Axxess Australia Pty Ltd v Primus Telecommunications

Axxess Australia Pty Ltd v Primus Telecommunications - [2000] VSC 64 - VSC 2000 case summary — Zoe

[9]

(a) promote and market the Services to Customers and, in, particular, must carry out its obligations in a manner that reflects favourably on the quality image of Primus and its services and will avoid all circumstances and actions which would place the Agent in a position of conflict of interest with its obligations hereunder or with the general interests of Primus;

(b) achieve the Targets;

(c) maintain a staff of adequately trained and competent sales personnel who have a reasonably adequate knowledge of the specifications, features and advantages of the Services to enable the effective marketing of the Services and make its personnel aware of, and obligate them to comply with, the obligations of the Agent in this Agreement;

(d) cause its employees and to personnel of its sub-contractors to undertake any training provided for the Agent by Primus;

(e) support Primus' sale of the Services to Customers solicited by Agent including, but not limited to:

(i) soliciting orders and Customer Applications;

(ii) promptly forwarding all completed Customer Applications and credit information to Primus;

(iii) promptly informing Customers of the services and support available from the Agent as well as from Primus;

(iv) consulting with Primus concerning additional requests for support, training or services from Customers;

(v) reporting promptly to Primus all known or suspected defects in the Services or any safety problems and keeping Primus informed of Customer complaints with respect to the Services; and

(vi) assisting Primus to resolve Customers complaints;

(f) use Customer Applications, promotional materials, sales literature and sales aids provided by Primus solely in its activities as prescribed by this Agreement and must not use any materials that refer to Primus in relation to any services that have not been approved in writing by Primus;

(g) not make any representations or warranties relating to the Services except as set out in sales literature or forms provided by Primus or as otherwise expressly permitted in writing by Primus;

(h) identify itself as an authorised agent of Primus only with respect to the Services and must otherwise identify itself as a business which is independent of Primus;

(i) not disparage Primus or its affiliates or their products or services, and must not disparage Primus' competitors or the services or products of such competitors;

(j) refer all customers requests for Primus services not covered by this Agreement to the Primus sales manager within one business day of receipt of such a request;

(k) be responsible for the fitness for purpose and compatibility with the Services of any non-Primus software furnished separately by the Agent to any Customer;

(l) keep accurate accounts, books and records relating to the business of the Agent with respect to the Services, in accordance with generally accepted commercial and business accounting principles and practices, that are at least sufficient for Primus to ascertain the Agent's compliance with its obligations under this Agreement;

(m) submit to Primus any Information which:

(i) relates to either the Customers or the Services;

(ii) is requested by Primus;

(iii) is in the possession custody or control of the Agent; and

(iv) the Agent may lawfully disclose;

(n) comply with all of Primus' written policies, procedures and directives provided to the Agent; and

(o) report to and comply with all reasonable directives from the Manager."

[14]

(a) If the Agent breaches any of its obligations under this Agreement and fails to remedy that breach within a period of 15 days after Primus has given the Agent written notice specifying the breach;

(b) If the Agent:

(i) enters into liquidation;

(ii) becomes insolvent;

(iii) has a receiver, receiver or manager, administrator, provisional liquidation or other corporate controller of its assets or any part of them appointed;

(iv) makes any composition or arrangement with its creditors;

(v) has any final judgment against it unsatisfied for 30 days or execution levied against any of its assets; or

(vi) has any of its assets sold or seized pursuant to any mortgage charge or other encumbrance;

(c) if any director of the Agent who is or has been actively involved in carrying out the obligations of the Agent, should be made or declared bankrupt or becomes incapable of managing his own affairs;

(d) if the Agent being an individual, should die or be made or declared bankrupt or becomes incapable of managing his own affairs;

(e) if all or any fundamental part of this Agreement becomes void, illegal, invalid, unenforceable, or of limited or reduced force or effect;

(f) if there is any change in ownership or effective control of the Agent or any company of which the Agent is a subsidiary;

(g) if any action is initiated by any competent authority with a view to striking the Agent's name off any register of companies;

(h) if the Agent fails to meet or exceed 80% of the Target in any two consecutive billing periods;

(i) if the Agent or any director of the Agent is found guilty of any charge of fraud or dishonesty, engages in any deceptive trade practices under Australian law or breaches any of the statutes specified in clause 5; or

(j) if Primus is unable to perform its obligations under this Agreement as a result of any action taken by any body involved in the regulation of telecommunications in Australia (including without limitation the Australian Communications Authority, the Australian Competition and Consumer Commission or the relevant government minister).

12.2 Either party may terminate this Agreement effective immediately by written notice, if or when representation, report or claim in relation to this Agreement; or

(a) intentionally or in a wiful, wanton or reckless manner, made any material false representation, report or claim in relation to this Agreement; or

(b) violated the other's copyright, trade mark or other intellectual or industrial property rights."

[38]

From about September 1999 as part of the verification procedures and in order to avoid future non-compliance Primus established a data base of complaints by customers concerning the actions of sales personnel referred to as "doorknockers". Thereafter Primus had an arrangement in place as part of its compliance procedures of recording complaints in writing from customers with respect to doorknocking sales personnel and "logging on" such complaints and referring those in due course to Axxess. Primus alleged that during the period from 1 September 1999 to 18 February 2000 it logged 241 complaints on its data base that it alleged had been made against Axxess. In summary the complaints were categorised as concerned with matters of harassment and coercion, deceptive and misleading conduct and other types of undesirable conduct. Examples of complaints made against the activities of sales staff employed by Axxess were that they allegedly told customers that the signing of a churn form was a request for further information, they allegedly told customers that Primus is part of Telstra or that Primus represented Telstra or that Telstra was no longer providing particular telephone services. There were also allegations of instances where persons were induced to sign churn forms who were unauthorised to do so. It was suggested on behalf of Axxess that the complaints had been resolved, for example, by way of terminating the services of the particular sales person or on the basis that the sales person no longer was employed by Axxess and other various means. It was also suggested by Axxess that many of the complaints in any event were stale their relating to events in 1999. In particular, Axxess emphasised that of the total number of complaints alleged against it by Primus only a handful related to events since 1 January 2000 in the context of approximately 22,000 new customers attracted by Axxess to Primus during the month of January 2000. I was not informed as to the total number of encounters between Axxess sales personnel and potential customers.

[45]

In support of the submissions emphasis was placed on the fact that Axxess has a limited control upon its sales staff out in the field. The example was given that Axxess cannot directly control the activities of its sales staff during encounters with potential customers of Primus other than to take every reasonable effort to ensure that the staff are aware of the relevant guidelines and standards of conduct required of them. In this respect Dr Pannam placed further emphasis upon the allegation that officers of Primus had informed officers of Axxess that a complaint rate of 0.3% was acceptable in all the circumstances. Dr Pannam, on the basis of the current complaint figures (for the period January 2000) urged the conclusion that the complaint rate was below the level of 0.1% and, therefore, well within the rate accepted by Primus. These matters are not necessarily agreed upon between the parties and at trial there may well be a dispute on these matters. Nevertheless, I am satisfied that there is a serious question to be tried upon the proper construction of clause 12.2(a) of the agreement as to two matters. Firstly, whether the alleged representation report or claim must relate to a provision of the agreement itself as distinct from a matter arising from or outside the agreement. Second, whether it is necessary for Primus to establish the existence of the state of mind of Axxess at the time of the relevant events for the purposes of satisfying clause 12.2(a) of the agreement. It might be argued that the first serious question to be tried that has been identified is a matter that could be determined at an interlocutory level. On the basis of the extensive disputation between the parties during the interlocutory hearing I am not disposed to make that determination. In any event even if the construction urged by Dr Pannam on behalf of Axxess is ultimately found at trial to be wrong with respect to whether the representation must relate to the agreement itself or can relate to a matter arising from or outside the agreement I am satisfied that the issue of the requisite state of mind of Axxess for the purposes of clause 12.2 of the agreement is a matter that can only be determined at trial.

[61]

I consider, therefore, that subject to satisfaction with respect to the balance of convenience there is no obstacle to an injunction being granted as sought notwithstanding that it necessarily involves specific performance of a service agreement. I turn to consider the balance of convenience. Dr Pannam urged that the balance of convenience was "all one way". He relied upon the submission that Axxess is the most successful agent of Primus and as a consequence brings enormous business to Primus. It was urged that there would be no real damage caused to the defendant by the existence of the injunction sought. By contrast, it was urged that the absence of the injunction would be utterly devastating for Axxess as it would effectively destroy its business. On the basis of the affidavits filed by Mr McGovern on behalf of Axxess it is apparent that the entire business of Axxess, which is substantial, has been built upon the existence of the agreement between it and Primus. The fact remains that Axxess was a sole purpose company established for the very purpose of providing the service that is the subject of the agreement between the parties. In addition, reliance was placed upon the fact that Axxess had gone to extensive expense and effort to establish its business, for example, engaging and training personnel and entering into leases for office premises. Particular emphasis was placed upon the fact that the existing staff particularly the 230 sales representatives constituted a personnel structure that would be lost in the event that the agreement was permitted to be terminated. In this respect, emphasis was placed upon the unrebutted assertion that sales representatives of Axxess since the purported termination on 17 February 2000 have been approached by a competitor of Axxess, Global, the other provider to Primus. Finally, reliance was placed upon the allegation that an officer of Primus had told an officer of Axxess that the reason underlying the termination on 17 February 2000 was because Primus wished to conduct the business itself.

[66]

The remaining issue for me to consider with respect to the balance of convenience is a foreshadowed service of an additional notice of termination by Primus on Axxess. Shortly before the commencement of the hearing of the application Primus filed an affidavit sworn by one Marcus Joseph Hoyne on 29 February 2000. Mr Hoyne is a solicitor retained for Primus in the proceeding. Exhibited to his affidavit was a copy of a document described as "the current draft termination notice". Mr Hoyne deposed that depending upon the outcome of the injunction application he was instructed by Primus to serve the exhibited draft termination notice upon Axxess. He deposed that he was instructed that there were additional breaches upon which Primus intended to rely. The draft notice purports to be a notice prepared pursuant to clause 12.1(a) of the agreement. The draft notice alleges that in breach of clause 4.1(a) of the agreement Axxess failed to promote and market services in that it engaged "doorknockers" who have made false and/or misleading representations to customers and that a doorknocker attempted to physically attack a potential customer of Primus. The draft notice alleges, also, that Axxess has failed to maintain sales staff who are adequately trained and competent. There are other allegations made also. The draft notice purports to rely upon matters contained in affidavits and exhibits to such affidavits that are filed in the present proceedings. It was submitted by Mr Macaw that the foreshadowed service of a fresh notice of termination pursuant to clause 12.1(a) is a factor that ought weigh in my discretion in determining where the balance of convenience lies. The submission is tantamount to the effect that it would be a waste of time to grant the injunction sought as immediately thereafter a further notice of termination will be served in any event by Primus upon Axxess. The response of Dr Pannam was that such obstacle would be dealt with by Axxess if and when it arose. As matters stand, in my view, it is entirely inappropriate for Primus to place before the court an intended notice of termination. I do not regard the foreshadowed notice of termination as exhibited to the affidavit of Mr Hoyne as a factor that I should take into account in assessing where the balance of convenience lies. In making the assessment that I do I must deal with actual circumstances and not speculated circumstances. I make the additional observation that in any event as the matters relied upon in the foreshadowed notice of default appear to be intertwined with issues that are the subject of the present proceeding this court if requested may well give consideration to enjoining Primus from service of the foreshadowed notice of termination pending the outcome of the present proceeding or, alternatively, direct that those matters be dealt with at the same time as this proceeding. Ultimately, the issue of the foreshadowed Notice of Termination is a matter for another day.

At a glance

Court

Decision date

Before

Source

Judgment (69 paragraphs)

Parties

Cases Cited (5)