Domain Names Australia Pty Ltd v .au Domain Administration Ltd [2004] FCAFC 247 (10 September 2004)

Last Updated: 10 September 2004

FEDERAL COURT OF AUSTRALIA

Domain Names Australia Pty Ltd v .au Domain Administration Ltd
[2004] FCAFC 247

TRADE PRACTICES – misleading and deceptive conduct – notices inviting business entities to register a domain name – found to be a misleading representation that the notice was for the renewal of the recipient’s existing similar domain name - whether trial judge should have required admissible evidence as to characteristics of recipients – whether s 144 Evidence Act 1995 (Cth) applicable – whether recipients of notices members of a specialist market – whether a significant number of members of group must be misled


Trade Practices Act 1974 (Cth), s 52
Evidence Act 1995 (Cth), s 144

J D Heydon, Cross on Evidence (Australian Edition), 1996, Ch 2

.au Domain Administration Limited v Domain Names Australia Pty Ltd Limited [2004] FCA 424 affirmed
Gattellaro v Westpac Banking Corporation [2004] HCA 6; (2004) 78 ALJR 394 at [17] discussed
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 49 CLR 191 at 198 applied
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82 at 87 applied
Taco Company Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 applied
Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987 at [49]- [50] per Gyles J followed
Transport Publishing Co Pty Ltd v The Literature Board of Review [1956] HCA 73; (1956) 99 CLR 111 at 119 considered
Cat Media Pty Ltd v Opti-Healthcare Pty Ltd [2003] FCA 133 at [55] applied
General Electric Co v General Electric Co Ltd [1972] 1 WLR 729 at 738 per Lord Diplock followed
Interlego AG v Croner Trader Pty Ltd [1992] FCA 624; (1992) 39 FCR 348 at 387 applied
Campomar Sociedad Limitada v Nike International Limited [2000] HCA 12; (2000) 202 CLR 45 at [103]- [105] applied
National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90 at [68] applied
Weitmann v Katies Ltd (1977) 29 FLR 336 cited

DOMAIN NAMES AUSTRALIA PTY LTD V .AU DOMAIN ADMINISTRATION LTD
V488 OF 2004

DOMAIN NAMES AUSTRALIA PTY LTD V AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
V566 OF 2004

WILCOX, HEEREY & R D NICHOLSON JJ
10 SEPTEMBER 2004
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V488 OF 2004 V566 OF 2004

ON APPEAL FROM A SINGLE JUDGE OF THE COURT

BETWEEN:	DOMAIN NAMES AUSTRALIA PTY LTD (ACN 102 562 649) FIRST APPELLANT CHESLEY PAUL RAFFERTY SECOND APPELLANT
AND:	.AU DOMAIN ADMINISTRATION LIMITED AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT
BETWEEN:	DOMAIN NAMES AUSTRALIA PTY LTD (ACN 102 562 649) FIRST APPELLANT CHESLEY PAUL RAFFERTY SECOND APPELLANT
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT
JUDGES:	WILCOX, HEEREY & R D NICHOLSON JJ
DATE OF ORDER:	10 SEPTEMBER 2004
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The appeals are dismissed;
2. The appellants pay the respondents’ costs of the appeals;
3. The matters be remitted to Finkelstein J for determination of costs of the trial and such further relief as is appropriate.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V488 OF 2004

V566 OF 2004

ON APPEAL FROM A SINGLE JUDGE OF THE COURT

BETWEEN:	DOMAIN NAMES AUSTRALIA PTY LTD (ACN 102 562 649) FIRST APPELLANT CHESLEY PAUL RAFFERTY SECOND APPELLANT
AND:	.AU DOMAIN ADMINISTRATION LIMITED RESPONDENT

BETWEEN:	DOMAIN NAMES AUSTRALIA PTY LTD (ACN 102 562 649) FIRST APPELLANT CHESLEY PAUL RAFFERTY SECOND APPELLANT
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT

JUDGES:	WILCOX, HEEREY & R D NICHOLSON JJ
DATE:	10 SEPTEMBER 2004
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

THE COURT:

1 The first appellant Domain Names Australia Pty Ltd (DNA) facilitates the registration of domain names on the Internet. In the course of its business it sends notices to Australian business entities inviting them to engage it to register particular domain names.

2 In June, July and September 2003 DNA sent out hundreds of thousands of such notices. The notices invited recipients to register a domain name, which in most cases was a variant of their existing domain name, by returning a portion of the notice, together with a specified payment, to DNA before a "Closing Date". For example, the variant might be a ".com" name (recipient.com) where the recipient had an existing ".com.au" name (recipient.com.au).

3 In separate proceedings filed in this Court .au Domain Administration Limited (.au Domain) and the Australian Competition and Consumer Commission (ACCC) claimed that in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the Act) the notices were misleading and deceptive, or likely to mislead and deceive.

4 Finkelstein J upheld the complaints of .au Domain and the ACCC: .au Domain Administration Limited v Domain Names Australia Pty Ltd Limited [2004] FCA 424. His Honour found that the notices made the following representations:

Alleged by .au Domain

(a) each notice was a notice for the renewal of an existing registered domain name of which the recipient was the registrant;
(b) the domain name to which the notice related was due for renewal by the "Closing Date" referred to in the notice; and
(c) the recipient of the notice risked losing the registration of its registered domain name if it did not take steps to have it renewed such as by requesting DNA to renew the name by returning the bottom portion of the notice with payment for the sum requested.

Alleged by ACCC

(a) the registration of the recipient’s existing domain name had expired or would expire if payment was not made by the "Closing Date";
(b) DNA was offering to re-register or renew the recipient’s existing domain name; and
(c) the recipient would be required to pay the amount mentioned in the notice in order to maintain the registration of his or her existing domain name.

5 His Honour found that these representations were misleading or deceptive or likely to mislead or deceive. The second appellant was held to have aided, abetted, counselled and procured and been knowingly concerned in the contraventions. His Honour’s findings were made by way of answers to questions tried separately. Leave to appeal was granted.

Issues on appeal

6 This was not a case in which either of the respondents claimed it had been misled or deceived. Rather they alleged that DNA’s representations were likely to mislead or deceive a section of the public, namely recipients of the notices.

7 Counsel for the appellants argued that:

(1) In the absence of admissible evidence as to the characteristics of the recipients of the notices, it was not possible to define the characteristics of the ordinary or reasonable recipients of the notices. Therefore the respondent failed to prove that ordinary or reasonable recipients would have been misled or deceived;

(2) His Honour erred in determining the capacity of DNA’s conduct to mislead or deceive by reference to a hypothetical individual from that section of the recipients of the notices that were most likely to be misled.

(3) His Honour erred in holding that where representations are made to unidentified persons it is not necessary to establish that "significant numbers" of the group are likely to be misled or deceived.

8 Counsel said that the first ground was critical and that the second and third grounds were subsidiary to the first.

9 Counsel did not address separate argument as to the capacity of the notices, objectively considered, to convey the representations found. Nor did he dispute that the representations so found were false. Instead, counsel focussed on abstract principles said to govern s 52 cases where representations are made to the public or a section thereof.

(1) Evidence as to characteristics of recipients

10 His Honour’s approach is encapsulated in the following passages:

"33. The first question then is whether a hypothetical representative member of each group who received an impugned notice would be misled by it. If our hypothetical recipient is likely to fall into error only because he did not react in the way an "ordinary" or reasonable" person would react, the notice would not be misleading.

34. Having stated the question which I am required to answer I am confronted with an immediate difficulty. How am I to judge the likely reaction of an ordinary or reasonable member of each group of recipients? I can only undertake that task after making some assumptions about the individual’s knowledge of the Internet and of the system for the registration of domain names. What are the assumptions that can legitimately be made? Unfortunately I have very little evidence to go on. I know that the notices were sent to "Australian businesses", that is to say, to individuals, partnerships, companies and institutions that conduct some form of business in Australia. Most recipients of the notices (but not necessarily each person who read the relevant notice) had an existing domain name which was similar or very similar to the domain name listed in the notice. Apart from the fact that the recipients are businesses, most with a domain name, I have been told nothing else about them. But to do justice in the case it is necessary to know more. There are some facts which can legitimately be found on the basis of common experience especially if they are facts which could not reasonably be disputed. For the purposes of this case I propose to make the following assumptions. Within the class from which the hypothetical individual is drawn there will be members (perhaps only a few) who know a good deal about the system of registration of domain names and members (whom I believe account for a significant number) who know little or nothing about the registration system save for the fact that a domain name can be registered. In the absence of any evidence (and there is none) I am not, however, prepared to infer that any member of any group knew of the existence or role of an accredited Registrar or an appointed Reseller. I am prepared to assume that some members would be aware that it is possible to obtain separate registration for substantially similar domain names such as fedcourt.gov.au, fedcourt.net.au and fedcourt.com. Conversely, there will be a significant number who will not appreciate that these different but nonetheless closely similar names are capable of separate registration."

11 His Honour observed that the representations alleged by .au Domain and the ACCC were based on the premise that each recipient would erroneously conclude that the domain name mentioned in the notice was the recipient’s actual registered domain name. Notwithstanding the lack of any express statement to this effect, his Honour found that such a statement could be implied or inferred. His Honour’s reasoning was as follows:

"36. ...I have based this conclusion on the following features of the notices. First the listed name only differs from the registered name by reason of a change to the gTLD [generic Top Level Domain such as ".com" or ".net"] or the 2LD [Second-level Domain such as ".com.au" or "net.au"]. This is important because the hypothetical recipient may not read the notice closely. A brief reading of the notice will not necessarily alert the reader to the difference between the domain name in the notice and his registered domain name. Not only is it likely that a person who reads the notice quickly will believe that the name in the notice is his registered domain name, a closer but not studious reading will produce the same state of mind. Someone reading the notice closely but not studiously will notice the "Reference Number". The "Reference Number" suggests that the subject of the notice, that is, the "Domain Name Registration" refers to an existing registration which has been assigned a particular number. The reader’s false impression will be further reinforced by the "Closing Date", which suggests that the recipient has an existing domain name registration which should be renewed by that date or else it may lapse and may not thereafter be capable of renewal. The notice also refers to a "MPID" number. While the reader may not know what this number refers to (I certainly do not understand this reference because no evidence was led to explain it), its existence also reinforces the suggestion that the listed domain name is a registered name which may be identified by its "MPID" reference. For many of the foregoing reasons, it is equally likely that a recipient whose domain name had recently expired would be led into similar error."

12 His Honour explained why he drew the inference that the hypothetical group member would not study the contents of the notice closely. Many of the recipients would know very little about the Internet and the use and registration of domain names. Recipients would include first time users of the Internet and "unsophisticated Registrants". The cost of registration ($237 for two years) was relatively small and the degree of attention paid to the notice would reflect the cost of the service to which it related. Some of the notices would go to the accounts departments of large organisations. With persons in such departments there was a greater risk that the reader would have little or no knowledge about the Internet, the registration of domain names or the fact that very similar domain names may be registered.

13 Counsel for the appellants referred to s 144 of the Evidence Act 1995 (Cth) which provides:

(1) Proof is not required about knowledge that is not reasonably open to question and is:

(a) common knowledge in the locality in which the proceeding is being held or generally; or
(b) capable of verification by reference to a document the authority of which cannot reasonably be questioned.

(2) The judge may acquire knowledge of that kind in any way the judge thinks fit.
(3) The court (including, if there is a jury, the jury) is to take knowledge of that kind into account.
(4) The judge is to give a party such opportunity to make submissions, and to refer to relevant information, relating to the acquiring or taking into account of knowledge of that kind as is necessary to ensure that the party is not unfairly prejudiced.

14 Counsel pointed out that s 144 has replaced the common law doctrine of judicial notice: Gattellaro v Westpac Banking Corporation [2004] HCA 6; (2004) 78 ALJR 394 at [17]. He claimed that critical facts found by his Honour – namely the knowledge of the recipients of notices as to the possibility of registering substantially similar domain names and the characteristics of those recipients – may reasonably be open to question, were not common knowledge and were not capable of verification by a document the authority of which could not reasonably be open to question.

15 Perhaps a circularity is involved here. It seems a party can assert, without evidence, that a matter is reasonably open to question or is not common knowledge. In Gattellaro a majority of the New South Wales Court of Appeal held that a court could take judicial notice that institutions such as Westpac use a standard form of guarantee. The High Court, however, agreed with the dissenting judge in the Court of Appeal (Priestley JA) who had said:

"This view depends upon their taking judicial notice both of the fact that the Bank used a standard form of guarantee and of what was in it.

I do not think judicial notice can safely be taken of either of those matters, for three reasons: in my experience bank forms frequently change – they must, in light of constantly changing economic conditions and legislative provisions, and never ending court decisions around the world about the meaning and effect of bank forms; there are, I believe and there certainly may be, different forms of guarantee within a single bank; and, transaction by transaction, additions and/or deletions may be made to standard forms."

16 Both majority and minority in the Court of Appeal assumed common law judicial notice was in issue; the New South Wales equivalent of s 144 (which is in the same terms as the Commonwealth provision) was not referred to. In the High Court Gleeson CJ, McHugh, Hayne and Heydon JJ, after citing s 144, said at [18]:

"Knowledge of the proposition that institutions such as Westpac use or at any particular time used a standard form of guarantee is not common knowledge, either in Sydney, which is the locality in which the proceeding was held, or generally". (emphasis in original)

Like Priestley JA, their Honours did not rely on any evidence to support that conclusion.

17 It has long been established that

• When the question is whether conduct has been likely to mislead or deceive it is unnecessary to prove anyone was actually misled or deceived: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 49 CLR 191 at 198.
• Evidence of actual misleading or deception is admissible, and may be persuasive, but is not essential: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82 at 87.
• The test is objective and the Court must determine the question for itself: Taco Company Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202.
• Conduct is likely to mislead or deceive if that is a real or not remote possibility, regardless of whether it is less or more than fifty per cent: Global Sportsman ibid.

18 The likelihood of recipients of a representation being misled or deceived is not a matter to be proved by evidence (testimony, documents or things), or by judicial notice or its statutory equivalent (these are alternative methods of proof; Cross on Evidence discusses judicial notice in Chapter Two which is entitled "Facts which need not be proved by evidence"). The existence or otherwise of such a likelihood is a jury question for the trier of fact: Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987 at [49]- [50] per Gyles J.

19 If the appellants’ argument is correct, what kind of evidence would be admissible? There could be evidence from actual recipients, although, as already mentioned such evidence is not essential. But in the present case one batch of notices (in September 2003) were sent to approximately 418,000 Australian businesses in all mainland states. If the respondents had called, say, 50 recipients as witnesses, an expensive exercise which would occupy substantial court time, the appellants would no doubt have argued that this amounted to only 0.01 per cent of recipients and therefore such evidence was unrepresentative and unreliable.

20 Opinion evidence sought to be adduced as to the likely characteristics or reactions of recipients might be met by the observation of Dixon CJ, Kitto and Taylor JJ in Transport Publishing Co Pty Ltd v The Literature Board of Review [1956] HCA 73; (1956) 99 CLR 111 at 119 that

" ... ordinary human nature, that of people at large, is not a subject of proof by evidence, whether supposedly expert or not."

21 Certainly market research evidence has not been received with enthusiasm in this Court in recent years in cases like the present one. In Cat Media Pty Ltd v Opti-Healthcare Pty Ltd [2003] FCA 133 at [55] Branson J said:

"... It seems to me that evidence of opinions based on market research and expert appreciation of consumer behaviour will rarely be of assistance in litigation where the Court’s primary concern is with the behaviour to be expected of, and the judgments likely to be made by, ordinary (even if it might be thought, somewhat credulous) members of the community intent on making a relatively modest purchase in a conventional way. I endorse the comment of Beaumont J in Pacific Publications Pty Ltd v IPC Media Pty Ltd [2003] FCA 104 at [92] that where a claim is essentially a matter for the Court’s impression, expert views which are merely ‘impressionistic’ can be given no more than nominal weight. ..."

22 Consideration of these difficulties shows the practical wisdom of the firm rule that the likelihood of conduct being misleading or deceptive is a question for the tribunal of fact and not for any witness to decide: General Electric Co v General Electric Co Ltd [1972] 1 WLR 729 at 738 per Lord Diplock, applied in a s 52 context by Gummow J, with whom Black CJ and Lockhart J agreed, in Interlego AG v Croner Trader Pty Ltd [1992] FCA 624; (1992) 39 FCR 348 at 387.

23 Lord Diplock points out (ibid) that a different rule applies in the case of sales not to the general public but in specialised markets concerning persons engaged in a particular trade. In the present case the relevant market is that in which the consumers are business users of domain names. Such users constitute large sections of the public and are not participants in a specialised market in the sense discussed by Lord Diplock.

(2) Reference to a hypothetical individual

24 His Honour (at [16]) summarised the text formulated by the High Court in Campomar Sociedad Limitada v Nike International Limited [2000] HCA 12; (2000) 202 CLR 45 at [103]- [105] in these terms:

"First, where the persons allegedly misled are not identified individuals but are members of a class it is necessary to isolate "a representative member" of the class and enquire whether this hypothetical individual is likely to be deceived. Second, when considering the likely effect of the misrepresentation on this hypothetical person he (or she) should be judged as an ‘ordinary’ or ‘reasonable’ member of the class. In this way, reactions to the representation that are ‘extreme’ or ‘fanciful’ will be disregarded."

Having identified the test his Honour then said (at [21]):

"How then is one to identify and give characteristics to Campomar Sociedad’s hypothetical individual? Logic demands that if one is dealing with a diverse group then, for the purpose of determining whether particular conduct has the capacity to mislead, it is necessary to select a hypothetical individual from that section of the group which is most likely to be misled. If the court is satisfied that this hypothetical individual is likely to have been misled by that conduct, that would be sufficient."

25 The appellants’ complaint appears to be that his Honour should have considered the effect of the notices on the "ordinary or reasonable" recipient.

26 However in our view his Honour accurately summarised the Campomar test. There is no inconsistency between testing the effect of the representation by reference to ordinary or reasonable members of the class and by reference to the hypothetical individual. The attribution of characteristics to the ordinary and reasonable members of the class must be objective in order to allow for the wide range of persons who would in fact not make up the class: National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90 at [68] per Jacobson and Bennett JJ. Within a large class there may be a number of subclasses of ordinary and reasonable people. Thus in the present case there may be ordinary and reasonable persons who were well informed about the Internet and the domain name registration system and other persons, equally ordinary and reasonable, who were not.

(3) "Significant numbers" of the group

27 His Honour held (at [25]) that in a case of representation to the public there was no warrant for implying a requirement that "significant numbers" of the public must be misled before a contravention of s 52 can be established. His Honour said (at [26]) that earlier decisions to this effect, and in particular Weitmann v Katies Ltd (1977) 29 FLR 336, were inconsistent with Campomar.

28 Although in National Exchange (at [71]) Jacobsen and Bennett JJ disagreed with his Honour’s view, the practical answer is, as their Honours pointed out (at [70]), a finding that reasonable members of the class would be likely to be misled carried with it the determination that a significant number of recipients of a representation would be misled. Dowsett J made the same observation (at [21]). In any event, it would seem from his Honour’s judgment at [34] (quoted above) that he did turn his attention to the likely state of knowledge of "significant" numbers in the group of recipients: see lines 23 and 32.

Orders

29 The appeals will be dismissed with costs and the matters remitted to Finkelstein J for the determination of such further relief as is appropriate.

I certify that the preceding twenty nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Heerey & Nicholson.

Associate:

Dated: 10 September 2004

Counsel for the Appellants:	D Pratt
Solicitors for the Appellants:	Phillips Fox
Counsel for .Au Domain Administration	M Connock
Solicitors for .Au Domain Administration:	Maddocks
Counsel for ACCC	J I Fajgenbaum QC & D Star
Solicitors for ACCC	Deacons
Date of Hearing:	24 August 2004
Date of Judgment:	10 September 2004