Macquarie Bank Limited v Seagle [2005] FCA 1239 (15 August 2005)

Last Updated: 26 September 2005

FEDERAL COURT OF AUSTRALIA

Macquarie Bank Limited v Seagle [2005] FCA 1239

PRACTICE AND PROCEDURE – where respondent does not file appearance or attend hearings – where applicants have filed application seeking various relief and statement of claim – where respondent ‘in default’ – relief sought in application granted pursuant to O 35A r 3(2)(c) Federal Court Rules


Federal Court Act 1976 (Cth)
Copyright Act 1968 (Cth)
Trade Practices Act 1974 (Cth)
Federal Court Rules 1976 (Cth) O 35A
Fair Trading Act 1987 (NSW)


Stuart Alexander & Co Pty Ltd v Trans-Atlantic (SA) (Pty) Ltd [2005] FCA 490 discussed




















MACQUARIE BANK LIMITED AND MACQUARIE NEW ZEALAND LIMITED v DAVID SEAGLE

NSD 1096 OF 2005



CONTI J
15 AUGUST 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1096 OF 2005

BETWEEN:	MACQUARIE BANK LIMITED FIRST APPLICANT MACQUARIE NEW ZEALAND LIMITED SECOND APPLICANT
AND:	DAVID SEAGLE RESPONDENT
JUDGE:	CONTI J
DATE OF ORDER:	15 AUGUST 2005
WHERE MADE:	SYDNEY

IN THESE ORDERS THE FOLLOWING TERMS CARRY THESE MEANINGS

Copyright Materials means the original literary works identified in exhibit RJH-5 to the affidavit of Richard John Hughes sworn 1 July 2005 and in paragraph 45 of the affidavit of Tobias Roberts sworn 1 July 2005.

Confidential Information means:

(a) the parties to, and involved in, the Tender; and

(b) subject to (c) all information relating to the Tender including without limitation as set out in the emails that are listed in confidential exhibit RJH-4 to the affidavit of Richard John Hughes sworn 1 July 2005, and in any other emails and attached documents received at the email address [e-mail].
(c) the Confidential Information does not include the fact that the assets to which the Tender related have now been sold nor does it include the identity of the person to whom the assets were sold.

Tender means the tender process, details of which are set in confidential exhibit RJH-1 to the affidavit of Richard John Hughes sworn 1 July 2005 and includes all preparation by the Macquarie Parties in relation to that process.

THE COURT MAKES THE FOLLOWING ORDERS:

1. A declaration that the Respondent has used or threatened to use the Confidential Information of the Applicants by:

(a) publishing the Confidential Information or part thereof on the website www.morning-news.com;
(b) threatening to sell, provide, or communicate the Confidential Information or any part thereof to third parties,

contrary to the equitable duty of confidence.
2. A declaration that the Respondent has infringed the copyright of the applicants in the Copyright Materials by:

(a) reproducing some or all of the Copyright Materials;
(b) publishing some or all of the Copyright Materials;
(c) communicating some or all of the Copyright Materials to the public.

3. A declaration that the Respondent has engaged in conduct that is misleading and deceptive or likely to mislead and deceive, contrary to s. 52 of the Trade Practices Act 1974.
4. A declaration that the Respondent has acted in breach of his contractual obligation under his agreement with the First Applicant dated 24 November 2003.
5. A declaration that the Respondent has acted in breach of his contractual obligation under his agreement with the First Applicant dated 16 December 2004.
6. An order that the Respondent be restrained, by himself, his servants or agents, from using the Confidential Information of the Applicants by:

(a) publishing the Confidential Information or any part thereof on the website www.morning-news.com;
(b) threatening to sell, provide, or communicate the Confidential Information or any part thereof to third parties,

contrary to the equitable duty of confidence.
7. An order that the Respondent be restrained, by himself, his servants or agents, from infringing the copyright of the applicants in the Copyright Materials by:

(a) reproducing the Copyright Materials or any of them;
(b) publishing the Copyright Materials or any of them;
(c) communicating the Copyright Materials or any of them to the public.

8. An order that the Respondent be restrained, by himself, his servants or agents, from engaging in conduct that is misleading and deceptive or likely to mislead and deceive, contrary to s. 52 of the Trade Practices Act 1974, by:

(a) maintaining his registration of the domain name www.accesseconomics.com (the "Domain Name");
(b) seeking the registration of any domain name substantially identical with or deceptively similar to the Domain Name;
(c) otherwise representing in trade or commerce, contrary to the fact, that he has any affiliation or association with Access Economics Pty Limited ("Access Economics").

9. An order that the Respondent deliver up on oath to the Applicants:

(a) all documents or other things that embody the Confidential Information or any part of it in his possession, custody or power;
(b) all copies of the Copyright Material in his possession, custody or power;
(c) all emails received at the email address [e-mail].

Subject to the following: to the extent that any matter that would be subject to delivery up pursuant to paragraphs (a), (b) and (c) above is intermingled with material that is not liable to be delivered up, in such a way that separate delivery up is impossible, the Respondent may cause a qualified, independent forensic expert to destroy or erase all copies of such material in its possession, custody or power provided that the expert verify that erasure by affidavit within seven (7) days of the making of these orders.
10. An order that the Respondent do all such things that are necessary or reasonable to be done, including the execution of such documents, to transfer the domain name www.accesseconomics.com, and all associated or similar addresses, to Access Economics and, failing the execution by the Respondent of any such document, an order that the Registrar of the Court be empowered to execute any such documents in the Respondent’s stead.
11. A declaration that there is a binding and enforceable agreement between the First Applicant and the Respondent dated 24 November 2003.
12. An order that paragraph 5 of the said agreement be specifically performed.
13. A declaration that there is a binding and enforceable deed between the First Applicant and the Respondent dated 16 December 2004.
14. An order that clauses 4 and 5 of the said deed be specifically performed.
15. An order that the Respondent is to pay the Applicants’ costs (including costs of the notice of motion filed 5 August 2005 and of the application).

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1096 OF 2005

BETWEEN:	MACQUARIE BANK LIMITED FIRST APPLICANT MACQUARIE NEW ZEALAND LIMITED SECOND APPLICANT
AND:	DAVID SEAGLE RESPONDENT

JUDGE:	CONTI J
DATE:	15 AUGUST 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 By notice of motion filed 5 August 2005 the applicants (‘the Bank’ unless otherwise stated) sought orders against the respondent, Mr David Seagle (‘Mr Seagle’), in accordance with the procedure contained in Order 35A rule 3(2)(c) of the Federal Court Rules. Order 35A rule 3 (2)(c) allows the Court to enter judgment against a respondent for the relief that the applicant appears entitled to on the statement of claim in circumstances where the respondent is in default.

2 Due to the confidential nature of the proceedings, which the Court accepted to be an appropriate categorisation in the light of the evidence tendered by the applicants from the outset, the Court made an order on 24 August 2005, pursuant to s 50 of the Federal Court Act 1976 (Cth), in terms that all affidavits filed in the proceedings, including documentary evidence tendered during the earlier interlocutory hearing on 15 August 2005, be kept confidential to the Court and to the parties, unless leave of the Court be first obtained. That order has placed some measure of constraint on the detail that may be conveniently provided in these reasons for judgment.

3 The proceedings arose from the registration effected by Mr Seagle of the domain name ‘accesseconomics.com’ (‘the false domain name’), and the consequential receipt by Mr Seagle of confidential email communications intended by the Bank for receipt by an employee of Access Economics, which concerned a tender in respect of which Access Economics was advising the Bank or parties associated with the Bank. In essence, the registration of the false domain name enabled Mr Seagle to receive some 34 emails (‘the tender emails’) that were incorrectly addressed to that particular employee of Access Economics by reason of the omission of the suffix ‘.au’ from the end of the email address used by the 34 email senders. The tender emails were received by Mr Seagle between 23 and 27 June 2005 and were said by the Bank to contain material drafted by an employee of the second applicant in the course of his employment (‘the copyright material’). The second applicant is a wholly owned subsidiary of the first applicant.

4 A person who registers a domain name can, by special arrangement with the web-hosting provider, create a catch-all email address so that that person receives all emails sent to that registered domain name, irrespective of the prefix adopted by the email sender. Hence through the making of those special arrangements, Mr Seagle enabled himself to receive all emails ending in the false domain name (that is, ‘@accesseconomics.com’), so that irrespective of whether an email was sent, for example, to [e-mail], or to [e-mail], Mr Seagle received it. Mr Seagle was thus in a position to receive emails purportedly sent to the particular employee of Access Economics, although Mr Seagle had not set up a specific email address for that employee.

5 The Bank contended that the contents of the tender emails, as well as information as to the existence of the tender and the parties involved therein was, and continued to be, confidential information (henceforth, ‘the confidential information’). Tendered into evidence by the Bank was a confidentiality deed executed by, inter alia the second applicant, concerning the tender process. Also relied upon by the applicants were the confidentiality notices affixed to ‘most’ of the communications made between the parties to the tender.

6 Upon receiving the tender emails, Mr Seagle published numerous references to, and extracts from, the material in those emails on a publicly-accessible website. On 27 June 2005 Mr Seagle also sent several further email communications to an employee of the tenderer referring thereby to some of the confidential information contained in the emails. Mr Seagle also offered to sell to the tenderer’s employee the tender emails that he had intercepted (and the attachments thereto), as well as the registration of a domain name that he had registered and which carried a similar name to that of the tenderer. Thereupon an email was sent by legal counsel of the first applicant to the email address used by Mr Seagle to send emails to the tenderer’s employee. The legal counsel’s email stated that Mr Seagle was not the intended recipient of the tender emails and that those emails were confidential, and furthermore that Mr Seagle was in breach of an antecedent deed of settlement entered into between Mr Seagle and the first applicant on 16 December 2004. Mr Seagle was asked to destroy the tender emails and to inform the first applicant’s legal counsel once he had done so. I will discuss the genesis of the 2004 deed of settlement shortly.

7 Mr Seagle responded by reply email informing legal counsel that his reply could be found on his website, which, as I have recounted, was freely accessible to the public. Mr Seagle placed a link to that website in the body of the email in reply. Mr Seagle’s email in reply was also sent to an employee of one member of the tender group, and it is not clear to how many others as well. Mr Seagle had in fact transposed the text of his email correspondence with the tenderer’s employee onto his website, as well as that of the email from the first applicant’s legal counsel. Mr Seagle also made some vague threats about the release of the information contained in the tender emails (although he did state that he had decided against providing it to the tenderer). The contents of Mr Seagle’s website, a copy of which was tendered to the Court in evidence, are difficult to follow; the author made various unpleasant if not also unsavoury allegations against the Bank, and in particular the Chief Executive Officer of the Bank. There is somewhat of a protracted history of disputation between Mr Seagle and the Bank.

8 The deed of settlement referred to in the email from the first applicant’s legal counsel to Mr Seagle ended a dispute between the parties arising from a course of conduct engaged in by Mr Seagle in 2003 and 2004, being conduct referred to by the Bank as ‘cybersquatting’.

9 ‘Cybersquatting’ was the term used by the Bank to describe the practice of adopting the domain name of other persons or entities and of causing to be registered that domain name with a slightly varied ‘type suffix’ or ‘geographic suffix’. For instance, in April 2003, Mr Seagle had registered the domain name ‘www.Macquarie-Bank.com’, whereas the Bank had registered various domain names, including ‘www.Macquarie-Bank.com.au’. In this instance, the omission of the geographic suffix ‘.au’ had rendered Mr Seagle’s registered site separate from that already registered by the Bank. Thereupon the Bank had attempted to reach a commercial settlement with Mr Seagle. It is the practice of ‘cybersquatters’ to register a similar domain name and then request payment from the other party in exchange for transfer of the domain name. No settlement was however reached, and the Bank made complaint to the World Intellectual Property Organisation (‘WIPO’) about Mr Seagle’s registration of that domain name. WIPO subsequently found in favour of the Bank and ordered that the domain name be transferred to the first applicant.

10 In the meantime however, another person by the name of Mike Smith had registered a similar domain name (‘www.Macquarie-Bank.net’). WIPO found similarly in favour of the first applicant in relation to that domain name as well, and in that context additionally found that the person calling himself ‘Mike Smith’ was actually Mr Seagle or an agent thereof. A third domain name had also been registered in the meantime (‘www.Macquarie.net’) by a person calling himself Jason Stead. The registration of that domain name was later transferred to a person calling himself ‘Lord Oxford’, being a pseudonym used by Mr Seagle in various email correspondence with the Bank since the start of his ‘cybersquatting’ campaign. Mr Seagle and the first applicant subsequently reached a settlement of the then disputes, which provided for the transfer of the third domain name to the Bank in exchange for a small payment (‘the first settlement agreement’). The first settlement agreement (that is, as reduced to writing) was made on 24 November 2003 when Mr Seagle countersigned his copy of the agreement, the same containing the following clause 5:

‘In consideration for that payment [the payment from the first applicant to the ‘Registrant, being Mr Seagle], the Registrant agrees:

5. not to disclose any information, publish any statement (either electronically or otherwise), or do anything, either now or in the future, which may tend to harm or injure the reputation or good name of the Bank, its officers or employees.’

11 In early 2004, Mr Seagle recommenced the registration of domain names that had the hallmarks of deceptive similarity to those registered by the first applicant. In the meantime Mr Seagle had also authored a number of other websites containing disparaging material about the first applicant and its employees. The first applicant initiated proceedings in the Lismore Local Court in May 2004 claiming damages for breach of the first settlement agreement. Mr Seagle was alleged to have breached a term of that agreement that he not register any further domain names containing the words ‘Macquarie Bank’, or any other trade mark of the first applicant, or any trade mark that may confuse or mislead customers of the first applicant into thinking that there might be an association between that domain name and the first applicant. Judgment was obtained on 13 July 2004, following a hearing at which Mr Seagle did not appear. In the months following, the first applicant took steps to recover the judgment debt. This process eventuated in the execution of a deed of settlement on 16 December 2004 (‘the second settlement agreement’). The second settlement agreement contained the following clauses 4 and 5:

‘4. Mr Seagle agrees not to interfere with the Business of the Bank either directly or indirectly.

5. Mr Seagle agrees not to do any act or thing which he knows or should reasonably suspect would harm the reputation of the Bank or its employees.’

12 The Bank first approached the Court in the context of the current proceedings on 1 July 2005, at which time interim orders were made ex parte restraining Mr Seagle from disclosing the confidential information and the copyright material involved. Orders were also made, inter alia requiring the delivery up of that material by Mr Seagle. Mr Seagle made no appearance one week later on 7 July 2005, when the proceedings came before the Court for further hearing.

13 On 7 July 2005, orders were made providing for the filing of a statement of claim by the Bank and a defence by Mr Seagle. An order was also made for substituted service of the Bank’s statement of claim by email to two email addresses known by the Bank to be accessed by Mr Seagle. The Bank also provided evidence at the hearing on 7 July 2005 to the effect that Mr Seagle had been served with the application herein filed 1 July 2005, the notice of motion herein filed on 1 July 2005, and the Court’s orders of the same date, as well as the relevant affidavit evidence filed in Court up until that point in time.

14 Subsequently on 18 July 2005 the Bank filed an amended application and a statement of claim. The statement of claim sought declaratory, injunctive and other relief arising from essentially four asserted causes of action:

(i) breach of the equitable duty of confidence;

(ii) infringement of copyright in contravention of the Copyright Act 1968 (Cth);

(iii) misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) or s 42 of the Fair Trading Act 1987 (NSW);

(iv) breach of contract.

15 By subsequent notice of motion filed on 5 August 2005, the Bank sought orders from the Court in terms of the relief claimed by the amended application filed on 18 July 2005. That process was listed for and was heard on 15 August 2005. Mr Seagle again failed to appear in Court on that day. Mr Seagle was served with the notice of motion and its supporting affidavit by email and also in person. Counsel for the Bank drew my attention to several extracts from Mr Seagle’s website, which referred in various places to the receipt of ‘two million words of legal drivel...on Friday night [5 August 2005]’. It is sufficiently clear that at least by the beginning of the hearing of these later proceedings on 15 August 2005, Mr Seagle had been served with the Bank’s various notices of motion, applications and pleadings which I have recounted, as well as with each affidavit filed in support thereof and with copies of the orders of the Court already made in the current proceedings.

16 The Bank’s statement of claim filed on 18 July 2005 sets out the material facts serving to establish each of the asserted causes of action listed above at [14]. To avoid needless repetition, I will not endeavour to repeat each of the background facts which I have already essayed. It is necessary though to briefly record the basis for each asserted cause of action.

17 The Bank contends that Mr Seagle owed to the Bank and to other persons involved in the tender an obligation in equity of confidence. That obligation was said to arise first from Mr Seagle’s knowledge that the tender emails were confidential, by virtue of the confidentiality notices contained in ‘most of the emails’; secondly the fact that it is not publicly known that the tender involves the second applicant; thirdly the fact that ‘information relating to the tender is intrinsically and self evidently confidential’; fourthly the notification of Mr Seagle by the Bank’s legal counsel on 27 June 2005 that the material was confidential and not to be passed on to anyone; and fifthly Mr Seagle’s own admission in his emails sent after 27 June 2005 that he knew the information was confidential. The Bank alleged that Mr Seagle breached duty of confidence thus arising and crystallised by disclosing the confidential tender information contained in the tender emails and threatening to further do the same, in the manner that I have relayed above.

18 Mr Seagle was submitted to have infringed the first and second applicants’ copyright subsisting respectively in the 27 June 2005 email created by legal counsel of the first applicant, and in the series of tender emails that were created by an employee of the second applicant between 23 and 27 June 2005. Both groups of emails were established at least prima facie to be original literary works. On 27 or 28 June 2005, Mr Seagle is alleged to have infringed copyright in the first applicant’s email by reproducing it in a material form, or a substantial part of it, by copying it and publishing it onto his website, and also by communicating it to the public per medium of publication on the same site. Since both acts were done without the licence or authority of the first applicant, it follows that Mr Seagle was guilty of infringing the first applicant’s copyright. Mr Seagle was alleged to have further infringed the second applicant’s copyright in the tender emails by making copies of each of them on the server used by him upon receipt of those emails, and also on the email programme used by him, those breaches arising from Mr Seagle’s absence of licence or authority to make copies of those emails. Evidence was led by the Bank about the way in which email communications are sent and received by user’s computers, which process inevitably involves the making of copies of the contents of each email on a server and in the user’s email programme.

19 The Bank further submitted that from the date of registration of the false domain name (‘www.accesseconomics.com’), Mr Seagle falsely represented that the registrant of the false domain name is Access Economics; that the false email address (‘[e-mail]’) is the email address of that employee; that emails sent to the false email address would be received by that employee of Access Economics or otherwise by Access Economics and would only be read by persons authorised by Access Economics. Those representations were alleged to be express, or implied, and were said to have been made by Mr Seagle by his conduct in registering the domain, by making arrangements to receive the emails ending in ‘@accesseconomics.com’ and by failing to inform the senders of the tender emails that he was not the intended recipient of those emails. By reason of the falsity of those representations, and the fact that they were made by Mr Seagle in trade or commerce and using telephonic services, Mr Seagle was alleged to have engaged in conduct that is misleading or deceptive or likely to mislead or deceive within the meaning of s 52 of the Trade Practices Act 1974 (Cth), or further or in the alternative, under s 42 of the Fair Trading Act 1987 (NSW).

20 Finally the Bank alleged that by virtue of Mr Seagle’s publication of material disparaging of the first applicant on his website, and in an email sent by him to the tenderer’s employee, and also by publishing various of the tender emails, and other email correspondence on his website, and by threatening to sell information from the tender emails to the tenderer’s employee, he was in breach of the terms of the first and second deeds of settlement. That breach crystallised in particular by virtue of the fact that Mr Seagle’s conduct harmed the reputation of the first applicant and interfered in the business of the first applicant, and had the tendency and likelihood of so doing.

21 Order 35A r 3(2) provides relevantly that:

‘If a respondent is in default, the Court may:

...

(c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on the pleadings – give judgment against the respondent for the relief that:

(i) the applicant appears entitled to on the statement of claim; and

(ii) the Court is satisfied it has power to grant...’

(The emphasis appearing in non-italicised text is mine).

22 Subsequently in the context of Mr Seagle’s failure to file any defence to the Bank’s statement of claim, the Bank submitted that Mr Seagle was in default within the scope and for the purposes of O 35A r 3(2)(c). Order 35A r 2(b) provides that a respondent is in default if the time for the respondent to file a defence has expired and the respondent has failed to file a defence. The Court’s 7 July 2005 orders required Mr Seagle to file a defence on or before 29 July 2005. That day having passed without Mr Seagle filing any defence (or even an appearance), it is evident that he is relevantly in default.

23 The Bank drew attention to the O 35A r 3(2)(c)(ii) requirement that the Court be satisfied it has power to grant the relief sought and submitted that this required proof of two elements, being first evidence of proper service complying with the requirements of the Federal Court Rules and secondly jurisdiction to grant the final relief sought, either under the Constitution or another valid enactment. As I have already recorded, I am satisfied that Mr Seagle was duly and sufficiently served with the relevant process. In relation to the second aspect of the present proceedings, the Bank submitted that the primary jurisdiction invoked by it is that conferred by the Trade Practices Act 1974 (Cth). Counsel drew my attention to s 6(3) of that Act in particular, which provides for the extension of the reach of, inter alia, Part V of that legislation (which part includes s 52) to the activities of persons that are not corporations, where the conduct engaged complained of as having been engaged in involves the use of postal, telegraphic or telephonic services. The representations complained of which I will shortly enumerate, have undoubtedly been made per medium of the telephonic services, that is of course, the Internet. Alternatively the Bank relies upon its claims purportedly made under the Copyright Act 1968 (Cth). The Federal Court has jurisdiction in relation to copyright infringement committed in Australia: see s 131C of the latter legislation. Finally it was submitted by the Bank that the Court’s jurisdiction (for example, in relation to confidential information and breach of contract) is further attracted by the operation of s 32 of the Federal Court Act 1976 (Cth). In all those circumstances, I have upheld the submission of the Bank that the Court has power to grant the relief sought here by the Bank.

24 There has apparently been no judicial consideration of the meaning of the words entitled to on the statement of claim which predicate the grant of the relief sought by the Bank under O 35A r 3(2)(c). Counsel for the Bank drew my attention to the reasons for judgment of Crennan J in Stuart Alexander & Co Pty Ltd v Trans-Atlantic (SA) (Pty) Ltd [2005] FCA 490, whereby her Honour appeared to accept the brevity which the rule imparts on proceedings conducted in the present manner that has taken place at the instance of the applicants. The Court was there dealing with a claim for debt, which is covered by another paragraph of the rule which does not contain the form of words entitled to on the statement of claim contained in O 35A r 3(2)(c)(i). Her Honour accepted the tender of affidavit evidence, which set out the loss or damage claimed by the applicant and its measurement. Counsel for the Bank submitted that so long as each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim, the requirement of sub-rule (2)(c)(i) will be satisfied in principle. In light of the evident objectives of the O 35A procedure in providing for a ready and expedient means to dispose of uncontested litigation, I consider that the Bank’s submission duly reflects a correct description of the sub-rule (2)(c)(i) requirement.

25 In the context therefore of the status quo of the present proceedings and for the reasons apparent from my recitation of the facts and circumstances given rise to the present proceedings, I have granted the relief and otherwise made the orders appended to these reasons.

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

Associate:

Dated: 2 September 2005

Counsel for the Applicant:	R Cobden
Solicitor for the Applicant:	Blake Dawson Waldron
The Respondent did not appear
Dates of Hearing:	1 and 7 July, 15 and 24 August 2005
Date of Judgment:	15 August 2005