Mobile Innovations Limited v Vodafone Pacific Limited

No judgment structure available for this case.

CITATION: Mobile Innovations Limited v Vodafone Pacific Limited & Ors [2003] NSWSC 166

HEARING DATE(S): 17/02/03, 18/02/03, 19/02/03, 21/02/03, 24/02/03, 25/02/03, 26/02/03, 27/02/03, 28/02/03, 3/03/03, 4/03/03, 5/03/03, 6/03/03, 7/03/03, 10/03/03, 11/03/03, 12/03/03, 13/03/03, 14/03/03

JUDGMENT DATE:
27 March 2003

JURISDICTION:
Equity Division

JUDGMENT OF: Einstein J

DECISION: Upon the proper construction of the ASP Vodafone was not entitled to put forward nil as the target level in respect of the number of connections of new subscribers. By setting a nil target or by refusing to determine a target Vodafone rendered it impossible for Mobile to perform its obligations under the ASP. Finding that the same decision may be reached by way of: (1) upholding the pleaded implied co-operation term obliging Vodafone to do whatever was necessary to be done on its part to enable Mobile to have the benefit of the ASP and to refrain from doing anything which would or which would be calculated to deprive Mobile of the benefit of the ASP but giving this term limited reach in terms of applicable content (2) upholding the pleaded implied terms that Vodafone would act in good faith and reasonably in exercising its powers under the ASP but giving this term limited reach in terms of applicable content. Other disparate cases dealt with. Parties to bring in short minutes of order.

CATCHWORDS: CONTRACT - Principles of construction - Inter- relationship with principles governing implication of terms - IMPLIED TERMS - Duty to co-operate - Duty to act in good faith - Duty to act reasonably - Whether duty of co-operation may be considered an implied legal duty discerned by a process of construction, a rule of law or an implied term - Principles governing implication of term in connection with the maintenance of a business - Principles governing exclusion of implied terms - CAUSATION AND DAMAGES - Difficulties of assessment - Hypotheticals - Lost Chance - Loss of benefit or detriment dependent upon the making or exercise of discretionary decisions - Doctrine of efficient breach - Vicissitudes - Contractual and other arrangements of parties carrying on business of providing mobile telecommunications services - [see extended catchwords within]

LEGISLATION CITED: Supreme Court Act
Telecommunications Act 1997 (Cth)

PARTIES :
Mobile Innovations Limited (Plaintiff)
Vodafone Pacific Limited (First Defendant)
Vodafone Network Pty Limited (Second Defendant)
Vodafone Pty Limited (Third Defendant)

FILE NUMBER(S): SC 50123/01

COUNSEL: Mr D J Hammerschlag SC, Mr V F Kerr (Plaintiff)
Mr T F Bathurst QC, Mr T D Castle (Defendants)

SOLICITORS: Deacons (Plaintiff)
Henry Davis York (Defendants)

Extended Catchwords
Long-term commercial contract appointing plaintiff as non-exclusive agent service provider for provision of acquisition and management services
Contract including close provisions with respect to parties obligations to use best endeavours to agree upon business plans prior to commencement of each quarter - Provision that defendant to have sole discretion to determine target level in respect of the number of connections of new subscribers which target level is to be determined by defendant in conjunction with the determination of business plan for relevant quarter - Whether discretion to set targets absolute or subject to implied terms to co-operate, to act in good faith and/or to act reasonably
Defendant purports to determine "nil" target
Defendant refuses to determine targets
Whether nil is "the number of new subscribers expected to be connected in the next quarter"
Whether defendant entitled to put forward nil as the target level in respect of the number of connections of new subscribers - Alleged co-operation term that defendant would do whatever was necessary to be done on its part to enable plaintiff to have the benefit of the contract and would refrain from doing anything which would or which would be calculated to deprive plaintiff of the benefit of the contract
Precise content of such implied term - Obligation of good faith and reasonableness obliges each party to behave honestly and to do all such things as are necessary to enable the other party to have the benefit of the contract - Whether implied obligation would be breached if discretions exercised arbitrarily or capriciously - Court does not require commercial parties to behave reasonably towards each other in the matter of fixing positive as opposed to nil targets when they have not expressly included the relevant standard
Court not in a position to clarify that which is irremediably obscure
Review of principles to be derived from case law with respect to implication of a term in connection with maintenance of a business
Exclusion of implied terms
Principles applicable
Setting target of nil effectively stultified further operation of contract
Damages for loss of benefit of chance contracted for
Courts assessment of prospects of success or loss had opportunity been pursued
Doctrine of efficient breach
Questions of causation to be answered in the legal framework in which they arise
Review of case law in terms of inability of curial procedures to determine with certainty what has happened in the past
Loss or benefit or detriment dependent upon the making or exercise of discretionary decisions
Review of case law concerning discounts for vicissitudes

List of Cases
Abu Dhabi National Tanker Co v Product Star Shipping Limited (The Product Star) (No 2) [1993] 1 Lloyd’s Rep 397
Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236
Ajayi v RT Briscoe (Nigeria) Ltd [1964] 1 WLR 1326
Alcatel Australia Ltd v Scarcella & Ors (1998) 44 NSWLR 349
Alexander v Cambridge Credit (1987) 9 NSWLR 310
Alpha Trading Ltd v Dunshaw-Patten Ltd [1981] 2 WLR 169
Ashington Piggeries v Christopher Hill [1972] AC 441
Australian Broadcasting Commission v Australian Performing Right Association (1972) 129 CLR 99
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Australis Media Holdings v Telstra Corporation (1998) 43 NSWLR 104
Beaton v McDivitt (1987) 13 NSWLR 162
Bennett v Minister for Community Welfare (1992) 176 CLR 486
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
B&M Readers’ Service v Anglo Canadian Publishers Pty Limited [1950] Ontario Reports 159 (Court of Appeal);
Board of Fire Commissioners (NSW) v Ardouin (1961) 109 CLR 105
BP Refinery (Westernport Port) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266
Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187
Byrne v Australian Airlines (1995) 185 CLR 411
Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468
Chaplin v Hicks [1911] 2 KB 786
Chappel v Hart (1998) 195 CLR 232
Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1
Cockburn v Alexander (1848) 6 CB 791
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Commonwealth v Amann Aviation (1991) 174 CLR 125
Comptoir Commercial Anversois and Power Son and Co [1920] 1 KB
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurances (Australia Ltd) (1986) 160 CLR 226
Coulter v Readhead (1931) 31 SR 432
Daniels v Anderson (1995) 37 NSWLR 438
Davis Contractors Ltd v Fareham UDC [1956] AC 696
Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth (1908) 6 CLR 647
Evans Marshall and Co Ltd v Bertola SA [1975] 2 Lloyd's Rep 373
Fightvision Pty Limited v Onisforou (1999) 47 NSWLR 473
Fink v Fink (1946) 74 CLR 127
Gissing v Gissing [1971] AC 886
Hamlyn & Co v Wood & Co [1891] 2 QB 488
Hardwick Game Farm v Suffolk Agricultural Poultry and Producers Association [1969] 2 AC 31
Hart v Macdonald [1910] CLR 417
Heimann v Commonwealth (1938) 38 SR (NSW) 691
Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Howe v Teefy (1927) 27 SR (NSW) 301
Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor (1993) 31 NSWLR 91
Hungry Jacks v Burger King [1999] NSWSC 1029
Immer (No. 145) Pty Ltd v. Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26
Inchbald v Neilgherry Coffee Tea and Cinchona Plantation Co (Ltd) (1864) 17 CB (NS) 733; 144 ER 293
Jones v Schiffmann (1971) 124 CLR 303
Johnson v Agnew [1980] AC 367
Kahn v Aircraft Industries Corporation [1937] 3 All ER 476
Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243
Krell v Henry (1983) 2 KB 740
Lavarack v Woods Colchester Ltd [1967] 1 QB 278
Lazarus v Cairn Line of Steamships Ltd (1918) 106 TLR 378
L French and Co Ltd v Leeston Shipping Co Ltd [1922] AC 451
Luxor (Eastbourne) Ltd v Cooper [1941] AC 108
Mackay v Dick (1881) 6 App Cas 251
Mallett v McMonagle [1970] AC 166
Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
McCutcheon v David MacBrayne [1964] 1 WLR 125
McIntyre v Belcher (1863) 11 BC (NS) 654; LJ (CP) 254
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Meehan v Jones (1982) 149 CLR 571
Monarch SS Co v A/B Karshamns Oljefabriker [1949] AC 196
Neeta v Philips (1974) 131 CLR 286
New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68
Norris v Blake [No 2] (1997) 41 NSWLR 49
Northey v Trevillion (1901) 18 TLR 648
Ogdens, Limited v Nelson [1905] AC 109
Oriental Steamship Co v Tylor (1893) 2 KB
Overlook v Foxtel [2002] NSWSC 17
Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10
Ratcliffe v Evans [1892] 2 QB 524
RDJ International Pty Ltd v Preformed Line Products (Australia) Pty Ltd (1996) 39 NSWLR 417
re English and Scottish Marine Insurance Company; Ex parte Maclure (1870) L Rep 5 Ch 737
Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592
Reid v Rush Tompkins Group Plc [1990] 1 WLR 212
Re Premier Products Ltd (in liq) [1965] NZLR 50
re Railway and Electric Appliances Company (1888) 28 ChD 597
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Rhodes v Forwood (1876) 1 App Cas 256
Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd Receiver and Manager Appointed (formerly CEL Home Video Pty Ltd) (1997) 42 NSWLR 462
Ronnoc Finance v Spectrum Network Systems Ltd (1997) 45 NSWLR 624
Sargent v. ASL Developments Ltd (1974) 131 CLR 634
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 (2002)
State of New South Wales v Banabelle Electrical Pty Ltd 54 NSWLR 503
Secured Income Real Estate v St Martin’s Investments Pty Ltd (1979) 144 CLR 596
Sterling v Maitland (1864) 5 B & S 840, 122 ER 1043
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245
Takaro Properties Limited v Rowling [1986] 1 NZLR 22
Taylor v Caldwell (1863) 3 B&S 826; 122 ER 309
TCN Channel 9 v Mayden Enterprises (1989) 16 NSWLR 130
Trans-Pacific Insurance Co (Australia) Ltd v Grand Union Insurance Co Ltd (1989) 18 NSWLR 675
Turner v Goldsmith [1891] QB 544
Tymshare Inc v Covell 727 F2d 1145 (1984)
United States Surgical Cooperation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Warren & Co v Agdeshman (1922) TLR 588
Wenham v Ella (1972) 127 CLR 454
Withers v General Theatre Corporation [1933] 2 KB 536

INDEX

Paragraph No.

The Proceedings 1

The parties 3

Ownership and transfer of the Network 5

The Agreements 10

GSM Service Provider Agreements - 13 May 1994;

7 November 1996 10

Structural changes to the relationship 12

Heads of Agreement 13

ASP Agreement - October 1998 14

First Amendment Agreement - May 1999 18

Novation/Parties to the ASP Agreement as at the date of the May

1999 Amendment Agreement 20

Second Amendment Agreement - August 2000 23

Glossary 25

General nature of issues for determination 26

Implied Terms 31

Overview of the ASP Agreement 35

The nil determination issue 42

Statistics 49

Identification of the eleven disparate cases 50

MC 9 Plan [Claim 3] 58

Mobile's Case 65

Vodafone's case 66

Additional Customer Management Agreement [Claim 1] 70

Website Agreement [Claim 11] 76

June 2001 Quarter [Claim 4] 81

Vodafone’s case 83

September 2001 Quarter [Claim 5] 85

Actual Acquisition Costs for the September 2001 Quarter 87

Vodafone’s case 88

December 2001 Quarter [Claim 6] 90

Vodafone's approach to the Quarters for March, June,

September and December 2002 91

Retention Funding Dispute [Claim 8] 92

Direct Marketing (X4) dispute [Claim 9] 96

Repudiation [Claim 10] 98

Interest 101

The evidence 102

General test of objectivity 102

Approach to the evidence adduced 106

Pre- contractual communications 107

Exhibit xx 110

Post-contractual communications 113

Matrix of facts objectively known to both parties against

which the ASP was executed 118

Dramatis personae 119

Mobile Innovations witnesses: 120

Mr Bramwell 120

Mr Marchbank 121

Mr Shaw 122

Mr Ralph Stonell 123

Mr Steven Ikeda 125

Ms Claire Statham 127

Mr Ilkka Tales 128

Vodafone witnesses: 129

Mr Julian Ogrin 129

Mr Christopher Wisbey 130

Mr Todd Buckley 131

Ms Jayne Blake 132

Ms Cindy Moussa 133

Mr Paul Stormon 135

Mr Grahame Maher 137

Mann Made Marketing Pty Ltd 138

Affidavits or Statements read but not examined on 139

Mark Nicholas Jones 139

Cindy Moussa 142

Expert evidence on damages 145

The Evidence 147

Targets set and plans sold 147

The sundry business plans which were sold 149

Statistics 151

Confusion factor 152

Theme of the cross-examination of Mobile witnesses 153

Profitability of Mobile up to 1999 156

Reliability 158

Evidence given by Mr Marchbank 162

Fixing and reduction of targets 165

Evidence given by Mr Shaw 166

Targets set from October 1998 up to March 2000 quarter 168

Late 1997 169

January 1998 - October 1998 170

Proposal to float 172

Modelling 174

Security factor 175

Value of future contract to make up perceived value 177

Guarantee of connection discussions 180

October 1998 and following 181

October 1998 - December 1999 181

December Marketing Plan 182

Vodafone objectives 183

3 February 1999 – Overhead costs higher than expected 186

March 1999 – Marketing of plans other $10.00 plan 187

15 March 1999 – Float concerns 189

17 March 1999 190

18 March 1999 191

26 March 1999 193

29 and 31 March 1999 196

1 April 1999 198

2 April 1999 199

Early April 1999 200

7 April 1999 201

Prospectus issued 204

25 May 1999 – Agreement to vary the ASP Agreement 209

24 June 1999 - Ms Blake email [3/ 457P] 211

25 June 1999 212

1 July 1999 213

30 July 1999 – Incentive withdrawn 214

4 August 1999 – Deteriorating relationship 215

13 December 1999 – Connection Performance Complaints 218

Mobile’s Marketing Plan for January – December 2000 220

December 21 1999 [3/ 466] 220

January 2000 - June 2000 227

First Quarter of 2000 231

January 2000 – V Mobile Plan 233

12 January 2000 - meetings 235

Power point presentation [3/ 471] 235

Web site Proposal 238

17 January 2000 - Letter 3/ 498 Mobile to Vodafone 239

19 January 2000 3/ 506 240

February 2000 241

8 February 2000 – end of year financial freeze complaint 242

Misfit in Vodafone’s distribution strategy 243

Channel Conflict 245

8 February 2000 3/ 517 246

10 February 2000 3/ 519 248

15 February 2000 3/ 524 249

24 February 2000 – 5/ 528 250

6 March 2000 251

8 March 2000 - Website Agreement 252

Early March 2000-Discussions concerning migration of 30,000

additional customers 253

Evidence of Mr Bramwell 254

9 March 2000 - Draft Letter of Intent [3/ 551] 255

Approximately 10 March 2000 - Draft Announcement to Market 256

13 March 2000 258

16/20 March 2000 – Additional Customer Management

Agreement 258

3 April 2000 3/ 563 262

4 April 2000 264

The Strategy Document 563E 271

7 April 2000 E-mail Marchbank to Ogrin 3/ 564 272

11 April 2000 3/ 564A 273

12 April 2000 3/ 564B 275

18 April 2000 276

Early May 2000 278

The timeline which then unfolds on the migration issue 280

2 May 2000 – Repudiation of Migration Agreement 282

5 May 2000 3/ 572 283

8 May 2000 3/ 573 285

9 May 2000 3/ 576 286

10 May 2000 289

15/16 May 2000 290

19 May 2000 293

21 May 2000 295

25 May 2000-Channel strategy presentation 3/ 598A [see q] 300

25 May 2000 305

Letter Mobile to Vodafone [3/ 596] 305

27 May 2000 306

2 June 2000 308

7 June 2000 309

8 June 2000 – Notification to the marketplace 311

26 June 2000 3/606A 314

Early July 2000 315

July 2000 - MC 9 Plan 318

10 July 2000 4/607 319

11 July 2000 320

19 July meeting Ex xx page 53 321

July 2000 - December 2000 325

Late July – Proceedings commence 325

20 July 2000 3/ 608 326

21 July 2000 327

21 July 2000 3/609O 328

27 July 2000 328

Email 3/ 611 330

27 July 2000 MC9 Plan 334

28 July 2000 335

8 August 2000 341

15 August 2000 – ASP Amending Agreement [PX 8/ 1330AB] 350

28 August 2000 351

Quarter ending December 2000 – CTA Worksheet with target

of 27,900 352

4 October 2000 353

5 October 2000 355

17 October 2000 358

1 November 2000 359

3 November 2000 360

6 November 2000 361

November 2000 365

15 November 2000 368

27 November 2000 369

30 November 2000 – BAM/CTA review 372

Mobile's summary of the ASP and of Vodafone position 374

Management Fee – reduced to nil for some subscribers 376

1 December 2000 377

7 December 2000 ASP Meeting - (minutes of the meeting

are at 4/ 669) 379

12 December 2000 4/ 679 381

14 December 2000 4/ 679 382

After 17 December 2000 383

20 - 22 December 2000 [5/ 697 - 5/ 698] 384

22 December 2001 385

January 2001 - June 2001 386

11 January 2001 388

12 January 2001 - Target for June quarter of 23,000 mentioned 390

15 January 2001 392

19 January 2001 393

24 January 2001 395

25 January 2001 – ASP meeting took place. 396

31 January 2001-24,000 connections for June quarter 400

31 January 2001 6/ 726A-726B 401

1 February 2001 403

1 February 2001 6/729 406

1 February 2001 - Numbers massaging email 407

8 February 2001 412

15 February 2001 413

16 February 2001 415

19 February 2001 416

20 February 2001 420

21 February 2001 6/753 421

23 February 2001 421

27 February 2001 Draft CTA business plan for June quarter 422

28 February 2001 423

7 March 2001 – target of 12000 subscribers for 12 month period 430

Chief Executive Officer's Report February/March 2001 written

by Mr Marchbank soon after 7 March 2001 [6/ 921D] 439

9 March 2001 6/ 790 442

9 March 2001 MC9 dispute 445

12 March 2001 6/ 776 448

13 March 2001 450

15 March 2001-Mobile Revised Budget Impact document

- exhibit P5 452

15 March 2001 6/ 831 455

16 March 2001 Henry Davis York response 6/ 833 456

20 March 2001 459

20 March 2001 6/ 844 Draft CTA for June quarter

appears at 6/ 764 466

21 March 2001 Amended CTA 466

CTA for the June 2001 quarter was based on 19,000 new

subscribers 6/ 851 466

22 March 2001 467

Finding as to contextual background 470

29 March 2001 472

30 March 2001 6/907-913 473

3 April 2001 476

3 April 2001 480

5/6 April 2001 – June 2001 business plan 6/ 939; 6/ 946 481

9 April 2001 482

11 April 2001 483

17 April 2001 492

27 – 30 April 2001 493

1 May 2001 494

2 May 2001 495

2 May 2001 Beginning of negotiations for the September quarter 496

4 May 2001 497

11 May 2001 Retention Meeting 500

14 May 2001 501

15 May 2001 502

18 May 2001 503

23 - 25 May 2001 504

28 May 2001 505

29 May 2001 506

31 May 2001 507

6 June 2001 508

8 June 2001 [7/ 1116] 509

13 June 2001 510

14 June 2001 511

15 - 18 June 2001 512

19 June 2001 516

20 June 2001 517

22/23 June 2001 521

25 June 2001 524

26 June 2001 525

Early July 2001 527

4 July 2001 528

5 July 2001 529

7 July 2001 533

17 July 2001 534

July 2001 - December 2001 537

July 2001 on 537

Pre 13 July 2001 538

13 July 2001 - Mr Marchbank invokes the dispute resolution

procedure in relation to the September CTA [7/1222-1224] 539

17 July 2001 541

Discussion Document presented to Vodafone – Suggested

strategies for going forward” [7/ 1211- 7/ 1221] 541

18 July 2001 7/1225-1227 543

19 July 2001 544

23 July 2001 – Nil target notification 7/1228 545

27 July 2001 and following – redundancies 546

2 August 2001 Meeting between the parties –

Nil target’s hereafter: 547

22 August 2001 561

23 August 2001 563

Mobile comes to the position that it would not need to prepare

business plans for the acquisitions of nil customers 564

30 August 2001 565

18 September 2001 566

28 September 2001 568

5 October 2001 572

24 October 2001 573

14 November 2001 575

16 November 2001 576

20 November 2001 577

6 December 2001 582

1 April 2002 587

CTA Worksheets for the June 2002 quarter and the September

2002 quarter 589

Vodafone’s refusal to pay CTA 599

Marketing Agreement 600

The Question 602

The duty to cooperate, good faith and reasonableness causes

of action 604

The principles governing implication of terms 604

The implied duty to cooperate in the performance of contractual

obligations 606

Good Faith 613

The scheme of the ASP 618

Benchmark provisions 622

Best endeavours 634

Business plans 636

Nil target and nil business plan 639

Estimated and Actual Acquisition Costs 646

Resolving these disparate internal conflicts 650

Objectivity 651

Matrix of circumstances 654

Commercial contract 655

Implied terms 657

Holding in respect of the nil target issue 669

Proper Construction 669

Obligation to co-operate 673

Obligation of good faith and reasonableness 680

Implication of term in Connection with the Maintenance of a

Business 695

Case law with respect to the implication of a term in connection

with the maintenance of a business 695

Principles to be derived from the case law 712

Exclusion of implied terms 717

Returning to the Mobile case 730

The Way Forward 735

Causation and Damages/Loss 738

Onus 738

Difficulty of assessment 740

Hypotheticals 743

Loss or benefit or detriment dependent upon the making or

exercise of discretionary decisions 747

Doctrine of efficient breach 751

Vicissitudes 754

Dealing with the matter 757

Applying these principles 759

Claims 6 and 7 777

Damages – December 2001 Quarter 777

Unpaid CTA 781

Damages - Subsequent quarters - March, June, September,

December 2002; March 2003 793

Dealing with the disparate cases otherwise than the nil

target issue 797

Additional Customer Management Agreement [Claim 1] 798

The nature of the obligations in the agreement 800

The repudiation of the agreement 801

Damages 808

The plaintiff’s written submissions 809

Vodafone's submissions 810

Holding as to damages 811

V Mobile Plan [Claim 2] 815

MC 9 dispute [Claim 3] 816

Leave to address further submissions 832

June 2001 [Claim 4] 833

Damages 843

Claim 5 - September 2001 Quarter dispute 845

No agreed CTA 846

Redundancies - the construction issue 851

Retention Funding - Claim 8 854

Web site Agreement - Claim 11 858

Staff Salaries 859

Security Costs 860

Direct marketing (X4 and HIA) Dispute - Claim 9 862

The relevant clauses in the ASP 863

The nature of Mobile's exclusivity rights 864

Use of the word "solely" in the definition of "Mobile Direct

Marketing Operation" 864

X4 and the Housing Commission 868

Direct Marketing by Vodafone 869

Dealing with the matter 870

Relief 880

Repudiation [Claim 10] 881

Short Minutes of Order and further address 884

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

EINSTEIN J

Thursday 27 March 2003

50123/01 MOBILE INNOVATIONS LIMITED v VODAFONE PACIFIC LIMITED & ORS

JUDGMENT

The Proceedings

1 These proceedings concern disputes arising from the contractual and other arrangements of parties carrying on the business of providing mobile telecommunications services.

2 The principal issues concern the proper construction of a long-term commercial agreement of some complexity. As often occurs in relation to such agreements the parties who have contracted into the future using a variety of concepts, formulae and detail, later come to heated disputation about what was agreed. The construction and other issues treated with in the judgment were hotly contested, no doubt by reason of the significance which findings one way or the other would have to the parties disparate commercial interests.

The parties

3 The Vodafone group is an international network of companies. The first defendant, Vodafone Pacific Ltd [formerly Vodafone Network Pty Ltd] ["Vodafone Pacific"], the second defendant Vodafone Network Pty Ltd ["Vodafone Network"] and the third defendant Vodafone Pty Ltd ["Vodafone Pty Ltd"] comprise three particular Australian companies forming part of this group. Vodafone Network and Vodafone Pty Ltd were at material times wholly owned subsidiaries of Vodafone Pacific. Vodafone Pacific is a wholly owned subsidiary of Vodafone Plc, which is listed on the London Stock Exchange.

4 Vodafone Pacific was at all material times a carrier licensed under the Telecommunications Act1997 (Cth) in respect of activities including provision of mobile telecommunications services to subscribers.

Ownership and transfer of the Network

5 Prior to April 2000 Vodafone Pacific owned and operated a public mobile telecommunications network in Australia.

6 In April 2000 Vodafone Pacific transferred its network to Vodafone Network which has since operated the network.

7 A convenient schedule identifying the relevant events with respect to transfer of the network and changes of name and novations was prepared by the plaintiff [MFI 5] and is conveniently appended as appendix “A”.

8 The plaintiff Mobile Innovations Ltd ["Mobile" or “MI”] is a company listed on the Australian Stock Exchange. It conducted a business of obtaining and managing customers for Vodafone. In particular, Mobile specialised in obtaining customers using “direct marketing” (also known as “remote selling”). It was sometimes referred to as Vodafone's direct channel. Direct marketing involves placing advertisements in press, magazines and direct mail and receiving the resulting orders centrally by telephone, fax, email or the Internet and then processing those orders. Advertising in mass circulation media (press and magazines) is also called “off the page” marketing.

9 Mobile entered into a series of agreements with either or both of Vodafone Pacific and Vodafone Network. One issue which was raised on the pleadings but ultimately not litigated concerned which of the Vodafone companies had entered into the relevant contracts. Save where it is necessary for obvious reasons to differentiate between Vodafone Pacific and Vodafone Network, the convenient course is to follow the approach taken in the Further Amended Summons by describing Vodafone Pacific and Vodafone Network jointly and severally as "Vodafone".

The Agreements

GSM Service Provider Agreements - 13 May 1994; 7 November 1996

10 On 13 May 1994 and on 7 November 1996 Mobile entered into GSM Service Provider Agreements with Vodafone Pacific (then called Vodafone Pty Limited) under which Mobile agreed to purchase mobile telecommunications services from Vodafone in order to resell those services to subscribers who became its customers [known as Mobile’s “subscriber base”]. Customers acquired by Mobile under that agreement were connected to the Vodafone network but remained Mobile’s customers.

11 The terms of these agreements are not in issue, the agreements providing no more than the backdrop for later agreements which are in issue on a number of parameters.

Structural changes to the relationship

12 Commencing in late 1997 and continuing until August 1998 Vodafone and Mobile engaged in negotiations to change the structure of their relationship so that:

(a) Mobile sold its subscriber base to Vodafone;

Heads of Agreement

13 On 27 August 1998 Heads of Agreement were signed.

ASP Agreement - October 1998

14 On 2 October 1998 Mobile and Vodafone Pacific (then called Vodafone Network) entered into:

· an Offer For Sale and a New Agreement which terminated the GSM Service Provider Agreement and transferred to Vodafone, Mobile Innovations' Subscriber Assets[ or Base]; and

· an Agent Service Provider Agreement ["the ASP Agreement" or the “ASP”].

15 A substantial consideration of approximately $20 million ($260 per subscriber) was paid upon the transfer of the subscriber base to Vodafone.

16 Mobile asserts that by the ASP Agreement, Vodafone Pacific engaged it as its agent to:

· acquire and connect New Subscribers to mobile telecommunications services made available to Subscribers by Vodafone on a post-paid basis ["the Acquisition Services"];

· provide Management Services including "retention activities and handset upgrades" to new and existing subscribers [“the Management Services”].

17 Vodafone asserts that under the ASP Agreement, Mobile was appointed as agent for Vodafone Billing Services Pty Ltd ["Vodafone Billing Services"] to provide Acquisition Services and Management Services. Vodafone further asserts, as seems, patently to have been the case, that the words "retention activities and handset upgrades" were subsequently inserted into the ASP Agreement pursuant to the terms of the May 1999 Amendment Agreement referred to below.

First Amendment Agreement - May 1999

18 In or about May 1999 a written Amendment Agreement was entered into pursuant to which amendments were made to the ASP Agreement. This agreement records the parties to it as Mobile and Vodafone Network and commences with recital A asserting that Vodafone Network and Mobile

"are parties to an Agent Service Provider Agreement dated 2 October 1998 under which [Mobile] performs certain customer acquisition and Management Services on behalf of [Vodafone Billing Services] (the ASP Agreement)".

19 This Amendment Agreement made some alterations and additions in relation to the provisions of the ASP Agreement concerning Acquisition Costs and Management Costs. [cl.2.2(f), (g)]. In particular, the Amendment Agreement introduced a differential management fee, with a lower fee being payable for “low tariff plans”, namely plans with monthly access fees of $20 or less. [cl.2.2(g)]

Novation/Parties to the ASP Agreement as at the date of the May 1999 Amendment Agreement

20 In its pleading concerning the suggested identification of the parties to the ASP Agreement, Mobile put the matter as follows:

"In that the parties to the ASP Agreement were Mobile and Vodafone Pacific and that the parties to the Amendment Agreement were Mobile and Vodafone Network then the parties to the ASP Agreement as amended by the Amendment Agreement… were Mobile and Vodafone Pacific or Mobile and Vodafone Network or Mobile and both Vodafone Pacific and Vodafone Network, Vodafone Pacific and Vodafone Network are hereinafter referred to jointly and severally as "Vodafone".

21 Vodafone pleads that

· the ASP Agreement was novated from Vodafone Pacific to Vodafone Network on or about 31 March 1999; and

· in the alternative that Mobile is estopped from denying such novation as having occurred in or about May 1999.

22 Ultimately the issue was not litigated.

Second Amendment Agreement - August 2000

23 The August 2000 Agreement [“second Amendment Agreement” or “Look Mobile Amendment”] gave Mobile another means of acquiring customers for Vodafone through a “dealer” called 'Look Mobile', in which Mobile hold a 50% interest.

24 The convenient course is to append the ASP Agreement and part of the “Operations Manual” [see definition of “Business Plan”] as appendix “B”, the first Amendment Agreement as appendix “C”, and the second Amendment Agreement as appendix “D” to this judgment.

Glossary

25 A useful glossary prepared by Mobile is appended as appendix “E” to this judgment.

General nature of issues for determination

26 On 23 July 2001, Vodafone notified Mobile that the target level for the December quarter was nil. These proceedings were commenced on 27 August 2001 in response to that decision.

27 In due course Mobile ceased their acquisition activities although they continue to incur particular fixed costs which could not be avoided. Mobile's general claim in this regard includes a claim in respect of lost base acquisition margins and lost Costs to Manage [" CTM"].

28 Whilst the pleaded issues extend to a general claim that Vodafone over the relevant period of time engaged in conduct constituting a repudiation of the ASP it is convenient to note even at this early stage the evidence given by Mobile's expert, Mr Gower, as to Mobile's audited/reviewed operating profit before tax for the years ended 30 June 1999, 2000, 2001 and the half-year ended 31 December 2001. The following Schedule speaks for itself in terms of emphasising the radical problems presented by the period in issue now litigated:

Year ended 30-Jun-99 ($)	Year ended 30-Jun-00($)	Year ended 30-Jun-01($)	Half yr end 30-Jun-01($)
Audited/reviewed operating profit before tax and abnormals	4,028,505	4,693,920	5,234,328	13,845

Source: Mobile Innovations audited/reviewed financial statements

29 It is inappropriate to endeavour to repeat the pleadings particularly where, in addition to the nil determination question, there were so many disparate issues which, although recurring and requiring for determination a proper understanding of the whole of the contractual relationship between the parties, were in substance discrete sub-contract matters.

30 A number of the issues for determination concern alleged breaches of express and implied terms of the ASP Agreement. Without any intention to be exhaustive, I set out below a general overview of much of the matters which were litigated. In due course the judgment, of course, deals with all of the matters which were litigated.

Implied Terms

31 Important questions were litigated concerning the alleged implied terms that Vodafone would:

· do whatever was necessary to be done on its part to enable Mobile to have the benefit of the ASP Agreement;

· refrain from doing anything which would or which was calculated to deprive Mobile of the benefit of the ASP Agreement;

[Each of these implied term allegations were described in the pleading as "the co-operation term"]

· act in good faith and reasonably in exercising its powers under the ASP Agreement ["the good faith term"].

32 The proceedings then include a number of disparate contractual questions often simply arising as effectively contracts within the ASP Agreement and sometimes suggested as arising by arrangements, either oral or in writing or both, said to have been entered into as part of the regime imposed by the ongoing umbrella ASP Agreement. Certain estoppel questions are raised by the defendants pleading that the plaintiff is estopped from taking a particular stance in relation to a suggested matter of agreement or similar.

33 One matter which should be noted as essentially grounding the commercial reasons for aspects of the subject dispute concerns the commercial realities/dynamics in terms of the different positions of the parties. In that sense the only customers worth having for Vodafone appear to have been those who would be profitable on a net basis. In short that would require Vodafone to derive revenue which exceeded the costs of acquiring and maintaining such customers. Whilst for a limited period corporations may and usually will seek to build up their businesses by building up turnover, but not profit, that approach long-term would obviously be, as senior counsel for the plaintiff put it, a recipe for disaster. And as the evidence clearly established, for each new subscriber which Mobile was able to sign up for Vodafone, there were a number of immediate costs to Vodafone not covered by revenue immediately derived. Hence Vodafone was sensitive to the number of new subscribers, requiring to pay very careful attention to the periods of time in which they were signed up.

34 On the other hand Mobile was paid by reference to an acquisition [cost plus margin] fee as well as a management fee. Neither of those fees were based on revenue so that the higher Mobile’s costs were, the higher the fee would be, by reason of the fact that the margin was based on a percentage of costs. In the result Mobile had a high incentive to bring in new subscribers.

Overview of the ASP Agreement

35 Broadly the ASP Agreement includes a series of provisions to regulate the appointment of Mobile as a non-exclusive agent service provider during the term as defined. The term was to commence on 30 September 1998 (or such other date as may be agreed) and was to terminate upon the earlier occurrence either of the termination of the Agreement under clause 27 or otherwise on the 10th anniversary of the Effective Date.

36 The issues for determination extend to cover the express provisions concerning how the parties would prior to each quarter, approach a number of matters which apparently required agreement relating to their respective obligations for the approaching quarter. The provisions included for example:

· Clause 1.1 which includes:

- of a figure representing "the number of new subscribers estimated to be connected to use the System in that month…";

acting in good faith

· Clause 17.2 providing that not later than 5 business days after the commencement of each quarter, the parties would agree the Estimated Acquisition Cost…;

· Clauses 18.4 and 21.1 providing that not later than the commencement of the month prior to the commencement of each quarter, Vodafone would:

- agree with Mobile the number of new subscribers expected to be connected in the next quarter; or

Connection levels

· Clause 21.1 providing that not later than the commencement of the month prior to the commencement of each quarter Mobile and Vodafone must use their best endeavours to agree a Business Plan for that quarter;

· Clause 43 entitled "Further Assurances" and providing that each party was to take all steps, to execute all documents and to do everything reasonably required by any other party to give effect to any of the transactions contemplated by the Agreement.

37 Mobile in its initial overview submissions conveniently set out certain detail of the ASP Agreement and it seems convenient, if only to enable one to follow Mobile’s suggested construction of the Agreement and the suggested logic underpinning this construction, to simply repeat these submissions making plain that where the summary proves contentious, or was supplemented in final address, the judgment below exposes and determines the relevant issue. These submissions included the following:

· "There were several key aspects to the ASP Agreement.

(a) MI was to perform two main functions (cl 2.1):

acquire

manage

(b) MI was to devote its direct marketing operations exclusively to Vodafone and not deal with competing carriers (cl 2.2).

(c) MI was exclusively entitled to acquire customers for Vodafone using direct marketing (cl 2.7).

(d) The agreement was for 10 years (cl 3), namely until 30 September 2008.

(e) MI was to be remunerated for acquiring customers by:

actual costs of acquisition

estimated costs of acquisition

the estimated acquisition fee was calculated on a quarterly basis in advance, payable on a monthly basis in arrears as explained at transcript 30.15

BAM

CTM

(g) The BAM and management fee were to be reviewed after 2 years and annually thereafter, with adjustments dependent upon changes in CPI and MI’s management costs respectively (cl 18.1, 33 and 20).

· The [first] Amendment Agreement, amongst other things, altered clause 20.1 to provide varied CTM rates, rather than the fixed CTM rate of $7, as follows:

(a) $7 for monthly billed customers

(b) $6.00, reducing to $5.50 (1/7/99) and $5 (1/7/00) for monthly billed customers on low access (less than $20) plans

(c) $5.50, reducing to $5 (1/7/00) for quarterly billed customers on low access plans

· MI (as did Vodafone) promoted a number of different “plans” to which potential customers could connect – the plans varied by matters such as minimum monthly charges, call rates charged, free services provided etc.

· The procedure for agreeing quarterly business plans generally, or at least ideally operated as follows. At some time prior to the commencement of the quarter Vodafone informed MI of the target level for the upcoming quarter. MI then formulated a business plan, known as a “Cost to Acquire (CTA) Worksheet”, incorporating:

(a) the plans or brands proposed to be promoted

(b) the allocation of the target amongst the plans

(c) the allocation of revenue (eg payments by the customer for handsets or connection fees) and costs (eg handset costs, advertising costs, sales commissions) to the plans

(d) the allocation of MI’s overheads attributable to carrying out acquisition activities

(e) the BAM payment based on the targeted level of connections

· The proposed CTA Worksheet was then negotiated until an agreed position was reached. The average CTA per customer was used as the basis for paying the estimated acquisition cost required under the ASP Agreement. The parties referred to each quarter by the last month in the quarter. For example, the quarter of April – June 2001 was referred to as the June 2001 quarter." [The CTA worksheet for June 2001 quarter, showing a target of 14,150 and a CTA per customer of $497.82 is at TB941.]

38 It is common ground that both parties treated the CTA worksheets which were generated as synonymous with and as a substitute for the business plans provided for in the ASP. [Evidence of Mr Stonell at transcript 705 - 706: describing the CTA worksheets as a "surrogate" for the business plan, and accepting that negotiations about these worksheets were in effect negotiations about what might be called business plans]. No point was taken by either party suggesting that this approach was inappropriate, presumably for the reason that the CTA worksheets contained sufficient information to permit them to be utilised effectively as business plans. As Mr Stonell put it, the major part of the CTA process involved getting the allocation of the budget for marketing for the reason that a lot of the advertisements had to be placed a month before they would appear in the press. [Transcript 705]

39 Mr Stonell gave the following evidence:

“Q. Mr Stonell, is it the case that without a target being given by Vodafone there is no way one can produce a CTA, because it all works the engine for the CTA starting point. That is a target, is that right?
A. I suppose if you have a target of say 1,000 customers for a month, just to pick a number, you have to determine how you are going to get those 1,000 customers, or acquire those customers. There are so many different offers, a high end offer, a low end offer, different types of phones. Once a target is set we have to work out how to achieve that target.

[Transcript 707]

40 For those reasons the references made in this judgment to "business plans" may be regarded as interchangeable with the CTA worksheet regime.

41 Vodafone pleaded that the following terms were part of the ASP Agreement namely that:

· Mobile acknowledged that any group member may at any time:

· Vodafone would use its best endeavours to give Mobile reasonable notice in advance of any replacement of or amendment to the Standard Terms and Conditions or any change to the tariff at which the Mobile Services were supplied where that replacement or amendment or that change would cause detriment to subscribers. [Clause 7.4 of the ASP Agreement]

The nil determination issue

42 As already mentioned, a matter of special significance concerns:

· certain written notices given by Vodafone which purported to determine that the target level for particular quarters was nil;

· an alleged failure to determine target levels for particular quarters;

· 2 August 2001 when Vodafone was said to have advised Mobile that it intended from thereon to purport to determine a nil target level for new subscribers.

43 Mobile's submission is that nil is not “a number of new subscribers expected to be connected in the next quarter” within the meaning of clause 1.1; nor is it a “target level in respect of the number of connections of new subscribers” within the meaning of clause 18.4.

44 The quarters in question are those ending:

Written Notices

· 31 December 2001 [written notice dated 23 July 2001;

"Determination"]

· 31 March 2002 [written notice dated 12 March 2002;

"Second Determination"]

· 30 June 2002 [written notice dated 12 March 2002;

"Second Determination"]

Failures to determine

· 30 September 2002 [failure to determine target level]

· 31 December 2002 [failure to determine target level]

· 31 March 2003 [failure to determine target level]

45 The approach taken by Mobile is to assert that the nil determinations were:

· in breach of clause 1.1 ["Estimated Acquisition Cost"];

· in breach of clause 18.4;

· in breach of clause 43;

· in breach of the alleged co-operation term;

· in breach of the alleged good faith term.

46 Mobile asserts that as a result of the 23 July 2001 Nil Determination, it made several of its employees redundant between 27 July 2001 and 31 January 2002.

47 Mobile asserts that the consequence of both the nil Determinations as well as the failure to determine target levels for other quarters, involve Vodafone:

· refusing to attempt to agree Estimated Acquisition Costs for the relevant quarters under clause 17;

· refusing to attempt to agree business plans for the relevant quarters under clause 21.1;

· representing that it would not pay and in fact not paying, either the Estimated Acquisition Cost or the Actual Acquisition Costs for the relevant quarters.

48 Vodafone’s submission is that the ASP Agreement as amended entitles it to set target connection levels for a quarter at zero.

Statistics

49 Exhibit D6 provides a convenient table:

Date	Target	CTA budget	TB Ref	Actual	CTA Actual	TB Ref	Cnnxn variance	CTA variance
Dec-98	15,000	$ 434.45	316E	14,611	$470.84	323J	389	-$ 36.39
Mar-99	16,000	$ 398.24	323L	16,692	$406.23	1713	-692	-$ 7.99
Jun-99	18,000	$ 426.19	1346	15,171	$416.44	1737	2,829	$ 9.75
Sep-99	24,000	$ 410.55	1351	18,397	$446.36	1765	5,603	-$ 35.81
Dec-99	18,000	$ 409.69	1356	15,182	$439.19	1790	2,818	-$ 29.50
Mar-00	20,000	$ 453.13	1361	7,979	$748.67	1820	12,021	-$ 295.54
Jun-00	19,000	$ 531.30	1368	13,782	$650.28	1848	5,218	-$ 118.98
Sep-00	26,500	$ 472.30	1373	23,017	$509.71	1878	3,483	-$ 37.41
Dec-00	27,900	$ 455.11	1375	29,582	$454.62	1911	-1,682	$ 0.49
Mar-01	19,105	$ 471.50	1380	20,489	$434.26	1938	-1,384	$ 37.24
Jun-01	14,150	$ 497.82	941	10,475	$545.46	1970	3,675	-$ 47.64
Sep-01	9,000	$ 616.39	1158	3,861	$970.31	1995	5,139	-$ 353.92

Identification of the eleven disparate cases

50 The convenient course is to simply identify each of the disparate cases.

51 One approach is simply to travel through these cases generally as they arose by reference to the timeline. Here again Mobile in its overview submissions [which were ultimately adapted to take into account updated experts agreed calculations as well as some finessing by Mobile with both how it puts its case as well as with its ultimate damages claims] sketched out how the 11 disparate cases arose as follows:

· "On 30 November 2000 Vodafone, having completed its first review of BAM and CTA, notified MI that the new rates were as follows:

(a) BAM:

(i) $43.17 per connection up to 8,000 connections

(ii) $21.58 per connection thereafter

(i) $7.67 for monthly billed customers

(ii) $5.67 for monthly billed customers on low access plans

(iii) $5.00 for quarterly billed customers

(iv) $nil for non-tolling V Mobile customers.

· MI disputes that Vodafone was permitted to set a $nil CTM for non-tolling V Mobile customers

· For each quarter from the commencement of the ASP Agreement until the June 2001 quarter the parties agreed a CTA and business plan, although occasionally only after significant disputes and often not within the timeframes dictated by the ASP Agreement. The quarterly targets varied from time to time, but were generally around 20,000 and peaking at 27,900 for December 2000 quarter.

· In early 2001 Vodafone determined radically to change the way business had been done since the inception of the ASP agreement. This process was first put into effect when on 28 February 2001 MI was informed by Mr Brown and Mr Stormon of Vodafone that, far from a target of 23,000 for the June 2001 quarter, which had been agreed with Mr Webb (Vodafone’s Finance Director) at the end of January, there was now a target of 12,000 for the 2001/2002 year (April 2001 to March 2002). Vodafone followed up with a letter dated 7 March 2001 to the same effect (TB775).

Claims 1 - 3

· However during that period several subsidiary disputes arose between the parties. They are described as Claims 1 – 3 below. [Claim 1 – ACM Agreement dispute; Claim 2 – V Mobile dispute; Claim 3 – MC 9 dispute]

Claim 8

· In early 2001 Vodafone decided to change its business approach to reduce the emphasis on customer acquisition and concentrate on high value customers. For the June and September 2001 quarters it drastically reduced the targets and changed the plans available to be used. Further, in March 2001 it changed the amount of, and criteria for, retention funding provided to MI. As a consequence MI suffered a significantly increased loss of customers through “churn”. That is Claim 8.

Claims 4 and 5

· Although a business plan was agreed for the June 2001 quarter, MI did not achieve the target, because, MI alleges, Vodafone did not provide the plans to enable MI to do so. That is Claim 4 below. As for the September 2001 quarter MI alleges, and Vodafone disputes, that no business plan was agreed. That is Claim 5.

Claims 6 and 7

· For each of the succeeding quarters (December 2001 – March 2003) Vodafone has either set a nil target or failed to set any target. That is Claims 6 and 7. They include claims for CTA (including redundancies) which Vodafone has refused to pay.

Claim 9

· At various times since July 2001 Vodafone has dealt with MI’s direct marketing competitors in contravention of its exclusive arrangement with MI. That is Claim 9.

Claim 10

· Claim 10 is an allegation that Vodafone, through one or more of setting nil targets, failing to set targets, dealing with MI’s competitors and withdrawing retention funding, has repudiated the ASP Agreement. Declaratory relief only is pursued.

Claim 11

· Finally, there is a discrete claim for MI’s costs of running a direct marketing e commerce website for Vodafone under an agreement in which Vodafone undertook to pay for all hosting and communication with the portal. That is Claim 11".

V Mobile Plan – Claim 2

52 On the final day of the four week hearing Vodafone withdrew its defences to this claim and consented to judgment. The original issues will however be described as a deal of the oral evidence often intermingled this and other claims which remain in issue.

53 The separate issue concerned Mobiles allegation of an oral agreement entered into in approximately January 2000 whereunder the parties agreed that:

· Mobile would launch a mobile call plan under what was referred to as the “V Mobile Plan” brand;

· Vodafone would pay Mobile a Management Fee for subscribers connected by Mobile on this Plan as described in clause 20.1 (a) and (c).

54 Mobile asserted and Vodafone accepted that on 20 April 2000 Mobile launched the subject plan.

55 Mobile asserted that on 30 November 2000 Vodafone, purporting to rely on clause 20.3, notified Mobile that the Management Fee payable to Mobile would be reduced to $0 for subscribers on the subject Plan who were not making any telephone calls.

56 Mobile then asserted that the change in Management Fee constituted a breach of clause 20.3 which it was said, did not permit Management Fees to be reduced to nil. This was denied by Vodafone.

57 Mobile alleged that in breach of clause 20.1,Vodafone had not since 1 November 2000, paid a Management Fee for those subscribers connected by Mobile on the subject V. Mobile Plan who have not been making any telephone calls.

MC 9 Plan [Claim 3]

58 Mobile's case here concerns an allegation that in approximately July 2000 Vodafone requested it to devise marketing plans that would enable Vodafone to expand its customer base and become the second largest mobile phone provider in Australia. The allegation is that in response to that request Mobile devised a $9 call Plan ["MC9 Plan"].

59 Mobile further alleges that on approximately 19 July 2000 it agreed with Vodafone that:

· Mobile would offer the MC 9 Plan

· Vodafone would pay Mobile a Management Fee of $7 per subscriber per month for subscribers connected by Mobile on this Plan.

60 The allegation is that in those circumstances Vodafone and Mobile agreed to vary the ASP Agreement so as to treat Subscribers to the Plan as “Subscribers” within the meaning of clause 20.1 (a) [to whom the $7 per Subscriber per month Management Fee applied].

61 The subject Plan is said to have commenced operation in September 2000.

62 Mobile claims that on or about 30 November 2000 pursuant to clause 20.3, Vodafone notified it that the Management Fee payable to Mobile for Subscribers within the meaning of clause 20.1 (a) was to be increased to $7.67 per Subscriber per month.

63 Mobile alleges that since February 2001 Vodafone has refused to pay it a Management Fee of $7.67 per subscriber per month for subscribers connected by it on these plans and is only paid a Management fee for those subscribers of $5.67 per Subscriber per month.

64 The claim is that in those circumstances Vodafone has breached clause 20.1 of the ASP Agreement as varied.

Mobile's Case

65 Mobile's case is put in overview submissions as follows:

· In July 2000 Vodafone commenced a drive to acquire a significant number of customers. As part of that drive Vodafone formulated a new, competitive, $9 plan for MI to market, which became known as the MC9 plan. The MC9 plan involved a $9 monthly access fee, no connection fees, competitive call rates and a level of free minutes (Vodafone’s “My Choice” program).

· MI alleges that the basis upon which it agreed to sell the MC9 plan was that customers would be billed monthly and Vodafone would pay the higher CTM of $7 (that applicable to high tariff plans) notwithstanding the MC9 was a low access fee plan. Vodafone paid CTM on that basis until February 2001.

· However, commencing in February 2001 Vodafone ceased paying the higher (then $7.67), and started paying the lower ($5.67), CTM for MC9 customers which it considered had an ARPU of less than $30. During the period February 2001 to March 2002 this was approximately 86% of the MC9 customer base.

· MI alleges that Vodafone must continue to pay the higher CTM for all customers on the MC9 customer base.

The issues

· The principal issue is whether an oral agreement was entered into which is binding given the terms of the ASP Agreement and whether the conduct of Vodafone in refusing to pay the higher CTM is a breach.

The damages claim

· MI claims $3,497,865 [Gower 1 para 184], made up as a combination of [Gower 1 para 167 – 185]:

(a) the lost CTM ($2 per customer, being the difference between the higher rate of $7.67 and the lower rate of $5.67) for low ARPU MC9 customers between February 2001 and March 2002

Vodafone's case

66 Vodafone has a number of responses to this case including an assertion that by reason of clause 45 (a) of the ASP Agreement there could be no binding variation to that Agreement which was not in writing.

67 A further response asserts that subsequent to the Amendment Agreement by reason of certain conduct Vodafone and Mobile agreed to:

· the high Management fee for managing low value customers if the average monthly spend of those customers had been greater than $30;

· the low Management fee for managing low value customers if the average monthly spend of those customers had been less than $30.

68 Vodafone also relies upon an estoppel and arising to prevent Mobile from maintaining these allegations.

69 Vodafone in Overview submissions summarises this case as follows:

· The MC9 Plan was a plan proposed by MI to Vodafone, which included a monthly access fee of $9. The plans were offered to subscribers from September 2000 onwards. Vodafone has at all times paid a Management Fee to MI in respect of the customers connected to the MC9 Plan. However, MI asserts that the amount of the fee paid to it by Vodafone was inadequate.

· Under clause 2.2(g) of the Amendment Agreement, clause 20.1 was amended to include a two-tier approach to management fees with the full $7 per month Management Fee being payable by Vodafone to MI in respect of ordinary subscribers, with a lesser amount being paid to MI for subscribers on a “low tariff plan”. Low tariff plans were not defined exhaustively but did include:

“any other plan introduced with [monthly] access fees of less than $20.00 (whether or not free calls are included) who is connected after 1 April 1999.”

· Accordingly, MI has no entitlement to be paid a full Management Fee in respect of the subscribers to the MC9 Plan. Nevertheless, Vodafone has been prepared to pay MI the full Management Fee for those MC9 subscribers whose average monthly call charges (or “spend”) has exceeded $30, but has paid the lower fee in respect of all other customers. The fact that Vodafone has been prepared to make such payments, rather than to insist upon its strict contractual rights, does not create any obligation to MI either to maintain this practice, nor does it create any right on the part of MI to claim the Full Management fee in respect of the low spend customers."

Additional Customer Management Agreement [Claim 1]

70 Mobile's case is that on 20 March 2000, Vodafone Pty Ltd agreed to provide Mobile, on or before 30 June 2000, with 30,000 additional customers in respect of which Mobile would undertake Management Services ["Additional Customer Management Agreement"]. The case relies upon a letter Agreement.

71 The assertion is that Vodafone Pty Ltd failed and refused to transfer the 30,000 additional customers to Mobile and that in consequence Vodafone Pty Ltd has breached the Additional Customer Management Agreement.

72 Vodafone essentially asserts:

· that a written agreement evidenced by a letter 16 March 2000 from Vodafone Pty Ltd to Mobile was entered into between it and Mobile;

· that Vodafone did not transfer an additional 30,000 customers to Global in the manner contemplated by this letter;

· that the Additional Customer Management Agreement was terminated by agreement between the parties in or about May or June 2000;

· alternatively that Mobile agreed that Vodafone Pty Ltd was not obliged to transfer the additional 30,000 customers to Mobile in the manner contemplated by the 16 March 2000 letter;

· alternatively that certain representational conduct was engaged in by Mobile to the effect that it would not require Vodafone Pty Ltd to transfer the additional customers to Mobile in the manner contemplated by the letter. The allegation is that it would be unconscionable for Mobile to maintain these allegations and/or that Mobile is estopped from maintaining these allegations.

73 Mobile in overview submissions asserts that:

· The facts indicate that, far from being discharged by agreement, MI has uniformly [pressed] its existence and breach".

· The estoppel pleaded fails to meet the threshold criteria and in particular relevant detriment.

The damages claim

· MI claims the lost future CTM, for the period from 1 July 2000 to 30 September 2008, on the customers who were to be transferred [Gower report of 13 June 2002 (Gower 1) para 186 –210].

· The net present value of the claim, as at 1 July 2000, is said by Mobile to be $2,634,621 [Gower report of 10 February 2003 (Gower 2) Annexure B-0 (updating Gower 1 para 209). For all disputes, other than Claim 8 – Retention funding dispute, these submissions use the post retention funding calculations of Mr Gower]

74 Vodafone in overview submissions asserted as follows:

· The “agreement” on which MI relies is a letter from Vodafone to MI dated 16 March 2000. However, that agreement never had any contractual force, because no consideration was payable to Vodafone for the proposed transfer of subscribers. Despite Vodafone's willingness to accommodate MI's request for the subscriber transfer as evidence by the letter of 16 March 2000, when Vodafone looked into the matter, it realised that the transfer was not practical from a cost or operational point of view. Thereafter, Vodafone and MI agreed not to pursue this “agreement”. [The lack of consideration issue was abandoned during the hearing]

· Vodafone kept MI advised at all times of the problems which it foresaw in relation to the customer transfer. MI's complaint in relation to this matter is misconceived.

75 The issues on this claim are thus whether the agreement was discharged, the efficacy of the estoppel and quantum.

Website Agreement [Claim 11]

76 Mobile's case is that on 8 March 2000, Vodafone Pty Ltd offered to enter into a contract with Mobile under which Mobile would, inter alia:

· develop Vodafone Pty Ltd's E-Commerce platform; and

· perform all back-office functions for the E-Commerce platform

77 Mobile asserts that:

· the letter comprised an agreement to develop an e commerce portal for Vodafone;

· after 8 March 2000 it carried out both of these obligations, the portal being launched in May 2000 and operating until April 2000 as an e commerce site;

· in the circumstances Vodafone Pty Ltd and Mobile entered into an agreement on the terms of the 8 March 2000 letter ["Web site Agreement"];

· it was a term of the Website Agreement that Vodafone Pty Ltd would pay Mobile:

- for developing the E-Commerce platform (clause 2);

· that it has not been paid, or paid in full, for the relevant costs;

· that its damages amount to $222,487 made up:

78 Vodafone's case is that:

· the letter of 8 March 2000 made plain that Mobile's costs were to be no greater than $430,000 for the development and customisation of phase 1 functionality;

· the letter made plain that hosting and communication costs would be charged to Vodafone Pty Ltd at cost price;

· Vodafone Pty Ltd in about May 2000 paid the sum of $430,000 to Mobile for services performed in developing a web site for Vodafone;

· sufficient or proper details of Mobile's hosting and communication costs have not been provided to Vodafone Pty Ltd.

79 Vodafone put the matter as follows in overview submissions:

· MI entered into an agreement with Vodafone by letter dated 8 March 2000 to develop and administer an E-commerce platform for Vodafone. Under that agreement, MI agreed to develop and customise the E-commerce site to the stage of “Phase 1 functionality” for which it was paid the agreed sum of $430,000 by Vodafone.

· Under the terms of the letter Vodafone agreed to pay all hosting and communication costs for the portal at cost price. MI claims to have demanded payment for these further moneys. Vodafone says that no sufficient or proper details of the alleged hosting and communication costs have been provided to it to enable Vodafone to consider any claim and make a payment.

80 The cross-examination of Mr Stonell in relation to this claim is to be found at transcript 724 and following.

June 2001 Quarter [Claim 4]

81 Mobile's case is that:

· on or about 6 April 2001 Vodafone and it agreed a business plan for the June 2001 Quarter [the Agreement is said to be set out in an exchange of correspondence dated 5 April 2001 and 6 April 2001].

· particular matters were integral parts of the business plan for the particular Quarter including the following:

- that the target level for new subscribers was 14,150

- that Vodafone would provide Mobile with:

(i) a new $15 call Plan with tariff rates equivalent to those offered on the MC 9 Plan

(ii) branding guidelines for marketing under the Vodafone Direct brand, pursuant to clause 25.3

· none of these were provided as promised;

· for these reasons Vodafone is in breach of:

82 In its Overview submissions which in terms of damages clause were slightly moved away from in final submissions, Mobile put the matter as follows:

· As a consequence of Vodafone’s changed business strategy there were lengthy negotiations over the June 2001 quarter target and CTA before a business plan was agreed in early April 2001. The agreed business plan had a target of 14,150 customers, 2,300 of which were to be acquired using a combination of a new $15 plan, Vodafone Direct marketing and Affinity program marketing.

· MI alleges that, in breach of both and express and implied terms of the ASP Agreement, Vodafone failed to provide the $15 plan, branding guidelines to enable MI to engage in Vodafone Direct marketing or Affinity programs so as to enable MI to meet the target. As a consequence MI connected only 10,475 new connections.

The legal issues

· The principal issues:

(a) the existence of the implied terms contended for (paragraphs 12 and 13 of the Second Further Amended Summons)

· As to the implied terms, MI relies amongst others on Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor (1993) 31 NSWLR 91; Alcatel Australia Ltd v Scarcella & Ors (1998) 44 NSWLR 349; Burger King Corp v Hungry Jacks Pty Limited [2001] NSWCA 187.

· Other useful decisions prayed in aid by MI include: Warren & Co v Agdeshman (1922) TLR 588; Turner v Goldsmith [1891] 1 QB 544; Ogdens, Limited v Nelson [1905] AC 109; B&M Readers’ Service v Anglo Canadian Publishers Pty Limited [1950] Ontario Reports 159 (Court of Appeal); Culina v Giuliani 22 DLR (3d) 211 (Supreme Court of Canada); .

The damages claim

· MI claims $501,574 [Gower 2 Annexure B-0 (updating Gower 1 para 124] made up as a combination of [Gower 1 para 95 – 125]:

(a) the lost BAM on the 3,675 customers targeted but not connected

(b) the lost CTM during the June 2001 quarter on the 3,675 customers targeted but not connected

Vodafone’s case

83 Vodafone's case is that:

· the Vodafone Network's letter dated 3 April 2001 formed part of an agreed business plan for the June Quarter;

· the agreed target level for new subscribers in the subject business plan for that quarter was subject to further amendment said to be agreed to by Mobile on 25 May 2001;

· the amendments to the business plan for the subject quarter included the removal from the business plan of any sales of Mobile's proposed $15 Plan.

84 In its Overview submissions Vodafone put the matter as follows:

· MI alleges that Vodafone breached the cooperation term and the good faith term by failing, between April and June 2001, to provide MI with:

a. A new $15 call plan;

b. Branding guidelines for marketing the Vodafone Direct brand;
c. Information relating to Vodafone’s Affinity programs.

$15 Plan

· The $15 Plan was proposed by MI to Vodafone on 29 March 2001. This plan was proposed by MI, even though Vodafone had previously told MI that it wished MI to concentrate on higher value plans of $17 per month or more. [Statham, 02.09.02, para 24] Vodafone did not agree to the plan as presented in its response on 3 April 2001. MI has acknowledged that the $15 Plan required approval from Vodafone before it could be marketed. [Mr Marchbank, 22.05.02, para 109(a)]. MI's acknowledgment reflects clause 8.1 of the ASP Agreement which makes Vodafone “solely responsible for determining the tariff for Mobile Services”. In any event, the $15 Plan was reduced by agreement from the June quarter business plan.

Vodafone Direct branding guidelines

· During the period January to May 2000 there was some discussion between Vodafone and MI about the use of a marketing strategy called the “Vodafone Direct” brand as an alternative to the MI brand. MI in fact commenced marketing the Vodafone Direct brand and achieved 334 connections during the June 2001 quarter and 791 connection in the following quarter without being troubled by the allegation now made about non-provision of any branding guidelines. [Stonell, 25.06.02, para 59,61]

Vodafone Affinity programs

· MI alleges Vodafone should have provided information to enable it to market to Vodafone's affinity partners. However, MI had no agreement with Vodafone which obliged Vodafone to share any such information with MI. Nevertheless, MI still concluded two Vodafone affinity partner programs, with NRMA and Bankers Trust, which achieved 4 connections. [Statham, 02.09.02, para 30(d)] MI's complaint appears to be that Vodafone should have acquired more affinity partners which it could then make available to MI.

· There is no basis for MI's allegation of breach of any duty by Vodafone in respect of these three matters.

September 2001 Quarter [Claim 5]

85 Mobile's case is that:

· prior to 13 July 2001 it attempted to negotiate with Vodafone, including by providing a proposed business plan, with a view to agreeing a Business Plan for this quarter;

· during the negotiations Vodafone failed to agree an Estimated Acquisition Cost under clause 17.2 or a business plan under clause 21 for the Quarter in question;

· in those circumstances Vodafone failed to:

(a) use its best endeavours to agree a business plan for the September Quarter, in breach of clause 21.1;

(b) take all steps and do everything reasonably required to agree a business plan for the September Quarter, in breach of clause 43;

(c) do whatever was necessary to be done on its part to enable MI to have the benefit of the ASP Agreement, in breach of the cooperation term;

· in those circumstances the parties failed to agree on a business plan for the September Quarter prior to seven days before the commencement of that quarter;

· pursuant to clause 32.1 on 13 July 2001 Mobile gave notice of a dispute which had arisen under clause 21.3 in terms of the failure to agree on the subject business plan for the September Quarter;

· in breach of clause 32, Vodafone refuse to engage in the dispute resolution process;

· for those reasons Vodafone is in breach of:

86 In its Overview submissions Mobile put the matter as follows:

· Negotiations for the September 2001 quarter CTA commenced in May 2001 when Vodafone set a target of 9,000 for the quarter. As a consequence of this significant reduction in target from previous levels, MI resolved to retrench staff.

· MI submitted several business plans, subject to various conditions, including that Vodafone bear MI’s redundancy costs and that Vodafone commit to providing marketing tools necessary to make the targeted sales. Vodafone did not accept the conditions. MI alleges that no business plan was agreed for the September 2001 quarter.

The issues

· The issues are:

(a) whether the business plan was not agreed (as asserted by MI) or agreed (as asserted by Vodafone – by denial of the allegation that it was not agreed (Defence para 29)); and

· The particulars of the breach are pleaded in paragraph 30 of the Second Further Amended Summons.

The damages claim

· MI proceeded to seek customers during the September 2001 quarter but connected only 1,509.

· MI claims damages as a combination of [Gower 1 para 126 – 142]:

(a) the lost BAM on the customers who ought to have been targeted

(b) the lost CTM during the September 2001 quarter on customers who ought to have been targeted

(c) the net present value, as at 1 October 2001, for the period from 1 October 2001 to 30 September 2008, of the lost future CTM on the customers who ought to have been targeted

· The quantum of the claim depends upon what assumption is made as to the number of connections which ought to have been targeted during the September 2001 quarter. Mr Gower has made assumptions of [Gower 1 para 94]:

(a) 12,000 (4,000 per month) – number for calculating minimum BAM in ASP Agreement

(b) 18,000 (6,000 per month) – average number acquired connected by MI over the life of the ASP Agreement

· On the different assumptions the quantum of the claims is [Gower 2 Annexure B-0 (updating Gower 1 para 141)]:

Target	12,000	18,000	24,000
Loss	$1,749,101	$2,572,048	$3,394,994

Actual Acquisition Costs for the September 2001 Quarter

87 Mobile's case is that:

· on 24 October 2001 it submitted to Vodafone a Schedule of its Actual Acquisition Costs related to the September Quarter, including its redundancy costs incurred as a result of its having made several of its employees redundant between 27 July 2001 and 31 January 2002;

· in breach of clause 17.6, Vodafone did not pay the Actual Acquisition Costs for the September 2001 Quarter.

Vodafone’s case

88 Vodafone's case is that an agreement on the business plan for the September Quarter was in fact reached on 18 June 2001 , notice of which agreement was formerly confirmed by Vodafone network by letter dated 20 June 2001.

89 In its Overview submissions Vodafone with the matter as follows:

· There is a dispute whether there was an agreement between Vodafone and MI in relation to the business plan for the September 2001 quarter. Vodafone says that it agreed to the business plan proposed by MI on 20 June 2001.

· MI purported to invoke the dispute resolution procedure under clause 32 of the ASP Agreement on the basis of an alleged failure to agree to the September 2001 business plan. However, MI had no entitlement to do so, because the business plan had been agreed. After Vodafone indicated that this was its position, on 18 July 2001, MI took no further steps to effect the dispute resolution procedure under clause 32 of the ASP Agreement.

· The true position appears to be that MI decided to cease incurring marketing expenditure because it could not or would not meet the agreed target level for the quarter. [Mr Marchbank, 22.05.02, para 142] Instead, MI has sought to blame Vodafone for this state of affairs by reference to Vodafone's alleged failures in relation to the $15 Plan, Vodafone Direct branding guidelines and the Vodafone Affinity program issues (see Issue 1 above).

· MI also alleges that Vodafone refused to enter into discussions about allowances for MI’s redundancy costs which it said were consequent upon Vodafone’s proposed reduced target level for new subscribers. MI first raised the question of seeking reimbursement from Vodafone for its redundancy costs in June 2001 and was told that Vodafone would not agree to meet these costs. MI's response was to refuse to agree to the Estimated Acquisition Costs for the September quarter budget. [Mr Marchbank, 22.05.02, para 129]

· MI had no entitlement to have the redundancy costs included in the Estimated Acquisition Costs, because they were not costs of acquiring customers but were costs of MI restructuring its business. Accordingly, there is no foundation for MI's allegation that Vodafone was in breach of any obligation to it in respect of its redundancy costs.

December 2001 Quarter [Claim 6]

90 Mobile puts its case as follows in its Overview submissions:

· On 23 July 2001 Vodafone informed MI that the target level for the December 2001 quarter was nil. No business plan or CTA schedule was negotiated.

· MI alleges that Vodafone is not permitted to set a nil target under the ASP Agreement.

The construction issue

· Central to this claim and to the proceedings is the construction and operation of the ASP Agreement and whether as a matter of pure construction “nil” could ever be a target within the meaning of that term.

· The term “target” implies a goal to be achieved by doing something. Nil is achieved by inertia.

· The construction contended for by MI renders the agreement meaningful and workable whereas Vodafone’s construction denudes it of efficacy.

· There are numerous reasons why the setting of a nil target is inimical to and impermissible under the agreement:

(a) the agreement is to perform “Acquisition Services” – a nil target is counter to the notion of performing services (cl 5.1(a)) [TB 147]

“Estimated Acquisition Fee”

“Estimated Acquisition Cost”

99. In March 2000, Mr Ogrin started working for Vodafone (Ogrin para 1). He started to develop a direct marketing channel strategy for Mobile Innovations. The channel strategy included the use of “affinity marketing” (Ogrin paras 86 and 91).

100. In late April 2000, Mr Ogrin presented his channel strategy to Mr Bramwell, Mr Marchbank and Ms Statham suggesting “ internal and external ” affinity (Ogrin para 94; TB 563D-TB 563R at TB563G).

101. Subsequently, on 10 May 2000, Mr Ogrin sent a letter to Mr Marchbank espousing more aggressive campaigns to major affinity partners (Marchbank 22/5/02 para 114; TB 578-579).

102. On 25 May 2000, Mr Ogrin gave a presentation to Mr Marchbank, Ms Statham and Mr Stonell on the channel strategy Vodafone suggested Mobile Innovations adopt. The presentation built on the earlier presentation in late April 2000 (TB563D–563R). During the presentation, Mr Ogrin requested that Mobile Innovations focus on affinity marketing. He advised Mobile Innovations that he had spoken to Cecilia Khoo, Vodafone’s affinity manager, and she had arranged a meeting with the Commonwealth Bank (TB 598A-598S at TB 598K; Ogrin para 111; T354.23).

103. Mr Marchbank then raised with Mr Ogrin the possibility of Mobile Innovations direct marketing to Vodafone’s affinity partners in a letter dated 25 May 2000 (Marchbank 22/5/02 para 114; TB 596-598). Mr Marchbank noted that the most potential lay in untapped existing relationships that Vodafone had (Commonwealth Bank and American Express) as well as Vodafone’s corporate customer base. Mr Marchbank forecast that these types of offers should generate a further 1500 connections per month (TB 597).
104. Mr Ogrin responded enthusiastically in two letters dated 2 and 7 June 2000 (7B601-604; Marchbank 22/5/02 para 114; Ogrin para 114(a); TB 604A-604B; Ogrin para 114(b)). In the earlier letter Mr Ogrin noted that Vodafone had a strategic partnership with the Commonwealth Bank. In his letter dated 7 June 2000, Mr Ogrin stated that Vodafone would offer its “ best endeavours to Mobile Innovations to partner programs that possibly could yield up to or exceeding 2000 new connections per month moving forward.” Mr Ogrin attached a table forecasting the amount of connections Vodafone anticipated to achieve through the affinity channel as follows:

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

500

1000

2000

2500

3000

3000

1000

2000

3000

(Marchbank 22/5/02 para 114; Ogrin para 114(b) TB 604A-604B at 7B604A).

Affinity marketing during the June 2001 Quarter

105. On 28 February 2001, Mr Marchbank attended a meeting with Mr Brown, Mr Stormon and Mr Ogrin (Marchbank 22/5/02 para 89). He subsequently summarised the meeting in a letter to Mr Brown (Marchbank 22/5/02 para 90, TB76). During the meeting he was advised that Vodafone expected Mobile Innovations to connect no more than 12,000 connections over the following 12 months and “ those customers are likely to come from Affinity programs conducted on Vodafone’s behalf .” The letter also notes that Mobile Innovations advised Vodafone that the company should identify the affinity programs because opportunities identified by Mobile Innovations had not been embraced (TB767).

106. On 5 April 2001, the business plan for the June 2001 quarter was agreed. It provided for the proposed acquisition of 450 customers through affinity marketing using the Vodafone Direct plan (Marchbank 22/5/02 para 109; TB 941).

107. Both Mobile Innovations and Vodafone considered that affinity marketing was an essential tool in obtaining higher spend customers (Blake at T885.35).

108. In preparation for the June 2001 business plan, Ms Statham had a number of conversations with Ms Khoo, Mr Ogrin and Mr Wisbey noting that “Vodafone has more clout as a brand than Mobile Innovations and we are going to need Vodafone to go out and obtain more affinity partners if we are going to make the numbers” . In response, the Vodafone team stated that they were going to put some programs in place to acquire more partners and they would report to her. As at 5 April 2001, the only Vodafone affinity programs in contemplation were NRMA, Bankers Trust and American Express (Statham 2/9/02 paras 33 and 34).

109. Ms Khoo and Ms Statham also had several meetings with management at the Commonwealth Bank. Several advertising campaigns were implemented targeting Commonwealth Bank customers. However, these campaigns were not successful. In 2001, 3 net sales were achieved (TB 699AA; Statham 12/2/03 para 5(p)). These sales did not become connections (Stonell para 57).

110. Between March and June 2001, there was correspondence between Mobile Innovations and Vodafone attempting to organise affinity programs and the Vodafone Direct plan to be offered in those programs.

111. In relation to a proposed affinity program to NRMA customers, on 6 March 2001 Ms Lees of Mobile Innovations requested Mr Wisbey of Vodafone to provide information on the marketing plan. She noted that the marketing plan was supposed to be offered in March and she still had not seen it (TB 838; Marchbank 22/5/02 para 117). Ms Lees followed up with Mr Stormon on 19 March 2001 (TB 838 para 117). Subsequently, Ms Karpes of Vodafone advised Ms Lees that the offer would have to be an M17 plan as opposed to a Vodafone Direct offer (TB 859 para 117).

112. Another marketing offer that Mobile Innovations tried to achieve was an offer to Bankers Trust customers. On 6 March 2001, Ms Lees sought details of the offer from Mr Wisbey. She subsequently sought details of the necessary creatives on 19 March 2001 from Mr Stormon (TB 840 para 117). On 22 March 2001, Ms Karpes advised Ms Lees that the proposed offer to the bank would be MI branded (TB 868 para 117).

113. In May 2001, Ms Statham attempted to facilitate an affinity marketing plan for campaigners involved in political campaigns (TB 975). She also did the same in relation to a Diner’s Club promotion (TB 980). Ms Kenny sought information from Mr Stormon in relation to a planned affinity marketing campaign to Double Day on 14 May 2001 (TB1007; Marchbank 22/5/02 para 117)

114. In about mid June 2001, Ms Statham met with Ms Karpes to discuss Vodafone’s affinity programs for the June 2001 quarter. Ms Karpes advised her that Vodafone was unlikely to come up with any new affinity partners for that quarter (Statham 2/9/02 para 36).

115. To facilitate more programs, Ms Statham attempted to obtain Vodafone’s approval for affinity programs in relation to the “Best Friend promotion” and to “Diner’s Club” customers (TB 975 and TB 980; Statham 2/9/02 paras 33 to 35 Insert A).

116. During the June 2001 quarter, the only affinity programs that were run were Bankers Trust and NRMA (Statham 2/9/02 paras 35 and 37, TB1010). These achieved only four sales (TB 699AA). No affinity sales were achieved using Vodafone Direct (Stonell para 57)….

E. Connections during the June quarter

(a) no $15 plan sales were made

(b) only 5 Vodafone Direct promotions were carried out - no sales were achieved as a result of these promotions (Statham 2/9/02 para 30(b)), although 334 customers were connected to Vodafone Direct plans because they requested that they be connected to Vodafone (Stonell para 58).

Plan

Target
(TB939-941, 945)

Actual
Connections

Vodafone Direct
Connections

M!9
5,300

4,227

3

M!11
6,050

4,539

0

M!15
1,500

0

0

MC17
500

925

218

MC33+
350

521

65

V/D Affinity
450

0

0

V.mobile
0

70

0

Other
0

269

48

TOTAL
14,150

10,551

334

838 To my mind this claim is to be regarded as no more than simply a subset of the parties obligations to put into place agreements which they may have reached under the ASP as part of the working mechanisms in respect of which they agreed to cooperate by doing everything reasonably required to give effect to, for example as here, a business plan which had been agreed to. So much it seems to me can very arguably be read into clause 43 of the ASP obliging each party to "take all steps, execute all documents and do everything reasonably required by any other party to give effect to any of the transactions contemplated by this Agreement". Even if that not be so, it seems to me that the agreement was necessarily implicit: Secured Income supra

839 The courts findings are that the June business plan was agreed to on 6 April 2001; that the $15 Plan, Vodafone Direct and affinity programs to be provided by Vodafone were elements of that business plan and that Vodafone failed to do everything reasonably required by it to give effect to the transactions contemplated by that plan.

840 Clearly on the above evidence Vodafone it shown to have breached the implied term by failing to provide the $15 Plan, by failing to provide branding guidelines for the use of the Vodafone Direct brand and by failure to provide Mobile with information on Vodafone's Affinity programs.

841 This is not to suggest that Vodafone was not entitled to determine the tariff or to change the tariff. However that entitlement [Clause 7.4] obliged Vodafone to use its best endeavours to give Mobile reasonable notice and [Clause 8.1] obliged Vodafone to consult with Mobile as appropriate.

842 What one has here in terms of the established evidence was no more and no less than a failure by Vodafone to follow through on the parameters of a business plan which had been agreed upon without any reasonable excuse, and in circumstances where its past conduct clearly showed a disregard for Mobile's continued regular exercise of its rights under the ASP.

Damages

843 In terms of causation and damages it seems to me that Mobile has made good its claim to the loss of its chance to obtain the BAM and the CTM on 2296 loss subscribers [ie 1,500 + 450 + 350 – 4]. Once the modelling is revisited to provide the relevant figure it should be further reduced by a discount of 10 percent for vicissitudes, there being no certainty that the targets would be met.

844 I have given close consideration to the possibility that notwithstanding the extent to which Vodafone chopped and changed during this period of time, the evidence may be thought to disclose that at an "operational level", the parties should be seen to have simply agreed during the quarter, to reallocate the funds and targets applicable to the $15 Plan in the regional CTA Worksheet between the $11 and $17 plans. A close examination of the evidence however satisfies me that Mobile was given no alternative but to go along with whatever Vodafone was prepared to provide, bearing in mind the relevant timeline into the June quarter. That is not the language of consensus. It is the language of being held to ransom.

Claim 5 - September 2001 Quarter dispute

845 The central issues raised in relation to this claim appear to be:

· whether there was an agreed CTA Worksheet for the quarter;

· questions concerning the $15 Plan, affinity programs and Vodafone Direct branding guidelines; and

· whether Vodafone was liable to reimburse Mobile for its redundancy costs.

No agreed CTA

846 Vodafone contends that there was an agreed CTA Worksheet for the September 2001 quarter with a target of 9,000 connections. Mobile actually achieved 1,509 connections in the quarter, which was the basis upon which the BAM was calculated and paid by Vodafone to Mobile.

847 Mobile disputes that any target was agreed and alleges that it was entitled to be paid the full BAM on 12,000 connections pursuant to clause 18.3 of the ASP Agreement.

848 In my view the evidence establishes that there was no agreed CTA Worksheet for the quarter. It is unnecessary in this regard to repeat the detailed evidence to be found in Exhibit XX. Suffice it to say that :

· clearly Vodafone advised Mobile on 14 May 2001 of the connection volumes for the September quarter [7/ 1006];

· on 28 May 2001 Mobile sent the proposed CTA Worksheet for the quarter which included an allowance of $300,000 for redundancies [7/ 1064-6];

· the meeting of 5 June 2001 between the parties and the e-mail from Vodafone of 6 June 2001 reflects the continued disagreement in terms of whether or not redundancies were to be included in the estimated CTA

· this disagreement continued through the 14 June 2001 the e-mail from Mr Marchbank to Vodafone [7/ 1112] and through Mr Marchbank's e-mail to Vodafone of 18 June 2001 [7/ 1143];

· the matter remained unresolved through the forwarding of the revised CTA Worksheet on 18 June 2001 [7/ 1153] and the letter of 20 June 2001 from Mr Townsend to Mobile [7/ 1174]. Mr Townsend made plain in this letter that redundancies should not be included in the CTA;

· Mobile’s responsive letter of 26 June 2001 made clear that its approval of the September quarter CTA was contingent upon the resolution of operational marketing matters relating to the new $15 Plan and other matters. Likewise it made clear that Vodafone was liable for redundancies as a consequence of its reduction in Mobile's connection levels;

· the matter which separated the parties in terms of each maintaining a diametrically opposite position in terms of whether the approval of the September CTA was contingent inter alia upon operational marketing matters being resolved in good time was again made explicit on 5 July 2001 [7/ 1205];

· on 13 July 2001 Mobile by letter maintained that no agreement was in place for the September CTA and notified a dispute in relation to the September CTA in accordance with clause 32.1 of the ASP . Mobile repeated that its approval for the September quarter CTA was conditional upon Vodafone "following through on the marketing assumptions made within that plan in a timely way and on a concurrent agreement in relation to redundancies."

849 Mr Bathurst submitted that in determining whether or not the parties had agreed, within the meaning of the ASP, upon a CTA [as earlier explained the term "CTA" was treated by the parties as synonymous for relevant purposes with "Business Plan”], it was necessary for the court to consider the issue in the way in which businessmen would have considered it, that is to say without looking at the matter in terms of a search for a formal offer and acceptance and the like. Whilst I can certainly accept that the Court does not expect the language of contract in terms of offer and acceptance to be used, in my view the parties cannot be seen to have an agreed upon a CTA where an important parameter of that CTA was explicitly simply not agreed upon and raised in almost every relevant communication. That is what occurred here. This conclusion is supported by the inability of the parties to contemporaneously identify or thumbnail sketch how they could or would treat with the disagreement on redundancies as they went into the future. The short position recognized by the parties was that the CTA could not operate in the terms in which it was required to operate, in the absence of agreement on this item.

850 The conclusion that no CTA had been agreed upon carries within it the further finding that Vodafone's refusal [7/ 1226] to accept that the dispute resolution procedure had been enlivened, and to participate in that proceeding, constituted a breach of the ASP.

Redundancies - the construction issue

851 The definition of “Actual Acquisition Costs” includes direct and indirect costs incurred in providing the Acquisition Services. These comprise Mobile’s total overhead costs allocated on a percentage basis (Schedule 3 (TB198)).

852 The template CTA Worksheet which forms part of Schedule 3 to the ASP contained no express provision for redundancy costs [1/ 199]. I accept that the exercise of making employees redundant could not be said in any logical way to involve the "acquisition and connection of new subscribers" to Vodafone's network. [cf the definition of "Acquisition Services" under the ASP (1/ 134)]

853 The parties will be invited to address submissions as to the way forward in terms of the above findings.

Retention Funding - Claim 8

854 During the course of the final hearing Mobile abandoned the claim which it originally advanced to the effect that an oral agreement had been reached between the parties that Vodafone would provide Mobile with retention funding to enable Mobile to undertake retention activities and handset upgrades. [Summons Paragraph 20]

855 Mobile however continued to press its claim that in particular the breaches of contract comprised by the nil target regime, led to Mobile's losing a valuable chance of commercial benefit. The lost chance is said to be the clear prospect that had:

· Vodafone honoured its contractual obligations and determined to and in fact set targets for the December 2001 and following quarters;

· proceeded to endeavour to agree upon business plans with Mobile.

856 Mobile's further claim proceeds to assert that Mobile is entitled to the lost future CTM for the customers it would have retained if Vodafone had continued to provide retention funding. The loss of retention funding is said to have affected Mobile's ability to retain customers other than those not on plans.

857 In my view it is likely that retention funding at some level would have been provided had the nil target regime not been imposed. However all things considered this matter does seem to me to fall within Deane J’s description:

Commonwealth v Amann

Web site Agreement - Claim 11

858 The only live issue effectively raised in relation to this claim by Mobile which was described early in the judgment, is as to whether or not staff salaries and costs of the installing a second firewall may be regarded as properly subsumed with in the description "hosting and communication costs" within the meaning of clause 5 of the 8 March 2000 Heads of Agreement [3/ 549].

Staff Salaries

859 In my view upon the proper construction of the Website Agreement, staff salaries attributable to the time periods spent by Mobile employees on the relevant Website are to be regarded as included within the ambit of "hosting and communication costs for the portal". Upon the proper construction of clause 5 of the Web site Agreement the words "hosting and communication costs" encompasses a full reimbursement by Vodafone, of Mobile's out-of-pocket expenses in operating the portal. Nothing in the cross-examination of Mr Ikeda affects this position. The issue is one of construction.

Security Costs

860 Likewise the same expression extends to include the security costs claimed by Mobile.

861 It will be necessary for the parties to confer in terms of the final amount which Mobile is to receive as part of the judgment in terms of the Website Agreement.

Direct marketing (X4 and HIA) Dispute - Claim 9

862 The issue which arises was described early in the judgment [cf paragraph 96 et seq]. Essentially the matters raised for consideration are:

· what are the nature of Mobile's exclusivity rights;

· whether Vodafone has engaged in any conduct in breach of those rights;

· what damage, if any, has resulted from the alleged breaches.

The relevant clauses in the ASP

863 The relevant clauses in the ASP appear to be the following:

· Clause 2.3 provides that:

(a) market, promote, distribute or sell the Mobile Services; or

· Clause 2.7 provides that:

· “Group Member” is defined to mean a:

· “Vodafone Group” means:

· “Service Provider” means:

· “Mobile Direct Marketing Operation” is defined to mean:

The nature of Mobile's exclusivity rights

Use of the word "solely" in the definition of "Mobile Direct Marketing Operation"

864 Attention has been focused by Vodafone on the use of the word “solely” in the definition of “Mobile Direct Marketing Operation”. The contention is that a Mobile Direct Marketing Operation only exists if the operator is doing that and nothing else. In short the contention by Vodafone is that clause 2.7 is limited in its application inter alia to where remote selling is the sole means by which the service provider acquires mobile telephone subscribers.

865 I accept as of substance the submission by Mobile that Vodafone's construction is incorrect for the following reasons:

· the word “solely”, grammatically qualifies the words “acquisition of subscribers” namely by “remote selling” which is an acquisition technique relying “solely” on responses to advertisements and is effected by means of “orders received centrally by telephone, fax, email or the Internet”. The word “solely” does not have any bearing on some other operation which may perchance be carried on by some other service provider.;

· the exclusivity given to Mobile, which is a critical part of the arrangement, would be worthless because the new service provider could have some other business (not even telephony related) alongside its direct mobile operation and would, on this construction, not be covered;

· the construction contended for by Vodafone would make clause 2.7 ambulatory. A competitor may be carrying on the same operation one day in breach of the one provision and the next day not in breach because it whimsically does something else on the next day.

866 Vodafone Pty Ltd has entered into relevant contractual relationships with X4 Pty Ltd ["X4"] and with the Housing Industry Association Limited ["Housing Industry"]. So much is clear from:

· the 30 June 2000 Vodafone Exclusive Dealer Agreement between Vodafone Pty Ltd and X4 [604 J-AA]; Affidavit Ms Blake 4 December 2002 paragraphs 275-276];

· the 3 September 2002 Vodafone Exclusive Dealer Terms and Conditions Agreement between Vodafone Pty Ltd and Housing Industry: [Annexure "C", Affidavit Ms Blake 24th February 2003; cf Affidavit paragraphs 19, 20].

867 Vodafone has also carried out its own promotional activities which Mobile submits make clear that Vodafone has itself established a Mobile Direct marketing Operation in breach of clause 2.7.

X4 and the Housing Commission

868 Mobile submits and I accept that on the evidence presently adduced in relation to this claim and before the court:

· Vodafone has clearly appointed and is clearly dealing with both X4 and the Housing Commission [see the above described agreements];

· X4 and the Housing Commission have contracted to and are acquiring subscribers for Vodafone by direct marketing [see the above described agreements and paragraphs in Ms Blake’s affidavits];

· X4 and the Housing Commission:

- sell hardware as sellers in their own right,

[see the above described agreements and paragraphs in Ms Blake’s affidavits; see also PX 7/ 1242]

Direct Marketing by Vodafone

869 Mobile has outlined the evidentiary basis for this allegation as follows:

· In November 2002, Vodafone launched a campaign to attract customers to its Business Choice Plans utilising, amongst other things, direct marketing. (Mr Tales 10/02/03 at para 24). In furtherance of this campaign, an email was sent by Vodafone to Ms England and Mr Tales, dated 11 November 2002, attaching details of the campaign (TB1330Z(xv) – TB1330Z(xxx)). At TB1330Z(xx) and TB1330Z(xxi) of the email, Vodafone referred to the use of “Direct Mail” to potential and existing customers and the use of “Direct Sales Tools” in the campaign. It also referred to a series of off the page promotions, including advertising in national papers.

· An example of a “remote selling” letter sent to potential subscribers (and in this case a subscriber acquired by Mobile Innovations) may be found at TB1330Z(xiv).

· Further, in the promotional newsletter included in the email referred to in the preceding paragraph (at TB1330Z(xviii)), Vodafone advised that it was employing what is known in the industry as a “member get member” scheme, a direct marketing tool. The tool works by Vodafone encouraging subscribers to facilitate further connections to Vodafone. It involves direct marketing because Vodafone can acquire a new subscriber when that subscriber responds to the invitation by calling an identified central telephone number (Tales 10/02/03 at para 25).

· Mr Jones (who was not cross examined) contacted the telephone number displayed in the advertisement in the 11 November 2002 edition of the Age (referred to at TB1330Z(xxi)) of the campaign document. He was advised that if he was an existing customer of Vodafone he could purchase a new phone directly from Vodafone but if he was not an existing customer he would have to purchase a phone using “No Plans” and subsequently upgrade to a “Business Choice Plan”. When asked whether that invitation could be put in writing he was advised

Dealing with the matter

870 It does not seem to me that properly construed clause 2.7 grants complete exclusivity to Mobile in the field of direct marketing. Vodafone itself is not proscribed from conducting that activity. The clause does however proscribe the conduct of the relevant activity by Vodafone when acting through or in conjunction with agents. This construction is consistent with the nature of the ASP and takes into account the exclusivity covenant binding Mobile [clause 2.2].

871 Clearly clause 2.7 prevents Vodafone itself from appointing or dealing, directly or indirectly, with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with Mobile.

872 Clearly clause 2.7 also extends to oblige Vodafone to procure that no Group Member appoints or deals, directly or indirectly, with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with Mobile.

873 In my view although clause 2.7 is not as elegantly drafted as it might have been, properly construed it is not intended to proscribe the activities of Vodafone in circumstances where it acts itself, as opposed to where it acts wholly or partly through an agent in conducting the relevant activity. Hence the clause can be seen to preclude Vodafone itself from conducting a Mobile Direct Marketing Operation in competition with Mobile. So much appears to have been conceded by Vodafone:

874 Vodafone focuses on the complaints concerning X4 and the Housing Commission putting the propositions that:

· clause 2.7 is limited in its application to circumstances where the entity conducting the direct marketing is a "Service Provider", which not only acquires but also manages customers

· Vodafone is not in breach of this clause if it:

- appoints a dealer as its agent to acquire the relevant customers,

- then manages and supports those customers itself.

875 This construction is rejected for the reasons already given. Vodafone is precluded from conducting a Mobile Direct Marketing Operation where the relevant activity is carried on by Vodafone in conjunction with an agent.

876 In short [leaving to the side Vodafone’s obligations to procure that no Group Member will engage in particular conduct] clause 2.7 properly construed:

· precludes Vodafone when acting partly through its agents, from conducting a Mobile Direct Marketing Operation in competition with Mobile;

· does not preclude Vodafone when only acting itself, from conducting a Mobile Direct Marketing Operation in competition with Mobile;

877 In the result Vodafone is not precluded by clause 2.7 from promoting its plans by itself placing newspaper advertisements, conducting mail outs or contacting its existing customers by text messages.

878 In the result insofar as the activities of X4 and the Housing Commission are focused upon, Vodafone is shown to have breached clause 2.7 in and to the extent that it has been shown to have acted partly through its agents in the conduct of a Mobile Direct Marketing Operation in competition with Mobile.

879 Insofar as Vodafone's other promotional activities are focused upon, it seems to me that the parties should be granted leave to further address on whether or not the evidence before the court in fact establishes that those activities which are complained of, involved Vodafone’s acting through an agent. The matter was not the subject of specific focus through final address

Relief

880 The parties will be given an opportunity to address on relief.

Repudiation [Claim 10]

881 The claim to relief in terms of a declaration as to repudiation has not been made out. Of vital significance to this decision of the following matters:

· Mobile has and continues to receive benefits under the ASP;

· The benefits have been the receipt of the payment of moneys by way of the minimum BAM and the CTM payments (Sargent v. ASL Developments Ltd (1974) 131 CLR 634, Immer No. 145) Pty Ltd v. Uniting Church in Australia Property Trust (NSW) (1992) 182 CLR 26);

· Mobile has also continued to receive the benefit of the Look Mobile 15 August 2000 ASP Amendment Agreement [cf Mobile's Annual Report to 30 June 2001 9/ 1622 at 1626].

882 In any event it would clearly be inappropriate for the court to make a declaration in these proceedings at this time because the parties are not agreed on the consequences which would flow from such a declaration and for the reasons given in the following passage from Neeta v Philips (1974) 131 CLR 286 at 307 in the judgment of Barwick CJ and Jacobs J:

"Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it is generally undesirable that a court should so declare without any orders for consequential relief. If a party to such a contract claims that a contract has not been validly rescinded such a judicial declaration is proper if that party continues ready and willing at the conclusion of the litigation to perform the contract. A consequence of the declaration should be that the party submit to the performance of the contract on his part and to an order for specific performance of the contract if that is appropriate. If such an order is not or cannot be made nor an inquiry to damages ordered then a declaration that on a certain day the contract has not been validly rescinded serves no purpose in the litigation. Before such a declaration is made the party seeking the declaration may already have elected to treat the other party’s purposed rescission as a repudiation and may have himself rescinded the contract. All that has then been achieved is an issue estoppel if and when the claim for damages for breach of contract is pursued in other proceedings."

883 Whilst the court has determined not to give any relief in terms of a declaration as to repudiation, the judgment in many places includes findings of repudiatory conduct as this is relevant to many of the disparate issues being litigated. It is convenient to set out in one place a number of the circumstances constituting Vodafone's repudiary conduct and I proceed to do so, generally accepting Mobile's submissions in this regard:

· Vodafone’s conduct commencing on 28 February 2001 and the letter of 7 March 2001 (TB775);

· the setting of a nil target for the December 2001 quarter;

· a statement on 2 August 2001 by Mr Maher, the Managing Director of Vodafone Plc’s operations in Australia, that all future targets would be set at nil;

· the setting of nil targets for the March and June 2002 quarters and the failure to set a target for the September and December 2002 and March 2003 quarters.

Short Minutes of Order and further address

884 The Judgment covers many areas in complex proceedings with many issues. From time to time in the course of the Judgment reference is made to matters which may require further address. As was foreshadowed at various times during the hearing, the complex and interrelated questions of modelling, damages and relief will in some areas plainly now require some further attention. The parties have the benefit of these reasons to assist in this regard.

885 The parties are also given leave to address further submissions on any particular claim which it may be suggested was not dealt with. The matter will be listed for the purpose of any such submissions being taken at the same time as short minutes of order to be drafted by the parties are to be examined and costs argued.

I certify that paragraphs 1 - 885
and appendices “A” to “H”
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on Thursday 27 March 2003

Susan Piggott

Associate

27 March 2003

Last Modified: 03/28/2003

Key Legal Topics

Areas of Law

Contract Law

Legal Concepts

Contract Formation
Implied Terms
Causation
Compensatory Damages

Actions

Download as PDF Download as Word Document

Citations

Mobile Innovations Limited v Vodafone Pacific Limited [2003] NSWSC 166

Most Recent Citation

Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874

Cases Citing This Decision

4

Paul v Cooke (Costs) [2012] NSWSC 1203

Trajkovski v R K Findlay Pty Ltd [2008] NSWSC 273

Pioneer Park Pty Limited (in liquidation), Clifford John Carpenter, Merlo Australia Pty Limited v Australia and New Zealand Banking Group Limited [2006] NSWSC 883

Cases Cited

44

Statutory Material Cited

2

Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187

Hungry Jacks v Burger King [1999] NSWSC 1029

Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17

CITATION:	Mobile Innovations Limited v Vodafone Pacific Limited & Ors [2003] NSWSC 166
HEARING DATE(S):	17/02/03, 18/02/03, 19/02/03, 21/02/03, 24/02/03, 25/02/03, 26/02/03, 27/02/03, 28/02/03, 3/03/03, 4/03/03, 5/03/03, 6/03/03, 7/03/03, 10/03/03, 11/03/03, 12/03/03, 13/03/03, 14/03/03
JUDGMENT DATE:	27 March 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Einstein J
DECISION:	Upon the proper construction of the ASP Vodafone was not entitled to put forward nil as the target level in respect of the number of connections of new subscribers. By setting a nil target or by refusing to determine a target Vodafone rendered it impossible for Mobile to perform its obligations under the ASP. Finding that the same decision may be reached by way of: (1) upholding the pleaded implied co-operation term obliging Vodafone to do whatever was necessary to be done on its part to enable Mobile to have the benefit of the ASP and to refrain from doing anything which would or which would be calculated to deprive Mobile of the benefit of the ASP but giving this term limited reach in terms of applicable content (2) upholding the pleaded implied terms that Vodafone would act in good faith and reasonably in exercising its powers under the ASP but giving this term limited reach in terms of applicable content. Other disparate cases dealt with. Parties to bring in short minutes of order.
CATCHWORDS:	CONTRACT - Principles of construction - Inter- relationship with principles governing implication of terms - IMPLIED TERMS - Duty to co-operate - Duty to act in good faith - Duty to act reasonably - Whether duty of co-operation may be considered an implied legal duty discerned by a process of construction, a rule of law or an implied term - Principles governing implication of term in connection with the maintenance of a business - Principles governing exclusion of implied terms - CAUSATION AND DAMAGES - Difficulties of assessment - Hypotheticals - Lost Chance - Loss of benefit or detriment dependent upon the making or exercise of discretionary decisions - Doctrine of efficient breach - Vicissitudes - Contractual and other arrangements of parties carrying on business of providing mobile telecommunications services - [see extended catchwords within]
LEGISLATION CITED:	Supreme Court Act Telecommunications Act 1997 (Cth)
PARTIES :	Mobile Innovations Limited (Plaintiff) Vodafone Pacific Limited (First Defendant) Vodafone Network Pty Limited (Second Defendant) Vodafone Pty Limited (Third Defendant)
FILE NUMBER(S):	SC 50123/01
COUNSEL:	Mr D J Hammerschlag SC, Mr V F Kerr (Plaintiff) Mr T F Bathurst QC, Mr T D Castle (Defendants)
SOLICITORS:	Deacons (Plaintiff) Henry Davis York (Defendants)

Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar
500	1000	2000	2500	3000	3000	1000	2000	3000

Plan	Target (TB939-941, 945)	Actual Connections	Vodafone Direct Connections
M!9	5,300	4,227	3
M!11	6,050	4,539	0
M!15	1,500	0	0
MC17	500	925	218
MC33+	350	521	65
V/D Affinity	450	0	0
V.mobile	0	70	0
Other	0	269	48
TOTAL	14,150	10,551	334

[2003] NSWSC 166

27 March 2003

Key Legal Topics

Areas of Law

Contract Law

Legal Concepts

Contract Formation

Implied Terms

Causation

Compensatory Damages