Axxess Australia Pty Ltd v Primus Telecommunications

8. The practice of persuading long distance telephone customers to transfer from an existing provider to a different provider is commonly referred to in the telecommunications industry as "churning". In order to achieve its desired level of churning Primus retained the services of the plaintiff, (formerly known as Clos P/L but changed to Axxess Australia P/L, ("Axxess"). Axxess is a company formed for the sole purpose of providing promotional and marketing services to Primus. It, together with another company unrelated to Axxess, Global Sales Ltd ("Global"), enjoys a monopoly over the provision of promotional and marketing services to Primus.

11. By an undated written agreement said to have been executed in January 1999 ("the agreement") Axxess agreed to provide promotional and marketing services to Primus with respect to attracting long distance telephone customers from other providers. The agreement was for a term of two years but subject to such further term as was agreed to by the parties.

14. For the purposes of providing its services Axxess took various steps in relation to its physical and human resources. By February 2000 it, through a related company called "Nexxus", employed a workforce of 30 full-time staff together with a sales staff of 230 persons. Axxess also has ongoing costs related to staff recruitment, travel and training of about $22,000 per month. Axxess leased office accommodation in Melbourne, Sydney, Brisbane and Perth for terms up to four years and established other office facilities in Adelaide, the Gold Coast and Hobart. It appears that the primary sales technique used by Axxess is to engage in doorknocking by its sales staff at the premises of potential customers. The basic modus operandi of Axxess is to send sales personnel out into the field to knock on the doors of potential customers and to endeavour to persuade such customers to transfer from their current long distance provider to Primus. From time to time this direct method of selling has given rise to complaints by customers. The complaints spanned allegations against doorknocking sales staff of harassment, misrepresentation, threats of violence and the like. The number of complaints against sales representatives engaged by Axxess has been a few hundred complaints in the context of thousands of encounters with customers. I will return to the nature and extent of the complaints as they lie at the heart of the dispute in these proceedings. Nevertheless, it should be observed that Axxess has been successful in attracting customers to Primus. So much is borne out by the undisputed fact of the Axxess sales figures. In January 1999 Axxess attracted approximately 2,500 customers to Primus. The numbers spiralled during the following 12 month period reaching approximately 22,000 customers in January 2000.

17. It is appropriate to consider the terms of the agreement. Clause 4.1 of the agreement sets out the responsibilities of Axxess to Primus, in particular, the carrying out of its promotional and marketing activities in a manner favourable to the image of Primus and maintaining competent sales personnel. Under the agreement, Axxess is referred to as "the Agent". Clause 4.1 provides:

(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."

24. Clause 6 of the agreement requires Axxess to engage sub-contractors approved by Primus and to ensure that such sub-contractors are bound by the same obligations under the agreement as apply to Axxess. Clause 6 provides:

(a) not engage sub-contractors to perform any of its obligations under this Agreement without prior approval of Primus, which approval shall not be unreasonably withheld;

and

(b) ensure that all sub-contractors approved by Primus and contracted by the Agent shall be subject to the terms of this Agreement and bound by the obligations applicable to the Agent as if they were party to this Agreement."

31. Clause 12 of the agreement sets out, importantly, the manner in which the agreement may be terminated. It provides four methods of termination. Firstly, immediate termination on written notice in the event of Axxess failing within 15 days to remedy a breach after receiving written notice specifying the breach. Secondly, immediate termination on written notice in the event of the insolvency of Axxess or any of its directors. Thirdly, immediate termination on written notice in the event of any of various circumstances arising such as a fundamental part of the agreement becoming void, a change in ownership of Axxess, failure by Axxess to meet defined sales targets or, most significantly, if Axxess engages in any deceptive trade practices contrary to Australian law. Fourthly, and most significantly for present purposes, the agreement provides for immediate termination by either party by written notice upon becoming aware of a false representation made by the other party in relation to the agreement or the violation of intellectual or industrial property rights by the other party. Clause 12 provides (in sub-clauses 12.1-12.2):

"12. TERMINATION 12.1 Primus may terminate this Agreement immediately by notice in writing to the Agent without prejudice to any claim that Primus may have against the Agent under this Agreement or otherwise:

(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. The remainder of the termination provision sets out the obligations of Axxess in the event of termination. Of potential importance in this proceeding is the deletion from clause 12 of sub-clause 12.3. It provided that either Primus or Axxess could terminate the agreement without needing to show cause by giving 30 days' written notice to the other party. The sub-clause was struck from the agreement.

41. Clause 17 of the agreement limits the aggregate liability of Primus to Axxess whether for breach of contract, in tort, under statute or otherwise to the sum of $200,000. Furthermore, sub-clause 17.2 provides that Axxess bears all liability for the acts of its sub-contractors and renders Primus not liable for any obligation that Axxess has to its sub-contractors. It provides:

"17. LIABILITY 17.1 Except as required by law, Primus' total aggregate liability to the Agent, whether for breach of contract, in tort, under statute or otherwise, is limited to $200,000. The parties agree that Primus shall not be liable to the Agent for any special, incidental, consequential, or any other indirect loss or damage whatsoever, arising out of or in connection with the performance of this Agreement. 17.2 The Agent assumes all liability for any acts or omissions of its sub-contractors as if they were the acts and omissions of the Agent. Primus is not liable for and does not guarantee the performance of any obligation which the Agent may have to its sub-contractors, including the payment of any remuneration and the Agent will so inform any sub-contractors it appoints."

45. Clause 21.4 provides that the failure or omission of a party to enforce or require the strict observance of compliance with any term of the agreement does not operate as a waiver of the rights of that party under the agreement.

48. The agreement provides a complex structure for the remuneration of Axxess upon achieving new customers for Primus. In summary the agreement provides that Axxess is entitled to be paid monthly in arrears 5% of the total of the Axxess customer base spending on long distance calls for a period of 12 months, a one off bounty of $35 for each customer achieved by Axxess for Primus and a verification fee of $1 for each application form submitted to Primus together with 16 cents per "form data entered". The bounty of $35 per customer is subject to a $35 claw back payable to Primus in the event of certain circumstances such as the customer not using the service or cancelling the service within a stipulated period. The agreement between Primus and Axxess has proved lucrative. On the most recent figures before the court the total income generated for Axxess from Primus is between $860,000 and $880,000 per month or over $200,000 per week.

51. It is next appropriate to turn to the history of complaints about the sales representatives engaged by or on behalf of Axxess.

54. On 10 August 1999 Primus wrote to Axxess reminding the latter of the right of termination of Primus under clause 12.2 of the agreement. The letter stated:

"As you will be aware, clause 12.2 of the Agreement provides that Primus may immediately terminate the agreement by written notice if the agent has intentionally or in a wilful, wanton or reckless manner, made any material false representation, report or claim in relation to the Agreement. Primus has become aware that you have breached at least those provisions in the agreement referred to above. We have received numerous affidavits from the solicitors for Telstra as well as other evidence regarding misleading or deceptive conduct by you in relation to doorknocking activities on behalf of Primus. Accordingly, Primus hereby immediately terminates the agreement pursuant to clause 12.2."

58. The letter went on to inform Axxess that Primus was under threat of litigation and purported to remind Axxess of its obligations upon termination of the agreement. It appears that the August 1999 letter of termination was never acted upon by Primus. So much is borne out by subsequent correspondence between Primus and Axxess to the effect that subject to the immediate implementation of certain measures with respect to sales personnel retained by or on behalf of Axxess the agreement was for all intents and purposes not terminated. Indeed so much is borne out by the fact that after the letter dated 10 August 1999 from Primus to Axxess the parties continued with their arrangements under the agreement until February 2000. Throughout the month of August 1999 Primus wrote to Axxess on a number of occasions setting out its requirements for compliance by the sales staff of Axxess with procedures set in place by Primus. On 27 August 1999 Primus wrote to Axxess advising that proceedings had been issued by Telstra Corporation Limited ("Telstra") against Primus and a related company, Primus Telecommunications Pty Ltd. The letter advised that orders were made by North J of the Federal Court on 27 August 1999 that Primus be restrained from making specific representations in trade or commerce in relation to the provision of its long distance telephone services. Orders were made by consent by the Federal Court on 27 August 1999 as follows:

"1 The Respondents ("Primus") be restrained from making representations in trade or commerce to the following effect:

(i) That an Application to Change Long Distance Telephone Company form proffered for or on behalf of Primus to the customers for signature ("the Primus Churn Form"):

(A) does not, when signed, constitute an authority and request to transfer the customer's long distance telephone service pre-selection from another supplier to Primus; or

(B) has a purpose or effect other than the transfer of the customer's long distance telephone service pre-selection to Primus;

(ii) that the Primus Churn Form is a form which the customer is required to sign in order to gain access to Primus using an override code for his or her long distance calls;

(iii) that the Primus Churn Form, when signed, constitutes merely an expression of interest by the customer in switching to Primus for long distance telephone services;

(iv) that the Primus Churn Form when signed, constitute merely a request to be provided with further information about Primus or its rates;

(v) that the Primus Churn form when signed, constitutes merely an acknowledgment that the Primus representative had spoken to the customer;

(vi) that the Primus is taking over from Telstra the provision of long distance calls to enable Telstra to focus on the provision of local calls;

(A) the new name for Telstra's long distance call division or branch;

(viii) that in circumstances where the customer has been misled into signing the Primus Churn Form and/or has not authorised or intended to authorise the transfer of the customer's long distance telephone service pre-selection to Primus, the customer's pre-selection to Primus can only be reversed and transferred back to Telstra for long distance telephone services if the customer presents to Telstra a carrier authority or similar form authorising the transfer.

2. Primus comply with the verification procedure set out in paragraphs 6, 7 and 8 inclusive of the written undertakings given by the respondents to the applicant dated 19 June 1998, a copy of which is annexed hereto and marked with the letter 'A' (being exhibit 'AMJ1' to the Affidavit of Agata Maria Jarbin dated 23 August 1999 filed in this proceeding).

3. That the motion for interlocutory relief by Notice dated 20 August 1999 and the directions hearing be adjourned to 8 October 1999.

79. Annexed to the Order made by the Federal Court was a series of undertakings given by Primus to Telstra principally setting out verification procedures to be carried out by Primus before a customer "churned" from Telstra to Primus. In correspondence from Primus to Axxess during the month of August 1999 Axxess was asked to comply with the verification procedures that were the subject of the undertaking by Primus to Telstra. In the course of communications between Axxess and Primus, Axxess substantially agreed to do so.

82. 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.

85. Arrangements between Primus and Axxess came to a head on 17 February 2000 when Primus wrote to Axxess purporting to terminate the agreement pursuant to clause 12.2 of the agreement on the basis that Axxess had made false representations in relation to the agreement. The relevant parts of the letter dated 17 February 2000 stated:

"As you will be aware, clause 12.2 of the Agreement provides that Primus may immediately terminate the Agreement by written notice if Axxess has intentionally or in a willful, wanton or reckless manner, made any material false representation, report or claim in relation to the Agreement. Clause 17.2 of the Agreement provides that Axxess assumes all liability for any acts or omissions of its sub-contractors as if they were the acts and omissions of Axxess. It is clear that Axxess has breached at least those provisions in the Agreement referred to above, notwithstanding several warnings from Primus and your repeated promises to remedy the matter. We enclose a number of customer complaints which we have recently received regarding Axxess. These complaints have been investigated and the agent in question found to have engaged in conduct in breach of the agreement. As you are aware, we have also received numerous affidavits from the solicitors for Telstra regarding misleading or deceptive conduct by Axxess in relation to doorknocking activities on behalf of Primus. As a result of Axxess' conduct, Primus is now involved in litigation, which remains with risk of considerable detriment to Primus. Accordingly, Primus hereby immediately terminates the Agreement pursuant to clause 12.2."

89. Attached to the letter of 17 February 2000 were five pages setting out the details of five separate complaints made by customers in November and December 1999 and January 2000.

92. Following receipt of the letter of termination dated 17 February 2000 Axxess obtained an interim injunction granted ex parte by Nathan J on 18 February 2000 restraining Axxess from terminating the agreement and preventing or hindering the plaintiff from performing its obligations under the agreement. The matter came before me sitting in the Commercial List on the return of the application for an interlocutory injunction pending trial of the proceeding.

95. There was no issue between the parties that the first matter about which I must be satisfied before granting the injunction is that there is a serious question to be tried (see Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398); A. v. Hayden (No. 1) (1984) 56 A.L.R. 73, at 78; 59 A.L.J.R. 1, at 4, per Dawson J.; Castlemaine Tooheys Ltd. v. State of South Australia [1986] HCA 58; (1986) 67 A.L.R. 553, per Mason A.C.J.; Murphy v. Lush [1986] HCA 37; (1986) 65 A.L.R. 651, at 652-3; [1986] HCA 37; 60 A.L.J.R. 523, at 524.) The second matter is to determine where the balance of convenience lies. The third matter, although essentially intertwined with the second matter, is whether damages are the appropriate remedy available to the plaintiff.

98. Dr C. Pannam QC who appeared with Mr J. Elliott for the plaintiff submitted that there were a number of serious questions to be tried. The first question was submitted to be one of the construction of clause 12.2 of the agreement. Essentially the question was whether the facts as before the court could demonstrate that Primus had discovered that Axxess had itself either intentionally or in a wilful, wanton or reckless manner made a material false representation in relation to the agreement. The issue arises because the notice of termination contained in the letter dated 17 February 2000 purports to rely upon clause 12.2 of the agreement and the complaints received by Primus were made with respect to the conduct of sales staff engaged by or on behalf of Axxess. Dr Pannam submitted that clause 12.2(a) of the agreement required Primus to have discovered the state of mind of Axxess with respect to any material false representation in relation to the agreement itself, that is, not a matter outside the agreement. Dr Pannam made three submissions with respect to the construction of clause 12.2(a) of the agreement. First, that clause 12.2(a) is prima facie attracted when a party to the agreement has made a "material false representation, report or claim" in relation to the agreement itself as distinct from some particular provision of the agreement. Second, in light of such circumstance, before clause 12.2(a) can be breached, it was submitted, that it is necessary that the existence of the specified personal state of mind of the party to the agreement who has made the false representation report or claim must exist. Third, following from the first two submissions, a party to the agreement cannot be found to be in breach of clause 12.2(a) by reason of some vicarious or attributed state of mind and conduct of some other person.

101. 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.

104. In support of the view that there is a serious question to be tried with respect to the alleged necessary link between the conduct alleged and the agreement itself it is arguable in my view that the focus in clause 12.2(a) is upon conduct that relates to the agreement itself rather than conduct which might constitute a breach of any particular obligation contained in it.

107. With respect to the words in clause 12.2(a) "intentionally or in a wilful, wanton or reckless manner" it is arguable that the identified conduct must be personal to the offending party. It is further arguable that there is no room for vicarious liability for any other person or persons' conduct as would be the case in relation to a breach relied upon for the purposes of termination under clause 12.1(a) or (g). With respect to both of those clauses there is room for the establishment of vicarious liability for the conduct of other persons where there is a breach of obligations under the agreement such as clause 12.1(a) or for engagement in deceptive trade practices such as clause 12.1(i). By contrast, clause 12.2(a) cannot rely upon vicarious liability to establish a basis for termination when terms are used that point to a requisite establishment of the existence of a particular state of mind of the offending party. In any event, all of these matters are matters for determination at trial.

110. Furthermore, I observe that there is a potentially compelling argument that clause 12.2(a) of the agreement is drafted with the intention of dealing with conduct that is different from and far more serious than the conduct encompassed within clause 12.1(a). For the purposes of determining whether or not there is a serious question to be tried with respect to the construction of clause 12.2(a) of the agreement the observation may be made that the clause was prepared by Primus for the purposes of controlling the contractual arrangements between it and Axxess and appears on its face to deal with a fundamental matter.

113. In the course of submissions, Dr Pannam made the observation that has some attraction that as a matter of ordinary language it is difficult to characterise for example a statement by a doorknocking salesperson of Axxess to the effect that Primus is associated with Telstra for the purposes of attracting a new customer to Primus as a material false representation, report or claim in relation to the agreement itself. Such conduct may provide a basis for a breach of a different nature but in my view it supports the view that clause 12.2(a) is concerned with representations reports or claims in relation to the actual agreement rather than conduct arising from or outside the agreement including conduct by a non-party to that agreement.

116. Mr R. Macaw QC who appeared with Mr J. Davis for the defendant urged that the construction with respect to the state of mind of the offending party and the confinement of the breach to a matter concerned with the agreement itself was misconceived. He submitted that there were other aspects of the agreement that supported a different view. Mr Macaw relied upon aspects of the agreement (for example, clause 4.1(e)(ii) and (v), (m) and (o)) as being terms of the agreement that imposed obligations upon Axxess. The view was urged that the reference in clause 12.2(a) to "representation report or claim" must comprehend activity undertaken by Axxess under the agreement including reports and claims made under clause 4 of the agreement. Such argument encounters two difficulties. Firstly, as to why clause 12.2(a) exists and in the form that it does. For the reasons already stated it is arguable that the clause was intended to deal with circumstances different from and of a more serious nature than circumstances that may give rise to a notice of termination under clause 12.1. Secondly, it is to be observed that clause 17.2 of the agreement imposes liability upon Axxess for any acts or omissions of its sub-contractors and appears on its face to extend the liability of Axxess beyond the ordinary principles of vicarious liability. Be that as it may, the suggestion that clause 17.2 catches Axxess and renders it liable with respect to any breaches of the agreement by its sales staff out in the field fails to take account of the existence and potential purpose of clause 12.2(a) of the agreement.

119. Mr Macaw submitted, further, that clause 12.2(a) of the agreement was appropriate to cover or apply to the report, claim or representation of complaints arising pursuant to clause 4.1(e)(ii) of the agreement. Such submission fails to deal with the reason for and purpose of clause 12.2(a) of the agreement compared with the other termination provisions in the agreement. It is appropriate to note at this point, also, that the parties appear to have determined to delete the right of immediate termination without the need to show cause upon 30 days' written notice (clause 12.3). There was no explanation in the evidence before me as to why the deletion was made from the agreement. It was argued by Dr Pannam that the deletion of the right of immediate termination without the need to show cause elevated the status and purpose of clause 12.2(a) to a higher plane, that is, it rendered the purpose of the clause to one of meeting a different and more serious purpose than circumstances warranting termination under clause 12.1. It is not necessary for me to determine that matter. It is sufficient that I be satisfied that there is a serious question to be tried with respect to the construction of clause 12.2(a) of the agreement and for the reasons already expressed I am so satisfied.

122. It was also submitted by Dr Pannam that the complaints relied upon by Primus as providing the foundation for the entitlement to terminate the agreement by virtue of the letter of 17 February 2000 involved stale complaints alleged to have occurred on 27 November, 1, 7 and 18 December 1999 and 12 January 2000. These were the complaints attached to the letter of termination. The five complaints concerned representations allegedly made by sub-agents of Axxess to customers or potential customers of Primus. Dr Pannam urged that the five complaints relied upon must be viewed in the context of the success rate of Axxess during the month of January being up to 22,000 customers. The issue of the staleness or otherwise of the complaints was related to the fact that in August 1999 Primus purported to serve notice of termination upon Axxess and subsequently appeared to change its mind or at the very least demonstrate disregard of similar complaints. Mr Macaw for Primus urged the view that even if the complaints were old Primus was entitled to rely upon the waiver provision contained in clause 21.4 of the agreement. Whilst pursuant to the agreement it may be arguable that at no time has Primus waived its rights and is entitled, therefore, to rely upon clause 21.4, nevertheless issues of election and estoppel arise as to whether Primus has resolved to keep the agreement on foot notwithstanding the alleged complaints that did or may have constituted breaches of the agreement.

125. Dr Pannam submitted, also, that there was a serious question to be tried on the status of the complaints relied upon by Primus for the purposes of the notice of termination of 17 February 2000. He relied upon matters contained in affidavits filed on behalf of Axxess, particularly the three affidavits of Steven Vincent McGovern to support the proposition that the particular complaints were non-existent, completely trivial, disputed or founded on matters outside the control of the complaint. In support of this submission, as already described, Dr Pannam relied upon the complaint rate of Axxess being well below the target of 0.3% set by Primus. I do not consider that a serious question to be tried is made out on this point. If there has in fact been a breach it is not a question in my view as to whether the breach was trivial or below a target rate. The question would be whether in fact a breach has occurred.

128. It was conceded by Dr Pannam that Axxess faced difficulty in seeking the injunction it did because it was tantamount to seeking specific performance of a service agreement. It is a well established principle that the courts are reluctant to grant injunctions in such circumstances. Furthermore, it is a well established principle that the courts are reluctant to interfere in commercial arrangements that parties have agreed to between themselves. See J.C. Williamson v Luckey and Mulholland [1931] HCA 15; (1931) 45 CLR 282, per Dixon J at 299-300; also, Dr I.C.F. Spry, Equitable Remedies, 4th ed., pp.538-40).

131. Nevertheless, in more recent times this court has adopted the view that the balance of convenience will favour the granting of an injunction where it is otherwise just in all the circumstances to do so: State Transport Authority v Apex Quarries Ltd [1988] VicRp 26; (1988) VR 187. In State Transport Authority v Apex Quarries, Kaye J of this court observed (at 191) that there has been a movement away from the more strict position expressed by Dixon J in J.C. Williamson towards an approach where the court looks at the overall prevailing justice of the circumstances of the matter before it. Accordingly, Kaye J considered Thomas Borthwick & Son (Australasia) Ltd v South Otago Freezing Co Ltd (1978) 1 NZLR 538 where the New Zealand Court of Appeal was of the view that the court may at its discretion grant an injunction to restrain an express negative covenant in a contract notwithstanding that the effect of the injunction might amount to ordering specific performance where equity would not do so. In State Transport Authority, Kaye J considered, also, Sanderson Motors (Sales) Pty Ltd v Yorkstar Motors Pty Ltd (1983) 1 NSWLR 513 where Yeldam J in considering an application to enjoin a defendant from terminating a motor car dealership agreement observed:

"The plaintiff has spent considerable sums of money in order to establish and maintain its position as a Mercedes-Benz dealer in the eastern suburbs of Sydney. Plainly it was entitled to expect that the agreement would be 'a self renewing agreement' and would not in normal circumstances be terminated. The future rights and obligations of the parties are controlled and determined by the dealership agreement and do not require the supervision of the court. Hence I see no reason why an injunction should not be granted and every reason why it should be".

135. In State Transport Authority v Apex Quarries Kaye J agreed with the observations of Yeldam J in Sanderson Motors. Ultimately Kaye J held (at 192):

"In my respectful opinion, both Thomas Borthwick & Son (Australasia) Ltd. v. South Otago Freezing Co. Ltd. and Sanderson Motors (Sales) Pty. Ltd. v. Yorkstar Motors Pty. Ltd. correctly state the principle that an injunction may lie to restrain a defendant from breach of an express negative term or stipulation of a contract, notwithstanding that the effect of the injunction might be to compel performance of a contract where equity would not decree specific performance. The terms of the injunction sought in the present case do not require the form of supervision which in some type of contracts, such as contracts of service, the court will not undertake. That principle being applicable in the present case, I consider that there is a serious question to be tried, namely whether the defendant by its notice of 16 March 1987 was acting in default of the freight agreement and thereby repudiating it."

139. The observation should be made that in Data Force Pty Ltd v Brambles Holdings Ltd [1988] VicRp 73; (1988) VR 771 Southwell J of this court declined to exercise his discretion to restrain by means of a mandatory injunction a contract which was yet to be performed. The learned judge followed the judgment of Gibbs CJ in State of Queensland v Australian Telecommunications [1985] HCA 25; (1985) 59 ALR 243 to the effect that where an interlocutory injunction is sought and is in substance a mandatory injunction there must be a high degree of assurance that the plaintiff will necessarily succeed at trial. Kaye J in State Transport Authority v Apex Quarries distinguished Data Force on the basis that the particular injunction sought to restrain a contract that was yet to be in force. I would distinguish Data Force on the same basis from the present matter.

142. However, I would make the further observation, with respect, that the approach adopted by Kaye J in State Transport Authority v Apex Quarries is the correct approach. So much is borne out by the current state of the authorities (see Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 per Gummow J at 501-503; also McDermott & Anor v BP Australia Ltd (1997) ATPR 41-547 per Drummond J at 43602).

145. 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.

148. On weighing up the potential prejudice to the plaintiff if the injunction is not granted I am satisfied that the potential financial impact on the plaintiff if the injunction is not granted is far more severe than that to defendant if the injunction is granted. I am conscious that there has been a substantial falling out between Axxess and Primus and that there will necessarily be difficulties in their continuing their business relationship in the face of the proceedings before this court. Nevertheless, I am satisfied that there is sufficient incentive to Axxess to ensure that the agreement operates between the parties in the best possible way before trial. There is a financial imperative lying with Axxess in this regard. With respect to such imperative, Primus will necessarily reap a benefit from Axxess conducting its operations in accordance with the agreement.

151. Mr Macaw submitted that Primus faced the threat of further proceedings in the Federal Court by Telstra seeking to restrain Primus as a result of misrepresentations and misconduct by sales personnel of Axxess. He put the submission as highly as to assert that the court is being asked to sanction "almost certain further conduct by Axxess in contravention of s.52 and the Orders of the Federal Court." The reference to s.52 is a reference to s.52 of the Trade Practices Act 1974. Having considered the allegations contained in the extensive affidavits filed on both sides and bearing in mind the dispute between the parties as to the veracity and accuracy of the complaints I cannot be satisfied that there is a risk of further conduct at the level urged by Mr Macaw. Furthermore, there is no evidence before me that Axxess itself has been engaged in conduct that would constitute contravention of s.52 of the Trade Practices Act. As for the Orders in the Federal Court proceeding I observe that those orders relate to Primus itself and that Axxess is not a party to those proceedings.

154. There are provisions in the agreement that entitle Primus to set off its "claw back" entitlement against commissions payable to Axxess. Mr Macaw submitted that this entitlement of Primus would necessarily require the court to supervise the performance of the agreement between Primus and Axxess if the injunction was granted as sought. For the reasons already expressed I am satisfied that notwithstanding that the injunction seeks specific performance of an agreement it is in the parties' interests to have the agreement remain on foot pending trial. In this respect I am mindful of the fact that the proceeding is within the province of the Commercial List. As such it will be subject to expeditious directions that will enable the matter to be brought on for trial promptly, indeed more promptly than may have been the case with respect to the circumstances that prevailed in such authorities as Data Force and Queensland v Australian Telecommunications Commission.

157. Mr Macaw urged, also, that the balance of convenience weighed in favour of Primus because the continuation of the agreement would enable serious misrepresentations by Axxess' agents to continue notwithstanding the claim by Axxess that it had done everything possible to prevent misrepresentations being made by its sales personnel. The submission goes directly to the issue in dispute between the parties as to the veracity and gravity of the complaints alleged and whether or not the complaints in any event have been rectified. It goes to the further issue as to whether Primus has elected to accept a minimal rate of complaints. These in my view are matters to be determined at trial.

160. 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.

163. The last matter I turn to consider is whether or not damages is an appropriate remedy available to Axxess instead of the injunction sought. I am satisfied on the basis of the affidavits filed on behalf of Axxess, in particular the affidavits of Mr McGovern that it may be difficult even impossible for an adequate assessment of damages to be made. I bear in mind the extent of the arrangements, particularly, staffing arrangements put in place by Axxess in order to provide the services that are the subject of the agreement between it and Primus. It can be readily contemplated that if Axxess loses all of its 230 field personnel and some of those to its immediate competitor it may be difficult to assess the actual damage suffered by Axxess. In all the circumstances of this matter I do not consider that a sufficient remedy is available to Axxess in the nature of damages.

166. Accordingly, the injunction will be granted as sought.

169. I will hear the parties as to the form of Order and, in particular, the setting in place of an expeditious timetable in order to ensure that the matter can be brought on for trial as soon as possible within the Commercial List.