Vodafone Pacific Ltd v Mobile Innovations Ltd - [2004] NSWCA 15

No judgment structure available for this case.

CITATION: Vodafone Pacific Ltd & Ors v Mobile Innovations Ltd [2004] NSWCA 15

HEARING DATE(S): 20, 21, 22, 23 October 2003

JUDGMENT DATE:
20 February 2004

JUDGMENT OF: Sheller JA at 1; Giles JA at 2; Ipp JA at 342

DECISION: (1) appeal and cross-appeal each allowed in part; (2) Set aside the declarations in orders 1 to 5, orders 6, 7, 9 and 10 and the judgment made and given on 16 April 2003; (3) Stand the proceedings over to 12 March 2004 at 9.15 for directions; (4) Appellant/cross-respondent pay 25 per cent of the respondent/cross-appellant's costs of the trial; respondent/cross-appellant pay 80 per cent of the appellants'/cross-respondents' costs of the appeal and cross-appeal, and have a certificate under the Suitors Fund Act if otherwise qualified.

CATCHWORDS: Agency contract - engagement by service provider of agent to acquire by direct marketing and manage subscribers to its mobile telephone network - agent conducting Mobile Direct Marketing Operation - construction of provision precluding service provider from dealing with other service providers conducting competitive Mobile Direct Marketing Operation - whether "only" in definition of Mobile Direct Marketing Operation confined preclusion - construction of provision by which service provider set target level for acquisition of subscribers - whether could set target level of nil - whether required target level other than nil - whether terms implied as to good faith and reasonableness in setting target levels - content of implied terms found by judge - whether implication of terms as found precluded by contrary intent in contract - whether implication of terms a process of construction - whether misuse of power in setting target levels - finding of breach in failing to set target levels upheld but other findings of breach overturned - whether loss through failing to set target levels at all proved - whether breaches of other provisions of contract - whether damages for those breaches proved - whether contractual entitlement to payment under other provisions of contract. Transfer contract - agreement by service provider to transfer customers to agent to be managed under agency contract - whether mutual abandonment.

CASES CITED: Abu Dhabi National Tanker Co v Product Star Shipping Ltd ("The Product Star") (No 2) (1993) 1 Ll R 397;
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349;
Australian Broadcasting Commission v Australian Performing Rights Association (1972) 129 CLR 99;
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104;
Biotechnology Austrlia Pty Ltd v Pace (1988) 15 NSWLR 130;
Breen v Williams (1996) 186 CLR 71;
Burger King Corporation v Hungry Jack's Pty Ltd (2001) NSWCA 187;
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468;
Butt v McDonald (1896) 7 QLJ 68;
Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11;
Byrne v Australian Airlines Ltd (1995) 185 CLR 410;
Codelfa Construction Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337;
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64;
Coulton v Holcombe (1986) 162 CLR 1;
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423;
The Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth (1908) 6 CLR 647;
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10;
Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109;
Ferrcom Pty Ltd v Commercial Union Assurance Company of Australia Ltd (1993) 176 CLR 332;
Godfrey Constructions Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529;
Hart v MacDonald (1910) 10 CLR 417;
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310;
Howard Smith Ltd v Ampol Ltd (1974) AC 821;
Lister v Romford Ice and Cold Storage Ltd (1957) AC 555;
Mackay v Dick (1881) 6 App Cas 251;
Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631;
Paragon Finance Plc v Staunton (2002) 2 All ER 248;
Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575;
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234;
Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73;
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596;
Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359;
TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130;
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429;
Water Board v Moustakas (1988) 180 CLR 491;
Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598;

PARTIES :
Vodafone Pacific Ltd - First Appellant/First Cross-Respondent
Vodafone Network Pty Ltd - Second Appellant/Second Cross-Respondent
Vodafone Pty Ltd - Third Appellant/Third Cross-Respondent
Mobile Innovations Ltd - Respondent/Cross-Appellant

FILE NUMBER(S): CA 40322/03

COUNSEL: T F Bathurst QC & T D Castle - First, Second and Third Appellants/First, Second and Third Cross-Respondents
F M Douglas QC & V F Kerr - Respondent/Cross-Appellant

SOLICITORS: Henry Davis York - First, Second and Third Appellants/First, Second and Third Cross-Respondents
Deacons - Respondent/Cross-Appellant

LOWER COURTJURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 50123/01

LOWER COURT
JUDICIAL OFFICER : Einstein J

CA 40322/03
SC 50123/01

SHELLER JA
GILES JA
IPP JA
Friday 20 February 2004

VODAFONE PACIFIC LTD & ORS v MOBILE INNOVATIONS LTD

Judgment

1 SHELLER JA: I have had the privilege of reading in draft the judgment of Giles JA with which I entirely agree. The orders should be as his Honour proposes.

2 GILES JA: This is an appeal and cross-appeal from decisions in proceedings brought by Mobile Innovations Ltd (“Mobile”) against Vodafone Pacific Ltd, Vodafone Network Pty Ltd and Vodafone Pty Ltd (collectively, “Vodafone”). Mobile sued on an Agent Service Provider Agreement dated 2 October 1998 as varied by amending agreements in May 1999 and again in August 2000 (“the ASP Agreement”), an Additional Customer Management Agreement dated in March 2000 (“the ACM Agreement”) and a Website Agreement also dated in March 2000.

3 From at least the early 1990’s Vodafone Pacific Ltd owned and operated a public mobile telecommunications network in Australia. In April 2000 it transferred the network to its subsidiary Vodafone Network Pty Ltd, which thereafter operated the network. From April 1998 its subsidiary Vodafone Pty Ltd acquired and managed subscribers for the operator of the network. In the language of the industry, Vodafone Pacific Ltd and then Vodafone Network Pty Ltd was a carrier and Vodafone Pty Ltd was a service provider.

4 From a time in 1994 Mobile purchased mobile telecommunications services from Vodafone Pacific Ltd and resold the services. Subscribers acquired and managed by Mobile were connected to the Vodafone network, but were Mobile’s customers. In October 1998 that arrangement came to an end. Mobile sold its customer base to Vodafone Pacific Ltd for approximately $20 million. By the ASP Agreement Vodafone Pacific Ltd engaged Mobile as agent to acquire by direct marketing new subscribers to the Vodafone network on a postpaid basis (that is, subscribers billed after mobile phone use as distinct from those who prepaid) and to provide management services to the existing subscribers Mobile had acquired and the new subscribers it thereafter acquired.

5 By the ACM Agreement, in a letter from Vodafone Pty Ltd dated 16 March 2000 signed by Mobile on 20 March 2000, it was agreed that Vodafone Pty Ltd would provide 30,000 customers to Mobile by 30 June 2000, to be managed by Mobile under the ASP Agreement.

6 By the Website Agreement evidenced by a letter from Vodafone Pty Ltd dated 8 March 2000 it was agreed that Mobile would develop and administer Vodafone Pty Ltd’s E-commerce platform and that Vodafone Pty Ltd would pay the development, hosting and communication costs.

7 In its summons filed on 27 August 2001, as subsequently amended, Mobile claimed declaratory and injunctive relief under the ASP Agreement and damages for breaches of the ASP Agreement, the ACM Agreement and the Website Agreement.

8 The proceedings were heard over nineteen days in February and March 2003. The principal judgment was published on 27 March 2003, and a supplementary judgment on outstanding issues was published on 15 April 2003. The judge made orders -

(a) declaring the proper construction of the ASP Agreement (orders 1 to 5);

(b) restraining the engagement of two organisations to acquire subscribers by direct marketing (orders 6 and 7); and

9 By its appeal Vodafone seeks to have the declarations, the restraining orders and all but $933,000 of the judgment set aside. The components of the judgment sum in issue, using the parties’ labels, are -

Claim 1	ACM Agreement dispute	$2,467,000
Claim 4	June 2001 quarter dispute	$312,000
Claim 5	September 2001 quarter dispute	$1,145,000
Claim 6	December 2001 quarter dispute	$2,253,000
Claim 7	March 2002 quarter dispute	$1,595,000
June 2002 quarter dispute	$1,451,000
September 2002 quarter dispute	$1,391,000
December 2002 quarter dispute	$1,354,000
March 2003 quarter dispute	$1,318,000
Claims 6 and 7	Retention damages	$100
$13,286,100

10 As its label indicates, for claim 1 Mobile sued on the ACM Agreement. For claims 4 to 7 Mobile sued on the ASP Agreement. The declarations as to the proper construction of the ASP Agreement in orders 1 to 3 related to claims 6 and 7, while the declarations as to its proper construction in orders 4 and 5 related to the restraining orders 6 and 7. The components of the judgment sum not in issue are $699,000 for claim 2, the V.Mobile dispute, and $234,000 for claim 11, the Website dispute. For claim 2 Mobile sued on the ASP Agreement and, as its label indicates, for claim 11 it sued on the Website Agreement.

11 By its cross-appeal Mobile seeks to have declaration in order 5 reformulated in part and the restraining orders 6 and 7 wholly reformulated. It seeks to have the judgment sum increased by additional damages of $369,504 plus interest under claims 5, 6 and 7; independently of that increase in the judgment sum, it seeks to preserve a judgment in its favour for part of claims 5, 6 and 7 by way of contractual entitlement rather than damages.

12 At the trial the three Vodafone companies were generally referred to collectively as Vodafone. The declarations and the restraining orders were made and the judgment was given against all three Vodafone companies. The practice of collective reference to Vodafone was followed in the appeal and cross-appeal.

13 It was and is convenient to refer collectively to Vodafone unless there be reason to do otherwise. On the judge’s holdings, however, the orders should have distinguished between the three Vodafone companies. Both amending agreements treated Vodafone Network Pty Ltd rather than Vodafone Pacific Ltd as the Vodafone party to the ASP Agreement. The judge noted the defendants’ pleading that the ASP Agreement had been novated from Vodafone Pacific Ltd to Vodafone Network Pty Ltd on or about 31 March 1999, alternatively that Mobile was estopped from denying that such novation had occurred in or about May 1999, and said that “[u]ltimately the issue was not litigated” (para 22; see also para 9). Only one or other of Vodafone Pacific Ltd and Vodafone Network Pty Ltd could be restrained from breach of the ASP Agreement or liable in damages for its breach. Only Vodafone Pty Ltd could be liable in damages for breach of the ACM Agreement and the Website Agreement.

14 Vodafone permitted the orders to be made without differentiation. The Court should nonetheless not have made orders or given judgments against parties not shown to have been subject to them. The matter having been raised, Vodafone eschewed any complaint in the appeal that the orders failed to distinguish between the three Vodafone companies. Whatever its reasons for that stance, I do not think the Court can be quiescent. The integrity of its processes must be maintained, and it should not make unfounded orders.

The restraining orders (6 and 7) and their related declarations (4 and 5)

15 The declarations and orders were concerned with the exclusivity conferred by Vodafone upon Mobile under the ASP Agreement and breach of contract by entry into agreements with X4 Pty Ltd (“X4”) and Housing Industry Association Ltd (“Housing Industry”). The judge made these declarations and orders -

“4. Upon the proper construction of the ASP Agreement, the word ‘solely’ in the definition of ‘Mobile Direct Marketing Operation’, qualifies the words ‘acquisition of subscribers’ namely by ‘remote selling, being an acquisition technique relying ‘solely’ on responses to advertisements effected by means of orders received centrally by telephone, fax, email or the Internet in response to advertisements placed in the press, magazines or catalogues or direct mail.

5. On its proper construction, the ASP Agreement:

(a) prevents each Defendant itself from appointing or dealing, directly or indirectly with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with the Plaintiff;

(b) obliges each Defendant to procure that no Group Member appoints or deals directly or indirectly, with a Service Provider which conducts a Mobile Direct Marketing Operation in competition with the Plaintiff;

(c) precludes each Defendant when acting partly through or in conjunction with its agents, from conducting a Mobile Direct Marketing Operation in competition with the Plaintiff;

itself

6. While the ASP Agreement is on foot, the defendants, by their directors, employees and agents, are restrained from acquiring post-paid subscribers to mobile telecommunication services by X4 Pty Limited placing advertisements in the press, magazines, catalogues or direct mail and receiving customer orders by telephone, fax, email or the Internet.

7. While the ASP Agreement is on foot, the defendants, by their directors, employees and agents, are restrained from acquiring post-paid subscribers to mobile telecommunication services by Housing Industry Association Limited placing advertisements in the press, magazines, catalogues or direct mail and receiving customer orders by telephone, fax, email or the Internet.”

16 The engagement of Mobile as agent was made in cl 2.1 of the ASP Agreement (in which Mobile was referred to as MI) -

2.1 Appointment

Vodafone appoints MI, and MI accepts appointment, as Vodafone Billing Services’ non-exclusive agent service provider during the Term, through the Territory and through the Authorised Channels solely for the purposes of:

(a) performing the Acquisition Services for the purposes of acquiring New Subscribers for and on behalf of Vodafone Billing Services from MI’s Mobile Direct Marketing Operation; and

on condition that MI complies with Clause 6.3.”

17 Clause 2.4 provided -

2.4 Acknowledgement concerning limitation on appointment

Notwithstanding any other provision in this Agreement, this Agreement concerns only the parties’ relationship with respect to the acquisition and management of Subscribers on a postpaid basis. The provision of prepaid mobile telecommunications services to subscribers may be dealt with in a separate agreement.”

18 Clause 2.5 provided -

2.5

Acknowledgement concerning agency

MI acknowledges that each of the functions described in Clause 2.1 are performed by it as agent for a disclosed principal, Vodafone Billing Services, and subject to the terms of this Agreement.”

19 Compliance by Mobile with cl 6.3 was not in issue. Vodafone Billing Services was Vodafone Billing Services Pty Ltd, it seems another service provider in the Vodafone group, for which Mobile was to act as agent.

20 The Term was ten years from 30 September 1998, the Territory was Australia and Authorised Channel meant any direct marketing channel. Acquisition Services and Management Services in substance meant acquiring and connecting new subscribers to the mobile telephone services made available by Vodafone on a postpaid basis, invoicing and collecting the relevant charges from the existing and new subscribers, dealing with disconnections, what was described as “customer care”, and other activities described in Vodafone’s operations manual. Mobile Direct Marketing Operation meant -

solely

21 Mobile committed its Mobile Direct Marketing Operation exclusively to Vodafone. Although cl 2.1 described Mobile as “non-exclusive agent service provider”, Vodafone conferred a measure of exclusivity upon Mobile.

22 Mobile’s commitment was by cl 2.2, read with cl .2.6 -

2.2 Exclusivity of Mobile Direct Marketing Operation

MI will devote the Mobile Direct Marketing Operation part of its business exclusively to Vodafone and Vodafone Billing Services for the purposes of its appointment under Clause 2.1. For the avoidance of doubt, during the term MI will not deal, and will procure that none of its Related Bodies Corporate deal, directly or indirectly with any other mobile network carrier or operator in respect of analogue or digital mobile phone services.”

2.6 MI’s other business activities

the Non-ASP Activities

23 Vodafone’s conferral of exclusivity was by cl 2.7, subject to a presently irrelevant exception in cl 2.8 concerning dealing with credit card and charge card issuers, read with cl 2.3 -

2.7 Persons with whom Vodafone may not deal

Vodafone will not, and will procure that no Group Member will, during the Term appoint, or deal with, either directly or indirectly, any new Service Provider, or any existing Service Provider which is a Group Member, which conducts a Mobile Direct Marketing Operation in competition with MI.”

2.3 Acknowledgement concerning non-exclusivity

Subject to any specific provision of this Agreement to the contrary (including Clauses 2.7 and 2.8), MI acknowledges that any Group Member may do or authorise any person to do any of the following at any time:

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

including where such activities are in competition with the performance of MI’s obligations or the conduct by MI of activities authorised, under this Agreement.”

24 Group Member meant a member of the Vodafone group. Service Provider meant “a person who acquires, manages and supports principally post-pay mobile telephone service subscribers for a period as determined by their subscriber contract”.

25 The evidence going to breach of contract, contrary to the exclusivity conferred by Vodafone upon Mobile, was not extensive.

26 By an agreement with X4 dated 30 June 2000 Vodafone Pty Ltd appointed X4 as a dealer authorised to introduce potential users of the Vodafone network. Under the agreement X4 could only conduct the business of promoting and selling connections of postpaid mobile services, and only at the customer’s or potential customer’s premises or at a specified location, being a shop in Sydney. By an agreement with Housing Industry dated 3 September 2002 Vodafone Pty Ltd made a similar appointment, the agreement being silent as to how Housing Industry could or would acquire subscribers.

27 In July 2001 X4 advertised Vodafone mobile telecommunication services, stating the address of its shop, giving a map of the shop’s location and describing it as a “show room”; the advertisement had a box stating “free delivery to your door 1300 30888 call X4 connection centre now”.

28 In November 2002 Housing Industry advertised Vodafone mobile communication services, inviting potential customers to call a particular telephone number of visit a particular website address. In December 2002 Vodafone advertised inviting potential customers to call the same telephone number.

29 There was no evidence that X4 or Housing Industry actually acquired a subscriber or subscribers by remote selling.

30 The judge’s conclusion was -

partly

31 The judge’s reasoning to this conclusion is, with respect, not entirely clear.

32 He first dealt with the operation of “solely” in the definition of Mobile Direct Marketing Operations, saying -

and nothing else

sole

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

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

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

33 It is evident that the declaration in order 4 was framed upon the first dot point in para 865.

34 The judge then referred to the entry into the agreements with X4 and Housing Industry, and continued -

“X4 and the Housing Commission

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

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

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

- sell hardware as sellers in their own right,

35 After a matter presently not material, the judge said -

“ Dealing with the matter

itself

no Group Member

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

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

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

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

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

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

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

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

itself

partly

36 The declaration in order 5 must have been framed upon some of these paragraphs. But why was there breach of cl 2.7 in Vodafone, the undifferentiated collective, acting through X4 and Housing Industry?

37 From para 868 it seems that the commencement of the reasoning was that Vodafone had appointed and was dealing with X4 and Housing Industry, which organisations were conducting Mobile Direct Marketing Operations. Within cl 2.7, then, the appointment of and dealing with X4 and Housing Industry must have been as new Service Providers. That had been Mobile’s pleaded case, in terms that X4 and Housing Industry were Service Providers and that the breach of cl 2.7 had been by Vodafone appointing and dealing with them as its agent. The pleaded case was reflected in Vodafone’s submission noted in para 874, which involved whether X4 and Housing Industry were Service Providers.

38 From this commencement, the reasoning must have been as follows. Vodafone had appointed and was dealing with new Service Providers, X4 and Housing Industry. X4 and Housing Industry had contracted to acquire subscribers for Vodafone, acting as Vodafone’s agent in facilitating connections between the customer and Vodafone with the contractual relationship between the customer and Vodafone. They were acquiring subscribers by remote selling. They were conducting a Mobile Direct Marketing Operation in competition with Mobile. Clause 2.7 not only precluded Vodafone from acquiring subscribers by remote selling by appointing or dealing with them, but also precluded Vodafone through X4 and Housing Industry from acquiring subscribers otherwise than by remote selling because “solely” in the definition of Mobile Direct Marketing Operation was treated as qualifying the means of selling in the manner declared in the declaration in order 4.

39 Other paragraphs, however, obscure this reasoning. Paragraphs 871 and 872 are consistent with and support it, since they speak of appointment of and dealing with a Service Provider although not distinguishing between a new Service Provider and the other prohibited organisation in cl 2.7, an existing Service Provider. But in paras 870, 873 and 875 and following no reference to a Service Provider, one of the key concepts in cl 2.7, is to be found. Instead, the concept of agency alone seems to be used as sufficient to identify the organisation conducting the competitive Mobile Direct Marketing Operation. It seems that appointment of or dealing with an agent which conducts a competitive Mobile Direct Marketing Operation was thought sufficient for breach of cl 2.7, even acting “in conjunction with” such an agent, whatever that may mean. If that was the judge’s reasoning, it was not correct.

40 In these paragraphs, including the closing reference in para 878 to Vodafone acting “partly” through its agents, it does not seem that the premise is that the agent is a new Service Provider or an existing Service Provider. If that is the premise, no Service Provider other than X4 and Housing Industry is mentioned. In particular, and the point of this will become apparent, reasoning which treats Vodafone Pty Ltd as an existing Service Provider is not to be found. On the contrary, there is only the collective reference to Vodafone as the party subject to contractual obligations.

41 Vodafone submitted that “solely” in the definition of Mobile Direct Marketing Operation had the operation rejected by the judge, requiring that the Service Provider acquire subscribers solely by remote selling, and so that cl 2.7 did not preclude appointing or dealing with a Service Provider which acquired subscribers otherwise than by remote selling as well as by remote selling. If so, it said, the declaration in order 4 should be set aside. It submitted that the declaration in order 5 should be set aside, because paras (a) and (b) did no more than reproduce the language of cl 2.7 and paras (c) and (d) erroneously recast cl 2.7 into a proscription from acting through an agent when the agent which Vodafone appointed or with which it dealt may or may not be a Service Provider. It submitted that it had not been shown that X4 and Housing Industry were acquiring subscribers by remote selling and that there was no basis for finding that they were conducting Mobile Direct Marketing Operations, whether or not “solely” had the declared operation. It submitted that in any event neither X4 nor Housing Industry was a Service Provider, because the definition of Service Provider required that they acquire, manage and support subscribers, but they only acquired subscribers and did not manage and support them.

42 Mobile conceded that Vodafone’s last submission, as to neither X4 nor Housing Industry being a Service Provider, was correct for the reason given. This very much changed the landscape, and Mobile of necessity submitted that there was a breach of cl 2.7 on a basis other than that found by the judge by either process of reasoning earlier postulated.

43 Mobile submitted that Vodafone Pty Ltd was an existing Service Provider and a Group Member and was conducting a Mobile Direct Marketing Operation in competition with Mobile, through its agents X4 and Housing Industry. Accordingly, by force of cl 2.7 Vodafone Pacific Ltd or Vodafone Network Pty Ltd (whichever it might be) could not deal with Vodafone Pty Ltd. Its further submissions proceeded from this basis for a breach. It acknowledged that para (d) of the declaration in order 5 should be set aside, but said that if Vodafone Pty Ltd was a Service Provider which was conducting a Mobile Direct Marketing Operation it could be restrained whether acting itself or through an agent: it said that paragraph (d) should be replaced by a reformulated declaration. Although in its written submissions it had sought to support para (c) of the declaration in order 5, at the hearing it proposed a reformulated paragraph. The new paras (c) and (d) were -

“(c) Prohibits the first and second defendant from dealing with the third defendant when conducting a Mobile Direct Marketing Operation, as defined by the ASP agreement, in competition with the plaintiff, including where the third defendant is acquiring subscribers to mobile telecommunication services partly through or in conjunction with its agents X4 Pty Limited and Housing Industry Association Limited.

(d) Precludes each Defendant, when only acting itself, from conducting a Mobile Direct Marketing Operation in competition with the Plaintiff.”

44 In conformity with these submissions, Mobile proposed alternative reformulations of the restraining order in order 6, in place of orders 6 and 7, both reformulations broadly following para (c) of the proposed declaration in order 5.

45 I have earlier referred to Mobile’s pleaded case that X4 and Housing Industry were Service Providers and that the breach of cl 2.7 had been by Vodafone appointing and dealing with them as its agent. Mobile said that although at the trial it had put the case of X4 and Housing Industry as new Service Providers, it had also put a case of Vodafone Pty Ltd as an existing Service Provider. It acknowledged that the latter case was “not pleaded as clearly as it might have been”, and referred to some pages in the transcript of the oral submissions before the judge. The acknowledgement did not go far enough: the case of Vodafone Pty Ltd as an existing Service Provider was not pleaded at all. The submissions in the pages in the transcript were in Mobile’s oral submissions in reply. Reading the cold print with the benefit of the submissions made on appeal, they can be seen to put a case of Vodafone Pty Ltd as an existing Service Provider, although the putting of the case was bedevilled by loose reference to the collective Vodafone. But it is apparent that the case was not appreciated in the atmosphere of the trial, because it is not reflected in the judge’s reasons. Rather, it seems to have produced confusion involving agency.

46 Vodafone accepted that Vodafone Pty Ltd was a Service Provider and a Group Member. As to the case now propounded by Mobile, it submitted that “conduct” referred only to an operation directly carried on by the organisation in question, on the case now propounded Vodafone Pty Ltd, and that an operation carried on by an agent was not consistent with cl 2.3. It submitted, however, that Mobile should not be permitted to maintain the case of Vodafone Pty Ltd as an existing Service Provider, because it had not been pleaded and the questions whether Vodafone Pty Ltd conducted a Mobile Direct Marketing Operation and whether, if it did, it did so in competition with Mobile, had not been in issue at the trial. Whatever the operation of “solely”, it said, what amounted to conducting an activity was a question of fact and degree, and whether the activity was in competition with someone else’s activity was similarly a question of fact and degree. It said that these questions as applied to Vodafone Pty Ltd had not been agitated at the trial; there were no findings, and there was no evidence directed to findings favourable to Mobile.

47 Putting aside the operation of “solely” in the definition of Mobile Direct Marketing Operation, I do not think that the other aspects of cl 2.7 raised by Vodafone need be or should be addressed. I consider that Mobile should not be permitted to maintain the case of Vodafone Pty Ltd as an existing Service Provider.

48 That case was put only in Mobile’s submissions in reply. It is tolerably clear that what was put brought the concept of agency to prominence in the judge’s reasoning, but Vodafone Pty Ltd as a Service Provider was not taken up by his Honour. There is no mention of Vodafone Pty Ltd, as would be necessary if appointment of or dealing with it by one of the other Vodafone companies was in point. There is not even reference to the collective Vodafone as an existing Service Provider. There is no finding as to the conduct by Vodafone Pty Ltd of a competitive Mobile Direct Marketing Operation, and the late arrival of the case is underlined if it be thought how easily Mobile could have attended to proof of what Vodafone Pty Ltd did by way of remote selling quite apart from what it may have done by the agency of X4 and Housing Industry.

49 Although the judge found that X4 and Housing Industry were acquiring subscribers for Vodafone by direct marketing, meaning by remote selling (para 868 second dot point), and presumably considered that they were conducting Mobile Direct Marketing Operations in competition with Mobile, it does not follow that Vodafone Pty Ltd was conducting a Mobile Direct Marketing Operation in competition with Mobile through the agency of those organisations. Particularly is that so when the evidence of what X4 and Housing Industry did was scanty, and the extent of Vodafone Pty Ltd’s authority to X4 and Housing Industry and the significance of the activities of X4 and Housing Industry to Vodafone Pty Ltd’s conduct of a Mobile Direct Marketing Operation (as distinct from X4’s or Housing Industry’s) were not in issue. It is a question of fact and degree, as is competition, and I do not think it can be said that, had those matters been in issue at the trial, Vodafone might not have addressed them by further evidence. It should be noted that Mobile said (written submissions para 565) that the judge had not decided, and it did not seek to have determined on appeal or by remission to the judge, whether the evidence established that Vodafone was conducting a Mobile Direct Marketing Operation.

50 In my view the well established principles apply, to the effect that a party will not be permitted to raise a point on appeal which was not taken at trial if evidence could have been adduced which could possibly have prevented the point from succeeding (Coulton v Holcombe (1986) 162 CLR 1 at 8-9; Water Board v Moustakas (1988) 180 CLR 491 at 496-7; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at [51]), and that even if there is no question of further evidence it may not be in the interests of justice to allow the new point to be raised (Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645-6; Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11 at [14]-[18]; Whisprun Pty Ltd v Dixon at [52]). The case of Vodafone Pty Ltd as an existing Service Provider was not pleaded, and the point was not taken at the trial for the purposes of these principles when raised in submissions in reply in a manner which it is apparent, in the conduct of the trial, was not appreciated as putting the case now propounded.

51 The restraining orders in orders 6 and 7 must be set aside. They can not be replaced by a reformulated order 6, because breach of cl 2.7 was not established. It is not necessary to consider Vodafone’s submissions that it had not been shown that X4 and Housing Industry were acquiring subscribers by remote selling and that, putting “solely” aside, there was no basis for finding that they were conducting Mobile Direct Marketing Operations.

52 What then of the declarations in orders 4 and 5? A declaration does not necessarily fall with the order giving effect to it. In rare cases, where a contract must be construed in order to decide whether the contract has been breached it may be appropriate that the proper construction is declared even though the decision is that the contract has not been breached. But in my opinion the declarations must also be set aside.

53 Although it was not the subject of submissions, I respectfully question whether the declaration in order 5 should have been made at all. Where a claim is made to damages or an injunction, a judge’s consideration of the operation of a contractual provision in respects other than that immediately in issue, in the course of resolving the question of its application in the particular case, is not to be given declaratory status. Even as to the issue of the provision’s application in the particular case, upholding the claim to damages or an injunction will usually suffice, with the decision upon the operation of the provision as part of the reasoning to breach warranting the award of damages or the restraint, and a declaration going beyond the particular contractual breach will commonly not be appropriate. Mobile’s summons claimed restraining orders without any preceding declaration as to the construction of cl 2.7. In the present case the confusion which arose involving agency rather than Service Provider demonstrates the unwisdom of making the declaration, and it travelled beyond what was necessary for the decision in the particular case.

54 If the declaration in order 5 was to be made, it should not have been made in the form it took. Notwithstanding the general reference to Vodafone, cl 2.7 contractually bound only Vodafone Pacific Ltd or Vodafone Network Pty Ltd, depending on the unlitigated issue. On any view it did not prevent, oblige or preclude “each Defendant”, as the declaration purported to convey, since only Vodafone Pacific Ltd or Vodafone Network Pty Ltd was contractually prevented, obliged or precluded. Whichever of those two companies was contractually bound had the further obligation to procure appropriate conduct from other members of the Vodafone group, including Vodafone Pty Ltd. If either the other of Vodafone Pacific Ltd and Vodafone Network Pty Ltd or Vodafone Pty Ltd were to be restrained by injunction, the legal basis for an order against it would not be the direct contractual prevention, obligation or preclusion in the ASP Agreement, and the declaration did not correctly accord with the positions in law of the Vodafone companies. Despite the failure of the parties, particularly Vodafone, to differentiate between the three Vodafone companies, the Court should have been astute to ensure that the declaration was accurately framed.

55 That aside, in my opinion the declaration in order 5 should be set aside because so far as it does more than reproduce the language of cl 2.7 it is incorrect. Paragraphs (c) and (d) fail to recognise the part played by the concept of a Service Provider, and in the manner earlier outlined give erroneous ascendency to the concept of agency alone.

56 I do not think the reformulated paragraphs proposed by Mobile should be substituted. In the new para (c) the words down to “in competition with the plaintiff” do no more than reproduce the language of cl 2.7, and the following reference to acting through or in conjunction with X4 and Housing Industry lacks the necessary foundation of a finding that in doing so Vodafone Pty Ltd is conducting a competitive Mobile Direct Marketing Operation. The new para (d) is just incorrect, at the least because it goes beyond preclusion of whichever of Vodafone Pacific Ltd and Vodafone Network Pty Ltd is contractually bound and more fundamentally because it ignores that the prohibition is against the appointment of or dealing with a new or existing Service Provider.

57 In turning to the declaration in order 4, what I have said about sufficiency of a decision upon the operation of a provision as part of the reasoning to the particular contractual breach is again in point. There was a question whether the preclusion in cl 2.7 applied where, in the competitive Mobile Direct Marketing Operation conducted by the new or existing Service Provider, subscribers were acquired otherwise than by remote selling as well as by remote selling. That question could adequately be dealt with in the course of deciding whether X4 and Housing Industry, or Vodafone Pty Ltd if that case had been put, were conducting competitive Mobile Direct Marketing Operations.

58 At a level short of the substance of the question, the declaration in order 4 is flawed. It purports to express what is meant by remote selling without allowing, as the definition of Mobile Direct Marketing Operation does allow, for agreement between the parties upon other remote selling techniques; as well, in its second use of “solely” the declaration seems to make that word apply to reliance on responses to advertisements rather than, as the definition provides (and the commencement of the declaration states) the acquisition of subscribers. The declaration carries unintended alteration of cl 2.7 as a side-wind of purporting to decide the substance of the question.

59 More significantly, the declaration does not provide an answer to the substantive question, certainly not the answer given by the judge. It is clear enough that “solely” qualifies “acquisition of subscribers” in the definition of Mobile Direct Marketing Operation. But that does not mean that the definition is so construed that the Service Provider acquiring the subscribers is caught by the definition although also acquiring subscribers otherwise than by remote selling. It is consistent with, perhaps even favours, the opposite result. Mobile submitted that in qualifying “acquisition of subscribers” the work done by “solely” was that any particular subscriber was to be acquired only by remote selling, as distinct from the general activity of acquiring subscribers. But the definition is not directed to any particular subscriber, and to read it as Mobile submitted would make no sense – “solely” would add nothing to acquisition by remote selling. If the question is to be answered as the judge answered it, some other reasoning to that result must be found, and the declaration in order 4 has no utility.

60 The declaration in order 4 should be set aside quite apart from whether the judge’s answer to the question was correct. It would be wrong, however, to leave the judge’s answer to the question untouched if it is not correct: that would be likely to distort the parties’ conduct during the rest of the term of the ASP Agreement, which is still on foot.

61 Clause 2.7 prohibits appointment of or dealing with a Service Provider of a particular kind, a Service Provider which conducts a Mobile Direct Marketing Operation in competition with Mobile. Reading the definition of Mobile Direct Marketing Operation into the clause, at first sight one of the characteristics of the prohibited Service Provider is that it “conducts” the acquisition of subscribers to mobile telecommunications services solely by means of remote selling. Hence Vodafone’s submission that, if the Service Provider in question “conducts” the acquisition of subscribers to mobile telecommunications services otherwise than by remote selling as well as by remote selling, it is not within the class of prohibited Service Providers. Vodafone added that Mobile’s appointment is described as non-exclusive and by Authorised Channels in cl 2.1, and that cl 2.3 makes clear that, subject to cl 2.7, Vodafone can engage in competitive direct marketing. There was no warrant, it said, for giving Mobile greater exclusivity than granted by cl 2.7 on a strict reading.

62 If Vodafone’s submission be correct, cl 2.7 can be outflanked by ensuring that the Service Provider also acquires subscribers otherwise than by means of remote selling, at least to an extent satisfying the requirement that the Service Provider “conducts” the acquisition of subscribers by that means. The judge was influenced by this, although perhaps over-stating the matter with respect to non-telephony business and daily alteration in conduct. If the submission be correct, the exclusivity conferred by Vodafone on Mobile will be compromised, if not ephemeral. Mobile submitted that this was contrary to commercial common sense, particularly where Mobile had committed its Mobile Direct Marketing Operation exclusively to Vodafone in return for the exclusivity conferred on it by Vodafone.

63 On the construction adopted by the judge, on the other hand, if Vodafone appoints or deals with a Service Provider which falls within cl 2.7 it will not be able to deal at all with that Service Provider, even where the Service Provider acquires subscribers to mobile telecommunication services otherwise than by remote selling. The extremes are both unattractive.

64 If it can be done consistently with the words used, the ASP Agreement should be given a sensible commercial operation (Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australian Performing Rights Association (1972) 129 CLR 99 at 109; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4). Avoidance of unreasonable, inconvenient or unjust consequences, where the language is open to two constructions, is permissible “even though the construction adopted is not the most obvious, or the most grammatically accurate” (Australian Broadcasting Commission v Australian Performing Rights Association at 109, citing earlier authority). Regard to Mobile’s exclusivity given to Vodafone is of assistance in recognising how the definition of Mobile Direct Marketing Operations worked in the ASP Agreement.

65 It is plain from cll 2.2 and 2.6 that the exclusivity given by Mobile to Vodafone is confined to the acquisition of subscribers by remote selling. Mobile can acquire subscribers for other carriers provided it does not use remote selling. “Solely” in the definition of Mobile Direct Marketing Operation plays a part in leaving it free to do this, by quarantining that part of Mobile’s business being the business of acquiring subscribers to mobile telecommunication services by remote selling from that part of its business “outside the Mobile Direct Marketing Operation” (cl 2.6), including any business of acquiring subscribers to mobile telecommunications services otherwise than by remote selling. For this exclusivity, “solely” does not mean that if Mobile acquires subscribers to mobile telecommunication services otherwise than by remote selling, it is not conducting a Mobile Direct Marketing Operation at all. It means that Mobile is not conducting a Mobile Direct Marketing Operation so far as it does so.

66 For the exclusivity conferred by Vodafone on Mobile, the operation of “solely” is the same. It is necessary to consider the composite phrase “which conducts a Mobile Direct Marketing Operation in competition with MI”. The competition is with that part of Mobile’s business being the business of acquiring subscribers to mobile telecommunications services by remote selling, and not with any business of acquiring subscribers to mobile telecommunications services otherwise than by remote selling. Thus a Mobile Direct Marketing Operation conducted by a Service Provider is an offending Mobile Direct Marketing Operation only so far as the Service Provider acquires subscribers to mobile telecommunications services by remote selling.

67 Reading the characteristic of the prohibited Service Provider be in this way, results in a sensible commercial bargain. Vodafone and Mobile both submit to exclusivity in relation to acquisition of subscribers to mobile telecommunications services by remote selling, but no further. Vodafone can not escape cl 2.7 by ensuring that to the required extent (see para 61 above) the Service Provider also acquires subscribers otherwise than by means of remote selling. Conversely, if the Service Provider acquires subscribers by remote selling to the requisite extent, there can be restraint only in that respect and not from all dealing with the Service Provider.

68 I consider, therefore, that the judge was correct in his answer to the question, in that the preclusion in cl 2.7 still applies where, in the competitive Mobile Direct Marketing Operation conducted by the Service Provider (new or existing), subscribers are acquired otherwise than by remote selling as well as by remote selling; but with the limitation on the extent of the preclusion.

Claims 6 and 7 and their related declarations 1, 2 and 3

69 The damages of $9,362,100 under claims 6 and 7 were awarded for breaches of contract to do with determining at nil or failing to determine target levels for the determination of which cl 18.4 of the ASP Agreement provided. In the manner to be explained, the breaches of contract were founded on both construction of the agreement and implication of terms. The judge made the declarations -

“1. Upon the proper construction of the Agent Service Provider Agreement dated 2 October 1998 (“ASP Agreement”) the defendants were and are not entitled to determine nil as the target level in respect of the number of connections of New Subscribers under clause 18.4.

2. Upon the proper construction of the ASP Agreement the defendants were and are not entitled to refuse or fail to set a target level in respect of the number of connections of New Subscribers under clause 18.4.

70 Clause 18.4 of the ASP Agreement should be seen in the context of Mobile’s remuneration under the agreement. Mobile was remunerated in three ways.

71 First, Vodafone paid Mobile’s direct and indirect costs incurred in providing Acquisition Services, following a scheme in cl 17 of the ASP Agreement and relevant definitions as amended by the May 1999 amending agreement. The scheme involved monthly payment of an estimated amount and then quarterly adjustment to an actual amount. In more detail -

· not later than the commencement of the month prior to the commencement of each quarter, Vodafone and Mobile agreed on the Estimated Acquisition Cost in respect of the quarter (cl 17.2);

· if Vodafone and Mobile failed to agree by the commencement of the quarter, the Estimated Acquisition Cost for the previous quarter was deemed to be the Estimated Acquisition Cost for that quarter (cl 17.4);

· Vodafone paid Mobile the Estimated Acquisition Fee, being a monthly sum calculated according to a formula of which the Estimated Acquisition Cost was a component, (cl 17.1);

· within fifteen business days after the end of the quarter Mobile calculated and notified Vodafone of the Actual Acquisition Costs for the quarter (cl 17.5);

· if the Actual Acquisition Costs for the quarter were less than the Estimated Acquisition Cost for the quarter, Mobile refunded 50 per cent of the difference to Vodafone; if they were more, subject to cl 17.7 Vodafone paid the difference to Mobile on the next monthly payment date (cl 17.6).

72 It can be seen that Mobile had an incentive to spend less than the agreed Estimated Acquisition Cost but, subject to cl 17.7, it suffered only in cash flow if its expenditure exceeded the Estimated Acquisition Cost. However, cl 17.7(a) provided that Mobile “must use its best endeavours to ensure that the Actual Acquisition Costs for a Quarter correspond to the Estimated Acquisition Cost for that Quarter as closely as possible”, and by cl 17.7(b) over-expenditure beyond a particular percentage and in particular circumstances would be excluded from the calculation of Actual Acquisition Costs.

73 Arriving at the Estimated Acquisition Cost involved an amount per New Subscriber and a number of New Subscribers, the number of New Subscribers in turn involving an expectation agreed in a Business Plan. More precisely, the definition of Estimated Acquisition Cost was -

“ … in respect of any quarter:

C x S

where:

C = the amount determined in accordance with Clause 17 representing the agreed costs estimated to be incurred in providing the Acquisition Services or, failing agreement and subject to clause 17.7, the Actual Acquisition Costs for each New Subscriber for the previous Quarter; and

S = the number of New Subscribers expected to be connected in the next quarter as agreed in the Business Plan or, failing agreement, as determined by Vodafone.”

74 Mobile was not paid the quarterly Estimated Acquisition Cost. It was paid the monthly Estimated Acquisition Fee. The Estimated Acquisition Fee went beyond costs incurred in providing the Acquisition Services, its name being a little misleading in that respect, and extended to the second source of Mobile’s remuneration, the Base Acquisition Margin. I will return to the Estimated Acquisition Fee a little later in these reasons.

75 The Business Plan to which the definition of Estimated Acquisition Cost referred was the subject of cl 21 of the ASP Agreement, providing -

21.1 Parties to agree Business Plan

Within one month prior to commencement of the relevant Quarter, MI and Vodafone must use their best endeavours to agree a Business Plan for that quarter.

21.2 Failure to agree Business Plan

If the parties fail to agree on the Business Plan as contemplated in cl 21.1, then the Business Plan for the 3 months prior to the relevant quarter will apply.

21.3 Expert determination

Failure by the parties to agree on the Business Plan not less than one month before the commencement of the relevant 3 month period will constitute a Dispute.”

76 Constitution of a Dispute enlivened cl 32, dealing with dispute resolution and providing a means of expert determination. Business Plan meant -

“ … an agreed quarterly business plan or, failing agreement, a quarterly business plan as determined in accordance with Clause 32, which includes the components set out in the Operation Manual.”

77 The Operations Manual was an annexure to the ASP Agreement. It appeared to be a document issued by Vodafone to service providers in general. It stated that the service provider must prepare a business plan annually, comprising a financial plan and a sales and marketing plan, and send it to a Vodafone officer. Amongst many other things, the financial plan was to include a three year budget, stating “the underlying assumptions”, and the sales and marketing plan was to include “actual and forecast connections by channel and state”, forecast connections being “expected connection levels over each calendar month”. Just what would be involved in including in the Business Plan the components set out in the Operation Manual was far from clear.

78 The May 1999 amending agreement provided that the Operation Manual should be amended -

“ … by inserting the following paragraphs where appropriate:

(a) (i) VNPL will request Mobile Innovations to cost one or more scenarios based on different connection volumes for calculation of estimated costs to acquire. The details must be with Mobile Innovations by the 15th day of the second month in each quarter;

(ii) Mobile Innovations to cost each scenario and discuss any associated issues with VNPL within 1 week of receiving the request;

(iii) Mobile Innovations and VNPL to review costings and plan strategy for following quarter during the 4th week of second month of each quarter;

(iv) VNPL to formally respond in writing to Mobile Innovations with agreed Costs to Acquire for following quarter by the last day of the second month in each quarter;

79 The contractual operation of this is rather obscure, but as will be seen Vodafone and Mobile took a course something like that described in the paragraphs in place of agreement upon a Business Plan.

80 Going to the second way in which Mobile was remunerated, Vodafone paid Mobile the Base Acquisition Margin earlier mentioned as a component of the monthly Estimated Acquisition Fee.

81 Base Acquisition Margin meant -

“ … in respect of any month and subject to adjustment in accordance with Clause 18.1, an amount equal to:

(a) $40 times the number of New Subscribers connected to the System in that month, up to a maximum of 8,000, subject to Clause 18.2; and

and in any event subject to Clause 18.3.”

82 Returning then to the Estimated Acquisition Fee, it meant -

“ … in respect of each month during any calendar Quarter, and subject to adjustment in accordance with Clause 19.3.

[(Q + B1) x N1] +(Q – B2) x N2]

where

Q = Estimated Acquisition Cost divided by the number of New Subscribers expected to be connected to use the System in that Quarter;

B1 = $40 (representing the Base Acquisition Margin applicable to, subject to Clause 18.2, the first 8,000 New Subscribers);

B2 = $20 (representing the Base Acquisition Margin applicable, subject to Clause 18.2, New Subscribers in excess of 8,000);

N1 = the number of New Subscribers estimated to be connected to use the System in that month, but in any event not to exceed 8,000; and

N2 = the number of New Subscribers estimated to be connected to use the System in that month excess of 8,000.”

83 Clause 18 of the ASP Agreement did not provide directly for payment of the Base Acquisition Margin: payment came via the Estimated Acquisition Fee. Clause 18 was an overlay to the calculation of the Base Acquisition Margin component of the Estimated Acquisition Fee. It provided for periodical adjustment of the Base Acquisition Margin (cl 18.1), and adjustment did occur: it is not necessary to go to the detail. It provided for some qualification on who could be regarded as New Subscribers (cl 18.2): again it is not necessary to go to the detail. It then provided -

18.3 Minimum Base Acquisition Margin

If, in respect of any Quarter, Vodafone determines that the target level for connections of New Subscribers is less than 12,000:

(a) if MI does not achieve the target level, the Base Acquisition Margin will be calculated and paid in accordance with the amounts specified in the definition of Base Acquisition Margin; and

(i) the actual number of New Subscriber connections in the Quarter; or

(ii) 12,000.

18.4 Connection levels

Vodafone will have the sole discretion to determine, from time to time, the target level in respect of the number of connections of New Subscribers. The target level will be determined by Vodafone in conjunction with the determination of the Business Plan referred to in Clause 21.”

84 Pursuant to cl 17, the Estimated Acquisition Cost component of the Estimated Acquisition Fee would be adjusted upon ascertaining the Actual Acquisition Costs. Although the definition of Base Acquisition Margin and cl 18.3 provided for payment of the Base Acquisition Margin upon the actual number of New Subscriber connections, subject to the minimum Base Acquisition Margin on an assumed 12,000 connections, the effect of the multipliers N1 and N2 in the Estimated Acquisition Fee, being estimated numbers of New Subscribers, was that the component was arrived at on estimated rather than actual numbers. There was no express provision for adjustment of the Base Acquisition Margin component of the Estimated Acquisition Fee from the number of New Subscribers estimated to be connected to the number of New Subscribers actually connected. How the payment of the Base Acquisition Margin worked in this respect was not explored before us, and no doubt did not matter.

85 In cl 18.4, then, came the determination of target levels to do with which the damages were awarded. Determining a target level in respect of the number of connections of New Subscribers was taken up in the ASP Agreement only in cl 18.3, in connection with calculation of the Base Acquisition Margin, and through cl 11 next mentioned in connection with the Benchmark provisions of the agreement. Elsewhere in the ASP Agreement the language was that of an expectation as to the number of connections of New Subscribers, see in particular the definitions of Estimated Acquisition Cost and Estimated Acquisition Fee.

86 By cl 11.2 of the ASP Agreement Mobile had to satisfy the Benchmarks set out in a schedule to the agreement. Failure to meet a Benchmark constituted a First Level Breach or a Second Level Breach (cl 11.3). The Benchmarks were subject to review and alteration (cl 11.1). Occurrence of a breach enlivened a procedure for remedial action, including by discussion and mediation, with potential for ultimate termination of the agreement (cl 11.4).

87 So far as the Benchmarks in the schedule are presently relevant, if quarterly net connections were less than stated figures or monthly gross connections fell below stated figures, combinations of 6,000 and 3,000 in the original figures, and certain other requirements were met, a First Level Breach or a Second Level Breach was deemed to occur. As to both net connections and gross connections, however, the schedule included -

“A First Level Breach or a Second Level Breach (as the case may be) will not be deemed to occur if Vodafone has determined, in accordance with Clause 18.4, that the target level in respect of the number of New Subscribers is less than the number of connections comprising a First Level Breach or a Second Level Breach (as set out above).

88 The third way in which Mobile was remunerated need only be outlined. Vodafone paid Mobile a monthly Management Fee for providing the Management Services, calculated at an amount per subscriber to whom Mobile provided Management Services times the number of subscribers on the day prior to the commencement of the month. The Management Fee was subject to review and adjustment, and was adjusted.

89 Standing back from the detail of the ASP Agreement, it was in Mobile’s interests to maximise the number of New Subscribers it acquired. It was effectively reimbursed its direct and indirect acquisition costs, but through the Base Acquisition Margin (and subject to the Minimum Base Acquisition Margin) the more subscribers it acquired the more it was paid. It would be paid for providing Management Services to subscribers previously acquired, but over time those subscribers would be lost. A certain number of New Subscribers would have to be acquired in order to maintain its remuneration from the Management Fee, and the more New Subscribers Mobile acquired and then managed the greater the Management Fee it would receive. From Vodafone’s side, however, maximising the number of New Subscribers was not necessarily in its interests. It depended on whether the subscribers were profitable to it. The tension between the two interests was fundamental. It can plainly be seen in the dispute which arose over the determination of target levels, and is important in deciding the implied terms issues.

90 Other provisions of the ASP Agreement material to claims 6 and 7 should be noted.

91 By cl 7 Vodafone promised to use its best endeavours to provide mobile telecommunications services on a postpaid basis to the existing and new subscribers brought or acquired by Mobile. However, Vodafone controlled the terms on which the mobile telecommunications services were provided. They were on Vodafone’s standard terms and conditions as notified to Mobile from time to time, which Mobile could not alter (cl 7.3). Vodafone could alter the standard terms and conditions, and even suspend or discontinue the provision of mobile telecommunication services (cl 7.4). The qualification to Vodafone’s control was only that Vodafone would “use its best endeavours to give MI reasonable notice in advance” of any alteration to the standard terms and conditions where the alteration would cause detriment to subscribers (cl 7.4).

92 By cl 8 Vodafone was “solely responsible for determining the tariff for Mobile Services (subject to the rights of Existing Subscribers) but will consult with MI as appropriate”. The same qualification as to best endeavours in cl 7.4 applied to changes to tariffs. This underlined that, as Vodafone’s (more specifically, Vodafone Billing Services Pty Ltd’s) agent, Mobile could only acquire subscribers on “plans”, as they were called, which Vodafone was prepared to provide.

93 Clause 32 dealing with dispute resolution has already been mentioned. If a Dispute arose the parties had to meet to attempt to resolve it, at ascending corporate levels, and if they could not an independent expert decided it. The expert’s decision was final. The purpose of avoiding litigation was manifest. However, some disagreements were excluded from the dispute resolution procedure, relevantly “Vodafone’s exercise of any discretion given to it under this Agreement” as to which “Vodafone’s decision will be conclusive and binding on the parties” (cl 32.6). It was common ground that the determination of target levels in connection with the number of connections of New Subscribers was an exercise of discretion excluded from the dispute resolution procedure.

94 Related to this, cl 41 of the ASP Agreement provided -

41.

EXERCISE OF DISCRETION

Where any provision of this Agreement allows Vodafone to exercise any discretion, including where some act of MI is expressed to be conditional on Vodafone giving its consent or granting its approval, Vodafone may (unless that provision provides to the contrary) exercise that discretion in any manner it sees fit.”

95 Clause 24.1 included -

24.1

Exclusion of Warranties and representations

(a) ( Exclusion ) To the full extent permitted by Law and other than as expressly set out in this Agreement the parties exclude all implied terms, conditions and warranties.

(b) …

MI has made own inquiries

96 Finally, cl 44 provided -

44. ENTIRE AGREEMENT

This agreement contains the entire agreement of the parties with respect to its subject matter. It sets out the only conduct relied on by the parties and supersedes all earlier conduct by the parties with respect to its subject matter.”

97 What, then, were the breaches of contract for which the damages were awarded? In the performance of the ASP Agreement the parties identified quarters by the closing month, so that the December 2001 quarter, for example, was the three months ending on 31 December 2001. The judge found that Vodafone was in breach of contract because it determined a target level of nil or failed to determine a target level for the December 2001 to the March 2003 quarters inclusive. On the judge’s findings of breaches of contract and assessments of damages, it did not matter whether the breach of contract lay in a nil determination or a failure to determine. He did not clearly find what had occurred for each quarter, although he referred near the end of his reasons to setting nil targets for the December 2001 and March and June 2002 quarters and failure to set targets for the September and December 2002 and March 2003 quarters (para 883).

98 No point arose that the breaches of contract occurred after the commencement of the proceedings in August 2001.

99 The judge’s reasoning to breach of contract must be found in a judgment which is lengthy and, with respect, at times diffuse.

100 In para 602 the judge identified as “the nil target issue” -

· put forward, in order to gain agreement [as part of an agreed business plan]; or

· failing agreement, to determine.

reasonably

101 After much discussion, to some of which it will be necessary to return, the judgment had a heading, “Holding in respect of the nil target issue”. The heading was followed by material under three sub-headings. The first was “Proper Construction” (paras 669-72), the second was “Obligation to co-operate” (paras 673-79) and the third was “Obligation of good faith and reasonableness” (paras 680-734, all on that subject despite other sub-headings).

102 Under the sub-heading “Proper Construction”, the judge said -

“669 In my view this issue may be decided shortly and by construing the ASP.

670 Upon the proper construction of the ASP Vodafone was not entitled to put forward nil as the target level in respect of the number of connections of new subscribers.

· Under clause 18.3 the target must be set in conjunction with a business plan. Nil means no business plan. It follows the parties could not have contemplated it as a target.

· Clause 17.3 and then clause 32 would have no application because there would be no scope for the agreement of Estimated Acquisition Cost.

· The agreement is to perform “Acquisition Services”. A nil target is inimical to the notion of performing services. Mobile has an express obligation to perform the “Acquisition Services” (Clause 5.1(a) at TB147).

· The formulas in the definitions of “Estimated Acquisition Fee” and “Estimated Acquisition Cost” do not operate with a nil target.

· Under clause 13.1(a) Mobile took upon itself the obligation to promote the Mobile Services, subject to Vodafone’s reasonable directions from time to time. Mobile must not do anything which would reasonably be regarded as inconsistent with this obligation (TB157). It could hardly be suggested that a reasonable direction could be to stop promoting the Services or from Mobile’s point of view it would hardly be using its best endeavours if it refused to promote acquisitions.

· The concept of a nil target is contrary to various indicators in the agreement:

· The idea that Mobile was to stagnate cannot have been the intention of the parties, objectively construed.

· By setting a nil target Vodafone renders it impossible for Mobile to perform its obligations under the agreement.

103 It is not easy to identify in the preceding discussion the “pervasive” (perhaps “persuasive”) reasons to which the factors stated in para 671 are supplementary, and the judge may have meant effectively to re-state factors found in that discussion.

104 One source of the reasons may be the discussion in pars 639-64, which were primarily directed at the nature of Vodafone’s conduct in setting target levels. Pararaph 641-2 will be set out in full later in these reasons. The paragraphs include that in setting target levels of nil or refusing to set target levels Vodafone “did so in an environment in which it eschewed any participation by itself in the setting of business plans” (para 639) and “walked away from such obligation as there was to endeavour to agree upon business plans” (para 641). This seems to underlie the factor in the first dot point in para 671, that determining a target level of nil (and presumably also failing to determine a target level) meant “no business plan”.

105 Another source of the reasons seems to be the judge’s discussion in relation to the Benchmarks -

any

106 In his consideration of the scheme involving Estimated Acquisition Cost and Actual Acquisition Costs, after noting a submission that by simply acquiring one subscriber Mobile would be entitled to the Actual Acquisition Costs the judge said -

308 It is also not apparent what information was sought in relation to a planned affinity marketing campaign to Double Day (Factual Narrative para 113). Double Day was a Mobile affinity partner. There was no finding that the information sought, whatever it was, was not provided, nor was there any reference to how the Double Day affinity programme was frustrated for want of the information.

309 Vodafone’s advice that it was unlikely to come up with any new affinity partners (Factual Narrative para 114) was not a failure to provide information relating to Vodafone’s affinity programmes. Unsuccessful attempts to obtain approval for affinity programmes in relation to the “Best Friend promotion” and Diner’s Club customers, apparently what was meant in submissions para 116, was not failure to provide information.

310 On the findings made by the judge, the pleaded breach was not made out. The marketing of the Bankers Trust and NRMA affinity programmes was not particularly productive, but the findings do not indicate that that was because of any failure to provide information.

311 In fact, the finding referring to Vodafone’s advice that it was unlikely to come up with any new affinity programmes (Factual Narrative para 114) did not fully reflect the evidence of Ms Statham, which was that in mid-June 2001 Ms Karpes of Vodafone told her, “We haven’t got any information yet but we’re working on some things and will let you know as soon as we can”. Mobile’s submissions on appeal included, referring to this evidence of Ms Statham, that Vodafone did not put any programmes in place other than the Bankers Trust and NRMA programmes, and that (written submissions para 415) -

“415. In the light of that evidence his Honour was entitled to conclude that Vodafone had no reasonable excuse for failing to put in place the affinity programs which it had undertaken to put in place prior to the June 2001 business plan being agreed and on the basis of which the June 2001 business plan had been agreed. It was not a matter of simply failing to provide information that it had. Vodafone had an obligation to do everything reasonably required to put in place the affinity programs, which duty it palpably failed to discharge.”

312 This departed from the pleaded case. It was not a submission of failure to provide information reasonably required to give effect to the CTA worksheet for the June 2001 quarter. It was a submission of breach of an undertaking to put in place affinity programmes beyond the Bankers Trust and NRMA affinity programmes. When the contemplated affinity partners were Bankers Trust, NRMA and possibly American Express, and affinity programmes with respect to the first two were run, it is far from clear that there was any failure of Vodafone to do what was reasonably required of it. Whatever failure there was, however, was not a failure in providing information relating to Vodafone’s affinity programmes.

313 Without undue repetition, if there had been breach then the assessment of damages by isolating the lost subscribers and giving a ten per cent discount is again open to question. The Bankers Trust and NRMA affinity programmes brought only four new connections. Why would something more extensive, although it is not known what, have brought anything like 400 new connections? The parties’ expectation as reflected in the agreed CTA worksheet appears to have been astray, and provided no basis for the assessment. The judge said only, in relation to all 2296 new connections in the June 2001 quarter, that “In terms of causation and damages it seems to me that Mobile has made good its claim” to the loss of a chance to obtain the remuneration on the subscribers (para 843). With respect, this did not adequately deal with the difficulty of the assessment of damages.

314 In my opinion, Mobile did not establish the pleaded breaches of contract, and claim 4 fails.

Claim 1 - ACM Agreement dispute

315 To repeat, by the ACM Agreement Vodafone Pty Ltd agreed to provide 30,000 customers to Mobile by 30 June 2000, to be managed by Mobile under the ASP Agreement. In awarding the damages of $2,467,000 under claim 1 the judge spoke of “Mobile’s obvious entitlement to claim both repudiation and breach of this agreement” (para 804), and his finding of breach was otherwise in terms of Vodafone’s “clear repudiation of the agreement” (para 801) and that Vodafone “simply point blank repudiated the agreement” (para 804). The damages were assessed on a number of “assumptions” (para 811) material to the Management Fee which Mobile would have received had the customers been transferred to it, with a discount for vicissitudes.

316 Vodafone’s defences to this claim included that the ACM Agreement had been terminated by agreement in May or June 2000, alternatively that it had been mutually abandoned prior to 1 July 2000, and alternatively again that Mobile was estopped from requiring performance founded on representation by Mobile that it would not require Vodafone to provide the customers. There were other defences.

317 The defence of termination by agreement and the estoppel defence were found unfavourably to Vodafone, as were the other defences. As to the defences of termination by agreement and estoppel, the judge said -

in reliance

318 The judge did not deal specifically with the defence of abandonment. On appeal Vodafone relied only on abandonment of the ACM Agreement. It submitted that the evidence showed that by the end of June 2000 neither party regarded the ACM Agreement as being on foot or intended that it should be further performed, and that the parties “had so conducted themselves as mutually to abandon or abrogate the contract”: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434. If it failed on that defence, Vodafone did not dispute the assessment of damages.

319 Mobile listed on the Australian Stock Exchange on 25 June 1999. Its prospectus forecast that its subscriber base would be 160,000 customers by 30 June 2000. By March 2000 Mobile had come to think that it would not achieve the customer base. That led to discussions with Vodafone in which Mobile obtained Vodafone’s agreement to provide the 30,000 customers to it.

320 The letter embodying the ACM Agreement made indiscriminate references to Vodafone, perhaps including when the relevant organisation was either Vodafone Pacific Ltd or Vodafone Network Pty Ltd and even when it was Vodafone Billing Services Pty Ltd. The pleadings nonetheless alleged and admitted an agreement with Vodafone Pty Ltd. The letter read -

“As per our discussion, this letter sets out the terms upon which Vodafone has agree to provide Mobile Innovations with 30,000 additional customers in respect of which MI will undertake customer management services (as set out in the ASP Agreement).

1. Vodafone agrees to have all these relevant customers available for Mobile Innovations to commence billing by no later than 30th June 2000.

· Migrating existing Vodafone billed customers to Mobile Innovations for billing management & customer care.

Or/

· Providing Mobile Innovations with the responsibility to manage billing & customer care of new customers connecting to Vodafone.

Or/

· Combination of Migrating existing Vodafone billed customers & provision of new customers connecting to Vodafone for the purpose of billing management & customer care.

· Quarterly Billed Customers $4.75

· Monthly Billed Customers $7.00

This excludes current cost to manage rates for low tariff customers as per detailed in the amended agreement.

Vodafone would negotiate a separate cost to manage rate for monthly billed customers if it were to propose Mobile Innovations managing new, monthly billed, customers connecting to Vodafone network in excess of the 30000 customers committed.

4. Should Vodafone choose one of the migration options outlined above, Mobile Innovations will use best endeavours to transition all (current and migrated $10 monthly billed customers) to quarterly billing by 1st July 2000.

5. MI must undertake the customer management services for the benefit of these customers as Vodafone’s agent in accordance with MI’s obligations under the ASP Agreement (as amended).

321 On 18 April 2000 Vodafone told Mobile of problems in “migrating” existing Vodafone customers to Mobile.

322 On 5 May 2000 Mobile wrote to Vodafone -

“As you are aware, it was agreed in March that Vodafone would transfer 30,000 customers to Mobile Innovations prior to the 30th June 2000.

This commitment formed the basis of our ASX disclosure that MOB would be on target for customer growth to 160,000 customers by the end of June 2000.

It appears obvious that there is no clear strategy within Vodafone to effect this transfer. Several unacceptable ‘smoke and mirror’ solutions have been tabled, but no activity has occurred and the project once defined, is now likely not to hit the 30 June deadline.

I have a duty to report this failure to the Mobile Innovations Board on Tuesday 9th May and subsequently would assume that our duty is to communicate this shortfall in our subscriber growth to the ASX, financial markets & shareholders.

We have been attempting to avoid the resultant negative publicity surrounding the inability of Mobile Innovations to grow since the demise of the Network organization, however this will become the subject of some media and financial market scrutiny if we are forced to declare our under-performance. Further it is clear that the lack of growth is driven by competitive pressure which Mobile Innovations has been unable to respond to, due to Vodafone’s end of Financial year constraints, and the current lack of an agreed plan going forward.

If an adequate solution does exist, I would ask that Vodafone communicate the detailed project plan with timelines to Mobile Innovations so that we can assess its feasibility prior to the Board Meeting on Tuesday.”

323 Vodafone replied on 8 May 2000, saying that it was “looking at possible options to enable Vodafone to transfer a group of subscribers to your base for Management purposes” and that Vodafone was “doing all it can to resolve this issue as quickly and as economically as possible and you will be kept informed of our final position”.

324 At the time there were wider discussions on planning for what was described as Vodafone’s direct marketing channel strategy. On 10 May 2000 Vodafone wrote to Mobile -

“After more detailed investigation into Vodafone migrating subscribers from Gemini to Mobile Innovations, it has become clear that this is not a viable option. Amdocs has estimated the cost of the migration at $500K and the time for completion at 4months minimum. Clearly this was not the intent of the parties at the time this option was put forward.

As discussed, we have considered other options which may temporarily satisfy your requirements, including the option of Vodafone leasing the customers from Mobile Innovations. However, this particular option also lacks viability as it does not provide a reliable solution for the achievement of customer numbers plus the cost to manage doubles.

It is very clear that the last two quarters have been extremely competitive in ‘off the page’ channel with the introduction of ‘B’ Mobile and OneTel’s ‘BYO’ promotion. Thirdly Optus Direct was launched and has since intensified its activity in this channel.

Therefore we would prefer to concentrate our efforts on continuing to implement the Vodafone channel strategy and delivering future growth. …”

325 Mobile was not impressed. On 12 May 2000 it wrote to Vodafone pointing out the significance of the 30,000 customers to its prospectus forecast, and saying -

“The agreement to transfer the 30,000 subscribers was absolute and unconditional. It was not an ‘option’ – the only option that Vodafone retained was the choice of which customers were to be transferred.

We have sought legal advice, which confirms that the agreement between Mobile Innovations and Vodafone in relation to the transfer of the 30,000 subscribers is legally binding. The recent letter from Julian Ogrin clearly shows that Vodafone is not now prepared to meet its contractual obligations. We are currently seeking advice on what remedies would be open to Mobile Innovations in relation to this breach of contract by Vodafone.

…

This now means that Mobile Innovations is in an untenable position. Mobile Innovations has always worked with Vodafone to support it in all communications with the financial markets and institutions, but I fear that we are now at a stage where some difficult and unpalatable disclosures will soon need to be made as part of this company’s continuing disclosure obligations. It is in our view crucial that both the subscriber’s transfer and outstanding operational issues are resolved as a matter of urgency.”

326 Vodafone replied on 19 May 2000 -

“I refer to your letter of 12 May 2000 and our subsequent discussions.

I emphasise the fact that my letter of 16 March 2000 was never intended to commit Vodafone to incurring significant costs or administrative time in transferring 30,000 customers to Mobile Innovations. Unfortunately, Vodafone cannot agree to incur such costs or administrative time. Nevertheless, Vodafone remains keen to discuss with you alternative arrangements whereby the customer transfer issue is resolved on a commercially sensible basis for both parties. In this regard, I am happy to meet with you as soon as possible to discuss alternative arrangements.

I look forward to further discussing this matter with you.”

327 Mobile replied on the same day -

“Thank you for your letter received this afternoon in response to my letter to Mike Buckling dated 12th May. I am unaware of the subsequent discussions between us referred to in your letter.

Your assertion that you had not considered costs or administrative time is of no relevance to the central issue outlined in my letter to Mike Buckling. As stated in my previous letter, we believe that the agreement to transfer the 30,000 subscribers by 30th June is legally binding.

A week has now passed, and the issues surrounding our continuous disclosure obligations, which were then urgent, have now become critical. In addition, this company will suffer serious financial loss as a result of Vodafone’s failure to honour its legal obligations. By your correspondence to us, it is clear that Vodafone has no intention to perform, or is unable to perform, its obligations under the agreement. As such, we must give full consideration to our legal rights, including, if necessary an election to terminate the contract and institute proceedings for damages. Mobile Innovations continues to be willing and able to perform its obligations under the agreement.

I note your suggestion that we meet, and I am happy to do so to consider what alternative arrangements you may wish to propose. In view of the time constraints I think it would be unproductive to enter into discussions without being in receipt of your written proposals prior to any such meeting. Time is now of the essence in relation to our various announcements to both the ASX and the Investment Community. We cannot delay the necessary communication beyond close of Business on Tuesday 22nd May. Our meeting will therefore need to take place on Monday. Obviously I am prepared to make any time available to resolve this matter at the eleventh hour, and subject to receiving your written proposals, look forward to your suggested time for the meeting.”

328 Apparently as the contemplated written proposals, Vodafone produced a “Channel Strategy Direct & Online”. It was discussed with Mobile at a meeting on 25 May 2000. Mobile said at the meeting that it had not yet decided whether to take legal action regarding the ACM Agreement.

329 In a letter to Vodafone dated 25 May 2000 Mobile described the discussion that day as “most productive”, referring to “key issues we need to address before we can make a positive announcement to our shareholders” and attaching a spreadsheet which “summarizes a plan we jointly believe is possible and should be budgeted for within Vodafone”. The letter concluded -

“When these issues are agreed and a budget signed off, which we suggest is early next week (w/c 29th May), Mobile Innovations needs to address its subscriber shortfall for the current year, and talk up the commitments in the next financial year. This together with the Baird IV, would satisfy Mobile Innovations and its shareholders that Vodafone are serious about providing growth to Mobile Innovations as an integral part of its channel strategy.

I look forward to your confirmation of the above, which I hope is a fair reflection of our discussion this morning.”

330 There followed further correspondence on the “key issues”, without specific reference to the provision of the 30,000 customers. Mobile did not on 1 June 2000 begin charging the new cost to manage rates in the letter.

331 On 8 June 2000 Mobile issued an announcement to the Stock Exchange. It was headed “Tough mobile phone market causes subscriber shortfall for Mobile Innovations”, and began -

“The Board of Mobile Innovations today announced that its subscriber numbers would fall short of prospectus forecasts by 20% for the year ending 30 June 2000.

Mobile Innovations had previously stated it was confident in meeting subscriber numbers of 160,000 for the June year-end based on an agreement with Vodafone that would have resulted in Mobile Innovations’ acquiring an additional 30,000 Vodafone customers. It is now highly unlikely that those customers will be acquired by 30 June 2000. Mobile Innovations’ subscriber base at 30 June 2000 is now expected to be approximately 130,000.

Mobile Innovations’ Chairman Will Jephcott said the outcome was disappointing. Significantly increased marketing spend [sic] by competitors and the impact of prepaid mobile phones have made it extremely difficult to achieve the forecast growth in subscriber numbers.

Mobile Innovations has an exclusive 10-year Agent Service Provider agreement with Vodafone under which it provides subscribers to Vodafone from non-electronic direct marketing sources. Mobile Innovations’ marketing budget and strategy is set in conjunction with Vodafone and discussions are continuing to develop plans to compete more successfully in the current market place.

The roll out of both v.mobile and Vodafone Direct is expected to provide major stimulus to new subscriber growth. Both of these products were launched too late in this financial year to have a significant impact on the 30 June 2000 subscriber numbers.”

332 Although Mr Marchbank of Mobile said that the ACM Agreement was “brought up from time to time in discussions”, until March 2001 the provision of the 30,000 customers was not thereafter raised between Mobile and Vodafone by insistence on the provision of the customers or assertion of an entitlement to damages for failure to provide them. On 9 March 2001, however, Mobile’s lawyers wrote to Vodafone asserting breach or apprehended breach of the ASP Agreement in a number of respects and breach of the ACM Agreement; as to the latter, they said -

“2.1 Pursuant to the ACM Agreement, Vodafone agreed to provide MI with 30,000 additional customers by 30 June 2000. This transfer did not occur by that date and has still not yet occurred. Accordingly, Vodafone is in breach of its obligations under the ACM Agreement. MI is suffering loss and damage as a result of this breach and all its rights are reserved.”

333 In due course breach of the ACM Agreement was alleged in Mobile’s summons.

334 Vodafone submitted that by 30 June 2000, if not earlier, the parties by their conduct had abandoned the ACM Agreement. Although it did not provide the 30,000 customers, it said, a direct marketing strategy was arrived at to Mobile’s satisfaction which removed from contention the provision of the customers. The agreement was abandoned because a satisfactory alternative had been found. Hence, it said, the absence of any complaint of failure to provide the customers after 25 May 2000 until the lawyers’ letter of 9 March 2001, which it said was particularly significant when Mobile generally took every opportunity to insist on what it saw as its entitlements. Hence also, it said, Mobile’s failure to move to the new cost to manage rates.

335 I do not think that this submission should be accepted. Vodafone had made clear enough, by the letter of 10 May 2000 and again by the letter of 19 May 2000, that the 30,000 customers would not be provided. Mobile had asserted that Vodafone was in breach of contract, and had said that it was considering its legal rights. It was not a situation of mutual abandonment of an unperformed agreement. Rather, there was failure of performance by one party protested by the other. That Mobile was willing to discuss alternative arrangements to provide growth via the channel strategy, a strategy which did not include the provision of the 30,000 customers, is not surprising, and did not mean abandonment of the ACM Agreement; nor is it surprising that Mobile did not move to the new cost to manage rates when Vodafone had failed to perform its part of the “package” of which that was part. Nor did Mobile’s failure immediately to prosecute its legal rights mean abandonment of the ACM Agreement. The judge held that it did not bargain away its legal rights, and nothing it did amounted to abandonment for its part of those rights or of the underlying agreement.

The result

336 The declarations and restraining orders should be set aside, and the appeal should be upheld as to the components of the judgment sum in issue save for the damages awarded under claim 1. The cross-appeal should be upheld in relation to idle costs and redundancy costs.

337 The new figures for the judgment can not immediately be stated. I propose that the parties be given the opportunity to agree, or to take up agreement at the trial so far as it may have it extended to the appropriate figures. If they are unable to agree, there can be remission for prompt decision or an order for an inquiry or for reference. The proceedings should be listed for directions in fourteen days time for the Court to be informed whether agreement has been reached and, if not, for consideration of the course to take.

338 It is necessary to return to the form of the orders, now only as to the judgment. The damages awarded under claim 1 should have been awarded only against Vodafone Pty Ltd, the party to the ACM Agreement. Of the components of the judgment sum not in issue on appeal, the damages awarded under claim 2 ($699,000) should have been awarded against either Vodafone Pacific Ltd or Vodafone Network Pty Ltd, the party to the ASP Agreement, and the damages awarded under claim 11 ($234,000) should have been awarded against Vodafone Pty Ltd, the party to the Website Agreement. The judgment with respect to idle costs and redundancy costs should be against either Vodafone Pacific Ltd or Vodafone Network Pty Ltd. The parties should have the opportunity to agree upon the correct judgment debtor, and again if necessary there can be remission for prompt decision of which of the two Vodafone companies was the party to the ASP Agreement.

339 Vodafone has substantially but not wholly succeeded in the appeal and cross-appeal. Nominal damages under claims 6 and 7 were really not what those claims were about, and the question of failure to determine target levels at all was relatively confined. The question of abandonment of the ACM Agreement, while sounding in a large sum of money, was also confined. The questions of idle costs and redundancy costs may or may not sound in a large sum of money, but were also confined. Rather than a complex apportionment by subject matter, I consider that a just disposition of costs is that Mobile pay 80 per cent of Vodafone’s costs of the appeal and cross-appeal.

340 The judge ordered that Vodafone pay 95 per cent of Mobile’s costs of the trial. Mobile’s success on claim 2, the V.Mobile dispute, and claim 11, the Website dispute, was not subject to appeal. Mobile has had some success in the proceedings overall, but much less than its claims. The judge’s order is no longer appropriate, and in my opinion a just disposition of the costs of the trial is that Vodafone pay 25 per cent of Mobile’s costs.

341 I propose the following orders -

(1) Appeal and cross-appeal each allowed in part.

(2) Set aside the declarations in orders 1 to 5, orders 6, 7, 9 and 10 and the judgment made and given on 16 April 2003.

(3) Stand the proceedings over to 12 March 2004 at 9.15 for directions.

342 IPP JA: I agree with Giles JA.

**********

Last Modified: 02/27/2004

Citations

Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15

Most Recent Citation

Cases Citing This Decision

74

UGL Rail Services Pty Ltd v Janik [2014] NSWCA 436

Sigiriya Capital Pty Ltd v Scanlon [2013] NSWCA 401

Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 199

Cases Cited

34

Statutory Material Cited

0

Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11

Suttor v Gundowda Pty Ltd [1950] HCA 35

Water Board v Moustakas [1988] HCA 12

Cited Sections

Actions

Download as PDF Download as Word Document

CITATION:	Vodafone Pacific Ltd & Ors v Mobile Innovations Ltd [2004] NSWCA 15
HEARING DATE(S):	20, 21, 22, 23 October 2003
JUDGMENT DATE:	20 February 2004
JUDGMENT OF:	Sheller JA at 1; Giles JA at 2; Ipp JA at 342
DECISION:	(1) appeal and cross-appeal each allowed in part; (2) Set aside the declarations in orders 1 to 5, orders 6, 7, 9 and 10 and the judgment made and given on 16 April 2003; (3) Stand the proceedings over to 12 March 2004 at 9.15 for directions; (4) Appellant/cross-respondent pay 25 per cent of the respondent/cross-appellant's costs of the trial; respondent/cross-appellant pay 80 per cent of the appellants'/cross-respondents' costs of the appeal and cross-appeal, and have a certificate under the Suitors Fund Act if otherwise qualified.
CATCHWORDS:	Agency contract - engagement by service provider of agent to acquire by direct marketing and manage subscribers to its mobile telephone network - agent conducting Mobile Direct Marketing Operation - construction of provision precluding service provider from dealing with other service providers conducting competitive Mobile Direct Marketing Operation - whether "only" in definition of Mobile Direct Marketing Operation confined preclusion - construction of provision by which service provider set target level for acquisition of subscribers - whether could set target level of nil - whether required target level other than nil - whether terms implied as to good faith and reasonableness in setting target levels - content of implied terms found by judge - whether implication of terms as found precluded by contrary intent in contract - whether implication of terms a process of construction - whether misuse of power in setting target levels - finding of breach in failing to set target levels upheld but other findings of breach overturned - whether loss through failing to set target levels at all proved - whether breaches of other provisions of contract - whether damages for those breaches proved - whether contractual entitlement to payment under other provisions of contract. Transfer contract - agreement by service provider to transfer customers to agent to be managed under agency contract - whether mutual abandonment.
CASES CITED:	Abu Dhabi National Tanker Co v Product Star Shipping Ltd ("The Product Star") (No 2) (1993) 1 Ll R 397; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Australian Broadcasting Commission v Australian Performing Rights Association (1972) 129 CLR 99; Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104; Biotechnology Austrlia Pty Ltd v Pace (1988) 15 NSWLR 130; Breen v Williams (1996) 186 CLR 71; Burger King Corporation v Hungry Jack's Pty Ltd (2001) NSWCA 187; Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468; Butt v McDonald (1896) 7 QLJ 68; Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Codelfa Construction Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Coulton v Holcombe (1986) 162 CLR 1; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; The Eastern Extension Australasia and China Telegraph Co Ltd v The Commonwealth (1908) 6 CLR 647; Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10; Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109; Ferrcom Pty Ltd v Commercial Union Assurance Company of Australia Ltd (1993) 176 CLR 332; Godfrey Constructions Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529; Hart v MacDonald (1910) 10 CLR 417; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; Howard Smith Ltd v Ampol Ltd (1974) AC 821; Lister v Romford Ice and Cold Storage Ltd (1957) AC 555; Mackay v Dick (1881) 6 App Cas 251; Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631; Paragon Finance Plc v Staunton (2002) 2 All ER 248; Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429; Water Board v Moustakas (1988) 180 CLR 491; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598;
PARTIES :	Vodafone Pacific Ltd - First Appellant/First Cross-Respondent Vodafone Network Pty Ltd - Second Appellant/Second Cross-Respondent Vodafone Pty Ltd - Third Appellant/Third Cross-Respondent Mobile Innovations Ltd - Respondent/Cross-Appellant
FILE NUMBER(S):	CA 40322/03
COUNSEL:	T F Bathurst QC & T D Castle - First, Second and Third Appellants/First, Second and Third Cross-Respondents F M Douglas QC & V F Kerr - Respondent/Cross-Appellant
SOLICITORS:	Henry Davis York - First, Second and Third Appellants/First, Second and Third Cross-Respondents Deacons - Respondent/Cross-Appellant

LOWER COURTJURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 50123/01
LOWER COURT JUDICIAL OFFICER :	Einstein J