BT Australasia Pty Ltd v State of New South Wales (No 12)
[1998] FCA 1101
•7 SEPTEMBER 1998
FEDERAL COURT OF AUSTRALIA
TRADE PRACTICES – practice and procedure – motion for leave to file a further amended statement of claim – pleading alleges contravention of s 46 of Trade Practices Act 1974 (Cth) – whether proposed statement of claim pleads material facts demonstrating a substantial degree of market power – whether proposed statement of claim pleads material facts demonstrating conduct constituted taking advantage of substantial market power – whether proposed statement of claim pleads material facts showing a causal link between alleged conduct and losses claimed by applicant.
TELECOMMUNICATIONS – practice and procedure – motion for leave to file a further amended statement of claim – pleading alleges contravention of ss 183 and 184 of the Telecommunications Act 1991 (Cth) – whether proposed statement of claim pleads material facts alleging discrimination against the applicant and that any alleged discrimination caused losses to applicant.
Telecommunications Act 1991 (Cth), ss 183, 184, 186.
Trade Practices Act 1974 (Cth), s 46.
Federal Court Rules, O 4, r 6, O 11, r 2, O 12, r 1,
Banque Commerciale SA (In Liq) v Akhil Holdings Limited (1990) 169 CLR 279, cited.
Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd [1996] ATPR 41-522 (FCA/Burchett J), applied.
Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 (Fisher J), cited.
Natwest Australia Bank Ltd v Boral Gerrard Strapping Systems Pty Ltd [1992] ATPR 41-196, followed.
BT AUSTRALASIA PTY LTD V STATE OF NEW SOUTH WALES & TELSTRA
NG 572 OF 1995
JUDGMENT NO 12
JUDGE: SACKVLLE J
PLACE: SYDNEY
DATE: 7 SEPTEMBER 1998
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 572 OF 1995
BETWEEN: BT AUSTRALASIA PTY LTD
APPLICANTAND STATE OF NEW SOUTH WALES
FIRST RESPONDENTTELSTRA CORPORATION LIMITED
SECOND RESPONDENTBETWEEN:
AND:
BETWEEN:
STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIRST CROSS CLAIMBT AUSTRALASIA PTY LIMITED
FIRST CROSS RESPONDENT TO FIRST CROSS CLAIMBRITISH TELECOMMUNICATIONS PLC
SECOND CROSS RESPONDENT TO FIRST CROSS CLAIMBT AUSTRALASIA PTY LIMITED
CROSS CLAIMANT TO SECOND CROSS CLAIMAND:
TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO SECOND CROSS CLAIMBETWEEN: BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO THIRD CROSS CLAIMAND: TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO THIRD CROSS CLAIMBETWEEN: BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO FOURTH CROSS CLAIMAND: STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO FOURTH CROSS CLAIMBETWEEN: STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIFTH CROSS CLAIMAND: TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO FIFTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SIXTH CROSS CLAIMAND: BT AUSTRALASIA PTY LIMITED
CROSS RESPONDENT TO SIXTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SEVENTH CROSS CLAIMAND: BRITISH TELECOMMUNICATIONS PLC
CROSS RESPONDENT TO SEVENTH CROSS CLAIMBETWEEN: TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO EIGHTH CROSS CLAIMAND: STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO EIGHTH CROSS CLAIMJUDGE: SACKVILLE J PLACE: SYDNEY DATE:
7 SEPTEMBER 1998
JUDGMENT NO 12
THE COURT ORDERS THAT:
BTA’S motion for leave to amend its Second Statement of Claim be dismissed.
BT plc’s motion to amend the Third Cross-Claim and the Fourth Cross-Claim be dismissed.
The parties be given the opportunity to make submissions as to the terms on which BTA and BT plc should be given leave to amend the Second Statement of Claim, the Third Cross-Claim and the Fourth Cross-Claim.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 572 OF 1995
BETWEEN:
BT AUSTRALASIA PTY LIMITED
APPLICANTAND:
STATE OF NEW SOUTH WALES
FIRST RESPONDENTTELSTRA CORPORATION LIMITED
SECOND RESPONDENTBETWEEN:
STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIRST CROSS CLAIMAND:
BT AUSTRALASIA PTY LIMITED
FIRST CROSS RESPONDENT TO FIRST CROSS CLAIMBRITISH TELECOMMUNICATIONS PLC
SECOND CROSS RESPONDENT TO FIRST CROSS CLAIMBETWEEN:
BT AUSTRALASIA PTY LIMITED
CROSS CLAIMANT TO SECOND CROSS CLAIMAND:
TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO SECOND CROSS CLAIMBETWEEN:
BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO THIRD CROSS CLAIMAND:
TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO THIRD CROSS CLAIMBETWEEN:
BRITISH TELECOMMUNICATIONS PLC
CROSS CLAIMANT TO FOURTH CROSS CLAIMAND:
STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO FOURTH CROSS CLAIMBETWEEN:
STATE OF NEW SOUTH WALES
CROSS CLAIMANT TO FIFTH CROSS CLAIMAND:
TELSTRA CORPORATION LIMITED
CROSS RESPONDENT TO FIFTH CROSS CLAIMBETWEEN:
TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SIXTH CROSS CLAIMAND:
BT AUSTRALASIA PTY LIMITED
CROSS RESPONDENT TO SIXTH CROSS CLAIMBETWEEN:
TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO SEVENTH CROSS CLAIMAND:
BRITISH TELECOMMUNICATIONS PLC
CROSS RESPONDENT TO SEVENTH CROSS CLAIMBETWEEN:
TELSTRA CORPORATION LIMITED
CROSS CLAIMANT TO EIGHTH CROSS CLAIMAND:
STATE OF NEW SOUTH WALES
CROSS RESPONDENT TO EIGHTH CROSS CLAIMJUDGE:
SACKVILLE J
DATE OF ORDER:
7 SEPTEMBER, 1998
WHERE MADE:
SYDNEY
REASONS FOR JUDGMENT – NO 12.
Background
By a motion filed on 27 May 1998, BT Australasia Pty Ltd (“BTA”) seeks orders that it be granted leave to further amend its statement of claim substantially in the form and to the effect of a draft exhibited to an affidavit of Mr Friedlander, sworn on 27 May 1998. In the same motion, British Telecommunications plc (“BT plc”) applies for leave to further amend its Third Cross-Claim and Fourth Cross-Claim to conform substantially with the further amendments made to the statement of claim. It is agreed between the parties that the fate of BT plc’s application rests on the outcome of BTA’s application.
BTA’s application was listed for hearing on 29 June 1998. On that date, Mr Bathurst QC (who appeared with Mr Street SC and Mr Lockhart for Telstra Corporation Ltd (“Telstra”)) made detailed submissions opposing the grant of leave. In substance, Mr Bathurst contended that the draft proposed statement of claim contained serious flaws such that it would be unfair to allow BTA to proceed with its reformulated case against Telstra.
On 9 July 1998, Mr Lindsay SC (who appeared with Mr Margo for BT) informed the Court that, without conceding the merits of any of the submissions put forward by Mr Bathurst, BTA was prepared to reformulate portions of its proposed statement of claim with a view to meeting some of the objections put forward on behalf of Telstra. The matter was relisted for directions on 29 July 1998.
At that directions hearing, it became clear that, although BTA had prepared and served a further version of the proposed statement of claim, Telstra did not accept that the reformulated version overcame the difficulties it had identified. Accordingly, further directions were given for the filing of written submissions and the motion was listed for a further hearing on 31 August 1998.
Written submissions were duly filed on behalf of both Telstra and BT. On 28 August 1998, BTA provided yet a further revised proposed statement of claim, together with further particulars of some of the paragraphs of the revised document. Argument thus concentrated on the document of 28 August 1998 and the particulars thereto provided on the same date.
I have previously explained the nature of the proceedings, including the many cross-claims which have been filed: see Judgment No 5 (24 December 1997, unreported).I have also commented on the extraordinary number of interlocutory disputes the litigation has generated.
The present application involves a further complication. Despite this case having been on foot for three years and despite the costs of discovery having exceeded eighteen million dollars, Telstra has never sought to strike out any portion of BTA’s pleadings. This is so notwithstanding that, as Mr Bathurst frankly acknowledged, some of the criticisms he made of BTA’s proposed amendments might equally have been made of portions of BTA’s Second Amended Statement of Claim (being the most recently filed version of the statement of claim). I have previously observed the fact that the discovery tail appears to have wagged the pleadings dog in this case. It is, to say the least, unfortunate that the parties have chosen to engage in repeated and prolonged discovery disputes while apparently paying little attention to the form of the pleadings. At this stage, I merely observe that Telstra’s failure to apply to strike out BTA’s Second Amended Statement of Claim (which was filed on 2 May 1997) is a factor to be borne in mind in determining whether BTA should be given leave to amend its pleadings.
I should note one other matter. BTA accepts that any amendments to the Second Statement of Claim do not carry with them any additional discovery obligations on the other parties, unless a further order is made by the Court.
Functions of Pleadings
I commence by reminding myself of the nature and functions of a statement of claim. A statement of claim must show the nature of the applicant’s claim and the material facts on which it is based: FCR, O 4, r 6. FCR O 11, r 2(a) provides that the pleadings are to contain and shall contain only a statement in summary form of the material facts upon which the applicant relies. FCR O 12, r 1, requires an applicant to state in the pleading or in a document filed with the pleading any necessary particulars. If a statement of claim discloses no reasonable cause of action or has a tendency to cause prejudice, embarrassment or delay, the whole or part of it may be struck out: FCR, O 11, r 16.
In Banque Commerciale SA (In Liq) v Akhil Holdings Limited (1990) 169 CLR 279, at 286, Mason CJ and Gaudron J said this:
“The function of pleadings is to state with sufficient clarity the case that must be met…. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness.”
In Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd [1996] ATPR 41-522, at 42,679, Burchett J approved observations made by Neaves J in The Bega Co-operative Society Limited v The Milk Authority of the Australian Capital Territory (FCA, 12 May 1992, unreported):
“The material facts are all those facts necessary for the purpose of formulating a complete cause of action…. It is not sufficient that the statement of claim simply express a conclusion drawn from facts which are not stated…; though in some circumstances to plead a conclusion may be to plead a material fact…. Not only must all material facts be pleaded, but they must be pleaded with a sufficient degree of specificity, having regard to the general subject-matter, to convey to the opposite party the case that party has to meet…. It must be apparent on the face of the document that the facts pleaded, if proved, would establish the cause of action relied upon…. It is not a function of particulars to take the place of the necessary averments in the statement of claim…”.
The distinction between material facts and particulars is illustrated by Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 (Fisher J).
Section 46 of the Trade Practices Act
Telstra objects to BTA being given leave to replead its claim that Telstra is liable for abuse of its market power, in contravention of s 46 of the Trade Practices Act 1974 (Cth) (“TP Act”). Sub-sections 46(1) and (7) provides as follows:
“46 (1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of –
(a)eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market;
(b)preventing the entry of a person into that or any other market; or
(c)deterring or preventing a person from engaging in competitive conduct in that or any other market.
…
(7) Without in any way limiting the manner in which the purpose of a person may be established for the purposes of any other provision of this Act, a corporation may be taken to have taken advantage of its power for a purpose referred to in sub-section (1) notwithstanding that after all the evidence has been considered the existence of that purpose is ascertainable only by inference from the conduct of the corporation or of any other person or from other relevant circumstances.”
BTA’s Pleading on Abuse of Market Power
In its proposed pleading, BTA alleges that Telstra is and at all material times has been a corporation (par 76). It is further alleged that, between April 1991 and August 1995, Telstra and BTA were competitors or potential competitors in a number of markets, including those specified in par 78 (par 77). Paragraph 78 pleads that, during the same period, Telstra had a substantial degree of market power in seven specified markets, including the “Australian Long Distance Calls Market” and the “New South Wales Local Calls Market”. No complaint is now made by Telstra about these paragraphs, although at one point it contended that the various markets had not been properly identified.
Sub-paragraphs 79(a)–(i) of the proposed statement of claim read as follows:
“79. The following facts and circumstances are indicative of the substantial degree of market power of Telstra pleaded in paragraph 78 hereof:
(a)The fact (pleaded in paragraph 36 hereof) that BTA was dependent upon Telstra for provision of essential parts of the TDN (included VPN not limited to CNH) and Telstra had a correlative power over BTA.
(b)Further and alternatively, the fact that Telstra was able to engage, and did engage, in the conduct (described as “Impermissible Conduct”) alleged in paragraphs 54 and 55 hereof.
(c)Further and alternatively, the fact that Telstra was able to engage, and did engage, in conduct calculated to procure and induce the Government to breach (and the repudiate) its obligations under the TDN Agreement and to interfere with BTA’s entitlements under the TDN Agreement and alleged in paragraph 56 hereof.
(d)Further and alternatively, the fact that Telstra was able to make, and made, the representations pleaded:
(i)in paragraph 37 hereof, being a range of representations to BTA generally.
(ii)in paragraph 38 hereof, being representations to BTA about CNH fitness and quality; and
(iii)in paragraphs 39 and 40 hereof, being representations to BTA and the Government about the equivalence of CNH and CVPN.
(e)Further and alternatively, the fact that Telstra was able to enter and breach, and did enter and breach, the consultancy agreements pleaded:
(i)in paragraphs 41-43 and 58 hereof, in respect of the General Consultancy Agreement; and
(ii)in paragraphs 44-46 and 59-60 hereof, in respect of the Services and Equipment Consultancy Agreement.
(f)Further and alternatively, the fact that Telstra was able to act, and did act, in breach of the common law duties pleaded in paragraphs 50 and 57 hereof.
(g)Further and alternatively, the fact that Telstra was able to act, and did act, in breach of fiduciary obligations as pleaded in paragraphs 51-53 and 61 hereof and to participate in breaches of fiduciary obligations as pleaded in paragraphs 63-64 hereof.
(h)Further and alternatively, the fact that Telstra was able to engage, and did engage, in conduct (including, but not limited to, the marketing of Flexi-plans and CVPN and the misapplication of CNH and CVPN tariffs) in contravention of:
(i)the Trade Practices Act sections 52-53 and the Fair Trading Act sections 42, 44 and 61 as pleaded in paragraphs 66-75 hereof;
(ii)the Telecommunications Act as pleaded in paragraphs 84-131 hereof.
(i)Further and alternatively, the fact that Telstra was able to engage, and did engage, in the conduct alleged in sub-paragraphs (b)-(h) hereof:
(i)with knowledge of the TDN Tender Process (as pleaded in paragraph 33 hereof) and knowledge about the TDN Agreement (as pleaded in paragraphs 34 and 35 hereof); and
(ii)further and alternatively, in circumstances in which BTA relied, and was dependent, upon Telstra for provision of essential parts of the TDN (as pleaded in paragraphs 36, 47-49 and 51 hereof).”
Sub-paragraphs (j)-(t) of par 79 set out further facts and circumstances indicative of Telstra’s substantial degree of market power. These include the fact that Telstra was recognised by virtually all consumers in the markets identified in par 78 as being the major telecommunications supplier in those markets (sub-par (j)) and Telstra’s enhanced position as a supplier in the markets by reason of its historical monopoly over the supply of the communications services until November 1991 (sub-par (k)(vi)). Telstra makes no complaint about sub-pars (j)-(t) of par 79.
Paragraphs 80 to 83 of the proposed statement of claim should be set out at length:
“Taking Advantage of Market Power
80.Between 1 April 1991 and 1 August 1995 or thereabouts, and at such other times as may be material, Telstra took advantage of its substantial market power (alleged in paragraph 78 hereof) for one or more or all of the purposes alleged in paragraph 82 hereof.
81.Telstra took advantage of its substantial market power as alleged in paragraph 80 hereof by:
(a)engaging in the conduct (described as ‘Impermissible Conduct’) pleaded in paragraphs 54 and 55 hereof;
(b)further and alternatively, engaging in conduct calculated to procure and induce the Government to breach (and to repudiate) its obligations under the TDN Agreement and to interfere with BTA’s entitlements under the TDN Agreement as alleged in sub paragraphs 56(a)-(c) and 56(e)-(g) hereof;
(c)further and alternatively, making the representations pleaded:
(i)in paragraph 37 hereof, being a range of representations to BTA generally;
(ii)in paragraph 38 hereof, being representations to BTA about CHN fitness and quality; and
(iii)in paragraphs 39 and 40 hereof, being representations to BTA and the Government about the equivalence of CHN and CVPN;
(d)further and alternatively, breaching the consultancy agreements pleaded:
(i)in paragraphs 41-43 and 58 hereof, in respect of the General Consultancy Agreement; and
(ii)in paragraphs 44-46 and 59-60 hereof, in respect of the Services and Equipment Consultancy Agreement;
(e)further and alternatively, breaching fiduciary obligations as pleaded in paragraphs 51-53 and 61 hereof, and participating in breaches of fiduciary obligations as pleaded in paragraphs 63-64 hereof;
(f)further and alternatively, engaging in conduct (including, but not limited to, the marketing of Flexi-plans and CVPN and the misapplication of CNH and CVPN tariffs) in contravention of:
(i)the Trade Practices Act sections 52-53 and the Fair Trading Act sections 42, 44 and 61, as pleaded in paragraphs 66-75 hereof; and
(ii)the Telecommunications Act, as pleaded in paragraphs 84-131 hereof;
(g)further and alternatively, the continued selling of Flexi-plans with a discount on untimed local calls but not permitting discounts on untimed local calls initiated on CNH-designated lines (and, by such conduct, misapplying its tariff and so acting in contravention of section 197 of the Telecommunications Act) in the Telecommunications Usage Service Markets identified in paragraph 78 hereof and each of those markets;
Particulars
(i) the Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its Substantial Market Power in Telecommunications Usage Service Markets’) and more particularly paragraphs 480-510 (under the heading ‘Allegations with respect to Flexi-plans’).
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(h)further and alternatively, selling many different Flexi-plans in order to create price confusion in the Telecommunications Usage Service Markets identified in paragraphs 78 hereof and each of those markets;
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its substantial Market Power in Telecommunications Usage Services Markets’) and more particularly paragraphs 480-481 and 511-513. See also paragraphs 398-402.
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’)
(i)further and alternatively, refusing to allow BTA to connect its PN to Telstra’s network on the trunk-side of Telstra’s network using CCSS 7 signalling;
Particulars
(i)the Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its Substantial Market Power in Telecommunications Usage Service Markets’) and more particularly paragraphs 514-556 (under the heading ‘Refusal to Interconnect using CCSS7’).
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(j)further and alternatively, withdrawing CNH without making it clear to Government that CVPN was an ‘Equivalent Service’ for the purposes of the TDN Agreement;
Particulars
(i)the Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its Substantial Market Power in Telecommunications Usage Service Markets’) and more particularly paragraphs 557-562 (under the heading ‘Withdrawal of CNH without making clear to NSWG that CVPN was an equivalent service’).
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(j)further and alternatively, the failure to give to BTA cooperation necessary for BTA to construct, implement install and manage the TDN in accordance with the TDN Agreement, including:
(i)failing to reveal the incompatibility of CNH with other Telstra services;
(ii)supplying inaccurate information about services and equipment currently provided to agencies and charging for that information;
(iii)requiring BTA to pay to ‘Pre-vet’ CNH Orders;
(iv)providing wrong information about the geographical availability of CNH;
(v)failing to reveal CNH product limitations and efficiencies including deficiencies in the CNH order, activation and billing processes;
(vi)being unduly slow in processing orders for CNH;
(vii)imposing an unduly cumbersome ordering process;
(viii)failing to bill CNH calls properly; and
(ix)misusing of billing information gained because Telstra supplied essential services to BTA;
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its Substantial Market Power in Telecommunications Usage Service Markets’) and more particularly paragraphs 563-651 (under the heading ‘Raising BTA’s costs by failing to give the necessary cooperation’) and paragraphs 652-661 under the heading ‘Misuse of Billing Information’).
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(l)further and alternatively, using billing information about BTA’s use of Telstra’s services in relation to the TDN for its own marketing purposes.
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its Substantial Market Power in Telecommunications Usage Service Markets’) and more particularly paragraphs 652-661 (under the heading ‘Misuse of Billing Information’).
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(m)further and alternatively, adopting a design of the CVPN calculated to make it difficult to resell, without offering another resellable VPN service.
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 474-692 (under the heading ‘Telstra’s use of its Substantial Market Power in Telecommunications Usage Service Markets’) and more particularly paragraphs 657-692 (under the heading ‘The Design of CVPN itself and abuse of substantial market power’).
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(n)further and alternatively, refusing to respond in a timely fashion to Requests for Quotations to re-programme PABX equipment;
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 693-740 (under the heading ‘Section 3: Analysis relevant to BTA’s claims under the Trade Practices Act against Telstra relating to PABX reprogramming and maintenance services’) and more particularly paragraphs 693-700 and 721,740.
(iii)The Cornel/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(o)further and alternatively, rationing the number of orders for re-programming PABX equipment that it would complete within a given time period;
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)The Cornell/McEwin Statement paragraphs 693-740 (under the heading ‘Section 3: Analysis relevant to BTA’s claims under the Trade Practices Act against Telstra relating to PABX reprogramming and maintenance services’) and more particularly paragraphs 693-700 and 721,740.
(iii)The Cornell/McEwin Statement paragraphs 662-674 (under the heading ‘The combined effects of Telstra’s abuses of substantial Market Power’).
(p)further and alternatively, engaging in conduct constituting breaches of common law duties as alleged in paragraphs 50 and 57 hereof; and
(q)further and alternatively, engaging in such conduct:
(i)with knowledge about the TDN Tender Process (as pleaded in paragraphs 33 hereof) and knowledge about the TDN Agreement (as pleaded in paragraphs 34 and 35 hereof); and
(iii)further and alternatively, in circumstances in which BTA relied, and was dependent upon Telstra for provision of essential parts of the TDN (as pleaded in paragraphs 36, 47-49 and 51 hereof).
Telstra Conduct was for a Proscribed Purpose
82.Between 1 April 1991 and 1 August 1995 or thereabouts, and at such other times as may be material, (as alleged in paragraphs 80 and 81 hereof) took advantage of its market power (pleaded in paragraph 78 hereof) for one or more or all of the following purposes:
(a)the purpose of eliminating or substantially damaging BTA as a competitor in that market or another of the markets identified in paragraph 78 hereof by, inter alia, substantially hindering and preventing BTA’s performance of its supply obligations and entitlements concerning telecommunications services under the TDN Agreement or otherwise in the market; and/or
(b)the purpose of preventing the entry of BTA into that market or another of the markets identified in paragraph 78 hereof by deterring or substantially hindering and preventing BTA’s performance of its supply obligations and entitlements concerning telecommunications services under the TDN Agreement or otherwise in the market; and/or
(c)the purpose of deterring or preventing BTA from engaging in conduct competitive with Telstra for the supply of telecommunications services in that market or another of the markets identified in paragraph 78 hereof, by substantially hindering and preventing BTA’s performance of its supply obligations and entitlements concerning telecommunications services under the TDN Agreement or otherwise in the market.
Particulars
(i)The Cornell/McEwin Statement generally.
(ii)BTA contends that Telstra took advantage of its substantial market power in one or more of the Telecommunications Usage Services (more particular-ly identified in paragraph 78(a) of this Statement of Claim) for the purpose of preventing BTA from engaging in competitive conduct, initially in the New South Wales Local VPN/PN market, or several geographically smaller local VPN/PN Markets that collectively covered New South Wales, and the New South Wales or Australian Long Distance VPN/PN Markets, substantially damaging BTA as a competitor in those markets, and thus preventing BTA from entering the Australian Long Distance Calls Market. See the Cornell/McEwin Statement paragraphs 474-692 and the summary of the Statement in paragraph 7.1(d) in the introductory section of the Statement.
(iii)BTA contends that Telstra took advantage of its substantial market power in the PABX Service Markets (more particularly identified in paragraph 78(b) of the Statement of Claim) to prevent BTA from engaging in competitive conduct in the New South Wales Local VPN/PN Market, or several geographically smaller local VPN/PN Markets that collectively covered New South Wales, and the New South Wales or Australian Long Distance VPN/PN Markets, leading to substantial damage to BTA in those VPN/PN Markets, and thereby preventing BTA from entering the Australian Long Distance Calls Market. See the Cornell/McEwin Statement paragraphs 721-740 and the summary of the Statement in paragraph 7.2(d) of the introductory section of the Statement.
(iv)BTA relies upon the matters alleged and particularised in paragraphs 77-81 hereof as supporting an inference that Telstra took advantage of its substantial market power for one or more or all of the purposes identified in this paragraph.
Contravention of TPA s 46
83.By reason of the matters pleaded in paragraphs 76-82 hereof, Telstra acted in contravention of section 46 of the Trade Practices Act between 1 April 1991 and 1 August 1995 or thereabouts.”
Paragraph 134 alleges that by reason of Telstra’s wrongful acts and conduct pleaded elsewhere in the proposed statement of claim (including par 83), BTA has suffered and will continue to suffer serious loss and damage. The particulars identify four heads of damages, namely
reliance damages, being expenses incurred referable to the TDN Agreement;
expectation damages, being loss of profits referable to the TDN Agreement;
restitutionary damages in a sum equivalent to BTA’s claims for an account of profit as referred to in an expert report prepared by Mr Vella; and
exemplary damages.
No further particulars are provided as to the first three heads of damage, except that the claims are said to be particularised in one or other of Mr Vella’s reports.
Telstra’s Submissions
Telstra made the following objections to BTA’s pleading that Telstra had contravened s 46 of the TP Act:
Sub-paragraphs (a) to (i) of par 79 failed to plead material facts supporting the proposition that Telstra’s ability to engage in the conduct referred to in those sub-paragraphs demonstrated that it had a substantial degree of market power in the relevant markets.
None of the sub-pars of par 81 pleaded material facts supporting the proposition that Telstra’s conduct constituted or flowed from it having taken advantage of its substantial market power, as pleaded in par 80. This defect could not be cured by cross-references to the expert statements prepared by Drs Cornell and McEwin. Their evidence could not take the place of a properly pleaded and particularised statement of claim.
Paragraph 82 did not plead material facts showing how Telstra took advantage of its market power for one or more of the proscribed purposes specified in s 46(1) of the TP Act.
The proposed statement of claim did not plead material facts showing a causal connection between Telstra’s alleged conduct and the particular losses claimed by BTA.
Section 46 Pleading Issues
The material facts which must be pleaded to make out a cause of action under s 46 of the TPA were set out by French J in Natwest Australia Bank Ltd v Boral Gerrard Strapping Systems Pty Ltd [1992] ATPR 41-196, at 40,643:
“[I]t is necessary that material facts be pleaded which include allegations:
1. Characterising the alleged contravener as a corporation.
2.Identifying a market or markets for goods or services within Australia.
3.Asserting and supporting the assertion that the corporation has a substantial degree of power in the relevant market.
4.Asserting and supporting the assertion that the corporation has taken advantage of that power.
5.Asserting and supporting the assertion that the corporation has taken advantage of its power for the purpose of:
(i)preventing the entry of a person into the market in which the contravener has power or into any other market;
(ii) deterring or preventing a person from engaging in competitive conduct in the market in which the contravener has power or in any other market.”
In assessing Telstra’s criticism of the proposed statement of claim it is useful to bear in mind that a mere assertion that a corporation took advantage of its substantial market power to act in a particular way, or that it acted in that manner for a proscribed purpose, is not necessarily an adequate pleading. The point is illustrated by the decision of Burchett J in Multigroup Distribution Services. There, the applicant pleaded that the respondents had made and implemented an arrangement to restrict competitive quoting, whereby each party was excluded from bidding for the customers of any of the other parties to the arrangement. It was then pleaded that by engaging in this conduct each of the respondents took advantage of its market power in the market for express freight transportation for the purposes identified in s 46(1) of the TP Act. Burchett J struck out the statement of claim. His Honour pointed out (at 42,683) that
“the mere making and implementing of an arrangement to restrict competitive quoting, so as to exclude from it any bidding for customers of other Respondents, does not imply a substantial purpose of eliminating or even affecting the Applicant.”
Similarly, in Natwest v Boral, French J dealt with an allegation that the respondent had refused to supply certain equipment until a debt had been paid. It was alleged that the respondent had thereby taken advantage of its market power. The pleading was struck out on the ground that nothing had been pleaded to show that the refusal of supply amounted to taking advantage of market power. French J (at 40,644) said this:
“It is…an essential element of a cause of action based upon s 46 that the alleged contravener is said to have used its market power. The conduct must either by necessary implication from its very nature or by reference to other pleaded facts and circumstances constitute a use of that power. It is not sufficient to show that a corporation with market power has engaged in conduct for the purpose of preventing entry of another person into a market or deterring or preventing a person from engaging in competitive conduct in that or any other market. An extreme example illustrates the point. If a corporation with substantial market power were to engage an arsonist to burn down its competitor’s factory and thus deter or prevent its competitor from engaging in competitive activity, it would not thereby contravene s 46. There must be a causal connection between the conduct alleged and the market power pleaded such that it can be said that the conduct is a use of that power. In many cases the connection may be demonstrated by showing a reliance by the contravener upon its market power to insulate it from the sanctions that competition would ordinarily visit upon its conduct. In the present case I am satisfied that the pleaded refusal to supply does not either expressly or by necessary implication disclose a link with market power such that it may be said to be a use of that power. The refusal to supply was limited to the Strapping Equipment which would be required by any potential purchaser of the Irvine Pastoral business. The pleaded facts do not support the inference that the refusal took advantage of Boral’s position in the market.”
See also Mick Skorpos Petrol Discount King Pty Ltd v The Shell Company of Australia Ltd [1997] ATPR 41-556 (FCA/Mansfield J), at 43,699-43,700.
Paragraph 79
In my opinion, there is considerable force in Telstra’s submission that BTA should not be given leave to amend in the form of the challenged sub-paragraphs of par 79 of the proposed statement of claim. The difficulty created by these sub-paragraphs is illustrated most clearly by sub-par (d), although I think the same difficulty affects all the challenged sub-paragraphs.
Sub-paragraph (d) asserts that Telstra’s ability to make and the fact that it did make the representations pleaded elsewhere in the proposed statement of claim is “indicative” of Telstra having a substantial degree of market power as pleaded in par 78. The representations allegedly made by Telstra range over a variety of subjects, but include representations, for example, to BTA that CNH (that is, the CustomNet Horizon Service provided by Telstra) was of merchantable quality and would remain available to BTA and the State during the currency of the TDN Agreement (that is, the Telephone and Data Network Agreement entered into between BTA and the State of New South Wales).
Clearly enough, a corporation’s ability to make representations on any given topic, especially representations alleged to be false, is not necessarily or even likely to be connected with the corporation’s market power. A supplier of a product might be prompted to represent that the product has particular virtues for reasons that have nothing to do with the supplier’s power in the relevant market. Indeed, the vast majority of claims for misleading and deceptive conduct are made against representers who have no significant power in the relevant market. If BTA claims that Telstra’s ability to make the large number of representations pleaded elsewhere in the statement of claim are indicative of its market power, it should plead the material facts that demonstrate the link. In the absence of such a pleaded link, Telstra cannot know the precise case made against it.
A similar analysis can be applied to sub-par 79(b). It is there pleaded that the fact that Telstra was able to and did engage in the “Impermissible Conduct” was indicative of it having a substantial degree of power in the relevant markets. The “Impermissible Conduct” pleaded in pars 54 and 55 of the proposed statement of claim includes, for example, Telstra’s alleged failure to warn BTA of certain difficulties being experienced with CNH and its alleged failure to ensure that CNH was reasonably fit for the implementation and operation of the TDN. But there is no necessary or apparent link between conduct (or inaction) of the kind pleaded and Telstra’s power in any given market. Telstra’s alleged failure may have nothing to do with the extent of its market power. If BTA asserts that Telstra’s “Impermissible Conduct” was linked to its market power, it should plead the material facts demonstrating the link and establishing or tending to establish that Telstra did have power in the relevant markets.
In substance, the same analysis can be applied to the other challenged sub-paragraphs of par 79. In each case, there is no necessary or apparent link between the pleaded “facts” (some of which are actually allegations of breach of common law, equitable or statutory duties) and Telstra’s alleged degree of market power. If BTA wishes to rely on these “facts” it must plead the material facts establishing the link.
Mr Lindsay stressed that expression “was able to” had been employed throughout the challenged sub-paragraphs. He foreshadowed that BTA’s submission would ultimately be that Telstra was only able to do the various acts referred to in the sub-paragraphs because it was not faced with a competitive market: cf Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177, at 202-203, per Dawson J. If anything, however, this reinforces the points I have already made. If BTA wishes to mount a case, for example, that Telstra could only have made the pleaded representations because it operated in a non-competitive market in which it had substantial power, that allegation should be pleaded. This pleading would enable Telstra to understand the case it has to meet and assist in identifying the issues requiring resolution.
Mr Lindsay invoked s 46(7) of the TP Act to support the proposition that a broad view should be taken of the pleading in par 79. He contended that, since a court is empowered to draw inferences from the conduct of the corporation in order to ascertain its purpose, BTA should be able to rely on the matters pleaded in sub-pars 79(a) to (i) for such evidentiary value as they might have. Section 46(7) of the TP Act is, however, concerned with inferences that might be drawn from evidence. It does not define the material facts that need to be pleaded in any particular case. I do not think that s 46(7) assists BTA on the pleadings question.
Mr Lindsay’s final argument on par 79 was that, even if the pleading was deficient, it was substantially to the effect of the pleading already filed (that is, the Second Amended Statement of Claim). He submitted that, as a matter of discretion, I should decline to entertain a challenge to the pleadings at this late stage of the litigation. He pointed out that each of the sub-paragraphs of par 79 had counterparts in the Second Amended Statement of Claim. But it is one thing, for example, to plead that BTA relied and was dependent on Telstra for provision of essential parts of the TDN (Second Amended Statement of Claim, par 28A); it is quite another to plead that BTA’s dependence was indicative of Telstra’s power in a particular market (proposed statement of claim, sub-par 79(a)). The latter was not pleaded in the Second Amended Statement of Claim. Moreover, the markets pleaded in par 78 of the proposed statement of claim are different in important respects from the markets pleaded in the Second Amended Statement of Claim. Accordingly, the challenged sub-paragraphs of par 79 cannot be said to be merely repetitious of the existing pleading.
Paragraph 81
In my opinion, much the same analysis can be applied to par 81 of the proposed Statement of Claim as I have applied to sub-pars 79(a) to (i). Paragraph 81 pleads that Telstra took advantage of its substantial market power, as alleged in par 80, by engaging in the conduct specified in sub-pars (a) to (q).
It is not apparent how the conduct pleaded in par 81 is said to be the result of Telstra taking advantage of its substantial market power. The conduct pleaded cannot be said by necessary implication from its very nature, or by reference to other pleaded facts and circumstances, to constitute a taking of advantage by Telstra of its substantial market power. No material facts are pleaded which demonstrate the link between Telstra’s market power and the conduct engaged in by Telstra.
Sub-paragraphs 81(a) to (f) substantially reproduce the corresponding provisions of par 79, namely, sub-pars (b), (c), (d), (e), (g) and (h). For much the same reasons as I have already given, I do not think that sub-pars 81(a) to (f) adequately plead that Telstra’s conduct constituted or flowed from an abuse of Telstra’s power in the relevant markets.
The remaining sub-paragraphs of par 81, in my opinion, suffer from the same defects. It may be that some of these sub-paragraphs are capable of being supported if further material facts were pleaded. Nonetheless, in its present form, par 81 does not plead the material facts necessary to establish that the conduct referred to constituted or resulted from taking advantage by Telstra of its power in the relevant markets.
Sub-paragraph (g) serves as an example. BTA there suggests that Telstra took advantage of its market power in the “Telecommunications Usage Service Markets” by selling Flexi-plans with a discount on untimed local calls but not permitting discounts on untimed local calls initiated on CNH-designated lines. This sub-paragraph does not plead material facts showing how Telstra’s market power enabled it to adopt its Flexiplan pricing strategy.
The particulars to sub-par (g) refer to the “Cornell/McEwin Statement generally” and identify 219 paragraphs in that statement as relevant to the pleading. It may well be that the Cornell/McEwin statement satisfactorily explains the link between Telstra’s market power and the adoption and implementation of its Flexiplan and pricing strategy. It is not necessary to express a view on this issue. The point is that cross-reference to an expert’s report cannot relieve BTA of the need to plead the material facts that are necessary to support its case. Particularly is this so in a case of such complexity and size where, in my opinion, the failure by all parties to give careful consideration at an early stage to the form of the pleadings has contributed to the vast cost of discovery.
Another example is provided by sub-par (i). That sub-paragraph refers to a refusal by Telstra to allow BTA to connect its Private Network to Telstra’s network “on the trunk side of Telstra’s network using CCSS7 signalling”. The material facts relating to BTA’s request and Telstra’s refusal are not pleaded. Nor are material facts pleaded which show that the refusal constituted or flowed from Telstra taking advantage of its market power, as distinct, for example, from simply taking advantage of its contractual or proprietary entitlements.
A third illustration is sub-par (k)(ix). This sub-paragraph alleges that Telstra took advantage of its substantial market power by failing to give BTA the cooperation necessary for it to implement and manage the TDN, specifically by reason of its misuse of billing information gained in consequence of Telstra supplying essential services to BTA. The particulars to this sub-paragraph once again refer to a large number of paragraphs in the Cornell/McEwin statement. According to Mr Lindsay, the Cornell/McEwin statement records that BTA’s case is that Telstra’s misuse of billing information to market its own services was an abuse of Telstra’s market power. It was an abuse because Telstra could not have misused the billing information had the market been truly competitive.
I am by no means sure that the Cornell/McEwin statement clearly explains how Telstra’s alleged misuse of billing information constituted an abuse of its market position. However, on the assumption that it does, as I have already said a reference in particulars to the experts’ report does not provide a substitute for material facts pleaded in the statement of claim. The sheer difficulty of tracing BTA’s claims by reference to an expert’s report, one or more witness statements and (in some cases) other documents, demonstrates the imperative of a clear and concise pleading to the orderly conduct of the litigation.
Paragraph 81 of the proposed statement of claim does not simply repeat allegations already pleaded for the same purpose in the Second Statement of Claim. Since it is deficient in the manner I have explained, BTA should not be granted leave to introduce par 81 by way of amendment.
Paragraph 82
In the light of what I have said about pars 79 and 81, there may be little point in considering par 82 in detail. It is dependent on the pleading in the earlier paragraphs and cannot stand in its present form if, for example, BTA is not to be granted leave to amend the statement of claim to include par 81.
However, I think it should be said that par 82 presents a particular problem. Paragraph 78 pleads that Telstra had a substantial degree of power in a number of markets. Paragraph 80 alleges that Telstra took advantage of its substantial market power, as alleged in par 78, for one or more or all of the purposes alleged in par 82. Paragraph 82 then alleges that Telstra took advantage of its market power, as alleged in par 78, for “one or more or all of” the three purposes identified in sub-pars (a) to (c).
This is a “rolled-up” pleading which does not attempt to link particular conduct on the part of Telstra with a particular purpose in a particular market. The number of possible combinations and permutations is, if not infinite, then very great. I think Telstra is entitled to know the alleged purpose of each of the acts or omissions said to have constituted an abuse of market power and how those acts or omissions demonstrate or reflect that purpose.
My impression is that the form of par 82 (and indeed other portions of the proposed statement of claim) reflects BTA’s desire to preserve as many options as possible. But a time comes when it is necessary for a party to commit itself to a particular course (which may include some, but not limitless, alternatives). That time has come.
Damages
Telstra further complains that the proposed pleadings do not clearly specify the causal relationship between Telstra’s alleged abuse of its market power and any loss or damage sustained by BTA. Paragraph 134 of the proposed Statement of Claim alleges that by reason of Telstra’s wrongful acts and conduct, including its contraventions of s 46 of the TP Act, BTA has suffered and continues to suffer substantial loss and damage. The particulars refer to Mr Vella’s report on damages and indicate that BTA claims reliance damages, expectation damages, restitutionary damages and exemplary damages.
In my opinion, Telstra is entitled to know how BTA puts it claims for damages arising out of the alleged contraventions of s 46 of the TP Act. Obviously, it is often difficult for an applicant to specify its claim for damages with precision until relatively late in the proceedings. However, that point has arrived in the present proceedings. Whether BTA’s claim is formulated as an elaboration of par 134 of the proposed Statement of Claim or in a separate document is not, perhaps, very important. What is important is that BTA formulate clearly and concisely its claim for damages arising out of the alleged contravention of s 46 of the TP Act. It is not satisfactory for that to be done by “rolled-up” particulars which do not distinguish between the various causes of action. The difficulty is not overcome by reference to a lengthy expert’s report.
Telecommunications Act
The proposed statement of claim includes allegations that Telstra contravened ss 183 and 184 of the Telecommunications Act 1991 (Cth) (“TC Act”) (as they stood at the relevant times) and that BTA is entitled to damages by reason of the contraventions. The relevant provisions are as follows:
“183(1) A carrier that is in a position to dominate a market for a particular kind of telecommunications service must not discriminate, between persons who acquire in that market telecommunications services of that kind, in relation to:
(a)the charges for the services; or
(b)the terms and conditions on which the services are supplied.
(2)Subsection (1) does not apply in relation to prescribed telecommunications services.
…
184(1) A carrier must not, in relation to the supply of basic carriage services, discriminate against a person for the reason, or for reasons including the reason, that the person:
(a)supplies, or proposes to supply, eligible services under a class licence; or
(b)uses, or wishes to use, eligible services supplied under a class licence.
(2)In subsection (1):
‘discriminate’ includes discriminate in relation to:
(a)the charges for the service concerned; or
(b)the performance characteristics of the service concerned; or
(c)other terms and conditions on which the service concerned is supplied.
(3)A carrier must not vary a charge for a basic carriage service that the carrier supplies, or proposes to supply, to a person if the reason, or one of the reasons, for the variation is that the carrier also supplies, or does not also supply, other telecommunications services to the person.
…
186(1) Where a carrier contravenes, or proposes to contravene, section 183 or 184:
(a)any person who is, or would be, subjected to discrimination; or
(b)any other aggrieved person;
may apply to the Federal Court for relief.
(2)The relief that may be granted includes an injunction and damages.
(3)Section 395 applies to an application under subsection (1) of this section.”
The Pleaded Case under the Telecommunications Act
Because the pleadings on these issues are lengthy, I shall summarise briefly the portion of the proposed statement of claim to which Mr Bathurst paid particular attention.
Section D16D of the proposed statement of claim contains allegations that Telstra was in a position to dominate each of the markets identified in par 78 (par 92). Paragraph 93 pleads facts and circumstances “indicative of the fact that Telstra was in a position to dominate each of the markets”. Sub-paragraphs 93(a) to (i) are substantially to the effect of sub-paragraphs 79(a) to (i) and must suffer the same fate.
Section D16F of the proposed statement of claim alleges that the sale of telecommunications services breached s 183(1) of the TC Act. It is alleged that Telstra, by supplying to the public automatic trunk calls and local calls pursuant to Flexi-plans and Standard Terms discriminated between persons who acquired those services in certain markets (par 99). Telstra alleges that a number of the features of the Flexi-plans were “indicative” of the discrimination alleged in par 99 (par 100). Sub-paragraphs 99(a) to (i) are substantially the same as the corresponding sub-paragraphs of par 79, to which I have already referred.
Section D16G of the proposed statement of claim alleges that the sale of telecommunications under Flexi-plans breached s 184(3) of the TC Act. It alleges that Telstra allowed the State and each Agency a discount on basic services which varied according to aggregate expenditure by the State or the Agency on all services under the particular Flexi-plan (pars 102, 103). The provision of discounts is said to have contravened s 184(3) because the Flexi-plans varied the Standard Price for each basic carriage service supplied to the State and the Agencies in circumstances where one reason for the variation was that Telstra also supplied basic carriage services to the State and the Agencies.
Section D16J of the proposed statement of claim alleges discrimination under s 183(1) of the TC Act in respect of the Strategic Partnership Agreement (“SPA”) which was entered into between the State and Telstra in December 1992 and terminated in June 1994. It is alleged that Telstra supplied discounts to the State and Agencies, but did not provide discounts to persons who did not enter SPA’s (pars 115, 116). This is said to be discrimination between persons who acquired telecommunication services in one or more of a series of markets (par 116). The proposed pleading says that a number of features of SPA’s were “indicative of the discrimination alleged in par 116 (par 117).
Section D16M of the proposed statement of claim pleads a case of discrimination against BTA as a reseller. It is alleged that Telstra discriminated against BTA as a person who acquired telecommunications services for resale in certain markets (par 124). The discrimination is said to have come about because, inter alia, Telstra deliberately designed the CVPN tariff in such a way as to preclude or discourage use of CVPN by resellers (par 125(a)). (“CVPN” was a basic carriage telecommunications service provided by Telstra with effect from 5 December 1994, known as Corporate Virtual Private Network.) The discrimination is alleged to have contravened ss 183(1) and 184(1) of the TC Act.
Section D16N of the proposed statement of claim pleads that the offering by Telstra of a “whole of Government” price to the State for CVPN contravened the TC Act. BTA pleads that Telstra discriminated against it and other customers wishing to acquire CVPN in a number of markets (par 128). The discrimination is said to have arisen because Telstra supplied CVPN to the State on the basis that it would provide a volume discount which took into account CVPN services purchased by the State and a large number of “Non-Government Entities” such as Councils and universities (par 129). This conduct is said to have discriminated against BTA and other non-Government customers in contravention of ss 183(1) and 184(1) of the TC Act (par 131(a)). Telstra is also said to have breached s 197 of the TC Act, by departing from its tariff filed with Austel (par 131(b)).
Paragraph 132 pleads that by reason of Telstra’s contravention of ss 183(1), 184(1) and 184(3) of the TC Act, BTA suffered loss and damage in that the marketing and sale of telecommunications services and the discrimination practised against BTA
obstructed and hindered BTA in its endeavours to ensure that the State and the Agencies obtained the “Required Services” under the TDN Agreement;
obstructed and hindered BTA’s opportunities for marketing and selling various services utilizing the TDN to the State and the Agencies; and
generally operated as a disincentive for the State and the Agencies to transact business with BTA.
The particulars to par 132 include the following:
“(i)BTA contends that, by entering into and giving effect to the Government SPA in contravention of the Telecommunications Act, Telstra:
(A)provided, particularly with use of the Flexi-plans, a disincentive for the Government and Agencies to connect with the TDN; and
(B)secured for itself opportunities to deal directly with the Government and Agencies, instead of having to deal with them through BTA as their agent under the TDN Agreement, and so to detract from the ability of BTA to implement the TDN Agreement.
(iii)Telstra’s offering and supply of Flexi-plan discounts to the Government and Agencies (including, without limitation those Flexi-plans which did not allow a discount on untimed local calls made from CNH designated access lines):
(A)constituted a disincentive for the Government and Agencies to connect to the TDN and operated, as such, as an inducement by Telstra to the Government, for the Government to breach (and to repudiate) the TDN Agreement, as alleged in paragraph 56 hereof;
(B)placed pressure on BTA to reduce its prices for Required Services which competed with the basic carriage services offered and sold by Telstra pursuant to the Flexi-plans; and
(C)was an abuse of Telstra’s market power as alleged in paragraph 81, including sub-paragraph 81(g) and 81(h), hereof.
…
(iv)The discounts for CVPN which were offered to the Government by Telstra in contravention of the Telecommunications Act as alleged in paragraphs 127 to 131 formed part of the conduct by which Telstra induced the Government to deal directly with it in relation to VPN services and to enter into the CVPN Agreement, as more particularly alleged in paragraph 56 hereof.
(v)If the CVPN tariff contravened sections 183(1) and 184(1) of the Telecommunications Act as pleaded in paragraphs 124 to 131 hereof, and (as BTA contends) Telstra and the Government were accordingly unable to utilise it to the detriment of BTA, then CNH would and should properly have continued to be available to BTA, the Government and Agencies for the purposes of the TDN Agreement. In fact, Telstra’s withdrawal of CNH and the Government’s decision to acquire CVPN from Telstra in lieu of CNH were material factors in the Government’s repudiation of the TDN Agreement and BTA’s decision to accept that repudiation as putting the Agreement at an end. In that context, Telstra’s conduct in contravention of the Telecommunications Act was a direct cause of BTA’s loss of the TDN Agreement. The same conduct was also an abuse of Telstra’s market power as alleged in paragraph 81, particularly subparagraphs 81(j) and 81(m), hereof.”
Paragraph 133 alleges that BTA is an “aggrieved person” within s 186 of the TC Act. I have already referred to the form of the damages claim in par 134.
Telstra’s Submissions
Telstra criticised a number of paragraphs in the proposed pleading, such as par 100, for using the expression “indicative of the discrimination” to describe the significance of the particular matters pleaded. Mr Lindsay conceded that that expression should be replaced by language to the effect that the pleaded matters constituted the discrimination and were not merely “indicative” of it. Nothing more needs to be said on this point.
Telstra attacked sub-pars 93(a) to (i), which pleaded facts and circumstances indicative of the fact that Telstra was in a position to dominate the markets specified in par 92. Sub-pars 93(a) to (i) are in substantially the same terms as sub-pars 79(a) to (i) and are covered by my earlier ruling. BTA should not be permitted to amend its pleading in this form.
Telstra’s principal complaint with respect to the remainder of the pleading dealing with contravention of the TC Act is that BTA did not plead material facts alleging a causative link between particular discriminatory conduct or pricing by Telstra and any damage sustained by it. Mr Bathurst referred, for example, to the pleading in Section D16F that the sale of telecommunications services under Flexi-plans breached s 183(1). He submitted that the pleading did not make it clear whether and, if so how, BTA had been discriminated against. Nor did it make clear whether it was intended to plead that discrimination against third parties had caused loss to BTA. If that was intended, it was necessary to plead material facts showing how the discrimination against third parties caused loss to BTA.
Mr Bathurst submitted that the same difficulties applied with respect to the pleading that Telstra’s sale of telecommunications services under Flexi-plans breached s 184(3) of the TC Act because it varied the price from the Standard Price (Section D16G). He contended that pars 132 and 134 did not make clear how the price variation caused loss to BTA. He said that it was necessary for BTA to plead what would have happened, but for the relevant price variations constituting a contravention of the TC Act.
In relation to the claim that Telstra’s pricing under the SPA contravened s 183(1) of the TC Act (section D16J), Mr Bathurst pointed out that the allegations did not suggest that the discrimination had been against BTA, but against all those who did not enter SPA’s. It was not clear from the pleading how BTA could be said to have suffered loss from such “third party discrimination”.
In relation to BTA’s claim that it was discriminated against as a reseller (Section D16M), Mr Bathurst complained that the pleading did not make clear what would have happened if CVPN had been offered without a discount (that is, without the alleged discrimination having occurred). His point was that, if CVPN had not been made available, CNH (the previous system) would have continued and there was reason to doubt that BTA could have carried on profitably under that arrangement. Mr Bathurst conceded that particular (v) to par 132 came “very close” to dealing with the difficulty. In my view, BTA’s case is pleaded sufficiently to answer the criticism on this point.
Mr Bathurst made three criticisms of BTA’s pleading relating to the “whole of Government” price. First, it did not plead that BTA acquired services in the relevant markets (a precondition for the application of s 183(1) of the TC Act). If it were intended to plead a third party discrimination case, in the sense that BTA suffered loss because of discrimination against third parties, the pleading did not make that clear. Secondly, the BTA did not allege that BTA was reselling services (a precondition for the application of s 184(1) of the TC Act). Thirdly, the relationship between the contravention of the TC Act alleged by BTA and the damages claimed by it had not been made clear.
BTA’s Response
Mr Lindsay submitted that the real difference between Telstra and BTA lay in the construction of the TC Act and, in particular, the concepts of “discrimination” and “person aggrieved” (the latter appearing in s 186). In his written submissions, Mr Lindsay described “the essence” of BTA’s allegations under the TC Act as follows:
“(a)Telstra was not entitled to compete with [BTA] for the telecommunications traffic of the Government and Agencies by use of Flexi-Plans, the Government SPA and CVPN.
(b)[T]his is because, on a proper construction of the [TC Act] and Telstra’s tariffs, Telstra’s discount arrangements (under the tariffs governing Flexi-Plans and the [State] SPA) and CVPN were invalid and, accordingly, Telstra had no legal entitlement to offer to supply or to supply, telecommunications services on the basis of those discounts.
(c)[I]n the absence of Telstra’s unlawful competition through Flexi-Plans and the [State] SPA, the [State] and Agencies would have had greater incentive to connect to the TDN: development of the Private Network would have been more economically attractive because it allowed public sector telecommunications to be aggregated on one or more leased lines and the cost of such lines spread over the aggregated calls, so that the unit cost of each call was less than Telstra’s Standard Price for a call.
(d)[B]y engaging in selective discounting in contravention of ss 813 and 184 of the [TC Act] Telstra engaged in competition which was unlawful under the Act.
(e)The contract BTA lost the benefit of (the TDN Agreement) should, and would, have been profitable had Telstra not engaged in lawful competition.”
Mr Lindsay pointed out that recently supplied particulars had specified, for example, that the discrimination alleged in par 100 was in favour of named Agencies and against persons acquiring the same services but not under a Flexi-plan. He accepted, however, that BTA had not specifically pleaded the invalidity of Telstra’s discount arrangements which, as I have noted, he characterised as part of the “essence” of BTA’s TC Act allegations. Furthermore, although par 133 pleads that BTA was an “aggrieved person” it does not plead that it acquired this status by reason of Telstra having offered discounts to customers of BTA that were illegal and invalid.
Deficiencies in the TC Act Pleading
Although much of BTA’s pleaded TC Act case is detailed, particularly as supplemented by recently provided particulars, I think it suffers from several deficiencies. I suspect that these can be cured fairly readily. Nonetheless, they should be attended to before leave is granted to BTA to replead its TC Act case.
The deficiencies are as follows:
BTA does not plead that it was a reseller of eligible services for the purposes of the claims made under s 184(a) of the TC Act.
BTA has not pleaded that the discounts provided by Telstra were invalid or illegal (or both) by reason of the TC Act. Nor has BTA specifically pleaded that it is a “person aggrieved” by reason of losses sustained by it in consequence of Telstra providing invalid or illegal discounts.
BTA has not clearly distinguished between losses flowing from
· Telstra’s price discrimination against BTA itself; and
· Telstra’s price discrimination against third parties resulting in losses to BTA which it is entitled to recover as an “aggrieved person” pursuant to s 186 of the TC Act.
BTA does not plead the facts and circumstances demonstrating the causal relationship between the different categories of Telstra's alleged discriminatory conduct and the particular losses said to have been suffered by BTA.
Conclusion
I do not think that BTA should be given leave to amend its pleadings at this point. Thus its motion should be dismissed. As Mr Bathurst accepted was appropriate, BTA should be given a further opportunity to remedy the deficiencies I have identified, provided it does so within a short period. I shall give the parties the opportunity to make submissions concerning the terms on which BTA should be given a further opportunity to amend. The same approach should be taken in relation to BT plc’s motion to amend the Third and Fourth Cross-Claims.
I certify that this and the preceding twenty eight (28) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.
Associate:
Dated: 7 September, 1998
Counsel for the Applicant: Mr G A Palmer QC with Mr G C Lindsay SC, Mr R Margo and Mr L S Einstein Solicitor for the Applicant: Middletons Moore & Bevins. Counsel for the First Respondent Mr F M Douglas QC with Mr W G Muddle and Mr D R Stack Solicitor for the First Respondent Crown Solicitors Office Counsel for the Second Respondent:
Mr T Bathurst QC with Mr A W Street SC and Mr J R J Lockhart
Solicitor for the Second Respondent: Blake Dawson Waldron. Date of Hearing:
29 June 1998 and 31 August 1998
Date of Judgment: 7 September, 1998
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