Capital Networks Pty Ltd v .au Domain Administration Limited [2004] FCAFC 324 (9 December 2004)

Capital Networks Pty Ltd v .au Domain Administration Limited [2004] FCAFC 324

CONTRACT – standard form agreement between the administrator of the .au domain space on the Internet and companies (known as "registrars") accredited by it to process domain name registrations – construction of the phrase "registrar’s business" in that agreement – reasonableness of administrator’s request for information

CAPITAL NETWORKS PTY LTD v .AU DOMAIN ADMINISTRATION LIMITED

ACD 19 of 2004

WHITLAM, FINN & CONTI JJ
SYDNEY (HEARD AT CANBERRA)
9 DECEMBER 2004

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACD 19 of 2004

BETWEEN:	CAPITAL NETWORKS PTY LTD APPELLANT
AND:	.AU DOMAIN ADMINISTRATION LIMITED RESPONDENT
JUDGES:	WHITLAM, FINN and CONTI JJ
DATE OF ORDER:	9 DECEMBER 2004
WHERE MADE:	SYDNEY (HEARD AT CANBERRA)

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

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACD 19 of 2004

BETWEEN:	CAPITAL NETWORKS PTY LTD APPELLANT
AND:	.AU DOMAIN ADMINISTRATION LIMITED RESPONDENT

JUDGES:	WHITLAM, FINN and CONTI JJ
DATE:	9 DECEMBER 2004
PLACE:	SYDNEY (HEARD AT CANBERRA)

1 The appellant, Capital Networks Pty Ltd (‘Capnet’), is accredited by the respondent, .au Domain Administration Limited (‘auDA’), to provide certain registration services in respect of Internet domain names. Earlier this year, when auDA threatened to suspend Capnet’s accreditation, Capnet sued auDA for an injunction to restrain its suspension, alleging an apprehended breach of contract and contraventions of the Trade Practices Act 1974 (‘the Act’). Bennett J dismissed that proceeding. This is an appeal from that judgment.

2 Domain names are the familiar and easy-to-remember names for Internet computers. They map to unique Internet Protocol (‘IP’) numbers that serve as routing addresses on the Internet. The domain name system (‘DNS’) translates those names into the IP numbers needed for transmission across the network.

3 The DNS is a hierarchy. At the very top is the root, which does not appear in the domain name. The next level down in this hierarchy is called the top level domain (‘TLD’), the one after that is the second level domain (‘2LD’), and so on. The TLD is what appears at the far right end of an Internet address. There are two types of TLD. One consisting of three or more characters is referred to as a generic TLD or gTLD. The other consisting of the two-letter International Standard for a country, territory or other geographic location is referred to as a country code TLD. So, for example, in the domain name ‘qantas.com’ the TLD is the generic ‘.com’, but in the domain name ‘qantas.com.au’ the TLD is the country code ‘.au’.

4 The Internet Corporation for Assigned Names and Numbers (‘ICANN’) is a non-profit corporation incorporated in California. It coordinates the assignment of technical parameters needed to maintain universal connectivity on the Internet and manages the DNS root. Although ICANN reports to the United States Department of Commerce, the Australian Government considers it to be the appropriate international entity to oversee the technical coordination of the Internet.

5 For each generic TLD ICANN designates a registry operator that maintains the authoritative database of its domain names. ICANN also accredits companies, known as ‘registrars’, to process domain name registrations for the public in certain generic TLDs. Capnet is accredited by ICANN as a registrar in the .biz, .com, .info, .name, .net and .org TLDs.

6 ICANN has delegated to auDA the management of the .au TLD. (The two-letter International Standard country code for Australia is AU.) The Australian Government endorsed auDA as the appropriate entity to hold the delegation of authority for administration of the .au domain space. The Telecommunications Legislation Amendment Act 2000 was enacted in order to provide powers of intervention for use in the event that this self-regulatory management structure for ‘electronic addressing’ was, in the future, considered to be ineffective.

7 AusRegistry Pty Ltd is licensed by auDA to operate the registry containing the authoritative database of domain names in the .com.au, .net.au and .asn.au 2LDs. Twenty companies have been accredited by auDA to process registrations in those domains. Capnet is one of them.

8 On 6 June 2003 auDA’s Industry Liaison Officer emailed Ed Sweeney, who was the contact person nominated by Capnet in its application for accreditation by auDA. She informed Mr Sweeney that auDA had been contacted about Capnet’s failure to respond to requests from customers to transfer the sponsorship of domain names in generic TLDs to other registrars. She concluded:

The Industry Liaison Officer emailed Mr Sweeney again on 11 December 2003, informing him that she was getting complaints from persons trying to transfer generic TLDs ‘away’ from Capnet and asking for advice on what she could tell these people. There was no response to either of these emails.

9 Further complaints were received by auDA about Capnet’s treatment of requests to transfer domain names in generic TLDs to competing registrars. On 17 March 2004 auDA’s Chief Executive Officer wrote to Mr Sweeney and, after referring to the Industry Liaison Officer’s unacknowledged emails, said:

The solicitors also told Mr Sweeney that auDA considered ‘Events of Default’ had occurred in respect of Capnet ‘under the terms of the Registrar Agreement’. They said that, unless the information sought in the letter of 17 March 2004 was received by 4.00 pm on 30 April 2004, auDA would suspend Capnet’s accreditation. Mr Sweeney replied, notifying his intention to commence proceedings prior to the deadline seeking ‘a court order to restrain auDA from acting as indicated in your letter’. He concluded:

11 Capnet commenced proceedings on 30 April 2004, claiming interlocutory relief in order to restrain auDA suspending or terminating its accreditation. The application was listed before the Duty Judge. Upon the undertaking of auDA not to take such action in the meantime, the claim for interlocutory relief was fixed for hearing on 5 May 2004. At the conclusion of the hearing on that day Gyles J ordered that ‘until further order’ auDA be restrained from suspending or terminating Capnet’s accreditation. Directions were given for pleadings, and the proceeding was fixed for an urgent final hearing on 26 May 2004. When Bennett J reserved judgment on 27 May 2004, the interlocutory injunction was varied to expire upon the delivery of judgment.

12 In the Court below the standard form document (‘the Registrar Agreement’) that all registrars accredited by auDA were required to enter into was at the core of Capnet’s case. Capnet alleged that auDA was not entitled under the Registrar Agreement to demand the information sought in its letter of 17 March 2004 and that, in demanding that information and in threatening to suspend Capnet’s accreditation, auDA engaged in conduct that was misleading and deceptive in contravention of s 52 of the Act and also engaged in conduct that was unconscionable in contravention of s 51AC of the Act. Further, it was alleged that the letter of 27 April 2004 threatened a breach of the Registrar Agreement and, contrary to s 51AD of the Act, contravened cl 21 of the Franchising Code of Conduct (‘the Code’).

13 Bennett J held that auDA was entitled to the information requested. As a first step to that conclusion, her Honour construed the term of the Registrar Agreement relied upon by auDA in the correspondence. It relevantly provides:

Bennett J noted that, whilst the word ‘Registrar’ is defined in clause 1 of the Registrar Agreement to mean ‘the party to this document in its capacity as a registrar for the Designated 2LD’ there is no definition of the word ‘registrar’. Her Honour said that a distinction was to be drawn between defined and undefined words in construing the document. Accordingly her Honour accepted that the reference to ‘information in relation to the Registrar’ in clause 14.1.9 relates to functions in the .au domain space. However, her Honour said that it followed that the expression ‘registrar’s business’ in that provision is not limited to operations in the .au domain space. Her Honour said that the expression ‘registrar’s business’ had to be given a broader meaning than the expression ‘Registrar Services’, which is used elsewhere in the document and is defined so as to be confined to services provided pursuant to the Registrar Agreement. Bennett J also rejected a submission that clause 14.1.9 was to be read down by reference to auDA’s Complaints Policy, which provides that auDA’s jurisdiction to handle complaints about registrars is limited to the .au domain space.

14 Next, her Honour considered whether auDA’s request was reasonable. She noted that on the website, where Capnet states that it is an auDA accredited registrar and uses the logo specified by auDA to indicate that fact, it also offers to process the registration of domain names in generic TLDs. Her Honour said:

Bennett J noted that in its application to auDA for accreditation Capnet had furnished details of its then current business operations. These activities included, not just those relating to its accreditation as a registrar by ICANN in respect of generic TLDs, but also an Australian webhosting service and the operation of the registry for the .hm TLD. (The two-letter International Standard country code ‘HM’ stands for the Heard and McDonald Islands.) Her Honour said that that fact also made auDA’s request reasonable. Finally, her Honour considered auDA’s very raison d’être and its vital role in the international self-regulatory structure endorsed by the Australian Government. She concluded that, having regard to these matters, auDA’s request for the information in dispute was reasonable.

15 Turning then to the s 52 count, her Honour held that, since auDA was entitled to make the demands in the correspondence, such conduct was not misleading or deceptive. So far as the threat to suspend Capnet’s accreditation was concerned, her Honour held that, to the extent that such conduct amounted to a representation that auDA was entitled under the Registrar Agreement to suspend Capnet’s accreditation, it was so entitled and that such conduct was not misleading or deceptive. Bennett J also dealt with a submission that the request for information was not made in good faith because auDA had already decided to suspend Capnet’s accreditation. Her Honour found that there was no evidence to support such an allegation of bad faith, pointing out that it was not in dispute that its Chief Executive Officer considered auDA was entitled to the information requested.

16 Bennett J held that Capnet’s failure to provide the information requested within the period of 30 days stipulated in auDA’s letter of 17 March 2004 meant that an Event of Default under clause 23.1 of the Registrar Agreement had occurred. Her Honour said that, since auDA also considered such an Event of Default had occurred, it was entitled to suspend or terminate Capnet’s accreditation by virtue of clause 4.2 of the Registrar Agreement.

17 In respect of the s 51AC count, Bennett J said that Capnet submitted that it was unconscionable for auDA to assert authority to regulate Capnet’s activities outside the .au domain namespace. Her Honour held that auDA made no such assertion and that its conduct was not unconscionable.

18 Finally, Bennett J dealt with the alleged contravention of s 51AD of the Act. Clause 21 of the Code imposes conditions upon the termination of a franchise agreement by a franchisor because of a breach by a franchisee. Her Honour held that the Registrar Agreement was not a ‘franchise agreement’ within the meaning given by cl 4 of the Code and that cl 21 of the Code thus had no application to its termination. Further, her Honour held that, in any event, auDA had not proposed to terminate the Registrar Agreement with Capnet.

19 In view of her findings, Bennett J did not need to consider auDA’s contention that its conduct was not ‘in trade or commerce’ for the purposes of s 51AC, s 51AD or s 52 of the Act. Accordingly, there being no contravention to enliven the power under s 80 of the Act and no other basis for the grant of the injunctive relief sought by Capnet, her Honour dismissed the proceeding with costs.

20 The grounds of appeal are widely (and wildly) drawn. However, in Capnet’s outline of submissions and in its counsel’s address, argument concentrated on Bennett J’s construction of clause 14.1.9 in the Registrar Agreement. Counsel submitted that the definition of ‘Registrar’ in clause 1 of that document meant that requests for information in relation to the operation of Capnet’s business under clause 14.1.9 must relate to ‘its capacity as a registrar for the Designated 2LD’.

21 Counsel for Capnet emphasized that the introductory words in clause 14.1 (‘The Registrar must:’) make it clear that all the obligations in the ensuing paragraphs are imposed on the ‘Registrar’, not the ‘registrar’. Reliance was also placed (as it had been before Bennett J) on the express provision dealing with cognate words in clause 28.5.5 of the Registrar Agreement that ‘where an expression is defined, another ... grammatical form of that expression has a corresponding meaning.’ In our opinion there is force in these submissions, but they are ultimately of no assistance to Capnet.

22 In fact, the word ‘Registrar’ is first used in the Registrar Agreement as a descriptive word for Capnet as one of the parties to that agreement before it is later given the stipulative definition in clause 1. We attach no significance to the fact that the initial letter of registrar used as a possessive noun in clause 14.1.9 is not capitalized. Even if the word be read as though it were capitalized, in our opinion, it is obviously used in the context merely to identify the other party to the agreement. (The definitions in clause 1 are all qualified by the introductory words ‘In this document unless... implied to the contrary:’, which formula acknowledges that a word may be used other than in a defined sense.) Had it been intended to confine the scope of the request to information relating to the provision of services in respect of the Designated 2LDs, the expression ‘Registrar Services’ (the definition of which in clause 1 is so limited) could have easily been employed in clause 14.1.9. There are also other indications in the Registrar Agreement that the phrase ‘the operation of the registrar’s business’ is not to be given such a limited meaning. Clause 14.4 (dealing with bundled services) and clause 18 (dealing with conflict of interests) plainly contemplate ‘the Registrar’ being involved in the provision of other services and engaged in different kinds of businesses. In our opinion, the expression ‘registrar’s business’ in clause 14.1.9 is not to be construed so as to give a limited meaning to the word ‘business’. The word is apt to include all the commercial activities of the other party to the agreement.

23 However, the obligation under clause 14.1.9 only extends to such information ‘as auDA may reasonably request’. Such a provision presents no difficulties in construction, but its application requires consideration of the evidence surrounding the request. The provisions of the Registrar Agreement provide a touchstone for ascertaining reasonableness, but they do not stand in isolation. Bennett J was undoubtedly correct to have regard to the information forwarded by Capnet in its application to auDA for accreditation and to auDA’s role in the self-regulatory structure for the Internet. Where auDA has knowledge of alleged sharp practices or unethical behaviour on the part of one of its accredited registrars, it does not matter in the slightest that auDA has no ‘jurisdiction’ to deal with complaints about the provision of registration services in generic TLDs. Nor would it matter if such complaints from Capnet’s customers related to its webhosting service or its operation of the registry for the .hm TLD. By any objective standard, auDA’s request was reasonable.

24 What we have said to this point is sufficient to dispose of the points argued in the appeal by counsel for Capnet, save those relating to the Code. Bennett J held that auDA was entitled to the information requested and found that Capnet had breached the Registrar Agreement. There was, however, no cross-claim by auDA for any relief. Strictly speaking, her Honour had only to assess the conduct of auDA in demanding the information and in threatening to suspend Capnet’s accreditation. No attempt was made by counsel for Capnet to argue before us that such conduct justified a quia timet injunction to restrain any infringement of her client’s contractual rights or that such conduct contravened s 52 or s 51AC of the Act.

25 So far as the Code is concerned, her Honour examined a number of American authorities on the meaning of statutory analogues to a key expression used in cl 4 of the Code before concluding that the Registrar Agreement did not fall within the meaning of ‘franchise agreement’ as defined by that clause. We do not think it is necessary to consider that question. Clause 21 of the Code only applies if a franchisor proposes to terminate a franchise agreement. Her Honour correctly found that there was no proposal to terminate the Registrar Agreement. Counsel for Capnet submitted that it was sophistry to say that suspension would not amount to termination. We do not agree. There was no evidence adduced before Bennett J to establish that, in fact, that was the case.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Court.

Counsel for the appellant:	L De Ferrari

Solicitors for the appellant:	Tetlow Jansen & Doyle

Counsel for the respondent:	M N Connock

Solicitors for the respondent:	Maddocks

Date of hearing:	8 November 2004

Date of judgment:	9 December 2004

Federal Court of Australia - Full Court Decisions

Capital Networks Pty Ltd v .au Domain Administration Limited [2004] FCAFC 324 (9 December 2004)