My Telecom Pty Ltd v Singtel Optus Pty Ltd
[2004] VSC 458
•28 October 2004
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
PRACTICE COURT
| No. 5733 of 2004 | |
| MY TELECOM PTY LTD | Plaintiff |
| v | |
| SINGTEL OPTUS PTY LTD | Defendant |
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JUSTICE: | HARPER | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 26 & 27 OCTOBER 2004 | |
DATE OF JUDGMENT: | 28 OCTOBER 2004 | |
CASE MAY BE CITED AS: | MY TELECOM PTY LTD v SINGTEL OPTUS PTY LTD | |
MEDIUM NEUTRAL CITATION | [2004] VSC 458 | |
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Injunction – Interim injunction to restrain termination of contract for the provision of telephone services – Whether serious issue to be tried – Whether arguable grounds for termination – Balance of convenience – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L. Watts | Belleli King & Associates |
| For the Defendant | Mr J. Moore | Minter Ellison |
HIS HONOUR:
On or about 28 June 2004, the parties to the present proceeding entered into an agreement. It was for the supply of telephone services. The plaintiff is anxious that it remain on foot. The defendant is equally anxious to bring it to an end. The plaintiff seeks and the defendant resists an injunction restraining its termination.
The plaintiff first began exercising its contractual right to the defendant's services only a matter of weeks ago. Since then, the defendant has detected what it claims to be a number of breaches of the agreement. It also claims that the plaintiff was guilty of misleading conduct in the period before the provision of services began. It is entitled, it alleges, to rescind the contract, both for misrepresentation and for breach.
It is for the party claiming injunctive relief to show that there is a serious issue to be tried. In the circumstances of this case, however, the most the plaintiff can do is to demonstrate that it has either a contract with the defendant or at least an arguable case that such a contract exists and that the defendant threatens to terminate the provision of the services for which the contract provides. The plaintiff has clearly succeeded in establishing this basis for the relief which it seeks.
The resolution of the present dispute, however, necessarily requires the court to move beyond that point. The defendant submits that it has grounds for terminating its services, that the foundation upon which these grounds are based is clearly arguable, and that the balance of convenience points to the plaintiff's application for injunctive relief being refused. I propose for present purposes, but without coming to any settled conclusion about the matter, to adopt that course which appears to carry the lower risk of injustice. The alternative is to refuse the application unless I have a high degree of assurance that at the trial it will appear that the injunction was rightly granted.
The defendant put forward eight grounds for termination. I put one of these aside altogether. It is a ground by which the defendant alleges that it has a reasonable suspicion of fraud in the actions of a person who, although undoubtedly a party to the negotiations which led to the contract, was equally undoubtedly an agent of the defendant.
I do not propose for the purposes of my judgment to take the actions of the defendant's agents into account. It seems to me that to do so would be to stray beyond that which is permissible for me to have regard in coming to my decision.
The remaining grounds upon which the defendant alleges a right to terminate may be summarised as follows. I interpolate to say that it is appropriate that I do no more than summarise these grounds. If the matter is to go to trial then neither the parties nor the trial judge should be troubled by any conclusion to which I come in this interlocutory application. It is, accordingly, inappropriate for me to deal with the alleged grounds in any detail lest by doing so I impinge upon the authority of the court in later proceedings.
I turn first to the second ground put forward by the defendant in written submissions on its behalf. Clause 24.2 of the contract document provides that, "If you" - that is, in this case, the plaintiff - "are or become a carrier or carriage service provider then Optus may immediately cancel the service by notice to you". The defendant alleges that the plaintiff is indeed a carrier within the meaning of that clause. It relies upon the evidence of Justin Wallis given in an affidavit sworn by him on 26 October 2004. At paragraph 17B of that affidavit, Mr Wallis says this: "The true nature of the business of My Telecom means that it is a carriage service provider within the meaning of the Telecommunications Act".
Answering material has been filed on behalf of the plaintiff which picks up a number of matters deposed to in the affidavit of Mr Wallis to which I have just referred. Indeed, the answering affidavit of Mr Jenardi Volcek, sworn on 26 October 2004, refers to paragraph 17 of Mr Wallis's affidavit without referring to sub-paragraph (b). In the absence of any answer to the allegation contained in that sub-paragraph, where an opportunity to give an answer was clearly open, it seems to me that I must conclude that the defendant has an arguable case that a breach of Clause 24.2 of the contract has occurred.
I next turn to the ground numbered 3 in the defendant's written submissions. That ground is that there was a misrepresentation by the plaintiff as to the nature of the business which is conducted by it. The evidence in support of the ground is set out in paragraph 15 of an affidavit sworn by Judy Manning on behalf of the defendant on 25 October 2004. She there deposes to a conversation which she had in the board room of an agent of the defendant in which she asked Mr Volcek about the nature of the business conducted by the plaintiff. She deposes to an answer given by Mr Volcek to the effect that the plaintiff re-billed telephone calls put through by tenants of the plaintiff. The answer thus given was, the defendant alleges, a misrepresentation of the true nature of the plaintiff's business. This again is an allegation which the plaintiff has had an opportunity to answer. No answer has been forthcoming.
In the affidavit of Mr Volcek sworn on 25 October this year, he referred to paragraph 13 of Ms Manning's affidavit but made no reference to paragraph 15. In these circumstances it seems to me that the proper conclusion for present purposes is that the defendant has an arguable case that a misrepresentation was made to it by the plaintiff.
The defendant also relies upon a misrepresentation by silence, in that in correspondence between the parties the defendant set out its understanding of the position as between the plaintiff and certain tenants which it understood the plaintiff to have in buildings in Melbourne and in Sydney. It appears that the understanding expressed in that correspondence by the defendant was incorrect. It also appears, at least arguably, that the misunderstanding was one which the plaintiff had an opportunity to correct but failed to do so. This, it seems to me, is an additional reason why I should conclude that the defendant has an arguable case that it was the victim of misrepresentations made to it by the plaintiff.
The written submissions of the defendant then turn to two clauses of the contract between the parties, each of which according to the defendant gives the defendant the right immediately to cancel the service. The first clause upon which the defendant relies in this context is Clause 13.2(f) of the contract. By that sub-clause it is provided that the defendant may without liability immediately cancel the service at any time if it reasonably believes that there has been an unusually high use of the service.
There is material before me to indicate that the defendant was provided with evidence of the plaintiff's use of telephone services over two separate periods earlier this year, one between 25 March and 24 April and the other between 1 May and 31 May. The usage during those periods when compared with the plaintiff's usage of the defendant's service for a period of ten days early this month would indicate, if the evidence is accurately put before me, that the pattern of usage of telephone services by the plaintiff has changed dramatically since the periods to which I have referred, those periods occurring earlier this year. The increase has been assessed by the defendant as in the order of 228 per cent.
For the purposes of this proceeding, I accept that the defendant has an arguable case that there was such an increase and that that increase is one upon which the defendant can reasonably base a belief of an unusually high use of its service. That being so, it is in my opinion at least arguable that the plaintiff is in breach of Clause 13.2(f) of the contract between the parties.
A like claim is made by the defendant in relation to Clause 2.4(d) of the contract. That sub-clause provides that the plaintiff may not use or attempt to use the service in excess of any forecast provided to the defendant. The forecasts in question here are those to which I earlier referred relating to the two periods between, respectively, 25 March and 24 April and 1 May and 31 May. To the extent that the figures there presented to the defendant may properly be regarded as a forecast of future use by the plaintiff of the defendant's services, that forecast was well below the figures of actual use given by the defendant for the period of ten days between 7 October and 17 October this year. In those circumstances, it seems to me that it is arguable that the plaintiff is in breach of Clause 2.4(d). It is accordingly also at least arguable that the defendant has the right pursuant to Clause 13.2(c) to immediately and without liability cancel the service.
A further allied breach relied upon by the defendant is that the difference between the usage of telephone services by the plaintiff in the first half of this year and the time since this contract came into operation has been so significant as to give a right to the defendant under Clause 13.2(f) to cancel the service. I have already referred to the terms of that clause.
The evidence upon which the alleged breach is said to arise is that the plaintiff put to the defendant a pattern or profile of usage in the evidence of its use in the two periods to which I have already referred which is different (the defendant would allege dramatically different) from its pattern of use following its access to the defendant's services. In particular, the defendant relies upon the evidence that a mix of calls was made through services operated under the aegis of the plaintiff earlier this year whereas, once the plaintiff began to use the services of the defendant, its local and national calls were reduced to zero and its international calls took 98.6 of the totality of calls made using the services of the defendant. Given this evidence, it seems to me that there is an arguable basis for the defendant to claim that there has been a breach of Clause 13.2(f) giving rise to a right to the defendant immediately to cancel the service.
The next ground upon which the defendant relies is that it has a reasonable suspicion that the plaintiff was guilty of fraud in connection with the provision of the service. The defendant here relies upon Clause 13.2(e) of the contract which provides that the defendant may immediately cancel the service if it reasonably suspects fraud on the part of the plaintiff in connection with the service. In support of this ground, the defendant relies upon evidence given in the affidavit of Mr Wallis sworn on 26 October at paragraph 17(a). This was the paragraph to which I earlier referred and which was in part the subject of a response from Mr Volcek. Paragraph 17(a) was not one of those to which Mr Volcek sought to respond.
In that paragraph, Mr Wallis alleges a misrepresentation by My Telecom as to the nature of its business and the purpose for which the Optus services would be used. I have already referred to that misrepresentation. It is one which was made in circumstances that, according to the defendant, gives it reason to suspect that a fraud upon it has been committed. I say no more about this than that in my opinion this ground is one about which it may properly be said that there is a real area of dispute.
The last ground to which I refer is the first taken up by the defendant in its written submissions. The defendant alleges a breach by the plaintiff of Clause 2.2 of the contract. That clause provides that the defendant's service may not be used for transiting or refiling domestic or international traffic without the prior written consent of the defendant. There is no suggestion here that the defendant has given prior written consent to any transiting or refiling in which the plaintiff may have been engaged. There is, however, evidence that the plaintiff has indeed used the service for the prohibited purpose. That evidence is in part to be found in a second affidavit sworn by Mr Wallis on 26 October where in paragraphs 2-6 he first exhibits two carrier service agreements between the plaintiff on the one part and two separate telephone corporations respectively on the other, and deposes to the fact that he sought the opinion of one of the defendant's managers in its international carrier services division about the character of the two service agreements in question.
The answer which Mr Wallis received from the relevant manager, a Ms Kate Kesbie, was that as she understood each of the agreements after having examined them, each involved refiling. One of them at least also involved the plaintiff acting as a transit party. Accordingly, the defendant alleges the plaintiff is in breach of Clause 2.2. I add that this matter was first broached by the defendant in the first affidavit of Mr Wallis sworn on 26 October where in paragraph 17(e) he refers to Clause 2.2 and deposes to information then in his possession from Ms Kesbie to the effect that she believed that transiting or refiling occurs in certain circumstances and that those circumstances appear to have been described in paragraphs 5 and 6 of Mr Volcek's affidavit of 25 October this year.
This reference, that is the reference in Mr Wallis's first affidavit of 26 October, is significant, it seems to me, because again Mr Volcek had the opportunity to specifically answer the points made in that sub-paragraph of Mr Wallis's affidavit but did not do so.
Clause 2.2 is not a clause which provides that its breach may be the occasion of immediate termination by the defendant. Accordingly, if the defendant were to rely upon a breach of this clause as giving rise to a right to terminate, it would have to show a court, were the matter to be disputed, that the breach was of such significance as to give rise to that right. There is nothing before me to indicate one way or another whether the breach has the significance to which I have just referred. The ground is nevertheless important, not simply because there is reason to think that Clause 2.2 may have been breached - or, to put it more accurately, there is an arguable case that the clause has been breached - but also because the matters to which I have just referred relate directly, it seems to me, to the question of whether or not the balance of convenience favours the grant of the injunction.
If the defendant is able to make good its allegation in relation to Clause 2.2, it follows that the contracts made between the plaintiff and the two other providers of telephone services are in breach of that clause. Yet the plaintiff relies upon those two contracts as a basis for its submission that the balance of convenience favours the grant of the injunction. Mr Volcek deposes to the fact that if the service agreement with the defendant is not given effect then its contractual arrangements with the two other suppliers will be adversely affected to the extent that the plaintiff's reputation will be likewise adversely affected and the plaintiff's ability to provide services which it has contracted to provide will be gravely affected.
This circumstance is one which has caused me some concern. Indeed, it is the reason why I think I can accurately say that this is a case that is somewhat troubling. It is a case where the claims of each side have a degree of strength that makes it not as easy as it sometimes is to determine whether or not the relief sought should be granted. In the end, however, it seems to me that there is a defining point in the several arguments put to me on either side. It is that if the injunction were granted, the plaintiff would be in a position to continue to act in accordance with the terms of the two contracts with its other telephone partners to which I have referred. Yet there is a strongly arguable case, it seems to me, that by doing so the plaintiff would be in breach of Clause 2.2 of the agreement it has with the defendant.
Given that Mr Volcek has had the opportunity to respond to the claim that the plaintiff is in breach of that clause, and given that he has not attempted to provide a response, it seems to me that I should, for the purposes of this proceeding only and without in any way affecting subsequent proceedings between the parties, hold that if the injunction were to be granted the plaintiff would continue activities which are highly likely to be in breach of its contract with the defendant. In these circumstances it seems to me that the balance of convenience points to a refusal of the application.
In summary, I am of the view that the application should be refused, first because although the plaintiff has for its part done what it can to demonstrate that it has an arguable case, the defendant in turn has demonstrated that it has grounds for termination which are at least arguable, if not strongly arguable, and the balance of convenience favours a refusal of the application. I will order accordingly.
(Discussion ensued.)
If the allegations of fraud are made out then the costs of this application will be paid by the plaintiff. The question then becomes whether the ordinary rules should apply or whether there are other bases for thinking that costs in the cause is appropriate. This is a somewhat unusual case. I have touched upon some of the reasons why I think that is a statement that can appropriately be made in respect of this application. Its unusualness is such as to cause me to think that here I ought not make an order that the costs be paid now by the plaintiff, albeit that the defendant has been successful. In my opinion this is a proper case where costs in the cause should be ordered.
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