FEDERAL COURT OF AUSTRALIA

Titan Support Systems Inc v Nguyen (No 2) [2015] FCA 359

THE COURT ORDERS THAT:

1.    The orders of Justice Perry made 15 August 2014 be varied by adding the endorsement required pursuant to r 41.06 of the Federal Court Rules 2011 (“the Rules”).

2.    For the avoidance of doubt having regard to Orders 2 and 3 of the orders of Justice Perry made 15 August 2014, pursuant to r 41.09 of the Rules the District Registrar of the New South Wales Registry of this Court is empowered to sign all necessary documents to give effect to the orders of the Court to:

(a)    take all necessary steps to transfer to the Applicant or its nominee the business name “Titan Support Australia” as soon as practicable; and

(b)    take all necessary steps to transfer to the Applicant or its nominee the domain name “titanaustralia” as soon as practicable.

3.    The Applicant is directed to provide a copy of this order to the Respondent, doing so by letters and email to the Respondent's addresses set out in Order 2 of the orders of Justice Perry dated 11 February 2015.

4.    The matter be adjourned for directions on 26 May 2015 at 9:30 am.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    The applicant, Titan Support Systems Inc (“Titan”) seeks an order by way of interlocutory application that the respondent, Minh Hoang Nguyen, be found to be in contempt of Court because he failed to comply with orders of the Court made on 15 August 2014. In the orders the Court awarded default judgment to Titan for breaches of s 18 of the Australian Consumer Law (“ACL”), granted injunctive relief against Mr Nguyen and made orders that he do certain things within prescribed timeframes: see Titan Support Systems Inc v Minh Hoang Nguyen [2014] FCA 884 (Perry J). Titan now alleges that Mr Nguyen wilfully defied the orders and seeks a finding of criminal, or in the alternative civil, contempt.

2    For the reasons I explain the application must fail because the orders of 15 August 2014 as entered, and as served upon Mr Nguyen, did not include the endorsement required pursuant to r. 41.06 of the Federal Court Rules 2011 (Cth)(“the Rules”). Rule 41.06 provides that if an order requires a person to do, or not to do, an act or thing, and the consequences of failing to comply with the order may be committal, sequestration or punishment for contempt, the order must carry an endorsement that the person to be served with the order will be liable for imprisonment, sequestration of property or punishment for contempt if the person neglects or refuses to do the act or thing ordered, within the time specified. Rule 41.07 requires that such an order be personally served on the person bound by the order, unless he or she is notified by another method permitted under the rule.

3    The required endorsement is important as it notifies the person bound by an order that the consequences of refusing or neglecting to comply with the order are potentially serious. In short, the endorsement should operate to focus the person’s mind on the consequences of non-compliance. The importance of the required notification and the serious nature of an allegation of contempt, particularly criminal contempt, indicates that a strict approach should be taken to compliance with the rules in this respect.

4    I have varied the orders of Justice Perry made on 15 August 2014 by adding the endorsement required by r 41.06. While I have adjourned rather than dismissed the contempt application, in my view Titan can only pursue a finding of contempt if Mr Nguyen fails to comply with the orders following being served with the orders as varied. In my view a fresh interlocutory application and statement of charge will be necessary, although it may be allowable to use the affidavits already filed in aid of the fresh application.

procedural history

5    Titan is a US corporation that designs, manufactures and distributes equipment used in the sports of powerlifting and/or weightlifting under the brand name “Titan”, usually with a distinctive brand name and logo. Mr Nguyen sells powerlifting and weightlifting products under his own name and under the unregistered business name “Lite W8 Enterprises”. He lives in Victoria and he carries on his business largely over the internet. He was Titan’s Australian dealer from December 2009 until October 2013 when Titan terminated the relationship and ceased to supply him with its products.

6    On 22 May 2014 Titan commenced proceedings against Mr Nguyen by way of Originating Application and Statement of Claim. The proceedings centred on Mr Nguyen’s practices after October 2013 by which he continued:

(a)    to trade under the name “Titan Support Australia”;

(b)    to operate a website at www.titanaustralia.com.au on which he advertised for sale and sold powerlifting and/or weightlifting products branded with the word “Titan” which were not genuine “Titan” products; and

(c)    to hold himself out as authorised to sell “Titan” brand products.

7    Mr Nguyen failed to defend the proceeding with any diligence or, indeed, at all. Because of Mr Nguyen’s failure to defend the proceeding Perry J ordered default judgment for Titan on 15 August 2014. In granting the relief sought by Titan her Honour made the following orders:

1.    As and from 4 pm on Tuesday 26 August 2014 and until further order of the Court, the Respondent by himself, his servants or agents, under his name or under the name Lite W8 Enterprises, be restrained from:

(a)    holding out that he is authorised to sell any Titan brand products used in the sports of Powerlifting and/or Weightlifting which have been manufactured or supplied by the Applicant;

(b)    using the Business Name “Titan Australia”, “Titan Support Australia” or any other Business Name which includes the word “titan” or “Titan” in connection with the sports of Powerlifting and/or Weightlifting or in connection to equipment used in such sports;

(c)    displaying in any forum connected to the sports of Powerlifting and/or Weightlifting, or on any product used in such sports, any logo which contains the word “titan” or “Titan”;

(d)    using the domain name “titanaustralia” or using any domain name connected to the sports of Powerlifting and/or Weightlifting or in connection to equipment used in such sports which includes the word “titan” or “Titan”;

(e)    selling or advertising for sale any product used, or intended for use in, the sports of Powerlifting and/or Weightlifting with the name “titan” or “Titan” anywhere on it which has not been supplied by the Applicant; and

(f)    using the word “titan” or “Titan” in any website connected to the sports of Powerlifting and/or Weightlifting, or connected to the equipment used in such sports, in any website operated by either of them.

WITHOUT the prior written consent of the Applicant.

1.    ORDER that the Respondent take all necessary steps to transfer to the Applicant, or its nominee, the business name “Titan Support Australia” on or before 4 pm on 26 August 2014, in default of which the District Registrar be authorised to do so.

2.    ORDER that the Respondent take all necessary steps to transfer to the Applicant and/or its nominee the domain name “titanaustralia” on or before 4 pm on 26 August 2014, in default of which the District Registrar be authorised to do so.

3.    ORDER that on or before 4 pm 26 August 2014 the Respondent delete from any website currently operated by either of them the word “titan” and/or “Titan”.

4.    ORDER that the Respondent deliver to the Applicant for destruction on or before 4 pm 26 August 2014 all products used in connection with the sports of Powerlifting and/or Weightlifting held by the Respondent which has the word “titan” or “Titan” anywhere on it which has not been supplied to the Respondent by the Applicant.

5.    The Respondent pay the Applicant’s costs of and incidental to this proceeding.

8    Mr Nguyen was not present in Court on the day the orders were made, but they were personally served on him on 7 September 2014. The time specified for compliance with the orders had passed before he was served.

9    On 23 October 2014 Titan filed the contempt application together with a statement of charge and affidavits upon which it proposed to rely. It alleges that Mr Nguyen failed to comply with the orders and that his failure constitutes wilful defiance.

10    It is unnecessary to traverse the detail of the affidavit evidence filed and it suffices to note that, as at the date of hearing on 13 April 2015, I am satisfied that Mr Nguyen failed to comply with the orders within the period specified therein, and in relation to some of the orders he failed to comply at all. Broadly, the evidence shows that until shortly prior to 18 February 2015 Mr Nguyen continued to hold out that he was authorised to sell “Titan” brand products and continued to operate the website www.titanaustralia.com.au to advertise for sale and sell powerlifting and/or weightlifting products carrying the word “Titan”, which were not genuine “Titan” products. Although the website www.titanaustralia.com.au was no longer operative after 18 February 2015 Mr Nguyen continued to own the domain name “titanaustralia” and did not comply with the order to take all necessary steps to transfer the domain name and the business name “Titan Support Australia” to Titan or its nominee.

The POWER TO PUNISH FOR Contempt OF COURT

11    Pursuant to s 31(1) of the Federal Court of Australia Act 1976 (Cth) the Federal Court has the same power to punish a contempt of court as that possessed by the High Court. The High Court’s power to punish a contempt of its power and authority is the same as that which was possessed by the Supreme Court of Judicature in England in 1903: s 24 of the Judiciary Act 1903 (Cth).

12    In Australian Competition & Consumer Commission v INFO4PC.com Pty Ltd (2002) 121 FCR 24 at [138] Nicholson J set out the range of penalties available to the Court to punish for contempt (as approved by the Full Court in Hughes v Australian Competition & Consumer Commission [2004] FCAFC 319 at [55]) as being to:

(1)    commit a contemnor to prison for an indefinite period of time;

(2)    impose a fine for a wilful breach of an order or undertaking;

(3)    impose a daily fine;

(4)    order the sequestration of the assets of a contemnor; and

(5)    suspend on condition any sentence of imprisonment that it might impose in respect to contempt.

It may also be appropriate to give a warning to a litigant in person that repetition of certain conduct may constitute a contempt: Bahonko v Sterjov [2007] FCA 1717 at [75] (Lander J).

13    While all contempts of court are serious there is a distinction between a criminal and a civil contempt: Plastec Australia Pty Ltd v Plumbing Solutions and Services Pty Ltd (No 4) [2012] FCA 657 at [5] (Logan J). In the present case Titan contends that Mr Nguyen’s conduct goes beyond a mere neglect or failure to comply with the orders of 15 August 2014 and submits that his conduct constitutes wilful defiance of the orders. It argues that, having regard to the number of opportunities afforded to Mr Nguyen to comply with the orders and his conduct in avoiding service, his breaches of the orders are contumacious. Criminal contempt ordinarily consists of the wrongful interference with the due administration of justice while civil contempt ordinarily consists of a refusal or a failure to comply with a specific order or direction of, or undertaking given to, a court: Viner and Others v Australian Building Construction Employees and Builders’ Labourers’ Federation (1981) 38 ALR 550 (Northrop J). Failure to comply with a court order will not generally give rise to a criminal contempt, but disobedience of a court order may be accompanied by such defiance on the part of the contemnor as to manifest a criminal contempt: Mudginberri Station Pty Ltd v Australasian Meat Industry Employees’ Union and Others (1985) 10 FCR 385 (Lockhart J).

The procedure under the rules

14    Rule 39.31 provides that an order must be entered if it is to be enforced.

15    Part 41 of the Rules deals with enforcement of Court orders. As a corner stone of enforcement, r 41.04(1) provides that a person who is ordered by the Court to do or not to do an act or thing must comply with the order.

16    Rule 41.06 is central in the present case. It provides:

41.06    Endorsement on order

If an order requires a person to do, or not to do, an act or thing, whether within a certain time or not, and the consequences of failing to comply with the order may be committal, sequestration or punishment for contempt, the order must carry an endorsement that the person to be served with the order will be liable to imprisonment, sequestration of property or punishment for contempt if:

(a)    for an order that requires the person to do an act or thing – the person neglects or refuses to do the act or thing within the time specified in the order; or

(b)    for an order that requires the person not to do an act or thing – the person disobeys the order.

(Emphasis added.)

17    Rule 41.07 provides:

41.07    Service of order

(1)    An order mentioned in rule 41.06 must be served personally on the person who is bound to do, or not to do the act or thing:

(a)    within the time mentioned in the order; or

(b)    if no time is mentioned – within a time that would allow the person to comply with the order.

(2)    However, if the person:

(a)    was present when the judgment was pronounced or the order was made; or

(b)    was notified of the terms of the order orally, by telephone or electronically;

the person is taken to have been served with the order at the time the person heard or was notified of the order.

(Emphasis added.)

18    The effect of rr 41.06 and 41.07 in combination is that an order of the type specified in r 41.06 must carry an endorsement warning of the consequences of failure to comply, and the order must be personally served on the person bound by it, unless the person was present when the order was made or is notified of its terms orally, by telephone or electronically.

19    Rule 41.08 provides:

41.08    Application where person fails to comply with order

(1)    If a person fails to comply with an order that the person is bound to comply with a party may apply to the Court for the following orders:

(a)    the committal of the person;

(b)    the sequestration of the person’s property.

(2)    If the person in default is a corporation or an organisation, a party may apply to the Court for an order:

(a)    for the committal of an officer of the corporation or organisation; or

(b)    for the sequestration of the property of the corporation or organisation.

(3)    However, no application may be made for an order under paragraph (2)(a) unless the officer:

(a)    has been served with the order in accordance with rule 41.07(1), and the order carries the endorsement in rule 41.06; or

(b)    was present when the order was made or was notified of the order in accordance with rule 41.07(2).

20    Part 42 of the Rules sets out the procedure for dealing with contempt of Court. Division 42.2 relates to applications for contempt other than contempt in the face or hearing of the Court (which is dealt with in Division 42.1).

21    Rule 42.11 provides the general procedure for an application for contempt. Relevantly to the present case, it provides in r 42.11(1) that, where a party alleges that a contempt has been committed by a person in connection with a proceeding in the Court, an application for punishment for the alleged contempt must be made by interlocutory application in the proceeding.

22    Rule 42.12 provides that an application alleging contempt must be accompanied by a statement of charge specifying the contempt with particularity and the affidavits on which the person making the charge intends to rely to prove the charge. The authorities provide that the alleged contemnor must be given a specific charge, including the acts, matters and things alleged as the foundation of the charge, and be given an opportunity to answer the charge: see Coward v Stapleton (1953) 90 CLR 573 at 581; In the Marriage of Davis (1976) 26 FLR 55 at 56 (Asche J); Ali v Collection Point Pty Ltd (2010) 274 ALR 618 at [16] (Gordon J).

consideration

23    In Mason v MWREDC Ltd [2012] FCA 1083 at [44]-[50] (“MWREDC”) Greenwood J considered the operation of the former Federal Court Rules and the present Rules in relation to contempt applications, and I generally agree with his Honour’s view. Order 37 r 2(1) provided that, subject to the Rules, an order shall not be enforced by committal or sequestration unless the order is personally served on the person bound, and where the order requires the person bound to do an act within a specified time, the order is served before that time expires.

24    Order 37 r 2(3) of the former rules provided:

An order or a certified or office copy thereof served under this rule must bear a notice (naming the persons concerned) that the person served is liable to imprisonment or sequestration of property if:

(a)    where the order requires the person bound to do an act within a specified time, the person bound refuses or neglects to do the act within that time; or

(b)    where the order requires the person bound to abstain from doing an act, the person bound disobeys the order.

25    However the prohibition on enforcement by committal or sequestration in O 37 r 2(1) did not extend to precluding a finding of contempt otherwise open and the imposition of a fine. It only precluded committal or sequestration: see Windsurfing International Inc v Sailboards Australia Pty Ltd (1986) 19 FCR 110 (Burchett J), Re Modern Woodcraft Pty Ltd (In Liquidation) (1997) 75 FCR 245 at 252–253 (Lindgren J) and Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129 at [67] (North, Goldberg and Weinberg JJ).

26    Rules 41.06, 41.07 and 41.08 of the Rules are in different terms to former O 37 r 2 but to similar effect except, in my view, they preclude enforcement by committal, sequestration or other punishment for contempt unless the orders are personally served or otherwise notified as provided under the Rules. The scheme of the Rules is that:

(a)    an order must be entered if it is to be enforced – r 39.31(a);

(b)    if an order requires the person to do, or not to do, an act or thing and the consequences of failure may be committal, sequestration or punishment for contempt the order must carry an endorsement to that effect – r 41.06;

(c)    an order of the type set out in r 41.06 must be served personally on the person who is bound to do, or not to do the act or thing within the time mentioned in the order, or if no time is mentioned, within a time that would allow the person to comply with the order – r 41.07(1);

(d)    however, if the person was present when the judgment was pronounced or the order was made, or was notified of the terms of the order orally, by telephone or electronically, the person is taken to have been served with the order of the time the person heard or was notified of it – r 41.07(2);

(e)    if a person then fails to comply with an order that party may apply to the Court for orders for committal or sequestration of the person’s property – r 41.08(1); and

(f)    if the person in default is a corporation or organisation no application may be made for the committal of an officer of the corporation or organisation unless the officer had been personally served with an order carrying the endorsement required under r 41.07 (unless the officer was present when the order was made or was notified of the order in accordance with r 41.07(2)) – r 41.08(3).

27    While, apart from the prohibition on enforcement in relation to officers of a corporation or organisation found in r 41.08(3), there is no other express prohibition on enforcement of an order by committal or sequestration of the person’s property in Division 41.1, in my view r 41.06 indicates that enforcement by way of committal, sequestration and punishment for contempt is not available unless the order is endorsed as required and served or otherwise notified as provided by the Rules.

28    Rule 41.06 necessitates an endorsement on orders that require the person bound to do, or not to do, an act or thing, and r 41.07(1) requires that the order (in my view carrying the required endorsement) be personally served on the person bound by it (unless the person has had other notice of the order as provided under r 41.07(2)). I consider that unless the required endorsement is included in the order served (or otherwise notified in accordance with Division 41.1) the order may not be enforced by way of committal, sequestration or punishment for contempt.

29    The orders of 15 August 2014 required Mr Nguyen to cease doing certain acts or things after 4 pm on 26 August 2014, and to do certain acts or things by 4 pm on 26 August 2014. The potential consequence of failure to comply with the order included committal, sequestration or punishment for contempt, as Titan now seeks. Rule 41.06 therefore required that the orders of 15 August 2014 carry an endorsement that Mr Nguyen would be liable to imprisonment, sequestration of property or imprisonment if he did not comply, and when made and entered the orders did not. Rule 41.07(1) required that the orders (carrying the required endorsement under r 41.06) be personally served on Mr Nguyen, but the orders with which he was served did not.

30    There is no evidence that Mr Nguyen was informed of the potential serious consequences of any failure to comply with the orders by one of the other notification methods provided under r 41.07(2)(a) or (b). It is apparent on the face of the judgment that Mr Nguyen was not present in Court on 15 August 2014 when the orders were made. Nor did Titan put on any evidence that Mr Nguyen was notified of the potentially serious consequences of the order orally, by telephone or electronically.

31    In MWREDC at [33] Greenwood J said, and I agree, that:

…personal service of the physical authenticated order or a true copy of the authenticated order endorsed under rule 41.06 tells the person bound by the order, in a way that enables the person to reflect upon the content of the order, first, the terms of the Court’s order containing the obligation to do something and, second, one of three possible consequences (committal, that is committal to prison; sequestration of property or punishment for contempt) should the person neglects or refuses to do the relevant thing within the time specified in the order.

As his Honour said (at [37]) r 41.06 provides some “proper protection of the interests of the person bound by the order.”

32    I consider the fact that:

(a)    the orders did not include the endorsement required under r 41.06;

(b)    Mr Nguyen was not served with orders which included the required endorsement;

(c)    Mr Nguyen did not receive any other notification of the potentially serious consequences of a failure to comply with the orders; and

(d)    Mr Nguyen was not served with the orders within the time specified for compliance;

means that the application cannot succeed. The solicitor for Titan did not submit that the Court should exercise its general power to waive compliance with r 41.06, but I would have rejected that submission had it been made. Strict compliance with the rules is necessary in a contempt application, and particularly when criminal contempt is alleged.

33    Even so, it is plain on the material before the Court that Mr Nguyen did not comply with orders 1(d), (e), (f) and 4 of the orders of 15 February 2014 until shortly prior to 18 February 2015, and that he has still not complied with orders 1(b), 2, 3 and 5. The Court should not allow its orders to be disobeyed with impunity as to do so tends to bring the administration of justice into disrepute.

34    I have made orders that the District Registrar of the New South Wales Registry of the Court be empowered to sign all necessary documents to give effect to the earlier orders of the Court to take all necessary steps to transfer to Titan or its nominee the business name “Titan Support Australia” and the domain name “titanaustralia” as soon as practicable. The solicitor for Titan informed the Court that if these orders result in the transfers occurring Titan is unlikely to pursue the contempt application.

35    The matter will be relisted for directions in one month to ascertain the progress in the matter.

Associate:

Dated:    17 April 2015