The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd - [2009] NSWSC 157

No judgment structure available for this case.

CITATION: The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 157

HEARING DATE(S): 16/02/09, 18/02/09 - 20/02/09, 23/02/09 - 25/02/09, 5/03/09, 12/03/09

JUDGMENT DATE :
20 March 2009

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Plaintiffs claims for declaratory relief fail. Parties to bring in short minutes of order

CATCHWORDS: Contract - Principles of construction - Claims for declaratory relief - Channel Supply Agreement entered into between The Movie Network Channels [CSA] and Optus Vision providing for the supply by TMNC to Optus Vision of pay TV channels containing movie content for use on Optus Vision's pay TV service - Meaning of the words 'Optus Vision retail price for the Movie Channels' - Critical Clause affecting the calculation of the licence fee payable by Optus Vision - Claim by TMNC including interest of approximately half $1,000,000,000- Parole evidence rule - Whether conversations said to have taken place during suite of anterior negotiations admissible - Attribution of corporate knowledge-Principles - Agency theory of attribution - Directing Mind theory of corporate attribution

LEGISLATION CITED: A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-10, 9-90(2)

CATEGORY: Principal judgment

CASES CITED: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685
Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
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 [1997] UKHL 28; [1998] 1 WLR 896 at 912; [1998] 1 All ER 98
J Australasian Performing Rights Association Limited v Monster Communications Pty Limited [2006] FCA 1806
L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Magill v National Australia Bank Ltd [2001] NSWCA 221
Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61
Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114
Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237
Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989; [1976] 3 All ER 570
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) Aust Contract R 90-254
Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103
Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429
Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15

TEXTS CITED: Lord Steyn, "The Intractable Problem of the Interpretation of Legal Texts" (2003) SLR 1 at 7

PARTIES: The Movie Network Channels Pty Ltd (Plaintiff)
Optus Vision Pty Ltd (Defendant)

FILE NUMBER(S): SC 50054/06

COUNSEL: Mr RJ Weber SC, Mr KL Andronos (Plaintiff)
Mr NC Hutley SC, Mr PJ Brereton (Defendant)

SOLICITORS: TressCox Lawyers (Plaintiff)
Baker & McKenzie (Defendant)

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

Einstein J

Friday 20 March 2009

50054/06 The Movie Network Channels Pty Limited v Optus Vision Pty Limited

JUDGMENT

The proceedings

1 The proceedings before the court involve a close contest as to the proper construction of a Channel Supply Agreement [CSA] entered into between The Movie Network Channels [TMNC] and Optus Vision on 25 August 1999. The agreement is still on foot.

2 The CSA provides for the supply by TMNC to Optus Vision of three pay TV channels containing movie content for use on Optus Vision's pay TV service.

3 The dispute fundamentally concerns the meaning of the words 'Optus Vision retail price for the Movie Channels'.

4 The clause in question affects the calculation of the licence fee payable by Optus Vision pursuant to the agreement. TMNC's claim excluding interest is for a sum exceeding $355,310.717. With the addition of an interest component the amount claimed is closer to half a billion dollars.

5 TMNC contends that an escalation clause was triggered in 2002, pursuant to which the monthly licence fee rose. Optus Vision's response is that TMNC misconstrues the escalation clause and the clause has never been triggered.

6 A particular feature of the proceedings concerns TMNC's endeavour to invoke an exception to the parole evidence rule: TMNC seeks to have the Court admit a particular conversation said to have taken place during the suite of anterior negotiations ultimately leading to execution of the CSA [cf the observations by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA24; (1982) 149 CLR 337at 351 to the effect that where words in a contract are susceptible of more than one meaning extrinsic evidence is admissible to show the facts which the negotiating parties had in their mind, and [at 352] where it is made plain that prior negotiations which tend to establish objective background facts which were known to both parties and the subject matter of the contract are admissible].

7 TMNC originally pleaded a construction case and in the alternative sought rectification of the CSA. Later in the piece the rectification case was abandoned. Finally on the third day of the final hearing TMNC sought to plead in the alternative, yet another version of its construction case [in effect re-introducing into the pleadings, a construction case which it had advanced very early in the life of the proceedings but had then withdrawn].

Background

8 TMNC has, with effect from 1 April 1999, licensed the Movie Channels to Optus Vision for distribution to subscribers to what was variously described as Optus Vision or Optus Television (the Optus subscription service). Subscribers to the Optus subscription service could, at various times relevant to the proceedings, subscribe to the subscription service alone or in conjunction with other services provided by its related corporations, such as local area telephony (LAT) or high speed data internet access (HSD). These became known as "unbundled" and "bundled" services respectively. See the definitions of these terms.

9 It has always been necessary for the consumer to subscribe to other subscription television channels in order to access the Movie Channels. At no time has it been possible for a subscriber to obtain access to the Movie Channels alone in any subscription to the Optus subscription service. As at August 1999, when the parties entered into the CSA, and at almost all times during the life of the CSA it was necessary for a subscriber who wanted to access the Movie Channels to do so by purchasing a tier in addition to the basic package. For "bundled" subscribers, in order to obtain the benefits held out by Optus Vision as accruing with a subscription to a bundled service, it was necessary to take both the Optus subscription service and another service or services being LAT and/or HSD.

10 Optus Vision was a wholly owned subsidiary of Cable & Wireless Optus Pty Limited (CWO) [For convenience the references herein to CWO usually do not distinguish between precise related corporate entities. However the CSA precisely identified the parties and took care to distinguish between Optus Vision and its related bodies corporate: see for example the definition of "Bundled Subscriber"].

11 TMNC was incorporated on 19 August 1999 in order to manage a joint venture on behalf of four entities each of which came to be represented among TMNC's shareholders: Warner Bros. International Distribution Inc (Warner Bros), Buena Vista International Television (Disney), MGM Worldwide Television Group (MGM) and Roadshow Television (Roadshow) (together the Studios).

12 Each of the Studios had licensed premium motion picture content to MovieVision, a wholly owned subsidiary of Optus Vision, from about 1995 to 1999. MovieVision packaged and licensed premium movie channels to Optus Vision for distribution by Optus Vision to its subscribers. Each of the Studios licensed its premium motion picture content to MovieVision for this purpose.

13 From 1995 to 1999, Optus Vision paid MovieVision a licence fee calculated by reference to two variables: the number of subscribers and a licence fee per subscriber (known as a Charge Per Subscriber or CPS). It is common in subscription television worldwide for licences to follow this formula. Similarly it is common that licences for premium content include payment for a minimum number of subscribers irrespective of whether that number of subscribers has been reached – this is usually described as a minimum guarantee. See the definitions in the CSA at clause 8.1. The CPS payable by Optus Vision was $8.03 per month.

14 By late 1998/early 1999, CWO had formed the view that it could not sustain the Optus Vision business while it was incurring such high costs and it sought to renegotiate its supply contracts, including in respect of the Movie Channels.

15 In 1999, an Austar subscriber had to pay $46.90 per month to subscribe either to the Movie Channels or to the Showtime Channels and in doing so, he or she had to purchase a basic package of subscription programming and supplement it with a premium movie service. This was known as a “buy through”. “Bundled” subscribers received a substantial discount on the Optus Vision price (of $10.00, the monthly subscription being $29.95 for the pay television services). CWO charged an access fee for LAT of $10.95. The amount of $10.95 was the lowest monthly service for telephony available at the time. It was a price charged by Optus Networks that was available to anybody, whether or not they subscribed for a pay television service with Optus Vision. The consumer was required to pay a minimum of $40.90 for the bundle of services.

16 It was not possible in 1999 for an Optus Vision subscriber to subscribe to the Movie Channels alone. Indeed, it has never been possible to subscribe to the Movie Channels alone. There has always been a requirement to subscribe at least to a "basic" package of programming, together with whatever other programming is located on the same tier as the Movie Channels. Obviously, in the case of Bundled Subscribers, a consumer must also pay for a suite of services, which may include LAT and/or HSD.

17 CWO generated a number of marketing plans which all expressed the same basic strategy: pay television would be marketed at a discount to its regular, unbundled price provided subscribers also subscribed to LAT and/or HSD. For a pay television subscriber to obtain a Deluxe package (i.e. a package of basic and premium channels that included the Movie Channels) in July and August 1999 would cost him or her $39.95 per month. To obtain a Deluxe package together with access to LAT at that time cost $40.90.

18 It was relevantly in these circumstances that the parties entered the CSA. The CSA was largely a renegotiation of the licence arrangements that had been initially negotiated in 1995. CWO had realised that it could not afford to pay the agreed licence fees. It approached the Studios seeking relief from the ongoing cost of those fees. CWO was at that time embarking on an ambitious attempt to grow its LAT and HSD businesses by pricing bundles of services at a discount to the discrete price that each service could be obtained individually. Premium subscription television content was key to this strategy as that was perceived as likely to drive subscription numbers across all of CWO's relevant businesses.

The critical clauses in question

19 The critical CSA clauses in question provide as follows:

(a) the Minimum Guarantee; and

(a) in respect of:

(A) before 1 April 2000 there will be no increase to CPS; and

(A) in respect of any shortfall between the number of Unbundled Subscribers and the Minimum Guaranteed Numbers of Subscribers, by 60% of the amount that the Optus Vision retail price for the Movie Channels (excluding GST) from time to time during the Term exceeds $48.00; and

(B) over and above the Minimum Guaranteed Numbers of Subscribers, by 60% of the amount that the Optus Vision retail price for the Movie Channels (excluding GST) from time to time during the Term exceeds $46.90; and

(iii) any shortfall between the Minimum Guaranteed Numbers of Subscribers and the aggregate of the actual number of Bundled Subscribers and Unbundled Subscribers by the amount specified in Clause 7.4(a)(ii)(A).

8. MINIMUM GUARANTEES

Minimum Guaranteed Numbers of Subscribers	Maximum Subscriber Reduction Number
Year 1 (1 April 1999 to 31 March 2000)	300,000	50,000
Year 2 (1 April 2000 to 31 March 2001)	400,000	50,000
Year 3 (1 April 2001 to 31 March 2002)	495,000	45,000
Year 4 (1 April 2002 to 31 March 2003)	625,000	75,000
Year 5 (1 April 2003 to 31 March 2004)	675,000	75,000
Year 6 (1 April 2004 to 30 June 2005)	680,000	80,000

8.3 If Optus Vision makes the election referred to in Clause 3.2 the Minimum Guaranteed Numbers of Subscribers during each year of the Extended Term shall be the same as the Year 6 number referred to in Clause 8.1 for the Original Term, varied as required by Clause 8.2.

20 Some of the defined terms (see clause 1) are of particular importance:

· "Subscriber" means persons who are authorised by Optus Vision to receive at least one of the Movie Channels.

· "Bundled Subscribers" means Subscribers who have subscribed for Pay Television with Optus Vision in a package which includes telephony and other services provided by Optus Vision or any of its Related Bodies Corporate.

· "Unbundled Subscribers" means Subscribers that are not Bundled Subscribers.

21 Other of the provisions of the CSA of relevance include:

"CPS" has the meaning in Clause 7.1(b).

"Minimum Guarantee" has the meaning in Clause 8.1.

"Minimum Guarantee Numbers of Subscribers" means the minimum Subscriber numbers specified in Clause 8.1.

"Pay Per View" shall mean the transmission of an encrypted television signal by means of a point to multipoint distribution system (excluding transmission by means of the Internet, intranet or other similar systems or other similar system of general availability) containing programming chosen by a subscriber for reception on the subscriber's television receiver, for which reception the subscriber is required to pay an individual, per program, per exhibition fee (including pay-per-day and so-called 'near video on demand'), as opposed to such payment being on a pre-packaged, subscription basis, where the transmission of the program originates from a transmission source outside of the subscriber's private dwelling unit, and where the scheduling of the exhibition of the program is predetermined, in whole or in part, by the distribution service.

(a) delivery via the Internet, intranet or other similar systems or other similar system of general availability, or any existing technology not presently in commercial use for television distribution anywhere in the world, and any technology which may be developed in the future;

2. Licences

(a) the non-exclusive right to distribute the Movie Channels in the Territory by means of Pay Television; and

3. Term

3.1 Subject to Clauses 3.2 and 3.3 the Licences are granted for six years and three months commencing on the Effective Date and terminating on 30 June 2005 ("Original Term").

3.2 Subject to the terms of this Agreement, during the period between 1 April 2004 and 30 September 2004 Optus Vision may elect by written notice to the Supplier to extend the Licences for a further four year term ("Extended Term") commencing on the expiry of the Original Term. If such election is not made by Optus Vision the Supplier may elect by written notice to Optus Vision given at any time between 1 October 2004 and 31 December 2004 to extend the Licences for the Extended Term.

3.3 Upon either election being made pursuant to Clause 3.2 the Licences are granted until the expiry of the Extended Term on the same terms and conditions as for the Original Term subject to Clauses 8.2 and 8.3 and as otherwise set forth in this Agreement, unless terminated pursuant to Clause 16…

4.8 Optus Vision shall not tier or package the Movie Channels in a manner less favourable to the Supplier than the arrangements as at the date of this Agreement in respect of the Movie Network without the Supplier's prior written consent which shall not be unreasonably withheld.

7. Licence Fee

(a) the Minimum Guarantee; and

7.5 Optus Vision shall give written notice to the Supplier on or prior to the 15th of each month of the number of Subscribers for the previous month…

8. Minimum Guarantees

Minimum Guaranteed Numbers of Subscribers	Maximum Subscriber Reduction Number
Year 1 (1 April 1999 to 31 March 2000)	300,000	50,000
Year 2 (1 April 2000 to 31 March 2001)	400,000	50,000
Year 3 (1 April 2001 to 31 March 2002)	495,000	45,000
Year 4 (1 April 2002 to 31 March 2003)	625,000	75,000
Year 5 (1 April 2003 to 31 March 2004)	675,000	75,000
Year 6 (1 April 2004 to 30 June 2005)	680,000	80,000

(a) the number of Austar Subscribers that exceed 100,000, up to a number which is 50% of the maximum subscriber reduction number specified in Clause 8.1 for that year; plus

8.3. If Optus Vision makes the election referred to in Clause 3.2 the Minimum Guaranteed Numbers of Subscribers during each year of the Extended Term shall be the same as the Year 6 number referred to in Clauses 8.1 for the Original Term, varied as required by Clause 8.2.

8.4 If the Supplier makes the election referred to in Clause 3.2 there are no Minimum Guaranteed for any year of the Extended Term…

18. Austar

18.1 Optus Vision shall have no objection to the Supplier negotiating with Austar on such terms and conditions as the Supplier and Austar agree for the Supplier to provide the Movie Channels to Austar and if requested by Austar and the Supplier Optus Vision will agree with Austar to terminate the agreement between Optus Vision, Austar, Optus Networks Pty Ltd, ACN 008 570 330 and UIH Asia Pacific Communications, Inc., a copy of which is exhibited to Optus Vision and the Supplier at the time of execution of this Agreement and initialled by them for identification ("Austar Agreement") releasing Optus Vision from any liability thereunder at the date of such termination (the "Austar Release").

(a) as and from the date of this Agreement the supplier hereby licenses to Optus Vision the Movie Channels to enable Optus Vision to comply with the terms of the Austar Agreement and

(i) as between the parties hereto the exercise of such licence will not result in any breach by Optus Vision of the Austar Agreement, and

(ii) Optus Vision will from the Effective Date pay to the Supplier the full amount of all moneys received from Austar as license fees pursuant to the Austar Agreement, without any deductions whatsoever, within ten (10) days of receipt of such funds; and

(b) without limiting anything elsewhere contained in this Agreement the Supplier will not license any of the Movie Channels or any of the Included Films to Austar.

The agreed chronology

22 The Court Book was replete with numerous documents. Mercifully the parties agreed upon a short form chronology and it is appropriate to set that out:

23 December 1994	Optus Vision and MGM enter agreement for movie "coventure".
25 December 1994	Optus Vision and Disney enter agreement for movie "coventure".
10 January 1995	Optus Vision and Roadshow enter agreement for movie "coventure".
8 May 1995	Optus Vision and Warners enter agreement for movie "coventure".
16 May 1995	MovieCo Cover Agreement executed.
December 1998	Austar Agreement finalised.
25 August 1999	TMNC and Optus Vision enter Channel Supply Agreement.
5 March 2002	Foxtel CSA executed.
July 2002	On TMNC's case, lowest price to access Bundled Service on Optus Vision pay television service exceeds $48.
2 September 2002	Optus Vision and TMNC execute deed varying Channel Supply Agreement.
27 November 2002	Foxtel CSA becomes unconditional.
December 2002	On TMNC's case, lowest price to access Unbundled Service on Optus Vision pay television service exceeds $46.90.
3 May 2004	TMNC raises issue of underpayment by Optus Vision pursuant to clause 7.4 by letter from Tony Forrest to Chris Keely
26 April 2006	TMNC files Summons in these proceedings.

The respective constructions

23 TMNC's final amended Summons seeks the following alternative declarations:

A declaration that, on its true construction, the agreement entitled Channel Supply Agreement dated 25 August 1999 between the Plaintiff and the Defendant (the Agreement) provides:

(a) in respect of:

(A) before 1 April 2000 there will be no increase to CPS; and

(A) in respect of any shortfall between the number of Unbundled Subscribers and the Minimum Guaranteed Numbers of Subscribers, by 60% of the amount that the retail price for the package (including a basic tier and any premium tier of programming together with telephony or such other service with which the programming is bundled) that must be purchased to access the Movie Channels (excluding GST) from time to time during the Term exceeds $48.00; and

In the alternative, a declaration that, on its true construction, the Agreement provides:

(A) before 1 April 2000 there will be no increase to CPS; and

(A) in respect of any shortfall between the number of Unbundled Subscribers and the Minimum Guaranteed Numbers of Subscribers, by 60% of the amount that the Optus Vision retail price for the package of programming (including a basic tier and any premium tier) that must be purchased to access the Movie Channels (excluding GST) from time to time during the Term exceeds $48.00; and

The admissibility issues

24 Extensive argument took place in relation to the plaintiff's contention that the court should admit the evidence given by Mr Dudley Smith of events said to have taken place at a two-day meeting on 25 and 26 March 1999 as deposed to in paragraphs 34-38 of his affidavit of 4 April 2007.

25 The approach taken was initially to permit a voir dire examination of Mr Dudley Smith to be conducted by the defendant's senior counsel followed by a re-examination by the plaintiff's senior counsel. Counsel then addressed on the admissibility issue. The court ruling included the following:

26 The same approach was taken when similar objections from time to time required rulings.

The principles concerning the construction of written agreements

27 It may be convenient to presently focus upon certain of the principles concerning the construction of written agreements which are reasonably well known.

28 Dealing firstly with conventional approaches to the construction of written documents the following propositions are well established:

i. where the language of an Agreement is ambiguous or susceptible of more than one meaning the factual matrix including the context and surrounding circumstances, its aim, object or commercial purpose may be taken into account in the construction of an agreement: Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 997 cited in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 per Mason J at 350-352.

Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd

ustralian Broadcasting Commission v Australasian Performing Right Association Ltd

L Schuler AG v Wickman Machine Tool Sales Ltd

Australian Broadcasting Commission v Australasian Performing Right Association Ltd

[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".

Antaios Compania Naviera SA v Salen Rederierna AB

Maggbury Pty Ltd v Hafele Australia Pty Ltd

Maggbury

Optus Vision Pty Ltd v Australian Rugby Football League Ltd

Royal Botanic Gardens and Domain Trust v South Sydney City Council

Codelfa

Construction Pty Ltd v State Rail Authority of New South Wales

Prenn v Simmonds

L

Schuler AG v Wickman Machine Tool Sales Ltd

Reardon Smith Line Ltd v Yngvar Hansen-Tangen

Toll (FGCT) Pty Limited v Alphapharm Pty Limited

Codelfa

"The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used."

The Intractable Problem of the Interpretation of Legal Texts

Ryledar Pty Ltd v Euphoric Pty Ltd

"However, that does not mean that when the Court begins the task of construction it puts the words of the document aside and endeavours first to ascertain the commonly known factual context and purpose of the transaction, often only by resolving a strenuous contest between the parties. The Court does not, once it has found the commonly known factual context and purpose, then look at the words of the contract and, if they do not readily accommodate the context and purpose so found, force them to do so by a process of interpretation.

When the Court is construing a commercial contract, it begins with the words of the document: there it often finds expressed the factual context known to both parties and the common purpose and object of the transaction. But the court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document. When that is taken into account, the words in the contract may legitimately have one or more of a number of possible meanings. It is then the Court's task to identify which of the possible meanings represents the parties' contractual intention.

However, when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract a meaning which, by no stretch of language or syntax they will bear then, in truth, one has a rectification suit, not a construction suit.

That is the case here ...

[109] In my opinion his Honour's approach articulated in the foregoing paragraphs of his judgment is unexceptionable."

29 Hence I take it as axiomatic that:

· the Court endeavours to give primacy to unambiguous words used in a written contract, this matter generally being approached in the manner outlined by McColl JA in Peppers Hotel Management, supra;

· the proper approach seeks "the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract" (Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at 188 citing Lord Hoffmann; Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114; Peppers Hotel Management Pty Ltd, supra at [66] et seq;

· commercial contracts should be construed so as to be given a sensible commercial operation: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109; Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 per Giles JA at [64].

The parole evidence rule

30 In the circumstance that the words of a contract are clear and unambiguous such that the language has a plain meaning, the parol evidence rule operates to exclude from the construction of the Agreement:

Brambles Holdings Ltd v Bathurst City Council

"…the construction of a contract is an objective question for the court, and subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered...".

Brambles

Codelfa Construction Pty Ltd v State Rail Authority of NSW

Brambles

"Post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed".

Sportsvision Australia Pty Ltd v Tallglen Pty Ltd

Magill v National Australia Bank Ltd

31 As will appear from what follows Mr Webber relied heavily upon Codelfa Construction v State Rail where Mason J drew together the various authorities concerning the broad purpose of the parole evidence rule and in particular observed as follows:

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious, knowledge of them will be presumed.

32 Before dealing with the so-called exception to the parole evidence rule it is convenient to turn to the Austar Agreement.

The Austar Agreement

33 Clause 18.1 of the CSA provides:

Optus Vision shall have no objection to the Supplier negotiating with Austar on such terms and conditions as the Supplier and Austar agree for the Supplier to provide the Movie Channels to Austar and if requested by Austar and the Supplier Optus Vision will agree with Austar to terminate the agreement between Optus Vision, Austar, Optus Networks Pty Limited, ACN 008 570 330 and UIH Asia Pacific Communications, Inc., a copy of which is exhibited to Optus Vision and the Supplier at the time of execution of this Agreement and initialled by them for identification ("Austar Agreement") releasing Optus Vision from any liability at the date of such termination (the "Austar Release").

34 Important elements of the Austar Agreement include the following provisions:

2. MovieVision Services

The premium movie and library movie channels primarily containing Warner, Disney, MGM and Village Roadshow product currently called Movie One, Movie Extra and Movie Greats ("MovieVision Services")…

4. Packaging

,

After the expiry of the Initial Period, Licensee must offer the MovieVision Services as a competing tier to the PMP movie channels and must not unbundle or sell the MovieVision services a la carte, except that it may distribute the premiere premium MovieVision Service (currently Movie One) to its MDS subscribers as an optional programming service. Licensee must offer the MovieVision Services to its subscribers on a non-discriminatory basis that reflects the following principles of fair competition…[see reference later in the clause to "retail price for the MovieVision Services"].

7. Wholesale Price

For the Initial Period, the wholesale price for the MovieVision Services will be nil.

For the period commencing after the Initial Period and expiring on 30 September 1999 (the "Second Period"), the wholesale price will be greater of:

(a) 50% of the Licence Fee (defined in para 8 below) per subscriber per month; and

For the period commencing after the Second Period and expiring 31 December 2000 (the "Third Period"), the wholesale price will be greater of:

(a) the Licence Fee (defined in para 8 below) per subscriber per month; and

For the period commencing after the Third Period; the wholesale price will be the greater of:

(a) the Licence Fee (defined in para 8 below) per subscriber per month; and

Within 30 days from the end of each month, Licensee will pay to Licensor an amount equal to the average monthly subscribers to the MovieVision Services for that month multiplied by the relevant wholesale price.

9. Retail Price

For the Initial Period, Licensee will provide the MovieVision Services to all its subscribers free of charge.

35 The evidence of Mr Dudley Smith is referred to below. However at this point it is convenient to note that his evidence at transcript 159.16-19 and at 159.39-160.1 included the following :

Q. You noticed, didn't you, when you read it, that this agreement used the phrase "the retail price for the MovieVision Services"?
A. Yes…

Q. In that agreement, the reference to "the retail price for the movies or MovieVision services" was a reference to a tier price, wasn't it?
A. It appears to be so, yes.

36 I accept as correct the defendant's proposition that the Austar Agreement is not merely evidence of the factual matrix. That is because the document is exhibited to the CSA. Indeed it appears to provide a valuable reference point for the construction of the words "retail price for the Movie Channels" as used in clause 7.4(a) of the CSA. In the context of the Austar Agreement, the words "retail price for the MovieVision Services" are used to refer to the price of the tier that included the MovieVision Services. The MovieVision Services were the same channels that came to comprise the Movie Channels in the CSA. The Austar Agreement also uses the expression "retail price for the PMP movie channels" in circumstances that one may clearly infer involved a reference to a tier price.

37 At the least it seems that the parties chose the words "retail price for the Movie Channels" against the background of the Austar agreement that uses the words "retail price for the Movie Vision Services". Clearly the inference which is open to the Court is that the parties must have intended that the words mean the same thing in both instances.

Dealing with the evidence sought to be adduced by TMNC as part of the so-called exception to the parole evidence rule

38 It is next convenient to deal with the evidence sought to be adduced by TMNC of a meeting which took place on 25 and 26 March 1999 upon which TMNC relies as part of the suggested relevant factual matrix.

39 Of the witnesses from the TMNC camp who had sworn affidavits only Mr Dudley Smith was required by the Optus Vision camp for cross-examination. The approach taken by the Optus Vision camp was to take certain objections to the affidavit evidence of the other witnesses which were duly ruled upon. Those other witnesses were Mr Ron Miele, Mr Brian Spaulding and Mr Simon Sutton. TMNC also sought to rely on the notes of Mr Grant Leddie (Warner Bros.) and others who were present at the meeting on behalf of Optus Vision: Chris Keely, Richard Toltz and Ms Penny Moran.

40 In relation to Mr Dudley Smith, the evidence upon which TMNC placed particular reliance is from paragraphs 37 and 38 of the affidavit sworn on 4 April 2007, which is as follows:

If we are not getting CPI increases on the CPS, we are going to need some protection on price. The wholesale price should reflect any percentage increase to the retail price.

Only if it goes beyond the current Austar retail price.

Ok, we understand you're competing with Austar and Foxtel. While your retail price is below theirs, we won't insist on a wholesale price increase. You can have a free ride until the lowest retail price to get the movie service on either Austar or Foxtel. But once you hit that point, there should be a share, say on a 60/40 split, like the revenue sharing arrangement for Austar. If the price point is $50 and you charge $51 the studios get 60 cents and you get 40 cents.

I think that is OK.

If Austar sell basic plus one premium movie service for $48, the studios would get a share above this.

41 TMNC contends that the circumstances that can and should be divined from Mr Dudley Smith's paragraphs 37 and 38 are as follows:

i. first, that Optus Vision were competing with Austar relevantly for the provision of pay television, including Movie Channels;

42 There are a number of problems which confront TMNC in these attempts to outflank the parole evidence rule.

43 The first concerns the fact at the March meeting took place at a very early stage of the material negotiations. As the defendants have submitted prior to any reliance being able to be placed on any discussion about the escalation clause at the March meeting, one has to have regard to what happened after that discussion. In short the evidence bears out the following matters :

i. A draft memorandum of understanding was circulated on 29 March 1999: CB2/538, which included language that is very similar to the final language in the CSA (at 543, clause 8.2).

ii. Mr Miele received legal advice from Australian lawyers to change the language to refer to "any package of programming including the Movie Channels": CB2/640 at 642.

iii. A non-binding memorandum of understanding was signed on 11 June 1999: CB2/710 (note clause 20.3).

iv. That document referred to "any package of subscription television programming which includes the Movie Channels" (clause 8.2 at 716).

v. On 7 July 1999, Clayton Utz for Optus Vision propounded a draft of the CSA that reverted to the language of an early draft of the memorandum of understanding – deleting the reference to "any package of subscription television programming which includes the Movie Channels" (which is the wording that TMNC seeks to reintroduce by means of construction) and changing the $46.90 to $60: CB3/891 at 908.

vi. Mr Dudley Smith saw that Optus Vision wanted to negotiate about the terms of the clause, and that is what occurred over the succeeding months: T99/12-22.

vii. Proposals went backwards and forwards in relation to the clause and the figure to be inserted into it: T99/32.

viii. The parties returned to $46.90 after protracted negotiations where parties put forward different figures: T99/41.

ix. Besides the figure of $46.90, the figure of $48 was inserted into the clause.

x. There is no evidence of how that came about and it undermines any particular significance that can be placed on $46.90.

xi. A plausible explanation is that Optus Vision negotiated a higher rate for Bundled Subscribers because it was intending to attract large numbers of Bundled Subscribers and so should receive a kind of volume discount.

xii. Moreover, clause 7.4(a) was just one of many clauses and cannot reasonably be considered in isolation: T100/5-28.

xiii. Having regard to that history, to suggest that anything was "agreed" at the March meeting does not withstand scrutiny.

xiv. The figure of $46.90 may well have found its origin in the Austar pricing at that time.

xv. So too the figure of 60% may well have come from the Austar Agreement.

xvi. But in March 1999 there was evidently confusion about the way the Austar Agreement worked.

xvii. The figures of $46.90 and 60% found there way into the CSA, but not before there was extensive negotiation about the price and the wording of the clause.

44 Then there is the issue of whether or not Mr Dudley Smith's evidence requires to be regarded as reliable once the cross examination is taken into account. He conceded under cross-examination that with respect to the conversation which is set out in paragraph 37 of his affidavit there were certain elements that he could now see were false. As the defendants have observed there was no re-examination to establish which parts were false. Ultimately his evidence was too uncertain to be relied upon. No doubt he was doing his best to accurately recall the events which occurred but the passage of time appeared to have led to real difficulties in his now recollections.

45 Earlier in his evidence Mr Dudley Smith was asked to give his best recollection of the conversation and his evidence included the following :

Q. Would you now tell his Honour what you think, to the best of your recollection, was likely to have been said, starting it off?
A. Right. We were having a conversation about after a certain level of pricing - well, actually, we were having a conversation about whether the wholesale price of The Movie Network Channels would remain constant or whether there would be an adjustment over time. That was the general conversation that we were having, to which Mike's point of view was …

Q. Please, just say what was said, to the best of your recollection?
A. So Mike said, "We want to hold it flat." My position was …

HIS HONOUR: Q. Can you say what you said, as best you can?

A. "I think, over time, it is appropriate that there is an upwards adjustment. We would prefer that to be a CPI annual increase." Mike's response to that was, "That doesn't fit with us, because we may not increase our pricing in line with the CPI", to which I suggested, "Maybe a fairer way is to increase the price in line with your retail pricing", to which Mike's response was, "At the moment, we are discounting our price against the other" - as I recall it, he may have said "competitors", but what he probably said was "other service providers in this market, so it would be unfair for us to increase that price while we are still discounting the price below that of other similar service providers." I agreed that point, and I said, "Well, at some point when you hit the same retail pricing as those other service providers, it would be reasonable at that point for us to start to share in that retail price increase." As I recall it, he agreed that that would be a fair proposition.

MR HUTLEY: Q. That's your best recollection of what occurred?

46 This recollection of the conversation does not include any reference to the notion of "the lowest retail price to get the movie service on either Austar or Foxtel". The conversation recalled by Mr Dudley Smith is devoid of any specific reference to the "Austar's basic price plus movies retail price".

47 There is also certainly considerable room for the court to draw an inference that the parties were confused or at cross-purposes in relation to the Austar Agreement and the proposed licence fee adjustment provisions.

48 Dealing with the manner in a little more detail :

i. It is apparent from the provisions that have been set out above that the Austar Agreement provided that Optus Vision would receive in the Third Period the greater of a particular fee and 60% of the retail price of the tier comprising the MovieVision services.

ii. The 60% related to the price of the tier.

iii. However, Mr Dudley Smith thought (wrongly) that the Austar Agreement included a provision that gave the licensor a 60% share of revenue once the price of the Movie Channels on Austar exceeded a price point of about $50: T157/8-13.

iv. That is consistent with his note of the meeting: CB2/520.

v. Mr Miele's note seems also to be consistent with this misunderstanding of the Austar Agreement ("same revenue sharing formula as in Austar deal": CB2/523, as are Mr Sutton's ("as in Austar Agreement"): CB2/527.

49 Ultimately I accept that little can be drawn from an endeavour to decipher the handwritten notes of the meetings. As the defendants have contended the notes are for the most part obscure. They are scribblings for the personal use of the authors. It is often unclear whether the author is recording something that was said, or some interpretation of what was said or some private thoughts of matters that were not raised in any conversation but occurred to the author at the time.

50 Returning to the first so-called surrounding circumstance, the evidence establishes that Optus Vision was not competing with Austar because they did not sell pay television services in any overlapping areas: see the Austar prospectus CB1/750 at 764.

51 Nor is there any evidence that Austar was selling any telephony or other services in competition with Optus. Mr Dudley Smith accepted that they were not in direct competition and said that "competing" may not have been the actual word that he used: T153/9. Accordingly, the evidence does not support the asserted fact.

52 Whilst of course there will in some cases be an ability to invoke the exception to the parole evidence rule upon a principled basis, the present is simply not one of those cases. Not only did the evidence of the critical meetings suffer from imprecision but additionally, the so-called critical conversations when examined against the later developments [where now one and later another alternative approach was sought to be adopted] points up the near impossibility of the Court finding any express agreement as to the particular way in which the retail price of the Movie Channels was to be determined. As Mason J observed in Codelfa [leading to the side the circumstance where prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract], when the issue is which of two or more possible meanings is to be given to a contractual provision the Court looks not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract: rather the Court looks to the objective framework of facts within which the contract came into existence and to the parties presumed intention in this setting. The Court does not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time-consuming, but would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

53 For those reasons the so-called materials sought to be relied upon by TMNC, which were the subject of the initial voir dire examination, are seen to have been inadmissible.

The attribution of corporate knowledge

54 Yet further hurdles standing in the part of TMNC's attempt to outflank the parole evidence rule arise by reasons of the facts that:

i. Village Roadshow in its corporate capacity was not represented at the meetings which took place on 25 and 26 March 1999

55 Stepping back from the detail to examine the issue in light of the state of the evidence the matter stands as follows:

i. TMNC relies on two routes to seek to overcome the difficulty that Mr Basser did not attend the March 1999 meeting: T338/26. Neither route is open.

· they could not have been agents of TMNC at the March meeting because at that time TMNC did not exist;

· they could not have been agents of Village Roadshow at the March meeting because Village Roadshow was not involved in the negotiations at that time;

· the available inference is that Messrs Dudley Smith, Miele and Sutton were agents for their respective employers at the March meeting, but could not infer some broader agency (for the 3 US studios); and

· there is no evidence that any of those gentlemen was an agent of TMNC in the period from incorporation on 19 August 1999 until execution of the CSA on 25 August 1999.

56 TMNC drew attention to the judgment of Nourse LJ in El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 at 699. The relevant passage reads:

57 Applying this, Mr Basser prima facie was the directing mind and will of TMNC. There is no evidence of any circumstances that conferred the status of directing mind and will on any other person.

58 In relation to Mr Miele, there was no submission on behalf of Optus Vision that he was uncertain about the Austar Agreement, as suggested at T340/19. Mr Miele's evidence merely recited his note of the meeting – see his affidavit at [26]. It states: "same revenue sharing formula as in Austar deal (ie for every $ increase we get a %)". This does not indicate any uncertainty about what he wrote; but it does indicate a misconception because that is not how the revenue sharing formula operated in the Austar Agreement: T309/35.

59 The evidence is clearly capable of suggesting that the parties to the negotiation may well have had different understandings about the effect of the Austar Agreement.

The important construction question

60 There is then the issue involving the proper construction of the words 'the Optus Vision Retail Price for the movie channels'.

61 The matter was litigated by both parties adopting a number of approaches. At least one common approach was to address submissions as to what a reasonable person subscribing to a basic package plus a tier comprising the Movie Channels would or would not consider to be the retail price for the Movie Channels. The alternative submissions were as follows :

Australasian Performing Rights Association Limited v Monster Communications Pty Limited

[the defendant's fuller contention was that if the tier comprised just the movie channels, the retail price would be the price of the tier and that if the tier comprised movie channels and other channels, the retail price would be (no more than) the price of the tier].

62 The convenient course is to approach the three elements found in subparagraphs (i), (ii) and (iii) of clause 7.4(a). And to do so seeking the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would have been available to the parties in the situation in which they were at the time of the contract.

Clause 7.4(a)(i)

63 In my view the words that TMNC would read into clause 7.4(a)(i) are at odds with an ordinary reading of the words.

64 A reasonable person subscribing to a basic package plus a tier comprising the Movie Channels would not consider that the retail price for the Movie Channels was the price of the whole package, including the price of basic and the price of the tier. Rather, he or she would conclude that the retail price was no more than the price of the tier that comprised the Movie Channels. If the tier comprised just the Movie Channels, the retail price would be the price of the tier. If the tier comprised Movie Channels and other channels, the retail price would be (no more than) the price of the tier.

65 Both parties sought to further their submissions by sundry examples. Whilst of course examples can be manufactured ad nauseam it did seem to me that the following example put by Optus Vision serves to explain its submission and rings true in the instant circumstances. That example runs as follows :

66 If the parties had intended that the relevant price in clause 7.4(a) was the price of any package of subscription television programming which includes the Movie Channels, it would have been very easy to use those words. Instead the clause is directly pointed at the retail price for the Movie Channels.

Clause 7.4(a)(ii)

67 The difficulties with TMNC's primary construction become even more apparent when one turns to the position of Bundled Subscribers, within clause 7.4(a)(ii). It is here that TMNC's deletion of the word "Optus Vision" is critical. With the words "Optus Vision" included in clause 7.4(a), as it is, it is misconceived to suggest that the "the Optus Vision retail price for the Movie Channels" could include an amount that was paid by a person for services (such as telephony) supplied by a company other than Optus Vision.

68 Optus Vision never supplied or charged anyone for telephony or internet. Consumers were offered discounts of one kind or another to his or her pay TV pricing (such as lower monthly charges or free installation) if he or she purchased telephony from a company related to Optus Vision. Between April and August 1999, a person who subscribed to local telephony from Optus Networks in addition to pay television from Optus Vision was offered free installation of the television service as well as a discounted monthly charge compared to a person who only subscribed to pay television alone: CB2/596. But the consumers were always charged separately for pay TV and telephony: see Langshaw [49] to [53]. Yet TMNC seeks in these proceedings to identify the retail price by adding the pay TV price to the telephony price.

69 Although TMNC contended that it was clear that the parties would at the time of entering into the CSA, have contemplated bringing to bear the access price of telephony in determining the Bundled price, the parties’ failure to make any express provision in this regard poses special difficulties for the Court in drawing the inference pursued by TMNC. Where, one may rhetorically ask, is the Court to find precision in terms of how the access price of telephony in determining the Bundled price is to be found.

70 The meaning of clause 7.4(a) emerges with greater clarity when the defined terms are set out in full within the clause. Thus in relation to Bundled Subscribers, clause 7.4 reads:

The CPS will increase as follows:

who are authorised by Optus Vision

persons who are authorised by Optus Vision

(B) over and above the Minimum Guaranteed Numbers of persons who are authorised by Optus Vision to receive at least one of the Movie Channels, by 60% of the amount that the Optus Vision retail price for the Movie Channels (excluding GST) from time to time during the Ter[m] exceeds $46.90.

71 In respect of persons who are authorised by Optus Vision to receive at least one of the Movie Channels, the inquiry is into the Optus Vision retail price of the Movie Channels. I accept that this is a strong indication that the clause is concerned with the retail price of obtaining the authority to receive the Movie Channels, and not some more general concern with the acquisition of services other than the Movie Channels.

72 As the defendants have contended it is also appropriate to note the use of the words "Optus Vision or any of its Related Bodies Corporate" in the opening words, in contradistinction with the words "Optus Vision" in (A). This too directs the inquiry specifically to the retail price of the Movie Channels rather than the retail price of all of the elements of a package including other services.

73 I further accept that some importance requires to be paid to the use of the word "package" as part of the definition of Bundled Subscriber and the absence of that word in the phrase "retail price of the Movie Channels" in clause 7.4(a).

74 TMNC seeks to inject the word package into the clause at a place where the parties would have included it for themselves if they had thought it to be appropriate.

75 TMNC has another problem in that it has to deal with the fact that on its case there are many different packages comprising the Movie Channels, with many different price points.

76 On its case a Bundled Subscriber, may for example, take pay TV and local telephony for one price or pay TV, local telephony and internet for some other higher price. Different "packages" may involve different telephony or other services. In the face of many of the alleged packages, the question becomes: what price is to be used? Does one look to the price each subscriber pays for his or her package? TMNC does not propound that case, for obvious reasons , namely that it would be unworkable.

TMNC's 'lowest amount' argument

77 TMNC seeks to deal with this difficulty in a way that does not emerge clearly from the declarations that it seeks. TMNC has contended, by way of particulars, that the price is the "lowest amount that a bundled subscriber must pay to access the Movie Channels" CB1/40 and T32/23-36. TMNC is driven to the notion of "the lowest amount", but it is not something that appears from the language of clause 7.4(a).

78 Even so, TMNC is further driven to a position that "the lowest amount" differs among different persons, with the consequence that even for Bundled Subscribers (and also for Unbundled Subscribers) the relevant retail price varies. Some of the numerous factors that may alter "the lowest amount" amongst different subscribers include pensioner discounts, the time the subscription expires, whether the subscriber requests a monthly magazine. These factors contribute to enormous complexity (see the particulars provided on 17 August 2007 and 20 September 2007: CB1/41 and 48).

79 The lowest price formulation must proceed on the assumption that it is the price for a new subscriber: a person already subscribing to basic would not consider the retail price for the Movie Channels to include the price he or she already pays for basic. Mr Winterbottom speaks of "the retail price of the cheapest available Optus Package to which a new Optus Vision customer would need to subscribe in order to access the Movie Channels…": cf Mr Winterbottom's first report at [54]. But why must the reference point be for a new subscriber? And if it is a new subscriber, no explanation is provided as to why the installation charges should be excluded from the calculation. Those costs must be paid by a new customer in order to access the Movie Channels. I accept that these difficulties further indicate that there is a fundamental problem with the construction advanced by TMNC.

80 Even if TMNC's "lowest price" notion makes sense, it does not ultimately assist TMNC on its case. The definition of Pay Television specifically excludes Pay Per View. All subscribers to Pay Television were given free access to Pay Per View as Mr Dudley Smith confirmed: T164/34 –T165/32. This is an "other service" within the definition of Bundled Subscriber and so all Subscribers were Bundled Subscribers. But because the service was free, the lowest bundled price was never higher than the price of the pay television package (on TMNC's case).

Clause 7.4(a)(iii)

81 Clause 7.4(a)(iii) refers to "the amount specified in clause 7.4(a)(ii)(A)". On TMNC's case clause 7.4(a)(iii) concerns any shortfall between the total number of Unbundled and Bundled Subscribers in a month and the Minimum Guaranteed Numbers of Subscribers. But these are not actual subscribers. Payment of a Licence Fee by reference to the Minimum Guarantee necessarily involves payment by reference to a notional number of subscribers – Optus Vision pays a CPS for subscribers that do not exist. TMNC contends that the CPS for these notional non-existent subscribers rises by reference to the bundled price derived by clause 7.4(a)(ii)(A). But on TMNC's case, clause 7.4(a)(ii)(A) throws up various amounts. However which amount does one choose? Is it the amount paid by a pensioner who pays by direct debit and who does not receive the magazine? Or is it some other amount?

82 By including a Minimum Guarantee, the CSA contemplates the possibility that Optus Vision might fail to achieve a subscriber base that would yield the minimum amount of remuneration required by TMNC. As TMNC would have it, Optus Vision must pay an increased CPS for non-existent subscribers, which is to be calculated by reference to the price charged by a company other than Optus Vision for a service other than pay TV, such as telephony.

83 Ultimately, the approach contended for by Optus Vision is seen to have the considerable advantages of simplicity and consistency.

The issue concerning the Extended Term

84 There is a further issue of construction that arises on TMNC’s case.

85 The Original Term of the CSA expired on 30 June 2005 (see clause 3.1). TMNC elected to extend the Licences for a further 4 years. Given that TMNC made that election, and Optus Vision did not, the CSA provided in clause 8.4 that "there are no Minimum Guarantees for any year of the Extended Term". In those circumstances, clause 7.1(a) has no operation in the Extended Term. That is common ground.

86 The parties are at issue in terms of whether or not clause 7.4(a)(ii) operates in the Extended Term:

i. Optus vision contends that it is clear that 7.4(a)(ii) and (iii) have no operation.

87 The case that TMNC has particularised (see letters dated 20 September 2007 at CB1/52; 1/55) and advanced through the calculation of damages (see Mr Winterbottom's first report at Annexure 1 assumption 20) is that:

88 Optus Vision maintains and I accept, that this contention is not open on the language of clause 7.4(a)(ii).

89 As Optus Vision has contended, in a context where the CSA specifically provides that "there are no Minimum Guarantees" it is nonsensical to speak of "any shortfall between the number of Unbundled Subscribers and the Minimum Guarantee".

90 In circumstances where TMNC has elected to extend the Licences, the only movement in CPS for Bundled Subscribers comes from CPI adjustments that are provided for by clause 7.4(b).

91 The only textual argument that was raised by TMNC arose in relation to clause 7.1(b). Mr Weber pointed out that clause 7.1(b) speaks of the charge per subscriber as varied pursuant to clauses 7.2, 7.3 and 7.4 and asked rhetorically, "Why would clause 7.4 be there if the Optus Vision construction was correct".

92 I accept that there are two obvious answers:

ii. Secondly, if it had been Optus Vision that had elected to extend the term rather than TMNC, then the minimum guarantees would have existed in the extended term and, in that event, clause 7.4 (a) (ii) would clearly have operated in the extended term: hence that is the work that those words would do in that context.

93 There is yet a further problem facing the TMNC contention:

i. TMNC contends that clause 7.1(a) is enlivened because the "Minimum Guarantee" was at all times less than the fee calculated by the formula in clause 7.4(1)(b).

ii. Clause 7.4(1)(b) provides for a calculation based on an average number of subscribers in a given month.

iii. TMNC’s calculation based on the Minimum Guarantee requires that the "CPS" when used in clause 8.1 involves a potential multiplicity of CPS numbers.

iv. Once one moves from a single CPS in clause 8.1, it becomes necessary to read into the clause some process of averaging the relevant numbers of subscribers.

v. That is problematic in circumstances where clause 7.1(b) has an express mechanism to identify the average number of subscribers in a month, but clause 8.1 does not.

94 In my view the submissions advanced by Optus Vision in this regard are of substance and they are adopted in what follows:

i. The supply of Movie Channels is a supply within the meaning of s 9-10 of the A New Tax System (Goods and Services Tax) Act 1999 (" GST Act "). That is so irrespective of whether the Movie Channels are supplied with other channels as part of a tier and irrespective of whether the subscriber is charged for basic and the tier as a single price. The GST Act contemplates invoices containing multiple taxable supplies, see s 9-90(2).

ii. If the retail price of the tier that includes the Movie Channels can be identified (an easy task), then the price excluding GST can be determined by multiplying the amount by 10 and dividing by 11. It is simple. It is a process that is reflected in Mr Langshaw’s affidavit.

iii. Consider an invoice that is in evidence MFI – D6/ Tab 16. This invoice records 4 items: Entertainment Pack03, Additional Outlet, Optus Movies 03 and Entertainment Guide. Each is listed with a GST exclusive amount. GST is added as a total at the end of the invoice.

Direct Debit

95 It has been submitted for TMNC that "unless the consumer wanted to pay an extra $2 for the privilege of sending a cheque or some other form of payment, then they were direct debited, so money went out in an undifferentiated sum to be split up, no doubt, by Cable & Wireless Optus as it saw fit": T38/21-26.

96 This contention is contrary to the evidence. Customers who subscribed to pay television as well as another service, such as telephony, and paid their bills by direct debit did not pay in a single undifferentiated sum. The amounts payable for each service were processed by entirely separate billing systems and separately debited from their nominated bank account or credit card.

97 The invoices at MFI – D6/Tab 15 (T 262/8-11) (examples of invoices where a Bundled customer has not chosen direct debit) also show different addresses for payment, different customer account numbers (reflecting the different billing systems used by Optus Vision and Optus Networks), different BPAY biller codes and Customer references, and different Coles payment Biller IDs.

98 Further, the invoices at MFI – D6/Tabs 16 and 17 (examples of invoices where the same customer has chosen to pay by direct debit) show that, in addition to being separate payments, the payments took place on different days of the month.

99 As Optus vision has submitted there was a possible contention that even if the customers detailed in MFI – D6/Tabs 16 and 17 were billed separately for television and telephony, that did not prove that all customers were billed separately.

100 Mr Langshaw’s affidavit establishes that Optus Vision uses a completely different system for billing pay television (called CMBS) from that used by Optus Networks for billing telephony (called ARBOR). Separate invoices are produced for each service with a different address (for mailing cheques) and different electronic biller codes (when paying electronically by BPAY or through the post office). Examples of bills for television and telephony and internet are at Tabs 9 (CB Page 2455) and 10 (CB Page 2458) of the Exhibit to his affidavit.

Rulings on objections

101 With the aid of a usefully prepared tables identifying the tender documents contained in the Court book and importantly identifying the rulings of an evidentiary nature it is possible to be reasonably short in explaining those rulings which for one reason or another were reserved to be delivered in the final reasons.

102 One set of a similar genus involved the parole evidence ruling: documents were allowed subject to the parole evidence rule. Ultimately the documents to be found at Court book page numbers 487, 505, 509, 520, 521, 524, 536, 647 are rejected by reason of the parole evidence rule.

103 The documents at pages 1674-1703 are rejected.

104 The document at 2475 is rejected.

105 The documents MFI-D6 behind tabs 15,16 and 17 of the defendants’ additional tender documents folder are allowed.

Quantum

106 In the circumstances it has not been necessary to deal with the quantum issues.

Short minutes of order

107 The parties are to bring in short minutes of order on which occasion costs may be argued

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Citations

The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 157

Most Recent Citation

The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2010] NSWCA 111

Cases Citing This Decision

1

The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2010] NSWCA 111

Cases Cited

16

Statutory Material Cited

1

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36

CITATION:	The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 157
HEARING DATE(S):	16/02/09, 18/02/09 - 20/02/09, 23/02/09 - 25/02/09, 5/03/09, 12/03/09
JUDGMENT DATE :	20 March 2009
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Plaintiffs claims for declaratory relief fail. Parties to bring in short minutes of order
CATCHWORDS:	Contract - Principles of construction - Claims for declaratory relief - Channel Supply Agreement entered into between The Movie Network Channels [CSA] and Optus Vision providing for the supply by TMNC to Optus Vision of pay TV channels containing movie content for use on Optus Vision's pay TV service - Meaning of the words 'Optus Vision retail price for the Movie Channels' - Critical Clause affecting the calculation of the licence fee payable by Optus Vision - Claim by TMNC including interest of approximately half $1,000,000,000- Parole evidence rule - Whether conversations said to have taken place during suite of anterior negotiations admissible - Attribution of corporate knowledge-Principles - Agency theory of attribution - Directing Mind theory of corporate attribution
LEGISLATION CITED:	A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-10, 9-90(2)
CATEGORY:	Principal judgment
CASES CITED:	Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 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 [1997] UKHL 28; [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 J Australasian Performing Rights Association Limited v Monster Communications Pty Limited [2006] FCA 1806 L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 Magill v National Australia Bank Ltd [2001] NSWCA 221 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237 Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989; [1976] 3 All ER 570 Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) Aust Contract R 90-254 Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15
TEXTS CITED:	Lord Steyn, "The Intractable Problem of the Interpretation of Legal Texts" (2003) SLR 1 at 7
PARTIES:	The Movie Network Channels Pty Ltd (Plaintiff) Optus Vision Pty Ltd (Defendant)
FILE NUMBER(S):	SC 50054/06
COUNSEL:	Mr RJ Weber SC, Mr KL Andronos (Plaintiff) Mr NC Hutley SC, Mr PJ Brereton (Defendant)
SOLICITORS:	TressCox Lawyers (Plaintiff) Baker & McKenzie (Defendant)