Josh Henderson

Court grants interlocutory injunction transferring domain name

Josh Henderson

11 June 2015

Domain Names

When someone has your domain name – and they should not –  there are a few different courses that you can take, such as an action under a dispute resolution policy (like auDA), settlement after issuing a demand or seeking final orders in a litigation.

A recent decision of Justice Nicholas in Thomas International Limited v Humantech Pty Ltd [2015] FCA 541 highlights an interesting possibility – applying to the Court on an interlocutory basis for a mandatory injunction to transfer the domain name.

 

Relevant facts

Thomas International Limited (TIL) is an English company that conducts a business providing psychological testing and psychometric assessments, and competency and skills-based assessments. Much of the business is carried out through the internet. In particular, TIL operates a centralised online “hub“ in the United Kingdom consisting of a sophisticated computer system that can be accessed online by TIL’s distributors and customers by logging into TIL’s website.

 

In January 2007, TIL entered into a ‘master licence agreement’ (MLA) with Humantech pursuant to which Humantech was granted exclusive rights to appoint distributors throughout territories, including Australia and South Africa.

 

In 2013 / 2014, Humantech’s sales figures declined dramatically.  In about 2014, TIL identified a business called ‘Assessment Centre Technologies (ACT), which advertised the sale of its own (similar) products as well as TIL’s products.   Another company, ‘Thomas International Australia Pty Ltd’ (TIA) was the registrant of www.thomasinternational.com.au. It appears that some of ACT’s business was directed through the TIA website.

 

The relationship between each of the respondents was not particularly transparent. However, one of the respondents, Mr Schutte, was a director of Humantech, ACT and TIA (as well as another related entity), all of which were joined to the resulting proceedings.  Those proceedings were commenced on 14 May 2015 and alleged a number of breaches of the MLA by Humantech and on that same day, TIL gave notice of termination.

 

On 17 May 2015, the parties and the their legal advisors met. The meeting culminated in Mr Schutte executing an undertaking which, relevantly, contained the following:

 

“Each of the Schutte Group companies (including their successors and assigns) jointly and severally undertake to TIL (including its successors and assigns) in the following terms (which adopt the definitions in the notice) which, save for paragraph 6 which is effective immediately, are not effective until TIL and the Schutte Group companies acting in good faith to resolve the dispute in the proceedings have exhausted such discussions or 25 May 2015, whichever occurs first:

 

 

4. Transfer of Domain Name

4.1 each of the Schutte Group Companies will immediately take all steps and do all things necessary to transfer the domain names thomasinternational.com.au and Thomas.co.za to TIL.

 

…”

 

There was also some discussion between the parties as to the grant of a new licence agreement.  TIL’s representative told Mr Schutte that no licence proposal would be discussed until the undertaking was signed.

 

The following morning, the parties again met and a licence proposal was put to Mr Schutte.  He formed the view that it “would have meant financial ruin” and decided to place his companies into administration, which he did later that day.

 

TIL identified that ACT’s and TIA’s websites had been taken down.  It was concerned as it meant that its Australian customers were prevented from accessing its centralised ‘hub’ in the UK and applied for an interlocutory injunction.

 

The factors for granting an interlocutory injunction

 

The principles are well known. In short:

 

  • An applicant is required to show a prima facie case (meaning that there is a probability that it will succeed at trial);
  • The balance of convenience must favour the grant of an injunction;
  • Damages must not be an adequate remedy; and
  • The applicant should offer an appropriate undertaking as to damages.

 

TIL argued that the obligation contained in clause 4.1 of the Undertaking to transfer the websites was a strong prima facie case and was capable of being enforced by a mandatory injunction.

 

Mr Schutte argued that the undertaking was unenforceable as TIL did not engage in a good faith negotiation with him. Nicholas J disagreed with this submission.  His Honour said: “A party does not fail to engage in a good faith negotiation merely because it drives a hard bargain”.

 

TIL submitted that the present state of affairs may cause it significant reputational damage as a result of customers who have purchased units entitling them to make use of facilities provided by TIL at its hub being prevented from gaining access to it through the TIA website.  This submission was accepted by his Honour.

 

The administrators of ACT argued that the proposed injunction would have a ‘catastrophic effect’ on the business which passed through TIA’s website. His Honour did not accept that submission, primarily because the website had already been disabled (presumably at Mr Schutte’s direction).

 

The result

 

Nicholas J granted the injunction as TIL had a strong prima facie case and enjoyed the balance of convenience.

 

However, the grant of the injunction came at a price, as TIL offered undertakings that it will:

 

  • Submit to any order of the Court for payment of compensation to any person adversely affected by the operation of the injunction, as well as agreeing to re-transfer the domain names;
  • Pay a substantial amount of security, which was a total of $225,000.

 

The decision is interesting as it shows that, in particular circumstances, a Court is prepared to require a party to transfer a domain name at an interlocutory stage.  The orders even included the transfer declaration to be signed by TIA as an annexure. Therefore, you should keep in mind, in appropriate cases involving domain name disputes, that an interlocutory injunction may be potential option.