Gilsan v Optus
[2004] NSWSC 1077
•26/11/2004
NEW SOUTH WALES SUPREME COURT
CITATION: Gilsan v Optus [2004] NSWSC 1077
CURRENT JURISDICTION:
FILE NUMBER(S): 50056/02
HEARING DATE{S): 6/9/04, 7/9/04, 8/9/04, 9/9/04, 10/9/04, 13/9/04, 14/9/04, 16/9/04, 17/9/04, 20/9/04, 27/9/04, 28/9/04, 29/9/04, 30/9/04
JUDGMENT DATE: 26/11/2004
PARTIES:
Gilsan (International) Limited (Plaintiff)
Optus Networks Pty Limited (Defendant)
JUDGMENT OF: McDougall J
LOWER COURT JURISDICTION: Not Applicable
LOWER COURT FILE NUMBER(S): Not Applicable
LOWER COURT JUDICIAL OFFICER: Not Applicable
COUNSEL:
P M Biscoe QC/F Kunc/M S White (Plaintiff)
I M Jackman SC/A S Bell (Defendant)
SOLICITORS:
Gadens (Plaintiff)
Gilbert & Tobin (Defendant)
CATCHWORDS:
CONTRACT - parol evidence rule - whether regulatory benchmarks admissible as parol evidence - formation of contract - whether plaintiff acted so that defendant reasonably entitled to believe that plaintiff assented to position put by defendant in e-mail - frustration - where third party in breach of obligations to defendant - whether contract between plaintiff and defendant frustrated - whether frustrating event can have retrospective operation - TRADE PRACTICES - ss 51AC, 52 Trade Practices Act 1974 - unconscionable conduct - misleading and deceptive conduct - where defendant entered into agreements with third party - where plaintiff not told of existence or terms of agreements with third party - whether plaintiff misled - whether unconscionable for defendant not to tell plaintiff of precise terms of agreements - whether statutory limit in s 51AC(9) exceeded - determination of contract "price" for purposes of statutory limit
RESTITUTION - unjust enrichment - recovery of money had and received on a failure of consideration - change of position - quantum meruit - whether defendant provided services for plaintiff or plaintiff's clients - whether services intended to be provided gratuitously - whether change of position defence made out - quantification of quantum meruit claim EVIDENCE - where defendant made assertion in e-mail - inferences - inference to be drawn from plaintiff's failure to respond to e-mail - whether plaintiff's failure to respond to e-mail an admission of allegations made in e-mail - content of applicable foreign law - whether assumption to be made that principles to be applied by foreign court in deciding whether an illegal agreement is enforceable same as principles to be applied by this Court - where no proof of any applicable provisions of relevant foreign legislation
ACTS CITED:
Trade Practices Act 1974 (Cth)
Frustrated Contracts Act 1978 (NSW)
DECISION:
See paras [523] and [524] of judgment
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST
McDOUGALL J
26 November 2004
50056/02 GILSAN (INTERNATIONAL) LIMITED v OPTUS
NETWORKS PTY LIMITED
JUDGMENT
HIS HONOUR:
Factual background
When an international telephone call is made, a number of telecommunications carriers are involved. The caller makes the call through his or her “local carrier”. The call is routed from the local carrier to the switch of an “originating carrier”. Where the originating carrier has a direct link to the “terminating carrier” (the carrier in the country of destination), it routes the call direct to the switch of the terminating carrier. Where there is no direct link, the originating carrier routes the call to the switch of a “transit carrier”, who has either a direct link to the terminating carrier or a direct link to another transit carrier that in turn has a direct link to the terminating carrier.
The caller pays a charge known as the “collection rate” of a specific amount per minute to his or her local carrier. (I think that, in some cases, the local carrier may also be the originating character, but if this is so, nothing turns on it.) The local carrier and the originating carrier agree to divide the collection rate between them.
The originating carrier and the terminating carrier agree on what is known as an “accounting rate” or “total accounting rate” (“TAR”) (which is a notional amount) between them. That, like the collection rate, is a specified amount per minute. Where there is a direct connection between the originating carrier and the terminating carrier, they agree what share each of them will take from the TAR. The originating carrier’s share is the “origination charge”. The terminating carrier’s share is the “termination charge”.
Where there is no direct connection between the originating and terminating carriers, so that a transit carrier is involved (for present purposes, situations involving more than one transit carrier may be disregarded), the three carriers enter into an agreement (“tripartite agreement”) for division of the TAR between them. Under that agreement, the transit carrier’s share (known as the “transit charge”) is agreed. In principle, the balance remaining of the TAR is divided equally between the originating and terminating carriers. (Origination, transit and termination charges are expressed as rates per minute in the applicable currency. When, in these reasons, I refer to such a charge as a monetary amount, that should be read as an amount per minute.)
It has been common practice for originating and transit carriers to enter into “confidential agreements” in relation to the transit charge. Notwithstanding the label, knowledge of the existence and at least the general terms of those agreements appears to be widespread in the industry, although no doubt the precise terms may in fact be confidential. The effect of a confidential agreement is that the originating and transit carriers agree that, in consideration for the originating carrier giving the business to the transit carrier (usually, there is more than one available transit carrier, so the market is competitive), the transit carrier will agree to take, as its transit charge, an amount that is less than the transit charge agreed under the tripartite agreement between the originating, transit and terminating carriers. Of necessity, since the terminating carrier is not a party to the confidential agreement, the monetary amount of its share of the TAR is not affected by the confidential agreement.
Accounts between originating, transit and terminating carriers are frequently settled under a system known as “cascade accounting”. Under that system, the originating carrier measures the number of minutes that it sends through the transit carrier to the terminating carrier in any given month. It quantifies the value of those minutes using the agreed TAR. It deducts from the amount so quantified the amount of its originating charge and, where a confidential agreement is in place, the amount of difference between the transit charged fixed under the tripartite agreement and the transit charge fixed under the confidential agreement. It pays to the transit carrier an amount equal to the balance thereby calculated of the TAR. That is known as an “outpayment” from the originating carrier and as an “inpayment” to the transit carrier. The transit carrier retains its share of the inpayment to it and pays the balance to the terminating carrier. Again, that payment is known as an “outpayment” or “inpayment”, depending upon the perspective from which it is considered.
TARs are expressed in US dollars (“USD”) where the originating carrier is an American telecommunications carrier and in “Special Drawing Rights” (“SDR”) where the originating carrier is a European telecommunications carrier. SDRs reflect the value of a basket of five European currencies. Usually, where the TAR is expressed in USD, settlement between originating, transit and terminating carriers will be in USD; and likewise, for TARs expressed in SDR, settlement will be in SDR.
The TAR is expressed as a rate per minute and divisions of the TAR are likewise a rate per minute. That should be understood in all future references to a TAR or a division of a TAR. Further, as I have said, the TAR is a notional charge. It is notional in the sense that, although it forms the basis of the accounting between originating and terminating (and, where applicable, transit) carriers, it does not reflect a charge actually imposed by and paid to the originating carrier. The originating carrier makes outpayments on the basis of the TAR; but it recoups itself, and takes its profit, from payments made to it on other bases.
Gilsan’s business model
The plaintiff (“Gilsan”) developed a business concept whereby consumers could use computers to call international telephone numbers to enable them to receive “adult entertainment” or other services. Gilsan did not itself provide those services; that was done by “service agents” who had contracts with “service providers” with whom in turn Gilsan had contracts. Gilsan referred to its product as “international internet dial up services”. They are often referred to by the acronym “IID”. A related product, whereby consumers could call international telephone numbers to receive recorded or live voice messages, is known as “audiotext services” (often referred to as “audiotex”). The two forms of service, although both involve the use of international telephone numbers, are conceptually different; but it appears that the distinction is not always observed in the use of the nomenclature. What Gilsan calls international internet dial up services are sometimes, if not frequently, referred to by others as audiotext services.
For Gilsan’s international internet dial up services to be profitable, it was necessary that the international call be one to which a high TAR applied. That is because Gilsan entered into agreements with terminating carriers whereby Gilsan received a substantial part of the terminating charge that would otherwise be payable to the terminating carrier. The incentive for the terminating carrier was that, although its charge per minute might be substantially less where Gilsan was involved, the overall number of minutes was vastly increased, and its revenues were substantially enhanced. Further, because the calls were diverted before reaching the country of destination, the terminating carrier incurred little, if any, direct or overhead cost.
In brief, a consumer who was browsing the internet (usually, what are known as “adult sites”) might see an advertisement for a particular service. Those advertisements were placed by service agents with whom service providers contracted to Gilsan had contractual or other arrangements. Consumers who wished to avail themselves of the services on offer would download the “dialler” that the service agent provided. Activation of that dialler would cause the computer to disconnect from the internet and, through its modem, to call the relevant international telephone number. The dialler also incorporated a Carrier Identification Code (“CIC”), so that the call was switched from the consumer’s local carrier to the originating carrier identified by the CIC code.
Calls thus made were not physically switched to (in this case) Vanuatu. They were diverted, usually at a switch operated by the transit carrier, and sent to another destination, from which the relevant service could be provided. This was known as “short stopping” or “long lining”. In the former case, a call originating in (say) Greece and routed to Optus in Sydney would be intercepted at Optus’ Facilities Management Centre (“FMC”) at Rosebery and diverted to a telephone number in Australia for the relevant service agent. In the latter case, the call would be intercepted and sent to an overseas telephone number for the relevant service agent.
Gilsan’s business in practice
In the present case, the originating carriers were AT&T Corporation (“AT&T”) and Hellenic Telecommunications Organisation SA (“Hellenic”). During the period material to these proceedings, the relevant portion of AT&T’s business was taken over and conducted by Concert Global Network Services Limited (“Concert”), a joint venture of AT&T and BT Plc. Nothing turns on this circumstance. Where in these reasons I refer to AT&T, that should be taken as including, at the relevant time, a reference to Concert.
Telecom Vanuatu Limited (“TVL”) was the terminating carrier. Since neither AT&T nor Hellenic had direct links to TVL, they needed to use a transit carrier. The defendant (“Optus”) was an available transit carrier. The TAR agreed between AT&T and TVL was USD 4.00.
Gilsan entered into an agreement with TVL (“the TVL agreement”), whereby TVL in effect gave up all but USD 0.10 of its share of the TARs agreed with AT&T and Hellenic.
Gilsan then entered into an agreement (“the Optus agreement”) with Optus whereby they agreed that, for calls to be routed by Optus to TVL, Optus would take a transit charge of SDR 0.175, would pay USD 0.10 to TVL and would pay the balance to Gilsan.
Gilsan thereby would have available the total inpayment to Optus for the relevant telephone calls, less the transit charge that it had agreed with Optus of SDR 0.175 and the terminating charge that it had agreed with TVL of USD 0.10. Gilsan was then able to contract with services providers to arrange for the provision of services to consumers who called the relevant Vanuatu telephone numbers.
In substance, Gilsan’s business plan worked where there were relatively high TARs because the actual cost of providing the telecommunications services involved (origination, transit and termination) were relatively low. Thus, the key to the success of Gilsan’s business was the identification of countries, international calls to which attracted a high TAR.
The disputes
In these proceedings, Gilsan brings a number of claims against Optus and Optus brings a number of claims against Gilsan.
The Gilsan underpayment claims
The first group of claims brought by Gilsan are the “underpayment claims”. Those underpayment claims relate to calls to Vanuatu telephone numbers originated by AT&T or Hellenic and routed through Optus as transit carrier. The primary issue is whether Optus was required to account to Gilsan on the basis that the inpayment to Optus should include (as Gilsan claims) the transit charge as fixed by the relevant tripartite agreement, or (as Optus claims) that as fixed by the relevant confidential agreement. There are further claims, including one for AT&T traffic after 1 January 2001. From that date, Concert has purported to account to Optus on the basis that its outpayment to Optus was USD 0.27, comprising a transit charge of USD 0.08 agreed under a confidential agreement and a terminating charge of USD 0.19 imposed, Concert says, pursuant to an order of the Federal Communications Commission (“FCC”).
Further, Gilsan says, Optus has under declared the number of traffic minutes and has not paid for all minutes actually declared or carried in January and February 2001.
Further, Gilsan says, the agreed transit charge payable under the Optus agreement was SDR 0.175, but Optus “paid” itself at the rate of USD 0.25, although the USD value of the agreed SDR figure was, at some times, less.
Finally, under this heading, Gilsan brings a claim for failure to account, both in respect of monies withheld and (to the extent that they are not otherwise caught up) in respect of under declarations and under payments.
The rogue traffic claim
The second principal claim brought by Gilsan against Optus is its “rogue traffic claim”. Gilsan says (and Optus denies) that under the TVL agreement Gilsan had the exclusive right to use Vanuatu telephone numbers for the provision of international internet dial up services; that Optus knew of this; and that Optus deliberately interfered with Gilsan’s contractual exclusivity by carrying, for other service providers who offered international internet dial up services in competition with the service providers contracted to Gilsan, calls to Vanuatu telephone numbers.
The reply claim
Gilsan also brings what is called the “reply claim” – given that name because it is pleaded in Gilsan’s reply to Optus’ defence. The reply claim invokes ss 52 and 51AC of the Trade Practices Act 1974 (Cth), and alternatively the alleged existence and breach of an implied term of good faith.
The Optus overpayments claim
Optus’ claims against Gilsan fall into three categories. The first category comprises what is known as the overpayments claim. Optus claims to have overpaid Gilsan for both AT&T and Hellenic traffic, and seeks to recover the overpayments on a restitutionary basis. The substantial issue is, again, whether Optus was required to account to Gilsan on the basis of the transit charged fixed by the relevant tripartite agreement or on the basis of the transit charge fixed from time to time by the relevant confidential agreement.
The quantum meruit claim
Optus’ second cross-claim is known as its quantum meruit claim. Optus provided a number of services or facilities in relation to Gilsan’s business. It claims to recover the cost of those services and facilities on a quantum meruit basis. The essential issue is whether those services and facilities were provided to Gilsan at its request, or to Gilsan’s service providers at Gilsan’s request.
The clawback claim
The third claim brought by Optus is its “clawback claim”. Optus says that, for some months, it had paid Gilsan on the basis of traffic minutes declared to it by the originating carrier and reflected in the inpayment to it from that originating carrier. However, in subsequent months, the originating carrier “clawed back” from Optus some of the payments that it had made. The originating carrier would do this where, for whatever reason, it was not itself paid for traffic in months that it had earlier declared to Optus and for which it had earlier paid Optus. The originating carrier would effect this clawback by deducting the amount to be clawed back from amounts otherwise due to Optus. Optus says that, in turn, it is entitled to claw those amounts back from Gilsan.
The issues
The parties agreed on the issues by which the claims that I have briefly summarised were to be decided. Those issues are as follows:
Issues arising on Gilsan’s Amended Summons
A. Gilsan’s underpayment claims
1.The true construction of the expression “origination charge” in Schedule C of the Optus Agreement dated 3 December 1998, including whether that expression means:
(a)the amount per minute of traffic agreed between the originating, transit and terminating carriers to be retained (notionally or otherwise) by the originating carrier from the Total Accounting Rate;
(b)the amount per minute of traffic in fact (albeit notionally or otherwise) retained by the originating carrier from the Total Accounting Rate;
(c)the amount per minute of traffic to which the originating carrier is ultimately entitled from the Total Accounting Rate as a result of any confidential agreement between the originating and transit carriers?
AT&T Underpayment Claim
2.In relation to traffic originating with AT&T in the USA, on the true construction of the Optus Agreement, during the term of the Optus Agreement what was the “origination charge” referred to in Schedule C of the Optus Agreement?
3.Whether in or about June 2000 there arose between the parties an assumption that the payment to Gilsan by Optus under Schedule C of the Optus Agreement, in relation to traffic originating in the USA with AT&T, was to be calculated at a rate of US$1.6805 per minute for the traffic generated for the calendar year of 1999 and US$1.5885 per minute for the traffic generated for the calendar year 2000, the effect of which, in the circumstances found, is to estop Gilsan from now denying that its entitlements were other than as assumed?
4.Alternatively to 3, whether in June 2000 the parties agreed to vary the Optus Agreement such that the payment by Optus to which Gilsan was entitled under Schedule C of the Optus Agreement, in relation to traffic originating in the USA with AT&T, was to be calculated at a rate of US$1.6805 per minute for the traffic generated for the calendar year of 1999 and US$1.5885 per minute for the traffic generated for the calendar year 2000?
5.Having regard to the answers to issues 1 to 4, 8, 9, 10 and 11 and the amount already paid as between the parties (Agreed Document B) what amount, if any, is payable to Gilsan by Optus in respect of traffic originating in the USA with AT&T?
Hellenic Underpayment Claim
6.In relation to traffic originating with Hellenic in Greece, on the true construction of the Optus Agreement, during the term of the Optus Agreement what was the “origination charge” referred to in Schedule C of the Optus Agreement?
7.Having regard to the answer to issues 1, 6, 8, 9 and 11 and the amount already paid as agreed between the parties (Agreed Document C) what amount, if any, is payable to Gilsan by Optus in respect of traffic originating in Greece with Hellenic?
Underdeclaration of minutes
8.Whether the number of minutes for which Optus is liable to pay Gilsan under the Optus Agreement is the number declared by the originating carrier or the number measured by Optus?
9. If the latter, whether Optus:
(a)in breach of the Optus Agreement, in relation to traffic originating both from the USA and Greece for the months January 1999 to February 2001, made declarations and calculated payments to Gilsan, based on minutes of traffic declared to it or on some other basis rather than the actual number of minutes measured for such traffic by Optus;
(b)caused Gilsan loss and damage by such breach, and is liable to pay Gilsan an amount, calculated by the number of minutes underdeclared multiplied by a rate per minute determined by resolution of issues 1 to 6 above?
US$/SDR Optus fee claim
10.Whether, by July 1999, the parties varied the Optus Agreement so that Optus was entitled to deduct the said Optus fee at the rate of US$0.25 rather than SDR 0.175 for traffic originating on any network where Optus was paid for the traffic in US dollars?
Failure to pay claim
11. Whether Optus:
(a)in breach of the Optus Agreement, in relation to traffic originating both from the USA and Greece transited by Optus to Vanuatu telephone numbers:
(i)for the months January and February 2001, failed to pay 25% and 62.5% respectively, and
(ii)for the months post February 2001, failed to pay Gilsan for any minutes of traffic;
(b)thereby caused Gilsan loss and damage by such breach, calculated by the number of minutes generated for those months multiplied by a rate per minute determined by resolution of issues 1 to 4 and 6 above,
or whether Optus was entitled not to pay Gilsan those amounts on the basis that the Optus Agreement was frustrated by reason that the agreed Total Accounting Rate between AT&T and TVL no longer existed for the 2001 calendar year,
or alternatively whether Optus’ obligation to make payments after 1 January 2001 was on the basis that the “origination share” retained by AT&T from the Total Accounting Rate referred to in Schedule C to the Optus Agreement was US$3.73 from 1 January 2001?
Failure to account claim
12.Whether Gilsan is entitled to an account from Optus for all amounts withheld and not paid by Optus:
(a)pursuant to the August 2000 Variation to the Optus Agreement and calculated at the rate of 10% of the monthly traffic minutes for which Optus was liable to pay Gilsan under Schedule C for the months May to December 2000; and
(b)in the event that Optus’s pleaded Febuary 2001 Variation is found to have been agreed by the parties, pursuant to the February 2001 Variation and calculated at the rate of 25% of the monthly traffic for the months of January and February 2001?
Reply claim
13.In the event that Optus’s construction of the Optus Agreement under Issues 1 and 6 above is accepted on the basis of the effect of the confidential transit rate agreements it entered into with AT&T and Hellenic, whether Optus failed to disclose to Gilsan the existence and alleged effect on the Optus Agreement of the confidential transit rate agreements Optus had entered into with AT&T and Hellenic and that, in the circumstances, such failure to disclose constituted:
(i)a contravention of section 52 of the Trade Practices Act 1974 (including the issue whether Optus acted otherwise than inadvertently within the meaning of the definition of conduct in s.4(2)(c) of the Act); or
(ii)a contravention of section 51AC of the Trade Practices Act 1974 (including the issue of “conduct” as referred to in (i) above, and the issue of the inapplicability of s.51AC where the price of the services exceeds the statutory cap in s.51AC(10)); or
(iii)the breach of an implied term in the Optus Agreement that the parties would act reasonably and in good faith towards each other in respect of the agreement (including whether or not such a term was implied); or
(iv)a breach of Optus’s fiduciary duty owed to Gilsan (including whether any such duty was owed)?
14. If so, whether:
(a)any such contravention or breach caused Gilsan loss and damage; and
(b)Gilsan is entitled to any other relief including under s 87 of the Trade Practices Act 1974?
15.If so, whether the quantum of such loss and damage is to be calculated:
(a)as the difference between the payments to which it is found Gilsan is entitled to under the Optus Agreement and the payments Gilsan would have been entitled to under the alternative agreements which it would have entered into; or
(b) on some other and, if so, what basis?
16. If yes to 14(a) above, the amount of those damages?
B. Gilsan’s Rogue Traffic claim
17.Whether Gilsan had any contractual right of exclusivity granted by TVL in the periods:
(a) 3 December 1998 to 5 March 1999;
(b) 5 March 1999 until 26 October 2000;
(c) from 26 October 2000;
(d) or for some other period or periods;
and, if so, the nature and extent of the exclusivity.
18.If yes in respect of any of the periods referred to in 17 above, whether Optus knew of such a right to contractual exclusivity?
19.Whether after 24 November 1998 Optus transited to Vanuatu telephone numbers dial-up data traffic generated by entities other than Gilsan in circumstances where Optus knew that such Vanuatu telephone numbers were Vanuatu numbers which had not been authorised for use by TVL at all or for dial-up data traffic?
20.Whether the conduct referred to in paragraph 19 (whether or not Gilsan had any contractual right of exclusivity) constituted:
(i)a breach of an implied term in the Optus Agreement that the parties would act towards each other reasonably and in good faith (including whether or not such a term is to be implied);
(ii)a breach of fiduciary duties owed by Optus to Gilsan (including whether or not any such duties were owed, and if so, which);
(iii)wrongful or unlawful interference by Optus in Gilsan’s contractual relations, trade or business interests;
(iv)unconscionable conduct in contravention of section 51AC of the Trade Practices Act 1974 (including the issue of the inapplicability of s.51AC where the price of the services exceeds the statutory cap in s.51AC(10))?
21.If so, whether Optus thereby deprived Gilsan of the benefit of such traffic, earned profit from such traffic and is liable to pay damages to Gilsan or make an account of profits to Gilsan?
22.If Optus is liable to pay damages to Gilsan, whether such damages are to be calculated by the number of minutes found to have been transited by Optus in such unauthorized manner multiplied by the rate per minute determined by resolution of Issues 1 to 6 less what Gilsan would have paid relevant service providers above?
23.If so, (subject to any election by Gilsan for an account of profits), what is the amount of the damages?
Issues arising on Optus’ Third Further Amended Cross Claim
C. Optus’ Overpayment Claims
Hellenic traffic
24.Whether, in relation to traffic originating with Hellenic in Greece, on the true construction of the Optus Agreement dated 3 December 1998:
(a)the “origination charge” referred to in Schedule C was SDR per minute of traffic:
i 0.995 in 1999;
ii 0.97 thereafter;
(b)Gilsan was entitled to a payment by Optus under Schedule C calculated at a rate of SDR per minute of traffic:
i 0.63 in 1999;
ii 0.655 thereafter;
25.Is Optus entitled to restitution in respect of amounts paid to Gilsan based upon a rate that was higher than that required by 24(b)?
26.Whether or not laches is a defence to a claim for restitution of those overpayments?
27. If so, whether laches is made out on the facts?
28.Whether or not Gilsan has established that it changed its position after receiving the Hellenic overpayments?
29. If it did, to what extent did it change its position?
30.Whether and to what extent Gilsan’s change of position operates as a defence to Optus’ claim?
31.If Optus is entitled to restitution, in what amount should restitution be ordered?
2001 AT&T traffic
32.Whether, in relation to traffic originating with AT&T in the United States, on the true construction of the Optus Agreement dated 3 December 1998, the “origination charge” referred to in Schedule C was $3.73 for the period from 1 January 2001?
33.If yes to 32, is Optus entitled to restitution in respect of payments to Gilsan in 2001 calculated by reference to a lower origination charge (the 2001 overpayments)?
34.Whether or not laches is a defence to Optus’ claim for restitution in respect of the 2001 overpayments?
35.If so, whether that claim is made out on the facts?
36.Whether or not Gilsan has established that it changed its position after receiving the 2001 AT&T overpayments?
37.If it did so, to what extent did it do so?
38.Whether and to what extent Gilsan’s change of position operates as a defence to Optus’ claim?
39.In the further alternative, whether Gilsan is obliged to repay to Optus any part of the payment received by it from Optus for traffic in respect of the months of February and March 2001 pursuant to an undertaking given to Optus by Gilsan on 21 April 2001?
40.If Optus is entitled to restitution, in what amount should restitution be ordered?
D. Optus’ Quantum Meruit Claims
Call Termination, Co-Location, Spinnaker and Domestic Traffic Services
41.Whether Optus was requested by or on behalf of Gilsan to supply each of the services?
42.Whether each of the services provided was intended to be gratuitous (including whether or not in the events which happened Optus was ultimately willing to and did in fact continue to provide such services without requiring or receiving payment)?
43.Whether Optus was obliged to provide each of the services provided pursuant to the terms of the Optus Agreement?
44.Who was benefited by each of the services provided sufficiently to justify an order for quantum meruit?
45.Whether Optus is estopped from making its quantum meruit claims in respect of each of the services?
46.Whether or not, in respect of the domestic traffic services:
(a)laches and change of position are defences to a quantum meruit claim;
(b)If so, whether there has been laches and or a change of position?
(c)Whether and to what extent Gilsan’s change of position operates as a defence to Optus’ claim based on a quantum meruit?
(d)If there has been a change of position, to what extent has Gilsan’s position changed?
47.For what amount, if any, should the quantum meruit claim be ordered in respect of each service?
E. Clawback
48.For the traffic months December 1999 to May 2000, whether or not it was the common assumption of Optus and Gilsan that Optus would pay Gilsan the 25% component referred to in clause 1.6 of the Optus Agreement up front on the basis that if Optus:
(a)did not receive payment from the distant and/or transit carriers; and/or
(b)overpaid Gilsan as a result of a distant or transit carrier refusing to make payments or later offsetting payment for the traffic of any particular month,
then:
(c)Gilsan would be obliged to repay the overpaid amounts to Optus; or
(d)Optus would be entitled to offset the overpaid amounts against future monies owed by Optus to Gilsan under the Optus Agreement
up to an amount equivalent to the 25% component?
49.The effect (if any) of the August 2000 and the February 2001 variations.
50.Whether or not, following the August 2000 and February 2001 Variations to the Optus Agreement, whether [sic] Optus was entitled to withhold payment from Gilsan [sic] 10% of the value of the traffic declared by Optus to Gilsan for the traffic months August 2000 to January 2001 (inclusive), and 25% from February 2001 for amounts not paid to Optus by AT&T?
51.What amounts, if any, Optus is entitled to offset against any future monies owed by Optus to Gilsan. [NB The determination of this question must await the extent (if any) to which Optus succeeds against AT&T in the London arbitration.]
52.Whether on the evidence Optus has proved that any AT&T refusals to pay relate to the Gilsan Vanuatu traffic minutes.
53.Should the agreed negative Vanuatu minutes recorded by AT&T be apportioned and, if so, how, for the purposes of Optus’ clawback claim?
54.What amounts, if any, Gilsan is obliged to repay to Optus by reason of the parties’ common assumption, and in what currency should those amounts be paid?
F. Set-offs
55.Whether any and, if so, which of the amounts which Optus is held to be liable to pay to Gilsan and which Gilsan is held to be liable to pay to Optus may be equitably set off against each other?
56.What is the final amount due from and to whom pursuant to such set off?
G. Interest and currency
57.What interest is payable on any sum or sums found to be due?
58.In what currency or currencies should any judgment or judgments be expressed?
The parties agreed that issues 5, 7, 31, 40, 51, 54, 56, 57 and 58 are not required to be answered by the Court in its reasons, but will be the subject of calculation and, if necessary, further submissions by the parties in the light of the Court’s reasons. The quantification of the issues in paragraphs 8 to 11 (inclusive) is subsumed in paragraphs 5 and 7. Issues 3, 4, 26, 27, 34 and 35 were not pressed in final submissions.
The TVL agreement
The TVL agreement was made on 24 November 1998 between TVL (referred to in the agreement as “PTT”) and Gilsan (referred to in the agreement as “SP”). Relevantly, it recited and provided as follows:
“WHEREAS
(a)SP wishes to offer International Audiotex and International Internet Dial-up services from countries listed in Schedule A utilizing number ranges owned by PTT, and being routed via a host carrier (Host) to terminate in Call Centre’s [sic] with whom they have facilities;
(b)PTT wishes to provide SP with number ranges in support of the SP business;
PTT and SP have agreed [sic] the following arrangements:
1. PTT shall:-
1.1issue number ranges to SP by mutual consent so that they may generate traffic to those numbers;
1.2authorize Host to forward number ranges issued to SP to call centre’s [sic] nominated by SP;
1.3advise all carriers of transit traffic to PTT that SP and Host are authorized to discuss transit rates and routing with such carriers for the purpose of handling the traffic that this Agreement relates to;
1.4authorize Host to remit directly to SP the amount due in accordance with Schedule B of this Agreement to SP;
1.5keep both SP and Host informed on a regular basis of any request for or actual accounting range changes that distant carriers request or implement;
1.6grant SP exclusive access to number ranges under their control for the purposes of offering International Internet Dialup service for a period of 12 months from commencement of service. After this period, continued exclusivity will depend upon SP generating a minimum of 100,000 minutes of traffic each month, as measured by Host. Should SP fail to deliver this volume of traffic for 3 consecutive months, PTT shall have the right to offer other suppliers the option to provide this service in addition to SP. In such circumstances, the rate offered to other suppliers will be no more than the rate offered to SP;
…
6This agreement shall remain in force until such time as either party gives notice to terminate. Such termination shall take place 180 days after receipt of formal written notice from either party, subject to the contract having been in force for a minimum of 24 months. In the event that PTT receives instruction from the Government of the Republic of Vanuatu to cease offering facilities for International Audiotex and Internet Dialup services, this agreement will automatically be terminated.
___________________________________________________________
Schedule A
Originating Countries
All countries with whom PTT has an agreed accounting rate, with the exception for International Audiotex only of traffic from USA, Greece, Italy and Turkey.
__________________________________________________________
Schedule B
Revenue Share
SP will receive the total accounting rate subject to deductions for origination and transit charges and the PTT share of USD$[sic] 0.10 per call minute to the PTT.”
Although Optus was not a party to the TVL agreement, a copy was sent to Mr John Bragg of Optus in mid January 1999.
The TVL agreement was renegotiated following a dispute and litigation between Gilsan and TVL. The renegotiated agreement, which was substantially more detailed than the agreement that it replaced, was dated 26 October 2000. At present, it is necessary to note the provisions of clause 2.2(a) (a condition precedent said by Optus never to have been fulfilled) and clause 2.4(a) (an exclusivity provision conditional on generation of a certain minimum of traffic per month). Those clauses read as follows:
“2.2 GILSAN shall:
(a)as a condition precedent of this Agreement use its best endeavours to, as expeditiously as possible, submit an application to the Vanuatu Foreign Investment Board (“VFIB”) to either obtain any necessary foreign investment approval certificate or obtain the VFIB’s ruling that a foreign investment approval certificate is not required for the purpose of fulfilling the terms and conditions of this Agreement and in either case, GILSAN shall provide TVL with satisfactory proof of the final decision by the VFIB of GILSAN’s said application to the VFIB.
…
2.4 Exclusivity
(a)TVL hereby grants to GILSAN the exclusive right for the period as set out in clause 2.6 hereof and subject always to this clause, to provide, by the use of any of the GILSAN Numbers, IBBS from all originating countries throughout the world. Continued exclusivity will depend on GILSAN generating a minimum of 100,000 minutes of traffic each month as measured by Host. If GILSAN fails to deliver this volume of traffic for three consecutive months GILSAN’s said exclusivity shall be forthwith automatically terminated and TVL shall have the right to offer other suppliers the option to provide IBBS. In such circumstances the terms offered to other suppliers will be no better than the terms in this Agreement, subject always to clause 4.1b) [sic] hereof.”
The Optus agreement
The Optus agreement was made on 3 December 1998 between Optus and Gilsan (referred to in the agreement as “SP”). It likewise referred to terminating carriers as “PTT”. Relevantly, it recited and provided as follows:
“WHEREAS
(a)SP wishes to offer International, Audiotex and International Internet Dialup services from countries listed in Schedule A utilizing number ranges owned by Countries listed in Schedule B (“PTT”);
(b)OPTUS wishes to provide SP with telecommunications services in support of the SP business;
OPTUS and SP have agreed the following arrangements:
1 OPTUS will:-
1.1negotiate with transit carriers, that carry traffic on behalf of the PTT, the transit rates for SP traffic in order that the maximum revenues can be achieved for the parties to this Agreement;
1.2enter into arrangements with transit carriers that carry traffic on behalf of the PTT to route the traffic directly to OPTUS for forwarding to SP;
1.3route international traffic generated on SP’s number ranges to SP’s nominated call centre in Australia, or to a [sic] SP nominated call centre in another country;
1.4pay PTT the amount due under Schedule B under normal traffic accounting and payment terms;
1.5pay SP, for the duration of this Agreement and for twelve months thereafter, 75% of all monies due, as defined in Schedule C hereto, for each calendar month in which traffic was generated, 45 days from that month end;
1.6pay SP, for the duration of this Agreement and for twelve months thereafter, 15% of all monies due, as defined in Schedule C hereto, for each calendar month in which traffic was generated, within 45 days of receiving payment from the distant and/or transit carriers. Such payment is to be made after deductions have been calculated for payments that have been overpaid as a result of a distant or transit carrier refusing to make payment for the traffic of any particular month;
1.7for the duration of this Agreement and for twelve months thereafter, provide SP with daily and monthly Traffic Reports and a monthly Financial Report in a format to be agreed.
…
____________________________________________________
Schedule A
Originating Countries
All countries notified to and agreed with OPTUS with whom PTT has an agreed Accounting Rate
___________________________________________________
Schedule B
Country Number Ranges Offered
1. Telecom Vanuatu Ltd. (“TVL”)
2. Solomon Telekom Ltd (“SOLTEL”)
OPTUS will deduct from the SP’s revenue the rates listed below and pay to PTT on the regular accounting basis upon which they both work.
Telecom Vanuatu USD$ [sic] 0.10 per minute
Solomon Telekom USD$ [sic] 0.10 per minute
The deductions are to be calculated monthly.
___________________________________________________
Schedule C
Payment Formula
OPTUS will pay SP their share of the total accounting rate subject to deductions for OTPUS [sic], origination and transit charges and the PTT share in Schedule B above.
The commencing OPTUS fee will be SDR0.175 which will be reviewed from time to time, by agreement with both parties, to compensate for lower accounting rates on various originating countries. Where the only point of transit is with OPTUS they will deduct only the OPTUS fee of SDR0.175 deductible for such traffic.”
The words that I have underlined were inserted by Mr Bragg (who signed the agreement on behalf of Optus) in handwriting before the agreement was signed.
The Optus agreement was varied in August 2000 and again in February 2001. In final submissions, Optus accepted that (as Gilsan contended) the effect of the August 2000 variation was to permit Optus to retain out of the 25% of the amounts referred to in clause 1.6 of the Optus agreement “10% of all monies due as a retention against any amounts which would not ultimately be payable to Gilsan by reason of a distant or transit carrier refusing to make payment for any part of the traffic of any particular month”. As a consequence, the parties accepted that 75% of all amounts due for traffic generated in any calendar month was payable 45 days from the end of that month; a further 15% was payable 105 days from the end of that month; and the final 10% was payable 45 days from the date on which Optus received payment for that month from the distant or transit carrier, subject to adjustment for uncollectible amounts.
In final submissions, the parties accepted that the effect of the February 2001 variation was as set out in an e-mail of 8 February 2001 from Mr David Pearson on behalf of Gilsan to Mr Franc Pazmino of Optus. That e-mail stated, relevantly, that the February 2001 and subsequent traffic months would be settled as to 75% within 45 days (of the end of the month) and the balance within 45 days of receipt by Optus “in accordance with the terms set out in the [Optus agreement]”; and that for traffic months up until and including January 2001, settlement would be made as to 75% within 45 days (of the end of the month), 15% within 105 days (again of the end of the month), with the remainder being settled within 45 days of receipt (by Optus) “[a]gain in accordance with the terms of the [Optus agreement] subject to this amendment to the timing of payments.”
The AT&T/Optus/TVL tripartite agreement
This agreement was established by correspondence. It fixed the TAR at USD 4.00 and the division of the TAR was agreed as follows:
| USD | |
| AT&T | 1.79 |
| Optus | 0.42 |
| TVL | 1.79 |
| Total | 4.00 (Cascade accounting) |
The Hellenic/Optus/TVL tripartite agreement
This agreement likewise was established by correspondence. It fixed the TAR at SDR 1.80 and the division of the TAR was agreed as follows:
| SDR | |
| TVL | 0.725 |
| Optus | 0.35 |
| Hellenic | 0.725 |
| TAR | 1.80 |
| Cascade accounting |
The AT&T/Optus confidential agreements
AT&T and Optus entered into a number of confidential agreements. The first (as shown by the evidence) was made in March 1998 and purported to apply from 1 January 1998 to 31 December 1998.
It provided, relevantly, as follows:
“1. PRINCIPLES
1.1The purpose of this Agreement is to establish special transit arrangements between Optus and AT&T Corp. for Optus’s U.S. originated switched transit service provided to AT&T.
1.2This Agreement and all its contents is [sic] confidential between Optus and AT&T.
1.3The Agreement is effective from January 1, 1998 through December 31, 1998.
1.4Any accounting rate division of revenue calculation with the distant administration shall be based on standard regional charges informed by each supplier. All other discount charges referred on item 2 are confidential.
1.5Optus’s official transit fee to be used by AT&T when negotiating divisions of the accounting rate with distant administrations is .35 SDR ($0.42) per minute which applies to all traffic covered by this agreement. This transit fee can be changed from time to time by Optus by providing thirty (30) days prior written notice to AT&T.
…
2. CHARGES
2.1All U.S. originated switched transit minutes via Optus to the world will be charged at the confidential rate of .05 SDR ($0.07) per minute except as noted below in 2.2.
2.2All U.S. originated switched transit minutes via Optus to the following destinations will be charged at a flat rate of .075 SDR ($0.10) per minute:
[The destinations included Vanuatu.]
…
3. SETTLEMENTS
3.1Transit settlements will be processed in the normal manner. Official transit fees are to be used in reporting all traffic. Cascade or Direct settlement will be used by the Parties depending upon the arrangements agreed with the distant operators.
… ”
The next agreement was entered into in about September 1999 and purported to apply from 1 January 1999 to 31 December 1999. This agreement introduced a distinction between “audiotext” and other traffic. The “official transit fee” referred to in clause 1.5 of the prior confidential agreement remained at SDR 0.35, but the USD equivalent was stated at USD 0.483. The confidential rates set out in clause 2.1 of the prior agreement were changed to SDR 0.04 and USD 0.055. The confidential rates set out in clause 2.2 of the prior agreement did not change. Clause 3.1 provided as follows:
“3.1Switched Transit settlements will be processed in the normal manner with the confidential discounted rate applied. Cascade or Direct settlement will be used by the Parties depending upon the arrangements agreed with the distant operators.”
The third agreement was made in June or July or August 2000 (it was signed on various dates by various parties) and purported to apply from 1 January 2000 to 31 December 2000. The official transit rate was set at SDR 0.44 or USD 0.61 for all traffic except Vanuatu, for which the official transit rate was set at USD 0.483. The confidential rates varied according to whether the traffic was audiotext traffic (which, in this context, appears to include what Gilsan referred to as international internet dial up traffic) or not. For the former, which is the only relevant amount, the transit fee was agreed at SDR 0.058 or USD 0.08. Clause 3.1 read as follows:
“Transit settlements will be processed in the normal manner. Concert will report all minutes to C&W OPTUS at a flat rate of 0.025 SDR/US$0.035 per minute for ROW and 0.058 SDR/US$0.08 per minute for Audiotext destinations for the duration of this agreement. Cascade or Direct settlement will be used by the Parties depending upon the arrangements agreed with the distant operators.
All Audiotext minutes should be reported and charged at the Audiotext rate regardless of volume and without any rebate or discounts.”
It appears that a further agreement was made for the 2001 calendar year. It purported to be effective from 1 January 2001 to 31 December 2001. It fixed the official transit fee at SDR 0.44 or USD 0.61, with certain presently irrelevant exceptions. It provided for confidential charges for “Premium Traffic Destinations” and other destinations; the former would appear to be for audiotext or international internet dial up services and the agreed rates were SDR 0.025 or USD 0.035. Clause 3.1 provided as follows:
“3.1Transit settlements will be processed in the normal manner. Concert will report all minutes to C&W OPTUS at a flat rate of 0.025 SDR/US$0.035 per minute for ROW and 0.058 SDR/US$0.08 per minute for Premium Traffic destinations for the duration of this agreement. Cascade or Direct settlement will be used by the Parties depending upon the arrangements agreed with the distant operators.
All Premium Traffic minutes should be reported and charged at the Premium Traffic rate regardless of volume and without any rebate or discounts.”
The Hellenic/Optus confidential agreement
On about 3 April 1997, Hellenic sent a fax to Optus. That fax stated, so far as is relevant, that where Hellenic routed traffic to Vanuatu through Optus it would do so “applying the published transit rate of 0,35 SDR/min and the confidential one of 0,08 SDR/min”. The effect of this was to decrease Optus’ share of the Hellenic/TVL TAR from SDR 0.35 to SDR 0.08 and, correspondingly, to increase Hellenic’s share from SDR 0.725 to SDR 0.995. From Optus’ perspective, the inpayment to it was reduced thereby from SDR 1.075 to SDR 0.805.
Credit issues
Before I turn to consider the issues individually, I shall deal with the credibility of the principal witnesses for each side. The witnesses of fact for Gilsan were its principal, Mr Peter Warwick, and Mr Pearson. The witnesses of fact for Optus were Mr Bragg, Ms Velvet Papachatgis, Ms Samantha Bicknell, Ms Brenda Kirkham and Mr Pazmino.
Mr Warwick
Mr Warwick is, I have said, the principal of Gilsan. It is clear that Mr Warwick was in substance the guiding mind of Gilsan. There were a number of respects in which his evidence was unsatisfactory.
For example, in his first statement, Mr Warwick said, of the terms “accounting rate” and “transit rate” that “these terms and their meanings were not familiar to me” (PX 3, para 40). It became apparent in his cross-examination that, as ultimately he conceded, this aspect of his statement was wrong (T 183.44). It also became clear that, at least by the time he entered into the Optus agreement, he was familiar with the term “transit rate” so that, as he conceded, that aspect of para 40 also was wrong (T 184.11). Although he tried to pass these off as “mistakes” (T 184.15), he then accepted that he was pretending to have an ignorance about accounting rates and transit rates which was simply wrong (T 184.24). In this context, as he acknowledged, he knew that the level of his awareness about accounting rates and transit rates was “a highly relevant matter in these proceedings” (T 184.31). Mr Warwick then resorted to semantic obfuscation, focussing on the word “familiar” and saying “it’s not a familiar thing I’ve worked with. To say I did have knowledge, it’s how you work the word “familiar”.” (T 184.36). It became abundantly clear in his evidence thereafter that, contrary to that to which he had sworn, he was indeed “familiar”, according to the ordinary English meaning of that word, with those terms at the relevant time.
In similar vein, Mr Warwick denied knowledge of the existence or terms of confidential agreements made between originating and transit carriers and their effect on inpayments to transit carriers (see, for example, PX 7, paras 2 and 3; see also PX 8, para 2). However, it was clear that he had been given ample material to show that the transit rate that Optus would in fact receive from AT&T was substantially less than the USD0.42 (per minute) fixed by the tripartite agreement. I have no doubt that Mr Warwick, who was an intelligent and astute businessman, would have understood this material, and its effect, at the time he received and read it.
Under the tripartite agreement, AT&T and TVL would each receive USD 1.79 of the TAR and Optus would receive USD 0.42. However, Mr Warwick conceded, he knew before signing the Optus agreement that the total inpayment to Optus from AT&T would be USD 1.89. Mr Warwick would not accept that, therefore, he knew that AT&T was retaining USD 2.11; and his refusal to accept the obvious, and evasions and obfuscations in cross-examination, do him no credit (see generally T 196-210). However, he did agree that it was obvious to him that if AT&T were paying Optus USD 1.89 out of the TAR, then whatever was left was being retained by AT&T (T 208.32).
In this context, Mr Warwick said repeatedly that his only interest was the amount of the inpayment to Optus, and that he had no interest at all in how that inpayment was arrived at (see, for example, T 210.46). No doubt, Mr Warwick intended by these statements to convey the suggestion that the existence and effect of confidential agreements were of no concern to him, and thereby to bolster the evidence of his claimed ignorance.
Mr Warwick received an e-mail from Ms Bicknell, which he passed to Mr Pearson for his attention (exhibit PX 2, vol 17, p91), showing in an attachment the existence of both official and confidential transit rates (the former relating to rates fixed under tripartite agreements, and the latter relating to rates fixed under confidential agreements). Mr Warwick said that he simply passed this document on to Mr Pearson and that he did not himself read it carefully. That evidence was implausible in itself. Mr Warwick’s e-mail forwarding the proposal to Mr Pearson noted that it was “[a]ll positive sounding stuff to me”: a comment reflecting knowledge and comprehension of the “stuff”. Further, the evidence was inconsistent with Mr Warwick’s earlier evidence that he always read e-mails and always read them very carefully (T 216.10). When pressed with this discrepancy in his evidence, he said “I said I read it, but not carefully” (T 223.20), and that “I don’t believe I used [the] word “carefully” “(T 223.24). The transcript shows that he accepted the words “very carefully” put to him by counsel (T 216.10). Mr Warwick received a revised version of the proposal from Ms Bicknell (exhibit PX 2, vol 17, p 196). His evidence in relation to that document was equally unsatisfactory; having admitted that he read it (T 230.36), he sought almost immediately thereafter to resile from that admission (T 231.37).
The last specific matter that I mention in this context is that Mr Warwick, by his own evidence, engaged in deceitful conduct on at least one occasion. He had a practice of recording telephone calls. On 1 May 2001, he was party to a telephone call between Mr Rick Hall of TVL and Ms Eva Ting of Concert. He recorded that conversation, although he did not disclose that he was doing so (the same may be said of other recorded conversations referred to in his evidence). Mr Hall introduced Mr Warwick to Ms Ting and Ms Ting said in substance that, based on legal advice, she wished to speak only with Mr Hall: “I really would like to keep the communication between us, between telephone administrations”. Mr Warwick then said “Well, let me drop off” and Mr Hall said, “OK, alright then. I’ll just disconnect Peter. OK Peter I’ll speak to you later”. Notwithstanding what Mr Warwick had said, he remained on the line and recorded the entirety of the call. He said that he did not regard this behaviour as underhand in relation to Ms Ting (T 271.20). Whether or not that answer is truthful, it reflects adversely on his credibility; as, indeed, does the whole episode.
More generally, although Mr Warwick impressed me as an intelligent, astute and capable businessman, I observed that he often would lapse into evasion and obfuscation with questioning that he perceived to be difficult, or where an honest answer would be inconsistent with the case that Gilsan wished to present. On other occasions, Mr Warwick denied matters that a truthful attitude would have required him to accept; on other occasions again, he took advantage of a question to force a non-responsive answer on cross-examining counsel; on yet other occasions he retreated from answers earlier given by him where he perceived those earlier answers to be adverse to his company’s interests. In this last category, reference may be made to his evidence on his understanding of the term “clawback” from T 293-308, culminating in the proposition that his earlier evidence as to his understanding of “clawback” was wrong – T 308.18. An example of forcing non responsive answers may be seen at T 290.16 and following; the gratuitous references to “them invoicing Beylen” and to “an invoice raised to Beylen” were, I find, a spur of the moment invention designed both to distract counsel and to justify the stand taken by Mr Warwick in relation to the subject matter of the particular cross-examination. See paras [359] to [366] below. It may be noted that, although the invoice was called for, nothing was produced; and I conclude that the invoice never existed and that Mr Warwick had no reason to believe that it did.
I conclude that, in general, I cannot rely on Mr Warwick as a witness of truth. In general, therefore, I would not accept his evidence unless it is corroborated by other and acceptable evidence, or is consistent with the probabilities objectively viewed, or is against interest. This leads to a particular problem because, as will be seen, I take a similar view (more adverse in one case, and less adverse in the other) of the evidence of two of the three principal witnesses for Optus.
Mr Pearson
Mr Pearson was an accountant in private practice. His firm provided accountancy services to Gilsan and the other companies controlled by Mr Warwick. It is clear that Mr Pearson was directly involved in the administration of the businesses of Mr Warwick’s companies. Mr Pearson (more accurately, the firm of which he was a member) was remunerated for his services on the basis of a share in the revenues of those companies.
There were a number of respects in which Mr Pearson’s evidence was unsatisfactory. Thus, he, too, at first disavowed familiarity with the concept of the TAR or its components, until he dealt with Optus; but he conceded in cross-examination that this was wrong (T 336.38). Again, although initially he denied knowledge of the existence of the 2000 confidential agreement between Optus and AT&T, he conceded in cross-examination that this too was wrong (T 348.40, .46).
Nonetheless, taking into account these and other matters referred to by Optus in final submissions, I do not think that Mr Pearson sought deliberately to mislead the Court, let alone to give false evidence. In this context, it is significant that, unlike Mr Warwick, Mr Pearson was prepared to admit error. Nonetheless, I do not think that he is a witness on whose uncorroborated evidence I can in general place great weight. Nor do I think that, in general, Mr Pearson’s evidence alone is capable of providing substantial corroboration to the evidence of Mr Warwick.
The Optus witnesses of fact: general considerations
There is a problem that, to a greater or lesser extent, was common to the evidence of each of Optus’ witnesses of fact. The problem is that those people, in their dealings with Gilsan, appear to have regarded as of little if any consequence the terms of the agreement between Optus and Gilsan, and, as a result, to have paid little if any regard to those terms in their dealings with Gilsan. Mr Pearson referred to the “imposition culture” of Optus (T 386.27). This, I think, was an apt phrase. Mr Pearson explained that culture, in the immediately following passage, as “I had a string of things imposed on me by Optus, without warning, without notice and a lot of it was just plain wrong. And I was getting quite honestly to the end of my tether and I needed to have a date from them when I wouldn’t get a stupid alteration coming through again and that clawback refers to a whole string of adjustments that went before”.
For example, Ms Papachatgis, who was Mr Bragg’s deputy, did not read the Optus agreement until about June 1999 (T 597.42), and said repeatedly that she did not consider its terms to be important (see for example T 610.37). Mr Bragg, correspondingly, did not seem to think it important that she should read the agreement (T 720.34). Mr Pazmino did not think that it was important for him even to look at the agreement (T 498.32) and he did not in fact do so until October 2000 (T 499.8). Ms Papachatgis and Mr Pazmino were directly involved in the administration of the relationships created by the Optus agreement well before they had read its terms.
Optus, in particular through Ms Papachatgis and Mr Pazmino and, to a lesser extent, Ms Bicknell, administered its relations with Gilsan on terms that Optus seems to have regarded as commercially appropriate (or beneficial to it) rather than in accordance with the terms of the agreement. Thus:
(1)Optus deducted 1% or more from its measured minutes when accounting to Gilsan for traffic, even though the agreement between them made no provision for this.
(2)Optus sought to claw back payment for minutes for which the originating carrier had refused to pay Optus, even though, as Mr Bragg at least well understood, Optus’ usual clawback provision had been deleted from the draft of the agreement at a relatively early stage in negotiations, and well before the agreement was signed.
(3)Optus deducted the fee of SDR 0.175 payable to it under the agreement at the rate of USD 0.25, regardless of whether this was the correct conversion rate. It sought to justify this by saying that it was a practice universally understood in the industry, or that Gilsan had agreed to this being done. At the hearing, it relied only on the latter justification (see issue 10), but it is clear, on the evidence, that at least Mr Bragg and Ms Papachatgis did not think that it was necessary for there to be any variation to the terms of the Optus agreement to enable this to be done.
Orders
I propose to order, pursuant to Pt 31, r 2, that issues numbered 5, 7, 31, 40, 51, 54, 56, 57 and 58, set out in para [29] above be determined separately from and after the determination of all other issues in these proceedings.
The only order I make at this stage is to stand the proceedings over, to a date to be arranged with my associate but no later than 21 days from the date of publication of these reasons, to enable the parties to consider my reasons and the orders that may be necessary to give effect to them. Those orders may include (by way of example only) orders or directions necessary to enable the remaining issues in the proceedings to be determined. The parties may, on that occasion, make further submissions on any matters left unresolved by these reasons, on the orders necessary to give effect to these reasons, and (if desired) on costs.
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LAST UPDATED: 26/11/2004
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