ltd is not indebted to and does not owe the Respondent Breakfast Bytes Pty Ltd any monies for the provision of domain name hosting services and for time or debt default charges associated with the provision of domain name hosting services by the Respondent ORDERS: for the domain names customsagent.net customsagents.net and customsbrokers.net in the period November 1998 to 30 June 2000. Reasons for Decision: Introduction 1 This application was filed on 1 October 1999. In it, the Applicant Austin Customs Brokers Pty Ltd (Austins) seeks an order that it does not have to pay any of the money demanded of it by the Respondent Breakfast Bytes Pty Ltd (Breakfast Bytes) for domain name hosting services provided by the Respondent. The application was initially listed before another Member of the Tribunal on 13 January 2000, who disqualified herself from the hearing. As a result the application was re-listed for hearing before me on 14 February 1999. At the conclusion of the hearing I reserved my decision because of the novelty of the issues raised. 2 The application is factually and technically complex, and raises interesting issues of law in relation to the provision of digital services over the Internet. During the course of the hearing sworn evidence was taken from the Austin's representative Mr Smith, Mr Lloyd Austin, a director of the Austin's, and Breakfast Bytes' representative, Mr Todd. Ms Suzanne Brook, another director of Breakfast Bytes also attended the hearing and was sworn in, but did not give evidence. In reality there was little dispute between the parties as to the factual background to the application, their dispute was as to the legal consequences which flowed from those facts. In order to properly understand the nature of the dispute and the legal issues raised, it is first necessary to traverse some of the technical issues and terms raised by the application. I do so as simply as possible. The Domain Name System and Domain Name Servers 3 The Internet is a vast array of computers, be they single computers, part of a local area network (LAN) or a wide area network (WAN), operated by individuals, governments, educational institutions or industry, which are able to communicate with each other by means of a series of overlayed communication protocols called Transmission Control Protocol/Internet Protocol (TCP/IP).i TCP/IP breaks data into packets or datagrams which are transmitted across the networks to their destination. Each packet does not necessarily follow the same path to its destination, but the transmitting computer must know the destination in order for data to be successfully transmitted.ii Each computer interfacing with the Internet therefore is allocated an IP address, which is a unique 32 bit number, so that data can be transmitted to it. Computers that dial in to an Internet Service Provider (ISP) using a modem to gain access to the Internet, usually do not have a permanent IP address, but are allocated an IP address each time they log onto their ISP, which corresponds to the IP address of each modem supported by the ISP.iii 4 IP addresses are long and difficult to remember: consisting of four octets between 1 and 255. A full TCP/IP address includes a communications port number.iv In order to make the Internet easier for people to navigate the Domain Name System (DNS) was created. Put simply, the DNS allocates unique, more user friendly domain names to each IP address.v Thus the domain name www.howstuffworks.com refers to - or is mapped to - the IP address 216.27.61.127.vi The organisation and allocation of domain names has long been the subject of tension and debate, and has recently undergone significant changes. 5 A domain name is made up of a number of components. These are: a) the host name (www) b) the domain name (howstuffworks), and c) the top-level domain name (com). Top-level domain names may be com, net, edu, org or gov, each of which is indicative of a certain type of user.vii Com or net is indicative of a commercial organisation. Org commonly indicates a non-commercial organisation, edu an educational institution, and gov an arm of government. In addition there are national domains which indicate the country in which a domain is registered, though not necessarily located. The national domain name "au" represents Australia, "uk" the United Kingdom, and "fr" France. Thus the name www.nsw.gov.au is the domain name of the New South Wales government. In the top level domains there is no national country identifier. 6 Domain names are registered to their users. It is said that there is no ownership of domain names although commercial experience indicates to the contrary.viii Registration systems have been established in the top-level and country level domains to ensure that each domain name remains unique. In the top-level domain the Registry is now run by Network Solutions a company established for that purpose.ix In the ".au" domain the Registry is now run by Melbourne IT,x a recently floated company which took over the Registry role from the University of Melbourne. The registration of domain names is a matter governed by international protocols and agreements, necessary to ensure the operation of the domain name system, and the orderly integration of, as well as navigation of the world wide web (the Web). 7 A domain name must have an IP address to which it refers or is mapped. It is possible for there to be a number of domain names mapped to the same IP address. To enable this to occur there are a multiplicity of domain name servers, which serve the purpose of translating domain names to IP addresses, thereby enabling navigation of the Internet.xi Thus, when an individual is using browser software, such as Netscape Navigator or Internet Explorer, to view materials on the Internet, he or she will follow a link to or enter the universal resource locater (URL) of the site they wish to visit , such as: http://www.lawlink.nsw.gov.au/ftt/ftt.nsf/pages/index 8 The "http" indicates the protocol they wish to use: in this case hyper-text transfer protocol one of the suite of protocols contained within TCP/IP. It is sometimes easier to think of protocols as systems for delivery of Internet services. Thus http refers to the world wide web service which provides access to documents, graphics and text using hyper-text mark-up language (HTML).xii FTP refers to file transfer protocol which is the mechanism for transferring data files across the Internet. Other services include telnet, news, e-mail and chat. The domain name above indicates the lawlink site maintained by the New South Wales government. The balance of the address indicates which hyper-text page, in which directory, at the site is being sought. In this example it is the home page of the Fair Trading Tribunal. When the browser user enters this address in the browser location bar (or presses a link to that page), the browser communicates with one or a series of domain name servers to translate the name www.lawlink.nsw.gov.au into an IP address. The browser then forms a connection with the server at the IP address, sends a GET request for the relevant page, and the server then transfers the html text for the page back to the browser which reads the html document and displays it properly formatted on the screen.xiii In reality the system is often more complicated than that, involving the name server requesting further information from other DNS servers (often referred to as root servers). 9 Frequently, but by no means always, the domain name server will be managed and configured by the ISP which hosts the web site of the domain in question. Larger companies and government departments may have their own domain name servers, dealing with domains within their domain, and have all their web pages and sites on their own servers. In other cases the web-site may be hosted by a ISP on a server in one location, but the domain name server which refers to it may be separately operated and located. Domain name servers in effect run an inter-related database of domain names and equivalent IP addresses, which point to the IP addresses of a multiplicity of domains. For the purpose of these reasons the provision of a DNS server configured for an IP address will be referred to as DNS hosting, which needs to be contrasted with the provision of hard disk space on a server with a permanent connection to the Internet for the purpose of displaying information on the world wide web, and disseminating information over the Internet. The latter will be referred to as Website hosting. When a website is created or moved, the DNS system requires that the domain name Registry and the DNS hosting service - if separate from the Website hosting service - be notified of the change so that the DNS server's configuration can be changed: this is known as a change of delegation. 10 In order to avoid confusion, it is worth diverting to consider the meaning of the word server. As the name implies a server provides data to users of the Internet. Those users are using computers, which the same terminology refers to as clients: they receive rather than supply data. It is possible for a single computer to be both a client and a server. Servers, by their nature can serve different purposes and are differently configured depending upon the use to which they are being put; eg, web servers, domain name servers and ftp servers. One thing they all share in common is the fact that they have a permanent connection to the Internet. A single server may be configured to serve a number of purposes, in which case the service which it is supplying is accessed by specifying the port address of that service as part of the TCP/IP address. Name servers are commonly found at port 42, while world wide web servers are commonly found at port 80. These are used as the default port addresses for Internet communications.xiv 11 With that technical background in mind I turn to the issues raised by this application. The Evidence 12 In October 1997 Austins commenced negotiations with an Internet web-site builder called Net Rezults Pty Ltd (Net Rezults), with a view to securing the registration of a number of domain names for use in conjunction with a web-site which the applicant was considering having Net Rezults build for it. In due course Net Results procured for Austins the registration of three domain names at a cost of $595.00 each. These were: a) customsbrokers.net b) customsagent.net c) customsagents.net Each of these domain names are what is termed top level domain names and were registered through Network Solutions, the Registrar of top level domain names in the United States, on 18 January 1998. The Registration details for each domain name are the same. They show the Registrant to be Austin Customs Agents, the administrative contact to be Keith Smith, and the technical and billing contact to be David Jackson-Gross of Net Rezults. 13 In a letter from Net Rezults to Austins dated 24 October 1997 Net Rezults wrote, among other things: We charge $595 per domain name. This is negotiable if you purchase a quantity of domain names. This covers the registration fee, hosting of the name for an unlimited period until you wish to activate your site. It includes the cost of hyperlinking to any other web address. For example your company name. 14 Mr Todd gave evidence that on the same day as Net Rezults registered the domain names with Network Solutions, 18 January 1998, Breakfast Bytes configured the domain names on its DNS servers, in accordance with e-mailed instructions received from Network Solutions. They could tell they were referred by Net Rezults because of the billing and technical contacts. He explained that Breakfast Bytes had a standing arrangement with Net Rezults, to configure DNS servers on behalf of Net Rezults' clients, and to issue regular, monthly bulk bills to Net Rezults for those services provided to its customers. Mr Todd was anxious to make it clear that the DNS services provided by Breakfast Bytes are separate and distinct from the domain name registry services provided by Network Solutions. 15 Following discussions between the Austins and Net Rezults, on 12 February 1998 Net Rezults wrote to Mr Smith as follows: Further to our conversation today, I have drawn up the details of the construction of your website. Included in the cost of each of your domain names are registration with all 21 search engines, both in Australia and Internationally. The cost of your website will include 3 web pages including all frames, simple animation and your e-mail addresses, and free hosting and free maintenance for 12 months, all for just $1,500.00. Keith may I also ask you to complete the questionnaire, so I can hand the information to our graphic designers to enable us to make you the biggest custom agents/brokers on the world wide web. ... 16 In response Mr Smith completed the Internet questionnaire and faxed it to Net Rezults on 16 February 1998. On the same day Net Rezults faxed an invoice to the Applicant which was paid. Subsequently, Net Rezults proceeded to develop a small website for the Applicant and advised the Applicant of how to access the proposed pages over the Internet. The address given was http://www.thepla.net/~rezults/austin/. This address indicates that - at that time - Net Rezults had not established a separate Web site for Austins, and had developed the Web pages for viewing on www.thepla.net. This is consistent with Breakfast Bytes statement that none of Austin's various domains were ever Web hosted, as Breakfast Bytes never received a delegation for them. On 16 March 1998 the Applicant wrote to Net Rezults setting out the changes it wanted to the text and design of the web pages. 17 In April 1998 Mr Smith became concerned when he was unable to access the company website over the Internet at www.thepla.net. He went to Net Rezults offices in Sussex Street and was told that Net Rezults had gone 'down the tube'. He subsequently verified this with the Australian Securities Industry Commission. Mr Smith explained that he thought this meant that Austins had not only lost its investment in the website, but had also lost its domain names. 18 Mr Todd said that in May 1998 he became aware that Net Rezults was in liquidation. At that time Breakfast Bytes was providing DNS hosting services to approximately 2,500 of Net Rezults customers. Over the next six months Mr Todd said Breakfast Bytes billed Net Rezults care of the liquidator for these services. He said that this was in accordance with Breakfast Bytes policy of invoicing the billing contact first. When this resulted in no payments being forthcoming Breakfast Bytes decided to bill the clients directly. They did so on the basis of advice that the individual clients were their customers, not Net Rezults. Mr Todd explained that their aim was to get customers to ring Breakfast Bytes in the hope of sorting the situation out. 19 On 4 December 1998 Breakfast Bytes faxed an invoice to Austins. The invoice was for $120.00, payable within 14 days, being $60.00 each for Domain Name Hosting of customsagents.net and customsbrokers.net for the period November 1998 to 30 June 1999. Mr Todd explained that at that time Breakfast Bytes had not associated the domain name customsagent.net with Austin's. The invoice from Breakfast Bytes showed a post office box address only, and contained a number of warnings and conditions which I set out in full. THE FEES INCLUDE ADMINISTRATION AND HOSTING UNTIL 30 JUNE 1999 WHEN A RENEWAL WILL BE ISSUED FOR HOSTING SERVICES ONLY. IF YOU HAVE CANCELLED THIS SERVICE YOU MUST NOTIFY BREAKFAST BYTES IN WRITING. YOU ARE LIABLE FOR ALL FEES AND CHARGES UP TO THE DATE OF CANCELLATION OTICE IN WRTING. A SERVICE IS NOT CANCELLED AND WILL CONTINUE TO ACCRUE DEBT UNTIL NOTICE IS PROVIDED IN WRITING. 1. Domain Authorities for Names hosted and not paid within 14 days of this invoice will be notified to release the domain name. 2. Cleared payments must be made by the due date shown on this invoice. 3. If payment is made by cheque, a $30.00 cheque clearance fee must be included if the cheque is sent less than seven days before the due date. Failure to include the $30.00 fee could deem your payment overdue if the funds are not cleared by the due date. 4. You are liable for any cheque and banking fees charged to Breakfast Bytes if the bank does not honour your cheque. A fee of $30.00 will be charged to you for each dishonour. 5. Overdue invoices will attract administration and collection fee of $150 per hour or part thereof for each attempted collection. 6. If you incorrectly mark the cheque, you are liable for any costs associated with resolving payment and clearance of the cheque at the rate of $150 per hour or part thereof. 7. Discounts are provided on the basis that payment is made by the due date. This will ensure further invoices will also be discounted. 8. Discounts are given at the discretion of the directors of Breakfast Bytes Pty Ltd. 20 Mr Smith said that when he received this invoice he noticed a number of things about it: a) it was from a company he had never heard of, Breakfast Bytes; b) it did not disclose a street address for Breakfast Bytes; and c) it related to only two domain names. His initial reaction was that it was some sort of 'scam'. He decided not to react or reply to it. 21 On 4 December 1998 Breakfast Bytes followed up the invoice with a telephone call, leaving a message for Mr Smith who was out of the office. He returned that call on 14 December 1999 at 9:35am. After a discussion, lasting 9 minutes according to Breakfast Bytes, during which the situation was reviewed, Mr Smith said he wanted to make further inquiries about Breakfast Bytes. Mr Todd said it was apparent from this discussion that Mr Smith did not realise that the domain names were still registered to Austins. 22 On 15 December 1999 at 1:01pm Breakfast Bytes rang Austins and spoke with Mr Smith for an hour. Mr Todd said that the nature of the domain name hosting services provided by Breakfast Bytes was explained to Mr Smith. He was told that Net Rezults, as Austin's agent, had arranged for Breakfast Bytes to provide domain name hosting services for Austin's domain names in January 1998. He was told that companies that did not have the facilities to offer domain name hosting services, frequently arranged for Breakfast Bytes to provide those services to their clients. He was told that only Austins could deregister the domain names or change the domain name server with Network Solutions, because Breakfast Bytes was prohibited from doing so under its agreement with Network Solutions. He was told about the other services offered by Breakfast Bytes including Web site hosting. He requested a copy of Breakfast Bytes standard agreement and a copy of the original invoice. These were faxed to him. Mr Smith agreed with Mr Todd's summary of this conversation. 23 There was no further contact between Breakfast Bytes and Austins until 2 February 1999 when Breakfast Bytes rang Mr Smith who was confused about the agreement. The agreement was explained to him and he was asked when he would be paying the invoice. He said he would call back soon. This call lasted 10 minutes. On 19 February 1999Mr Smith wrote to Mr Todd. This was unsuccessfully faxed to Breakfast Bytes and so was ultimately posted on 22 February 1999, and received on 24 February 2000. Mr Smith wrote: I have been making some enquires. Both of the domain names mentioned in your invoice are registered to www.ah.net and not to Austin Customs, and there is no connection to B/Bytes. I fail to see why we should agree to pay anything in these circumstances. www.ah.net is apparently something to do with the AUX MEDIA GROUP, and not B/Bytes. If the domain names are not registered to Austin Customs and are not hosted in some sort of beneficial and direct way by B/Bytes, then there is nothing to be paid for. Even if those names could be registered to us (which I doubt would happen), we would get "zilch" from them in benefits to our company from B/Bytes. Thanks but no thanks. Keith Smith 24 On 25 February 1999 Breakfast Bytes called Austins and left a message for Mr Smith. On the same day Breakfast Bytes conducted a search of the domain name registry database which showed that both customsagents.net and customsbrokers.net had been registered to Austins on 18 January 1998. Copies of these searches were tendered during the hearing. On the same day Breakfast Bytes spoke with a Mr Daryl Sharp from Austins, who denied that Austins was liable for Breakfast Bytes' fees. Mr Todd said that Mr Sharp was asked to arrange for the registration of customsagents.net and customsbrokers.net to be terminated if Breakfast Bytes' services were not wanted. Mr Todd explained that the registration with Network Solutions lasted for two years, and that Breakfast Bytes had no authority remove them from the server unless Network Solutions was advised of a cancellation or transfer to a different DNS server. 25 On 14 March 1999 Breakfast Bytes discovered that it was also providing domain name hosting for Austins in the name customsagent.net. A fresh search of the domain name database confirmed that this name was registered to Austins on 18 January 1998, and that all three names remained registered. On 13 April 1999 Breakfast Bytes sent Austins a new invoice this time for a total of $646.00 comprised of: a) the initial $120.00; b) 94 minutes of time charges - relating to telephone calls with Austins - charged at $4.00 a minute ($240.00 an hour); and c) $140.00 being four separate debt collection charges of $35.00 each, relating to an allocated potion of four separate conversations with Austins, two of which were also the subject of the time charges mentioned above. The charges made are best illustrated in a table. Date Duration Time Charged Time Charge Debt Collection Time Debt Collection Charge 11 Dec 99 2mins 2mins $35.00 14 Dec 99 9min 9mins $36.00 15 Jan 99 61mins 51mins $204.00 10mins $35.00 2 Feb 99 2mins 10mins $35.00 24 Feb 99 5mins 5mins $20.00 25 Feb 99 29mins 18mins $72.00 1mins $35.00 14 Mar 99 5mins 5min $20.00 26 Mr Smith replied to this invoice by fax on 14 April 1999. In summary he denied having any contract with Breakfast Bytes, and refused to pay for unsolicited and 'not needed' services. There then ensued a series of increasingly hostile communications which there is little value n repeating here. Of note is that: a) on 20 April 1999 Mr Todd wrote to Mr Smith advising, among other things, www.ah.net provided services to Breakfast Bytes and that Breakfast Bytes had nothing to do with the AUX Media Group. b) on 25 July 1999 Breakfast Bytes faxed Austins an additional invoice for $590.67 (making the total owing $1,327,71) comprised of: i) an account keeping fee (time allocated 1 minute 26 seconds) of $50.00; ii) time based consultancy fees for the period 14 April 1999 to 20 April 1999 totalling 18 minutes and 10 seconds charged at $4.00 a minute: $73.67; iii) domain name hosting fees for the 1999-2000 financial year of $468.00; and iv) interest due of $15.23. Submissions Made by the Parties 27 Austins' submissions in this case were simple. Austins say that there is not and never was any contractual relationship between it and Breakfast Bytes. Austins contract was with Net Rezults. Under the terms of that contract Net Rezults were to provide them with all relevant services including domain name hosting. Austins deny that Net Rezults was ever authorised to enter contractual relationships on their behalf. 28 Breakfast Bytes says that Net Rezults at all times acted as agent for Austins in its dealings with Breakfast Bytes. While the precise arrangement between Net Rezults and Breakfast Bytes is not documented, Breakfast Bytes implicitly argued that it is industry practice for Website developers such as Net Rezults to act as agent for their principals when arranging for domain name hosting services. In doing so Net Rezults relied on the nature of the services it provides, and the fact that those services can only be terminated by the cancellation of the domain name registration, or a transfer of domain name servers, which under Network Solutions domain name policy and agreements can only be occur at the request of the Registrants administrative contact. Mr Todd referred to a copy of Network Solutions standard contract at the time in support of this. He also pointed to the fact that the standard Network Solutions contract made it clear that a web site developer registering a domain name for a client was doing so as agent for the client. He argued that the same relationship must exist when a web site developer engages a domain name hosting provider to host a domain name, because the web site developer had no ongoing control with respect to the domain name. 29 Alternately, Mr Todd argued that Breakfast Bytes was entitled to recover its fees from Austins pursuant to sections 58 of the Fair Trading Act 1975. Findings of Fact 30 In considering the evidence given in the course of the hearing, I was impressed by the technological knowledge and the depth of preparation displayed by Mr Todd. I was similarly persuaded that he has little tolerance for those who do not grasp, and have little understanding of, the technicalities of cyberspace. I was left with the definite impression that he does not tolerate those he considers ignorant gladly, and has difficulty in making himself understood by those who do not share his technical expertise. This may, in part, explain why this dispute has reached the stage it has. Correspondingly, I was satisfied that Mr Smith from Austins had no understanding of the technology, systems or industry he was dealing with when he embarked on the task of putting his company on the Internet. While Mr Smith said in the course of evidence that he had learned a lot during the course of the dispute, what knowledge he had gained was only minimal. He clearly had no understanding of the technical matters I have sought to outline earlier in these reasons, he did not understand the domain name registration system, and displayed an understandable suspicion of the unknown when discussing these matters. That also, I suspect, is a contributing factor to the escalation of this dispute. Nonetheless I was satisfied that both of them did their best to give the Tribunal a full and complete picture of what had transpired. 31 Having considered the evidence I make the following findings of fact: a) In early January 1998 Austins engaged Net Rezults to register domain names on its behalf. Included in the fee Austins paid Net Rezults was provision for: i) all registration fees; ii) hosting of the name for an unlimited period; and iii) hyperlinking to any other web address. b) On 18 January 1998 Net Rezults procured the registration of the following domain names on Austins' behalf with Network Solutions: i) customsbrokers.net ii) customsagent.net iii) customsagents.net c) On 18 January 1999, pursuant to an arrangement in place between Net Rezults and Breakfast Bytes, Breakfast Bytes commenced providing DNS hosting services for Austins' three domain names, and in accordance with the arrangement in place, billed Net Rezults for those services. d) In February 1998 Austins engaged Net Rezults to develop a web site for it, which the domain names were intended to refer to. e) Net Rezults commenced development of the Austins' web site, and in March 1998 that development reached the stage whereby draft pages were viewable over the Internet at Net Rezults' development site. f) In April 1998 Net Rezults ceased trading and was subsequently placed in liquidation in May 1998. g) Net Rezults did not complete the development of Austin's web site, nor arrange for the hosting of that web site, nor for the domain names to refer to such a web site. h) Net Rezults ceased paying Breakfast Bytes for DNS hosting services provided by Breakfast Bytes for Net Rezults' clients. i) On 11 December 1998 Breakfast Bytes invoiced Austins for the supply of DNS hosting services from November 1998 to 30 June 1999. Its invoice set out various conditions of trade, especially with respect to default in payment. j) Austins did not accept liability for Breakfast Bytes' invoice and denied that Breakfast Bytes was providing it with any service. k) Breakfast Bytes continued to provide DNS hosting services for the three domain names registered to Austins, and requested Austins to cancel the registrations if it was not going to pay for the DNS hosting services. Breakfast Bytes advised Austins that it was unable to unilaterally terminate the services because of its agreement with Network Solutions. l) In the period since December 1998: i) Breakfast Bytes has continued to supply the DNS hosting services; ii) Austins have refused to acknowledge that that service was being provided; iii) Breakfast Bytes have invoiced Austins for the delivery of the DNS hosting services together with substantial time charges for discussions with Austins about the dispute and debt recovery charges. Application of the Law 32 This case highlights difficulties which are being, and will continue to be experienced, in adapting the law to modern technology. It also, in my view, highlights the tendency of those engaged in digital commerce to let technological solutions overcome good business practice, and presume a license which the law has not readily granted to others. An example can be readily found in Breakfast Bytes failure to communicate at all with those it argues are its clients, preferring instead the ease of digital communication with the middlemen who introduce those clients. It is paradoxical that, at the same time, technology enabled the first direct contact with those clients to be the dispatch, by fax, of invoices generated by an automated billing process capable of time charging to the second. I suspect a simple letter of explanation may have been more successful with Austins. Some of these difficulties will be settled by the introduction of the Electronic Commerce Act 1999 (Cth) xv which seeks to treat digital and written communications equally, adopting the principles of functional equivalence and media neutrality. 33 A detailed examination of all communications between Austins and Net Rezults makes it clear that at no time did Austins expressly authorise Net Rezults to act as its agent in procuring domain name or web hosting services on its behalf. Rather it contracted with Net Rezults to supply those services. I think an argument can be advanced that Austins impliedly authorised Net Rezults to act as its agent in procuring the registration of the domain names with Network Solutions, as it was clearly the understanding of both Austins and Net Rezults that the domain names had to be registered with a third party. In those circumstances an agency might be implied to give business efficacy to the agreement.xvi In any case, I have no doubt from Mr Smith's evidence that Austins wish to ratify Net Rezults' conduct in registering the domain names. That, however, is not the issue here. With respect to DNS hosting services Net Rezults told Austins that for payment of the fee Austins would receive, among other things, 'hosting of the name for an unlimited period until you wish to activate your site'. Those words are indicative of a sale of services. 34 Breakfast Bytes argues that its arrangement with Net Rezults and other web site developers is predicated on the web site developers being the agent of their principals. The fact that the principals were not billed by Breakfast Bytes militates against this. Why bill the agent of a disclosed principal, not the principal? The billing of the web developer is strong evidence that the web developer is the client, who with the knowledge and consent of Breakfast Bytes, is reselling the DNS hosting services to its clients. It is a relationship analogous to that of a builder, who engages various expert sub-contractors to work on the building site, and who is responsible for the payment of those sub-contractors. The builder sells the construction of the building to his or her client as a package. I am reinforced in this conclusion by the failure of Breakfast Bytes to produce any documentation as to the arrangement it had 'in place' with Net Rezults, and the practice of Breakfast Bytes in not communicating with its alleged clients. It would be a simple matter for Breakfast Bytes to automate an e-mail notification of its services to new clients introduced by web developers, without the need to resort to more mundane methods of communication. It could have done so with Austins. Mr Smith's e-mail address was registered with Network Solutions. That it did nothing at all, is confirmatory of the fact that its client was Net Rezults, rather than Austins. Further, it is clear that Net Rezults did not pass Breakfast Bytes fees on to Austins for payment as one would expect in the case of an agency. Rather, it aggregated Breakfast Bytes services with those purchased from others, into an overall domain name registration package it offered Austins, which clearly included an element of profit for Net Rezults. This is redolent of a relationship of a seller and purchaser, not that of agent and principal. xvii 35 Breakfast Bytes relies on the nature of Network Solutions rules with respect to the cancellation of domain name registrations, or the transfer of DNS hosting services as supporting its contention that Net Rezults acted as Austins' agent. As I understand it the reasoning underlying this is that, as only Austins can terminate the registration or transfer the DNS hosting service for the domain names, under the terms of their registration with Network Solutions, Net Rezults cannot be Breakfast Bytes' client as they do not have the authority to change the registration details. Only Austins' have that authority, ipso facto, they must be Breakfast Bytes' client. This reasoning is syllogistic, requiring acceptance of the proposition that a client must have authority to deal with Network Solutions in order to contract with Breakfast Bytes for DNS hosting services. Yet no such condition or warranty by the client (or indeed by Net Rezults as putative agent), appears on any of the documentation produced by Breakfast Bytes. To return to the building analogy. A builder is engaged to prepare the site and undertake the building works. The owner requires and obtains an excavation permit to prepare the site. The builder in turn engages a specialist excavator to do the excavation. After commencing work at the site the excavator advises the builder that because of rock it will be necessary to apply for a modification to the permit. As the owner must apply for the permit, the Council will not recognise an application in the Builder's name, does that change the legal relationships between the parties? Does the Builder become the agent of the owner with respect to the excavator, because only the owner can apply to change the permit? I think not. Yet that is the logic underlying Breakfast Bytes' contention with respect to only Austins being able to change the domain name registration details with Network Solutions. 36 The only other means by which it can be argued that Net Rezults acted as Austins agent with respect to Breakfast Bytes is by application of the doctrine of ostensible authority. In Freeman & Lockyer v Buckwurst Park Properties Ltd xviii in a frequently quoted passage Lord Diplock said: xix An "apparent" or "ostensible" authority [as compared to actual authority] is a legal relationship created between the principal and the contractor, created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by the contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the representation, but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates an estoppel, preventing the principal asserting that he is not bound by the contract. It is irrelevant whether the agent has actual authority to enter the contract. The doctrine of ostensible authority clearly has no application here, as there is no evidence of Austins at any time making any representation to Breakfast Bytes, let alone one with respect to Net Rezults having authority to act on its behalf. xx It is worth repeating that Breakfast Bytes configured the DNS server for Austins' domain names, upon receipt of e-mailed advice from Network Solutions, in accordance with an agreement in place with Net Rezults. At no time prior to the DNS servers being configured was there any contact between Austins and Breakfast Bytes. 37 I therefore am not satisfied that Net Rezults acted as Austins' agent. The contract for the provision of DNS hosting services was one between Breakfast Bytes and Net Rezults. It can be understood as a sub-contract entered into by Net Rezults in fulfilling its contractual obligations to Austins. 38 In passing I note that the Australian Competition and Consumer Commission has published a set of principles called, Consumer Protection Principles in Electronic-Commerce. xxi Among these principles are those that exhort on line businesses to: Provide easily accessible, accurate information about your identity and physical location, and about the goods and services you offer online. Provide customers with accurate information related to the terms and conditions of the transaction. ... Allow your customers to indicate clearly that they intend to make a purchase in a manner that allows them to both identify precisely the goods or services they wish to purchase and maintain a complete and accurate record of the transaction. Develop and implement mechanisms to provide consumers with a multi-step confirmation process. Have in place fair and effective policies and internal mechanisms to address and respond to consumer complaints and difficulties within a reasonable time, without undue cost to the consumer, and without prejudice to judicial redress. While these principles do not have legislative status they reflect a standard of probity and fairness in on-line business transactions which providers should aim to achieve. Similar principles can be found in the Internet Industry Draft Code of Practice, xxii and in the OECD Guidelines for Consumer Protection in the Context of the Internet. I observe that Breakfast Bytes breached each and everyone of these principles in its dealing with Austins, who it identified as its client. The use it made of its charging and default policy in attempting to intimidate Austins into paying its account was clearly unfair. A glance at the table on page 14 of charges unilaterally levied against Austins, amply demonstrates the use to which these policies were put. As I have found that there is no contract between Austins and Breakfast Bytes I do not need to explore those issues further. 39 Mr Todd for Breakfast Bytes argued that if there was no contractual relationship between Breakfast Bytes and Austins, Breakfast Bytes was nonetheless entitled to recover its charges pursuant to section 58 of the Fair Trading Act 1987 which deals with the provision of unsolicited goods and services. Relevantly it provides: 58 Assertion of right to payment for unsolicited goods or services, or for making entry in directory (TPA s 64) (1) ... (2) A person shall not, in trade or commerce, assert a right to payment from another person for unsolicited services unless the person asserting the right has reasonable cause to believe that there is a right to payment. (3) ... (5) For the purposes of this section, a person shall be taken to assert a right to payment from another person for unsolicited goods or unsolicited services, or of a charge for the making of an entry in a directory, if the first-mentioned person: (a) makes a demand for the payment or asserts a present or prospective right to the payment, (b) threatens to bring any legal proceedings with a view to obtaining the payment, (c) places or causes to be placed the name of the other person on a list of defaulters or debtors, or threatens to do so, with a view to obtaining the payment, (d) invokes or causes to be invoked any other collection procedure, or threatens to do so, with a view to obtaining the payment, or (e) sends any invoice or other document stating the amount of the payment or setting out the price of the goods or services or the charge for the making of the entry and not stating as prominently (or more prominently) that no claim is made to the payment, or to payment of the price or charge, as the case may be. (6) ... (7) For the purposes of this section, an invoice or other document purporting to have been sent by or on behalf of a person shall be deemed to have been sent by that person unless the contrary is established. (8) In a proceeding against a person in respect of a contravention of this section: (a) in the case of a contravention constituted by asserting a right to payment from another person for unsolicited goods or unsolicited services the burden lies on the defendant of proving that the defendant had reasonable cause to believe that there was a right to payment, or (b) ... 40 Section 58 is a provision which, among other things, seeks to prevent people demanding payment for the provision of unsolicited services, unless they have reasonable cause for believing there is a right to payment. It does not provide that a person who has reasonable cause for believing there is a right to payment, is entitled to payment. In order to recover payment that person must establish that right to payment. In other words, section 58 deals with the circumstances in which a person may demand payment for unsolicited services, but does not give a right to recover payment for unsolicited services. The section therefore can be of no assistance to Breakfast Bytes in attempting to recover from Austins, as it does not confer a right of action. Accordingly, I do not intend to further consider the applicability of the section to this case. There was an issue as to whether Breakfast Bytes could recover for unsolicited services under section 59 of the Fair Trading Act, but that deals with the liability of recipients of unsolicited goods, not services. xxiii 41 One further issue arises from the way Mr Todd presented Breakfast Bytes' case: whether Breakfast Bytes is entitled to recover the costs of the services it provided to Austins by application of the doctrine of restitution for unjust enrichment. A constant theme of his argument was that Austins were receiving DNS hosting at the cost of Breakfast Bytes, but at no cost to Austins. In Pavey & Matthews Pty Ltd v Paul xxiv Deane J said of the concept of unjust enrichment: xxv It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case (see Muschinski v. Dodds (1985) 60 ALJR 52, at p 67; 62 ALR 429, at p 455; Goff & Jones, op. cit., at pp 11ff.). In a category of case where the law recognizes an obligation to pay a reasonable remuneration or compensation for a benefit actually or constructively accepted, the general concept of restitution or unjust enrichment is, as is pointed out subsequently in this judgment, also relevant, in a more direct sense, to the identification of the proper basis upon which the quantum of remuneration or compensation should be ascertained in that particular category of case. 42 Earlier, xxvi His Honour said when discussing cases in which parties had been able to reclaim moneys wrongly paid on the basis of an implied (or quasi) contract: In that ... category of case, the tendency of common lawyers to speak in terms of implied contract rather than in terms of an obligation imposed by law (see, e.g., per Salter J., Scott v. Pattison (1923) 2 KB 723, at pp 727-728) should be recognized as but a reflection of the influence of discarded fictions, buried forms of action and the conventional conviction that, if a common law claim could not properly be framed in tort, it must necessarily be dressed in the language of contract. That tendency should not be allowed to conceal the fact that, in that category of case, the action was not based upon a genuine agreement at all. Indeed, if there was a valid and enforceable agreement governing the claimant's right to compensation, there would be neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration. The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution. Mason and Wilson JJ said of the application of the doctrine to cases in which there was a subsisting contract: xxvii Where work is done by a plaintiff under a contract which expressly or impliedly provides for the plaintiff's remuneration, there is no ground in rest itution or unjust enrichment for imposing an obligation to pay remuneration different from the agreed remuneration. 43 In this case there was no contract between Breakfast Bytes and Austins. There was, however, a contract between Breakfast Bytes and Net Rezults. In Christiani & Nielsen Pty Ltd v Goliath Portland Cement Company Limited xxviii the Full Court of the Supreme Court of Tasmania considered an appeal against an order striking out a claim for restitution for unjust enrichment. In that case Christiani had been engaged as a sub-contractor by a Builder with the knowledge and at the request of the owner Goliath. Subsequently, after Christiani had undertaken various works, the Builder was placed in liquidation and Christiani was unpaid. In the complex litigation which ensued, Christiani, among other things, claimed restitution for unjust enrichment from Goliath. Zeeman J (with whom Crawford J concurred) said: xxix Whilst it may be arguable that there is nothing in Pavey and Matthews Pty Ltd v Paul (supra) which prevents recovery by Christiani, nothing that was said in that case is capable of forming the foundation for the claim by Christiani on a quantum meruit. By its pleadings, as I have construed them, Christiani sought to claim an entitlement to be paid what it claims is owing to it by the first defendant pursuant to the subcontract merely because Goliath requested that it do the work whereupon Christiani entered into the subcontract with the first defendant pursuant to which it was to do the work. One needs only to state the claim in those stark terms to immediately recognise that is one which is not maintainable. Whilst it may be that Deane J did not have the present type of situation in mind when he referred to the concurrent existence of a valid and enforceable agreement, it may yet be said that the circumstances of the present case cannot possibly give rise to any "occasion or legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration" on the part of Goliath. By entering into the subcontract Christiani made a commercial decision that it was prepared to perform the subject matter of the subcontract and look to the first defendant for payment. That may have been a commercial decision which was wise or foolish. Regardless of the wisdom of that decision there is no occasion for the law to relieve Christiani of the consequences of the first defendant's inability to perform its side of the contract, if indeed it is unable to do so, by imposing upon Goliath the obligation to pay for work or materials for which the first defendant has failed to pay. Had Christiani wished to protect itself against the risk that it would not be paid by the first defendant then it could have sought to protect itself by asking that Goliath join in the subcontract in some appropriate way. Goliath might or might not have been prepared to accede to such a request. If it had done so then Christiani could have sought relief from Goliath on the contract. If it had declined to do so then Christiani would have had to decide whether it would enter into the subcontract without such protection or not enter into the subcontract at all. 44 In my view Zeeman J's words can be applied with equal force and effect to the situation here. If Breakfast Bytes had desired the added protection of contracting directly with Austins, rather than with Net Rezults as a web developer, it was open to Net Rezults to so arrange its business affairs, so that its contracts were directly with the Registrants of the domain names for whom it provided DNS hosting services. Instead, Breakfast Bytes operated in a manner which kept the Registrants, including Austins, entirely out of the loop. Breakfast Bytes contract was with Net Rezults. If Breakfast Bytes is unable to recover from Net Rezults that is a consequence of the commercial risk Breakfast Bytes assumed when it chose to contract with Net Rezults, and not to require Registrants to contract with it for the supply of DNS hosting services. From Austins' point of view it has already purchased the service which Breakfast Bytes supplies from Net Rezults. The arrangements between Net Rezults and Breakfast Bytes in respect to that service are a matter for them, and not a concern of Austins. 45 The conclusion I reach, therefore, is that Austins do not owe Breakfast Bytes anything. There will be a declaration to that effect. Looking back over these reasons, I am left with the impression that this is a situation in which Breakfast Bytes has allowed easy technological solutions to drive it business systems, rather than the proper commercial needs of the business driving its technology: the cart before the horse. The results are predictable. _______________ P. H. Molony Senior Member I HEREBY CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF THE ADMINISTRATIVE DECISIONS TRIBUNAL. REGISTRAR ______________________________________________________________________________________________________ Endnotes: i Ian F. Fletcher (Ed) 'Centrepoint '[1996] Journal of Business Law 416, at 417 - 418. ii Ibid. iii www.howstuffworks.com/webserver2.htm iv Ian F. Fletcher (Ed) 'Centrepoint '[1996] Journal of Business Law 416, at 418. v Ibid. vi www.howstuffworks.com/webserver4.htm vii Ian F. Fletcher (Ed) 'Centrepoint '[1996] Journal of Business Law 416, at 419 viii 'Marketing Your Website: Legal issues relating to the Allocation of Internet Doman Names', 21 University of NSW Law Journal ix http://www.networksolotions.com x http://www.melbourneit.com.au xi www.howstuffworks.com/webserver5.htm xii Ian F. Fletcher (Ed) 'Centrepoint '[1996] Journal of Business Law 416, at 417 - 418. xiii see www.howstuffworks.com/webserver.htm xiv www.howstuffworks.com/webserver.htm xv This will come into effect with respect to most Commonwealth laws on 1 January 2001. see the discussion in "A national framework for electronic commerce" (1989) 1 Internet Law Bulletin 137. xvi ANZ Bank Ltd v Ateliers de Construcions Electirques de Charleroi (1999) 39 ALJR 414. xvii Weiner v Harris [1910] 1 KB 285 and Bosanquet v Mofflin (1906) SR (NSW) 617. See also Bowstead and Reynolds on Agency (17th Ed.) 1-030. xviii [1964] 2 QB 480 xix at 502 xx see Crabtree Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd (1975) 133 CLR 72 xxi These can be accessed at http://www.accc.gov.au/ecomm/principles.htm xxii "Internet industry draft code of Practice - Parts 1 & 2" (1999) 2 Internet Law Bulletin 61 and 74 xxiii 59 Liability of recipient of unsolicited goods (TPA s 65) (1) A person to whom unsolicited goods are supplied by another person, in trade or commerce, is not liable to make any payment for the goods and is not liable for the loss of or damage to the goods other than loss or damage resulting from the doing of a wilful and unlawful act in relation to the goods during the period specified in subsection (4). (2) Subject to subsection (3), where a person sends, in trade or commerce, unsolicited goods to another person: (a) neither the person who sent the goods nor any person claiming under that person is entitled after the expiration of the period specified in subsection (4) to take action for the recovery of the goods from the person to whom the goods were sent, and (b) upon the expiration of that period the goods become, by force of this section, the property of the person to whom the goods were sent freed and discharged from all liens and charges of any description (3) Subsection (2) does not apply to or in relation to unsolicited goods sent to a person if: (a) the person has at any time during the period specified in subsection (4) unreasonably refused to permit the sender or the owner of the goods to take possession of the goods, (b) the sender or the owner of the goods has within that period taken possession of the goods, or (c) the goods were received by the person in circumstances in which the person knew, or might reasonably be expected to have known, that the goods were not intended for the person (4) The period referred to in subsections (1), (2) and (3) is: (a) if the person who receives the unsolicited goods gives notice with respect to the goods to the sender in accordance with subsection (5): (i) the period of 1 month next following the day on which the notice is given, or (ii) the period of 3 months next following the day on which the person received the goods, whichever first expires, and (b) in any other case the period of 3 months next following the day on which the person received the goods. (5) A notice referred to in subsection (4) shall be in writing and shall: (a) state the name and address of the person who received the goods, (b) state the address at which possession may be taken of the goods if it is an address other than that of the person, and (c) contain a statement to the effect that the goods are unsolicited goods. xxii (1987) 162 CLR 221 xxv at 256 xxvi at 254 xxvii at para 11 xxviii (1993) 2 Tas R 122 xxix at para 26 -27 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.