Primus Telecommunications Pty Limited v Kooee Communications Pty Limited
[2007] NSWSC 91
•16 February 2007
CITATION: Primus Telecommunications Pty Limited v Kooee Communications Pty Limited & Anor [2007] NSWSC 91 HEARING DATE(S): 31/01/07, 01/02/07, 02/02/07, 05/02/07
JUDGMENT DATE :
16 February 2007JURISDICTION: Equity Division
Commercial ListJUDGMENT OF: Einstein J DECISION: Separation Deed construed. Parties to bring in short minutes of order. CATCHWORDS: Contract - Construction and interpretation of contract - Admissibility of extrinsic evidence to assist in interpretation of contract - Construction of general release - Release to be read down to conform to contemplation of parties at execution LEGISLATION CITED: Trade Practices Act 1974 (Cth) CASES CITED: Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310
Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191
Atkinson v Hastings Deering (Qld) Pty Ltd (1985) 8 FCR 481
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64
Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112
Hudson Investment Group Ltd v Australian Hardboards Ltd [2005] NSWSC 716
International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237
Lakatoi Universal Pty Ltd v Walker [2000] NSWSC 113
Macdonald v Longbottom (1859) 1 El & El 977
Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181
Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114
Prenn v Simmonds [1971] 1 WLR 1381
Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26
River Wear Commissioners v Adamson (1877) 2 App Cas 743
Utica City National Bank v Gunn (1918) 118 NE 607PARTIES: Primus Telecommunications Pty Limited (Plaintiff)
Kooee Communications Pty Limited (First Defendant)
SP Telemedia Limited (Second Defendant)FILE NUMBER(S): SC 50004/06 COUNSEL: Mr R Garratt QC, Mr D Priestley (Plaintiff)
Mr L Foster SC, Mr J Duncan (Defendants)SOLICITORS: Browne & Co (Plaintiff)
Sparke Helmore (Defendants)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST
Einstein J
Friday 16 February 2007
50004/06 Primus Telecommunications Pty Ltd v Kooee Communications Pty Limited & Anor
JUDGMENT
The Proceedings
1 Primus Telecommunications Pty Ltd brings these proceedings to secure its claims in contract made against Kooee Communications Pty Ltd and its holding company S P Telemedia Ltd. The material contract[s] were for the supply by Primus of telecommunications carriage services to Kooee, which was a retailer of telecommunications services. Primus [in the name of Kooee] supplied the subject services to customers of Kooee [a process sometimes referred to as "badging"].
2 The sole role of S P Telemedia was as guarantor to Primus of the sundry contractual obligations of Kooee so that no further mention of S P Telemedia requires to be made as part of these reasons.
3 The initial contract [known as the "Virtual Service Provider Agreement" or "VSPA"] was entered into in about July 2000 and was thereafter varied on occasion. Whilst the VSPA has some relevance to issues in the proceedings, the crucial contract for present purposes is the contract by which Primus and Kooee agreed to terminate the VSPA, this contract being known as the "Separation Deed". There has been some debate between the parties as to the date when the Separation Deed was signed and the parties have agreed that it can be taken for the purpose of the proceedings, that it was signed at some stage between the 20th and the 27th of April 2005.
4 The Separation Deed was itself varied from time to time. In general terms it provided mechanical provisions to enable the parties to terminate their anterior contractual arrangements, hence to permit a company known as B Digital Ltd to take over and to provide, or to arrange to provide, the services previously provided by Primus to Kooee. The background was one where the shareholding of Kooee was to be sold by S P Telemedia to B Digital.
5 A complicating factor which besets the present proceedings concerns the fact that the parties to the original VSPA continued in dispute about a particular contractual matter through periods whilst that contract was on foot. This anterior dispute was still raging at the very time when the Separation Deed was entered into. One of the issues concerns whether or not these anterior disputes had by the time the Separation Deed was entered into, been in part settled by an agreement that at least a particular amount was clearly owed and accepted as owed by Primus to Kooee: the issue raising questions as to the reach of releases provided for in the Separation Deed.
The cross-claims
6 The cross-claims pursued by Kooee are in contract as well as pursuant to a cause of action alleging misleading and deceptive conduct. These will be referred to as appropriate in the reasons which follow.
The remaining matters in issue
7 The parties have sensibly reduced the matters in issue considerably. The matters which were litigated were as follows:
Net Debtors
What is the proper construction of the definition of "Debtors Amount” in the Separation Deed?
Revenue Share
Is the Kooee claim for a share of revenue barred by the release in clause 7.1 of the Separation Deed (or by clauses 7.2, 7.3, 7.4 and 7.5)?
Deficient Information Losses
What obligation if any did the plaintiff have as to the accuracy of the information provided? What was the source of the obligation?
Is the defendants’ claim barred by the release in Clause 3.6(a) of the Separation Deed?
What is the effect if any of the words in clause 3.6(a) “… which was not otherwise imposed under the VSPA …”?
What is the relationship between the obligation to provide Schedule 1 information and any obligations in the VSPA?
Does the release in Clause 7 of the Separation Deed apply to this claim?
Is the defendants’ evidence capable of establishing that there were such inaccuracies or deficiencies in the information sufficient to constitute any breach of any obligation?
Is the defendants’ evidence capable of allowing quantification of loss? If so, what is the quantum of loss?
How are expenses incurred or losses suffered by B Digital Ltd recoverable by the defendants?Does the defendants’ evidence establish that any losses suffered were suffered by the defendants and not a third party?
Matters of agreement
8 Exhibit P1 is a record of a number of matters agreed between the parties in an attempt to reduce the issues being litigated. These matters generally treat with quantum issues. The agreement so recorded is in the following terms:
1. It is agreed that:
Net debtors (clause 2.3)
(b) if the defendant’s construction be correct, the value of Net Debtors is $3,180,941.(a) if the plaintiff’s construction be correct, the value of Net Debtors is $4,400,724;
Unbilled Revenue (clause 2.3)
2. Unbilled Revenue, pursuant to clause 2.3, is agreed in the sum of $1,087,152.24 (inclusive of GST).
Primus’ (migration) Costs (clause 6)
3. Primus’ costs, incurred in respect of the migration pursuant to clause 6, is agreed in the sum of $300,000 (inclusive of GST*).
Collections
4. Primus has collected on behalf of Kooee from Kooee customers, and holds, the sum of $2,365,218.75.
5. Subject to the plaintiff’s legal arguments contesting the defendants’ entitlement to any sum for revenue share, the undisputed component of revenue share payable by Primus to Kooee pursuant to the VSPA as at the date of the Separation Deed is agreed as $1,263,205.40.Revenue Share (commission)
- * It is noted that the plaintiff will provide to the defendants a GST invoice for so much of this sum in respect of which no invoice has previously been provided.
Issues concerning interest
9 The parties agreed that there was sufficient prospect of the issues concerning interest being resolved following the delivery of the reasons in terms of the other major issues, to warrant the Court quarantining the interest issues until after these reasons were delivered. That accommodation seemed to the Court to be efficient and the details of the arrangement were transcribed.
The VSPA
10 The VSPA received only minimal attention during the hearing. It is likely sufficient for present purposes to do no more than to set out the recitals and some detail from the schedules.
[NBTC the company named in the VSPA, changed its name to Kooee Communications Pty Ltd. The Primus subsidiary referred to in the VSPA, became Kooee Telecom Pty Ltd].
11 The recitals were as follows:
A. Primus owns or controls and operates the Primus Network and is a supplier of Internet, mobile phone and other telecommunications access, products, carriage services and related services.
B. NBTC is or is shortly to become a wholly owned subsidiary of SPT Holdings Pty Limited which in turn is or is shortly to become a wholly owned subsidiary of Washington H. Soul Pattinson and Company Limited (ACN 000 002 728).
D. The parties intend to foster a co-operative resale relationship whereby NBTC promotes the Primus products under its own brand name in conjunction with Primus.C. The Parties have agreed Primus will supply its carriage service products and related services from the Primus Network to NBTC for resale to NBTC’s customers subject to the terms of this agreement and on the basis that those carriage service products will be resold by NBTC using the trading name “Kooee Communications” or such other trading name or names as NBTC may from time to time decide and using such facilities and other assistance as NBTC may from time to time secure from SPT and NBN Television.
12 Schedule 1 to the VSPA identified the commencement date as 1 August 2000, the term as three years, an option period as two years and defined the material SPT geographic area across which the agreement was to operate.
13 Schedules 2 and 3 respectively identified the Primus products and Customer Services. Schedule 4 identified the material Primus advertising and marketing support services.
14 Schedule 5 was in the following terms:
Revenue Sharing
The Parties agree that Revenue from NBTC’s resale of Primus Products under this agreement will be shared as follows:
| Primus or the Primus Subsidiary will make monthly payments to NBTC from the Operating Account calculated at the following Rates upon the Resale Revenues: |
| Primus productRates to payable NBTC as a percentage of Resale Revenues |
| National LD8% |
| International LD8% |
| Total Mobile Telephoning billings8% |
| Internet Access8% |
| Local calls and Line RentalsNil |
| 1 800/1 300/13/and other toll free numbers8% |
| Fixed to mobile callsNil |
| Phone card/Calling card8% |
| International Toll Free8% |
| Other Telstra ResaleNil |
| If and when profitable resale of local calls and line rentals and/or fixed to mobile calls and/or other Telstra resale is possible then 25% of a margin to be agreed between the Parties will be paid to NBTC on such profitable calls up to a maximum of 8%. |
Material Provisions of the Separation Deed
15 The recitals were in the following terms:
A. Kooee, formerly known as the Newcastle Broadcasting & Television Corporation Pty Limited, and Primus are parties to the VSPA;
B. Under the VSPA, Primus through Subsidiary provides certain Carriage Services, Primus Products (as defined in the VSPA) and other services to Kooee;
C. Kooee and Primus have had disagreements as to certain matters in connection with the provision of those services and as to the amounts payable by Primus to Kooee under the terms of VSPA;
D. Kooee wishes to be free to obtain Carriage Services and associated customer services for its customers from another party on any terms it chooses;
F. In order to resolve all disputes and all possible Claims between Kooee on the one hand and Primus on the other and to facilitate the sale of Kooee, without any admission of liability, the parties have agreed to terminate the VSPA and release each other from all Claims under or in connection with the VSPA or otherwise, on the terms of this Deed.E. SP Telemedia Limited, Kooee’s parent company, is proposing to sell all the shares in Kooee to B Digital;
16 The following definitions are of particular relevance:
Claims means all debts, claims allegations, suits, actions, demands, causes of action, claims for account and proceedings:
(a) of whatever kind or nature (including, in respect of legal costs and direct or consequential loss of profits);
(b) however and whenever arising (including at common law, in equity and whether in respect of a breach of trust or other fiduciary obligation or under statute);
(c) whether actual or contingent; and
(d) whether made by a party to this Deed or a person claiming under or through that party…
Debtors Amount means an amount equivalent to all Debts recorded in Primus’ books of account at the Termination Time less any of those Debts in respect of which Primus has made provision in accordance with its usual bad and doubtful debt policy in respect of Customer Debts as at the Termination Time.
Debts means the amounts properly owed by Customers to Primus in respect of charges for Primus Services to Customers…
Net Debtors means an amount equivalent to the Debtors Amount multiplied by 83.92% plus all GST paid by Primus in relation to the Debts…
Transition Period means the period beginning on the date of this Deed and ending at the Termination Time.
VSPA means the Virtual Service Provider Agreement dated 21 July 2000, which has been extended, supplemented, varied and amended from time to time by the parties together with all other agreements, if any, under which Primus provides carriage services to Kooee.Unbilled Revenue means 90% of the amount of any charges that, but for this agreement, could be entitled to bill or could have been entitled to bill to Customers after Termination Time for Primus Services in accordance with the provisions of the VSPA whether provided before or after Termination Time.
17 Clauses 2, 3, 7 and 8 [making agreed typographic corrections] were in the following terms:
2. Payment of debts and Unbilled Revenue
2.1 Subject to subclause 2.3 below, from Termination Time, Kooee (and not Primus) will collect and may retain the proceeds of all Debts and Primus agrees and acknowledges that neither it nor its Associates is entitled to all or any part of the Debts or any amount in respect of the Debts, other than as set out in this Deed.
2.2 Primus will, on or before 7 clear Business Days after Termination Time to the extent that such details are then known to Primus advise Kooee of the Net Debtors and Unbilled Revenue and must supply the information in Schedule 1 in respect of any such amounts.
2.3 Kooee must pay to Primus one-half of the amount equivalent to the Net Debtors and Unbilled Revenue as stated in the notice issued pursuant to clause 2.2 within three Business Days of receipt of such notice. Kooee must pay the remaining amount equivalent to one-half of the Net Debtors and Unbilled Revenue as stated in the notice issued pursuant to clause 2.2 within 30 Business Days of receipt of such notice.
2.4 Within 180 days of the Termination Time Primus may issue further notices to Kooee advising of any Net Debtors and Unbilled Revenue amounts that were not included in the notice issued under sub-clause 2.2 and must supply the information in Schedule 1 in respect of any such amounts if Primus does so Kooee must pay Primus within 5 Business Days of receipt of any such notices the amounts equivalent to the Net Debtors and Unbilled Revenue so advised.
2.5 Subject to Kooee complying with its obligations under sub-clauses 2.3 and 2.4 above any amount paid by a Customer to Primus or any Associate of Primus on or after Termination Time must be paid by Primus to Kooee on the last day of the week following after the second payment by Kooee under sub-clause 2.3 and each subsequent week and regardless of when any payments are made by Primus under this clause 2.5, if any amount is received by Primus in respect of any Debt, Primus must give Kooee sufficient information for Kooee to identify each Debt and the amount of such Debt in respect of which such payments were made.
2.6 This clause 2 shall not have any effect from the expiry of 240 clear days after Termination Time and each party will then no longer be required to make further payments to the other party other than in respect of payments which were then outstanding.
2.7 From the Termination Time Primus assigns to Kooee all its right, title and interest in and to the Debts for the consideration payable pursuant to sub-clauses 2.3 and 2.4 above. Primus does not guarantee the validity of any particular debt.
2.8 In meeting its obligations Primus will follow its usual procedures from its usual records or sources (including its usual procedures to collect Debts up to the Termination Time) with the exception of reminder calls Primus will not bar or suspend any services during the Transition Time.
3. Transfer of customer data and termination of VSPA
3.1 Kooee will before the end of the Transition Period, procure that all of its Customers are transferred to another provider of Carriage Services and customer services or will cease to use Primus Services with respect to any person that was a Customer during the term of the VSPA. Subject to clause 3.6, Primus will provide to Kooee or its nominated representative the information referred to and perform the actions set out in Schedule 1. In the case of any items in Schedule 1 that are marked with an asterisk Primus will give the information that it has in its possession after diligent inquiries have been performed.
3.2 Subject to clause 3.5, the parties hereby agree to terminate the VSPA with effect from Termination Time.
3.3 Subject to clause 3.5 and clause 4, Primus will have no obligation to Kooee with respect to Customers after the Termination Time. Primus will not bear any obligation or liability in respect of the provision of any services to Customer from the Termination Time and Kooee indemnifies Primus with respect to any Claim from any person arising from the provision or non-provision of any services to Customers from the Termination Time.
3.4 Upon written request and payment of the relevant charges specified in Schedule 2 after Termination Time Primus will provide Kooee summaries of inquiries and copies of verbal agreement recordings in relation to Customers specified by Kooee.
3.5 The obligations in clause, 5.5 (Intellectual Property Rights of Kooee and Primus Materials), 7.5 (Ownership and use of Customer Information), 13.1 (“Public Statements”) and 13.2 (“Confidential Information”) of the VSPA survive the termination of the VSPA under clause 3.2. For the avoidance of any doubt, notwithstanding anything in the VSPA, no other provision of the VSPA survives the termination of the VSPA under clause 3.2.
3.6 It is acknowledged that Primus wishes to assist Kooee and B Digital to achieve the efficient migration of Customers from the arrangements comprised in the VSPA to those nominated by Kooee but Primus must do so within the practical circumstances of its own business and therefore:
(a) Kooee and B Digital release and forever discharge Primus and each of its Associates from any and all Claims which it might have, in relation to this clause 3 which was not otherwise imposed under the VSPA and for the sake of clarity B Digital cannot make any claims upon Primus for any reason at all related to Kooee or the subject matter of this Deed and but for this release there is no relationship of any kind between B Digital and Primus; and
(b) Kooee indemnifies Primus and its Associates against any and all loss arising from any Claims that Kooee and B Digital, any Associates of Kooee or B Digital or any other person on behalf of Kooee or B Digital pursues against Primus or its Associates, which Claim was the subject of a release under clause 3.6 (a)…
7. Release and indemnity
Release
7.1 Each of Kooee and Primus hereby release and forever discharge each other from any and all Claims which each has, or might have had but for this Deed, against the other on any account whatsoever, (including Claims in respect of the negotiation, execution and operation of VSPA and the facts, matters and circumstances referred to in the recitals to his Deed), other than Claims which may arise as a result of any breach of this Deed by any party.
Indemnity
7.2 Each party (the First Party) indemnifies the other (the Second Party) against any and all loss arising from any Claims that the First Party, any Associate of the First Party or any other person on behalf of the First Party pursues, now or in the future, or has pursued in the past against the Second Party which Claim was the subject of a release under Clause 7.1.
Covenant not to claim
7.3 Each party agrees not to make any Claim which was the subject of a release under clause 7.1 (and to use its best endeavours to ensure that no other person makes any such Claim) against the other party, its Associates or any other person.
Benefit of releases and indemnities
7.4 The benefit of any release and indemnity given in this Deed to a party is also given to each of that party’s Associates. Each party holds the benefit of the releases and indemnities given by this Deed on trust for that party’s Associates.
Plead in bar
7.5 The Parties agree that the agreement, releases and covenants provided in Clause 7 may be pleaded as an absolute bar to any suits, actions, proceedings or other claims commenced or continued by any party (or any person on behalf of a party) against any other party with respect to or in connection with any Claims which use the subject of a release under clause 7.1.
Guarantee
7.6 SPT guarantees payment of each and all sums of money, interest and damages (whether present, future, contingent, liquidated or Unliquidated) and the prompt observance and performance of all Kooee’s obligations under or, in relation to or arising from this agreement for which Kooee may now or later be liable to Primus or its Associates.
8.1 Nothing in this Deed is an admission of liability on the part of any party.8. No admission
18 Schedule 1 to the Separation Deed was headed "Information and services to be provided by Primus for migration of Customers” and relevantly for present purposes included the following:
“ 8 Finance
- Debtors Ledger with aged debtor break down as to current 30 days, 60 days, 90 days and more than 90 days.”
Dealing with the issues
The proper construction of the definition of “Debtors Amount” in the Separation Agreement
19 The essential issue which divides the parties in this regard is whether the debts for which provision has been made are to stand inside or outside of the definition. This depends upon the sense in which one reads the words "less any of those debts in respect of which Primus has made provision in accordance with its usual bad and doubtful debt policy in respect of customer debts as at the Termination Time".
20 In short Primus' claim under clause 2.3 in respect of “Net Debtors” is based upon a calculation by which Primus deducted from the amount of all debts, the amount of provisions made by Primus in respect of those debts.
21 Each party claims that the construction put forward by the other is misconceived.
22 The contentions of Kooee were as follows:
ii. 'Debtors Amount' is defined as:
i. The exercise of interpretation is one in respect of which there is no relevant, admissible extrinsic evidence.
- an amount equivalent to all Debts recorded in Primus’ books of account at the Termination Time less any of those Debts in respect of which Primus has made provision in accordance with its usual bad and doubtful debt policy in respect of Customer Debts at the Termination Time.
(emphasis added)
iii. 'Debts' is defined as:
- the amounts properly owed by Customers to Primus in respect of charges for Primus Services to Customers.
iv. 'Customer Debts' is not separately defined but obviously is the same as 'Debts'.
v. 'Debts' is plainly the plural of Debt. Necessarily, each Debt is an ascertainable, discrete monetary amount. No doubt certain Customers would own more than one Debt; each such Debt would bear its own age.
vii. The plaintiff’s interpretation would require a rewriting of the definition of Debtors Amount, entailing both the deletion, and the addition, of words. The plaintiff has to say that Debtors Amount must be defined as:vi. In these circumstances, applying the ordinary precepts of contractual interpretation, Debtors Amount is the amount of Debts at the relevant time less the amount of those individual Debts, where by reason of their age, pursuant to the Primus usual bad and doubtful debt policy, a provision would apply. It is the Debt that is to be deducted.
- “an amount equivalent to all Debts recorded in Primus’ books of account at the Termination Time less
(words deleted - struck through; words added - underlined)”
viii. There is no justification for such a rewriting of the definition.
Primary route to the construction
23 In my view the proper construction of the definition of “Debtors Amount” is that contended for by Primus.
24 The primary route to this construction is no more and no less than:
ii. the background knowledge which a reasonable person in the position of the parties will be regarded as having, for the purposes of the construction of a contract, includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man with the proviso that it should have been reasonably available to the parties: cf Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 912-913.
i. a reading of the Separation Agreement taking into account [in the manner stated in ii below], what were the circumstances with reference to which the words were used, and what is the object appearing from those circumstances, which the person using them had in view: cf Prenn v Simmonds [1971] 1 WLR 1381 at 1384 per Lord Wilberforce; Lakatoi Universal Pty Ltd v Walker [2000] NSWSC 113 at [1039];
The principles
25 Generally it is sufficient to note that the principles which are apt to inform the proper approach to the construction of a commercial document were set out in Hudson Investment Group Ltd v Australian Hardboards Ltd [2005] NSWSC 716 at [287] – [297] which formulation is adopted for present purposes.
26 Of particular significance to the matter presently in issue are the following portions [repeated in Hudson] taken from the judgment of McColl JA in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 at [71] and [72]:
[72] Consistently with this approach, it has been held that if detailed semantic and syntactical analysis of a written contract lead to a conclusion that flouts business commonsense the contract must be made to yield to business commonsense: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 per Lord Diplock; applied by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Ltd v Hafele Australia Pty Ltd , above, at 198.
[71] Gibbs J’s statement in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 that “the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd (“The Fina Samco”) [1995] 2 Lloyd’s Rep 344 at 350 per Neill LJ (with whom Roch and Auld LL.J agreed) that the primary focus is the agreement itself which “must speak for itself, but … must do so in situ and not be transported to a laboratory for microscopic analysis”.
27 There is, it seems to me, clear substance in the submission put by Primus to the effect that the contentions of Kooee in relation to the net debtors issue, present a strong aura of commercial unreality. This is because the submission involves Primus selling all of the relevant class of debts without payment at all for any of those for which it had made some provision in its books. I accept that this presents as a somewhat startling commercial outcome which would effectively mean that very large sums were simply being in effect given away in the context of an agreement that was sought by the defendants to go on their own way in selecting a new commercial carrier and to enable the selling of the shares in the first defendant to B Digital. This permits the Court, cognisant of the circumstances in which the Separation Agreement was entered into and as a matter of commercial reality, to read the words "less any of those debts in respect of which Primus has made provision" [in the definition of 'Debtors Amount'], as meaning "less any part of those debts in respect of which Primus has made provision".
28 In the broad, the primary scheme generally set out in clauses 2.1, 2.3 and 2.4 was accurately summarised by Mr Garrett QC, leading counsel for Primus, in the following summary [Transcript 10.26]:
“2.1, collection of debts from the termination time is to be Kooee's affair.
2.3, Kooee must pay Primus one-half of the amount equivalent to the net debtors and unbilled revenue as stated in the notice pursuant to clause 2.2 within three business days of receipt of such notice. Kooee must pay the remaining amount equivalent to one-half within thirty business days.”2.2, Primus will on or before seven clear business days after termination time, in other words after 27 May, to the extent that such details are then known to Primus, advise Kooee of the net debtors and unbilled revenue and must supply the information in schedule 1 in respect of any such amounts.
29 The Separation Agreement clearly throws up the purpose of bringing an end to the VSPA and to the commercial relationship between Primus and Kooee. That may be regarded as a policy of severance.
30 However a related purpose was to transfer all debts owed by Kooee customers [to Kooee Telecom] to Kooee Communications as at the Termination Time. Those matters seem to have been progressed in first the definition of debts and then in clause 2.1. The definition of debts is in clause 1.1, the general definition clause which stipulates that "debts" means the amounts properly owing by customers to Primus in respect of charges for Primus services to customers.
31 When one comes to focus upon the related purposes of first, the determination of the business, and then the transfer of debts or the collection of debts, I accept that the business commonsense of what was occurring involved "debts" in this context as plainly meaning all debts of the kind falling within the description and would include debts for which provision may have been made by Primus in its books. Approaching the matter in another way, what is intended is that given that Primus may have made provision under its bad debt policy for ageing debts, all debts including those, were from the termination time, to be collected and only collected by Kooee Communications.
32 The Kooee construction is I accept, unrealistic and commercially unreasonable. It would depart dramatically from the ordinary approach to debt provisioning which allows for the writing off an increasing proportion of debts as they age. Further it produces a result that bears no resemblance to the result produced by applying the policy in the ordinary way.
33 The Kooee construction would make most of the terms of Primus’ policy irrelevant, in particular the percentage rates of provisioning for various aged debts. The only term of relevance would be the earliest age at which some provisioning is made [90 days].
34 These are the primary reasons for acceptance of the construction put by Primus.
Assistance from Schedule 1
35 Whilst I accept that the following proposition may well be debatable, there is an argument that the inclusion in Schedule 1 of the requirement for Primus to include [in the information and services it was to provide for migration of customers], detail of the debtors ledger with an aged debtor breakdown as to current 30 days, 60 days, 90 days and more, is a pointer supporting the construction pursued by Primus. The proposition is that this form of information was to be supplied in terms of all debts being purchased. [I note that in using the word ‘provide’ in the parenthesis in the first sentence of this paragraph, the matter of the basis on which the information and services were to be provided is examined in the section of these reasons where the Deficient Information Losses are dealt with: the point there emphasised is that Primus agreed to provide the information only on the basis that it was released from all claims in so providing].
36 The proposition was put by Mr Garrett in the following terms:
"Primus will on or before seven clear business days after termination time to the extent that such details are then known to Primus advise Kooee of the net debtors and the unbilled revenue and must supply the information in schedule 1 in respect of such amounts."
In clause 2.2 the agreement says:
In our submission, that again is such an extraordinary conclusion that one rejects it and so one arrives, simply by the text of the agreement, at the conclusion that we say the concept was used with the same meaning in both places: That which you are using as the measure of payment, in other words, the face value including provisioned face value of all debtors, is also the yardstick for that which you are providing information for. All debts, whether they have been provisioned for or not. There is no basis for approaching those two different but related matters, information about debtors and payment for debtors, in a different way.It is those concluding words, "supply the information in schedule 1 in respect of such amounts", which plainly in our submission are intended to mean that information in respect of all debts being purchased is to be provided. But if the definition of "net debtors" had the meaning for which the defendants contend, information would not be provided under this agreement in respect of debts for which provision had been made.
[Transcript 240]
37 The contra submission put by Mr Foster SC, leading counsel for Kooee, was that clause 8 of Schedule 1 was not provided in accordance with the debtors provisioning policy but to the contrary, was provided to give to Kooee some insight as to whether it could collect the debts in order to permit it to better manage the situation.
38 Whilst the matter is by no means clear, on balance it does seem to me that the presence of clause 8 of Schedule 1 lends some support to the basal proposition put by Primus in terms of the ‘net debtors’ issue.
Admissibility of extrinsic material
39 Early during the final hearing it emerged that although primarily submitting that its construction of the words "debtors amount" was tolerably clear [hence requiring the amounts written off by the provisioning policy to be deducted from the total debts], Primus sought to further submit in the alternative, that evidence of "surrounding circumstances" was admissible to resolve the ambiguity: Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J at 352.
40 Although Kooee strongly disputed the contention that the particular alleged surrounding circumstances were admissible [for the reason that no ambiguity was said to exist], the parties sensibly agreed to a regime whereunder the evidence sought to be adduced by Primus was taken on the voir dire with the ruling as to admissibility to be given in these reasons.
41 The proposition pursued by Primus was that the evidence in contention should be admitted as ‘a body’, because it went to establishing a common assumption as to a matter of fact said to have been known to the parties prior to and on entering into the contract, namely that the debts of Kooee customers would be purchased by Kooee Communications at a price reduced by the application of Primus’ bad and doubtful debt policy [Primus contending that Kooee's construction produced a dramatically divergent result].
42 Primus submitted that the evidence taken on the voir dire was not put forward to show the subjective intention of Kooee Communications as to the meaning of the definitions, or to rely on the preliminary negotiations before the terms were settled to vary or contradict the language of the contract. Rather the evidence was said to demonstrate both the genesis and the aim of the transaction [Prenn v Simmonds [1971] 1 WLR 1381 per Lord Wilberforce], and its commonly assumed subject matter, namely the purchase of all Kooee customer debts at a proportion of their value in the books of Primus.
43 It will be recalled that the issue in Prenn v Simmonds was whether the word "profits" meant the separate profits of R.T.T., a company controlled by the appellant, or the consolidated profits of the group of companies consisting of R.T.T. and its subsidiaries. As was made plain by Mason J in Codelfa, though evidence of prior negotiations and of the parties' intentions, and a fortiori, the intentions of one of the parties, ought not to be received, evidence restricted to the factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively of the "aim" of the transaction, was admissible. Considered in the light of this evidence the holding was that "profits" meant "consolidated profits" [cf Codelfa at 348].
44 Lord Wilberforce said (Prenn v Simmonds at 1383-4):
“The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti-literal, tendencies, for Lord Blackburn's well-known judgment in River Wear Commissioners v Adamson (1877) 2 App Cas 743 at 763 provides ample warrant for a liberal approach. We must, as he said, inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view. Moreover, at any rate since 1859 ( Macdonald v Longbottom (1859) 1 El & El 977) it has been clear enough that evidence of mutually known facts may be admitted to identify the meaning of a descriptive term.”
45 As Mason J went on to observe, his Lordship went on to assert that the well-known decision of Cardozo J in Utica City Nat Bank v Gunn (1918) 118 NE 607 “followed precisely the English line” (at 1384). There extrinsic evidence of the circumstances in which a guarantee was executed and of its object was received for the purpose of giving the words “loans and discounts” the looser meaning of “renewals”. Lord Wilberforce quoted with evident approval the comment of Cardozo J (118 NE at 608) that surrounding circumstances may “stamp upon a contract a popular or looser meaning” than the strict legal meaning, certainly when to adopt the latter would make the transaction futile.
46 Primus seeks to rely inter alia upon evidence adduced during the voir dire to the following effect:
ii. the cross-examination in which Mr Simmons conceded in effect that the discussions he held with Primus always proceeded on the basis that there was common ground that the debts would be subject to ordinary provisioning.
i. a note made by Mr Simmons the Chief Executive of the defendants, on 7 April 2005 [at CB [0141]] of Primus’ bad debt policy. In the same note he recorded calculations based on $5.6M (gross) debtors and recorded provisioning at $1.3M and Net debts of approx $3.69M. [The contention is that this can only be consistent with what Primus says was a common assumption as to the purpose of referring to the policy];
- The evidence is at [at transcript 164]:
Q. You knew at least by 7 April 2005 about the bad debt provisioning policy of Primus?
A. Yes, this was advised by Gerald on 7 April.
Q. And you had, I suggest, a discussion or several discussions with Mr Miller, and perhaps other Primus people, concerning the price that was to be payable for all the Kooee debtors?
A. Yes.
Q. And in those discussions the only discussion about price was about paying the face value of the debts, being reduced in the case of those debts against which provision had been made by the amount of the provision?Q. And that's discussions in the period up to 27 April?
A. Yes.
A. Yes.
iii. The fact that Mr Simmons on behalf of SP Telemedia Ltd (‘SPT’) entered into a Deed of Undertaking with B Digital [at CB [0161]] at about the same date as the Separation Deed was signed, under which SPT indemnified KCP for an excess that KCP would be paying under the Separation Deed.
- At paragraph 2 (c) of the Deed of Undertaking it can be seen that those parties anticipated an excess between a price formula stipulated by B Digital for the Kooee debtors and the price formula applicable to Net Debtors under the Separation Deed. [The proposition for which Primus contends is that this only makes sense if there was a common assumption that provisioned debts fell within the price formula in the Separation Deed.] Further the results were set out prior to both deeds by Mr Simmons in his calculations at CB [0071].
47 The essential contentions by Kooee to the contrary were as follows:
i. the words used were unambiguous and do not yield to any suggestion that the language was open to two constructions;
ii. the evidence in no way established Primus' proposition that a construction in accordance with Kooee's contention would provide a commercially untenable result, nor that Kooee would obtain an "unwarranted" benefit under the construction for which it contended;
iv. in essence Primus was seeking to go outside of that which was permissible on the authorities and to do no more and no less than to give evidence of negotiations or of the party's intentions and to go beyond evidence of the factual background known to the parties at or before the date of the contract, that is to say to go beyond evidence of the 'genesis' and objectively, the 'aim' of the transaction.iii. the "entire agreement" provision in clause 11.6 prohibited reference to any prior agreement, understandings and negotiations in respect of the subject matter of the agreement;
Decision on admissibility
48 In my view the above-described authorities justify the admissibility of the evidence sought to be adduced by Primus and set out above. Whilst the matter is a close one, a careful analysis discloses that the evidence put forward by Primus is indeed evidence of surrounding circumstances amounting to objective background which can and indeed here does “stamp upon a contract a … looser meaning” than the strict legal meaning.
49 Hence the ruling is that this evidence is allowed.
50 In my view however the letter written by Mr Simmons on 18 May 2005 [said to demonstrate that there was common ground that the debts would be subject to ordinary provisioning] is not admissible having been written after the date on which the Separation Agreement was entered into. I do not accept as correct the contention by Primus that events occurring after formation of a written contract can demonstrate "as a matter of retrospective factual inference", what was the common assumption and factual background to the dealings of the parties for the Separation Deed.
51 The evidence thus before the Court clearly assists in serving to underpin the correctness of the construction of the phrase "Net Debtors" appearing in the Separation Deed put by Primus.
52 It is appropriate to again repeat that even if this evidence had been rejected, the construction put forward by Primus would have been upheld by reference to the above described ‘primary route’ to that construction.
Revenue Share
53 This is another area where the parties are divided on whether or not it is permissible for the Court to go outside of the terms of the Separation Deed to resolve the dispute. Hence as appropriate, material was treated with on the voir basis.
54 Although there was a deal of oral as well as documentary material adduced on the subject, the evidence can be addressed quite shortly. In short:
i. following the entry into of the VSPA and while Mr Bhatia was the Chief Executive of Primus, the payments made to Kooee by Primus were made as a commission on billing s rather than receipts [Kooee was paid commission on 10% of billings];
ii. once Mr Bhatia ceased in office and Mr Wilson Chief Financial Officer took over executive responsibility for Primus during the year 2002, the basis upon which Kooee was paid commission changed when Kooee was paid a commission on 10% of collections;
iii. these changes lead to dissention between the parties as to what was the correct basis for commission to be paid;
iv. the matter was never resolved satisfactorily, each party standing upon its contention: Primus contending that the commission payment on 10% of collections represented the true obligation and Kooee contending to the contrary that commission on 10% of the billings represented the true obligation. In particular the dispute had not been resolved prior to the entry into of the Separation Deed;
vi. subject to the Court allowing this evidence as admissible, the evidence taken on the voir dire clearly establishes the following:v. it is apparently common ground that at some time in 2004 an Amended or Restated Agreement in terms of the VSPA was prepared and was submitted by Mr Miller to Mr Simmons for signature. The document was never signed by Kooee. The evidence of Mr Miller was that Mr Simmons had initially indicated that he would sign the document but subsequently refused to sign it. The evidence given by Mr Simmons [Transcript 148] was that he never informed Mr Miller that he would sign the document. The critical fact is that the document was never signed by Primus;
b) that at about or very shortly after the signing of the Separation Agreement, the document which became Exhibit D1 and has been called "the Stepdown Report" was received by Kooee from Primus [this document recording that which Primus contended was the limit of what was owing to Kooee in terms of a precise amount of $1,263,205.40, ie no more than 10% of the amount of the debts collected by Primus]. [The document across the line entry "commission payable" identified five particular months January, February, March, April and May 2005 when commission had not been paid even on the basis for which Primus contended it was due];
a) that on occasions prior to the entry into of the Separation Deed Primus persistently and consistently at all times from 2003 through to April 2005 took the position that it was only obliged to pay 10% of collections and documents containing information similar to that set out in the Stepdown Report referred to below were forwarded regularly by Primus to Kooee [Transcript 133];
- (c) that in December 2005 an internal Primus communication passing from Mr Sweiden to Ms Maguire to Mr Miller [Volume 2 Final Court Book document 345] recorded the very same amount as to the Primus position with respect to the amount owing by it to Kooee for revenue share.
- [It may also be noted that, as Ms Maguire of Primus accepted, an internal Primus print out as at late November 2005 prepared in order to inform her of what the current state of play was according to Primus on the account, included a line item reading:
- Amount owed by Primus Telecom to SP -commission-(1263, 205.53)]: cf Exhibit D2]
55 These are the broad circumstances which give rise to the admissibility issue and the central question of whether or not upon the proper construction of the release provisions in the Separation Deed, Kooee gave away any anterior right it may have had against Primus to receive the above described amount $1,263,205.40 [an entitlement which had comprised common ground up to the execution of the Separation Deed].
56 The essential proposition put by Primus is that it was released from the claim for revenue share by in particular clause 7.1 of the Agreement and that additionally clauses 7.2, 7.3, 7.4 and 7.5 support the release clause in question.
57 It will be recalled that clause 7.1 read as follows:
7.1 Each of Kooee and Primus hereby release and forever discharge each other from any and all Claims which each has, or might have had but for this Deed, against the other on any account whatsoever, (including claims in respect of the negotiation execution and operation of the VSPA and the facts, matters and circumstances referred to in the recitals to this Deed), other than Claims which may arise as a result of any breach of this Deed by any party.
58 Primus' essential proposition is that the revenue share claim pursued by Kooee is a claim for an alleged debt accrued before the Separation Deed was entered into. The proposition is that the claim falls within the definition of ‘Claims’ being the very first of the concepts embraced within the definition of that term in clause 1.1. It is said to be a claim which Kooee ‘might have had’ if the Separation Agreement had not been entered into, and is accordingly embraced by clause 7.1.
59 Primus contends that an important feature of the potential claim in issue is that the claim was known to Kooee at the time it entered the contract. The evidence does disclose that the revenue share was Kooee's only substantial income. Payment had ceased in February 2005 and Mr Simmons knew this, and referred to it in the ‘Primus Settlement’ proposal which he forwarded on 1 March 2005 to Primus with a copy to Kooee’s solicitors and investment bankers.
60 Primus also draws attention to the fact that the recitals to the Deed referred to disagreements. It is certainly true that revenue share generally was certainly subject to disagreement, as Mr Simmons had refused to sign the re-cast VSPA and payment had ceased [even if there is no evidence of specific dispute about the sum now claimed].
61 Primus also makes the point that recital F does not purport to confine or connect the releases to the disagreements, concluding with the words:
“release each from all Claims under or in connection with the VSPA or otherwise, on the terms of this Deed.”
62 For each of these reasons Primus contends that the release applies.
63 Kooee relied heavily upon Grant v John Grant and Sons (1954) 91 CLR 112 in support of its proposition that in construing releases expressed in broad terms, the Court will look to the intent of the parties and will readily read down the language to give effect to that intent [cf Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 at 29].
64 As made plain in Grant (at 129.8-130.3) it is clear enough:
"that equity proceeded upon the principle that a releasee could not used the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor" .
65 At 131.6, their Honours said:
“The question is whether upon a proper interpretation of the deed the general release clause should be restrained to matters in dispute within the meaning of these recitals. The question depends primarily on the application of the prima facie canon of construction qualifying the general words of a release by reference to particular matters which recitals show to be the occasion of the instrument. But it is also affected by the general tenor of the deed. It is unnecessary to say more about the canon of construction or to discuss further the contents of the deed. As to the first all that remains is to apply the principle that prima facie the release should be read as confined to the matters forming the subject of the disputes which the deed recites. As to the second, such indications as can be found in the provisions of the deed point rather in the same direction. The detailed character of the terms of settlement, the careful readjustment of rights, the specific reference to the debt of H.C. Grant and his wife and its discharge and the particularity of the allocation of things and contracts between the companies do not favour the view that a general release was intended going outside the actual area of dispute.”
66 In Qantas Airways Limited v Gubbins (1992) 28 NSWLR 26, Gleeson CJ. (as he then was) and Handley JA., in Joint Reasons for Judgment, at 28G-29B/C, observed:
“There was no dispute before the tribunal that a settlement agreement had been entered into. The question was whether it covered the claims which the respondents wished to pursue. The case for the respondents was that, although they had executed releases in general terms they had been assured by the appellant that the claims they were releasing were different from the claims now in issue, which had been said to be ‘entirely separate’. They said that they had been assured that the releases would not be raised as a defence to their present claims, and, on the faith of that assurance, gave the releases. Surprisingly, the legal representatives of the parties debated that issue in terms of the legal concepts of waiver and estoppel, without adverting to the decision of the High Court in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112, which is directly in point, and which sets out the principles by reference to which a court will decide whether a general release will be held to cover a particular dispute. The rule is that the general words of a release will, in an appropriate case, be read down to conform to the contemplation of the parties at the time the release was executed.”
67 Kirby P (in Gubbins) discussed the relevant principles at 43-45. After citing from the joint judgment in Grant at 125 and at 130, Kirby P. said:
“This principle is still good law in Australia. It has never been modified by the High Court.”
68 His Honour went on (at 44B-E):
“The change in the system of pleadings has not altered its continuing operation. The injunction by the Act that the tribunal here should have regard to ‘equity, good conscience and the substantial merits of the case’ would quite readily take the tribunal to such a principle. It has obvious good sense. If a deed of release is signed by a party, perhaps as a compromise as in Grant and here, it should be open to a party to contend that the generality of the language of the deed of release was not, in the circumstances, intended to cover a particular matter. Deeds of release are usually expressed in very wide terms, as in Grant and here. In the days of Grant , such deeds came out of the conveyancer’s collection. Nowadays, they come rolling off the word processor. Most people, at least in the position of these respondents, execute them without attention to the detail and to the generality of their expression. It is thus entirely legitimate to consider what is the subject matter to which such a deed was directed if it is later contended that, despite the generality of its language, the parties at execution had something more confined in mind. Such is a rule of equity. Unsurprisingly, given the origins of that rule, it is a rule which ‘equity, good conscience and the substantial merits of the case’ would have made relevant to the present litigation before the tribunal.”
69 In my view upon careful examination, the evidence before the Court taken on the voir dire makes clear that neither party intended that the general words of the release were to cover that which had consistently been the position taken as a given by each of them: namely that at the least, the amount of $1,263,205.40 was accepted as owing to Kooee [calculated as 10% of the amount of the debts collected by Primus].
70 In those circumstances the principled approach set by the authorities dictates a finding that there was no intent that the general words of the release were to cover the amounts which Primus had accepted was at the least, payable by it to Kooee by way of Kooee's revenue share. It has to be recalled that the evidence demonstrated the importance of that revenue share to Kooee, it being the sole source of Kooee's income.
Deficient Information Losses
71 There is no substance to the cross-claims pursued by Kooee for a number of disparate reasons.
72 In relation to many of the matters in issue, the submissions of Primus were of substance and are generally adopted in what follows.
73 The gravaman of the claims comprise an allegation of breaches by Kooee of the terms of clause 5.3 (d) of the VSPA and of clause 3 of the Separation Deed [whereunder the cross claimant contends that Primus was obliged to provide the information referred to and to perform the actions set out in Schedule 1].
74 The information was referred to in Schedule 1 [as well as elsewhere] as the "Migration Data". It was, in short, information to enable the "migration" of customers from being subject to a billing process managed by Primus to one managed by Kooee [or associated entities].
75 The claims are not only put in contract but also as having constituted misleading and deceptive conduct within the meaning of s 52 of the Trade Practices Act.
76 The contractual analysis requires the Court inter alia, to analyse and deal with the interplay between the VSPA and the Separation Deed. Other matters are raised importantly including the failure of Kooee to discharge its burden of proving loss, even had an extant contractual obligation or a s 52 Trade Practices Act breach been made out.
77 In the first place, Clause 3 of the Separation Deed does not create any obligation to provide the information by any particular time. In the circumstances, if, as is alleged, Primus sent information which was deficient but later rectified, there has been no breach of the clause.
78 Importantly this information was only due to be provided after the Transition Period had ended. Kooee already had information in respect of its customers, and had had access to information under the VSPA.
79 I accept that upon the proper construction of the relevant parts of the Separation Deed, clause 3 places no real obligation on Primus at all. In short:
i. clause 3.6 is to be read in conjunction with clauses 2.2 and 2.4 of the Separation Deed;
ii. Primus agreed to provide the information only on the basis that it was released from all claims in relation to so providing;
iii. the words in clause 3.6(a) “… which was not otherwise imposed under the VSPA …”, serve only to underscore that by agreeing to provide Schedule 1 information, Primus was not taking on any new legal obligation or liability;
v. importantly Clause 5.3 was not preserved by the preserving clause in the Separation Deed 3.5 (note also 3.3): the words “…no other provision of the VSPA survives the termination of the VSPA under clause 2” could not be clearer.iv. clause 5.3 (d) of the VSPA required Primus to provide information “… necessary to provide a transparent view …” of Primus customer services;
80 Approaching the analysis in a different fashion the following appears to be the case:
i. any obligation to provide Schedule 1 information has no corresponding obligation in the VSPA, and is unique;
iii. to the extent that any part of this aspect of the cross claim could be considered to be based on something other than Clause 3 obligations, it must be defeated by the release in Clause 7.ii. in the circumstances the release is operative in respect of it;
81 Whilst I acknowledge that this analysis often leaves Primus with no more than a discretion to assist [recognised by the reference to its entitlement to take into account the practical circumstances of its own business], the express words make clear that this was the bargain.
82 However even if some of the above analysis were to be incorrect the evidence fell far short of establishing that there were such inaccuracies or deficiencies in the information provided as was sufficient to constitute any breach of a contractual obligation which Primus may have had, to provide information. Likewise the evidence fell far short of establishing misleading and deceptive conduct as alleged.
83 The allegations by Mr Farrington and Mr Scherp by way of complaints of shortcomings [by way of the suggested inaccuracies or deficiencies in the information supplied by Primus] were carefully addressed in the affidavit made by Ms Maguire of December 2006 and in the evidence which she gave and upon which she was cross-examined.
84 Her propositions as to the reasons why B Digital may have had difficulties with migration [in particular that information proving inaccurate may have been as a result of becoming out of date through no fault of Primus] remain unanswered. Moreover the evidence falls short of placing the Court in a position to distill what proportion of the difficulties and associated costs, if any, maybe sheeted home to Primus. The subject is one of particular technicality and specialist knowledge.
85 Mr Farrington had never had any position with Kooee but was employed by B Digital. His function was not to say how the Kooee customers and their debts were incorporated into the business at B Digital as a result of the transfer.
86 His cross-examination established that a number of the matters to which he had deposed had simply been grounded upon information which he received from others. On other occasions he had taken figures from the records of B Digital.
87 Mr Farrington gave the following evidence:
Q. If you look at paragraph 27 in your affidavit, you talk there in the first sentence about B Digital having engaged an external call centre to manage the usual day-to-day calls from existing customers that Kooee could not effectively manage. It was B Digital that was managing these things at the time you are writing there, isn't it?
A. B Digital employed or engaged Stellar to supply an after hours support.
Q. To B Digital?
A. Both, B Digital and Kooee Communications.
Q. That is right, and it wasn't a question of Kooee separately managing anything at that point, was there, B Digital was managing it all?
A. B Digital was managing on behalf of Kooee Communications.
Q. You say on behalf of Kooee Communications. Was there some agreement between Kooee Communications and B Digital that you are aware of that governed the management of these things?
A. Not that I am aware of.
Q. So that is just your assumption about it this, is it?
A. It was a hundred percent owned subsidiary.
Q. And that's even after having been company secretary of B Digital for over a year?Q. You can't say, indeed, whether there was any separate agreement apportioning the tasks between B Digital and Kooee Communications, can you?
A. I am unaware of an agreement.
A. Correct. This is prior to that.
- [Transcript 202]
88 One only of the many examples given by Ms Maguire in answer to a complaint by Mr Farrington [that Primus continued to supply a number of the services in question until December 2005] was answered by Ms Maguire as follows:
"In fact to my knowledge Primus is still supplying a very small number of such services as at the date of swearing of this affidavit, as Kooee has failed to effect the migration of the said services, despite the weekly updates from me as to the Kooee services still being on the Primus network for 26 weeks from the date of the Separation Deed."
89 Other of the responses by Ms Maguire to complaints to be found in the evidence of Mr Scherp are self explanatory:
As to the complaint that a draft specification document had not been sent to him until 29 April 2005, her response was:
- “In paragraph 9 Mr Scherp refers to the Specification document. I agree that I provided that document on or about 29 April 2005, however this was subsequent to a number of discussions I had had with Mr Scherp about what would be the contents of that document.”
“In paragraph 15 Mr Scherp refers to a Data File. I do not know whether the Data File did not comply with the Specification in the way Mr Scherp asserts. However I recall I sent a sample Data File in the same format as the Data File a few days in advance. No complaint was conveyed to me about the format of the sample Data File.”
As to the complaints with respect to the provision of lists of finance barred customers, her response was:
- “In paragraphs 22 and 23 Mr Scherp refers to finance barred customers, and resulting calls to their customer call centre. I note that Primus fielded all such calls until 20 May 2005.”
90 Ms Maguire further responded to the following complaints in these terms:
“In paragraph 32 Mr Scherp refers to customers I advised him of who were no longer active. Many of these customers may have become inactive, that is no longer Primus customers, at some time between the provision of the original information on 10 May 2005 and these communications of 24 and 25 May 2005. I do not know how many or what proportion of the customers would fall into that category.
In regards to paragraph 38, I rang Mr Scherp because I became aware I believe from something I came across on the internet that Kooee had incorrectly churned some customers.”In paragraph 35 Mr Scherp asserts that some customers may have lost their service altogether if not migrated in time. In fact this would not have occurred because Primus did not to my knowledge cut off any customers even if not migrated long after Termination Time. In fact, as I have said there are still a few old “Kooee customers” on our network.
91 That information proved inaccurate may, as Primus has submitted, have been as a result of becoming out of date through no fault of Primus. Furthermore, the evidence does not establish that any perceived deficiencies were greater than what could reasonably be expected for the transfer of very large quantities of a broad range of constantly fluctuating data.
92 Finally and notwithstanding the above disparate grounds for rejecting the "Deficient Information" claims as not made out, there is a separate area entirely which falls for consideration. This is no more and no less than that the evidence adduced by Kooee fails to reach the minimum standard to establish that financial losses have been suffered [see Atkinson v Hastings Deering (Qld) Pty Ltd (1985) 8 FCR 481; JLW (Vic) Pty Ltdv Tsiloglou [1994] 1 VR 237], or to quantify such losses.
93 The following table put forward by Primus in explaining this matter treats seriatim with Kooee's schedule of damages and points up some of the difficulties in the manner in which the evidence has been left:
| Increased call costs | Unclear as to what proportion if any resulted from incorrect information rather than migration itself |
| Additional call centre staff costs | Unclear what cost if any incurred. Unclear as to what proportion if any resulted from incorrect information rather than migration itself – speculation involved. |
| Additional external call centre staff costs | Unclear as to what proportion if any resulted from incorrect information rather than migration itself |
| TIO | Unclear as to what proportion if any of complaints resulted from incorrect information rather than migration itself |
| Legals | Insufficient evidence that legal work necessary to deal with Telstra. Some of solicitor’s accounts pre-date and plainly not related to any migration difficulties. Not reasonable foreseeable as a loss [Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310]. |
| Credit reversals | Unclear how this is an actual cost to B Digital. |
| Loss of accounts | No evidence as to how many if any loss of accounts resulted from incorrect information. |
| Migration Credit | Discretionary decision to incur loss. Not foreseeable. Defendants failed to mitigate. Unclear as to any real connection with incorrect information. |
94 As Primus has submitted, the only evidence that Kooee, rather than a third part, [B Digital Ltd], sustained losses, was that of Mr Farrington. Mr Farrington had the view that B Digital was incurring the costs “on behalf” of its subsidiary, but conceded that he did not know how, if at all, this was accounted for [T 190.37-49 and T 202.40-50]. He thought that Kooee might have had a bank account after its acquisition by B Digital, but could not give details or say that any of the moneys claimed had been debited to that account. He also thought that there may have been accounting records of Kooee maintained after its acquisition by B Digital which could have shown some of the moneys claimed as expenses of Kooee, but none was produced.
95 Nor was any agreement between B Digital and Kooee produced to show that after Kooee's acquisition by B Digital, there was some continuing commercial activity between them or of the allocation between them of the costs and expenses of servicing the Kooee customers making up the class of Net Debtors.
96 When regard is had to all these matters, including the references in the evidence to a merger of the Kooee customers into the business of B Digital [see paragraph 4 of Mr Farrington’s affidavit, and paragraph 3 of the affidavit of Mr Scherp ], it appears at the least probable that the Kooee debtors were integrated directly into the business of B Digital and that B Digital thereafter carried on business with them and incurred all expenses of the integration and subsequently on its own account.
97 Kooee failed to produce evidence within its control of the accounting for the claimed losses.
98 Kooee clearly failed to procure a migration of its customers by the end of the Transition Period. The responsibility for this occurrence is extraordinarily difficult to unravel from the state in which the evidence was left.
99 The claimed breaches cannot be treated with in the broad. And although the Court’s task of assessing damages may often be difficult but must nonetheless be discharged, there are cases, of which the present is one, where the exercise becomes purely speculative: cf Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 125-126 per Deane J.
100 For these reasons the cross claim in both of its parts [the alleged breach of contract as well as the alleged misleading and deceptive conduct] are to be dismissed.
101 It is appropriate in passing to observe that there was very little mention at all of the misleading and deceptive conduct claim at any stage through the whole of the final hearing, so much so that the Court would have been justified in regarding the claim as not pressed. Certainly the claim was not made out on the evidence.
Rulings on evidence
102 The reasons given earlier in this judgment have already treated with explanations as to certain evidence accepted as admissible and as to other evidence which is rejected as inadmissible. It is also appropriate to make express the ruling allowing the particular evidence earlier referred to in paragraph 46 [where a note made by Mr Simmons on 7 April 2005; a portion of the cross examination of the same witness and a reference to a Deed of Undertaking with B Digital were identified].
103 The parties conveniently furnished the Court with an index to Court Book MFI 3 which made provision for the Court to identify its rulings where objections had been taken to the admissibility of documents on the basis of the need to await the voir dire rulings. The rulings in each case have now been completed on to a further copy of MFI 3 which is marked "MFI P3 (rulings)". In a number of instances the documents are of little real materiality and are treated with in terms of their weight. In other instances as the reasons will have already made clear, documents of particular significance are admissible: either by the Court’s entitlement to examine what were the circumstances with reference to which the words were used and what was the object appearing from those circumstances which the persons using them had in view [cf Prenn v Simmonds, Lakatoi v Walker as well as Investors Compensation Schemev West Bromwich Building Society [1998] 1 WLR 896 referred to earlier in these reasons, or by the Grant v John Grant entitlement to discern the true purpose of the release transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.
104 In terms of the reservation of the rulings noted during the transcript as to whether or not evidence taken on the voir dire would be admitted [save to the extent already dealt with in these reasons and rejected], all of that evidence is admitted.
105 Where particular objections had been taken to the admissibility of sections of affidavits the reasons given above certainly do as to particular segments, make clear which are and which are not admitted into evidence. There are some areas where rulings on evidence were reserved which are not yet spelled out in this judgment. If the parties require more precise clarification they may make this clear after the publishing of this judgment and of course such clarification will be forthcoming as requested. The fact is that there was such a plethora of areas of controversy that it is somewhat difficult to shortly and exhaustively identify all of these areas without further assistance from the parties.
The way forward
106 Effectively and as earlier explained these reasons do not dispose of the whole of the proceedings. The parties will be given an opportunity to address on the way forward and as appropriate may need further Court time if a consensus on matters such as interest is unable to be reached.
107 The proceedings will be stood over for a few days to permit the parties to assess their positions. Naturally costs up to this point in time are reserved for the time being.
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