Australian Court Confirms AuDA's Right to Terminate Bottle Domains Registrar Accreditation

Controversial entrepreneur Nicholas Bolton has lost his dispute with auDA, the policy and regulatory body for .AU (Australian) domain names in the Victorian Supreme Court entitling and is no longer accredited to be a registrar of .AU domain names.
Bolton has recently been in the news over share trading issues with BrisConnections, an infrastructure project in Brisbane and, most recently, a failed attempt to take control of a property fund after a regulatory body ruled his bid was launched in unacceptable circumstances.
The Bottle Domains’ registrar accreditation was revoked in April 2009 following a security breach in April 2007 affecting the registrar’s customers and the subsequent failure to notify auDA of the breach. The court upheld auDA’s decision to terminate Bottle Domains’ registrar accreditation. Following the original termination, Bottle Domains attempted to transfer all the domain names registered with Bottle Domains to other companies within the Australian Style group and this was found to be in bad faith.
As a result of the security breaches, auDA ordered Bottle Domains notify its customers of the security breach. However Bolton, in disagreement with his lawyer at times, failed to notify his customers of the security breaches with the judge, Justice Hargrave, believing “the principal reason for Mr Bolton’s opposition to registrants receiving a warning that their credit card details may have been misused was his desire to retain the business of registrants.”
Justice Hargrave found that Bolton’s opposition to advising registrants of the security breach “demonstrated an extraordinary indifference to the effect of credit card fraud upon its victims.” Summarising Bolton’s argument, the judge said “Bolton said that warning registrants about possible credit card fraud was ‘not a time sensitive matter because they can address it retrospectively’.”
Bolton claimed his first concern was not to inconvenience registrants unnecessarily, and that if a notice had been sent to 40,000 registrants to the effect that ‘their credit data may have been leaked’ this would cause ‘a potentially big problem’ for them, as they may immediately go out and cancel their credit cards for no good reason, according to the court judgement. He said that he believed it was prudent to wait until further information was received from the AFP as to the likely number of credit cards which may have been affected.
Upon notifying his customers of the security breaches, Bolton sent customers emails different to those agreed upon in discussions with auDA, without being able to explain the reasoning at times. In one incident where a “defective email” was sent, Bolton argued he had two different versions of an email to be sent to customers open on his computer monitor at one time and had sent the wrong version. The judge described this as “improbable”.
The judge concluded “that auDA was entitled to terminate the registrar agreement depends upon my findings that the 2007 security incident constituted a security breach, and that the failure by Australian Style to give immediate notice of that security breach constituted a breach of the registrar agreement which was incapable of remedy.”
The judge also said “that the purpose of the unauthorised transfers was to defeat the efficacy of the notice of termination in the event that auDA succeeded at trial. In my view, that conduct by Australian Style breached its obligation to act in good faith in its dealings with auDA, and such a breach is not capable of remedy. Accordingly, were it necessary to do so, I would have made the declaration sought by auDA in its counter-claim that it is entitled to terminate the registrar agreement as a result of a breach by Australian Style of its obligation to exercise good faith in its dealings with auDA in connection with the unauthorised transfers.”
Final orders will be made by the court on 30 September 2009 where court costs will be awarded and the future of Bottle Domains could be determined. It is not known if an appeal will be lodged.
The court decision can be downloaded here.