Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (ACN 075 400 529) [2002] FCA 89 (8 February 2002)

Last Updated: 26 February 2002

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd

(ACN 075 400 529) [2002] FCA 89

TRADE PRACTICES - providers of wholesale internet services - injunction - whether first, second and third respondents should be restrained from debiting credit card from any person without having first received handwritten authorisation to do so in circumstances where the respondents had accessed credit cards of people they had no entitlement to access

Trade Practices Act 1974 (Cth)

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DATALINE.NET.AU PTY LTD (ACN 075 400 529), AUSTRALIS INTERNET PTY LTD (ACN 090 539 432), WORLD PUBLISHING SYSTEMS PTY LTD (ACN 075 141 007), JOHN LYNDEN RUSSELL, NEALE FRANCIS BANKS, JEFFERSON LITCHFIELD AND SARA MARY MOORE

Q 277 OF 2001

DRUMMOND J

BRISBANE

8 FEBRUARY 2002

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 277 OF 2001

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DATALINE.NET.AU PTY LTD (ACN 075 400 529) FIRST RESPONDENT AUSTRALIS INTERNET PTY LTD (ACN 090 539 432) SECOND RESPONDENT WORLD PUBLISHING SYSTEMS PTY LTD (ACN 075 141 007) THIRD RESPONDENT JOHN LYNDEN RUSSELL FOURTH RESPONDENT NEALE FRANCIS BANKS FIFTH RESPONDENT JEFFERSON LITCHFIELD SIXTH RESPONDENT SARA MARY MOORE SEVENTH RESPONDENT

JUDGE:	DRUMMOND J
DATE OF ORDER:	8 FEBRUARY 2002
WHERE MADE:	BRISBANE

UPON CONDITION THAT William Main, Diane Main, Robert Hammersley, Deborah Hammersley, John Audley Davies, Microed Pty Ltd, Jeanette Maria Josephina Clifford, Daniel Loren Clifford, and Oz Web Internet Providers by 4.00 pm on 20 February 2002 file undertakings in this Court that:

(a) they will take no step to prosecute their respective counterclaims in the proceedings referred to in paragraph 1 of the respondents' undertaking while that undertaking is in place;

(b) they will take no step in the respective District Court proceedings, whilst the respondents' undertaking in paragraph 1 is in place, which is adverse to the interests of the first or second respondents, including any application to have the proceedings struck out or dismissed for want of prosecution, or any application to penalise those respondents (whether in costs or otherwise) for non-compliance with their obligations under any order, direction or rule of the relevant District Court;

(c) upon the determination of these proceedings, with the result that the applicant's respective claims in paragraphs 16 and 17 of the application filed herein on 21 December 2001 are dismissed, or earlier release from the undertakings in paragraph 1, they will, at their own cost, consent to all such orders or directions as may be necessary to permit the respective District Court proceedings then to proceed, including any order which may be required under r 389 of the Queensland Uniform Civil Procedure Rules (or any corresponding provision in Western Australia) for leave to proceed notwithstanding delay:

AND UPON the Commission undertaking, by no later than 4 pm 13 February 2002, to pay to the first and second respondents the loss which they may suffer as a consequence of delay in the expeditious prosecution of the litigation referred to in paragraph 1 of the respondents' undertaking but limited to delay which is a direct consequence of the giving of that undertaking:

THE FIRST, SECOND, THIRD AND FOURTH RESPONDENTS each, by their senior counsel, undertakes to the Court that:

1. Until the hearing and determination of this proceeding or further order, the first and second respondents will not, by themselves or by their servants or agents or otherwise howsoever, and the fourth respondent will not cause or permit the first and second respondents (or either of them) to take any step in the following proceedings with a view to having such proceedings (or part of them) set down or entered for trial, or allocated trial dates, or brought on for trial, or summarily determined (by strike out application or otherwise), that is to say:

(a) the following proceedings in the District Court of Queensland at Brisbane:

(i) proceeding number D2518 of 2001 between the first and second respondents as plaintiffs and Microed Pty Ltd and John A Davies as defendants;

(ii) proceeding number D857 of 2000 between the first respondent as plaintiff and Robert Hammersley and Deborah Hammersley as defendants;

(iii) proceeding number D2308 of 2001 between the first respondent as plaintiff and Oz Web Internet Providers Pty Ltd, Daniel Loren Clifford and Jeanette Maria Josephina Clifford as defendants; and

(b) Proceeding number 3191 of 2000 in the District Court of Western Australia at Perth, between the first respondent as plaintiff and William Main and Diane Main as defendants.

THE COURT ORDERS THAT:

2. Until the hearing and determination of this proceeding or further order, the first, second and third respondents, by themselves, their servants and agents, be restrained from debiting the credit card of any person in connection with the Dataline and Australis Businesses (as those terms are defined in the accompanying Statement of Claim ) unless the following conditions are satisfied:

(a) they have first received a written authorisation for such a debit bearing a handwritten signature by the apparent credit cardholder, or a person apparently authorised to use such credit card, such written authorisation not having been revoked orally or in writing prior to such a debit being made;

(b) the amount of the debit does not exceed the amount authorised to be debited;

(c) if the authority is in terms permitting recurrent or periodic debiting, the amount of the debit does not exceed, in any period, the amount so authorised to be debited; and

(d) the debit is processed in favour of the respondent to whom such authority is given.

3. Until further order, the Commission make no use of the mud maps or the photographs taken by KPMG personnel referred to in the letter from Corrs Chambers Westgarth to Irish Hughes & Bentley of 7 February 2002 exhibited to the affidavit of Mr Bentley sworn 8 February 2002.

THE COURT ORDERS BY CONSENT THAT:

4. The hard disk drives presently in the possession of the Court and numbered with serial numbers 3HV0J290 and 3HV0KHBT (the "drives") be released to the respondents' solicitors.

5A. Upon receipt of the drives, the respondents' solicitors shall forthwith deliver the drives to an independent forensic technology consultant nominated by the applicant's solicitors.

5B The applicant's solicitors shall cause the said consultant to make a copy of the drives forthwith (the "copy drives").

6. Upon completion of the copying referred to in paragraph 5B, the drives and copy drives are to be delivered forthwith to the respondents' solicitors and the respondents' solicitors are then to forthwith return the drives to the Registry during opening hours.

7. In the execution of paragraphs 4 to 6, the applicant's forensic technology consultant must not, save as is herein provided:

(a) inspect or make any image or copy of anything contained in the drives or copy drives; and

(b) permit any person to inspect or make any image or copy of anything contained in the drives or copy drives.

8. Costs associated with the matters referred to in paragraphs 4 to 7 of this order are to be reserved.

9. Costs of today are costs in the proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 277 OF 2001

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DATALINE.NET.AU PTY LTD (ACN 075 400 529) FIRST RESPONDENT AUSTRALIS INTERNET PTY LTD (ACN 090 539 432) SECOND RESPONDENT WORLD PUBLISHING SYSTEMS PTY LTD (ACN 075 141 007) THIRD RESPONDENT JOHN LYNDEN RUSSELL FOURTH RESPONDENT NEALE FRANCIS BANKS FIFTH RESPONDENT JEFFERSON LITCHFIELD SIXTH RESPONDENT SARA MARY MOORE SEVENTH RESPONDENT

JUDGE:	DRUMMOND J
DATE:	8 FEBRUARY 2002
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 The Australian Competition and Consumer Commission ("the ACCC") instituted proceedings on 21 December 2001 for relief under various provisions of the Trade Practices Act 1974 (Cth) against seven respondents. It moves today for interlocutory injunctive relief against the first to fourth respondents.

2 By its originating application of December 2001 it sought by way of interlocutory relief injunctions restraining the first and second respondents from taking further action in certain District Court proceedings in Queensland and Western Australia, which those respondents have instituted against organisations to whom those respondents had contracted to supply certain internet access services. By par 29 of the originating application the ACCC also seeks by way of interlocutory relief an injunction restraining the first, second and third respondents from debiting the credit card of any person in connection with the Dataline and Australis business, as those terms are defined in the accompanying statement of claim, without first having received a written authorisation for such a debit, signed by the credit card holder. Interlocutory relief is also sought against the fourth respondent, who is the principal of the first to third respondents.

3 Much has been able to be resolved, in large part by agreement, and I have made orders, based on undertakings given by the first to fourth respondents, which dispose of the ACCC's claim for interlocutory relief in relation to the restraint of the proceedings in the District Courts.

4 The respondents have not put on any evidence, so that the ACCC's evidence remains completely uncontradicted. They accordingly do not dispute that an interlocutory restraint in respect of the debiting of credit cards should be made. But there is a debate about the precise form that restraint should take, ie, how widely it should restrain the respondents in conducting their business.

5 Dataline sells wholesale internet provider services, ie, services that enable an internet user to connect to the internet, to what are called virtual internet service providers, or VISPs, for resale by the VISPs to their customers who pay for those services by giving the VISPs their credit card details over the internet.

6 Dataline also supplies to VISPs the right to use an on-line computer program called Pandora. That is a computer program developed by Dataline which is used to record consumers' financial information, including credit card details, the terms of charging and the amount of time spent on the data accessed by consumers in using the internet services in question.

7 The second respondent is a VISP engaged in the business of the retail resale of internet services. The fourth respondent set it up to provide internet services directly to customers, rather than to VISPs. It thus appears to be in competition with the first respondent's wholesale VISP customers.

8 The respondents contend, firstly, that no injunction should issue in the terms proposed by the ACCC in so far as it will require the respondents to have written authorisation to debit a cardholder. They say that if an injunction is to issue in those terms, it should also permit them to debit cardholders from whom they have various forms of electronic authority. It is the latter proposition that the ACCC disputes, insisting upon an injunction requiring written authority before the respondents can debit any credit cardholder.

9 Secondly, the respondents point to the fact that in the standard form contract they entered into with the various organisations to whom they supplied at a wholesale level internet access which the other organisations then retailed to individual consumers, clause 12 provides that the particular retail organisation, as I will call it, agrees that should it fail to pay on time, attempt to move or re-delegate the domain, cease to trade, become insolvent or engage in actions that breach this agreement, the retail organisation authorises Dataline, ie, the first respondent, to take full control of the retail organisation's customers, services, billing and management. The respondents accordingly submit that any injunction which goes in relation to debiting credit cardholders should recognise Dataline's entitlements as between itself and its retail organisation contracting parties to exercise the clause 12 rights.

10 There is no suggestion that any of the respondents were themselves in a contractual relationship with end consumers of internet services provided by the respondents. But it is said that clause 12 operates as an assignment of the defaulting retail organisation's contractual rights and that no notice to the consumer is necessary to empower the relevant respondent to debit, without specific authority, that consumer's credit card for certain services, including services supplied by a respondent to a former customer of a retail organisation. It was also submitted that there is a lack of justification for an injunction that fails to accommodate the respondents' clause 12 rights because the evidence shows that, if notice to the end consumer of the exercise of those rights be necessary to empower the relevant respondent to debit the consumer's credit card, the relevant respondent has given such notice. Reference is made to the evidence of the ACCC witness, Mr Hammersley, and in particular to exhibit 21 to that affidavit. This evidence supports the submission in this regard.

11 It is necessary to say a little about the nature of the respondents' activities to understand the debate that remains to be resolved. I take this in large part from the submissions on behalf of the ACCC, which appear to be not contentious.

12 The evidence, as I have said, uncontradicted by anything from the respondents, shows repeated, deliberate and dishonest unauthorised debiting of credit cards by the first, second and third respondents at the instigation of the fourth respondent.

13 I make particular reference to the evidence of the following witnesses. Daly is a former direct customer of the second respondent. He says his account was debited on three separate occasions after he had terminated his account with the second respondent, Australis.

14 The witness Chatman says that she never had a contract or account with the second respondent or indeed any respondent. But the second respondent has made debits to her credit card account on seven occasions. Her relationship, so far as the provision of internet services is concerned, was with one of the respondents' VISPs, Microed Pty Ltd.

15 Dutton deposes that he subscribed to one of the respondents' VISPs, Oz Web, for internet services, but found that over a period of six months his credit card was debited not only by Oz Web, but also by Australis. That is, it was debited in circumstances where Australis, on the evidence before me, could not have been purporting to exercise clause 12 rights in respect of defaults by Oz Web. Dutton says that he never authorised Australis to debit his visa card and that he has not transacted any business with Australis nor purchased or accessed services from Australis. He gives evidence of the difficulties he has experienced when he complained direct to Australis to stop them continuing to debit, without his authority, his credit card.

16 McMahon gives evidence that he had an account with the first respondent, but debits were made on four occasions between February 2000 and September 2000 after he had terminated his account.

17 The witness Groom gives evidence of being a customer of the second respondent, cancelling his services and, despite sending written notice by facsimile that his account was terminated and his credit card details should be deleted, and despite confirmation from the second respondent of receipt of that facsimile and that the appropriate action would be taken, his account was debited five days later in an amount of $236.

18 The ACCC has made out, on the material before me, what is a strong case that the respondents have debited credit cards of their own former customers when not authorised to do so, sometimes in the face of former customers' complaints.

19 In addition, the evidence shows that they have debited the credit card accounts of people who were never their customers, but customers only of their VISPs, when they were also not authorised to do so. They have been able to do this because they have the technology to enable them to access credit card details both of existing and former customers of their own and customers of their various VISPs.

20 The evidence of Mr Heidemann indicates that they also have the technological capacity, which they have utilised, to modify incoming electronic messages from customers. I refer particularly to pars 61 and 63 of his affidavit.

21 So far as the submissions that it would be too onerous to issue an injunction to respondents now permitting them to access credit card details only if they have written authorisation and that authority should extend to electronic information is concerned, I have already referred to the facts that the respondents have put no evidence on. There is thus no evidence to suggest that such a restraint would impede their ability to carry on with their business or as to the extent to which such a restraint might do that.

22 They put no evidence on, moreover, in circumstances where it seems to me the claim for interlocutory relief requiring written authorisation before credit cards can be debited has been in their hands for a long period of time. And there is this absence of evidence against uncontradicted evidence from the ACCC suggesting that the respondents have acted quite ruthlessly in accessing the credit cards of people that they have no entitlement to access, obviously in order, on the evidence before me, to take the benefit of the funds thereby obtained by them. I refer to the evidence of Heidemann and Tupper.

23 In these circumstances, the balance of convenience favours the issue of an injunction in respect of debiting credit cards in the form proposed by the ACCC in so far as it requires written authority. As to the submission that the injunction should be qualified to recognise the respondents' clause 12 rights, the uncontradicted evidence shows that the respondents are prepared to debit cards when they have no claim of right to do that. I have referred already to the evidence of Dutton.

24 It seems to me that, in these circumstances, an injunction in the form proposed by the ACCC, which does not recognise the existence of the clause 12 rights as between the first and second respondents and their various VISP providers, is appropriate.

25 I propose therefore to make an order in terms of par 2 of the draft, which I will initial and place with the papers, with the handwritten additions in sub-par (a) so that sub-paragraph will commence as follows: "They have first received a written authorisation for such a debit, being a handwritten signature by the apparent credit cardholder, etcetera."

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Associate:

Dated: 12 February 2002

Counsel for the applicant:	P McMurdo QC and L Kelly
Solicitor for the applicant:	Corrs Chambers Westgarth
Counsel for the first, Second, Third and fourth respondents:	A Morris QC and I Erskine
Solicitor for the first, Second, Third and fourth respondents:	Irish Hughes & Bentley
Date of Hearing:	8 February 2002
Date of Judgment:	8 February 2002