Telecom Vanuatu Ltd v Optus Networks Pty Ltd - [2008] NSWSC 1209

No judgment structure available for this case.

CITATION: Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2008] NSWSC 1209

HEARING DATE(S): 11, 12, 13, 14, 18 & 19 February 2008 & 11, 12, 13 & 14 August 2008

JUDGMENT DATE :
27 November 2008

JURISDICTION: Equity - Commercial List

JUDGMENT OF: Bergin J

DECISION: Plaintiff's claims dismissed.

CATCHWORDS: [CONTRACT] - contracts between telecommunications companies for the provision of telecommunications services from certain countries to Vanuatu - whether subject matter of contract extended to telecommunications services in circumstances where the services were not provided from, to, or through Vanuatu - whether agreement reached between the parties on the amount to be paid for audiotext traffic - [CONVERSION] - use of telephone numbers without legal authority - whether intangible property can be the subject of a suit in conversion

LEGISLATION CITED: Telecommunications Act 1989 (Vanuatu)

CATEGORY: Principal judgment

CASES CITED: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Directv Inc v Ostrowski 334 F.Supp.2d 1058 (N.D. Ill. 2004)
Ferguson v Eakin (New South Wales Court of Appeal, 27 August 1997, unreported)
Gilsan v Optus [2004] NSWSC 1077
Hoath v Connect Internet Services Pty Ltd (2006) 229 ALR 566
Kremen v Cohen 337 F.3d 1024 (9th Cir. 2003)
Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635
OBG Ltd v Allan [2005] 2 All ER 602
OBG Ltd v Allan [2007] 4 All ER 545
Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204
Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516
Shmueli v Corcoran Group 9 Misc.3d 589 (2005)
Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2005] NSWSC 951
Thyroff v Nationwide Mutual Insurance Company 832 N.Y.S.2d 873 (2007)

PARTIES: Telecom Vanuatu Ltd (Plaintiff)
Optus Networks Pty Ltd (Defendant)

FILE NUMBER(S): SC 50107 of 2005

COUNSEL: F Kunc SC/C N Bova (Plaintiff)
I M Jackman SC/J A C Potts (Defendant)

SOLICITORS: Gadens Lawyers (Plaintiff)
Clayton Utz (Defendant)

- 1 -

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

BERGIN J

27 NOVEMBER 2008

50107/05 TELECOM VANUATU LIMITED V OPTUS NETWORKS PTY LIMITED

JUDGMENT

1 In proceedings that were litigated in Vanuatu between Optus Networks Pty Limited (Optus) and Gilsan (International) Limited (Gilsan) (the Vanuatu proceedings) the plaintiff, Telecom Vanuatu Limited (TVL), became aware of what it claims were unauthorised uses of its telephone number ranges (referred to as “rogue traffic”) in respect of which it claims the defendant, Optus, is liable to pay it and has failed to do so. TVL’s telephone number ranges were used for the delivery of audiotext traffic of an “adult” nature. Optus accepted that it is liable to pay TVL for the use of its number ranges however it claimed that it has already paid TVL all amounts to which it is entitled.

2 The matter was heard on 11,12, 13, 14, 18 and 19 February 2008 and 11, 12, 13 and 14 August 2008. Mr F Kunc SC leading Mr CN Bova, of counsel, appeared for TVL and Mr IM Jackman SC leading Mr JAC Potts, of counsel, appeared for Optus.

Background

3 There were a number of similar issues dealt with in litigation in this Court in 2004 (Gilsan v Optus [2004] NSWSC 1077) (the Gilsan proceedings). The following passage from McDougall J’s judgment in relation to the international telecommunications industry practice is applicable to the arrangements between the parties to the present proceedings:

1 When an international telephone call is made, a number of telecommunications carriers are involved. The caller makes the call through his or her “local carrier”. The call is routed from the local carrier to the switch of an “originating carrier”. Where the originating carrier has a direct link to the “terminating carrier” (the carrier in the country of destination), it routes the call direct to the switch of the terminating carrier. Where there is no direct link, the originating carrier routes the call to the switch of a “transit carrier”, who has either a direct link to the terminating carrier or a direct link to another transit carrier that in turn has a direct link to the terminating carrier.

2 The caller pays a charge known as the “collection rate” of a specific amount per minute to his or her local carrier. (I think that, in some cases, the local carrier may also be the originating carrier, but if this is so, nothing turns on it.) The local carrier and the originating carrier agree to divide the collection rate between them.

3 The originating carrier and the terminating carrier agree on what is known as an “accounting rate” or “total accounting rate” (“TAR”) (which is a notional amount) between them. That, like the collection rate, is a specified amount per minute. Where there is a direct connection between the originating carrier and the terminating carrier, they agree what share each of them will take from the TAR. The originating carrier’s share is the “origination charge”. The terminating carrier’s share is the “termination charge”.

5 It has been common practice for originating and transit carriers to enter into “confidential agreements” in relation to the transit charge. Notwithstanding the label, knowledge of the existence and at least the general terms of those agreements appears to be widespread in the industry, although no doubt the precise terms may in fact be confidential. The effect of a confidential agreement is that the originating and transit carriers agree that, in consideration for the originating carrier giving the business to the transit carrier (usually, there is more than one available transit carrier, so the market is competitive), the transit carrier will agree to take, as its transit charge, an amount that is less than the transit charge agreed under the tripartite agreement between the originating, transit and terminating carriers. Of necessity, since the terminating carrier is not a party to the confidential agreement, the monetary amount of its share of the TAR is not affected by the confidential agreement.

6 Accounts between originating, transit and terminating carriers are frequently settled under a system known as “cascade accounting”. Under that system, the originating carrier measures the number of minutes that it sends through the transit carrier to the terminating carrier in any given month. It quantifies the value of those minutes using the agreed TAR. It deducts from the amount so quantified the amount of its originating charge and, where a confidential agreement is in place, the amount of difference between the transit charged fixed under the tripartite agreement and the transit charge fixed under the confidential agreement. It pays to the transit carrier an amount equal to the balance thereby calculated of the TAR. That is known as an “outpayment” from the originating carrier and as an “inpayment” to the transit carrier. The transit carrier retains its share of the inpayment to it and pays the balance to the terminating carrier. Again, that payment is known as an “outpayment” or “inpayment”, depending upon the perspective from which it is considered.

8 The TAR is expressed as a rate per minute and divisions of the TAR are likewise a rate per minute. That should be understood in all future references to a TAR or a division of a TAR. Further, as I have said, the TAR is a notional charge. It is notional in the sense that, although it forms the basis of the accounting between originating and terminating (and, where applicable, transit) carriers, it does not reflect a charge actually imposed by and paid to the originating carrier. The originating carrier makes outpayments on the basis of the TAR; but it recoups itself, and takes its profit, from payments made to it on other bases.

Audiotext

4 The “audiotext” traffic the subject of these proceedings consisted of calls made by consumers to telephone information services, being typically a "live" call centre or recorded voice service. These audiotext services were charged for on a per minute basis and were generated by audiotext service providers, referred to at times in the evidence as “ISPs”. There were two groups of such service providers relevant to the present proceedings. The first, associated with Hugh Chambers, was Interwest Communications International Limited (Interwest), and its associated entities, Global Internet Billing UK (Limited) (GIB) and Interbill International Limited (Interbill) (collectively the Interwest Group). The second, associated with Michael Charlesworth, was MDC (Europe) Limited (MDC), Mediatel Services Pty Limited (Mediatel) and Sound Advertising Limited (Sound Advertising) (collectively the MDC Group).

5 The sub-contractor "clients" of the Interwest Group and the MDC Group generated audiotext services and provided live or recorded services. They advertised telephone numbers on which such services were provided, and the consumer accessed those services by dialling the number provided in the advertisement. The steps by which an audiotext call was delivered were described in affidavit evidence by an expert witness for TVL, William Gray as follows (affd 1 May 2007, par [55]):

(a) Audiotext service providers required international numbers in order to route the calls from the originating country to the destination in which the calls terminated in call centres.

(b) This required use of a country’s telephone numbers.

(c) The transit carrier routing the calls had to divert the call to the country in which the call centre was located.

(d) Usually the call centre, or physical termination point of the audiotext call, was not in the country whose telephone numbers were being used. This process by which the transit carrier diverted the calls was known as "short-stopping".

(e) For example if a caller in Greece called an advertised audiotext number +64 4 444 4444, which is a New Zealand number, the exchange in Greece or the transit carrier exchange would be programmed to route this particular number range to an Ecuadorian call centre number.
(f) The carrier’s switch in Greece or the transit carrier switch would divert the NZ number to an Ecuador number. The Ecuador number would be provided to the Greek carrier or the transit carrier by the audiotext service provider.

(g) The call would be charged to the customer as a call to New Zealand and settled by the Greek carrier with the transit carrier. The transit carrier would then pay the audiotext service provider the terminal share and the audiotext service provider would pay New Zealand a reduced amount as agreed in the audiotext agreement.

Short stopping

6 The expression “short-stopping” (referred to by Mr Gray in the evidence extracted above) means that a call is terminated before it reaches the network of the country whose number range has been used to make the call. A diversion occurs at the transit carrier's network, where the transit carrier diverts the calls to wherever the audiotext provider has told the carrier to divert the call. It is common ground that all the audiotext traffic in this case was short-stopped. The traffic was diverted to the audiotext provider’s equipment located in the Optus Rosebery facility, or in the case of MDC traffic, to an MDC facility in Surry Hills.

7 The reason the audiotext was short-stopped was because TVL was concerned about the Vanuatu Government’s attitude towards audiotext, and in particular, “adult” audiotext.

Longlining

8 In “longlining”, the call may reach the network of the country whose number is being utilised but it is diverted from that network to a destination that may be in another country.

9 The allocation of Vanuatu number ranges was at the relevant time under TVL’s exclusive control. Applications ranged from individuals seeking the allocation of a single number to businesses seeking the allocation of numerous numbers. Audiotext providers would approach small island countries for the allocation of numbers because of their high TAR that would give them a higher margin after payment of the various carriers. The audiotext providers’ applications would usually be to “lease” the numbers.

TVL

10 TVL was incorporated in the Republic of Vanuatu on 2 November 1992 to undertake the operation of both domestic and international telecommunication services in Vanuatu. On 20 November 1992 TVL was granted a licence to operate a telecommunications system in Vanuatu pursuant to a Franchise Agreement between it and the Government of the Republic of Vanuatu (the Franchise Agreement). Prior to that time national telecommunication services in Vanuatu had been provided by National Telecommunications of Vanuatu Limited and international telecommunications services to and from Vanuatu had been provided by a company known as Vanitel. The relevant Minister granted the licence to TVL with the prior approval of the Council of Ministers on the understanding that there would only be one telecommunications system in operation in Vanuatu to provide public national and international telecommunication services: s 16 Telecommunications Act 1989 (Vanuatu) (the TAV Act). The TAV Act included the following definitions:

“Public National Telecommunication Service” means national telecommunication services, other than a broadcasting service or a broadcasting satellite service, for use by the general public and may include telephone, telegrams, telex, data facsimile or any other telecommunication service established nationally which is available publicly, and also includes dedicated leased point-to-point services provided over the national network for the exclusive use of lessees but does not include any international telecommunications which are reserved to Vanitel pursuant to the Vanitel Franchise.

11 The Franchise Agreement included the following definitions:

“Public Telecommunication Service” means a telecommunication service, whether national or international, which is available to members of the public and by which voice, music, visual images, other sounds, any matters (not otherwise audible or visible) or machine control commands can be sent or received by any member of the public to or from some other person either within Vanuatu or outside Vanuatu …
“Public Telecommunication System” means a Telecommunication System used for the purposes of providing Public Telecommunication Services.

12 Recital E to the Franchise Agreement provided that the Minister “has agreed to grant to the Company [TVL] a licence to operate the Public National Telecommunication Services and the Public International Telecommunication Services, together with ancillary powers for the period and upon the terms and conditions set out herein”. Clause 2.1 of the Franchise Agreement provided:

13 Clause 3.1 of the Franchise Agreement provided:

(g) enter into agreements with other telecommunication organisations or any other organisations; and

(h) undertake all commercial, industrial and financial operations, including the acquisition of property, relating to the activities the subject of this Licence.

14 Clause 4.8 of the Franchise Agreement provided that TVL “shall provide Public International Telecommunication Services to a Public Telecommunication Service customer to and from destinations which the Company is by international agreement permitted to provide connection”. In order to carry and receive international telecommunications traffic, TVL required a country code that international carriers could recognise as indicating that a call was directed to the Republic of Vanuatu and program their switches accordingly.

International Telecommunications Union

15 The Republic of Vanuatu was allocated the country code (+678) by the International Telecommunications Union (ITU), a specialised agency of the United Nations dealing with all matters relating to telecommunication and radio-communication. Although the ITU is an intergovernmental organisation with signatories to its Constitution known as “member states”, private telecommunications entities can participate in the activities of the ITU as “sector members”. Australia and Vanuatu are member states of the ITU. The plaintiff and the defendant are sector members each being a “Recognized Operating Agency”. There are three sectors of the ITU, one of which is ITU-T (formerly known as CCITT), the sector responsible for telecommunications standardisation.

16 The ITU provides a regulatory framework for the carriage of international telecommunications traffic. There is an hierarchy of instruments governing the ITU. At the top is the ITU Constitution. The second level is the ITU Convention. Both the Constitution and the Convention are treaties which are ratified by member states and are binding on them. Next is the Administrative Regulations one set of which is relevantly the International Telecommunication Regulations (ITR). These regulations also have treaty status and are binding on member states. At the lowest level are the Recommendations developed by the three sectors. Article 1.6 of the ITR provides:

17 Each sector comprises several Study Groups, set up by the sector’s Assembly, where experts from member states participate to study, discuss and adopt various Recommendations. Study Group 3 (SG3) of the ITU-T is assigned the task of developing the D-Series Recommendations, covering tariff and accounting principles for international telecommunications services. The ITU-T Recommendations provide a default position in the absence of specific agreements.

Accounting and remuneration

18 There are three stages in the process of remuneration between carriers: (1) agreement on the accounting rate and its divisions; (2) the periodic (normally monthly) settlement of traffic volume; and (3) the payment of the balance due, following settlement. Appendix 1 to the ITR, entitled “General Provisions Concerning Accounting”, includes the following:

2.1 Unless otherwise agreed, the administrations responsible for collecting the charges shall establish a monthly account showing all the amounts due and send it to the administrations concerned.

19 The originating carrier is required to establish an account showing the amount of traffic it sends to the terminating carrier. These accounts are sent by the originating carrier to the terminating carrier each month and are called “declarations” of traffic sent. Under clause 2.3 of Appendix 1, the originating carrier is to be regarded as bound by traffic declarations it sends to a transit or terminating carrier, subject only to amendments made as a result of objections raised by the transit or terminating carrier. Settlements are generally made on the declaration by the originating carrier of minutes sent, rather than measurement by a transit or terminating carrier of minutes received. Clause 2.4 of Appendix 1 gives a carrier a period to question declarations, and reconcile discrepancies, and unless otherwise agreed, this period is two calendar months after receipt of a declaration. Once the period for questioning declarations has expired the traffic declaration is regarded as final and binding.

20 In practice traffic flows in both directions, and each carrier will issue monthly declarations to the other. Under clause 2.5 of the Appendix 1 of the ITR, a statement showing the balances of all the monthly accounts is prepared each quarter by the “creditor administration” and sent to the “debtor administration”. The net balance is the sum of money due from and payable by the carrier who sent more of the traffic (the debtor administration) to the carrier who sent less of the traffic (the creditor administration). The creditor administration selects the currency of payment. The balance must be paid as promptly as possible, but no later than two months after the dates of the settlement statements. There is an entitlement (rarely if ever exercised) to charge interest at up to 6% per annum after this time.

21 A “switched transit relation” is defined by the ITU in Recommendation D 155 as follows:

22 Such relationships rely upon the division of the TAR between the originating, transit and terminating carriers. The TAR system was based on ITU Recommendation D 140 “Accounting Rate Principles for International Telephone Services” that the TAR should reflect the costs of operating the network.

23 In the case of a direct transit, remuneration is normally made on a monthly flat-rate basis, without the need to account for the volume of traffic passing through the transit facilities. In the case of a switched transit, the traffic is subject to accounting rate arrangements. The two carriers, A and B, agree on the TAR per minute to be applied between the two countries. Then the division of the TAR is agreed between carriers A, B and C. From around the mid 1990s, competition among the international carriers became stronger and it became common practice for carriers to publicise their switched transit rate per minute, independent of the origins and destinations of traffic, rather than to negotiate a share or division of the accounting rate with the terminal carriers. The three carriers still entered into written agreements to finalise the financial arrangements, including the share per minute of the transit carrier, whether their transit rate was published or not.

24 Carriers involved in transit arrangements account to each other for the traffic flowing under a transit arrangement either by way of direct accounting or as referred to by McDougall J in the Gilsan proceedings [2004] NSWSC 1077 at [6], cascade accounting. With cascade accounting, A, the originating carrier, issues a single declaration to C, the transit carrier, and then C issues its own traffic declarations to B, the terminating carrier. In direct accounting the originating carrier pays both the transit carrier, C, and the terminating carrier, B, directly. Irrespective of whether traffic is direct or transit, and in the case of transit, irrespective of whether it is cascade accounted or direct accounted, the settlements and payments process is the same as for bilateral traffic.

25 The telecommunications industry created the SDR as a standardised currency. Its value is determined by reference to a number of other currencies, thereby decreasing the effect of fluctuations in individual currencies. The TAR on a direct connection between the originating and terminating carriers was normally split 50:50 for settlement purposes. For example if the TAR was $1.00 per minute then the originating carrier and the terminating carrier would each receive $0.50 per minute. The price paid by a subscriber to their telephone service provider was known as the “collection rate” and was set by the carrier providing the service to the customer. The TAR agreed between the originating and terminating countries was normally lower than the collection rate and the margin between the two rates varied from country to country. The “settlement rate” is the amount of the TAR paid to the terminating carrier.

26 When traffic was routed via a transit carrier, the originating carrier and the terminating carrier shared the TAR with the transit carrier. The originating carrier, terminating carrier and transit carrier would ordinarily enter into a tripartite agreement prior to the commencement of the transmission of traffic. For example, for traffic from the United States to Vanuatu, in relation to which there is no direct link, the originating carrier (for example AT&T) and the terminating carrier (for example TVL) would enter into an agreement with a transit carrier (for example Telstra or Optus) which set out how the TAR was to be divided. Usually the transit carrier’s fee (known as the transit fee) was deducted from the TAR and the remainder was split evenly between the originating carrier and the terminating carrier. For example if the TAR was $1.00 per minute and the transit fee was $0.30 then the difference of $0.70 was split 50:50 and the originating and terminating carrier received a payment rate of $0.35 each.

27 In cascade accounting, the originating carrier declared and paid the transit carrier the transit fee plus the payment to the terminating carrier. The transit carrier then deducted its transit fee and declared and paid the terminating carrier its share of the TAR. For example, if the TAR for traffic between AT&T and Vanuatu, transited by Optus, was $1.00, split $0.35 to AT&T, $0.30 to Optus and $0.35 to TVL, AT&T would retain its $0.35 per minute and pay $0.30 + $0.35 per minute to Optus which would retain its $0.30 per minute and pay the remaining $0.35 per minute to TVL.

APT and Gilsan Agreements

28 During the period 1996 to 2000 TVL entered into a number of agreements in relation to audiotext traffic other than those upon which it sues. Optus was also a party to those agreements.

APT/Optus Agreement

29 On 4 April 1996, Asia Pacific Telecommunications Ltd (APT) and Optus entered the following agreement:

WHEREAS

APT wishes to offer Audiotext services to their customers and Optus wishes to provide APT with telecommunications services in support of APT business, Optus and APT have agreed the following arrangements:

2. International telephone traffic received by Optus for APT will be traffic that Optus has been advised by the destination carriers to route to APT. This traffic will be routed to the FMC unless otherwise advised by APT.

APT/TVL Agreement

30 On 1 August 1996 APT and TVL entered into an agreement whereby TVL granted APT the right to establish audiotext services utilising Vanuatu number ranges in return for an agreed fee. Clause 2.4 of the APT/TVL agreement granted APT “the exclusive rights in termination of audiotext traffic” on Vanuatu number ranges on traffic originating from Italy (at US$0.08 per minute), the Philippines (at US$0.15 per minute) and the United States of America (at US$0.15 per minute). On 3 October 1996 TVL instructed Mr Bragg, of Optus, to route all traffic on the +6787xxxx number range to the APT switch. On 14 July 1997 Mr Woollard of TVL wrote to Ms Papachatgis of Optus, with a copy to APT, as follows:

Subject: Disclosure to APT

Velvet,

Please accept this instruction as TVL’s authority to provide Asia Pacific Telecommunications Limited with information on the settlement rates (or “Terminal Share” of the TAR) on those routes relevant to the operation of APT’s audiotext business on TVL’s number ranges.

31 On 20 August 1997 Mr Woollard of TVL wrote to Mr Bragg of Optus as follows:

Subject: Asia Pacific Telecommunications

John

71xxx, 72xxx, 73xxx, 74xxx, 75xxx, 76xxx, 77xxx and 78xxx

Gilsan/TVL Agreement

32 On 24 November 1998 TVL entered into a “Memorandum of Understanding” with Gilsan that included obligations on TVL to issue number ranges to Gilsan and to grant Gilsan exclusive access to the number ranges under their control for the purpose of offering international internet dialup services for a period of 12 months. On 24 November 1998 Mr Woollard of TVL wrote to Mr Bragg of Optus as follows:

Gilsan (International) Limited

As of today’s date, Telecom Vanuatu Limited (“TVL”) have entered into an agreement with Gilsan (International) Limited for them to generate International Audiotext and Internet Dialup traffic using Vanuatu number ranges.

Please accept this letter as TVL’s confirmation that Gilsan (International) Limited are authorised to discuss and agree with yourselves the following:

1. The routing of the traffic to their authorised call centres;

2. The transit rates, inpayments and distribution of the same; and

3. Reporting requirements relating to their traffic.

(+678) 5xxxx

33 On 15 December 1998 Mr Woollard wrote again to Mr Bragg in the following terms:

Gilsan (International) Limited

(+678) 50xxx to (+678) 58999, & (+678) 67xxx

34 On 17 December 1998 Mr Woollard informed various entities including AT&T of the opening of the Vanuatu number ranges allocated to Gilsan.

Gilsan/Optus Agreement

35 On 3 December 1998 Gilsan and Optus entered into a “Memorandum of Understanding” pursuant to which Optus was obliged to route international traffic generated on the number ranges allocated to Gilsan to its nominated call centre in another country. That agreement included the following:

Payment Formula

OPTUS will pay SP that share of the total accounting rate subject to reductions for OTPUS, origination and transit charges and the PTT share in Schedule B above.

TVL’s Claims

36 TVL relies upon three agreements to claim that Optus is liable to pay it in respect of rogue traffic between the USA and Vanuatu and Greece and Vanuatu. The first is the tripartite agreement between AT&T Corporation (AT&T), TVL and Optus (the AT&T Agreement) in respect of traffic between the USA and Vanuatu. The second is the tripartite agreement between Sprint Corporation (Sprint), TVL and Optus (the Sprint Agreement) in respect of traffic between the USA and Vanuatu. The third is the tripartite agreement between Hellenic Telecommunications Organisation SA (Hellenic), TVL and Optus (the Hellenic Agreement) in respect of traffic between Greece and Vanuatu.

The AT&T Agreement

37 On 6 March 1996 Mr Keith Wilson, of TVL, wrote to Ms Galloway of AT&T as follows:

AT&T TRAFFIC TO VANUATU

You will be aware that Telecom Vanuatu Ltd (TVL) and Optus Communications are both Associated companies of Cable & Wireless Plc. In late 1995 TVL opened direct high quality digital circuits with Optus which are used for Australian terminal and transit traffic.

Your telephone traffic to Vanuatu is currently routed via Telstra, and we would propose AT&T change this routeing so it transits via Optus.

Whilst we are aware of Telstra’s high published transit rate, we do not of course know what informal rate they charge you. However I am sure Optus would be prepared to offer you a low transit rate in order that your total outpayment is not increased.

The Optus route is currently open for testing whenever you require, and I look forward to receiving your confirmation of this routing change as soon as possible.

38 On 18 March 1996, Mr Isaacs, of Optus, prepared an internal note for Messrs Lawrence and Cooke, of Optus, recording a conversation that he had with Mr Wilson of TVL regarding the proposed agreement with AT&T. The note included the following:

I have just spoken with Keith Wilson at TVL and ATT have agreed to transit via Optus. ATT will contact TVL later this week with a date for implementation.

39 On 3 April 1996 Mr Cooke of Optus wrote to Ms Galloway of AT&T with a copy to Mr Collins, also of AT&T, in the following terms:

We refer to Vanuatu’s message of 6 March 1996 proposing that AT&T change the routing for USA traffic to Vanuatu to via Optus.

Optus would be very pleased to carry this traffic to Vanuatu. We understand that the below accounting rates/divisions would apply for this traffic:

AT&T 1.485 SDR

Optus 0.35 SDR

Vanuatu 1.485 SDR

TAR 3.32 SDR

Vanuatu

In addition Optus’ special transit fee rate applies for traffic of 0.10 SDR – our rate for hard to get to destinations for ATT – total outpayment 1.585 SDR per minute. Our discounted rate to AT&T remains at 0. 08 SDR for all other streams.

We look forward to your early confirmation.

40 On 20 May 1996 Anita Hui of AT&T wrote to Mr Cooke of Optus and Mr Wilson of TVL in the following terms:

Subject: Telephone Service U.S. – Vanuatu via Australia (Optus)

AT&T would like to utilize Optus’s transit facilities for its terminal traffic to Vanuatu. The following rate/divisions of revenue could apply:

4.00 USDLR 1.79 .42 1.79

We await both administrations earliest comments/agreements.

41 On 21 May 1996 Mr Wilson responded to Ms Hui with a copy to Mr Cooke in the following terms:

ACCOUNTING RATE TVL - AT&T

I refer to your fax dated 20 May 1996 concerning the accounting rate to be used for telephone traffic between USA and Vanuatu. The accounting rate you quote is incorrect, the rate as per our records and as used by all other US carriers is a TAR of 3.32 SDR.

I also believe Gordon Cooke, Optus International Transit Business Manager has been corresponding with AT&T confirming the TAR for this telephone service is 3.32 SDR.

Could you please review the matter in light of the above and initiate proposal based on the 3.32 SDR rate.

42 On 25 June 1996 Mr Wilson sent the following facsimile to Mr Chin of AT&T with a copy to Mr Cooke at Optus:

TAR VANUATU / AT&T

Further to our recent correspondence and discussions on the above subject, TVL agree to use a TAR of US$4.00 for this traffic. The rate divisions for this service would thus be as follows:

US$

Total 4.00 (Cascade accounting)

43 On 26 June 1996 Mr Cooke wrote to Mr Chin (AT&T) in the following terms:

Subject: TAR AT&T / VANUATU

US$

As testing has been successfully completed between USA and Vanuatu via Optus I would greatly appreciate if the work order could be put in place before the commencement of the embargo date of 5 July 1996.

Please contact me if you have any queries.

44 On 28 June 1996 Mr Chin (AT&T) wrote to Mr Wilson (TVL) and Mr Cooke (Optus) with a copy to Ms Hui, Ms Galloway and Mr Collins (AT&T) in the following terms:

Thank you for your faxes in the past few days confirming Total Accounting Rate (TAR) of USD 4.00.

In regards to switching transit traffic to go via Optus, there are some quality and connectivity issues which require clarification in order to ensure a smooth transition. These are:

The initial possible reason for this was that Optus has a feature which will prevent double satellite hops, and that if they receive a transit call on satellite, they will not allow the call to continue on satellite. This should generally not be a problem, however if Optus only has satellite capacity into Vanuatu, then it would be preferable that this feature is turned off, so that if transit calls for Vanuatu are received via satellite, Optus will then allow these calls to continue on satellite to Vanuatu.

Gordon, please confirm this will be done, and that satellite incoming calls to you will not be blocked.

Given the points of Mr Disanayake’s fax as outlined above, AT&T is concerned that there is a high percentage of calls that would fail via Optus, but which would otherwise complete if sent via the other carrier.

The solution would not be to have Optus allow 6 digit numbers as these may still not complete to the devices in Australia.

Keith/Gordon, please provide your thoughts as to possible solutions to the above identified item.

At any rate, given the clarification and resolution of the above 2 items, and successful testing of transit via Optus, we would agree to implement sending our transit traffic first choice via Optus.

45 The attachment to Mr Chin’s letter was as follows:

AT&T AND TELECOM VANUATU

TRANSIT AGREEMENT

For the provisioning of transit traffic between AT&T and Telecom Vanuatu via Optus, it is agreed that the following rate/divisions of revenue will apply:

RATE/MINUTE

U.S.

OPTUS

VANUATU

46 Mr Wilson signed the Transit Agreement on behalf of TVL on 28 June 1996 and Ms Hui signed it on behalf of AT&T on 1 July 1996.

47 Mr Disanayake’s advice of 7 June 1996, referred to in Mr Chin’s 28 June 1996 letter, was in the following terms:

Further to our telephone conversation this afternoon I have done an analysis of the transit traffic received from AT&T to Vanuatu during the period 27.5.96 to 2.6.96.

It appears that all calls have arrived via your cable route, hence failing due to double satellite hop would not have occurred. However I have observed that a high percentage of calls (29.6) have been failed due to digit length being in excess of the maximum number length as advised by Vanuatu Telecom. These numbers are not Working numbers in Vanuatu and hence we fail them in our ISCs. If these calls are excluded from the calculation the ASR improves to 50%. I have also observed 77 repeat attempts to four B numbers two of which are fax numbers and two wrong numbers which have been routed to RVAs in Vanuatu. If these are also excluded the ASR improves to 57.6%.

48 On 28 June 1996 Philip Richards, the Managing Director of TVL, wrote to Mr Chin (AT&T) in the following terms:

TELEPHONE TRAFFIC USA – VANUATU

Now that the accounting rate of US$4.00 has been agreed to by Telecom Vanuatu Limited would you please arrange for the immediate re-routing of all AT & T traffic from USA to Vanuatu via OPTUS (instead of Telstra).

The Sprint Agreement

49 On 24 February 1997 Alison Rothery of Optus wrote to Emma Dymmock of Global One USA (Sprint), copied to Mr Wilson of TVL, in the following terms:

SUBJECT: Sprint (USA) – Vanuatu via Optus

Optus would appreciate both administrations confirmation to the accounting arrangements as outlined below;

SPRINT: 1.79 USD/minute
OPTUS 0.42 USD/minute
VANUATU 1.79 USD/minute
TAR 4.00 USD/minute

50 On 24 February 1997 Rory Haywen of TVL wrote to Ms Rothery of Optus, copied to Ms Dymmock of Sprint, in the following terms:

TELEPHONE SERVICE Sprint (USA) – VANUATU VIA OPTUS

Refer to your fax of today 24 February 1997.

We confirmed our agreement to the following rate/divisions

Sprint (USA) 1.79
Optus 0.42
Vanuatu 1.79
TAR 4.00 USD/min

No PCS accounting

Cascade accounting to be applied.

51 On 27 February 1997 Ms Dymmock wrote by email to Ms Rothery (Optus) in the following terms:

The Hellenic Agreement

52 On 22 June 1998 Rory Haywen (TVL) wrote to D Strathopoulos of Hellenic and Alex Robertson of Optus in the following terms:

SUBJECT: Telephone Service Greece – Vanuatu via Optus

Refer to your fax of 12 June 1998.

We confirmed our agreement to the proposed TAR of 1.80 SDR/min with rate/divisions as follows:

Vanuatu 0.725
Optus 0.35
Greece 0.725
TAR 1.80 SDR/min

Cascade accounting

No accounting for PCS

53 On 29 February 2000, Mr Haywen (TVL) received a facsimile from D Pavlopoulos (Hellenic) in the following terms:

Telephone service Greece-Vanuatu/TAR reduction

Rate division via Optus as follows:

Your agreement the soonest possible will be appreciated otherwise OTE will be forced to reroute its traffic.

54 TVL and Optus did not agree to this variation, however TVL submitted that this letter is important because Hellenic acknowledges that the Hellenic Agreement applies to audiotext traffic and there is no suggestion that short stopped traffic is excluded from this agreement.

Rogue Traffic

55 On 22 October 1998 John Ridgway, a lawyer with the Vanuatu law firm, Ridgway Blake Lawyers, wrote to the then Managing Director of TVL, Daniel Fermine, advising that Ridgway Blake had a client who was considering establishing an “enterprise” in Vanuatu which required 100 consecutively numbered telephone numbers. Mr Ridgway advised that the client had requested that, if possible, the numbers be distinctly separate from other Port Vila numbers. On 28 October 1998 Mr Ridgway and Mr Fermine had a telephone conversation in which Mr Ridgway informed Mr Fermine that the purpose of the reservation of the numbers was for “the provision of gambling services”. Mr Ridgway confirmed this conversation in a letter to Mr Fermine dated 28 October 1998 and advised that the client had not made any approaches relating to the licensing or other government requirements that may be necessary before “any such gambling or other services can be provided using the allocated numbers”. Mr Ridgway also advised that all the client was seeking was the confirmation of the reservation of 100 numbers for a minimum period of 12 months and, because TVL had requested it, the possible renewal of those reservations for a minimum further period of 12 months.

56 On 2 November 1998 Mr Fermine wrote to Mr Ridgway advising that TVL was able to reserve and allocate a range of 100 consecutive numbers at a cost for one year of VATU 45,000 (VAT included). Mr Fermine advised that TVL could not make any promises about the capability of providing any service until TVL was completely informed about the technical issues of the project. On 19 November 1998 Mr Ridgway wrote to Mr Fermine requesting that the numbers 678 678000 to 678 678999 be reserved and enclosed a cheque for VATU 45,000. It is clear that Mr Ridgway advised Mr Bragg at Optus that these numbers had been allocated to his client, GIB. However on 26 November 1998 Mr Ridgway wrote to Mr Bragg as follows:

We have had some bad news from Telecom Vanuatu – they have discovered some of the numbers we gave you have been allocated elsewhere previously – the numbers DEFINITELY available are 66000 to 66099 - the first year fee has been waived and will be refunded because of this error.

Let me know if any real problems arise out of the above.

57 On 8 December 1998 Mr Woollard wrote to Mr Ridgway in the following terms:

Thank you for your clearance today to go ahead and utilise the number range #678xx previously indicated to you.

Your new range for your customer, subject to final technical clearance, will be the range #660xx.

58 It is apparent that the previous number ranges provided to Mr Ridgway were then allocated to Gilsan. This was the subject of notification to Mr Bragg by Mr Woollard in the letter dated 15 December 1998 referred to earlier in this judgment.

59 On 24 December 1998 Mr Woollard wrote to Mr Bragg in the following terms:

An existing audiotext agreement has exclusivity to audiotext traffic from four (4) originations, being USA, Greece, Italy, & Turkey.

USA, Greece, Italy

Turkey

(+678) 50000-58999 & (+678) 67xxx

60 On 7 January 1999 Gavin Whyte of Interbill wrote to Mr Bragg in terms that included the following:

I remember you telling me that Vanuatu short stopped in Sydney and could present us with an attractive remuneration rate. Given the volume of business that we are intending to generate with this product, I would like to know if capacity has ever presented itself as a problem to the current Vanuatu players.

61 On the same day Mr Bragg responded to Mr Whyte with a copy to Mr Woollard at TVL in the following terms:

62 On the same day Mr Collins (Telstra) responded to Mr Bragg advising that if a Vanuatu number range was to be allocated he would appreciate if a 1,000 number range was allocated because it was easier to switch. That email included the following:

63 On 8 January 1999 Mr Woollard responded to Mr Bragg’s email in the following terms:

As indicated yesterday, TVL has a contract with Warwick re Internet Dial Up Audiotext that is a world exclusive for 18 months.

I know that Warwick is only interested in certain markets, most especially the USA. He would not release exclusivity on this route whatever was said.

However, I have already e-mailed him asking him whether he is willing to state certain markets that he would want exclusivity whilst allowing other originations through that may be of interest to your contacts.

64 The reference to “Warwick” was a reference to Peter Warwick of Gilsan, to whom Mr Woollard had written on 8 January 1999 by email in terms that included the following:

Peter, I have to broach a topic that I do not particularly wish to, but upon which I am at present unfairly but nevertheless significantly being held out to dry from internal political forces at too high a level for me to totally ignore!

I fully understand that the Memorandum of Understanding between TVL & Gilsan gives you exclusive access to number ranges under our control for Internet Dial Up for 12 months from commencement of service, after which a volume parameter becomes relevant. I also am very aware that the USA is your primary target for origination.

Do you have an anticipated list of prime other originations that you will be aiming at? I assume that there will be many countries where you will have very little intention of using, and some where the prospects are very limited. I need to investigate if there are some originations that you might, through nothing than your own goodwill as we haven’t got a leg to stand on, allow a different provider to give us a similar service.
My problem is that an internal partner of C&W wishes to provide some of this service type, and TVL was mentioned as a possibility. However, they had no idea of the nature of our agreement, and are now looking for a sacrificial lamb to blame for their own ineptitude, which appears to be me! If I can offer them any sort of an olive branch, it may be very useful.

Just some thoughts. How about a list of absolute no-go origination that are untouchable, then a second list that you would gain exclusivity on if you provided traffic first, then a list of “don’t care” originations? Are you interested in all types of internet dial-up, or only “pink lines”? Are there any categories that you would allow us to deal with?

In short, my neck is in a noose, and I legally cannot do anything about it. However if there were to be just a few morcels that I could offer to my parent company, I would be most grateful.

65 Although Mr Bragg was aware of Mr Woollard’s position in relation to exclusivity, he entered into an arrangement with GIB described by Mr Chambers as follows:

66 On 4 March 1999 TVL received a letter from the Minister of Infrastructures and Public Utilities of Vanuatu in the following terms:

The Government of Vanuatu was recently in receipt of information regarding Dial-up Internet Access Providers on PSTN and using the international access code 678, apparently in collaboration with TELECOM VANUATU Ltd. Moreover, other information given by the international press make believe some Internet Networks could be used for money laundering in the South Pacific and particularly in Vanuatu.

All this could have an ( sic ) very negative impact on the image of the country, mainly on tourism and finance activities which make-up the first wealth of Vanuatu.

67 On 5 March 1999 Mr Woollard wrote to Mr Bragg in the following terms:

(+678) 50000-58999

&

(+678) 67xxx

Please confirm in writing/e-mail when these numbers have been blocked.

68 After Mr Bragg received Mr Woollard’s letter he drafted a letter for Mr Warwick to send back to him. He sent that draft to Mr Warwick on 7 March 1999. It was in the following terms:

John

I expect you are in receipt of a message from Telecom Vanuatu asking you to block Gilsan Vanuatu numbers due to concerns expressed by the Government of Vanuatu.

Let me assure you that none of our companies including Gilsan have ever been involved with money laundering or fraudulent use of Internet services.

However to ensure the worries expressed by the Government of Vanuatu are addressed will you please ensure that all Gilsan Vanuatu numbers are short-stopped in Sydney and access to Vanuatu is blocked. The calls should be sent to appropriate Gilsan platforms where we will also ensure none are forwarded to Vanuatu.

Will you please let me know of any costs involved in this exercise.

Regards

69 Mr Warwick forwarded this email to a consultant and his accountant making the following comment:

70 Optus blocked the Gilsan number range, the consequence of which was the commencement of the Vanuatu proceedings. On 6 March 1999 Mr Chambers of GIB emailed Mr Bragg in the following terms:

I am hearing a very nasty piece of scuttlebutt, can you confirm/deny asap please.

Apparently, the Government of Vanuatu has outlawed inbound international internet access to Vanuatu.

This has been lobbied for by ViSL (as expected) in a move to cut off Peter Warwick and his undesirable customer base.

Unfortunately, if true, it would appear to cut us off too wouldn’t it?

71 On 8 March 1999 Mr Bragg responded to Mr Chambers’ email in terms that included the following:

Gosh Hugh you should never listen to scuttlebutt but yes in fact what you say is true.

Further I believe there is no truth in thinking it will effect (sic) you. A couple of days ago I had a chat with Graham Oldreive who asked where he could get more revenue and I mentioned Interwest and when he asked volumes I told him around 50% of VISL as a guess. He was quite pleased with that and asked if there was any way you could be encouraged to start while the other problems were being sorted out.

A. No. We received a document – we tried to settle up the outstanding issues with Optus, including the traditional traffic, and we received – instead of an agreement where we could have all agreed on an equitable rate and put the whole thing to bed, it was a document that I was unable to sign because, from my view, it seemed as though Optus was asking TVL for indemnity against an action by American carriers. It was a very strange document and one I haven’t seen in the normal course of business, and that is where it got left. The whole thing stalled.

Q. Mr Hall, by the end of December 2000, you regarded relations with Mr Bragg as being good, didn’t you?
A. Better.

Q. You regarded them as good, didn’t you--
A. Yes--

Q. --do you agree?
A. --they were up and down, yes.

Q. You regarded the situation between TVL and Optus as stable, didn’t you?
A. Apart from the issue of the settlement, yes.

Q. Well, even taking into account the issue with the settlement, you regarded the situation between the companies as stable, didn’t you?
A. Yes, compared with what was there before, yes.

Q. You regarded the relations with Mr Bragg as good and the situation with Optus as stable because Optus, by the end of December 2000, had paid you what you had agreed to accept for the so-called rogue traffic; correct?
A. No, they paid it at 10 cents a minute. We didn’t agree to 10 cents a minute for the rogue traffic.

168 The reference to the “FCC benchmark” in this evidence was a reference to a benchmark order imposed in the USA providing how much was going to be paid for calls out of the USA, thus reducing the TAR.

169 Optus submitted that Mr Hall’s claim that he regarded the $313,000 as “partial payment” should be rejected. It emphasised the fact that Mr Hall never raised any concern or issue with Optus after TVL received this payment. Mr Hall claimed he had done so through Mr Milard. However Mr Hall accepted that there was no complaint or issue raised by him or by Mr Milard between December 2000 and August 2002 concerning any outstanding payments for so-called rogue traffic (tr 270). On 2 September 2002 Mr Milard wrote to Optus in relation to a meeting between TVL and Optus on 26 August 2002. That email included the following:

4. Audiotext

- TVL confirms that we require a statement from OPTUS certifying that OPTUS routes or short stops the traffic strictly as instructed by TVL (previous numerous faxes from Richard Hall).

- All amounts due to the audiotext service providers must be settled by OPTUS, so that TVL can be paid by the audiotext service providers for the use of Vanuatu number ranges.

TVL asks for a financial compensation for the illegal audiotext use of Vanuatu numbers arranged by OPTUS in the past without the agreement of TVL. Following past emails on the matter, Richard Hall will indicate to OPTUS the amount which is claimed.

170 In cross-examination Mr Hall was referred to this section of the email, in particular to the suggestion that he would indicate to Optus the amount which was claimed. He was cross-examined on this matter as follows (tr 270-271):

Q. You never did so, did you?
A. It was pre-empted by the arrival of that document which, if you like, stopped all things moving forward.

Q. You never indicated to Optus the amount which was claimed, did you?
A. Not that I recall, no.

Q. Because you knew, didn’t you, that you had reached an agreement with Mr Bragg in late November or early December 2000 that Optus would pay TVL 10 ¢ a minute for the so-called rogue traffic and you regarded the $313,000 payment as satisfying that agreement; correct?
A. Not at all, no.

171 A peculiar feature of Mr Hall’s conduct is that he did not advise Mr Milard that he had agreed with Mr Bragg that Optus would pay 10 cents per minute for the MDC rogue traffic, notwithstanding that he accepted in his evidence that he had agreed to 10 cents per minute for the MDC traffic. He was cross-examined about this aspect of his conduct (tr 272):

Q. You hadn’t told Mr Milard at any time in or after December 2000 that you had agreed with Mr Bragg to accept 10¢ for the MDC rogue traffic, did you?
A. I considered – I’m not sure whether I spoke to Thierry about it. I spoke to him about most things. Did I say to him we will just stick – I spoke to him about sticking MDC under APT to tidy it up. I don’t think the MDC amounts are material.

Q. You didn’t tell Mr Milard that you had reached an agreement with Mr Bragg for the payment of 10¢ a minute for all the rogue traffic, whether MDC, GIB or Interwest, in December 2000; correct?
A. No, I never agreed to the 10¢ a minute for all rogue traffic.

Q. I suggest to you the reason you never indicated after reading this email what amount TVL claimed was that you regarded TVL as having been fully paid in December 2000 by Optus’ payment of $313,000?
A. Well, actually I handed over the document that Optus had put in front of us to my successor who was Mr Andrew Wigglesworth. I said to Andrew, “My advice is” – and he was acting MD – “do not sign this. We are still in dispute with Optus, I am moving on to a new job, you know, and you will have to deal with it now.” So I never agreed to the 10¢ and the reason I didn’t sign the proposed document from Optus was that it was outrageous.

172 In re-examination Mr Hall identified the “outrageous” document that he claimed had stalled the negotiations. That deed is dated October 2004 and it would appear that the earliest version of it was submitted to TVL on 8 April 2004. Optus submitted that there is no explanation as to why Mr Hall did not provide details of the amounts claimed for the rogue traffic between 2 September 2002 and April 2004. It submitted that the reason there was no such explanation is because Mr Hall did agree with Mr Bragg in late November or early December 2000 to accept 10 cents per minute for all the so called “rogue traffic”.

173 Mr Hall’s evidence in his affidavit that he “never agreed” to accept US$0.10 per minute for the audiotext traffic operated by MDC was clearly quite wrong. Mr Hall’s rather begrudging concession in cross-examination that he agreed with Mr Bragg that Optus would pay TVL at the rate of $0.10 per minute in respect of the MDC traffic was rather devastating for the balance of his evidence. He claimed in cross-examination that this agreement of $0.10 per minute for the MDC traffic was “not necessarily all of it” because the “stuff” as he called it, that TVL knew about was regarded by it as “small beer”. This evidence suggested that Mr Hall was willing to concede that he had agreed that MDC traffic that he knew about would be paid at $0.10 per minute but that he had not agreed an amount in respect of traffic that he did not know about. That is a far cry from his affidavit evidence in which he claimed that he “never considered” that the amount of $0.10 per minute was adequate compensation. I have no doubt that Mr Hall was at the very least mistaken when he claimed in his evidence that he had not agreed with Mr Bragg to accept $0.10 per minute for MDC traffic. The fatal blow to Mr Hall’s evidence in relation to the MDC traffic makes his evidence in relation to the other traffic very unreliable.

174 I accept that some of Mr Bragg’s conduct seems to have been lacking in commercial morality, however that of itself does not prove that he did not have this conversation, as alleged, with Mr Hall. There was never any communication from Mr Hall or TVL to Mr Bragg or Optus during the period 2000 to 2002 that the agreement in relation to the 10 cents per minute for the MDC traffic was only in relation to the traffic that TVL knew about, and that TVL wished to reserve its position to negotiate for a higher or different rate for other traffic. Nor was there any suggestion that the payment that TVL accepted in December 2000, clearly calculated on the basis of 10 cents per minute, was not to be taken as acceptance of a rate of 10 cents per minute for the rogue traffic.

175 On balance I am satisfied that the conversation alleged by Mr Bragg with Mr Hall did occur and that Mr Hall, on behalf of TVL agreed to the figure of US$0.10 per minute in respect of all rogue traffic. As Mr Kunc conceded that finding puts an end to TVL’s case and its claims will be dismissed.

Other claims

176 Although my findings in relation to the agreement reached between Mr Bragg and Mr Hall puts an end to the plaintiff’s claims, I should say something about two other aspects of the claims. TVL claims that Optus’ actions in opening its international switch to permit entities other than those authorised by TVL to generate the rogue traffic amounted to conversion of the Vanuatu number ranges to Optus for Optus’ benefit. TVL claims that Optus then received payments from originating carriers in respect of the use of those converted number ranges.

177 Optus made submissions on the assumption that TVL’s rights over the +678 number ranges were proprietary, submitting that such rights are at best intangible property over which no claim for conversion lies. In support of this submission Optus relied upon the following passage of Cole JA’s judgment (with which Meagher JA agreed) in Ferguson v Eakin (New South Wales Court of Appeal, 27 August 1997, unreported, BC 9703869) at 9:

178 In the same case Powell JA said at 2:

179 Reliance was also placed on the following passage of Dixon J’s (as his Honour then was) judgment in Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 229:

180 In Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2005] NSWSC 951, White J declined to strike out TVL’s claim in conversion. However, his Honour did not deal with the merits of the argument and in any event considered that for a Judge at first instance the matter was settled by binding authority. In Hoath v Connect Internet Services Pty Ltd (2006) 229 ALR 566, White J dealt with the issue of conversion of intangible property. In that case the plaintiff alleged that the defendants had committed the tort of conversion by their unauthorised dealings with the domain name “dragon.net.au”. White J regarded Ferguson v Eakin as binding on him and clearly establishing that there could be no claim in conversion or detinue of a chose in action (at 594). His Honour noted that the English Court of Appeal had come to the same conclusion in OBG Ltd v Allan [2005] 2 All ER 602. (Since his Honour delivered his judgment in Hoath the House of Lords dismissed the appeal from the Court of Appeal in OBG: [2007] 4 All ER 545). White J held that the plaintiff had to: identify a chattel embodying the intangible rights with which the defendant interfered; establish that it owned or had an immediate right to possess that chattel; and establish that the defendants dealt with the chattel in a manner repugnant to the plaintiff’s rights. His Honour said (at 597-598):

181 In their dissenting opinions in OBG Lord Nicholls and Baroness Hale expressed the view that there was no logical reason why the law should afford a remedy for misappropriation of tangible property but not intangible property. As Lord Nicholls said (at 602): “This distinction makes no sense. It lacks rhyme or reason”.

182 In Thyroff v Nationwide Mutual Insurance Company 832 N.Y.S.2d 873 (2007), the New York Court of Appeals said (at 879) that “the tort of conversion must keep pace with the contemporary realities of widespread computer use”. In Shmueli v Corcoran Group 9 Misc. 3d 589 (2005) the Supreme Court of New York County observed in dealing with a case of conversion of electronically stored data (at 592):

183 In the United States, conversion has been held to be available in respect of an internet domain name (Kremen v Cohen 337 F.3d 1024 (9th Cir 2003); electronic records stored on a computer (Thyroff); and unauthorised decryption and display of satellite program (Directv Inc v Ostrowski 334 F.Supp 2d 1058 (N.D. Ill. 2004).

184 Under the present law, the tort of conversion is not available in relation to intangible property. However the powerful dissenting opinions of Lord Nicholls and Baroness Hale in OBG may one day find favour if the law is to keep pace with the advances in technology in our modern society.

185 The second matter was TVL’s claim that by reason of the use of the Vanuatu number ranges, Optus has been “unjustly enriched at the expense of TVL”. Unjust enrichment is not an independent cause of action but rather a concept which may explain why the law recognises an obligation to make restitution in a particular context. It is not a vehicle by which idiosyncratic notions of fairness and justice may be applied: Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 per Gummow, Hayne, Crennan and Kiefel JJ at 665; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 per Gummow J at 543-545. As I have found that agreement was reached on a rate of USD$0.10 per minute for the rogue traffic, it is not necessary to consider this matter further.

Conclusion

186 The plaintiff’s claims will be dismissed. The parties are to bring in short minutes of order reflecting this outcome together with an agreed costs order. The matter is listed at 9.15 on 12 December 2008 for that purpose. If the parties are unable to agree on a costs order I will hear argument at that time.

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Citations

Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2008] NSWSC 1209

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CITATION:	Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2008] NSWSC 1209
HEARING DATE(S):	11, 12, 13, 14, 18 & 19 February 2008 & 11, 12, 13 & 14 August 2008
JUDGMENT DATE :	27 November 2008
JURISDICTION:	Equity - Commercial List
JUDGMENT OF:	Bergin J
DECISION:	Plaintiff's claims dismissed.
CATCHWORDS:	[CONTRACT] - contracts between telecommunications companies for the provision of telecommunications services from certain countries to Vanuatu - whether subject matter of contract extended to telecommunications services in circumstances where the services were not provided from, to, or through Vanuatu - whether agreement reached between the parties on the amount to be paid for audiotext traffic - [CONVERSION] - use of telephone numbers without legal authority - whether intangible property can be the subject of a suit in conversion
LEGISLATION CITED:	Telecommunications Act 1989 (Vanuatu)
CATEGORY:	Principal judgment
CASES CITED:	BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Directv Inc v Ostrowski 334 F.Supp.2d 1058 (N.D. Ill. 2004) Ferguson v Eakin (New South Wales Court of Appeal, 27 August 1997, unreported) Gilsan v Optus [2004] NSWSC 1077 Hoath v Connect Internet Services Pty Ltd (2006) 229 ALR 566 Kremen v Cohen 337 F.3d 1024 (9th Cir. 2003) Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 OBG Ltd v Allan [2005] 2 All ER 602 OBG Ltd v Allan [2007] 4 All ER 545 Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 Shmueli v Corcoran Group 9 Misc.3d 589 (2005) Telecom Vanuatu Ltd v Optus Networks Pty Ltd [2005] NSWSC 951 Thyroff v Nationwide Mutual Insurance Company 832 N.Y.S.2d 873 (2007)
PARTIES:	Telecom Vanuatu Ltd (Plaintiff) Optus Networks Pty Ltd (Defendant)
FILE NUMBER(S):	SC 50107 of 2005
COUNSEL:	F Kunc SC/C N Bova (Plaintiff) I M Jackman SC/J A C Potts (Defendant)
SOLICITORS:	Gadens Lawyers (Plaintiff) Clayton Utz (Defendant)