Kingfisher Mobile Australia Pty Ltd v Telstra Ltd

[2023] NSWSC 1600

Supreme Court

New South Wales

Medium Neutral Citation:	Kingfisher Mobile Australia Pty Ltd v Telstra Ltd [2023] NSWSC 1600
Hearing dates:	14 December 2023
Decision date:	15 December 2023
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Defer consideration of whether separate question should be ordered; direct plaintiff first to adduce all evidence on which it relies in relation to that question; provisionally fix separate question for hearing
Catchwords:	CIVIL PROCEDURE – application for determination of separate question – whether hearing of separate question should be ordered – whether proper construction of contract and final injunctive relief in respect of alleged breach of that contract should be heard before claim for damages – whether separate question should be provisionally listed for hearing
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW)
Category:	Procedural rulings
Parties:	Kingfisher Mobile Australia Pty Ltd (Plaintiff/Applicant) Telstra Limited (Defendant/Respondent)
Representation:	Counsel: D R Sulan SC with B Yin (Plaintiff/Applicant) R Scruby SC with C Ernst (Defendant/Respondent) Solicitors: Corrs Chambers Westgarth (Plaintiff/Applicant) King & Wood Mallesons (Defendant/Respondent)
File Number(s):	2023/429982

JUDGMENT

1. The plaintiff, Kingfisher Mobile Australia Pty Ltd is a provider of mobile device lifecycle services.

2. On 11 November 2020, Kingfisher entered into a Mobility Products Services Agreement with Telstra Corporation Ltd pursuant to which it agreed to provide certain lifecycle services to Telstra for the benefit of customers who had enrolled in certain programs offered by Telstra during the “Ordering Period”. The Ordering Period was initially to 30 June 2023, but has now been extended to 31 March 2024.

3. The agreement is for a seven year term concluding on 30 June 2027.

4. The agreement provides that Telstra could “only enrol new devices” until, effectively, 31 March 2024.

5. In submissions before me Mr Sulan SC, who appeared with Mr Yin for Kingfisher, described customers already “enrolled” by 31 March 2024 as “Tail Customers”. It is Kingfisher’s position that the effect of the Agreement is that Tail Customers will always remain customers of Kingfisher. There is a significant number of Tail Customers.

6. In November 2022, Telstra commenced a tender process for the provision, from 1 April 2024, of services such as those provided by Kingfisher to Telstra under the Agreement. Kingfisher participated in that tender but was not the successful tenderer. The result is that, from 1 April 2024, Telstra will engage a third party, Assurant Services Australia Pty Ltd to provide the services hitherto provided by Kingfisher in relation to “New Enrolments”.

7. Kingfisher contends that:

1. Telstra failed properly to engage in the good faith negotiation process specified in the Agreement before engaging a third party to provide services substantially similar to those provided by it; and thus acted in breach of an identified clause in the Agreement and causing it, in effect, to lose the chance to be the successful tenderer (the “Lost Opportunity Case”); and

2. the combined operation of a number of express terms of the Agreement, and a number of implied terms alleged to be in the Agreement, is that Telstra may not cause the Tail Customers to be migrated to the successful tenderer, Assurant (the “Tail Customers Case”).

8. Kingfisher commenced these proceedings on 28 November 2023 seeking:

1. as to the Lost Opportunity Case:

1. a declaration that Telstra’s conduct constituted a breach of the Agreement; and

2. damages (in effect for the loss of a chance to be the successful tenderer); and

2. as to the Tail Customers Case:

1. a declaration that the contract has the effect set out at [7(b)];

2. an injunction to restrain Telstra from causing Tail Customers to be migrated to Assurant (the “Tail Customers Injunction”); and

3. damages.

9. During argument before me on 14 December 2023, Mr Sulan accepted that if Kingfisher obtained the Tail Customers Injunction, it would not suffer damage as referred to in [8(b)(iii)].

10. By Notice of Motion filed on 5 December 2023, and as in substance pressed during the hearing on 14 December 2023, Kingfisher seeks an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 28.2 that the question of its entitlement to the declaratory and injunctive relief concerning its Tail Customers Case be determined separately from and before its Lost Opportunity Case and before any assessment of damages.

11. At the hearing on 14 December 2023, Mr Sulan also sought the setting of a hearing date in March 2024 for those questions so that Kingfisher could then move, on a final basis, for the Tail Customers Injunction prior to the date on which Assurant will commence to provide services to Telstra.

12. Telstra opposed this course of action on three bases.

Delay

13. As Mr Scruby SC, who appeared with Ms Ernst for Telstra pointed out, Kingfisher has known of the outcome of the tender process since late July 2023.

14. Since late August 2023, Kingfisher has on a number of occasions sought undertakings from Telstra that it not migrate Tail Customers to an alternative service provider and has threatened to commence proceedings, such as are now on foot, in the absence of such undertakings.

15. The agreement contains a dispute resolution clause which requires the holding of good faith discussion and purports to prevent either party from commencing legal proceedings unless certain procedures are followed. However, the clause does not prevent either party from seeking “urgent injunctive or declaratory relief”.

16. In the four month period between Telstra’s announcement of the outcome of the tender process and the commencement of these proceedings there have been without prejudice negotiations the contents of which, obviously, have not been revealed.

17. This delay is a factor that is relevant to whether or not the Court should accede to Kingfisher’s proposal but not one I find to be decisive.

Overlapping issues

18. When seeking the Tail Customers Injunction, Kingfisher will contend that one reason an injunction should be granted is that damages will not be an adequate remedy. In that regard, Mr Sulan and Mr Yin submitted that “the Court will not need to make any precise findings as to Kingfisher’s loss; only that it’s likely to be greater than the Liability Cap Amount” in the Agreement: assumed for present purposes to be $45 million.

19. But to determine whether Kingfisher’s likely loss would exceed $45 million, it will be necessary for the Court to determine, with some degree of precision, what Kingfisher’s damages are likely to be. On this application, Kingfisher has adduced evidence of revenue projections but, it is agreed, the key integer here is Kingfisher’s likely loss of profit. Thus, a separate determination of Kingfisher’s claim for the Tail Customers Injunction will involve some, perhaps very detailed, consideration of that question.

20. There is thus likely to be an overlap between the evidence adduced in that exercise and, assuming that Kingfisher does not obtain the Tail Customers Injunction, but succeeds in establishing that Telstra was relevantly in breach of contract, the evidence adduced on the issue of Kingfisher’s damages in its Tail Customers Case. There is also likely to be an overlap between that evidence and the evidence to be adduced in Kingfisher’s Lost Opportunity Case.

21. However, it is unlikely that issues of credit arise. The matter is likely to be resolved by reference to expert accounting evidence. Telstra’s position can be protected by a direction that Kingfisher may not adduce any evidence in its damages case inconsistent with or different from the evidence that it adduces in its application for a Tail Customers Injunction.

22. Accordingly, I do not see that the prospect of there being some overlapping accounting evidence is itself being a reason to refuse to take the course sought by Kingfisher.

Telstra’s ability to be ready

23. Finally, and perhaps most importantly, Telstra is unable to say at the moment whether it could meet a March date.

24. Mr Scruby submitted that Telstra is not at the moment in a position to say whether it could marshal all of the evidence it would need to meet the proposed separate questions by a date in March.

25. The topics on which Telstra would seek to adduce evidence include:

1. the operational difficulties to Telstra were it to be enjoined from migrating Tail Customers to Assurant in circumstances where Telstra does not currently have systems capable of accommodating parallel providers (Kingfisher for Tail Customers and Assurant for new customers);

2. the impact on Telstra customers of Telstra being required to maintain parallel providers with a possibility of impaired customer service delivery;

3. the time that will be required for Telstra to build platforms capable of accommodating parallel service providers;

4. the prejudice to third parties, including Assurant;

5. the cost of Telstra being required to run two parallel services; and

6. in the context of considering whether damages would be an adequate remedy, Kingfisher’s likely losses absent the making of the Tail Customers Injunction.

26. Telstra will also have to consider what evidence it adduces relevant to the construction question raised in Kingfisher’s Tail Customer’s Case, including as to matters which were mutually known.

27. Mr Scruby also submitted that it may be that Telstra will need to seek discovery from Kingfisher in relation to some or more of these issues.

28. The next step is for Kingfisher to serve all the evidence on which it relies in support of its Tail Customers Case, other than damages. That evidence should include all evidence on which Kingfisher relies to show that damages would not be an adequate remedy, assuming it established the breach of the Agreement for which it contends.

29. Mr Sulan told me that Kingfisher can do this by 22 January 2024.

30. I am also persuaded to allocate a provisional hearing date for the hearing of Kingfisher’s Tail Customers Case, other than damages. The only dates the Court has available are from 18 to 21 March 2023. I will provisionally fix those hearing dates.

31. I will list the matter for directions before me at 9.15 am on 31 January 2024 and hear further submissions from Telstra as to its ability to accommodate the provisional hearing date. Counsel who appeared for Telstra before me yesterday are not currently available on the provisional dates. Telstra can raise that matter when the matter returns for directions. Counsel’s availability is a factor to be considered when deciding whether to confirm the provisional dates. But as the provisional dates are now known, the possibility of retaining alternate Counsel will also weigh in the balance.

32. Telstra is very well advised in this matter and I have no doubt that every effort will be made to give the Court a responsible assessment at the directions hearing of Telstra’s ability to meet the provisional fixture.

33. I make the following directions:

1. By 5 pm on 22 January 2024 the plaintiff serve all evidence on which it proposes to rely in relation to the relief sought in paragraphs 2 and 3 of the Summons, other than as to damages, but including as to why damages would not be an adequate remedy were the plaintiff to be granted the relief sought in paragraph 2 of the Summons.

2. Provisionally fix the plaintiff’s claim for such relief for hearing on 18 to 21 March 2024.

3. List the matter before Stevenson J at 9.15 am on 31 January 2024 for the purpose of considering whether the provisional hearing date should be confirmed and necessary further directions.

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Decision last updated: 15 December 2023