Centralnic Ltd v WebCentral Group Ltd

[2023] VCC 2374

IN THE COUNTY COURT OF VICTORIA AT MELBOURNE

COMMERCIAL DIVISION

Revised Not Restricted

Suitable for Publication

Case No. CI-22-03121

CENTRALNIC LTD (UK Company Number 4985780)	Plaintiff
v
WEBCENTRAL GROUP LTD (ACN 073 716 793)	Defendant

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JUDGE:	His Honour Judge Rozen
WHEREHELD:	Melbourne
DATE OF HEARING:	30 October – 2 November; 14 November 2023 (Closing Submissions)
DATE OF JUDGMENT:	19 December 2023
CASEMAYBECITEDAS:	CENTRALNIC LTD v WEBCENTRAL GROUP LTD
MEDIUMNEUTRALCITATION:	[2023] VCC 2374

REASONS FOR JUDGMENT

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Subject:  COMMERCIAL LAW

Catchwords:              Disputed services agreement – Interpretation of provisions – “Webhosting services” – Contract construction principles – Commercially rational outcome

Legislation Cited:   –

Cases Cited:Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; Fitzwood Pty v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; The J & P Marlow (No 2) Pty Ltd v Joseph Hayes & Andrew McCabe in their capacity as joint and several liquidators of Peak Invest Pty Ltd (in liq), Five Islands Invest Pty Ltd (in liq), Surry Hills Pub Invest Pty Ltd (in liquidation) and Four By Four Investments Pty Ltd (in liq) [2023] NSWCA 117; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; Banque Brussels Lambert SA v ANI Ltd (1989) 21 NSWLR 502

Judgment:                  Parties to confer on orders

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APPEARANCES:	Counsel	Solicitors
Forthe Plaintiff	Mr R. Heath KC & Mr N. Guenther	BlackBay Lawyers

For the Defendant Mr N. De Young KC & Mr A. Meagher Cornwalls

HIS HONOUR:

What is this Case About?

1The case concerns a financial dispute between two commercial organisations operating in the digital services industry. The plaintiff, CentralNic Ltd, will be referred to in these reasons as CNIC and the defendant, Webcentral Group Ltd, will be referred to as WCG.

2The dispute concerns the provision of certain business services by WCG to CNIC. The background to the dispute is that, in 2019, CNIC purchased the ‘TPP wholesale business’ for the price of $22,000,000 from Arq Group Ltd.1 The ‘Business’ that was purchased by CNIC was the ‘wholesaler and partnering business conducted under the TPP brand’.2 That business included the provision of ‘web hosting services’ which included cloud hosting and email hosting to partners and resellers who then on-sell to end users.

3In summary, these services involve the storage of the data that is needed to operate web sites and email accounts.

4The sale of the TPP wholesale business was effected by a ‘Business Sale Agreement’ (BSA) executed on 19 May 2019.3 WCG sold the TPP ‘Business Assets’ to CNIC.4 A key asset that was sold was known as the ‘Console’. This term is defined in the BSA as ‘the database and software system of that name owned by [Arq Group Limited] which is used to manage the Business and the Contracts.

5The transfer of the TPP business from WCG to CNIC was a protracted process and lasted until approximately March 2023. During this transfer period, WCG

1 During the trial the parties referred to this entity and WCG interchangeably – see, e.g., Outline of Defendant’s Opening Submissions dated 26 October 2023, [5].

2 See the definition of ‘Business’ in the BSA Dictionary at Court Book, 160.

3 Court Book, 119.

4 BSA, clause 2.1 (Court Book, 126). ‘Business Assets’ is defined in the Dictionary (Court Book, 160).

provided certain services to CNIC pursuant to a ‘Transitional Services Agreement’ (TSA) also executed by the parties on 19 May 2019.5

6The structure of these reason is as follows:

(a)In section A the key clauses of the contract in question are reproduced;

(b)Section B outlines the factual background against which the disputed question of contractual construction arose;

(c)In section C, the competing claims of the parties are outlined;

(d)The applicable legal principles are summarised in section D;

(e)In section E, the competing submissions of the parties in relation to the construction question are outlined;

(f)Section F contains the Court’s consideration of those submissions; and

(g)Finally, the Court’s conclusions and orders are presented in section G.

A       The Services Agreement

7On 22 October 2021, after a period of dispute between the parties, they executed a further agreement, the ‘Services Agreement’ (SA).6 After identifying the parties to the SA, the document provides as follows under the heading ‘Background’:

AWebcentral and CentralNic entered into a Transitional Services Agreement on or around 19 May 2019 whereby Webcentral agreed to provide or procure the provision to CentralNic of certain transitional services (Transitional Services Agreement).

BWebcentral and CentralNic have been in dispute on matters relating to the provision of and payment for certain transitional services under the Transitional Services Agreement and have agreed to settle those disputes without any admissions as to liability, on the terms set out in this Agreement, including by

5 Court Book, 190.

6 Court Book, 310.

terminating the Transitional Services Agreement and by Webcentral agreeing to provide, or procure to the provision of, the services set out in this Agreement.

8It is the correct construction of clauses 2.1 and 2.3 of the SA that is at the heart of the dispute before the Court. It is first necessary to set out the key clauses in dispute.

9Clause 2.1 is entitled ‘Services’, the capitalisation having some significance.7 The clause provides:8

Services

(a)  Webcentral must provide (or procure the provision of) each of the services specified in the Service Schedule (Services) to CentralNic to transition the remaining assets of the Business to CentralNic in accordance with the Business Sale Agreement (including the transition of billing and account functions and Console to CentralNic) by the dates agreed for each Service in the Service Schedule. The Service Schedule forms part of this Agreement.

(b)  Webcentral must provide such documentation as is reasonably required to enable CentralNic to operate the Services following transition and is usual for those types of services.

(c)  Webcentral acknowledges that performance of the Services in accordance with this Agreement is critical to the ongoing transition of the operation and control of the Business to CentralNic in accordance with the Business Sale Agreement and nothing in this Agreement impacts on the rights or obligations of either party under the Business Sale Agreement, including the obligation to transfer the remaining assets of the Business to the extent not already transferred to CentralNic.

(d)   Webcentral must not cease to provide or vary a Service or any part of a Service before the end of the relevant Service Term unless otherwise agreed by the parties.

10Clause 2.1(a) provides that ‘Services’ means the services specified in the ‘Service Schedule’. According to the Dictionary in Schedule 1 to the SA, this is in turn a reference to ‘the spreadsheet headed ‘Service Schedule’ and signed for

7 Clause 1.1(a) of the SA provides that ‘a term or expression starting with a Capital letter which is defined in the Dictionary in Schedule 1 (Dictionary), has the meaning given to it in the Dictionary.

8 Underlining added.

identification on behalf of each of Webcentral and CentralNic at the time of execution of this Agreement’.9

11The case proceeded on the agreed basis that, the ‘Service Schedule’ is the single page A3 document that was tendered as exhibit P8.10 For convenience, it is reproduced as part of this judgment as Schedule 1.

12Clause 2.3 provides:

2.3 Cooperation and additional services

(a)  The parties will co-operate and work together in good faith with the objective of completing the Services efficiently and in a timely manner with the joint objectives and priorities of minimising the costs incurred by each party and minimising the disruption to the Customers.

(b) The parties agree to comply with the Project Plan to the extent practicable, provided that any changes to the Project Plan are to be agreed by the Governance Committee in accordance with clause 4.

(c)  If CentralNic requests Webcentral to provide any services which are outside the current scope of the Services and those Services are reasonably required to achieve transition of operation and control of the Business to CentralNic and Webcentral is able to provide them, then Webcentral must perform those Services, and CentralNic must reimburse Webcentral for the reasonable additional charges, costs and expenses incurred by Webcentral (or any Webcentral Group Member) and notified in writing in advance to CentralNic in connection with providing such services.

(d)   Webcentral agrees to provide additional services as reasonably requested by CentralNic in relation to the implementation of .AU Direct. The parties will negotiate in good faith to agree reasonable commercial terms in relation to the provision of any such services having regard to the scope of the request and the amount of effort involved which will be documented in writing.

(e)  Upon request by Webcentral and with the consent of CentralNic (such consent not to be unreasonably withheld or delayed where such consent is necessary to enable Webcentral to perform its obligations), CentralNic will allow Webcentral (and

9 Court Book, 333.

10 Exhibit P8 is an expanded version of the same document which appears at Court Book, 337.

Webcentral's Personnel) to access CentralNic's premises, systems, equipment or data as reasonably required to enable Webcentral to perform its obligations under this Agreement, under the supervision of CentralNic, and provided Webcentral complies with CentralNic's reasonable security, confidentiality, health and safety, and office conduct policies and procedures. Webcentral shall not be liable for any breach of this Agreement or failure to perform its obligations under this Agreement if such breach or failure is caused by CentralNic unreasonably refusing to grant access to Webcentral to the CentralNic's premises, systems, where equipment or data, Webcentral is otherwise complying with the obligations in this clause.

B       Factual Background

13As with most contractual disputes, the one before the Court emerged from a period of disagreement between the parties about their respective rights and responsibilities. To place their disagreement in its proper context, it is necessary to outline the terms of their disagreement. The purpose of so doing is not to give any weight to their respective subjective views about the proper construction of the contract.11 That evidence is inadmissible in respect of the proper meaning which is to be objectively determined.12 The purpose is merely to explain the factual setting in which the dispute emerged.

14As nearly all of the relevant communications were in the form of emails, there is not a great deal of dispute about the circumstances that led the parties to this court.

15As noted earlier in these reasons, the ‘Background’ section of the SA states that the parties entered into the SA to resolve disputes they had ‘relating to the provision of and payment for certain services under the [TSA]…’.

16In brief summary, those disputes arose in February 2021 when WCG significantly increased the fees it was charging CNIC for the services it was providing pursuant

11 By agreement, the parties adduced a deal of evidence that falls into this category. I accepted that it was admissible as part of the background and also as going to the plaintiff’s unconscionable conduct case. Because it is unnecessary to deal with that aspect of the case, there is minimal reference to the evidence of the witnesses in the judgment.

12 See [55]-[63] below.

to the TSA. This in turn resulted from a new system that WCG was employing to calculate the fees for those services.

17The SA was agreed between the parties on 22 October 2021 to resolve those disputes under the TSA.

18The dispute about the pricing of services supplied under the TSA between these parties, and the way that dispute was resolved (by making a new agreement) are relevant events, circumstances and things external to the contract which were known to the parties at the time they made the SA. They assist the court in understanding the commercial purpose or objects of the SA.13

19Between October 2021 and May 2022, WCG provided certain services to CNIC and invoiced CNIC for those services on a monthly basis.

20On 31 May 2022, Mr Demase of WCG wrote to Mr Hosking of CNIC by email.14 The subject was ‘CNIC Ongoing Hosting Charges’:

Dear Graeme

Under the Services Agreement we entered on 22 October 2021, webcentral agreed to provide continuing services to CNIC, principally being transition of the Console into the Cloud and under the operation of CNIC. These services have now been completed.

Webcentral currently hosts various other services for CNIC and its customers on Webcentral infrastructure. We have, on a number of occasions, reminded CNIC that it will need to migrate these services and its customers off Webcentral infrastructure to its own infrastructure. This was discussed most recently in our meeting on Wednesday 27 April but no specific dates have been supplied as to when these migrations will be completed. This is a friendly reminder that if CNIC would like us to continue to provide

13 Cf Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37, [49]-[50] (‘Mount Bruce Mining’).

14 Court Book, 2655.

these services, we will need CNIC to pay for them. We will continue to charge Management Fees as per usual.

Unless we agree to an alternative arrangement, we propose to charge market rates for the hosting services.

Webcentral is open to offering a discounted commercial rate for a longer commitment from CNIC. Please contact me if you would like to discuss this. In the meantime, we will send you an account for June 2022 (commencing tomorrow on 1 June) which is based on market rates.

Kimd regards Chris Demase

Executive General Manager - Operations

21On 1 June 2022, Mr Demase again emailed Mr Hosking15:

Hi Graeme

Further to my e-mail to you yesterday, I attach the Schedule of Hosting Services which sets out the rates that will apply to the supply of hosting services from 1 June 2022 onwards and our invoice for the month of June 2022.

A gentle reminder that the hosting charges are levied in addition to the management fees.

Kind regards Chris Demase

Executive General Manager - Operations

22The email attached a ‘Schedule of Hosting Services’.16 The Schedule included a fee for Cloud Hosting broken down into a ‘Product Price’ of $10.00 and a ‘Management Fee’ of $3.00. The same prices were listed for ‘SQL Database Hosting’. The respective process for ‘POP/IMAP Inbox Hosting’ were $2.80 and

$0.20 respectively.

23I interpolate at this point that the ‘Management Fees’ listed in this Schedule correspond with the fees in the Service Schedule to the SA for the three services described.17 The ‘Product Prices’ have no equivalent in the service Schedule to the SA. I will return to discuss the significance of this presently.

24The 1 June 2022 email from Mr Demase of WCG also attached an invoice seeking payment of US$507,942.57. Of that amount, US$153,413.00 related to Cloud Hosting; US$65,949.00 was for SQL database hosting and US$235,611 related to POP/IMAP mail.

25On 2 June 2022, Mr Hosking emailed Mr Demase18:

Dear Chris,

I acknowledge receipt of your emails of 31st May and 1st June. These came as a complete surprise, given we have been discussing the legacy products for several months with you, without any mention of a significant cost increase from your side for continued provision of the services.

We have repeatedly stated our intent to migrate all services out of Webcentral by the end of 2022 (excluding Windows Shared Hosting, which is covered under a separate 3-year agreement with you). Our finalised plans to do so have been contingent on completion of the Console migration (i.e. after June 2022), which is a point you have verbally accepted whenever we have discussed this in our executive meetings.

16 Court Book, 341.

17 The fees are in column G of cell 32 in the Schedule.

Your proposed revised rates represent an enormous increase on what we budgeted to pay to Webcentral for the remainder of this year. Because you have presented these with no notice or discussion, you will understand that these need to be tabled by our Group Managing Director Don Baladasan for approval by the CentralNic plc board in London, as your invoice represents a material over-budget cost that can only be signed off by them. As London is today starting a four day holiday to celebrate the Platinum Jubilee, and the CentraNic Plc board does not meet until later this month, there is no practical likelihood that your invoice could be legally paid by 7th June as requested.

While we are waiting for London to be available to respond, we should meet to discuss this matter. In order to fully brief the Board on the substance behind your new invoice I would like to understand

1 Your reference point for “market rates”, as your charges now seem well above what a retail customer would pay, let alone a wholesale customer at volume such as CentralNic. As there is no increased cost to you from continuing to provide support for our Cloud and POP email services, I would like to understand the basis of your thinking for proposing an effective 10x cost increase.

2 The major differences (increases) in the volumes (units) you are basing these charges upon, compared to all prior invoices. I attach a simple comparison between the last invoice from you (April) with your latest one which illustrates this point.

3 Why CNIC is being charged for services we no longer receive from you with regard to Microsoft, as all Microsoft accounts have now been migrated to our partner TechData.

I have asked my team to complete an urgent review of our Cloud & POP client accounts, as it appears that there are many obsolete records here which are overstating the total volume of services required to be provided by Webcentral. We should be able to provide you with details on the accounts and services to delete early next week.

May I remind you that Webcentral s obligations under our Service agreement of 22nd October 2021 are not complete until full transfer of the operating system and client database from your premises into our AWS infrastructure. We expect this transfer to occur on 18th June, as planned with your technical team for some months now, and would appreciate your confirmation that this will continue to proceed without delay.

I look forward to discussing this matter with you shortly. Kind regards,

Graeme

26Mr Demase responded to that email on 6 June 202319:

Hi Graeme

We have, on numerous occasions, asked CNIC to provide a migration plan and sought a firm commitment from you to complete full migration off Webcentral platforms in a timely manner.

As at 6th June 2022, CNIC has not completed full migration off Webcentral platforms, and as such, Webcentral supplies the hosting resources that enables CNIC to supply its products/services to its own customers under the TPPW brand, at no cost to CNIC. Webcentral has no intention of supporting your customers and hosting their services at no cost.

Now that the split of CNIC s instance of the Console into the Cloud is complete, we are not obligated to host CNIC s customers and their services on our infrastructure CNIC needs to begin using its own resources and infrastructure support its customers Webcentral is happy to supply hosting services to CNIC but will only do so on a commercial basis.

19 Court Book, 346 (emphasis added).

While Webcentral recognises that CNIC needs time to review the service charges, we request that you review the charges promptly as Webcentral is drawing upon its own resources and supplying its own infrastructure to the benefit of CNIC and its customers

Regarding your points below:

1 As you can see in the table below, our proposed pricing is in line with current market rates, especially with respect to POP / IMAP Email Hosting:

Other Providers:

Company:	Mailbox     Per     Month (AUD):	URL:
ApexHost	from $3 99	apexhost com au/email- hosting php
Australian Websites	from $3 00	com/emailhosting html
ServersAuRUs	from $4 50	au/premium-web-and-email- hosting/premium-dedicated- australian-emailhosting/
CrazyDomainz	from $5 50	crazydomains     com au/email-hosting/-
Register Com	from $4 92 USD	register     com/email- account/business-email
ScalaHosting	from $2 95 USD	com/business-email-hosting html#5f50ee0e05dfe&data1=trdpro- au-5298436695701635000
IONOS	from $1 00 USD	solutions/create-an-email- address#plans

1 We have reviewed your comparison of amounts charged Regarding the volume of POP/IMAP E-Mail and Cloud Hosting services, having reviewed the TPPW services on our infrastructure platforms as this information is no longer readily available to us via the Console (TPPW customers have been removed from the Webcentral Console), we have determined that the volume of active TPPW accounts had been underquoted

As regards SQL DBs, Webcentral does not intend to provide this service for free to CNIC and its customers

Webcentral is more than happy to provide CNIC with the details of the email accounts, hosting services and DBs that it currently hosts on its own infrastructure

If, upon review, CNIC identifies non-active services, Webcentral is more than happy to cancel them immediately and will not charge further for them

1 Webcentral continues to incur licensing costs for TPPW customers that are still within its Microsoft CSP If CNIC advises that no further TPP customers are within Webcentral s CSP, we will cancel all of these services effective from Monday, 6 June 2022 at 5pm and will adjust the June Invoice to reflect the cancellations

As a further matter, Webcentral does not intend to impede CNIC from migrating its Console to AWS As advised previously, we believe we will be able to supply the direct connection requested to CNIC on or around Wednesday, 8 June as per the most up to date information we have from our network engineers

Kind Regards Chris Demase

Executive General Manager – Operations

27Mr Hosking replied later that same day:20

Hi Chris,

I m (sic) surprised about your comment that you are hosting our customers' services “at no cost” Since the beginning of the TSA CentralNic has paid fees to Webcentral to cover the cost of providing these specific Cloud & POP services, which amounts to many tens of thousands of AUD per month

On the 3 points of discussion:

20 Court Book, 345 (emphasis added).

1  Thank you for providing some detail on your market comparisons for pricing, I will pass this onto our team for comment and will revert to you shortly

2  Thank you for your offer to provide details of the email accounts, hosting services and databases that Webcentral currently hosts for TPPW clients Please send these to us ASAP - preferably in Excel or CSV format - and we can then advise you of which services can be removed as no longer required

3   Finally, with regards to Microsoft accounts and products still recorded for TPPW clients under your CSP, please do not delete these today, but rather also provide details of these accounts so that we can confirm they are no longer required, or if they are, arrange to migrate them immediately

Many thanks, Graeme

28On 7 June 2022, Mr Demase once again emailed Mr Hosking21:

Hi Graeme

Thank you for your email yesterday Referring to your points:

•No response required

•Details of the email accounts, hosting services and databases that Webcentral currently hosts for TPPW clients are attached in Excel format as requested

•We will not delete the Microsoft accounts today Please let us know by 5 00 pm EST Tuesday 14 June if any of these services are still active Otherwise we will delete them

This applies to any other services we are currently supplying They are all listed in the spreadsheet Unless you specify services that you wish to retain by 5 00 pm EST Tuesday 14 June we will delete them next Wednesday 15 June

The direct connect to your AWS account is available as at today You will need to complete the AWS end on the incoming VIF connection

For the record, we consider we have now complied with all of our obligations under the Service Agreement of 22 October 2021

Kind Regards Chris Demase

Executive General Manager – Operations

29After further correspondence between the parties, Webcentral issued a revised June invoice to CNIC under cover of an email dated 20 June 2022.22 This sought a revised payment of AU$ 473,753.50.23

30On 29 June 2022, Mr Hosking again emailed Mr Demase24:

Dear Chris,

Thank you for sending this Service Order - I will write to you separately on this point.

The main issue outstanding between us continues to be the new rates for Cloud Hosting & email services first proposed by you on 1st June. CentralNic does not accept that these are in any way commercially viable, nor are they appropriate given the nature of our prior relationship with Webcentral.

in the spirit of that relationship, we remain keen to discuss this with you directly. To that end CentralNic’s Group Managing Director Don Baladasan is in Australia this week

22 Court Book, 344

23 Court Book, 348.

to discuss this point, and we will be available to meet with you any time on the morning of Thursday 30th June or any time on Friday 1st July. in Melbourne.

Please let me know your availability, so we may discuss and resolve this matter as soon as possible.

Yours sincerely,

31Mr Hosking received an email from Mr Glen Dymond, Chief Financial Officer and Company Secretary, WCG on 29 June 202225:

Hi Graeme

Do you have any feedback on the amended May invoice?

I am still waiting for information for the June invoice and should be able to provide an amended invoice tomorrow

Just a heads up also that we will be issuing a pending suspension notice for the May and prior invoices – this is our standard process which I need to follow

Any questions, please call or email Kind regards

Glen

32Mr Dymond again emailed Mr Hosking on 29 June 202226:

Reminder Notice ~ Outstanding Account

~ Pending Suspension~ Customer ID: CentralNic

25 Court Book, 356.

Total amount owing: $636,207

Hi,

Unfortunately Webcentral Ltd is still yet to receive payment for your outstanding invoices.

If payment is not received by close of business Monday 4^th July 2022 your services will be suspended, without any further notice.

Please note that if your services are suspended, it can take up to 5          business days to turn your services on again after the payment has been received.

If you could please either make payment or contact us to discuss when payment will be made, it would be much appreciated.

Kind regards Glen Dymond

33Mr Hosking replied to these emails on 30 June 202227:

Dear Glen,

As we have reconciled the Oct-May details you provided on 27th June, I have today instructed our Finance team to pay the outstanding $162,452 due to Webcentral for the May and earlier invoices back to and including October 2021 I will forward confirmation of this payment made to you shortly once it has been released by our bank

Your Suspension Notice received last night refers to an outstanding balance which includes the disputed June invoice INV-034, which you have said below you are amending I have not yet seen this revised version

Would you please confirm by return that you will cancel this suspension notice immediately on the basis of this payment made today

I look forward to your response on this questions, by 3:30 pm today please Your sincerely,

Graeme

34Shortly after this, Mr Dymond replied28:

Hi Graeme

Thanks very much for your confirmation of payment, much appreciated

We will provide the revised June invoice to you shortly and I confirm we will now hold off on any suspension activities

Could you please confirm payment date for the June invoice once you receive the revised version?

Thanks and regards Glen

35Later that day, Mr Hosking sent an email to Mr Demase and Mr Michael Wilton,

General Counsel, WCG29:

Dear Michael & Chris,

When you publish a client-specific service price increase of over 1000%, we believe you should be open to a direct discussion, especially when your client asks for it. I know that CentralNic wouldn’t feel good about refusing to engage in this way with any of our clients.

28 Court Book, 361.

You asked for some evidence on market rates to justify why you should engage with us. I therefore attach a copy of a simple spreadsheet which provides details of a sample of providers across US and AU markets. You’ll see that the email providers are the 7 quoted by Chris in his email of 6th June. A click through to each provider website quickly reveals service options for email clients which are mostly far lower than the $3 per email account per month quoted by you.

I have done the same kind of analysis for the hosting service, and again based on some simple googling quickly found providers who do not charge extra for databases (as WCG did not either, before this June invoice), and overall at prices much lower than the $13 per month per service proposed by Webcentral.

The prices on the attached sheet are not wholesale, they are retail, prior to any volume negotiations. We would expect a high-volume client like CentralNic would achieve substantial discounts on these prices, of perhaps 10-20% or more.

We would be happy to talk about these results and options we may have to adjust our historical, TSA based pricing from WCG. We are not ignoring your need to achieve a commercial return. However, the level of pricing you have proposed effectively charges TPP its entire annual profit for this product every month, which reinforces the point that the rates you have quoted are not in line with any market pricing we can see. As you collected the entire fee from our clients on our behalf up until November 2021, you can quickly validate this point.

We have advised you for some time now that we intended to migrate these clients and services away from WCG by the end of 2022, following the Console migration. We sent a number of emails to WCG personnel on this point, as well as held discussions on this topic at the Executive level. This included our face-to-face meeting in your offices in March this year where you (Chris) brought the topic up - but did not mention your intent to change any terms or conditions for this service. I told you then that our intent was to be gone from WCG servers by the end of 2022, and that has been the basis for all of

our planning. Following your recent actions we have decided to accelerate that timeline if at all possible.

We remain keen to discuss these points with you directly, and await your early response.

Yours sincerely, Graeme

36On 1 July 2022, Mr Dymond emailed Mr Hosking attaching a further tax invoice for

June 202230:

Hi Graeme

Please see amended June 2022 invoice with the following adjustments:

1  Whilst the unfound services are in the system, we have agreed to remove them as summarised below:

a Cloud Hosting - 454

b Database hosting - 147

c Mailboxes - 850

2  The Windows hosting services have been separated and charged at the agreed rate of $3 00 per licence

3  We have also carried out a further analysis of our platform to detail the Alias that were deleted during June 2022 Please see attached excel file The total found was actually 29,047, however due to them not being cancelled prior to the start of June these will be removed for the July 2022 invoice

Kind regards

30 Court Book, 367-8.

Glen

37A further email was sent on 1 July 2022 by Ms Elise Woolcock of WCG to Ms Karen Chan and Ms Katrina Roetteler of CNIC attaching a tax invoice for July 202231:

Hi Kat and Karen

Please find the July invoice attached.

I am leaving the organisation on the 15th July, so going forward could you please direct any billing queries to Nathan Legg ([email protected]).

Cheers

31 Court Book, 383; 370; 369.

Elise Woolcock

Commercial Finance Manager

38On 5 July 2022, WCG partially suspended the Hosting services it was providing to CNIC. That suspension was lifted on 7 July 2022.

39WCG again partially suspended the Hosting services it was providing to CNIC on 15 July 2022.

40CNIC paid WCG $468,650.60 as payment of the Third June Invoice. The payment was made under protest pursuant to clause 5.3 of the SA.32 The disputed portion of the payment was $413,183.76.

41Under threat of further suspensions, CNIC paid the July invoice in full with the disputed portion being $307,752.06.

32 Clause 5.3 relevantly provides that ‘If CentralNic disputes all or part of any invoice received from Webcentral, CentralNic may withhold payment of the amount in dispute and must pay the undisputed portion when due’ – see Court Book, 319.

42On 8 August 2022, this Court granted an interlocutory injunction restraining WCG from suspending any of the Hosting Services, pending determination of this proceeding.33

43In the period August 2022 – March 2023, CNIC only paid the undisputed portion of the invoices it received from WCG.

44The significant features of this correspondence may be summarised as follows:

(a)In late May 2022, WCG informed CNIC that it would henceforth start charging CNIC for Webhosting charges which it explained it had hitherto been providing to CNIC without charge;

(b)The amounts that WCG charged CNIC for these services were far in excess of the agreed amounts in the Service Schedule.

(c)WCG explained that it was charging at a reasonable commercial rate for services that were not covered by the Service Schedule.

(d)CNIC’s response was that the charges represented a 1000% increase on what it had previously been paying.

(e)Under protest, CNIC paid WCG the full amount of the invoice in the months June and July 2022.

(f)From August 2022 onwards, WCG continued to invoice CNIC at what WCG contended was a reasonable rate under the SA.

(g)Having the benefit of the interlocutory injunction, CNIC only paid that part of those invoices that it considered appropriate.

33 Orders of her Honour Judge Burchell dated 8 August 2022, [1].

C       The Competing Claims

45CNIC’s case, in summary, and only so far as it is relevant to the determination of Issue No 1, is that, by providing the three invoices in June, the Second July invoice and the August invoice, WCG contravened several clauses of the SA.34 However, it seeks no relief in respect of these claims.

46CNIC also alleges that, by twice suspending the hosting services WCG was providing to CNIC, WCG contravened a number of clauses of the SA.35 It seeks damages including for loss of use of moneys in respect of these contraventions.

47CNIC also seeks a declaration that ‘the disputed portion of each invoice issued for the months August 2022 to March 2023 is not due and payable by CentralNic, DDPL or any other member of the CentralNic Group’.

48WCG defends the case on the basis that it did not contravene the SA as alleged by CNIC.

49WCG counterclaims that, by failing to pay the full amount of the August 2022 – March 2023 invoices, CNIC failed to pay a reasonable sum for the ‘hosting and management services’ it received from WCG.36

50It alleges that that breach has caused it to suffer loss and damage.

51In summary:

(a)CNIC’s claim in this proceeding is the difference between what it paid WCG in respect of the June and July invoices and the amount it did not dispute, being $720,935.82.

34 Further Amended Statement of Claim dated 30 October 2023, paras 26, 34, 46, 66 and 88.

35 Ibid, [51] and [82].

36 Defence and Counterclaim dated 4 May 2023, para 111.

(b)WCG resists this claim and counterclaims in the amount of $843,676 being the difference between what it invoiced CNIC for and what CNIC actually paid.

52Prior to the commencement of the trial, the parties agreed37 that the following questions arise in this case:

Services Agreement

1)On a proper construction of the services agreement dated 22 October 2021 (Services Agreement) between the plaintiff (CNIC) and the defendant (WCG), was the hosting by WCG on its infrastructure (servers) of the date/software required for the provision of “Webhosting Services” to CNIC’s customers (Hosting):

a)within (as CNIC contends) or

b)outside (as WCG contends);

the scope of services as defined in clause 2.1(a) of the Services Agreement?

Quantum Meruit/reasonable charges

2)If the answer to paragraph (1) is that the Hosting was outside the scope of the Services, is WCG entitled to payment by CNIC of reasonable charges for Hosting pursuant to clause 2.3(c) of the Services Agreement and/or quantum meruit? If so, what is the amount of the fair and reasonable charges?

September 2021 agreement

3)Was the September 2021 Agreement as alleged by CNIC in the Amended Statement of Claim established and legally binding on the parties?

4)If the answer to paragraph (3) is yes, is CNIC estopped from relying on the September 2021 agreement (as alleged by WCG)?

37 Agreed Statement of Issues provided to the Court on 30 October 2023.

Statutory unconscionable conduct

5)Did WCG contravene s 21 of the ACL as alleged by CNIC in the Amended Statement of Claim?

Loss and damage/quantum

6)Having regard to the answers to paragraphs (1) to (5) above, what is the amount owing as between WCG and CNIC?

53In the course of the trial, it was agreed by the parties that issues 3 and 4 concerning the alleged September 2021 Agreement did not arise for resolution.

54It was also agreed that questions 2 and 5 only arise if the answer to question 1 is resolved against CNIC, i.e. if the court concludes that the Hosting was outside clause 2.1(a) of the Services agreement.

D       Legal Principles

55Before addressing the first of the agreed issues for resolution, it is convenient to start with a statement of the applicable legal principles to be applied by a court when called upon to construe a commercial agreement. Those principles do not appear to be in dispute.

56In Electricity Generation Corporation v Woodside Energy Ltd,38 the plurality in the High Court stated the following general propositions:

... this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured

by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties ... intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”³⁹

57In the more recent case of Mount Bruce Mining, French CJ, Nettle and Gordon JJ stated:

The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis

of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals

Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.

Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”⁴⁰

58Mr De Young KC, who appeared with Mr Meagher for WCG, submitted on behalf of the defendant that the Court should be wary of construing the SA on the basis of what would have been ‘commercially unlikely’ or ‘commercially unrealistic’, a course urged by Mr Heath on behalf of the plaintiff. In both of the extracted passages the Court referred to the generally accepted principle that a commercial contract should be construed in a manner that avoids working commercial inconvenience. Put the other way around, that a court should construe a contract in a manner that achieves commercial sense.

59As often occurs in such cases, both parties argued that their preferred construction was one which achieved a commercial outcome. Mr Heath KC, who appeared with Mr Guenther for CNIC, emphasised that the construction of the SA posited by WCG would be one that would have the opposite effect. He submitted that it was commercially unlikely that such an agreement would have ben reached.

60Mr De Young KC relied in this respect on the observations of Bell CJ of the New South Wales Court of Appeal in Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd41:

Caution is required when resort is had … to assertions of “commercially unlikely consequences” as a reason for departing from the language parties have in fact used. “Business common-sense” is also a topic upon which minds may differ, and what a lawyer may surmise to amount to business common-sense may be far removed from the true position, whether because of a general lack of understanding of commerce, or because of an information deficit as to the commercial positions of both parties and their larger commercial concerns. Indeed, as Spigelman CJ observed writing extra- judicially, “when the matter comes to the level of litigation, each party remains convinced that ‘a business like’ interpretation or ‘business common-sense’ happens to coincide with its own commercial interests”⁴²

61In a similar vein, Finkelstein J warned in the case of Fitzwood Pty v Unique Goal Pty Ltd (in liq),43 that ‘… a judge must be cautious when there is an attempt to sway a case by reference to commercial good sense, because views may easily differ on what is good sense, and in some cases a party is willing to bargain away a good sense result on one aspect of a contract because of a perceived advantage in another’.44

62While I have borne these warnings in mind, it remains the task of this court, on the basis of the High Court authority cited, to construe the terms of the SA by reference

41 (2019) 101 NSWLR 679.

42 Ibid, [58] (citations omitted).

43 [2001] FCA 1628.

to what a ‘reasonable businessperson would have understood those terms to mean’.45 That process of construction requires the court, where possible, to identify the ‘commercial purpose’ that the parties were seeking to achieve and ‘so far as is reasonably possible, … to construe the terms of the contract to achieve that purpose and produce a commercial result’.46

63As the plurality explained in the High Court case of Ecosse, in cases such as the present, ‘the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense’. Further, ‘it goes without saying that this requires that the construction placed on [the clause] be consistent with the commercial object of the agreement’.47 Finally, as Nettle J (in dissent as to the result) explained in the same case, commercial reality ‘demands a construction which yields to what business common-sense requires’.48

E       Issue Number One

64With these general principles and that factual background in mind, I turn to the first question that the parties have presented to the court for resolution.

65Was the hosting by WCG on its infrastructure (servers) of the date/software required for the provision of “Webhosting Services” to CNIC’s customers (Hosting): (a) within (as CNIC contends); or outside (as WCG contends) the scope of services as defined in clause 2.1(a) of the Services Agreement?

45 Woodside (n 38) [35]; Mount Bruce (n 13).

46 The J & P Marlow (No 2) Pty Ltd v Joseph Hayes & Andrew McCabe in their capacity as joint and several liquidators of Peak Invest Pty Ltd (in liq), Five Islands Invest Pty Ltd (in liq), Surry Hills Pub Invest Pty Ltd (in liquidation) and Four By Four Investments Pty Ltd (in liq) [2023] NSWCA 117, [98] (emphasis added).

47 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12, [17]; see also, [23] and [26] (Kiefel, Bell and Gordon JJ); [52] and [57] (Gageler J) (‘Ecosse’).

E.1Submissions of the parties

66The submissions of the parties in relation to Issue 1 refer extensively to the wording of the Service Schedule as incorporated into clause 2.1(a) of the SA. As noted, the Schedule is extracted at Schedule 1 to these reasons.

E.1.1Submissions of CNIC

67CNIC submits that the plain and ordinary meaning of the text of the Schedule ‘is that WCG was required to provide the webhosting services as required by CentralNic and was entitled to charge the rates set out in the Service Schedule for the provision of those services until those webhosting services were no longer required due to the relevant data having been transitioned off WCG’s infrastructure’.49

68CNIC refers to:

(a)the description of the Service in column A of the schedule: ‘Webhosting services’;

(b)the absence of any reference to ‘management services’;

(c)the description in Column C which provides particulars of the ‘webhosting services’ being cloud hosting, cloud resource hosting and POP/IMAP mail;

(d)the ‘remaining tasks’ as identified in column D including ‘maintenance of hosting infrastructure and software’ and ‘provision, management and renewal of hosting products/services’.

69CNIC submits that its contention that webhosting is a service within clause 2.1(a) is supported by a consideration of the ‘Business’ it purchased from WCG. That ‘Business’ included the ‘Contracts’.50 CNIC was purchasing the customers of the Business and those customers used the Business’s services for cloud and mailbox

49 CentralNic’s Closing Submissions dated 10 November 2023, [20].

hosting with their data being stored on WCG’s servers. Unless and until that data could be migrated to a different location, ‘it was essential for WCG’s servers to remain available to CentralNic or else those customers who CentralNic had purchased would have their services interrupted’.51

70Finally, CNIC submits that its preferred construction is consistent with the object and purposes of the SA. This argument is made in part by reference to the earlier TSA and the mutual desire of the parties to resolve the disputes that had arisen under the TSA including disputes about the provision of hosting services.52

71CNIC submits that:

One would therefore expect that the SA was designed to be comprehensive and not to leave an important matter such as the provision of webhosting services to be dealt with under a separate arrangement. It is most unlikely that the parties intended in the SA to cover only some of the services that WCG was providing to CentralNic which CentralNic needed in fact to maintain the value of the purchased Business (as the value of the Contracts would be lost if WCG ceased providing the webhosting services before CentralNic transitioned those customers to its chosen replacement infrastructure)⁵³

72CNIC submits that, on WCG’s preferred construction, critical services would be ‘outside the ambit of the SA, being services that WCG had supplied since the commencement of the TSA’.54

73In summary, CNIC contends that WCG’s preferred construction would produce results that are ‘uncommercial, unreasonable and inconvenient’.55

51 CentralNic’s Closing Submissions dated 10 November 2023, [16].

52 Ibid, [29]-[33].

53 Ibid, [34].

54 Ibid, [35].

E.1.2WCG’s submissions

74WCG also places much emphasis on the Schedule. It submits that it is clear from an examination of cell 32 in the Service Schedule that ‘webhosting services’ is limited to ‘managing the provision of TPP’s Webhosting services to its customers on behalf of CNIC’.56 WCG is not obliged under clause 2.1(a) to provide Hosting to CNIC.

75WCG emphasised column D - ‘remaining tasks’. This, it submitted is where the parties identified the obligations of WCG under clause 2.1(a). WCG noted that the first ‘task’ is the ‘maintenance of hosting infrastructure and software’, a ‘task’ that does not include the ‘provision’ of hosting infrastructure and software. WCG argues that if CNIC’s construction is correct, this bullet point would be left with no work to do ‘as such services would necessarily incorporate the maintenance of hosting infrastructure and software’.57

76WCG further submits that clause 2.1(a) sets out what it characterises as the ‘limited purpose of the services’ to be provided by WCG under that clause.58 That purpose is to ‘transition the remaining assets of the Business to CentralNic’.

77WCG contrasts the purpose identified in clause 2.1(a) with that identified in clause 2.3(c). In the latter clause, the parties agreed that ‘services outside the scope of the Services’ are to be provided ‘to achieve transition of operation and control of the Business’. WCG contends that ‘this is a wider purpose than the stated purpose of the Services under clause 2.1(a)’.59

78WCG’s response to the ‘commercially irrational’ submission advanced by CNIC is to deride it as a ‘bootstraps argument’ and to urge the court to treat it ‘with caution’.60 WCG submits that it cannot be concluded it was commercially absurd

56 Outline of Defendant’s Closing Submissions dated 10 November 2023, [32].

57 Ibid, [30](c).

58 Ibid, [21](b) (emphasis in original).

59 Ibid, [21](e).

60 Ibid, [35].

for the parties to have agreed to leave Hosting outside the Services in clause 2.1(a) and for the provision of such services to be governed by clause 2.3(c) as ‘additional services’.61

F       Consideration

79The parties are at loggerheads about the nature of the service that clause 2.1(a) of the SA obliged WCG to provide to CNIC. CNIC argues that WCG was obliged to provide it with ‘webhosting services’ and that CNIC was obliged to pay WCG for that service in accordance with the fees specified in column G. WCG argues that it was only obliged to provide ‘management services’ to CNIC under clause 2.1(a) and the fees in column G related to the provision of those services. If CNIC also wanted WCG to provide it with webhosting services, they could be provided under clause 2.3(c) and the fees that CNIC was obliged to pay were essentially at large but governed by the requirement that they be reasonable.

80The dispute therefore raises the question of the proper construction of clause 2.1(a) of the SA.

81It is necessary to refer to the text, the background and the context.

F.1Text

82The starting point is the text of clause 2.1 of the SA. The clause is reproduced at

[9] above.

83Clause 2.1(a) provides that ‘Services’ means the services specified in the ‘Service Schedule’. According to the Dictionary in Schedule 1 to the SA, this is in turn a reference to ‘the spreadsheet headed ‘Service Schedule’ and signed for identification on behalf of each of Webcentral and CentralNic at the time of execution of this Agreement’.62

61 Outline of Defendant’s Closing Submissions dated 10 November 2023, [36].

62 Court Book, 333.

84The case proceeded on the agreed basis that, the ‘Service Schedule’ is the single page A3 document that was tendered as exhibit P8.63

85There is no dispute between the parties that WCG provided CNIC with Hosting Services during the relevant period in dispute although WCG seeks to characterise those services as ‘Hosting and Management Services’.

86What is in dispute is whether those services were provided under clause 2.1 of the SA (as CNIC contends) or under clause 2.3 of the SA (as WCG contends). The practical difference between those contentions is that, if CNIC is correct, it is only required to pay the amounts prescribed in the Schedule for the services. If WCG is correct, it was able to charge a ‘reasonable’ amount for providing the services.

87The parties agree that the choice facing the court is binary – the services were either provided under clause 2.1 or clause 2.3.

88In their final submissions, both parties referred to clause 2.3 as part of the contractual context in which clause 2.1 appears.

89The ‘obligation’ imposed on WCG by clause 2.1(a) is ‘to provide (or procure the provision of) each of the services specified in the Service Schedule (Services)’. The term ‘Services’ is defined in the dictionary at Schedule 1 as ‘the services listed and described in the Service Schedule’.

90Clause 2.3 by contrast is concerned with ‘additional services’. These are, by definition, not prescribed. The parties clearly considered that CNIC may require WCG to provide other services ‘which are outside the current scope of the (clause 2.1) Services’.

91The operation of clause 2.3(c) may be summarised as follows:

63 Exhibit P8 is an expanded version of the same document which appears at Court Book, 337.

(a)If CNIC requests WCG to provide a service outside of those covered by clause 2.1 which is reasonably required to achieve transition of operation and control of the Business to CNIC; and

(b)WCG is able to provide that service; then

(c)WCG must perform the service; and

(d)CNIC must reimburse WCG for the reasonable additional charges, costs and expenses incurred by WCG and notified in writing in advance to CNIC in connection with providing the service.

92The starting point is of course the text of clause 2.1(a). Clause 2.1(a) obliges WCG to provide each of the services ‘specified’ in the Service Schedule. According to the Macquarie Dictionary, ‘specified’ means ‘mentioned or named specifically or definitely’.64

93The heading of column A in the Service Schedule is ‘service’. A number of services are specified in the various rows of column A. Within column A there is a sub- heading – ‘Other Managed Services & Charges’. The first ‘service’ specified under that heading is ‘Domain Names’. The second, which is at the heart of this dispute, is ‘Webhosting Services’.

94Nowhere does the Schedule specify ‘management services’.

95Thus a plain reading of this aspect of the text supports CNIC’s case. However, as noted earlier in these reasons, WCG submits that this is simplistic and pays insufficient regard to the remainder of the Schedule. It is therefore necessary to consider the other columns.

96Column B is entitled ‘Status’ and the status of cell 32 is ‘execution’. This does not advance the issues in the case.

64 Macquarie Dictionary (online at 15 December 2023) ‘specify’.

97Column C of the schedule is headed ‘Description of Project’. The relevant entry for cell 32 states ‘Webhosting services for four types of hosting and ‘POP/IMAP/mail’. This appears to be a breakdown of the specific types of webhosting services and supports the plaintiff’s construction of the Schedule.

98As noted, WCG placed considerable emphasis on column D – ‘remaining tasks’. It submitted that this is where the obligations imposed on WCG are ‘specified’. It drew attention to the wording of the first dot point which refers to the ‘maintenance’ but not the ‘provision’ of hosting infrastructure. However, the second dot point refers to the ‘provision, etc’ of ‘hosting products/services’. The drafting is somewhat inconsistent. I consider that column D is a neutral consideration.

99Column E – ‘TSA Schedule 2 Mapping’ appears to be of little relevance.

100Column F – ‘End Date’ is ‘N/A’ in cell 32. CNIC submits that this supports its construction that WCG was required under the SA to provide webhosting services for as long as necessary. I accept this submission.

101Finally, column G – ‘New Commercial Costings’ supports both arguments to a certain extent. It identifies the ‘management fees’ that CNIC was obliged to pay WCG for the services listed in column C.

102On balance, the text of the Schedule is broadly consistent with a construction of clause 2.1(a) under which webhosting services as identified in column A are required to be provided by WCG to CNIC at the prices identified in column G.

103In accordance with the authorities discussed earlier, it is appropriate at this point to consider the background to the SA.

F.2Background

104The ‘Background’ to the parties making the SA is explained in the agreement itself. Clauses A and B of the SA provide:

AWebcentral and CentralNic entered into a Transitional Services Agreement on or around 19 May 2019 whereby Webcentral agreed to provide or procure the provision to CentralNic of certain transitional services (Transitional Services Agreement).

BWebcentral and CentralNic have been in dispute on matters relating to the provision of and payment for certain transitional services under the Transitional Services Agreement and have agreed to settle those disputes without any admissions as to liability, on the terms set out in this Agreement, including by terminating the Transitional Services Agreement and by Webcentral agreeing to provide, or procure to the provision of, the services set out in this Agreement.

105It is common ground that, in the lead up to executing the SA on 22 October 2021, the parties were in dispute about a number of issues under the TSA. In brief summary, according to the evidence of Graeme Hosking, CN’s managing director, the dispute included the level of fees that WCG was charging for the transitional services it was providing to CNIC. Mr Hosking’s evidence is that this included a dispute about what he refers to as ‘Hosting Services’.65 Mr Hosking deposes that he was informed by WCG’s representatives that WCG would not continue to provide ‘transitional services (which included Hosting services)’ unless a new agreement was entered into for the outstanding transitional services and ongoing management of the services.66

106The correspondence between CNIC and WCG at the time is set out in some detail in the affidavit of Chris Demase, WCG’s Executive General Manager, affirmed 8 September 2022. It is clear from this correspondence that both parties were aware that the transitional services about which there was a dispute included ‘POP and Cloud Hosting’.

65 Affidavit of Graeme Hosking affirmed 8 August 2022, [15]-[21]. See also the affidavit of Chris Demase, WCG’s Executive General Manager, affirmed 8 September 2022, [42].

66 Affidavit of Graeme Hosking affirmed 8 August 2022, [18].

107That the mutual intent of the parties in executing the SA was to quell their disputes is apparent from this brief discussion of the context in which the SA was finalised. That is consistent with the ‘Background’ to the SA as set out in the paragraphs extracted at [104] above.

108These ‘events, circumstances and things’ assist in identifying the object or purpose of the SA.67

109What emerges from this examination in my view, is that it can safely be assumed that the common intention of the parties in the SA was to ensure so far as was possible that there was no further scope for dispute. Given that part of the dispute under the TSA had concerned the fees that WCG could charge CNIC for the provision of services, the most efficacious way of reducing the scope for future disputes was to identify with precision both the remaining services that WCG was obliged to provide to CNIC to effect the BSA and the prices that CNIC was obliged to pay for those services. I conclude that that was the purpose of clause 2.1(a) in ‘specifying’ Services and the accompanying definition of ‘Services’ in Schedule 1. Both parties benefitted from the certainty especially when viewed against the background dispute between them.

110By the time the parties came to negotiate the Service Schedule in the SA, they had the shared experience of more than two years of working under the BSA and the TSA. They were well placed to identify with some certainty what services CNIC would need WCG to provide and what was a fair rate of return for CNIC to pay.

111

While it was clearly desirable for the parties to specify each of the services to be provided and to agree a price for their provision, the complexity of the Business that CNIC had purchased was such that it was conceivable that there could be other services that CNIC would need WCG to perform. It is therefore understandable that CNIC wanted some certainty that, if it identified such a service that fell outside the agreed ‘Services’, it could request WCG to provide it in the

67 Mount Bruce (n 13) [50]; Ecosse (n 47) [17].

expectation that, provided the request was a reasonable one, WCG would provide it. This is consistent with the agreed term in the SA about co-operation and working together in good faith.68

112It is equally understandable that WCG wanted the certainty that it would only be obliged to provide such a reasonably requested service if it was able to do so and if it would be appropriately remunerated for doing so.

113Viewed from the perspective of their mutual needs, the process agreed by the parties in clause 2.3(c) makes evident commercial sense.

114What makes less commercial sense in my view is that the parties would have left a service they both knew was central to the business transition, and that had been the subject of provision and acrimonious dispute under the TSA, to be dealt with under clause 2.3(c) rather than clause 2.1(a). Why would they have agreed to leave webhosting services to be sought by CNIC and provided by WCG under the cumbersome and uncertain clause 2.3(c) process under which price had to be negotiated when clause 2.1(a) provided them both with the certainty of a fixed price for each relevant service? Such a construction ‘lacks any reason that sounds in commercial sense’.69

115WCG does not grapple adequately with these questions in its submissions. It merely submits that that is what the parties did and the court should be slow to impose its own view about commercial rationality on them.

116The difficulty with this is the court is faced with a constructional choice where one option produces an evidently commercially rational outcome and the other does not. Where that commercially rational option is consistent with the text of the contract and its background and purpose, in accordance with the authorities discussed earlier, I consider it to be the correct construction.

68 SA, clause 2.3(a).

69 Ecosse (n 47) [23].

F.3Context

117WCG relies on the different purposes expressed in clauses 2.1(a) and 2.3(c) of the SA. Under clause 2.1(a), Webcentral is obliged to provide (or procure the provision of) the Services to CentralNic ‘to transition the remaining assets of the Business to CentralNic in accordance with the [BSA]…’.

118By contrast, the purpose of what I have referred to as the residual ‘services’ anticipated by clause 2.3(c) is expressed to be those Services that are ‘reasonably required to achieve transition of operation and control of the Business to CentralNic’.

119WCG submits that, based on that difference in wording, the parties are to be taken to have agreed that the provision of webhosting services falls more comfortably under the residual services category in clause 2.3(c) than the principal Services category under clause 2.1(a).

120There are three difficulties with this analysis in my view.

121First, it is not explained by WCG why the provision by it of webhosting services is appropriately seen as part of transitioning the assets of the Business rather than the operation and control of the Business. As CNIC has submitted, a key ‘asset’ of the Business was the contracts with the TPP customers. The provision of webhosting services during the period of transition was a key part of those contracts.

122The second difficulty with WCG’s submission about the different ‘purposes’ as between clause 2.1(a) and 2.3(c) is that both purposes (the narrower one and the wider one) appear in clause 2.1 itself. Under clause 2.1(c), ‘Webcentral acknowledges that performance of the Services in accordance with this Agreement

is critical to the ongoing transition of the operation and control of the Business to CentralNic in accordance with the Business Sale Agreement’.70

123This suggests that the parties attached little significance to the distinction now identified by WCG as critical to the construction of clause 2.1 and 2.3 of the SA. It is of course the objective meaning of the contract ascertained at the time it was entered into that the court is now required to identify.

124Finally, this submission invites the court to construe the SA by reference to what appears to be no more than infelicitous drafting.71 Terms are not used consistently in the SA. For example, the principal services identified under clause 2.1(a) are designated ‘Services’ commencing with a capital letter. Clause 1.1(a) records the parties’ agreement that in this case, the term is to have the meaning ‘given to it in the Dictionary’. ‘Services’ is defined in the Dictionary by reference to ‘the Service Schedule’ However, this nomenclature is not used consistently. For example, the residual category of ‘services’ identified in clause 2.3(c) is also occasionally capitalised.72 If these references were to be read literally, the result would be circular because the same service could be provided under both clause 2.1(a) and 2.3(c). That cannot have been the intent of the drafter.

125The courts will generally eschew an approach to construing contracts on the basis of ‘semantic niceties’.73 A court will not use a ‘finely tuned linguistic fork’ to construe a contract.74

126Ultimately, I conclude that a consideration of the text of the relevant clauses, the context in which they appear in the SA and the objects or purpose of the SA all lead to the conclusion that the hosting by WCG on its infrastructure (servers) of

70 Court Book, 315 (emphasis added).

71 Cf Ecosse (n 47) [51] (Gageler J).

72 See in line 2 of clause 2.3(c), second time occurring and in line 4 but noting that in line 8, the draftsperson reverted to lower case ‘services’

73 Ecosse (n 47) [98] (Nettle J); see also [52] (Gaegler J).

74 Banque Brussels Lambert SA v ANI Ltd (1989) 21 NSWLR 502, 524.

the data/software required for the provision of “Webhosting Services” to CNIC’s customers was within the scope of services as defined in clause 2.1(a) of the SA.

127This construction of the SA produces a commercially rational outcome in my view as it provides both parties to the SA with the certainty they were seeking when they resolved their disputes under the TSA.

G       Conclusions and Orders

128I have concluded issue number 1 concerning the construction of clause 2.1(a) of the SA in favour of the plaintiff.

129As agreed by the parties, issues 2-5 do not arise.

130The defendant’s counterclaim, based as it is on the answer to question 2 being in its favour, is dismissed.

131Turning to issue number 6 concerning the remedies the plaintiff should get, I direct the parties to confer about the form of final orders including interest and costs in an effort to agree upon orders giving effect to this judgment.

132If they cannot agree on any aspect of the final order, then by 10:00 am on 29 January 2024, each party is to file with my chambers and serve a written submission setting out the final orders agreed upon and those which are sought and the reasons in support together with any supporting material. The submissions are not to exceed ten A4 pages with minimum 12 point typeface and

1.5 spacing.  ---

Schedule

A	B	C	D	E	F	G	J
1	Service	Status	Description of Project	Remaining Tasks	TSA Schedule 2 Mapping	End Date	New Commercial Costings	CNIC Comments
2	AWS Support							AGREED. CNIC WILL MIGRATE ITS APPSTREAM USERS BY MID OCTOBER LATEST, AND WORK WITH HELP NEEDED FROM WCG TO REMOVE OTHER USAGE AS SOON AS POSSIBLE. ACCEPTED. TO END AS SOON AS CNIC NO LONGER REQUIRES WCG CONSOLE SUPPORT, BUT AT END 30 APRIL 2022 LATEST ACCEPTED ITEMS (A) AND (B) HAVE TRANSITIONED TO CNIC SO ARE EXCLUDED. ITEMS C), (D), (E): ACCEPTED
3	The new commercial rates / professional services charge will be capped at a monthly charge of $15,000 while CNIC utilises the WCG AWS service.
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5
6		Management of assets within AWS	The end date for these tasks under
7		AWS Support	EXECUTION	containers, including deployment, performance and up time management. Any consumption (third party charges) wil be passed	•Management of the asset •Cost management and optimisation •Monitoring	N/A	the TSA Sch 2 was 1 August 2020 (12 months from completion). Therefore, from 1 August 2020,
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		through as costs to CentralNic	•Maintain security	Webcentral was entitled to charge
11		(separate from the management fee	new commercial rates for this work
		outlined in this Service Schedule)	stream.
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13
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16	Console Support
17	From 1 March 2021, Webcentral will charge new commercial rates for these services (given it has never charged for this before under the TSA)
18		•Application Support
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		•24x7 Operational Support (including
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		on call)
21		•Development team support	The new commercial rates /
22		This relates to CentralNic’s	•Platform maintenance (Firewalls, F5	professional services charge will
		Console Support	EXECUTION	contributition to upkeep of the console which Webcentral is	load balancers) •Monitoring	N/A	depend on effort and personnel involved in each given month, but on
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		currently maintaining.	•Security and patching	average we estimate that we will bill
25		•Monitoring	a monthly charge of $53,000
		• Implement pricing and product
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		updates as needed to manage the
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		TPP business
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30	Other Managed Services & Charges
• Registrations, modification and	•Domain create (registration of new domain, managed by Console platform): $1 per transaction •Domain renew (renewal of existing domain, managed by Console platform): $1 per
renewal of customer domain
names.
Domain Names		EXECUTION	Domain name creations and renewals	• Manage accreditations with the respective registries and take	Item #3 in the TSA Sch 2	N/A (these charges are charged on an ongoing per action basis)
appropriate actions in
accordance with the obligations
31		of an accredited registrar.
•Maintenance of hosting infrastructure and software •Provision, management and renewal of hosting products/services. •Security and patching •Monitoring	a) WHM/cPanel hosting –
	reseller (bulk reseller shared
	cPanel hosting including WMH
	management): $5 per hosting
	account per month.
	b)cPanel hosting – shared
	(cPanel hosting per user account
	Webhosting services for:	(non-reseller): $5 per hosting
	account per month.
	Webhosting Services	EXECUTION	•WHM/cPanel Hosting •cPanel Hosting •Cloud hosting	Item #6 in the TSA Sch 2	N/A (these charges are charged on an ongoing per action basis)	c)Cloud hosting (cloud hosting per user account (non-reseller)): $3 per hosting account per
	•Cloud resource hosting	month.
	•POP/IMAP mail	d)Cloud hosting – reseller
	resource hosting (cloud hosting
	per resource account): $3 per
	reseller account per month.
	e)POP/IMAP mail (shared
	POP/IMAP email service): $0.20
	per mail box per month. As
	POP/IMPA email users are
	32	migrated to cPanel, these users

A	B	C	D	E	F	G	J
33	VPS Services	EXECUTION	VPS hosting services	• Maintenance of hosting infrastructure and software • Provision, management and renewal of VPS products/services. • Security and patching • Monitoring	Item #7 in the TSA Sch 2	N/A (these charges are charged on an ongoing per action basis)	• VPS hosting (Managed): $166 per month per active service • VPS hosting (Unmanaged): $76 per month per active service Management fees: • VPS managed (management fee per VPS): $10 per active service per month • VPS unmanaged (VPS service per VPS): $10	ACCEPTED
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35
36	INACTIVE SERVICES AS NO LONGER REQUIRED BY CNIC
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38	SSL Services	COMPLETED	SSL creation and management services	• Provision and renewal of SSL products/services. • Maintain account and connection with SSL service provider.	Item #8 in the TSA Sch 2	N/A (these charges are charged on an ongoing per action basis)	• SSL certificates: Value invoiced by supplier Management fees: • SSL create (purchase of a new SSL, managed via the Console): $5 per transaction • SSL renew (renewal of existing	SERVICE MIGRATED TO CNIC MARCH 2021. SERVICE MIGRATED TO CNIC AUGUST 2021. NOT REQUIRED BY CNIC FROM JULY 2021
39	Microsoft 365	COMPLETED	Provision of Micrsoft 365 services and business essentials to accounts Ending 25/08/21 due to: Migration of TPPW M365 accounts out of the Webcentral CSP to TechData's CSP	• Provisioning, management and renewal of M365 subscriptions. • Maintain the M365 account and connector from the Console.	Item #5 in the TSA Sch 2	N/A (these charges are charged on an ongoing per action basis)	COGS: Office 365 subscriptions (email essentials, business essentials, business premium): Value invoiced by Microsoft Management fees: Office 365 subscriptions: • email essentials: $1 per month Office 365 license • business essentials: $1 per month per Office 365 license • business premium: $1 per month per Office 365 license
40	Provision of Premises	COMPLETED	Provision of office space in Sydney office	• Provide desk space and office facilities in its Sydney Office for 8 employees • Office facilities shall include access to meeting rooms	Item #13 in TSA Sch 2 (entirely)	The end date for these tasks under the TSA Sch 2 is 1 August 2021 (and therefore the rate under the TSA Sch 2 will continue to apply until then - which was no charge)	No charge until 1 August 2021. Rate from 1 August 2021 to be negotiated and discussed.
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Certificate

I certify that these 47 pages are a true copy of the judgment of His Honour Judge Rozen delivered on 19 December 2023.

Dated: 19 December 2023

Andrew Morrison Associate to His Honour Judge Rozen

VCC:

1. JUDGMENT